<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-24920
ERP OPERATING LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Its Charter)
ILLINOIS 36-3894853
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
TWO NORTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
(Address of Principal Executive Offices) (Zip Code)
(312) 474-1300
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
----------------
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ________
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Part II incorporates by reference the Registrant's Current Report on Form 8-K
dated March 1, 1996 and filed on March 7, 1996.
Part III incorporates by reference the Equity Residential Properties Trust
Annual Report on Form 10-K for the year ended December 31, 1996 relating to Part
III, Item 11. Executive Compensation.
Part IV incorporates by reference the following exhibits as filed with the
Equity Residential Properties Trust's Form S-11 on May 21, 1993 (Registration
No. 33-63158) and as amended thereafter: Exhibits 2.1, 2.2, 10.1, 10.1A, 10.12
and 10.14.
Part IV incorporates by reference the following exhibits as filed with the
Equity Residential Properties Trust's Form S-11 on November 23, 1993
(Registration No. 33-72080) and as amended thereafter: Exhibits 10.15, 10.15A,
10.16 and 10.16A.
Part IV incorporates by reference the following exhibits as filed with the
Registrant's Form 10 on October 7, 1994 (Registration No. 0-24920) and as
amended thereafter: Exhibits 4.1, 4.2, 10.1B, 10.13, 10.17 and 10.18.
Part IV incorporates by reference the following exhibit as filed with the
Registrant's Form 10-Q for the quarter ended September 30, 1995 on November 9,
1995 and as amended thereafter: Exhibit 10.1C.
Part IV incorporates by reference the following exhibit as filed with the
Registrant's Form 10-K for the year ended December 31, 1996 on March 18, 1996
and as amended thereafter: Exhibit 4.3.
2
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ERP OPERATING LIMITED PARTNERSHIP
TABLE OF CONTENTS
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PART I. PAGE
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Item 1. Business 4
Item 2. Properties 11
Item 3. Legal Proceedings 28
Item 4. Submission of Matters to a Vote of Security Holders 28
PART II.
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters 29
Item 6. Selected Financial Data 29
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 32
Item 8. Financial Statements and Supplementary Data 41
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 41
PART III.
Item 10. Trustees and Executive Officers of the Registrant 42
Item 11. Executive Compensation 45
Item 12. Security Ownership of Certain Beneficial Owners and Management 46
Item 13. Certain Relationships and Related Transactions 49
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 52
</TABLE>
3
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PART I
ITEM 1. BUSINESS
GENERAL
ERP Operating Limited Partnership, an Illinois limited partnership formed
in May 1993 (the "Operating Partnership"), is managed by Equity Residential
Properties Trust, a Maryland real estate investment trust (the "Company"), its
general partner. The Company is a self-administered and self-managed equity
real estate investment trust ("REIT"). The Company was organized in March 1993
and commenced operations on August 18, 1993 upon completion of its initial
public offering (the "IPO") of 13,225,000 common shares of beneficial interest,
$0.01 par value per share ("Common Shares"). The Company was formed to continue
the multifamily residential business objectives and acquisition strategies of
certain affiliated entities controlled by Mr. Samuel Zell, Chairman of the Board
of Trustees of the Company. These entities had been engaged in the acquisition,
ownership and operation of multifamily residential properties since 1969.
The Company, through its subsidiaries, which include the Operating
Partnership, Equity Residential Properties Management Limited Partnership and
Equity Residential Properties Management Limited Partnership II (collectively,
the "Management Partnerships"), a series of partnerships (the "Financing
Partnerships") and limited liability companies ("LLCs") which beneficially own
certain properties encumbered by mortgage indebtedness, is the successor to the
multifamily residential property business of Equity Properties Management Corp
("EPMC"), an entity controlled by Mr. Zell and a series of other entities which
owned 69 of the multifamily residential properties contributed at the time of
the Company's IPO (the "Initial Properties").
As of December 31, 1996, the Operating Partnership owned or had interests
in 239 multifamily properties of which it controlled a portfolio of 218
multifamily properties (individually, a "Property" and collectively, the
"Properties") containing 67,705 units, including 61 of the Initial Properties.
The remaining 21 properties represent an investment in partnership interests and
subordinated mortgages collateralized by 21 properties (the "Additional
Properties") containing 3,896 units, which units are property managed by a third
party unaffiliated entity. The Operating Partnership's Properties and the
Additional Properties are located throughout the United States in the following
states: Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan,
Minnesota, Missouri, New Hampshire, New Jersey, New Mexico, Nevada, North
Carolina, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Virginia and
Washington. In addition, Equity Residential Properties Management Corp.
("Management Corp.") and Equity Residential Properties Management Corp. II
("Management Corp. II") also provide residential property and asset management
services to 40 properties containing 13,054 units owned by affiliated entities.
The Company is, together with the Operating Partnership, one of the largest
publicly traded REITs (based on the aggregate market value of its outstanding
Common Shares) and is the largest publicly traded REIT owner of multifamily
properties (based on the number of apartment units owned and total revenues
earned).
4
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PART I
Since the Company's IPO and through December 31, 1996, the Operating
Partnership has acquired direct or indirect interests in 160 properties (which
included the debt collateralized by six Properties) containing 49,679 units in
the aggregate for a total purchase price of approximately $2.4 billion,
including the assumption of approximately $554.2 million of mortgage
indebtedness. The Operating Partnership also made an $89 million investment in
partnership interests and subordinated mortgages collateralized by the
Additional Properties. Since the IPO, the Operating Partnership has disposed of
11 of its properties containing 3,699 units for a total sales price of
approximately $93.3 million and the release of mortgage indebtedness in the
amount of $20.5 million.
The Company's corporate headquarters and executive offices are located in
Chicago, Illinois. In addition, the Company has regional operations centers in
Chicago, Illinois; Dallas, Texas; Denver, Colorado; Seattle, Washington; Tampa,
Florida and Bethesda, Maryland and area offices in Atlanta, Georgia; Las Vegas,
Nevada; Phoenix, Arizona; Portland, Oregon; San Antonio and Houston, Texas;
Ypsilanti, Michigan; Raleigh, North Carolina; Ft. Lauderdale, Florida and
Irvine, California. The Company has approximately 2,189 full-time employees
(1,944 of which are on site at the Properties). Each of the Operating
Partnership's Properties is directed by an on-site manager, who supervises the
on-site employees and is responsible for the day-to-day operations of the
Property. The manager is generally assisted by a leasing administrator and/or
property administrator. In addition, a maintenance director at each Property
supervises a maintenance staff whose responsibilities include a variety of
tasks, including responding to service requests, preparing vacant apartments for
the next resident and performing preventive maintenance procedures year-round.
BUSINESS OBJECTIVES AND OPERATING STRATEGIES
The Operating Partnership seeks to maximize both current income and long-
term growth in income, thereby increasing: (i) the value of the Properties;
(ii) distributions on a per limited partnership interest ("OP Unit") basis; and
(iii) partners' value.
The Operating Partnership's strategies for accomplishing these objectives
are:
. maintaining and increasing Property occupancy while increasing rental rates;
. controlling expenses, providing regular preventive maintenance, making
periodic renovations and enhancing amenities;
. pursuing acquisitions that: (i) are available at prices below estimated
replacement costs; (ii) have potential for rental rate and/or occupancy
increases; (iii) have attractive locations in their respective markets; and
(iv) provide anticipated total returns that will increase the Operating
Partnership's distributions per OP Unit.
The Operating Partnership is committed to tenant satisfaction by striving
to anticipate industry trends and implementing strategies and policies
consistent with providing quality tenant
5
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PART I
services. In addition, the Operating Partnership continuously surveys rental
rates of competing properties and conducts satisfaction surveys of residents to
determine the factors they consider most important in choosing a particular
apartment unit.
ACQUISITION STRATEGIES
The Operating Partnership anticipates that future property acquisitions
will be located in the continental United States. Management will continue to
use market information to evaluate acquisition opportunities. The Operating
Partnership's market data base allows it to review the primary economic
indicators of the markets where the Operating Partnership currently manages
Properties and where it expects to expand its operations. Acquisitions may be
financed from various sources of capital, which may include undistributed funds
from operations ("FFO"), sales of Properties and collateralized and
uncollateralized borrowings. In addition, the Operating Partnership may acquire
additional multifamily properties in transactions that include the issuance of
OP Units as consideration for the acquired properties. Such transactions may, in
certain circumstances, partially defer the sellers' tax consequences.
When evaluating potential acquisitions, the Operating Partnership will
consider: (i) the geographic area and type of community; (ii) the location,
construction quality, condition and design of the property; (iii) the current
and projected cash flow of the property and the ability to increase cash flow;
(iv) the potential for capital appreciation of the property; (v) the terms of
resident leases, including the potential for rent increases; (vi) the potential
for economic growth and the tax and regulatory environment of the community in
which the property is located; (vii) the occupancy and demand by residents for
properties of a similar type in the vicinity (the overall market and submarket);
(viii) the prospects for liquidity through sale, financing or refinancing of the
property; and (ix) competition from existing multifamily properties and the
potential for the construction of new multifamily properties in the area. The
Operating Partnership expects to purchase multifamily properties with physical
and market characteristics similar to the Properties.
DISPOSITION STRATEGIES
Management will use market information to evaluate potential dispositions.
Factors the Operating Partnership considers in deciding whether to dispose of
its Properties include the following: (1) the amount of increases in new
construction; (2) areas where the economy is expected to decline substantially;
and (3) markets where the Operating Partnership does not intend to establish
long-term concentrations. The Operating Partnership will reinvest the proceeds
received from property dispositions to fund property acquisitions. In addition,
when feasible the Operating Partnership will structure these transactions as tax
deferred exchanges.
6
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PART I
FINANCING STRATEGIES
Equity Offerings
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In January 1994, the Company completed a public offering of 5,750,000
Common Shares (the "Second Public Offering") at $29.00 per share and contributed
net proceeds to the Operating Partnership of approximately $157.4 million in
connection therewith.
In June 1994, the Company concluded a private placement of 1,569,270 Common
Shares to six accredited institutional investors (the "Private Equity Offering")
and contributed proceeds to the Operating Partnership of approximately $47.0
million in connection therewith. The prices at which the Common Shares were
sold ranged from $29.43 to $32.87.
In July 1994, the Company completed a public offering of 9,200,000 Common
Shares (the "Third Public Offering") at $31.25 per share and contributed net
proceeds to the Operating Partnership of approximately $271.7 million in
connection therewith.
In September 1994, the Company registered 5,000,000 Common Shares pursuant
to an equity shelf registration statement (the "Equity Shelf Registration") of
which 2,735,320 registered Common Shares were sold in separate transactions
completed in October 1994 (collectively, the "Shelf Offering"). The Company
contributed net proceeds to the Operating Partnership of approximately $81
million in connection therewith. The prices at which the Common Shares were
sold ranged from $29.34 to $30.17.
In June 1995, the Company sold 6,120,000 of its 9 3/8% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share
(liquidation preference $25 per share) (the "Series A Preferred Shares"),
pursuant to a $250 million shelf registration (the "Preferred Shelf
Registration"), at $25 per share. The Company raised gross proceeds of $153
million from this offering (the "Series A Preferred Share Offering"). The net
proceeds of approximately $148.2 million from the Series A Preferred Share
Offering have been contributed by the Company to the Operating Partnership in
exchange for 6,120,000 of the Operating Partnership's 9 3/8% cumulative
redeemable preference units (the "Series A Cumulative Redeemable Preference
Units").
On September 11, 1995, the Company filed with the Securities and Exchange
Commission (the "SEC") a Form S-3 Registration Statement to register up to $500
million of non-voting preferred shares of beneficial interest, $0.01 par value
per share ("Preferred Shares"), Common Shares and depositary shares, pursuant to
a shelf offering (the "Second Shelf Registration").
In November 1995, the Company sold 5,000,000 depositary shares (the "Series
B Depositary Shares") pursuant to the Second Shelf Registration. Each Series B
Depositary Share represents a 1/10 fractional interest in a 9 1/8% Series B
Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par value
per share (the "Series B Preferred Shares"). The liquidation preference of each
of the Series B Preferred Shares is $250.00 (equivalent to $25 per Series B
Depositary Share). The Company raised gross proceeds of $125 million from the
sale of the Series
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PART I
B Depositary Shares. The net proceeds of approximately $121 million have been
contributed by the Company to the Operating Partnership in exchange for 500,000
of the Operating Partnership's 9 1/8% cumulative redeemable preference units
(the "Series B Cumulative Redeemable Preference Units").
In January 1996, the Company completed an offering of 1,725,000 registered
Common Shares, which were sold at a net price of $29.375 per share (the "January
1996 Common Share Offering") and contributed to the Operating Partnership net
proceeds of approximately $50.7 million in connection therewith. In February
1996, the Company completed an offering of 2,300,000 registered Common Shares,
which were sold at a net price of $29.50 per share (the "February 1996 Common
Share Offering") and contributed to the Operating Partnership net proceeds of
approximately $67.8 million in connection therewith.
On May 21, 1996, the Company completed an offering of 2,300,000 publicly
registered Common Shares, which were sold at a net price of $30.50 per share.
On May 28, 1996, the Company completed the sale of 73,287 publicly registered
Common Shares to employees of the Company and to employees of Equity Group
Investments, Inc. ("EGI") and certain of their respective affiliates and
consultants at a net price equal to $30.50 per share. On May 30, 1996, the
Company completed an offering of 1,264,400 publicly registered Common Shares,
which were sold at a net price of $30.75 per share. The Company contributed to
the Operating Partnership net proceeds of approximately $111.3 million in
connection with the sale of the 3,637,687 Common Shares mentioned above
(collectively, the "May 1996 Common Share Offerings").
In September 1996, the Company sold 4,600,000 depositary shares (the
"Series C Depositary Shares") pursuant to the Second Shelf Registration. Each
Series C Depositary Share represents a 1/10 fractional interest in a 9 1/8%
Series C Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par
value per share (the "Series C Preferred Shares"). The liquidation preference of
each of the Series C Preferred Shares is $250.00 (equivalent to $25 per Series C
Depositary Share). The Company raised gross proceeds of $115 million from this
offering (the "Series C Preferred Share Offering"). The net proceeds of
approximately $111.4 million from the Series C Preferred Share Offering were
contributed by the Company to the Operating Partnership in exchange for 460,000
of the Operating Partnership's 9 1/8% cumulative redeemable preference units
(the "Series C Cumulative Redeemable Preference Units").
On September 18, 1996, the Company filed with the SEC a Form S-3
Registration Statement to register $500 million of equity securities (the "1996
Equity Shelf Registration").
Also in September 1996, the Company completed the sale of 2,272,728
publicly registered Common Shares which were sold at a net price of $33 per
share. The Company contributed to the Operating Partnership net proceeds of
approximately $75 million in connection with this offering (the "September 1996
Common Share Offering").
In November, 1996, the Company issued 39,458 Common Shares pursuant to the
1996 Nonqualified Employee Share Purchase Plan at a net price of $30.44 and
received net proceeds of approximately $1.2 million.
8
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PART I
In December 1996, the Company completed offerings of 4,440,000 publicly
registered Common Shares, which were sold to the public at a price of $41.25 per
share (the "December 1996 Common Share Offerings"). The Company contributed to
the Operating Partnership net proceeds of approximately $177.4 million.
Debt Offerings
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In May 1994, the Operating Partnership issued $125 million of 8 1/2%
unsecured notes due May 15, 1999 (the "1999 Notes") guaranteed by the Company in
a private placement (the "Debt Offering") to qualified institutional buyers as
defined in Rule 144A of the Securities Act of 1933, as amended (the "Securities
Act"). The Operating Partnership received net proceeds of $122.9 million in
connection with the Debt Offering.
In December 1994, the Operating Partnership registered $500 million in debt
securities pursuant to a debt shelf registration statement (the "Debt Shelf
Registration") of which $100 million of floating rate notes due December 22,
1997 (the "Floating Rate Notes") were issued by the Operating Partnership on
December 21, 1994 (the "Public Debt Offering"). The Operating Partnership
received net proceeds of $98.6 million in connection with the Public Debt
Offering. The Floating Rate Notes bear interest at three month London Interbank
Offered Rate ("LIBOR") plus 0.75%.
In April 1995, the Operating Partnership issued $125 million of 7.95%
unsecured fixed rate notes (the "2002 Notes") pursuant to the Debt Shelf
Registration in a public debt offering (the "Second Public Debt Offering"). The
Operating Partnership received net proceeds of approximately $123.1 million in
connection with the Second Public Debt Offering.
In August 1996, the Operating Partnership issued $150 million of 7.57%
unsecured fixed rate notes (the "2026 Notes ") in connection with the Debt Shelf
Registration in a public debt offering (the "Third Public Debt Offering"). The
Operating Partnership received net proceeds of approximately $149 million in
connection with this issuance.
On September 18, 1996, the Operating Partnership filed with the SEC a Form
S-3 Registration Statement to register $500 million of debt securities (the
"1996 Debt Shelf Registration").
CREDIT FACILITY
The Operating Partnership had a $250 million unsecured line of credit with
Wells Fargo Realty Advisors Funding Incorporated, as agent, through November 14,
1996. On November 15, 1996, the Operating Partnership completed an agreement
with Morgan Guaranty Trust Company of New York ("Morgan Guaranty") and Bank of
America Illinois ("Bank of America") to provide the Operating Partnership a $250
million unsecured line of credit. This new line of credit matures in November
1999 and borrowings generally will bear interest at a per annum rate of one,
two, three
9
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PART I
and six month LIBOR, plus 0.75%, and is subject to an annual facility fee of
$500,000. As of December 31, 1996, there were no amounts outstanding on this
line of credit.
RECENT DEVELOPMENTS
In January 1997, the Operating Partnership acquired three properties from
unaffiliated third parties for a total purchase price of approximately $44.6
million, which included the assumption of mortgage indebtedness of approximately
$20.2 million. These properties were Town Center, a 258-unit property located
in Kingwood, Texas; Harborview, a 160-unit property located in San Pedro,
California, and The Cardinal, a 256-unit property located in Greensboro, North
Carolina.
On January 16, 1997 the Company entered into an Agreement and Plan of
Merger regarding the planned acquisition of the multifamily property business of
Wellsford Residential Property Trust ("Wellsford"), a Maryland real estate
investment trust, through the tax free merger of the Company and Wellsford (the
"Merger"). The transaction is valued at approximately $1 billion and includes
75 multifamily properties containing 19,004 units. In the Merger, each
outstanding common share of beneficial interest of Wellsford will be converted
into .625 of a Common Share of the Company, assuming the market price of a
Common Share remains in excess of $40. The Merger plans call for the issuance
of approximately 10.7 million new common shares valued at approximately $464
million based on the Company's January 16, 1997 closing price of $43.375 and
requires the assumption of all Wellsford outstanding debt of approximately $332
million and exchange of approximately $158 million in preferred shares.
In February 1997, the Operating Partnership acquired four properties from
unaffiliated third parties for a total purchase price of approximately $90.5
million, which included the assumption of mortgage indebtedness of approximately
$30.6 million. These properties were Trails at Dominion, a 843-unit multifamily
property located in Houston, Texas; Dartmouth Woods, a 201-unit property located
in Denver, Colorado; Rincon Apartments, a 288-unit property located in Houston,
Texas and Waterford at the Lakes, a 344-unit property located in Kent,
Washington.
In March 1997, the Operating Partnership acquired one property from an
unaffiliated third party for a total purchase price of approximately $9.15
million. This property was Junipers at Yarmouth, a 225-unit property located in
Yarmouth, Maine.
As of March 20, 1997, the Company completed offerings of 938,800 publicly
registered Common Shares, which were sold at a net price of $46 per share (the
"March 1997 Common Share Offerings") and contributed to the Operating
Partnership net proceeds of approximately $43.2 million in connection therewith.
COMPETITION
All of the Properties are located in developed areas that include other
multifamily properties. The number of competitive multifamily properties in a
particular area could have a material effect on the Operating Partnership's
ability to lease units at the Properties or at any newly acquired properties and
on the rents charged. The Operating Partnership may be competing with other
entities that have greater resources than the Operating Partnership and whose
managers have more experience than the Operating Partnership's officers and
trustees. In addition, other forms of multifamily properties, including
multifamily properties and manufactured housing controlled by Mr. Zell, and
single-family housing, provide housing alternatives to potential residents of
multifamily properties.
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PART I
ITEM 2. THE PROPERTIES
As of December 31, 1996, the Operating Partnership controlled a portfolio
of 218 multifamily properties located in 30 states consisting of 5,198 buildings
containing 67,705 apartment units. The average number of units per Property was
approximately 311. The units are typically contained in a series of two-story
buildings. The Properties contain an aggregate of approximately 59.5 million
rentable square feet, with an average unit size of 878 square feet. The average
rent per unit was $673, and the average rent per square foot was $0.77.
As of December 31, 1996, the Properties had an average occupancy rate of
95%. Tenant leases are generally year-to-year and require security deposits.
The Properties typically provide residents with attractive amenities, which may
include a clubhouse, swimming pool, laundry facilities and cable television
access. Certain Properties offer additional amenities such as saunas,
whirlpools, spas, sports courts and exercise rooms.
The Operating Partnership believes that the Properties provide amenities
and common facilities that create an attractive residence for tenants. It is
management's role to monitor compliance with Property policies and to provide
preventive maintenance of the Properties including common areas, facilities and
amenities. The Operating Partnership holds periodic meetings of its Property
management personnel for training and implementation of the Operating
Partnership's strategies. The Operating Partnership believes that, due in part
to this strategy, the Properties historically have had high occupancy rates.
The distribution of the Properties throughout the United States reflects
the Operating Partnership's belief that geographic diversification helps
insulate the portfolio from regional and economic influences. At the same time,
the Operating Partnership has sought to create clusters of Properties within
each of its primary markets in order to achieve economies of scale in management
and operation; however, the Operating Partnership may acquire additional
multifamily properties located anywhere in the United States.
The Operating Partnership beneficially owns fee simple title to 211 of the
Properties and holds a 73-year leasehold interest with respect to one Property
(Mallgate). Direct fee simple title for certain of the Properties is owned by
single-purpose nominee corporations or land trusts that engage in no business
other than holding title to the Property for the Operating Partnership. Holding
title in such a manner is expected to make it less costly to transfer such
Property in the future in the event of a sale and should facilitate financing
since lenders often require title to a Property to be held in a single purpose
entity in order to isolate that Property from potential liabilities of other
Properties. Direct fee simple title for certain other Properties is owned by an
LLC. In addition, with respect to two Properties, the Operating Partnership
owns the debt collateralized by such Properties and with respect to four
Properties, the Operating Partnership owns an interest in the debt
collateralized by the properties.
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PART I
As of December 31, 1996, the Operating Partnership had an investment in
partnership interests and subordinated mortgages collateralized by the
Additional Properties. The Additional Properties consist of 578 buildings
containing 3,896 units, located in four states.
The following two tables set forth certain information relating to the
Properties and the Additional Properties:
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ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
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<CAPTION>
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
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ARIZONA
Bay Club, Phoenix (1) 1976 22 13 420 257,790 614 96% $493 $0.80
Camellero, Scottsdale (1) 1979 33 15 344 311,526 906 94% $722 $0.80
Canyon Creek, Tuscan 1986 15 10 242 169,946 702 97% $473 $0.67
Canyon Sands, Phoenix (1) 1983 38 20 412 353,592 858 91% $560 $0.65
Chandler Court, Chandler 1987 33 20 311 263,338 847 95% $613 $0.72
Crystal Creek, Phoenix 1985 24 10 273 190,140 696 97% $559 $0.80
Del Coronado, Mesa (1) 1985 43 19 419 394,062 940 95% $609 $0.65
Desert Sands, Phoenix (1) 1982 39 20 412 353,592 858 91% $560 $0.65
Flying Sun, Phoenix (1) 1983 10 4 108 93,708 868 97% $553 $0.64
Fountain Creek, Phoenix 1984 20 9 186 144,374 776 94% $600 $0.77
Indian Bend, Scottsdale 1973 8 14 275 226,444 823 97% $675 $0.82
Southbank, Mesa 1985 13 5 113 99,448 880 98% $552 $0.63
Southcreek, Mesa (1) 1986-89 66 23 528 472,152 894 95% $650 $0.73
Via Ventura, Scottsdale 1980 22 19 320 279,187 872 71% $712 $0.82
Villa Madeira, Scottsdale 1971 39 17 332 291,280 877 95% $692 $0.79
Villa Manana, Phoenix 1971-85 13 8 260 212,150 816 96% $587 $0.72
ARKANSAS
Fox Run, Little Rock (1) 1974 27 14 337 303,230 900 97% $536 $0.60
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
<TABLE>
<CAPTION>
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
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ARKANSAS, CONTINUED
Greenwood Forest, Little Rock (1) 1975 23 10 239 191,062 799 98% $501 $0.63
Walnut Ridge, Little Rock (1) 1975 18 10 252 210,776 836 95% $477 $0.57
Williamsburg, Little Rock (1) 1974 21 10 211 184,348 874 99% $552 $0.63
CALIFORNIA
Carmel Terrace, San Diego 1988-89 27 20 384 298,588 778 98% $771 $0.99
Casa Capricorn, San Diego 1981 24 10 192 178,320 929 96% $742 $0.80
Creekside Oaks, Walnut Creek (1) 1974 5 7 316 237,952 753 97% $724 $0.96
Deerwood, San Diego 1990 37 29 315 333,079 1,057 93% $987 $0.93
Eagle Canyon, Chino Hills 1985 34 32 252 252,493 1,002 95% $907 $0.90
Emerald Place, Bermuda Dunes 1988 27 17 240 214,072 892 98% $619 $0.69
Hathaway, Long Beach 1987 41 17 385 266,805 693 95% $843 $1.22
Lakeville Resort, Petaluma (1) 1984 84 45 492 461,798 939 99% $729 $0.78
Lands End, Pacifica 1974 11 7 260 161,121 620 98% $927 $1.50
Merrimac Woods, Costa Mesa 1970 19 39 123 88,160 717 97% $744 $1.04
Mountain Terrace, Stevenson Ranch 1992 19 39 510 425,612 835 77% $852 $1.02
Oak Park North, Agoura (1) 1990 31 12 220 180,600 821 94% $1,023 $1.25
Oak Park South, Agoura (1) 1989 31 12 224 188,000 839 93% $1,006 $1.20
Park West, Los Angeles 1990 1 4 444 315,588 711 95% $962 $1.35
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
<TABLE>
<CAPTION>
Acreage Average
Year(s) (approx- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA, CONTINUED
Promenade Terrace, Corona Hills (1) 1990 38 27 330 360,838 1,093
Regency Palms, Huntington Beach 1969 39 14 310 261,634 844
Summer Ridge, Riverside 1985 9 6 136 104,832 771
Summerset Village, Chatsworth 1985 29 29 280 286,752 1,024
Villa Solana, Laguna Hills 1984 17 13 272 245,104 901
Vista Del Lago, Mission Viejo (1) 1986-88 51 29 608 512,200 842
Windridge, Laguna Niguel (1) 1989 22 19 344 375,312 1,091
COLORADO
Cheyenne Crest, Colorado Springs (1) 1984 13 9 208 175,424 843
Glenridge, Colorado Springs (1) 1985 12 8 220 176,792 804
Indian Tree, Arvada (1) 1983 7 8 168 140,000 833
Trails, Aurora (1) 1986 17 11 351 286,964 818
Willow Glen, Aurora 1983 22 20 384 302,944 789
Windmill, Colorado Springs (1) 1985 15 11 304 180,640 594
Yuma Court, Colorado Springs 1985 10 5 40 37,400 935
FLORIDA
Brierwood, Jacksonville 1974 22 17 196 263,052 1,342
Casa Cordoba, Tallahassee 1972-73 32 12 168 164,336 978
Casa Cortez, Tallahassee 1970 13 4 66 74,916 1,135
<CAPTION>
Occupancy December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA, CONTINUED
Promenade Terrace, Corona Hills (1) 96% $851 $0.78
Regency Palms, Huntington Beach 97% $806 $0.95
Summer Ridge, Riverside 98% $660 $0.86
Summerset Village, Chatsworth 98% $1,067 $1.04
Villa Solana, Laguna Hills 97% $827 $0.92
Vista Del Lago, Mission Viejo (1) 98% $864 $1.03
Windridge, Laguna Niguel (1) 92% $948 $0.87
COLORADO
Cheyenne Crest, Colorado Springs (1) 94% $640 $0.76
Glenridge, Colorado Springs (1) 96% $641 $0.80
Indian Tree, Arvada (1) 99% $641 $0.77
Trails, Aurora (1) 95% $614 $0.75
Willow Glen, Aurora 90% $597 $0.76
Windmill, Colorado Springs (1) 97% $503 $0.85
Yuma Court, Colorado Springs 95% $597 $0.64
FLORIDA
Brierwood, Jacksonville 97% $620 $0.46
Casa Cordoba, Tallahassee 99% $615 $0.63
Casa Cortez, Tallahassee 97% $613 $0.54
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
<TABLE>
<CAPTION>
Acreage Average
Year(s) (approx- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FLORIDA, CONTINUED
Chaparral, Largo (1) 1976 52 23 444 451,420 1,017
Gatehouse on the Green, Pambroke Pines 1990 12 21 312 310,140 994
Gatehouse at Pine Lake, Plantation 1990 11 25 296 293,792 993
Habitat, Orlando 1974 26 17 344 334,352 972
Hammock's Place, Miami (1) 1986 11 15 296 307,900 1,040
Heron Cove, Coral Springs 1987 13 12 198 189,932 959
Heron Landing, Lauderhill 1988 13 11 144 151,684 1,053
Heron Run, Plantation 1987 13 13 198 185,504 937
La Costa Brava, Orlando 1967 17 10 194 190,780 983
La Costa Brava, Jacksonville (1)(2) 1970-73 46 30 464 441,268 951
Marbrisa, Tampa 1984 16 37 224 188,544 842
Oaks of Lakebridge, Ormond Beach 1984 13 12 170 120,792 711
Paradise Point, Dania 1987-90 13 13 260 226,980 873
Pine Harbour, Orlando 1991 18 20 366 344,204 940
Pines of Springdale, W. Palm Beach 1986 3 5 151 126,975 841
The Place, Fort Meyers 1986 15 9 230 183,588 798
Port Royale, Fort Lauderdale 1988 10 17 252 182,380 724
Port Royale II, Fort Lauderdale 1991 3 5 161 115,025 714
<CAPTION>
Occupancy December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FLORIDA, CONTINUED
Chaparral, Largo (1) 95% $582 $0.57
Gatehouse on the Green, Pambroke Pines 98% $908 $0.91
Gatehouse at Pine Lake, Plantation 92% $908 $0.92
Habitat, Orlando 95% $556 $0.57
Hammock's Place, Miami (1) 97% $739 $0.71
Heron Cove, Coral Springs 96% $754 $0.79
Heron Landing, Lauderhill 92% $769 $0.73
Heron Run, Plantation 96% $793 $0.85
La Costa Brava, Orlando 96% $615 $0.63
La Costa Brava, Jacksonville (1)(2) 95% $530 $0.56
Marbrisa, Tampa 98% $565 $0.67
Oaks of Lakebridge, Ormond Beach 97% $578 $0.81
Paradise Point, Dania 96% $810 $0.93
Pine Harbour, Orlando 93% $654 $0.70
Pines of Springdale, W. Palm Beach 95% $616 $0.73
The Place, Fort Meyers 94% $544 $0.68
Port Royale, Fort Lauderdale 98% $855 $1.18
Port Royale II, Fort Lauderdale 99% $883 $1.24
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES - CONTINUED
<TABLE>
<CAPTION>
Acreage Average
Year(s) (approx- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FLORIDA, CONTINUED
River Bend, Tampa 1971 32 15 296 333,580 1,127
Sabal Pointe, Coral Springs 1995 11 14 275 355,575 1,293
Sawgrass Cove, Bradenton 1991 21 28 336 342,880 1,020
Springs Colony, Altamonte Springs 1986 9 10 188 161,168 857
Stonelake Club, Ocala (1) 1986 31 15 240 194,320 810
Woodlake at Killearn, Tallahassee 1986-90 18 25 352 305,480 868
GEORGIA
Frey, Atlanta (1) 1985 29 44 489 453,760 928
Governor's Place, Augusta 1972 20 9 190 191,580 1,008
Greengate, Marietta 1971 11 11 152 157,808 1,038
Holcomb Bridge, Atlanta (1) 1985 34 36 437 419,150 959
Ivy Place, Atlanta 1978 17 15 122 180,830 1,482
Longwood, Decatur 1992 9 9 268 216,970 810
Maxwell House, Augusta 1951 1 1 216 97,173 450
Park Knoll, Marietta 1983 51 41 484 587,250 1,213
Preston Lake, Tucker 1984-86 9 32 320 338,130 1,057
Roswell, Atlanta (1) 1985 23 30 236 225,598 956
Terraces at Peachtree, Atlanta 1987 1 1 96 86,800 904
<CAPTION>
Occupancy December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
FLORIDA, CONTINUED
River Bend, Tampa 95% $558 $0.50
Sabal Pointe, Coral Springs 97% $895 $0.69
Sawgrass Cove, Bradenton 93% $664 $0.65
Springs Colony, Altamonte Springs 98% $573 $0.67
Stonelake Club, Ocala (1) 95% $501 $0.62
Woodlake at Killearn, Tallahassee 91% $615 $0.71
GEORGIA
Frey, Atlanta (1) 95% $697 $0.75
Governor's Place, Augusta 94% $448 $0.44
Greengate, Marietta 92% $621 $0.60
Holcomb Bridge, Atlanta (1) 95% $695 $0.72
Ivy Place, Atlanta 94% $918 $0.62
Longwood, Decatur 96% $747 $0.92
Maxwell House, Augusta 94% $370 $0.82
Park Knoll, Marietta 95% $828 $0.68
Preston Lake, Tucker 93% $708 $0.67
Roswell, Atlanta (1) 93% $720 $0.75
Terraces at Peachtree, Atlanta 93% $928 $1.03
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
<TABLE>
<CAPTION>
Acreage Average
Year(s) (approx- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GEORGIA, CONTINUED
Woodland Hills, Decatur 1985 25 19 228 266,304 1,168
IDAHO
The Seasons, Boise 1990 10 6 120 108,460 904
ILLINOIS
Bourbon Square, Palatine (1) 1984-87 102 47 612 875,160 1,430
Four Lakes III-IV, Lisle (1) 1968 31 92 942 798,245 847
Four Lakes V, Lisle (1) 1988 2 15 478 310,208 649
Spice Run, Naperville 1988 20 32 400 396,320 991
INDIANA
Diplomat South, Beech Grove (1) 1970 16 15 272 254,528 936
IOWA
3000 Grand, Des Moines 1970 1 6 186 199,530 1,073
KANSAS
Cedar Crest, Overland Park 1986 38 30 466 430,034 923
Essex Place, Overland Park (1) 1970-84 32 34 352 429,048 1,219
Rosehill Pointe, Lenexa 1984 32 35 498 459,318 922
Silverwood, Mission (1) 1986 20 15 280 234,876 839
Sunnyoak Village, Overland Park 1984 55 46 548 492,700 899
KENTUCKY
Cloisters on the Green, Lexington (1) 1974 6 12 228 196,560 862
Doral, Louisville (1) 1972 19 10 228 293,106 1,286
<CAPTION>
Occupancy, 1996 December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GEORGIA, CONTINUED
Woodland Hills, Decatur 91% $790 $0.68
IDAHO
The Seasons, Boise 94% $623 $0.69
ILLINOIS
Bourbon Square, Palatine (1) 90% $1,018 $0.71
Four Lakes III-IV, Lisle (1) 92% $828 $0.98
Four Lakes V, Lisle (1) 90% $735 $1.13
Spice Run, Naperville 88% $872 $0.88
INDIANA
Diplomat South, Beech Grove (1) 93% $502 $0.54
IOWA
3000 Grand, Des Moines 84% $876 $0.82
KANSAS
Cedar Crest, Overland Park 96% $610 $0.66
Essex Place, Overland Park (1) 94% $767 $0.63
Rosehill Pointe, Lenexa 88% $590 $0.64
Silverwood, Mission (1) 98% $603 $0.72
Sunnyoak Village, Overland Park 93% $578 $0.64
KENTUCKY
Cloisters on the Green, Lexington (1) 97% $551 $0.64
Doral, Louisville (1) 94% $600 $0.47
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
<TABLE>
<CAPTION>
Occupancy
Acreage Average As of
Year(s) (approx- Square Square Footage December
Property Constructed Buildings imate Units Footage Per Unit 31, 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
KENTUCKY, CONTUNUED
Mallgate, Louisville 1969 46 24 540 535,444 992 92%
Sonnet Cove I-II, Lexington (1) 1972-1974 11 14 331 346,675 1,047 97%
LOUISIANA
Plantation, Monroe 1972 6 10 200 180,416 902 92%
MARYLAND
Canterbury, Germantown (1) 1986 37 23 544 481,083 884 92%
Country Club I & II, Silver Spring (1) 1980-1982 24 20 376 371,296 987 94%
Georgian Woods II, Wheaton (1) 1967 21 17 371 305,693 824 95%
Greenwich Woods, Silver Spring (1) 1967 47 12 564 514,318 912 96%
Marymont, Laurel 1987-88 12 10 308 251,264 816 94%
Northhampton I & II, Largo (1) 1977-1988 47 58 620 564,399 910 96%
Oak Mill II, Germantown (1) 1985 16 8 192 165,611 863 92%
Town Centre III & IV, Laurel (1) 1968-1969 49 30 562 553,083 984 96%
Yorktowne at Olde Mill, Millersville 1974 18 21 216 195,100 903 96%
MICHIGAN
Country Ridge, Farmington Hills 1986 26 18 252 278,060 1,103 94%
Hidden Valley, Ann Arbor 1973 6 28 324 237,348 733 97%
Lake in the Woods, Ypsilanti 1969 40 175 1,028 971,873 945 89%
Pines of Cloverlane, Pittsfield Township 1975-79 59 63 582 471,966 811 94%
<CAPTION>
December, 1996
Avg Monthly
Rental Rate Per
Property Unit Square Foot
- ----------------------------------------- -------------------------------
<S> <C> <C>
KENTUCKY, CONTUNUED
Mallgate, Louisville $534 $0.54
Sonnet Cove I-II, Lexington (1) $611 $0.58
LOUISIANA
Plantation, Monroe $437 $0.48
MARYLAND
Canterbury, Germantown (1) $710 $0.80
Country Club I & II, Silver Spring (1) $779 $0.79
Georgian Woods II, Wheaton (1) $766 $0.93
Greenwich Woods, Silver Spring (1) $792 $0.87
Marymont, Laurel $759 $0.93
Northhampton I & II, Largo (1) $792 $0.87
Oak Mill II, Germantown (1) $712 $0.83
Town Centre III & IV, Laurel (1) $731 $0.74
Yorktowne at Olde Mill, Millersville $681 $0.75
MICHIGAN
Country Ridge, Farmington Hills $850 $0.77
Hidden Valley, Ann Arbor $695 $0.95
Lake in the Woods, Ypsilanti $728 $0.77
Pines of Cloverlane, Pittsfield Township $633 $0.78
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
<TABLE>
<CAPTION>
Acreage Average
Year(s) (approx- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MICHIGAN, CONTINUED
Walden Wood, Southfield (1) 1972 23 20 210 295,080 1,405
MINNESOTA
Park Place I & II, Plymouth (1) 1986 4 60 500 569,768 1,140
MISSOURI
Hunters Glen, Chesterfield 1985 8 19 192 156,489 815
Sleepy Hollow, Kansas City (1) 1987 26 33 388 325,486 839
NEVADA
Catalina Shores, Las Vegas 1989 15 13 240 211,200 880
Cypress Point, Las Vegas (1) 1989 19 9 212 179,800 848
Desert Park, Las Vegas 1987 23 15 368 172,513 469
Fountains at Flamingo, Las Vegas 1989-91 34 30 521 417,870 802
Newport Cove, Henderson 1983 35 10 140 152,600 1,090
Silver Shadow, Las Vegas 1992 13 9 200 194,656 973
Sunrise Springs, Las Vegas 1989 18 10 192 164,424 856
Trails, Las Vegas 1988 38 28 440 453,656 1,031
NEW HAMPSHIRE
Wellington Hill, Manchester (1) 1987 55 40 390 394,627 1,012
NEW JERSEY
Ravens Crest, Plainsboro (1) 1984 37 19 704 583,176 828
NEW MEXICO
Pueblo Villas, Albuquerque 1975 17 12 232 173,118 746
<CAPTION>
Occupancy December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MICHIGAN, CONTINUED
Walden Wood, Southfield (1) 98% $847 $0.60
MINNESOTA
Park Place I & II, Plymouth (1) 98% $768 $0.67
MISSOURI
Hunters Glen, Chesterfield 97% $626 $0.77
Sleepy Hollow, Kansas City (1) 98% $546 $0.65
NEVADA
Catalina Shores, Las Vegas 92% $709 $0.81
Cypress Point, Las Vegas (1) 88% $675 $0.80
Desert Park, Las Vegas 92% $508 $1.08
Fountains at Flamingo, Las Vegas 96% $679 $0.85
Newport Cove, Henderson 94% $771 $0.71
Silver Shadow, Las Vegas 93% $723 $0.74
Sunrise Springs, Las Vegas 94% $678 $0.79
Trails, Las Vegas 93% $755 $0.73
NEW HAMPSHIRE
Wellington Hill, Manchester (1) 94% $729 $0.72
NEW JERSEY
Ravens Crest, Plainsboro (1) 96% $822 $0.99
NEW MEXICO
Pueblo Villas, Albuquerque 92% $559 $0.75
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
<TABLE>
<CAPTION>
Occupancy
Acreage Average As of
Year(s) (approx- Square Square Footage December
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NORTH CAROLINA
Bainbridge, Durham 1984 15 24 216 191,240 885 90%
Bridgeport, Raleigh 1990 13 17 276 252,190 914 92%
Deerwood Meadows, Greensboro (1) 1986 49 44 297 217,757 733 93%
East Pointe, Charlotte (1) 1987 22 29 310 301,560 973 95%
Laurel Ridge, Chapel Hill 1975 28 13 160 158,964 994 99%
McAlpine Ridge, Charlotte 1989-90 16 15 320 238,125 744 93%
Pine Meadow, Greensboro (1) 1974 29 14 204 226,600 1,111 92%
Rock Creek, Corrboro 1986 20 16 188 153,548 817 89%
Winterwood, Charlotte (1) 1986 22 23 384 369,260 962 91%
Woodbridge, Cary (1) 1993-95 16 28 344 315,624 918 92%
Woodscape, Raleigh 1979 21 25 240 186,192 776 95%
Woods of North Bend, Raleigh 1983 22 30 235 243,975 1,038 98%
OHIO
Olentangy Commons, Columbus (1) 1972 95 76 827 981,190 1,186 93%
Reserve Square, Cleveland 1973 1 4 765 631,803 826 78%
University Park, Toledo 1965 1 2 99 49,950 505 99%
Village of Hampshire Heights, Toledo 1950 92 10 392 241,920 617 99%
OKLAHOMA
Brittany Square, Tulsa 1982 13 8 212 170,516 804 96%
<CAPTION>
December, 1996
Avg. Monthly
Rental Rate Per
Property Unit Square Foot
- ------------------------------------------------------------------------------
<S> <C> <C>
NORTH CAROLINA
Bainbridge, Durham $692 $0.78
Bridgeport, Raleigh $714 $0.78
Deerwood Meadows, Greensboro (1) $572 $0.78
East Pointe, Charlotte (1) $629 $0.65
Laurel Ridge, Chapel Hill $719 $0.72
McAlpine Ridge, Charlotte $582 $0.78
Pine Meadow, Greensboro (1) $593 $0.53
Rock Creek, Corrboro $673 $0.82
Winterwood, Charlotte (1) $658 $0.68
Woodbridge, Cary (1) $719 $0.78
Woodscape, Raleigh $570 $0.73
Woods of North Bend, Raleigh $673 $0.65
OHIO
Olentangy Commons, Columbus (1) $747 $0.63
Reserve Square, Cleveland $853 $1.03
University Park, Toledo $433 $0.86
Village of Hampshire Heights, Toledo $416 $0.67
OKLAHOMA
Brittany Square, Tulsa $508 $0.63
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
<TABLE>
<CAPTION>
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OKLAHOMA, CONTINUED
Quail Run, Oklahoma City 1978-83 13 9 208 149,408 718 99% $385 $0.54
Stonebrook, Oklahoma City 1983 21 8 360 247,088 686 93% $408 $0.59
The Lodge, Tulsa 1979 13 11 208 152,240 732 99% $413 $0.56
OREGON
Bridgecreek, Wilsonville 1987 26 22 315 274,236 871 95% $647 $0.74
Kempton Downs, Gresham 1990 17 12 278 277,536 998 95% $679 $0.68
Meadowcreek, Tigard (1) 1985 19 15 304 247,690 815 97% $628 $0.77
Tanasbourne Terrace, Hillsboro 1986-89 29 18 373 363,758 975 95% $734 $0.75
Tanglewood, Lake Oswego 1976 35 8 158 200,660 1,270 97% $798 $0.63
Woodcreek, Beaverton (1) 1982-84 28 22 440 335,120 762 96% $584 $0.77
SOUTH CAROLINA
Mallard Cove, Greenville 1983 3 14 211 264,187 1,252 88% $602 $0.48
TENNESSEE
Arbors of Hickory Hollow, Nashville (1) 1986 17 31 336 337,260 1,004 96% $634 $0.63
Arbors of Brentwood, Nashville (1) 1986-87 20 41 346 320,993 928 94% $691 $0.74
Brixworth, Nashville 1985 5 6 216 144,912 671 92% $728 $1.09
Canterchase, Nashville (1) 1985 12 22 235 170,140 724 97% $567 $0.78
TEXAS
7979 Westheimer, Houston 1973 30 15 459 401,571 875 95% $625 $0.71
Altamonte, San Antonio (1) 1985 29 17 432 322,928 748 93% $536 $0.72
</TABLE>
22
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
<TABLE>
<CAPTION>
Acreage Average
Year(s) (approxi- Square Square Footage
Property Constructed Buildings imate) Units Footage Per Unit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TEXAS, CONTINUED
Arbors of Las Colinas, Irving 1985 21 15 408 334,556 820
Breton Mill, Houston (1) 1986 21 14 392 294,152 750
Celebration at Westchase, Houston (1) 1979 27 13 367 305,609 833
Champion Oaks, Houston (1) 1984 20 10 252 190,628 756
Dawntree, Carrollton 1982 53 23 400 370,152 925
Forest Ridge, Arlington 1984-85 34 29 660 555,364 841
Fountainhead I-III, San Antonio (1) 1985-87 55 23 688 457,616 665
Harbour Landing, Corpus Christi 1985 22 11 284 193,288 681
Hampton Green, San Antonio (1) 1979 32 11 293 222,341 759
Hearthstone, San Antonio (1) 1982 17 11 252 167,464 665
Hunter's Green, Fort Worth (1) 1981 17 10 248 188,720 761
Keystone, Austin (1) 1981 13 6 166 111,440 671
Kingswood Manor, San Antonio (1) 1983 12 6 129 109,996 853
Lakewood Oaks, Dallas 1987 26 12 352 257,606 732
Lincoln Green I-III, San Antonio 1984-86 54 24 680 465,664 685
Marina Club, Ft. Worth 1987 19 14 387 265,475 686
Northgate Village, San Antonio (1) 1984 23 10 264 214,928 814
Parkwest, Austin (1) 1985 50 15 196 179,046 914
<CAPTION>
Occupancy December, 1996
As of Avg. Monthly
December Rental Rate Per
Property 31, 1996 Unit Square Foot
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TEXAS, CONTINUED
Arbors of Las Colinas, Irving 96% $676 $0.82
Breton Mill, Houston (1) 98% $533 $0.71
Celebration at Westchase, Houston (1) 96% $545 $0.65
Champion Oaks, Houston (1) 97% $531 $0.70
Dawntree, Carrollton 96% $577 $0.62
Forest Ridge, Arlington 93% $600 $0.71
Fountainhead I-III, San Antonio (1) 92% $520 $0.78
Harbour Landing, Corpus Christi 96% $525 $0.77
Hampton Green, San Antonio (1) 94% $486 $0.64
Hearthstone, San Antonio (1) 96% $440 $0.66
Hunter's Green, Fort Worth (1) 92% $486 $0.64
Keystone, Austin (1) 92% $573 $0.85
Kingswood Manor, San Antonio (1) 98% $507 $0.59
Lakewood Oaks, Dallas 98% $647 $0.88
Lincoln Green I-III, San Antonio 96% $478 $0.70
Marina Club, Ft. Worth 94% $478 $0.70
Northgate Village, San Antonio (1) 94% $523 $0.64
Parkwest, Austin (1) 90% $759 $0.83
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy
Acreage Average As of
Year(s) (approx- Square Square Footage December
Property Constructed Buildings imate Units Footage Per Unit 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TEXAS, CONTINUED
Preston in Willow Bend, Plano 1985 23 13 229 233,893 1,021 97%
Ridgetree, Dallas 1983 38 17 798 597,642 749 95%
Saddle Creek, Carrollton 1980 18 16 238 244,488 1,027 95%
Songbird, San Antonio (1) 1981 29 15 262 277,720 1,060 93%
Sutton Place, Dallas 1985 16 10 456 301,440 661 94%
The Lodge, San Antonio 1979 20 10 384 259,512 676 93%
The Trails, Arlington 1984 10 9 208 141,696 681 99%
Village Oaks, Austin (1) 1984 25 13 280 199,152 711 97%
Woodmoor, Austin 1981 16 9 208 151,348 728 90%
VIRGINIA
Amberton, Manassas (1) 1986 16 7 190 143,402 755 100%
Kingsport, Alexandria 1985 73 13 416 285,793 687 97%
Saddle Ridge, Ashburn 1989 25 14 216 194,142 899 94%
Sheffield Court, Arlington 1986 36 14 597 356,822 598 97%
Tanglewood, Manassas (1) 1987 36 29 432 388,704 900 99%
Wilde Lake, Richmond (1) 1989 8 18 189 172,980 915 91%
Woodside, Lorton 1987 21 13 252 231,781 920 96%
WASHINGTON
2900 on First, Seattle 1989-91 1 1 135 87,320 647 99%
<CAPTION>
December, 1996
Average Monthly
Rental Rate Per
Property Unit Square Foot
- -------------------------------------------------------------
<S> <C> <C>
TEXAS, CONTINUED
Preston in Willow Bend, Plano $740 $0.72
Ridgetree, Dallas $502 $0.67
Saddle Creek, Carrollton $681 $0.66
Songbird, San Antonio (1) $643 $0.61
Sutton Place, Dallas $568 $0.86
The Lodge, San Antonio $494 $0.73
The Trails, Arlington $518 $0.76
Village Oaks, Austin (1) $660 $0.93
Woodmoor, Austin $592 $0.81
VIRGINIA
Amberton, Manassas (1) $682 $0.90
Kingsport, Alexandria $687 $1.00
Saddle Ridge, Ashburn $837 $0.93
Sheffield Court, Arlington $793 $1.33
Tanglewood, Manassas (1) $697 $0.77
Wilde Lake, Richmond (1) $672 $0.73
Woodside, Lorton $757 $0.82
WASHINGTON
2900 on First, Seattle $837 $1.29
</TABLE>
<PAGE>
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
<TABLE>
<CAPTION>
Occupancy
Acreage Average As of
Year(s) (approx- Square Square Footage December
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
WASHINGTON, CONTINUED
Brentwood, Vancouver 1990 28 14 296 286,132 967 95%
Chandler's Bay I, Kent 1989 27 36 293 278,874 952 98%
Charter Club, Everett 1991 17 12 201 172,773 860 99%
Creekside, Mountlake Terrace (1) 1987 24 43 512 407,296 796 99%
Eagle Rim, Redmond 1986-88 39 20 156 137,920 884 96%
Edgewood, Woodinville (1) 1986 15 10 203 166,299 819 98%
Fox Run, Federal Way 1988 9 5 143 127,960 895 100%
Huntington Park, Everett 1991 27 14 381 307,793 808 100%
Newport Heights, Seattle (1) 1985 12 5 80 59,056 738 99%
Orchard Ridge, Lynnwood 1988 9 6 104 86,548 832 99%
Pointe East, Redmond 1988 19 6 76 83,280 1,096 96%
Village of Newport, Federal Way (1) 1987 7 4 100 76,890 769 98%
Waterstone Place, Federal Way 1990 72 37 750 616,436 822 92%
Wellington, Silverdale (1) 1990 17 11 240 214,024 892 80%
----------------------------------------------------------------------------------
TOTAL PROPERTIES: 5,198 4,055 67,705 59,472,576
----------------------------------------------------------------------------------
AVERAGE: 24 19 311 272,810 878 95%
==================================================================================
<CAPTION>
December 1996
Avg. Monthly
Rental Rate Per
Property Unit Square Foot
- -----------------------------------------------------------------
<S> <C> <C>
WASHINGTON, CONTINUED
Brentwood, Vancouver $640 $0.66
Chandler's Bay I, Kent $680 $0.71
Charter Club, Everett $681 $0.79
Creekside, Mountlake Terrace (1) $656 $0.83
Eagle Rim, Redmond $743 $0.84
Edgewood, Woodinville (1) $693 $0.85
Fox Run, Federal Way $626 $0.70
Huntington Park, Everett $653 $0.81
Newport Heights, Seattle (1) $674 $0.91
Orchard Ridge, Lynnwood $649 $0.78
Pointe East, Redmond $944 $0.86
Village of Newport, Federal Way (1) $582 $0.76
Waterstone Place, Federal Way $571 $0.69
Wellington, Silverdale (1) $641 $0.72
-----------------------------
TOTAL PROPERTIES:
-----------------------------
AVERAGE: $673 $0.77
=============================
</TABLE>
(1) Encumbered by a third party mortgage.
(2) Includes La Costa Brava (JAX) and Cedar Cove.
25
<PAGE>
ITEM 2. PROPERTIES (CONTINUED)
ADDITIONAL PROPERTIES
<TABLE>
<CAPTION>
Occupancy
Acreage Average As of
Year(s) (approx- Square Square Footage December
Property Constructed Building imate) Units Footage Per Unit 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA
Brookside Place, Stockton 1981 28 10 90 96,664 1,074 96%
Canyon Creek, San Ramon 1984 27 13 268 257,676 961 94%
Cobblestone Village, Fresno 1983 33 15 162 153,118 945 94%
Country Oaks, Agoura 1985 38 15 256 258,558 1,010 93%
Edgewater, Bakersfield 1984 35 15 258 240,322 931 93%
Feather River, Stockton 1981 16 8 128 97,328 760 95%
Hidden Lake, Sacramento 1985 27 17 272 261,808 963 93%
Lakeview, Lodi 1983 25 9 138 136,972 993 95%
Lantern Cove, Foster City 1985 29 17 232 228,432 985 94%
Schooner Bay I, Foster City 1985 21 12.5 168 167,345 996 95%
Schooner Bay II, Foster City 1985 18 12.5 144 143,442 996 97%
South Shore, Stockton 1979 24 8 129 141,055 1,093 93%
Waterfield Square I, Stockton 1984 22 10 170 160,100 942 95%
Waterfield Square II, Stockton 1984 24 9 158 151,488 959 96%
Willow Brook, Pleasant Hill 1985 38 12 228 234,840 1,030 95%
Willow Creek, Fresno 1984 15 7 116 118,422 1,021 91%
COLORADO
<CAPTION>
December, 1996
Avg Monthly
Rental Rate Per
Unit Square Foot
- ----------------------------------------------------------------
<S> <C> <C>
CALIFORNIA
Brookside Place, Stockton $ 740 $0.69
Canyon Creek, San Ramon $1,055 $1.10
Cobblestone Village, Fresno $ 563 $0.60
Country Oaks, Agoura $1,184 $1.17
Edgewater, Bakersfield $ 638 $0.68
Feather River, Stockton $ 547 $0.72
Hidden Lake, Sacramento $ 677 $0.70
Lakeview, Lodi $ 682 $0.69
Lantern Cove, Foster City $1,524 $1.55
Schooner Bay I, Foster City $1,583 $1.59
Schooner Bay II, Foster City $1,570 $1.58
South Shore, Stockton $ 749 $0.69
Waterfield Square I, Stockton $ 580 $0.62
Waterfield Square II, Stockton $ 597 $0.62
Willow Brook, Pleasant Hill $1,209 $1.17
Willow Creek, Fresno $ 668 $0.65
COLORADO
</TABLE>
26
<PAGE>
ITEM 2. PROPERTIES (CONTINUED)
ADDITIONAL PROPERTIES
<TABLE>
<CAPTION>
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate Units Footage Per Unit 31, 1996 Unit Square Foot
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Deerfield, Denver 1983 22 9 158 146,380 926 94% $705 $0.76
COLORADO, CONTINUED
Foxridge, Englewood 1984 27 15 300 292,992 977 92% $764 $0.78
NEW MEXICO
Mesa Del Oso, Albuquerque 1983 69 25 221 252,169 1,141 99% $893 $0.78
Tierra Antigua, Albuquerque 1985 19 9 148 152,241 1,029 93% $796 $0.77
OKLAHOMA
Lakewood, Tulsa 1985 21 9 152 157,372 1,035 95% $670 $0.65
----------------------------------------------------------------------------------------
TOTAL ADDITIONAL PROPERTIES: 578 257 3,896 3,848,724
----------------------------------------------------------------------------------------
AVERAGE: 28 12 186 183,273 988 94% $899 $0.91
========================================================================================
</TABLE>
Note: All of these Additional Properties are encumbered by mortgages, of which
the Company has an investment in the second and third mortgages (which
are subordinate to first mortgages owned by third party unaffiliated
entities).
27
<PAGE>
PART I
ITEM 3. LEGAL PROCEEDINGS
Richard M. Perlman, a former employee of companies controlled by Mr. Zell,
filed a legal proceeding against Mr. Zell and various partnerships and
corporations controlled by Mr. Zell claiming, inter alia, that he had an
----------
interest in 20 of 46 of the Initial Properties (the "Zell Properties") and that
he suffered damages when those Properties were transferred into the REIT. The
proceeding was filed on July 21, 1995 (Richard M. Perlman, et al. v. Samuel
------------------------------------
Zell, et al.) (United States District Court for the Northern District of
- -----------
Illinois-Eastern Division, Case No. 95 C 4242). Mr. Perlman voluntarily
dismissed the action that he previously filed in the Circuit Court of Cook
County, Illinois, which was known as Richard M. Perlman v. Samuel Zell, et al,
-----------------------------------------
Case No. 92 CH 19915. Mr. Zell believes that such claim lacks merit and is
vigorously contesting the claims. The Company and the Operating Partnership are
not currently parties to this lawsuit. Discovery is currently proceeding and
trial is currently anticipated to commence in June, 1997. Because Mr. Perlman's
entire claimed interest in these Properties, based on Mr. Perlman's pleadings,
does not exceed 1% of the value of these Properties, the Operating Partnership
has title insurance coverage, and the Operating Partnership has been indemnified
by Mr. Zell and certain of his affiliates for any actual losses incurred in
connection with such matters, the Operating Partnership believes no material
loss to the Operating Partnership could occur.
On March 20, 1996, a legal proceeding (Nick J. Miletich, Administrator of
the Estates of Dorothy Miletich and Madelyne Miletich, deceased, v. Equity
Residential Properties Trust, Equity Residential Properties Management
Corporation, Curt Vajgrt, Raymond Countryman and Darla Countryman) (Iowa
District Court, Polk Count, Iowa, Law Case No. CL 68908) was filed against the
Company. This legal proceeding arises out of the Company's ownership and
management of the apartment building known as 3000 Grand Ave. in Des Moines,
Iowa and alleges that Raymond and Darla Countryman murdered Dorothy Miletich and
Madelyne Miletich, who were residents of the apartment complex, on June 15,
1995. Raymond Countryman is a former employee of the Company. The plaintiff
alleges, inter alia, that had the Company learned of the background of Mr.
----- ----
Countryman prior to his employment, the Company would not have hired him and the
deaths of the Miletichs would have been avoided. The Company is vigorously
contesting these claims, and believes it has strong defenses to these claims,
nevertheless, there is no assurance that the Company will not be held liable for
said deaths and there is no assurance that its insurance coverage will cover all
damages that may be awarded against it.
In addition, only ordinary routine litigation incidental to the business
which is not deemed material was initiated during the year ended December 31,
1996. The Operating Partnership does not believe there is any other litigation,
except as mentioned in the previous paragraph, threatened against the Operating
Partnership other than routine litigation arising out of the ordinary course of
business, some of which is expected to be covered by liability insurance, none
of which is expected to have a material adverse effect on the consolidated
financial statements of the Operating Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
28
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
There is no established public trading market for the OP Units.
The following table sets forth for the periods indicated, the distributions
paid on the Operating Partnership's OP Units:
<TABLE>
<CAPTION>
Distributions
-------------
<S> <C>
Fiscal Year 1996
Fourth Quarter Ended December 31, 1996 $0.625
Third Quarter Ended September 30, 1996 $0.59
Second Quarter Ended June 30, 1996 $0.59
First Quarter Ended March 31, 1996 $0.59
Fiscal Year 1995
Fourth Quarter Ended December 31, 1995 $0.59
Third Quarter Ended September 30, 1995 $0.53
Second Quarter Ended June 30, 1995 $0.53
First Quarter Ended March 31, 1995 $0.53
</TABLE>
In addition, on February 25, 1997, the Operating Partnership declared a
$0.625 distribution on each OP Unit payable on April 11, 1997 to OP Unit holders
of record on March 28, 1997.
The number of holders of record of OP Units in the Operating Partnership at
December 31, 1996, was 146. The number of outstanding OP Units as of December
31, 1996 was 59,013,064.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and operating information
on a historical basis for the Operating Partnership and the Predecessor
Business. The following information should be read in conjunction with all of
the financial statements and notes thereto included elsewhere in this Form 10-K.
The historical operating data for the years ended December 31, 1995, 1994, 1993
and 1992 have been derived from the historical Financial Statements of the
Operating Partnership and the Predecessor Business audited by Grant Thornton
LLP, independent accountants. The historical operating data for the year ended
December 31, 1996, has been derived from the historical Financial Statements of
the Operating Partnership by Ernst & Young LLP, independent auditors. Certain
capitalized terms as used herein, are defined in the Notes to the Consolidated
Financial Statements as included elsewhere in this Form 10-K.
29
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
AND PREDECESSOR BUSINESS
CONSOLIDATED AND COMBINED HISTORICAL FINANCIAL INFORMATION
(Amounts in thousands except OP Units and property data)
<TABLE>
<CAPTION>
Year Ended December 31, (1)
---------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues $ 478,385 $ 390,384 $ 231,034 $ 112,070 $ 92,973
========== ========== ========== ========== ==========
Income (loss) before gain on disposition of properties,
extraordinary items and allocation to Predecessor Business $ 97,033 $ 59,738 $ 45,988 $ 8,137 $ (3,281)
========== ========== ========== ========== ==========
Net income $ 115,923 $ 83,355 $ 45,988 $ 9,929 $ -
========== ========== ========== ========== ==========
Net income per weighted average OP Unit outstanding $ 1.70 $ 1.68 $ 1.34 $ 0.43 $ -
========== ========== ========== ========== ==========
Weighted average OP Units outstanding 51,108 42,749 34,150 22,939 -
========== ========== ========== ========== ==========
Distributions declared per OP Unit outstanding $ 2.40 $ 2.18 $ 2.01 $ 0.68 $ -
========== ========== ========== ========== ==========
BALANCE SHEET DATA (at end of period):
Real estate, before accumulated depreciation $2,983,510 $2,188,939 $1,963,476 $ 634,577 $ 358,212
Real estate, after accumulated depreciation $2,681,998 $1,970,600 $1,770,735 $ 478,210 $ 218,825
Total assets $2,986,127 $2,141,260 $1,847,685 $ 535,914 $ 238,878
Total debt $1,254,274 $1,002,219 $ 994,746 $ 278,642 $ 343,282
Redeemable Preference Interests, net $ - $ 24,578 $ 26,001 $ - $ -
9 3/8% Series A Cumulative Redeemable Preference Units $ 153,000 $ 153,000 $ - $ - $ -
9 1/8% Series B Cumulative Redeemable Preference Units $ 125,000 $ 125,000 $ - $ - $ -
9 1/8% Series C Cumulative Redeemable Preference Units $ 115,000 $ - $ - $ - $ -
Partners' capital (deficit) $1,216,467 $ 750,902 $ 761,373 $ 229,644 $(122,094)
OTHER DATA:
Total properties (at end of period) (2) 218 174 163 79 46
Total apartment units (at end of period) (2) 67,705 53,294 50,704 24,419 15,732
Funds from operations (unaudited) (3) $ 160,267 $ 120,965 $ 83,886 $ 30,127 $ 11,975
Cash flow provided by (used for):
Operating activities $ 210,930 $ 141,534 $ 93,997 $ 25,582 $ 10,871
Investing activities $ (635,655) $ (324,018) $ (896,515) $(106,543) $ (5,917)
Financing activities $ 558,568 $ 175,874 $ 808,495 $ 94,802 $ (4,945)
</TABLE>
<PAGE>
PART II
ITEM 6. SELECTED FINANCIAL AND OPERATING INFORMATION (COMBINED HISTORICAL
(CONTINUED))
(1) Historical results for the year ended December 31, 1992 represented the
combined results for the Predecessor Business. Historical results for the year
ended December 31, 1993 included combined results of the Predecessor Business
for the period January 1, 1993 through August 17, 1993.
(2) In August 1995, the Operating Partnership also made an $89 million
investment in partnership interests and subordinated mortgages collateralized by
the Additional Properties. The Additional Properties consist of 3,896 units.
(3) The Operating Partnership generally considers FFO to be one measure of the
performance of real estate companies. The new definition of FFO adopted in
March 1995 by the Board of Governors of the National Association of Real Estate
Investment Trusts ("NAREIT") defines FFO as net income (loss) (computed in
accordance with generally accepted accounting principles ("GAAP")), excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation on real estate assets, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures are calculated to reflect FFO on the same basis. The Operating
Partnership believes that FFO is helpful to investors as a measure of the
performance of a real estate company because, along with cash flows from
operating activities, financing activities and investing activities, it provides
investors an understanding of the ability of the Operating Partnership to incur
and service debt and to make capital expenditures. FFO does not represent cash
generated from operating activities in accordance with GAAP and therefore should
not be considered an alternative to net income as an indication of the Operating
Partnership's performance or to net cash flows from operating activities as
determined by GAAP as a measure of liquidity and is not necessarily indicative
of cash available to fund cash needs. The Operating Partnership's calculation
of FFO represents net income excluding gains on dispositions of properties,
gains on early extinguishment of debt, and write-off of unamortized costs on
refinanced debt, less allocation of income to the Redeemable Preference
Interests and the Series A, Series B and Series C Cumulative Redeemable
Preference Units, plus depreciation on real estate assets and amortization of
deferred financing costs related to the Predecessor Business. The Operating
Partnership's calculation of FFO may differ from the methodology for calculating
FFO utilized by other companies and, accordingly, may not be comparable to such
other companies. The Operating Partnership's calculation of FFO for 1995 and
1994 have been restated to reflect the effects of the new definition as
mentioned above. FFO for the year ended December 31, 1994 includes the effect of
a one-time charge of approximately $879,000 for the relocation of the property
management headquarters to Chicago. In addition, FFO for the year ended December
31, 1993 excludes the effect of refinancing costs of approximately $3.3 million
which represented costs associated with the prepayment of certain mortgage
loans.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7. OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of the Operating Partnership should be read in conjunction
with "Selected Financial Data" and the historical Consolidated Financial
Statements thereto appearing elsewhere in this Form 10-K. Due to the Operating
Partnership's ability to control through ownership the Management Partnerships,
the Financing Partnerships and the LLCs, each such entity has been consolidated
with the Operating Partnership for financial reporting purposes.
RESULTS OF OPERATIONS
Since the Company's IPO, the Operating Partnership has acquired direct or
indirect interests in 160 properties (the "Acquired Properties"), containing
49,679 units in the aggregate for a total purchase price of approximately $2.4
billion, including the assumption of approximately $554.2 million of mortgage
indebtedness. The Operating Partnership's interest in six of the Acquired
Properties at the time of acquisition thereof consisted solely of ownership of
the debt collateralized by such Acquired Properties. The Operating Partnership
purchased ten of such Acquired Properties or 2,694 units between the IPO and
December 31, 1993 (the "1993 Acquired Properties"); 84 of such Acquired
Properties or 26,285 units in 1994 (the "1994 Acquired Properties"); 17 of such
Acquired Properties or 5,035 units in 1995 (the "1995 Acquired Properties") and
49 of such Acquired Properties consisting of 15,665 units in 1996 (the "1996
Acquired Properties"). In addition, in August 1995 the Operating Partnership
made an investment in partnership interests and subordinated mortgages
collateralized by the 21 Additional Properties. The Acquired Properties were
presented in the Consolidated and Combined Financial Statements of the Operating
Partnership from the date of each acquisition.
During 1995 the Operating Partnership also disposed of six properties
containing 2,445 units (the "1995 Disposed Properties") for a total sales price
of approximately $52 million and the release of mortgage indebtedness of $20.5
million. During 1996, the Operating Partnership disposed of five properties
containing 1,254 units (the "1996 Disposed Properties") for a total sales price
of approximately $41.3 million.
The Operating Partnership's overall results of operations for the three
years ended December 31, 1996 have been significantly impacted by the Operating
Partnership's acquisition activity. The significant changes in rental revenues,
property and maintenance expenses, real estate taxes and insurance, depreciation
expense, property management and interest expense can all primarily be
attributed to the acquisition of the Acquired Properties. The impact of the
Acquired Properties is discussed in greater detail in the following paragraphs.
Properties that the Operating Partnership owned for all of both 1996 and
1995 (the "1996 Same Store Properties") and Properties that the Operating
Partnership owned for all of both 1995 and 1994 (the "1995 Same Store
Properties") also impacted the Operating Partnership's results of operations and
are discussed as well in the following paragraphs.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
For the year ended December 31, 1996, income before gain on disposition of
properties and extraordinary items increased by $37.3 million when compared to
the year ended December 31, 1995. This increase was primarily due to increases
in rental revenues net of increases in property and maintenance expenses, real
estate taxes and insurance, property management expenses, depreciation, interest
expense and general and administrative expenses. All of the increases in the
various line item accounts mentioned above can be primarily attributed to the
1996 Acquired Properties and 1995 Acquired Properties. These increases were
partially offset by the 1996 Disposed Properties and the 1995 Disposed
Properties. Interest income earned on the Company's mortgage note investment
increased by approximately $8 million and was an additional factor that impacted
the year to year changes.
In regard to the 1996 Same Store Properties, rental revenues increased by
approximately $15.9 million or 4.8 % primarily as a result of higher rental
rates charged to new tenants and tenant renewals and higher average occupancy
levels. Overall property operating expenses which include property and
maintenance, real estate taxes and insurance and an allocation of property
management expenses increased approximately $1.7 million or 1.2%. This
increase was primarily the result of higher payroll expenses and utilities
costs. For 1996 the Operating Partnership also increased its per unit charge
for property level insurance which increased insurance expense by approximately
$0.7 million. In addition, real estate taxes increased due to reassessments on
certain of the 1996 Same Store Properties.
Property management represents expenses associated with the management of the
Operating Partnership's Properties. These expenses increased by approximately
$2.3 million primarily as a result of the expansion of the Operating
Partnership's property management with the addition of a regional operations
center ("ROC") in Seattle, Washington and during the third quarter of 1996 the
addition of two new area offices located in Raleigh, North Carolina and Ft.
Lauderdale, Florida. Other factors that impacted this increase were higher
payroll and travel costs and legal and professional fees.
Fee and asset management revenues and fee and asset management expenses are
associated with the management of properties not owned by the Operating
Partnership that are managed for affiliates. These revenues decreased by $0.3
million primarily due to the disposition of certain of these properties.
Interest expense, including amortization of deferred financing costs,
increased by approximately $3.8 million. This increase was primarily the result
of an increase in the Operating Partnership's average indebtedness outstanding
which increased by $75.8 million. However, the Operating Partnership's
effective interest costs decreased from 8.09% in 1995 to 7.87% in 1996.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses, which include corporate operating
expenses, increased approximately $1.7 million between the years under
comparison. This increase was primarily due to adding corporate personnel,
higher salary costs and shareholder reporting costs as well as an increase in
professional fees. General and administrative expenses as a percentage of total
revenues were 2.06% for the year ended December 31, 1996, which was a slight
decrease from 2.08% in 1995.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31,
1994
For the year ended December 31, 1995, income before gain from disposition
of properties and extraordinary items increased by $13.8 million when compared
to the year ended December 31, 1994. This increase was primarily due to
increases in rental revenues net of increases in interest expense, property and
maintenance expenses, real estate taxes and insurance, property management
expenses, depreciation expense and general and administrative expenses. All of
the increases in the various line item accounts mentioned above can be primarily
attributed to the 1995 Acquired Properties and 1994 Acquired Properties which
was partially offset by the 1995 Disposed Properties. Increases in fee and
asset management revenues, net of fee and asset management expenses as well as
interest income of approximately $4.9 million earned on the Operating
Partnership's mortgage note investment were additional factors that impacted the
change from 1994 to 1995.
In regard to the 1995 Same Store Properties, rental revenues increased by
approximately $5.5 million or 4% as a result of higher rental rates charged to
new tenants and tenant renewals. Overall property operating expenses which
include property and maintenance, real estate taxes and insurance and an
allocation of property management expenses increased approximately $0.9 million
or 1.5%. This increase was the result of higher leasing and advertising costs,
repair and maintenance and real estate taxes for certain of the 1995 Same Store
Properties located in Texas.
Property management represents expenses associated with the management of
the Operating Partnership's Properties. These expenses increased by
approximately $5 million primarily as a result of the expansion of the Operating
Partnership's property management with the addition of ROCs in Bethesda,
Maryland, Denver, Colorado and Seattle, Washington. These new ROCs were the
result of acquiring Artery Property Management, Inc. ("Artery") in December 1994
and assuming property management for 31 Properties in January and February 1995.
Fee and asset management revenues and fee and asset management expenses are
associated with the management of properties not owned by the Operating
Partnership that are managed for affiliates. These revenues increased by $2.3
million and expenses increased by $1.8 million, primarily due to the management
of an additional 6,213 units for certain properties owned by various Artery
entities.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Interest expense, including amortization of deferred financing costs, increased
by approximately $42.8 million. Of this increase, $18.1 million was due to the
interest associated with the debt assumed on the 1994 Acquired Properties and
1995 Acquired Properties, $4.1 million was due to the 1999 Notes, $7.3 million
was due to the Floating Rate Notes, $8 million was due to the Operating
Partnership's line of credit and $7.3 million was due to the 2002 Notes. This
increase was partially offset by a decrease of approximately $2 million in
interest expense due to repayment of mortgage indebtedness in the amount of
$45.5 million on seven of the Operating Partnership's Properties at various
times in 1995.
General and administrative expenses, which include corporate operating
expenses, increased by approximately $2.1 million, primarily due to an increase
in state and local income and franchise taxes, as well as adding corporate
personnel and incurring higher administrative costs associated with increasing
the size of the Operating Partnership. However, general and administrative
expenses as a percentage of total revenues decreased from 2.6% in 1994 to 2.1%
in 1995.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of January 1, 1996, the Operating Partnership had approximately $13.4
million of cash and cash equivalents and $158 million available on its line of
credit. After taking into effect the various transactions discussed in the
following paragraphs, cash and cash equivalents at December 31, 1996 was
approximately $147.3 million and the amounts available on the Operating
Partnership's line of credit were $250 million. In addition, the Operating
Partnership had $3.6 million of proceeds from a property sale included in
deposits-restricted. The following discussion also explains the changes in net
cash provided by operating activities, net cash (used for) investing activities
and net cash provided by financing activities, all of which are presented in the
Operating Partnership's Consolidated Statements of Cash Flows.
Part of the Operating Partnership's strategy in funding the purchase of
multifamily properties is to utilize its line of credit and to subsequently
repay the line of credit from the issuance of additional equity or debt
securities. Continuing to employ this strategy, during 1996 the Company and/or
the Operating Partnership; (i) issued a total of approximately 14.4 million
Common Shares through various offerings and received total net proceeds of $483
million, (ii) completed the offering of the Series C Preferred Shares and
received net proceeds of $111.4 million, (iii) issued the 2026 Notes and
received net proceeds of $149 million and (iv) refinanced certain of its tax-
exempt bonds in two separate transactions for a total of $112.2 million of net
proceeds. All of these proceeds have been or will be utilized to purchase
additional properties and/or repay the line of credit and mortgage indebtedness
on certain properties.
With respect to Property acquisitions during the year, the Operating
Partnership purchased 49 Properties containing 15,665 units for a total
acquisition cost of $778.2 million, which included the assumption of $142.2
million of mortgage indebtedness, the forgiveness of debt of $2.7 million and
the issuance of OP Units having a value of approximately $0.4 million. These
acquisitions were primarily funded from amounts drawn on the Operating
Partnership's line of credit and a portion of the proceeds received in
connection with the transactions mentioned in the previous paragraph.
During the year ended December 31, 1996, the Operating Partnership also
disposed of five properties which generated net proceeds of approximately $40
million. Proceeds from four of the dispositions were ultimately applied to
purchase additional Properties and the remaining proceeds have been set aside
for future property acquisitions.
As of December 31, 1996, the Operating Partnership had total indebtedness
of approximately $1.3 billion, which included mortgage indebtedness of $755.4
million, of which $274 million represented tax exempt bond indebtedness, and
unsecured debt of $498.8 million (net of a $1.2 million discount). During the
year, the Operating Partnership repaid an aggregate of $57 million mortgage
indebtedness on eight of its Properties. These repayments were funded from the
Operating Partnership's line of credit or from proceeds received from the
various capital transactions mentioned in previous paragraphs. The Operating
Partnership has, from time to time, entered into interest rate protection
agreements, financial instruments, to reduce the
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
potential impact of increases in interest rates but has limited exposure to the
extent of non-performance by the counterparties of each protection agreement
since each counterparty is a major U.S. financial institution, and the Operating
Partnership does not anticipate their non-performance. No such financial
instrument has been used for trading purposes. On February 12, 1996, the
Operating Partnership entered into two interest rate protection agreements that
will hedge the Operating Partnership's interest rate risk at maturity of $175
million of indebtedness. The first agreement hedged the refinance risk of $50
million of mortgage loans scheduled to mature in September 1997 by locking the
five year Treasury Rate, commencing October 1, 1997. The second agreement hedged
the interest rate risk of the Operating Partnership's 1999 Notes by locking the
four year Treasury Rate commencing May 15, 1999. There was no current cost to
the Operating Partnership for entering into these agreements.
The Operating Partnership has a policy of capitalizing expenditures made
for new assets, including newly acquired properties and the costs associated
with placing these assets into service. Expenditures for improvements and
renovations that significantly enhance the value of existing assets or
substantially extend the useful life of an asset are also capitalized. Capital
spent for replacement-type items such as appliances, draperies, carpeting and
floor coverings, mechanical equipment and certain furniture and fixtures is also
capitalized. Expenditures for ordinary maintenance and repairs are expensed to
operations as incurred. With respect to acquired properties, the Operating
Partnership has determined that it generally spends $1,000 per unit during its
first three years of ownership to fully improve and enhance these properties to
meet the Operating Partnership's standards. In regard to capital replacements,
the Operating Partnership generally expects to spend $300 per unit on an annual
recurring basis.
During the year ended December 31, 1996, total capital expenditures for the
Operating Partnership approximated $45.9 million. Of this amount, approximately
$10.6 million related to capital improvements and major repairs for certain of
the 1994, 1995 and 1996 Acquired Properties. Capital improvements and major
repairs for all of the Operating Partnership's pre-IPO properties and Acquired
Properties approximated $13.8 million, or $232 per unit. Capital spent for
replacement-type items approximated $16.3 million, or $276 per unit, which is in
line with the Operating Partnership's expected annual recurring per unit cost.
In regard to capital spent for upgrades at certain properties and tenant
improvements with respect to the retail and commercial office space at one
Property, the amount was approximately $2.9 million. Also included in total
capital expenditures was approximately $2.3 million expended for non-real estate
additions such as computer software, computer equipment, furniture and fixtures
and leasehold improvements for the Operating Partnership's ROCs and its
corporate headquarters. Such capital expenditures were primarily funded from
working capital reserves and from net cash provided by operating activities.
Total capital expenditures for 1997 are budgeted to be approximately $48
million.
37
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Total distributions paid in 1996 amounted to $142.3 million, which included
the distribution declared in the fourth quarter of 1995. The fourth quarter of
1996 distributions were paid on January 10, 1997 and approximated $45.9 million.
On February 25, 1997, the Operating Partnership declared a $0.625 distribution
on each OP Unit payable to holders of record on March 28, 1997. This
distribution will be paid on April 11, 1997. The Operating Partnership also
declared a $0.585938 distribution, a $0.570313 distribution and a $0.570313
distribution to the Company as holder of the Series A Cumulative Redeemable
Preference Units, the Series B Cumulative Redeemable Preference Units and Series
C Cumulative Redeemable Preference Units, respectively. These distributions
will be paid on or about April 15, 1997.
In January 1997 the Company announced its planned Merger with Wellsford,
and upon shareholder approval by both companies, anticipates the consummation of
such Merger on or around June 1, 1997. In connection with the Merger, the
Company may have to fund up to $67 million to cover certain transaction and
termination costs, repay Wellsford's line of credit balance and fund an
investment in a Company to be spun off from Wellsford.
Subsequent to December 31, 1996, the Operating Partnership acquired eight
additional properties representing 2,575 units for a total purchase price of
approximately $144.2 million, including the assumption of approximately $50.8
million of mortgage indebtedness. These acquisitions were funded from proceeds
of the December 1996 Common Share Offering. The Operating Partnership is
actively seeking to acquire additional multifamily properties with physical and
market characteristics similar to the Properties. During the remainder of 1997,
the Operating Partnership expects to acquire between 10,000 to 15,000
multifamily units, in addition to the Merger mentioned above. However, there is
no assurance that this level of property acquisitions can be achieved since the
Operating Partnership is dependent on the capital markets in order to issue
additional equity and debt securities to permanently finance such acquisitions.
In March 1997, the Company contributed to the Operating Partnership net
proceeds of $43.2 million from the March 1997 Common Share Offerings. These
proceeds will be utilized to purchase additional properties and/or repay
mortgage indebtedness on certain properties.
The Operating Partnership anticipates that it may sell certain Properties
in the portfolio and may sell up to 2,500 multifamily units during 1997.
However, there is no assurance that this level of property dispositions may be
achieved.
The Operating Partnership expects to meet its short-term liquidity
requirements generally through its working capital and net cash provided by
operating activities. The Operating Partnership considers its cash provided by
operating activities to be adequate to meet operating requirements and payments
of distributions. The Operating Partnership also expects to meet its long-term
liquidity requirements, such as scheduled mortgage debt maturities, reduction of
outstanding amounts under its line of credit, property acquisitions and capital
improvements through the issuance of unsecured notes and debt securities
including additional OP Units as well as from undistributed FFO and proceeds
received from the disposition of certain Properties. In addition, the Operating
Partnership has certain uncollateralized Properties available for additional
mortgage borrowings in the event that the public capital markets are unavailable
to the
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Operating Partnership or the cost of alternative sources of capital to the
Operating Partnership is too high.
In November 1996, the Operating Partnership reached an agreement with
Morgan Guaranty and Bank of America to provide the Operating Partnership a new
credit facility with potential borrowings of up to $250 million. This new line
of credit matures in November 1999 and will continue to be used for property
acquisitions and for any working capital needs. As of March 20, 1997, no
amounts were outstanding under this facility.
As of January 1, 1995, the Operating Partnership had approximately $20
million of cash and cash equivalents and $88 million available on its line of
credit. After taking into effect the various transactions discussed in the
following paragraphs, the Operating Partnership's cash and cash equivalents
balance at December 31, 1995 was approximately $13.4 million and the amounts
available on the Operating Partnership's line of credit were $158 million. In
addition, the Operating Partnership had $15 million of proceeds from various
property sales included in deposits-restricted. The following discussion also
explains the changes in net cash provided by operating activities, net cash
(used for) investing activities and net cash provided by financing activities,
all of which are presented in the Operating Partnership's Statements of Cash
Flows.
The Company completed its Second Public Debt Offering in April 1995 and
contributed to the Operating Partnership net proceeds of approximately $123.1
million, substantially all of which were applied to repay a portion of the
outstanding balance on the Operating Partnership's line of credit. In May 1995,
the Company completed its offering of the Series A Preferred Shares and
contributed to the Operating Partnership net proceeds of approximately $148.2
million. Of these proceeds, $95 million were applied to repay the remaining
outstanding balance on the Operating Partnership's line of credit. The
remaining proceeds were subsequently used to purchase additional Properties and
pay off scheduled debt maturities. In November 1995, the Company completed its
offering of the Depositary Shares and contributed to the Operating Partnership
net proceeds of approximately $121.1 million, all of which were once again
applied to repay a portion of the outstanding balance on the Operating
Partnership's line of credit.
With respect to property acquisitions during 1995, the Operating
Partnership purchased 17 Properties containing 5,035 units for a total of
$263.8 million, which included the assumption of $23.6 million of mortgage
indebtedness and the issuance of OP Units having a value of approximately $17.8
million. The Operating Partnership also made an $89 million investment in
partnership interests and subordinated mortgages collateralized by 21 properties
containing 3,896 units. These acquisitions were primarily funded from amounts
drawn on the Operating Partnership's line of credit and a portion of the
proceeds received in connection with the Series A Preferred Shares as mentioned
in the previous paragraph.
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
During 1995, the Operating Partnership disposed of six properties which
generated net proceeds of $46.4 million and reduced mortgage indebtedness by
$20.5 million. As of December 31, 1995, approximately $15 million of such
proceeds were included in the Operating Partnership's balance sheet in its
deposits-restricted account.
As of December 31, 1995, the Operating Partnership had total indebtedness
of approximately $1 billion, which included conventional mortgages of $399.2
million, unsecured debt of $348.5 million (net of a $1.5 million discount) and
tax exempt bond indebtedness of $162.5 million and $92 million outstanding on
the Operating Partnership's line of credit. During the year, the Operating
Partnership repaid mortgage indebtedness on seven of its Properties, which
aggregated $45.5 million. These repayments were funded from the Operating
Partnership's line of credit or from proceeds received from the various capital
transactions mentioned in previous paragraphs.
During the year ended December 31, 1995, total capital expenditures for the
Operating Partnership approximated $49.8 million. Of this amount, approximately
$14.2 million, or $256 per unit, related to capital improvements and major
repairs for the Acquired Properties. Capital improvements and major repairs for
all of the Company's pre-IPO Properties approximated $13.7 million, or $247 per
unit. Capital spent for replacement-type items approximated $16.4 million, or
$296 per unit, which is in line with the Company's expected annual recurring per
unit cost. In regard to capital spent for upgrades at certain properties and
tenant improvements with respect to the retail and commercial office space at
Reserve Square, the amount was approximately $5.5 million. Also included in
total capital expenditures was approximately $3.7 million expended for non-real
estate additions such as computer software, computer equipment and furniture and
fixtures for the Operating Partnership's regional operation centers and its
corporate headquarters. Such capital expenditures were primarily funded from
working capital reserves and from net cash provided by operating activities.
FUNDS FROM OPERATIONS
Commencing in 1996, the Operating Partnership implemented the new
definition of FFO adopted by the Board of Governors of NAREIT in March 1995.
The new definition primarily eliminates the amortization of deferred financing
costs and depreciation of non-real estate as items added back to net income when
calculating FFO.
The Operating Partnership generally considers FFO to be one measure of the
performance of real estate companies. The resolution adopted by the Board of
Governors of NAREIT defines FFO as net income (loss) (computed in accordance
with GAAP), excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect FFO on the same basis.
The Operating Partnership believes that FFO is helpful to investors as a measure
of the performance of a real
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FUNDS FROM OPERATIONS (CONTINUED)
estate company because, along with cash flows from operating activities,
financing activities and investing activities, it provides investors an
understanding of the ability of the Operating Partnership to incur and service
debt and to make capital expenditures. FFO in and of itself does not represent
cash generated from operating activities in accordance with GAAP and therefore
should not be considered an alternative to net income as an indication of the
Operating Partnership's performance or to net cash flows from operating
activities as determined by GAAP as a measure of liquidity and is not
necessarily indicative of cash available to fund cash needs. The Operating
Partnership's calculation of FFO represents net income excluding gains on
dispositions of properties, gains on early extinguishment of debt and write-off
of unamortized costs on refinanced debt, less allocation of income to the
Redeemable Preference Interests and the Series A, Series B and Series C
Cumulative Redeemable Preference Units, plus depreciation on real estate assets
and amortization of deferred financing costs related to the Predecessor
Business. The Operating Partnership's calculation of FFO may differ from the
methodology for calculating FFO utilized by other companies and, accordingly,
may not be comparable to such other companies.
For the year ended December 31, 1996 FFO increased $39.3 million
representing a 32.5% increase when compared to the year ended December 31, 1995.
For the year ended December 31, 1995, FFO, based on the Operating Partnership's
calculation of FFO, increased by $37.1 million representing a 44.2% increase
when compared to the year ended December 31, 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on page F-1 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 7, 1996, the Operating Partnership filed a Current Report on Form 8-
K, as amended, reporting the dismissal of Grant Thornton L.L.P. as its
independent public accountants that is incorporated herein by reference.
41
<PAGE>
PART III
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a,b,c,d,e & f) TRUSTEES AND EXECUTIVE OFFICERS
-------------------------------
The Operating Partnership does not have any trustees or executive officers.
The trustees and executive officers, as of March 1, 1997, of the Company, their
ages and their positions and offices are set forth in the following table:
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES HELD
- ---------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Samuel Zell 55 Chairman of the Board of Trustees (term expires in 1999)
Douglas Crocker II 56 President, Chief Executive Officer and Trustee (term expires in
1998)
David J. Neithercut 41 Executive Vice President and Chief Financial Officer
Bruce C. Strohm 42 Executive Vice President, General Counsel and Secretary
Gregory H. Smith 46 Executive Vice President-Asset Management
Gerald A. Spector 50 Executive Vice President, Chief Operating Officer and Trustee
(term expires in 1997)
Frederick C. Tuomi 42 Executive Vice President-Property Management
Michael J. McHugh 41 Senior Vice President, Chief Accounting Officer and Treasurer
Alan W. George 39 Executive Vice President-Acquisitions
John W. Alexander 50 Trustee (term expires in 1999)
Henry H. Goldberg 58 Trustee (term expires in 1999)
Errol R. Halperin 56 Trustee (term expires in 1999)
James D. Harper, Jr. 63 Trustee (term expires in 1998)
Sheli Z. Rosenberg 55 Trustee (term expires in 1998)
Barry S. Sternlicht 36 Trustee (term expires in 1997)
B. Joseph White 49 Trustee (term expires in 1997)
</TABLE>
Samuel Zell. Mr. Zell has been Chairman of the Board of Trustees of the
Company since March 1993. Mr. Zell is chairman of the board of directors of
Equity Group Investments, Inc., an owner, manager and financier of real estate
and corporations ("EGI"), American Classic Voyages Co., an owner and operator of
cruise lines ("American Classic"), and Anixter International Inc., a provider of
integrated network and cabling systems ("Anixter"). Mr. Zell is chairman of the
board and chief executive officer of both Capsure Holdings Corp., a holding
company whose principal subsidiaries are specialty property and casualty
insurers ("Capsure") and Manufactured Home Communities, Inc., a REIT
specializing in ownership and management of manufactured home communities
("MHC"). He is co-chairman of the board of directors of Revco D.S., Inc., a
drugstore chain ("Revco"), and is a director of Quality Food Centers, Inc., an
owner and operator of supermarkets, Sealy Corporation, a bedding manufacturer
("Sealy"), Ramco Energy PLC, an independent oil company based in the United
Kingdom, and TeleTech Holdings, Inc., a provider of telephone and computer based
customer care solutions.
Douglas Crocker II. Mr. Crocker has been President, Chief Executive Officer
and Trustee of the Company since March 1993. Mr. Crocker is a director of
Horizon Group, Inc., an owner,
42
<PAGE>
PART III
developer and operator of outlet retail properties. Mr. Crocker has been
president and chief executive officer of First Capital Financial Corporation, a
sponsor of public limited real estate partnerships ("First Capital"), since
December 1992 and a director since January 1993. He has been an executive vice
president of Equity Financial and Management Company ("EF & M"), a subsidiary of
EGI, providing strategic direction and services for EGI's real estate and
corporate activities since November 1992. From September 1992 until November
1992, Mr. Crocker was a managing director of investment banking with Prudential
Securities, an investment banking firm. He was a director and president of
Republic Savings Bank, a national chartered savings and loan association
("Republic"), from December 1988 to June 1992, at which time the Resolution
Trust Corporation took control of Republic.
David J. Neithercut. Mr. Neithercut has been Executive Vice President and
Chief Financial Officer of the Company since February 1995. Mr. Neithercut had
been Vice President-Financing of the Company from September 1993 until February
1995. Mr. Neithercut was senior vice president-finance of EGI from January 1995
until February 1995. He was vice president-finance of Equity Assets Management,
Inc., a subsidiary of EGI providing real estate ownership services ("EAM"), from
October 1990 until December 1994.
Bruce C. Strohm. Mr. Strohm has been Executive Vice President and General
Counsel of the Company since March 1995 and Secretary since November 1995. Mr.
Strohm was an Assistant Secretary since March 1995 and Vice President of the
Company since its formation. From January 1988 until March 1995, Mr. Strohm
was a vice president of Rosenberg & Liebentritt, a law firm ("R & L"), most
recently serving as a member of the firm's management committee.
