e424b5
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PROSPECTUS SUPPLEMENT
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Filed pursuant to Rule 424(b)(5) |
(To Prospectus dated October 15, 2010)
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Registration No. 333-169956 |
CALCULATION OF REGISTRATION FEE
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Proposed |
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Proposed |
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Amount to |
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Maximum |
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Amount of |
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Title of Each Class |
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be |
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Offering Price |
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Aggregate |
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Registration |
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of Securities to be Registered |
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Registered |
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per Unit (1) |
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Offering Price (1) |
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Fee |
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Common Shares of Beneficial Interest, $0.01 par value per share |
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2,750,000 |
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$ |
62.55 |
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$ |
172,012,500 |
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$ |
19,971 |
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(1) |
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Estimated solely for the purpose of computing the registration fee in accordance with Rule
457(c) under the Securities Act of 1933, as amended (the Securities Act), based on the
average of the high and low reported sales prices on the New York Stock Exchange on July 12,
2011. |
Equity Residential
2,750,000 Common Shares
Our operating partnership, ERP Operating Limited Partnership, issued and sold
$650,000,000 aggregate principal amount of its 3.85% Exchangeable Senior Notes due 2026. As of the
date hereof, $482,545,000 of the notes are outstanding. Under certain circumstances, the notes are
exchangeable at the option of the holders thereof, and upon any such exchange we may elect in our
sole discretion to issue shares of our common shares of beneficial interest, $0.01 par value per
share (Common Shares), in partial payment upon such an exchange. The registration of our Common
Shares covered by this prospectus supplement does not necessarily mean that upon any exchange of
the notes we will elect, in our sole discretion, to exchange the notes, in part, for our Common
Shares rather than cash.
We will receive no proceeds from any issuance of our Common Shares to noteholders that
exchange their notes.
Our Common Shares are listed on the New York Stock Exchange under the symbol EQR. The last
reported sale price of our Common Shares on the New York Stock Exchange on July 15, 2011 was $61.75
per share.
See the Risk Factors section of our Annual Report on Form 10-K for the year ended
December 31, 2010, which is incorporated by reference in this prospectus supplement, to read about
factors you should consider before investing in our Common Shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
July 18, 2011
TABLE OF CONTENTS
Prospectus Supplement
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S-ii |
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S-1 |
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S-2 |
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S-3 |
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S-3 |
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S-3 |
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S-5 |
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S-5 |
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Prospectus
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You should rely only on the information contained or incorporated by reference in
this prospectus supplement and the accompanying prospectus. We have not authorized any other
person to provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement and the accompanying prospectus, as well as
information that we have previously filed with the U.S. Securities and Exchange Commission, is
accurate only as of their respective dates. Our business, financial condition, results of
operations and prospects may have changed since then.
S-i
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus supplement,
which describes the specific terms of this offering and also adds to and updates information
contained in the accompanying prospectus and the documents incorporated by reference in this
prospectus supplement and the accompanying prospectus. The second part is the accompanying
prospectus, which gives a description of our Common Shares and more general information about other
securities we may offer from time to time under our shelf registration statement, some of which
does not apply to this offering.
If the description of this offering varies between this prospectus supplement and
the accompanying prospectus, you should rely on the information contained in or incorporated by
reference in this prospectus supplement.
It is important for you to read and consider all information contained in this
prospectus supplement and the accompanying prospectus, including the documents incorporated by
reference herein and therein, in making your investment decision. This prospectus supplement and
the accompanying prospectus incorporate important business and financial information about us and
our subsidiaries that is not included in or delivered with these documents. This information is
available without charge to security holders upon written or oral request. See Where You Can Find
More Information About Us.
Unless the context otherwise requires or as otherwise specified, references in
this prospectus to we, us, our or the Company refer to Equity Residential and its
subsidiaries, including ERP Operating Limited Partnership.
S-ii
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the documents
incorporated or deemed incorporated by reference as described under Where You Can Find More
Information About Us contain certain information that we intend to be considered forward-looking
statements within the meaning of Section 27A of the Securities Act. These forward-looking
statements relate to such things as our anticipated future economic performance, our plans and
objectives for future operations and projections of revenue and other financial items, which can be
identified by the use of forward-looking words such as may, will, should, expect,
anticipate, estimate or continue or the negative thereof or other variations thereon or
comparable terms.
Actual results could differ materially from those contemplated by these
forward-looking statements as a result of many factors. The cautionary statements under the
caption Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31,
2010, which is incorporated herein by reference, and other similar statements contained in this
prospectus supplement, the accompanying prospectus and the documents incorporated or deemed
incorporated by reference herein and therein identify important factors with respect to
forward-looking statements, including certain risks and uncertainties, that could cause actual
results to differ materially from those in such forward-looking statements. Additional risks and
uncertainties not presently known to us or that we currently believe to be immaterial also may
adversely affect us. Should any known or unknown risks and uncertainties develop into actual
events, those developments could have a material adverse effect on our business, financial
condition and results of operations.
In light of these risks and uncertainties, there can be no assurance that the
results and events contemplated by the forward-looking information contained in this prospectus
supplement and the documents incorporated by reference or deemed incorporated by reference herein
will in fact transpire. Potential investors are cautioned not to place undue reliance on these
forward-looking statements. We do not undertake any obligation to update or revise any
forward-looking statements. All subsequent written or oral forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary
statements.