Gregory H. Smith. Mr. Smith has been Executive Vice President-Asset
Management of the Company since December 1994. Mr. Smith was a senior vice
president of Strategic Realty Advisors, Inc., a real estate and advisory
company, from January 1994 until December 1994. Mr. Smith had been employed at
VMS Realty Partners, a sponsor of public and private real estate limited
partnerships from June 1989 until December 1993, most recently serving as first
vice president.
Gerald A. Spector. Mr. Spector has been the Executive Vice President and
Trustee of the Company since March 1993 and Chief Operating Officer of the
Company since February 1995. Mr. Spector was the Treasurer of the Company from
March 1993 through February 1995. Mr. Spector had been an officer of EF&M since
January 1973, most recently serving as vice president from November 1994 through
January 1996. Mr. Spector was executive vice president and chief operating
officer of EF&M from September 1990 through November 1994. Mr. Spector had been
an officer of EGI since January 1988, most recently serving as vice president
from November 1994 through January 1996. Mr. Spector was executive vice
president and chief operating officer of EGI from January 1991 through January
1994.
Frederick C. Tuomi. Mr. Tuomi has been Executive Vice President-Property
Management of the Company since January 1994. Mr. Tuomi had been president of
RAM Partners, Inc., a subsidiary of Post Properties, Inc., a REIT, from March
1991 until January 1994. Mr. Tuomi was
43
<PAGE>
PART III
president of Pilot Property Company, a property management company, from July
1988 until March 1991.
Michael J. McHugh. Mr. McHugh has been Senior Vice President of the Company
since November 1994 and Chief Accounting Officer and Treasurer of the Company
since February 1995. From May 1990 to January 1995, Mr. McHugh was senior vice
president and chief financial officer of First Capital.
Alan W. George Mr. George has been Executive Vice President-Acquisitions of
the Company since February 1997, Senior Vice President - Acquisitions of the
Company from December 1995 until February 1997 and Vice President-Acquisitions
and asset manager of the Company from December 1993 to December 1995. Mr.
George was vice president-asset management of EAM from June 1992 until December
1993. He was vice president-asset management for American Real Estate Group, a
real estate investment company, from 1990 to 1992.
John W. Alexander. Mr. Alexander became a Trustee of the Company in May
1993. He has been the president of Mallard Creek Capital Partners, Inc.,
primarily an investment company with interests in real estate and development
entities, since February 1994. He has been a partner of Meringoff Equities, a
real estate investment company and is a director of Jacor Communications, Inc.,
an owner and operator of radio stations ("Jacor").
Henry H. Goldberg. Mr. Goldberg has been a Trustee of the Company since
January 1995. Mr. Goldberg is chairman of the board, chief executive officer
and founder of Artery Properties, Inc. Founded in 1959, Artery Properties, Inc.
is a diversified real estate company. Mr. Goldberg was the direct or indirect
general partner (or an executive thereof) of seven partnerships owning
residential apartment communities and one commercial office building, each of
which filed petitions under Federal bankruptcy laws during 1991 through 1993.
Each of the partnerships is now out of bankruptcy through a reorganization plan
agreed to by the project lender.
Errol R. Halperin. Mr. Halperin became a Trustee of the Company in May 1993.
Mr. Halperin has been an attorney at Rudnick and Wolfe, a law firm, since 1979,
serving as a senior partner and a member of such firm's policy committee since
1981, specializing in Federal income tax counseling and real estate and
corporate transactions.
James D. Harper, Jr. Mr. Harper became a Trustee of the Company in May 1993.
Since 1982, Mr. Harper has been president of JDH Realty Co., a real estate
development and investment company. Since 1988 he has been a co-managing
partner in AH Development, S.E. and AH HA Investments, S.E., special limited
partnerships formed to develop over 400 acres of land in Puerto Rico.
Sheli Z. Rosenberg. Ms. Rosenberg has been a Trustee of the Company since
March 1993. She is a principal of the law firm of R&L. Ms. Rosenberg is chief
executive officer, president and a director of EGI. Ms. Rosenberg has been a
director of Jacor since 1994 and has been chairman of its board of directors
since February 1996. Ms. Rosenberg is a director of Capsure, Falcon Building
Products, Inc., a manufacturer and supplier of building products ("Falcon"),
American Classic, MHC, Anixter, Revco and Sealy.
44
<PAGE>
PART III
Barry S. Sternlicht. Mr. Sternlicht became a Trustee of the Company in May
1993. Mr. Sternlicht has been chief executive officer and president of Starwood
Capital Group, L.P. since 1993 and president of Starwood Capital Partners, L.P.,
a privately owned real estate investment firm since its formation in 1991. Mr.
Sternlicht is chairman of the board and chief executive officer of Starwood
Lodging Trust, a REIT specializing in the ownership of hotels and co-chairman of
the board of Westin Hotels and Resorts Company, an owner and operator of hotels.
Mr. Sternlicht is a trustee of Angeles Participating Mortgage Trust, a mortgage
REIT, and a director of, U.S. Franchise Systems, a hotel franchise company and
Starwood Lodging Corporation, which manages hotels owned by Starwood Lodging
Trust.
B. Joseph White. Mr. White became a Trustee of the Company in May 1993. He
has been a professor at the University of Michigan Business School since 1987
and has served as Dean since 1991. Mr. White is a director of Falcon, Union
Pump Company, a manufacturer of pumps, and Kelly Services, Inc., an employment
agency.
Pursuant to the Company's declaration of trust, the trustees are divided into
three classes as nearly equal in number as possible, with each class having a
term of three years.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Operating Partnership to
report, based on its review of reports to the SEC about transactions in its OP
Units furnished to the Operating Partnership and written representation of the
Company's trustees and executive officers and the Operating Partnership's 10%
owners.
Mr. Goldberg filed a Form 4 late to report the redemption of 300 Preference
Units and Mr. Sternlicht filed a Form 4 late to report the disposition of
325,000 OP Units.
ITEM 11. EXECUTIVE COMPENSATION
The Operating Partnership does not have any executive compensation.
Information concerning the Company's executive compensation will be contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
which Annual Report is incorporated herein by reference.
45
<PAGE>
PART III
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 1, 1997, (except as
otherwise indicated in the footnotes) regarding the beneficial ownership of the
OP Units by each person known by the Operating Partnership to be the beneficial
owner of more than five percent of the Operating Partnership's outstanding OP
Units, and in addition, each trustee of the Company, the executive officers of
the Company, and by all trustees and executive officers of the Company as a
group. Each person named in the table has sole voting and investment power with
respect to all OP Units shown as beneficially owned by such person, except as
otherwise set forth in the notes to the table.
<TABLE>
<CAPTION>
OP Units
Beneficially Owned
-------------------------
Name and Business Percent
Address of Beneficial Owner Amount of Class
- ----------------------------------------------------- -------------- ---------
<S> <C> <C>
Samuel Zell (1) 3,436,060 (2) 5.81%
Partnerships and Corporations
controlled by Ann Lurie (1) 3,300,675 (3) 5.58%
Douglas Crocker II (1) -- *
Bruce C. Strohm -- *
</TABLE>
46
<PAGE>
PART III
<TABLE>
<S> <C> <C>
Gregory H. Smith (1) -- *
Gerald A. Spector (1) 1,683 *
Frederick C. Tuomi (1) -- *
John W. Alexander (4) -- *
Henry H. Goldberg (5 & 6) 387,139 (6) *
Errol R. Halperin (7) -- *
James D. Harper Jr. (8) -- *
Sheli Z. Rosenberg (1) (9) 1,528 *
B. Joseph White (10) -- *
Barry S. Sternlicht (11) 1,899,996 (11) 3.21%
Robert A. Faith (11) 1,899,996 (11) 3.21%
Equity Residential Properties Trust (1) 51,748,007 87.55%
All trustees and officers of the Company as a group 5,723,195 9.68%
including the above-named persons (16 persons)
</TABLE>
* Less than 1%
47
<PAGE>
PART III
(1) The business address for each of these entities and individuals is Two
North Riverside Plaza, Chicago, Illinois 60606.
(2) Includes 3,436,060 OP Units deemed to be owned beneficially by Mr. Zell
because Mr. Zell controls or shares control of power to vote and invest
such OP Units, either as the indirect majority shareholder of a corporation
or a corporate general partner or as a general partner. Includes the
following partnerships and corporations which are under the control of Mr.
Zell: B/S Investments, First Capital Financial Corporation, FU Associates
and ROPU Associates Limited Partnership. However, Mr. Zell disclaims
ownership of 1,557,561 OP Units because the economic benefits, with respect
to such OP Units, are attributable to others. Includes 2,599,513 OP Units
which are pledged as collateral in connection with various loans. Under the
loan agreements, the lenders cannot vote (assuming exchange of the OP Units
for Common Shares) or exercise any ownership rights relating to the pledged
OP Units unless there is an event of default under the respective loan
agreements.
(3) Includes 3,300,675 OP Units deemed to be owned beneficially by Ann Lurie
because Mrs. Lurie shares control of power to vote and invest such OP
Units, either as the indirect majority shareholder of a corporation or a
corporate general partner or as a general partner. Includes the following
partnerships and corporations which are under the control of Mrs. Lurie:
B/S Investments, First Capital Financial Corporation, and ROPU Associates
Limited Partnership. However, Mrs. Lurie disclaims ownership of 1,878,499
OP Units because the economic benefits, with respect to such OP Units, are
attributable to others. Includes 2,599,513 OP Units which are pledged as
collateral in connection with various loans. Under the loan agreements, the
lenders cannot vote (assuming exchange of the OP Units for Common Shares)
or exercise any ownership rights relating to the pledged OP Units unless
there is an event of default under the respective loan agreements.
(4) Mr. Alexander's business address is c/o Mallard Creek Capital Partners, 227
North Church Street, Suite 200 - Box E, Charlotte, North Carolina 28202.
(5) The business address for Mr. Goldberg is c/o Artery Properties, Inc. Artery
Plaza West, 4733 Bethesda Avenue, Suite 400, Bethesda, Maryland 20814.
(6) Includes 48,078 OP Units held by Mr. Goldberg's spouse. Also includes
75,714 OP Units held by GGL Investment Partners #1 ("GGL"), a Maryland
general partnership. Mr. Goldberg is a general partner of GGL with a 66.67%
percentage interest. Mr. Goldberg disclaims beneficial ownership of the OP
Units held by his spouse and 33.33% of the OP Units held by GGL.
(7) Mr. Halperin's business address is Rudnick & Wolfe, 203 North LaSalle
Street, Suite 1800, Chicago, Illinois 60601.
48
<PAGE>
PART III
(8) Mr. Harper's business address is JDH Realty Company, 3250 Mary Street,
Suite 206, Coconut Grove, Florida 33133.
(9) Ms. Rosenberg is a trustee or a co-trustee for the benefit of Mrs. Lurie
and her family and certain trusts for the benefits of Mr. Zell and his
family and accordingly may be deemed to control or share control or share
the power to vote and invest OP Units attributable to Samuel Zell and Ann
Lurie. Ms. Rosenberg disclaims beneficial ownership of all OP Units owned
by trusts for which she is a trustee or co-trustee.
(10) Mr. White's business address is Office of the Dean, School of Business
Administration, University of Michigan, 701 Tappen, Ann Arbor, Michigan
48109.
(11) The business address for Mr. Sternlicht is Three Pickwick Plaza, Suite 250,
Greenwich, Connecticut 06830 and the business address for Mr. Faith is c/o
Greystar Capital Partners, L.P., Two Riverway, Suite 850, Houston, Texas
77056. Each of Messrs. Sternlicht and Faith may be deemed to be the
beneficial owner of these 1,899,996 OP Units because each controls or
shares control of the power to vote and invest the OP Units owned by the
Starwood Original Owners. However, Mr. Sternlicht disclaims beneficial
ownership of 1,601,665 OP Units and Mr. Faith disclaims beneficial
ownership of 1,625,986 because the economic benefits, with respect to such
OP Units are attributable to other partners in the Starwood Original
Owners. Includes the following partnerships and corporations which are
under the control of Messrs. Sternlicht and Faith:
Sofistar I Limited Partnership
Breton/Hammocks Limited Partnership
SCP Nashville Partners, L.P.
Starwood Opportunity Fund I, L.P.
Starwood Opportunity Fund IA, L.P.
Starwood Mortgage Investors III, Inc.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Pursuant to the terms of the partnership agreement for the Operating
Partnership, the Operating Partnership is required to reimburse the Company for
all expenses incurred by the Company in excess of income earned by the Company
through its indirect 1% ownership of various Financing Partnerships. Amounts
paid on behalf of the Company are reflected in the Consolidated Statement of
Operations as general and administrative expenses.
During 1996, certain related entities provided services to the Operating
Partnership and the Company. These included, but were not limited to, Rosenberg
& Liebentritt, P.C., which provided legal services; Greenberg & Pociask, Ltd.,
which provided tax and accounting services; and First Capital Financial
Corporation, which provided accounting services. Fees paid to Rosenberg &
Liebentritt, P.C., of which Ms. Rosenberg has been chairman of the board since
March 1995 and was president from 1980 until March 1995,
49
<PAGE>
PART III
amounted to approximately $0.7 million for the year ended December 31, 1996.
Fees paid to the other affiliates mentioned above amounted in the aggregate to
approximately $4,400 for the year ended December 31, 1996. In addition, The
Riverside Agency, Inc., which provided insurance brokerage services, was paid
fees and reimbursed premiums and loss claims in the amount of $4.1 million for
the year ended December 31, 1996. As of December 31, 1996, no amounts were owed
to The Riverside Agency, Inc. As of December 31, 1996, $315,700 was owed to
Rosenberg & Liebentritt, P.C. for legal fees incurred in connection with new
acquisitions and securities matters.
Equity Group Investments, Inc. ("EGI") and certain of its subsidiaries,
including EAM, Eagle Flight Services, Equity Properties & Development, L.P. and
EPMC have provided certain services to the Operating Partnership and the Company
which include, but are not limited to, financial and accounting services, tax
services, investor relations, corporate secretarial, computer and support
services, real estate tax evaluation services, financing services,
telecommunications services, information systems services and property
development services. Fees paid to EGI for these services amounted to $1.3
million for the year ended December 31, 1996. Amounts due to EGI were
approximately $0.3 million as of December 31, 1996.
Artery Property Management, Inc. ("Artery") provided consulting services
with regard to property acquisitions and additional business opportunities and
was paid approximately $0.2 million for the year ended December 31, 1996.
During 1995, the Operating Partnership engaged Rudnick & Wolfe, a law firm
in which Mr. Halperin is a partner, to perform legal services. Fees paid to
this firm amounted to approximately $4,300 for the year ended December 31, 1996.
Management Corp. has lease agreements with affiliated parties covering
office space occupied by regional operation centers located in Chicago, Illinois
("Midwest ROC") and Tampa, Florida ("Southeast ROC") and the corporate
headquarters located in Chicago, Illinois. In connection with these affiliated
lease agreements, Management Corp. paid Equity Office Holdings, L.L.C. ("EOH")
$118,919 in connection with the Midwest ROC, $137,638 in connection with the
Southeast ROC and $409,392 in connection with the space occupied by the
corporate headquarters for the year ended December 31, 1996. As of December
31, 1996, $46,435 was owed to EOH.
In addition, the Operating Partnership and the Company have provided
acquisitions, asset and property management services to certain related entities
for properties not owned by the Company. Fees received for providing such
services were approximately $6.7 million for the year ended December 31, 1996.
(b) Rosenberg and Liebentritt, P.C. provides legal services to the
Operating Partnership and the Company. Sheli Z. Rosenberg, a Trustee of the
Company, is a principal of this firm. The Operating Partnership has also
engaged Seyfarth, Shaw, Fairweather & Geraldson, a law firm in which Ms.
Rosenberg's husband is a partner, to provide legal services from time to time
relating to employee benefit issues.
(c) Mr. Goldberg is a two-thirds owner and chairman of the board of
directors of Artery Property Management, Inc. ("APMI"), a real estate property
management company. In connection with the acquisition of certain properties
from Mr. Goldberg and his affiliates during 1995, the Operating Partnership made
a loan of $15,212,000 evidenced by two notes and secured by 465,545 OP Units.
Mr. Goldberg estimates that his interest in this transaction equaled
$26,000,000. The largest aggregate amount of indebtedness outstanding under the
loan at any time during 1996 and the amount outstanding as of December 31, 1996
was $15,212,000. The first note issued in the amount of $1,056,000 accrues
interest at the prime rate plus 3-1/2% per annum. The second note issued in the
amount of $14,156,000 bears interest equal to approximately $300,000 per year
plus the amount of distributions payable on 433,230 of the OP Units pledged as
collateral for this loan.
Mr. Tuomi borrowed $100,000 from one of the Management Partnerships in 1994
related to his purchase of a home in the Chicago area. The loan bears interest
at 30-day LIBOR plus 2% with interest due quarterly. The largest principal
amount owed in 1996 was $90,000 and the principal balance at December 31, 1996
was $72,000. The loan is payable in equal principal installments of $18,000 over
five years.
Mr. Tuomi borrowed $40,000 from the Operating Partnership in 1996 related to
the payment of a tax liability incurred when the restrictions relating to 1,261
Common Shares lapsed on December 16, 1996. The loan carried interest at the rate
of 8-1/2% with the outstanding principal balance, together with any accrued and
unpaid interest due on the earlier of March 31, 1997 or the sale of Mr. Tuomi's
1,261 Common Shares. The largest principal amount owed in 1996 was $40,000 and
the principal balance at December 31, 1996 was $40,000. Payment was secured by a
pledge of Mr. Tuomi's 1,261 Common Shares. The loan was paid in full on March 5,
1997.
Mr. Crocker borrowed $78,000 from the Operating Partnership in December
1995. The loan bears interest at 30 day LIBOR plus 2%. The largest principal
amount owed in 1996 was $78,000 and the principal balance at December 31, 1996
was $78,000. Interest is due monthly with the outstanding balance due on March
31, 1997. Payment was secured by a pledge of Mr. Crocker's restricted share
awards issued in January 1996. The loan was paid in full on March 3, 1997.
Mr. Crocker borrowed $140,000 from the Operating Partnership in April 1996
related to the payment of a tax liability incurred. The loan bears interest at
30-day LIBOR plus 2%. The largest principal amount owed in 1996 was $140,000 and
the principal balance at December 31, 1996 was $140,000. Interest is due monthly
with the outstanding balance due on March 1, 1998. Payment was secured by a
pledge of Mr. Crocker's restricted share awards issued in January 1996.
Mr. Crocker borrowed $564,000 from the Operating Partnership during 1996.
The loan bears interest at monthly LIBOR plus 2% with interest due quarterly.
The largest principal amount owed in 1996 was $564,000 and the principal balance
at December 31, 1996 was $564,000. Payment is secured by a pledge of Mr.
Crocker's Common Shares. Payments of principal shall be payable annually in the
amount of $80,580 on March 15, 1997 and in the amounts $80,570 on March 15th of
each of the next six succeeding years. A payment in the amount of $80,580 was
received in February 1997 and the principal balance now is $483,420.
The executive officers listed below are indebted to the Company as a result
of purchasing Common Shares from the Company in June 1994. The loans accrue
interest, payable quarterly in arrears, at the applicable federal rate, as
defined in the Internal Revenue Code of 1986, as amended, in effect at the date
of each loan. The loans are due and payable on the first to occur of the date in
which the individual leaves the Company, other than by reason of death or
disability, or the respective loan's due date. The loans are with recourse to
the respective individuals and are collateralized by a pledge of the Common
Shares purchased. All dividends paid on pledged Common Shares in excess of the
then marginal tax rate on the taxable portion of such dividends are used to pay
interest and principal on the loans.
<TABLE>
<CAPTION>
Largest Principal Principal
Amount Owed Balance at Interest
Name in 1996 December 31, 1996 Rate
- --------------------------------------------------------------------
<S> <C> <C> <C>
Douglas Crocker II $ 878,776 $ 850,318 6.21%
Douglas Crocker II 983,171 960,748 6.15%
Douglas Crocker II 944,584 944,584 7.26%
Douglas Crocker II 1,901,807 1,901,807 7.93%
Frederick C. Tuomi 314,861 314,861 7.26%
</TABLE>
(d) None
50
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)
(1 & 2) See Index to Financial Statements and Schedule on page F-1 of this
Form 10-K.
(3) Exhibits:
<TABLE>
<C> <S>
2.1* Property Contribution Agreement (Zell Properties and EPMC)
2.2* Property Contribution Agreement (Starwood Properties)
4.1*** Indenture, dated as of May 16, 1994, by and among the Operating
Partnership, as obligor, the Company, as guarantor and The First
National Bank of Chicago, as trustee in connection with 81/2% senior
notes due May 15, 1999
4.2*** Indenture, dated October 1, 1994, between the Operating Partnership,
as obligor and The First National Bank of Chicago, as trustee in
connection with up to $500 million of debt securities
4.3***** Registration Rights and Lock-Up Agreement (Beauchamp)
10.1* Agreement of Limited Partnership of ERP Operating Limited Partnership
10.1A* Second Amended and Restated Agreement of Limited Partnership of ERP
Operating Limited Partnership
10.1B*** Third Amended and Restated Agreement of Limited Partnership of ERP
Operating Limited Partnership
10.1C**** Fourth Amended and Restated Agreement of Limited Partnership of ERP
Operating Limited Partnership
10.12* Form of Property Management Agreement (REIT properties)
10.13*** Form of Property Management Agreement (Non-REIT properties)
10.14* Form of Contribution Agreement dated as of August 11, 1993
10.15** Revolving Credit Agreement by and among the Operating Partnership, the
Company, NationsBank of Texas, N.A., and Wells Fargo Realty Advisors
Funding, Incorporated.
10.15A** First Amendment to Revolving Credit Agreement by and among the
Operating Partnership, the Company, NationsBank of Texas, N.A. and
Wells Fargo Realty Advisors Funding, Incorporated
10.16** Revolving Credit Agreement by and among the Operating Partnership, the
Company, The First National Bank of Chicago and First National Bank
Association, and First Amendment to Revolving Credit Agreement
10.16A** Second Amendment to Revolving Credit Agreement by and among the
Operating Partnership, the Company, The First National Bank of
Chicago, First National Bank Association and the First National Bank
of Boston
10.17*** Credit Agreement by and among the Operating Partnership, as borrower,
the Company, Wells Fargo Realty Advisors Funding, Incorporated, as
lender, Wells Fargo Realty Advisors Funding, Incorporated, as lender,
Wells Fargo Realty Advisors Funding, as agent, and the First National
Bank of Chicago and NationsBank of Texas, N.A., as co-agents, dated
November 14, 1994
</TABLE>
51
<PAGE>
PART IV
<TABLE>
<C> <S>
10.18*** Purchase and Sale Agreement by and among Real Estate Equities Joint
Venture as Seller and EQR-EXL Vistas, Inc. and Executive Life
Insurance Company in Rehabilitation/Liquidation, dated August 17, 1994
10.19 Revolving Credit Agreement, dated as of November 15, 1996 among the
Operating Partnership and Morgan Guaranty Trust Company of New York,
as lead agent and Bank of America Illinois, as co-lead agent
10.20 Amended and Restated Master Reimbursement agreement, dated as of
November 1, 1996 by and between Federal National Mortgage Association
and EQR-Bond Partnership
12 Computation of Ratio of Earnings to Fixed Charges
21 List of Subsidiaries of the Operating Partnership
23.1 Consent of Grant Thornton LLP
23.2 Consent of Ernst & Young LLP
24.1 Power of Attorney for John W. Alexander dated February 24, 1997
24.2 Power of Attorney for James D. Harper, Jr. dated February 24, 1997
24.3 Power of Attorney for Errol R. Halperin dated February 24, 1997
24.4 Power of Attorney for B. Joseph White dated February 24, 1997
24.5 Power of Attorney for Barry S. Sternlicht dated February 24, 1997
24.6 Power of Attorney for Henry H. Goldberg dated February 24, 1997
</TABLE>
______________________
* Included as an exhibit to the Company's Form S-11 Registration Statement,
File No. 33-63158, and incorporated herein by reference.
** Included as an exhibit to the Company's Form S-11 Registration Statement,
File No. 33-72080, and incorporated herein by reference.
*** Included as an exhibit to the Operating Partnership's Form 10/A, dated
December 12, 1994, File No. 0-24920, and incorporated herein by
reference.
**** Included as an exhibit to the Operating Partnership's Form 10-Q for the
quarter ended September 30, 1995, dated November 7, 1995, and
incorporated herein by reference.
***** Included as an exhibit to the Operating Partnership's Form 10-K for the
year ended December 31, 1995
(b) Reports on Form 8-K:
A Report on Form 8-K dated November 15, 1996 reporting information on
property acquisitions.
(c) Exhibits:
See Item 14(a)(3) above.
(d) Financial Statement Schedules:
See Index to Financial Statements attached hereto on page F-1 of this Form
10-K.
52
<PAGE>
PART IV
SIGNATURES
----------
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
behalf by the undersigned thereunto duly authorized.
ERP OPERATING LIMITED PARTNERSHIP
BY: EQUITY RESIDENTIAL PROPERTIES TRUST,
ITS GENERAL PARTNER
Date: March 20, 1997 By: /s/ Douglas Crocker II
-------------- -------------------------------------------
Douglas Crocker II
President, Chief Executive Officer,
Trustee and *Attorney-in-Fact
Date: March 20, 1997 By: /s/ David J. Neithercut
-------------- -------------------------------------------
David J. Neithercut
Executive Vice-President and
Chief Financial Officer
Date: March 20, 1997 By: /s/ Michael J. McHugh
-------------- -------------------------------------------
Michael J. McHugh
Senior Vice-President, Chief Accounting
Officer, Treasurer and *Attorney-in-fact
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: March 20, 1997 By: /s/ Samuel Zell
--------------- -------------------------------------------
Samuel Zell
Chairman of the Board of Trustees
Date: March 20, 1997 By: /s/ Gerald A. Spector
-------------- -------------------------------------------
Gerald A. Spector
Executive Vice-President, Chief
Operating Officer and Trustee
Date: March 20, 1997 By: /s/ Sheli Z. Rosenberg
-------------- -------------------------------------------
Sheli Z. Rosenberg
Trustee
53
<PAGE>
PART IV
SIGNATURES-CONTINUED
--------------------
Date: March 20, 1997 By: /s/ James D. Harper
-------------- -------------------------------------------
James D. Harper
Trustee
Date: March 20, 1997 By: /s/ Errol R. Halperin
-------------- -------------------------------------------
Errol R. Halperin
Trustee
Date: March 20, 1997 By: /s/ Barry S. Sternlicht
-------------- -------------------------------------------
Barry S. Sternlicht
Trustee
Date: March 20, 1997 By: /s/ John W. Alexander
-------------- -------------------------------------------
John W. Alexander
Trustee
Date: March 20, 1997 By: /s/ B. Joseph White
-------------- -------------------------------------------
B. Joseph White
Trustee
Date: March 20, 1997 By: /s/ Henry H. Goldberg
-------------- -------------------------------------------
Henry H. Goldberg
Trustee
54
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
ERP OPERATING LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Report of Independent Auditors............................... F-2
Report of Independent Accountants............................ F-3
Consolidated Balance Sheets as of
December 31, 1996 and 1995................................ F-4
Consolidated Statements of Operations for
the years ended December 31, 1996, 1995 and 1994.......... F-5
Consolidated Statements of Cash Flows for
the years ended December 31, 1996, 1995 and 1994.......... F-6 to F-7
Consolidated Statements of Partners' Capital
for the years ended December 31, 1996, 1995 and 1994...... F-8
Notes to Consolidated and Combined Financial Statements...... F-9 to F-31
SCHEDULE FILED AS PART OF THIS REPORT
Report of Independent Accountants............................ S-1
Schedule III - Real Estate and Accumulated Depreciation...... S-2 to S-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners
ERP Operating Limited Partnership
We have audited the accompanying consolidated balance sheet of ERP Operating
Limited Partnership (the "Operating Partnership") as of December 31, 1996 and
the related consolidated statements of operations, partners' capital and cash
flows for the year then ended. Our audit also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Operating Partnership's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ERP
Operating Limited Partnership at December 31, 1996, and the consolidated results
of its operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
February 12, 1997
except for Note 21, as to which the date is
March 20, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
ERP Operating Limited Partnership
We have audited the accompanying consolidated balance sheets of ERP Operating
Limited Partnership (the "Operating Partnership") as of December 31, 1995, and
the related consolidated statements of operations, changes in partners' capital
and cash flows for each of the two years in the period ended December 31, 1995.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ERP Operating
Limited Partnership as of December 31, 1995, and the consolidated results of its
operations, and cash flows for each of the two years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
/s/ GRANT THORNTON LLP
GRANT THORNTON LLP
Chicago, Illinois
February 14, 1996
F-3
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
-------------- --------------
<S> <C> <C>
ASSETS
Investment in rental property
Land $ 284,879 $ 210,439
Depreciable property 2,698,631 1,978,500
-------------- --------------
2,983,510 2,188,939
Accumulated depreciation (301,512) (218,339)
-------------- --------------
Investment in rental property, net of accumulated depreciation 2,681,998 1,970,600
Cash and cash equivalents 147,271 13,428
Investment in mortgage notes, net 86,596 87,154
Rents receivable 1,450 1,073
Deposits - restricted 20,637 18,272
Escrow deposits - mortgage 15,434 16,745
Deferred financing costs, net 14,555 12,653
Other assets 18,186 21,335
-------------- --------------
Total assets $ 2,986,127 $ 2,141,260
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 755,434 $ 561,695
Notes, net 498,840 348,524
Line of credit - 92,000
Accounts payable and accrued expenses 33,117 23,544
Accrued interest payable 12,737 8,354
Due to affiliates 628 1,568
Rents received in advance and other liabilities 15,838 11,138
Security deposits 14,128 10,131
Distributions payable 45,938 30,826
-------------- --------------
Total liabilities 1,376,660 1,087,780
-------------- --------------
Commitments and contingencies
Redeemable Preference Interests - 24,578
-------------- --------------
9 3/8% Series A Cumulative Redeemable Preference Units 153,000 153,000
-------------- --------------
9 1/8% Series B Cumulative Redeemable Preference Units 125,000 125,000
-------------- --------------
9 1/8% Series C Cumulative Redeemable Preference Units 115,000 -
-------------- --------------
Partners' capital:
General Partner 1,065,830 606,517
Limited Partners 150,637 144,385
-------------- --------------
Total partners' capital 1,216,467 750,902
-------------- --------------
Total liabilities and partners' capital $ 2,986,127 $ 2,141,260
============== ==============
</TABLE>
See accompanying notes.
F-4
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per OP Unit data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
REVENUES
Rental income $ 454,412 $ 373,919 $ 220,727
Fee and asset management 6,749 7,030 4,739
Interest income - investment in mortgage notes 12,819 4,862 -
Interest and other income 4,405 4,573 5,568
--------- --------- ---------
Total revenues 478,385 390,384 231,034
--------- --------- ---------
EXPENSES
Property and maintenance 127,172 112,186 66,534
Real estate taxes and insurance 44,128 37,002 23,028
Property management 17,512 15,213 10,249
Property management - non-recurring - - 879
Fee and asset management 3,837 3,887 2,056
Depreciation 93,253 72,410 37,273
Interest:
Expense incurred 81,351 78,375 37,044
Amortization of deferred financing costs 4,242 3,444 1,930
General and administrative 9,857 8,129 6,053
--------- --------- ---------
Total expenses 381,352 330,646 185,046
--------- --------- ---------
Income before gain on disposition of properties and
extraordinary items 97,033 59,738 45,988
Gain on disposition of properties 22,402 21,617 -
--------- --------- ---------
Income before extraordinary items 119,435 81,355 45,988
Write-off of unamortized costs on refinanced debt (3,512) - -
Gain on early extinguishment of debt - 2,000 -
--------- --------- ---------
Net income $ 115,923 $ 83,355 $ 45,988
========= ========= =========
ALLOCATION OF NET INCOME:
Redeemable Preference Interests $ 263 $ 1,508 $ 108
========= ========= =========
9 3/8% Series A Cumulative Redeemable
Preference Units $ 14,345 $ 8,367 $ -
========= ========= =========
9 1/8% Series B Cumulative Redeemable
Preference Units $ 11,406 $ 1,742 $ -
========= ========= =========
9 1/8% Series C Cumulative Redeemable
Preference Units $ 3,264 $ - $ -
========= ========= =========
General Partner 72,609 57,610 34,418
Limited Partners 14,036 14,128 11,462
--------- --------- ---------
$ 86,645 $ 71,738 $ 45,880
========= ========= =========
Net income per weighted average OP Unit outstanding $ 1.70 $ 1.68 $ 1.34
========= ========= =========
Weighted average OP Units outstanding 51,108 42,749 34,150
========= ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
----------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 115,923 83,355 45,988
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 93,253 72,410 37,273
Amortization of deferred financing costs (including discount on
1999 and 2002 Notes) 4,558 3,717 2,039
Amortization of discount on investment in mortgage notes (613) - -
Gain on disposition of properties (22,402) (21,617) -
Gain on early extinguishment of debt - (2,000) -
Write-off of unamortized costs on refinanced debt 3,512 - -
Changes in assets and liabilities:
(Increase) in rents receivable (409) (259) (641)
(Increase) in deposits - restricted (556) (218) (1,849)
Decrease (increase) in other assets 158 1,913 (7,906)
(Decrease) increase in due to affiliates (857) (2,305) 1,261
Increase in accounts payable and accrued expenses 9,901 3,765 9,286
Increase in accrued interest payable 4,383 2,616 4,483
Increase in rents received in advance and other liabilities 4,079 157 4,063
--------- --------- ---------
Net cash provided by operating activities 210,930 141,534 93,997
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in rental properties, net (641,015) (239,964) (855,156)
Improvements to rental property (33,001) (32,800) (16,721)
Additions to non-rental property (2,347) (3,669) (2,417)
Proceeds from disposition of rental property 40,093 46,426 -
Purchase of contract rights - - (5,836)
Decrease (increase) in mortgage deposits 1,311 (1,299) (3,541)
Deposits (made) on rental property acquisitions (16,916) (15,107) (5,200)
Deposits applied on rental property acquisitions 15,107 5,200 -
Decrease (increase) in investment in mortgage notes 1,171 (87,154) -
Other investing activities (58) 4,349 (7,644)
--------- --------- ---------
Net cash (used for) investing activities (635,655) (324,018) (896,515)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions from General Partner 597,752 270,311 557,342
Redemption of Preference Interests (1,083) (1,352) -
Distributions paid to partners (142,304) (95,875) (59,780)
Proceeds from sale of 1999 Notes, net of discount - - 124,131
Proceeds from sale of Floating Rate Notes - - 100,000
Proceeds from sale of 2002 Notes, net of discount - 124,011 -
Proceeds from sale of 2026 Notes 150,000 - -
Principal receipts on employee notes 76 143 29
Loan to seller - - (15,212)
Proceeds from refinancing of tax-exempt bonds, net 112,209 - -
Proceeds from line of credit 250,000 317,000 376,800
Repayments on line of credit (342,000) (387,000) (247,400)
Principal payments on mortgage notes payable (60,706) (47,787) (25,872)
Loan and bond acquisition costs (9,111) (4,558) (7,026)
Increase in security deposits 3,735 948 5,125
Other financing activities - 33 358
--------- --------- ---------
Net cash provided by financing activities 558,568 175,874 808,495
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 133,843 (6,610) 5,977
Cash and cash equivalents, beginning of year 13,428 20,038 14,061
--------- --------- ---------
Cash and cash equivalents, end of year $ 147,271 13,428 20,038
========= ========= =========
</TABLE>
See accompanying notes.
F-6
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
-------------------------------
<S> <C> <C> <C>
Supplemental information:
Cash paid during the period for interest $ 76,968 $ 75,759 $ 32,561
========= ========= =========
Mortgage loans assumed through acquisitions of rental properties $ 142,237 $ 23,554 $ 388,357
========= ========= =========
Rental property assumed through foreclosure $ 10,854 $ - $ -
========= ========= =========
Net rental properties contributed in exchange for OP units $ 440 $ 18,811 $ -
========= ========= =========
Rental property conveyed in exchange for release of mortgage
indebtedness $ - $ 20,500 $ -
========= ========= =========
Stated value of Preference Units issued for rental properties $ - $ - $ 41,213
========= ========= =========
Conversion of mortgage note receivable $ - $ - $ 25,000
========= ========= =========
</TABLE>
See accompanying notes.
F-7
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(Amounts in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1996 1995 1994
------------------------------------------------
<S> <C> <C> <C>
Accumulated partners' capital, beginning of year 1,053,480 $ 787,374 $ 229,644
Net income for the year ended December 31, 115,923 83,355 45,988
Capital contributions from General Partner 598,123 271,273 556,779
Issuance of Redeemable Preference Interests, net - - 26,001
Redemption of Preference Interests (1,083) (1,352) -
Issuance of OP Units in connection with acquisitions 440 18,811 -
Distributions declared to Redeemable
Preference Interests for the year ended December 31, - (10,109) -
Distributions declared to partners for the year ended December 31, (157,416) (95,872) (71,038)
-------------- -------------- -------------
Accumulated partners' capital, end of period 1,609,467 $ 1,053,480 $ 787,374
============== ============== =============
Allocation of partners' capital:
General Partner, partner's capital, end of year 1,065,830 $ 606,517 $ 609,936
============== ============== =============
Limited Partners, partners' capital, end of year 150,637 $ 144,385 $ 151,437
============== ============== =============
Redeemable Preference Interests, end of year - $ 24,578 $ 26,001
============== ============== =============
9 3/8% Series A Cumulative Redeemable Preference Units 153,000 $ 153,000 $ -
============== ============== =============
9 1/8% Series B Cumulative Redeemable Preference Units 125,000 $ 125,000 $ -
============== ============== =============
9 1/8% Series C Cumulative Redeemable Preference Units 115,000 $ - $ -
============== ============== =============
</TABLE>
See accompanying notes.
F-8
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
ERP Operating Limited Partnership (the "Operating Partnership"), an Illinois
limited partnership, was formed to conduct the multifamily residential property
business of Equity Residential Properties Trust (the "General Partner" or the
"Company"). The Company is a Maryland real estate investment trust formed on
March 31, 1993. The Company conducts substantially all of its operations
through the Operating Partnership. The Company, through the Operating
Partnership, is the successor to the multifamily residential property business
of Equity Properties Management Corp. ("EPMC"), an entity controlled by Mr.
Samuel Zell, Chairman of the Board of Trustees of the Company, and a series of
other entities which owned 69 of the properties (the "Initial Properties").
Forty-six of the Initial Properties (the "Zell Properties") were contributed or
sold by entities substantially controlled by Mr. Zell and primarily owned by Mr.
Zell and trusts for the benefit of Mr. Robert Lurie, a deceased partner of Mr.
Zell. The remaining 23 of the Initial Properties (the "Starwood Properties")
were acquired from entities controlled by Starwood Capital Partners, L.P.
("Starwood") and its affiliates ("Starwood Original Owners"). Prior to the
completion of the Company's initial public offering (the "IPO") of 13,225,000
common shares of beneficial interest, $0.01 par value per share ("Common
Shares") EPMC provided multifamily residential management services (the
"Management Business") to the Zell Properties.
The Company, through the Operating Partnership, is engaged in the
acquisition, disposition, ownership, management and operation of multifamily
properties. As of December 31, 1996, the Operating Partnership controlled a
portfolio of 218 multifamily properties (individually a "Property and
collectively the "Properties") containing 67,705 apartment units. The Operating
Partnership's interest in six of these Properties at the time of acquisition
thereof consisted solely of ownership of debt collateralized by such Properties.
The Operating Partnership also has an investment in partnership interests and
subordinated mortgages collateralized by 21 properties (the "Additional
Properties"). The Properties and Additional Properties are located throughout
the United States in the following 30 states: Arizona, Arkansas, California,
Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maryland, Michigan, Minnesota, Missouri, New Hampshire, New Jersey,
New Mexico, Nevada, North Carolina, Ohio, Oklahoma, Oregon, South Carolina,
Tennessee, Texas, Virginia and Washington.
In exchange for contributing 33 of the Zell Properties and the Management
Business and the Starwood Properties, the 33 existing entities (the "Zell
Original Owners"), and entities controlled by Starwood and EPMC received a total
of 8,433,238 partnership interests ("OP Units") (including an additional 93,639
OP Units issued in August 1994 and 1,835 OP Units issued in September 1995) in
the Operating Partnership. The other 13 Zell Properties were acquired from 13
existing partnerships (the "Zell Sellers") for $43.5 million in cash. The
Management Business, the Zell Original Owners and the Zell Sellers are
collectively the "Predecessor Business."
The Company has formed a series of partnerships (the "Financing
Partnerships") which beneficially own certain Properties encumbered by mortgage
indebtedness. The Operating Partnership owns a 1% limited partner interest and a
98% general partner interest in each Financing Partnership. The remaining 1%
general partner interest in each Financing Partnership is owned by
F-9
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
various qualified REIT subsidiaries wholly owned by the Company (each a "QRS
Corporation"). Rental income from the Properties that are beneficially owned by
a Financing Partnership is used first to service the applicable mortgage debt
and pay other operating expenses and any excess is then distributed 1% to the
applicable QRS Corporation, as the general partner of such Financing
Partnership, and 99% to the Operating Partnership, as sole 1% limited partner
and as the 98% general partner. The Company has also formed a series of limited
liability companies (the "LLCs") which own certain Properties and one such LLC
which has an investment in partnership interests and subordinated mortgages
collateralized by the Additional Properties. The Operating Partnership is a 99%
managing member of each LLC and a QRS Corporation is a 1% member of each LLC.
As of December 31, 1996, all of the Properties were managed by Equity
Residential Properties Management Limited Partnership, the successor to the
Management Business contributed by EPMC contemporaneously with the IPO and
Equity Residential Properties Management Limited Partnership II (collectively,
the "Management Partnerships"). The Management Partnerships collect a property
management fee consistent with a reasonable arms-length charge for the
performance of such services. The sole general partners of the Management
Partnerships with a 1% interest is the Operating Partnership. The sole limited
partners of the Management Partnerships are Equity Residential Properties
Management Corp. ("Management Corp.") and Equity Residential Properties
Management Corp. II ("Management Corp. II"), respectively, and each has a 99%
interest in the respective partnership.
2. BASIS OF PRESENTATION
The balance sheets as of December 31, 1996 and 1995 and the statements of
operations, cash flows and partners' capital for the years ended December 31,
1996, 1995 and 1994 represent the consolidated financial information of the
Operating Partnership and its interests in its subsidiaries.
Due to the Operating Partnership's ability to control either through
ownership or by contract the Management Partnerships, the Financing
Partnerships and the LLCs, each such entity has been consolidated with the
Operating Partnership for financial reporting purposes. In regard to Management
Corp. and Management Corp. II, the Operating Partnership does not have legal
control; however, these entities are consolidated for financial reporting
purposes, the effects of which are immaterial. Certain reclassifications have
been made to the prior period's financial statements in order to conform with
the current period presentation.
Minority interests represented by the Company's indirect 1% interest in
various Financing Partnerships and LLCs are immaterial and have not been
accounted for in the Consolidated Financial Statements. In addition, certain
amounts due from the Company for its 1% interest in the Financing Partnerships
has not been reflected in the Consolidated Balance Sheets since such amounts are
immaterial to the Consolidated Balance Sheets.
F-10
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. PARTNER'S CAPITAL
In August 1995, the Company, as general partner of the Operating Partnership,
approved the addition of new limited partners (the "Beauchamp Partners") to the
Operating Partnership in connection with the acquisition of a portfolio of four
properties and issued the Beauchamp Partners OP Units in connection therewith.
In addition, in October 1995, as consideration under an earnout agreement
related to four Properties contributed to the Operating Partnership in April
1994, the Operating Partnership issued 32,153 OP Units in connection therewith
to JG Financial Management Services ("JG Financial"). JG Financial converted its
OP Units into Common Shares in January 1996.
The limited partners of the Operating Partnership as of December 31, 1996
consist primarily of the Zell Original Owners that contributed 33 of the Zell
Properties to the Operating Partnership, entities controlled by Starwood, the
Beauchamp Partners and EPMC (collectively, the "Limited Partners") and are
represented by 7,858,228 OP Units which are exchangeable on a one-for-one basis
into the Company's Common Shares. As of December 31, 1996, the General Partner
had an approximate 86.68% interest and the Limited Partners had an approximate
13.32% interest.
In regards to the General Partner, net proceeds from the various offerings of
the Company as described in the following paragraphs of this footnote, have been
contributed by the Company to the Operating Partnership in return for an
increased ownership percentage. Due to the Limited Partner's ability to convert
their interest into an ownership interest in the General Partner, the net
offering proceeds are allocated between the Company (as general partner) and the
Limited Partners (to the extent represented by OP Units) to account for the
change in their respective percentage ownership of the equity of the Operating
Partnership.
On January 26, 1994, the Company completed a second public offering of
5,750,000 additional Common Shares (the "Second Public Offering"). The Second
Public Offering price was $29 per Common Share resulting in gross proceeds of
$166.8 million. Proceeds to the Company, net of underwriters' discount and
estimated offering expenses, were approximately $157.4 million.
Between April, 1994 and June, 1994, the Company sold 1,569,270 unregistered
Common Shares to six accredited institutional investors (the "Private Equity
Offering") and contributed net proceeds to the Operating Partnership of
approximately $47 million.
On July 27, 1994, the Company completed a third public offering of 9,200,000
additional Common Shares (the "Third Public Offering"). The Third Public
Offering price was $31.25 per Common Share resulting in gross proceeds of $287.5
million. Proceeds to the Company, net of underwriters' discount and estimated
offering expenses were approximately $271.7 million.
In September 1994, the Company registered 5,000,000 Common Shares pursuant to
an equity shelf registration statement (the "Equity Shelf Registration") of
which 2,735,320 registered Common Shares were sold in separate privately
negotiated transactions completed in October 1994 (collectively, the "Shelf
Offering"). The Company received net proceeds of approximately $81
F-11
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
million in connection therewith. The prices at which the Common Shares were sold
ranged from $29.34 to $30.17.
On September 11, 1995, the Company filed with the Securities and Exchange
Commission (the "SEC") a Form S-3 Registration Statement to register up to $500
million of its non-voting preferred shares of beneficial interest, $0.01 par
value per share ("Preferred Shares"), Common Shares and depositary shares,
pursuant to a shelf offering (the "Second Shelf Registration").
In January 1996, the Company completed an offering of 1,725,000 registered
Common Shares, which were sold in a privately negotiated transaction at a net
price of $29.375 per share (the "January 1996 Common Share Offering") and
received net proceeds of approximately $50.7 million in connection therewith.
Also in January 1996, the Company filed with the SEC a Form S-3 Registration
Statement to register 1,676,423 Common Shares which may be sold by holders
thereof or by holders of OP Units upon the issuance of Common Shares in exchange
for such OP Units.
In February 1996, the Company completed an offering of 2,300,000 registered
Common Shares, which were sold in a privately negotiated transaction at a net
price of $29.50 per share (the "February 1996 Common Share Offering") and
received net proceeds of approximately $67.8 million in connection therewith.
On May 21, 1996, the Company completed an offering of 2,300,000 publicly
registered Common Shares, which were sold at a net price of $30.50 per share.
On May 28, 1996, the Company completed the sale of 73,287 publicly registered
Common Shares to employees of the Company and to employees of Equity Group
Investments, Inc. and certain of its subsidiaries ("EGI") and certain of their
respective affiliates and consultants at a price equal to $30.50 per share. On
May 30, 1996, the Company completed an offering of 1,264,400 publicly registered
Common Shares, which were sold at a net price of $30.75 per share. The Company
received net proceeds of approximately $111.3 million in connection with the
sale of the 3,637,687 Common Shares mentioned above (collectively, the "May 1996
Common Share Offerings").
On June 26, 1996, the Company filed with the SEC a Form S-3 Registration
Statement to register 608,665 Common Shares which may be issued by the Company
to holders of 608,665 OP Units. The SEC declared this Registration effective on
September 6, 1996.
On September 18, 1996, the Company filed with the SEC a Form S-3 Registration
Statement to register $500 million of equity securities (the "1996 Equity Shelf
Registration"). The SEC declared the Registration effective on September 23,
1996.
F-12
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In September 1996, the Company completed the sale of 2,272,728 publicly
registered Common Shares which were sold at a price of $33 per share. The
Company received net proceeds of approximately $75 million in connection with
this offering (the "September 1996 Common Share Offering").
On September 27, 1996, the Company filed with the SEC a Form S-3 Registration
Statement to register 1,182,835 Common Shares which may be issued by the Company
to holders of 1,182,835 OP Units. The SEC declared the Registration effective on
October 3, 1996.
In November 1996, the Company issued 39,458 Common Shares pursuant to the
1996 Non-qualified Employee Share Purchase Plan (the "Employee Share Purchase
Plan") at a net price of $30.44 per share and received net proceeds of
approximately $1.2 million.
In December 1996, the Company completed offerings of 4,440,000 publicly
registered Common Shares, which were sold to the public at a price of $41.25 per
share (the "December 1996 Common Share Offerings"). The Company received net
proceeds of approximately $177.4 million.
The Operating Partnership paid a $0.59, $0.59, $0.59 and $0.625 per OP Unit
distribution on April 12, July 12, and October 11, 1996 and January 10, 1997,
respectively, for the quarters ended March 31, June 30, September 30 and
December 31, 1996, to OP Unit holders of record on March 29, June 28, September
27 and December 27, 1996, respectively.
The Operating Partnership also paid a $5.859, $5.859, $5.859 and $5.8605
distribution on April 15, July 15 and October 15, 1996 and January 17, 1997,
respectively, for the quarters ended March 31, June 30, September 30, and
December 31, 1996 to the Company as holder of the Series A Cumulative Redeemable
Preference Units (as discussed in Note 11). The Operating Partnership also paid
a $5.703, $5.703, $5.703 and a $5.7035 distribution on April 15, July 15 and
October 15, 1996 and January 17, 1997, respectively, for the quarters ended
March 31, June 30, September 30 and December 31, 1996 to the Company as holder
of the Series B Cumulative Redeemable Preference Units (as discussed in Note
12). In addition, the Operating Partnership paid a $1.394 distribution, covering
the period September 9, 1996 through September 30, 1996, and a $5.703
distribution for the quarter ended December 31, 1996 on January 17, 1997 to the
Company as holder of the Series C Cumulative Redeemable Preference Units (as
discussed in Note 13).
F-13
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Rental Property
Rental property is recorded at cost less accumulated depreciation less an
adjustment, if any, for impairment. Rental properties intended to be held and
operated by the Operating Partnership over their remaining useful life are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the particular rental property may not be
recoverable. If these events or changes in circumstances are present, the
Operating Partnership estimates the sum of the expected future cash flows
(undiscounted) to result from the operations and eventual disposition of the
particular rental property, and if less than the carrying amount of the rental
property, the Operating Partnership will recognize an impairment loss. Upon
recognition of any impairment loss the Operating Partnership measures that loss
based on the amount by which the carrying amount of the rental property exceeds
the estimated fair value of the rental property.
For rental properties to be disposed of, an impairment loss is recognized
when the fair value of the rental property, less the estimated cost to sell, is
less than the carrying amount of the rental property measured at the time the
Operating Partnership has a commitment to sell the property and/or is actively
marketing the property for sale. Rental property to be disposed of is reported
at the lower of its carrying amount or its estimated fair value, less its cost
to sell. Depreciation is not recorded during the period in which assets are
held for disposal. There were no Properties held for sale as of December 31,
1996.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets. The Operating Partnership uses a 30-year estimated life
for buildings, a 10-year estimated life for land improvements and up to a seven-
year estimated life for furniture, fixtures and equipment. Expenditures for
ordinary maintenance and repairs are expensed to operations as incurred and
significant renovations and improvements that improve and/or extend the useful
life of the asset are capitalized over their estimated useful life. Initial
direct leasing costs are expensed as incurred and such expense approximates the
deferral and amortization of initial direct leasing costs over the lease terms.
Property sales or dispositions are recorded when title transfers and sufficient
consideration has been received by the Operating Partnership. Upon disposition,
the related costs and accumulated deprecation are removed from the respective
accounts. Any gain or loss on sale or disposition is recognized in accordance
with generally accepted accounting principles.
(b) Cash and Cash Equivalents
The Operating Partnership considers all demand deposits, money market
accounts and investments in certificates of deposit and repurchase agreements
purchased with a maturity of four months or less, at the date of purchase, to be
cash equivalents. The Operating Partnership maintains its cash and cash
equivalents at financial institutions. The combined account balances at each
institution periodically exceed the Federal Depository Insurance Corporation
("FDIC") insurance coverage, and, as a result, there is a concentration of
credit risk related to amounts on deposit in excess of FDIC insurance
F-14
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
coverage. The Operating Partnership believes that the risk is not significant as
the Operating Partnership does not anticipate their non-performance.
(c) Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain the
Operating Partnership's lines of credit, long-term financing and costs for
certain interest rate protection agreements. These costs are being amortized
over the terms of the related debt. Unamortized financing costs are written-off
when debt is retired before the maturity date. As of December 31, 1996 and
1995, the accumulated amortization of such deferred financing costs was $3.8
million and $6.4 million, respectively.
(d) Interest Rate Protection Agreements
The Operating Partnership from time to time enters into interest rate
protection agreements to effectively convert floating rate debt to a fixed rate
basis, as well as to hedge anticipated financing transactions. Net amounts paid
or received under these agreements are recognized as an adjustment to interest
expense when such amounts paid are incurred or earned. Settlement amounts paid
or received in connection with terminated interest rate protection agreements
are deferred and amortized over the term of the related financing transaction on
the straight-line method. The Operating Partnership believes it has limited
exposure to the extent of non-performance by the counterparties of each
protection agreement since each counterparty is a major U.S. financial
institution, and the Operating Partnership does not anticipate their non-
performance.
(e) Fair Value of Financial Instruments
The fair values of the Operating Partnership's financial instruments,
including cash and cash equivalents, and mortgage notes payable, other notes
payable, lines of credit and other financial instruments, approximate their
carrying or contract values. With respect to the Operating Partnership's
investment in mortgage notes, the fair value as of December 31, 1996 was
estimated to be approximately $100 million compared to the Operating
Partnership's carrying value of $86.6 million. The estimated fair value of the
Operating Partnership's investment in mortgage notes represents the estimated
net present value based on the expected future property level cash flows and an
estimated current market discount rate.
(f) Revenue Recognition
Rental income attributable to leases is recorded when due from tenants and is
recognized monthly as it is earned, which is not materially different than on a
straight line basis. Interest income is recorded on an accrual basis.
F-15
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(g) Lease Agreements
A substantial portion of the leases entered into between the tenant and a
multifamily property for the rental of an apartment unit is month-to-month or
year-to-year, renewable upon consent of both parties.
(h) Income Taxes
The Operating Partnership is not liable for Federal income taxes as the
partners recognize their proportionate share of the Operating Partnership income
or loss in their tax returns, therefore, no provision for Federal income taxes
is made in the financial statements of the Operating Partnership. However, the
Operating Partnership is subject to certain state and local income, excise and
franchise taxes. The aggregate cost of land and depreciable property for Federal
income tax purposes as of December 31, 1996 was approximately $2.8 billion .
(i) Cash Distributions and Allocation of Income (Loss)
Distributions, profits and losses are generally allocated to the General
Partner and the Limited Partners in proportion to their respective percentage
interests.
(j) Use of Estimates
In preparation of the Operating Partnership's financial statements in
conformity with generally accepted accounting principles, management makes
estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
5. RENTAL PROPERTY
The following summarizes the carrying amounts for the rental property as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(Amounts in thousands)
<S> <C> <C>
Land $ 284,879 $ 210,439
Buildings and Improvements 2,566,568 1,884,510
Furniture, Fixtures and Equipment 132,063 93,990
---------- ----------
Rental Property 2,983,510 2,188,939
Accumulated Depreciation (301,512) (218,339)
---------- ----------
</TABLE>
F-16
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<S> <C> <C>
Rental Property, net $2,681,998 $1,970,600
========== ==========
</TABLE>
During 1996, the Operating Partnership acquired the Properties listed
below. Each Property was purchased from an unaffiliated third party. The cash
portions of the acquisitions were funded from either proceeds raised through the
various offerings, amounts drawn on the Operating Partnership's line of credit
or working capital. In connection with certain of the acquisitions listed
below, the Operating Partnership assumed mortgage indebtedness of $134.1 million
and issued OP Units having a value of $440,000.
F-17
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
<TABLE>
<CAPTION>
Total
Date Number Acquisition Cost
Acquired Property Location of Units (in thousands)
- -------- -------- -------- -------- --------------
<C> <S> <C> <C> <C>
02/08/96 7979 Westheimer Houston, TX 459 $14,618
02/27/96 Sabal Pointe (formerly The Coral Springs, FL 275 19,606
Vinings at Coral Springs)
03/01/96 Woodbridge (formerly The Cary, NC 344 19,938
Plantations)
03/05/96 Heron Landing (formerly Lauderhill, FL 144 7,239
Oxford & Sussex)
03/12/96 The Pines at Cloverlane Ypsilanti, MI 582 20,982
03/14/96 Regency Palms Huntington Beach, CA 310 18,710
03/21/96 Port Royale II Ft Lauderdale, FL 161 10,468
04/16/96 2900 on First Seattle, WA 135 11,861
05/22/96 Woodland Hills Decatur, GA 228 12,420
05/31/96 Ivy Place (formerly Post Atlanta, GA 122 8,079
Place)
06/03/96 Ridgetree Dallas, TX 798 21,347
06/05/96 Country Ridge Farmington Hills, MI 252 16,388
06/07/96 Rosehill Pointe Lenexa, KS 498 21,236
06/07/96 Forest Ridge Arlington, TX 660 23,670
06/12/96 Canyon Sands Phoenix, AZ 412 14,905
06/12/96 Desert Sands Phoenix, AZ 412 14,893
06/25/96 Chandler Court Chandler, AZ 311 13,633
06/28/96 Lands End Pacifica, CA 260 18,326
07/01/96 Sunny Oak Village Overland Park, KS 548 22,523
07/01/96 Mallard Cove Greenville, SC 211 8,171
07/16/96 Pine Meadow Greensboro, NC 204 7,262
07/19/96 Summer Ridge Riverside, CA 136 6,031
07/19/96 Promenade Terrace Corona, CA 330 22,853
07/19/96 South Creek Phoenix, AZ 528 26,773
08/01/96 Pueblo Villas Albuquerque, NM 232 8,581
08/28/96 Brixworth Nashville, TN 216 11,766
08/30/96 Brierwood Jacksonville, FL 196 5,528
08/30/96 Woodscape Raleigh, NC 240 9,595
09/03/96 Park Place Plymouth, MN 500 24,472
09/19/96 Eagle Canyon Chino Hills, CA 252 18,095
09/19/96 Summerset Village Chatsworth, CA 280 26,317
09/19/96 Canterchase Nashville, TN 235 8,655
09/20/96 Songbird San Antonio, TX 262 10,854
09/20/96 Willowglen Aurora, CO 384 17,173
</TABLE>
F-18
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
<TABLE>
<S> <C> <C> <C> <C>
09/26/96 Merrimac Woods Costa Mesa, CA 123 6,765
09/27/96 Casa Capricorn San Diego, CA 192 12,631
09/30/96 Hunter's Glen Chesterfield, MO 192 9,166
10/11/96 Marbrisa Tampa, FL 224 8,140
10/31/96 Lakeville Resort Petaluma, CA 492 27,348
11/01/96 Cedar Crest Overland Park, KS 466 21,614
12/12/96 Rock Creek Carrboro, NC 188 8,952
12/13/96 Village Oaks Austin, TX 280 11,849
12/16/96 Creekside Oaks Walnut Creek, CA 316 21,680
12/19/96 Gatehouse on the Green Plantation, FL 312 22,268
12/19/96 Gatehouse at Pine Lake Pembroke Pines, FL 296 18,962
12/20/96 Wilde Lake Richmond, VA 189 9,452
12/20/96 Spice Run Naperville, IL 400 25,793
12/31/96 Mountain Terrace Stevenson Ranch, CA 510 39,772
------ --------
15,297 $767,360
====== ========
</TABLE>
In addition to the Properties mentioned above, on February 1, 1996,
Management Corp. II transferred to the Operating Partnership its interest in
Desert Park, a 368-unit Property located in Las Vegas, Nevada, subject to $8.1
million of indebtedness, in exchange for the forgiveness of a $2.7 million note
payable to the Operating Partnership.
During 1996, the Company disposed of the properties listed below. Each
property was sold to an unaffiliated third party.
<TABLE>
<CAPTION>
Number of Disposition
Date Disposed Property Location Units Price
- ------------- -------- -------- ----- -----
<S> <C> <C> <C> <C>
01/31/96 Sanddollar Tulsa, OK 328 $ 6,200
06/25/96 Deer Run Charleston, SC 152 3,950
11/22/96 Valley Park South Bethlehem, PA 384 18,500
12/09/96 Colonial Glen Harrisburg, PA 174 6,005
12/20/96 Continental Villas Lithonia, GA 216 6,600
----- -------
1,254 $41,255
===== =======
</TABLE>
The Company recognized a total gain of approximately $22.4 million on the
disposition of these five Properties.
During the year ended December 31, 1995, the Operating Partnership recorded
a $1 million loss which represented the estimated impairment in connection with
the potential sale of University Park located in Toledo, Ohio. This Property
had a net carrying amount as of December 31, 1995 of approximately $1.1 million
after the impairment loss. The impairment loss on real estate to be disposed of
is included in gain on disposition of properties on the statement of operations
for the year ended December 31, 1995.
F-19
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. INVESTMENT IN MORTGAGE NOTES AND PARTNERSHIP INTERESTS
In 1995, the Operating Partnership made an $89 million investment in
partnership interests and subordinated mortgages collateralized by the
Additional Properties. These Additional Properties consist of 3,896 units,
located in California, Colorado, New Mexico and Oklahoma. This included an
$87.1 million investment in second and third mortgages (net of an original
discount of approximately $12.7 million to their face value), $1.6 million
represents a one time payment for an interest rate protection agreement and $0.3
million represents an investment for primarily a 49.5% limited partnership
interest in the title-holding entities. As the Operating Partnership does not
control the general partners of the title-holding entities and substantially all
of the Operating Partnership's investment is in second and third mortgages
(which are subordinate to first mortgages owned by third party unaffiliated
entities), the $87.1 million investment is accounted for as an investment in
mortgage notes. The $1.6 million payment made for the interest rate protection
agreement is included in deferred financing costs and is being amortized over
the term of the related debt. The investment in limited partnership interests
is accounted for under the equity method and is included in other assets on the
balance sheet.
As of December 31, 1996 the second mortgage notes had a combined principal
balance of approximately $27.8 million, accrue interest at a rate of 9.45% per
annum, receive principal amortization from excess cash flow and have a stated
maturity date of December 31, 2019. The third mortgage notes had a combined
principal balance of approximately $71.1 million, accrue interest at a rate of
6.15% per annum, plus up to an additional 3% per annum to the extent of
available cash flow. Contingent interest on the third mortgage notes is
recognized to the extent it is determined to be received. The third mortgage
notes have a stated maturity of December 31, 2024. Receipt of principal and
interest on the second and third mortgage notes is subordinated to the receipt
of all interest on the first mortgage notes. With respect to the discount on
these notes, the unamortized balance at December 31, 1996 was $12.1 million.
During 1996, the Operating Partnership amortized $0.6 million, which is included
in interest income - investment in mortgage notes in the consolidated statement
of operations. This discount is being amortized utilizing the effective yield
method.
F-20
<PAGE>
7. MORTGAGE NOTES PAYABLE
As of December 31, 1996, the Operating Partnership had outstanding mortgage
indebtedness of approximately $755.4 million encumbering 88 of the Properties.
The carrying value of such Properties (net of accumulated depreciation of $141.2
million) was approximately $1.1 billion. The mortgage notes payable are
generally due in monthly installments of interest only. In connection with the
Properties acquired during the year ended December 31, 1996, the Operating
Partnership assumed the outstanding mortgage balances on 14 Properties in the
aggregate amount of $142.2 million. In addition, during 1996, in two separate
transactions, certain indebtedness as evidenced by tax-exempt bonds encumbering
certain Properties was refinanced resulting in an increase in mortgage
indebtedness affecting these Properties of approximately $112 million. As a
result of the most recent transaction, the Operating Partnership recorded an
extraordinary loss in the amount of approximately $3.5 million, which
represented the write-off of unamortized deferred financing costs from the early
retirement of debt. Concurrent with the most recent refinanced tax-exempt bonds
and as a requirement of the credit provider of the bonds, the Financing
Partnership, which owns certain of the Properties entered into interest rate
protection agreements to fix the interest rate on the bonds, which agreements
were assigned to the credit provider as additional security. The Operating
Partnership simultaneously entered into substantially identical reverse
protection agreements in order to convert the interest rate on the tax-exempt
bonds back to a floating interest rate. As of December 31, 1996, the notional
amount of these agreements was approximately $166.8 million. The Operating
Partnership believes that it has limited exposure to the extent of non-
performance by the counterparties of the agreements since each counterparty is a
major U.S. financial institution, and the Operating Partnership does not
anticipate their non-performance.
Scheduled maturities for the Operating Partnership's outstanding mortgage
indebtedness are at various dates through August 1, 2030. During the year ended
December 31, 1996, effective interest cost on certain of these mortgage notes
was 7.87%. During the year ended December 31, 1996, the Operating Partnership
repaid the outstanding mortgage balances on eight Properties in the aggregate
amount of $57 million. Subsequent to December 31, 1996, the Operating
Partnership repaid the outstanding mortgage balance on three Properties in the
amount of approximately $19.6 million.
In February 1996, the Operating Partnership entered into an interest rate
protection agreement which hedged the interest rate risk of $50 million of
mortgage loans scheduled to mature in September 1997 by locking the five year
Treasury Rate, commencing October 1, 1997.
As of December 31, 1995, the Company had outstanding mortgage indebtedness
of approximately $561.7 million encumbering 73 of the Properties. The carrying
value of such Properties (net of accumulated depreciation of $103.4 million) was
$770.3 million. The mortgage notes payable are generally due in monthly
installments of interest only. Scheduled maturities are at various dates through
April 1, 2027. As of December 31, 1995, fixed interest rates on certain of the
mortgage notes ranged from 4.00% to 10.27% and variable interest rates on
certain of the mortgage notes ranged from 4.05% to 7.63%. During the year ended
December 31, 1995, the
F-21
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Company repaid the outstanding mortgage balance on seven Properties in the
aggregate amount of approximately $45.5 million.
During 1996 the Operating Partnership terminated two interest rate
protection agreements that were initially entered into in connection with two
mortgage loans with notional amounts totaling $64.2 million. These two
agreements effectively converted these two mortgage loans to fixed rate
instruments based on the London Interbank Offered Rate ("LIBOR"). Upon the
termination of these agreements the Operating Partnership received, or is
entitled to receive, settlement payments of approximately $230,000.
Aggregate payments of principal on mortgage notes payable for each of the
next five years and thereafter are as follows:
<TABLE>
<CAPTION>
YEAR TOTAL
---- -----
(in thousands)
<S> <C>
1997 $ 28,223
1998 89,497
1999 20,641
2000 13,369
2001 34,639
Thereafter 569,065
--------
Total $755,434
========
</TABLE>
8. LINES OF CREDIT
The Operating Partnership had a $250 million unsecured line of credit with
Wells Fargo Realty Advisors Funding Incorporated, as agent, through November 14,
1996. On November 15, 1996, the Operating Partnership completed an agreement
with Morgan Guaranty Trust Company of New York and Bank of America Illinois to
provide the Operating Partnership a $250 million unsecured line of credit. This
new line of credit matures in November 1999 and borrowings generally will bear
interest at a per annum rate of one, two, three and six month LIBOR, plus 0.75%,
and is subject to an annual facility fee of $500,000. As of December 31, 1996,
there were no amounts outstanding on this line of credit.
9. NOTES
On May 16, 1994, the Operating Partnership issued $125 million of unsecured
senior notes (the "1999 Notes") in a private placement (the "Debt Offering") to
qualified institutional buyers. The 1999 Notes were issued at a discount, which
is being amortized over the life of the 1999 Notes on a straight-line basis. As
of December 31, 1996 the unamortized discount balance was approximately $0.4
million. The 1999 Notes are due May 15, 1999 and bear interest at a rate of
8.5%, which is payable semiannually in arrears on May 15 and November 15. The
Operating
F-22
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Partnership received net proceeds of approximately $122.9 million in connection
with the Debt Offering. In February 1996 the Operating Partnership entered into
an interest rate protection agreement that hedged the interest rate risk of the
1999 Notes by locking the effective four year Treasury Rate commencing May 15,
1999. There was no current cost to the Operating Partnership for entering into
this agreement.
In December 1994, the Operating Partnership registered $500 million in debt
securities pursuant to a debt shelf registration statement (the "Debt Shelf
Registration") of which $100 million of unsecured floating rate notes (the
"Floating Rate Notes") were issued by the Operating Partnership on December 22,
1994 (the "Public Debt Offering"). The Floating Rate Notes are due on December
22, 1997 and bear interest at three month LIBOR plus 0.75%, which is payable
quarterly in arrears on the third Wednesday of each February, May, August and
November of each year. The Operating Partnership received net proceeds of $98.6
million in connection with the Public Debt Offering. In connection with the
Floating Rate Notes, the Operating Partnership has entered into interest rate
protection agreements which fix the interest rate at an effective rate of 7.075%
through the term of the Floating Rate Notes.
In April 1995, the Operating Partnership issued $125 million of unsecured
fixed rate notes (the "2002 Notes") in connection with the Debt Shelf
Registration in a public debt offering (the "Second Public Debt Offering"). The
2002 Notes were issued at a discount, which is being amortized over the life of
the 2002 Notes on a straight-line basis. As of December 31, 1996 the
unamortized discount balance was approximately $0.8 million. The 2002 Notes are
due on April 15, 2002 and bear interest at 7.95%, which is payable semi-annually
on each October 15 and April 15. The Operating Partnership received net
proceeds of $123.1 million in connection with the Second Public Debt Offering.
Prior to the issuance of the 2002 Notes, the Operating Partnership entered into
an interest rate protection agreement to effectively fix the interest rate cost
of such issuance. The Operating Partnership made a one time settlement payment
of this protection transaction, which was approximately $0.8 million, and is
being amortized over the term of the 2002 Notes. As of December 31, 1996 the
unamortized balance of this cost was approximately $0.6 million.
In August 1996, the Operating Partnership issued $150 million of unsecured
fixed rate notes (the "2026 Notes") in connection with the Debt Shelf
Registration in a public debt offering (the "Third Public Debt Offering"). The
2026 Notes are due on August 15, 2026 and bear interest at 7.57%, which is
payable semi-annually in arrears on February 15 and August 15, commencing
February 15, 1997. The 2026 Notes are redeemable at any time after August 15,
2006 by the Operating Partnership pursuant to the terms thereof. The Operating
Partnership received net proceeds of approximately $149 million in connection
with this issuance. Prior to the issuance of the 2026 Notes, the Operating
Partnership entered into an interest rate protection agreement to effectively
reduce the overall interest rate cost of this issuance to 7.5%. The Operating
Partnership received a one time settlement payment of this transaction, which
was approximately $0.6 million,
F-23
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
which amount is being amortized over the term of the 2026 Notes. As of December
31, 1996, the unamortized balance was approximately $0.6 million.
On September 18, 1996, the Operating Partnership filed with the SEC a Form
S-3 Registration Statement to register $500 million of debt securities (the
"1996 Debt Shelf Registration"). The SEC declared this Registration effective
on September 23, 1996.
In regard to all of the interest rate protection agreements mentioned in
the previous paragraphs, the Operating Partnership believes that it has limited
exposure to the extent of non-performance by the counterparties of each
agreement since each counterparty is a major U.S. financial institution, and the
Operating Partnership does not anticipate their non-performance.
10. REDEEMABLE PREFERENCE INTERESTS
In connection with the acquisition of seven of the Properties, which closed
in December 1994, the Company, through the Operating Partnership, issued 41,213
preferred interests ("Preference Units") to certain sellers of these Properties.
The Preference Units had a stated value of $1,000 and entitled the holders
thereof to preferential distributions from the Operating Partnership (other than
liquidating distributions) before distributions to the holders of the OP Units
and the Company (provided the Company shall be entitled to receive distributions
necessary to maintain its REIT status under U.S. tax laws). The Operating
Partnership also made loans to certain of these sellers in the aggregate amount
of $15.2 million, which loans are fully collateralized by 465,545 OP Units.
During the year ended December 31, 1995 the Operating Partnership redeemed
1,423 Preference Units for a total redemption price of approximately $1,351,900.
During the year ended December 31, 1996 the operating Partnership redeemed 1,140
Preference Units for a total redemption price of approximately $1.1 million. On
March 1, 1996, the Operating Partnership exercised its option to convert all of
the Preference Units into OP Units. This conversion resulted in 1,182,835 OP
Units being issued.
F-24
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. 9 3/8% SERIES A CUMULATIVE REDEEMABLE PREFERENCE UNITS
In June 1995, the Company sold 6,120,000 of its 9 3/8% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share
(liquidation preference $25 per share) (the "Series A Preferred Shares"),
pursuant to a $250 million shelf registration (the "Preferred Shelf
Registration"), at $25 per share. The Company raised gross proceeds of $153
million from this offering (the "Series A Preferred Share Offering"). The net
proceeds of approximately $148.2 million from the Series A Preferred Share
Offering were contributed by the Company to the Operating Partnership in
exchange for 6,120,000 of the Operating Partnership's 9 3/8% cumulative
redeemable preference units (the "Series A Cumulative Redeemable Preference
Units"). The Series A Preferred Shares are cumulative from the date of original
issue and are payable quarterly on or about the fifteenth of January, April,
July and October of each year, at the annual rate of 9 3/8% of the liquidation
preference of $25 per share. The Series A Preferred Shares are not redeemable
prior to June 1, 2000. On or after June 1, 2000, the Preferred Shares may be
redeemed for cash at the option of the Company in whole or in part, at a
redemption price of $25 per share, plus accrued and unpaid distributions, if
any, thereon.
12. 9 1/8% SERIES B CUMULATIVE REDEEMABLE PREFERENCE UNITS
In November 1995, the Company sold 5,000,000 depositary shares (the "Series
B Depositary Shares") pursuant to the Preferred Shelf Registration and the
Second Shelf Registration. Each Series B Depositary Share represents a 1/10
fractional interest in a 9 1/8% Series B Cumulative Redeemable Preferred Share
of Beneficial Interest, $0.01 par value per share (the "Series B Preferred
Shares"). The liquidation preference of each of the Series B Preferred shares is
$250.00 (equivalent to $25 per Series B Depositary Share). The Company raised
gross proceeds of $125 million from this offering (the "Series B Preferred Share
Offering"). The net proceeds of approximately $121 million from the Series B
Preferred Share Offering were contributed by the Company to the Operating
Partnership in exchange for 500,000 of the Operating Partnership's 9 1/8%
cumulative redeemable preference units (the "Series B Cumulative Redeemable
Preference Units"). The Series B Preferred Shares are cumulative from the date
of original issue and are payable quarterly on or about the fifteenth day of
January, April, July and October of each year, commencing on January 15, 1996,
at the annual rate of 9 1/8% of the liquidation preference of $25 per Series B
Depositary Share. The Series B Preferred Shares are not redeemable prior to
October 15, 2005. On and after October 15, 2005, the Series B Preferred Shares
may be redeemed for cash at the option of the Company, in whole or in part, at a
redemption price of $250 per share (equivalent to $25 per Series B Depositary
Share), plus accrued and unpaid distributions, if any, thereon.
13. 9 1/8% SERIES C CUMULATIVE REDEEMABLE PREFERENCE UNITS
In September, 1996 the Company sold 4,600,000 depositary shares (the
"Series C Depositary Shares") pursuant to the Second Shelf Registration. Each
Series C Depositary Share represents a 1/10 fractional interest in a 9 1/8%
Series C Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par
value share (the "Series C Preferred Shares"). The liquidation preference of
each
F-25
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
of the Series C Preferred Shares is $250.00 (equivalent to $25 per Series C
Depositary Share). The Company raised gross proceeds of $115 million from this
offering (the "Series C Preferred Share Offering"). The net proceeds of
approximately $111.4 million from the Series C Preferred Share Offering were
contributed by the Company to the Operating Partnership in exchange for 460,000
9 1/8% cumulative preference units (the "Series C Cumulative Redeemable
Preference Units"). The Series C Preferred Shares are cumulative from the date
of original issue and are payable quarterly on or about the fifteenth day of
January, April, July and October of each year, commencing on October 15, 1996,
at the annual rate of 9 1/8% of the liquidation preference of $25 per Series C
Depositary Share. The Series C Preferred Shares are not redeemable prior to
September 9, 2006. On and after September 9, 2006, the Series C Preferred Shares
may be redeemed for cash at the option of the Company, in whole or in part, at a
redemption price of $250 per share (equivalent to $25 per Series C Depositary
Share), plus accrued and unpaid distributions, if any, thereon.
14. EMPLOYEE TRANSACTIONS
As of December 31, 1996, the outstanding principal balance on the employee
notes issued in connection with Common Shares purchased was, in the aggregate,
approximately $5.26 million. Douglas Crocker II, President and Chief Executive
Officer of the Company and four other officers had purchased an aggregate of
194,000 Common Shares at prices which range from $26 to $31.625 per Common
Share. These purchases were financed by loans made by the Company in the
aggregate amount of approximately $5.4 million. The employee notes accrue
interest, payable in arrears, at rates that range from 6.15% per annum to 7.93%
per annum. Scheduled maturities are at various dates through March 2005. The
employee notes are recourse to Mr. Crocker and the four other officers and are
collateralized by pledges of the 194,000 Common Shares purchased.
In addition, as of December 31, 1996, the outstanding principal balance on
additional notes issued to Mr. Crocker was approximately $0.8 million. These
notes accrue interest, payable in arrears at one month LIBOR plus 2% per annum.
Scheduled maturities are at various dates through March 2003. The notes are
recourse to Mr. Crocker and are collateralized by pledges of options, share
awards and Common Shares purchased.
During 1996 the Board of Trustees of the Company approved a deferred
compensation agreement (the "Agreement") for Mr. Crocker. This Agreement would
provide Mr. Crocker with a salary benefit after his termination of employment
with the Company. If Mr. Crocker's employment is terminated without cause, he
would be entitled to annual deferred compensation for a 10-year period
commencing on the termination date in an amount equal to his average annual base
compensation (before bonus) for the prior five calendar years, multiplied by a
percentage equal to 10% per year since December 31, 1995. In the event Mr.
Crocker's employment is terminated as a result of his death, permanent
disability or incapacity, he would be entitled to a similar amount except the
annual percentage would be 15% and the maximum paid per year would not exceed
100% of his average base salary. Should Mr. Crocker be terminated for cause or
should he choose to leave voluntarily without good reason, he would not be
entitled to any deferred compensation.
F-26
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Board of Trustees also approved a deferred compensation (share
distributions) agreement ("Deferred Compensation Agreement") for Mr. Crocker. On
January 18, 1996, Mr. Crocker was issued options to purchase 100,000 Common
Shares, which vest over a 3-year period and are effective for 10 years. Pursuant
to the terms of the Deferred Compensation Agreement, upon the exercise of any
options, Mr. Crocker would be entitled to an amount equal to the amount of
Common Share distributions that would have been paid on said shares being
exercised had he owned said shares for the period from January 18, 1996 until
the date of the exercise of the options in question. This agreement is not
affected by Mr. Crocker's death or termination of employment with the Company.
15. DEPOSITS-RESTRICTED
Deposits-restricted as of December 31, 1996, primarily included deposits in
the amount of approximately $16.4 million held in third party escrow accounts
which were made in connection with a January 1997 acquisition and the expected
acquisition of an additional property. In addition, approximately $3.7 million
was for tenant security and utility deposits for certain of the Operating
Partnership's Properties.
Deposits-restricted as of December 31, 1995 primarily included deposits
held in third party escrow accounts made in connection with certain of the
Operating Partnership's dispositions. Approximately $15 million was held in
these accounts and were utilized for the purchase of additional properties. In
addition, approximately $3.2 million was for tenant security and utility
deposits for certain of the Operating Partnership's Properties.
16. GAIN ON EARLY EXTINGUISHMENT OF DEBT
In June 1995, the Operating Partnership paid approximately $12.6 million in
full satisfaction of a $14.6 million mortgage note obligation relating to one of
its Properties. As a result, the Operating Partnership recognized a gain of $2
million on the extinguishment of this indebtedness.
17. SUMMARIZED PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
The following Summarized Pro Forma Condensed Statement of Operations has
been prepared as if the January 1996 Common Share Offering, the February 1996
Common Share Offering, the May 1996 Common Share Offerings, the Third Public
Debt Offering, the Series C Preferred Share Offering, the September 1996 Common
Share Offering, the December 1996 Common Share Offerings, the acquisition of 49
Properties, the assumption of $142.2 million of mortgage indebtedness, the
repayment of $57 million of mortgage indebtedness and the disposition of five
Properties (as described in Note 5, Note 7 and Note 9 of Notes to Consolidated
Financial Statements) had occurred on January 1, 1996 and all Preference Units
had been converted into OP units. This would result in 59,013,064 OP Units
outstanding. In management's opinion, the Summarized Pro Forma Condensed
Statement of Operations does not purport to present what actual results would
have been had the above transactions occurred on January 1, 1996, or to
F-27
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
project results for any future period. The amounts presented in the following
statement are in thousands except for OP Unit share amounts:
<TABLE>
<CAPTION>
Summarized Pro Forma
Condensed Statement
of Operations
For the Year Ended
December 31, 1996
(Amounts in thousands
except per OP unit amounts)
---------------------------
<S> <C>
Total Revenues $ 541,118
-------
Total Expenses 424,541
-------
Pro Forma net income available
for OP Units $ 80,333
=======
Pro Forma net income per OP Unit $ 1.36
=======
</TABLE>
18. COMMITMENTS AND CONTINGENCIES
The Operating Partnership, as an owner of real estate, is subject to
various environmental laws of Federal and local governments. Compliance by the
Operating Partnership with existing laws has not had a material adverse effect
on the Operating Partnership's financial condition and management does not
believe it will have such an impact in the future. However, the Operating
Partnership cannot predict the impact of new or changed laws or regulations on
its current Properties or on properties that it may acquire in the future.
On March 20, 1996, a legal proceeding (Nick J. Miletich, Administrator of
the Estates of Dorothy Miletich and Madelyne Miletich, deceased, v. Equity
Residential Properties Trust, Equity Residential Properties Management
Corporation, Curt Vajgrt, Raymond Countryman and Darla Countryman) (Iowa
District Court, Polk Count, Iowa, Law Case No. CL 68908) was filed against the
Company. This legal proceeding arises out of the Company's ownership and
management of the apartment building known as 3000 Grand Ave. in Des Moines,
Iowa and alleges that Raymond and Darla Countryman murdered Dorothy Miletich and
Madelyne Miletich, who were residents of the apartment complex, on June 15,
1995. Raymond Countryman is a former employee of the Company. The plaintiff
alleges, inter alia, that had the Company learned of the background of Mr.
----- ----
Countryman prior to his employment, the Company would not have hired him and the
deaths of the Miletichs would have been avoided. While the Company is vigorously
contesting these claims, there is no assurance that the Company will not be held
liable for said deaths and there is no assurance that its insurance coverage
will cover all damages that may be awarded against it. At this time, an estimate
of the possible loss or range of loss that the Company may incur cannot be
determined.
The Operating Partnership does not believe there is any other litigation,
except as mentioned in the previous paragraph, threatened against the Operating
Partnership other than routine litigation arising out of the ordinary course of
business, some of which is expected to be covered by liability insurance, none
of which is expected to have a material adverse effect on the consolidated
financial statements of the Operating Partnership.
F-28
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Management Corp. has lease agreements with an affiliated party covering
office space occupied by regional operating centers located in Tampa, Florida
("Southeast ROC") and Chicago, Illinois ("Midwest ROC"). The Southeast ROC
agreement, expires on October 31, 2001 and the Midwest ROC agreement expires on
September 30, 2000.
Management Corp. also has four additional lease agreements with
unaffiliated parties covering space occupied by regional operations centers
located in Dallas, Texas (the "Southwest ROC"); Bethesda, Maryland (the
"Atlantic ROC"); Denver, Colorado (the "Western ROC") and Seattle, Washington
(the "Pacific Northwest ROC"). The lease agreement for the Southwest ROC expires
on March 31, 1999; the lease agreement for the Atlantic ROC expires on November
30, 1998; the lease agreement for the Western ROC expires on November 30, 1999;
and the lease agreement for the Pacific Northwest ROC expires on November 30,
2000.
Management Corp. also has a lease with an affiliated party covering office
space occupied by the corporate headquarters located in Chicago, Illinois. This
agreement, as amended, expires on July 31, 2001. In addition, commencing
September 1, 1996, Management Corp. increased the office space occupied by its
corporate personnel. The lease agreement covering the additional office space
expires on April 29, 1998.
During the years ended December 31, 1996, 1995 and 1994, total rentals,
including a portion of real estate taxes, insurance, repairs and utilities,
aggregated $1,020,311, $1,049,731 and $403,346, respectively.
The minimum basic aggregate rental commitment under the above described
leases in years succeeding December 31, 1996 is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1997 $1,144,500
1998 1,046,800
1999 821,700
2000 684,600
2001 390,600
----------
Total $4,088,200
==========
</TABLE>
19. TRANSACTIONS WITH RELATED PARTIES
Pursuant to the terms of the partnership agreement for the Operating
Partnership, the Operating Partnership is required to reimburse the Company for
all expenses incurred by the Company in excess of income earned by the Company
through its indirect 1% ownership of various Financing Partnerships. Amounts
paid on behalf of the Company are reflected in the Consolidated Statement of
Operations as general and administrative expenses
Certain related entities provided services to the Operating Partnership and
the Company. These included, but were not limited to, Rosenberg & Liebentritt,
P.C., which provided legal services; Greenberg & Pociask, Ltd., which provided
tax and accounting services; First Capital Financial Corporation, which provided
accounting services; and Computech Systems, Inc., which provided computer
services. Fees paid to these related entities amounted to approximately $0.7
F-29
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
million, $2.5 million and $3 million for the years ended December 31, 1996, 1995
and 1994, respectively. In addition, The Riverside Agency, Inc., which provided
insurance brokerage services, was paid fees and reimbursed premiums and loss
claims in the amount of $4.1 million, $2.6 million and $2.3 million for the
years ended December 31, 1996, 1995 and 1994, respectively. As of December 31,
1996 and 1995, $315,700 and $366,300, respectively, was owed to Rosenberg &
Liebentritt, P.C. for legal fees incurred in connection with securities
offerings, litigation matters, property acquisitions and other general corporate
matters.
F-30
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Equity Group Investments, Inc. and certain of its subsidiaries, including
Equity Assets Management, Inc., Eagle Flight Services, Equity Properties &
Development, L.P. and EPMC ("EGI"), have provided certain services to the
Operating Partnership and the Company which include, but are not limited to,
financial and accounting services, investor relations, corporate secretarial and
computer and support services, real estate tax evaluation services, market
consulting and research services, financing services, information systems
services and property development services. Fees paid to EGI for these services
amounted to $1.3 million, $3.4 million and $1.1 million for the years ended
December 31, 1996, 1995 and 1994, respectively. Amounts due to EGI were
approximately $0.3 million and $1.1 million as of December 31, 1996 and 1995,
respectively.
In connection with the affiliated lease agreements discussed in Note 18,
Management Corp. paid Equity Office Holdings, L.L.C. ("EOH") $118,919, $104,421
and $118,518 in connection with the Midwest ROC, $137,638, $9,783 and $85,466 in
connection with the Southeast ROC and $409,392, $632,725 and $19,070 in
connection with the space occupied by the corporate headquarters for the years
ended December 31, 1996, 1995 and 1994, respectively. As of December 31, 1996,
approximately $46,435 was owed to EOH and as of December 31, 1995, no amounts
were owed to EOH.
In connection with the Private Equity Offering and the Shelf Offering, the
Company paid Equity Institutional Investors, Inc. ("EII") consulting fees in the
amount of $200,000 and $680,000 for the years ended December 31, 1995 and 1994,
respectively. As of December 31, 1996 and 1995, no amounts were owed to EII for
consulting services.
Artery Property Management, Inc. ("Artery") provided the Operating
Partnership consulting services with regard to property acquisitions and
additional business opportunities. Fees paid for those services and reimbursed
expenses amounted to approximately $0.2 and $0.7 million for the years ended
December 31, 1996 and 1995.
Rudnick & Wolfe, a law firm in which Mr. Errol Halperin, a trustee of the
Company, is a partner, provided legal services to the Operating Partnership.
Fees paid to this firm amounted to approximately $4,300, $41,300 and $10,000 for
the years ended December 31, 1996, 1995 and 1994.
Genesis Merchant Group Securities ("Genesis") provided the Operating
Partnership brokerage services and was paid $18,970 during the year ended
December 31, 1994. SZRL Investments, an Illinois general partnership of which
one of its partners is a trust created for the benefit of Mr. Zell, is a limited
partner of Genesis Merchant Group, the sole general partner of Genesis.
In addition, the Operating Partnership and the Company have provided
acquisitions, asset and property management services to certain related entities
for properties not owned by the Operating Partnership. Fees received for
providing such services were approximately $6.7 million, $7 million and $4.7
million for the years ended December 31, 1996, 1995 and 1994, respectively.
F-31
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following unaudited quarterly data has been prepared on the basis of a
December 31 year end: (Amounts in thousands)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1995 3/31 6/30 9/30 12/31
- ---------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues $ 91,882 $ 93,294 $ 99,594 $105,614
======== ======== ======== ========
Net income $ 13,220 $ 15,544 $ 17,570 $ 37,021
======== ======== ======== ========
1996
- ----------------
Total revenues $106,321 $113,267 $124,459 $134,338
======== ======== ======== ========
Net income $ 21,295 $ 23,310 $ 22,111 $ 49,207
======== ======== ========= ========
</TABLE>
21. SUBSEQUENT EVENTS
On January 2, 1997, the Operating Partnership acquired Town Center
Apartments, a 258-unit multifamily property located in Kingwood, Texas, from an
unaffiliated third party for a purchase price of $12.8 million.
On January 16, 1997 the Company entered into an Agreement and Plan of
Merger regarding the planned acquisition of the multifamily property business of
Wellsford Residential Property Trust ("Wellsford"), a Maryland real estate
investment trust, by the Company through the tax free merger of the Company and
Wellsford. This transaction is valued at approximately $1 billion and includes
75 multifamily residential properties containing 19,004 units.
On January 21, 1997, the Operating Partnership acquired Harborview
Apartments, a 160-unit multifamily property located in San Pedro, California,
from an unaffiliated third party for a purchase price of $19 million, which
included the assumption of mortgage indebtedness of approximately $12.69
million.
On January 31, 1997, the Operating Partnership acquired The Cardinal
Apartments, a 256-unit multifamily property located in Greensboro, North
Carolina, from an unaffiliated third party for a purchase price of $12.77
million, including the assumption of mortgage indebtedness in the amount of
$7.53 million.
F-32
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
On February 12, 1997, the Operating Partnership acquired Trails at Dominion
Apartments, a 843-unit multifamily property located in Houston, Texas from an
unaffiliated third party for a purchase price of $38.3 million, which included
the assumption of mortgage indebtedness of approximately $26.19 million.
On February 25, 1997, the Operating Partnership declared a $0.625
distribution per OP Unit for the quarter ended March 31, 1997 to OP Unit holders
of record on March 28, 1997. The Operating Partnership also declared a $05.85938
distribution, a $05.70313 distribution and a $05.70313 distribution to the
Company as holder of the Series A Cumulative Redeemable Preference Units, Series
B Cumulative Redeemable Preference Units and Series C Cumulative Redeemable
Preference Units, respectively.
On February 25, 1997, the Operating Partnership acquired Dartmouth Woods
Apartments, a 201-unit multifamily property located in Lakewood, Colorado, from
an unaffiliated third party for a purchase price of $12.4 million, including the
assumption of mortgage indebtedness in the amount of approximately $4.44
million.
On February 28, 1997, the Operating Partnership acquired Rincon Apartments,
a 288-unit multifamily property located in Houston, Texas, from an unaffiliated
third party for a purchase price of $20.87 million.
On February 28, 1997, the Operating Partnership acquired Waterford at the
Lakes Apartments, a 344-unit multifamily property located in Kent, Washington,
from an unaffiliated third party for a purchase price of $18.9 million.
On March 17, 1997, the Operating Partnership acquired Junipers at Yarmouth
Apartments, a 225-unit multifamily property located in Yarmouth, Maine, from an
unaffiliated third party for a purchase price of $9.15 million.
As of March 20, 1997, the Company completed offerings of 938,800 publicly
registered Common Shares, which were sold at a net price of $46 per share and
contributed to the Operating Partnership net proceeds of approximately $43.2
million in connection therewith.
F-33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULE
TO THE PARTNERS
ERP OPERATING LIMITED PARTNERSHIP
In connection with our audit of the consolidated financial statements of ERP
Operating Limited Partnership referred to in our report dated February 14, 1996,
which financial statements are included in this Form 10-K, we have also audited
the 1995 and 1994 information in the financial statement schedule listed in the
Index to the Financial Statements and Schedule. In our opinion, this financial
statement schedule presents fairly, in all material respects, the 1995 and 1994
information required to be set forth therein.