EQUITY RESIDENTIAL
We are a Maryland REIT formed in March 1993 and are an S&P 500 company focused on the
acquisition, development and management of high quality apartment properties in top United States
growth markets. We are the managing general partner of ERP Operating Limited Partnership and have
elected to be taxed as a REIT.
We are one of the largest publicly traded real estate companies and the largest publicly
traded owner of multifamily properties in the United States of America (based on the aggregate
market value of our outstanding Common Shares, the number of apartment units wholly-owned and total
revenues earned). Our corporate headquarters are located in Chicago, Illinois and we also operate
property management offices in each of our markets.
Our executive offices are located at Two North Riverside Plaza, Suite 400, Chicago, Illinois
60606, and our telephone number is
(312) 474-1300.
S-1
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
This prospectus supplement and the accompanying prospectus, which we refer to
together as the prospectus, do not contain all of the information included in the related
registration statement. We have omitted parts of the registration statement in accordance with the
rules and regulations of the SEC. For further information, we refer you to the registration
statement on Form S-3, including its exhibits. Statements contained in this prospectus supplement
about the provisions or contents of any agreement or other document are not necessarily complete.
In accordance with SEC rules and regulations, we have filed agreements and documents that we are
required to file as exhibits to the registration statement. Please see such agreements and
documents for a complete description of these matters. You should not assume that the information
in this prospectus supplement or the accompanying prospectus is accurate as of any date other than
the date on the front of this prospectus supplement or the date on the front of the accompanying
prospectus, as the case may be.
We file annual, quarterly and current reports and other information with the SEC.
You may read and copy any document we file at the SECs public reference room in Washington, D.C.,
100 F Street, N.E., Washington, D.C 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our SEC filings are also available to you at the SECs
web site at http://www.sec.gov and at our website at
http://www.equityapartments.com. The contents of our website are not
deemed to be a part of this prospectus.
The SEC allows us to incorporate by reference into this prospectus supplement
the information we file with it. This means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is considered to be a
part of this prospectus supplement, and later information filed with the SEC will update and
supersede information in prior filings. We incorporate by reference into this prospectus
supplement our documents listed below:
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Annual Report on Form 10-K for the year ended December 31, 2010; |
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Quarterly Report on Form 10-Q for the quarter ended March 31, 2011; |
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Current Reports on Form 8-K filed on February 3, 2011 (two reports),
April 8, 2011, May 23, 2011, June 22, 2011, July 12, 2011 and July 14, 2011; and |
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Description of Common Shares contained in our registration statement on Form 8-A/A
dated August 10, 1993. |
All documents filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended, or the 1934 Act, after the date of this prospectus
supplement and prior to the termination of our offering under this prospectus supplement will also
be deemed to be incorporated by reference in this prospectus supplement and to be a part hereof
from the date of filing those documents. We are not, however, incorporating by reference any
documents or portions thereof, whether specifically listed above or filed in the future, that are
not deemed filed with the Commission, including, but not limited to, any information furnished
pursuant to Items 2.02 or 7.01 of Form 8-K or any exhibits furnished pursuant to Item 9.01 of Form
8-K.
You may request copies of these filings, at no cost, by writing to or telephoning
us at the following address:
Equity Residential
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attention: Investor Relations
Telephone Number: (888) 879-6356
S-2
NO PROCEEDS TO THE COMPANY
We will receive no proceeds from any issuance of our Common Shares to noteholders that
exchange their notes. We will pay all of the costs and expenses incurred in connection with the
registration under the Securities Act of the offering made hereby.
ADDITIONAL FEDERAL INCOME TAX CONSIDERATIONS
The following discussion supplements the discussion under the heading Federal Income Tax
Considerations in our annual report on Form 10-K for the year ended December 31, 2010, which has
been incorporated into this prospectus by reference. As discussed under the heading Plan of
Distribution, the issuance of any Common Shares upon the exchange of notes is in our sole
discretion. The following discussion summarizes certain material federal income tax considerations
that may be relevant to a noteholder who exchanges its notes for cash and, if we so determine,
Common Shares.
Exchange of Notes. Upon the exchange of a note, a noteholder generally will recognize capital
gain or loss equal to the difference between (i) the amount of cash proceeds and the fair market
value of any other property (including Common Shares) received on the exchange (except to the
extent such amount is attributable to accrued but unpaid stated interest, which is taxable as
ordinary income if not previously included in such noteholders income) and (ii) such noteholders
adjusted tax basis in the note. A noteholders adjusted tax basis in a note generally equals the
cost of the note to such noteholder (i) increased by (A) any original issue discount included in
income and (B) any accrued market discount, if the noteholder has included the accrued market
discount in income and (ii) decreased by (A) the amount of any payments, other than qualified
stated interest payments, received by the noteholder, and (B) amortizable bond premium taken by the
noteholder with respect to such note.
Upon the exchange of a note for cash and Common Shares, a noteholder will have a tax basis in
any Common Shares received equal to the fair market value of such Common Shares at the time of the
exchange. The noteholders holding period for any Common Shares received upon an exchange of notes
will begin on the date immediately following the date of such exchange.
Disposition of Common Shares. In general, a shareholder will recognize gain or loss for
federal income tax purposes on the sale or other disposition of Common Shares in an amount equal to
the difference between:
(a) the amount of cash and the fair market value of any property received in the sale or other
disposition; and
(b) the shareholders adjusted tax basis in the Common Shares.
The gain or loss will be capital gain or loss if the Common Shares were held as a capital
asset. Generally, the capital gain or loss will be long-term capital gain or loss if the Common
Shares were held for more than one year.
You are advised to consult with your own tax advisors regarding the specific tax consequences
of the exchange of notes or the sale of Common Shares, including the federal, state, local,
foreign, or other tax consequences relating thereto.
PLAN OF DISTRIBUTION
The notes were issued by our operating partnership. Under certain circumstances, including if
the notes are called for redemption, the notes may be exchanged at the option of the holder thereof
for, in respect of each $1,000 principal amount of notes tendered for exchange, (i) cash in an
amount equal to the lesser of (A) the principal amount of the notes surrendered for exchange and
(B) the exchange value, and (ii) if the exchange value is greater than the principal amount (the
Net Amount), an amount in cash, Common Shares, or a combination of cash and Common Shares, at our operating partnerships election, with an
aggregate value equal to the Net Amount. Exchange value means, for each $1,000 principal amount
of notes, the product of the current exchange rate (which is subject to adjustment in accordance
with the terms of the notes) multiplied by the average of the closing sale price of Common Shares
for each trading day during the 10 consecutive trading day period commencing on the third trading
day following the date the notes are tendered for exchange. The decision to issue Common Shares
rather than cash for the Net Amount is in the sole discretion of our operating partnership.
Therefore, we may issue all, some or none of the Common Shares which we may issue pursuant to this
prospectus supplement. Assuming an exchange rate of 16.3934 Common Shares (the exchange rate as of
July 15, 2011) and a constant Common Share price of $61.75 (the last reported sale price of our
Common Shares on the New York Stock Exchange on July 15, 2011), the maximum number of Common
Shares which would be issuable upon exchange of the notes, if the operating partnership determined
to issue such
S-3
shares in its sole discretion, would be approximately 96,000. There is no guarantee what the
exchange value will be, and the exchange value may be less than the principal amount of the notes
tendered for exchange.
If our operating partnership determines, in its sole discretion, to deliver Common Shares in
partial payment of notes tendered for exchange by holders, we will issue to our operating
partnership the number of Common Shares determined by our operating partnership to be delivered to
such holders in respect of such partial payment, and we will deliver such Common Shares to such
holders on behalf of our operating partnership in accordance with the terms of the notes. If we so
deliver Common Shares upon an exchange of notes, our operating partnership will issue to us a
number of operating partnership units equal in number to the number of Common Shares issued by us
pursuant to the foregoing sentence.
Any of the future holders of our Common Shares issued pursuant to this prospectus supplement
may, in one or more transactions, sell all or a portion of the offered Common Shares. Such offered
Common Shares may be sold, among other ways, on the New York Stock Exchange, in the over the
counter market, on any other national securities exchange on which the Common Shares are listed or
traded, in negotiated transactions, in underwritten transactions or otherwise, at prices then
prevailing or related to the then current market price or at negotiated prices. The offering price
of the offered Common Shares from time to time will be determined by the future holders of such
shares and, at the time of such determination, may be higher or lower than the market price of the
Common Shares on the New York Stock Exchange. Underwriters or agents may receive compensation in
the form of discounts, concessions or commissions from a future holder of offered Common Shares or
from purchasers of offered Common Shares for whom they may act as agents, and underwriters may sell
offered Common Shares to or through dealers, and such dealers may receive compensation in the form
of discounts, concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agents. The offered Common Shares may be sold directly or
through broker dealers acting as principal or agent, or pursuant to a distribution by one or more
underwriters on a firm commitment or best efforts basis. The methods by which the offered Common
Shares may be sold include: (a) a block trade in which the broker dealer so engaged will attempt to
sell the offered Common Shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker dealer as principal and resale
by such broker dealer for its account pursuant to this prospectus supplement; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers; (d) an exchange
distribution in accordance with the rules of the New York Stock Exchange; (e) privately negotiated
transactions; and (f) underwritten transactions. The selling shareholders and any underwriters,
dealers or agents participating in the distribution of the offered Common Shares may be deemed to
be underwriters within the meaning of the Securities Act, and any profit on the sale of the
offered Common Shares by the selling shareholders and any commissions received by any such broker
dealers may be deemed to be underwriting commissions under the Securities Act.
If our operating partnership elects to pay the Net Amount in our Common Shares, we will
deliver such Common Shares no later than 15 trading days after the date a noteholder tenders its
notes for exchange.
We expect that our total expenses for this offering will be approximately $30,000.
The exchange agent for our Common Shares is The Bank of New York Mellon Trust Company, N.A.
Our Common Shares are traded on the New York Stock Exchange under the symbol EQR.
S-4
EXPERTS
The consolidated financial statements and schedule of Equity Residential appearing
in Equity Residentials Annual Report (Form 10-K) for the year ended December 31, 2010, as amended
by our Current Report on Form 8-K dated May 23, 2011, and the effectiveness of Equity Residentials
internal control over financial reporting as of December 31, 2010 also included in the Form 10-K,
have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth
in their reports thereon included therein, and incorporated herein by reference. Such consolidated
financial statements and schedule are incorporated herein by reference, in reliance upon such
reports given on the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the offered Common Shares will be passed upon for us by the law
firm of DLA Piper LLP (US). Certain tax matters will be passed upon for us by DLA Piper LLP (US),
Chicago, Illinois, our special tax counsel.