/S/ GRANT THORNTON LLP
----------------------------------------
GRANT THORNTON LLP
Chicago, Illinois
February 14, 1996
<PAGE>
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I)
- ----------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2900 on First.................Seattle, WA 0 1,176,400 10,588,096 1,200 95,180 1,177,600
3000 Grand....................Des Moines, IA 0 858,305 7,827,336 0 1,191,980 858,305
7979 Westheimer...............Houston, TX 0 1,388,400 12,495,280 1,400 733,108 1,389,800
Altamonte.....................San Antonio, TX 14,600,000 1,663,100 14,968,079 1,970 540,718 1,665,070
Amberton......................Manassas, VA 6,595,519 888,800 8,352,507 11,800 745,330 900,600
Arbors of Hickory Hollow......Nashville, TN (D) 202,285 6,594,754 700 1,071,223 202,985
Arbors of Brentwood...........Nashville, TN (D) 404,570 13,189,508 100 749,501 404,670
Arbors of Las Colinas.........Irving, TX 0 1,662,300 14,960,709 1,600 1,012,376 1,663,900
Bainbridge....................Durham, NC 0 1,042,900 9,385,579 33,400 837,173 1,076,300
Bay Club......................Phoenix, AZ (E) 828,100 5,821,759 100 1,077,580 828,200
Bourbon Square................Palatine, IL 28,150,000 3,982,600 35,843,025 2,700 2,024,772 3,985,300
Brentwood.....................Vancouver, WA 0 1,318,200 11,863,517 39,021 824,156 1,357,221
Breton Mill...................Houston, TX (F) 212,720 8,154,404 100 613,371 212,820
Bridgecreek...................Wilsonville, OR 0 1,294,600 11,651,108 5,290 536,972 1,299,890
Bridgeport....................Raleigh, NC 0 1,296,200 11,665,351 500 208,931 1,296,700
Brierwood.....................Jacksonville, FL 0 546,100 4,914,681 4,300 62,886 550,400
Brittany Square...............Tulsa, OK 0 625,000 4,220,662 0 352,527 625,000
Brixworth.....................Nashville, TN 0 1,172,100 10,549,371 1,600 42,780 1,173,700
Camellero.....................Scottsdale, AZ 11,949,595 1,923,600 17,312,869 1,300 274,238 1,924,900
Canterbury....................Germantown, MD 19,032,948 2,781,300 26,656,574 (0) 2,044,601 2,781,300
Canterchase...................Nashville, TN 5,824,040 862,200 7,759,711 1,100 32,267 863,300
Canyon Creek..................Tucson, AZ (E) 834,313 5,840,188 100 358,628 834,413
Canyon Sands..................Phoenix, AZ 8,849,680 1,475,900 13,282,737 14,550 131,988 1,490,450
Carmel Terrace................San Diego, CA 0 2,288,300 20,632,540 (0) 99,768 2,288,300
Casa Capricorn................San Diego, CA 0 1,260,100 11,341,085 2,400 27,534 1,262,500
Casa Cordoba..................Tallahassee, FL 0 307,055 2,732,177 0 787,356 307,055
Casa Cortez...................Tallahassee, FL 0 120,590 1,196,857 0 467,869 120,590
Catalina Shores...............Las Vegas, NV 0 1,222,200 10,999,974 4,800 413,277 1,227,000
Cedar Crest...................Overland Park, KS 0 2,159,800 19,438,107 500 15,521 2,160,300
Celebration at Westchase......Houston, TX (E) 2,204,590 6,312,399 100 708,272 2,204,690
Champion Oaks.................Houston, TX 7,298,817 931,900 8,519,479 (0) 146,787 931,900
Chandler Court................Chandler, AZ 0 1,352,600 12,172,974 500 107,033 1,353,100
Chandler's Bay I..............Kent, WA 0 1,503,400 13,530,223 3,500 497,871 1,506,900
Chaparral.....................Largo, FL 6,891,428 303,100 6,169,465 0 2,608,105 303,100
Charter Club..................Everett, WA 0 998,700 8,988,560 2,400 224,471 1,001,100
Cheyenne Crest................Colorado Springs, CO (E) 73,950 3,936,559 100 643,159 74,050
Cloisters on the Green........Lexington, KY 2,827,810 187,074 2,193,726 0 1,370,338 187,074
Country Club I................Silver Spring, MD 7,077,694 1,119,500 10,815,232 1,457 465,095 1,120,957
Country Club II...............Silver Spring, MD 5,966,153 850,000 8,255,502 2,294 23,886 852,294
<CAPTION>
GROSS AMOUNT CARRIED LIFE USED TO
AT CLOSE OF COMPUTE
PERIOD 12/31/96 DEPRECIATION IN
- ----------------------------------------------------------------------------------------------------------------
BUILDING & ACCUMULATED DATE OF LATEST INCOME
FIXTURES (A) TOTAL (B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2900 on First.................Seattle, WA 10,683,276 11,860,876 266,733 1989-91 30 Years
3000 Grand....................Des Moines, IA 9,019,316 9,877,621 4,136,718 1970 30 Years
7979 Westheimer...............Houston, TX 13,228,388 14,618,188 481,175 1973 30 Years
Altamonte.....................San Antonio, TX 15,508,797 17,173,867 1,259,430 1985 30 Years
Amberton......................Manassas, VA 9,097,837 9,998,437 679,673 1986 30 Years
Arbors of Hickory Hollow......Nashville, TN 7,665,977 7,868,962 960,405 1986 30 Years
Arbors of Brentwood...........Nashville, TN 13,939,009 14,343,679 1,657,104 1986 30 Years
Arbors of Las Colinas.........Irving, TX 15,973,085 17,636,985 1,740,888 1984/85 30 Years
Bainbridge....................Durham, NC 10,222,752 11,299,052 1,010,232 1984 30 Years
Bay Club......................Phoenix, AZ 6,899,339 7,727,539 906,957 1976 30 Years
Bourbon Square................Palatine, IL 37,867,797 41,853,097 3,931,913 1984-87 30 Years
Brentwood.....................Vancouver, WA 12,687,673 14,044,894 673,352 1990 30 Years
Breton Mill...................Houston, TX 8,767,775 8,980,595 1,003,745 1986 30 Years
Bridgecreek...................Wilsonville, OR 12,188,080 13,487,970 1,161,921 1987 30 Years
Bridgeport....................Raleigh, NC 11,874,282 13,170,982 1,331,562 1990 30 Years
Brierwood.....................Jacksonville, FL 4,977,567 5,527,967 66,571 1974 30 Years
Brittany Square...............Tulsa, OK 4,573,189 5,198,189 2,041,207 1982 30 Years
Brixworth.....................Nashville, TN 10,592,150 11,765,850 133,056 1985 30 Years
Camellero.....................Scottsdale, AZ 17,587,107 19,512,007 920,338 1979 30 Years
Canterbury....................Germantown, MD 28,701,175 31,482,475 2,155,479 1986 30 Years
Canterchase...................Nashville, TN 7,791,978 8,655,278 84,269 1985 30 Years
Canyon Creek..................Tucson, AZ 6,198,816 7,033,229 790,012 1986 30 Years
Canyon Sands..................Phoenix, AZ 13,414,725 14,905,175 283,324 1983 30 Years
Carmel Terrace................San Diego, CA 20,732,308 23,020,608 1,575,010 1988-89 30 Years
Casa Capricorn................San Diego, CA 11,368,619 12,631,119 107,033 1981 30 Years
Casa Cordoba..................Tallahassee, FL 3,519,533 3,826,588 2,322,089 1972/1973 30 Years
Casa Cortez...................Tallahassee, FL 1,664,726 1,785,316 1,039,578 1970 30 Years
Catalina Shores...............Las Vegas, NV 11,413,251 12,640,251 994,406 1989 30 Years
Cedar Crest...................Overland Park, KS 19,453,627 21,613,927 121,265 1986 30 Years
Celebration at Westchase......Houston, TX 7,020,671 9,225,361 1,056,903 1979 30 Years
Champion Oaks.................Houston, TX 8,666,266 9,598,166 712,007 1984 30 Years
Chandler Court................Chandler, AZ 12,280,007 13,633,107 237,596 1987 30 Years
Chandler's Bay I..............Kent, WA 14,028,094 15,534,994 1,106,336 1989 30 Years
Chaparral.....................Largo, FL 8,777,570 9,080,670 5,077,932 1976 30 Years
Charter Club..................Everett, WA 9,213,031 10,214,131 970,112 1991 30 Years
Cheyenne Crest................Colorado Springs, CO 4,579,718 4,653,768 663,938 1984 30 Years
Cloisters on the Green........Lexington, KY 3,564,064 3,751,138 2,349,167 1974 30 Years
Country Club I................Silver Spring, MD 11,280,327 12,401,284 804,078 1980 30 Years
Country Club II...............Silver Spring, MD 8,279,388 9,131,682 555,368 1982 30 Years
</TABLE>
S-2
<PAGE>
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I)
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Country Ridge................Farmington Hills, MI 0 1,605,800 14,452,066 14,750 315,877
Creekside....................Mountlake Terrace, WA 15,883,770 2,802,900 25,226,096 4,400 509,926
Creekside Oaks...............Walnut Creek, CA 11,566,208 2,167,300 19,505,628 700 6,495
Crystal Creek................Phoenix, AZ 0 952,900 8,576,084 600 162,583
Cypress Point................Las Vegas, NV 5,560,452 953,800 8,583,719 5,890 461,972
Dawntree.....................Carrollton, TX 0 1,204,600 10,841,783 900 501,107
Deerwood.....................San Diego, CA 0 2,075,700 18,680,801 6,395 2,734,498
Deerwood Meadows.............Greensboro, NC (E) 986,643 6,906,503 100 582,195
Del Coronado.................Mesa, AZ (O) 1,963,200 17,669,207 1,200 158,272
Desert Park..................Las Vegas, NV 0 1,085,400 9,401,015 0 501,594
Desert Sands.................Phoenix, AZ 8,844,182 1,464,200 13,177,336 14,550 237,114
Diplomat South...............Beech Grove, IN 2,634,919 472,414 2,267,310 0 2,138,355
Doral........................Louisville, KY 4,110,646 96,607 1,526,628 0 2,550,299
Eagle Canyon.................Chino Hills, CA 0 1,806,800 16,261,336 1,400 25,406
Eagle Rim....................Redmond, WA 0 976,200 8,785,605 1,600 292,191
East Pointe..................Charlotte, NC 9,740,000 1,364,100 12,276,563 1,800 760,279
Edgewood.....................Woodinville, WA 6,177,002 1,068,200 9,613,388 1,900 314,708
Emerald Place................Bermuda Dunes, CA 0 954,400 8,589,110 2,100 442,566
Essex Place..................Overland Park, KS 11,161,045 1,831,900 16,486,600 3,500 1,251,417
Flying Sun...................Phoenix, AZ (E) 87,120 2,035,537 100 137,450
Forest Ridge.................Arlington, TX 0 2,339,300 21,053,447 21,600 255,713
Fountain Creek...............Phoenix, AZ 0 686,000 6,173,818 500 107,826
Fountainhead Combined........San Antonio, TX 23,275,000 3,617,449 13,446,560 0 1,197,985
Fountains at Flamingo........Las Vegas, NV 0 3,180,900 28,628,533 2,200 405,159
Four Lakes...................Lisle, IL 10,344,569 2,465,000 13,178,449 0 5,443,148
Four Lakes Lisle.............Lisle, IL 39,680,000 600,000 16,530,115 0 3,012,666
Fox Run......................Little Rock, AR 5,481,038 422,014 4,053,552 0 4,563,021
Fox Run......................Federal Way, WA 0 638,500 5,746,956 1,200 313,307
Frey.........................Atlanta, GA 19,700,000 2,464,900 22,183,783 2,300 652,772
Gatehouse on the Green.......Pambroke Pines, FL 0 2,216,800 19,951,085 9,900 90,552
Gatehouse at Pine Lake.......Plantation, FL 0 1,886,200 16,975,382 9,900 90,508
Georgian Woods II............Wheaton, MD 10,618,991 2,049,000 19,287,578 4,400 1,556,763
Glenridge....................Colorado Springs, CO (F) 884,688 4,466,900 100 372,410
Governor's Place.............Augusta, GA 0 347,355 2,518,146 0 765,732
Greengate....................Marietta, GA 0 132,979 1,476,005 0 1,119,555
Greenwich Woods..............Silver Spring, MD 17,940,321 3,095,700 29,073,395 5,300 1,340,526
Greenwood Forest.............Little Rock, AR 3,562,675 559,038 1,736,549 0 2,664,879
Habitat......................Orlando, FL 0 600,000 494,032 0 5,636,708
Hammock's Place..............Miami, FL (F) 319,080 12,216,608 100 608,118
<CAPTION>
GROSS AMOUNT LIFE USED TO
CLOSE OF COMPUTE
PERIOD 12/31/96 DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
BUILDING & ACCUMULATED DATE OF LATEST INCOME
APARTMENT NAME LOCATION LAND FIXTURES (A) TOTAL (B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Country Ridge................Farmington Hills, MI 1,620,550 14,767,943 16,388,493 300,193 1986 30 Years
Creekside....................Mountlake Terrace, WA 2,807,300 25,736,022 28,543,322 1,983,579 1987 30 Years
Creekside Oaks...............Walnut Creek, CA 2,168,000 19,512,122 21,680,122 30,810 1974 30 Years
Crystal Creek................Phoenix, AZ 953,500 8,738,667 9,692,167 484,560 1985 30 Years
Cypress Point................Las Vegas, NV 959,690 9,045,691 10,005,381 771,850 1989 30 Years
Dawntree.....................Carrollton, TX 1,205,500 11,342,890 12,548,390 912,733 1982 30 Years
Deerwood.....................San Diego, CA 2,082,095 21,415,299 23,497,394 1,936,782 1990 30 Years
Deerwood Meadows.............Greensboro, NC 986,743 7,488,698 8,475,441 960,160 1986 30 Years
Del Coronado.................Mesa, AZ 1,964,400 17,827,479 19,791,879 945,455 1985 30 Years
Desert Park..................Las Vegas, NV 1,085,400 9,902,609 10,988,009 361,874 1987 30 Years
Desert Sands.................Phoenix, AZ 1,478,750 13,414,450 14,893,200 283,007 1982 30 Years
Diplomat South...............Beech Grove, IN 472,414 4,405,665 4,878,079 2,482,055 1970 30 Years
Doral........................Louisville, KY 96,607 4,076,927 4,173,534 1,684,821 1972 30 Years
Eagle Canyon.................Chino Hills, CA 1,808,200 16,286,742 18,094,942 165,212 1985 30 Years
Eagle Rim....................Redmond, WA 977,800 9,077,796 10,055,596 708,488 1986-88 30 Years
East Pointe..................Charlotte, NC 1,365,900 13,036,842 14,402,742 1,403,023 1987 30 Years
Edgewood.....................Woodinville, WA 1,070,100 9,928,096 10,998,196 791,151 1986 30 Years
Emerald Place................Bermuda Dunes, CA 956,500 9,031,676 9,988,176 979,033 1988 30 Years
Essex Place..................Overland Park, KS 1,835,400 17,738,017 19,573,417 1,697,366 1970-84 30 Years
Flying Sun...................Phoenix, AZ 87,220 2,172,987 2,260,207 331,352 1983 30 Years
Forest Ridge.................Arlington, TX 2,360,900 21,309,160 23,670,060 473,229 1984/85 30 Years
Fountain Creek...............Phoenix, AZ 686,500 6,281,644 6,968,144 345,109 1984 30 Years
Fountainhead Combined........San Antonio, TX 3,617,449 14,644,545 18,261,994 4,992,983 1985/1987 30 Years
Fountains at Flamingo........Las Vegas, NV 3,183,100 29,033,692 32,216,792 2,214,423 1989-91 30 Years
Four Lakes...................Lisle, IL 2,465,000 18,621,597 21,086,597 7,916,639 1968/1988* 30 Years
Four Lakes Lisle.............Lisle, IL 600,000 19,542,781 20,142,781 5,648,085 1968/1988* 30 Years
Fox Run......................Little Rock, AR 422,014 8,616,573 9,038,587 4,506,821 1974 30 Years
Fox Run......................Federal Way, WA 639,700 6,060,263 6,699,963 500,256 1988 30 Years
Frey.........................Atlanta, GA 2,467,200 22,836,555 25,303,755 1,909,476 1985 30 Years
Gatehouse on the Green.......Pambroke Pines, FL 2,226,700 20,041,637 22,268,337 25,538 1990 30 Years
Gatehouse at Pine Lake.......Plantation, FL 1,896,100 17,065,890 18,961,990 21,910 1990 30 Years
Georgian Woods II............Wheaton, MD 2,053,400 20,844,341 22,897,741 1,458,067 1967 30 Years
Glenridge....................Colorado Springs, CO 884,788 4,839,310 5,724,098 658,422 1985 30 Years
Governor's Place.............Augusta, GA 347,355 3,283,878 3,631,233 1,967,054 1972 30 Years
Greengate....................Marietta, GA 132,979 2,595,560 2,728,539 1,215,888 1971 30 Years
Greenwich Woods..............Silver Spring, MD 3,101,000 30,413,921 33,514,921 2,216,764 1967 30 Years
Greenwood Forest.............Little Rock, AR 559,038 4,401,428 4,960,466 2,269,057 1975 30 Years
Habitat......................Orlando, FL 600,000 6,130,740 6,730,740 3,511,792 1974 30 Years
Hammock's Place..............Miami, FL 319,180 12,824,726 13,143,906 1,474,391 1986 30 Years
</TABLE>
S-3
<PAGE>
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO GROSS AMOUNT CARRIED
INITIAL COST TO ACQUISITION AT CLOSE OF
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I) PERIOD 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES LAND FIXTURES (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hampton Green...........San Antonio, TX (E) 1,561,830 2,962,670 0 1,894,677 1,561,830 4,857,347
Harbour Landing.........Corpus Christi, TX 0 761,600 6,854,524 3,400 758,682 765,000 7,613,206
Hathaway................Long Beach, TX 0 2,512,200 22,609,720 300 146,216 2,512,500 22,755,936
Hearthstone.............San Antonio, TX (E) 1,035,700 3,375,132 100 283,285 1,035,800 3,658,417
Heron Cove..............Coral Springs, FL 0 823,000 7,997,360 0 458,184 823,000 8,455,544
Heron Landing (K).......Lauderhill, FL 0 707,100 6,363,784 5,400 163,137 712,500 6,526,921
Heron Run...............Plantation, FL 0 917,800 8,854,001 0 564,445 917,800 9,418,446
Hidden Valley...........Ann Arbor, MI 0 915,000 7,583,653 0 723,276 915,000 8,306,929
Holcomb Bridge..........Atlanta, GA 9,545,000 2,142,400 19,281,704 900 752,903 2,143,300 20,034,607
Hunter's Glen...........Chesterfield, MO 0 913,500 8,221,026 1,600 29,842 915,100 8,250,868
Hunter's Green..........Fort Worth, TX (F) 524,200 3,404,622 100 619,907 524,300 4,024,529
Huntington Park.........Everett, WA 0 1,594,500 14,350,001 3,000 461,869 1,597,500 14,811,870
Indian Bend.............Phoenix, AZ 0 1,072,500 9,652,385 3,200 373,611 1,075,700 10,025,996
Indian Tree.............Arvada, CO (E) 881,125 4,868,332 100 352,319 881,225 5,220,651
Ivy Place (L)...........Atlanta, GA 0 793,200 7,139,200 8,450 138,033 801,650 7,277,233
Kempton Downs...........Gresham, OR 0 1,182,200 10,639,993 35,149 756,737 1,217,349 11,396,730
Keystone................Austin, TX 2,959,560 498,000 4,482,306 500 313,558 498,500 4,795,864
Kingsport...............Alexandria, VA 0 1,262,250 11,454,606 0 1,454,504 1,262,250 12,909,110
Kingswood Manor.........San Antonio, TX (E) 293,900 2,061,996 100 325,573 294,000 2,387,569
La Costa Brava (J)......Jacksonville, FL 4,741,003 835,757 4,964,681 (1) 5,751,810 835,756 10,716,491
La Costa Brava..........Orlando, FL 0 206,626 1,380,505 0 5,174,152 206,626 6,554,657
Lake in the Woods.......Ypsilanti, MI 0 1,859,625 16,314,064 0 5,349,035 1,859,625 21,663,099
Lakeville Resort........Petaluma, CA 20,776,563 2,734,100 24,773,523 0 (159,496) 2,734,100 24,614,027
Lakewood Oaks...........Dallas, TX 0 1,630,200 14,671,813 1,200 526,491 1,631,400 15,198,304
Lands End...............Pacifica, CA 0 1,824,500 16,423,435 0 77,817 1,824,500 16,501,252
Laurel Ridge............Chapel Hill, NC 0 160,000 1,752,118 0 2,779,323 160,000 4,531,441
Lincoln Green I.........San Antonio, TX 0 947,366 2,133,002 0 3,609,969 947,366 5,742,971
Lincoln Green II........San Antonio, TX 0 1,052,340 6,045,696 0 (249,429) 1,052,340 5,796,267
Lincoln Green III.......San Antonio, TX 0 536,010 2,121,295 0 (66,297) 536,010 2,054,998
Lodge - Oklahoma........Tulsa, OK 0 313,571 2,677,951 0 789,532 313,571 3,467,483
Lodge - Texas...........San Antonio, TX 0 1,363,636 5,496,784 0 3,427,219 1,363,636 8,924,003
Longwood................Decatur, GA 0 1,452,000 13,067,523 2,048 192,005 1,454,048 13,259,528
Mallard Cove............Greenville, SC 0 803,700 7,233,160 8,350 125,996 812,050 7,359,156
Mallgate................Louisville, KY 0 0 6,162,515 0 3,399,784 0 9,562,299
Marbrisa................Tampa, FL 0 811,500 7,303,334 1,500 23,966 813,000 7,327,300
Marina Club.............Fort Worth, TX 0 781,000 7,028,588 3,269 1,381,884 784,269 8,410,472
Marymont................Laurel, MD 0 1,901,800 17,116,593 2,000 462,012 1,903,800 17,578,605
Maxwell Apartments......Augusta, GA 0 216,000 1,846,772 0 681,209 216,000 2,527,981
McAlpine Ridge..........Charlotte, NC 0 1,283,400 11,550,225 600 300,938 1,284,000 11,851,163
<CAPTION>
LIFE USED IN
COMPUTE
DESCRIPTION DEPRECIATION IN
- ----------------------------------------------------------------------------------------------------------------
ACCUMULATED DATE OF LATEST INCOME
APARTMENT NAME LOCATION TOTAL(B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hampton Green...........San Antonio, TX 6,419,177 676,323 1979 30 Years
Harbour Landing.........Corpus Christi, TX 8,378,206 807,403 1985 30 Years
Hathaway................Long Beach, TX 25,268,436 1,060,589 1987 30 Years
Hearthstone.............San Antonio, TX 4,694,217 527,069 1982 30 Years
Heron Cove..............Coral Springs, FL 9,278,544 661,829 1987 30 Years
Heron Landing (K).......Lauderhill, FL 7,239,421 199,030 1988 30 Years
Heron Run...............Plantation, FL 10,336,246 706,775 1987 30 Years
Hidden Valley...........Ann Arbor, MI 9,221,929 4,101,426 1973 30 Years
Holcomb Bridge..........Atlanta, GA 22,177,907 1,684,661 1985 30 Years
Hunter's Glen...........Chesterfield, MO 9,165,968 77,392 1985 30 Years
Hunter's Green..........Fort Worth, TX 4,548,829 519,924 1981 30 Years
Huntington Park.........Everett, WA 16,409,370 1,533,292 1991 30 Years
Indian Bend.............Phoenix, AZ 11,101,696 941,553 1973 30 Years
Indian Tree.............Arvada, CO 6,101,876 803,866 1983 30 Years
Ivy Place (L)...........Atlanta, GA 8,078,883 152,322 1978 30 Years
Kempton Downs...........Gresham, OR 12,614,079 610,026 1990 30 Years
Keystone................Austin, TX 5,294,364 281,085 1981 30 Years
Kingsport...............Alexandria, VA 14,171,360 942,883 1986 30 Years
Kingswood Manor.........San Antonio, TX 2,681,569 317,155 1983 30 Years
La Costa Brava (J)......Jacksonville, FL 11,552,247 5,378,546 1970/1973 30 Years
La Costa Brava..........Orlando, FL 6,761,283 3,259,968 1967 30 Years
Lake in the Woods.......Ypsilanti, MI 23,522,724 10,105,716 1969 30 Years
Lakeville Resort........Petaluma, CA 27,348,127 153,152 1984 30 Years
Lakewood Oaks...........Dallas, TX 16,829,704 1,247,503 1987 30 Years
Lands End...............Pacifica, CA 18,325,752 301,140 1974 30 Years
Laurel Ridge............Chapel Hill, NC 4,691,441 1,876,897 1975 30 Years
Lincoln Green I.........San Antonio, TX 6,690,337 2,342,894 1984/1986 30 Years
Lincoln Green II........San Antonio, TX 6,848,607 1,863,118 1984/1986 30 Years
Lincoln Green III.......San Antonio, TX 2,591,008 682,835 1984/1986 30 Years
Lodge - Oklahoma........Tulsa, OK 3,781,054 1,768,970 1979 30 Years
Lodge - Texas...........San Antonio, TX 10,287,639 2,752,127 1979(#) 30 Years
Longwood................Decatur, GA 14,713,576 1,339,222 1992 30 Years
Mallard Cove............Greenville, SC 8,171,206 139,976 1983 30 Years
Mallgate................Louisville, KY 9,562,299 5,471,136 1969 30 Years
Marbrisa................Tampa, FL 8,140,300 63,078 1984 30 Years
Marina Club.............Fort Worth, TX 9,194,741 867,288 1987 30 Years
Marymont................Laurel, MD 19,482,405 1,343,520 1987-88 30 Years
Maxwell Apartments......Augusta, GA 2,743,981 955,986 1951 30 Years
McAlpine Ridge..........Charlotte, NC 13,135,163 896,373 1989-90 30 Years
</TABLE>
S-4
<PAGE>
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I)
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Meadowcreek..................Tigard, OR 8,788,473 1,298,100 11,682,684 1,000 497,605
Merrimac Woods...............Costa Mesa, CA 0 673,300 6,059,722 1,600 29,948
Mountain Terrace.............Stevenson Ranch, CA 0 3,977,200 35,794,729 0 (0)
Newport Cove.................Henderson, NV 0 698,700 6,288,245 1,600 765,432
Newport Heights..............Seattle, WA 2,655,505 390,700 3,516,229 500 208,031
Northampton I................Largo, MD 13,333,122 1,843,200 17,318,363 0 1,720,009
Northampton II...............Largo, MD 0 1,494,100 14,279,723 19,400 186,486
Northgate Village............San Antonio, TX (E) 660,000 5,753,724 100 350,807
Oak Mill II..................Germantown, MD 6,475,057 854,000 8,187,169 133 689,508
Oak Park North...............Agoura Hills, CA (O) 1,706,500 15,358,942 400 44,593
Oak Park South...............Agoura Hills, CA (O) 1,683,400 15,150,835 400 82,585
Oaks of Lakebridge...........Ormond Beach, FL 0 413,700 3,742,503 2,100 270,178
Olentangy....................Columbus, OH 28,425,106 3,032,336 20,862,191 0 7,394,749
Orchard Ridge................Seattle, WA 0 482,600 4,343,826 3,000 157,534
Paradise Point...............Dania, FL 0 1,494,700 13,452,161 855,955 1,237,844
Park Knoll...................Atlanta, GA 0 2,904,500 26,140,219 4,300 1,252,945
Park Place I & II............Plymouth, MN 17,951,182 2,428,200 21,853,006 5,700 185,384
Park West....................Los Angeles, CA 0 3,033,300 27,299,323 100 236,356
Parkwest.....................Austin, TX (E) 648,605 4,541,683 100 419,923
Pine Harbour.................Orlando, FL 0 1,661,000 14,948,625 3,300 749,584
Pine Meadow..................Greensboro, NC 4,921,530 719,300 6,474,036 1,250 67,385
Pines at Cloverlane..........Pittsfield Township, MI 0 1,906,600 17,159,269 2,400 1,913,775
Pines of Springdale..........West Palm Beach, FL 0 471,200 4,240,800 2,667 385,267
Plantation...................Monroe, LA 0 210,000 3,370,715 0 (399,716)
Pointe East..................Redmond, WA 0 601,800 5,416,489 800 108,328
Port Royale..................Ft. Lauderdale, FL 0 1,752,100 15,769,281 2,100 406,225
Port Royale II...............Fort Lauderdale, FL 0 1,015,700 9,141,355 6,300 304,166
Preston in Willowbend........Plano, TX 0 872,500 7,852,675 3,000 1,261,802
Preston Lake.................Atlanta, GA 0 1,430,900 12,877,986 34,993 934,101
Promenade Terrace............Corona Hills, CA 16,490,541 2,281,000 20,529,476 1,700 40,643
Pueblo Villas................Albuquerque, NM 0 854,300 7,688,783 1,200 36,858
Quail Run....................Oklahoma City, OK 0 1,000,000 4,136,059 0 551,288
Ravens Crest.................Plainsboro, NJ (O) 4,673,000 42,057,149 2,850 1,065,442
Regency Palms................Huntington Beach, CA 0 1,856,500 16,708,950 800 143,839
Reserve Square...............Cleveland, OH 0 2,618,352 23,565,022 500 7,965,098
Ridgetree I & II.............Dallas, TX 0 2,094,600 18,851,177 19,000 382,141
River Bend...................Tampa, FL 0 602,945 2,161,915 0 1,994,175
Rock Creek...................Corrboro, NC 0 895,100 8,056,360 0 148
Rosehill Pointe..............Lenexa, KS 0 2,073,400 18,660,475 18,300 483,594
<CAPTION>
GROSS AMOUNT CARRIED LIFE USED TO
CLOSE OF COMPUTE
PERIOD 12/31/96 DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
BUILDING & ACCUMULATED DATE OF LATEST INCOME
APARTMENT NAME LOCATION LAND FIXTURES (A) TOTAL (B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Meadowcreek..................Tigard, OR 1,299,100 12,180,289 13,479,389 972,673 1985 30 Years
Merrimac Woods...............Costa Mesa, CA 674,900 6,089,669 6,764,569 58,694 1970 30 Years
Mountain Terrace.............Stevenson Ranch, CA 3,977,200 35,794,729 39,771,929 3,502 1992 30 Years
Newport Cove.................Henderson, NV 700,300 7,053,677 7,753,977 844,928 1983 30 Years
Newport Heights..............Seattle, WA 391,200 3,724,260 4,115,460 300,036 1985 30 Years
Northampton I................Largo, MD 1,843,200 19,038,372 20,881,572 1,440,396 1977 30 Years
Northampton II...............Largo, MD 1,513,500 14,466,209 15,979,709 1,026,005 1988 30 Years
Northgate Village............San Antonio, TX 660,100 6,104,531 6,764,631 918,384 1984 30 Years
Oak Mill II..................Germantown, MD 854,133 8,876,677 9,730,810 616,158 1985 30 Years
Oak Park North...............Agoura Hills, CA 1,706,900 15,403,535 17,110,435 660,163 1990 30 Years
Oak Park South...............Agoura Hills, CA 1,683,800 15,233,420 16,917,220 703,216 1989 30 Years
Oaks of Lakebridge...........Ormond Beach, FL 415,800 4,012,681 4,428,481 505,544 1984 30 Years
Olentangy....................Columbus, OH 3,032,336 28,256,940 31,289,276 14,672,182 1972 30 Years
Orchard Ridge................Seattle, WA 485,600 4,501,360 4,986,960 411,431 1988 30 Years
Paradise Point...............Dania, FL 2,350,655 14,690,005 17,040,660 1,199,383 1987-90 30 Years
Park Knoll...................Atlanta, GA 2,908,800 27,393,164 30,301,964 2,838,509 1983 30 Years
Park Place I & II............Plymouth, MN 2,433,900 22,038,390 24,472,290 265,497 1986 30 Years
Park West....................Los Angeles, CA 3,033,400 27,535,679 30,569,079 1,281,092 1987/90 30 Years
Parkwest.....................Austin, TX 648,705 4,961,606 5,610,311 607,764 1985 30 Years
Pine Harbour.................Orlando, FL 1,664,300 15,698,209 17,362,509 1,558,426 1991 30 Years
Pine Meadow..................Greensboro, NC 720,550 6,541,421 7,261,971 115,437 1974 30 Years
Pines at Cloverlane..........Pittsfield
Township, MI 1,909,000 19,073,044 20,982,044 583,144 1975-79 30 Years
Pines of Springdale..........West Palm Beach, FL 473,867 4,626,067 5,099,934 485,180 1985/87(x) 30 Years
Plantation...................Monroe, LA 210,000 2,970,999 3,180,999 1,930,187 1972 30 Years
Pointe East..................Redmond, WA 602,600 5,524,817 6,127,417 421,303 1988 30 Years
Port Royale..................Ft. Lauderdale, FL 1,754,200 16,175,506 17,929,706 1,236,499 1988 30 Years
Port Royale II...............Fort Lauderdale, FL 1,022,000 9,445,521 10,467,521 264,972 1991 30 Years
Preston in Willowbend........Plano, TX 875,500 9,114,477 9,989,977 980,635 1985 30 Years
Preston Lake.................Atlanta, GA 1,465,893 13,812,087 15,277,980 1,394,584 1984-86 30 Years
Promenade Terrace............Corona Hills, CA 2,282,700 20,570,119 22,852,819 332,826 1990 30 Years
Pueblo Villas................Albuquerque, NM 855,500 7,725,641 8,581,141 122,902 1975 30 Years
Quail Run....................Oklahoma City, OK 1,000,000 4,687,347 5,687,347 1,911,096 1978/1983 30 Years
Ravens Crest.................Plainsboro, NJ 4,675,850 43,122,591 47,798,441 3,741,881 1984 30 Years
Regency Palms................Huntington Beach, CA 1,857,300 16,852,789 18,710,089 493,126 1969 30 Years
Reserve Square...............Cleveland, OH 2,618,852 31,530,120 34,148,972 2,619,824 1973 30 Years
Ridgetree I & II.............Dallas, TX 2,113,600 19,233,318 21,346,918 405,273 1983 30 Years
River Bend...................Tampa, FL 602,945 4,156,090 4,759,035 2,714,440 1971 30 Years
Rock Creek...................Corrboro, NC 895,100 8,056,508 8,951,608 16,432 1986 30 Years
Rosehill Pointe..............Lenexa, KS 2,091,700 19,144,069 21,235,769 404,389 1984 30 Years
</TABLE>
S-5
<PAGE>
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I)
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Roswell......................Atlanta, GA 8,100,000 1,217,500 10,957,845 2,500 442,046
Sabal Pointe (M).............Coral Springs, FL 0 1,941,900 17,477,592 9,500 177,360
Saddle Creek.................Carrollton, TX 0 703,300 6,329,899 4,800 2,939,209
Saddle Ridge.................Loudoun County, VA 0 1,351,800 12,165,984 13,000 191,045
Sawgrass Cove................Bradenton, FL 0 1,671,200 15,041,179 2,950 718,569
Sheffield Court..............Arlington, VA 0 3,349,350 30,246,228 (0) 1,991,716
Silver Shadow................Las Vegas, NV 0 952,100 8,568,921 1,340 254,165
Silverwood...................Mission, KS 11,000,000 1,244,000 11,196,244 1,700 496,371
Sleepy Hollow................Kansas City, MO 12,500,000 2,193,546 13,689,443 1 1,224,190
Songbird.....................San Antonio, TX 6,984,854 1,080,500 9,724,928 1,900 46,272
Sonnet Cove I................Lexington, KY 0 183,407 2,422,860 0 1,553,169
Sonnet Cove II...............Lexington, KY 1,495,882 100,000 1,108,405 0 821,113
Southbank....................Mesa, AZ 0 319,600 2,876,874 10,900 304,656
South Creek..................Mesa, AZ 16,541,027 2,669,300 24,023,758 1,900 78,353
Spice Run....................Naperville, IL 0 2,578,900 23,210,030 400 3,874
Springs Colony...............Orlando, FL 0 631,900 5,687,010 8,500 657,299
Stonebrook...................Oklahoma City, OK 0 1,418,887 7,528,238 0 180,721
Stonelake Club...............Ocala, FL (E) 250,000 2,024,968 100 319,301
Summer Ridge.................Riverside, CA 0 600,500 5,404,571 1,800 23,710
Summerset Village............Chatsworth, CA 0 2,628,500 23,656,668 1,900 30,377
Sunny Oak Village............Overland Park, KS 0 2,222,600 20,003,050 20,950 276,118
Sunrise Springs..............Las Vegas, NV 0 972,600 8,753,491 2,700 144,038
Sutton Place.................Dallas, TX 0 1,316,500 11,848,717 41,900 2,241,843
Tanasbourne Terrace..........Hillsboro, OR 0 1,873,000 16,857,220 3,700 695,796
Tanglewood...................Manassas, VA 15,795,420 2,103,400 19,559,772 4,895 1,576,348
Tanglewood...................Portland, OR 0 760,000 6,839,589 3,000 800,883
Terraces at Peachtree........Atlanta, GA 0 582,800 5,245,560 700 284,134
The Place....................Fort Myers, FL 0 722,900 6,506,350 3,340 350,239
The Seasons..................Boise, ID 0 604,400 5,439,624 3,600 200,077
Towne Centre III.............Laurel, MD 6,022,120 982,300 9,301,830 (0) 929,712
Towne Centre IV..............Laurel, MD 9,781,127 1,564,200 14,787,362 4,700 44,169
Trails.......................Arlington, TX 0 616,700 5,550,590 21,300 531,223
Trails.......................Las Vegas, NV 0 3,076,200 27,685,764 3,000 713,626
Trails.......................Aurora, CO (E) 1,217,800 8,525,346 100 1,142,930
University Park..............Toledo, OH 0 70,000 834,378 0 1,415,627
Via Ventura..................Phoenix, AZ 0 1,476,500 13,288,894 7,100 2,735,078
Village Oaks.................Austin, TX 5,506,970 1,184,400 10,659,432 500 4,761
Villa Madeira................Phoenix, AZ 0 1,580,000 14,219,907 2,100 403,579
Villa Manana.................Phoenix, AZ 0 951,400 8,562,443 3,900 484,091
<CAPTION>
GROSS AMOUNT LIFE USED TO
CLOSE OF COMPUTE
PERIOD 12/31/96 DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
BUILDING & ACCUMULATED DATE OF LATEST INCOME
APARTMENT NAME LOCATION LAND FIXTURES (A) TOTAL (B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Roswell......................Atlanta, GA 1,220,000 11,399,891 12,619,891 965,464 1985 30 Years
Sabal Pointe (M).............Coral Springs, FL 1,951,400 17,654,952 19,606,352 531,729 1995 30 Years
Saddle Creek.................Carrollton, TX 708,100 9,269,108 9,977,208 1,175,684 1980 30 Years
Saddle Ridge.................Loudoun County, V 1,364,800 12,357,029 13,721,829 506,256 1989 30 Years
Sawgrass Cove................Bradenton, FL 1,674,150 15,759,748 17,433,898 1,471,148 1991 30 Years
Sheffield Court..............Arlington, VA 3,349,350 32,237,944 35,587,294 2,072,699 1986 30 Years
Silver Shadow................Las Vegas, NV 953,440 8,823,086 9,776,526 941,078 1992 30 Years
Silverwood...................Mission, KS 1,245,700 11,692,615 12,938,315 956,744 1986 30 Years
Sleepy Hollow................Kansas City, MO 2,193,547 14,913,633 17,107,180 4,287,699 1987 30 Years
Songbird.....................San Antonio, TX 1,082,400 9,771,200 10,853,600 103,123 1981 30 Years
Sonnet Cove I................Lexington, KY 183,407 3,976,029 4,159,436 2,577,503 1972 30 Years
Sonnet Cove II...............Lexington, KY 100,000 1,929,518 2,029,518 1,208,653 1974 30 Years
Southbank....................Mesa, AZ 330,500 3,181,530 3,512,030 347,843 1985 30 Years
South Creek..................Mesa, AZ 2,671,200 24,102,111 26,773,311 400,568 1986-89 30 Years
Spice Run....................Naperville, IL 2,579,300 23,213,904 25,793,204 27,627 1988 30 Years
Springs Colony...............Orlando, FL 640,400 6,344,309 6,984,709 587,311 1986 30 Years
Stonebrook...................Oklahoma City, OK 1,418,887 7,708,959 9,127,846 3,310,433 1983 30 Years
Stonelake Club...............Ocala, FL 250,100 2,344,269 2,594,369 344,464 1986 30 Years
Summer Ridge.................Riverside, CA 602,300 5,428,281 6,030,581 91,415 1985 30 Years
Summerset Village............Chatsworth, CA 2,630,400 23,687,044 26,317,444 236,265 1985 30 Years
Sunny Oak Village............Overland Park, KS 2,243,550 20,279,168 22,522,718 380,603 1984 30 Years
Sunrise Springs..............Las Vegas, NV 975,300 8,897,529 9,872,829 735,256 1989 30 Years
Sutton Place.................Dallas, TX 1,358,400 14,090,560 15,448,960 1,558,058 1985 30 Years
Tanasbourne Terrace..........Hillsboro, OR 1,876,700 17,553,016 19,429,716 1,491,360 1986-89 30 Years
Tanglewood...................Manassas, VA 2,108,295 21,136,120 23,244,415 1,634,125 1987 30 Years
Tanglewood...................Portland, OR 763,000 7,640,472 8,403,472 716,175 1976 30 Years
Terraces at Peachtree........Atlanta, GA 583,500 5,529,694 6,113,194 227,212 1987 30 Years
The Place....................Fort Myers, FL 726,240 6,856,589 7,582,829 608,174 1986 30 Years
The Seasons..................Boise, ID 608,000 5,639,701 6,247,701 510,392 1990 30 Years
Towne Centre III.............Laurel, MD 982,300 10,231,542 11,213,842 789,981 1969 30 Years
Towne Centre IV..............Laurel, MD 1,568,900 14,831,531 16,400,431 1,020,310 1968 30 Years
Trails.......................Arlington, TX 638,000 6,081,813 6,719,813 623,069 1984 30 Years
Trails.......................Las Vegas, NV 3,079,200 28,399,390 31,478,590 2,184,035 1988 30 Years
Trails.......................Aurora, CO 1,217,900 9,668,276 10,886,176 1,306,466 1986 30 Years
University Park..............Toledo, OH 70,000 2,250,005 2,320,005 1,235,516 1965 30 Years
Via Ventura..................Phoenix, AZ 1,483,600 16,023,972 17,507,572 1,331,620 1980 30 Years
Village Oaks.................Austin, TX 1,184,900 10,664,193 11,849,093 20,925 1984 30 Years
Villa Madeira................Phoenix, AZ 1,582,100 14,623,486 16,205,586 1,324,635 1971 30 Years
Villa Manana.................Phoenix, AZ 955,300 9,046,534 10,001,834 839,816 1971-85 30 Years
</TABLE>
S-6
<PAGE>
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO ACQUISITION
DESCRIPTION COMPANY (IMPROVEMENTS, NET) (I)
- ------------------------------------------------------------------------------------------------------------------------------
BUILDING & BUILDING &
APARTMENT NAME LOCATION ENCUMBRANCES LAND FIXTURES LAND FIXTURES
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Villa Solana.................Laguna Hills, CA 0 1,663,500 14,971,366 1,600 796,923
Village of Hampshire.........Toledo, OH 0 195,886 1,320,453 0 9,366,924
Village of Newport...........Federal Way, WA 3,272,574 414,900 3,733,899 1,400 248,689
Vista Del Lago...............Mission Viejo, CA 32,350,000 4,524,400 41,357,681 1,400 966,539
Walden Wood..................Southfield, MI 5,960,000 833,300 7,499,662 1,400 818,712
Walnut Ridge.................Little Rock, AR 3,654,026 196,079 2,424,631 0 2,997,627
Waterstone Place.............Seattle, WA 0 2,950,900 26,558,353 13,100 2,237,608
Wellington...................Silverdale, WA 8,349,435 1,097,300 9,876,034 2,000 382,036
Wellington Hill..............Manchester, NH 28,625,000 1,872,500 16,852,955 29,700 1,407,693
Wilde Lake...................Richmond, VA 4,440,000 934,600 8,411,613 10,600 95,472
Williamsburg Square..........Little Rock, AR 3,288,623 315,000 1,745,958 0 3,305,267
Willowglen...................Aurora, CO 0 1,708,000 15,371,641 1,100 92,270
Windmill.....................Colorado Springs, CO (E) 395,544 4,953,156 100 488,925
Windridge....................Laguna Niguel, CA (O) 2,660,800 23,947,096 2,100 293,993
Winterwood...................Charlotte, NC 12,260,000 1,720,100 15,481,455 1,700 898,560
Woodbridge (N)...............Cary, NC 4,820,441 1,981,900 17,839,380 (0) 116,484
Woodcreek....................Beaverton, OR 11,600,802 1,753,700 15,783,764 1,400 1,102,966
Woodlake at Killearn.........Tallahassee, FL 0 1,404,300 12,638,426 3,855 846,099
Woodland Hills...............Decatur, GA 0 1,223,900 11,017,542 (0) 178,798
Woodmoor.....................Austin, TX 0 649,300 5,843,200 4,500 830,321
Woods at North Bend..........Raleigh, NC 0 1,039,000 9,350,616 500 267,612
Woodscape....................Raleigh, NC 0 956,000 8,603,550 1,200 34,519
Woodside.....................Lorton, VA 0 1,308,100 12,503,220 17,900 209,155
Yorktowne....................Millersville, MD 0 216,000 1,330,710 0 4,508,939
Yuma Court...................Colorado Springs, CO 0 113,163 836,429 100 104,328
Operating Partnership........Chicago, IL 0 0 88,566 0 0
Management Business..........Chicago, IL 0 0 3,442,962 1,000 5,589,868
---------------------------- -----------------------------------------
TOTAL $680,755,447 $283,252,575 $2,486,293,619 $1,626,411 $212,337,130
============================ =========================================
<CAPTION>
GROSS AMOUNT CARRIED LIFE USED TO
AT CLOSE OF COMPUTE
DESCRIPTION PERIOD 12/31/96 DEPRECIATION IN
- ---------------------------------------------------------------------------------------------------------------------
BUILDING & ACCUMULATED DATE OF LATEST INCOME
APARTMENT NAME LOCATION LAND FIXTURES (A) TOTAL (B) DEPRECIATION CONSTRUCTION STATEMENT (C)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Villa Solana.................Laguna Hills, CA 1,665,100 15,768,289 17,433,389 1,579,997 1984 30 Years
Village of Hampshire.........Toledo, OH 195,886 10,687,377 10,883,263 3,281,711 1950 30 Years
Village of Newport...........Federal Way, WA 416,300 3,982,588 4,398,888 326,790 1987 30 Years
Vista Del Lago...............Mission Viejo, CA 4,525,800 42,324,220 46,850,020 4,318,438 1986-88 30 Years
Walden Wood..................Southfield, MI 834,700 8,318,374 9,153,074 899,416 1972 30 Years
Walnut Ridge.................Little Rock, AR 196,079 5,422,258 5,618,337 2,659,332 1975 30 Years
Waterstone Place.............Seattle, WA 2,964,000 28,795,961 31,759,961 3,101,327 1990 30 Years
Wellington...................Silverdale, WA 1,099,300 10,258,070 11,357,370 554,721 1990 30 Years
Wellington Hill..............Manchester, NH 1,902,200 18,260,648 20,162,848 1,750,000 1987 30 Years
Wilde Lake...................Richmond, VA 945,200 8,507,085 9,452,285 10,254 1989 30 Years
Williamsburg Square..........Little Rock, AR 315,000 5,051,225 5,366,225 2,325,587 1974 30 Years
Willowglen...................Aurora, CO 1,709,100 15,463,911 17,173,011 161,468 1983 30 Years
Windmill.....................Colorado Springs, CO 395,644 5,442,081 5,837,725 856,207 1985 30 Years
Windridge....................Laguna Niguel, CA 2,662,900 24,241,089 26,903,989 1,825,518 1989 30 Years
Winterwood...................Charlotte, NC 1,721,800 16,380,015 18,101,815 1,748,890 1986 30 Years
Woodbridge (N)...............Cary, NC 1,981,900 17,955,864 19,937,764 549,380 1993-95 30 Years
Woodcreek....................Beaverton, OR 1,755,100 16,886,730 18,641,830 1,396,188 1982-84 30 Years
Woodlake at Killearn.........Tallahassee, FL 1,408,155 13,484,525 14,892,680 1,404,945 1986 30 Years
Woodland Hills...............Decatur, GA 1,223,900 11,196,340 12,420,240 250,737 1985 30 Years
Woodmoor.....................Austin, TX 653,800 6,673,521 7,327,321 694,877 1981 30 Years
Woods at North Bend..........Raleigh, NC 1,039,500 9,618,228 10,657,728 399,780 1983 30 Years
Woodscape....................Raleigh, NC 957,200 8,638,069 9,595,269 104,374 1979 30 Years
Woodside.....................Lorton, VA 1,326,000 12,712,375 14,038,375 937,395 1987 30 Years
Yorktowne....................Millersville, MD 216,000 5,839,649 6,055,649 3,740,770 1974 30 Years
Yuma Court...................Colorado Springs, C 113,263 940,757 1,054,020 128,338 1985 30 Years
Operating Partnership........Chicago, IL 0 88,566 88,566 30,113 (H)
Management Business..........Chicago, IL 1,000 9,032,830 9,033,830 5,413,107 (G)
------------ -------------- -------------- ------------
TOTAL $284,878,986 $2,698,630,748 $2,983,509,734 $301,511,545
============ ============== ============== ============
</TABLE>
S-7
<PAGE>
SCHEDULE III
ERP OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
NOTES:
(A) The balance of furniture & fixtures included in the total amount was
$132,062,754 as of December 31, 1996.
(B) The aggregate cost for Federal Income Tax purposes as of December 31, 1996
was approximately $2.8 billion.
(C) The life to compute depreciation for furniture & fixtures is 5 years.
(D) These two properties are encumbered by $15,178,699 in bonds.
(E) These 15 properties are encumbered by a $44,000,000 note payable.
(F) These four properties are encumbered by $15,500,000 in bonds.
(G) This asset consists of various acquisition dates and represents furniture,
fixtures and equipment owned by the Management Business.
(H) This asset consists of various acquisition dates and represents furniture,
fixtures and equipment owned by the Operating Partnership.
(I) Improvements are net of write-off of fully depreciated assets which are no
longer in service.
(J) Combined with Cedar Cove
(K) Formerly Oxford & Sussex
(L) Formerly Post Place
(M) Formerly The Vinings at Coral Springs
(N) Formerly The Plantations (NC)
(O) These properties are pledged as additional collateral in connection with
the tax-exempt bond refinancing.
* Four Lakes was constructed in phases between 1968 & 1988.
(#) The Lodge-Texas was struck by a tornado that destroyed most of the property.
The property was reconstructed during 1989 & 1990.
(x) Pines of Springdale was constructed in phases between 1985 & 1987.
S-8
<PAGE>
Schedule III
ERP OPERATING LIMITED PARTNERSHIP
Real Estate and Accumulated Depreciation (continued)
(Amounts In Thousands)
The changes in total real estate for the years ended December 31, 1996, 1995,
and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year $2,188,939 $1,963,476 $ 634,577
Acquisitions 789,056 288,277 1,313,077
Improvements 33,001 32,800 16,721
Write-off of fully depreciated assets
which are no longer in service (20) (34,320)
Dispositions and other (27,466) (61,294) (899)
----------- ----------- -----------
Balance, end of year $2,983,510 $2,188,939 $1,963,476
=========== =========== ===========
</TABLE>
The changes in accumulated depreciation for the years ended December 31, 1996,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year $ 218,339 $ 192,741 $ 156,367
Depreciation 93,253 72,410 37,273
Write-off of fully depreciated assets
which are no longer in service (20) (34,320)
Dispositions and other (10,060) (12,492) (899)
----------- ----------- -----------
Balance, end of year $ 301,512 $ 218,339 $ 192,741
=========== =========== ===========
</TABLE>
S-9
<PAGE>
---------------------------------------------------------
---------------------------------------------------------
REVOLVING CREDIT AGREEMENT
dated as of November 15, 1996
among
ERP OPERATING LIMITED PARTNERSHIP,
THE BANKS LISTED HEREIN,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Lead Agent
and
BANK OF AMERICA ILLINOIS,
as Co-Lead Agent
---------------------------------------------------------
---------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions................................................. 1
1.2 Accounting Terms and Determinations......................... 30
1.3 Types of Borrowings......................................... 30
ARTICLE II
THE CREDITS
SECTION 2.1 Commitments to Lend......................................... 31
2.2 Notice of Borrowing......................................... 31
2.3 Money Market Borrowings..................................... 31
2.4 Notice to Banks; Funding of Loans........................... 37
2.5 Notes....................................................... 38
2.6 Method of Electing Interest Rates........................... 39
2.7 Interest Rates.............................................. 41
2.8 Fees........................................................ 43
2.9 Maturity Date............................................... 44
2.10 Mandatory Prepayment........................................ 44
2.11 Optional Prepayments........................................ 45
2.12 General Provisions as to Payments........................... 46
2.13 Funding Losses.............................................. 47
2.14 Computation of Interest and Fees............................ 48
2.15 Use of Proceeds............................................. 48
ARTICLE III
CONDITIONS
SECTION 3.1 Closing..................................................... 48
3.2 Borrowings.................................................. 51
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Existence and Power......................................... 52
4.2 Power and Authority......................................... 52
4.3 No Violation................................................ 53
4.4 Financial Information....................................... 53
4.5 Litigation.................................................. 54
4.6 Compliance with ERISA....................................... 54
4.7 Environmental Matters....................................... 55
4.8 Taxes....................................................... 55
4.9 Full Disclosure............................................. 55
i
<PAGE>
Page
----
4.10 Solvency.................................................... 56
4.11 Use of Proceeds; Margin Regulations......................... 56
4.12 Governmental Approvals...................................... 56
4.13 Investment Company Act; Public Utility Holding
Company Act............................................... 56
4.14 Principal Offices........................................... 57
4.15 REIT Status................................................. 57
4.16 Patents, Trademarks, etc.................................... 57
4.17 Ownership of Property....................................... 57
4.18 No Default.................................................. 57
4.19 Licenses, etc............................................... 57
4.20 Compliance With Law......................................... 58
4.21 No Burdensome Restrictions.................................. 58
4.22 Brokers' Fees............................................... 58
4.23 Labor Matters............................................... 58
4.24 Insurance................................................... 58
4.25 Organizational Documents.................................... 59
4.26 Qualifying Unencumbered Properties.......................... 59
ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS
SECTION 5.1 Information................................................. 59
5.2 Payment of Obligations...................................... 63
5.3 Maintenance of Property; Insurance; Leases.................. 64
5.4 Conduct of Business and Maintenance of Existence............ 64
5.5 Compliance with Laws........................................ 64
5.6 Inspection of Property, Books and Records................... 65
5.7 Existence................................................... 65
5.8 Financial Covenants......................................... 65
5.9 Restriction on Fundamental Changes.......................... 67
5.10 Changes in Business......................................... 68
5.11 Margin Stock................................................ 69
5.12 Hedging Requirements........................................ 69
5.13 EQR Status.................................................. 69
ARTICLE VI
DEFAULTS
SECTION 6.1 Events of Default........................................... 71
6.2 Rights and Remedies......................................... 74
6.3 Notice of Default........................................... 75
ARTICLE VII
THE AGENTS
SECTION 7.1 Appointment and Authorization............................... 75
ii
<PAGE>
Page
----
7.2 Agency and Affiliates....................................... 75
7.3 Action by Lead Agent and Co-Lead Agent...................... 76
7.4 Consultation with Experts................................... 76
7.5 Liability of Lead Agent and Co-Lead Agent................... 76
7.6 Indemnification............................................. 77
7.7 Credit Decision............................................. 77
7.8 Successor Lead Agent or Co-Lead Agent....................... 77
7.9 Consents and Approvals...................................... 78
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.1 Basis for Determining Interest Rate Inadequate or
Unfair.................................................... 79
8.2 Illegality.................................................. 80
8.3 Increased Cost and Reduced Return........................... 81
8.4 Taxes....................................................... 83
8.5 Base Rate Loans Substituted for Affected
Euro-Dollar Loans......................................... 86
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Notices..................................................... 86
9.2 No Waivers.................................................. 87
9.3 Expenses; Indemnification................................... 87
9.4 Sharing of Set-Offs......................................... 89
9.5 Amendments and Waivers...................................... 90
9.6 Successors and Assigns...................................... 91
9.7 Collateral.................................................. 93
9.8 Governing Law; Submission to Jurisdiction................... 93
9.9 Counterparts; Integration; Effectiveness.................... 94
9.10 Waiver of Jury Trial........................................ 94
9.11 Survival.................................................... 94
9.12 Domicile of Loans........................................... 94
9.13 Limitation of Liability..................................... 94
9.14 Recourse Obligation......................................... 95
9.15 Confidentiality............................................. 95
9.16 Bank's Failure to Fund...................................... 95
Schedule 4.6 - ERISA Plans
Schedule 4.17 - Real Property
Schedule 5.13(c)(i) - EQR Investments
Schedule 5.13(c)(2) - EQR Property
Exhibit A - Form of Note
Exhibit B - Form of Money Market Quote Request
Exhibit C - Form of Invitation for Money Market Quote
Exhibit D - Form of Money Market Quote
Exhibit E - Assignment and Assumption Agreement
Exhibit F - Qualifying Unecumbered Properties
iii
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "Agreement") dated as of
November 15, 1996 among ERP OPERATING LIMITED PARTNERSHIP (the "Borrower"), the
BANKS listed on the signature pages hereof, MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Lead Agent, and BANK OF AMERICA ILLINOIS, as Co-Lead Agent.
W I T N E S S E T H
- - - - - - - - - -
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.3.
"Accommodation Obligations" as applied to any Person, means any
obligation, contingent or otherwise, of that Person in respect of which that
Person is liable for any Indebtedness or other obligation or liability of
another Person, including without limitation and without duplication (i) any
such Indebtedness, obligation or liability directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable,
including Contractual Obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase or otherwise acquire such Indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof (whether in the form of loans, advances, stock
purchases,
<PAGE>
capital contributions or otherwise), or to maintain solvency, assets, level of
income, or other financial condition, or to make payment other than for value
received and (ii) any obligation of such Person arising through such Person's
status as a general partner of a general or limited partnership with respect to
any Indebtedness, obligation or liability of such general or limited
partnership.
"Adjusted Asset Value" means, with respect to any Person or Property,
(i) for any Property for which an acquisition or disposition has not occurred in
the Fiscal Quarter most recently ended by the Borrower or a Financing
Partnership, the product of four (4) and a fraction, the numerator of which is
EBITDA for such Fiscal Quarter attributable to such Property in a manner
reasonably acceptable to Lead Agent for the Fiscal Quarter most recently ended,
and the denominator of which is the FMV Cap Rate, plus (ii) for any Property
which has been acquired by the Borrower or a Financing Partnership in the Fiscal
Quarter most recently ended, the Net Price of the Property paid by Borrower or a
Financing Partnership for such Property.
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.7(b).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Lead Agent and
submitted to the Lead Agent (with a copy to the Borrower and the Co-Lead Agent)
duly completed by such Bank.
"Agreement" shall mean this Revolving Credit Agreement as the same may
from time to time hereafter be modified, supplemented or amended.
"Applicable Interest Rate" means (i) with respect to any Fixed Rate
Indebtedness, the fixed interest rate applicable to such Fixed Rate Indebtedness
at the time in question, and (ii) with respect to any Floating Rate
Indebtedness, either (x) the rate at which the interest rate applicable to such
Floating Rate Indebtedness is actually capped (or fixed pursuant to an interest
rate hedging device), at the time of calculation, if Borrower has entered into
an interest rate cap agreement or other interest rate hedging device with
respect
2
<PAGE>
thereto or (y) if Borrower has not entered into an interest rate cap agreement
or other interest rate hedging device with respect to such Floating Rate
Indebtedness, the greater of (A) the rate at which the interest rate applicable
to such Floating Rate Indebtedness could be fixed for the remaining term of such
Floating Rate Indebtedness, at the time of calculation, by Borrower's entering
into any unsecured interest rate hedging device either not requiring an upfront
payment or if requiring an upfront payment, such upfront payment shall be
amortized over the term of such device and included in the calculation of the
interest rate (or, if such rate is incapable of being fixed by entering into an
unsecured interest rate hedging device at the time of calculation, a fixed rate
equivalent reasonably determined by Lead Agent) or (B) the floating rate
applicable to such Floating Rate Indebtedness at the time in question.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office, and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.
"Applicable Margin" means, with respect to each Loan, the respective
percentages per annum determined, at any time, based on the range into which
Borrower's Credit Rating then falls, in accordance with the table set forth
below. Any change in Borrower's Credit Rating causing it to move to a different
range on the table shall effect an immediate change in the Applicable Margin. In
the event that Borrower receives two (2) Credit Ratings that are not equivalent,
the Applicable Margin shall be determined by the lower of such two (2) Credit
Ratings. In the event that Borrower receives more than two (2) Credit Ratings,
and such ratings are not equivalent, the Applicable Margin shall be determined
by the lower of the two (2) highest ratings, provided that each of said two (2)
highest ratings shall be Investment Grade Ratings and at least one of which
shall be an Investment Grade Rating from S&P or Moody's. In the event that only
one of the Rating Agencies shall have set Borrower's Credit Rating, then the
Applicable Margin shall be based on such rating only.
3
<PAGE>
<TABLE>
<CAPTION>
Range of Applicable
Borrower's Margin for Applicable
Credit Rating Base Rate Margin for Euro
(S&P/Moody's Loans Dollar Loans
Ratings) (% per annum) (% per annum)
- -------- ------------- -------------
<S> <C> <C>
Non-Invest-
ment Grade 0.0 1.125
BBB-/Baa3 0.0 0.950
BBB/Baa2 0.0 0.750
BBB+/Baa1 0.0 0.625
A-/A3
or better 0.0 0.550
</TABLE>
"Approved Bank" shall mean banks which have (i)(a) a minimum net worth
of $500,000,000 and/or (b) total assets of $10,000,000,000, and (ii) a minimum
long term debt rating of (a) BBB+ or higher by S&P, and (b) Baa1 or higher by
Moody's.
"Assignee" has the meaning set forth in Section 9.6(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.6(c), and their respective
successors.
"Bankruptcy Code" shall mean Title 11 of the United States Code,
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 0.5% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a Base
Rate Loan in accordance with the applicable Notice of Borrowing or pursuant to
Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is
4
<PAGE>
maintained or otherwise contributed to by any member of the ERISA Group.
"Borrower" means ERP Operating Limited Partnership, an Illinois
limited partnership.
"Borrower's Share" means Borrower's or EQR's share of the liabilities
of an Investment Affiliate based upon Borrower's or EQR's percentage ownership
of such Investment Affiliate, as the case may be.
"Borrowing" has the meaning set forth in Section 1.3.
"Capital Leases" as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Cap Rate" means the Treasury Rate plus 2.8%.
"Capital Reserve" shall mean, for any period, $62.50 for each Fiscal
Quarter to occur during such period.
"Cash and Cash Equivalents" shall mean (i) cash, (ii) direct
obligations of the United States Government, including without limitation,
treasury bills, notes and bonds, (iii) interest bearing or discounted
obligations of Federal agencies and Government sponsored entities or pools of
such instruments offered by Approved Banks and dealers, including without
limitation, Federal Home Loan Mortgage Corporation participation sale
certificates, Government National Mortgage Association modified pass through
certificates, Federal National Mortgage Association bonds and notes, and Federal
Farm Credit System securities, (iv) time deposits, Domestic and Eurodollar
certificates of deposit, bankers acceptances, commercial paper rated at least A-
1 by S&P and P-1 by Moody's and/or guaranteed by an Aa rating by Moody's, a AA
rating by S&P or better rated credit, floating rate notes, other money market
instruments and letters of credit each issued by Approved Banks (provided that
the same shall cease to be a "Cash or Cash Equivalent" if at any time any such
bank shall cease to be an Approved Bank), (v) obligations of domestic
corporations, including, without limitation, commercial paper, bonds, debentures
and loan participations, each of which is rated at least AA by S&P
5
<PAGE>
and/or Aa2 by Moody's and/or guaranteed by an Aa rating by Moody's, a AA rating
by S&P or better rated credit, (vi) obligations issued by states and local
governments or their agencies, rated at least MIG-1 by Moody's and/or SP-1 by
S&P and/or guaranteed by an irrevocable letter of credit of an Approved Bank
(provided that the same shall cease to be a "Cash or Cash Equivalent" if at any
time any such bank shall cease to be an Approved Bank), (vii) repurchase
agreements with major banks and primary government security dealers fully
secured by the U.S. Government or agency collateral equal to or exceeding the
principal amount on a daily basis and held in safekeeping, and (viii) real
estate loan pool participations, guaranteed by an AA rating given by S&P or Aa2
rating given by Moody's or better rated credit.
"Closing Date" means the date on or after the Effective Date on which
the conditions set forth in Section 3.1 shall have been satisfied to the
satisfaction of the Lead Agent and the Co-Lead Agent.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
as it may be further amended from time to time, any successor statutes thereto,
and applicable U.S. Department of Treasury regulations issued pursuant thereto
in temporary or final form.
"Co-Lead Agent" shall mean Bank of America Illinois in its capacity as
Co-Lead Agent hereunder, and its permitted successors in such capacity in
accordance with the terms of this Agreement.
"Committed Borrowing" has the meaning set forth in Section 1.3.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.1;
provided that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "Committed
Loan" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof (and, for each Bank
which is an Assignee, the amount set forth in the Assignment and
6
<PAGE>
Assumption Agreement entered into pursuant to Section 9.6(c) as the Assignee's
Commitment), as such amount may be reduced from time to time pursuant to Section
2.10(c) or in connection with an assignment to an Assignee.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity which is consolidated with Borrower in accordance with GAAP.
"Consolidated Tangible Net Worth" means at any date the consolidated
partner's capital plus the value of preference units of the Borrower and its
Consolidated Subsidiaries (determined on a book basis), less their consolidated
Intangible Assets, all determined as of such date. For purposes of this
definition "Intangible Assets" means with respect to any such intangible assets,
the amount (to the extent reflected in determining such consolidated
stockholders' equity) of (i) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of assets of a going concern
business made within twelve months after the acquisition of such business)
subsequent to June 30, 1996 in the book value of any asset (other than Real
Property Assets) owned by the Borrower or a Consolidated Subsidiary and (ii)
goodwill, patents, trademarks, service marks, trade names, anticipated future
benefit of tax loss carry forwards, copyrights, organization or developmental
expenses and other intangible assets.
"Contingent Obligation" as to any Person means, without duplication,
(i) any contingent obligation of such Person required to be shown on such
Person's balance sheet in accordance with GAAP, and (ii) any obligation required
to be disclosed in the footnotes to such Person's financial statements,
guaranteeing partially or in whole any Non-Recourse Indebtedness, lease,
dividend or other obligation, exclusive of contractual indemnities (including,
without limitation, any indemnity or price-adjustment provision relating to the
purchase or sale of securities or other assets) and guarantees of non-monetary
obligations (other than guarantees of completion) which have not yet been called
on or quantified, of such Person or of any other Person. The amount of any
Contingent Obligation described in clause (ii) shall be deemed to be (a) with
respect to a guaranty of interest or interest and principal, or operating income
guaranty, the Net Present Value of the sum of all payments required to be made
thereunder (which in the case of an operating income guaranty shall be deemed to
be equal
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<PAGE>
to the debt service for the note secured thereby), calculated at the Applicable
Interest Rate, through (i) in the case of an interest or interest and principal
guaranty, the stated date of maturity of the obligation (and commencing on the
date interest could first be payable thereunder), or (ii) in the case of an
operating income guaranty, the date through which such guaranty will remain in
effect, and (b) with respect to all guarantees not covered by the preceding
clause (a), an amount equal to the stated or determinable amount of the primary
obligation in respect of which such guaranty is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as recorded on the
balance sheet and on the footnotes to the most recent financial statements of
Borrower required to be delivered pursuant to Section 4.4 hereof.
Notwithstanding anything contained herein to the contrary, guarantees of
completion shall not be deemed to be Contingent Obligations unless and until a
claim for payment or performance has been made thereunder, at which time any
such guaranty of completion shall be deemed to be a Contingent Obligation in an
amount equal to any such claim. Subject to the preceding sentence, (i) in the
case of a joint and several guaranty given by such Person and another Person
(but only to the extent such guaranty is recourse, directly or indirectly to
Borrower), the amount of the guaranty shall be deemed to be 100% thereof unless
and only to the extent that such other Person has delivered Cash or Cash
Equivalents to secure all or any part of such Person's guaranteed obligations
and (ii) in the case of a guaranty (whether or not joint and several) of an
obligation otherwise constituting Indebtedness of such Person, the amount of
such guaranty shall be deemed to be only that amount in excess of the amount of
the obligation constituting Indebtedness of such Person. Notwithstanding
anything contained herein to the contrary, "Contingent Obligations" shall be
deemed not to include guarantees of Unused Commitments or of construction loans
to the extent the same have not been drawn. All matters constituting "Contingent
Obligations" shall be calculated without duplication.
"Contractual Obligation," as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject
8
<PAGE>
(including without limitation any restrictive covenant affecting such Person or
any of its properties).
"Convertible Securities" means evidences of shares of stock, limited
or general partnership interests or other ownership interests, warrants,
options, or other rights or securities which are convertible into or
exchangeable for, with or without payment of additional consideration, shares of
common stock of EQR or partnership interests of Borrower, as the case may be,
either immediately or upon the arrival of a specified date or the happening of a
specified event.
"Credit Rating" means the rating assigned by the Rating Agencies to
Borrower's senior unsecured long term indebtedness.
"Debt Restructuring" means a restatement of, or material change in,
the amortization or other financial terms of any Indebtedness of EQR, the
Borrower or any Investment Affiliate.
"Debt Service" means, for any period, Interest Expense for such period
plus scheduled principal amortization (excluding any individual scheduled
principal payment which exceeds 25% of the original principal amount of an
issuance of Indebtedness) for such period on all Indebtedness of EQR (calculated
as provided in Section 1.2), on a consolidated basis, plus Borrower's Share of
scheduled principal amortization for such period on all Indebtedness of
Investment Affiliates for which there is no recourse to EQR or Borrower (or any
Property thereof), plus, without duplication, EQR's and Borrower's actual or
potential liability for principal amortization for such period on all
Indebtedness of Investment Affiliates that is recourse to EQR or Borrower (or
any Property thereof).
"Default" means any condition or event which with the giving of notice
or lapse of time or both would, unless cured or waived, become an Event of
Default.
"Default Rate" has the meaning set forth in Section 2.6(d).
"Development Activity" means (a) the development and construction of
multiple apartment complexes by the Borrower or any of its Subsidiaries
excluding Unimproved Assets, (b) the financing by the Borrower or any of its
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<PAGE>
Subsidiaries of any such development or construction or (c) the incurrence by
the Borrower or any of its Subsidiaries of any Contingent Obligations in
connection with such development or construction (other than purchase contracts
for Real Property Assets which are not payable until completion of development
or construction), valued at the cost of such projects under development and
construction.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address in the United States set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its Domestic
Lending Office) or such other office as such Bank may hereafter designate as its
Domestic Lending Office by notice to the Borrower and the Lead Agent.
"EBITDA" means, for any period (i) Net Income for such period, plus
(ii) depreciation and amortization expense and other non-cash items deducted in
the calculation of Net Income for such period, plus (iii) Interest Expense
deducted in the calculation of Net Income for such period, plus, (iv) Taxes
deducted in the calculation of Net Income for such period, plus (v) Borrower's
Share of distributed earnings of Investment Affiliates for such period, minus
(vi) the gains (and plus the losses) from extraordinary items or asset sales or
write-ups or forgiveness of indebtedness included in the calculation of Net
Income, for such period, minus (vii) Borrower's Share of accrued income and
losses of Investment Affiliates for such period minus (viii) earnings of
Subsidiaries for such period distributed to third parties, all of the foregoing
without duplication.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 9.9.
"Environmental Affiliate" means any partnership, joint venture, trust
or corporation in which an equity interest is owned by the Borrower, either
directly or indirectly.
"Environmental Approvals" means any permit, license, approval, ruling,
variance, exemption or other authorization required under applicable
Environmental Laws.
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"Environmental Claim" means, with respect to any Person, any notice,
claim, demand or similar communication (written or oral) by any other Person
alleging potential liability of such Person for investigatory costs, cleanup
costs, governmental response costs, natural resources damage, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
(i) the presence, or release into the environment, of any Materials of
Environmental Concern at any location, whether or not owned by such Person or
(ii) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law, in each case (with respect to both (i) and (ii) above) as
to which there is a reasonable possibility of an adverse determination with
respect thereto and which, if adversely determined, would have a Material
Adverse Effect on the Borrower.
"Environmental Laws" means any and all federal, state, and local
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, licenses,
agreements and other governmental restrictions relating to the environment, the
effect of the environment on human health or to emissions, discharges or
releases of Materials of Environmental Concern into the environment including,
without limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern
or the clean up or other remediation thereof.
"EQR" means Equity Residential Properties Trust, a Maryland real
estate investment trust, the sole general partner of the Borrower.
"EQR Guaranty" means the Guaranty of Payment of even date herewith
executed by EQR in favor of Lead Agent, Co-Lead Agent and the Banks.
"EQR 1995 Form 10-K" means EQR's annual report on Form 10-K for 1995,
as filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
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<PAGE>
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Code.
"Euro-Dollar Borrowing" has the meaning set forth in Section 1.3.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its Euro-
Dollar Lending Office) or such other office, branch or affiliate of such Bank as
it may hereafter designate as its Euro-Dollar Lending Office by notice to the
Borrower and the Lead Agent.
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Borrowing.
"Euro-Dollar Reference Bank" means the principal London offices of the
Lead Agent.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.7(b).
"Event of Default" has the meaning set forth in Section 6.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business
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<PAGE>
Day, and (ii) if no such rate is so published on such next succeeding Domestic
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to the Lead Agent on such day on such transactions as determined by the
Lead Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System as constituted from time to time.
"FFO" means "funds from operations," defined to mean, for any period,
Net Income before Borrower's share of the Net Income or loss of any Investment
Affiliate, plus any and all cash distributions received by Borrower representing
Borrower's Share of the Net Income (plus Borrower's Share of depreciation and
amortization expenses of Investment Affiliates) of any Investment Affiliate,
plus depreciation and amortization expense for such period and excluding gains
(or losses) from Debt Restructurings and sales or other dispositions of Property
of the Borrower or any Investment Affiliate.
"Financing Partnerships" means (i) those subsidiary limited
partnerships for which the Borrower is a limited partner with a 1% limited
partnership interest, Borrower is a general partner with a 98% general partner
interest and a QRS Corporation is a general partner with a 1% general partner
interest, (ii) those limited liability companies for which the Borrower is a
member with a 99% member interest and a QRS Corporation is a member with a 1%
member interest, (iii) those general partnerships in which the Borrower is a
general partner with a 99% partnership interest and a QRS Corporation is a
general partner with a 1% partnership interest, and (iv) those corporations
which are wholly-owned and controlled by the Borrower or an entity described in
clause (i), (ii) or (iii) of this definition.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Borrower and EQR which shall be
the twelve (12) month period ending on the last day of December in each year.
"Fixed Charges" for any Fiscal Quarter period means the sum of (i)
Debt Service for such period, (ii) the product of the average number of
apartment units owned
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<PAGE>
(directly or beneficially) by Borrower or a Financing Partnership during such
period and the Capital Reserve for such Period, (iii) Borrower's Share of the
aggregate sum of the product of the average number of apartment units owned
(directly or beneficially) by each Investment Affiliate during such period and
the Capital Reserve for such period, and (iv) dividends on preferred units
payable by Borrower for such period.
"Fixed Rate Borrowing" has the meaning set forth in Section 1.3.
"Fixed Rate Indebtedness" means all Indebtedness which accrues
interest at a fixed rate.
"Floating Rate Indebtedness" means all Indebtedness which is not Fixed
Rate Indebtedness and which is not a Contingent Obligation or an Unused
Commitment.
"FMV Cap Rate" means 9%.
"GAAP" means generally accepted accounting principles recognized as
such in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.
"Gross Asset Value" means, with respect to any Person or Property,
Adjusted Asset Value plus, in the case of any Person, the value of any Cash or
Cash Equivalent owned by such Person and not subject to any Lien.
"Group of Loans" means, at any time, a group of Loans consisting of
(i) all Committed Loans which are Base Rate Loans at such time, or (ii) all
Euro-Dollar Loans having the same Interest Period at such time; provided that,
if a Committed Loan of any particular Bank is converted to or made as a Base
Rate Loan pursuant to Section 8.2 or 8.5, such Loan shall be included in the
same Group or Groups of Loans from time to time as it would have been in if it
had not been so converted or made.
"Indebtedness" as applied to any Person (and without duplication),
means (a) all indebtedness, obligations or
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<PAGE>
other liabilities of such Person for borrowed money, (b) all indebtedness,
obligations or other liabilities of such Person evidenced by Securities or other
similar instruments, (c) all Contingent Obligations of such Person, (d) all
reimbursement obligations and other liabilities of such Person with respect to
letters of credit or banker's acceptances issued for such Person's account or
other similar instruments for which a contingent liability exists, (e) all
obligations of such Person to pay the deferred purchase price of Property or
services, (f) all obligations in respect of Capital Leases (including ground
leases) of such Person, (g) all indebtedness obligations or other liabilities of
such Person or others secured by a Lien on any asset of such Person, whether or
not such indebtedness, obligations or liabilities are assumed by, or are a
personal liability of such Person, (h) all indebtedness, obligations or other
liabilities (other than interest expense liability) in respect of Interest Rate
Contracts and foreign currency exchange agreements (other than Interest Rate
Contracts purchased to hedge Indebtedness), (i) ERISA obligations currently due
and payable and (j) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of such
Person.
"Indemnitee" has the meaning set forth in Section 9.3(b).
"Interest Expense" means, for any period and without duplication,
total interest expense, whether paid, accrued or capitalized (including the
interest component of Capital Leases but excluding interest expense covered by
an interest reserve established under a loan facility) of EQR, on a consolidated
basis, including without limitation all commissions, discounts and other fees
and charges owed with respect to drawn letters of credit, amortized costs of
Interest Rate Contracts incurred on or after the Closing Date and the Facility
Fees payable to the Banks in accordance with Section 2.8, plus Borrower's Share
of accrued, paid or capitalized interest with respect to any Indebtedness of
Investment Affiliates for which there is no recourse to EQR or Borrower, plus,
without duplication, EQR's and Borrower's actual or potential liability for
accrued, paid or capitalized interest with respect to Indebtedness of Investment
Affiliates that is recourse to EQR or Borrower calculated for all Fixed Rate
Indebtedness, at the actual interest rate in effect with respect to all
Indebtedness outstanding as of the last day of such Fiscal
15
<PAGE>
Quarter and in the case of all Floating Rate Indebtedness, the greater of (i)
(A) the Treasury Rate plus 1.75% for taxable Indebtedness and (B) 7.0% for tax-
exempt Indebtedness, (ii) the actual rate of interest in effect with respect to
such Floating Rate Indebtedness outstanding for which no Interest Rate Contract
is in effect as of the last day of such quarter and (iii) if an Interest Rate
Contract is in effect with respect to such Floating Rate Indebtedness, the
strike rate payable under such Interest Rate Contract, all determined on an
annualized basis.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing specified in the
Notice of Borrowing or on the date specified in the applicable Notice of
Interest Rate Election and ending 30, 60, 90, or 180 days thereafter, as the
Borrower may elect in the applicable Notice of Borrowing or Notice of Interest
Rate Election; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) if any Interest Period includes a date on which a payment of
principal of the Loans is required to be made under Section 2.10 but does
not end on such date, then (i) the principal amount (if any) of each Euro-
Dollar Loan required to be repaid on such date shall have an Interest
Period ending on such date (it being understood that the foregoing shall
not be deemed to relieve the Borrower of any obligation to pay any amounts
otherwise required pursuant to Section 2.13 in connection with such
prepayment) and (ii) the remainder (if any) of each such Euro-Dollar Loan
shall have an Interest Period determined as set forth above.
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<PAGE>
(2) with respect to each Base Rate Borrowing and solely for determining when
interest is payable on any Base Rate Borrowing, the period commencing on the
date of such Borrowing specified in the Notice of Borrowing or on the date
specified (or deemed specified) in the applicable Notice of Interest Rate
Election and ending 30 days thereafter; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b)(i) below) which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) if any Interest Period includes a date on which a payment of
principal of the Loans is required to be made under Section 2.10 but does
not end on such date, then (i) the principal amount (if any) of each Base
Rate Loan required to be repaid on such date shall have an Interest Period
ending on such date and (ii) the remainder (if any) of each such Base Rate
Loan shall have an Interest Period determined as set forth above.
(3) with respect to each Money Market LIBOR Loan, the period commencing on the
date of borrowing specified in the applicable Money Market Quote Request and
ending such number of months thereafter as the Borrower may elect in accordance
with Section 23; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
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<PAGE>
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market Absolute Rate Loan, the period commencing
on the date of borrowing specified in the applicable Money Market Quote Request
and ending such number of days thereafter (but not less than 14 days or more
than 180 days) as the Borrower may elect in accordance with Section 23;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Interest Rate Contracts" means, collectively, interest rate swap,
collar, cap or similar agreements providing interest rate protection.
"Interest Rate Hedges" has the meaning set forth in Section 5.12.
"Investment Affiliate" means any Person in whom EQR or Borrower holds
an equity interest, directly or indirectly, whose financial results are not
consolidated under GAAP with the financial results of EQR or Borrower on the
consolidated financial statements of EQR and Borrower.
"Investment Grade Rating" means a rating for a Person's senior long-
term unsecured debt, or if no such rating has been issued, a "shadow" rating, of
BBB- or better from S&P, and a rating or "shadow" rating of Baa3 or better from
Moody's. Any such "shadow" rating shall be evidenced by a letter from the
applicable Rating Agency or by such other evidence as may be reasonably
acceptable to the Lead Agent (as to any such other evidence, the Lead Agent
shall present the same to, and discuss the same with, the Banks).
"Investment Mortgages" means mortgages securing indebtedness directly
or indirectly owed to Borrower or any of its Subsidiaries, including
certificates of interest in real estate mortgage investment conduits.
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<PAGE>
"Invitation for Money Market Quotes" has the meaning set forth in
Section 2.3(c).
"Lead Agent" shall mean Morgan Guaranty Trust Company of New York in
its capacity as Lead Agent hereunder, and its permitted successors in such
capacity in accordance with the terms of this Agreement.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.3.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement, in each case that has the effect of creating a
security interest, in respect of such asset. For the purposes of this Agreement,
the Borrower or any Consolidated Subsidiary shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" means a Base Rate Loan, a Euro-Dollar Loan or a Money Market
Loan and "Loans" means Base Rate Loans, Euro-Dollar Loans or Money Market Loans
or any combination of the foregoing.
"Loan Documents" means this Agreement, the Notes and the EQR Guaranty.
"London Interbank Offered Rate" has the meaning set forth in Section
2.7(b).
"Margin Stock" shall have the meaning provided such term in Regulation
U and Regulation G of the Federal Reserve Board.
"Material Adverse Effect" means an effect resulting from any
circumstance or event or series of circumstances or events, of whatever nature
(but excluding general economic conditions), which does or could reasonably be
expected to, materially and adversely (i) effect the business, operations,
properties, assets or financial condition of the Borrower and its Consolidated
Subsidiaries taken as a whole, (ii) impair the ability of the Borrower and its
Consolidated Subsidiaries, taken as a whole, to
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<PAGE>
perform their respective obligations under the Loan Documents, or (iii) cause a
Default under Sections 5.8, 5.9 or 5.13.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $5,000,000.
"Materials of Environmental Concern" means and includes pollutants,
contaminants, hazardous wastes, toxic and hazardous substances, asbestos, lead,
petroleum and petroleum by-products.
"Maturity Date" shall mean the date when all of the Obligations
hereunder shall be due and payable which shall be November 15, 1999, unless
accelerated pursuant to the terms hereof.
"Minority Holdings" means partnerships, limited liability companies
and corporations held or owned by the Borrower which are not consolidated with
Borrower on Borrower's financial statements.
"Money Market Absolute Rate" has the meaning set forth in Section
2.3(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Borrowing" has the meaning set forth in Section 1.3.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Borrower
and the Agent; provided that any Bank may from time to time by notice to the
Borrower and the Lead Agent designate separate Money Market Lending Offices for
its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute
Rate Loans, on the other hand, in which case all references herein to the Money
Market Lending Office of such Bank shall be deemed to refer to either or both of
such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan
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bearing interest at the Base Rate pursuant to Article VIII).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.3(d)(2).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.3.
"Moody's" means Moody's Investors Services, Inc. or any successor
thereto.
"Morgan" means Morgan Guaranty Trust Company of New York, in its
individual capacity.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Multifamily Residential Property Mortgages" means Investment
Mortgages issued by any Person engaged primarily in the business of developing,
owning, and managing multifamily residential property.
"Multifamily Residential Property Partnership Interests" means
partnership or joint venture interests issued by any Person (other than a
Financing Partnership) engaged primarily in the business of developing, owning,
and managing multifamily residential property.
"Net Income" means, for any period, the net earnings (or loss) after
Taxes of the Borrower, on a consolidated basis, for such period calculated in
conformity with GAAP.
"Net Offering Proceeds" means all cash or other assets received by EQR
or Borrower as a result of the sale of common shares of beneficial interest,
preferred shares of beneficial interest, partnership interests, limited
liability company interests, Convertible Securities or other
21
<PAGE>
ownership or equity interests in EQR or Borrower less customary costs and
discounts of issuance paid by EQR or Borrower, as the case may be.
"Net Operating Income" means, for any period with respect to any
Property owned (directly or beneficially) by Borrower or a Financing
Partnership, the net operating income of such Property (attributed to such
Property in a manner reasonably acceptable to Agent) for such period (i)
determined in accordance with GAAP, (ii) determined in a manner which is
consistent with the past practices of EQR and Borrower, and (iii) inclusive of
an allocation of reasonable management fees and administrative costs to each
Property consistent with the past practices of EQR and Borrower, except that,
for purposes of determining Net Operating Income, income shall not (a) include
security or other deposits, lease termination or other similar charges,
delinquent rent recoveries, unless previously reflected in reserves, or any
other items deemed by Lead Agent to be of a non-recurring nature or (b) be
reduced by depreciation or amortization.
"Net Price" means, with respect to the purchase and sale of any
Property, without duplication, (i) Cash and Cash Equivalents paid as
consideration for such purchase or sale, plus (ii) the principal amount of any
note received or other deferred payment to be made in connection with such
purchase or sale (except as described in clause (iv) below), plus (iii) the
value of any other considerations delivered in connection with such purchase or
sale (including, without limitation, shares of beneficial interest in EQR and OP
Units or Preferred OP Units (as defined in Borrower's partnership agreement))
(as reasonably determined by Lead Agent), minus (only in the case of a sale)
(iv) the value of any consideration deposited into escrow or subject to
disbursement or claim upon the occurrence of any event, minus (only in the case
of a sale) (v) the value of any consideration required to be paid to any Person
other than the Borrower and its Subsidiaries owning a beneficial interest in
such Property, minus (vi) reasonable costs of sale and taxes paid or payable in
connection with such purchase or sale.
"Net Present Value" shall mean, as to a specified or ascertainable
dollar amount, the present value, as of the date of calculation of any such
amount using a discount rate
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equal to the Base Rate in effect as of the date of such calculation.
"Non-Multifamily Residential Property" means Property which is not (i)
used for lease, operation or use as a multifamily residential property, (ii)
Unimproved Assets, (iii) Securities, (iv) Multifamily Residential Property
Mortgages, or (v) Multifamily Residential Property Partnership Interests.
"Non-Recourse Indebtedness" means Indebtedness with respect to which
recourse for payment is limited to (i) specific assets related to a particular
Property or group of Properties encumbered by a Lien securing such Indebtedness
or (ii) any Subsidiary (provided that if a Subsidiary is a partnership, there is
no recourse to Borrower or EQR as a general partner of such partnership);
provided, however, that personal recourse of Borrower or EQR for any such
Indebtedness for fraud, misrepresentation, misapplication of cash, waste,
environmental claims and liabilities and other circumstances customarily
excluded by institutional lenders from exculpation provisions and/or included in
separate indemnification agreements in non-recourse financing of real estate
shall not, by itself, prevent such Indebtedness from being characterized as Non-
Recourse Indebtedness.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Borrowing (as defined in
Section 2.4).
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.6.
"Obligations" means all obligations, liabilities, indemnity
obligations and Indebtedness of every nature of the Borrower, from time to time
owing to Lead Agent, Co-Lead Agent or any Bank under or in connection with this
Agreement or any other Loan Document.
"Other Indebtedness" means all Indebtedness other than the
Obligations.
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"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 9.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Period Fraction" means with respect to any period of time, a
fraction, the numerator of which is the actual number of days in such period,
and the denominator of which is three hundred and sixty (360).
"Permitted Holdings" means Unimproved Assets, Development Activity,
Securities, Non-Multifamily Residential Property and Investment Mortgages, but
only to the extent permitted in Section 5.8.
"Permitted Liens" means:
a. Liens for Taxes, assessments or other governmental charges not yet
due and payable or which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted in accordance with
the terms hereof;
b. statutory liens of carriers, warehousemen, mechanics, materialmen
and other similar liens imposed by law, which are incurred in the ordinary
course of business for sums not more than sixty (60) days delinquent or
which are being contested in good faith in accordance with the terms
hereof;
c. deposits made in the ordinary course of business to secure
liabilities to insurance carriers;
d. Liens for purchase money obligations for equipment; provided that
(i) the Indebtedness secured by any such Lien does not exceed the purchase
price of such equipment, (ii) any such Lien encumbers only the asset so
purchased and the proceeds upon sale, disposition, loss or
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destruction thereof, and (iii) such Lien, after giving effect to the
Indebtedness secured thereby, does not give rise to an Event of Default;
e. easements, rights-of-way, zoning restrictions, other similar
charges or encumbrances and all other items listed on Schedule B to
Borrower's owner's title insurance policies for any of Borrower's Real
Property Assets, so long as the foregoing do not interfere in any material
respect with the use or ordinary conduct of the business of Borrower and do
not diminish in any material respect the value of the Property to which it
is attached or for which it is listed;
f. Liens and judgments which have been or will be bonded or released
of record within thirty (30) days after the date such Lien or judgment is
entered or filed against ERQ, Borrower, or any Subsidiary; and
g. Liens on Property of the Borrower or its Subsidiaries (other than
Qualifying Unencumbered Property) securing Indebtedness which may be
incurred or remain outstanding without resulting in an Event of Default
hereunder.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by the Lead
Agent in New York City from time to time as its Prime Rate.
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"Property" means, with respect to any Person, any real or personal
property, building, facility, structure, equipment or unit, or other asset owned
by such Person.
"Property Income" means, when used with respect to any Real Property
Asset, annual contractual rents (other than prepaid rents and revenues and
security deposits except to the extent applied in satisfaction of tenants'
obligations for rent), in effect as of the last day of a quarter in accordance
with the applicable leases, but provided that if any tenant is more than 60 days
in arrears in the payment of base or fixed rent as of the last day of a quarter,
the annual contractual rents payable pursuant to such tenant's lease shall not
constitute "Property Income".
"Qualifying Unencumbered Property" means any Property from time to
time which (i) is an operating multifamily residential property wholly-owned
(directly or beneficially) by Borrower or a Financing Partnership, (ii) is not
subject (nor are any equity interests in such Property subject) to a Lien which
secures Indebtedness of any Person other than Permitted Liens, (iii) is not
subject (nor are any equity interests in such Property subject) to any covenant,
condition, or other restriction which prohibits or limits the creation or
assumption of any Lien upon such Property.
"QRS Corporation" means those qualified EQR subsidiaries wholly owned
by EQR.
"Rating Agencies" means, collectively, S&P and Moody's.
"Real Property Assets" means as of any time, the real property assets
(including interests in participating mortgages in which the Borrower's interest
therein is characterized as equity according to GAAP) owned directly or
indirectly by the Borrower and the Consolidated Subsidiaries at such time.
"Recourse Debt" shall mean Indebtedness that is not Non-Recourse
Indebtedness.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
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"Required Banks" means at any time Banks having at least 51% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 51% of the aggregate unpaid
principal amount of the Loans.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
"Secured Debt" means Indebtedness, the payment of which is secured by
a Lien on any Property owned or leased by EQR, Borrower, or any Subsidiary.
"Securities" means any stock, partnership interests, shares, shares of
beneficial interest, voting trust certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or in general any instruments commonly known as "securities," or
any certificates of interest, shares, or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire any of the foregoing, but shall not include any evidence of
the obligations.
"Solvent" means, with respect to any Person, that the fair saleable
value of such Person's assets exceeds the Indebtedness of such Person.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Taxes" means all federal, state, local and foreign income and gross
receipts taxes.
"Term" has the meaning set forth in Section 2.9.
"Termination Event" shall mean (i) a "reportable event, as such term
is described in Section 4043 of ERISA (other than a "reportable event" not
subject to the provision for 30-day notice to the PBGC), or an event described
in Section 4062(e) of ERISA, (ii) the withdrawal by any member of the ERISA
Group from a Multiemployer Plan
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during a plan year in which it is a "substantial employer (as defined in
Section 4001(a)(2) of ERISA), or the incurrence of liability by any member of
the ERISA Group under Section 4064 of ERISA upon the termination of a
Multiemployer Plan, (iii) the filing of a notice of intent to terminate any Plan
under Section 4041 of ERISA, other than in a standard termination within the
meaning of Section 4041 of ERISA, or the treatment of a Plan amendment as a
distress termination under Section 4041 of ERISA, (iv) the institution by the
PBGC of proceedings to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or cause a trustee to be appointed
to administer, any Plan or (v) any other event or condition that might
reasonably constitute grounds for the termination of, or the appointment of a
trustee to administer, any Plan or the imposition of any liability or
encumbrance or Lien on the Real Property Assets or any member of the ERISA Group
under ERISA.