S-5
PROSPECTUS
EQUITY RESIDENTIAL
Common Shares
Preferred Shares
Depositary Shares
Share Purchase
Contracts
Warrants
EQR Debt Securities
Guarantees
ERP OPERATING LIMITED
PARTNERSHIP
ERP Debt Securities
Guarantees
From time to time Equity Residential may offer (i) common
shares of beneficial interest, $0.01 par value per share
(Common Shares), (ii) in one or more series
preferred shares of beneficial interest, $0.01 par value
per share (Preferred Shares), (iii) in one or
more series Preferred Shares represented by depositary
shares (the Depositary Shares), (iv) share
purchase contracts (Share Purchase Contracts),
(v) warrants (Warrants), (vi) debt
securities (EQR Debt Securities), and
(vii) guarantees of debt securities of ERP Operating
Limited Partnership. The Common Shares, Preferred Shares,
Depositary Shares, Share Purchase Contracts, Warrants, EQR Debt
Securities, and guarantees of debt securities of ERP Operating
Limited Partnership (collectively, the EQR
Securities) may be offered, separately or together, in
separate series (with respect to Preferred Shares, Depositary
Shares and EQR Debt Securities), in amounts, at prices and on
terms to be described in one or more supplements to this
prospectus.
From time to time ERP Operating Limited Partnership may offer
(i) unsecured senior or subordinated debt securities
(ERP Debt Securities) and (ii) guarantees of
EQR Debt Securities (together, the ERP Securities
and, together with the EQR Securities, the
Securities), in amounts, at prices and on terms to
be described in one or more supplements to this prospectus.
When we decide to offer the Securities, we will prepare a
prospectus supplement describing the offering and the particular
terms of the Securities we are selling, which terms will
include, among other things: (i) in the case of Preferred
Shares, the specific title and stated value, any distribution,
liquidation, redemption, conversion, voting and other rights,
and any initial public offering price; (ii) in the case of
Common Shares, any initial public offering price; and
(iii) in the case of Depositary Shares, the fractional
Preferred Shares represented by each Depositary Share and the
applicable terms of those preferred shares. In addition, such
specific terms may include limitations on direct or beneficial
ownership and restrictions on transfer of the Securities, in
each case as may be appropriate to assist in maintaining our
status as a real estate investment trust (a REIT)
for federal income tax purposes. Any prospectus supplement
describing the offering and the particular terms of debt
securities will include, among other things:
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the issuer of the debt securities,
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the specific title of the debt securities,
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the amount of the offering and the offering price,
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the form of the debt securities (which may be registered or
bearer, certificated or global),
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the denominations in which the debt securities may be offered,
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the maturity date,
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the rate of interest (or manner of calculation thereof) and date
of payment of interest,
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any applicable terms for redemption (at our option) or repayment
(at your option),
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terms for any sinking fund payments,
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covenants,
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any material United States federal income tax considerations, and
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the exchanges upon which we intend to apply to list the debt
securities, if any.
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The applicable prospectus supplement also will contain
information, where applicable, about the material United States
federal income tax considerations relating to, and any listing
on a securities exchange of, the Securities covered by such
prospectus supplement, not contained in this prospectus.
The Securities may be offered directly, through agents
designated from time to time by us, or to or through
underwriters or dealers. If any agents or underwriters are
involved in the sale of any of the Securities, their names, and
any applicable purchase price, fee, commission or discount
arrangement with, between or among them, will be set forth, or
will be calculable from the information set forth, in an
accompanying prospectus supplement. See Plan of
Distribution. No Securities may be sold without delivery
of a prospectus supplement describing the method and terms of
the offering of such Securities.
You should read this prospectus and any prospectus supplement
carefully before you make an investment in our securities.
The Common Shares are listed on the New York Stock Exchange
under the symbol EQR.
Our principal executive offices are located at Two North
Riverside Plaza, Suite 400, Chicago, Illinois 60606 and our
telephone number is
(312) 474-1300.
Investing in our securities involves risks. Before buying our
securities, you should read and consider the risk factors
included in our periodic reports, in the prospectus supplements
or any free writing prospectus relating to any specific
offering, and in other information that we file with the
Securities and Exchange Commission. See Where You Can Find
More Information About Us and Special Note Regarding
Forward-Looking Statements.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is October 15, 2010.
TABLE OF
CONTENTS
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We have not authorized any person to give any information or
to make any representations in connection with this offering
other than those contained or incorporated or deemed to be
incorporated by reference in this prospectus and any applicable
prospectus supplement or free writing prospectus, and, if given
or made, such information or representations must not be relied
upon as having been so authorized. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy
by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person is not
qualified to do so or to any person to whom it is unlawful to
make such offer or solicitation. Neither the delivery of this
prospectus nor any sale hereunder shall, under any
circumstances, create any implication that there has been no
change in our affairs since the date hereof, that the
information contained herein is correct as of any time
subsequent to its date, or that any information incorporated or
deemed to be incorporated by reference herein is correct as of
any time subsequent to its date.