"Total Liabilities" means, as of the date of determination and without
duplication, all Indebtedness of EQR (calculated as provided in Section 1.2), on
a consolidated basis, plus Borrower's Share of all Indebtedness of Investment
Affiliates for which there is no recourse to EQR or Borrower (or any Property
thereof) plus the actual or potential liability of EQR, Borrower or any
Subsidiary for any Indebtedness of Investment Affiliates that is recourse to EQR
or Borrower (or Property thereof) plus accounts payable incurred in the ordinary
course of business.
"Treasury Rate" means, as of any date, a rate equal to the annual
yield to maturity on the U.S. Treasury Constant Maturity Series with a ten year
maturity, as such yield is reported in Federal Reserve Statistical Release
H.15--Selected Interest Rates, published most recently prior to the date the
applicable Treasury Rate is being determined. Such yield shall be determined by
straight line linear interpolation between the yields reported in Release H.15,
if necessary. In the event Release H.15 is no longer published, the Lead Agent
shall select, in its reasonable discretion, an alternate basis for the
determination of Treasury yield for U.S. Treasury Constant Maturity Series with
ten year maturities.
"Unencumbered Asset Value" means (i) a fraction, the numerator of
which is the product of four (4) and the
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aggregate Unencumbered Net Operating Income for the most recently ended Fiscal
Quarter which is attributable (in a manner reasonably acceptable to Lead Agent)
to Qualifying Unencumbered Properties owned (directly or beneficially) by the
Borrower or any Financing Partnership (exclusive of Unimproved Assets) for the
entire Fiscal Quarter and the denominator of which is the FMV Cap Rate plus (ii)
for all Qualifying Unencumbered Properties wholly-owned (directly or
beneficially) by Borrower or any Financing Partnership which have been acquired
(directly or indirectly) by the Borrower or any Financing Partnership in the
Fiscal Quarter most recently ended, the aggregate Net Price of the Qualifying
Unencumbered Properties paid by Borrower or its Affiliates for such Qualifying
Unencumbered Properties.
"Unencumbered Net Operating Income" means for any period for all
Qualifying Unencumbered Properties owned (directly or beneficially) by the
Borrower or any Financing Partnership during the applicable period, Net
Operating Income from each such Qualifying Unencumbered Property minus an amount
equal to the product of the average number of apartment units in such Qualifying
Unencumbered Property during such period and the Capital Reserve for such
period.
"Unimproved Assets" means Real Property Assets upon which no material
improvements have been completed which completion is evidenced by a certificate
of occupancy or its equivalent.
"United States" means the United States of America, including the
fifty states and the District of Columbia.
"Unsecured Debt" means Indebtedness of Borrower and any Financing
Partnership which is not Secured Debt.
"Unsecured Interest Expense" means Interest Expense other than
Interest Expense payable in respect of Secured Debt.
"Unused Commitments" shall mean an amount equal to all unadvanced
funds (other than unadvanced funds in connection with any construction loan)
which any third party is obligated to advance to Borrower or another Person or
otherwise pursuant to any loan document, written instrument or otherwise.
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SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP
applied on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Lead Agent; provided that for purposes of references to the financial
results and information of "EQR, on a consolidated basis," EQR shall be deemed
to own one hundred percent (100%) of the partnership interests in Borrower; and
provided further that, if the Borrower notifies the Lead Agent that the Borrower
wishes to amend any covenant in Article V to eliminate the effect of any change
in GAAP on the operation of such covenant (or if the Lead Agent notifies the
Borrower that the Required Banks wish to amend Article V for such purpose), then
the Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
reasonably satisfactory to the Borrower and the Required Banks.
SECTION 1.3. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article 2 on the same date, all of which Loans are of the same type (subject to
Article 8) and, except in the case of Base Rate Loans, have the same initial
Interest Period. Borrowings are classified for purposes of this Agreement either
by reference to the pricing of Loans comprising such Borrowing (e.g., a "Fixed
Rate Borrowing" is a Euro-Dollar Borrowing or a Money Market Borrowing
(excluding any such Borrowing consisting of Money Market LIBOR Loans bearing
interest at the Base Rate pursuant to Article VIII), and a "Euro-Dollar
Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the
provisions of Article 2 under which participation therein is determined (i.e.,
a "Committed Borrowing" is a Borrowing under Section 2.1 in which all Banks
participate in proportion to their Commitments, while a "Money Market Borrowing"
is a Borrowing under Section 2.3 in which a Bank's share is determined on the
basis of its bid in accordance therewith).
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ARTICLE II
THE CREDITS
SECTION 2.1. Commitments to Lend. Each Bank severally agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the Borrower
pursuant to this Article from time to time during the term hereof in amounts
such that the aggregate principal amount of Committed Loans by such Bank at any
one time outstanding shall not exceed the amount of its Commitment. Each
Borrowing outstanding under this Section 2.1 shall be in an aggregate principal
amount of $3,000,000, or an integral multiple of $100,000 in excess thereof
(except that any such Borrowing may be in the aggregate amount available in
accordance with Section 3.2(c)) and, other than with respect to Money Market
Loans, shall be made from the several Banks ratably in proportion to their
respective Commitments. Subject to the limitations set forth herein, any amounts
repaid may be reborrowed.
SECTION 2.2. Notice of Borrowing. The Borrower shall give Lead Agent
notice not later than 10:00 a.m. (New York City time) (x) one Domestic Business
Day before each Base Rate Borrowing, or (y) three Euro-Dollar Business Days
before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be Base Rate
Loans or Euro-Dollar Loans, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the definition
of Interest Period.
SECTION 2.3. Money Market Borrowings.
(a) The Money Market Option. From time to time during the Term, and
provided that at such time the Borrower maintains an Investment Grade Rating,
the Borrower may, as set forth in this Section 2.3, request the Banks during the
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Term to make offers to make Money Market Loans to the Borrower, not to exceed,
at such time, the lesser of (i) $150,000,000 in the aggregate outstanding, and
(ii) the aggregate Commitments less all Loans then outstanding. Subject to the
provisions of this Agreement, the Borrower may repay any outstanding Money
Market Loan on any day which is both a Domestic Business Day and a Euro-Dollar
Business Day and any amounts so repaid may be reborrowed, up to the amount
available under this Section 2.3 at the time of such Borrowing, until the
Domestic Business Day next preceding the Maturity Date. The Banks may, but shall
have no obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.3.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received not later
than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day
prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction
or (y) the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such other
time or date as the Borrower and the Lead Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective) specifying:
1. the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
2. the aggregate amount of such Borrowing, which shall be $3,000,000
or a larger multiple of $100,000,
3. the duration of the Interest Period applicable thereto (which
shall not be less than 14 days or more than 180 days), subject to the
provisions of the definition of Interest Period, and
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4. whether the Money Market Quotes requested are to set forth a Money
Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Lead Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Lead Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.
(d) Submission and Contents of Money Market Quotes. 1. Each Bank
may submit a Money Market Quote containing an offer or offers to make Money
Market Loans in response to any Invitation for Money Market Quotes. Each Money
Market Quote must comply with the requirements of this subsection (d) and must
be submitted to the Lead Agent by telex or facsimile transmission at its offices
specified in or pursuant to Section 9.1 not later than (x) 2:00 P.M. (New York
City time) on the fourth Euro-Dollar Business Day prior to the proposed date of
Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York City time)
on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or,
in either case, such other time or date as the Borrower and the Lead Agent shall
have mutually agreed and shall have notified to the Banks not later than the
date of the Money Market Quote Request for the first LIBOR Auction or Absolute
Rate Auction for which such change is to be effective); provided that Money
Market Quotes submitted by the Lead Agent (or any affiliate of the Lead Agent)
in the capacity of a Bank may be submitted, and may only be submitted, if the
Lead Agent or such affiliate notifies the Borrower of the terms of the offer or
offers contained therein not later than (x) one hour prior to the deadline for
the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the
deadline for the other Banks, in the case of an Absolute Rate Auction. Subject
to Articles 3 and
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6, any Money Market Quote so made shall be irrevocable except with the written
consent of the Lead Agent given on the instructions of the Borrower.
2. Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(a) the proposed date of Borrowing,
(b) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Bank, (x) must be $3,000,000 or a larger
multiple of $100,000, (y) may not exceed the principal amount of Money
Market Loans for which offers were requested and (z) may be subject to an
aggregate limitation as to the principal amount of Money Market Loans for
which offers being made by such quoting Bank may be accepted,
(c) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(d) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(e) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
3. Any Money Market Quote shall be disregarded if it:
(a) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d)(2) above;
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(b) contains qualifying, conditional or similar language (except for
an aggregate limitation as provided in subsection (d)(2)(b) above);
(c) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
(d) arrives after the time set forth in subsection (d)(1).
(e) Notice to Borrower. The Lead Agent shall promptly (and in any
event within one (1) Domestic Business Day after receipt thereof) notify the
Borrower in writing of the terms (x) of any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Lead Agent unless such subsequent Money Market Quote is submitted solely to
correct a manifest error in such former Money Market Quote or modifies the terms
of such previous Money Market Quote to provide terms more favorable to Borrower.
The Lead Agent's notice to the Borrower shall specify (A) the aggregate
principal amount of Money Market Loans for which offers have been received for
each Interest Period specified in the related Money Market Quote Request, (B)
the respective principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered and (C) if applicable,
limitations on the aggregate principal amount of Money Market Loans for which
offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Lead Agent shall have mutually
agreed and shall have notified to the Banks not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective), the Borrower shall notify the Lead Agent
of its acceptance or non-acceptance of the offers so notified to it
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pursuant to subsection (e). In the case of acceptance, such notice (a "Notice
of Money Market Borrowing") shall specify the aggregate principal amount of
offers for each Interest Period that are accepted. The Borrower may accept any
Money Market Quote in whole or in part; provided that:
1. the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request;
2. the principal amount of each Money Market Borrowing must be
$3,000,000 or a larger multiple of $100,000;
3. acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be;
and
4. the Borrower may not accept any offer that is described in
subsection (d)(3) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks
with the same Money Market Margins or Money Market Absolute Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted shall
be allocated by the Lead Agent among such Banks as nearly as possible (in
multiples of $100,000, as the Lead Agent may deem appropriate) in proportion to
the aggregate principal amounts of such offers. The Lead Agent shall promptly
(and in any event within one (1) Domestic Business Day after such offers are
accepted) notify the Borrower and each such Bank in writing of any such
allocation of Money Market Loans. Determinations by the Lead Agent of the
allocation of Money Market Loans shall be conclusive in the absence of manifest
error.
(h) Notwithstanding anything to the contrary contained herein, each
Bank shall be required to fund its pro rata share of Committed Loans in
accordance with Section 2.1 hereof despite the fact that any Bank's Commitment
may have been or may be exceeded as a result of such Bank's making of Money
Market Loans.
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SECTION 2.4. Notice to Banks; Funding of Loans.
(a) Upon receipt of a notice from Borrower in accordance with Section
2.2 hereof (each such notice being a "Notice of Borrowing"), the Lead Agent
shall, on the date such Notice of Borrowing is received by the Lead Agent,
notify Co-Lead Agent and each Bank of the contents thereof and of such Bank's
share of such Borrowing, of the interest rate determined pursuant thereto and
the Interest Period(s) (if different from those requested by the Borrower) and
such Notice of Borrowing shall not thereafter be revocable by the Borrower,
unless Borrower shall pay any applicable expenses pursuant to Section 2.13.
(b) Not later than 1:00 p.m. (New York City time) on the date of each
Borrowing as indicated in the Notice of Borrowing, each Bank shall (except as
provided in subsection (c) of this Section) make available its share of such
Borrowing in Federal funds immediately available in New York City, to the Lead
Agent at its address referred to in Section 9.1.
(c) Unless the Lead Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Lead Agent such Bank's share of such Borrowing, the Lead Agent may assume that
such Bank has made such share available to the Lead Agent on the date of such
Borrowing in accordance with subsection (b) of this Section 2.4 and the Lead
Agent may, in reliance upon such assumption, but shall not be obligated to, make
available to the Borrower on such date a corresponding amount on behalf of such
Bank. If and to the extent that such Bank shall not have so made such share
available to the Lead Agent, such Bank and the Borrower severally agree to repay
to the Lead Agent forthwith on demand, and in the case of the Borrower one (1)
Domestic Business Day after demand, such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Lead Agent, at (i) in
the case of the Borrower, a rate per annum equal to the interest rate applicable
thereto pursuant to Section 2.7 and (ii) in the case of such Bank, the Federal
Funds Rate. If such Bank shall repay to the Lead Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement.
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SECTION 2.5. Notes.
(a) The Loans of each Bank shall be evidenced by a single Note
payable to the order of such Bank for the account of its Applicable Lending
Office in an amount equal to the aggregate amount of such Bank's Commitment.
(b) Each Bank may, by notice to the Borrower, the Lead Agent and the
Co-Lead Agent, request that its Loans of a particular type (including Money
Market Loans) be evidenced by a separate Note in an amount equal to the
aggregate unpaid principal amount of such Loans. Any additional costs incurred
by the Lead Agent, the Borrower or the Banks in connection with preparing such a
Note shall be at the sole cost and expense of the Bank requesting such Note. In
the event any Loans evidenced by such a Note are paid in full prior to the
Maturity Date, any such Bank shall return such Note to Borrower. Each such Note
shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans of the relevant
type. Upon the execution and delivery of any such Note, any existing Note
payable to such Bank shall be replaced or modified accordingly. Each reference
in this Agreement to the "Note" of such Bank shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.1(a), the
Lead Agent shall forward such Note to such Bank. Each Bank shall record the
date, amount, type and maturity of each Loan made by it and the date and amount
of each payment of principal made by the Borrower with respect thereto, and may,
if such Bank so elects in connection with any transfer or enforcement of its
Note, endorse on the appropriate schedule appropriate notations to evidence the
foregoing information with respect to each such Loan then outstanding; provided
that the failure of any Bank to make any such recordation or endorsement shall
not affect the obligations of the Borrower hereunder or under the Notes. Each
Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and
to attach to and make a part of its Note a continuation of any such schedule as
and when required.
(d) The Committed Loans shall mature, and the principal amount
thereof shall be due and payable, on the Maturity Date.
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(e) Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable,
together with accrued interest thereon, on the earlier to occur of (i) last day
of the Interest Period applicable to such Borrowing or (ii) the Maturity Date.
(f) There shall be no more than ten (10) Euro-Dollar Groups of Loans
outstanding at any one time.
SECTION 2.6. Method of Electing Interest Rates. (a) The Loans
included in each Committed Borrowing shall bear interest initially at the type
of rate specified by the Borrower in the applicable Notice of Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Group of Loans (subject in each case to the
provisions of Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert all or any portion of such Loans to Euro-Dollar Loans as of any Euro-
Dollar Business Day;
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert all or any portion of such Loans to Base Rate Loans and/or elect to
continue all or any portion of such Loans as Euro-Dollar Loans for an additional
Interest Period or additional Interest Periods, in each case effective on the
last day of the then current Interest Period applicable to such Loans, or on
such other date designated by Borrower in the Notice of Interest Rate Election
provided Borrower shall pay any losses pursuant to Section 2.13.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Lead Agent at least three (3) Euro-Dollar Business Days
before the conversion or continuation selected in such notice is to be
effective. A Notice of Interest Rate Election may, if it so specifies, apply to
only a portion of the aggregate principal amount of the relevant Group of Loans;
provided that (i) such portion is allocated ratably among the Loans comprising
such Group, (ii) the portion to which such Notice applies, and the remaining
portion to which it does not apply, are each $500,000 or any larger multiple of
$100,000, (iii) there shall be no more than ten (10) Euro-Dollar
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Groups of Loans outstanding at any time, (iv) no Committed Loan may be continued
as, or converted into, a Euro-Dollar Loan when any Event of Default has occurred
and is continuing, and (v) no Interest Period shall extend beyond the Maturity
Date.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new
type of Loans and, if such new Loans are Euro-Dollar Loans, the duration of the
initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Lead Agent shall notify the Co-
Lead Agent and each Bank the same day as it receives such Notice of Interest
Rate Election of the contents thereof, the interest rates determined pursuant
thereto and the Interest Periods (if different from those requested by the
Borrower) and such notice shall not thereafter be revocable by the Borrower. If
the Borrower fails to deliver a timely Notice of Interest Rate Election to the
Lead Agent for any Group of Euro-Dollar Loans, such Loans shall be converted
into Base Rate Loans on the last day of the then current Interest Period
applicable thereto.
(d) If the Borrower shall fail to pay any principal of or interest on
any Money Market Loan when due, such Money Market Loan shall bear interest,
payable on
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demand, for each day until paid at a rate per annum equal to the Base Rate until
such failure shall become an Event of Default and thereafter at a rate per annum
equal to the sum of 4% plus the Base Rate for such day.
SECTION 2.7. Interest Rates.
(a) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until the
date it is repaid or converted into a Euro-Dollar Loan pursuant to Section 2.6
or at the Maturity Date, at a rate per annum equal to the Base Rate plus the
Applicable Margin for Base Rate Loans for such day. Such interest shall be
payable for each Interest Period on the last day thereof.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin for Euro-
Dollar Loans for such day plus the Adjusted London Interbank Offered Rate
applicable to such Interest Period. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period is longer
than one month, at intervals of one month after the first day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
London Interbank Offered Rate applicable during such Interest Period by (ii)
1.00 minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
the Euro-Dollar Reference Bank in the London interbank market at approximately
11:00 a.m. (London time) two Euro-Dollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal amount of
the Euro-Dollar Borrowing or Group of Loans or portion thereof to be converted
into or continued as Euro-Dollar Loans to which such Interest Period is to apply
and for a period of time comparable to such Interest Period.
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"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D, as Regulation D may be amended, modified or supplemented, for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(c) Subject to Section 8.1, each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.7(b) as if the related Money Market LIBOR Borrowing were a Euro-Dollar
Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making
such Loan in accordance with Section 2.3. Each Money Market Absolute Rate Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the Money
Market Absolute Rate quoted by the Bank making such Loan in accordance with
Section 2.3. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than one month, at
intervals of one month after the first day thereof. Any overdue principal of or
interest on any Money Market Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the Base Rate until such
failure shall become an Event of Default and thereafter at a rate per annum
equal to the sum of 4% plus the Base Rate for such day.
(d) In the event that, and for so long as, any Event of Default shall
have occurred and be continuing, the outstanding principal amount of the Loans,
and, to the extent permitted by applicable law, overdue interest in respect of
all Loans, shall bear interest at the annual rate
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equal to the sum of the Base Rate and four percent (4%) (the "Default Rate").
(e) The Lead Agent shall determine each interest rate applicable to
the Loans hereunder. The Lead Agent shall give prompt notice to the Borrower
and the Banks of each rate of interest so determined, and its determination
thereof shall be conclusive in the absence of demonstrable error.
(f) The Euro-Dollar Reference Bank agrees to use its best efforts to
furnish quotations to the Lead Agent as contemplated by this Section.
SECTION 2.8. Fees.
(a) Facility Fee. The Borrower shall pay to the Lead Agent for the
account of the Banks ratably in proportion to their respective Commitments a
facility fee on the aggregate Commitments at the respective percentages per
annum based upon the range into which the Borrower's Credit Rating then falls,
in accordance with the following table. The facility fee shall be payable in
arrears on each January 1, April 1, July 1 and October 1 during the Term.
Non-Investment
Grade Rating 0.375%
BBB-/Baa3 0.300%
BBB/Baa2 0.200%
BBB+/Baa1 0.150%
A-/A3 or better 0.150%
Any change in the Borrower's Credit Rating causing it to move into a different
range on the table shall effect an immediate change in the applicable percentage
per annum. In the event that the Borrower's Credit Rating is such that the
Rating Agencies' ratings are split between a higher and a lower range on the
table, the applicable percentage per annum shall be based upon the lower of such
two (2) Credit Ratings. In the event that only one (1) Rating Agency has set
the Borrower's Credit Rating, then the applicable percentage per annum shall be
based on such single rating.
(b) Fees Non-Refundable. All fees set forth in this Section 2.8 shall
be deemed to have been earned on the date payment is due in accordance with the
provisions hereof and shall be non-refundable. The obligation of the Borrower
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to pay such fees in accordance with the provisions hereof shall be binding upon
the Borrower and shall inure to the benefit of the Lead Agent, the Co-Lead Agent
and the Banks regardless of whether any Loans are actually made.
SECTION 2.9. Maturity Date.
The term (the "Term") of the Commitments (and each Bank's obligations
to make Loans hereunder) shall terminate and expire on the Maturity Date. Upon
the date of the termination of the Term, any Loans then outstanding (together
with accrued interest thereon and all other Obligations) shall be due and
payable on such date.
SECTION 2.10. Mandatory Prepayments.
(a) If at any time the Borrower or any Consolidated Subsidiary sells,
transfers, assigns or conveys any Real Property Asset which shall cause the
Borrower in any fiscal year period commencing after the Closing Date, to have
sold, transferred or conveyed property or assets which constitute in the
aggregate more than 30% of the Gross Asset Value of the Borrower and its
Subsidiaries on the date of such transfer, then at the request of Lead Agent,
Borrower shall pay to the Lead Agent, for the account of the Banks, within
thirty (30) days after the date of such request, an amount equal to the Net
Proceeds of such transfer (but in no event more than the outstanding balance of
the Loans). Borrower shall make such prepayment together with interest accrued
to the date of the prepayment on the principal amount prepaid. In connection
with the prepayment of a Euro-Dollar Loan prior to the maturity thereof, the
Borrower shall also pay any applicable expenses pursuant to Section 2.13. Each
such prepayment shall be applied to prepay ratably the Loans of the Banks.
Amounts prepaid pursuant to this Section 2.10 may not be reborrowed. As used in
this Section 2.10, the term "Net Proceeds" shall mean all amounts received by
Borrower and its Consolidated Subsidiaries in connection with such sale,
transfer, assignment or conveyance after payment of all expenses to be made by
Borrower and any Consolidated Subsidiaries in connection with such sale,
transfer, assignment or conveyance (including, without limitation, payment of
then existing Liens or encumbrances on such Real Property Asset, brokerage
commissions, title and survey costs or transfer taxes).
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(b) If at any time the Borrower shall purchase or hold any interest
in any Minority Holdings which, taken singly or in the aggregate, exceeds ten
percent (10%) of the Gross Asset Value of the Borrower and its Subsidiaries
then, at the request of Lead Agent, Borrower shall pay to the Lead Agent, for
the account of the Banks, within thirty (30) days after the date of such
request, an amount equal to the outstanding balance of all Borrowings hereunder
(except as to any Fixed Rate Borrowings for which such repayments shall be made
at the end of the Interest Period applicable to such Fixed Rate Borrowing), and
Borrower shall not be entitled to request any further Borrowings under this
Agreement until such time as the interest in any Minority Holdings of Borrower
shall not, taken singly or in the aggregate, exceed ten percent (10%) of the
Gross Asset Value of the Borrower and its Subsidiaries. Borrower shall make
such prepayment together with interest accrued to the date of the prepayment on
the principal amount prepaid.
SECTION 2.11. Optional Prepayments.
(a) The Borrower may, upon at least one (1) Domestic Business Day's
notice to the Lead Agent, prepay any Group of Base Rate Loans (or any Money
Market Borrowing bearing interest at the Base Rate pursuant to Section 8.1), in
whole at any time, or from time to time in part in amounts aggregating One
Million Dollars ($1,000,000) or any larger multiple of One Hundred Thousand
Dollars ($100,000), by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Group or Borrowing.
(b) The Borrower may, upon at least one (1) Euro-Dollar Business
Days' notice to the Lead Agent, prepay any Euro-Dollar Loan as of the last day
of the Interest Period applicable thereto. Except as provided in Article 8 and
except with respect to any Euro-Dollar Loan which has been converted to a Base
Rate Loan pursuant to Section 8.2, 8.3 or 8.4 hereof, the Borrower may not
prepay all or any portion of the principal amount of any Euro-Dollar Loan or
Money Market Loan prior to the end of the Interest Period applicable thereto
unless the Borrower shall also pay any applicable expenses pursuant to Section
2.13. Any such prepayment shall be upon at least three (3) Euro-Dollar Business
Days notice to the Lead Agent. Each such optional
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prepayment shall be in the amounts set forth in Section 2.11(a) above and shall
be applied to prepay ratably the Loans of the Banks included in any Group of
Euro-Dollar Loans, except that any Euro-Dollar Loan which has been converted to
a Base Rate Loan pursuant to Section 8.2, 8.3 or 8.4 hereof may be prepaid
without ratable payment of the other Loans in such Group of Loans which have not
been so converted.
(c) The Borrower may at any time and from time to time cancel all or
any part of the Commitments by the delivery to the Lead Agent of a notice of
cancellation within the applicable time periods set forth in Sections 2.11(a)
and (b) if there are Loans then outstanding or, if there are no Loans
outstanding at such time as to which the Commitments with respect thereto are
being cancelled, upon at least one (1) Domestic Business Day's notice to the
Lead Agent, whereupon, in either event, all or such portion of the Commitments,
as applicable, shall terminate as to the Banks, pro rata on the date set forth
in such notice of cancellation, and, if there are any Loans then outstanding,
Borrower shall prepay, as applicable, all or such portion of Loans outstanding
on such date in accordance with the requirements of Section 2.11(a) and (b).
Borrower shall be permitted to designate in its notice of cancellation which
Loans, if any, are to be prepaid.
(d) Any amounts so prepaid pursuant to Section 2.11 (a) or (b) may be
reborrowed. In the event Borrower elects to cancel all or any portion of the
Commitments pursuant to Section 2.11(c) hereof, such amounts may not be
reborrowed.
SECTION 2.12. General Provisions as to Payments.
(a) The Borrower shall make each payment of interest on the Loans and
of fees hereunder, not later than 12:00 Noon (New York City time) on the date
when due, in Federal or other funds immediately available in New York City, to
the Lead Agent at its address referred to in Section 9.1. The Lead Agent will
promptly (and in any event within one (1) Domestic Business Day after receipt
thereof) distribute to each Bank its ratable share (or applicable share with
respect to Money Market Loans) of each such payment received by the Lead Agent
for the account of the Banks. If and to the extent that the Lead Agent shall
receive any such payment for the account of the Banks on or
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before 12:00 Noon (New York City time) on any Domestic Business Day, and Lead
Agent shall not have distributed to any Bank its applicable share of such
payment on such Domestic Business Day, Lead Agent shall distribute such amount
to such Bank together with interest thereon, for each day from the date such
amount should have been distributed to such Bank until the date Lead Agent
distributes such amount to such Bank, at the Federal Funds Rate. Whenever any
payment of principal of, or interest on the Base Rate Loans or of fees shall be
due on a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day. Whenever any
payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a
day which is not a Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day unless such Euro-
Dollar Business Day falls in another calendar month, in which case the date for
payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever
any payment of principal of, or interest on, the Money Market Loans shall be due
on a day which is not a Euro-Dollar Business Day, the date for payment thereof
shall be extended to the next succeeding Euro-Dollar Business Day. If the date
for any payment of principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
(b) Unless the Lead Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks hereunder
that the Borrower will not make such payment in full, the Lead Agent may assume
that the Borrower has made such payment in full to the Lead Agent on such date
and the Lead Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent that the Borrower shall not have so made such
payment, each Bank shall repay to the Lead Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day from the
date such amount is distributed to such Bank until the date such Bank repays
such amount to the Lead Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or Money Market LIBOR Loan
(pursuant to Article II, VI or VIII or otherwise) on any day other than the last
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day of the Interest Period applicable thereto, or if the Borrower fails to
borrow any Euro-Dollar Loans or Money Market LIBOR Loans after notice has been
given to any Bank in accordance with Section 2.4(a), or if Borrower shall
deliver a Notice of Interest Rate Election specifying that a Euro-Dollar Loan
shall be converted on a date other than the first (1st) day of the then current
Interest Period applicable thereto, the Borrower shall reimburse each Bank
within 15 days after certification of such Bank of such loss or expense (which
shall be delivered by each such Bank to Lead Agent for delivery to Borrower) for
any resulting loss or expense incurred by it (or by an existing Participant in
the related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or failure to borrow,
provided that such Bank shall have delivered to Lead Agent and Lead Agent shall
have delivered to the Borrower a certification as to the amount of such loss or
expense, which certification shall set forth in reasonable detail the basis for
and calculation of such loss or expense and shall be conclusive in the absence
of demonstrable error.
SECTION 2.14. Computation of Interest and Fees. All interest and fees
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
SECTION 2.15. Use of Proceeds. The Borrower shall use the proceeds
of the Loans for general corporate purposes, including, without limitation, the
acquisition of real property to be used in the Borrower's existing business and
for general working capital needs of the Borrower.
ARTICLE III
CONDITIONS
SECTION 3.1. Closing. The closing hereunder shall occur on the date
when each of the following conditions is satisfied (or waived by the Lead Agent
and the Banks), each document to be dated the Closing Date unless otherwise
indicated:
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(a) the Borrower shall have executed and delivered to the Lead Agent
a Note for the account of each Bank dated on or before the Closing Date
complying with the provisions of Section 2.4;
(b) the Borrower, the Lead Agent and Co-Lead Agent and each of the
Banks shall have executed and delivered to the Borrower, the Lead Agent and Co-
Lead Agent a duly executed original of this Agreement;
(c) EQR shall have executed and delivered to the Lead Agent and Co-
Lead Agent a duly executed original of the EQR Guaranty;
(d) the Lead Agent shall have received an opinion of Rosenberg &
Liebentritt, P.C., counsel for the Borrower, acceptable to the Lead Agent, the
Co-Lead Agent, the Banks and their counsel;
(e) the Lead Agent shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, acceptable to the Lead Agent, the Co-Lead Agent, the
Banks and their counsel;
(f) the Lead Agent shall have received all documents the Lead Agent
may reasonably request relating to the existence of the Borrower and EQR, the
authority for and the validity of this Agreement and the other Loan Documents,
and any other matters relevant hereto, all in form and substance satisfactory to
the Lead Agent. Such documentation shall include, without limitation, the
agreement of limited partnership of the Borrower, as well as the certificate of
limited partnership of the Borrower, both as amended, modified or supplemented
to the Closing Date, certified to be true, correct and complete by a senior
officer of the Borrower as of a date not more than ten (10) days prior to the
Closing Date, together with a certificate of existence as to the Borrower from
the Secretary of State (or the equivalent thereof) of Illinois, to be dated not
more than thirty (30) days prior to the Closing Date, as well as the declaration
of trust of EQR, as amended, modified or supplemented to the Closing Date,
certified to be true, correct and complete by a senior officer of EQR as of a
date not more than ten (10) days prior to the Closing Date, together with a good
standing certificate as to EQR from the Secretary of State (or the equivalent
thereof) of
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Maryland, to be dated not more than thirty (30) days prior to the Closing Date;
(g) the Lead Agent shall have received all certificates, agreements
and other documents and papers referred to in this Section 3.1 and the Notice of
Borrowing referred to in Section 3.2, if applicable, unless otherwise specified,
in sufficient counterparts, satisfactory in form and substance to the Lead Agent
and Co-Lead Agent in their sole discretion;
(h) the Borrower shall have taken all actions required to authorize
the execution and delivery of this Agreement and the other Loan Documents and
the performance thereof by the Borrower;
(i) the Lead Agent and Co-Lead Agent shall be satisfied that neither
the Borrower, EQR nor any Consolidated Subsidiary is subject to any present or
contingent environmental liability which could have a Material Adverse Effect;
(j) the Lead Agent shall have received, for its and any other Bank's
account, all fees due and payable pursuant to Section 2.8 hereof on or before
the Closing Date, and the fees and expenses accrued through the Closing Date of
Skadden, Arps, Slate, Meagher & Flom LLP;
(k) the Lead Agent shall have received copies of all consents,
licenses and approvals, if any, required in connection with the execution,
delivery and performance by the Borrower, EQR and the applicable Consolidated
Subsidiaries, and the validity and enforceability, of the Loan Documents, or in
connection with any of the transactions contemplated thereby, and such consents,
licenses and approvals shall be in full force and effect;
(l) the Lead Agent shall have received the audited financial
statements of the Borrower and its Consolidated Subsidiaries and of EQR for the
fiscal year ending December 31, 1995; and
(m) no Default or Event of Default shall have occurred.
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SECTION 3.2. Borrowings. The obligation of any Bank to make a Loan
is subject to the satisfaction of the following conditions:
(a) the Closing Date shall have occurred on or prior to November 15,
1996;
(b) receipt by the Lead Agent of a Notice of Borrowing as required by
Section 2.2 or a Notice of Money Market Borrowing as required by Section 2.3;
(c) immediately after such Borrowing, the aggregate outstanding
principal amount of the Loans will not exceed the aggregate amount of the
Commitments;
(d) immediately before and after such Borrowing, no Default or Event
of Default shall have occurred and be continuing both before and after giving
effect to the making of such Loans;
(e) the representations and warranties of the Borrower contained in
this Agreement (other than representations and warranties which expressly speak
as of a different date) shall be true and correct in all material respects on
and as of the date of such Borrowing both before and after giving effect to the
making of such Loans;
(f) no law or regulation shall have been adopted, no order, judgment
or decree of any governmental authority shall have been issued, and no
litigation shall be pending, which does or seeks to enjoin, prohibit or
restrain, the making or repayment of the Loans or the consummation of the
transactions contemplated by this Agreement; and
(g) no event, act or condition shall have occurred after the Closing
Date which, in the reasonable judgment of the Lead Agent, Co-Lead Agent or the
Required Banks, as the case may be, has had or is likely to have a Material
Adverse Effect;
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(c), (d), (e), (f), and (g) (to the extent that Borrower is or should have been
aware of any Material Adverse Effect) of this Section, except as otherwise
disclosed in writing by Borrower to the Banks. Notwithstanding anything to the
contrary, no
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Borrowing shall be permitted if such Borrowing would cause Borrower to fail to
be in compliance with any of the covenants contained in this Agreement or in any
of the other Loan Documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lead Agent, Co-Lead Agent and each of the other
Banks which is or may become a party to this Agreement to make the Loans, the
Borrower makes the following representations and warranties as of the Closing
Date. Such representations and warranties shall survive the effectiveness of
this Agreement, the execution and delivery of the other Loan Documents and the
making of the Loans.
SECTION 4.1. Existence and Power. The Borrower is a limited
partnership, duly formed and validly existing as a limited partnership under the
laws of the State of Illinois and has all powers and all material governmental
licenses, authorizations, consents and approvals required to own its property
and assets and carry on its business as now conducted or as it presently
proposes to conduct and has been duly qualified and is in good standing in every
jurisdiction in which the failure to be so qualified and/or in good standing is
likely to have a Material Adverse Effect. EQR is a real estate investment
trust, duly formed, validly existing and in good standing as a real estate
investment trust under the laws of the State of Maryland and has all powers and
all material governmental licenses, authorizations, consents and approvals
required to own its property and assets and carry on its business as now
conducted or as it presently proposes to conduct and has been duly qualified and
is in good standing in every jurisdiction in which the failure to be so
qualified and/or in good standing is likely to have a Material Adverse Effect.
SECTION 4.2. Power and Authority. The Borrower has the partnership
power and authority to execute, deliver and carry out the terms and provisions
of each of the Loan Documents to which it is a party and has taken all necessary
partnership action, if any, to authorize the execution and delivery on behalf of
the Borrower and the performance by the Borrower of such Loan Documents. The
Borrower has duly executed and delivered each Loan Document to which it is a
party in accordance with the terms of this Agreement, and
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each such Loan Document constitutes the legal, valid and binding obligation of
the Borrower, enforceable in accordance with its terms, except as enforceability
may be limited by applicable insolvency, bankruptcy or other laws affecting
creditors rights generally, or general principles of equity, whether such
enforceability is considered in a proceeding in equity or at law. EQR has the
power and authority to execute, deliver and carry out the terms and provisions
of each of the Loan Documents on behalf of the Borrower to which the Borrower is
a party and has taken all necessary action to authorize the execution and
delivery on behalf of the Borrower and the performance by the Borrower of such
Loan Documents.
SECTION 4.3. No Violation. Neither the execution, delivery or
performance by or on behalf of the Borrower of the Loan Documents to which it is
a party, nor compliance by the Borrower with the terms and provisions thereof
nor the consummation of the transactions contemplated by the Loan Documents, (i)
will materially contravene any applicable provision of any law, statute, rule,
regulation, order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will materially conflict with or result in any breach of,
any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Borrower or
any of its Consolidated Subsidiaries pursuant to the terms of any indenture,
mortgage, deed of trust, or other agreement or other instrument to which the
Borrower (or of any partnership of which the Borrower is a partner) or any of
its Consolidated Subsidiaries is a party or by which it or any of its property
or assets is bound or to which it is subject, or (iii) will cause a material
default by the Borrower under any organizational document of any Person in which
the Borrower has an interest, or cause a material default under the Borrower's
agreement or certificate of limited partnership, the consequences of which
conflict, breach or default would have a Material Adverse Effect, or result in
or require the creation or imposition of any Lien whatsoever upon any Property
(except as contemplated herein).
SECTION 4.4. Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries, dated as of
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December 31, 1995, and the related consolidated statements of Borrower's
financial position for the fiscal year then ended, reported on by Ernst & Young
LLP, a copy of which has been delivered to each of the Banks, fairly present, in
conformity with GAAP, the consolidated financial position of the Borrower and
its Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The consolidated balance sheet of EQR, dated as of December 31,
1995, and the related consolidated statements of EQR's financial position for
the fiscal year then ended, reported on by Ernst & Young LLP and set forth in
the EQR 1995 Form 10-K, a copy of which has been delivered to each of the Banks,
fairly present, in conformity with GAAP, the consolidated financial position of
EQR and its Consolidated Subsidiaries as of such date and their consolidated
results of operations and cash flows for such fiscal year.
(b) Since September 30, 1996, (i) except as may have been disclosed
in writing to the Banks, nothing has occurred having a Material Adverse Effect,
and (ii) except as previously disclosed to the Banks, neither the Borrower not
EQR has incurred any material indebtedness or guaranty on or before the Closing
Date.
SECTION 4.5. Litigation. Except as previously disclosed by the
Borrower in writing to the Banks, there is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or affecting,
(i) the Borrower, EQR or any of their Consolidated Subsidiaries, (ii) the Loan
Documents or any of the transactions contemplated by the Loan Documents or (iii)
any of their assets, before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could, individually, or in the aggregate have a Material Adverse
Effect or which in any manner draws into question the validity of this Agreement
or the other Loan Documents.
SECTION 4.6. Compliance with ERISA. (a) Except as set forth on
Schedule 4.6 attached hereto, neither Borrower nor EQR is a member of any Plan
or Multiemployer Plan or any other Benefit Arrangement.
(b) The transactions contemplated by the Loan Documents will not
constitute a nonexempt prohibited
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transaction (as such term is defined in Section 4975 of the Code or Section 406
of ERISA) that could subject the Lead Agent, Co-Lead Agent or the Banks to any
tax or penalty or prohibited transactions imposed under Section 4975 of the Code
or Section 502(i) of ERISA.
SECTION 4.7. Environmental Matters. The Borrower conducts reviews of
the effect of Environmental Laws on the business, operations and properties of
the Borrower and its Consolidated Subsidiaries when necessary in the course of
which it identifies and evaluates associated liabilities and costs (including,
without limitation, any capital or operating expenditures required for clean-up
or closure of properties presently owned, any capital or operating expenditures
required to achieve or maintain compliance with environmental protection
standards imposed by law or as a condition of any license, permit or contract,
any related constraints on operating activities, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, the Borrower has reasonably concluded
that such associated liabilities and costs, including the costs of compliance
with Environmental Laws, are unlikely to have a Material Adverse Effect on the
Borrower, EQR and their Consolidated Subsidiaries.
SECTION 4.8. Taxes. United States Federal income tax returns of the
Borrower, EQR and their Consolidated Subsidiaries have been prepared and filed
through the fiscal year ended December 31, 1995. The Borrower, EQR and their
Consolidated Subsidiaries have filed all United States Federal income tax
returns and all other material tax returns which are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower, EQR or any Consolidated Subsidiary, except
such taxes, if any, as are reserved against in accordance with GAAP, such taxes
as are being contested in good faith by appropriate proceedings or such taxes,
the failure to make payment of which when due and payable will not have, in the
aggregate, a Material Adverse Effect. The charges, accruals and reserves on the
books of the Borrower, EQR and their Consolidated Subsidiaries in respect of
taxes or other governmental charges are, in the opinion of the Borrower,
adequate.
SECTION 4.9. Full Disclosure. All information heretofore furnished
by the Borrower to the Lead Agent, Co-
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Lead Agent or any Bank for purposes of or in connection with this Agreement or
any transaction contemplated hereby or thereby is true and accurate in all
material respects on the date as of which such information is stated or
certified. The Borrower has disclosed to the Lead Agent, in writing any and all
facts which have or may have (to the extent the Borrower can now reasonably
foresee) a Material Adverse Effect.
SECTION 4.10. Solvency. On the Closing Date and after giving effect
to the transactions contemplated by the Loan Documents occurring on the Closing
Date, the Borrower will be Solvent.
SECTION 4.11. Use of Proceeds; Margin Regulations. All proceeds of
the Loans will be used by the Borrower only in accordance with the provisions
hereof. No part of the proceeds of any Loan will be used by the Borrower to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof will violate or be inconsistent with the
provisions of Regulations G, T, U or X of the Federal Reserve Board.
SECTION 4.12. Governmental Approvals. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection with
the execution, delivery and performance of any Loan Document or the consummation
of any of the transactions contemplated thereby other than those that have
already been duly made or obtained and remain in full force and effect or those
which, if not made or obtained, would not have a Material Adverse Effect;
SECTION 4.13. Investment Company Act; Public Utility Holding Company
Act. Neither the Borrower, EQR nor any Consolidated Subsidiary is (x) an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended, (y) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or (z)
subject to any other federal or state law or regulation
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which purports to restrict or regulate its ability to borrow money.
SECTION 4.14. Principal Offices. As of the Closing Date, the
principal office, chief executive office and principal place of business of the
Borrower is Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606.
SECTION 4.15. REIT Status. For the fiscal year ended December 31,
1995, EQR qualified and EQR intends to continue to qualify as a real estate
investment trust under the Code.
SECTION 4.16. Patents, Trademarks, etc. The Borrower has obtained
and holds in full force and effect all patents, trademarks, servicemarks, trade
names, copyrights and other such rights, free from burdensome restrictions,
which are necessary for the operation of its business as presently conducted,
the impairment of which is likely to have a Material Adverse Effect.
SECTION 4.17. Ownership of Property. Schedule 4.17 attached hereto
and made a part hereof sets forth all the real property owned or ground leased
by the Borrower and Persons in which the Borrower, directly or indirectly, owns
an interest as of the Closing Date. As of the Closing Date, the Borrower and
such Persons have good and insurable fee simple title (or leasehold title if so
designated on Schedule 4.17) to all of such real property, subject to Permitted
Liens. As of the date of this Agreement, there are no mortgages, deeds of
trust, indentures, debt instruments or other agreements creating a Lien against
any of the Real Property Assets except as disclosed on Schedule 4.17.
SECTION 4.18. No Default. No Event of Default or, to the best of the
Borrower's knowledge, Default exists under or with respect to any Loan Document
and the Borrower is not in default in any material respect beyond any applicable
grace period under or with respect to any other material agreement, instrument
or undertaking to which it is a party or by which it or any of its property is
bound in any respect, the existence of which default is likely to result in a
Material Adverse Effect.
SECTION 4.19. Licenses, etc. The Borrower has obtained and does hold
in full force and effect, all franchises, licenses, permits, certificates,
authorizations,
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qualifications, accreditation, easements, rights of way and other consents and
approvals which are necessary for the operation of its businesses as presently
conducted, the absence of which is likely to have a Material Adverse Effect.
SECTION 4.20. Compliance With Law. To the Borrower's knowledge, the
Borrower and each of the Real Property Assets are in compliance with all laws,
rules, regulations, orders, judgments, writs and decrees, including, without
limitation, all building and zoning ordinances and codes, the failure to comply
with which is likely to have a Material Adverse Effect.
SECTION 4.21. No Burdensome Restrictions. Except as may have been
disclosed by the Borrower in writing to the Banks, Borrower is not a party to
any agreement or instrument or subject to any other obligation or any charter or
corporate or partnership restriction, as the case may be, which, individually or
in the aggregate, is likely to have a Material Adverse Effect.
SECTION 4.22. Brokers' Fees. The Borrower has not dealt with any
broker or finder with respect to the transactions contemplated by this Agreement
or otherwise in connection with this Agreement, and the Borrower has not done
any act, had any negotiations or conversation, or made any agreements or
promises which will in any way create or give rise to any obligation or
liability for the payment by the Borrower of any brokerage fee, charge,
commission or other compensation to any party with respect to the transactions
contemplated by the Loan Documents, other than the fees payable to the Lead
Agent, the Co-Lead Agent and the Banks, and certain other Persons as previously
disclosed in writing to the Lead Agent.
SECTION 4.23. Labor Matters. There are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Borrower and the
Borrower has not suffered any strikes, walkouts, work stoppages or other
material labor difficulty within the last five years.
SECTION 4.24. Insurance. The Borrower currently maintains insurance
at 100% replacement cost insurance coverage (subject to customary deductibles)
in respect of each of the Real Property Assets, as well as commercial general
liability insurance (including "builders' risk"
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where applicable) against claims for personal, and bodily injury and/or death,
to one or more persons, or property damage, as well as workers' compensation
insurance, in each case with respect to liability and casualty insurance with
insurers having an A.M. Best policyholders' rating of not less than A-VII in
amounts that prudent owner of assets such as the Real Property Assets would
maintain.
SECTION 4.25. Organizational Documents. The documents delivered
pursuant to Section 3.1(d) constitute, as of the Closing Date, all of the
organizational documents (together with all amendments and modifications
thereof) of the Borrower and EQR. The Borrower represents that it has
delivered to the Lead Agent true, correct and complete copies of each of the
documents set forth in this Section 4.25.
SECTION 4.26. Qualifying Unencumbered Properties. As of the date
hereof, each Property listed on Exhibit F as a Qualifying Unencumbered Property
(i) is an operating multifamily residential property wholly-owned (directly or
beneficially) by Borrower or a Financing Partnership, (ii) is not subject (nor
are any equity interests in such Property subject) to a Lien which secures
Indebtedness of any Person, other than Permitted Liens, and (iii) is not subject
(nor are any equity interests in such Property subject) to any covenant,
condition, or other restriction which prohibits or limits the creation or
assumption of any Lien upon such Property. All of the information set forth on
Exhibit F is true and correct in all material respects.
ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any Bank has any
Commitment hereunder or any Obligations remain unpaid:
SECTION 5.1. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within five (5) Domestic
Business Days after the same is required to be filed with the Securities and
Exchange Commission (but in no event later than 125 days after the end of each
fiscal year of the Borrower) a consolidated balance sheet of the
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Borrower, EQR and their Consolidated Subsidiaries as of the end of such fiscal
year and the related consolidated statements of Borrower's and EQR's operations
and consolidated statements of Borrower's and EQR's cash flow for such fiscal
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on in a manner acceptable to the Securities
and Exchange Commission on Borrower's and EQR's Form 10K and reported on by
Ernst & Young LLP or other independent public accountants of nationally
recognized standing;
(b) as soon as available and in any event within five (5) Domestic
Business Days after the same is required to be filed with the Securities and
Exchange Commission (but in no event later than 80 days after the end of each of
the first three quarters of each fiscal year of the Borrower and EQR), (i) a
consolidated balance sheet of the Borrower, EQR and their Consolidated
Subsidiaries as of the end of such quarter and the related consolidated
statements of Borrower's and EQR's operations and consolidated statements of
Borrower's and EQR's cash flow for such quarter and for the portion of the
Borrower's or EQR's fiscal year ended at the end of such quarter, all reported
on in the form provided to the Securities and Exchange Commission on Borrower's
and EQR's Form 10Q, and (ii) and such other information reasonably requested by
the Lead Agent and Co-Lead Agent or any Bank;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Borrower (i) setting
forth in reasonable detail the calculations required to establish whether the
Borrower was in compliance with the requirements of Section 5.8 on the date of
such financial statements; (ii) certifying (x) that such financial statements
fairly present the financial condition and the results of operations of the
Borrower on the dates and for the periods indicated, on the basis of GAAP, with
respect to the Borrower subject, in the case of interim financial statements, to
normally recurring year-end adjustments, and (y) that such officer has reviewed
the terms of the Loan Documents and has made, or caused to be made under his or
her supervision, a review in reasonable detail of the business and condition of
the Borrower during the period beginning on the date through which the last such
review was made pursuant to this Section 5.1(c) (or, in the case of the first
certification pursuant
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to this Section 5.1(c), the Closing Date) and ending on a date not more than ten
(10) Domestic Business Days prior to the date of such delivery and that (1) on
the basis of such financial statements and such review of the Loan Documents, no
Event of Default existed under Section 6.1(b) with respect to Sections 5.8 and
5.9 at or as of the date of said financial statements, and (2) on the basis of
such review of the Loan Documents and the business and condition of the
Borrower, to the best knowledge of such officer, as of the last day of the
period covered by such certificate no Default or Event of Default under any
other provision of Section 6.1 occurred and is continuing or, if any such
Default or Event of Default has occurred and is continuing, specifying the
nature and extent thereof and, the action the Borrower proposes to take in
respect thereof and (3) no event has occurred and is continuing which would give
rise to a mandatory prepayment pursuant to Section 2.10 hereof. Such
certificate shall set forth the calculations required to establish the matters
described in clauses (1) and (3) above;
(d) (i) within five (5) Domestic Business Days after any officer of
the Borrower obtains knowledge of any Default, if such Default is then
continuing, a certificate of the chief financial officer, the chief accounting
officer, controller, or other executive officer of the Borrower setting forth
the details thereof and the action which the Borrower is taking or proposes to
take with respect thereto; and (ii) promptly and in any event within five (5)
Domestic Business Days after the Borrower obtains knowledge thereof, notice of
(x) any litigation or governmental proceeding pending or threatened against the
Borrower or the Real Property Assets as to which there is a reasonable
possibility of an adverse determination and which, if adversely determined, is
likely to individually or in the aggregate, result in a Material Adverse Effect,
(y) any other event, act or condition which is likely to result in a Material
Adverse Effect, and (z) any event giving rise to a mandatory prepayment pursuant
to Section 2.10;
(e) promptly upon the mailing thereof to the shareholders of EQR
generally, copies of all financial statements, reports and proxy statements so
mailed;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equiv-
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alent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) (other
than the exhibits thereto, which exhibits will be provided upon request therefor
by any Bank) which EQR shall have filed with the Securities and Exchange
Commission;
(g) Promptly and in any event within thirty (30) days, if and when
any member of the ERISA Group (i) gives or is required to give notice to the
PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with
respect to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such reportable event, a copy of
the notice of such reportable event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under Title IV
of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum funding standard under Section 412 of the Code, a
copy of such application; (v) gives notice of intent to terminate any Plan under
Section 4041(c) of ERISA, a copy of such notice and other information filed with
the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063
of ERISA, a copy of such notice; or (vii) fails to make any payment or
contribution to any Plan or Multiemployer Plan or in respect of any Benefit
Arrangement or makes any amendment to any Plan or Benefit Arrangement which has
resulted or could result in the imposition of a Lien or the posting of a bond or
other security, and in the case of clauses (i) through (vii) above, which event
could result in a Material Adverse Effect, a certificate of the chief financial
officer or the chief accounting officer of the Borrower setting forth details as
to such occurrence and action, if any, which the Borrower or applicable member
of the ERISA Group is required or proposes to take;
(h) promptly and in any event within ten (10) days after the Borrower
obtains actual knowledge of any of the following events, a certificate of the
Borrower, executed by an officer of the Borrower, specifying the nature of such
condition, and the Borrower's or, if the Bor-
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rower has actual knowledge thereof, the Environmental Affiliate's proposed
initial response thereto: (i) the receipt by the Borrower, or, if the Borrower
has actual knowledge thereof, any of the Environmental Affiliates of any
communication (written or oral), whether from a governmental authority, citizens
group, employee or otherwise, that alleges that the Borrower, or, if the
Borrower has actual knowledge thereof, any of the Environmental Affiliates, is
not in compliance with applicable Environmental Laws, and such noncompliance is
likely to have a Material Adverse Effect, (ii) the Borrower shall obtain actual
knowledge that there exists any Environmental Claim pending against the Borrower
or any Environmental Affiliate and such Environmental Claim is likely to have a
Material Adverse Effect or (iii) the Borrower obtains actual knowledge of any
release, emission, discharge or disposal of any Material of Environmental
Concern that is likely to form the basis of any Environmental Claim against the
Borrower or any Environmental Affiliate which in any such event is likely to
have a Material Adverse Effect;
(i) promptly and in any event within five (5) Domestic Business Days
after receipt of any material notices or correspondence from any company or
agent for any company providing insurance coverage to the Borrower relating to
any loss which is likely to result in a Material Adverse Effect, copies of such
notices and correspondence; and
(j) from time to time such additional information regarding the
financial position or business of the Borrower, EQR and their Subsidiaries as
the Lead Agent, at the request of any Bank, may reasonably request in writing.
SECTION 5.2. Payment of Obligations. The Borrower, EQR and their
Consolidated Subsidiaries will pay and discharge, at or before maturity, all its
respective material obligations and liabilities including, without limitation,
any obligation pursuant to any agreement by which it or any of its properties is
bound, in each case where the failure to so pay or discharge such obligations or
liabilities is likely to result in a Material Adverse Effect, and will maintain
in accordance with GAAP, appropriate reserves for the accrual of any of the
same.
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SECTION 5.3. Maintenance of Property; Insurance; Leases.
(a) The Borrower will keep, and will cause each Consolidated
Subsidiary to keep, all property useful and necessary in its business, including
without limitation the Real Property Assets (for so long as it constitutes Real
Property Assets), in good repair, working order and condition, ordinary wear and
tear excepted, in each case where the failure to so maintain and repair will
have a Material Adverse Effect.
(b) The Borrower shall maintain, or cause to be maintained, insurance
comparable to that described in Section 4.24 hereof with insurers meeting the
qualifications described therein, which insurance shall in any event not provide
for less coverage than insurance customarily carried by owners of properties
similar to, and in the same locations as, the Real Property Assets. The
Borrower will deliver to the Lead Agent upon the reasonable request of the Lead
Agent from time to time (i) full information as to the insurance carried, (ii)
within five (5) days of receipt of notice from any insurer a copy of any notice
of cancellation or material change in coverage from that existing on the date of
this Agreement and (iii) forthwith, notice of any cancellation or nonrenewal of
coverage by the Borrower.
SECTION 5.4. Conduct of Business and Maintenance of Existence. The
Borrower and EQR will continue to engage in business of the same general type as
now conducted by the Borrower and EQR, and each will preserve, renew and keep in
full force and effect, its partnership and trust existence and its respective
rights, privileges and franchises necessary for the normal conduct of business
unless the failure to maintain such rights and franchises does not have a
Material Adverse Effect.
SECTION 5.5. Compliance with Laws. The Borrower will comply in all
material respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities (including, without limitation,
Environmental Laws, and all zoning and building codes with respect to the Real
Property Assets and ERISA and the rules and regulations thereunder and all
federal securities laws) except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings or where the failure to do so
will not have a Material Adverse Effect
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or expose Lead Agent, Co-Lead Agent or Banks to any material liability therefor.
SECTION 5.6. Inspection of Property, Books and Records. The Borrower
will keep proper books of record and account in which full, true and correct
entries shall be made of all dealings and transactions in relation to its
business and activities in conformity with GAAP, modified as required by this
Agreement and applicable law; and will permit representatives of any Bank at
such Bank's expense to visit and inspect any of its properties, including
without limitation the Real Property Assets, to examine and make abstracts from
any of its books and records and to discuss its affairs, finances and accounts
with its officers and independent public accountants, all at such reasonable
times during normal business hours, upon reasonable prior notice and as often as
may reasonably be desired. Lead Agent shall coordinate any such visit or
inspection to arrange for review by any Bank requesting any such visit or
inspection.
SECTION 5.7. Existence. The Borrower shall do or cause to be done,
all things necessary to preserve and keep in full force and effect its, EQR's
and their Consolidated Subsidiaries' existence and its patents, trademarks,
servicemarks, tradenames, copyrights, franchises, licenses, permits,
certificates, authorizations, qualifications, accreditation, easements, rights
of way and other rights, consents and approvals the nonexistence of which is
likely to have a Material Adverse Effect.
SECTION 5.8. Financial Covenants.
(a) Total Liabilities to Gross Asset Value. Borrower shall not permit
the ratio of Total Liabilities to Gross Asset Value of Borrower and its
Subsidiaries to exceed 0.50:1 at any time.
(b) Secured Debt to Gross Asset Value. Borrower shall not permit the
ratio of Secured Debt to Gross Asset Value of Borrower and its Subsidiaries to
exceed 0.30:1 at any time.
(c) Unencumbered Pool. Borrower shall not permit the ratio of the
Unencumbered Asset Value to outstanding Unsecured Debt to be less than 2.5:1 at
any time.
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(d) EBITDA to Fixed Charges Ratio. Borrower shall not permit the
ratio of EBITDA for the then most recently completed Fiscal Quarter to Fixed
Charges for the then most recently completed Fiscal Quarter to be less than
1.8:1.
(e) Unencumbered Net Operating Income to Unsecured Interest Expense.
Borrower shall not permit the ratio of Unencumbered Net Operating Income for the
then most recently completed Fiscal Quarter to Unsecured Interest Expense for
the then most recently completed Fiscal Quarter to be less than 2.25:1.
(f) Dividends. The Borrower will not, as determined on an aggregate
annual basis, pay any partnership distributions in excess of 90% of the
Borrower's FFO for such year. During the continuance of a monetary Event of
Default, Borrower shall only pay those dividends necessary to maintain its
status as a real estate investment trust.
(g) Minimum Consolidated Tangible Net Worth. The Consolidated
Tangible Net Worth of the Borrower and its Consolidated Subsidiaries will at no
time be less than $1,000,000,000 plus ninety percent (90%) of all Net Offering
Proceeds received by EQR or Borrower after the date hereof.
(h) Unimproved Assets. The Borrower and its Subsidiaries shall not
purchase or continue to hold any Unimproved Assets to the extent that the
undepreciated book value of all such Unimproved Assets, taken singly or in the
aggregate, exceeds ten percent (10%) of the Gross Asset Value of Borrower and
its Subsidiaries.
(i) Development Activity. The Borrower and its Subsidiaries will not
engage in any Development Activity other than Development Activity in which the
Borrower and its Subsidiaries do not have a total aggregate investment at any
time exceeding an amount equal to five percent (5%) of the Gross Asset Value of
Borrower and its Subsidiaries.
(j) Permitted Holdings. Borrower's primary business will be the
ownership, operation and development of multifamily residential property and any
other business activities of Borrower and its Subsidiaries will remain
incidental thereto. Notwithstanding the foregoing, Borrower and its
Subsidiaries may acquire or maintain the following Permitted Holdings if and so
long as (i) the aggregate value
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of Permitted Holdings, together with the Permitted Holdings described in
subsections (h) and (i) above, whether held directly or indirectly by Borrower
and its Subsidiaries, does not exceed, at any time, twenty five percent (25%) of
Gross Asset Value of Borrower and its Subsidiaries as a whole and (ii) the value
of each such Permitted Holding, whether held directly or indirectly by Borrower
or its Subsidiaries, does not exceed, at any time, the following percentages of
Gross Asset Value of Borrower and its Subsidiaries:
Maximum Percentage
Permitted Holdings of Gross Asset Value
- ------------------ --------------------
Non-Multifamily Residential Property
(other than Cash or Cash Equivalents) 10%
Securities 5%
Multifamily Residential Property
Mortgages 10%
Multifamily Residential Property
Partnership Interests 10%
For purposes of calculating the foregoing percentages the value of each category
shall be calculated in the manner that Gross Asset Value is determined;
provided, however, that the Gross Asset Value for Securities shall be equal to
the lesser of (a) the acquisition cost thereof or (b) the current market value
thereof (such market value to be determined in a manner reasonably acceptable to
Lead Agent).
(k) Calculation. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each Fiscal Quarter.
SECTION 5.9. Restriction on Fundamental Changes. (a) Neither the
Borrower nor EQR shall enter into any merger or consolidation, unless (i) the
Borrower or EQR is the surviving entity, (ii) the entity which is merged into
Borrower or EQR is predominantly in the commercial real estate business, (iii)
the creditworthiness of the surviving entity's long term unsecured debt or
implied senior debt, as applicable, is not lower than Borrower's or EQR's
creditworthiness two months immediately preceding such merger, and (iv) in the
case of any merger where the then
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fair market value of the assets of the entity which is merged into the Borrower
or EQR is twenty-five percent (25%) or more of the Borrower's or EQR's then
Combined Asset Value, the Lead Agent and Co-Lead Agent consent thereto in
writing, which consent shall not be unreasonably withheld, conditioned or
delayed. Neither the Borrower nor EQR shall liquidate, wind-up or dissolve (or
suffer any liquidation or dissolution), discontinue its business or convey,
lease, sell, transfer or otherwise dispose of, in one transaction or series of
transactions, all or substantially all of its business or property, whether now
or hereafter acquired. Nothing in this Section shall be deemed to prohibit the
sale or leasing of portions of the Real Property Assets in the ordinary course
of business.
(b) The Borrower shall not amend its agreement of limited partnership
or other organizational documents in any manner that would have a Material
Adverse Effect without the Lead Agent's and Co-Lead Agent's consent, which shall
not be unreasonably withheld. EQR shall not amend its declaration of trust, by-
laws, or other organizational documents in any manner that would have a Material
Adverse Effect without the Lead Agent's and Co-Lead Agent's consent, which shall
not be unreasonably withheld.
(c) The Borrower shall deliver to Lead Agent copies of all amendments
to its agreement of limited partnership or to EQR's declaration of trust, by-
laws, or other organizational documents no less than ten (10) days after the
effective date of any such amendment.
SECTION 5.10. Changes in Business. (a) Neither the Borrower nor EQR
shall enter into any business which is substantially different from that
conducted by the Borrower or EQR on the Closing Date after giving effect to the
transactions contemplated by the Loan Documents. The Borrower shall carry on
its business operations through the Borrower and its Subsidiaries.
(b) Except for Permitted Holdings, Borrower shall not engage in any
line of business other than ownership, operation and development of multifamily
residential property and the provision of services incidental thereto, whether
directly or through its Subsidiaries and Investment Affiliates.
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SECTION 5.11. Margin Stock. None of the proceeds of the Loan will be
used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any Margin Stock.
SECTION 5.12. Hedging Requirements. Within five (5) Domestic
Business Days after the last day of each calendar quarter, commencing December
31, 1996, the Borrower shall have in effect "Interest Rate Hedges" on Borrower's
Indebtedness so that such Indebtedness, together with all Fixed Rate
Indebtedness of Borrower, shall constitute at least fifty percent (50%) of the
then aggregate Indebtedness of the Borrower. "Interest Rate Hedges" shall mean
interest rate exchange, collar, cap, swap, adjustable strike cap, adjustable
strike corridor or similar agreements, each of which (i) shall have a minimum
term of two (2) years, or, in the case of loans pursuant to which interest shall
accrue at a rate other than a fixed rate, a term equal to the term of such
floating rate loan (to the extent the term of such floating rate loan is less
than two (2) years), (ii) shall have the effect of capping the interest rates
covered thereby at a rate equal to or lower than the Cap Rate at the time of
purchase or execution, and (iii) shall be with an Approved Bank as the
counterparty. It is acknowledged and agreed that the Borrower shall have no
obligation to replace any Interest Rate Hedge even if the counterparty thereto
shall cease to be an Approved Bank. The Borrower shall submit evidence of its
compliance with Interest Rate Hedges to the Lead Agent together with the
certificate required to be delivered by the Borrower pursuant to Section 5.1(c).
SECTION 5.13. EQR Status.
(a) Status. EQR shall at all times (i) remain a publicly traded
company listed on the New York Stock Exchange, and (ii) maintain its status as a
self-directed and self-administered real estate investment trust under the Code.
(b) Indebtedness. EQR shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(1) the Obligations; and
(2) Indebtedness which, after giving effect thereto, may be
incurred or may remain outstanding
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without giving rise to an Event of Default or Default under any provision
of this Article V.
(c) Restriction on Fundamental Changes.
(1) EQR shall not have an Investment in any Person other than
Borrower, common stock of QRS Corporations, and the interests identified on
Schedule 5.13(c)(1) as being owned by EQR.
(2) EQR shall not acquire an interest in any Property other than
Securities issued by Borrower, common stock of QRS Corporations, and the
interests identified on Schedule 5.13(c)(2).
(d) Environmental Liabilities. Neither EQR nor any of its
Subsidiaries shall become subject to any Environmental Claim which has a
Material Adverse Effect, including any arising out of or related to (i) the
release or threatened release of any Material of Environmental Concern into the
environment, or any remedial action in response thereto, or (ii) any violation
of any Environmental Laws. Notwithstanding the foregoing provision, EQR shall
have the right to contest in good faith any claim of violation of an
Environmental Law by appropriate legal proceedings and shall be entitled to
postpone compliance with the obligation being contested as long as (i) no Event
of Default shall have occurred and be continuing, (ii) EQR shall have given Lead
Agent prior written notice of the commencement of such contest, (iii)
noncompliance with such Environmental Law shall not subject EQR or such
Subsidiary to any criminal penalty or subject Lead Agent, Co-Lead Agent or any
Bank to pay any civil penalty or to prosecution for a crime, and (iv) no portion
of any Property material to Borrower or its condition or prospects shall be in
substantial danger of being sold, forfeited or lost, by reason of such contest
or the continued existence of the matter being contested.
(e) Disposal of Partnership Interests. EQR will not directly or
indirectly convey, sell, transfer, assign, pledge or otherwise encumber or
dispose of any of its partnership interests in Borrower, except for the
reduction of EQR's interest in the Borrower arising from Borrower's issuance of
partnership interests in the Borrower or the retirement of preference units by
Borrower.
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ARTICLE VI
DEFAULTS
SECTION 6.1. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any
Loan, or the Borrower shall fail to pay when due interest on any Loan or any
fees or any other amount payable hereunder and the same shall continue for a
period of five (5) days after the same becomes due;
(b) the Borrower shall fail to observe or perform any covenant
contained in Section 5.8, Section 5.9(a) or (b), or Sections 5.10 to 5.13,
inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a),
(b), (e), (f), (g), (h), (j), (n) or (o) of this Section 6.1) for 30 days after
written notice thereof has been given to the Borrower by the Lead Agent, or if
such default is of such a nature that it cannot with reasonable effort be
completely remedied within said period of thirty (30) days such additional
period of time as may be reasonably necessary to cure same, provided Borrower
commences such cure within said thirty (30) day period and diligently prosecutes
same, until completion, but in no event shall such extended period exceed ninety
(90) days;
(d) any representation, warranty, certification or statement made by
the Borrower in this Agreement or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made) and the defect
causing such representation or warranty to be incorrect when made (or deemed
made) is not removed within thirty (30) days after written notice thereof from
Lead Agent to Borrower;
(e) the Borrower, EQR, any Subsidiary or any Investment Affiliate
shall default in the payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) of any amount owing in respect of
any Recourse Debt (other than the Obligations) for which the aggregate
outstanding principal amount exceeds $10,000,000 and such default shall continue
beyond the giving of any required notice and the expiration of any
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applicable grace period and such default has not been waived, in writing, by the
holder of any such Debt; or the Borrower, EQR, any Subsidiary or any Investment
Affiliate shall default in the performance or observance of any obligation or
condition with respect to any such Recourse Debt or any other event shall occur
or condition exist beyond the giving of any required notice and the expiration
of any applicable grace period, if the effect of such default, event or
condition is to accelerate the maturity of any such indebtedness or to permit
(without any further requirement of notice or lapse of time) the holder or
holders thereof, or any trustee or agent for such holders, to accelerate the
maturity of any such indebtedness;
(f) the Borrower or EQR shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any action to authorize any of the foregoing;
(g) an involuntary case or other proceeding shall be commenced
against the Borrower or EQR seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 90 days; or an order for
relief shall be entered against the Borrower or EQR under the federal bankruptcy
laws as now or hereafter in effect;
(h) one or more final, non-appealable judgments or decrees in an
aggregate amount of Twenty Million Dollars ($20,000,000) or more shall be
entered by a court or courts of competent jurisdiction against the Borrower, EQR
or its Consolidated Subsidiaries (other than any judgment as to which, and only
to the extent, a reputable insurance company has acknowledged coverage of such
claim in writing) and (i) any such judgments or decrees shall not be stayed,
discharged, paid, bonded or vacated within thirty (30) days or
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(ii) enforcement proceedings shall be commenced by any creditor on any such
judgments or decrees;
(i) there shall be a change in the majority of the Board of Trustees
of EQR during any twelve (12) month period, excluding any change in directors
resulting from (x) the death or disability of any director, or (y) satisfaction
of any requirement for the majority of the members of the board of directors or
trustees of EQR to qualify under applicable law as independent trustees or (z)
the replacement of any trustee who is an officer or employee of EQR or an
affiliate of EQR with any other officer or employee of EQR or an affiliate of
EQR;
(j) any Person (including affiliates of such Person) or "group" (as
such term is defined in applicable federal securities laws and regulations)
shall acquire more than thirty percent (30%) of the common shares of EQR;
(k) EQR shall cease at any time to qualify as a real estate
investment trust under the Code;
(l) if any Termination Event with respect to a Plan shall occur as a
result of which Termination Event or Events any member of the ERISA Group has
incurred or may incur any liability to the PBGC or any other Person and the sum
(determined as of the date of occurrence of such Termination Event) of the
insufficiency of such Plan and the insufficiency of any and all other Plans with
respect to which such a Termination Event shall occur and be continuing (or, in
the case of a Multiple Employer Plan with respect to which a Termination Event
described in clause (ii) of the definition of Termination Event shall occur and
be continuing, the liability of the Borrower) is equal to or greater than
$10,000,000 and which the Lead Agent reasonably determines will have a Material
Adverse Effect;
(m) if, any member of the ERISA Group shall commit a failure described
in Section 402(f)(1) of ERISA or Section 412(n)(1) of the Code and the amount of
the lien determined under Section 402(f)(3) of ERISA or Section 412(n)(3) of the
Code that could reasonably be expected to be imposed on any member of the ERISA
Group or their assets in respect of such failure shall be equal to or greater
than $10,000,000 and which the Lead Agent reasonably determines will have a
Material Adverse Effect;
(n) at any time, for any reason the Borrower seeks to repudiate its
obligations under any Loan Document; or
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(o) a default beyond any applicable notice or grace period under any
of the other Loan Documents.
SECTION 6.2. Rights and Remedies. (a) Upon the occurrence of any
Event of Default described in Sections 6.1(f) or (g), the Commitment shall
immediately terminate and the unpaid principal amount of, and any and all
accrued interest on, the Loans and any and all accrued fees and other
Obligations hereunder shall automatically become immediately due and payable,
with all additional interest from time to time accrued thereon and without
presentation, demand, or protest or other requirements of any kind (including,
without limitation, valuation and appraisement, diligence, presentment, notice
of intent to demand or accelerate and notice of acceleration), all of which are
hereby expressly waived by the Borrower; and upon the occurrence and during the
continuance of any other Event of Default, the Lead Agent may (and upon the
demand of the Required Banks and the Co-Lead Agent shall), by written notice to
the Borrower, in addition to the exercise of all of the rights and remedies
permitted the Lead Agent and the Banks at law or equity or under any of the
other Loan Documents, declare the unpaid principal amount of and any and all
accrued and unpaid interest on the Loans and any and all accrued fees and other
Obligations hereunder to be, and the same shall thereupon be, immediately due
and payable with all additional interest from time to time accrued thereon and
(except as otherwise as provided in the Loan Documents) without presentation,
demand, or protest or other requirements of any kind (including, without
limitation, valuation and appraisement, diligence, presentment, notice of intent
to demand or accelerate and notice of acceleration), all of which are hereby
expressly waived by the Borrower.
(b) Notwithstanding anything to the contrary contained in this
Agreement or in any other Loan Document, the Co-Lead Agent, the Lead Agent, and
the Banks each agree that any exercise or enforcement of the rights and remedies
granted to the Co-Lead Agent, the Lead Agent or the Banks under this Agreement
or at law or in equity with respect to this Agreement or any other Loan
Documents shall be commenced and maintained by the Co-Lead Agent or the Lead
Agent on behalf of the Co-Lead Agent, the Lead Agent and/or the Banks. The Lead
Agent shall act at the direction of the Required Banks and the Co-Lead Agent in
connection with the exercise of any and all remedies at law, in equity or under
any of the Loan Documents or, if the Required Banks and the Co-Lead Agent are
unable to reach agreement, then, from and after an Event of Default, the Lead
Agent may pursue such rights and remedies as it may determine.
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SECTION 6.3. Notice of Default. The Lead Agent shall give notice to
the Borrower under Section 6.1(c) promptly upon being requested to do so by the
Required Banks and the Co-Lead Agent and shall thereupon notify all the Banks
thereof. Neither Lead Agent nor Co-Lead Agent shall be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default (other than
nonpayment of principal of or interest on the Loans) unless Lead Agent or Co-
Lead Agent has received notice in writing from a Bank or Borrower referring to
this Agreement or the other Loan Documents, describing such event or condition.
Should Lead Agent or Co-Lead Agent receive notice of the occurrence of an
Default or Event of Default expressly stating that such notice is a notice of an
Default or Event of Default, or should Lead Agent or Co-Lead Agent send Borrower
a notice of Default or Event of Default, Lead Agent or Co-Lead Agent, as
applicable, shall promptly give notice thereof to each Bank.
SECTION 6.4. Distribution of Proceeds after Default. Notwithstanding
anything contained herein to the contrary, from and after an Event of Default,
to the extent proceeds are received by Lead Agent, such proceeds will be
distributed to the Banks pro rata in accordance with the unpaid principal amount
of the Loans.
ARTICLE VII
THE AGENTS
SECTION 7.1. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Lead Agent and Co-Lead Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement and the
other Loan Documents as are delegated to the Lead Agent and Co-Lead Agent by the
terms hereof or thereof, together with all such powers as are reasonably
incidental thereto. Except as set forth in Sections 7.8 and 7.9 hereof, the
provisions of this Article VII are solely for the benefit of Lead Agent, Co-Lead
Agent and the Banks, and Borrower shall not have any rights to rely on or
enforce any of the provisions hereof. In performing its functions and duties
under this Agreement, Lead Agent and Co-Lead Agent shall each act solely as an
agent of the Banks and do not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for the Borrower.
SECTION 7.2. Agency and Affiliates. Morgan and Bank of America
Illinois shall have the same rights and
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powers under this Agreement as any other Bank and may exercise or refrain from
exercising the same as though it were not the Lead Agent or Co-Lead Agent
respectively, and Morgan and Bank of America Illinois and their affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower, EQR or any Subsidiary or affiliate of the Borrower
as if they were not the Lead Agent and Co-Lead Agent, respectively, hereunder,
and the term "Bank" and "Banks" shall include Morgan and Bank of America
Illinois in their individual capacities.
SECTION 7.3. Action by Lead Agent and Co-Lead Agent. The obligations
of the Lead Agent and Co-Lead Agent hereunder are only those expressly set forth
herein. Without limiting the generality of the foregoing, the Lead Agent and
Co-Lead Agent shall not be required to take any action with respect to any
Default or Event of Default, except as expressly provided in Article VI. The
duties of Lead Agent and Co-Lead Agent shall be administrative in nature.
Subject to the provisions of Sections 7.1, 7.5 and 7.6, Lead Agent and Co-Lead
Agent shall administer the Loans in the same manner as each administers its own
loans.
SECTION 7.4. Consultation with Experts. As between Lead Agent and the
Banks, the Lead Agent and Co-Lead Agent may consult with legal counsel (who may
be counsel for the Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
SECTION 7.5. Liability of Lead Agent and Co-Lead Agent. As between
Lead Agent and the Banks, none of the Lead Agent, the Co-Lead Agent nor any of
their affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks or (ii) in
the absence of its own gross negligence or wilful misconduct. As between Lead
Agent and the Banks, none of the Lead Agent, the Co-Lead Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower; (iii) the satisfaction of any condition specified in
Article III, except receipt of items required to be delivered to the Lead Agent
or the Co-Lead Agent; or (iv) the validity,
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effectiveness or genuineness of this Agreement, the other Loan Documents or any
other instrument or writing furnished in connection herewith. As between Lead
Agent and the Banks, neither the Lead Agent nor the Co-Lead Agent shall incur
any liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
SECTION 7.6. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Lead Agent and the Co-Lead Agent and their
affiliates and their respective directors, officers, agents and employees (to
the extent not reimbursed by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitee's gross negligence or wilful
misconduct) that such indemnitee may suffer or incur in connection with its
duties as Lead Agent and/or Co-Lead Agent under this Agreement, the other Loan
Documents or any action taken or omitted by such indemnitee hereunder. In the
event that the Co-Lead Agent or the Lead Agent shall, subsequent to its receipt
of indemnification payment(s) from Banks in accordance with this section, recoup
any amount from the Borrower, or any other party liable therefor in connection
with such indemnification, such Co-Lead Agent or the Lead Agent shall reimburse
the Banks which previously made the payment(s) pro rata, based upon the actual
amounts which were theretofore paid by each Bank. The Co-Lead Agent or the Lead
Agent, as the case may be, shall reimburse such Banks so entitled to
reimbursement within two (2) Domestic Business Days of its receipt of such funds
from the Borrower or such other party liable therefor.
SECTION 7.7. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Lead Agent, the Co-Lead Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Lead Agent, Co-Lead Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.8. Successor Lead Agent or Co-Lead Agent. The Lead Agent
or the Co-Lead Agent may resign at any time by giving notice thereof to the
Banks, the Borrower and each other and the Lead Agent or the Co-Lead Agent, as
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applicable, shall resign in the event its Commitment is reduced to zero. Upon
any such resignation, the Required Banks shall have the right to appoint a
successor Lead Agent or Co-Lead Agent, as applicable, which successor Lead Agent
or successor Co-Lead Agent (as applicable) shall, provided no Event of Default
has occurred and is then continuing, be subject to Borrower's approval, which
approval shall not be unreasonably withheld or delayed (except that Borrower
shall, in all events, be deemed to have approved Bank of America Illinois as a
successor Lead Agent and Morgan as a successor Co-Lead Agent). If no successor
Lead Agent or Co-Lead Agent (as applicable) shall have been so appointed by the
Required Banks and approved by the Borrower, and shall have accepted such
appointment, within 30 days after the retiring Lead Agent or Co-Lead Agent (as
applicable) gives notice of resignation, then the retiring Lead Agent or
retiring Co-Lead Agent (as applicable) may, on behalf of the Banks, appoint a
successor Lead Agent or Co-Lead Agent (as applicable), which shall be the Co-
Lead Agent or the Lead Agent, as the case may be, who shall act until the
Required Banks shall appoint a Lead Agent or Co-Lead Agent. Upon the acceptance
of its appointment as the Lead Agent or Co-Lead Agent hereunder by a successor
Lead Agent or successor Co-Lead Agent, as applicable, such successor Lead Agent
or successor Co-Lead Agent, as applicable, shall thereupon succeed to and become
vested with all the rights and duties of the retiring Lead Agent or retiring Co-
Lead Agent, as applicable, and the retiring Lead Agent or the retiring Co-Lead
Agent, as applicable, shall be discharged from its duties and obligations
hereunder. After any retiring Lead Agent's or retiring Co-Lead Agent's
resignation hereunder, the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was the Lead Agent
or the Co-Lead Agent, as applicable. For gross negligence or willful misconduct,
as determined by all the Banks (excluding for such determination Lead Agent or
Co-Lead Agent in its capacity as a Bank, as applicable), Lead Agent or Co-Lead
Agent may be removed at any time by giving at least thirty (30) Domestic
Business Days prior written notice to Lead Agent, Co-Lead Agent and Borrower.
Such resignation or removal shall take effect upon the acceptance of appointment
by a successor Lead Agent or Co-Lead Agent, as applicable, in accordance with
the provisions of this Section 7.8.
SECTION 7.9. Consents and Approvals. All
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communications from Lead Agent to the Banks requesting the Banks' determination,
consent, approval or disapproval (i) shall be given in the form of a written
notice to each Bank, (ii) shall be accompanied by a description of the matter or
item as to which such determination, approval, consent or disapproval is
requested, or shall advise each Bank where such matter or item may be inspected,
or shall otherwise describe the matter or issue to be resolved, (iii) shall
include, if reasonably requested by a Bank and to the extent not previously
provided to such Bank, written materials and a summary of all oral information
provided to Lead Agent by Borrower in respect of the matter or issue to be
resolved, and (iv) shall include Lead Agent's recommended course of action or
determination in respect thereof. Each Bank shall reply promptly, but in any
event within ten (10) Domestic Business Days after receipt of the request
therefor from Lead Agent (the "Bank Reply Period"). Unless a Bank shall give
written notice to Lead Agent that it objects to the recommendation or
determination of Lead Agent (together with a written explanation of the reasons
behind such objection) within the Bank Reply Period, such Bank shall be deemed
to have approved of or consented to such recommendation or determination. With
respect to decisions requiring the approval of the Required Banks or all the
Banks, Lead Agent shall submit its recommendation or determination for approval
of or consent to such recommendation or determination to all Banks and upon
receiving the required approval or consent shall follow the course of action or
determination of the Required Banks (and each non-responding Bank shall be
deemed to have concurred with such recommended course of action) or all the
Banks, as the case may be.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Euro-
Dollar Borrowing or Money Market LIBOR Loan:
(a) the Lead Agent is advised by the Reference Bank that the Euro-Dollar
Reference Bank has determined in good faith that deposits in dollars (in the
applicable amounts) are not being offered to the Euro-Dollar Reference Bank in
the relevant market for such Interest Period, or
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(b) Banks having 50% or more of the aggregate amount of the Commitments
advise the Lead Agent that the Adjusted London Interbank Offered Rate, as
determined by the Lead Agent will not adequately and fairly reflect the cost to
such Bank of funding its Euro-Dollar Loans for such Interest Period, the Lead
Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Lead Agent notifies the Borrower that the circumstances
giving rise to such suspension no longer exist, the obligations of the Banks to
make Euro-Dollar Loans shall be suspended. Unless the Borrower notifies the
Lead Agent at least two Domestic Business Days before the date of (i) any Euro-
Dollar Borrowing for which a Notice of Borrowing has previously been given that
it elects not to borrow on such date, such Borrowing shall instead be made as a
Base Rate Borrowing, or (ii) any Money Market LIBOR Borrowing for which a Notice
of Money Market Borrowing has previously been given, the Money Market LIBOR
Loans comprising such Borrowing shall bear interest for each day from and
including the first day to but excluding the last day of the Interest Period
applicable thereto at the Base Rate for such day. For purposes of this Section
8.1(b), in determining whether the Adjusted London Interbank Offered Rate, as
determined by Lead Agent, will not adequately and fairly reflect the cost to any
Bank of funding its Euro-Dollar Loans for such Interest Period, such
determination will be based solely on the ability of such Bank to obtain
matching funds in the London interbank market at a reasonably equivalent rate.
SECTION 8.2. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) made after the Closing Date of any such
authority, central bank or comparable agency shall make it unlawful for any Bank
(or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar
Loans, the Lead Agent shall forthwith give notice thereof to the other Banks and
the Borrower, whereupon until such Bank notifies the Borrower and the Lead Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be suspended. With
respect to Euro-Dollar Loans, before giving any notice to the Lead Agent
pursuant to this Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will
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avoid the need for giving such notice and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine
that it may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower
shall be deemed to have delivered a Notice of Interest Rate Election and such
Euro-Dollar Loan shall be converted as of such date to a Base Rate Loan (without
payment of any amounts that Borrower would otherwise be obligated to pay
pursuant to Section 2.13 hereof with respect to Loans converted pursuant to this
Section 8.2) in an equal principal amount from such Bank (on which interest and
principal shall be payable contemporaneously with the related Euro-Dollar Loans
of the other Banks), and such Bank shall make such a Base Rate Loan.
If at any time, it shall be unlawful for any Bank to make, maintain or
fund its Euro-Dollar Loans, the Borrower shall have the right, upon five (5)
Domestic Business Day's notice to the Lead Agent, to either (x) cause a bank,
reasonably acceptable to the Lead Agent, to offer to purchase the Commitments of
such Bank for an amount equal to such Bank's outstanding Loans, and to become a
Bank hereunder, or obtain the agreement of one or more existing Banks to offer
to purchase the Commitments of such Bank for such amount, which offer such Bank
is hereby required to accept, or (y) to repay in full all Loans then outstanding
of such Bank, together with interest and all other amounts due thereon, upon
which event, such Bank's Commitments shall be deemed to be cancelled pursuant to
Section 2.11(c).
SECTION 8.3. Increased Cost and Reduced Return.
(a) If, on or after (x) the date hereof in the case of Committed
Loans made pursuant to Section 2.1, or (y) the date of the related Money Market
Quote, in the case of any Money Market Loan, the adoption of any applicable law,
rule or regulation, or any change in any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
made at the Closing Date of any such authority, central bank or comparable
agency shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System (but excluding with respect to any Euro-Dollar Loan any
such requirement reflected in an applicable
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Euro-Dollar Reserve Percentage)), special deposit, insurance assessment or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Applicable Lending Office) or shall impose
on any Bank (or its Applicable Lending Office) or on the London interbank market
any other condition materially more burdensome in nature, extent or consequence
than those in existence as of the Closing Date affecting such Bank's Euro-Dollar
Loans, its Note, or its obligation to make Euro-Dollar Loans, and the result of
any of the foregoing is to increase the cost to such Bank (or its Applicable
Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce the
amount of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect to such Euro-Dollar
Loans, by an amount deemed by such Bank to be material, then, within 15 days
after demand by such Bank (with a copy to the Lead Agent and Co-Lead Agent), the
Borrower shall pay to such Bank such additional amount or amounts (based upon a
reasonable allocation thereof by such Bank to the Euro-Dollar Loans made by such
Bank hereunder) as will compensate such Bank for such increased cost or
reduction to the extent such Bank generally imposes such additional amounts on
other borrowers of such Bank in similar circumstances.
(b) If any Bank shall have reasonably determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) made after the Closing Date of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on capital of such Bank (or its Parent) as a
consequence of such Bank's obligations hereunder to a level below that which
such Bank (or its Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with respect to
capital adequacy) by an amount reasonably deemed by such Bank to be material,
then from time to time, within 15 days after demand by such Bank (with a copy to
the Lead Agent and Co-Lead Agents), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank (or its Parent) for
such reduction to the extent such Bank generally imposes such additional amounts
on other borrowers of such Bank in similar circumstances.
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(c) Each Bank will promptly notify the Borrower, the Lead Agent and
the Co-Lead Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the reasonable judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall fail to notify Borrower of any
such event within 90 days following the end of the month during which such event
occurred, then Borrower's liability for any amounts described in this Section
incurred by such Bank as a result of such event shall be limited to those
attributable to the period occurring subsequent to the ninetieth (90th) day
prior to the date upon which such Bank actually notified Borrower of the
occurrence of such event. A certificate of any Bank claiming compensation under
this Section and setting forth a reasonably detailed calculation of the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of demonstrable error. In determining such amount, such Bank may
use any reasonable averaging and attribution methods.
(d) If at any time, any Bank shall be owed amounts pursuant to this
Section 8.3, the Borrower shall have the right, upon five (5) Domestic Business
Day's notice to the Lead Agent to either (x) cause a bank, reasonably acceptable
to the Lead Agent, to offer to purchase the Commitments of such Bank for an
amount equal to such Bank's outstanding Loans, and to become a Bank hereunder,
or to obtain the agreement of one or more existing Banks to offer to purchase
the Commitments of such Bank for such amount, which offer such Bank is hereby
required to accept, or (y) to repay in full all Loans then outstanding of such
Bank, together with interest and all other amounts due thereon, upon which
event, such Bank's Commitment shall be deemed to be cancelled pursuant to
Section 2.11(c).
SECTION 8.4. Taxes.
(a) Any and all payments by the Borrower to or for the account of any
Bank, the Co-Lead Agent or the Lead Agent hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank, the Co-Lead Agent and the Lead Agent, taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction
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under the laws of which such Bank, the Co-Lead Agent or the Lead Agent (as the
case may be) is organized or any political subdivision thereof and, in the case
of each Bank, taxes imposed on its income, and franchise or similar taxes
imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or
any political subdivision thereof or by any other jurisdiction (or any political
subdivision thereof) as a result of a present or former connection between such
Bank, Co-Lead Agent or Lead Agent and such other jurisdiction or by the United
States (all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Non-
Excluded Taxes"). If the Borrower shall be required by law to deduct any Non-
Excluded Taxes from or in respect of any sum payable hereunder or under any
Note, (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 8.4) such Bank, the Co-Lead Agent or the Lead Agent
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (iv) the
Borrower shall furnish to the Lead Agent, at its address referred to in Section
9.1, the original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, or charges or
similar levies which arise from any payment made hereunder or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any Note (hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Bank, the Co-Lead Agent and
the Lead Agent for the full amount of Non-Excluded Taxes or Other Taxes
(including, without limitation, any Non-Excluded Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section 8.4) paid by
such Bank, the Co-Lead Agent or the Lead Agent (as the case may be) and, so long
as such Bank, Co-Lead Agent or Lead Agent has promptly paid any such Non-
Excluded Taxes or Other Taxes, any liability for penalties and interest arising
therefrom or with respect thereto. This indemnification shall be made within 15
days from the date such Bank, the Co-Lead Agent or the Lead Agent (as the case
may be) makes demand therefor.
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(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
shall provide the Borrower with (A) two duly completed copies of Internal
Revenue Service form 1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service, and (B) an Internal Revenue Service
Form W-8 or W-9, or any successor form prescribed by the Internal Revenue
Service, and shall provide Borrower with two further copies of any such form or
certification on or before the date that any such form or certification expires
or becomes obsolete and after the occurrence of any event requiring a change in
the most recent form previously delivered by it to Borrower, certifying (i) in
the case of a Form 1001 or 4224, that such Bank is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the rate
of withholding tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States, and (ii) in the case of a Form W-8
or W-9, that it is entitled to an exemption from United States backup
withholding tax. If the form provided by a Bank at the time such Bank first
becomes a party to this Agreement indicates a United States interest withholding
tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from "Non-Excluded Taxes" as defined in Section 8.4(a).
(e) For any period with respect to which a Bank has failed to provide
the Borrower with the appropriate form pursuant to Section 8.4(d) (unless such
failure is due to a change in treaty, law or regulation occurring subsequent to
the date on which a form originally was required to be provided), such Bank
shall not be entitled to indemnification under Section 8.4(c) with respect to
Non-Excluded Taxes imposed by the United States; provided, however, that should
a Bank, which is otherwise exempt from or subject to a reduced rate of
withholding tax, become subject to Non-Excluded Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Bank shall reasonably request to assist such Bank to recover such Taxes so long
as Borrower shall incur no cost or liability as a result thereof.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section 8.4, then such Bank will change
the jurisdiction of
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its Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Bank, is not otherwise disadvantageous to such Bank.
(g) If at any time, any Bank shall be owed amounts pursuant to this
Section 8.4, the Borrower shall have the right, upon five (5) Domestic Business
Day's notice to the Lead Agent to either (x) cause a bank, reasonably acceptable
to the Lead Agent, to offer to purchase the Commitments of such Bank for an
amount equal to such Bank's outstanding Loans, and to become a Bank hereunder,
or to obtain the agreement of one or more existing Banks to offer to purchase
the Commitments of such Bank for such amount, which offer such Bank is hereby
required to accept, or (y) to repay in full all Loans then outstanding of such
Bank, together with interest and all other amounts due thereon, upon which
event, such Bank's Commitment shall be deemed to be cancelled pursuant to
Section 2.11(c).
SECTION 8.5. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.2 or (ii) any Bank has demanded compensation
under Section 8.3 or 8.4 with respect to its Euro-Dollar Loans and the Borrower
shall, by at least five Euro-Dollar Business Days' prior notice to such Bank
through the Lead Agent, have elected that the provisions of this Section shall
apply to such Bank, then, unless and until such Bank notifies the Borrower that
the circumstances giving rise to such suspension or demand for compensation no
longer exist:
(a) Borrower shall be deemed to have delivered a Notice of Interest
Rate Election with respect to such affected Euro-Dollar Loans and thereafter all
Loans which would otherwise be made by such Bank as Euro-Dollar Loans shall be
made instead as Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Euro-Dollar Loans of the other
Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all payments
of principal which would otherwise be applied to repay such Euro-Dollar Loans
shall be applied to repay its Base Rate Loans instead, and
(c) Borrower will not be required to make any payment which would
otherwise be required by Section 2.13 with respect to such Euro-Dollar Loans
converted to Base Rate Loans pursuant to clause (a) above.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission followed by telephonic confirmation or similar writing)
and shall be given to such party: (x) in the case of the Borrower, the Co-Lead
Agent or the Lead Agent, at its address, telex number or facsimile number set
forth on the signature pages hereof with a duplicate copy thereof, in the case
of the Borrower, to the Borrower, at Equity Residential Properties Trust, Two
North Riverside Plaza, Suite 400, Chicago, Illinois 60606, Attn: General
Counsel, and to Rosenberg & Liebentritt, P.C., Two North Riverside Plaza, Suite
1515, Chicago, Illinois 60606, Attn: James M. Phipps, Esq., (y) in the case of
any Bank, at its address, telex number or facsimile number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address, telex number or facsimile number as such party may hereafter specify
for the purpose by notice to the Lead Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex or
facsimile transmission, when such telex or facsimile is transmitted to the telex
number or facsimile number specified in this Section and the appropriate
answerback or facsimile confirmation is received, (ii) if given by certified
registered mail, return receipt requested, with first class postage prepaid,
addressed as aforesaid, upon receipt or refusal to accept delivery, (iii) if
given by a nationally recognized overnight carrier, 24 hours after such
communication is deposited with such carrier with postage prepaid for next day
delivery, or (iv) if given by any other means, when delivered at the address
specified in this Section; provided that notices to the Lead Agent and the Co-
Lead Agent under Article II or Article VIII shall not be effective until
received.