ABOUT
THIS PROSPECTUS
This prospectus is part of an automatic shelf registration
statement that we filed with the Securities and Exchange
Commission, or the SEC, as a well-known
seasoned issuer as defined in Rule 405 under the
Securities Act of 1933, as amended, or the Securities
Act. By using an automatic shelf registration statement,
we may, at any time and from time to time, sell the securities
described in this prospectus or in any applicable prospectus
supplement in one or more offerings. The exhibits to the
registration statement contain the full text of certain
contracts and other important documents we have summarized in
this prospectus. Since these summaries may not contain all the
information that you may find important in deciding whether to
purchase the securities we offer, you should review the full
text of these documents. The registration statement and the
exhibits can be obtained from the SEC as indicated under the
heading Where You Can Find More Information About Us.
This prospectus only provides you with a general description of
the securities we may offer. Each time we sell securities, we
will provide a prospectus supplement that will contain specific
information about the terms of those securities. The prospectus
supplement may also add, update or change information contained
in this prospectus. You should read both this prospectus and any
prospectus supplement together with the documents incorporated
or deemed to be incorporated by reference in this prospectus and
the additional information described under the heading
Where You Can Find More Information About Us in this
prospectus.
Unless the context otherwise requires or as otherwise specified,
references in this prospectus to we, us,
or our refer to Equity Residential and its
subsidiaries, including ERP Operating Limited Partnership. In
addition, we sometimes refer to ERP Operating Limited
Partnership as the Operating Partnership and to
Equity Residential as the Company.
WHERE YOU
CAN FIND MORE INFORMATION ABOUT US
This prospectus does not contain all of the information included
in the related registration statement. Parts of the registration
statement have been omitted in accordance with the rules and
regulations of the SEC. For further information, we refer you to
the registration statement on
Form S-3,
including its exhibits. Statements contained in this prospectus
about the provisions or contents of any agreement or other
document are not necessarily complete. In accordance with SEC
rules and regulations, we have filed agreements and documents
that we are required to file as exhibits to the registration
statement. Please see such agreements and documents for a
complete description of these matters. You should not assume
that the information in this prospectus is accurate as of any
date other than the date on the front of this prospectus.
Equity Residential and ERP Operating Limited Partnership file
annual, quarterly and current reports and other information with
the SEC. You may read and copy any document we file at the
SECs public reference room located at
100 F Street NE, Washington, D.C., 20549. Please
call the SEC at
1-800-SEC-0330
for further information on the public reference room. Our SEC
filings are also available to you at the SECs web site at
http://www.sec.gov
and at our website at
http://www.equityapartments.com.
The contents of our website are not deemed to be part of this
prospectus or any prospectus supplement.
The SEC allows us to incorporate by reference into
this prospectus the information we file with it. This means that
we can disclose important information to you by referring you to
those documents. The information incorporated by reference is
considered to be a part of this prospectus, and later
information filed with the SEC will update and supersede
information in prior filings. We incorporate by reference into
this prospectus our documents listed below:
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Annual reports of Equity Residential and ERP Operating Limited
Partnership on
Form 10-K
for the year ended December 31, 2009 (Files Nos.
001-12252
and
000-24920);
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Quarterly reports of Equity Residential on
Form 10-Q
for the quarters ended March 31, 2010 and June 30,
2010 (File
No. 001-12252);
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Quarterly reports of ERP Operating Limited Partnership on
Form 10-Q
for the quarters ended March 31, 2010 and June 30,
2010 (File No.
000-24920);
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Current reports of Equity Residential on
Form 8-K
filed on January 4, 2010, January 26, 2010,
February 4, 2010, March 22, 2010, June 21, 2010,
July 8, 2010 and September 14, 2010 (File
No. 001-12252);
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Current reports of ERP Operating Limited Partnership on
Form 8-K
filed on January 4, 2010, January 26, 2010,
March 22, 2010, July 8, 2010, July 15, 2010 and
September 14, 2010 (File
No. 000-24920); and
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Description of Equity Residentials Common Shares contained
in its registration statement on
Form 8-A/A
dated August 10, 1993.
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All documents filed by either of us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act of
1934, as amended, or the 1934 Act, after the
date of this prospectus will also be deemed to be incorporated
by reference in this prospectus and to be a part hereof from the
date of filing those documents. We are not, however,
incorporating by reference any documents or portions thereof,
whether specifically listed above or filed in the future, that
are not deemed filed with the SEC, including, but
not limited to, any information furnished pursuant to
Items 2.02 or 7.01 of
Form 8-K.
You may request a copy of these filings, at no cost, by writing
to or telephoning either of us at the following address:
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attention: Investor Relations
Telephone number:
(888) 879-6356
2
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated or deemed
incorporated by reference as described under Where You Can
Find More Information About Us contain certain information
that we intend to be considered forward-looking
statements within the meaning of Section 27A of the
Securities Act. These forward-looking statements relate to such
things as our anticipated future economic performance, our plans
and objectives for future operations and projections of revenue
and other financial items, which can be identified by the use of
forward-looking words such as may, will,
should, expect, anticipate,
estimate or continue or the negative
thereof or other variations thereon or comparable terms.
Actual results could differ materially from those contemplated
by these forward-looking statements as a result of many factors.
The cautionary statements under the caption Risk
Factors contained in the Annual Reports on
Form 10-K
of Equity Residential and ERP Operating Limited Partnership for
the year ended December 31, 2009 and under Part II,
Item 1A of our Quarterly Reports on
Form 10-Q
for the quarter ended June 30, 2010, all of which are
incorporated herein by reference, and other similar statements
contained in this prospectus, any accompanying prospectus
supplement, any related free writing prospectus and the
documents incorporated or deemed incorporated by reference
herein and therein identify important factors with respect to
forward-looking statements, including certain risks and
uncertainties, that could cause actual results to differ
materially from those in such forward-looking statements.
Additional risks and uncertainties not presently known to us or
that we currently believe to be immaterial also may adversely
affect us. Should any known or unknown risks and uncertainties
develop into actual events, those developments could have a
material adverse effect on our business, financial condition and
results of operations.
In light of these risks and uncertainties, there can be no
assurance that the results and events contemplated by the
forward-looking information contained in this prospectus and the
documents incorporated by reference or deemed incorporated by
reference herein will in fact transpire. Potential investors are
cautioned not to place undue reliance on these forward-looking
statements. We do not undertake any obligation to update or
revise any forward-looking statements. All subsequent written or
oral forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety
by these cautionary statements.
EQUITY
RESIDENTIAL AND ERP OPERATING LIMITED PARTNERSHIP
Equity Residential is a Maryland REIT formed in March 1993 and
an S&P 500 company focused on the acquisition,
development and management of high quality apartment properties
in top United States growth markets. Equity Residential is the
managing general partner of ERP Operating Limited Partnership
and has elected to be taxed as a REIT.
Equity Residential is one of the largest publicly traded real
estate companies and is the largest publicly traded owner of
multifamily properties in the United States of America (based on
the aggregate market value of its outstanding common shares, the
number of apartment units wholly-owned and total revenues
earned). As of June 30, 2010, we had a national portfolio
of 492 multifamily properties containing 137,091 apartment units
located in 23 states and the District of Columbia. As of
June 30, 2010, our properties had an average same store
occupancy rate of approximately 95%.
ERP Operating Limited Partnership was formed to conduct the
multifamily residential property business of Equity Residential.
ERP Operating Limited Partnership is a limited partnership
organized under the laws of the State of Illinois.
Our principal executive offices are located at Two North
Riverside Plaza, Suite 400, Chicago, Illinois 60606, and
our telephone number is
(312) 474-1300.
ANTICIPATED
USE OF PROCEEDS
Unless otherwise indicated in a prospectus supplement
accompanying this prospectus, we intend to use the proceeds from
the sale of the Securities for working capital and general
company purposes including,
3
without limitation, the acquisition or development of
multifamily properties and the repayment of debt. Net proceeds
may be temporarily invested prior to use.
RATIOS OF
EARNINGS TO COMBINED FIXED CHARGES
The following table sets forth Equity Residentials and ERP
Operating Limited Partnerships ratios of (i) earnings
before combined fixed charges to total combined fixed charges
and (ii) earnings before combined fixed charges and
preferred distributions to total combined fixed charges and
preferred distributions for the periods shown.
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For the Six Months Ended
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June 30,(1)
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For the Years Ended December 31,(1)
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2010
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2009
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2009
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2008
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2007
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2006
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2005
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Ratio of earnings before combined fixed charges to total
combined fixed charges(1)
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Ratio of earnings before combined fixed charges and preferred
distributions to total combined fixed charges and preferred
distributions(1)
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For the six months ended June 30, 2010 and 2009 and the
years ended December 31, 2009, 2008, 2007, 2006 and 2005,
the coverage deficiencies approximated $9.3 million,
$6.1 million, $32.7 million, $97.9 million,
$62.9 million, $77.8 million and $15.5 million,
respectively. All ratios have been reduced due to the
disposition of properties which resulted in the inclusion of
those properties in discontinued operations. The ratios have
been further reduced due to non-cash depreciation expense and
impairment charges and premiums on the redemption of preferred
shares and/or preference units/interests. We were in compliance
with our unsecured public debt covenants for all periods
presented. |
Ratio of earnings before combined fixed charges to total
combined fixed charges represents the ratio of income from
continuing operations plus fixed charges (primarily interest and
other financing costs incurred) and less preferred distributions
to fixed charges. Ratios of earnings before combined fixed
charges and preferred distributions to total combined fixed
charges and preferred distributions represents the ratio of
income from continuing operations plus fixed charges (primarily
interest and other financing costs incurred) and preferred
distributions to fixed charges and preferred distributions.
DESCRIPTION
OF EQUITY RESIDENTIAL SECURITIES
The following description sets forth certain general terms and
provisions of the EQR Securities to which any prospectus
supplement may relate. The particular terms of the EQR
Securities being offered and the extent to which such general
provisions may apply will be described in a prospectus
supplement relating to such EQR Securities. Please note that in
this section entitled Description of Equity Residential
Securities, references to the Company,
we, our and us refer to
Equity Residential, as the issuer of EQR Securities, unless the
context requires otherwise.
The summary of the terms of the shares of beneficial interest of
the Company set forth below does not purport to be complete and
is subject to and qualified in its entirety by reference to the
Articles of Restatement of Declaration of Trust of the Company
dated December 9, 2004 (Declaration of Trust),
as amended
and/or
restated from time to time, and the Sixth Amended and Restated
Bylaws of the Company, as adopted on September 10, 2008, as
amended, supplemented
and/or
restated from time to time, each of which is incorporated herein
by reference.