SECTION 9.2. No Waivers. No failure or delay by the Lead Agent, the
Co-Lead Agent or any Bank in exercising any right, power or privilege hereunder
or under any Note shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
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SECTION 9.3. Expenses; Indemnification.
(a) The Borrower shall pay within thirty (30) days after written
notice from the Lead Agent or Co-Lead Agent, as applicable, (i) all reasonable
out-of-pocket costs and expenses of the Lead Agent and the Co-Lead Agent
(including reasonable fees and disbursements of special counsel Skadden, Arps,
Slate, Meagher & Flom LLP), in connection with the preparation of this
Agreement, the Loan Documents and the documents and instruments referred to
therein, and any waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder, (ii) all reasonable fees and disbursements
of special counsel Skadden, Arps, Slate, Meagher & Flom LLP in connection with
the syndication of the Loans and (iii) if an Event of Default occurs, all
reasonable out-of-pocket expenses incurred by the Lead Agent, Co-Lead Agent and
each Bank, including fees and disbursements of counsel for the Lead Agent, the
Co-Lead Agent and each of the Banks, in connection with the enforcement of the
Loan Documents and the instruments referred to therein and such Event of Default
and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom; provided, however, that the attorneys' fees and
disbursements for which Borrower is obligated under this subsection (a)(iii)
shall be limited to the reasonable non-duplicative fees and disbursements of (A)
counsel for Lead Agent, (B) counsel for Co-Lead Agent and (C) counsel for all of
the Banks as a group; and provided, further, that all other costs and expenses
for which Borrower is obligated under this subsection (a)(iii) shall be limited
to the reasonable non-duplicative costs and expenses of Lead Agent and Co-Lead
Agent. For purposes of this Section 9.3(a)(iii), (1) counsel for Lead Agent
shall mean a single outside law firm representing Lead Agent, (2) counsel for
Co-Lead Agent shall mean a single outside law firm representing Co-Lead Agent
(which may or may not be the same law firm representing Lead Agent) and (3)
counsel for all of the Banks as a group shall mean a single outside law firm
representing such Banks as a group (which law firm may or may not be the same
law firm representing either or both of Lead Agent or Co-Lead Agent).
(b) The Borrower agrees to indemnify the Co-Lead Agent, the Lead
Agent and each Bank, their respective affiliates and the respective directors,
officers, agents and employees of the foregoing (each an "Indemnitee") and hold
each Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by such
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Indemnitee in connection with any investigative, administrative or judicial
proceeding that may at any time (including, without limitation, at any time
following the payment of the Obligations) be asserted against any Indemnitee, as
a result of, or arising out of, or in any way related to or by reason of, (i)
any of the transactions contemplated by the Loan Documents or the execution,
delivery or performance of any Loan Document, (ii) any violation by the Borrower
or the Environmental Affiliates of any applicable Environmental Law, (iii) any
Environmental Claim arising out of the management, use, control, ownership or
operation of property or assets by the Borrower or any of the Environmental
Affiliates, including, without limitation, all on-site and off-site activities
of Borrower or any Environmental Affiliate involving Materials of Environmental
Concern, (iv) the breach of any environmental representation or warranty set
forth herein, but excluding those liabilities, losses, damages, costs and
expenses (a) for which such Indemnitee has been compensated pursuant to the
terms of this Agreement, (b) incurred solely by reason of the gross negligence,
wilful misconduct bad faith or fraud of any Indemnitee as finally determined by
a court of competent jurisdiction, (c) violations of Environmental Laws relating
to a Property which are caused by the act or omission of such Indemnitee after
such Indemnitee takes possession of such Property or (d) any liability of such
Indemnitee to any third party based upon contractual obligations of such
Indemnitee owing to such third party which are not expressly set forth in the
Loan Documents. In addition, the indemnification set forth in this Section
9.3(b) in favor of any director, officer, agent or employee of Lead Agent, Co-
Lead Agent or any Bank shall be solely in their respective capacities as such
director, officer, agent or employee. The Borrower's obligations under this
Section shall survive the termination of this Agreement and the payment of the
Obligations.
SECTION 9.4. Sharing of Set-Offs. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
any Event of Default, each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to the
Borrower or to any other Person, any such notice being hereby expressly waived,
but subject to the prior consent of the Lead Agent and the Co-Lead Agent, to set
off and to appropriate and apply any and all deposits (general or special, time
or demand, provisional or final) and any other indebtedness at any time held or
owing by such Bank (including, without limitation, by
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branches and agencies of such Bank wherever located) to or for the credit or the
account of the Borrower against and on account of the Obligations of the
Borrower then due and payable to such Bank under this Agreement or under any of
the other Loan Documents, including, without limitation, all interests in
Obligations purchased by such Bank. Each Bank agrees that if it shall by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest due with respect
to any Note held by it which is greater than the proportion received by any
other Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Notes held by the other Banks, and such
other adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Notes held by the Banks shall be
shared by the Banks pro rata; provided that nothing in this Section shall impair
the right of any Bank to exercise any right of set-off or counterclaim it may
have to any deposits not received in connection with the Loans and to apply the
amount subject to such exercise to the payment of indebtedness of the Borrower
other than its indebtedness under the Notes. The Borrower agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Borrower in the amount of such participation.
Notwithstanding anything to the contrary contained herein, any Bank may, by
separate agreement with the Borrower, waive its right to set off contained
herein or granted by law and any such written waiver shall be effective against
such Bank under this Section 9.4.
SECTION 9.5. Amendments and Waivers. Any provision of this Agreement
or the Notes or other Loan Documents may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed by the Borrower, the Lead
Agent, the Co-Lead Agent and the Required Banks (and, if the rights or duties of
the Lead Agent or the Co-Lead Agent in their capacity as Lead Agent or Co-Lead
Agent, as applicable, are affected thereby, by the Lead Agent or the Co-Lead
Agent, as applicable); provided that no such amendment or waiver with respect to
this Agreement, the Notes or any other Loan Documents shall, unless signed by
all the Banks, (i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate of interest on any
Loan
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or any fees hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder or for any reduction
or termination of any Commitment, (iv) change the percentage of the Commitments
or of the aggregate unpaid principal amount of the Notes, or the number of
Banks, which shall be required for the Banks or any of them to take any action
under this Section or any other provision of this Agreement, (v) release the EQR
Guaranty or (vi) modify the provisions of this Section 9.5.
SECTION 9.6. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or otherwise transfer any of
its rights under this Agreement or the other Loan Documents without the prior
written consent of all Banks and the Lead Agent and a Bank may not assign or
otherwise transfer any of its interest under this Agreement except as permitted
in subsection (b) and (c) of this Section 9.6.
(b) Any Bank may at any time grant (i) prior to the occurrence of an
Event of Default, to an existing Bank, one or more banks, finance companies,
insurance companies or other financial institutions in minimum amounts of not
less than $10,000,000 (or any lesser amount in the case of participations to an
existing Bank) and (ii) after the occurrence and during the continuance of an
Event of Default, to any Person in any amount (in each case, a "Participant"),
participating interests in its Commitment or any or all of its Loans, with (and
subject to) the consent of the Lead Agent and, provided that no Event of Default
shall have occurred and be continuing, the Borrower, which consent shall not be
unreasonably withheld or delayed. Any participation made during the
continuation of an Event of Default shall not be affected by the subsequent cure
of such Event of Default. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Lead Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrower, the Co-Lead Agent
and the Lead Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision
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of this Agreement; provided that such participation agreement may provide that
such Bank will not agree to any modification, amendment or waiver of this
Agreement described in clause (i), (ii), (iii), (iv) or (v) of Section 9.5
without the consent of the Participant. The Borrower agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article VIII with respect to its participating
interest.
(c) Any Bank may at any time assign to (i) prior to the occurrence of
an Event of Default, an existing Bank or one or more banks, finance companies,
insurance or other financial institutions which (A) has (or, in the case of a
bank which is a subsidiary, such bank's parent has) a rating of its senior debt
obligations of not less than Baa-1 by Moody's Investors Service or a comparable
rating by a rating agency acceptable to Lead Agent and (B) has total assets in
excess of Ten Billion Dollars ($10,000,000,000), in minimum amounts of not less
than Ten Million Dollars ($10,000,000) and integral multiple of One Million
Dollars ($1,000,000) thereafter (or any lesser amount in the case of assignments
to an existing Bank) and (ii) after the occurrence and during the continuance of
an Event of Default, to any Person in any amount (in each case, an "Assignee"),
all or a proportionate part of all, of its rights and obligations under this
Agreement, the Notes and the other Loan Documents, and, in either case, such
Assignee shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit "E" hereto executed by
such Assignee and such transferor Bank, with (and subject to) the consent of the
Lead Agent and, provided that no Event of Default shall have occurred and be
continuing, the Borrower, which consent shall not be unreasonably withheld or
delayed; provided that if an Assignee is an affiliate of such transferor Bank or
was a Bank immediately prior to such assignment, no such consent shall be
required; and provided further that such assignment may, but need not, include
rights of the transferor Bank in respect of outstanding Money Market Loans.
Upon execution and delivery of such instrument and payment by such Assignee to
such transferor Bank of an amount equal to the purchase price agreed between
such transferor Bank and such Assignee, such Assignee shall be a Bank party to
this Agreement and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and no further consent
or action by any party shall be required and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent. Upon the
consummation of any assignment pursuant to this subsection (c), the transferor
Bank, the Lead Agent and the Borrower
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<PAGE>
shall make appropriate arrangements so that, if required, a new Note is issued
to the Assignee. In connection with any such assignment, the transferor Bank
shall pay to the Lead Agent an administrative fee for processing such assignment
in the amount of $2,500. If the Assignee is not incorporated under the laws of
the United States of America or a state thereof, it shall deliver to the
Borrower and the Lead Agent certification as to exemption from deduction or
withholding of any United States federal income taxes in accordance with Section
8.4. Any assignment made during the continuation of an Event of Default shall
not be affected by any subsequent cure of such Event of Default.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.3 or 8.4 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.2, 8.3 or 8.4 requiring such
Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 9.7. Collateral. Each of the Banks represents to the Lead
Agent and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.8. Governing Law; Submission to Jurisdiction. (a) THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect to this Agreement or
any other Loan Document and any action for enforcement of any judgment in
respect thereof may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, the Borrower hereby accepts for itself
and in respect of its
93
<PAGE>
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts and appellate courts from any thereof. The Borrower irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the hand delivery, or mailing of copies thereof
by registered or certified mail, postage prepaid, to the Borrower at its address
set forth below. The Borrower hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Agreement or any other
Loan Document brought in the courts referred to above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of the Lead Agent or
the Co-Lead Agent to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Borrower in any
other jurisdiction.
SECTION 9.9. Counterparts; Integration; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Lead Agent and the Borrower
of counterparts hereof signed by each of the parties hereto (or, in the case of
any party as to which an executed counterpart shall not have been received,
receipt by the Lead Agent in form satisfactory to it of telegraphic, telex or
other written confirmation from such party of execution of a counterpart hereof
by such party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE LEAD
AGENT, THE Co-Lead Agent AND THE BANKS HEREBY IRREVOCABLY WAIVE ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Survival. All indemnities set forth herein shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Loans hereunder.
SECTION 9.12. Domicile of Loans. Each Bank may transfer and carry
its Loans at, to or for the account of
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<PAGE>
any domestic or foreign branch office, subsidiary or affiliate of such Bank.
SECTION 9.13. Limitation of Liability. No claim may be made by the
Borrower or any other Person acting by or through Borrower against the Lead
Agent, the Co-Lead Agent or any Bank or the affiliates, directors, officers,
employees, attorneys or agent of any of them for any consequential or punitive
damages in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement or by the other Loan Documents, or any act, omission or event
occurring in connection therewith; and the Borrower hereby waives, releases and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
SECTION 9.14. Recourse Obligation. This Agreement and the Obligations
hereunder are fully recourse to the Borrower. Notwithstanding the foregoing, no
recourse under or upon any obligation, covenant, or agreement contained in this
Agreement shall be had against any officer, director, shareholder or employee of
the Borrower or EQR except in the event of fraud or misappropriation of funds on
the part of such officer, director, shareholder or employee.
SECTION 9.15. Confidentiality. The Lead Agent, the Co-Lead Agent and
each Bank shall use reasonable efforts to assure that information about
Borrower, EQR and its Subsidiaries and Investments Affiliates, and the
Properties thereof and their operations, affairs and financial condition, not
generally disclosed to the public, which is furnished to Lead Agent, the Co-Lead
Agent or any Bank pursuant to the provisions hereof or any other Loan Document
is used only for the purposes of this Agreement and shall not be divulged to any
Person other than the Lead Agent, the Co-Lead Agent, the Banks, and their
affiliates and respective officers, directors, employees and agents who are
actively and directly participating in the evaluation, administration or
enforcement of the Loan, except: (a) to their attorneys and accountants, (b) in
connection with the enforcement of the rights and exercise of any remedies of
the Lead Agent, the Co-Lead Agent and the Banks hereunder and under the other
Loan Documents, (c) in connection with assignments and participations and the
solicitation of prospective assignees and participants referred to in Section
9.6 hereof, who have agreed in writing to be bound by a confidentiality
agreement substantially equivalent to the terms of this Section 9.15, and (d) as
may otherwise be required or requested by any regulatory authority having
95
<PAGE>
jurisdiction over the Lead Agent, the Co-Lead Agent or any Bank or by any
applicable law, rule, regulation or judicial process.
SECTION 9.16. Bank's Failure to Fund.
(a) Unless the Lead Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Lead Agent such Bank's share of such Borrowing, the Lead Agent may assume that
such Bank has made such share available to the Lead Agent on the date of such
Borrowing in accordance with subsection (b) of Section 2.4 hereof, and the Lead
Agent may, in reliance upon such assumption, make available to Borrower on such
date a corresponding amount. If and to the extent that such Bank shall not have
so made such share available to the Lead Agent, such Bank and Borrower severally
agree to repay to the Lead Agent forthwith on demand such corresponding amount
together with interest thereon, in accordance with the provisions of Section
2.4(c) hereof. If such Bank shall repay to the Lead Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement. Nothing contained in this Section or
Section 2.4(c) shall be deemed to reduce the Commitment of any Bank or in any
way affect the rights of Borrower with respect to any defaulting Bank or Lead
Agent. The failure of any Bank to make available to the Lead Agent such Bank's
share of any Borrowing in accordance with Section 2.4(b) hereof shall not
relieve any other Bank of its obligations to fund its Commitment, in accordance
with the provisions hereof.
(b) If a Bank does not advance to Lead Agent such Bank's pro rata
share of a Loan in accordance herewith, then neither Lead Agent, Co-Lead Agent
nor the other Banks shall be required or obligated to fund such Bank's pro rata
share of such Loan.
(c) As used herein, the following terms shall have the meanings set
forth below:
(i) "Defaulting Bank" shall mean any Bank which (x) does not advance
to the Lead Agent such Bank's pro rata share of a Loan in accordance herewith
for a period of five (5) Domestic Business Days after notice of such failure
from Lead Agent, (y) shall otherwise fail to perform such Bank's obligations
under the Loan Documents, or (z) shall fail to
96
<PAGE>
pay the Lead Agent, Co-Lead Agent or any other Bank, as the case may be, upon
demand, such Bank's pro rata share of any costs, expenses or disbursements
incurred or made by the Lead Agent pursuant to the terms of the Loan Documents,
and in all cases, such failure is not as a result of a good faith dispute as to
whether such advance is properly required to be made pursuant to the provisions
of this Agreement, or as to whether such other performance or payment is
properly required pursuant to the provisions of this Agreement.
(ii) "Junior Creditor" means any Defaulting Bank which has not (x)
fully cured each and every default on its part under the Loan Documents and (y)
unconditionally tendered to the Lead Agent such Defaulting Bank's pro rata share
of all costs, expenses and disbursements required to be paid or reimbursed
pursuant to the terms of the Loan Documents.
(iii) "Payment in Full" means, as of any date, the receipt by the
Banks who are not Junior Creditors of an amount of cash, in lawful currency of
the United States, sufficient to indefeasibly pay in full all Senior Debt.
(iv) "Senior Debt" means (x) collectively, any and all indebtedness,
obligations and liabilities of the Borrower to the Banks who are not Junior
Creditors from time to time, whether fixed or contingent, direct or indirect,
joint or several, due or not due, liquidated or unliquidated, determined or
undetermined, arising by contract, operation of law or otherwise, whether on
open account or evidenced by one or more instruments, and whether for principal,
premium, interest (including, without limitation, interest accruing after the
filing of a petition initiating any proceeding referred to in Section 6.1(f) or
(g)), reimbursement for fees, indemnities, costs, expenses or otherwise, which
arise under, in connection with or in respect of the Loans or the Loan
Documents, and (y) any and all deferrals, renewals, extensions and refundings
of, or amendments, restatements, rearrangements, modifications or supplements
to, any such indebtedness, obligation or liability.
(v) "Subordinated Debt" means (x) any and all indebtedness,
obligations and liabilities of Borrower to one or more Junior Creditors from
time to time, whether fixed or contingent, direct or indirect, joint or several,
due or not
97
<PAGE>
due, liquidated or unliquidated, determined or undetermined, arising by
contract, operation of law or otherwise, whether on open account or evidenced by
one or more instruments, and whether for principal, premium, interest
(including, without limitation, interest accruing after the filing of a petition
initiating any proceeding referred to in Section 6.1(f) or (g)), reimbursement
for fees, indemnities, costs, expenses or otherwise, which arise under, in
connection with or in respect of the Loans or the Loan Documents, and (y) any
and all deferrals, renewals, extensions and refundings of, or amendments,
restatements, rearrangements, modifications or supplements to, any such
indebtedness, obligation or liability.
(d) Immediately upon a Bank's becoming a Junior Creditor, no Junior
Creditor shall, prior to Payment in Full of all Senior Debt:
(i) accelerate, demand payment of, sue upon, collect, or receive any
payment upon, in any manner, or satisfy or otherwise discharge, any Subordinated
Debt, whether for principal, interest and otherwise;
(ii) take or enforce any Liens to secure Subordinated Debt or attach
or levy upon any assets of Borrower, to enforce any Subordinated Debt;
(iii) enforce or apply any security for any Subordinated Debt; or
(iv) incur any debt or liability, or the like, to, or receive any
loan, return of capital, advance, gift or any other property, from, the
Borrower.
(e) In the event of:
(i) any insolvency, bankruptcy, receivership, liquidation,
dissolution, reorganization, readjustment, composition or other similar
proceeding relating to Borrower;
(ii) any liquidation, dissolution or other winding-up of the
Borrower, voluntary or involuntary, whether or not involving insolvency,
reorganization or bankruptcy proceedings;
98
<PAGE>
(iii) any assignment by the Borrower for the benefit of creditors;
(iv) any sale or other transfer of all or substantially all assets of
the Borrower; or
(v) any other marshalling of the assets of the Borrower;
each of the Banks shall first have received Payment in Full of all Senior Debt
before any payment or distribution, whether in cash, securities or other
property, shall be made in respect of or upon any Subordinated Debt. Any
payment or distribution, whether in cash, securities or other property that
would otherwise be payable or deliverable in respect of Subordinated Debt to any
Junior Creditor but for this Agreement shall be paid or delivered directly to
the Lead Agent for distribution to the Banks in accordance with this Agreement
until Payment in Full of all Senior Debt. If any Junior Creditor receives any
such payment or distribution, it shall promptly pay over or deliver the same to
the Lead Agent for application in accordance with the preceding sentence.
(f) Each Junior Creditor shall file in any bankruptcy or other
proceeding of Borrower in which the filing of claims is required by law, all
claims relating to Subordinated Debt that such Junior Creditor may have against
Borrower and assign to the Banks who are not Junior Creditors all rights of such
Junior Creditor thereunder. If such Junior Creditor does not file any such
claim prior to forty-five (45) days before the expiration of the time to file
such claim, Lead Agent, as attorney-in-fact for such Junior Creditor, is hereby
irrevocably authorized to do so in the name of such Junior Creditor or, in Lead
Agent's sole discretion, to assign the claim to a nominee and to cause proof of
claim to be filed in the name of such nominee. The foregoing power of attorney
is coupled with an interest and cannot be revoked. The Lead Agent shall, to the
exclusion of each Junior Creditor, have the sole right, subject to Section 9.5
hereof, to accept or reject any plan proposed in any such proceeding and to take
any other action that a party filing a claim is entitled to take. In all such
cases, whether in administration, bankruptcy or otherwise, the Person or Persons
authorized to pay such claim shall pay to Lead Agent the amount payable on such
claim and, to the full extent necessary for that purpose, each Junior Creditor
99
<PAGE>
hereby transfers and assigns to the Lead Agent all of the Junior Creditor's
rights to any such payments or distributions to which Junior Creditor would
otherwise be entitled.
(g)(i) If any payment or distribution of any character or any
security, whether in cash, securities or other property, shall be received by
any Junior Creditor in contravention of any of the terms hereof, such payment or
distribution or security shall be received in trust for the benefit of, and
shall promptly be paid over or delivered and transferred to, Lead Agent for
application to the payment of all Senior Debt, to the extent necessary to
achieve Payment in Full. In the event of the failure of any Junior Creditor to
endorse or assign any such payment, distribution or security, Lead Agent is
hereby irrevocably authorized to endorse or assign the same as attorney-in-fact
for such Junior Creditor.
(ii) Each Junior Creditor shall take such action (including, without
limitation, the execution and filing of a financing statement with respect to
this Agreement and the execution, verification, delivery and filing of proofs of
claim, consents, assignments or other instructions that Lead Agent may require
from time to time in order to prove or realize upon any rights or claims
pertaining to Subordinated Debt or to effectuate the full benefit of the
subordination contained herein) as may, in Lead Agent's sole and absolute
discretion, be necessary or desirable to assure the effectiveness of the
subordination effected by this Agreement.
(h)(i) Each Bank that becomes a Junior Creditor understands and
acknowledges by its execution hereof that each other Bank is entering into this
Agreement and the Loan Documents in reliance upon the absolute subordination in
right of payment and in time of payment of Subordinated Debt to Senior Debt as
set forth herein.
(ii) Only upon the Payment in Full of all Senior Debt shall any
Junior Creditor be subrogated to any remaining rights of the Banks which are not
Defaulting Banks to receive payments or distributions of assets of the Borrower
made on or applicable to any Senior Debt.
(iii) Each Junior Creditor agrees that it will deliver all
instruments or other writings evidencing any
100
<PAGE>
Subordinated Debt held by it to Lead Agent, promptly after request therefor by
the Lead Agent.
(iv) No Junior Creditor may at any time sell, assign or otherwise
transfer any Subordinated Debt, or any portion thereof, including, without
limitation, the granting of any Lien thereon, unless and until satisfaction of
the requirements of Section 9.6 above and the proposed transferee shall have
assumed in writing the obligation of the Junior Creditor to the Banks under this
Agreement, in a form acceptable to the Lead Agent.
(v) If any of the Senior Debt, should be invalidated, avoided or set
aside, the subordination provided for herein nevertheless shall continue in full
force and effect and, as between the Banks which are not Defaulting Banks and
all Junior Creditors, shall be and be deemed to remain in full force and effect.
(vi) Each Junior Creditor hereby irrevocably waives, in respect of
Subordinated Debt, all rights (x) under Sections 361 through 365, 502(e) and 509
of the Bankruptcy Code (or any similar sections hereafter in effect under any
other Federal or state laws or legal or equitable principles relating to
bankruptcy, insolvency, reorganizations, liquidations or otherwise for the
relief of debtors or protection of creditors), and (y) to seek or obtain
conversion to a different type of proceeding or to seek or obtain dismissal of a
proceeding, in each case in relation to a bankruptcy, reorganization, insolvency
or other proceeding under similar laws with respect to the Borrower. Without
limiting the generality of the foregoing, each Junior Creditor hereby
specifically waives (A) the right to seek to give credit (secured or otherwise)
to the Borrower in any way under Section 364 of the Bankruptcy Code unless the
same is subordinated in all respects to Senior Debt in a manner acceptable to
Lead Agent in its sole and absolute discretion and (B) the right to receive any
collateral security (including any "super priority" or equal or "priming" or
replacement Lien) for any Subordinated Debt unless the Banks which are not
Defaulting Banks have received a senior position acceptable to the Banks in
their sole and absolute discretion to secure all Senior Debt (in the same
collateral to the extent collateral is involved).
(i)(i) In addition to and not in limitation of the subordination
effected by this Section 9.16, the Lead
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<PAGE>
Agent and each of the Banks which are not Defaulting Banks may in their
respective sole and absolute discretion, also exercise any and all other rights
and remedies available at law or in equity in respect of a Defaulting Bank; and
(ii) The Lead Agent shall give each of the Banks notice of the
occurrence of a default under this Section 9.16 by a Defaulting Bank and if the
Lead Agent and/or one or more of the other Banks shall, at their option, fund
any amounts required to be paid or advanced by a Defaulting Bank, the other
Banks who have elected not to fund any portion of such amounts shall not be
liable for any reimbursements to the Lead Agent and/or to such other funding
Banks.
(j) Notwithstanding anything to the contrary contained or implied
herein, a Defaulting Bank shall not be entitled to vote on any matter as to
which a vote by the Banks is required hereunder, including, without limitation,
any actions or consents on the part of the Lead Agent as to which the approval
or consent of all the Banks or the Required Banks is required under Article
VIII, Section 9.5 or elsewhere, so long as such Bank is a Defaulting Bank;
provided, however, that in the case of any vote requiring the unanimous consent
of the Banks, if all the Banks other than the Defaulting Bank shall have voted
in accordance with each other, then the Defaulting Bank shall be deemed to have
voted in accordance with such Banks.
5. Each of the Lead Agent and any one or more of the Banks which are
not Defaulting Banks may, at their respective option, (i) advance to the
Borrower such Bank's pro rata share of the Loans not advanced by a Defaulting
Bank in accordance with the Loan Documents, or (ii) pay to the Lead Agent such
Bank's pro rata share of any costs, expenses or disbursements incurred or made
by the Lead Agent pursuant to the terms of this Agreement not theretofore paid
by a Defaulting Bank. Immediately upon the making of any such advance by the
Lead Agent or any one of the Banks, such Bank's pro rata share and the pro rata
share of the Defaulting Bank shall be recalculated to reflect such advance. All
payments, repayments and other disbursements of funds by the Lead Agent to Banks
shall thereupon and, at all times thereafter be made in accordance with such
Bank's recalculated pro rata share unless and until a Defaulting Bank shall
fully cure all defaults on the part of such Defaulting Bank under the Loan
Documents or otherwise
102
<PAGE>
existing in respect of the Loans or this Agreement, at which time the pro rata
share of the Bank(s) which advanced sums on behalf of the Defaulting Bank and of
the Defaulting Bank shall be restored to their original percentages.
103
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
ERP OPERATING LIMITED PARTNERSHIP
By: Equity Residential
Properties Trust
By: ________________________
Name:
Title:
Facsimile number:
Address: Two North Riverside Plaza
Suite 400
Chicago, Illinois 60606
Attn: Chief Financial
Officer
Commitments
- -----------
$125,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: ______________________________
Name: Timothy O'Donovan
Title: Vice President
$125,000,000 BANK OF AMERICA ILLINOIS
By: ______________________________
Name:
Title:
Total Commitments
- -----------------
$250,000,000
<PAGE>
BANK OF AMERICA ILLINOIS,
as Co-Lead Agent
By: ___________________________
Name:
Title:
Bank of America Illinois
Commercial Real Estate
Services Group
231 South LaSalle Street
Chicago, Illinois 60607
Attention: Andrew Hensel
Telecopy: (312) 974-4970
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Lead Agent
By: ___________________________
Name: Timothy O'Donovan
Title: Vice President
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713-2107
Attention: Nancy K. Dunbar
Telecopy: (302) 634-4222
Domestic and Euro-Currency
Lending Office:
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713-2107-
Attention: Kevin M. McCann
Telecopy: (302) 634-1852/1872
<PAGE>
SCHEDULE 4.6
------------
Borrower and EQR ERISA Plans
The employees of EQR and the Borrower may currently participate in a 401(k)
Plan.
Other benefits include: Health care plan, dental care, life insurance and
accidental death and dismemberment plan,
travel/accident insurance, short-term disability, long-
term disability, sick time, vacation time, personal
days, holidays and direct paycheck deposit.
<PAGE>
SCHEDULE 5.13(c)(1)
-------------------
None
<PAGE>
SCHEDULE 5.13(c)(2)
-------------------
None
<PAGE>
EXHIBIT A
NOTE
New York, New York
_________ __, 1996
For value received, ERP OPERATING LIMITED PARTNERSHIP, an Illinois
partnership (the "Borrower"), promises to pay to the order of ____________ (the
"Bank"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the maturity date provided for in the Credit
Agreement). The Borrower promises to pay interest on the unpaid principal amount
of each such Loan on the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and interest shall be made in
lawful money of the United States in Federal or other immediately available
funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Notes referred to in, and is delivered
pursuant to and subject to all of the terms of, the Revolving Credit Agreement
dated as of November 15, 1996 among the Borrower, the banks listed on the
signature pages thereof, Bank of America Illinois, as Co-Lead Agent and Morgan
Guaranty Trust Company of New
<PAGE>
York, as Lead Agent (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the
same meanings. Reference is made to the Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof.
ERP OPERATING LIMITED PARTNERSHIP
By: Equity Residential Properties
Trust
By:
--------------------------
Name:
Title:
A-2
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- ------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A-3
<PAGE>
EXHIBIT B
Form of Money Market Quote Request
----------------------------------
[Date]
To: Morgan Guaranty Trust Company of New York (the "Lead Agent")
From: ERP Operating Limited Partnership
Re: Revolving Credit Agreement (the "Credit Agreement") dated as of
November 15, 1996 among ERP Operating Limited Partnership, the Banks
parties thereto, the Lead Agent and Bank of America Illinois, as Co-
Lead Agent
We hereby give notice pursuant to Section 2.3 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing:
----------------------
Principal Amount* Interest Period**
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
- ---------------------
* Amount must be $(MINIMUM BORROWING) or a larger multiple of $(MINIMUM
BORROWING INCREMENT).
** Not less than 14 days (LIBOR Auction) or not less than 14 days (Absolute
Rate Auction), subject to the provisions of the definition of Interest Period.
<PAGE>
Terms used herein have the meanings assigned to them in the Credit
Agreement.
(NAME OF BORROWER)
By
--------------------------
Name:
Title:
B-2
<PAGE>
EXHIBIT C
Form of Invitation for Money Market Quotes
------------------------------------------
To: [Name of Bank]
Re: Invitation for Money Market Quotes to ERP Operating Limited Partnership
(the "Borrower")
Pursuant to Section 2.3 of the Revolving Credit Agreement dated as of
November 15, 1996 among ERP Operating Limited Partnership, the Banks parties
thereto, the undersigned, as Lead Agent, and Bank of America Illinois, as Co-
Lead Agent, we are pleased on behalf of the Borrower to invite you to submit
Money Market Quotes to the Borrower for the following proposed Money Market
Borrowing(s):
Date of Borrowing:
------------------
Principal Amount Interest Period
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30
A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
----------------------
Authorized Officer
<PAGE>
EXHIBIT D
Form of Money Market Quote
--------------------------
To: Morgan Guaranty Trust Company of New York, as Agent
Re: Money Market Quote to ERP Operating Limited Partnership (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- -------- --------- ---------------------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed $____________.]**
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in
the Revolving Credit Agreement dated as of November 15, 1996 among ERP
Operating Limited Partnership, the Banks parties thereto, Bank of
America Illinois, as Co-Lead Agent, and yourselves, as Lead Agent,
<PAGE>
irrevocably obligates us to make the Money Market Loan(s) for which any
offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated: By:
---------------- -------------------------
Authorized Officer
- ----------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal amount
requested. Specify aggregate limitation if the sum of the individual offers
exceeds the amount the Bank is willing to lend. Bids must be made for $3,000,000
or a larger multiple of $100,000.
*** Not less than 14 days, as specified in the related Invitation. No more than
five bids are permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
D-2
<PAGE>
EXHIBIT E
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
TRANSFER SUPPLEMENT (this "Transfer Supplement") dated as of
_________, 199_ between ______________________ (the "Assignor") and
_________________ having an address at ______________ (the "Purchasing Bank").
W I T N E S S E T H:
--------------------
WHEREAS, the Assignor has made loans to ERP Operating Limited
Partnership, an Illinois limited partnership (the "Borrower"), pursuant to the
Revolving Credit Agreement, dated as of November 15, 1996 (as the same may be
amended, supplemented or otherwise modified through the date hereof, the "Credit
Agreement"), among the Borrower, the banks party thereto, Morgan Guaranty Trust
Company of New York, as Lead Agent, and Bank of America Illinois, as Co-Lead
Agent. All capitalized terms used and not otherwise defined herein shall have
the respective meanings set forth in the Credit Agreement;
WHEREAS, the Purchasing Bank desires to purchase and assume from the
Assignor, and the Assignor desires to sell and assign to the Purchasing Bank,
certain rights, title, interest and obligations under the Credit Agreement;
NOW, THEREFORE, IT IS AGREED:
1. In consideration of the amount set forth in the receipt (the
"Receipt") given by Assignor to Purchasing Bank of even date herewith, and
transferred by wire to Assignor, the Assignor hereby assigns and sells, without
recourse, representation or warranty except as specifically set forth herein, to
the Purchasing Bank, and the Purchasing Bank hereby purchases and assumes from
the Assignor, a __% interest (the "Purchased Interest") of the Loans
constituting a portion of the Assignor's rights and obligations under the Credit
Agreement as of the Effective Date (as defined below) including, without
limitation, such percentage interest of the Assignor in any Loans owing to the
Assignor, any Note held by the Assignor, any Loan Commitment of the Assignor and
any other interest of the Assignor under any of the Loan Documents.
2. The Assignor (i) represents and warrants that as of the date
hereof the aggregate outstanding principal amount of its
<PAGE>
share of the Loans owing to it (without giving effect to assignments thereof
which have not yet become effective) is $_________; (ii) represents and warrants
that it is the legal and beneficial owner of the interests being assigned by it
hereunder and that such interests are free and clear of any adverse claim; (iii)
represents and warrants that it has not received any notice of Default or Event
of Default from the Borrower; (iv) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations (or the truthfulness or accuracy thereof) made in or in
connection with the Credit Agreement, or the other Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, or the other Loan Documents or any other instrument or
document furnished pursuant thereto; and (v) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement or the other Loan Documents or any other
instrument or document furnished pursuant thereto. Except as specifically set
forth in this Paragraph 2, this assignment shall be without recourse to
Assignor.
3. The Purchasing Bank (i) confirms that it has received a copy of
the Credit Agreement, and the other Loan Documents, together with such financial
statements and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Transfer
Supplement and to become a party to the Credit Agreement, and has not relied on
any statements made by Assignor or Skadden, Arps, Slate, Meagher & Flom LLP;
(ii) agrees that it will, independently and without reliance upon any of the
Lead Agent, the Co-Lead Agent, the Assignor or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own appraisal of and investigation into the business, operations,
property, prospects, financial and other conditions and creditworthiness of the
Borrower and will make its own credit analysis, appraisals and decisions in
taking or not taking action under the Credit Agreement, and the other Loan
Documents; (iii) appoints and authorizes the Lead Agent to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement, and
the other Loan Documents as are delegated to the Agent by the terms thereof,
together with such powers as are incidental thereto; (iv) agrees that it will be
bound by and perform in accordance with their terms all of the obligations which
by the terms of the Credit Agreement are required to be performed by it as a
Bank; (v) specifies as its address for notices and lending office, the office
set forth beneath its name on the signature page hereof; (vi) it has full power
and authority to execute and deliver, and perform under,
E-2
<PAGE>
this Transfer Supplement, and all necessary corporate and/or partnership action
has been taken to authorize, and all approvals and consents have been obtained
for, the execution, delivery and performance thereof; (vii) this Transfer
Supplement constitutes its legal, valid and binding obligation enforceable in
accordance with its terms; and (viii) the interest being assigned hereunder is
being acquired by it for its own account, for investment purposes only and not
with a view to the public distribution thereof and without any present intention
of its resale in either case that would be in violation of applicable securities
laws.
4. This Transfer Supplement shall be effective on the date (the
"Effective Date") on which all of the following have occurred (i) it shall have
been executed and delivered by the parties hereto, (ii) copies hereof shall have
been delivered to the Lead Agent and the Borrower, and (iii) the Purchasing Bank
shall have paid to the Assignor the agreed purchase price as set forth in the
Receipt.
5. On and after the Effective Date, (i) the Purchasing Bank shall be a
party to the Credit Agreement and, to the extent provided in this Transfer
Supplement, have the rights and obligations of a Bank thereunder and be entitled
to the benefits and rights of the Banks thereunder and (ii) the Assignor shall,
to the extent provided in this Transfer Supplement as to the Purchased Interest,
relinquish its rights and be released from its obligations under the Credit
Agreement.
6. From and after the Effective Date, the Assignor shall cause the Lead
Agent to make all payments under the Credit Agreement, and the Notes in respect
of the Purchased Interest assigned hereby (including, without limitation, all
payments of principal, fees and interest with respect thereto and any amounts
accrued but not paid prior to such date) to the Purchasing Bank.
7. This Transfer Supplement may be executed in any number of counterparts
which, when taken together, shall be deemed to constitute one and the same
instrument.
8. Assignor hereby represents and warrants to Purchasing Bank that it has
made all payments demanded to date by Morgan Guaranty Trust Company of New York
("Morgan") as Lead Agent in connection with the Assignor's pro rata share of the
obligation to reimburse the Agent for its expenses. In the event Morgan, as Lead
Agent, shall demand reimbursement for fees and expenses from Purchasing Bank for
any period prior to the Effective Date, Assignor hereby agrees to promptly pay
Morgan, as Lead Agent, such sums directly, subject, however, to Paragraph 12
hereof.
E-3
<PAGE>
9. Assignor will, at the cost of Assignor, and without expense to
Purchasing Bank, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances, assignments, notices of assignments, transfers and
assurances as Purchasing Bank shall, from time to time, reasonably require, for
the better assuring, conveying, assigning, transferring and confirming unto
Purchasing Bank the property and rights hereby given, granted, bargained, sold,
aliened, enfeoffed, conveyed, confirmed, assigned and/or intended now or
hereafter so to be, on which Assignor may be or may hereafter become bound to
convey or assign to Purchasing Bank, or for carrying out the intention or
facilitating the performance of the terms of this Agreement or for filing,
registering or recording this Agreement.
10. The parties agree that no broker or finder was instrumental in
bringing about this transaction. Each party shall indemnify, defend the other
and hold the other free and harmless from and against any damages, costs or
expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) suffered by such party arising from claims by any broker or
finder that such broker or finder has dealt with said party in connection with
this transaction.
11. Subject to the provisions of Paragraph 12 hereof, if, with respect to
the Purchased Interest only, Assignor shall on or after the Effective Date
receive (a) any cash, note, securities, property, obligations or other
consideration in respect of or relating to the Loan or the Loan Documents or
issued in substitution or replacement of the Loan or the Loan Documents, (b) any
cash or non-cash consideration in any form whatsoever distributed, paid or
issued in any bankruptcy proceeding in connection with the Loan or the Loan
Documents or (c) any other distribution (whether by means of repayment,
redemption, realization of security or otherwise), Assignor shall accept the
same as Purchasing Bank's agent and hold the same in trust on behalf of and for
the benefit of Purchasing Bank, and shall deliver the same forthwith to
Purchasing Bank in the same form received, with the endorsement (without
recourse) of Assignor when necessary or appropriate. If the Assignor shall fail
to deliver any funds received by it within the same Business Day of receipt,
unless such funds are received by Assignor after 4:00 p.m., Eastern Standard
Time, then the following business day after receipt, said funds shall accrue
interest at the federal funds interest rate and in addition to promptly
remitting said amount, Assignor shall remit such interest from the date received
to the date such amount is remitted to the Purchasing Bank.
12. Assignor and Purchasing Bank each hereby agree to indemnify and hold
harmless the other, each of its directors and
E-4
<PAGE>
each of its officers in connection with any claim or cause of action based on
any matter or claim based on the acts of either while acting as a Bank under the
Credit Agreement. Promptly after receipt by the indemnified party under this
Section of notice of the commencement of any action, such indemnified party
shall notify the indemnifying party in writing of the commencement thereof. If
any such action is brought against any indemnified party and that party notifies
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein, and to the extent that it may elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after receipt of notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof. In no event shall the indemnified party settle or consent to a
settlement of such cause of action or claim without the consent of the
indemnifying party.
E-5
<PAGE>
13. THIS TRANSFER SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
Wire Transfer Instructions: --------------------------
By:
----------------------
Name:
Title:
--------------------------
By:
----------------------
Name:
Title:
Receipt Acknowledged this
__day of _____, 199_:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Lead Agent
By:
------------------------
Name:
Title:
E-6
<PAGE>
__________________________
AMENDED AND RESTATED
MASTER REIMBURSEMENT AGREEMENT
Dated as of November 1, 1996
by and between
FEDERAL NATIONAL MORTGAGE ASSOCIATION
and
EQR-BOND PARTNERSHIP
__________________________
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I.
DEFINITIONS
SECTION 1.1 General Interpretative Principles . . . . . . . . . . 3
SECTION 1.2 Defined Terms . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.3 Interpretation. . . . . . . . . . . . . . . . . . . . 29
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.1 Representations and Warranties of Owner . . . . . . . 29
SECTION 2.2 Affirmative Covenants of Owner. . . . . . . . . . . . 43
SECTION 2.3 Negative Covenants of Owner . . . . . . . . . . . . . 55
SECTION 2.4 Certain Covenants With Respect to Sleepy Hollow
Project . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE III.
INTEREST RATE PROTECTION
SECTION 3.1 Interest Rate Protection. . . . . . . . . . . . . . . 59
ARTICLE IV.
FANNIE MAE REIMBURSEMENT; FEES; INDEMNIFICATION
SECTION 4.1 Reimbursement Obligations Under Related Fannie Mae
Collateral Agreements . . . . . . . . . . . . . . . . 63
SECTION 4.2 Fees and Expenses . . . . . . . . . . . . . . . . . . 65
SECTION 4.3 Payment of Fees and Expenses. . . . . . . . . . . . . 67
SECTION 4.4 Facility and Activity Fees. . . . . . . . . . . . . . 68
SECTION 4.5 Indemnification . . . . . . . . . . . . . . . . . . . 70
SECTION 4.6 Liability of Owner. . . . . . . . . . . . . . . . . . 72
SECTION 4.7 Fannie Mae and Servicer Not Liable. . . . . . . . . . 73
SECTION 4.8 Waivers and Consents. . . . . . . . . . . . . . . . . 73
SECTION 4.9 Subrogation . . . . . . . . . . . . . . . . . . . . . 74
SECTION 4.10 Application of Payments . . . . . . . . . . . . . . . 74
SECTION 4.11 Pledge of Rights to Certain Funds and Investments . . 74
SECTION 4.12 Purchased Bonds . . . . . . . . . . . . . . . . . . . 75
SECTION 4.13 Cash Collateral . . . . . . . . . . . . . . . . . . . 75
SECTION 4.14 Nonrecourse Obligations . . . . . . . . . . . . . . . 75
SECTION 4.15 Application for Related Fannie Mae Collateral
(i)
<PAGE>
<PAGE>
PAGE
----
Agreements. . . . . . . . . . . . . . . . . . . . . . 78
SECTION 4.16 Bond Matters. . . . . . . . . . . . . . . . . . . . . 79
ARTICLE V.
SUBSTITUTION, RELEASE, AND ADDITION OF PROPERTIES;
REUNDERWRITING; PRINCIPAL RESERVE FUNDS
SECTION 5.1 Allocable Facility Amount . . . . . . . . . . . . . . 79
SECTION 5.2 Substitution of Additional Mortgaged Properties . . . 80
SECTION 5.3 Release of Properties . . . . . . . . . . . . . . . . 81
SECTION 5.4 Addition of New Properties to the Credit Facility . . 82
SECTION 5.5 Portfolio Reunderwriting. . . . . . . . . . . . . . . 83
SECTION 5.6 Certain Permitted Transfers . . . . . . . . . . . . . 84
SECTION 5.7 Principal Reserve Fund. . . . . . . . . . . . . . . . 87
SECTION 5.8 Credit Enhancement of the Springs Colony Refunding
Bond Issue . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE VI.
SERVICING; REPLACEMENT OF CREDIT ENHANCEMENT
SECTION 6.1 Servicing . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 6.2 Replacement of Fannie Mae Credit Enhancement. . . . . 93
ARTICLE VII.
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.1 Events of Default . . . . . . . . . . . . . . . . . . 94
SECTION 7.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . 99
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1 Waivers, Amendments . . . . . . . . . . . . . . . . . 102
SECTION 8.2 Survival of Representations and Warranties. . . . . . 102
SECTION 8.3 Notices . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 8.4 Payment Procedure . . . . . . . . . . . . . . . . . . 104
SECTION 8.5 Continuing Obligation . . . . . . . . . . . . . . . . 104
SECTION 8.6 Satisfaction Requirement. . . . . . . . . . . . . . . 105
SECTION 8.7 Consent of Fannie Mae . . . . . . . . . . . . . . . . 105
SECTION 8.8 Governing Law . . . . . . . . . . . . . . . . . . . . 105
SECTION 8.9 Jurisdiction, Consent to Service. . . . . . . . . . . 105
(ii)
<PAGE>
PAGE
----
SECTION 8.10 Waivers of Jury Trial . . . . . . . . . . . . . . . . 106
SECTION 8.11 Counterparts. . . . . . . . . . . . . . . . . . . . . 106
SECTION 8.12 Severability. . . . . . . . . . . . . . . . . . . . . 107
SECTION 8.13 Business Days . . . . . . . . . . . . . . . . . . . . 107
SECTION 8.14 Entire Agreement. . . . . . . . . . . . . . . . . . . 107
SECTION 8.15 Headings. . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 8.16 Further Assurances and Corrective Instruments . . . . 107
SECTION 8.17 Assignment; Transfers; Third-Party Rights . . . . . . 108
SECTION 8.18 Waiver of Claims. . . . . . . . . . . . . . . . . . . 108
SECTION 8.19 Disclaimer; Acknowledgements. . . . . . . . . . . . . 108
SECTION 8.20 Conflicts Between Agreements. . . . . . . . . . . . . 108
SECTION 8.21 Acknowledgment and Agreement of Nominee Corps. to
Joint and Several Liability . . . . . . . . . . . . . 109
SECTION 8.22 No Novation . . . . . . . . . . . . . . . . . . . . . 111
EXHIBIT A BOND PROPERTIES; ISSUERS
EXHIBIT B ADDITIONAL MORTGAGED PROPERTIES
EXHIBIT C SCHEDULE OF TRANSACTION DOCUMENTS
EXHIBIT D PERMITTED LIENS
EXHIBIT E FORM OF INTEREST RATE HEDGE SECURITY AGREEMENT
EXHIBIT F FORM OF NEW PROPERTY CONFIRMATION
EXHIBIT G FORM OF RENT ROLL
EXHIBIT H SCHEDULE OF MANAGEMENT AGREEMENTS
SCHEDULE 2.1(f) SCHEDULE OF LITIGATION
SCHEDULE 2.1(o) SCHEDULE OF ENVIRONMENTAL REPORTS
SCHEDULE 2.1(y) SCHEDULE OF CERTAIN DISCLOSURES PURSUANT TO SECTION
2.1(Y)
SCHEDULE 2.1(z) SCHEDULE OF STRUCTURAL AND MATERIAL DEFECTS
SCHEDULE 2.1(aa) SCHEDULE OF CONTRACTUAL DEFAULTS
SCHEDULE 2.1(am) SCHEDULE OF CONTRACTS WITH AFFILIATES
(iii)
<PAGE>
AMENDED AND RESTATED
MASTER REIMBURSEMENT AGREEMENT
THIS AMENDED AND RESTATED MASTER REIMBURSEMENT AGREEMENT is made and
entered into as of this 1st day of November, 1996, by and between FEDERAL
NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE"), a corporation duly organized and
existing under the Federal National Mortgage Association Charter Act, 12 U.S.C.
Section 1716 et. seq., and EQR-BOND PARTNERSHIP ("OWNER"), a general partnership
duly organized and existing under the laws of Georgia. The meanings of
initially capitalized terms used herein and not defined are set forth in section
1.2.
RECITALS
WHEREAS, Owner owns each of the eight (8) multifamily housing
projects described in Exhibit A, Section 1 (the "EXISTING BOND PROPERTIES");
WHEREAS, as contemplated in that certain Master Reimbursement
Agreement dated as of August 1, 1996 by and between Owner and Fannie Mae, as the
same has been amended by that certain First Amendment to Master Reimbursement
Agreement, dated as of November 27, 1996, by and between Owner and Fannie Mae
(such Master Reimbursement Agreement as so amended, the "EXISTING REIMBURSEMENT
AGREEMENT"), Fannie Mae has provided credit enhancement and liquidity support
for each issue of Related Bonds with respect to the Existing Bond Properties,
pursuant to the terms of the Related Fannie Mae Collateral Agreements with
respect to such Existing Bond Properties;
WHEREAS, concurrently herewith Owner is acquiring the multifamily
residential housing project described in Exhibit A, Section 2 (the "ADDITIONAL
BOND PROPERTY"), which Additional Bond Property is financed by an existing issue
of tax-exempt housing bonds (the "EXISTING BOND ISSUE") in accordance with a
certain existing trust indenture (the "EXISTING INDENTURE");
WHEREAS, the Existing Bond Issue is supported by a first priority
mortgage, deed of trust or deed to secure debt (the "EXISTING SECURITY
INSTRUMENT") and mortgage note secured thereby (the "EXISTING MORTGAGE NOTE");
WHEREAS, the Issuer with respect to the Additional Bond Property has
received a request from Owner to issue new bonds under the Related Act in order
to refinance such Additional Bond Property by the current refunding of the
Existing Bond Issue with respect to such Additional Bond Property;
WHEREAS, the Issuer with respect to the Additional Bond Property has
determined that the issuance of the Related Bonds and the application of the
proceeds thereof to fund the Mortgage Loan relating thereto will promote and
serve the intended
1
<PAGE>
purposes of, and in all respects will conform to the provisions and requirements
of, the Related Act;
WHEREAS, in order to provide funding for the Mortgage Loan with
respect to the Additional Bond Property, and in that way assist in the
refinancing of such Additional Bond Property, the Issuer with respect to the
Additional Bond Property is issuing and selling the Related Bonds and depositing
the proceeds of the Related Bonds with the Related Trustee, to be used to fund
the Mortgage Loan with respect to such Additional Bond Property;
WHEREAS, each Mortgage Loan will be (a) made in accordance with the
requirements of Fannie Mae and the Issuer, (b) evidenced by the Related Mortgage
Note, (c) secured by the Related Bond Mortgage, and (d) otherwise secured by the
other Related Bond Documents;
WHEREAS, with respect to the Additional Bond Property, the Related
Mortgage Note, the Related Bond Mortgage and certain other Related Bond
Documents will be executed by Owner in favor of the Issuer with respect to such
Additional Bond Property and immediately following the origination of such
Mortgage Loans, the Issuer with respect to such Additional Bond Property will,
pursuant to an Assignment, assign the Mortgage Loan, the Related Mortgage Note
and the Related Bond Mortgage, together with certain other collateral, to the
Related Trustee and Fannie Mae as their interests may appear;
WHEREAS, as contemplated in the Existing Reimbursement Agreement,
Fannie Mae has agreed to provide credit enhancement and liquidity support for
the Related Bonds with respect to the Additional Bond Property, pursuant to and
in accordance with the terms of the Related Fannie Mae Collateral Agreement with
respect to such Additional Bond Property;
WHEREAS, in consideration of Fannie Mae entering into the Related
Fannie Mae Collateral Agreements with respect to the Additional Bond Property
and in order to further evidence and secure Owner's obligations to Fannie Mae,
Owner has agreed, among other things: (i) to renew the obligations evidenced by
the Existing Reimbursement Agreement by amending, restating and consolidating
the Existing Reimbursement Agreement so as to constitute one Master
Reimbursement Agreement with respect to the Existing Bond Properties and the
Additional Bond Property, (ii) to grant Fannie Mae second priority mortgages,
deeds to secure debt and deeds of trust on the Additional Bond Property, (iii)
pay certain fees to Fannie Mae and Servicer, and (iv) to reimburse Fannie Mae
for amounts advanced to the Related Trustees pursuant to the Related Fannie Mae
Collateral Agreements or otherwise advanced in accordance with this Agreement
and the other Transaction Documents; and
2
<PAGE>
WHEREAS, it is a condition to the execution and delivery of the
Related Fannie Mae Collateral Agreements with respect to the Additional Bond
Property by Fannie Mae that Owner enter into this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and
undertakings set forth herein, the payment of certain fees to Fannie Mae, and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged by Fannie Mae and Owner, the parties hereto agree that the Existing
Reimbursement Agreement is hereby amended, restated and consolidated in its
entirety so as to constitute one Master Reimbursement Agreement as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 GENERAL INTERPRETATIVE PRINCIPLES.
---------------------------------
For purposes of this Agreement, except as otherwise provided or
unless the context otherwise requires:
(a) the terms defined in section 1.2 have the meanings assigned
to them in section 1.2 and include the plural as well as the singular, and the
use of any gender herein shall be deemed to include the other gender;
(b) accounting terms relating to financial statements prepared in
accordance with GAAP and not otherwise defined herein have the meanings assigned
to them in accordance with GAAP, otherwise such terms shall have the meanings
ascribed to them in accordance with Owner's modified cash basis accounting
consistently applied;
(c) references herein to "sections," "subsections," "paragraphs"
and other subdivisions without reference to a document are to designated
sections, subsections, paragraphs and other subdivisions of this Agreement;
(d) a reference to a subsection without further reference to a
section is a reference to such subsection as contained in the same section in
which the reference appears, and this rule shall also apply to paragraphs and
other subdivisions;
(e) a reference to an Exhibit or a Schedule without a further
reference to the document to which the Exhibit or Schedule is attached is a
reference to an Exhibit or Schedule to this Agreement;
(f) unless otherwise provided herein, a reference to Fannie Mae
forms, guides, memos, updates or announcements shall mean such Fannie Mae forms,
guides, memos, updates or announcements as the same exist on the date hereof
and as such Fannie
3
<PAGE>
Mae forms, guides, memos, updates or announcements may be amended, supplemented,
otherwise modified, superseded or replaced from time to time;
(g) the words "attorneys' fees and expenses," "legal fees and
expenses," "attorneys' fees and costs," "attorneys' fees and court costs," and
other words of similar import are deemed to include any actual costs and
expenses incurred by Fannie Mae's in-house counsel (unless otherwise expressly
limited where used);
(h) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision;
(i) the word "including" means "including, but not limited to";
and
(j) references to "knowledge" of any EQR Party shall mean the
actual knowledge of (i) those persons principally involved in the negotiation,
implementation and administration of this Agreement and the transactions
contemplated hereunder, including David Neithercut, Bruce Strohm, and Lori
Shelstad, (ii) all senior officers of each EQR Party, including any officer
holding the position of, or position equivalent to, Chairman, President, Senior
Vice President, Executive Vice President, Chief Financial Officer, Chief
Accounting Officer, Secretary or Treasurer, (iii) the attorneys who are part of
any EQR Party's in-house legal staff, and (iv) with respect to any particular
factual matter, the employees of any EQR Party with significant responsibility
for such factual matter and the employees and officers to whom such employees
report, including, by way of example only, (A) with respect to a representation
or warranty relating to the physical condition of a Property, the Property
Manager for such Property (but not maintenance or other personnel reporting to
the Property Manager, unless such other personnel would be included by virtue of
any of clauses (i) through (iii) of this subsection 1.1(j)) and the employees
and officers to whom such Property Manager reports, and (B) with respect to a
representation or warranty relating an environmental condition of a Property,
the environmental officer or other individual employed by an EQR Party who is
responsible for overseeing, evaluating or advising senior management with
respect to environmental matters similar to the relevant environmental
condition, and the employees and officers to whom such environmental officer or
other individual reports.
SECTION 1.2 DEFINED TERMS.
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For all purposes of this Agreement, the following terms shall have
the respective meanings set forth below:
"ACTIVITY FEE" shall have the meaning given that term in section 4.4(b).
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"ACTIVITY RATE" means the prime rate of interest as reported from day to
day in The Wall Street Journal as the base rate on corporate loans posted by
at least seventy-five percent (75%) of the nation's thirty (30) largest banks
plus two percent (2%) per annum. The Activity Rate will be the rate reported
on the applicable publication date as determined above, notwithstanding the
fact that such reported rate shall be the prime rate for the preceding
business day. If such rate is no longer available, then the Activity Rate
shall mean the average base rate or prime rate of interest of any three "Money
Center" banks designated by Fannie Mae, in its discretion, plus two percent
(2%) per annum.
"ADDITIONAL BOND PROPERTY" shall have the meaning given that term in the
recitals to this Agreement.
"ADDITIONAL MORTGAGED PROPERTIES" means the real properties, together with
the improvements and fixtures located thereon, described in Exhibit B.
"Additional Mortgaged Properties" shall also include each New Additional
Property from and after the date of its addition to the Fannie Mae Credit
Facility, and shall exclude each Released Property (which prior to such
substitution or release, as applicable, was an Additional Mortgaged Property),
from and after the date of such substitution or release. "ADDITIONAL MORTGAGED
PROPERTY" means any one of the foregoing, individually.
"ADVANCE" means the payment, or deemed payment pursuant to the Related
Fannie Mae Collateral Agreement of any monies, from the cash flow or the
redemption of mortgages pledged by Fannie Mae or otherwise, by Fannie Mae to a
Related Trustee pursuant to the terms of a Related Fannie Mae Collateral
Agreement.
"AFFILIATE", as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities,
partnership interests or by contract or otherwise.
"AGGREGATE DEBT SERVICE COVERAGE RATIO" means, at any time, the ratio of
(a) the aggregate of the Net Operating Income for the applicable period for all
of the Properties, to (b) the aggregate scheduled debt service due on all of the
Mortgage Loans for the applicable period, assuming that the scheduled debt
service due on each Mortgage Loan is equal to interest at the Underwriting Rate,
plus all payments required to be made to the Principal Reserve Fund during the
applicable period; provided, however, that if the Pass-Through Rate (as such
term is defined in the Related Mortgage Notes) on the Mortgage Loans has been
converted to a Fixed Rate which is to remain in effect until maturity of the
Mortgage Loans, then the assumed scheduled debt service shall be equal to
interest at such actual Fixed Rate with respect to each such Mortgage Loan plus
amounts payable at the "Set Rate" set forth in each Related Mortgage Note plus
all payments required to be made
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to the Principal Reserve Fund during the applicable period. As of the
Restatement Closing Date, Fannie Mae has calculated that the Aggregate Debt
Service Coverage Ratio for the 12 month period ending on July 1, 1996 is equal
to or greater than 1.65:1.
"AGGREGATE FACILITY AMOUNT" means at any time the total amount of all
Facility Amounts.
"AGREEMENT" means this Amended and Restated Master Reimbursement
Agreement, as amended, supplemented, or otherwise modified or amended and
restated from time to time in accordance with its terms.
"ALLOCABLE FACILITY AMOUNT" means the portion of the Aggregate Facility
Amount allocated to a particular Property by Fannie Mae in accordance with this
Agreement.
"ALLOCATED RELEASE PRICE CASH COLLATERAL" means, with respect to each Bond
Property, the portion of the aggregate amount of all Release Price Cash
Collateral allocable to such Bond Property, as determined by Owner at the time
the Release Price Cash Collateral is paid by Owner to Fannie Mae, or, if Owner
does not timely make such a determination, on a pro rata basis, as reasonably
determined by Fannie Mae.
"ALTERATIONS" shall mean the meaning given to such term in section 2.2(o).
"ALTERNATE CREDIT FACILITY", with respect to particular Related Bonds,
shall have the meaning given that term in the Related Indenture.
"ALTERNATIVE HEDGE SHORTFALL COLLATERAL" shall have the meaning given that
term in section 3.1(e).
"APPLICABLE LAW" means (a) all applicable provisions of all constitutions,
statutes, rules, regulations and orders of all governmental bodies, all
Governmental Approvals and all applicable orders, judgments and decrees of all
courts and arbitrators, (b) all zoning, building, environmental and other laws,
ordinances, rules, regulations and restrictions of any Governmental Authority
affecting the ownership, management, use, operation, maintenance or repair of
any Property, including the Americans with Disabilities Act (if applicable), the
Fair Housing Amendment Act of 1988 and Hazardous Materials Laws, (c) any
building permits or any conditions, easements, rights-of-way, covenants,
restrictions of record or any recorded agreement (other than the Transaction
Documents) affecting or concerning any Property including planned development
permits, condominium declarations, and reciprocal easement and regulatory
agreements with any Governmental Authority, (d) all laws, ordinances, rules and
regulations, whether in the form of rent control, rent stabilization or
otherwise, that limit or impose conditions on the amount of rent that may be
collected from the units of any Property, and (e) all terms of any insurance
policy that Owner is required to maintain under the Mortgages, all requirements
of the issuers of any such policy, and all orders, rules, regulations and other
requirements of the National Board of Fire Underwriters
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(or any body exercising similar functions) applicable to or affecting the
operation or use of any Property or the consummation of the transactions to be
effected by this Agreement or any of the other Transaction Documents.
"ASSIGNMENT" means, individually, any Assignment of Mortgage (or Deed to
Secure Debt or Deed of Trust, as the case may be) and Other Loan Documents with
respect to a Bond Property by an Issuer (or in the case of the Silverwood
Apartments Bond Property, by the Related Trustee) to the Related Trustee and
Fannie Mae as their interests may appear, as such Assignment may be amended,
supplemented or otherwise modified or amended and restated from time to time in
accordance with its terms. "ASSIGNMENTS" means every such Assignment,
collectively.
"BOND DOCUMENTS" means, collectively, the Related Bond Documents for all
Bond Properties, and "BOND DOCUMENT" means any one of the foregoing,
individually.
"BOND FEES" shall have the meaning given that term in section 4.3(a).
"BONDHOLDERS" with respect to any Related Bonds shall have the meaning
given that term in the Related Indenture.
"BOND MORTGAGE" means the first priority Security Instrument on each Bond
Property securing the obligations of Owner (and with respect to the Additional
Bond Property, of Manchester Nominee Corp.) under and with respect to the
Related Mortgage Note and the related Mortgage Loan, and "BOND MORTGAGES" means
every such Bond Mortgage, collectively.
"BOND PROPERTIES" means the real properties, together with the
improvements and fixtures located thereon, described in Exhibit A. "Bond
Properties" shall also include each New Bond Property from and after the date of
its addition to the Fannie Mae Credit Facility, and shall exclude each Released
Property (which prior to its substitution or release, as applicable, was a Bond
Property), from and after the date of such substitution or release. "BOND
PROPERTY" means any one of the foregoing, individually.
"BOND PROPERTY LOAN DOCUMENT" means, with respect to a Mortgage Loan, any
of the documents, agreements or instruments granting, evidencing or securing
such Mortgage Loan, including the Related Mortgage Note, the Related Mortgages,
the title policy, UCC fixture filings and UCC financing statements (in each case
relating to such Mortgage Loan) and the Assignment with respect to such Mortgage
Loan, as each such document, agreement or instrument may be amended,
supplemented, otherwise modified or amended and restated from time to time in
accordance with its respective terms, and "BOND PROPERTY LOAN DOCUMENTS" means
every such Bond Property Loan Document with respect to such Mortgage Loan,
collectively.
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"BONDS" means, collectively, the Related Bonds for all Bond Properties.
"BOND TRANSACTION CLOSING DATE" with respect to a particular Related
Bonds, means the date such Related Bonds are initially issued and paid for.
"BUSINESS DAY" means any day, other than (a) a Saturday or a Sunday, (b)
any day on which banking institutions located in the City of New York, New York
or the city in which the principal office of Servicer is located are required or
authorized by law to close, (c) a day on which The New York Stock Exchange is
closed, or (d) any day on which Fannie Mae is closed.
"CAP" means an interest rate cap, and includes an interest rate cap which
has its first "calculation period" commencing on the last day of a Reset Period
which commences on or after the date such cap was obtained (i.e. a "future"
cap).
"CASH COLLATERAL" shall have the meaning given to the term "Collateral" in
the Cash Management Agreement.
"CASH MANAGEMENT AGREEMENT" means, with respect to all Properties, that
certain Cash Management, Security, Pledge and Assignment Agreement dated as of
August 1, 1996, among Owner, Fannie Mae and Servicer, as such agreement may be
amended, supplemented, otherwise modified or amended and restated from time to
time in accordance with its terms.
"CASUALTY", with respect to any Property, means any damage to, or
destruction or loss of, all or any portion of the Property, whether by fire or
other cause.
"CENTRAL ACCOUNT" means, the Central Account identified in the Cash
Management Agreement.
"CODE" means the Internal Revenue Code of 1954, as amended (the "1954
CODE") and the Internal Revenue Code of 1986, (the "1986 CODE"), in each case to
the extent made applicable to matters relating to the Bonds and or the
Properties by Section 1313(a) of the Tax Reform Act of 1986, and with respect to
a specific section thereof such reference shall be deemed to include (a) the
applicable regulations promulgated or proposed under such section or any
previous corresponding section, (b) any successor provision of similar import
hereafter enacted, (c) any corresponding provision of any subsequent Internal
Revenue Code and (d) the applicable regulations promulgated or proposed under
the provisions described in (b) and (c).
"COLLATERAL" means all cash, Government Obligations, assets and property,
real and personal (including the Bond Properties, the Additional Mortgaged
Properties, the Property Accounts, the Central Account, the Cash Collateral,
Release Price Cash Collateral, the Replacement Reserve Accounts and all funds
contained in such accounts, the Hedges and
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Hedge Documents, and cash and any investments in the Principal Reserve Funds),
pledged by Owner pursuant to any Bond Document or any Mortgage Document or any
other Transaction Document and the Proceeds thereof.
"CONDEMNATION", with respect to any Property, means (a) any action or
proceeding for the taking of the Property, or any part thereof or interest
therein, for public or quasi-public use under the power of eminent domain, by
reason of any public improvement or condemnation proceeding, or in any other
similar manner or (b) the conveyancing of any Property under the threat or
contemplation of any action or proceeding described in clause (a).
"CONDEMNATION PROCEEDS" means the proceeds of any Condemnation.
"CONTINGENT OBLIGATION" as to any Person (the "GUARANTEEING PERSON"),
means any obligation (a) of the guaranteeing person or (b) of another Person
(including any bank under any letter of credit) to induce the creation of which
the guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case, guaranteeing or in effect guaranteeing any
indebtedness, leases, dividends or other obligations (the "PRIMARY OBLIGATIONS")
of any other third person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including (without double counting) any obligation of
the guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment of any
such primary obligation or (2) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
Contingent Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Contingent
Obligation of any guaranteeing person shall be deemed to be the lesser of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Contingent Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Contingent Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by Owner in good faith.
"CONTROLLED GROUP" means all members of a group of corporations and all
trades or businesses (whether or not incorporated) under common control which,
together with Owner, are treated as a single employer under Section 414 of the
Code.
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"COUNTERPARTY" shall have the meaning given to such term in section
3.1(d).
"CREDIT ENHANCEMENT COMPONENT" means, with respect to each issue of
Related Bonds that is part of the Fannie Mae Credit Facility as of the date
hereof, .60% per annum or 60 basis points; provided, however, that the Credit
Enhancement Component with respect to each issue of Related Bonds that is part
of the Fannie Mae Credit Facility as of the date hereof, shall be subject to
adjustment in accordance with section 5.8(d). With respect to each New Bond
Property added to the Fannie Mae Credit Facility pursuant to section 5.4, the
Credit Enhancement Component shall be the amount set forth in the New Property
Confirmation with respect to such New Bond Property.
"CUSTODIAL ACCOUNT" shall have the meaning given that term in section
3.1(g).
"DETERMINATION DATE" shall have the meaning given that term in section
5.1.
"DUS GUIDE" means the Fannie Mae Multifamily Delegated Underwriting and
Servicing (DUS) Guide, as such DUS Guide may be amended, supplemented or
otherwise modified from time to time, including by Lender Memos, Guide Updates
and Guide Announcements (all references to Parts, Chapters, Sections and other
subdivisions of the DUS Guide shall be deemed references to (a) the Parts,
Chapters, Sections and other subdivisions in effect on the Restatement Closing
Date and (b) any successor provisions to such Parts, Chapters, Sections and
other subdivision).
"ENVIRONMENTAL CLAIM" means any notice of violation, claim, demand,
abatement, order or other order or direction (conditional or otherwise) by any
person or entity for any damage, including personal injury (including sickness,
disease or death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
pollution, contamination or other adverse effects on the environment, removal,
cleanup or remedial action or for fines, penalties or restrictions, resulting
from or based upon (a) the existence or occurrence, or the alleged existence or
occurrence, of a Hazardous Substance Activity or (b) the violation, or alleged
violation, of any Hazardous Materials Laws in connection with any Property.
"ENVIRONMENTAL REPORTS" means any Phase I environmental report meeting the
requirements of the DUS Guide, and any additional environmental report delivered
to Servicer or Fannie Mae with respect to any Property.
"EQR" means Equity Residential Properties Trust, a Maryland real estate
investment trust.
"EQR PARTY" means any of Owner, QRS Partner, Ravens Crest Nominee Corp.,
Manchester Nominee Corp., OP Partner or EQR, and "EQR PARTIES" means all such
Persons, collectively.
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"ERISA" means the Employee Retirement Income Security Act of 1974 as
amended from time to time.
"EVENT OF DEFAULT" shall have the meaning given that term in section 7.1.
"EXISTING BOND ISSUES" shall have the meaning given that term in the
recitals to this Agreement.
"EXISTING BOND PROPERTIES" shall have the meaning given that term in the
recitals to this Agreement.
"EXISTING INDENTURE" and "EXISTING INDENTURES" shall have the respective
meanings given such terms in the recitals to this Agreement.
"EXISTING MORTGAGE NOTE" shall have the meaning given such term in the
recitals to this Agreement.
"EXISTING REIMBURSEMENT AGREEMENT" shall have the meaning given that term
in the recitals to this Agreement.
"EXISTING SECURITY INSTRUMENT" shall have the meaning given such term in
the recitals to this Agreement.
"FACILITY", with respect to particular Related Bonds, means the facility
for credit enhancement of such Related Bonds by Fannie Mae and the Liquidity
Commitment (as defined in the Related Fannie Mae Collateral Agreement) provided
by Fannie Mae, subject and pursuant to the Related Fannie Mae Collateral
Agreement.
"FACILITY AMOUNT", with respect to particular Related Bonds, means the
aggregate principal amount of such Related Bonds then outstanding.
"FACILITY FEE" shall have the meaning set forth in section 4.4(a).
"FANNIE MAE CREDIT FACILITY" means the credit enhancement and liquidity
support of the Bonds provided by Fannie Mae subject and pursuant to the Related
Fannie Mae Collateral Agreements.
"FANNIE MAE FACILITY CLOSING DATE" means September 30, 1996.
"FANNIE MAE TITLE COMMITMENTS" means, the marked-up title insurance
commitments or pro-forma title policies insuring the lien of the Reimbursement
Mortgage with respect to each Property listed on Exhibit D.
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"FINANCING AGREEMENT", with respect to an issue of Related Bonds, shall
have the meaning given that term in the Related Bond Indenture and "FINANCING
AGREEMENTS" means every such Financing Agreement, collectively.
"FINANCING LEASE" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee or to be otherwise
disclosed as such in a note to such balance sheet.
"FIXED RATE", with respect to particular Related Bonds, shall have the
meaning given that term in the Related Indenture.
"GAAP" means generally accepted accounting principles in effect in the
United States from time to time.
"GOVERNMENT OBLIGATIONS", with respect to particular Related Bonds, shall
have the meaning given that term in the Related Indenture.
"GOVERNMENTAL ACTION" means any pending or, to the actual knowledge of
Owner, threatened suit, proceeding, order, or governmental inquiry or opinion
involving any Property that alleges the violation of any Hazardous Materials
Law.
"GOVERNMENTAL APPROVAL" means an authorization, permit, consent, approval,
license, registration or exemption from registration or filing with, or report
to, any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"GROSS CASH FLOW" means, for any period, with respect to any of the
Properties, all gross rents collected from or on behalf of tenants at such
Property (other than unforfeited tenant security deposits), any other income,
receipts or withdrawals from reserves (but only to the extent such reserves were
included as Operating Expenses at the times they were set aside) derived from
such Property (including from the use or operation thereof) without regard to
its source, including tenant reimbursements for utilities, services and
supplies, security deposit forfeitures, parking rents or fees, concessions and
vending fees and laundry income and proceeds from rental interruption insurance,
but excluding Insurance Proceeds (other than proceeds from rental interruption
insurance), Condemnation Proceeds, proceeds from the sale of the Related Bonds,
if any, unearned portions of prepaid rent, other refundable items, interest on
any account established for the deposit of refundable items, and proceeds from
the sale or other disposition of all or any portion of a Property.
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"HAZARDOUS MATERIALS" means petroleum and petroleum products, flammable
explosives, radioactive materials (excluding radioactive materials in smoke
detectors), polychlorinated biphenyls, lead, asbestos in any form that is or
could become friable, hazardous waste, toxic or hazardous substances or other
related materials whether in the form of a chemical, element, compound,
solution, mixture or otherwise and shall also include those materials defined as
"hazardous substances," "extremely hazardous substances," "hazardous chemicals,"
"hazardous materials," "toxic substances," "solid waste," "toxic chemicals,"
"air pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous
waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated
by Hazardous Materials Law in any manner whatsoever.
"HAZARDOUS MATERIALS LAW" means all federal, state, and local laws,
ordinances and regulations and standards, rules, policies and other binding
governmental requirements and any court judgments applicable to Owner or any
Property relating to industrial hygiene or to environmental or unsafe conditions
or to human health, including those relating to the generation, manufacture,
storage, handling, transportation, disposal, release, emission or discharge of
Hazardous Materials, those in connection with the construction, fuel supply,
power generation and transmission, waste disposal or any other operations or
processes relating to any Property, and those relating to the atmosphere, soil,
surface and ground water, wetlands, stream sediments and vegetation on, under,
in or about any Property.
"HAZARDOUS SUBSTANCE ACTIVITY" means any storage, holding, existence,
release, spill, leaking, pumping, pouring, injection, escaping, deposit,
disposal, dispersal, leaching, migration, use, treatment, emission, discharge,
generation, processing, abatement, removal, disposition, handling or
transportation of any Hazardous Materials from, under, into or on any Property
in violation of Hazardous Materials Laws, including the discharge of any
Hazardous Materials emanating from any Property in violation of Hazardous
Materials Laws through the air, soil, surface water, groundwater or property and
also including the abandonment or disposal of any barrels, containers and other
receptacles containing any Hazardous Materials from or on any Property in
violation of Hazardous Materials Laws, in each case whether sudden or nonsudden,
accidental or nonaccidental.
"HEDGE" means a Swap or a Cap.
"HEDGE DOCUMENTS" means the documents evidencing and governing a Hedge.
"HEDGE PERIOD" shall have the meaning given that term in section 3.1(b).
"HEDGE RATE", with respect to particular Related Bonds, means 5.70% per
annum.
"HEDGE SECURITY AGREEMENT" means, with respect to each Hedge, an Interest
Rate Hedge Security Agreement between Owner and Fannie Mae and substantially in
the form of Exhibit E (subject to modifications approved by Fannie Mae), as such
agreement may be amended, supplemented, otherwise modified or amended and
restated from time to time
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in accordance with its terms, and "HEDGE SECURITY AGREEMENTS" means every Hedge
Security Agreement, collectively.
"HEDGE SHORTFALL CASH COLLATERAL" means either (i) a letter of credit in
form and substance and provided by a financial institution satisfactory to
Fannie Mae in its discretion or (ii) cash collateral deposited with Fannie Mae
or its designee and otherwise held in a manner approved by Fannie Mae in its
discretion.
"IMPOSITIONS" means, with respect to any Property, all real estate and
personal property taxes, water, sewer and vault charges and all other taxes,
levies, assessments, common charges and other similar charges, general and
special, ordinary and extraordinary, foreseen and unforeseen, of every kind and
nature whatsoever, which at any time prior to, at or after the execution of this
Agreement may be assessed, levied or imposed by, in each case, a Governmental
Authority or any other Person upon such Property or the rents or the ownership,
use, occupancy or enjoyment thereof, and any interest, costs or penalties with
respect to any of the foregoing; but excluding all documentary stamp, recording,
transfer, mortgage, intangible or filing or other similar taxes or fees.
"INDEBTEDNESS" of any Person at any date means, without duplication, (a)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
under Financing Leases, (d) all obligations of such person in respect of
acceptances issued or created for the account of such Person, (e) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof,
and (f) all Contingent Obligations; "Indebtedness," however, shall exclude
endorser liability on checks endorsed in the ordinary course of such Person's
business.
"INDEPENDENT DIRECTOR" shall mean a director of a Person who is not at the
time of appointment and has not been at any time during the preceding five (5)
years and does not become subsequently: (i) a member, partner, director,
stockholder, officer or employee of such Person or any Affiliate of such Person;
(ii) a creditor, supplier, independent contractor, manager, or any other person
who derives more than 25% of its gross revenues from its activities with such
Person or any Affiliate of such Person; (iii) a person controlling any such
partner, stockholder, creditor, supplier, independent contractor, manager, or
any other person; (iv) the legal or beneficial owner, at any time while serving
as a director, of any beneficial interest in such Person or any Affiliate of
such Person; or (v) a member of the immediate family of any such stockholder,
partner, officer, employee, creditor, supplier, director, independent
contractor, manager, or any other person of such Person or any Affiliate of such
Person. Notwithstanding anything to the contrary set forth above, an
Independent Director may be a partner of any outside law firm who is engaged in
the practice of law on a full-time basis.
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"INITIAL HEDGE PERIOD" shall have the meaning given that term in section
3.1(b).
"INITIAL RESET PERIOD" shall have the meaning given that term in section
3.1(a).
"INSURANCE PROCEEDS" means, with respect to any Property, all insurance
proceeds, damages, claims and rights of action and the right thereto under any
insurance policies with respect to a Casualty insuring and relating to any
portion of such Property.
"INTEREST ACCOUNT", with respect to particular Related Bonds, shall have
the meaning given that term in the Related Indenture, and "Interest Accounts"
shall mean every such Interest Account, collectively.
"INTEREST RESERVE REQUIREMENT", with respect to particular Related Bonds,
shall have the meaning given that term in the Related Indenture.
"ISSUER" means the issuer with respect to an issue of Related Bonds, and
"Issuers" means every such Issuer, collectively. As of the date hereof, the
Issuer with respect to each Bond Property is listed on Exhibit A.
"ISSUER DEFAULT" shall have the meaning given that term in section 7.2(c).
"LEASE" means any lease, any sublease or subsublease, license, concession
or other agreement (whether written or oral and whether now or hereafter in
effect) pursuant to which any Person is granted a possessory interest in, or
right to use or occupy all or any portion of any space in any Property, and
every modification, amendment or other agreement relating to such lease,
sublease, subsublease or other agreement entered into in connection with such
lease, sublease, subsublease or other agreement, and every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto.
"LIABILITIES" shall have the meaning set forth in section 4.5(a).
"LIEN" means any mortgage, deed of trust, deed to secure debt, charge
(whether fixed or floating), pledge, lien, encumbrance, assignment,
hypothecation, security interest, conditional sale, capital lease or other title
retention, preferential right, trust arrangement or any other encumbrance,
security agreement or arrangement securing any obligation of any Person.
"MANCHESTER NOMINEE AGREEMENT" means that certain Nominee Agreement dated
as of August 1, 1996 between Owner, as principal, and Manchester Nominee Corp.,
as agent.
"MANCHESTER NOMINEE CORP." means EQR-Manchester Hill Vistas, Inc., an
Illinois corporation, the legal title holder of the Bond Property, commonly
known as Wellington Hill Apartments.
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"MANCHESTER ORGANIZATIONAL DOCUMENTS" shall have the meaning given such
term in section 2.1(a).
"MANAGER" means Equity Residential Properties Management Limited
Partnership, an Illinois limited partnership.
"MANAGEMENT AGREEMENTS" means the Property Management Agreements between
Owner (or in the case of a Nominee Property, the respective Nominee Corp.) and
Manager identified on Exhibit H hereto.
"MATERIAL ADVERSE EFFECT" means any circumstance, act, condition or event
of whatever nature (including any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding), whether singly or in
conjunction with any other event or events, act or acts, condition or
conditions, or circumstance or circumstances, whether or not related, that could
reasonably be expected to have a material adverse change in or a materially
adverse effect upon the business, operations, property or condition (financial
or otherwise) of any Person.
"MATERIAL ADVERSE IMPACT" means any circumstance, act, condition or event
of whatever nature (including any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding), whether singly or in
conjunction with any other event or events, act or acts, condition or
conditions, or circumstance or circumstances, whether or not related, that could
reasonably be expected to have a material adverse change in or a materially
adverse effect upon any of: (a) the value, financial condition, operations,
property or business of any Property; (b) Fannie Mae's ability to have recourse
against any Property; (c) the rights and remedies of Fannie Mae under any
Transaction Documents or under this Agreement or the present or future ability
of Owner to perform the Obligations; or (d) the validity, priority, perfection
or enforceability of any Related Mortgage, this Agreement or any other
Transaction Document or the rights or remedies of Fannie Mae under any
Transaction Document.
"MAXIMUM RATE", with respect to an issue of Related Bonds, shall have the
meaning given that term in the Related Indenture.
"MINIMUM SUBSTITUTE PROPERTY VALUE" means, with respect to each Released
Property, the Allocable Facility Amount for such Released Property divided by
.618.
"MODE" with respect to each Mortgage Loan, shall have the meaning given
that term in the Related Indenture.
"MOODY'S INVESTORS SERVICE" means Moody's Investors Service, Inc., a
corporation organized and existing under the laws of the State of Delaware, and
its successors and assigns, if such successors and assigns shall continue to
perform the functions of a securities rating agency.
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"MORTGAGE" means any Bond Mortgage and any Reimbursement Mortgage,
individually, and "MORTGAGES" means every such Mortgage, collectively.
"Mortgage" shall include any Security Instrument in favor of Fannie Mae or a
Related Trustee on any New Property from and after the date of its addition to
the Fannie Mae Credit Facility, and shall exclude any Mortgage on a Released
Property released from the lien of such Mortgage, from and after the date of
release.
"MORTGAGE DOCUMENTS" means, collectively, the Bond Property Loan Documents
for all of the Bond Properties and the Reimbursement Loan Documents.
"MORTGAGE LOAN", with respect to an issue of Related Bonds, shall have the
meaning given that term in the Related Indenture, and "MORTGAGE LOANS" shall
mean every such Mortgage Loan, collectively.
"MORTGAGE NOTE RATE", with respect to a Related Mortgage Note, shall have
the meaning assigned to such term in such Related Mortgage Note.
"MORTGAGE RIGHTS" shall have the meaning given such term in the Related
Fannie Mae Collateral Agreement.
"MULTIFAMILY RESIDENTIAL PROPERTY" means a residential property containing
five or more dwelling units in which not more than twenty percent (20%) of the
net rentable area is or will be rented to non-residential tenants.
"NET OPERATING INCOME" means, for any period, with respect to any of the
Properties, the amount, if any, without duplication, by which the Gross Cash
Flow for such Property during such period exceeds the Operating Expenses for
such Property during such period.
"NEW ADDITIONAL PROPERTY" means a Multifamily Residential Property
substituted for an Additional Mortgaged Property pursuant to section 5.2 or
otherwise added to the Fannie Mae Credit Facility by Owner as Collateral for the
Obligations.
"NEW BOND PROPERTY" means a Multifamily Residential Property added to the
Fannie Mae Credit Facility in connection with Fannie Mae's issuance of a new
Related Fannie Mae Collateral Agreement.
"NEW PROPERTY" means a New Additional Property or a New Bond Property.
"NEW PROPERTY CONFIRMATION" shall have the meaning given that term in
section 5.4.
"NOMINEE AGREEMENT" means either the Manchester Nominee Agreement or the
Ravens Crest Nominee Agreement individually, and "NOMINEE AGREEMENTS" means
every such Nominee Agreement, collectively.
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"NOMINEE CORP." means either Manchester Nominee Corp. or Ravens Crest
Nominee Corp. individually, and "NOMINEE CORPS." means every such Nominee Corp.,
collectively.
"NOMINEE CORP. ORGANIZATIONAL DOCUMENTS" means the Manchester
Organizational Documents and the Ravens Crest Organizational Documents,
collectively.
"NOMINEE PROPERTY" means either of (i) that certain Bond Property located
in Manchester, Hillsborough County, New Hampshire and commonly known as
Wellington Hill Apartments, or (ii) that certain Additional Mortgaged Property
located in Plainsboro, Middlesex County, New Jersey and commonly known as Ravens
Crest Apartments, and "Nominee Properties" means every such Nominee Property,
collectively.
"OBLIGATIONS" means the obligations of Owner (i) to pay principal,
interest and fees (including the Pass-Through Rate and the Set Rate, each as
defined in the Related Mortgage Notes) and any other amounts on the Mortgage
Loans when due and payable, (ii) to pay all other amounts payable under the
Transaction Documents, (iii) to make all required deposits into the Principal
Reserve Funds, Interest Accounts, the Replacement Reserve Accounts, the Central
Account, the Property Accounts, the Custodial Accounts and any and all other
loan funds, escrow funds, revenue funds, debt service funds, reserve funds,
redemption funds or other funds or accounts required to be maintained under the
Transaction Documents, (iv) to reimburse Fannie Mae and Servicer for all
Advances and for all other sums advanced and costs and expenses incurred by
Fannie Mae and Servicer in accordance with the terms of this Agreement or any
other Transaction Document, (v) to pay all other amounts payable under the
Transaction Documents, and (vi) to observe and perform each of the terms,
conditions and provisions of this Agreement and the other Transaction Documents.
"OFFICIAL STATEMENT" means the Official Statement or any reoffering or
remarketing circular approved by Owner and issued in connection with the
issuance or remarketing of an issue of Related Bonds, as such statement may be
amended, supplemented, otherwise modified or amended and restated from time to
time in accordance with its terms, and "OFFICIAL STATEMENTS" means every such
Official Statement, collectively.
"OPERATING EXPENSES" means, for any period, with respect to any of the
Properties, the aggregate of all direct, ordinary, normal, recurring and
necessary expenses thereof including, without duplication, (a) Impositions, (b)
property and liability insurance premiums, (c) wages, salaries and benefits of
personnel employed on site to manage, lease, maintain and operate such Property,
(d) costs or expenses of utility services to such Property and tenant spaces to
the extent payable by Owner, (e) costs or expenses of providing security
services to such Property, if any, (f) costs or expenses of in-house or outside
service arrangements for landscaping, janitorial, window washing and cleaning,
trash, debris, make ready units, cable and satellite television and other
services, (g) expenses of maintaining, repairing and cleaning the grounds,
parking, amenities, exterior and interior spaces of such Property, (h) expenses
of repairing and maintaining in good operable condition the
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mechanical, structural, electrical, elevator, heating, ventilating, air
conditioning and plumbing systems, (i) property management fees payable to
parties other than Owner (and specifically including management fees paid to any
Affiliate of Owner), (j) administrative expenses including advertising incurred
at the site of such Property, (k) legal fees associated with lease documentation
and tenant matters and legal, accounting and other professional fees relating to
the operation of the Properties, (l) (for all purposes hereunder other than the
calculation of Value) the replacement and repair amount with respect to such
Property (based on historical costs), (m) costs for water and sewage fees, and
(n) any other property operation items that are not treated as capitalized
expenses under GAAP. All of the foregoing (including Impositions) shall be
computed on an accrual basis and in accordance with customary real estate
management accounting principles consistently applied. During any period the
Properties are managed by an Affiliate of Owner, Operating Expenses shall also
include an amount equal to the difference, if any, by which management fees paid
by owners of similar properties in the same geographic location exceed
management fees then payable by Owner. In addition, for all purposes Operating
Expenses shall exclude (i) payments on the Obligations and any other interest
payments or principal payments on any Indebtedness (including payments into the
Principal Reserve Funds), (ii) depreciation and amortization, (iii) all legal,
accounting and professional fees not included in clause (k) above, and (iv)
items that would be treated as capital expenses under GAAP consistently applied
and calculated in accordance with Fannie Mae Form 4254.
"OP GUARANTY" means that certain Payment Guaranty dated as of August 1,
1996, executed by OP Partner for the benefit of Fannie Mae.
"OP ORGANIZATIONAL DOCUMENTS" shall have the meaning set forth in section
2.1(a).
"OP PARTNER" means ERP Operating Limited Partnership, an Illinois limited
partnership.
"OP PARTNERSHIP AGREEMENT" shall have the meaning set forth in section
2.1(a).
"OP PARTNERSHIP CERTIFICATE" shall have the meaning set forth in section
2.1(a).
"OWNER" means EQR-Bond Partnership, a Georgia general partnership.
"OWNER PARTNERSHIP AGREEMENT" shall have the meaning set forth in section
2.1(a).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITS" means all permits, or similar licenses or approvals issued
and/or required by an applicable Governmental Authority or any Applicable Law in
connection with the ownership, use, occupancy, leasing, management, operation,
repair, maintenance or rehabilitation of any Property or Owner's business.
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"PERMITTED LIENS" means, with respect to each Property, (i) exceptions to
title (other than notes or other informational items set forth therein)
contained in the Fannie Mae Title Commitments or insured over in a manner
approved by Fannie Mae in its discretion; (ii) Liens created by, or permitted
by, the applicable Mortgage Documents and the Bond Documents with respect to
such Property; (iii) Liens created by the Leases with respect to such Property
(including those permitted under Paragraphs 4 and 16 of the Related Mortgages);
(iv) easements, rights-of-way, restrictions on use of real property and other
similar Liens incurred or entered into in the ordinary course of business which,
in the aggregate, are not substantial in amount and individually do not
materially detract from the Value of any Property subject thereto or materially
interfere with the operation and use of, or the ordinary conduct of the business
on, such Property; and (v) Liens approved by Fannie Mae.
"PERSON" means an individual, an estate, a trust, a corporation, a
partnership, a limited liability company or any other organization or entity
(whether governmental or private).
"PLAN" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other agreement
under which more than one employer makes contributions and to which a member of
the Controlled Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions.
"POTENTIAL EVENT OF DEFAULT" means any of the events specified in section
7.1 which with the passage of time or giving of notice or both would constitute
an Event of Default.
"PREPAYMENT PREMIUM", with respect to a Bond Property, shall have the
meaning given such term in the Related Mortgage Note.
"PRINCIPAL RESERVE FUND" with respect to any Bond Property shall have the
meaning given that term in the Related Indenture, and "PRINCIPAL RESERVE FUNDS"
shall mean every such Principal Reserve Fund, collectively.
"PROCEEDS" mean all "proceeds" as such term is defined in Section 9-
306(1) of the UCC and, in any event, shall include all interest, dividends or
other earnings, income or distributions from or in respect of, or from or in
respect of investments or reinvestments of, the Property Accounts, the Central
Account or the Cash Collateral, all collections and distributions with respect
to the Mortgage Loans and all other proceeds of Collateral.
"PROHIBITED ACTIVITIES OR CONDITIONS", with respect to a particular
Mortgage, shall have the meaning given that term in such Mortgage.
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"PROPERTY" means any of the Bond Properties or any of the Additional
Mortgaged Properties, individually. "PROPERTIES" means every such Bond Property
and Additional Mortgaged Property, collectively.
"PROPERTY ACCOUNT" means, with respect to each Property, the Property
Account corresponding to such Property as identified in the Cash Management
Agreement, and "PROPERTY ACCOUNTS" means every such Property Account,
collectively.
"PROPOSED TRANSFER" shall have the meaning given that term in section
5.6(a).
"PROPOSED TRANSFEREE" shall have the meaning given that term in section
5.6(a).
"QRS ARTICLES OF INCORPORATION" shall have the meaning set forth in
section 2.1(a).
"QRS ORGANIZATIONAL DOCUMENTS" shall have the meaning set forth in section
2.1(a).
"QRS PARTNER" means QRS-Bond, Inc., an Illinois corporation.
"RATING AGENCIES" means Standard & Poor's and Moody's Investors Service,
their successors in interest, or any other nationally recognized rating agency
reasonably acceptable to Fannie Mae.
"RAVENS CREST NOMINEE AGREEMENT" means that certain Nominee Agreement
dated as of August 1, 1996 between Owner, as principal, and Ravens Crest Nominee
Corp., as agent.
"RAVENS CREST NOMINEE CORP." means EQR-Ravens Crest Vistas, Inc., an
Illinois corporation, the legal title holder of the Additional Mortgaged
Property commonly known as Ravens Crest Apartments.
"RAVENS CREST ORGANIZATIONAL DOCUMENTS" shall have the meaning given such
term in section 2.1(a).
"REFUNDING COMMITMENT TERMINATION DATE" shall have the meaning given that
term in section 5.8(b).
"REGULATORY AGREEMENT", with respect to each Bond Property, shall have the
meaning given such term in the Related Indenture, and "REGULATORY AGREEMENTS"
means every such Regulatory Agreement, collectively.
"REIMBURSEMENT LOAN DOCUMENTS" means, collectively, the Reimbursement
Mortgages and each of the other documents, agreements and instruments granting,
evidencing or perfecting security interests granted in connection with the
obligations secured by the Reimbursement Mortgages, including the Hedge Security
Agreements, the Cash
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Management Agreement, the OP Guaranty, the Replacement Reserve Agreements, the
Assignment of Management Agreement, title policies, UCC fixture filings and UCC
financing statements, as each such document, agreement or instrument may be
amended, supplemented, otherwise modified or amended and restated from time to
time in accordance with its respective terms, and "REIMBURSEMENT LOAN DOCUMENT"
means any one of the foregoing, individually.
"REIMBURSEMENT MORTGAGES" means, collectively, the first priority Security
Instruments on each of the Additional Mortgaged Properties securing the
obligations of Owner (and, if applicable, a Nominee Corp.) under all of the
Related Mortgage Notes and under this Agreement, and the second priority
Security Instruments on each of the Bond Properties securing the obligations of
Owner (and, if applicable, a Nominee Corp.) under all of the Related Mortgage
Notes, other than the Related Mortgage Note evidencing the Mortgage Loan secured
by the first priority Mortgage on such Bond Property, and under this Agreement,
and "REIMBURSEMENT MORTGAGE" means any one of the foregoing, individually.
"RELATED ACT", with respect to particular Related Bonds, shall have the
meaning given to the term "Act" in the Related Indenture.
"RELATED BOND DOCUMENTS" means, with respect to particular Related Bonds,
the Related Bonds, the Related Indenture, the Related Fannie Mae Collateral
Agreement, the Regulatory Agreement (and any other agreement relating to rental
restrictions on the applicable Bond Property), the Related Pledge Agreement, the
Financing Agreement, a Tax Certificate (or other applicable agreement relating
to arbitrage in connection with the proceeds of such Related Bonds) and all
other documents, instruments and agreements executed and delivered by or on
behalf of any EQR Party or by which any EQR Party is bound and delivered in
connection with the issuance, sale, delivery and/or remarketing of the Related
Bonds, as each such agreement or instrument may be amended, supplemented,
otherwise modified or amended and restated from time to time in accordance with
its terms.
"RELATED BOND MORTGAGE" with respect to a particular Bond Property, means
the first priority Bond Mortgage encumbering such Bond Property and securing the
Related Mortgage Note.
"RELATED BONDS" means, with respect to a particular Bond Property, the
tax-exempt multifamily revenue bonds issued pursuant to the Related Indenture.
"RELATED FANNIE MAE COLLATERAL AGREEMENT" means, with respect to a
particular Bond Property, the Collateral Agreement between Fannie Mae and the
Related Trustee pursuant to which Fannie Mae has agreed to provide credit
enhancement and liquidity support for the Related Bonds, as such Related Fannie
Mae Collateral Agreement may be amended, supplemented, otherwise modified or
amended and restated from time to time in accordance with its terms, and
"RELATED FANNIE MAE COLLATERAL AGREEMENTS" means every such Related Fannie Mae
Collateral Agreement, collectively.
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"RELATED INDENTURE" means, with respect to an issue of Related Bonds, the
indenture of trust between an Issuer and a Related Trustee pursuant to which
such Related Bonds were issued, as such Related Indenture may be amended,
supplemented, otherwise modified or amended and restated from time to time in
accordance with its terms, and "RELATED INDENTURES" means every such Related
Indenture, collectively.
"RELATED MORTGAGE" means (a) with respect to a particular Bond Property,
the Related Bond Mortgage and the Related Second Mortgage, collectively,
encumbering such Bond Property, and (b) with respect to a particular Additional
Mortgaged Property, the Reimbursement Mortgage encumbering such Additional
Mortgaged Property.
"RELATED MORTGAGE NOTE" means, with respect to a Bond Property, the
Multifamily Note (together with all addenda thereto) executed by Owner (and with
respect to the Additional Bond Property, by Manchester Nominee Corp.) in favor
of an Issuer and secured by, among other things, a Related Bond Mortgage on such
Bond Property, as such Related Mortgage Note may be amended, supplemented,
otherwise modified or amended and restated from time to time in accordance with
its terms, and "RELATED MORTGAGE NOTES" means every such Related Mortgage Note,
collectively.
"RELATED PLEDGE AGREEMENT", with respect to particular Related Bonds,
shall have the meaning given to the term "Pledge Agreement" in the Related
Indenture.
"RELATED PURCHASED BOND", with respect to each issue of Related Bonds,
shall have the meaning given the term "Purchased Bond" in the Related Indenture,
and "RELATED PURCHASED BONDS" means every such Related Purchased Bond,
collectively.
"RELATED REMARKETING AGREEMENT", with respect to particular Related Bonds,
shall have the meaning given to the term "Remarketing Agreement" in the Related
Indenture.
"RELATED SECOND MORTGAGE", with respect to a particular Bond Property,
means the second priority Reimbursement Mortgage encumbering such Bond Property.
"RELATED TRUSTEE" with respect to an issue of Related Bonds, means the
entity designated as the "Trustee" under the Related Indenture, and "RELATED
TRUSTEES" means every such Related Trustee, collectively.
"RELEASE PRICE CASH COLLATERAL" shall have the meaning given that term in
section 5.3(a).
"RELEASED PROPERTY" means a Property released or proposed to be released
from the lien of a Mortgage pursuant to section 5.2 or section 5.3.
"REMARKETING AGENT", with respect to particular Related Bonds, shall have
the meaning given such term in the Related Indenture.
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"REMARKETING PERIOD" shall have the meaning given that term in section
7.1(p).
"RENT ROLL" shall have the meaning given that term in section 2.1(r).
"RENTS AND PROFITS" with respect to any Property, shall have the meaning
given that term in section 4.14.
"REPLACEMENT RESERVE ACCOUNT", with respect to a particular Property,
means the replacement reserve account established pursuant to the Replacement
Reserve Agreement relating to such Property, and "REPLACEMENT RESERVE ACCOUNTS"
shall mean every such Replacement Reserve Account, collectively.
"REPLACEMENT RESERVE AGREEMENT" means each Replacement Reserve and
Security Agreement between Owner and Fannie Mae relating to a Property and
Owner's obligation to fund certain replacement reserve accounts, as such
agreement may be amended, supplemented, otherwise modified or amended and
restated from time to time in accordance with its terms, and "REPLACEMENT
RESERVE AGREEMENTS" means every such Replacement Reserve Agreement,
collectively.
"RESERVE COMPONENT" means, with respect to each issue of Related Bonds
that is part of the Fannie Mae Credit Facility as of the date hereof, .30% per
annum, or 30 basis points, and with respect to each issue of Related Bonds with
respect to each New Bond Property added to the Fannie Mae Credit Facility
pursuant to section 5.4, the Reserve Component shall be the amount set forth in
the New Property Confirmation with respect to such New Bond Property.
"RESET PERIOD", with respect to particular Related Bonds, shall have the
meaning given such term in the Related Indenture.
"RESTATEMENT CLOSING DATE" means December 11, 1996.
"REUNDERWRITING" shall have the meaning given to such term in section 5.5.
"REUNDERWRITING DSC TESTPOINT" initially, means 1.85:1; provided, however,
that such Reunderwriting DSC Testpoint shall be subject to adjustment in
accordance with section 5.8(d).
"REUNDERWRITING LTV TESTPOINT" initially, means sixty-one and eight-
tenths of one percent (61.8%); provided, however, that such Reunderwriting LTV
Testpoint shall be subject to adjustment in accordance with section 5.8(d).
"RESET RATE", with respect to particular Related Bonds, shall have the
meaning given such term in the Related Indenture.
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"SECURITY INSTRUMENT" means a written instrument creating a valid lien on
a Property either in favor of or held by Fannie Mae and/or a Related Trustee, as
such instrument may be amended, supplemented, otherwise modified or amended and
restated from time to time in accordance with its terms. A Security Instrument
may be in the form of a mortgage, deed of trust, deed to secure debt or security
deed.
"SERVICER" means the independent contractor engaged to service the
Mortgage Loans, the Bond Property Loan Documents and the Reimbursement Documents
for Fannie Mae and any replacements or successors engaged by Fannie Mae;
provided, however, that nothing set forth in this definition shall limit the
provisions of section 6.1. The initial Servicer pursuant to a written contract
with Fannie Mae is Washington Capital DUS, Inc.
"SERVICING FEE COMPONENT" means 0.1% per annum or 10 basis points
initially; provided, however, that in the event a successor servicer is
appointed to service the Mortgage Loans, the Servicing Fee Component shall be
adjusted (subject to section 6.1) to the amount agreed upon among Fannie Mae and
such successor servicer, but in any event such amount shall not be greater than
.125% or 12.5 basis points.
"SERVICING AGREEMENT" means any agreement with respect to the servicing
of the Mortgage Loans, the Bond Property Loan Documents and the Reimbursement
Documents between Fannie Mae and an independent contractor, if any, designated
from time to time by Fannie Mae as the Servicer of the Mortgage Loans, the Bond
Property Loan Documents and the Reimbursement Documents, as each such agreement
may be amended, supplemented, otherwise modified or amended and restated from
time to time in accordance with its terms; provided that the Servicing Agreement
may be a Fannie Mae guide or announcement made applicable to the Mortgage Loans
by an agreement between Fannie Mae and the Servicer.
"SHORTFALL HEDGE" shall have the meaning given that term in section
3.1(e).
"SINGLE-PURPOSE" means, with respect to a Person, that such Person at all
times since its formation: (i) has been a duly formed and existing partnership
or corporation, as the case may be; (ii) has been duly qualified in each
jurisdiction in which such qualification was at such time necessary for the
conduct of its business; (iii) has complied with the provisions of its
organizational documents and the laws of its jurisdiction of formation in all
material respects; (iv) has observed all customary formalities regarding its
partnership or corporate existence, as the case may be; (v) has accurately
maintained its financial statements, accounting records and other partnership or
corporate documents separate from those of any other Person subject to
appropriate consolidation (for accounting purposes) with those of other
Affiliates in accordance with GAAP (provided, however, that all consolidated
financial statements prepared with respect to any Affiliate of Owner will
include footnote references to indicate that the Properties are owned by a
partnership the equity interests in which are owned in part by a wholly-owned
subsidiary of EQR and in part by OP Partner); (vi) has not commingled its assets
or funds with those of any other Person; (vii) has
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accurately maintained its own bank accounts, payroll and books and accounts
separate from those of any other Person; (viii) has paid its own liabilities
from its own separate assets; (ix) has identified itself in all dealings with
the public under its own name (which may include the word "Equity") and as a
separate and distinct entity; (x) has not identified itself as being a division
or a part of any other Person; (xi) has not identified any other Person as being
a division or a part of such Person; (xii) has been adequately capitalized in
light of its contemplated business operations; (xiii) has not assumed,
guaranteed or become obligated for the liabilities of any other Person (except
in connection with the endorsement of negotiable instruments in the ordinary
course of business) or held out its credit as being available to satisfy the
obligations of any other Person, except as otherwise permitted herein and so
long as such other Person is not an Affiliate of such Single-Purpose Person;
(xiv) has not made loans or advances to (or pledged its assets for) any other
Person (except loans, advances or pledges expressly permitted hereunder and made
in the ordinary course of business, and provided that payments collected in
arrears shall not by virtue of such fact alone be considered loans); (xv) has
not entered into and was not a party to any transaction with any Affiliate of
such Person, except in the ordinary course of business and on terms which are no
less favorable to such Person than would be obtained in a comparable
arm's-length transaction with an unrelated third party, except as identified on
Schedule 2.1(am).B; (xvi) has conducted its own business in its own name; (xvii)
has paid the salaries of its own employees, if any, and maintained a sufficient
number of employees in light of its contemplated business operations; (xviii)
has allocated fairly and reasonably any overhead for shared office space; (xix)
has used stationery, invoices and checks separate from those of any other
Person; (xx) has not engaged in a non-exempt prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code; (xxi) has not acquired
obligations or securities of its partners or Affiliates (provided, however, that
QRS Partner shall not fail to qualify as a Single-Purpose entity because of its
ownership of general partnership interests in Owner); and (xxii) has corrected
any known misunderstanding regarding its separate identity. Notwithstanding the
foregoing, Owner shall not fail to be a Single-Purpose entity solely because of
(a) business dealings with Manager that are conducted in accordance with the
terms of the Management Agreements, or (b) distributions it may make to its
constituent partners.
"SLEEPY HOLLOW PUBLIC IMPROVEMENTS DEED OF TRUST" means that certain
Second Deed of Trust executed by Sleepy Hollow Associates, L.P. a Kansas limited
partnership, to Heather Brown, as Trustee, for the benefit of the City of Kansas
City, Missouri, dated March 12, 1987 and filed April 8, 1987 as Document No.
K-767723 in Book K-1661 at Page 1694 of the land records of Jackson County,
Missouri, and securing an original amount of $291,000.00.
"SLEEPY HOLLOW PUBLIC IMPROVEMENTS AGREEMENT" means that certain
Cooperative Agreement for Public Improvements, by and between Sleepy Hollow
Associates, L.P. a Kansas limited partnership and the City of Kansas City,
Missouri, filed April 8, 1987 as Document No. K-767720 in Book K-1661 at page
1670 of the land records of Jackson County, Missouri.
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"SPRINGS COLONY CREDIT ENHANCEMENT" shall have the meaning given that term
in section 5.8(a).
"SPRINGS COLONY ISSUER" means the Florida Housing Finance Agency.
"SPRINGS COLONY PROJECT" means that certain Multifamily Residential
Property located in Altamonte Springs, Seminole County, Florida and commonly
known as Springs Colony Apartments.
"SPRINGS COLONY REFUNDING BONDS" means an issue of tax-exempt housing
finance bonds issued by the Springs Colony Issuer in order to refinance (by
repurchase and a subsequent remarketing pursuant to an amended and restated
trust indenture and related bond documents) or refund (by the issuance of new
refunding bonds) certain existing housing finance bonds with respect to the
Springs Colony Project.
"SPRINGS COLONY REFUNDING DOCUMENTS" shall have the meaning given that
term in section 5.8(b).
"SPRINGS COLONY REFUNDING MORTGAGE LOAN" shall have the meaning given such
term in section 5.8(b).
"SPRINGS COLONY REFUNDING TRANSACTION" means the tax-exempt bond issue and
mortgage loan transaction to be credit enhanced by Fannie Mae's Springs Colony
Credit Enhancement as contemplated in section 5.8.
"STANDARD & POOR'S" means Standard & Poor's, a division of The McGraw Hill
Companies, Inc. and its successors and assigns if such successors and assigns
shall continue to perform the functions of a securities rating agency.
"SUBSIDIARY" means, as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.
"SUBSTITUTION PERCENTAGE" shall have the meaning given that term in
section 5.2(a).
"SWAP" means an interest rate swap, and includes an interest rate swap
which has its first "calculation period" commencing on the last day of a Reset
Period which commences on or after the date such swap was obtained (i.e. a
"future" swap).
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"TAX CERTIFICATE" (i) with respect to the Related Bonds for that certain
Bond Property located in Manchester, Hillsborough County, New Hampshire and
commonly known as Wellington Hill Apartments, shall have the meaning given to
the term or "Tax Certificate of the Borrower" in the Related Indenture, and (ii)
with respect each other issue of Related Bonds, shall have the meaning given to
the term "Tax Certificate", and "TAX CERTIFICATES" means every such Tax
Certificate, collectively.
"TAXES" shall have the meaning given that term in section 2.2(u).
"TENDER AGENT", with respect to particular Related Bonds, shall have the
meaning given that term in the Related Indenture.
"TENDERED BONDS" with respect to a Related Indenture shall have the
meaning given that term in such Related Indenture.
"TERMINATION DATE" shall have the meaning given that term in the Related
Fannie Mae Collateral Agreement.
"TERMINATION PAYMENTS" shall have the meaning given that term in section
3.1(i).
"TRANSACTION DOCUMENTS" means, collectively, the Bond Documents, the
Mortgage Documents, this Agreement, the Cash Management Agreement, the OP
Guaranty, the Hedge Documents and all other agreements, instruments or documents
executed by or on behalf of any EQR Party or by which any EQR Party is bound and
delivered in connection with the Bonds, the Mortgage Loans, this Agreement or
the transactions contemplated thereby or hereby, including those listed in
Exhibit C, and "TRANSACTION DOCUMENT" means any one of the foregoing,
individually.
"UCC" or "UNIFORM COMMERCIAL CODE", with respect to a Property, means the
Uniform Commercial Code as in effect in the state where such Property is
located.
"UNDERWRITING RATE" means 6.82%.
"VALUE" means, as of any date of determination, the value attributed to
any Property by Fannie Mae in accordance with the standards and procedures
utilized for underwriting purposes for similar Multifamily Residential
Properties in accordance with the applicable provisions of the DUS Guide as of
such date of determination, it being acknowledged that, to the extent consistent
with the foregoing, in evaluating the Value of a Property, Fannie Mae may take
into account all factors relevant to the value of such Property including the
current condition of the Property, and in evaluating the Value of a Property
without an extended operating history, such Value shall be based on projections
and pro forma satisfactory to Fannie Mae.
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"WEEKLY VARIABLE RATE", with respect to particular Related Bonds, shall
have the meaning given that term in the Related Indenture.
"WITHDRAWAL" means, with respect to an issue of Related Bonds, a
withdrawal of funds from the Principal Reserve Fund with respect to such Related
Bonds in accordance with the terms of the Transaction Documents in order to
either (i) reimburse Fannie Mae for an Advance or (ii) make any payment
otherwise due from Owner under the Related Bond Documents (including a payment
to purchase Related Purchased Bonds on behalf of Owner) other than a payment to
redeem any Related Bonds.
SECTION 1.3 INTERPRETATION.
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The parties to this Agreement acknowledge that each party and their
respective counsel have participated in the drafting and revision of this
Agreement and the other Transaction Documents. Accordingly, the parties agree
that any rule of construction which disfavors the drafting party shall not apply
in the interpretation of this Agreement and the other Transaction Documents or
any statement or supplement or exhibit to this Agreement or to the other
Transaction Documents.
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.1 REPRESENTATIONS AND WARRANTIES OF OWNER.
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To induce Fannie Mae to enter into this Agreement and to execute and
deliver the Related Fannie Mae Collateral Agreements, Owner represents and
warrants to Fannie Mae as follows:
(A) DUE ORGANIZATION; OWNERSHIP STRUCTURE.
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(i) Owner is a Single-Purpose general partnership duly
organized, validly existing and in good standing under the laws of the
State of Georgia pursuant to those certain Articles of General Partnership
dated as of August 1, 1996 (together with all schedules, exhibits and
annexes thereto, the "OWNER PARTNERSHIP AGREEMENT"). A copy of the Owner
Partnership Agreement certified as true, correct and complete by a duly
authorized officer of QRS Partner, has been delivered to Fannie Mae on or
before the date hereof. The Owner Partnership Agreement is in full force
and effect and constitutes the entire agreement of the partners thereof
with respect to Owner, and has not been supplemented, amended or modified.
(ii) QRS Partner and OP Partner are the sole general partners
of Owner. QRS Partner is the record and beneficial owner of, and has good
title to, a one percent (1%) interest in Owner, and OP Partner is the
record and beneficial owner of, and has good title to, a ninety-nine
percent (99%) interest in Owner, in
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each case free and clear of all liens, security interests, options, rights
of first refusal and adverse claims of title of any kind or character, and
no such percentage interest is the subject of any agreement providing for
the sale or transfer thereof.
(iii) QRS Partner is a Single-Purpose corporation duly
organized, validly existing and in good standing under the laws of the
State of Illinois pursuant to those certain Articles of Incorporation
dated as of August 23, 1996 and duly filed on August 26, 1996 in the
office of the Secretary of State of Illinois (the "QRS ARTICLES OF
INCORPORATION"). Copies of the QRS Articles of Incorporation, By-Laws and
other organizational documents of QRS Partner (the "QRS ORGANIZATIONAL
DOCUMENTS"), certified as true, correct and complete by a duly authorized
officer of QRS Partner, have been delivered to Fannie Mae. The QRS
Organizational Documents are in full force and effect and have not been
supplemented, amended or modified.
(iv) OP Partner is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of
Illinois pursuant to (x) that certain Fourth Amended and Restated
Agreement of Limited Partnership dated as of September 30, 1995 (together
with all schedules, exhibits and annexes thereto, the "OP PARTNERSHIP
AGREEMENT"), and (y) that certain Certificate of Limited Partnership duly
filed on May 13, 1993 in the office of the Secretary of State of Illinois
(the "OP PARTNERSHIP CERTIFICATE"). Copies of the OP Partnership
Agreement and the OP Partnership Certificate (the "OP ORGANIZATIONAL
DOCUMENTS"), certified as true, correct and complete by a duly authorized
officer of EQR, have been delivered to Fannie Mae. The OP Organizational
Documents are in full force and effect and constitute the entire agreement
of the partners thereof with respect to the organization of OP Partner,
and have not been supplemented, amended or modified.
(v) EQR is the sole general partner of OP Partner and is the
record and beneficial owner of, and has good title to, not less than a
seventy five percent (75%) interest in OP Partner, free and clear of all
liens, security interests, options, rights of first refusal and adverse
claims of title of any kind or character (except for any options' rights
of first refusal and adverse claims arising under or pursuant to the OP
Partnership Agreement), and such percentage interest is not subject to any
agreement providing for the sale or transfer thereof. EQR is the sole
shareholder of QRS Partner and is the record and beneficial owner of, and
has good title to, a one hundred percent (100%) ownership interest in QRS
Partner, free and clear of all liens, security interests, options, rights
of first refusal and adverse claims of title of any kind or character, and
such percentage interest is not subject to any agreement providing for the
sale or transfer thereof.
(vi) Manchester Nominee Corp. is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Illinois pursuant to those certain Articles of Incorporation duly
filed on March 18, 1994 in the office
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of the Secretary of State of Illinois (the "MANCHESTER CORP. ARTICLES OF
INCORPORATION"). Copies of the Manchester Corp. Articles of
Incorporation, By-Laws and other organizational documents of Manchester
Nominee Corp. (the "MANCHESTER CORP. ORGANIZATIONAL DOCUMENTS") certified
as true, correct and complete by a duly authorized officer of QRS Partner,
have been delivered to Fannie Mae. The Manchester Corp. Organizational
Documents are in full force and effect and have not been otherwise
supplemented, amended or modified. A copy of the Manchester Nominee
Agreement certified as true, correct and complete by a duly authorized
officer of QRS Partner, has been delivered to Fannie Mae on or before the
date hereof. The Manchester Nominee Agreement is in full force and effect
and constitutes the entire agreement of the parties thereto with respect
to the Nominee Property commonly known as Wellington Hill Apartments, and
has not been supplemented, amended or modified.
(vii) Ravens Crest Nominee Corp. is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Illinois pursuant to those certain Articles of Incorporation
dated July 21, 1994 and duly filed on July 22, 1994 in the office of the
Secretary of State of Illinois (the "RAVENS CREST ARTICLES OF
INCORPORATION"). Copies of the Ravens Crest Articles of Incorporation,
By-Laws and other organizational documents of Ravens Crest Nominee Corp.
(the "RAVENS CREST ORGANIZATIONAL DOCUMENTS") certified as true, correct
and complete by a duly authorized officer of QRS Partner, have been
delivered to Fannie Mae. The Ravens Crest Organizational Documents are in
full force and effect and have not been otherwise supplemented, amended or
modified. A copy of the Ravens Crest Nominee Agreement certified as true,
correct and complete by a duly authorized officer of QRS Partner, has been
delivered to Fannie Mae on or before the date hereof. The Ravens Crest
Nominee Agreement (a) is in full force and effect and constitutes the
entire agreement of the parties thereto with respect to the Nominee
Property commonly known as Ravens Crest Apartments, (b) has not been
supplemented, amended or modified and (c) constitutes the legal, valid and
binding obligation of Ravens Crest Nominee Corp.
(viii) Donald Liebentritt is the sole shareholder of each
Nominee Corp. and is the record and beneficial owner of, and has good
title to, a one hundred percent (100%) ownership interest in each Nominee
Corp., free and clear of all liens, security interests, options, rights of
first refusal and adverse claims of title of any kind or character, and
such percentage interest is not subject to any agreement providing for the
sale or transfer thereof.
(ix) Owner has duly made each state and/or local filing and
registration necessary for the conduct of its business in the jurisdiction
of Arizona, California, Florida, Georgia, Kansas, Illinois, Missouri, New
Jersey, New Hampshire and Texas and in each other jurisdiction where the
failure to make any such filing or registration would adversely affect the
validity of, the enforceability of, or the
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ability of Owner to perform the Obligations under this Agreement and the
other Transaction Documents.
(x) Each of QRS Partner and OP Partner is qualified to
transact business and in good standing in the States of Arizona,
California, Florida, Georgia, Kansas, Illinois, Missouri, New Jersey, New
Hampshire and Texas, and in each other jurisdiction in which such
qualification and/or standing is necessary to the conduct of its business
and where the failure to be so qualified would adversely affect the
validity of, the enforceability of, or the ability of Owner to perform the
Obligations under this Agreement and the other Transaction Documents. EQR
is qualified to transact business and is in good standing in the State of
Maryland and in each other jurisdiction in which such qualification and/or
standing is necessary to the conduct of its business and where the failure
to be so qualified would adversely affect the validity of, the
enforceability of, or the ability of Owner to perform the Obligations
under this Agreement and the other Transaction Documents.
(xi) Ravens Crest Nominee Corp. is qualified to transact
business and in good standing in the State of New Jersey and in each other
jurisdiction in which such qualification and/or standing is necessary to
the conduct of its business and where the failure to be so qualified would
adversely affect the validity of, the enforceability of, or the ability of
Owner to perform the Obligations under this Agreement and the other
Transaction Documents.
(xii) Manchester Nominee Corp. is qualified to transact
business and in good standing in the State of New Hampshire and in each
other jurisdiction in which such qualification and/or standing is
necessary to the conduct of its business and where the failure to be so
qualified would adversely affect the validity of, the enforceability of,
or the ability of Owner to perform the Obligations under this Agreement
and the other Transaction Documents.
(xiii) Owner's principal place of business, principal office
and office where it keeps its books and records as to the Collateral is
located at Two North Riverside Plaza, Suite 450, Chicago, Illinois 60606.
(b) POWER AND AUTHORITY. Each of Owner, QRS Partner and the
Nominee Corps. has the requisite power and authority (i) to own its properties
and to carry on its business as now conducted and as contemplated to be
conducted in connection with the performance of its Obligations hereunder and
under the other Transaction Documents and (ii) to execute and deliver this
Agreement and the other Transaction Documents to which it is a party and to
carry out the transactions contemplated by this Agreement and the other
Transaction Documents to which it is a party.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement and the other Transaction Documents have been duly authorized by
all
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necessary action and proceedings by or on behalf of each of Owner, QRS Partner
and the Nominee Corps., and no further approvals or filings of any kind,
including any approval of or filing with any Governmental Authority, are
required by or on behalf of Owner, QRS Partner or the Nominee Corps., as a
condition to the valid execution, delivery and performance by Owner, QRS Partner
or the Nominee Corps. of this Agreement or any of the other Transaction
Documents.
(d) VALID AND BINDING OBLIGATIONS. This Agreement and the other
Transaction Documents have been duly authorized, executed and delivered by each
EQR Party that is a party thereto and (assuming the due authorization, execution
and delivery by the other parties thereto) constitute the legal, valid and
binding obligations of such EQR Party, enforceable against such EQR Party in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles affecting the enforcement of creditors'
rights generally or by equitable principles or by the exercise of discretion by
any Court.
(e) NON-CONTRAVENTION; NO LIENS. Neither the execution and
delivery of this Agreement and the other Transaction Documents to which any EQR
Party is a party, nor the fulfillment of or compliance with the terms and
conditions of this Agreement and the other Transaction Documents to which any
EQR Party is a party, the issuance of the Bonds nor the payment of the
Obligations:
(i) does or will conflict with or result in any breach or
violation of any Applicable Law, rule or regulation enacted or issued by
any Governmental Authority or other agency having jurisdiction over Owner,
QRS Partner or any Nominee Corp., any of the Properties or any other
portion of the Collateral or other assets of Owner, QRS Partner or any
Nominee Corp., or any judgment or order applicable to Owner, QRS Partner
or any Nominee Corp. or to which Owner, QRS Partner or any Nominee Corp.,
any of the Properties or other assets of either Owner, QRS Partner or any
Nominee Corp. are subject, which in any case could have a Material Adverse
Effect or a Material Adverse Impact;
(ii) does or will conflict with or result in any material
breach or violation of, or constitute a default under, any of the terms,
conditions or provisions of the Owner Partnership Agreement, the QRS
Organizational Documents, the Nominee Corp. Organizational Documents, any
indenture, existing agreement or other instrument to which Owner, QRS
Partner or any Nominee Corp. is a party or to which Owner, QRS Partner or
any Nominee Corp., any of the Properties or any other portion of the
Collateral or other assets of Owner, QRS Partner or any Nominee Corp. are
subject and which will remain in effect on or after the Restatement
Closing Date;
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(iii) does or will result in or require the creation of any
Lien on all or any portion of the Collateral or any of the Properties,
except for the Permitted Liens; or
(iv) does or will require the consent or approval of any
creditor of Owner, QRS Partner or any Nominee Corp., any Governmental
Authority or any other Person except such consents or approvals which have
already been obtained, which in any case could have a Material Adverse
Effect or a Material Adverse Impact.
(f) PENDING LITIGATION OR OTHER PROCEEDINGS. Except as set forth
on Schedule 2.1(f), there is no pending or, to the best knowledge of Owner,
threatened action, suit, proceeding or investigation, at law or in equity,
before any court, board, body or official of any Governmental Authority or
arbitrator against or affecting any Property or any other portion of the
Collateral or other assets of any EQR Party, which, if decided adversely to such
EQR Party, (i) would have a Material Adverse Effect on such EQR Party or would
have an Material Adverse Impact, or (ii) challenges the exclusion of interest on
any Related Bonds from gross income for federal income tax purposes. Owner is
not in default with respect to any order of any Governmental Authority, which in
any case could have a Material Adverse Effect or a Material Adverse Impact.
(g) SOLVENCY. No EQR Party is insolvent or will be rendered
insolvent by the transactions contemplated by this Agreement or the other
Transaction Documents and after giving effect to such transactions, none of the
EQR Parties will be left with an unreasonably small amount of capital with which
to engage in its business or undertakings, nor will any EQR Party have incurred,
have intended to incur, or believe that it has incurred, debts beyond its
ability to pay such debts as they mature. Owner did not receive less than a
reasonably equivalent value in exchange for incurrence of the Obligations. There
(i) is no contemplated, pending or, to the best of Owner's knowledge, threatened
bankruptcy, reorganization, receivership, insolvency or like proceeding, whether
voluntary or involuntary, affecting any EQR Party or any of the Properties and
(ii) has been no assertion or exercise of jurisdiction over any EQR Party or any
of the Properties by any court empowered to exercise bankruptcy powers.
(h) TITLE. With respect to each Property other than the Nominee
Properties, Owner has good, valid, marketable and indefeasible fee simple title
in such Property, free and clear of all Liens whatsoever except the Permitted
Liens. With respect to each Nominee Property, (i) the respective Nominee Corp.
holds record title solely on behalf of Owner, subject to the respective Nominee
Agreement, free and clear of all Liens whatsoever except the Permitted Liens,
(ii) Owner owns and holds all beneficial ownership interests and Owner has good,
valid, marketable title, free and clear of all Liens whatsoever except the
Permitted Liens, pursuant to the respective Nominee Agreement, (iii) Owner has
the sole undivided right, power and authority to direct the respective Nominee
Corp. to sell, convey, mortgage, pledge, otherwise encumber, lease, grant
easements and otherwise take
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any action with respect to such Nominee Property and (iv) the respective Nominee
Corp. has no right, power or authority to sell, convey, mortgage, pledge,
otherwise encumber, lease, grant easements or otherwise take any action with
respect to such Nominee Property except at the direction of Owner. Each Bond
Mortgage, if and when properly recorded in the appropriate records, together
with any Uniform Commercial Code financing statements required to be filed in
connection therewith, will create or has created a valid, perfected first lien
on the Bond Property intended to be encumbered thereby (including the Leases of
such Bond Property and the Rents and Profits and all rights to collect Rents and
Profits under such Leases), subject only to Permitted Liens. Each Reimbursement
Mortgage with respect to an Additional Mortgaged Property, if and when properly
recorded in the appropriate records, together with any Uniform Commercial Code
financing statements required to be filed in connection therewith, will create
or has created a valid, perfected first priority lien on the Additional
Mortgaged Property intended to be encumbered thereby (including the Leases of
such Additional Mortgaged Property and the Rents and Profits and all rights to
collect Rents and Profits under such Leases), subject only to Permitted Liens.
Each Reimbursement Mortgage with respect to a Bond Property, if and when
properly recorded in the appropriate records, together with any Uniform
Commercial Code financing statements required to be filed in connection
therewith, will create or has created a valid, perfected second priority lien on
the Bond Property intended to be encumbered thereby (including the Leases of
such Bond Property and the Rents and Profits and all rights to collect Rents and
Profits under such Leases), subject only to Permitted Liens. Except for (i) any
Permitted Liens and (ii) claims for work, labor, or materials affecting any
Properties that will either (x) be paid in full in the ordinary course of
Owner's business, or (y) if in dispute, bonded over in the ordinary course of
Owner's business, and which claims in the aggregate do not exceed $250,000,
there are no Liens or claims for work, labor or materials affecting any Property
which are or may be prior to, subordinate to, or of equal priority with, the
Liens created by the Mortgage Documents.
(i) COMPLIANCE WITH EXISTING BOND ISSUE AND EXISTING SECURITY
INSTRUMENT. Owner has no knowledge, and since Owner acquired its interests in
the Bond Properties Owner has not received notice, of any event or condition
that remains uncured that would constitute an event of default or which, with
the lapse of time, if not cured, or with the giving of notice or both, would
become an event of default under the Existing Security Instrument or any other
document executed in connection with the Existing Bond Issue. Owner has
complied in all material respects with the requirements of the loan agreement
executed in connection with the Existing Bond Issue.
(j) COMPLIANCE WITH TAX CERTIFICATES. Neither Owner nor
Manchester Nominee Corp. has taken and neither will take any action, or permit
any action that is within the control of Owner or Manchester Nominee Corp., that
would impair the exclusion from gross income for federal income tax purposes of
the interest payable on the Existing Bond Issue or any of the Bonds. As of the
Restatement Closing Date, Owner and Manchester Nominee Corp. are in compliance
with all material requirements of all of the Tax Certificates. Each of Owner
and Manchester Nominee Corp. has complied and will
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comply with all the material terms and conditions of the Tax Certificates,
including the terms and conditions of the exhibits thereto, and the
representations set forth in the Tax Certificates pertaining to Owner and, if
applicable, Manchester Nominee Corp. are true and accurate in all material
respects.
(k) COMPLIANCE WITH REGULATORY AGREEMENTS. Each of the Bond
Properties is in compliance with all material requirements of the applicable
Regulatory Agreement. Owner intends to cause the residential units in each Bond
Property to be rented or available for rental on a basis which satisfies the
requirements of the Regulatory Agreement with respect to such Bond Property. All
Leases with respect to each Bond Property will comply with all material
requirements of the Regulatory Agreement with respect to such Bond Property and
in all material respects with all Applicable Laws.
(l) TAXES. Owner has filed or caused to be filed all property and
similar tax returns required to have been filed by it with respect to each
Property and has paid and discharged, or caused to be paid and discharged, all
installments for the payment of real estate, property or similar taxes due to
date, and all other material Impositions imposed against, affecting or relating
to each Property other than those which have not become due, together with any
fine, penalty, interest or cost for nonpayment pursuant to such returns or
pursuant to any assessment received by it, except with regard to tax contests
being diligently prosecuted in accordance with the requirements of the Related
Mortgages. Owner has no knowledge of any new proposed tax, levy or other
governmental or private assessment or charge in respect of any Property which
has not been disclosed in writing to Fannie Mae.
(m) ZONING. Each Property complies in all material respects with
all Applicable Laws affecting such Property, except to the extent such failure
to comply would not have a Material Adverse Impact. Without limiting the
foregoing, all material Permits, including certificates of occupancy, have been
issued and are in full force and effect, except to the extent that the lack of
such Permits and such certificates of occupancy would not have a Material
Adverse Impact. Neither Owner, any Nominee Corp. or, to the knowledge of Owner,
any former owner of any Property, has received any written notification or
threat of any actions or proceedings regarding the noncompliance or
nonconformity of any Property with any Applicable Laws or Permits, nor is Owner
or any Nominee Corp. otherwise aware of any such pending actions or proceedings,
except to the extent that such pending or threatened actions or proceedings
would not have a Material Adverse Impact.
(n) LIABILITY FOR HAZARDOUS SUBSTANCES. Neither Owner, QRS
Partner, any Nominee Corp. or OP Partner has any liability, contingent or
otherwise, in connection with any Hazardous Substance Activity on or affecting
any Property in violation of Hazardous Materials Laws in an amount in excess of
$100,000 with respect to any Property.
(o) PROHIBITED ACTIVITIES OR CONDITIONS. Except as disclosed in
the Environmental Reports delivered to Fannie Mae prior to the date of this
Agreement and described on Schedule 2.1(o), or otherwise disclosed in writing by
Owner to Fannie Mae
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prior to the date of this Agreement, (i) to the best knowledge of Owner, no
Prohibited Activities or Conditions exist or have existed at, upon, under or
within any Property that have not been remedied and (ii) neither Owner, QRS
Partner, any Nominee Corp. or OP Partner has at any time caused or permitted any
Prohibited Activities or Conditions to exist at, upon, under or within any
Property.
(p) HAZARDOUS MATERIALS LAWS. Except as disclosed in the
Environmental Reports delivered to Fannie Mae prior to the date of this
Agreement and described on Schedule 2.1(o) or otherwise disclosed in writing by
Owner to Fannie Mae prior to the date of this Agreement: (i) neither Owner, QRS
Partner, any Nominee Corp., OP Partner or, to the knowledge of Owner, any other
party has been or is involved in operations at any Property which operations
could reasonably be expected to lead to (x) the imposition of liability on
Owner, QRS Partner, any Nominee Corp., OP Partner under any Hazardous Materials
Law in effect as of the Restatement Closing Date, or on any subsequent or former
owner of any Property in an amount (together with all claims and liabilities
with respect to such Property described in clauses (ii) and (iii) below) in
excess of $100,000 with respect to any Property, or (y) the creation of a Lien
with respect to a liability on any Property under any Hazardous Materials Law in
effect as of the date hereof; (ii) neither Owner, QRS Partner, any Nominee
Corp., OP Partner, nor to the best knowledge of Owner, any predecessor-in-
interest with respect to any Property has permitted any tenant or occupant of
any Property to engage in any activity that could reasonably be expected to
impose a claim or liability under any Hazardous Materials Law in effect as of
the date hereof on such tenant or occupant, on Owner or on any other subsequent
or former owner of any Property in an amount (together with all claims and
liabilities with respect to such Property described in clause (i) above and
clause (iii) below) in excess of $100,000 with respect to any Property; and
(iii) neither Owner, QRS Partner, any Nominee Corp. or OP Partner has received,
and Owner has no knowledge of the issuance of, any claim, citation or notice of
any Governmental Actions with respect to an amount (together with all claims and
liabilities with respect to such Property described in clauses (i) and (ii)
above) in excess of $100,000 with respect to any Property.
(q) LEASES. Owner has delivered to Servicer, on behalf of Fannie
Mae, a true and correct copy of its form apartment lease for each Property, and
each Lease with respect to such Property is in substantially the form thereof,
with no material modifications thereto, except as previously disclosed in
writing to Servicer or Fannie Mae. Except as set forth in a Rent Roll, no Lease
for any unit in any Property (i) is for a term in excess of one year, including
any renewal or extension period unless such renewal or extension period is
subject to termination by Owner upon not more than 30 days' written notice, (ii)
provides for prepayment of more than one month's rent, or (iii) was entered into
in other than the ordinary course of business.
(r) RENT ROLL. Owner has executed and delivered to Servicer, on
behalf of Fannie Mae, a rent roll (the "RENT ROLL"), for each Property, each
dated as of and delivered within thirty (30) days prior to (i) Fannie Mae
Facility Closing Date with respect
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to the Existing Bond Properties and the Additional Mortgaged Properties, and
(ii) the Restatement Closing Date with respect to the Additional Bond Property,
and otherwise in the form attached hereto as Exhibit G and on which Owner is
required to disclose each Lease in effect as of the date of such Rent Roll. The
information set forth on each Rent Roll is true, correct and complete as of its
date and there has occurred no material adverse change in the information shown
on any Rent Roll from the date of each such Rent Roll to the Restatement Closing
Date.
(s) STATUS OF LANDLORD UNDER LEASES. Except for any assignment of
leases and rents which is a Permitted Lien or which is to be released in
connection with the consummation of the transactions contemplated by this
Agreement, Owner is the owner and holder of the landlord's interest under each
of the Leases of units in each Property and there are no prior outstanding
assignments of any such Lease, or any portion of the Rents and Profits due and
payable or to become due and payable thereunder.
(t) ENFORCEABILITY OF LEASES. Each Lease constitutes the legal,
valid and binding obligation, in all material respects, of Owner and, to the
knowledge of Owner, of each of the other parties thereto, enforceable, in all
material respects, in accordance with its terms, subject only to bankruptcy,
insolvency, reorganization or other similar laws relating to creditors' rights
generally, and equitable principles, and except as disclosed in writing to
Fannie Mae, no notice of any default by Owner which remains uncured has been
received by Owner or any affiliate of Owner under any such Lease which in the
aggregate could reasonably be expected to have a Material Adverse Impact.
(u) NO LEASE OPTIONS. No Lease contains any option or right to
purchase, right of first refusal or any other similar provisions. No option or
right to purchase, right of first refusal, purchase contract or similar right
exists with respect to any Property.
(v) INSURANCE. Owner has delivered to Servicer or Fannie Mae true
and correct certified copies of all policies of insurance currently in effect as
of the date of this Agreement with respect to the Properties. Each such
insurance policy complies in all material respects with the requirements set
forth in the Mortgage Documents.
(w) TAX PARCELS. Each Property is on one or more separate tax
parcels, and each such parcel (or parcels) is (or are) separate and apart from
any other property.
(x) ENCROACHMENTS. Except as discussed on the survey or the title
insurance commitments listed in Exhibit D, none of the improvements located on
any Property encroaches upon the property of any other Person nor lies outside
of the boundaries and building restriction lines of such Property and no
improvement located on property adjoining such Property lies within the
boundaries of or in any way encroaches upon such Property.
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(y) INDEPENDENT UNIT. Except as set forth in the Fannie Mae Title
Commitment (other than notes or other informational items set forth therein)
with respect to each Property or on the survey described in the "Survey
Endorsement" attached to such Fannie Mae Title Commitment with respect to such
Property, each Property is an independent unit which does not rely on any
drainage, sewer, access, parking, structural or other facilities located on any
property not included in such Property or on public or utility easements for the
(i) fulfillment of any zoning, building code or other requirement of any
Governmental Authority that has jurisdiction over such Property, (ii) structural
support, or (iii) the fulfillment of the requirements of any Lease or other
agreement affecting such Property. Except as disclosed on Schedule 2.1(y),
Owner, directly or indirectly, has the right to use all amenities, easements,
public or private utilities, parking, access routes or other items necessary or
currently used for the operation of each Property. Except as disclosed on
Schedule 2.1(y), all public utilities are installed and operating at each
Property and all billed installation and connection charges have been paid in
full. Except as disclosed on Schedule 2.1(y), each Property is either (x)
contiguous to or (y) benefits from an irrevocable unsubordinated easement
permitting access from such Property to a physically open, dedicated public
street, and has all necessary permits for ingress and egress and is adequately
serviced by public water, sewer systems and utilities. Except as set forth in
the Fannie Mae Title Commitment (other than notes or other informational items
set forth therein) with respect to each Property or on the survey of such
Property identified in such Fannie Mae Title Commitment and certified to Fannie
Mae, no building or other improvement not located on a Property relies on any
part of the Property to fulfill any zoning requirements, building code or other
requirement of any Governmental Authority that has jurisdiction over the
Property for structural support or to furnish to such building or improvement
any essential building systems or utilities.
(z) CONDITION OF THE PROPERTIES. Except as disclosed on Schedule
2.1(z), each Property is in good condition, order and repair, there exist no
structural or other material defects in such Property, whether latent or
otherwise and Owner has not received notice from any insurance company or
bonding company of any defects or inadequacies in such Property, or any part of
it, which would affect the insurability of such Property or cause the imposition
of extraordinary premiums or charges for insurance or of any termination or
threatened termination of any policy of insurance or bond such that any of the
foregoing could reasonably be expected to have a Material Adverse Impact on any
such Property. No EQR Party has made a claim against any contractor, architect
or other party with respect to the condition of any Property or the existence of
any structural or other material defect therein. No Property has been materially
damaged by Casualty which has not been fully repaired or for which Insurance
Proceeds have not been received or are not expected to be received except as
previously disclosed in writing to Fannie Mae or Servicer. There are no
proceedings pending for partial or total Condemnation of any Property except as
disclosed in writing to Fannie Mae or Servicer. The weighted average maturity
of each issue of Related Bonds does not exceed 120% of the average remaining
reasonably expected economic life of the facilities financed with the proceeds
of such Related Bonds.
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(aa) NO CONTRACTUAL DEFAULTS. Except as disclosed on Schedule
2.1(aa), there are no defaults by any EQR Party or, to the knowledge of Owner,
by any other Person under any contract to which any EQR Party is a party
relating to any Property, including any management, rental, service, supply,
security, maintenance or similar contract, that either (i) individually or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect, or (ii) involves, in any individual instance, an actual or potential
disputed amount that is equal to or greater than $25,000. No EQR Party or to
the knowledge of Owner, any other person has received notice or has any
knowledge of any existing circumstances in respect of which it could receive any
notice of default or breach in respect of any contracts affecting or concerning
any Property, that either (i) individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect, or (ii) involves, in any
individual instance, an actual or potential disputed amount that is equal to or
greater than $25,000.
(ab) COMPLIANCE WITH THE TRANSACTION DOCUMENTS. Owner is in
compliance with all provisions of the Transaction Documents to which it is a
party or by which it is bound.
(ac) ERISA. Each EQR Party is in compliance in all material
respects with all applicable provisions of ERISA and has not incurred any
liability to the PBGC on a Plan under Title IV of ERISA. The assets of each EQR
Party do not constitute plan assets (within the meaning of Department of Labor
Regulation Section 2510.3-101) of any employee benefit plan subject to Title I
of ERISA.
(ad) OFFICIAL STATEMENT. The statements and information concerning
Owner and its Affiliates, and the Related Bond Property set forth in each
Official Statement (other than the information under the subheading "Federal
National Mortgage Association" of each such Official Statement) are each true,
complete and correct in all material respects as of its date and, as of its
date, do not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(ae) OWNERSHIP; REIT STATUS. EQR currently qualifies and is taxed
as a real estate investment trust under Subchapter M of the Code. QRS Partner
currently qualifies as a "Qualified REIT Subsidiary" (as defined in Subchapter M
of the Code) of EQR.
(af) FINANCIAL INFORMATION. Any written financial projections
relating to the EQR Parties and delivered to Servicer, on behalf of Fannie Mae,
on or prior to the date hereof, if any, were prepared on the basis of
assumptions believed by Owner, in good faith at the time of preparation, to be
reasonable and Owner is not aware of any fact or information that would lead it
to believe that such assumptions are incorrect or misleading in any material
respect; provided, however, that no representation or warranty is made that
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any result set forth in such financial projections shall be achieved. The
consolidated financial statements of Owner and QRS Partner which have been
furnished to Servicer on behalf of Fannie Mae, if any, are complete and accurate
in all material respects and present fairly the financial condition and results
of operations of each of Owner and QRS Partner, as the case may be, as of their
respective dates, and were prepared on an accrual accounting basis in accordance
with GAAP. The consolidated financial statements of EQR and OP Partner which
have been furnished to Servicer on behalf of Fannie Mae are complete and
accurate in all material respects and present fairly the financial condition and
results of operations of EQR and OP Partner, as the case may be, as of their
respective dates in accordance with GAAP. Since the date of the most recent of
such financial statements with respect to each EQR Party no event has occurred
which would have a Material Adverse Effect on such EQR Party, and there has not
been any material transaction entered into by Owner or QRS Partner other than
transactions in the ordinary course of business. No EQR Party has any
Contingent Obligation which would be required to be disclosed in GAAP financial
statements and which is not otherwise disclosed in its most recent financial
statements. Neither Owner nor QRS Partner or any Nominee Corp. has any material
liabilities, other than those incurred under the Transaction Documents.
(ag) ACCURACY OF INFORMATION. The representations, warranties of
Owner and any other EQR Party contained in this Agreement, the Bond Documents,
the Mortgage Documents or any other Transaction Document are true, correct and
complete in all material respects, do not contain any untrue statement or
misleading statement of a material fact, and do not omit to state a material
fact required to be stated therein or necessary in order to make the
certifications, representations, warranties, statements, information and
descriptions contained therein, in light of the circumstances under which they
were made, not misleading. No information, statement or report furnished in
writing to Fannie Mae, any Issuer, Servicer or any Related Trustee by any EQR
Party in connection with the consummation of the transactions contemplated in
this Agreement, the Bond Documents, the Mortgage Documents or any other
Transaction Document (including any information furnished by any EQR Party in
connection with the preparation of any materials related to the issuance
delivery or offering of any of the Bonds on the Bond Transaction Closing Date)
contains any material misstatement of fact or omits to state a material fact
necessary to make the statements contained therein not misleading, except to the
extent that such misstatements and omissions when considered in light of the
totality of such information, statements and reports furnished by such EQR
Parties are not materially misleading in the aggregate.
(ah) NO CONFLICTS OF INTEREST. To the best knowledge of Owner, no
member, officer, agent or employee of any Issuer has been or is in any manner
interested, directly or indirectly (except for the publicly traded stock of
EQR), in that Person's own name, or in the name of any other Person, in the
Related Bonds, the Related Bond Documents, the Bond Property Loan Documents,
Owner, any Nominee Corp., OP Partner or QRS Partner or the applicable Bond
Property, in any contract for property or materials to be furnished
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or used in connection with such Bond Property or in any aspect of the
transactions contemplated by the Related Bond Documents or the Bond Property
Loan Documents.
(ai) GOVERNMENTAL ORDERS. No EQR Party is presently under any
cease or desist order or other orders of a similar nature, temporary or
permanent, of any Governmental Authority which would have the effect of
preventing or hindering performance of Owner's duties hereunder, nor are there
any proceedings presently in progress or to its knowledge contemplated which
would, if successful, lead to the issuance of any such order.
(aj) NO RELIANCE. Owner acknowledges, represents and warrants that
it understands the nature and structure of the transactions relating to the
refinancings of the Bond Properties as contemplated by the Transaction
Documents, that it is familiar with the provisions of all of the documents and
instruments relating to such refinancings to which it or any Issuer is a party
or of which it is a beneficiary; that it understands the risks inherent in such
transactions, including the risk of loss of all or any of the Bond Properties
and the Additional Mortgaged Properties; and that it has not relied on any
Issuer or Fannie Mae for any guidance or expertise in analyzing the financial or
other consequences of the transactions contemplated by this Agreement, any
Related Indenture or any other Transaction Document or otherwise relied on any
Issuer or Fannie Mae in any manner in connection with interpreting, entering
into or otherwise in connection with this Agreement, any other Transaction
Document or any of the matters contemplated hereby or thereby; provided,
however, that this provision shall not be interpreted to limit Fannie Mae's
obligations under the Related Fannie Mae Collateral Agreements or any other
Transaction Document to which Fannie Mae is a party.
(ak) ARBITRAGE BONDS. No money on deposit in any fund or account
in connection with the Existing Bond Issue or any issue of Related Bonds,
whether or not such money was derived from other sources, has been used by or
under the direction of Owner, QRS Partner or Manchester Nominee Corp. in a
manner which would (i) cause the Existing Bond Issue or any issue of Related
Bonds to be ``arbitrage bonds'' within the meaning of Section 103(c) of the Code
and (ii) either cause a Material Adverse Impact on Owner or result in the
interest received by the Bondholders of any of the Bonds being taxable for
federal income tax purposes.
(al) COMPLIANCE WITH APPLICABLE LAW. Each of Owner, QRS Partner
and each Nominee Corp. is in compliance with Applicable Law, including all
Governmental Approvals, if any, except for such items of noncompliance that,
singly or in the aggregate (i) would not have a Material Adverse Effect upon
any of Owner, QRS Partner or any Nominee Corp. and (ii) would not have a
Material Adverse Impact.
(am) CONTRACTS WITH AFFILIATES. Except as set forth on Schedule
2.1(am), Owner has not entered into and is not a party to any contract, lease or
other agreement with any Affiliate of Owner for the provision of any service,
materials or supplies to any Property
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or Properties (including any contract, lease or agreement for the provision of
property management services, cable television services or equipment, gas,
electric or other utilities, security services or equipment, laundry services or
equipment or telephone services or equipment).
(ao) COMPLIANCE WITH SLEEPY HOLLOW PUBLIC IMPROVEMENT AGREEMENT and
DEED OF TRUST. Owner is in compliance (and at all times in the past has
complied) with all terms, conditions and requirements (including payment
obligations) under and with respect to the Sleepy Hollow Public Improvements
Agreement and the Sleepy Hollow Public Improvements Deed of Trust. Owner has
not received notice of any event or condition that remains uncured that would
constitute a default or which, with the lapse of time, if not cured, or with the
giving of notice or both, would become a default under the Sleepy Hollow Public
Improvements Agreement or the Sleepy Hollow Public Improvements Deed of Trust.
Owner has not received notice of or demand for any payment required to be made
by Owner under or with respect to the Sleepy Hollow Public Improvements
Agreement or the Sleepy Hollow Public Improvements Deed of Trust.
SECTION 2.2 AFFIRMATIVE COVENANTS OF OWNER.
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Owner agrees and covenants with Fannie Mae that, at all times during
the term of this Agreement:
(a) COMPLIANCE WITH AGREEMENTS; NO AMENDMENTS. Owner shall comply
with all the terms and conditions of each Transaction Document to which it is a
party or by which it is bound, subject to applicable cure periods, if any, as
set forth in such Transaction Documents, and shall use its commercially
reasonable efforts to cause each Related Trustee at all times to comply with the
terms of the Related Bond Documents to which each such Related Trustee is a
party.
(b) MAINTENANCE OF EXISTENCE. Owner shall maintain its existence
and continue to be a general partnership organized under the laws of the state
of its organization, duly qualified to do business in each jurisdiction in which
such qualification is necessary to the conduct of its business and where the
failure to be so qualified would materially and adversely affect the validity
of, the enforceability of or ability to perform its obligations under this
Agreement or any other Transaction Document to which it is a party or by which
it is bound.
(c) MAINTENANCE OF REIT STATUS. At all times during which Owner
is bound by the terms of this Agreement: (i) EQR shall continue to qualify and
be taxed as a real estate investment trust under Subchapter M of the Code; (ii)
QRS Partner shall continue to (x) qualify as a "Qualified REIT Subsidiary" (as
defined in Subchapter M of the Code) of EQR, and (y) be a general partner of
Owner; and (iii) OP Partner shall continue to be a general partner of Owner.
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(d) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
Owner shall keep and maintain at all times (i) complete and accurate books of
accounts and records in sufficient detail to correctly reflect (x) all of
Owner's financial transactions and assets and (y) the results of the operation
of each Property and (ii) copies of all written contracts, Leases and other
instruments which affect each Property (including all bills, invoices and
contracts for electrical service, gas service, water and sewer service, waste
management service, telephone service and management services). In addition,
Owner shall furnish, or cause to be furnished, to Servicer, and upon Fannie
Mae's request, to Fannie Mae:
(i) Annual Financial Statements. As soon as available, and
in any event within one hundred and twenty (120) days after the close of
each of Owner's fiscal years during the term of this Agreement, its
balance sheet as of the end of such fiscal year, its statement of
operation for such fiscal year and its statement of cash flows for such
fiscal year, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the prior
fiscal year, prepared on an accrual accounting basis in accordance with
GAAP consistently applied, and certified by the chief financial officer or
chief accounting officer of EQR to the effect that such financial
statements have been prepared in accordance with GAAP consistently
applied, and that such financial statements fairly present the results of
its operations and financial condition for the periods and dates
indicated. Together with each delivery of Owner's annual financial
statements required under the preceding sentence, Owner shall deliver or
cause to be delivered, the audited financial statements of OP Partner and
EQR (including their respective balance sheets, statements of operation
and statements of cash flows) for such fiscal year, prepared in accordance
with GAAP, consistently applied.
(ii) Quarterly Financial Statements. As soon as available,
and in any event within sixty (60) days after each of the first three
fiscal quarters of each fiscal year during the term of this Agreement, its
unaudited balance sheet as of the end of such fiscal quarter and its
unaudited statement of income and retained earnings and its unaudited
statement of cash flows for the portion of the fiscal year ended with the
last day of such quarter, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and
period in the previous fiscal year, accompanied by a certificate of the
chief financial officer or chief accounting officer of EQR to the effect
that such financial statements have been prepared on an accrual accounting
basis in accordance with GAAP consistently applied, and that such
financial statements fairly present the results of its operations and
financial condition for the periods and dates indicated subject to year
end adjustments in accordance with GAAP.
(iii) Monthly Property Statements. On a monthly basis within
thirty (30) days of the last day of the prior month, a statement of income
and expenses of each Property accompanied by a certificate of the chief
financial officer or chief
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accounting officer of EQR to the effect that each such statement of income
and expenses fairly, accurately and completely presents the operations of
each such Property for the period indicated on a modified cash accounting
basis in accordance with customary real estate management accounting
practices.
(iv) Annual Property Statements. On an annual basis within
thirty (30) days of the end of the fiscal year, an annual statement of
income and expenses of each Property accompanied by a certificate of the
chief financial officer or chief accounting officer of EQR to the effect
that each such statement of income and expenses fairly, accurately and
completely presents the operations of each such Property for the period
indicated on a modified cash accounting basis in accordance with customary
real estate management accounting practices.
(v) Updated Rent Rolls. Upon Servicer's or Fannie Mae's
request, a current Rent Roll for each Property, showing the name of each
tenant, and for each tenant, the space occupied, the lease expiration
date, the rent payable, the rent paid and any other information requested
by Servicer or Fannie Mae and in the form required by Servicer or Fannie
Mae and accompanied by a certificate of the chief financial officer or
chief accounting officer of EQR to the effect that each such Rent Roll
fairly, accurately and completely presents the information required
therein.
(vi) Security Deposit Information. Upon Servicer's or
Fannie Mae's request, an accounting of all security deposits held in
connection with any lease of any part of any Property, including the name
and identification number of the accounts in which such security deposits
are held, the name and address of the financial institutions in which such
security deposits are held and the name of the person to contact at such
financial institution, along with any authority or release necessary for
Servicer or Fannie Mae to access information regarding such accounts.
(vii) Security Law Reporting Information. So long as EQR or
OP Partner or any Subsidiary of either of them is a reporting company
under the Securities and Exchange Act of 1934, promptly upon their
becoming available, copies of (a) all 10K's, 10Q's, 8K's, annual reports
and proxy statements, and all replacement, substitute or similar filings
or reports required to be filed after the date of this Agreement by the
United States Securities and Exchange Commission or other Governmental
Authority exercising similar functions, and (b) all press releases and
other statements made available generally by EQR, OP Partner or any
subsidiary of either of them to the public concerning material develop-
ments in the business of EQR, OP Partner or any Subsidiary of either of
them;
(viii) Accountants' Reports. Promptly upon receipt thereof,
copies of any reports or management letters submitted to any EQR Party by
its independent certified public accountants in connection with the
examination of its financial statements made by such accountants (except
for reports otherwise provided pursuant
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to clause (i) above); provided, however, that Owner shall only be required
to deliver such reports and management letters to the extent that they
relate to Owner, QRS Partner, any Nominee Corp. or any of the Properties.
(ix) Other Reports. Promptly upon Fannie Mae's or
Servicer's request therefor, all schedules, financial statements or other
similar reports delivered by Owner pursuant to the Transaction Documents
or otherwise reasonably requested by Servicer or Fannie Mae with respect
to Owner's business affairs or condition (financial or otherwise) or any
of the Properties.
(e) CERTIFICATE OF COMPLIANCE. Owner shall deliver to Servicer
concurrently with the delivery of the financial statements and/or reports
required to be delivered pursuant to paragraphs (d)(i) and (d)(ii) above a
certificate signed by the chief financial officer or chief accounting officer of
EQR stating that, to the best of the knowledge of the chief financial officer or
chief accounting officer of EQR executing such certificate following reasonable
inquiry, no Event of Default or Potential Event of Default has occurred, or if
an Event of Default or Potential Event of Default has occurred, specifying the
nature thereof.
(f) MAINTAIN LICENSES. Owner shall procure and maintain in full
force and effect all licenses, Permits, charters and registrations which are
material to the conduct of its business and shall abide by and satisfy all terms
and conditions of all such licenses, Permits, charters and registrations except
where Owner's failure to abide by and satisfy the requirements of the foregoing
would not have a Material Adverse Impact.
(g) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS.
To the extent permitted by law and in addition to the applicable requirements of
the Mortgages, Owner shall permit Fannie Mae or Servicer:
(i) to inspect, make copies and abstracts of, and have
reviewed or audited, such of Owner's books and records as may relate to
the Obligations or any Property;
(ii) to discuss Owner's affairs, finances and accounts with
any of Owner's officers, partners and employees;
(iii) to discuss Owner's affairs, finances and accounts with
its independent public accountants, provided that the controller of QRS
Partner has been given the opportunity by Servicer or Fannie Mae to be a
party to such discussions; and
(iv) to receive any other information that Fannie Mae or
Servicer deems necessary or relevant in connection with any Mortgage Loan,
any Transaction Document or the Obligations.
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Notwithstanding the foregoing, prior to an Event of Default or
Potential Event of Default, all inspections shall be conducted at reasonable
times during normal business hours.
(h) INFORM FANNIE MAE AND SERVICER OF MATERIAL EVENTS. Owner
shall promptly inform Fannie Mae and Servicer in writing of any of the following
(and shall deliver to the Fannie Mae and Servicer copies of any related written
communications, complaints, orders, judgments and other documents relating to
the following) of which Owner has or obtains actual knowledge:
(i) Defaults. The occurrence of any Event of Default or
any Potential Event of Default under this Agreement or any other
Transaction Document;
(ii) Regulatory Proceedings. The commencement of any
rulemaking or disciplinary proceeding or the promulgation of any proposed
or final rule which (A) would have a Material Adverse Effect on Owner or
any EQR Party, (B) would have a Material Adverse Impact, or (C) with
respect to any specific Bond Property, adversely affects the tax- exempt
status of the interest payable on any of the Related Bonds;
(iii) Legal Proceedings. The commencement or written threat
of, or amendment to, any proceedings by or against Owner, QRS Partner, OP
Partner or EQR in any Federal, state or local court or before any
Governmental Authority, or before any arbitrator, which, if adversely
determined, would adversely affect the tax-exempt status of interest
payable on any of the Related Bonds, or in which parties adverse to any
EQR Party have a reasonable chance of prevailing and which if adversely
determined would have, or at the time of determination may reasonably be
expected to have, (A) a Material Adverse Effect on any EQR Party, or (B) a
Material Adverse Impact;
(iv) Bankruptcy Proceedings. The commencement of any
proceedings by or against Owner, QRS Partner, OP Partner or EQR under any
applicable bankruptcy, reorganization, liquidation, insolvency or other
similar law now or hereafter in effect or of any proceeding in which a
receiver, liquidator, trustee or other similar official is sought to be
appointed for it;
(v) Regulatory Supervision or Penalty. The receipt of
notice from any Governmental Authority having jurisdiction over any EQR
Party that (A) such EQR Party is being placed under regulatory
supervision, (B) any license, Permit, charter, membership or registration
material to the conduct of such EQR Party's respective business or the
operation of the Properties is to be suspended or revoked or (C) such EQR
Party is to cease and desist any practice, procedure or policy employed by
such EQR Party, as the case may be, in the conduct of its business, and
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such cessation would have a Material Adverse Effect on such EQR Party,
would have a Material Adverse Impact or would adversely affect the
tax-exempt status of interest payable on any of the Related Bonds; and
(vi) Environmental Claim. The receipt of notice from any
Governmental Authority or other Person relating to any Environmental Claim
involving Owner or any Nominee Corp. or any of its assets, including the
Properties and which represents, in Owner's reasonable judgment, a
liability, contingent or otherwise, which exceeds $100,000 with respect to
any Property.
(i) SINGLE-PURPOSE ENTITIES. Owner and QRS Partner shall at all
times maintain and conduct themselves as Single-Purpose entities.
(j) INSPECTION. Owner shall permit any Person designated in
writing by Fannie Mae (including Servicer): (i) to make entries upon and
inspections of the Properties; and (ii) to otherwise verify, examine and inspect
the amount, quantity, quality, value and/or condition of, or any other matter
relating to, any Property; provided, however, that prior to an Event of Default
or Potential Event of Default, all such entries, examinations and inspections
shall be conducted at reasonable times during normal business hours.
(k) COMPLIANCE WITH APPLICABLE LAWS. Owner shall comply in all
material respects with all Applicable Laws now or hereafter affecting any
Property or any part of any Property or requiring any alterations, repairs or
improvements to any Property, except for such items of noncompliance that,
singly or in the aggregate (i) would not have a Material Adverse Effect upon any
of Owner, QRS Partner or any Nominee Corp. and (ii) would not have a Material
Adverse Impact. Owner shall procure and continuously maintain in full force and
effect, and shall abide by and satisfy all material terms and conditions of all
Permits, except for such items of noncompliance that, singly or in the aggregate
(i) would not have a Material Adverse Effect upon any of Owner, QRS Partner or
any Nominee Corp. and (ii) would not have a Material Adverse Impact.
(l) WARRANTY OF TITLE. Owner shall warrant and defend (a) the
title to each Property and every part of each Property, subject only to
Permitted Liens, and (b) the validity and priority of the lien of the applicable
Mortgage Documents, subject only to Permitted Liens, in each case against the
claims of all other Persons whatsoever. Owner shall reimburse Fannie Mae and
Servicer for any actual out-of-pocket losses, costs, damages or expenses
(including reasonable attorneys' fees and court costs) incurred by Fannie Mae or
Servicer if an interest in any Property, other than with respect to a Permitted
Lien, is claimed by others.
(m) DEFENSE OF ACTIONS. Owner shall appear in and defend any
action or proceeding purporting to affect the security for this Agreement or the
rights or power of Fannie Mae or Servicer hereunder, and shall, as set forth in
to section 4.2, pay
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the reasonable out-of-pocket costs and expenses, including the cost of evidence
of title and attorneys' fees, in any such action or proceeding in which Fannie
Mae may appear. If Owner fails to perform any of the covenants or agreements
contained in this Agreement, or if any action or proceeding is commenced that is
not diligently defended by Owner which affects in any material respect Fannie
Mae's or any Related Trustee's interest in any Property or any part thereof,
including eminent domain, code enforcement or proceedings of any nature
whatsoever under any Applicable Law, whether now existing or hereafter enacted
or amended, then Fannie Mae may, but without obligation to do so and without
notice to or demand upon Owner and without releasing Owner from any Obligation,
make such appearances, disburse such sums and take such action reasonably
determined by Fannie Mae or Servicer to be necessary or appropriate to protect
Fannie Mae's or such Related Trustee's interest, including disbursement of
reasonable attorney's fees, entry upon such Property to make repairs or take
other action to protect the security of said Property, and payment, purchase,
contest or compromise of any encumbrance, charge or lien which in the judgment
of Fannie Mae appears to be prior or superior to the Transaction Documents. In
the event (i) that any Mortgage is foreclosed in whole or in part or that any
Transaction Document is put into the hands of an attorney for collection, suit,
action or foreclosure, or (ii) of the foreclosure of any mortgage, deed to
secure debt, deed of trust or other security instrument prior to or subsequent
to any Mortgage or any Transaction Document in which proceeding Fannie Mae is
made a party or (iii) of the bankruptcy of Owner, QRS Partner or OP Partner or
an assignment by Owner, QRS Partner or OP Partner for the benefit of its
creditors, Owner shall be chargeable with and agrees to pay all reasonable costs
of collection and defense, including reasonable actual attorneys' fees in
connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, which shall be due and payable together
with all required service or use taxes.
(n) PROPERTY MANAGEMENT; MAINTENANCE OF PROPERTIES. Owner shall
continue to operate each Property as a Multifamily Residential Property, and
shall manage or cause to be managed the operations of each Property in
accordance with the applicable provisions of the Mortgage Documents and the
other Transaction Documents. Owner (i) shall not commit waste or permit
impairment or deterioration of any Property, (ii) shall not abandon any
Property, (iii) shall restore or repair promptly and in a good and workmanlike
manner all or any part of any Property to the equivalent of its condition
existing immediately prior to such Casualty, or such other lesser condition as
Fannie Mae may approve in writing, in the event of any Casualty thereto, whether
or not Insurance Proceeds are available to cover in whole or in part the costs
of such restoration or repair, (iv) shall keep each Property (except to the
extent Insurance Proceeds would be available to pay for such restoration or
repair but for Fannie Mae's application of such proceeds to repayment of the
Related Mortgage Note), including improvements, fixtures, equipment, machinery
and appliances thereon in good repair and shall replace fixtures, equipment,
machinery and appliances on each Property when necessary to keep such items in
good repair, (v) shall generally operate and maintain each Property in the same
manner as of the date hereof (subject to reasonable wear and tear). Neither
Owner nor any tenant or other person shall remove, demolish or alter any
material improvement now existing or hereafter erected on
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any Property or any fixture, equipment, machinery or appliance in or on any
Property except when incident to the replacement of fixtures, equipment,
machinery and appliances with items of like kind except for property owned by
tenants.
(o) ADDITIONS TO THE PROPERTIES. Except as otherwise provided in
the Mortgage Documents, Owner shall have the right to undertake any alteration,
improvement, demolition, removal, or construction (collectively, "Alterations")
to any Property without the prior consent of Fannie Mae; provided, however, that
in any case, no such Alterations shall be made to any Property without the prior
written consent of Fannie Mae if (i) such Alterations would reasonably be
expected to adversely affect the value of such Property or its operation as a
multifamily housing facility in substantially the same manner in which it is
being operated on the date of this Agreement, (ii) the construction of such
Alterations could reasonably be expected to result in interference to the
occupancy of tenants of such Property such that tenants in occupancy with
respect to 5% or more of the Leases would be permitted to terminate their Leases
or to abate the payment of all or any portion of their rent, or (iii) such
Alterations will be completed in more than 12 months from the date of
commencement or in the last year of the term of this Agreement. Notwithstanding
the foregoing, Owner must obtain Fannie Mae's prior written consent (which shall
not be unreasonably withheld or delayed) to construct Alterations with respect
to the Property costing in excess of $250,000; provided, however, the preceding
requirements shall not be applicable to Alterations made, conducted or
undertaken by Owner as part of Owner's routine maintenance and repair of the
Properties pursuant to Section 2.2(n) or as otherwise required by the Mortgage
Documents.
(p) ASSIGNMENT OF RIGHTS TO THE TRUSTEE. Owner acknowledges and
agrees that (i) the Related Trustee is the assignee of the applicable Issuer's
right, title and interest in and to the Bond Property Loan Documents with
respect to each Bond Property and certain rights as and to the extent provided
in the Assignment, (ii) Fannie Mae is the assignee of the Mortgage Rights with
respect to each Bond Property as and to the extent provided in the Related
Fannie Mae Collateral Agreement, and (iii) by virtue of such Related Fannie Mae
Collateral Agreement referred to in clause (ii) above, Fannie Mae shall, as and
to the extent provided in such Related Fannie Mae Collateral Agreement, be
entitled to exercise certain rights and receive certain benefits which would
otherwise be available to the Related Trustee under the Bond Property Loan
Documents with respect to each Bond Property. Owner further acknowledges and
agrees that Fannie Mae has delegated or may delegate certain matters and
functions related to or arising under the Bond Property Loan Documents with
respect to each Bond Property to Servicer, as an independent contractor,
pursuant to the Servicing Agreement. Any terms and conditions contained in this
Agreement that may also be contained in the other Transaction Documents shall
not, to the extent reasonably practicable, be construed to be in conflict with
each other but rather shall be construed as additional, cumulative provisions.
To the extent that any ultimate conflict between the terms and conditions of
this Agreement and those set forth in the other Transaction Documents is
determined to exist, the terms and conditions of this Agreement shall control.
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(q) INTEREST RESERVE REQUIREMENT; PRINCIPAL RESERVE FUND. Owner
shall deposit with the Related Trustee with respect to each Bond Property, on or
before the date the Related Mortgage is executed and delivered, for deposit into
the Interest Account with respect to each Bond Property, the Interest Reserve
Requirement for such Bond Property. If the Interest Account with respect to a
Bond Property is not otherwise replenished to the Interest Reserve Requirement
for such Bond Property from the receipt of the monthly payments under the
Related Mortgage Note pursuant to the Related Indenture, Owner shall promptly
deposit with the Related Trustee the amount necessary for amounts on deposit in
such Interest Account to equal the Interest Reserve Requirement for such Bond
Property. In addition, Owner agrees that as a condition to Fannie Mae's
executing and delivering the Related Fannie Mae Collateral Agreement, Owner
shall fund, and replenish, the applicable Principal Reserve Fund with respect to
each Bond Property as and when required by the Related Mortgage Note and this
Agreement. Owner shall also replenish each Principal Reserve Fund by delivery
to the Related Trustee the amount equal to any loss from the investment of
amounts on deposit in such Principal Reserve Fund, as and when such loss is
incurred and Owner has knowledge of such loss, and irrespective of the reason
for such loss. Owner acknowledges and agrees that amounts on deposit in the
Principal Reserve Fund with respect to each Mortgage Loan shall be applied
toward the mandatory redemption of the Related Bonds, and the corresponding
reduction of amounts owed under the Related Mortgage Note, as and to the extent
provided in the Related Indenture. Owner further acknowledges and agrees that,
as provided in the Related Mortgage Note, the Mortgage Loan with respect to any
Bond Property shall not be deemed to have been amortized by reason of deposits
into the Principal Reserve Fund with respect to such Mortgage Loan until such
deposits have been withdrawn from such Principal Reserve Fund and applied to the
redemption of the Related Bonds as provided in the Related Indenture.
(r) ERISA. Owner shall at all times remain in compliance in all
material respects with all applicable provisions of ERISA and similar
requirements of the PBGC.
(s) PREPAYMENT. If Owner elects, or is required (other than a
prepayment in connection with a mandatory application of Insurance Proceeds or
Condemnation Proceeds), to prepay any Related Mortgage Note in whole or in part,
subject to and in accordance with the terms and conditions of such Related
Mortgage Note and section 2.3(j), Owner shall be obligated to pay any additional
amounts due under the applicable Related Bonds in respect of the amount prepaid
under such Related Mortgage Note, including accrued interest on the Related
Bonds to the date of redemption (calculated at the Maximum Rate to the extent
and for the period that such Related Bonds bear interest at the Weekly Variable
Rate), and the premium, if any, payable to the applicable Bondholders by reason
of such redemption, until such Related Bonds have been redeemed in accordance
with the Related Bond Documents, together with and in addition to, any
prepayment premium due pursuant to the Related Mortgage Note.
(t) NO AMENDMENTS TO TRANSACTION DOCUMENTS. Unless Fannie Mae
shall otherwise consent in writing Owner shall not agree to any amendment of,
supplement to,
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waiver of, or modification of, the terms of any Transaction Document; provided,
however, if Fannie Mae is not a party to any such Transaction Document and
Fannie Mae determines in its discretion that such amendment, supplement waiver
or modification does not adversely affect Fannie Mae's interests, then Fannie
Mae shall not unreasonably withhold its consent to such amendment, supplement
waiver or modification.
(u) TAXES. Subject to Owner's right to contest as set forth in
the Mortgages, Owner shall pay all Impositions now or hereafter levied or levied
or assessed upon or against any Property prior to the date upon which any fine,
penalty, interest or cost may be added thereto or imposed for the nonpayment
thereof. If any tax, assessment or Imposition (other than a franchise tax
imposed on or measured by, the net income or capital (including branch profits
tax) of any Related Trustee or Fannie Mae (or any transferee or assignee
thereof, including a participation holder)) ("TAXES") is levied, assessed or
charged by the United States or any political subdivision or taxing authority
thereof or therein upon any of the Transaction Documents or the obligations
secured thereby, the interest of Fannie Mae or any Related Trustee in the
Properties, or Fannie Mae or any Related Trustee by reason of or as holder of
the Transaction Documents, Owner shall pay all such Taxes to, for, or on account
of Fannie Mae or the applicable Related Trustee (or provide funds to Fannie Mae
or such Related Trustee for such payment, as the case may be) as they become due
and payable and shall promptly furnish proof of such payment to Fannie Mae or
such Related Trustee, as applicable. In the event of passage of any law or
regulation permitting, authorizing or requiring such Taxes to be levied,
assessed or charged, which law or regulation in the opinion of counsel to Fannie
Mae or any Related Trustee may prohibit Owner from paying the Taxes to or for
Fannie Mae or such Related Trustee, Owner shall enter into such further
instruments as may be permitted by law to obligate Owner to pay such Taxes. In
addition, Owner shall pay all documentary stamp, recording, transfer, mortgage,
intangible or filing or other taxes or fees and any and all liabilities with
respect thereto, or resulting therefrom which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of
or filing of record, recordation, release or discharge of, this Agreement, the
Mortgages, or any other Transaction Document.
(v) FURTHER ASSURANCES. Provided they do not materially increase
the obligations of Owner or any other EQR Party, Owner shall, at the request of
Fannie Mae, execute and deliver and, if necessary, file or record such
statements, documents, agreements, UCC financing and continuation statements and
such other instruments and take such further action as Fannie Mae from time to
time may request as reasonably necessary or appropriate to carry out the
purposes of this Agreement or any of the other Transaction Documents to which
Owner is a party or by which Owner is bound, or to subject the Collateral to the
lien and security interests of the Mortgage Documents or to evidence, perfect or
otherwise implement, to assure the lien and security interests intended by the
terms of the Transaction Documents to which Owner is a party or by which Owner
is bound, or in order to exercise or enforce its rights under the Transaction
Documents to which
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Owner is a party or by which Owner is bound. In addition, Owner shall
reasonably cooperate with each of the Rating Agencies in connection with any
review of the transactions described in the Transaction Documents which may be
undertaken by either of the Rating Agencies after the date of this Agreement.
(w) ADJUSTMENT OR CONVERSION OF INTEREST RATE ON THE BONDS. Owner
acknowledges and agrees that the interest rate on any issue of Related Bonds may
be adjusted to the Weekly Variable Rate or Reset Rate or converted to the Fixed
Rate, in each case as provided in, and subject to the terms and conditions of,
the Related Indenture and this Agreement.
(x) MONITORING COMPLIANCE. Upon the request of Servicer, from
time to time, and at any time certification of the matters set forth below is
provided to the Issuer, the Related Trustee or any other Governmental Authority,
Owner shall promptly provide to Servicer the following:
(i) Owner's certification of each Bond Property's compliance
with the Related Bond Documents and the requirements of the Regulatory
Agreement with respect to such Bond Property;
(ii) If any Property has received or receives a tax credit
allocation, Owner's certification of such Property's compliance with the
requirements of Section 42 of the Code and the regulations issued under
Section 42 of the Code and if the tax credits have not yet been
syndicated, Owner's report regarding progress in syndicating the tax
credit allocation until the syndication is completed; and
(iii) Such other documents, certificates and other
information as Servicer or Fannie Mae may deem reasonably necessary to
enable it to perform its functions under the Servicing Agreement.
(y) REMOVAL OF REMARKETING AGENT. Owner agrees that (i) after the
occurrence of any Event of Default or (ii) if, at any time, Fannie Mae
reasonably determines that there is a basis in fact for the removal of the then
existing Remarketing Agent with respect to an issue of Related Bonds and the
designation of a new Remarketing Agent with respect to such Related Bonds, if
Fannie Mae so directs, Owner immediately shall take such action as is required
under the Related Remarketing Agreement to remove the existing Remarketing Agent
with respect to such Related Bonds and replace such Remarketing Agent, without
interruption of service, with a Remarketing Agent acceptable to Fannie Mae.
Owner acknowledges and agrees that any Remarketing Agent's failure to perform
any of its duties or obligations under or with respect to the Related Indenture
or the Related Remarketing Agreement, including, a failure to give or deliver
any notice or information required under the Related Indenture or the Related
Remarketing Agreement, shall constitute sufficient basis in fact for such
Remarketing Agent's removal.
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(z) CHANGES IN REMARKETING AGENT OR REMARKETING AGREEMENT. Owner
agrees that it will not change any Remarketing Agent, or appoint or engage any
Person as a Remarketing Agent or materially change the fees payable to any
Remarketing Agent, without Fannie Mae's prior written consent which consent
shall not be unreasonably withheld or delayed.
(aa) CONTINUING DISCLOSURE. Owner shall comply with all provisions
applicable to Owner (pursuant to the Bond Documents or otherwise) relating to
all federal securities laws relating to continuing disclosure that are
applicable to the Bonds, including Rule 15c2-12, promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as such rule
may be amended from time to time.
(ab) LEASES. All leases now or hereafter entered into shall: (i)
be legally valid, binding and enforceable obligations of the tenants thereto;
(ii) comply with all applicable laws; and (iii) be in the form previously
delivered to, and deemed acceptable to, Fannie Mae and Servicer with respect to
each Property (the "PROPERTY FORM LEASE"), with no material modifications to
such Property Form Lease, except as disclosed to and approved by Fannie Mae and
Servicer, in writing. At any time and from time to time, Fannie Mae or Servicer
may require that each Property Form Lease: (A) provide that tenants and
subtenants with respect to such Property shall not cause, permit or exacerbate
any Prohibited Activities or Conditions (as defined in the Mortgages); (B)
satisfy the then applicable lease standards of the DUS Guide; and (C)
specifically provide that such lease is subordinate to the Related Mortgage,
that the tenant attorns to the holder of each such Related Mortgage, such
attornment to be effective upon such holder's acquisition of title to the
Property, that the tenant agrees to execute such further evidences of attornment
as such holder may from time to time request, that the attornment of the tenant
shall not be terminated by foreclosure, and that such holder may, at such
holder's option, accept or reject such attornments; provided, however, that each
Property Form Lease approved by Fannie Mae or Servicer shall be deemed to have
satisfied the requirements in the preceding clauses (A) through (C) until such
time as Owner receives written notice to the contrary from Fannie Mae or
Servicer which notice shall specify the changes necessary to make such Property
Form Lease comply with Fannie Mae's then current leasing requirements. Upon
receipt of such notice, Owner shall have thirty (30) days (or such longer time
as shall be approved by Fannie Mae in its reasonable discretion) to revise such
Property Form Lease to comply with Fannie Mae's then current leasing
requirements and all leases of such Property entered into on or after the
expiration of such thirty (30) day period shall be in the form of such revised
Property Form Lease with no material modifications except as disclosed to and
approved by Fannie Mae and Servicer in writing; provided however that Owner not
be required to amend any leases entered into prior to such date to conform to
the revisions to the Property Form Lease. Without the prior written consent of
Fannie Mae, Owner shall not enter into a lease for any unit in any Property
that: (1) is for a term in excess of one year, including any renewal or
extension period unless such renewal or extension period is subject to
termination by Owner upon not more than 30 days' written notice; (2) provides
for prepayment of more than one month's rent; (3) is entered into in
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other than the ordinary course of Owner's business; or (4) contains any option
or right to purchase, right of first refusal or any other similar provisions.
(ac) INDEPENDENT DIRECTOR REQUIREMENTS. The Owner Partnership
Agreement currently provides, and at all times during the term hereof shall
provide, that no action to either (x) commence a voluntary case under the
Federal bankruptcy laws (as now or hereafter in effect) of Owner or (y) file a
petition seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up
or composition or adjustment of debts of Owner, shall be taken without the
unanimous affirmative vote of each of OP Partner and QRS Partner. In addition,
the QRS Organizational Documents currently provide, and at all time during the
term hereof shall provide as follows: (i) that QRS Partner shall at all times
have at least one Independent Director on its board of directors; (ii) that such
Independent Director cannot be removed without the appointment of a successor
Independent Director; (iii) that no action requiring unanimous approval of the
board of directors of QRS Partner shall be taken in the absence of such
Independent Director except for the action of removal and replacement of an
Independent Director with another Independent Director; and (iv) that no action
to either (x) commence a voluntary case under the Federal bankruptcy laws (as
now or hereafter in effect) of either QRS Partner or Owner, or (y) file a
petition seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, debt adjustment, winding up
or composition or adjustment of debts of either QRS Partner or Owner, shall be
taken without the unanimous affirmative vote of the directors of QRS Partner,
including the Independent Director.
SECTION 2.3 NEGATIVE COVENANTS OF OWNER. Owner enters into the
covenants and agreements with Fannie Mae set forth in this section 2.3. Each
covenant and agreement shall apply continuously during the term of this
Agreement:
(a) OTHER ACTIVITIES. Neither Owner, any Nominee Corp. nor QRS
Partner shall:
(i) either directly or indirectly sell, transfer,
exchange or otherwise dispose of any of its assets except as
permitted hereunder, by the Mortgages or the Cash Management
Agreement;
(ii) take any action or omit to take any action that,
if taken or omitted, would adversely affect the exclusion of
interest on the Bonds from gross income for Federal income tax
purposes pursuant to Section 103 of the Code;
(iii) engage in any business or activity other than in
connection with (x) with respect to Owner, the ownership, management
and operation of the Properties, (y) with respect to any Nominee
Corp., the ownership, management and operation of the applicable
Nominee Property
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and (z) with respect to QRS Partner, the ownership, management and
operation of Owner;
(iv) amend the Owner Partnership Agreement, the QRS
Organizational Documents or the Nominee Corp. Organizational
Documents, as the case may be, in any manner (including, the
provisions of the Owner Partnership Agreement and the QRS
Organizational Documents relating to the Independent Director or the
taking of any action to commence a voluntary case under the Federal
bankruptcy laws (as now or hereafter in effect) of either QRS
Partner or Owner, or file a petition seeking to take advantage of
any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, debt adjustment, winding up or
composition or adjustment of debts of either QRS Partner or Owner),
without the prior written consent of Fannie Mae; provided that such
consent shall not be unreasonably withheld or delayed if the
proposed amendments are reasonable and not inconsistent with Owner's
Obligations;
(v) dissolve or liquidate in whole or in part;
(vi) merge or consolidate with any Person; or
(vii) use, or permit to be used, any Property for any
uses or purposes other than as a Multifamily Residential Property.
(b) NO AMENDMENTS TO TRANSACTION DOCUMENTS. Unless Fannie Mae
shall otherwise consent in writing Owner shall not agree to any amendment of,
supplement to, waiver of, or modification of, the terms of any Transaction
Document; provided, however, if Fannie Mae is not a party to any such
Transaction Document and Fannie Mae determines in its discretion that such
amendment, supplement waiver or modification does not adversely affect Fannie
Mae's interests, then Fannie Mae shall not unreasonably withhold its consent to
such amendment, supplement waiver or modification.
(c) COMPLIANCE WITH THE TRANSACTION DOCUMENTS. Owner shall not
fail to comply with any provision of the Transaction Documents to which it is a
party or by which it is bound.
(d) VALUE OF SECURITY. Owner shall not take any action which
would have a Material Adverse Effect on Owner or have a Material Adverse Impact.
(e) ZONING. Owner shall not initiate or consent to any zoning
reclassification of any Property or seek any variance under any zoning ordinance
or use or permit the use of any Property in any manner that could result in the
use becoming a nonconforming use under any zoning ordinance or any other
applicable land use law, rule or regulation.
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(f) LIENS. Owner shall not create, incur, assume or suffer to
exist any Lien on any Property or any part of any Property, except the Permitted
Liens;
(g) SALE. Owner shall not sell, convey, transfer, assign or
otherwise relinquish any Property or any part of any Property without the prior
written consent of Fannie Mae (which consent may be granted or withheld in
Fannie Mae's discretion), or any interest in any Property, other than (i) as may
be permitted by the Mortgage Documents with respect to such Property, or (ii) in
accordance with the provisions of section 5.2 or section 5.3, or (iii) to enter
into Leases for units in a Property to any tenant in the ordinary course of
business or (iv) to the extent such conveyance or transfer creates a Permitted
Lien.
(h) USE OF PROCEEDS. The proceeds from the issuance and sale of
the Bonds shall not be used for any purpose other than the purposes set forth in
the Related Bond Documents.
(i) FIXED RATE; RESET RATE. So long as any Related Fannie Mae
Collateral Agreement remains in effect and Fannie Mae has any obligations,
direct or contingent, under any Related Fannie Mae Collateral Agreement, Owner
shall not direct or cause the interest rate on any Related Bonds to be converted
to the Fixed Rate (from the Weekly Variable Rate or the Reset Rate) or to the
Reset Rate (from the Weekly Variable Rate or a prior Reset Rate) or to the
Weekly Variable Rate (from the Reset Rate) unless Fannie Mae consents to such
conversion. Fannie Mae will consent to such conversion if:
(i) in the case of a conversion to the Fixed Rate, (A) no Event of
Default or Potential Event of Default has occurred and is
continuing, (B) Owner complies with the terms and conditions of
sections 3.1 and 4.2, and (C) the Fixed Rate applicable to such
Related Bonds is equal to or less than the Hedge Rate;
(ii) in the case of a conversion to the Reset Rate, (A) no Event of
Default or Potential Event of Default has occurred and is
continuing, (B) Owner complies with the terms and conditions of
sections 3.1 and 4.2, and (C) the Reset Rate on such Related Bonds
is equal to or less than the Hedge Rate; and
(iii) in the case of a conversion to the Weekly Variable Rate, (A) no
Event of Default or Potential Event of Default has occurred and is
continuing, and (B) Owner complies with the terms and conditions of
sections 3.1 and 4.2.
In addition, with respect to the Bond Property described on Exhibit A as
Wellington Hill located in Manchester, Hillsborough County, New Hampshire,
Fannie Mae's consent to any conversion described in clauses (i), (ii) or (iii)
above shall be subject to the additional condition that in connection with such
conversion, Fannie Mae shall have received an opinion of bond counsel acceptable
to Fannie Mae confirming that such conversion is
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authorized and permitted under the Related Indenture and the laws of the State
of New Hampshire and will not adversely affect the exclusion from gross income
for federal income tax purposes of the interest payable on the Related Bonds.
(j) PREPAYMENT OF A MORTGAGE LOAN. Notwithstanding anything to
the contrary contained in the Transaction Documents, Owner shall not make a
voluntary prepayment of any Mortgage Loan that would result in a redemption of
all or any part of any Related Bonds pursuant to section 214(a) of the Related
Indenture or section 5.2(b) of the Financing Agreement with respect to such
Related Indenture unless (i) Owner has deposited with the Related Trustee on or
prior to the date on which such Related Trustee will call the applicable Related
Bonds for redemption, all amounts required for such redemption, (ii) Owner has
received the prior written consent of Fannie Mae; provided that Fannie Mae shall
not withhold its consent unless Fannie Mae reasonably determines that all or any
part of such prepayment by Owner is not permitted by the terms of any Related
Mortgage or may be subject to avoidance or any other recovery or disgorgement
pursuant to the Bankruptcy Code, as amended (including sections 544, 547, 549 or
550 thereof) or any other applicable bankruptcy or insolvency law, and (iii)
with respect to the prepayment in part or in full of the Facility Amount prior
to the seventh anniversary of the Facility, Fannie Mae has received a Prepayment
Premium pursuant to the Related Mortgage Note.
(k) INDEBTEDNESS. Owner and QRS Partner, collectively, shall not
incur or be obligated at any time with respect to aggregate Indebtedness (other
than the Mortgage Loans), in excess of $500,000; provided, however, that for
purposes of this section 2.3(k), the calculation of Indebtedness shall exclude
Indebtedness (A) relating to claims for work, labor, or materials affecting any
Property and that (i) consists of current trade liabilities incurred for work
commissioned in the ordinary course of Owner's business, (ii) is payable in
accordance with customary practices, and (iii) is unsecured or secured by
mechanic's or materialmen's liens against such Properties which are released of
record or otherwise remedied to Fannie Mae's satisfaction, within thirty (30)
days of the date of creation, and (B) unsecured debt the proceeds of which are
used to pay for Alterations permitted under the Transaction Documents.
(l) SINGLE-PURPOSE ENTITIES. Neither Owner nor QRS Partner shall
cease at any time during the term hereof to be a Single-Purpose entity.
(m) PRINCIPAL PLACE OF BUSINESS. Owner shall not change its
principal place of business or the location of its books and records, each as
set forth in section 2.1(a), without first giving thirty (30) days' prior
written notice to Fannie Mae.
SECTION 2.4 CERTAIN COVENANTS WITH RESPECT TO SLEEPY HOLLOW PROJECT.
-------------------------------------------------------
The Owner agrees and covenants with Fannie Mae that, at all times
during the term of this Agreement:
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(a) COMPLIANCE WITH SLEEPY HOLLOW PUBLIC IMPROVEMENTS AGREEMENT
AND DEED OF TRUST. Owner shall timely comply with all terms, conditions and
requirements (including payment obligations) under and with respect to the
Sleepy Hollow Public Improvements Agreement and the Sleepy Hollow Public
Improvements Deed of Trust.
(b) TERMINATION OF SLEEPY HOLLOW PUBLIC IMPROVEMENTS AGREEMENT AND
DEED OF TRUST. Notwithstanding anything herein to the contrary, on or before
May 1, 2002, Owner shall deliver to Fannie Mae written confirmation from the
City of Kansas City, Missouri (or its successors or assigns with respect to the
Sleepy Hollow Public Improvements Agreement and the Sleepy Hollow Public
Improvements Deed of Trust) evidencing the termination or release of all of
Owner's liability under the Sleepy Hollow Public Improvements Agreement and the
Sleepy Hollow Public Improvements Deed of Trust and shall cause the Sleepy
Hollow Public Improvements Deed of Trust to be fully satisfied and discharged of
record by obtaining appropriate release documentation from City of Kansas City,
Missouri (or its successors or assigns with respect to the Sleepy Hollow Public
Improvements Agreement and the Sleepy Hollow Public Improvements Deed of Trust)
and causing such release documentation to be recorded in the land records of
Jackson County, Missouri.