Our Declaration of Trust provides that we may issue up to
1,100,000,000 shares of beneficial interest, consisting of
1,000,000,000 Common Shares and 100,000,000 Preferred Shares. As
of June 30, 2010, 283,442,674 Common Shares and 1,947,425
Preferred Shares were issued and outstanding.
4
Both the Maryland REIT Law and our Declaration of Trust provide
that no shareholder of the Company will be liable for any debt
or obligation of the Company solely as a result of his or her
status as a shareholder of the Company. Our Declaration of Trust
further provides that the Company has the power to indemnify
each shareholder against any claim or liability to which the
shareholder may become subject by reason of his or her being or
having been a shareholder and to reimburse each shareholder for
all reasonable expenses incurred by him or her in connection
with any such claim or liability.
Common
Shares
Distributions. All Common Shares offered
hereby will be duly authorized, fully paid and non-assessable.
Subject to the preferential rights of any other shares of
beneficial interest and to the provisions of our Declaration of
Trust regarding excess shares (as defined herein), holders of
Common Shares are entitled to receive distributions if, as and
when authorized and declared by the Board of Trustees of the
Company (the Board of Trustees) out of assets
legally available therefor and to share ratably in the assets of
the Company legally available for distribution to its
shareholders in the event of its liquidation, dissolution or
winding-up
after payment of, or adequate provision for, all known debts and
liabilities of the Company. The Company currently pays regular
quarterly distributions.
Voting Rights. Subject to the provisions of
our Declaration of Trust regarding excess shares, each
outstanding Common Share entitles the holder to one vote on the
following matters: (a) the election or removal of Trustees;
(b) the amendment of our Declaration of Trust; (c) the
voluntary dissolution or termination of Equity Residential;
(d) the merger of Equity Residential, provided, however,
that the shareholders shall not be entitled to vote on a merger
of Equity Residential which may be approved pursuant to the
provisions of the Maryland REIT Law by a majority of the entire
Board of Trustees without a vote of the shareholders and,
further provided, that if a shareholder vote is required
pursuant to the provisions of the Maryland REIT Law, such merger
shall be approved by the affirmative vote of the holders of not
less than a majority of all the shares then outstanding and
entitled to vote thereon, (e) the sale or other disposition
of all or substantially all of Equity Residentials assets,
provided, however, that the sale or other disposition of all or
substantially all of Equity Residentials assets shall be
approved by the affirmative vote of the holders of not less than
a majority of all the shares then outstanding and entitled to
vote thereon, and (f) such other matters with respect to
which the Board of Trustees has adopted a resolution declaring
advisable or recommending a proposal and directing that the
matter be submitted to the shareholders for consideration.
Except as otherwise required by law or except as provided with
respect to any other class or series of shares of beneficial
interest, the holders of such Common Shares will possess the
exclusive voting power. There is no cumulative voting in the
election of Trustees, which means that the holders of a majority
of the outstanding Common Shares can elect all of the Trustees
then standing for election and the holders of the remaining
shares of beneficial interest, if any, will not be able to elect
any Trustees.
Conversion, Redemption, Liquidation
Rights. Holders of Common Shares have no
conversion, sinking fund, redemption or preemptive rights to
subscribe for any securities of the Company. Subject to the
provisions of our Declaration of Trust regarding excess shares,
Common Shares have equal distribution, liquidation and other
rights, and have no preference, exchange or, except as expressly
required by the Maryland REIT Law, appraisal rights.
Pursuant to the Maryland REIT Law, a REIT generally cannot amend
its declaration of trust or merge unless approved by the
affirmative vote or written consent of shareholders holding at
least two-thirds of the shares entitled to vote on the matter
unless a lesser percentage (but not less than a majority of all
of the votes entitled to be cast on the matter) is set forth in
the REITs declaration of trust. Our Declaration of Trust
provides that a merger, and amendments to the Declaration of
Trust in connection with a merger, may be approved by the
affirmative vote of the holders of not less than a majority of
the shares then outstanding and entitled to vote thereon. Under
the Maryland REIT Law, a declaration of trust may permit the
trustees by a two-thirds vote to amend the declaration of trust
from time to time to qualify as a REIT under the Internal
Revenue Code or the Maryland REIT Law without the affirmative
vote or written consent of the shareholders. Our Declaration of
Trust permits such action by the Board of Trustees. Subject to
the provisions of any class or series of our shares outstanding,
after approval of the Board of Trustees, Equity Residential may
be
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dissolved or terminated by the affirmative vote of the holders
of not less than two-thirds of all of the votes entitled to be
cast on the matter.
Registrar and Transfer Agent. The registrar
and transfer agent for the Common Shares is Computershare
Trust Company, N.A.