ARTICLE III.
INTEREST RATE PROTECTION
SECTION 3.1 INTEREST RATE PROTECTION.
------------------------
The terms, conditions and provisions of this section 3.1 shall apply
to each issue of Related Bonds.
(a) INTEREST RATE MODES. To protect against fluctuations in
interest rates: (i) no Related Bonds shall initially bear interest at or be
converted to the Fixed Rate unless the Fixed Rate applicable to such Related
Bonds is equal to or less than the Hedge Rate; (ii) no Related Bonds shall
initially bear interest at or be converted to the Reset Rate unless (A) the
Reset Rate applicable to such Related Bonds is equal to or less than the Hedge
Rate, and (B) the Reset Period with respect to such Related Bonds is at least
equal to (x) seven (7) years, if the Related Bonds are issued bearing interest
at the Reset Rate (the "INITIAL RESET PERIOD"), or (y) except as provided in
section 3.1(c), the lesser of five (5) years or the then remaining term of the
Related Bonds, if the Reset Period commences other than on issuance of such
Related Bonds; and (iii) no Related Bonds shall initially bear interest at or be
converted to the Weekly Variable Rate unless Owner shall obtain, and maintain at
all times during which the Related Bonds bear interest at such Weekly Variable
Rate, a Hedge in accordance with this section 3.1.
(b) VARIABLE RATE HEDGE REQUIREMENTS. If an issue of Related
Bonds is issued bearing interest at the Weekly Variable Rate, a Hedge must be in
place on the Bond
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Transaction Closing Date with respect to such issue for a period of not less
than seven (7) years from the Bond Transaction Closing Date (the "INITIAL HEDGE
PERIOD"). Effective not later than the last day of the Initial Hedge Period, or
the last day of any other period that the Weekly Variable Rate and a Hedge are
in effect, or the last day of any Reset Period where the Related Bonds will
subsequently bear interest at the Weekly Variable Rate, Owner shall either (i)
secure a new Hedge for an additional period (a "HEDGE PERIOD") ending not
earlier than the earliest of (A) the date which is not earlier than the fifth
(5th) anniversary of the effective date of the new Hedge, (B) the date on which
the Related Fannie Mae Collateral Agreement terminates or (C) the maturity date
of the Related Bonds, (ii) adjust the Related Bonds to a Reset Rate equal to or
less than the Hedge Rate, or (iii) convert the Related Bonds to a Fixed Rate
equal to or less than the Hedge Rate, in each case under clauses (ii) and (iii)
above in accordance with the Related Bond Documents and the related Bond
Property Loan Documents.
(c) RESET RATE HEDGE REQUIREMENTS. Notwithstanding anything
herein to the contrary, any Reset Period other than the Initial Reset Period may
be for a period less than five (5) years if, prior to the commencement of such
Reset Period, Owner shall obtain and fully pay for a "forward" Swap or Cap that:
(i) has its first "calculation period" beginning on the date such Reset Period
ends, and ending on a date that is at least five years from the first day of
such Reset Period and (ii) otherwise complies with the requirements of this
section 3.1.
(d) GENERAL HEDGE TERMS AND CONDITIONS. Each Hedge shall be (i)
obtained on terms and conditions approved by Fannie Mae in its discretion, (ii)
evidenced and governed by Hedge Documents in form and substance acceptable to
Fannie Mae in its discretion and (iii) with a counterparty acceptable to Fannie
Mae in its discretion (a "COUNTERPARTY"). Except as provided in section 3.1(e),
if any Hedge required under this Agreement constitutes a Swap, such Swap shall
provide for a fixed rate of interest equal to or less than the Hedge Rate, and
if any Hedge required under this Agreement constitutes a Cap, such Cap shall
require the Counterparty to make interest payments equal to the amount by which
the notional interest rate payable under the terms of the Hedge Documents with
respect to such Cap exceeds the Hedge Rate. The notional amount of the Hedge
shall be reduced by an amount equal to amounts deposited into the Principal
Reserve Fund.
(e) SPECIAL HEDGE TERMS AND CONDITIONS. If Owner is unable to
obtain a Hedge with a fixed rate of interest (with respect to a Swap) or a
notional interest rate (with respect to a Cap) that is equal to or less than the
Hedge Rate, Owner may obtain a Hedge (a "SHORTFALL HEDGE") at an interest rate
in excess of the Hedge Rate if Owner provides Fannie Mae with Hedge Shortfall
Cash Collateral in an amount at least equal to the aggregate amount of all
interest that would accrue on the initial notional principal amount of such
Shortfall Hedge at an assumed interest rate equal to the difference between the
interest rate with respect to such Shortfall Hedge and the Hedge Rate for the
full term of such Shortfall Hedge. Such Hedge Shortfall Cash Collateral shall
be released by Fannie
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Mae upon Owner providing either (i) a Hedge that meets the requirements of this
section 3.1, or (ii) an Additional Mortgaged Property ("ALTERNATIVE HEDGE
SHORTFALL COLLATERAL") as collateral for the Fannie Mae Credit Facility in
accordance with section 5.4, provided, that such Alternative Hedge Shortfall
Collateral has annual Net Operating Income, as determined by Fannie Mae in its
discretion, at least equal to 125% of the product of (A) the difference between
the actual hedge rate (i.e. the actual fixed rate payable under a Swap or the
notional interest rate for a Cap) of the Shortfall Hedge and the Hedge Rate,
multiplied by (B) the outstanding amount of Related Bonds in the Facility with
respect to which such Hedge is required. Such Hedge Shortfall Cash Collateral
or Alternative Hedge Shortfall Collateral shall be released by Fannie Mae upon
the expiration of the Hedge Period with respect to the Shortfall Hedge,
provided, however, that if the Related Bonds will bear interest at the Weekly
Variable Rate or in a Reset Period of less than five (5) years, prior to any
release of such Hedge Shortfall Cash Collateral or Alternative Hedge Shortfall
Collateral, Owner shall have obtained a new Hedge with respect to such Related
Bonds satisfying the requirements of this section 3.1.
(f) SWAP PAYMENT TERMS. Under each Swap arrangement, if any, the
Counterparty shall pay a rate based on the PSA Municipal Swap Index (as defined
below) and Owner shall pay a fixed rate to the Counterparty, in each case based
on the notional amount of the Swap. If the PSA Municipal Swap Index is not
published on any reset date under the Swap, the Counterparty must determine an
appropriate index as a substitute for the PSA Municipal Swap Index on each such
reset date. The index so determined shall equal the prevailing rate determined
by the Counterparty for bonds that are rated in the highest short-term rating
category by the Rating Agencies in respect of issuers of not less than five
"high grade" component issuers selected by the Counterparty which shall include,
without limitation, issuers of general obligation bonds, and that are subject to
tender by holders thereof for purchase on not more than seven (7) days notice
and the interest on which is (i) variable, determined on a weekly basis, (ii)
excludable from gross income for federal income tax purposes, and (iii) not
subject to a "minimum tax" or other similar tax. The PSA Municipal Swap index
rate is the rate determined on the basis of an index based upon the weekly
interest rate resets of tax- exempt variable rate issues included in a database
maintained by Municipal Market Data which meet specific criteria established by
the Public Securities Association.
(g) SECURITY INTEREST IN HEDGE PAYMENTS. Fannie Mae shall be
granted an enforceable, perfected, first priority lien on and security interest
in each Hedge, net payments due under the Hedge (including scheduled and
termination payments) and each Custodial Account (as defined below) in order to
secure Owner's obligations to Fannie Mae under this Agreement pursuant to a
Hedge Security Agreement to be delivered by Owner to Fannie Mae (i) no later
than the Bond Transaction Closing Date with respect to each Hedge required to be
obtained for the Initial Hedge Period, and (ii) no later than the commencement
date of each Hedge Period with respect to each Hedge required to be obtained
after such Bond Transaction Closing Date. Pursuant to the terms of the Hedge
Security Agreement with respect to each Hedge, the Counterparty with respect to
such
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Hedge shall make all net payments under such Hedge (including any Termination
Payments due from a Counterparty upon termination of such Hedge) directly to a
custodial account (the "CUSTODIAL ACCOUNT") designated by Fannie Mae pursuant to
such Hedge Security Agreement. As provided in the applicable Hedge Security
Agreement, each Custodial Account with respect to a Swap shall be established in
Fannie Mae's name and each Custodial Account with respect to a Cap shall be
established in the name of the Related Trustee. Pursuant to the terms of the
Cash Management Agreement, all payments into each Custodial Account with respect
to a Swap shall be required to be deposited into the Central Account and treated
as Cash Collateral.
(h) CHANGE IN HEDGE. Owner may change the type of Hedge (i.e.,
from a Swap to a Cap or from a Cap to a Swap) which is in place at any time with
respect to the applicable Related Bonds so long as the terms and conditions of
the replacement Hedge, the Hedge Documents, the Hedge Security Agreement and the
new counterparty comply with the terms and conditions of this Agreement,
including any consent or approval rights of Fannie Mae.
(i) TERMINATION. Owner shall not terminate any existing Hedge
unless (i) either (x) Owner shall have obtained Fannie Mae's prior written
consent to such termination, or (y) no Event of Default or Potential Event of
Default then exists and after such termination Owner will be in compliance with
all requirements under this Agreement relating to Hedges and Hedge
counterparties, and (ii) Owner shall have paid all "breakage" and termination
fees (collectively, "TERMINATION PAYMENTS") due under the applicable Hedge
Documents.
(j) PERFORMANCE UNDER HEDGE DOCUMENTS. Owner agrees to comply
fully with, and to pay and otherwise perform when due, its obligations under all
applicable Hedge Documents and all other agreements evidencing, governing and/or
securing any Hedge arrangement contemplated under this section 3.1; provided,
however, that Owner shall not exercise without Fannie Mae's prior written
consent, and shall exercise at Fannie Mae's direction, any rights or remedies
permitted in accordance with the terms of any Hedge Documents, including any
right of termination. Notwithstanding anything herein to the contrary, Fannie
Mae shall not have any liability, responsibility, obligation or accountability
for the performance, payment or remittance of any of Owner's obligations or a
Counterparty's obligations under any Hedge or Hedge Document; provided, however,
that this provision shall not be interpreted to limit Fannie Mae's obligations
under the Related Fannie Mae Collateral Agreements or any other Transaction
Document to which Fannie Mae is a party.
(k) FANNIE MAE RIGHT TO CONVERT TO RESET RATE, FIXED RATE. Owner
shall with respect to each issue of Related Bonds, at least seventy (70) days
prior to the expiration date of each Initial Hedge Period and each subsequent
Hedge Period, as the case may be, give notice to Fannie Mae that it will either
(i) secure a new Hedge with respect to such Related Bonds, or (ii) adjust such
Related Bonds to a Reset Rate for a period not
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shorter than the Hedge Period except as permitted by section 3.1(c), or (iii)
convert such Related Bonds to the Fixed Rate, in each case in accordance with
this section 3.1. If pursuant to Owner's election a Hedge will be required for
any upcoming Hedge Period, then (A) at least thirty (30) days prior to the
commencement of the upcoming Hedge Period, Owner shall notify Fannie Mae of the
type of Hedge to be obtained, the Hedge counterparty, and the term of the Hedge,
and (B) at least seven (7) Business Days prior to the commencement of the
upcoming Hedge Period, Owner shall provide Fannie Mae with evidence satisfactory
to Fannie Mae that the Hedge has been obtained. If Owner fails to provide the
foregoing notice and/or satisfactory evidence, Fannie Mae is hereby granted the
right to direct on behalf of Owner that the interest rate on such Related Bonds
be (x) adjusted to a Reset Rate pursuant to the Related Indenture, (y) converted
to a Fixed Rate pursuant to the Related Indenture, or (z) adjusted to, or remain
at, the Weekly Variable Rate pursuant to the Related Indenture, without a Hedge
being in place (without waiving any right to declare an Event of Default under
this Agreement because of Owner's failure to comply with the requirements of
this section 3.1). Fannie Mae shall have the right at any time to revoke any
prior direction it may give in connection with any proposed adjustment or
conversion of the interest rate on any issue of Related Bonds as contemplated
above in this section 3.1, without waiving any of its rights under this
Agreement. A copy of any such direction or revocation of a direction shall be
given to Owner promptly after it is issued. Fannie Mae shall have the further
right, in its discretion, to take no action upon Owner's failure to provide
timely notice and/or evidence as required by this section or otherwise to comply
with this section, without waiving any of its rights under this Agreement. Owner
hereby appoints Fannie Mae, through any duly authorized officer of Fannie Mae,
as Owner's attorney-in-fact, with full authority in the place and stead of Owner
and in the name of Owner or otherwise, from time to time in Fannie Mae's
discretion, to take any action and to execute any instrument which Fannie Mae
may deem necessary or advisable to accomplish the purposes of this section 3.1.
Owner agrees that the power of attorney established pursuant to this section 3.1
shall be deemed coupled with an interest and shall be irrevocable.
ARTICLE IV.
FANNIE MAE REIMBURSEMENT; FEES; INDEMNIFICATION
SECTION 4.1 REIMBURSEMENT OBLIGATIONS UNDER RELATED FANNIE MAE
--------------------------------------------------
COLLATERAL AGREEMENTS.
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(a) REIMBURSEMENT OBLIGATIONS UNDER RELATED FANNIE MAE COLLATERAL
AGREEMENTS. Owner unconditionally promises and agrees that:
(i) Advances other than for Purchased Bonds. By 2:00 p.m.
Washington, D.C. time on each date on which Fannie Mae shall have provided
an Advance (other than an Advance with respect to Related Purchased
Bonds), Owner
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shall, without notice or demand, pay Servicer for remittance to Fannie
Mae, an amount equal to the amount of such Advance;
(ii) Withdrawals other than for Purchased Bonds. After
first paying all amounts payable pursuant to subsection (i) above, by 2:00
p.m., Washington, D.C. time on each date on which the Related Trustee with
respect to any Related Bonds shall have made a Withdrawal (other than a
Withdrawal with respect to Related Purchased Bonds), Owner shall, without
notice or demand, pay Servicer, for remittance to such Related Trustee for
deposit into the Principal Reserve Fund with respect to such Related
Bonds, an amount equal to the amount of such Withdrawal;
(iii) Advances With Respect to Related Purchased Bonds. In
reimbursement for an Advance with respect to Related Purchased Bonds, by
2:00 p.m. Washington, D.C. time on (A) the effective date of any Alternate
Credit Facility or (B) the first to occur of the date (1) on which the
Tendered Bonds purchased with such Advance are (x) remarketed by the
Remarketing Agent with respect to such Related Bonds and the proceeds of
the remarketing are delivered to the Related Trustee (but only to the
extent of such remarketing proceeds), or (y) redeemed or otherwise paid in
full and canceled or (2) on which the Related Fannie Mae Collateral
Agreement either terminates in full or terminates as a liquidity facility
for the Related Bonds or (3) which is the last day of the Remarketing
Period with respect to such Related Purchased Bonds, Owner shall, without
notice or demand, pay Servicer for remittance to Fannie Mae, an amount
equal to the amount of such Advance then outstanding;
(iv) Withdrawals With Respect to Related Purchased Bonds. In
reimbursement for a Withdrawal with respect to Related Purchased Bonds, by
2:00 p.m. Washington, D.C. time on (A) the effective date of any Alternate
Credit Facility or (B) the first to occur of the date (1) on which the
Tendered Bonds purchased with such Withdrawal are (x) remarketed by the
Remarketing Agent with respect to such Related Bonds and the proceeds of
the remarketing are delivered to the Related Trustee (but only to the
extent of such remarketing proceeds), or (y) redeemed or otherwise paid in
full and canceled or (2) on which the Related Fannie Mae Collateral
Agreement either terminates in full or terminates as a liquidity facility
for the Related Bonds or (3) the last day of the Remarketing Period with
respect to such Related Purchased Bonds, Owner shall, without notice or
demand, pay Servicer, for remittance to the Related Trustee for deposit
into the Principal Reserve Fund with respect to the Related Bonds, an
amount equal to the amount of such Withdrawal then outstanding; and
(v) Activity Fee. Owner shall, without notice or demand,
pay Servicer for remittance to Fannie Mae the Activity Fee, pursuant to
section 4.4(b) hereof, with respect to (A) the amount outstanding from
time to time of all Advances and (B) the amount outstanding from time to
time of all Withdrawals described in
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section 4.1(a)(ii), in each case until such amounts have been fully and
completely paid, provided, however, with respect to Advances made to
purchase Related Purchased Bonds, the Activity Fee shall be due and
payable while such Advance has not been reimbursed by Owner (or the
Principal Reserve Fund has not been replenished, as the case may be) on
the first Business Day of each month and on the date such Advance is
reimbursed in full.
(b) CREDITS RELATING TO REMARKETING PROCEEDS AND THE CANCELLATION
OF PURCHASED BONDS. Owner's obligation to reimburse Fannie Mae and/or replenish
the Principal Reserve Fund for amounts described in clauses (iii), (iv) and (v)
of section 4.1(a) to the extent Advances or Withdrawals relate to Related
Purchased Bonds shall be reduced as and to the extent that remarketing proceeds
become available and are applied to such reimbursement and/or replenishment. In
addition, the obligation to replenish a Withdrawal which was used to purchase
Related Purchased Bonds shall be satisfied upon the date such Related Purchased
Bonds are canceled; provided that so long as no Event of Default has occurred
and is continuing, no such cancellation may occur during the Remarketing Period
without Owner's consent.
(c) FUNDS DEEMED ADVANCED UNDER RELATED FANNIE MAE COLLATERAL
AGREEMENTS. Owner and Fannie Mae acknowledge and agree that any reference in
this Agreement to payments made under any Related Fannie Mae Collateral
Agreement or to the provision by Fannie Mae of funds under any Related Fannie
Mae Collateral Agreement (or words of similar import) shall, for all purposes
under this Agreement, including Owner's obligation to reimburse Fannie Mae and
to pay the Activity Fee, be construed to refer, in addition, to any and all
funds that, pursuant to any written agreement between the Servicer and Fannie
Mae, are advanced by the Servicer or which otherwise would have been required to
be advanced by Fannie Mae under any Related Fannie Mae Collateral Agreement but
for the advance of the Servicer. No agreement between the Servicer and Fannie
Mae pursuant to which the Servicer may advance funds on behalf of Fannie Mae
shall be construed to create a guaranty or other surety obligation by the
Servicer with respect to Owner's Obligations.
SECTION 4.2 FEES AND EXPENSES.
-----------------
In addition to Owner's obligations set forth in section 4.1 and in
the other Transaction Documents, Owner hereby agrees absolutely and
unconditionally to pay, or cause to be paid, to Fannie Mae or Servicer, as the
case may be, the following:
(a) any and all reasonable fees, costs, charges and expenses
(including the reasonable fees and expenses of attorneys, accountants and other
experts) which Fannie Mae or Servicer may pay or incur in connection with any
payment under any Related Fannie Mae Collateral Agreement, including payments of
any fees and charges in connection with any accounts established to facilitate
payments under any Related Fannie Mae Collateral
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Agreement, or the performance of Fannie Mae's obligations under any Related
Fannie Mae Collateral Agreement;
(b) any and all reasonable out-of-pocket fees, costs, charges and
expenses (including the reasonable fees and expenses of attorneys, accountants
and other experts) which Fannie Mae may pay or incur in connection with the
approval and documentation of any Hedge arrangement;
(c) the amount of any reasonable out-of-pocket fees, costs,
charges or expenses (including fees and expenses of attorneys, accountants and
other experts) incurred by Fannie Mae or Servicer in connection with the
administration of this Agreement or any of the other Transaction Documents;
(d) the amount of any out-of-pocket fees, costs, or charges or
expenses (including the reasonable fees and expenses of attorneys, accountants
and other experts) incurred by Fannie Mae or Servicer in connection with the
preservation of rights or remedies under this Agreement or any of the other
Transaction Documents;
(e) the amount of any out-of-pocket fees, costs, or charges or
expenses (including the reasonable fees and expenses of attorneys, accountants
and other experts) incurred by Fannie Mae or Servicer, if an Event of Default
has occurred and is continuing, in connection with the enforcement of this
Agreement or any of the other Transaction Documents or in connection with the
foreclosure upon, sale of or other disposition of any security granted pursuant
to the Transaction Documents;
(f) any and all reasonable fees, costs, charges and expenses
(including the reasonable fees and expenses of attorneys, accountants and other
experts) incurred by Fannie Mae or Servicer in connection with the disbursement
or application of insurance or condemnation awards, proceeds, payments or
damages to the costs of restoration and repair of any Property;
(g) any payments or advances (other than Advances and Withdrawals)
made by Fannie Mae or Servicer on behalf of Owner pursuant to any of the
Transaction Documents;
(h) all reasonable out-of-pocket expenses incurred in connection
with or related to the execution and delivery of the Related Fannie Mae
Collateral Agreements, the sale of the Bonds or the Obligations and the
preparation and review of this Agreement and the other Transaction Documents and
the consummation of the transactions contemplated hereby and thereby, including
fees payable to any agencies rating the Bonds or the Obligations from which
ratings were requested and received, any tax or governmental charge imposed in
connection with the execution and delivery of the Related Fannie Mae Collateral
Agreements and the reasonable fees and disbursements of Fannie Mae's and
Servicer's counsel and accountants, including reasonable out-of-pocket fees and
expenses relating to
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any (i) amendments, consents or waivers to this Agreement or any of the other
Transaction Documents (whether or not any such amendments, consents or waivers
are entered into), (ii) requests to evaluate any substitute or additional
collateral, (iii) proposed Hedge arrangement, (iv) proposed or actual change in
the mode of interest borne by the Bonds, or (v) proposed or actual release or
substitution of a Property; and
(i) all documentary stamp, recording, transfer, mortgage,
intangible or filing or other taxes or fees and any and all liabilities with
respect to, or resulting therefrom which are payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of or filing of record,
recordation, release or discharge of, this Agreement, the Mortgages, or any
other Transaction Document; and
(j) interest on any and all amounts referred to in paragraphs (a)
through (i) of this section 4.2 from the date when due under this Agreement
until payment of all such amounts in full, payable at the Activity Rate, in
immediately available funds.
All amounts to be paid pursuant to clauses (a) through (j) of this section 4.2
shall be payable separate and apart from principal, interest and other amounts
due under the Mortgage Loans. Prior to an Event of Default or a Potential Event
of Default all such amounts shall be due and payable within thirty (30) days of
Owner's receipt of written demand therefor and upon the occurrence of and during
the continuance of an Event of Default or a Potential Event of Default all such
amounts shall be due and payable on demand. So long as no Potential Event of
Default or Event of Default shall exist and be continuing, Fannie Mae will use
reasonable efforts to avoid unnecessary duplication of third party fees and
expenses. Upon request by Owner, Fannie Mae will provide reasonable supporting
back-up documentation for invoiced fees and expenses.
SECTION 4.3 PAYMENT OF FEES AND EXPENSES.
----------------------------
(a) BOND FEES. In addition to the foregoing, Owner shall pay, or
cause to be paid, when due, the ongoing fees and expenses of the Issuer, the
Related Trustee, the Remarketing Agent, any tender agent and any rebate analyst
(collectively, the "BOND FEES") with respect to each issue of Related Bonds.
Such Bond Fees shall be paid by Owner in accordance with the terms of the
Related Bond Property Loan Documents and the Related Bond Documents. The Bond
Fees, as of the Restatement Closing Date with respect to each issue of Related
Bonds, are set forth on Exhibit A.
(b) FANNIE MAE ADVANCES. Fannie Mae shall have the right but not
the obligation to pay any fee or expense due and owing by Owner pursuant to
sections 4.2 and 4.3 or any Financing Agreement on behalf of Owner if Owner
fails to pay such fee or expense when due, unless Owner is contesting such fee
in good faith and otherwise in accordance with the terms of the Transaction
Documents. If Fannie Mae pays any such fee
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or expense, Owner shall pay such amount and the Activity Fee relating to such
amount to Fannie Mae in the same manner as any Advance.
(c) PREPAYMENT PREMIUM. Owner agrees to pay the Prepayment
Premium pursuant to each Related Mortgage Note (i) whether prepayment of such
Related Mortgage Note is voluntary or involuntary (in connection with
acceleration of the unpaid principal balance of such Related Mortgage Note) or
the Related Mortgage is satisfied or released by foreclosure (whether by power
of sale or judicial proceeding) and in lieu of foreclosure or by any other means
and (ii) in the event that an Alternate Credit Facility is provided to the
Related Trustee in substitution for the Related Fannie Mae Collateral Agreement.
SECTION 4.4 FACILITY AND ACTIVITY FEES.
--------------------------
In addition to any other fees and amounts payable to Fannie Mae
under this Agreement or the other Transaction Documents, the following fees
shall be payable by Owner to Fannie Mae with respect to the Related Fannie Mae
Collateral Agreements, the Mortgage Documents and the Bonds:
(a) FACILITY FEE. Owner shall, in consideration of Fannie Mae's
entering into the Related Fannie Mae Collateral Agreements and so long as any
Related Fannie Mae Collateral Agreement shall remain in effect, be responsible
for paying to Servicer, for remittance to Fannie Mae, a facility fee (the
"FACILITY FEE"). The Facility Fee shall be calculated and is payable with
respect to each series of Related Bonds as follows:
(i) the product of the Credit Enhancement Component
multiplied by the difference between (x) the outstanding principal balance
of the Mortgage Loan with respect to such Related Bonds and (y) the sum of
(A) the Allocated Release Price Cash Collateral, if any, with respect to
such Related Bonds, plus (B) the principal amount (without regard to
earnings) from time to time on deposit in the Principal Reserve Fund with
respect to such Related Bonds; plus
(ii) the product of the Reserve Component multiplied by the
sum of (x) the Allocated Release Price Cash Collateral, if any, with
respect to such Related Bonds, plus (y) the principal amount (without
regard to earnings) from time to time on deposit in the Principal Reserve
Fund with respect to such Related Bonds, if any; plus
(iii) for any period during which either (x) the Weekly
Variable Rate is in effect with respect to such Related Bonds, or (y) the
Reset Rate is in effect for a Reset Period less than five (5) years with
respect to such Related Bonds, the product of .125% per annum, or 12.5
basis points, multiplied by the outstanding principal balance of the
Mortgage Loan with respect to such Related Bonds; plus
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(iv) the product of the Servicing Fee Component multiplied
by the outstanding principal amount of the Mortgage Loan with respect to
such Related Bonds; plus
The Facility Fee shall be calculated as of the first (1st) day of each month
based on the amount then on deposit in the Principal Reserve Fund for each
Mortgage Loan. The Facility Fee shall be payable monthly in arrears, on the
first day of each month, as part of the Mortgage Note Rate (but without
duplication) under each of the Related Mortgage Notes. The initial payment for
the month in which the applicable Related Bonds are issued shall be a prorated
amount if the applicable Related Bonds are issued on other than the first day of
a month, such proration to be determined by multiplying the fee otherwise
payable for the entire month by a fraction, the numerator of which is the number
of days in such month from and including the date on which the applicable
Related Bonds are issued to and including the last day of the month and the
denominator of which is the number of days in such month.
(b) ACTIVITY FEE. In addition to the Facility Fee, Owner shall,
in consideration of Fannie Mae providing the Fannie Mae Collateral Agreements,
pay to Servicer, for the account of and remittance to Fannie Mae, an activity
fee (the "ACTIVITY FEE") with respect to each Advance and each Withdrawal (other
than Withdrawals with respect to Related Purchased Bonds). The Activity Fee
shall, with respect to each Advance and each Withdrawal (other than Withdrawals
with respect to Related Purchased Bonds), be an amount equal to the amount of
such Advance or Withdrawal, as the case may be, outstanding from time to time
multiplied by the Activity Rate and further multiplied by a fraction, the
numerator of which is the number of days that such Advance or Withdrawal is
outstanding (i.e., until Fannie Mae is reimbursed for such Advance or until the
Principal Reserve Fund is replenished for such Withdrawal, in either case in
accordance with section 4.1) and the denominator of which is 365 days or 366
days, as applicable. The Activity Fee shall be payable so long as the Advance
or Withdrawal (other than Withdrawals with respect to Related Purchased Bonds)
remains unreimbursed, in whole or in part, to Fannie Mae. Fannie Mae shall be
deemed to have been reimbursed if and when a payment is made to Servicer, or the
Principal Reserve Fund is replenished, as the case may be, in accordance with
the terms of this Agreement. The Activity Fee shall not be due to Fannie Mae if
Fannie Mae is reimbursed for all funds provided under the Related Fannie Mae
Collateral Agreement by 2:00 p.m., Washington, D.C. time, on the date on which
Fannie Mae shall have provided such funds. Any reimbursement payment received
after 2:00 p.m., Washington, D.C. time, shall be treated as if it were paid at
9:00 a.m., Washington, D.C. time, on the next Business Day. The Activity Fee
shall be payable initially on the first (1st) day of each month following any
Advance or Withdrawal and shall be payable on the first (1st) day of each
successive month for so long as such Advance or Withdrawal shall remain
outstanding. Notwithstanding anything herein to the contrary:
(i) Owner shall not be required to pay the Activity Fee on
Withdrawals with respect to Related Purchased Bonds; and
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(ii) so long as no Event of Default exists, each installment of the
Activity Fee payable in connection with an Advance with respect to Related
Purchased Bonds shall be reduced by an amount equal to the Facility Fee
Credit (as defined below). For purposes of this section 4.4(b), the
"FACILITY FEE CREDIT" shall equal: (A) the Facility Fee paid by Owner with
respect to the time period for which each such Activity Fee installment is
due minus the portion of such Facility Fee attributable to the Servicing
Fee Component; multiplied by (b) a fraction, the numerator of which is the
amount of such Advance and the denominator of which is the outstanding
principal balance of the Mortgage Loan with respect to such Related
Purchased Bonds.
The Activity Fee shall be otherwise due and payable as provided in this
Agreement. Upon receipt by Servicer, the Activity Fee shall be remitted
immediately to Fannie Mae.
SECTION 4.5 INDEMNIFICATION.
---------------
(a) INDEMNIFICATION. Owner hereby releases Fannie Mae, Servicer
and their respective officers, directors, members, shareholders, officials,
agents, independent contractors and employees and each of them and each Person,
if any, who controls Fannie Mae or Servicer within the meaning of either Section
15 of the Securities Act of 1933, as amended, or Section 20 of the Securities
Exchange Act of 1934, as amended (each an "INDEMNIFIED PARTY"), from, and
covenants and agrees to indemnify, hold harmless and defend each such
indemnified party from and against, any and all claims, losses, liabilities
(including penalties), actions, suits, judgments, demands, damages, costs,
charges or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and costs of investigation) and obligations whatsoever
to the extent the same are or result in actual loss, cost or expense (but
excluding consequential damages) to the indemnified party (herein collectively
referred to as "LIABILITIES") of any nature arising out of, relating to or in
connection with: (i) the transactions provided for in this Agreement or the
other Transaction Documents or otherwise in connection with any Property, the
Bonds, the Mortgage Loans or the execution or amendment of any document relating
thereto; (ii) the approval (A) by the Related Issuers of the refinancing of the
Bond Properties or (B) of the making of the Mortgage Loans; (iii) any act or
omission of Owner or any of its partners, agents, servants, employees or
licensees, in connection with the Mortgage Loans, the Properties, this Agreement
or the other Transaction Documents; (iv) the issuance and sale, resale or
remarketing of any Bonds or any certifications or representations made by any
person (other than any Issuer or the party seeking indemnification in connection
therewith), related to (A) any untrue statement or alleged untrue statement of a
material fact contained in any offering documents relating to any of the Bonds
or arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading (other than with respect to information
provided or omitted to be provided by Fannie Mae or Servicer for the respective
sections of such offering documents relating to Fannie Mae or Servicer) or (B)
the violation by Owner of any Federal, state or local securities or real estate
laws, rules
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or regulations in connection with the issuance, offer and sale of any of the
Bonds; (v) the operations of any Property, or the conditions, occupancy, use,
possession, conduct or management of work done in or about, or from the
planning, design, acquisition, installation or construction of any Property, or
any part of any Property; (vi) the exercise by Fannie Mae or Servicer of their
respective powers or duties under this Agreement or any other Transaction
Document; (vii) any Related Trustee's acceptance or administration of the trusts
created by the Related Indenture and the exercise of its powers or duties
thereunder, and under any Regulatory Agreement or any other agreements in
connection therewith to which it is a party; (viii) errors, omissions,
interruptions, losses or delays in transmission or delivery of any messages by
mail, cable, telegraph, telex, telephone or otherwise; (ix) any other
circumstances whatsoever in making or failing to make payment under any Related
Fannie Mae Collateral Agreement; (x) the Sleepy Hollow Public Improvements
Agreement or the Sleepy Hollow Public Improvements Deed of Trust or from any
claim, action, proceeding, judgment, order or process arising from, based upon
or growing out of the Sleepy Hollow Public Improvements Agreement or the Sleepy
Hollow Public Improvements Deed of Trust; and (xi) all reasonable costs, counsel
fees, expenses or liabilities incurred in connection with any such claim or
proceeding referred to in clauses (i) through (x) above; provided, however, that
the foregoing indemnification shall not be effective to the extent such
Liabilities are caused by the gross negligence, willful misconduct or bad faith
breach of an express contractual payment obligation of an indemnified party.
Neither Fannie Mae nor Servicer shall have any liability to Owner or to any
other person as a result of any reduction of the credit rating of any of the
Bonds or any deterioration of Fannie Mae's financial condition, nor shall any
such reduction or deterioration reduce or diminish in any respect Owner's
obligations under this Agreement. In the event that any action or proceeding is
brought against any indemnified party with respect to which indemnity may be
sought hereunder, Owner, upon written notice from the indemnified party, shall
assume the investigation and defense thereof, including the employment of
counsel selected by Owner, but acceptable to the indemnified party, and shall
assume the payment of all expenses related thereto, with full power to litigate,
compromise or settle the same in its discretion, provided that if such
settlement or compromise shall contain or infer an admission regarding, or
relating in any way to, any indemnified party, such indemnified party shall have
the right to review and approve or disapprove any such compromise or settlement.
Each indemnified party shall have the right, if such indemnified party shall
conclude in good faith that a conflict of interest exists, to employ separate
counsel in any such action or proceeding and participate in the investigation
and defense thereof, and Owner shall pay the reasonable fees and expenses of
such separate counsel. If separate counsel are employed as described above,
Owner and any such indemnified party agree to cooperate as may reasonably be
required in order to ensure the proper and adequate defense of any such action,
suit or proceeding, including making available to each other, and their counsel
and accountants, all books and records relating to such action, suit or
proceeding. If any such counsel determines that the rendering of such
assistance will adversely affect the defense or interests of its client, such
counsel shall not be required to comply with the terms of the immediately
preceding sentence.
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Notwithstanding the foregoing, upon any permitted transfer of any
Property to another Person, or the release of any Property from the lien of any
Mortgage, or the foreclosure of the lien of any Mortgage, Owner shall remain
obligated to indemnify each indemnified party pursuant to this section 4.5 with
respect to (but only with respect to) acts occurring prior to the date of
permitted transfer of legal title to such Property or release of such Property
from the lien of any Mortgage or foreclosure of the lien of any Mortgage, as
applicable (irrespective of when a claim is actually made), subject to
subsection 4.5(b).
(b) SURVIVAL. The indemnity provisions of this section 4.5 shall
survive the termination of this Agreement and foreclosure or release of the
Mortgages or other disposition of the Properties until the sooner of the
expiration of the applicable statute of limitations or six years following such
termination, foreclosure or release, as applicable.
SECTION 4.6 LIABILITY OF OWNER.
------------------
Subject to section 4.14, the obligations of Owner under this
Agreement shall be absolute, unconditional and irrevocable and shall be paid and
performed strictly in accordance with the terms of this Agreement under all
circumstances whatsoever, including the following circumstances: (a) any
invalidity or unenforceability of this Agreement or any of the other Transaction
Documents or any other agreement or instrument related to such Transaction
Documents; (b) any amendment or waiver of, or any consent to or departure from,
the terms of this Agreement, any Related Fannie Mae Collateral Agreement, any of
the other Transaction Documents, or any other agreement or instrument related to
the Transaction Documents, any extensions of time or other modifications of the
terms and conditions for any act to be performed in connection with this
Agreement, any Related Fannie Mae Collateral Agreement, or any of the other
Transaction Documents, other than any amendment, waiver, consent, extension or
modification entered into in strict accordance with the terms of this Agreement
provided that any of the foregoing are made in accordance with the provisions of
the relevant document; (c) the existence of any claim, set-off, defense or other
right which Owner may have at any time against any Issuer, any Related Trustee,
any tender agent, Fannie Mae, Servicer, Remarketing Agent or any other Person,
whether in connection with this Agreement, any of the other Transaction
Documents, any Property, or any unrelated transaction; (d) the surrender or
impairment of any security for the performance or observance of any of the
agreements or terms of this Agreement or the other Transaction Documents; (e)
defect in title to any Property, any acts or circumstances that may constitute
failure of consideration, destruction of, damage to or condemnation of any
Property, commercial frustration of purpose, or any change in the tax or other
laws of the United States of America or of the State or any political
subdivision of either; (f) the breach by any Issuer, any Related Trustee, any
tender agent, Servicer, Remarketing Agent, Fannie Mae or any other Person of its
obligations under any Transaction Document or (g) any other circumstance,
happening or omission whatsoever.
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SECTION 4.7 FANNIE MAE AND SERVICER NOT LIABLE.
----------------------------------
Neither Fannie Mae, Servicer nor any of their officials, officers,
directors, members, shareholders, agents, independent contractors or employees
shall be responsible for or liable to Owner, its Affiliates or any of Owner's or
its Affiliates' members, partners, Affiliates, independent contractors or
employees for (i) any act or omission of Fannie Mae, Servicer or any other
Person made in good faith with respect to the validity, sufficiency, accuracy or
genuineness of documents, or of any endorsement(s) thereon (except for documents
and endorsements provided by Fannie Mae or Servicer, as applicable), even if
such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged, (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Related Fannie Mae Collateral Agreement or the rights or benefits under any
Related Fannie Mae Collateral Agreement or proceeds under any Related Fannie Mae
Collateral Agreement in whole or in part, that may prove to be invalid or
ineffective for any reason, (iii) failure of any Related Trustee to comply fully
with all conditions required in order to effect any Advance, (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex, telecopier or otherwise; (v) for any loss or
delay in the transmission or otherwise of any document or draft required in
order to make any Advance, or (vi) any consequences arising from causes beyond
the control of Fannie Mae. In furtherance and not in limitation of the
foregoing, Fannie Mae (or Servicer) may accept documents that appear on their
face to be valid and in order, without any responsibility for further
investigation. None of the above shall affect, impair, or prevent the vesting
of rights or powers of Fannie Mae or Servicer under this Agreement. In
furtherance and extension and not in limitation of the specific provision set
forth above, any action taken or omitted by Fannie Mae under or in connection
with any Transaction Document or any related certificates or other documents
shall be binding upon Owner, the Related Trustee, the Issuer, the Remarketing
Agent and the tender agent and shall not under the Related Fannie Mae Collateral
Agreement put Fannie Mae under any resulting liability to any of them except to
the extent that such action or omission of Fannie Mae is attributable to Fannie
Mae's gross negligence, willful misconduct or bad faith breach of an express
contractual payment obligation.
SECTION 4.8 WAIVERS AND CONSENTS.
--------------------
OWNER AGREES TO BE BOUND BY THIS AGREEMENT AND TO THE EXTENT
PERMITTED BY LAW, (A) WAIVES AND RENOUNCES ANY AND ALL REDEMPTION AND EXEMPTION
RIGHTS AND THE BENEFIT OF ALL VALUATION AND APPRAISAL PRIVILEGES AGAINST THE
INDEBTEDNESS AND OBLIGATIONS EVIDENCED BY THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS OR BY ANY EXTENSION OR RENEWAL OF THIS AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS; (B) WAIVES PRESENTMENT AND DEMAND FOR PAYMENT,
NOTICES OF NONPAYMENT AND OF DISHONOR, PROTEST OF DISHONOR AND NOTICE OF
PROTEST; (C) WAIVES ALL NOTICES IN CONNECTION WITH THE DELIVERY AND
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ACCEPTANCE OF THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS AND ALL OTHER
NOTICES IN CONNECTION WITH THE PERFORMANCE, DEFAULT OR ENFORCEMENT OF THE
PAYMENT OF ANY OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS EXCEPT AS REQUIRED BY THIS AGREEMENT OR THE OTHER TRANSACTION
DOCUMENTS; (D) AGREES THAT ITS LIABILITIES UNDER THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS SHALL BE UNCONDITIONAL AND WITHOUT REGARD TO THE LIABILITY
OF ANY OTHER PERSON; AND (E) AGREES THAT ANY CONSENT, WAIVER OR FORBEARANCE
UNDER THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS WITH RESPECT TO AN
EVENT SHALL OPERATE ONLY FOR SUCH EVENT AND NOT FOR ANY SUBSEQUENT EVENT.
SECTION 4.9 SUBROGATION.
-----------
Owner acknowledges that Fannie Mae is to be fully subrogated to the
extent of any payment made by Fannie Mae pursuant to any Related Fannie Mae
Collateral Agreement, any additional interest due on any late payment, to the
rights of the Related Trustee and the respective Bondholders to any moneys paid
or payable under the Related Bonds and all security therefor under the Related
Indenture. Owner agrees to such subrogation and further agrees to execute such
instruments and to take such actions as, in the judgment of Fannie Mae, are
necessary to evidence such subrogation and to perfect the rights of Fannie Mae
to the extent necessary to provide reimbursement hereunder.
SECTION 4.10 APPLICATION OF PAYMENTS.
-----------------------
Payments made by Owner in respect of the Obligations shall be
applied in the manner provided in the Mortgage Documents.
SECTION 4.11 PLEDGE OF RIGHTS TO CERTAIN FUNDS AND INVESTMENTS.
-------------------------------------------------
To secure Owner's obligations under this Agreement, to the extent,
if any, that Owner retains an interest in and to all funds and accounts and
investments of funds and accounts now or hereafter held by: (a) the Related
Trustees under the Related Indentures as security for the payment of the Bonds,
including the Principal Reserve Funds, and any and all loan funds, escrow funds,
revenue funds, debt service funds, reserve funds, redemption funds and other
funds and securities and other instruments comprising investments of any of the
foregoing and interest and other income derived from any of the foregoing held
as security for the payment of the Bonds, Owner hereby pledges and assigns to
Fannie Mae and grants to Fannie Mae a security interest in such funds, accounts,
and investments which pledge, assignment and grant shall be subject only to the
rights of each Related Trustee under the Related Indenture) and (b) by Servicer
with respect to payments payable under any of the Transaction Documents
including the Replacement Reserve Funds and any and all escrow funds, completion
repair funds and other funds, and any securities
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and other instruments comprising investments of any of the foregoing and
interest income and other proceeds derived from any of the foregoing. Owner
covenants and agrees that it will defend Fannie Mae's rights and security
interests created by this section 4.11 against the claims and demands of all
Persons except the Related Trustee. In addition to its other rights and
remedies under this Agreement and the other Transaction Documents, Fannie Mae
shall have all the rights and remedies of a secured party under the Uniform
Commercial Code or other applicable law with respect to the security interests
created by this section 4.11, subject only to the rights of the Related Trustees
under the Related Indentures. Fannie Mae's rights under this section 4.11 are
in addition to, and not in lieu of, its rights and remedies described elsewhere
in this Agreement.
SECTION 4.12 PURCHASED BONDS.
---------------
Owner acknowledges that any Purchased Bonds (as defined in the
Related Indenture) will be purchased for and registered in the name of Owner, to
the extent that Fannie Mae has provided the funds to purchase such Purchased
Bonds or moneys in the applicable Principal Reserve Fund were used for such
purposes and will be pledged to Fannie Mae pursuant to the Related Pledge
Agreement.
SECTION 4.13 CASH COLLATERAL.
---------------
In addition to the pledge and security interest granted to Fannie
Mae by Owner pursuant to section 4.11, as separate and additional security for
Owner's obligations under this Agreement, Owner shall pledge and assign to
Fannie Mae, and grant to Fannie Mae a first priority security interest in, all
of Owner's right, title and interest in and to each Property Account, the
Central Account and the Cash Collateral by executing and delivering to Fannie
Mae the Cash Management Agreement on the Fannie Mae Facility Closing Date. Owner
covenants and agrees that it will defend Fannie Mae's rights and security
interest created by this section 4.13 and the Cash Management Agreement against
the claims and demands of all Persons. The Property Accounts, the Central
Account and the Cash Collateral shall be pledged, assigned, secured, maintained,
invested and disposed of pursuant to the Cash Management Agreement.
SECTION 4.14 NONRECOURSE OBLIGATIONS.
-----------------------
(a) NON-RECOURSE LIABILITY. Subject to the provisions of sections
4.14(b) and 4.14(c) and notwithstanding any other provision in the Related
Mortgage Notes, the Mortgages or any other Transaction Document, the personal
liability of Owner, QRS Partner, OP Partner and any other person or entity to
pay and perform the Obligations shall be limited to (i) the real and personal
property described as "Property" in the Mortgages, (ii) the personal property
described in and pledged under any other Mortgage Document, (iii) the rents,
profits, issues, products and income of the Properties received or collected by
or on behalf of Owner (the "RENTS AND PROFITS") while an Event of Default exists
to the extent not used to pay Operating Expenses then due and payable as of the
time of receipt
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of such Rents and Profits, or to pay principal and interest then due and payable
under the Related Mortgage Notes, any other sums then due and payable under the
Mortgages or any other Mortgage Document (including deposits or reserves due
under any Mortgage Document) and any other Obligations then due and owing to
Fannie Mae under this Agreement, except in each case to the extent that (x)
Owner did not have the legal right, because of a bankruptcy, receivership or
similar judicial proceeding, to direct the disbursement of such sums or (y)
Fannie Mae was unwilling to disburse such Rents and Profits from the Central
Account established pursuant to the Cash Management Agreement. Except as
provided in sections 4.14(b) and 4.14(c), notwithstanding the terms and
provisions of the Note or any other Transaction Document, Fannie Mae shall not
seek or obtain (A) any judgment for a deficiency or money damages against Owner,
QRS Partner or OP Partner, or Owner's, QRS Partner's or OP Partner's heirs,
legal representatives, successors or assigns, in any action to enforce any right
or remedy under the Related Mortgage Notes, the Mortgages, this Agreement or any
of the other Transaction Documents, or (B) any judgment on any of the Related
Mortgage Notes, the Mortgages, this Agreement, any of the other Transaction
Documents or the Obligations except as may be necessary in any action brought
under any of the Mortgages to enforce the lien against the Property encumbered
thereby or to exercise any remedies under any other Mortgage Documents, so long
as no judgment, order, decree or other relief in the nature of a personal or
deficiency judgment is sought to be enforced against Owner, QRS Partner, OP
Partner or any other Person.
(b) EXCEPTIONS TO NON-RECOURSE LIABILITY. If, without obtaining
Fannie Mae's prior written consent, (i) a "Transfer" shall occur which, pursuant
to Uniform Covenant 19 of the any of the Mortgages, gives Fannie Mae the right,
at its option, to declare all sums secured by any such Mortgage immediately due
and payable, (ii) Owner shall encumber any Property with the lien of any
"Subordinate Instrument" (as defined in the Related Mortgage with respect to
such Property) in connection with any financing by Owner, or (iii) Owner shall
cease to be a Single-Purpose entity, any of such events shall (after the
expiration of any applicable notice and cure period) constitute an Event of
Default hereunder and under the other Mortgage Documents, and if any such event
shall continue for (thirty) 30 days after notice from Fannie Mae, then, from and
after the date that is (thirty) 30 days after such notice, (x) section 4.14(a)
shall not apply to, and (y) Owner, QRS Partner and OP Partner shall be
personally liable on a joint and several basis for full recourse liability under
this Agreement and the other Mortgage Documents for, Fannie Mae's actual loss,
cost and expense (including reasonable attorney's fees and expenses but
excluding consequential damages) suffered or incurred by Fannie Mae to the
extent suffered or incurred by Fannie Mae as a result of any event or occurrence
described in clauses (i) through (iii) of this section 4.14(b).
(c) EXCEPTIONS TO EXCULPATION. Notwithstanding section 4.14(a),
Owner, QRS Partner and OP Partner, shall be personally liable on a joint and
several basis, in the amount of Fannie Mae's actual loss, damage or cost
(including but not limited to attorneys' fees and expenses but excluding
consequential damages) to the extent suffered or incurred by Fannie Mae as a
result of (1) fraud or intentional misrepresentation by Owner, Owner's
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employees, QRS Partner or OP Partner, in connection with obtaining the Mortgage
Loans evidenced by the Related Mortgage Notes, obtaining the credit enhancement
evidenced by the Related Fannie Mae Collateral Agreements, or in complying with
any of Owner's Obligations, (2) Insurance Proceeds, Condemnation Proceeds, and
security deposits from tenants received by or on behalf of Owner in its capacity
as owner of the Properties and not being applied in accordance with the
provisions of the Mortgages (except to the extent that Owner did not have the
legal right, because of a bankruptcy, receivership or similar judicial
proceeding, to direct disbursement of such sums or payments), (3) all Rents and
Profits (except to the extent that (x) Owner did not have the legal right,
because of a bankruptcy, receivership or similar judicial proceeding, to direct
the disbursement of such sums, or (y) Fannie Mae was unwilling to disburse such
Rents and Profits from the Central Account established pursuant to the Cash
Management Agreement) received after an Event of Default (or within the
one-hundred and eighty (180) day period immediately prior to the occurrence of
an Event of Default) not being applied (a) to the payment of the Operating
Expenses then due and payable, and (b) to the payment of principal and interest
due under the Related Mortgage Notes, any other sums then due and payable under
the Mortgages or any other Mortgage Document (including deposits or reserves due
under any Mortgage Document) and any other Obligations then due and owing to
Fannie Mae under this Agreement, except in each case to the extent that (i)
Owner did not have the legal right, because of a bankruptcy, receivership or
similar judicial proceeding, to direct the disbursement of such sums, or (ii)
Fannie Mae was unwilling to disburse such Rents and Profits from the Central
Account established pursuant to the Cash Management Agreement, (4) Owner's
failure to deposit all Gross Cash Flow into the Property Accounts in accordance
with the Cash Management Agreement (except to the extent that Owner did not have
the legal right because of a bankruptcy, receivership or similar judicial
proceeding to deposit such sums), (5) Owner's failure following an Event of
Default to deliver to Fannie Mae on demand all books and records relating to the
Properties, or (6) Owner's indemnification obligations set forth in section
4.5(a), excluding indemnification obligations set forth in (A) clauses (i),
(ii)(B), (iii), (v) and (vi) of section 4.5(a), (B) clause (vii) of section
4.5(a) to the extent such indemnification obligation includes the payment or
performance by Owner of its obligations with respect to the Mortgage Loans or
this Agreement, (C) clause (ix) of section 4.5(a) to the extent such
indemnification obligation does not relate to claims by third parties for
failure to make payments under any Related Fannie Mae Collateral Agreement, and
(D) clause (xi) of section 4.5(a) to the extent the costs, fees, expenses or
liabilities referenced in such clause relate to an indemnification obligation
referred to in clauses (A), (B) or (C) of this sentence.
(d) NO IMPAIRMENT OF CERTAIN RIGHTS. No provision of this section
4.14 shall (i) affect any guaranty or similar agreement executed in connection
with Mortgage Loans evidenced by the Related Mortgage Notes or otherwise in
connection with the Obligations, (ii) release or reduce the Obligations or the
debt evidenced by the Related Mortgage Notes, (iii) impair the right of Fannie
Mae to enforce the provisions of Paragraph 6.B ("Environmental Hazards") of each
Mortgage, (iv) impair the lien of any Mortgage or (v) impair the right of Fannie
Mae to enforce the provisions of any Cash Management
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Agreement, any Replacement Reserve Agreement, the Assignment of Management
Agreement, any Hedge Security Agreement or any other agreement defined as an
"Ancillary Collateral Agreement" in any Mortgage; provided that the personal
liability of Owner, QRS Partner and OP Partner shall be limited as provided in
sections 4.14(a), (b), and (c). Notwithstanding anything to the contrary in the
Related Mortgage Notes or any Bond Property Loan Document, the provisions of
this section 4.14 and not the provisions of Sections 10 or 11 of the Related
Mortgage Notes shall control and govern the rights and obligations of Fannie Mae
and Owner with respect to the personal liability of Owner regardless of whether
Fannie Mae is exercising remedies (directly or indirectly) under the
Reimbursement Mortgages and other documents evidencing or securing the
Obligations or under all or any of the Related Mortgage Notes, the Related Bond
Mortgages or the Bond Property Loan Documents with respect to any Bond Property.
SECTION 4.15 APPLICATION FOR RELATED FANNIE MAE COLLATERAL
---------------------------------------------
AGREEMENTS.
- ----------
Upon the terms and subject to the conditions set forth in this
Agreement and subject to the condition that the Mortgage Loans be originated by
an independent third-party lender or issuer and comply with the other
requirements of the Fannie Mae Charter Act for multifamily loans, Owner hereby
applies to Fannie Mae for and hereby requests Fannie Mae, and Fannie Mae agrees,
to enter into the Related Fannie Mae Collateral Agreements in the Facility
Amount with respect to the Related Bonds. While each Mortgage Loan and the
Related Fannie Mae Collateral Agreement represents a separate and independent
obligation of Owner and Fannie Mae, respectively, Owner acknowledges that, in
requesting Fannie Mae to execute and deliver the Related Fannie Mae Collateral
Agreements, it intends that the Mortgage Loans be treated as if they were a
single, integrated Indebtedness of Owner. Accordingly, Owner agrees that if it
fails to pay fully, when due, any amount payable under any Related Mortgage Note
or its Related Mortgage, then Fannie Mae may elect to treat the amount owing
with respect to such Related Mortgage Note or its Related Mortgage as being due
and owing by Owner, on a pro rata basis, under each of the other Mortgages.
Similarly, if Owner fails to pay fully, when due, to Fannie Mae any other amount
which Owner is obligated to pay under this Agreement, the unpaid amount shall be
deemed to be due and owing by Owner on a pro rata basis with respect to each of
the Properties. It is a material part of the consideration for Fannie Mae's
agreement to execute and deliver the Related Fannie Mae Collateral Agreements
that Owner not be able to put one or more Mortgage Loans in default without
putting all Mortgage Loans in default. Accordingly, Owner expressly agrees that
irrespective of the actual payments made by it under the Mortgage Loans or this
Agreement, if the amount actually paid is not sufficient to pay fully and timely
all such obligations, then the failure to pay shall exist with respect to all
the Mortgage Loans notwithstanding that the amount paid was sufficient to pay
fully some but not all of the amounts due and owing with respect to the Mortgage
Loans or other Obligations.
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SECTION 4.16 BOND MATTERS.
------------
Fannie Mae shall provide its written consent to the exercise by
Owner of the purchase in lieu of redemption provisions in a Related Indenture so
long as:
(a) Fannie Mae determines that its obligations, risks and
liabilities will not be increased in any respect as a result of the
proposed purchase in lieu of redemption;
(b) Owner has provided to the Related Trustee Available Monies (as
defined in the Related Indenture) to fund such purchase of the Related
Bonds on behalf of Owner pursuant to the Related Indenture, and Fannie Mae
reasonably determines that no part of such funds may be subject to
avoidance or any other recovery or disgorgement pursuant to the Bankruptcy
Code, as amended (including sections 544, 547, 549 or 550 thereof), or any
other applicable bankruptcy or insolvency laws;
(c) no Event of Default or Potential Event of Default exists; and
(d) Owner has provided evidence satisfactory to Fannie Mae that
upon such purchase in lieu of redemption Fannie Mae will no longer be
obligated to make payments with respect to such Related Bonds pursuant to
the Related Fannie Mae Collateral Agreement.
Fannie Mae shall provide such written consent within ten (10)
Business Days from the date that Fannie Mae receives each of (i) Owner's written
request for such consent and (ii) all of the information required by Fannie Mae
in the preceding clauses (a) through (d).
ARTICLE V.
SUBSTITUTION, RELEASE, AND ADDITION OF PROPERTIES;
REUNDERWRITING; PRINCIPAL RESERVE FUNDS
SECTION 5.1 ALLOCABLE FACILITY AMOUNT.
-------------------------
Fannie Mae shall determine the Allocable Facility Amount for each
Property on or before September 30th of each year (commencing September 30,
1997) during the term of this Agreement (the "DETERMINATION DATE"). Once
determined by Fannie Mae as aforesaid, the Allocable Facility Amount for each
Property shall be promptly disclosed to Owner by Fannie Mae and shall remain in
effect until the next Determination Date, unless sooner modified in connection
with the addition of a New Property pursuant to section 5.4.
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SECTION 5.2 SUBSTITUTION OF ADDITIONAL MORTGAGED PROPERTIES.
-----------------------------------------------
At Owner's request, an Additional Mortgaged Property shall be
released from the lien of the Related Mortgage and the collateral derived from
such Additional Mortgaged Property (such as the related Principal Reserve Fund)
shall be released to Owner, and a New Additional Property substituted therefor,
if each of the following conditions are met:
(a) The New Additional Property has a Value equal to or greater
than the product of 125% (the "SUBSTITUTION PERCENTAGE") multiplied by the
Minimum Substitute Property Value of the Released Property;
(b) The New Additional Property has Net Operating Income (as
determined by Fannie Mae in its discretion) for the 12 month period ending
within 60 days of the date this test is applied, equal to or greater than the
Net Operating Income (as determined by Fannie Mae in its discretion) of the
Additional Mortgaged Property being released from the lien for the corresponding
12 month period multiplied by the Substitution Percentage;
(c) No Event of Default or Potential Event of Default shall have
occurred and be continuing;
(d) Owner shall cause the Released Property to be immediately
conveyed by Owner to OP Partner, or such other purchaser as Owner may otherwise
determine, provided that with the consent of Fannie Mae, which consent will not
be unreasonably withheld, Owner or, if applicable, the related Nominee Corp.,
may continue to own the Released Property for up to one year following the date
the lien of the Related Mortgage is released pursuant to this section;
(e) The New Additional Property meets all of Fannie Mae's then
applicable underwriting criteria;
(f) All documentation relating to the foregoing is acceptable to
Fannie Mae in its discretion in all respects, including legal opinions, title
insurance, Security Instruments, Replacement Reserve Agreements, assignments and
any amendments to this Agreement or the other Transaction Documents; and
(g) With respect to each proposed New Additional Property, Owner
shall pay Fannie Mae and Servicer a due diligence fee plus all reasonable costs
and expenses (including legal fees and expenses) incurred by Fannie Mae or
Servicer in connection with the foregoing. Such amounts shall be paid by Owner
on or prior to the closing date of such substitution or, if such substitution
fails to close within thirty (30) days of Owner's receipt of invoices therefor
(and if requested by Owner, reasonable supporting back-up invoices evidencing
such items), and shall be payable regardless of whether the property
substitution does or does not (for any reason) ultimately occur.
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SECTION 5.3 RELEASE OF PROPERTIES.
---------------------
At Owner's request, a Property shall be released from the lien of
the Related Mortgage and all collateral derived from such Property (such as the
related Principal Reserve Fund and the related Property Account) shall be
released to Owner, without another Multifamily Residential Property being
substituted therefor, if each of the following conditions are met:
(a) Owner shall, at Owner's option, either redeem (using funds
from the Principal Reserve Fund or otherwise) or otherwise remove Bonds from the
credit facility evidenced by this Agreement and/or post cash collateral in a
manner acceptable to Fannie Mae in its discretion, in either case in an amount
equal to 110% of the Allocable Facility Amount of the Released Property; the
following shall be credited toward such amount: (i) if the Released Property is
a Bond Property, the principal amount of Related Bonds outstanding with respect
to such Bond Property immediately prior to such release (provided, that, the
requirements of section 5.3(c) have been satisfied), plus (ii) the amount of any
other Bonds redeemed by Owner to obtain such release, plus (iii) the amount of
any cash collateral ("RELEASE PRICE CASH COLLATERAL") that has been deemed
acceptable by Fannie Mae and posted by Owner to obtain such release;
(b) No Event of Default or Potential Event of Default shall have
occurred and be continuing;
(c) If the Released Property is a Bond Property, then either (i)
the Related Fannie Mae Collateral Agreement with respect to such Bond Property,
if any, shall terminate on or before the Released Property is released from the
lien of any Related Mortgage, or (ii) Fannie Mae, in its discretion, shall have
consented to the transfer of the Bond Property and the assumption of the Related
Mortgage Note, the Related Mortgage and the other related Transaction Documents,
in accordance with section 5.6;
(d) Owner shall cause the Released Property to be immediately
conveyed by Owner to OP Partner, or such other purchaser as Owner may determine,
provided that with the consent of Fannie Mae, which consent will not be
unreasonably withheld, Owner or, if applicable, the related Nominee Corp., may
continue to own the Released Property for up to one year following the date the
lien of the Related Mortgage is released pursuant to this section;
(e) All documentation relating to the foregoing is acceptable to
Fannie Mae in all respects, including legal opinions, release documentation and
any amendments to this Agreement or the other Transaction Documents; and
(f) Owner shall pay, with respect to each Released Property, to
Fannie Mae and Servicer, a due diligence fee plus all out-of-pocket costs and
expenses (including reasonable legal fees and expenses) incurred by Fannie Mae
or Servicer in connection with
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the foregoing. Such amounts shall be paid by Owner on or prior to the closing
date of such release, or if such release fails to close, within thirty (30) days
of Owner's receipt of invoices therefor (and if requested by Owner, reasonable
supporting back-up invoices evidencing such items), and shall be payable
regardless whether the property is or is not (for any reason) ultimately
released from the lien of a Mortgage.
SECTION 5.4 ADDITION OF NEW PROPERTIES TO THE CREDIT FACILITY.
-------------------------------------------------
(a) At the request of Owner and Servicer, Fannie Mae may, from time to
time, consent to the addition of a New Bond Property or a New Additional
Property (as distinct from the substitution of Additional Mortgaged Properties
which is governed by section 5.2) to the Fannie Mae Credit Facility; provided,
however, that
(i) such consent may be granted or withheld by Fannie Mae
in its discretion;
(ii) the underwriting with respect to each such New Property
shall be conducted by Servicer and reviewed by Fannie Mae and shall take
into account all facts and circumstances deemed relevant by Servicer and
Fannie Mae in their discretion;
(iii) the terms and conditions relating to the addition of
such New Property shall be determined by Servicer and Fannie Mae in their
discretion;
(iv) all documentation deemed necessary by Servicer or
Fannie Mae for the making of a new loan, if applicable, and the addition
of such New Property shall be fully executed and delivered by each party
thereto and shall be in form and substance acceptable to Servicer and
Fannie Mae in their discretion;
(v) any loan made in conjunction with the addition of such
New Property must be originated by Servicer, another multifamily
seller/servicer approved under Fannie Mae's Delegated Underwriting and
Servicing product line, the bond trustee or issuer and otherwise comply
with applicable Fannie Mae Charter Act requirements; and
(vi) Owner shall pay or cause to be paid all reasonable
fees, charges and expenses (including fees and expenses of attorneys,
accountants and other experts) incurred by or on behalf of Fannie Mae or
Servicer in connection with the addition of such New Property in
accordance with section 4.2.
(b) The addition of any New Bond Property and any New Additional
Property to the Facility shall become effective only upon satisfaction of all
requirements in section 5.4(a) and Fannie Mae's execution and delivery to Owner
of a Confirmation of Addition of New Property, substantially in the form of
Exhibit G attached hereto (a "NEW
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PROPERTY CONFIRMATION"), which New Property Confirmation shall be given as of
the date the New Property is added to the Facility and shall specify whether
such New Property is a New Bond Property or a New Additional Property. Upon the
execution and delivery of the New Property Confirmation in accordance with this
section 5.4, this Agreement shall be automatically deemed amended and
supplemented to incorporate the terms and provisions of such New Property
Confirmation including any provisions:
(i) specifying the Credit Enhancement Component, the
Reserve Component with respect to such New Bond Property;
(ii) specifying the amendment and restatement of any of the
Exhibits to this Agreement; and
(iii) modifying the Allocable Facility Amount of all or any
of the Properties.
SECTION 5.5 PORTFOLIO REUNDERWRITING.
------------------------
(a) At Owner's request, made not more frequently than once in each
twenty-four month period and not more than seven times in the aggregate during
the term of the Fannie Mae Credit Facility, Servicer shall reunderwrite at the
sole cost and expense of Owner (using then current standard Fannie Mae
underwriting criteria) the Value of each Property and the Aggregate Debt Service
Coverage Ratio (each such event, a "REUNDERWRITING"). Solely for purposes of
this section 5.5, earnings upon all Release Price Cash Collateral and earnings
upon amounts contained in the Principal Reserve Funds with respect to each
Mortgage Loan shall be treated as a component of Owner's aggregate Net Operating
Income.
(b) Upon any such Reunderwriting, Owner shall have the right to
obtain a release of either some or all of the Release Price Collateral and/or
one or more of the Additional Mortgaged Properties (and, but only in Fannie
Mae's discretion, the Principal Reserve Fund) and all other Collateral relating
thereto, if each of the following conditions are met:
(i) Fannie Mae determines that, after giving effect to each such
release, the Aggregate Facility Amount will be equal to or less than the
Reunderwriting LTV Testpoint multiplied by the aggregate amount of (x) the
Value of each Property, plus (y) the amount of all Release Price Cash
Collateral (excluding interest earnings), plus (z) the amounts contained
in the Principal Reserve Fund with respect to each Mortgage Loan
(excluding interest earnings);
(ii) the Aggregate Debt Service Coverage Ratio exceeds the
Reunderwriting DSC Testpoint;
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(iii) no Event of Default or Potential Event of Default shall have
occurred and be continuing;
(iv) if in connection with such Reunderwriting Owner requests the
release of an Additional Mortgaged Property, Owner shall cause such
released Additional Mortgaged Property to be immediately conveyed by Owner
to OP Partner, or such other purchaser as Owner may determine, provided
that with the consent of Fannie Mae, which consent will not be
unreasonably withheld, Owner or, if applicable, the related Nominee Corp.,
may continue to own the released Additional Mortgaged Property for up to
one year following the date the lien of the Related Mortgage is released
pursuant to this section;
(v) all documentation relating to the release is acceptable to
Fannie Mae in all respects, including legal opinions, release
documentation and any amendments to this Agreement or the other
Transaction Documents; and
(vi) Owner shall pay to Fannie Mae and Servicer their then
applicable charges relating to the Reunderwriting and all of their
respective reasonable fees and expenses and costs (including legal fees
and expenses) incurred by such parties in connection with the
Reunderwriting and any release of Collateral resulting from such
Reunderwriting. Such amounts shall be paid by Owner promptly upon receipt
of invoices therefor (and if requested by Owner, reasonable supporting
back-up invoices evidencing such items), and shall be payable regardless
whether any Collateral is or is not (for any reason) ultimately released.
SECTION 5.6 CERTAIN PERMITTED TRANSFERS.
---------------------------
(a) CONDITIONS TO PERMITTED TRANSFERS. At the request of Owner,
Fannie Mae shall, from time to time, consent to Owner's sale and transfer of a
Bond Property subject to Fannie Mae credit enhancement (a "PROPOSED TRANSFER")
to an independent third-party purchaser if Fannie Mae determines that each of
the following conditions have been satisfied in full:
(i) no Event of Default or Potential Event of Default shall have
occurred and be continuing either immediately before or immediately after
giving effect to the Proposed Transfer;
(ii) at the time of such Proposed Transfer, Fannie Mae continues to
provide credit enhancement, and if applicable, liquidity support, with
respect to new bond transactions similar to the Related Bonds, pursuant to
guaranteed mortgage pass-through certificates or collateral agreements, as
the case may be, similar to the Related Fannie Mae Collateral Agreement
and the provision of such credit enhancement and liquidity support
continues to be permitted under the Fannie Mae Charter Act;
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(iii) Owner shall either redeem or otherwise remove Bonds from the
Fannie Mae Credit Facility and/or post cash collateral in a manner
acceptable to Fannie Mae, in either case in an amount equal to 110% of the
Allocable Facility Amount of the Bond Property that is proposed to be
transferred, which redemption, removal or cash collateral requirement
shall be satisfied by (1) the amount of the Related Bonds outstanding
immediately prior to the Proposed Transfer, plus (2) the amount of any
other Bonds redeemed by Owner to obtain approval of such transfer, plus
(3) the amount of any Release Price Cash Collateral posted by Owner to
obtain approval for the Proposed Transfer;
(iv) the proposed transferee shall be a Single-Purpose entity,
shall not be an Affiliate of Owner or any other EQR Party and meets the
eligibility, credit, management and otherwise satisfies the then
applicable underwriting standards customarily applied by Fannie Mae for
approval of new borrowers (the "PROPOSED TRANSFEREE");
(v) Owner causes to be submitted to Fannie Mae all information
required by Fannie Mae to evaluate the Proposed Transferee and the Bond
Property proposed to be transferred as if a new loan were being made to
the Proposed Transferee and secured by the Bond Property proposed to be
transferred;
(vi) at the time of such Proposed Transfer, the Bond Property
proposed to be transferred shall be subject to re-underwriting in
accordance with Fannie Mae's then applicable standards (including
satisfaction of loan to value ratio requirements, debt service coverage
ratio requirements, physical maintenance requirements, replacement reserve
requirements and all other applicable conditions, requirements and
limitations) customarily applied by Fannie Mae for approval of new loans
secured by liens on new Multifamily Residential Properties and such
re-underwriting shall be conducted by or on behalf of Servicer and Fannie
Mae taking into account all facts and circumstances deemed relevant by
Servicer and Fannie Mae;
(vii) the Proposed Transferee shall: (1) assume all of the
obligations of Owner under and with respect to the Related Bonds, the
other Related Bond Documents, the Bond Property Loan Documents with
respect to such Bond Property and the related Fannie Mae credit
enhancement Facility pursuant to documentation in form and substance
acceptable to Fannie Mae; (2) enter into a reimbursement agreement and
such other documentation deemed necessary by Fannie Mae to evidence and
secure its reimbursement and other obligations to Fannie Mae; (3) agree to
credit enhancement pricing and, if applicable, liquidity pricing that
shall be determined by Fannie Mae; and (4) amend, modify, supplement or
amend and restate the Related Bond Documents and the Bond Property Loan
Documents with respect to such Bond Property, all as deemed necessary by
Fannie Mae;
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(viii)Owner shall have obtained the consent of the Issuer with
respect to the Related Bonds, the Related Trustee and each other party to
the Related Bond Documents and the Bond Property Loan Documents that is
required under the terms of such documents to consent to a transfer of the
Bond Property;
(ix) all documentation relating to the foregoing shall be
acceptable to Fannie Mae in all respects, including legal opinions,
release documentation and any amendments to this Agreement or the other
Transaction Documents; and
(x) Owner or the Permitted Transferee shall have paid to Fannie
Mae it customary transfer and assumption fees consisting of a $3000
non-refundable application fee and, upon completion of the Proposed
Transfer transaction, a transfer fee equal to one percent (1%) of the
Allocable Facility Amount of the Bond Property that is proposed to be
transferred. In addition, Owner shall have paid to Fannie Mae and
Servicer, customary due diligence fees plus all reasonable costs and
expenses (including legal fees and expenses) incurred by Fannie Mae or
Servicer in connection with the foregoing, to the extent such expenses
exceed $3000. Such additional amounts shall be paid by Owner on or prior
to the closing date of the Proposed Transfer, or if such Proposed Transfer
fails to close, within thirty (30) days of Owner's receipt of invoices
therefor (and if requested by Owner, reasonable supporting back-up
materials evidencing such items), and shall be payable regardless of
whether the Bond Property is or is not (for any reason) ultimately
transferred; and
(xi) Owner or the Permitted Transferee shall have paid to the
appropriate parties all other fees, costs and expenses (including legal
fees and expenses) payable by Owner to each of the related Issuer, the
Related Trustee, the related Remarketing Agent, Fannie Mae and Servicer
under the terms of the Bond Property Loan Documents and the Bond Documents
with respect to such Bond Property in connection with the Proposed
Transfer.
(b) PERMITTED TRANSFERS. Fannie Mae's consent to a Proposed
Transfer shall become effective upon (i) Fannie Mae's determination, that each
of the conditions set forth above have been satisfied in full, and (ii) Fannie
Mae's execution and delivery to Owner of a written instrument releasing (in
whole or in part, as applicable) Owner from its obligations to Fannie Mae (but
solely to Fannie Mae), if any, under and with respect to the Related Bonds, the
other Related Bond Documents, the Bond Property Loan Documents with respect to
such Bond Property, and the related Facility and confirming that each of the
conditions set forth in section 5.6(a) above have been satisfied in full and
releasing Owner from its Obligations under this Agreement (except as such
release is limited by section 4.5) solely to the extent such Obligations relate
to the Bond Property to be released. Any transfer of a Bond Property consented
to by Fannie Mae in accordance with the provisions set forth above (a "PERMITTED
TRANSFER") shall be made together with and subject to (1) the Related Bonds, (2)
the other Related Bond Documents (subject to any amendments and modifications
required by Fannie Mae in accordance with subsection (a) above), (3) the
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Bond Property Loan Documents with respect to such Bond Property (subject to any
amendments and modifications required by Fannie Mae in accordance with
subsection (a) above), and (4) Fannie Mae credit enhancement with respect to
such Bond Property. Notwithstanding anything herein or in the Bond Property
Loan Documents with respect to such Bond Property to the contrary, Owner shall
not be required to pay the Prepayment Premium otherwise required under any the
Related Mortgage Note in connection with a Permitted Transfer.
SECTION 5.7 PRINCIPAL RESERVE FUND.
----------------------
(a) Owner shall establish the Principal Reserve Funds in
accordance with the Related Indenture. So long as no Event of Default or no
Potential Event of Default has occurred and is continuing, investment income
derived from amounts on deposit in the Principal Reserve Funds shall be paid to
Owner by the Related Trustees to the extent and in the manner provided in the
Related Indenture.
(b) Payments into any Principal Reserve Fund shall not for any
purpose be deemed to reduce the outstanding principal amount of any Related
Mortgage Note.
(c) At the request of Owner, Fannie Mae shall direct the Related
Trustee to apply funds in a particular Principal Reserve Fund to make an
optional redemption of a corresponding principal amount of the Related Bonds, if
each of the following conditions are met:
(i) no Event of Default has occurred and is continuing; and
(ii) either (x) Owner has the right under Section 214 of the
Related Indenture to direct the optional redemption of the Related Bonds,
or (y) Owner elects to prepay all (but not part) of the Related Bonds in
connection with a condemnation or casualty of a Property.
(d) Upon the occurrence and during the continuance of an Event of
Default or a Potential Event of Default, Fannie Mae shall have the absolute
right, in its discretion, to apply the funds in the Principal Reserve Funds in
accordance with sections 7.2(a)(iv) and 7.2(b).
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SECTION 5.8 CREDIT ENHANCEMENT OF THE SPRINGS COLONY REFUNDING BOND
-------------------------------------------------------
ISSUE.
- -----
(a) AGREEMENT TO CREDIT ENHANCE. Subject to satisfaction in full
of the conditions and limitations set forth in sections 5.8(b) and 5.8(c), at
the request of Owner and Servicer, Fannie Mae will provide credit enhancement
and liquidity support for the Springs Colony Refunding Bonds (the "SPRINGS
COLONY CREDIT ENHANCEMENT") by issuing a collateral agreement substantially in
the form and substance of the Related Fannie Mae Collateral Agreements. Fannie
Mae's obligation to issue the Springs Colony Credit Enhancement shall not be
subject to the conditions set forth in section 5.2 or 5.4. The Credit
Enhancement Component and the Reserve Component with respect to such Springs
Colony Refunding Transaction shall be equal to the Credit Enhancement Component
and the Reserve Component with respect to the other issues of Related Bonds,
subject to adjustment as set forth in section 5.8(d).
(b) CERTAIN CONDITIONS TO SPRINGS COLONY CREDIT ENHANCEMENT.
Fannie Mae's obligation to issue the Springs Colony Credit Enhancement shall be
subject to Fannie Mae's determination in Fannie Mae's discretion that each of
the following conditions have been satisfied in full:
(i) The Springs Colony Refunding Transaction shall close on
or before January 31, 1997, or such later date as may be requested by
Owner and agreed to by Fannie Mae in its discretion (the "REFUNDING
COMMITMENT TERMINATION DATE");
(ii) No Event of Default or Potential Event of Default shall
have occurred and be continuing and prior to the addition of the Springs
Colony Refunding Transaction to the Fannie Mae Credit Facility, the
subject property shall not have suffered any fire, destruction or other
casualty or any condemnation which, in Fannie Mae's reasonable
determination, has a Material Adverse Impact on such property;
(iii) The mortgage loan with respect to the Springs Colony
Refunding Transaction (the "SPRINGS COLONY REFUNDING MORTGAGE LOAN") shall
be originated by an independent third-party lender or issuer and comply
with applicable Fannie Mae Charter Act requirements;
(iv) All documentation (including any amendments to this
Agreement and the other Transaction Documents) relating to the Springs
Colony Refunding Transaction shall be the same in all material respects as
the documentation relating to the existing Bonds, subject to such
modifications as may be necessary and which, in any event, are agreed to
by Owner and approved by Fannie Mae in its discretion. In addition, the
terms and conditions of the Springs Colony Refunding Bonds, the related
bond documents, mortgage loan documents and other documents delivered
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in connection with the Springs Colony Refunding Transaction (the "SPRINGS
COLONY REFUNDING DOCUMENTS"), shall be satisfactory to Fannie Mae,
including the following:
(A) such Springs Colony Refunding Transaction shall be
incorporated into and be governed by the terms of this
Agreement;
(B) the principal amount of the Springs Colony Refunding Mortgage
Loan shall be equal to or less than $9,350,000.00;
(C) the terms and conditions governing the availability of and
conversion between interest rate modes applicable to the
Springs Colony Refunding Transaction and the Springs Colony
Refunding Mortgage Loan shall conform to the interest rate
mode provisions applicable to the existing Bonds and the
existing Mortgage Loans;
(D) the Maturity Date of the Springs Colony Refunding Mortgage
Loan shall be September 1, 2026, and the principal
amortization schedule of such Springs Colony Refunding
Mortgage Loan shall be sufficient to cause such Springs Colony
Refunding Mortgage Loan to fully amortize by September 1,
2026;
(E) the Springs Colony Refunding Documents shall contain cross-
default and cross-collateralization provisions that conform to
the existing Transaction Documents; and
(F) the Springs Colony Refunding Transaction shall be subject to
the interest rate protection provisions of section 3.1;
Notwithstanding the foregoing, the Prepayment Premium with respect
to the Springs Colony Refunding Transaction shall continue for not
less than seven (7) years from the Fannie Mae Facility Closing Date;
(v) Owner shall execute and deliver to Fannie Mae (A) a
certificate in form and substance approved by Fannie Mae confirming that
all of the representations and warranties set forth in this Agreement are
true, correct and complete in all material respects after giving effect to
the Springs Colony Refunding Transaction and (B) a certificate confirming
that no Event of Default or Potential Event of Default exists or will
exist after giving effect to such Springs Colony Refunding Transaction;
(vi) The Springs Colony Refunding Documents with respect to
the Springs Colony Refunding Bonds shall provide that so long as Fannie
Mae provides credit enhancement for such Springs Colony Refunding Bonds,
only Fannie Mae shall provide liquidity support;
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(vii) Each of Owner and OP Partner, to the extent applicable,
shall have delivered to Fannie Mae appropriate evidence, satisfactory to
Fannie Mae, of its authority to execute and deliver the Springs Colony
Refunding Documents to which it is a party;
(viii) Fannie Mae shall have received from Servicer such
representations, warranties, undertakings and such other certificates as
Fannie Mae shall customarily require relating to the Springs Colony
Refunding Transaction;
(ix) Fannie Mae shall have received satisfactory evidence
that all conditions to the effectiveness and enforceability of the Springs
Colony Refunding Documents have been fully satisfied, including:
(A) opinions of counsel to Owner concerning such matters as Fannie
Mae may reasonably require relating to the Springs Colony
Refunding Transaction;
(B) such opinions of bond counsel, trustee's counsel and issuer's
counsel, and such other opinions and certificates as Fannie
Mae shall reasonably require relating to the Springs Colony
Refunding Transaction;
(C) certified copies of all consents and authorizations (including
Governmental Approvals, if any), necessary for the Springs
Colony Issuer or Owner to execute, deliver and perform their
respective obligations under the applicable Springs Colony
Refunding Documents;
(D) certified copies of (x) the issuer's charter or certificate of
incorporation and by-laws, if any, (y) the resolution or
resolutions of such issuer authorizing the execution, delivery
and performance of its obligations under the Springs Colony
Refunding Documents to which it is a party and (z) certified
copies of all other documents evidencing any other official
action of such issuer taken with respect thereto as each such
item is then in full force and effect;
All legal opinions relating to the Springs Colony Refunding Transaction
shall be the same in all material respects as the opinions relating to the
existing Transaction Documents and otherwise in form and substance
satisfactory to Fannie Mae;
(x) Fannie Mae shall have received copies of all documents
relating to the closing of such Springs Colony Refunding Transaction,
authenticated to Fannie Mae's reasonable satisfaction;
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(xi) Fannie Mae shall have received true and correct copies
of rating letters from the Rating Agency rating the Springs Colony
Refunding Bonds confirming that such bonds have received the same rating
afforded the other Related Bonds;
(xii) Owner shall have executed and delivered to Fannie Mae
such amendments and modifications to this Agreement or the other
Transaction Documents and Fannie Mae shall have received such other
documents, certificates, filings, legal opinions, approvals or
instruments, as Fannie Mae shall deem necessary in order to effectuate the
Springs Colony Refunding Transaction;
(xiii) Fannie Mae shall have received payment in full of all
fees and expenses (including reasonable fees and disbursements of Fannie
Mae's and the Servicer's counsel and accountants), incurred in connection
with or related to the Springs Colony Refunding Transaction and the
preparation, review, execution and delivery of the Springs Colony
Refunding Documents; and
(xiv) Subject to the qualifications set forth above, all
documentation relating to the foregoing shall be acceptable to Fannie Mae
in its discretion in all respects, including all legal opinions, title
insurance policies and endorsements, Security Instruments, replacement
reserve agreements, indentures, collateral agreements, assignments and any
amendments necessary to this Agreement or the other Transaction Documents.
(c) CONFIRMATION OF CREDIT ENHANCEMENT OF SPRINGS COLONY REFUNDING
TRANSACTION. Upon satisfaction in full of the conditions and limitations set
forth in this section 5.8 with respect to the Springs Colony Refunding Bonds,
the Springs Colony Project shall thereafter be deemed a New Bond Property and
the Springs Colony Refunding Bonds shall be added to the Fannie Mae Credit
Facility. The addition of the Spring Colony Refunding Bonds to the Fannie Mae
Credit Facility shall become effective only upon Fannie Mae's execution and
delivery to Owner of a New Property Confirmation. Upon the execution and
delivery of any such New Property Confirmation in accordance with this section
5.8, this Agreement shall be automatically deemed amended and supplemented to
incorporate the terms and provisions of such New Property Confirmation.
(d) CERTAIN ADJUSTMENTS TO CREDIT ENHANCEMENT COMPONENT AND
REUNDERWRITING TESTS. Fannie Mae and Owner acknowledge and agree that if the
Spring Colony Refunding Bonds fails to be added to the Fannie Mae Credit
Facility on or before the Refunding Commitment Termination Date then each of the
Credit Enhancement Component, the Reunderwriting LTV Testpoint and the
Reunderwriting DSC Testpoint shall be adjusted as follows:
(A) the Credit Enhancement Component shall be adjusted to sixty
(60) basis points;
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(B) the Reunderwriting LTV Testpoint shall be adjusted to fifty-
nine and ninety-three one-hundredths percent (59.93%); and
(C) the Reunderwriting DSC Testpoint shall be adjusted to 1.71:1;
Any such adjustment shall be deemed to be applicable from and after February 1,
1997. Any such adjustment shall occur automatically without the need for any
further writing or agreement between Owner and Fannie Mae; provided, however,
that Fannie Mae, upon the written request of Owner, shall deliver confirmation
of such adjustments to Owner and Servicer. In no event shall any such
adjustment be deemed to apply to any Facility Fee payments due from Owner for
the period from the Fannie Mae Facility Closing Date through to and including
the Refunding Commitment Termination Date.
ARTICLE VI.
SERVICING; REPLACEMENT OF CREDIT ENHANCEMENT
SECTION 6.1 SERVICING.
---------
Owner acknowledges that Fannie Mae has designated or may designate
an independent contractor to service the Mortgage Loans, the Bond Property Loan
Documents and the Reimbursement Loan Documents. Owner agrees that to the extent
that any provision in this Agreement or any other Transaction Document requires,
at stipulated dates or at the request of Fannie Mae, the delivery by Owner of
certain notices, documents, certificates, opinions, and financial or other
information to Fannie Mae or the Lender (as such term is used and defined in the
Mortgage Documents), all such items shall instead be delivered to, or at the
request of, Servicer, subject to the provisions of this section. Owner
acknowledges and agrees that Fannie Mae has delegated or may delegate certain
functions to Servicer with respect to the Transaction Documents, subject to and
in accordance with the Servicing Agreement. Owner further acknowledges and
agrees that in connection with any provision in this Agreement or in any other
Transaction Document requiring that any notices, documents or other information
shall be given to Servicer, or that Servicer shall have the right to request any
documents or other information from Owner, Fannie Mae shall have the right to
instruct Owner to instead (a) deliver such items directly to Fannie Mae or to
such other Person as Fannie Mae may, from time to time, designate, and (b) act
in accordance with the instructions of Fannie Mae with respect to any such items
or any other rights Servicer may have under this Agreement or under any other
Transaction Document. In addition, Owner agrees that any right of Fannie Mae to
give or deliver to Owner any notice or other communications, or to receive from
Owner any document or other information, may be given, delivered or received by
Servicer, unless otherwise directed by Fannie Mae. Owner shall act in
accordance with any instructions received from Fannie Mae pursuant to this
section. Owner further acknowledges and agrees that Fannie Mae reserves the
unconditional right to replace any Servicer with or without cause with a
substitute Servicer chosen by Fannie Mae in its discretion; provided, however,
that,
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notwithstanding anything to the contrary set forth herein or in the other
Transaction Documents, if Fannie Mae shall terminate and replace Servicer for
any reason other than for cause, the Servicing Fee Component with respect to any
such successor servicer shall not exceed .125% or 12.5 basis points. Provided
that no Event of Default or Potential Event of Default then exists and the
Servicer is not then in default, if Fannie Mae elects to replace Servicer, then
Owner may recommend a replacement servicer from among three or more potential
replacement servicers identified by Fannie Mae, provided that Owner notifies
Fannie Mae of its recommendation within ten (10) Business Days of the date Owner
is notified of the potential replacement servicers and provided further that the
final selection of any potential replacement servicer shall be made by Fannie
Mae. If an Event of Default or Potential Event of Default exists or Fannie Mae
elects to replace the Servicer because the Servicer is in default of any of its
obligations under the Servicing Agreement, then the provisions of the preceding
sentence shall not be applicable and Fannie Mae shall have the right to
immediately select and install a replacement servicer without prior consultation
with or notice to Owner, provided that, if Fannie Mae replaces the Servicer in
accordance with the foregoing clause because the Servicer is in default (such
replacement servicer, an "INTERIM SERVICER"), then Owner may, within thirty (30)
days from the appointment of such Interim Servicer, request that Fannie Mae
provide a list of potential permanent replacement servicers as set forth above.
Owner may recommend a permanent replacement servicer from such list within ten
(10) Business Days of Owner's receipt of such list, provided further that the
final selection of any replacement servicer shall be made by Fannie Mae in its
discretion. Owner shall have the right to separately negotiate fees with such
servicers, subject to Fannie Mae's determination that such fees are reasonable
for the services to be performed.
SECTION 6.2 REPLACEMENT OF FANNIE MAE CREDIT ENHANCEMENT.
--------------------------------------------
Except as otherwise permitted upon a substitution, release or
transfer of a Property pursuant to and in accordance with sections 5.2, 5.3 or
5.6, respectively, Owner will not cause any Related Trustee to terminate any
Facility (except in connection with the repayment of all of the outstanding
Related Bonds and the Related Mortgage Loans) or replace any Facility with
alternate credit enhancement unless prior to or simultaneously with the
effectiveness of such termination or replacement:
(a) the Fannie Mae Credit Facility is replaced on or terminated
with respect to all of the outstanding Bonds, and all the Related Fannie Mae
Collateral Agreements are terminated;
(b) the alternate credit enhancer's short term debt obligations
are rated in the highest short term category and long term debt obligations are
rated at least "A" by the Rating Agencies;
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(c) Owner shall have paid to Fannie Mae the amount of all
Advances, Activity Fees and any other outstanding obligations of Owner to Fannie
Mae hereunder, whether or not such Advances, Activity Fees or other amounts are
otherwise then due;
(d) Fannie Mae reasonably determines that no part of any payments
made by Owner prior to or concurrently with the credit enhancement termination
or replacement will likely result in an avoidance or any other recovery or
disgorgement pursuant to the Bankruptcy Code, as amended (including sections
544, 547, 549 or 550 thereof) or any other applicable bankruptcy or insolvency
law which would result in Fannie Mae having any liability under any Related
Fannie Mae Collateral Agreement, or Owner will provide Cash Collateral or make
other arrangements acceptable to Fannie Mae in its discretion to ameliorate such
risk of avoidance, recovery or disgorgement; and
(e) Owner shall have paid the Prepayment Premium, if applicable,
with respect to the Mortgage Loans in accordance with the requirements of the
Related Mortgage Notes calculated based on the assumption that the Mortgage Loan
is being prepaid in full on the day immediately preceding the effective date of
the alternative credit enhancement or the termination of the Facility as
applicable.
ARTICLE VII.
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.1 EVENTS OF DEFAULT.
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Each of the following events shall constitute an "Event of Default"
under this Agreement, whatever the reason for such event and whether it shall be
voluntary or involuntary, or within or without the control of Owner, or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any Governmental Authority:
(a) the occurrence of a default by Owner under any Transaction
Document beyond any notice, grace or cure period set forth herein or therein, or
the occurrence of any "Event of Default" as defined in any Transaction Document;
or
(b) the failure by Owner to pay when due any amount payable by
Owner under any Related Mortgage Note, any Mortgage, this Agreement or any other
Transaction Document, including any fees, costs or expenses; or
(c) the failure by Owner to perform or observe any covenant set
forth in subsections 2.2(a), (b), (c), (h), (p), (q), (s), (t), (u), (w), (z) or
(ac), in subsections 2.3 (a)(i), (a)(ii) (other than with respect to omitting to
take any action), (a)(iv) (but only with respect to an amendment relating to a
matter described in the parenthetical of subsection (a)(iv)),
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(a)(v)-(vii) inclusive, (b), (e), (f) (but only with respect to Liens granted or
conveyed by Owner or an Affiliate of Owner), (g), (h), (i), (j), (k), (m) (but
only with respect to changes of Owner's principal place of business that could
reasonably be expected to materially and adversely affect the validity,
priority, perfection or enforceability of any Transaction Document) or in
Article III; or
(d) the failure by Owner to perform or observe any covenant set
forth in subsection 2.2(d), (e), (f), (g), (j), (k), (l), (m), (n), (o), (r),
(v), (x), (y), (ab), or in subsections 2.3(a)(ii) (with respect to omitting to
take any action), (a)(iii), (a)(iv) (with respect to any amendment not relating
to a matter described in the parenthetical of subsection (a)(iv)), (c), (d), (f)
(other than with respect to Liens granted or conveyed by Owner or any Affiliate
of Owner), or (m) (other than with respect to changes of Owner's principal place
of business that could reasonably be expected to materially and adversely affect
the validity, priority, perfection or enforceability of any Transaction
Document), within ten (10) days after receipt of notice from Servicer or Fannie
Mae; or
(e) the failure by Owner to perform or observe any covenant set
forth in subsections 2.2(i) or 2.3(l), within twenty (20) days after receipt of
notice from Servicer or Fannie Mae, or the failure by Owner to perform or
observe any covenant set forth in subsections 2.2(aa) within thirty (30) days
after receipt of notice from Servicer or Fannie Mae; or
(f) any warranty, representation or other written statement made
by or on behalf of Owner contained in this Agreement, any other Transaction
Document or in any instrument furnished in compliance with or in reference to
any of the foregoing, is false or misleading in any material respect on any date
when made; or
(g) any other Indebtedness in an aggregate amount in excess of
$500,000 of or assumed by Owner (i) is not paid when due nor within any
applicable grace period in any agreement or instrument relating to such
Indebtedness or (ii) becomes due and payable before its normal maturity by
reason of a default or event of default, however described, or any other event
of default shall occur and continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness; or
(h) (i) Owner, QRS Partner, OP Partner or any Nominee Corp. shall
(A) commence a voluntary case under the Federal bankruptcy laws (as now or
hereafter in effect), (B) file a petition seeking to take advantage of any other
laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization,
debt adjustment, winding up or composition or adjustment of debts, (C) consent
to or fail to contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or other similar
laws, (D) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of a substantial part of
its property, domestic or foreign, (E) admit in writing its inability to pay, or
generally not be paying, its
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debts as they become due, (F) make a general assignment for the benefit of
creditors, (G) assert that Owner, QRS Partner, OP Partner or any Nominee Corp.
has no liability or obligations under this Agreement or any other Transaction
Document to which it is a party; or (H) take any action for the purpose of
effecting any of the foregoing; or (ii) a case or other proceeding shall be
commenced against Owner, QRS Partner, OP Partner or any Nominee Corp. in any
court of competent jurisdiction seeking (A) relief under the Federal bankruptcy
laws (as now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding upon or
composition or adjustment of debts, or (B) the appointment of a trustee,
receiver, custodian, liquidator or the like of Owner, QRS Partner, OP Partner,
any Nominee Corp., or of all or a substantial part of the property, domestic or
foreign, of Owner, QRS Partner, OP Partner or any Nominee Corp. and any such
case or proceeding shall continue undismissed or unstayed for a period of ninety
(90) consecutive calendar days, or any order granting the relief requested in
any such case or proceeding against Owner, QRS Partner, OP Partner or any
Nominee Corp. (including an order for relief under such Federal bankruptcy laws)
shall be entered and be unstayed; or
(i) if any provision of this Agreement or any other Transaction
Document or the lien and security interest purported to be created hereunder or
under any Transaction Document shall at any time for any reason cease to be
valid and binding in accordance with its terms on any Issuer, Owner or any
Nominee Corp., as the case may be, or shall be declared to be null and void, or
the validity or enforceability hereof or thereof or the validity or priority of
the lien and security interest created hereunder or under any other Transaction
Document shall be contested by Owner or any Nominee Corp. seeking to establish
the invalidity or unenforceability hereof or thereof, or any Issuer, Owner or
any Nominee Corp., as the case may be, shall deny that it has any further
liability or obligation hereunder or thereunder; or
(j) if a "Transfer" (as defined in any Related Mortgage) shall
occur in violation of Uniform Covenant 19 of any Related Mortgage or if any
Property or any part thereof is otherwise conveyed, assigned, mortgaged,
pledged, leased or encumbered in any way other than as permitted under this
Agreement or any Related Mortgage without the prior written consent of Fannie
Mae; or
(k) the execution by Owner of a chattel mortgage or other security
agreement on any materials, fixtures or articles used in the construction or
operation of the improvements located on any Property or on articles of personal
property located therein, or (y) if any such materials, fixtures or articles are
purchased pursuant to any conditional sales contract or other security agreement
or otherwise so that the ownership thereof will not vest unconditionally in
Owner free from encumbrances, or (z) if Owner does not furnish to Fannie Mae
upon request the contracts, bills of sale, statements, receipted vouchers and
agreements, or any of them, under which Owner claims title to such materials,
fixtures, or articles; or
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(l) failure, upon request, to furnish to Fannie Mae the results of
official searches made by any Governmental Authority, or failure by Owner to
comply with any requirement of any Governmental Authority (not being contested
in good faith in accordance with the terms of the Transaction Documents) within
thirty (30) days after written notice of such requirement shall have been given
to Owner by such Governmental Authority; provided that, if action is commenced
and diligently pursued by Owner within such 30 days, then Owner shall have an
additional 30 days to comply with such requirement; or
(m) a dissolution or liquidation for any reason (whether voluntary
or involuntary) of Owner, QRS Partner, OP Partner or any Nominee Corp., provided
that, in the case of the dissolution of OP Partner, it shall not be an Event of
Default if OP Partner is reconstituted within ninety (90) days of such
dissolution; or
(n) if QRS Partner shall fail to qualify as a "qualified REIT
subsidiary" or if EQR shall fail to qualify as a real estate investment trust
under Subchapter M of the Code; or
(o) any judgment against Owner or QRS Partner or any attachment or
other levy against any portion of Owner's assets with respect to a claim in an
amount in excess of $500,000.00 individually and/or $1,000,000.00 in the
aggregate remains unpaid, unstayed on appeal undischarged, unbonded, not fully
insured (after giving affect to applicable deductibles permitted under the DUS
Guide) or undismissed for a period of sixty (60) days; or
(p) if, following an optional or mandatory tender of Related
Bonds in accordance with the Related Indenture, the Related Bonds have not been
remarketed, but have been purchased by the Related Trustee on behalf of and as
agent for Owner with funds provided by Fannie Mae under the Related Fannie Mae
Collateral Agreement and such Related Bonds have not been remarketed or redeemed
by Owner as of either (i) if no Event of Default or Potential Event of Default
has occurred and is continuing as of the date of such optional or mandatory
tender, the one-hundred and eightieth (180th) day following such purchase, or
(ii) otherwise, the ninetieth (90th) day following such purchase (such
applicable period, the "REMARKETING PERIOD"), then, at any time following the
end of such Remarketing Period, and provided the Related Bonds have not then
been remarketed, such failed remarketing shall, at Fannie Mae's option,
constitute an Event of Default under this Agreement; provided, however, that
such Remarketing Period may be extended by Fannie Mae in its discretion; or
(q) the failure by Owner to maintain insurance with respect to
each Property in accordance with the terms of the Related Mortgage with respect
to each such Property; or
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(r) the failure by Owner to perform or observe the covenants with
respect to Hazardous Materials or Hazardous Materials Laws set forth in any
Mortgages or in any other Transaction Document, including the covenants set
forth in Paragraph 6.B ("ENVIRONMENTAL HAZARDS") of each Mortgage, within ten
(10) days after receipt of notice from Servicer or Fannie Mae identifying such
failure; provided, however, that if in Fannie Mae's judgment, (i) the cure of
such failure requires a period in excess of ten (10) days, (ii) such failure
will not result in a Material Adverse Effect on Owner or a Material Adverse
Impact, and (iii) corrective action is instituted by Owner within such period
and pursued diligently and in good faith, then such failure shall not constitute
an Event of Default unless such failure is not cured by Owner within forty-five
(45) days after receipt of notice from Servicer or Fannie Mae identifying such
failure; or
(s) the failure by Owner to cause the Gross Cash Flow with respect
to any Property to be deposited into the applicable Property Account in
accordance with the requirements of the Cash Management Agreement; or
(t) if any Nominee Corp. shall claim in any formal legal
proceeding that such Nominee Corp. owns or holds (except in accordance with the
terms of the relevant Nominee Agreement), has conveyed or is entitled to convey
any beneficial ownership interests in the relevant Nominee Property or that any
Person other than Owner holds any beneficial ownership interest in any such
Nominee Property or otherwise has any right, power or authority to direct the
respective Nominee Corp. to sell, convey, mortgage, pledge, otherwise encumber,
lease, grant easements or take any action with respect to such Nominee Property;
(u) the failure by Owner to perform or observe any term, covenant,
condition or agreement hereunder, other than as set forth in subsections (a)
through (t) above, or in any other Transaction Document, within thirty (30) days
after receipt of notice from Servicer or Fannie Mae identifying such failure;
provided, however, that if in Fannie Mae's judgment, (i) the cure of such
failure requires a period in excess of thirty (30) days, (ii) such failure will
not result in a Material Adverse Effect on Owner or a Material Adverse Impact,
and (iii) corrective action is instituted by Owner within such period and
pursued diligently and in good faith, then such failure shall not constitute an
Event of Default unless such failure is not cured by Owner within sixty (60)
days after receipt of notice from Servicer or Fannie Mae identifying such
failure; or
(v) Owner, QRS Partner, OP Partner, any Nominee Corp. or any
Issuer shall have asserted that it has no liability or obligations under this
Agreement or under any Transaction Document to which it is a party or that the
liens and the security interests purported to be created by the Mortgage
Documents shall not be a valid and perfected first priority security interest
subject to no Liens except Permitted Liens; or any Governmental Authority having
jurisdiction over Owner, QRS Partner, OP Partner, any Nominee Corp. or any
Issuer shall find or rule that any material provision of this Agreement or any
Transaction Document to which it is a party is not valid and binding on such
person or that
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the lien and the security interest purported to be created by any Mortgage
Document shall not be a valid and perfected first priority security interest
subject to no Liens except Permitted Liens; or
(w) a Reset Period expires and Owner has not either (i) received
the prior written consent of Fannie Mae to a change in Mode or the maintenance
of the existing Mode or (ii) delivered Alternate Credit Facilities in accordance
with the terms of the Related Bond Documents and section 6.2.
SECTION 7.2 REMEDIES.
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(a) REMEDIES UPON AN EVENT OF DEFAULT. Upon the occurrence of an
Event of Default, Fannie Mae may in its discretion, but shall not be obligated
to, exercise any or all of the following remedies:
(i) declare all amounts payable by Owner under this
Agreement or the other Transaction Documents to be forthwith due and
payable, and the same shall thereupon become due and payable without
demand, presentment, protest or notice of any kind, all of which are
hereby expressly waived; or
(ii) exercise all or any of its rights and remedies as it
may otherwise have under Applicable Law and under this Agreement or the
other Transaction Documents or otherwise by such suits, actions, or
special proceedings in equity or at law, or by proceedings in the office
of any board or officer having jurisdiction, either for specific
performance of any covenant or agreement contained in this Agreement or
any other Transaction Document, or in aid or execution of any power
therein granted or for the enforcement of any proper legal or equitable
remedy; or
(iii) demand and Owner shall provide cash collateral or
Government Obligations in the full amount of the outstanding obligations
under all of the Bonds whether or not due and payable; or
(iv) apply all or any portion of the Collateral to any
Obligations or other obligation of Owner under this Agreement or any other
Transaction Document, in such amounts, at such times and in such order as
determined by Fannie Mae in its discretion. Owner acknowledges that this
may include, among other things, applying funds or directing any Related
Trustee or Servicer, as the case may be, to apply funds on deposit in a
Principal Reserve Fund, any Property Account or the Central Account to
prepay the applicable Related Bonds or to prepay any other Related Bonds
or reimbursement or other payment obligations under this Agreement or any
other Transaction Document. Such funds may be applied to prepay or reduce
amounts outstanding under one or more Related Bonds regardless of whether
such amounts are then due and owing; or
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(v) deliver to the Related Trustees written notice that an
Event of Default has occurred under this Agreement and directing the
Related Trustees to take such action pursuant to the Transaction Documents
as Fannie Mae may determine, including a request that the Related Trustees
declare the principal of all or a portion of the Related Bonds then
outstanding and the interest accrued thereon to be immediately due and
payable in accordance with the terms and conditions of the Related
Indentures.
(b) REMEDIES UPON A POTENTIAL EVENT OF DEFAULT. Notwithstanding
anything in this Agreement or in any other Transaction Document to the contrary,
upon the occurrence of a Potential Event of Default, Fannie Mae may in its
discretion, but shall not be obligated to, apply all or any funds in any of the
Principal Reserve Funds or direct any Related Trustee or Servicer, as the case
may be, to apply funds on deposit in any of the Principal Reserve Funds to
prepay the applicable Related Bonds (regardless of whether such amounts are then
due and owing), in such amounts, at such times and in such order as determined
by Fannie Mae in its discretion.
(c) ISSUER DEFAULTS. Notwithstanding anything in this Agreement,
any Bond Document or any other Transaction Document to the contrary, Fannie Mae
acknowledges and agrees that if Fannie Mae shall be entitled to declare an Event
of Default under this Agreement, any Related Mortgage Note or any Mortgage
solely as the result of an Issuer Default (as defined below) then:
(i) Fannie Mae shall not declare such Event of Default so long as (A) no
portion of the trust estate created, or any other collateral held,
under the Related Indenture is subject to an automatic stay or
otherwise adversely impacted as a result of such Issuer Default, (B)
Fannie Mae determines in Fannie Mae's discretion, that neither (1)
the validity, enforceability or priority of the liens and security
interests held by Fannie Mae (in whole or in part) in any of the
Collateral or (2) any of the Obligations of Owner to Fannie Mae, are
being challenged by any party or otherwise adversely impacted in any
way as a result of such Issuer Default, and (C) Fannie Mae
determines in Fannie Mae's discretion, that Fannie Mae's failure to
declare such Event of Default shall not result in Fannie Mae being
in default of any of its obligations under the Related Fannie Mae
Collateral Agreement; and
(ii) in the event Fannie Mae elects to declare an Event of Default as the
result of an Issuer Default, then Fannie Mae agrees that it shall
first accelerate only the indebtedness evidenced by the Related
Mortgage Note and that from and after the date of such acceleration
Owner shall have ten (10) Business Days to repay such Related
Mortgage Note in full (together with any additional amounts due
under the applicable Related Bonds in respect of the amount repaid
under such Related Mortgage Note, including accrued interest on the
Related Bonds to the date of redemption, and the premium, if any,
payable
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to the applicable Bondholders by reason of such redemption, any
prepayment premium due pursuant to the Related Mortgage Note and any
other additional amounts due in accordance with section 2.2(s));
provided, however, that, notwithstanding any such payment in full,
Owner shall not be entitled to a release of the related Bond
Mortgage or the related Reimbursement Mortgage unless Owner
satisfies all of the requirements of section 5.3. If such Related
Mortgage Note is repaid in full on or before the tenth (10th)
Business Day after the date of such acceleration, then Fannie Mae
shall not accelerate any of the other Mortgage Loans or exercise any
other remedies on account of such Issuer Default. If Owner fails to
repay such Related Mortgage Note in full on or before such tenth
(10th) Business Day, then Fannie Mae may in its discretion, but
shall not be obligated to, exercise any or all of the other remedies
set forth in this section 7.2 or any of the other Transaction
Documents.
For purposes of this section 7.2(c) an "ISSUER DEFAULT" shall mean any of the
following events: (w) if an Act of Bankruptcy (as defined in a Related
Indenture) shall have occurred; (x) if any provision of any Transaction Document
applicable to any Issuer or the lien and security interest purported to be
created by any Issuer under any Transaction Document shall at any time for any
reason cease to be valid and binding in accordance with its terms on such Issuer
or shall be declared to be null and void, or if any Issuer shall deny that it
has any further liability or obligation thereunder; (y) if any Issuer shall have
asserted that it has no liability or obligations under any Transaction Document
to which it is a party or if any Governmental Authority having jurisdiction over
any Issuer shall find or rule that any material provision of any Transaction
Document to which such Issuer is a party is not valid and binding on such
Issuer; or (z) if any Issuer shall otherwise fail to comply with the terms and
conditions of any Transaction Document to which such Issuer is a party and such
failure to comply results in Fannie Mae having the right to declare an Event of
Default under this Agreement or any other Transaction Document.
(d) NO WAIVER, REMEDIES CUMULATIVE. No failure or delay on the
part of Fannie Mae to exercise any right or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right or remedy
hereunder preclude any further exercise thereof or the exercise of any further
right or remedy hereunder or under any other Transaction Document. The remedies
herein provided are cumulative and not exclusive of any remedies provided by law
or under any Transaction Document. No exercise by Fannie Mae of any remedy
under any Transaction Document shall operate as a limitation on any rights or
remedies of Fannie Mae under this Agreement. In order to entitle Fannie Mae to
exercise any remedy reserved to Fannie Mae in this Article, it shall not be
necessary to give any notice, other than such notice as may be required under
the applicable provisions of any of the Transaction Documents. The rights and
remedies of Fannie Mae specified in this Agreement are for the sole and
exclusive benefit, use and protection of Fannie Mae, and Fannie Mae is entitled,
but shall have no duty or obligation to Owner, any Issuer, any Related Trustee,
any Bondholder with respect to any of the Bonds, or otherwise,
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(a) to exercise or to refrain from exercising any right or remedy reserved to
Fannie Mae hereunder, or (b) to cause any Related Trustee or any other party to
exercise or to refrain from exercising any right or remedy available to it under
any of the Transaction Documents.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1 WAIVERS, AMENDMENTS.
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This Agreement may be amended only by a written instrument duly
executed by each of the parties hereto. Owner may take any action herein
prohibited or omit to perform any act herein required to be performed or omit to
perform any act herein required to be performed by it, only if Owner shall first
obtain the written consent of Fannie Mae thereto. No course of dealing between
Owner and Fannie Mae, nor any delay in exercising any rights hereunder, shall
operate as a waiver of any rights of Fannie Mae hereunder. Unless otherwise
specified in such waiver or consent, a waiver or consent given hereunder shall
be effective only in the specific instance and for the specific purpose for
which given.
SECTION 8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
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All representations and warranties of Owner contained in any
Transaction Document and all statements contained in any certificate, financial
statement or other instrument delivered by any EQR Party or by any EQR Party
pursuant to or in connection with this Agreement (including any such statement
made in or in connection with any amendment hereto or thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement (a) shall be made and shall be true at
and as of the date of this Agreement and the Restatement Closing Date, and (b)
shall survive the execution and delivery of this Agreement, regardless of any
investigation made by Fannie Mae or on its behalf.
SECTION 8.3 NOTICES.
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All notices, directions, certificates or other communications
hereunder shall be given by certified or registered mail, return receipt
requested, or by overnight courier addressed to the appropriate notice address
set forth below. Any of the parties hereto may, by a notice to the other party
specifically captioned "Notice of Change of Address pursuant to section 8.3 of
the Amended and Restated Master Reimbursement Agreement", designate any further
or different address to which subsequent notices, certificates or other
communications shall be sent without any requirement of execution of any
amendment to this Agreement. Any such notice, certificate or communication
shall be deemed to have been given as of the date of actual delivery or the date
of failure to deliver by reason of refusal to accept delivery or changed address
of which no notice was given pursuant to this
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section 8.3. All notices pursuant to this Agreement shall also be given to
Servicer in accordance with this section 8.3. The notice addresses are as
follows:
(a) if to Owner:
EQR-Bond Partnership
c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 450,
Chicago, Illinois 60606
Attention: Chief Financial Officer
with a copy to:
EQR-Bond Partnership
c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 450,
Chicago, Illinois 60606
Attention: General Counsel
(b) if to Fannie Mae:
if by mail or overnight courier:
Fannie Mae
3900 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attention: Senior Vice President - Multifamily
Activities
if by messenger:
Fannie Mae
3939 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attention: Senior Vice President - Multifamily
Activities
in each case, with copies to:
Fannie Mae
Midwest Regional Office
One South Wacker Drive
Suite 1300
Chicago, Illinois 60606-4667
Attention: Vice President - Multifamily Activities
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and to:
Fannie Mae
3900 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attention: Multifamily Mortgage Operations - Manager
Multifamily Deliveries
(c) if to Servicer:
Washington Capital DUS, Inc.
1616 North Fort Myer Drive, Suite 1210
Arlington, Virginia 22209
Attention: Bridget O. Schmitz
Executive Vice President
SECTION 8.4 PAYMENT PROCEDURE.
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Owner agrees that, unless otherwise directed pursuant to section
6.1, all amounts due to Fannie Mae under Article 4 of this Agreement shall be
paid to Servicer for remittance to Fannie Mae pursuant to the Servicing
Agreement. All payments to be made to Servicer, for the account of Fannie Mae,
pursuant to this Agreement shall be paid (in immediately available funds with
respect to Advances and Withdrawals) to Servicer in accordance with the Related
Mortgage Note or in accordance with instructions given to Owner by Servicer. All
repayments of Advances and Withdrawals shall be in immediately available funds.
Except as otherwise provided above in this section 8.4, all payments to be made
to Fannie Mae pursuant to this Agreement shall be made before 2:00 p.m.,
Washington, D.C. time, on the date when due, in lawful currency of the United
States of America and in immediately available funds by wire transfer to an
account designated in writing by Fannie Mae unless Owner is otherwise instructed
in writing by Fannie Mae. Notwithstanding the foregoing, in connection with
Owner's obligation to reimburse Fannie Mae by 2:00 p.m., Washington, D.C. time
for certain payments made by Fannie Mae as provided in Article 4 of this
Agreement, such payment will be deemed to have been timely made if made to
Servicer, for remittance to Fannie Mae, by wire transfer to an account
designated in writing by Servicer, before 2:00 p.m., Washington, D.C. time.
SECTION 8.5 CONTINUING OBLIGATION.
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This Agreement is a continuing obligation of Owner and shall, until
the later of the Termination Date under the last remaining Related Fannie Mae
Collateral Agreement or the date upon which the Obligations shall have been paid
in full, (a) be binding upon the parties hereto and their respective successors
and assigns and (b) inure to the benefit of and be enforceable by Fannie Mae and
its successors, transferees and assigns; provided, that Owner may not assign all
or any part of this Agreement without the prior
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written consent of Fannie Mae. This Agreement shall terminate upon the date on
which the Obligations to Fannie Mae or its successors or assigns have been
satisfied in full.
SECTION 8.6 SATISFACTION REQUIREMENT.
------------------------
If any agreement, certificate or other writing, or any action taken
or to be taken, is by the terms of this Agreement required to be satisfactory
to, or subject to the satisfaction of, Fannie Mae, then, unless otherwise
expressly specified herein, the determination of such satisfaction shall be made
by Fannie Mae in its sole and exclusive judgment.
SECTION 8.7 CONSENT OF FANNIE MAE.
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If any provision of this Agreement provides for the approval,
consent, election, determination, exercise of discretion, choice, designation,
judgment or waiver of or by Fannie Mae and if a basis for Fannie Mae granting
such approval, consent, determination, election, exercise of discretion, choice,
designation, judgment or waiver is not otherwise stated (i.e., that such
approval, consent, election, determination, exercise of discretion, choice,
designation, judgment or waiver will be "reasonable"), then in each case such
approval, consent, determination, election, exercise of discretion, choice,
designation, judgment or waiver will be given by Fannie Mae in its sole and
absolute discretion.
SECTION 8.8 GOVERNING LAW.
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This Agreement shall be construed and enforced in accordance with,
and the rights and remedies of the parties hereto shall be governed by, the laws
of the District of Columbia without regard to conflicts of law principles,
except to the extent that Federal laws may prevail; provided, however, that
matters respecting the creation, perfection, priority and foreclosure of the
Lien on each Property granted pursuant to or in connection with the Transaction
Documents shall be governed by, and construed and enforced in accordance with,
the internal law of the state or commonwealth in which such Property is situated
without giving effect to the conflicts of law principles of such state or
commonwealth.
SECTION 8.9 JURISDICTION, CONSENT TO SERVICE.
--------------------------------
(a) Owner hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any District of
Columbia court or Federal court of the United States of America sitting in the
District of Columbia, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, the Bond Documents, the
Mortgage Documents and every other Transaction Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such District of Columbia court or, to
the extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a
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final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall effect any right that Fannie
Mae may otherwise have to bring any action or proceeding relating to this
Agreement, the Bond Documents, the Mortgage Documents or the other Transaction
Documents against Owner or its properties in the courts of any jurisdiction.
(b) Owner hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement, the Bond Documents, the Mortgage
Documents or the other Transaction Documents in any District of Columbia or
Federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in section 8.3. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 8.10 WAIVERS OF JURY TRIAL.
---------------------
Owner and Fannie Mae (a) covenant and agree not to elect a trial by
jury with respect to any issue arising under this Agreement or any of the other
transaction documents otherwise triable by a jury and (b) waive any right to
trial by jury to the extent that any such right shall now or hereafter exist.
This waiver of right to trial by jury is separately given, knowingly and
voluntarily with the benefit of competent legal counsel by Owner, and this
waiver is intended to encompass individually each instance and each issue as to
which the right to a jury trial would otherwise accrue. Further, Owner hereby
certifies that no representative or agent of Fannie Mae (including, but not
limited to, Fannie Mae's counsel) has represented, expressly or otherwise, to
Owner that Fannie Mae will not seek to enforce the provisions of this Section
8.10
SECTION 8.11 COUNTERPARTS.
------------
To facilitate execution, this Agreement may be executed in any
number of counterparts. It shall not be necessary that the signatures of, or on
behalf of, each party, or that the signatures of all persons required to bind
any party, appear on each counterpart, but it shall be sufficient that the
signature of, or on behalf of, each party, appear on one or more counterparts.
All counterparts shall collectively constitute a single agreement. It shall not
be necessary in making proof of this Agreement to produce or account for more
than a number of counterparts containing the respective signatures of, or on
behalf of, all of the parties hereto.
106
<PAGE>
SECTION 8.12 SEVERABILITY.
------------
Any provision of this Agreement that is prohibited, unenforceable or
not authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or non
authorization without invalidating the remaining provisions hereof or affecting
the validity, enforceability or legality of such provision in any other
jurisdiction and the remaining portion of such provision and all other remaining
provisions will be construed to render them enforceable to the fullest extent.
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 8.13 BUSINESS DAYS.
-------------
If any payment under this Agreement shall be specified to be made
upon a day which is not a Business Day, it shall be made on the next succeeding
day which is a Business Day and such extension of time shall in any case be
included in computing interest, if any, in connection with such payment.
SECTION 8.14 ENTIRE AGREEMENT.
----------------
This Agreement and the other Transaction Documents constitute the
entire contract between the parties relative to the subject matter hereof. Any
previous agreement among the parties with respect to the subject matter hereof
is superseded by this Agreement and the other Transaction Documents. Nothing in
this Agreement or the other Transaction Documents, expressed or implied, is
intended to confer upon any party other than the respective parties hereto and
thereto any rights, remedies, obligations or liabilities under or by reason of
this Agreement or the other Transaction Documents; provided, however, that as to
Persons other than Fannie Mae and Owner that are parties to any of the
Transaction Documents, such Persons shall not have any rights, remedies,
obligations or liabilities under this Agreement or any of the Transaction
Documents except under such Transaction Documents as to which such Persons are
direct parties.
SECTION 8.15 HEADINGS.
--------
Section, subsection and paragraph headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purposes.
SECTION 8.16 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS.
---------------------------------------------
To the extent permitted by law, the parties to this Agreement agree
that they will, from time to time, execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, such supplements to this Agreement and
such further
107
<PAGE>
instruments as Fannie Mae may request and as may be reasonably required in the
opinion of Fannie Mae or its counsel to effectuate the intention of or
facilitate the performance of this Agreement or any other Transaction Document
provided that such supplements or instruments shall not impose any material
additional obligations or recourse on any EQR Party.
SECTION 8.17 ASSIGNMENT; TRANSFERS; THIRD-PARTY RIGHTS.
-----------------------------------------
Owner shall not assign this Agreement, or delegate any of the
Obligations hereunder, without the prior written consent of Fannie Mae. This
Agreement may not be transferred in any respect without the prior written
consent of Fannie Mae. Nothing in this Agreement shall confer any right upon
any holder of any Bond or any other Person other than the parties hereto and
their successors and permitted assigns; provided, however, that notwithstanding
anything to the contrary herein, Servicer shall be a third party beneficiary
with respect to Owner's covenants and obligations under section 4.5.
SECTION 8.18 WAIVER OF CLAIMS.
----------------
IN ORDER TO INDUCE FANNIE MAE TO EXECUTE AND DELIVER THE AGREEMENTS,
OWNER HEREBY REPRESENTS AND WARRANTS THAT IT HAS NO CLAIMS, SET- OFFS OR
DEFENSES AS OF THE RESTATEMENT CLOSING DATE IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR IN CONNECTION WITH ANY OF THE OTHER
TRANSACTION DOCUMENTS. TO THE EXTENT ANY SUCH CLAIMS, SET-OFFS OR DEFENSES MAY
EXIST, WHETHER KNOWN OR UNKNOWN, THEY ARE EACH HEREBY WAIVED AND RELINQUISHED IN
THEIR ENTIRETY.
SECTION 8.19 DISCLAIMER; ACKNOWLEDGEMENTS.
----------------------------
Approval by Fannie Mae of Owner, the Mortgage Loans, the Bonds or
otherwise shall not constitute a warranty or representation by Fannie Mae as to
any matter. Nothing set forth in this Agreement, in any of the Transaction
Documents or in the subsequent conduct of the parties shall be deemed to
constitute Fannie Mae as the partner or joint venturer of any person for any
purpose whatsoever.
SECTION 8.20 CONFLICTS BETWEEN AGREEMENTS.
----------------------------
Any terms and conditions contained in this Agreement that may also
be contained in any of the Related Mortgage Notes, any of the Related Mortgages,
any of the Reimbursement Loan Documents or any other Transaction Document shall
not, to the extent reasonably practicable, be construed to be in conflict with
each other but rather shall be construed as duplicative, confirming, additional,
or cumulative provisions. To the extent that any ultimate conflict is
determined to exist between the terms and conditions of this Agreement and those
set forth in any of the Related Mortgage Notes, any of the Related
108
<PAGE>
Mortgages, any of the Reimbursement Loan Documents or any of the other
Transaction Document the terms and conditions of this Agreement shall control
the rights, duties and obligations of Fannie Mae and Owner.
SECTION 8.21 ACKNOWLEDGMENT AND AGREEMENT OF NOMINEE CORPS. TO
-------------------------------------------------
JOINT AND SEVERAL LIABILITY.
- ---------------------------
(a) JOINT AND SEVERAL LIABILITY. Owner and each Nominee Corp.
acknowledge and agree that Fannie Mae has entered into the transactions
evidenced by this Agreement based in part upon its understanding that each
Nominee Property is beneficially owned by Owner, that the respective Nominee
Corp. holds fee simple title to such Nominee Property solely on behalf of Owner,
as Owner's nominee, and that such Nominee Corp. does not hold any beneficial
ownership interests in its respective Nominee Property. In furtherance of this
understanding and notwithstanding anything contained in this Agreement or any of
the other Transaction Documents to the contrary (but subject, however, to the
provisions of subsection 8.21(b)), each Nominee Corp. acknowledges and agrees
that all Obligations of Owner under this Agreement, the Mortgage Documents and
the other Transaction Documents shall be joint and several obligations of Owner
and each Nominee Corp.
(b) NOMINEE CORPS. Nothing in this Agreement or the other
Transaction Documents shall impose or shall be construed to impose any personal
liability on the shareholders, officers, directors or agents of the Nominee
Corps.
(c) CERTAIN REPRESENTATIONS AND WARRANTIES OF THE NOMINEE CORPS.
To induce Fannie Mae to enter into this Agreement and to execute and deliver the
Related Fannie Mae Collateral Agreements, each Nominee Corp. represents and
warrants to Fannie Mae (in addition to and not in any way in limitation of the
representations and warranties of Owner) as follows:
(i) Manchester Nominee Corp. is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Illinois pursuant the Manchester Corp. Articles of Incorporation.
Copies of the Manchester Corp. Organizational Documents certified as true,
correct and complete by a duly authorized officer of Manchester Corp. have
been delivered to Fannie Mae. The Manchester Corp. Organizational
Documents are in full force and effect and have not been otherwise
supplemented, amended or modified. A copy of the Manchester Nominee
Agreement certified as true, correct and complete by a duly authorized
officer of QRS Partner, has been delivered to Fannie Mae on or before the
date hereof. The Manchester Nominee Agreement (a) is in full force and
effect and constitutes the entire agreement of the parties thereto with
respect to the Nominee Property commonly known as Wellington Hill
Apartments, (b) has not been supplemented, amended or modified and (c)
constitutes the legal, valid and binding obligation of Manchester Nominee
Corp.
109
<PAGE>
(ii) Ravens Crest Nominee Corp. is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Illinois pursuant to the Ravens Crest Articles of Incorporation.
Copies of the Ravens Crest Organizational Documents certified as true,
correct and complete by a duly authorized officer of Ravens Crest Nominee
Corp. have been delivered to Fannie Mae. The Ravens Crest Organizational
Documents are in full force and effect and have not been otherwise
supplemented, amended or modified. A copy of the Ravens Crest Nominee
Agreement certified as true, correct and complete by a duly authorized
officer of QRS Partner, has been delivered to Fannie Mae on or before the
date hereof. The Ravens Crest Nominee Agreement (a) is in full force and
effect and constitutes the entire agreement of the parties thereto with
respect to the Nominee Property commonly known as Ravens Crest Apartments,
(b) has not been supplemented, amended or modified and (c) constitutes the
legal, valid and binding obligation of Ravens Crest Nominee Corp.
(iii) Donald Liebentritt is the sole shareholder of each
Nominee Corp. and is the record and beneficial owner of, and has good
title to, a one hundred percent (100%) ownership interest in each Nominee
Corp., free and clear of all liens, security interests, options, rights of
first refusal and adverse claims of title of any kind or character, and
such percentage interest is not subject to any agreement providing for the
sale or transfer thereof.
(iv) Manchester Nominee Corp. is qualified to transact
business and in good standing in the State of New Hampshire and in each
other jurisdiction in which such qualification and/or standing is
necessary to the conduct of its business and where the failure to be so
qualified would adversely affect the validity of, the enforceability of,
or the ability of Owner to perform the Obligations under this Agreement
and the other Transaction Documents.
(v) Ravens Crest Nominee Corp. is qualified to transact
business and in good standing in the State of New Jersey and in each other
jurisdiction in which such qualification and/or standing is necessary to
the conduct of its business and where the failure to be so qualified would
adversely affect the validity of, the enforceability of, or the ability of
Owner to perform the Obligations under this Agreement and the other
Transaction Documents.
(vi) With respect to each Nominee Property, (a) the
respective Nominee Corp. holds record title solely on behalf of Owner,
subject to the respective Nominee Agreement, free and clear of all Liens
whatsoever except the Permitted Liens, (b) Owner owns and holds all
beneficial ownership interests and Owner has good, valid, marketable
title, free and clear of all Liens whatsoever except the Permitted Liens,
pursuant to the respective Nominee Agreement, (c) Owner has the sole
undivided right, power and authority to direct the respective Nominee
Corp. to sell, convey, mortgage, pledge, otherwise encumber, lease, grant
easements and
110
<PAGE>
otherwise take any action with respect to such Nominee Property and (d)
the respective Nominee Corp. has no right, power or authority to sell,
convey, mortgage, pledge, otherwise encumber, lease, grant easements or
otherwise take any action with respect to such Nominee Property except at
the direction of Owner.
SECTION 8.22 NO NOVATION.
-----------
Nothing herein in intended to nor shall constitute a novation of the
Existing Reimbursement Agreement or the obligations evidenced thereby, which
such obligations shall remain in full force and effect, but shall be repayable
by and governed under the terms and conditions of this Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
111
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers or
representatives as of the date hereof.
EQR-BOND PARTNERSHIP, a Georgia general
partnership
By: QRS-BOND, INC., an Illinois
corporation, a general partner
By:
-----------------------------
Name:
Title:
By: ERP OPERATING LIMITED PARTNERSHIP,
an Illinois limited partnership, a
general partner
By: EQUITY RESIDENTIAL PROPERTIES
TRUST, a Maryland real estate
investment trust, its general
partner
By:
-----------------------
Name:
Title:
FEDERAL NATIONAL MORTGAGE ASSOCIATION
By:
----------------------------
S-1
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT OF JOINT AND SEVERAL LIABILITY PURSUANT TO SECTION
8.21 BY NOMINEE CORPS.:
EQR-RAVENS CREST VISTAS, INC., an
Illinois corporation
By:
----------------------------
Name:
Title:
EQR-MANCHESTER HILL VISTAS, INC., an
Illinois corporation
By:
----------------------------
Name:
Title:
S-2
<PAGE>
EXHIBIT A
BOND PROPERTIES, ISSUERS AND RELATED INFORMATION
EXHIBIT A, SECTION 1:
- --------------------
<TABLE>
<CAPTION>
BOND/LOAN BOND
PROJECT ISSUER AMOUNT TRUSTEE ISSUER
- ------- ------ --------- ------- ------
<S> <C> <C> <C> <C>
1. Altamonte Bexar County $14,600,000 Texas Commerce ---
(San Antonio, Bexar Housing Finance Bank National
County, Texas) Corporation, Texas Association
2. Fountainhead Bexar County $23,275,000 Texas Commerce ---
(San Antonio, Bexar Housing Finance Bank National
County, Texas) Corporation, Texas Association
3. Four Lakes Phase V Village of Lisle, $39,680,000 Reliance Trust ---
(Lisle, DuPage DuPage County, Company
County, Illinois) Illinois
4. Frey Road Housing Authority $19,700,000 Reliance Trust .125%(2)
(Kennesaw, Cobb of Cobb County Company
County, Georgia)
5. Holcomb Bridge Housing Authority $9,545,000 First Union ---
(Alpharetta, Fulton of Fulton County, National Bank of
County, Georgia) Georgia Georgia, N.A.
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FEES
-------------------------------
REBATE REMARK. RATING
PROJECT TRUSTEE MONITOR AGENT AGENCY BONDS
- ------- ------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
1. Altamonte $4,500 $350(1) 0.10% $3,500 Bexar County Housing Finance
(San Antonio, Bexar Corporation Multifamily Housing
County, Texas) Refunding Revenue Bonds
(Altamonte Apartments Project)
Series 1996
2. Fountainhead $4,500 $350 0.10% $3,500 Bexar County Housing Finance
(San Antonio, Bexar Corporation Multifamily Housing
County, Texas) Refunding Revenue Bonds
(Fountainhead Apartments
Project) Series 1996
3. Four Lakes Phase V $3,500 $350 0.10% $3,500 Village of Lisle, DuPage
(Lisle, DuPage County, Illinois Multifamily
County, Illinois) Housing Revenue Refunding Bonds
(Four Lakes Phase V -Lisle
Project), Series 1996
4. Frey Road $2,500 $350 0.10% $3,500 Housing Authority of Cobb
(Kennesaw, Cobb County Multifamily Housing
County, Georgia) Revenue Refunding Bonds
(Greenhouse Frey Apartments
Project), Series 1996
5. Holcomb Bridge $2,500 $350 0.10% $3,500 Housing Authority of Fulton
(Alpharetta, Fulton County, Georgia - Multifamily
County, Georgia) Housing Revenue Refunding Bonds
(Greenhouse Holcomb Bridge
Apartments Project), Series
1996
</TABLE>
- ----------------------------------
(1) The actual fee payable to the rebate monitor with respect to each
bond transaction is $1,750 per calculation, with calculations
being performed every 5 years.
(2) The issuer's fee with respect to this transaction shall payable to
The Housing Authority of Cobb County commencing September 1, 2001.
Exh A - 1
<PAGE>
<TABLE>
<CAPTION>
BOND/LOAN BOND
PROJECT ISSUER AMOUNT TRUSTEE ISSUER
- ------- ------ --------- ------- ------
<S> <C> <C> <C> <C>
6. Roswell Housing Authority $8,100,000 Reliance Trust .125%
(Roswell, Fulton of the City of Company
County, Georgia) Roswell, Georgia
7. SilverWood City of Mission, $11,000,000 Mark Twain Bank ---
(Mission, Johnson Kansas
County, Kansas)
8. Sleepy Hollow The Industrial $12,500,000 Mark Twain Bank ---
(Kansas City, Jackson Development
County, Missouri) Authority of the
City of Kansas
City, Missouri
</TABLE>
SUBTOTAL $138,400,000
<TABLE>
<CAPTION>
ANNUAL FEES
-------------------------------
REBATE REMARK. RATING
PROJECT TRUSTEE MONITOR AGENT AGENCY BONDS
- ------- ------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
6. Roswell $2,500 $350 0.10% $3,500 Housing Authority of the City
(Roswell, Fulton of Roswell, Georgia -
County, Georgia) Multifamily Housing Revenue
Refunding Bonds (Greenhouse
Roswell Apartments Project),
Series 1996
7. SilverWood $3,500 $350 0.10% $3,500 City of Mission, Kansas -
(Mission, Johnson Multifamily Housing Refunding
County, Kansas) Revenue Bonds (Silverwood
Project), Series 1996
8. Sleepy Hollow $3,500 $350 0.10% $3,500 The Industrial Development
(Kansas City, Jackson Authority of the City of Kansas
County, Missouri) City, Missouri - Multifamily
Housing Revenue Refunding Bonds
(Sleepy Hollow Apartments
Project), Series 1996
</TABLE>
Exh A - 2
<PAGE>
EXHIBIT A, SECTION 2:
- --------------------
<TABLE>
<CAPTION>
BOND/LOAN BOND
PROJECT ISSUER AMOUNT TRUSTEE ISSUER
- ------- ------ --------- ------- ------
<S> <C> <C> <C> <C>
1. Wellington Hill New Hampshire $28,625,000 Bank of New 0.15%
(Manchester, Housing Finance Hampshire per
Hillsborough County, Authority annum
New Hampshire)
</TABLE>
SUBTOTAL $28,625,000
TOTAL $167,025,000
============
<TABLE>
<CAPTION>
ANNUAL FEES
-------------------------------
REBATE REMARK. RATING
PROJECT TRUSTEE MONITOR AGENT AGENCY BONDS
- ------- ------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
1. Wellington Hill 0.015% $350 0.10% $3,500 New Hampshire Housing Finance
(Manchester, per annum Authority Multi-Family
Hillsborough County, Housing Refunding Revenue
New Hampshire) Bonds (EQR-Bond Partnership -
Manchester Project), 1996
Issue
</TABLE>
Exh A - 3
<PAGE>
EXHIBIT B
ADDITIONAL MORTGAGED PROPERTIES
Project Name City, County State
- -------------------------------------------------------------------------------
1. Oak Park North Agoura, Ventura County CA
2. Oak Park South Agoura, Ventura County CA
3. Ravens Crest Plainsboro, Middlesex NJ
County
4. Del Coronado Mesa, Maricopa County AZ
5. Windridge Laguna Niguel, Orange CA
County
B-1
<PAGE>
EXHIBIT C
SCHEDULE OF TRANSACTION DOCUMENTS
See attached closing transcripts as follows:
1. Altamonte Bond Closing Document Index.
2. Fountainhead Bond Closing Document Index.
3. Frey Road Bond Closing Document Index.
4. Holcomb Bridge Bond Closing Document Index.
5. Roswell Bond Closing Document Index.
6. Sleepy Hollow Bond Closing Document Index.
7. Silverwood Bond Closing Document Index.
8. Four Lakes Phase V Bond Closing Document Index.
9. Wellington Hill Bond Closing Document Index.
10. Fannie Mae Reimbursement/Credit Enhancement Transaction Closing Document
Index (Initial Closing).
11. Fannie Mae Reimbursement/Credit Enhancement Transaction Closing Document
Index (Amended and Restated Closing).
C-1
<PAGE>
EXHIBIT D
PERMITTED LIENS
<TABLE>
<CAPTION>
Property Title Pro Forma # Effective Date
<S> <C> <C>
1. Altamonte 9600995DE September 30,
(San Antonio, Bexar County, TX) 1996
2. Fountainhead 9600994DE September 30,
(San Antonio, Bexar County, TX) 1996
3. Four Lakes Phase V H455-0633 September 30,
(Lisle, DuPage County, IL) 1996
4. Frey Road 96-73A September 30,
(Kennesaw, Cobb County, GA) 1996
5. Holcomb Bridge 96-73B September 30,
(Alpharetta, Fulton County, GA) 1996
6. Roswell 96-73C September 30,
(Roswell, Fulton County, GA) 1996
7. SilverWood J161208 September 30,
(Mission, Johnson County, KS) 1996
8. Sleepy Hollow J161209 September 30,
(Kansas City, Jackson County, MO) 1996
9. Oak Park North 6600234-6 September 30,
(Agoura, Ventura County, CA) 1996
10. Oak Park South 6600236-6 September 30,
(Agoura, Ventura County, CA) 1996
11. Ravens Crest T960193 September 30,
(Plainsboro, Middlesex County, NJ) 1996
12. Del Coronado 75011728 September 30,
(Mesa, Maricopa County, AZ) 1996
13. Windridge 2602214-3 September 30,
(Laguna Niguel, Orange County, CA) 1996
14. Wellington Hill Apartments, Proforma December 11, 1996
(Manchester, Hillsborough County, NH) File No. 0083-NH
</TABLE>
D-1
<PAGE>
EXHIBIT E
[FORM OF INTEREST RATE HEDGE SECURITY AGREEMENT]
INTEREST RATE HEDGE SECURITY AGREEMENT
THIS INTEREST RATE HEDGE SECURITY AGREEMENT (this "PLEDGE
AGREEMENT"), dated as of ______________, ____, is between EQR-BOND PARTNERSHIP
(the "GRANTOR"), a Georgia general partnership, and FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FANNIE MAE"), a federally-chartered and stockholder-owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act, 12 U.S.C. Section 1716, et seq.
The meaning of capitalized terms can be determined
by reference to section 1.2 of this Pledge Agreement.
BASIS FOR THIS AGREEMENT
------------------------
1 The Issuer intends to issue the Bonds under the Trust
Indenture (the "Indenture"), dated as of _______________, 1996, between the
Issuer and the Trustee.
2 [TRUSTEE] as trustee (the "TRUSTEE") and Fannie Mae have
entered into the Collateral Agreement (the "COLLATERAL AGREEMENT") dated as of
______________, 1996 pursuant to which Fannie Mae, subject to the terms and
conditions of the Collateral Agreement, will provide credit enhancement and
liquidity for the Bonds by pledging and granting to the Trustee a security
interest in certain mortgage loans owned by Fannie Mae and, if applicable,
certain other securities, obligations and participation interests of or owned
by Fannie Mae.
3 As a condition precedent to Fannie Mae's providing credit
enhancement and liquidity for the Bonds, the Grantor has made arrangements to
enter into one or more interest rate [hedges/swaps] (together, the "HEDGE")
pursuant to certain documents attached as Exhibit A to this Pledge Agreement
(the "HEDGE DOCUMENTS").
4 Pursuant to the terms of the Amended and Restated Master
Reimbursement Agreement (the "REIMBURSEMENT AGREEMENT") dated as of
_________________, 1996 between the Grantor and Fannie Mae, the Grantor has
agreed, among other things, to reimburse Fannie Mae for payments made or
collateral delivered by Fannie Mae under the Collateral Agreement.
5 It is a condition precedent to Fannie Mae's obligation to
enter into the Collateral Agreement that the Grantor shall have made the pledge
and granted the security interest to Fannie Mae as contemplated and effected by
this Pledge Agreement.
E-1
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings set forth in this Pledge Agreement and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by the
Grantor and Fannie Mae, the Grantor and Fannie Mae agree as follows:
1. INCORPORATION OF RECITALS; DEFINITIONS; INTERPRETATION; REFERENCE
-----------------------------------------------------------------
MATERIALS.
- ---------
1.1 INCORPORATION OF RECITALS. The recitals set forth in "Basis
for this Pledge Agreement" are, by this reference, incorporated into and deemed
a part of this Pledge Agreement.
1.2 DEFINITIONS. Capitalized terms used in this Pledge Agreement
shall have the meanings given to those terms in this Pledge Agreement.
Capitalized terms used in this Pledge Agreement and not defined in this Pledge
Agreement, but defined in the Reimbursement Agreement, shall have the meaning
given those terms in the Reimbursement Agreement.
1.3 INTERPRETATION. Words importing any gender include all
genders. The singular form of any word used in this Pledge Agreement shall
include the plural, and vice versa, unless the context otherwise requires. Words
importing persons include natural persons, firms, associations, partnerships and
corporations. The parties hereto acknowledge that each party and their
respective counsel have participated in the drafting and revision of this Pledge
Agreement. Accordingly, the parties agree that any rule of construction which
disfavors the drafting party shall not apply in the interpretation of this
Pledge Agreement or any statement or supplement or exhibit hereto.
1.4 REFERENCE MATERIALS. Sections mentioned by number only are
the respective sections of this Pledge Agreement so numbered. Reference to
"this section" or "this subsection" shall refer to the particular section or
subsection in which such reference appears. Any captions, titles or headings
preceding the text of any section and any table of contents or index attached to
this Pledge Agreement are solely for convenience of reference and shall not
constitute part of this Pledge Agreement or affect its meaning, construction or
effect.
2. PLEDGE OF COLLATERAL.
--------------------
2.1 PLEDGE AND ASSIGNMENT. The Grantor pledges and assigns to
Fannie Mae and grants to Fannie Mae a lien and security interest in, and right
of setoff against, Grantor's right, title and interest in and to the following
collateral (collectively, the "COLLATERAL"):
(a) the Hedge Documents;
E-2
<PAGE>
(b) any and all moneys (collectively, "PAYMENTS") payable to
the Grantor, from time to time, pursuant to the Hedge Documents by the
Counterparty under the Hedge Documents;
(c) all rights of the Grantor under any of the foregoing,
including all rights of the Grantor to the Payments, contract rights and
general intangibles now existing or hereafter arising with respect to any
or all of the foregoing, including with respect to such rights;
(d) all rights, liens and security interests or guarantees
now existing or hereafter granted by the Counterparty or any other person
to secure or guaranty payment of the Payments due pursuant to the Hedge
Documents.
(e) all documents, writings, books, files, records and other
documents arising from or relating to any of the foregoing, whether now
existing or hereafter arising;
(f) all extensions, renewals and replacements of the
foregoing; and
(g) all cash and non-cash proceeds and products of any of
the foregoing, including, without limitation, interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed or distributable in respect of or in exchange for
any or all of the other Collateral.
2.2 SECURITY FOR OBLIGATIONS. This Pledge Agreement secures the
prompt payment and performance in full when due, whether at stated maturity, by
acceleration or otherwise (including the payments of amounts that would become
due but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. Section 362(a), or any successor provision thereto),
of all Obligations (as defined in the Reimbursement Agreement) of the Grantor.
2.3 FINANCING STATEMENTS. At the request of Fannie Mae from time
to time, the Grantor shall execute such financing statements as may be required
in order to perfect the security interest granted in this Pledge Agreement in
the Collateral pursuant to the Uniform Commercial Code as adopted in the
District of Columbia and any other applicable jurisdiction (the "CODE").
2.4 FURTHER ASSURANCES. At any time and from time to time, at the
expense of the Grantor, the Grantor shall promptly execute and deliver to Fannie
Mae all further instruments and documents, and take all further action, that may
be necessary, or that Fannie Mae or Servicer may reasonably request, in order to
perfect, continue and protect any security interest granted or purported to be
granted by this Pledge Agreement or to enable Fannie Mae to exercise and enforce
its rights and remedies under this Pledge Agreement.
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<PAGE>
2.5 SECURITY INTEREST IN COLLATERAL. The Grantor shall, from time
to time, at the request of Fannie Mae or Servicer, take or cause to be taken all
actions necessary to provide Fannie Mae a first priority perfected security
interest in the Collateral, including all actions, notifications, registrations,
filings and acts of delivery or transfer required under Articles 8 and 9 of the
Code. The Grantor further agrees that it shall not grant, pledge, assign or
hypothecate, directly or indirectly, any interest in the Collateral, except as
may be expressly permitted by this Pledge Agreement.
3. DELIVERY OF COLLATERAL; PAYMENTS.
--------------------------------
3.1 DELIVERY OF COLLATERAL. True, complete and correct copies of
the Hedge Documents and all amendments thereto are attached as Exhibit A to this
Pledge Agreement. The Grantor hereby represents and warrants to Fannie Mae that
there is no additional security for the Counterparty's obligations or any other
arrangements or agreements relating to the Hedge Documents.
3.2 DIRECTION AND APPLICATION OF PAYMENT. Any Payments due and
payable to the Grantor under the Hedge Documents are to be delivered by the
Counterparty directly into the account described in Exhibit B attached hereto
for the benefit of Fannie Mae (the "ACCOUNT"). The Account has also been
pledged to Fannie Mae as security for the Obligations pursuant to that certain
Cash Management, Security Pledge and Assignment Agreement dated as of August 1,
1996 among the Grantor, Fannie Mae and the Servicer. Notwithstanding the
foregoing, nothing contained herein shall relieve the Grantor of its primary
obligation to pay all amounts due in respect of the Obligations.
4. REPRESENTATIONS AND WARRANTIES.
------------------------------
4.1 REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor
represents and warrants to Fannie Mae on the Closing Date that:
(a) it is a partnership duly organized, validly existing and
in good standing under the laws of the State of Georgia;
(b) it has all requisite power and authority to enter into
this Pledge Agreement and to carry out its obligations under this Pledge
Agreement; this Pledge Agreement has been duly executed and delivered by
it and is the valid and binding obligation of the Grantor, enforceable
against it in accordance with its terms subject to the affect of
applicable bankruptcy, insolvency, reorganization, moratorium, other
similar laws affecting the rights of creditors generally and general
principals of equity; the execution, delivery and performance of this
Pledge Agreement and the consummation of the transactions contemplated by
this Pledge Agreement have been duly authorized by all necessary
partnership action and other action on the part of the Grantor;
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<PAGE>
(c) neither the execution nor delivery of this Pledge
Agreement nor the performance by the Grantor of its obligations under this
Pledge Agreement, nor the consummation of the transactions contemplated by
this Pledge Agreement, will (i) conflict with any provision of the
partnership agreement of the Grantor; (ii) conflict with, result in a
breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default)
under, or give rise to a right to terminate, amend, modify, abandon or
accelerate, any contract, agreement, promissory note, lease, indenture,
instrument or license to which the Grantor is a party or by which the
Grantor's assets or properties may be bound or affected; (iii) violate or
conflict with any federal, state or local law, statute, ordinance, rule,
regulation, order, judgment, decree or arbitration award which is either
applicable to, binding upon or enforceable against the Grantor; (iv)
result in or require the creation or imposition of any liens, security
interests, options or other charges or encumbrances ("LIENS") upon or with
respect to the Collateral, other than Liens in favor of Fannie Mae; (v)
violate any legally protected right of any individual or entity or give to
any individual or entity a right or claim against the Grantor; or (vi)
require the consent, approval, order or authorization of, or the
registration, declaration or filing with, any federal, state or local
government entity;
(d) it is not presently under any cease or desist order or
other orders of a similar nature, temporary or permanent, of any federal
or state authority which would have the effect of preventing or hindering
the performance of its obligations under this Pledge Agreement; nor, to
its knowledge, are there any proceedings presently in progress or
contemplated which would, if successful, lead to the issuance of any such
order;
(e) it is the sole legal and beneficial owner of, and has
good and marketable title to (and has full right and authority to pledge
and assign), the Collateral, free and clear of all Liens, except Liens
granted pursuant to this Pledge Agreement and the Collateral is not
subject to any offset, right of redemption (other than in accordance with
the terms of the Hedge Documents on this Pledge Agreement), defense or
counterclaim of a third party;
(f) upon the filing of financing statements under the Code,
Fannie Mae shall have a valid, enforceable and perfected first priority
security interest in all of the Collateral securing the Obligations; and
(g) its principal place of business and chief executive
office is located in Cook County, Illinois with an address at Two North
Riverside Plaza, Suite 450, Chicago, Illinois 60606.
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<PAGE>
5. EVENTS OF DEFAULT: RIGHTS AND REMEDIES.
--------------------------------------
5.1 EVENT OF DEFAULT. For purposes of this Pledge Agreement,
"Event of Default" shall have the meaning given that term in the Reimbursement
Agreement.
5.2 REMEDIES ON DEFAULT. If any Event of Default has occurred and
is continuing and written notice of the Event of Default has been provided by
either the General Counsel or the Controller of Fannie Mae (each, a "FANNIE MAE
AUTHORIZED OFFICER") to the Grantor:
(a) at the direction of a Fannie Mae Authorized Officer, the
Grantor shall deliver all Collateral to Fannie Mae or its designee;
(b) Fannie Mae may, without further notice, exercise all
rights, privileges or options pertaining to the Collateral as if Fannie
Mae were the absolute owner of such Collateral, including, but not limited
to, the right to terminate the existing Hedge Documents (subject to the
terms and conditions regarding termination set forth in the Hedge
Documents), upon such terms and conditions as Fannie Mae may determine,
all without liability except to account for property actually received by
Fannie Mae, and Fannie Mae shall have no duty to exercise any of those
rights, privileges or options and shall not be responsible for any failure
to do so or delay in so doing; and
(c) Fannie Mae may exercise in respect of the Collateral, in
addition to other rights and remedies provided for in this Pledge
Agreement or otherwise available to it, all of the rights and remedies of
a secured party under the Code and also may, without notice except as
specified below, sell the Collateral at public or private sale, at any of
the offices of Fannie Mae or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as may be commercially reasonable. The
Grantor agrees that, to the extent notice of sale shall be required by
applicable law, at least ten (10) days' prior notice to the Grantor of the
time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Fannie Mae shall
not be obligated to make any sale of Collateral regardless of notice of
sale having been given. Fannie Mae may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place
to which it was so adjourned.
5.3 APPLICATION OF PROCEEDS. Fannie Mae shall apply the cash
proceeds actually received from any sale or other disposition of the Collateral
as follows: (a) first, to reimburse Fannie Mae for any amounts due to it
pursuant to section 8 of this Pledge Agreement including the reasonable expenses
of preparing for sale, selling and the like and to reasonable attorneys' fees
and legal expenses incurred by Fannie Mae in connection therewith, (b) second,
to the repayment of all amounts then due and unpaid on the
E-6
<PAGE>
Obligations in such order of priority as Fannie Mae may determine and (c) then
to pay the balance, if any, to Grantor or as otherwise required by law.
5.4 NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. If any agreement
contained in this Pledge Agreement is breached by the Grantor and thereafter
waived by Fannie Mae in writing, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other breach under this
Pledge Agreement.
5.5 FANNIE MAE APPOINTED ATTORNEY-IN-FACT. The Grantor hereby
appoints Fannie Mae, through any duly authorized officer of Fannie Mae or
Servicer, as the Grantor's attorney-in-fact, with full authority in the place
and stead of the Grantor and in the name of the Grantor or otherwise, from time
to time in Fannie Mae's discretion during the continuance of an Event of
Default, to take any action and to execute any instrument which Fannie Mae may
deem necessary or advisable to exercise the rights and remedies granted in this
Pledge Agreement, including, to receive, indorse and collect all instruments
made payable to the Grantor representing any interest payment, dividend, or
other distribution in respect of the Collateral or any part thereof and to give
full discharge for the same. The Grantor agrees that the power of attorney
established pursuant to this section 5.5 shall be deemed coupled with an
interest and shall be irrevocable.
5.6 NATURE OF FANNIE MAE'S RIGHTS. The right of Fannie Mae to the
Collateral held for its benefit under this Pledge Agreement shall not be subject
to any right of redemption the Grantor might otherwise have and shall not be
suspended, discontinued or reduced or terminated for any cause, including,
without limiting the generality of the foregoing, any event constituting force
majeure or any acts or circumstances that may constitute commercial frustration
of purpose.
6. MISCELLANEOUS PROVISIONS.
------------------------
6.1 COOPERATION. At any time and from time to time after the date
of this Pledge Agreement, each party shall, at the request of another party,
execute and deliver any instruments or documents, including financing and
continuation statements under the Code in favor of Fannie Mae, and other
documents reflecting Fannie Mae's security interest in the Collateral, and take
all such further actions as such party may reasonably request in order to
consummate and make effective the transactions contemplated by this Pledge
Agreement, all at the sole cost and expense of the Grantor.
6.2 FEES, COSTS AND EXPENSES; INDEMNIFICATION. The Grantor agrees
to reimburse Fannie Mae, on demand, for all reasonable out-of-pocket costs and
expenses incurred by Fannie Mae in connection with the administration and
enforcement of this Pledge Agreement and agrees to indemnify and hold harmless
Fannie Mae from and against any and all losses, costs, claims, damages,
penalties, causes of action, suits, judgments, liabilities and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
incurred by Fannie Mae under this Pledge Agreement or in connection with this
E-7
<PAGE>
Pledge Agreement, unless such liability shall be due to willful misconduct or
gross negligence on the part of Fannie Mae or its agents or employees. If the
Grantor shall fail to do any act or thing which it has covenanted to do under
this Pledge Agreement or any representation or warranty on the part of the
Grantor contained in this Pledge Agreement or repeated and reaffirmed in this
Pledge Agreement shall be breached, Fannie Mae may (but shall not be obligated
to) do the same or cause it to be done or remedy any such breach, and may expend
its funds for such purpose. Any and all amounts so expended by Fannie Mae shall
be repayable to it by the Grantor upon Fannie Mae's demand therefor. The
obligations of the Grantor under this section 6.2 shall survive the termination
of this Pledge Agreement and the discharge of the other obligations of the
Grantor under this Pledge Agreement.
6.3 TERMINATION. This Pledge Agreement and the assignments,
pledges and security interests created or granted by this Pledge Agreement shall
create a continuing security interest in the Collateral and shall terminate upon
the later to occur of (a) expiration of the Term of the Reimbursement Agreement
(as provided in the Reimbursement Agreement) or (b) the date which is ninety-one
(91) days after the date on which all amounts due under the Hedge Documents have
been paid in full, provided that during such ninety-one (91) day period no Act
of Bankruptcy (as defined below) shall have occurred. "Act of Bankruptcy" means
the filing of a petition in bankruptcy or other commencement of a bankruptcy or
similar proceeding by or against the Grantor under any applicable bankruptcy,
insolvency, reorganization or similar law now in effect or any such proceeding
by or against the Grantor under any applicable bankruptcy, insolvency,
reorganization or similar law in effect after the date of this Pledge Agreement.
Notwithstanding the foregoing, the provisions of clause (b) above of this
section 6.3 shall not apply in connection with the provision, in accordance with
the Bond Documents, of an Alternate Credit Facility in substitution for, and
replacement of, the Collateral Agreement. Upon termination of this Pledge
Agreement, Fannie Mae shall deliver to the Grantor all Collateral and documents
then in the custody or possession of Fannie Mae and, if requested by the
Grantor, shall execute and deliver to the Grantor for recording or filing in
each office in which any assignment or financing statement relative to the
Collateral or the agreements relating thereto or any part thereof, shall have
been filed or recorded, a termination statement or release under applicable law
(including, if relevant, the Code) releasing Fannie Mae's interest therein and
such other documents and instruments as the Grantor may reasonably request, all
without recourse to or any warranty whatsoever by, Fannie Mae, and at the cost
and expense of the Grantor.
6.4 ENTIRE AGREEMENT. This Pledge Agreement constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties to this Pledge Agreement with respect to
the subject matter of this Pledge Agreement. This Pledge Agreement may not be
amended, changed, waived or modified except by a writing executed by both
parties.
E-8
<PAGE>
6.5 SUCCESSORS AND ASSIGNS. This Pledge Agreement shall inure to
the benefit of, and be enforceable by, the Grantor and Fannie Mae and their
respective successors and permitted assigns, and nothing herein expressed or
implied shall be construed to give any other Person any legal or equitable
rights under this Pledge Agreement. Neither this Pledge Agreement nor any of
the rights, interests or obligations under this Pledge Agreement shall be
assigned by either party to this Pledge Agreement without the prior consent of
the other parties to this Pledge Agreement.
6.6 AMENDMENT. Fannie Mae and the Grantor agree that this Pledge
Agreement shall be amended only by an instrument in writing executed by their
duly authorized representatives.
6.7 NOTICES; CHANGE IN PRINCIPAL PLACE OF BUSINESS. All notices,
directions, certificates or other communications hereunder shall be sufficiently
given and shall be deemed given when sent by certified or registered mail,
return receipt requested, by overnight courier or by telecopy (to be confirmed
with a copy thereof sent by regular mail within two Business Days), addressed to
the appropriate notice address set forth below. Any of the parties hereto may,
by such notice described above, designate any further or different address to
which subsequent notices, certificates or other communication shall be sent
without any requirement of execution of any amendment to this Pledge Agreement.
Any such notice, certificate or communication shall be deemed to have been given
as of the date of actual delivery or the date of failure to deliver by reason of
refusal to accept delivery or changed address of which no notice was given
pursuant to this section 6.7. The notice addresses are as follows:
To the Grantor: EQR-Bond Partnership
c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 450,
Chicago, Illinois 60606
Attention: Chief Financial Officer
To Fannie Mae: Fannie Mae
3900 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attention: Senior Vice President-Multifamily
With copies to: Fannie Mae
135 North Robles Avenue
Suite 300
Pasadena, California 91101-1707
Attention: Vice President-Multi-family
Activities
E-9
<PAGE>
Fannie Mae
3900 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attention: Office of General Counsel
Re: Multifamily Matters
To Servicer: Washington Capital DUS, Inc.
1616 North Fort Myer Drive, Suite 1210
Arlington, Virginia 22208
Attention: Bridget O. Schmitz
Executive Vice President
All notices to be given by the Grantor under this Pledge Agreement shall be
given to Fannie Mae and Servicer. The Grantor shall give Fannie Mae and
Servicer at least thirty (30) days prior written notice of a change in its
principal place of business and chief executive office.
6.8 RIGHTS OF SERVICER. The parties to this Pledge Agreement
acknowledge and agree that, except as otherwise provided below, in connection
with any provision of this Pledge Agreement under which Fannie Mae is granted
the right to (a) request that the Grantor or another party (i) take or refrain
from taking certain action, or (ii) deliver certain information, documents or
instruments, (b) give any instructions or directions or (c) exercise remedies
under section 5.2 of this Pledge Agreement, Servicer is hereby authorized to act
on behalf of, and in the place and stead of, Fannie Mae, pursuant to the
Servicing Agreement. Any rights of Servicer to act on behalf of Fannie Mae
pursuant to the preceding sentence shall be terminated as and to the extent
determined by Fannie Mae upon delivery by Fannie Mae to the parties to this
Pledge Agreement of written notice of such termination. Servicer is neither
affiliated with, nor acting as an agent for, the Grantor.
6.9 DISCRETION. If any provision of this Pledge Agreement
provides for the approval, consent, determination, exercise of discretion,
designation, judgment or waiver of or by Fannie Mae and if a standard for Fannie
Mae granting such approval, consent, determination, exercise of discretion,
choice, designation, judgment or waiver is not otherwise stated (e.g., , that
such approval, consent, determination, exercise of discretion, choice,
designation, judgment or waiver will be "reasonable"), then in each case such
approval, consent, determination, exercise of discretion, choice, designation,
judgment or waiver may be given by Fannie Mae in its sole and absolute
discretion.
6.10 GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS AND REMEDIES OF THE PARTIES HERETO
SHALL BE GOVERNED BY, THE LAWS OF THE DISTRICT OF COLUMBIA WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT FEDERAL LAWS MAY
PREVAIL. UNLESS OTHERWISE DEFINED IN THIS PLEDGE AGREEMENT, TERMS USED IN
E-10
<PAGE>
THIS PLEDGE AGREEMENT THAT ARE DEFINED IN THE CODE SHALL HAVE THE MEANING GIVEN
THOSE TERMS IN THE CODE.
6.11 SEVERABILITY. If any term or other provision of this Pledge
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Pledge Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party.
6.12 MULTIPLE COUNTERPARTS. This Pledge Agreement may be
simultaneously executed in multiple counterparts, all of which shall constitute
one and the same instrument and each of which shall be, and shall be deemed to
be, an original.
IN WITNESS WHEREOF, the Grantor and Fannie Mae have caused this
Pledge Agreement to be signed, on the date first written above, by their
respective officers duly authorized.
EQR-BOND PARTNERSHIP,
a Georgia general partnership
By: QRS-BOND, INC. an Illinois corporation, a
general partner
By:
------------------------------------
Name:
Title:
By: ERP OPERATING LIMITED PARTNERSHIP, an
Illinois limited partnership, a general
partner
By: EQUITY RESIDENTIAL PROPERTIES TRUST,
a Maryland real estate investment
trust, its general partner
By:
------------------------------
Name:
Title:
E-11
<PAGE>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
By:
-------------------------------
Name:
Title:
E-12
<PAGE>
EXHIBIT A TO INTEREST RATE HEDGE SECURITY AGREEMENT
HEDGE DOCUMENTS
[To be attached]
A-1
<PAGE>
EXHIBIT B TO INTEREST RATE HEDGE SECURITY AGREEMENT
ACCOUNT INFORMATION
Account No.
- -----------
B-1
<PAGE>
EXHIBIT F
[FORM OF NEW PROPERTY CONFIRMATION]
CONFIRMATION OF ADDITION OF NEW PROPERTY
Reference is made to that certain Amended and Restated Master
Reimbursement Agreement dated as of _______ __, 1996, (as the same has been
amended, supplemented or otherwise modified prior to the date hereof, the
"REIMBURSEMENT AGREEMENT"), between EQR-BOND PARTNERSHIP, a Georgia general
partnership ("OWNER"), and the FEDERAL NATIONAL MORTGAGE ASSOCIATION, a
corporation duly organized and existing under the Federal National Mortgage
Association Charter Act, 12 U.S.C. Section 1716 et. seq. ("FANNIE MAE").
Capitalized terms used herein without definition shall have the same meaning
herein as set forth in the Reimbursement Agreement.
1. Owner has acquired that certain Multifamily Residential Property located
in [County, City, State] and known as [Name of Project] and more particularly
described on Exhibit A hereto (the "PROJECT").
2. Owner has requested that Fannie Mae consent to the addition of the
Project to the credit facility evidenced by the Reimbursement Agreement (the
"FANNIE MAE CREDIT FACILITY") as a New [Additional */* Bond] Property.
3. By execution and delivery of this instrument by Fannie Mae to Owner,
Fannie Mae hereby consents to the addition of the Project to the Fannie Mae
Credit Facility as a New [Additional */* Bond] Property effective as of
__________ (the "EFFECTIVE DATE").
4. In connection with the addition of the Project to the Fannie Mae
Credit Facility as a New Bond Property, Owner and Fannie Mae acknowledge and
agree as follows:
(a) the Credit Enhancement Component with respect to such New Bond
Property shall be _____________________.
(b) the Reserve Component with respect to such New Bond Property
shall be _____________________.
5. The Allocable Facility Amount with respect to each Property
(including the Project) from and after the Effective Date until the next
Determination Date shall be the amount set forth next to each such Property on
Exhibit B attached hereto.
6. As of the Effective Date, the Reimbursement Agreement is hereby
further amended, modified and supplemented as follows:
F-1
<PAGE>
[(a) The schedule of Bond Properties, Issuers and Related
Information attached as Exhibit A to the Reimbursement Agreement is hereby
amended and restated in its entirety as set forth in Annex I attached
hereto.]
[(b) The schedule of Additional Mortgaged Properties attached as
Exhibit C to the Reimbursement Agreement is hereby amended and restated in
its entirety as set forth in Annex II attached hereto.]
(c) The schedule of Permitted Liens attached as Exhibit E to the
Reimbursement Agreement is hereby amended and restated in its entirety as
set forth in Annex III attached hereto.
F-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers or
representatives as of the date hereof.
FEDERAL NATIONAL MORTGAGE ASSOCIATION
By:
-----------------------------------
Name:
Title:
EQR-BOND PARTNERSHIP, a Georgia general
partnership
By: QRS-BOND, INC., an Illinois
corporation, a general partner
By:
-----------------------------
Name:
Title:
By: ERP OPERATING LIMITED PARTNERSHIP,
an Illinois limited partnership, a
general partner
By: EQUITY RESIDENTIAL PROPERTIES
TRUST, a Maryland real estate
investment trust, its general
partner
By:
-----------------------
Name:
Title:
F-3
<PAGE>
ACKNOWLEDGMENT, AGREEMENT AND
CONSENT OF GUARANTOR AND NOMINEE CORPS.:
ERP OPERATING LIMITED PARTNERSHIP, an
Illinois limited partnership
By: EQUITY RESIDENTIAL PROPERTIES TRUST, a
Maryland real estate investment trust, its general partner
By:
---------------------------
Name:
Title:
EQR-RAVENS CREST VISTAS, INC.,
an Illinois corporation
By:
----------------------------
Name:
Title:
EQR-MANCHESTER HILL VISTAS, INC.,
an Illinois corporation
By:
----------------------------
Name:
Title:
F-4
<PAGE>
EXHIBIT G
FORM OF RENT ROLL
[See Attached]
Exh. G - 1
<PAGE>
EXHIBIT H
SCHEDULE OF MANAGEMENT AGREEMENTS
1. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Altamonte Apartments, San
Antonio, Bexar County, Texas.
2. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Fountainhead Apartment, San
Antonio, Bexar County, Texas.
3. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Four Lakes Phase V
Apartments, Lisle, DuPage County, Illinois.
4. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Frey Road Apartments,
Kennesaw, Cobb County, Georgia.
5. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Holcomb Bridge Apartments,
Alpharetta, Fulton County, Georgia.
6. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Roswell Apartments,
Roswell, Fulton County, Georgia.
7. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to SilverWood Apartments,
Mission, Johnson County, Kansas.
8. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Sleepy Hollow Apartments,
Kansas City, Jackson County, Missouri.
Exh H - 1
<PAGE>
9. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Oak Park North Apartments,
Agoura, Venture County, California.
10. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Oak Park South Apartments,
Agoura, Ventura County, California.
11. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Ravens Crest Vistas, Inc. and Equity Residential
Properties Management Limited Partnership and relating to Ravens Crest
Apartments, Plainsboro, Middlesex County, New Jersey.
12. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Del Coronado Apartments,
Mesa, Maricopa County, Arizona.
13. That certain Property Management Agreement dated as of August 1, 1996 by
and between EQR-Bond Partnership and Equity Residential Properties
Management Limited Partnership and relating to Windridge Apartments,
Laguna Niguel, Orange County, California.
14. That certain Property Management Agreement dated as of November 1, 1996 by
and between EQR-Manchester Hill Vistas, Inc. and Equity Residential
Properties Management Limited Partnership and relating to Wellington Hill
Apartments, Manchester, Hillsborough County, New Hampshire.
Exh. H - 2
<PAGE>
SCHEDULE 2.1(f)
SCHEDULE OF LITIGATION
[NONE]
Sch. 2.1(f)-1
<PAGE>
SCHEDULE 2.1(o)
SCHEDULE OF ENVIRONMENTAL REPORTS
[See Attached]
Sch. 2.1(o)-1
<PAGE>
SCHEDULE 2.1(y)
SCHEDULE OF CERTAIN DISCLOSURE REGARDING SECTION 2.1(y)
NONE
Sch. 2.1(y)-1
<PAGE>
SCHEDULE 2.1(z)
SCHEDULE OF STRUCTURAL AND
MATERIAL DEFECTS
Ravens Crest Apartments:
- -----------------------
To repair the deterioration of fire retardant lumber, roof repair is being done
and is expected to be completed by the summer of 1997 at an estimated remaining
cost of $200,000.
Sch. 2.1(z)-1
<PAGE>
SCHEDULE 2.1(aa)
SCHEDULE OF CONTRACTUAL DEFAULTS
1. ERP Operating Limited Partnership ("ERP") alleges that Interactive Cable
Systems, Inc. ("Interactive") and ICS Communications, Inc. ("ICS") have
breached that certain Master Agreement dated as of May 24, 1995 by and
among ERP, Interactive and ICS, which breach resulted in lost revenues at
the following Properties in the following approximate amounts due to
Interactive's and ICS' failure to install cable and telephone systems:
Fountainhead Apartments $123,000
Sleepy Hollow Apartments 34,500
Frey Road Apartments 87,000
Silverwood Apartments 50,000
2. ERP Operating Limited Partnership, EQR-Bond Partnership, EQR-Manchester
Hill Vistas, Inc. and/or certain Affiliates (collectively, "Equity")
allege that in connection with Citibank, N.A.'s and/or certain Affiliates'
("Citibank") sale of the Wellington Hill Apartments Project to Equity,
Citibank assigned all of its right, title and interest in and to all
insurance proceeds payable on account of existing claims under Wellington
Hill Apartments Project's insurance policies with Aetna Insurance Company.
Equity further alleges that Citibank and/or Aetna Insurance Company have
breached certain agreements made in connection with the sale (including,
without limitation, the assignment of insurance proceeds) by subsequently
entering into a potential settlement of certain insurance claims under
such policies. The amount in dispute with respect to such breach is equal
to or less than $400,000.
Sch. 2.1(aa)-1
<PAGE>
SCHEDULE 2.1(am)
SCHEDULE OF CONTRACTS WITH AFFILIATES
A. ARMS-LENGTH CONTRACTS WITH AFFILIATES:
-------------------------------------
Management Agreements as to each of the Properties, as more fully
described on Exhibit H.
B. NON-ARMS-LENGTH CONTRACTS WITH AFFILIATES:
-----------------------------------------
NONE
Sch. 2.1(am)-1
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
Consolidated and Combined Historical, Including Predecessor Business
Earnings to Combined Fixed Charges and Preferred Distributions Ratio
<TABLE>
<CAPTION>
Historical
--------------------------------------------------------------------
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
------------ ------------ ------------ ------------ ------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
REVENUES
Rental income $ 454,412 $ 373,919 $ 220,727 $ 104,388 $ 86,597
Fee income - outside managed 6,749 7,030 4,739 4,651 4,215
Interest income - investment in mortgage notes 12,819 4,862 - - -
Interest and other income 4,405 4,573 5,568 3,031 2,161
------------ ------------ ------------ ------------ ------------
Total revenues 478,385 390,384 231,034 112,070 92,973
------------ ------------ ------------ ------------ ------------
EXPENSES
Property and maintenance 127,172 112,186 66,534 35,324 30,680
Real estate taxes and insurance 44,128 37,002 23,028 11,403 10,274
Property management 17,512 15,213 10,249 3,491 2,912
Property management - non-recurring - - 879 - -
Fee and asset management 3,837 3,887 2,056 2,524 2,403
Depreciation 93,253 72,410 37,273 15,384 13,442
Interest:
Expense incurred 81,351 78,375 37,044 26,042 31,926
Amortization of deferred financing costs 4,242 3,444 1,930 3,322 2,702
Refinancing costs - - - 3,284 -
General and administrative 9,857 8,129 6,053 3,159 1,915
------------ ------------ ------------ ------------ ------------
Total expenses 381,352 330,646 185,046 103,933 96,254
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary items 97,033 59,738 45,988 8,137 (3,281)
============ ============ ============ ============ ============
Combined Fixed Charges and Preferred Distributions:
Interest and other financing costs 81,351 78,375 37,044 26,042 31,926
Refinancing costs - - - 3,284 -
Amortization of deferred financing costs 4,242 3,444 1,930 3,322 2,702
Preferred distributions 29,015 10,109 - - -
------------ ------------ ------------ ------------ ------------
Total Combined Fixed Charges
and Preferred Distributions 114,608 91,928 38,974 32,648 34,628
============ ============ ============ ============ ============
Earnings before combined fixed charges
and preferred distributions 182,626 141,557 84,962 40,785 31,347
============ ============ ============ ============ ============
Funds from operations before combined fixed
charges and preferred distributions 275,879 213,967 123,114 56,169 44,789
============ ============ ============ ============ ============
Ratio of earnings before combined fixed charges
and preferred distributions to combined fixed charges
and preferred distributions 1.59 1.54 2.18 1.25 0.91
============ ============ ============ ============ ============
Ratio of funds from operations before combined fixed
charges and preferred distributions to combined fixed
charges and preferred distributions 2.41 2.33 3.16 1.72 1.29
============ ============ ============ ============ ============
Earnings deficiency to cover fixed charges N/A N/A N/A N/A (3,281)
============ ============ ============ ============ ============
</TABLE>
<PAGE>
EXHIBIT 21.1
EXHIBIT A
---------
ERP OPERATING LIMITED PARTNERSHIP
SUBSIDIARIES
------------
1. Equity Residential Properties Management Limited Partnership
2. Equity Residential Properties Management Limited Partnership II
3. Equity Residential Properties Management Corp. I (own preferred stock only,
not common)
4. Equity Residential Properties Management Corp. II (own preferred stock
only, not common)
ILLINOIS
--------
1. EQR-BS Financing Limited Partnership
2. EQR-Chaparral Creek GP Limited Partnership
3. EQR-Lincoln Green I and II GP Limited Partnership
4. EQR-Lodge (OK) GP Limited Partnership
5. EQR-Stonebrook GP Limited Partnership
6. EQR-Sleepy Hollow Financing Limited Partnership
7. EQR-EOI Financing Limited Partnership
8. EQR-Continental Villas Financing Limited Partnership
9. EQR-Doral Financing Limited Partnership
10. EQR-Governor's Place Financing Limited Partnership
11. EQR-Plantation Financing Limited Partnership
12. EQR-Valley Park South Financing Limited Partnership
13. EQR-Yorktowne Financing Limited Partnership
14. EQR-SWN Line Financing Limited Partnership
15. EQR-Arbors Financing Limited Partnership
16. EQR-Breton Hammocks Financing Limited Partnership
17. EQR-Emerald Place Financing Limited Partnership
18. EQR-Essex Place Financing Limited Partnership
19. EQR-Met Financing Limited Partnership
20. EQR-Met CA Financing Limited Partnership
21. EQR-Wellington Hill Financing Limited Partnership - (New Hampshire)
22. EQR-Tanasbourne Terrace Financing Limited Partnership
23. EQR-Reserve Square Limited Partnership - (Ohio)
24. EQR-Fountainhead I Financing General Partnership
25. EQR-Fountainhead II Financing General Partnership
26. EQR-Fountainhead III Financing General Partnership
27. E-Chaparral Associates Limited Partnership
28. Equity-Chaparral Venture Limited Partnership
29. E-G-One Associates
30. Equity Green I Venture
31. E-G-Two Associates
32. Equity-Green II Venture
33. E-Stonebrook Associates
34. Equity-Stonebrook Venture Limited Partnership
35. E-Lodge Associates Limited Partnership
<PAGE>
36. Equity-Lodge Venture Limited Partnership
37. Country Club Associates Limited Partnership
38. Second Country Club Associates Limited Partnership
39. Second Georgian Woods Limited Partnership
40. Greenwich Woods Associates Limited Partnership
41. Artery Northampton Limited Partnership
42. Third Towne Centre Limited Partnership
43. Fourth Towne Centre Limited Partnership
44. Georgian Woods Annex Associates
45. EQR-Keystone Financing General Partnership
46. EQR-Camellero Financing Limited Partnership
47. EQR-Arizona, L.L.C. - (Delaware)
48. EQR-Washington, L.L.C. - (Delaware)
49. EQR-Wellington, L.L.C. - (Delaware)
50. EQR-Oregon, L.L.C. - (Delaware)
51. EQR-Waterfall, L.L.C. - (Delaware)
52. EQR-Virginia, L.L.C. - (Delaware)
53. Multifamily Portfolio LP Limited Partnership
54. EQR-Plantation, L.L.C. - (Delaware)
55. EQR-California, L.L.C.;
56. EQR-ArtBHolder, L.L.C.;
57. EQR-ArtCapLoan, L.L.C.;
58. EQR-Keystone Financing G.P.;
59. Country Ridge General Partnership;
60. Rosehill Pointe General Partnership;
61. EQR-Canter Chase General Partnership;
62. Hunter's Glen General Partnership;
63. Sunny Oak Village General Partnership;
64. EQR-Pine Meadows Garden General Partnership;
65. EQR-Bond Partnership;
66. EQR-Park Place I General Partnership;
67. EQR-Park Place II General Partnership;
68. Songbird General Partnership;
69. Cedar Crest General Partnership;
70. EQR-Creekside Oaks General Partnership;
71. EQR-Village Oaks General Partnership;
72. EQR-Lakeville Resort General Partnership;
73. EQR-Trails at Dominion General Partnership;
74. EQR-Virginia, L.L.C.
75. EQR-Dartmouth Woods General Partnership
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation of our reports on page F-3 and S-1 of
this Form 10-K by reference in the prospectus constituting part of the
Registration Statements on Form S-3 (No. 333-12213) of ERP Operating Limited
Partnership.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Chicago, Illinois
March 19, 1996
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No. 333-12213) of ERP Operating Limited Partnership and in the related
Prospectus of our report dated February 12, 1997, except for Note 21, as to
which the date is March 19, 1997, with respect to the consolidated financial
statements and schedule of ERP Operating Limited Partnership included in this
Annual Report (Form 10-K) for the year ended December 31, 1996.
/s/ Ernst & Young LLP
Ernst & Young LLP
Chicago, Illinois
March 20, 1997
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
-----------------
STATE OF ILLINOIS
COUNTY OF COOK
KNOW ALL MEN BY THESE PRESENTS that John W. Alexander, having an address at
229 N. Church St., Charlotte, N.C. 28202, has made, constituted and appointed
and BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and
Michael J. McHugh, or either of them, having an address at Two North Riverside
Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in-Fact for him and
his name, place and stead to sign and execute in any and all capacities this
Annual Report on Form 10-K and any or all amendments to this Annual Report
granting unto each of such, Attorney-in-Fact, full power and authority to do and
perform each and every act and thing, requisite and necessary to be done in an
about the premises, as fully, to all intents and purposes as he might or could
do if personally present at the doing thereof, with full power of substitution
and revocation, hereby ratifying and confirming all that each of such Attorney-
in-Fact or his substitutes shall lawfully do or cause to be done by virtue
hereof.
This Power of Attorney shall remain in full force and effect until
terminated by the undersigned through the instrumentality of a signed writing.
IN WITNESS WHEREOF, John W. Alexander, has hereunto set his hand this 24th
day of February, 1997.
/s/ John W. Alexander
-------------------------------
John W. Alexander
I, Patricia M. Nesti, a Notary Public in and for said County in the State
of aforesaid, do hereby certify that John W. Alexander, personally known to me
to be the same person whose name is subscribed to the foregoing instrument
appeared before me this day in person and acknowledged that he signed and
delivered said instrument as his own free voluntary act for the uses and
purposes therein set forth.
Given under my hand and notarial seal this 24th day of February, 1997.
/s/ Patricia M. Nesti
-------------------------------
(Notary Public)
My Commission Expires:
1/24/98
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
-----------------
STATE OF ILLINOIS
COUNTY OF COOK
KNOW ALL MEN BY THESE PRESENTS that James D. Harper, Jr., having an address
at 3250 Mary St., Coconut Grove, FL 33133, has made, constituted and appointed
and BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and
Michael J. McHugh, or either of them, having an address at Two North Riverside
Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in-Fact for him and
his name, place and stead to sign and execute in any and all capacities this
Annual Report on Form 10-K and any or all amendments to this Annual Report
granting unto each of such, Attorney-in-Fact, full power and authority to do and
perform each and every act and thing, requisite and necessary to be done in an
about the premises, as fully, to all intents and purposes as he might or could
do if personally present at the doing thereof, with full power of substitution
and revocation, hereby ratifying and confirming all that each of such Attorney-
in-Fact or his substitutes shall lawfully do or cause to be done by virtue
hereof.
This Power of Attorney shall remain in full force and effect until
terminated by the undersigned through the instrumentality of a signed writing.
IN WITNESS WHEREOF, James D. Harper, Jr., has hereunto set his hand this
24th day of February, 1997.
/s/ James D. Harper, Jr.
------------------------------
James D. Harper, Jr.
I, Patricia M. Nesti, a Notary Public in and for said County in the State
of aforesaid, do hereby certify that James D. Harper, Jr., personally known to
me to be the same person whose name is subscribed to the foregoing instrument
appeared before me this day in person and acknowledged that he signed and
delivered said instrument as his own free voluntary act for the uses and
purposes therein set forth.
Given under my hand and notarial seal this 24th day of February, 1997.
/s/ Patricia M. Nesti
------------------------------
(Notary Public)
My Commission Expires: 1/24/98
<PAGE>
EXHIBIT 24.3
POWER OF ATTORNEY
-----------------
STATE OF ILLINOIS
COUNTY OF COOK
KNOW ALL MEN BY THESE PRESENTS that Errol R. Halperin, having an address at
203 N. LaSalle St., Chicago, IL 60601, has made, constituted and appointed and
BY THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and
Michael J. McHugh, or either of them, having an address at Two North Riverside
Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in-Fact for him and
his name, place and stead to sign and execute in any and all capacities this
Annual Report on Form 10-K and any or all amendments to this Annual Report
granting unto each of such, Attorney-in-Fact, full power and authority to do and
perform each and every act and thing, requisite and necessary to be done in an
about the premises, as fully, to all intents and purposes as he might or could
do if personally present at the doing thereof, with full power of substitution
and revocation, hereby ratifying and confirming all that each of such Attorney-
in-Fact or his substitutes shall lawfully do or cause to be done by virtue
hereof.
This Power of Attorney shall remain in full force and effect until
terminated by the undersigned through the instrumentality of a signed writing.
IN WITNESS WHEREOF, Errol R. Halperin, has hereunto set his hand this
24th day of February, 1997.
/s/ Errol R. Halperin
----------------------
Errol R. Halperin
I, Patricia M. Nesti, a Notary Public in and for said County in the State
of aforesaid, do hereby certify that Errol R. Halperin, personally known to me
to be the same person whose name is subscribed to the foregoing instrument
appeared before me this day in person and acknowledged that he signed and
delivered said instrument as his own free voluntary act for the uses and
purposes therein set forth.
Given under my hand and notarial seal this 24th day of February, 1997.
/s/ Patricia M. Nesti
---------------------
(Notary Public)
My Commission Expires:
1/24/98
<PAGE>
EXHIBIT 24.4
POWER OF ATTORNEY
-----------------
STATE OF ILLINOIS
COUNTY OF COOK
KNOW ALL MEN BY THESE PRESENTS that B. Joseph White, having an address at
701 Tappan, Ann Arbor, MI 48109, has made, constituted and appointed and BY
THESE PRESENTS, does make, constitute and appoint Douglas Crocker II and Michael
J. McHugh, or either of them, having an address at Two North Riverside Plaza,
Chicago, Illinois 60606, his true and lawful Attorney-in-Fact for him and his
name, place and stead to sign and execute in any and all capacities this Annual
Report on Form 10-K and any or all amendments to this Annual Report granting
unto each of such, Attorney-in-Fact, full power and authority to do and perform
each and every act and thing, requisite and necessary to be done in an about the
premises, as fully, to all intents and purposes as he might or could do if
personally present at the doing thereof, with full power of substitution and
revocation, hereby ratifying and confirming all that each of such Attorney-in-
Fact or his substitutes shall lawfully do or cause to be done by virtue hereof.
This Power of Attorney shall remain in full force and effect until
terminated by the undersigned through the instrumentality of a signed writing.
IN WITNESS WHEREOF, B. Joseph White, has hereunto set his hand this 24th
day of February 1997.
/s/ B. Joseph White
------------------------------
B. Joseph White
I, Patricia M. Nesti, a Notary Public in and for said County in the State
of aforesaid, do hereby certify that B. Joseph White, personally known to me to
be the same person whose name is subscribed to the foregoing instrument appeared
before me this day in person and acknowledged that he signed and delivered said
instrument as his own free voluntary act for the uses and purposes therein set
forth.
Given under my hand and notarial seal this 24th day of February, 1997.
/s/ Patricia M. Nesti
------------------------------
(Notary Public)
My Commission Expires: 1/24/98
<PAGE>
EXHIBIT 24.5
POWER OF ATTORNEY
-----------------
STATE OF ILLINOIS
COUNTY OF COOK
KNOW ALL MEN BY THESE PRESENTS that Barry S. Sternlicht, having an address
at 3 Pickwick Plaza, #250, Greenwich, CT 06830, has made, constituted and
appointed and BY THESE PRESENTS, does make, constitute and appoint Douglas
Crocker II and Michael J. McHugh, or either of them, having an address at Two
North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in-
Fact for him and his name, place and stead to sign and execute in any and all
capacities this Annual Report on Form 10-K and any or all amendments to this
Annual Report granting unto each of such, Attorney-in-Fact, full power and
authority to do and perform each and every act and thing, requisite and
necessary to be done in an about the premises, as fully, to all intents and
purposes as he might or could do if personally present at the doing thereof,
with full power of substitution and revocation, hereby ratifying and confirming
all that each of such Attorney-in-Fact or his substitutes shall lawfully do or
cause to be done by virtue hereof.
This Power of Attorney shall remain in full force and effect until
terminated by the undersigned through the instrumentality of a signed writing.
IN WITNESS WHEREOF, Barry S. Sternlicht, has hereunto set his hand this
24th day of February, 1997.
/s/ Barry S. Sternlicht
------------------------------
Barry S. Sternlicht
I, Patricia M. Nesti, a Notary Public in and for said County in
the State of aforesaid, do hereby certify that Barry S. Sternlicht, personally
known to me to be the same person whose name is subscribed to the foregoing
instrument appeared before me this day in person and acknowledged that he signed
and delivered said instrument as his own free voluntary act for the uses and
purposes therein set forth.
Given under my hand and notarial seal this 24th day of February, 1997.
/s/ Patricia M. Nesti
------------------------------
(Notary Public)
My Commission Expires: 1/24/98
<PAGE>
EXHIBIT 24.6
POWER OF ATTORNEY
-----------------
STATE OF ILLINOIS
COUNTY OF COOK
KNOW ALL MEN BY THESE PRESENTS that Henry H. Goldberg, having an address
at 4733 Bethesda Ave., #400, Bethesda, MD, 20814, has made, constituted and
appointed and BY THESE PRESENTS, does make, constitute and appoint Douglas
Crocker II and Michael J. McHugh, or either of them, having an address at Two
North Riverside Plaza, Chicago, Illinois 60606, his true and lawful Attorney-in-
Fact for him and his name, place and stead to sign and execute in any and all
capacities this Annual Report on Form 10-K and any or all amendments to this
Annual Report granting unto each of such, Attorney-in-Fact, full power and
authority to do and perform each and every act and thing, requisite and
necessary to be done in an about the premises, as fully, to all intents and
purposes as he might or could do if personally present at the doing thereof,
with full power of substitution and revocation, hereby ratifying and confirming
all that each of such Attorney-in-Fact or his substitutes shall lawfully do or
cause to be done by virtue hereof.
This Power of Attorney shall remain in full force and effect until
terminated by the undersigned through the instrumentality of a signed writing.
IN WITNESS WHEREOF, Henry H. Goldberg, has hereunto set his hand this
24th day of February, 1997.
/s/ Henry H. Goldberg
--------------------------
Henry H. Goldberg
I, Patricia M. Nesti, a Notary Public in and for said County in
the State of aforesaid, do hereby certify that Henry H. Goldberg, personally
known to me to be the same person whose name is subscribed to the foregoing
instrument appeared before me this day in person and acknowledged that he signed
and delivered said instrument as his own free voluntary act for the uses and
purposes therein set forth.
Given under my hand and notarial seal this 24th day of February, 1997.
/s/ Patricia M. Nesti
---------------------
(Notary Public)
My Commission Expires:
1/24/98
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 147,271
<SECURITIES> 0
<RECEIVABLES> 1,450
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 196,896
<PP&E> 2,983,510
<DEPRECIATION> (301,512)
<TOTAL-ASSETS> 2,986,127
<CURRENT-LIABILITIES> 122,386
<BONDS> 1,254,274
<COMMON> 0
0
393,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,986,127
<SALES> 473,980
<TOTAL-REVENUES> 478,385
<CGS> 0
<TOTAL-COSTS> 188,812
<OTHER-EXPENSES> 9,857
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,593
<INCOME-PRETAX> 97,033
<INCOME-TAX> 0
<INCOME-CONTINUING> 97,033
<DISCONTINUED> 22,402
<EXTRAORDINARY> (3,512)
<CHANGES> 0
<NET-INCOME> 86,645
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.70
</TABLE>