Restriction on Ownership and Transfer. For the
Company to qualify as a REIT under the Internal Revenue Code, no
more than 50% in value of its outstanding shares of beneficial
interest may be owned, actually or constructively, by five or
fewer individuals (as defined in the Internal Revenue Code to
include certain entities) during the last half of a taxable year
(other than the first year for which an election to be treated
as a REIT has been made) or during a proportionate part of a
shorter taxable year. A REITs shares also must be
beneficially owned by 100 or more persons during at least
335 days of a taxable year of twelve months or during a
proportionate part of a shorter taxable year (other than the
first year for which an election to be treated as a REIT has
been made). To facilitate maintenance of its qualification as a
REIT for federal income tax purposes, we generally will prohibit
ownership, directly or by virtue of the attribution provisions
of the Internal Revenue Code, by any single shareholder of more
than 5% of the issued and outstanding Common Shares and
generally will prohibit ownership, directly or by virtue of the
attribution provisions of the Internal Revenue Code, by any
single shareholder of more than 5% of the issued and outstanding
shares of any class or series of the Companys Preferred
Shares (collectively, the Ownership Limit).
Because the Board of Trustees believes it is desirable for the
Company to qualify as a REIT, the Declaration of Trust, subject
to certain exceptions, provides that no holder may own, or be
deemed to own by virtue of the attribution provisions of the
Internal Revenue Code, more than the Ownership Limit. The
ownership attribution rules under the Internal Revenue Code are
complex and may cause Common Shares owned actually or
constructively by a group of related individuals
and/or
entities to be owned constructively by one individual or entity.
As a result, the acquisition of less than 5% of the Common
Shares (or the acquisition of an interest in an entity that
owns, actually or constructively, Common Shares) by an
individual or entity could nevertheless cause that individual or
entity, or another individual or entity, to own constructively
in excess of 5% of the outstanding Common Shares and thus
subject such Common Shares to the Ownership Limit. The Board of
Trustees shall grant an exemption from the Ownership Limit with
respect to one or more persons who would not be treated as
individuals for purposes of the Internal Revenue
Code if it is satisfied that such ownership will not cause a
person who is an individual to be treated as owning Common
Shares in excess of the Ownership Limit, applying the applicable
constructive ownership rules, and will not otherwise jeopardize
the Companys status as a REIT. As a condition of such
waiver, the Board of Trustees may require undertakings or
representations from the applicant with respect to preserving
the REIT status of the Company. Under certain circumstances, the
Board of Trustees may, in its sole and absolute discretion,
grant an exemption for individuals to acquire Preferred Shares
in excess of the Ownership Limit, provided that certain
conditions are met and any representations and undertakings that
may be required by the Board of Trustees are made.
The Board of Trustees of the Company will have the authority to
increase the Ownership Limit from time to time, but will not
have the authority to do so to the extent that after a giving
effect to such increase, five beneficial owners of Common Shares
could beneficially own in the aggregate more than 49.5% of the
outstanding Common Shares.
The Declaration of Trust further prohibits (a) any person
from actually or constructively owning shares of beneficial
interest of the Company that would result in the Company being
closely held under Section 856(h) of the
Internal Revenue Code or otherwise cause the Company to fail to
qualify as a REIT and (b) any person from transferring
shares of beneficial interest of the Company if such transfer
would result in shares of beneficial interest of the Company
being owned by fewer than 100 persons.
Any person who acquires or attempts or intends to acquire actual
or constructive ownership of shares of beneficial interest of
the Company that will or may violate any of the foregoing
restrictions on transferability and ownership is required to
give notice to the Company and provide the Company with such
other information as the Company may request in order to
determine the effect of such transfer on the Companys
status as a REIT.
6
If any purported transfer of shares of beneficial interest of
the Company or any other event would otherwise result in any
person violating the Ownership Limit or the other restrictions
in the Declaration of Trust, then any such purported transfer
will be void and of no force or effect with respect to the
purported transferee (the Prohibited Transferee) as
to that number of shares that exceeds the Ownership Limit
(referred to as excess shares) and the Prohibited
Transferee shall acquire no right or interest (or, in the case
of any event other than a purported transfer, the person or
entity holding record title to any such shares in excess of the
Ownership Limit (the Prohibited Owner) shall cease
to own any right or interest) in such excess shares. Any such
excess shares described above will be transferred automatically,
by operation of law, to a trust, the beneficiary of which will
be a qualified charitable organization selected by the Company
(the Beneficiary). Such automatic transfer shall be
deemed to be effective as of the close of business on the
Business Day (as defined in the Declaration of Trust) prior to
the date of such violating transfer. Within 20 days of
receiving notice from the Company of the transfer of shares to
the trust, the trustee of the trust (who shall be designated by
the Company and be unaffiliated with the Company and any
Prohibited Transferee or Prohibited Owner) will be required to
sell such excess shares to a person or entity who could own such
shares without violating the Ownership Limit, and distribute to
the Prohibited Transferee an amount equal to the lesser of the
price paid by the Prohibited Transferee for such excess shares
or the sales proceeds received by the trust for such excess
shares. In the case of any excess shares resulting from any
event other than a transfer, or from a transfer for no
consideration (such as a gift), the trustee will be required to
sell such excess shares to a qualified person or entity and
distribute to the Prohibited Owner an amount equal to the lesser
of the fair market value of such excess shares as of the date of
such event or the sales proceeds received by the trust for such
excess shares. In either case, any proceeds in excess of the
amount distributable to the Prohibited Transferee or Prohibited
Owner, as applicable, will be distributed to the Beneficiary.
Prior to a sale of any such excess shares by the trust, the
trustee will be entitled to receive, in trust for the
Beneficiary, all dividends and other distributions paid by the
Company with respect to such excess shares, and also will be
entitled to exercise all voting rights with respect to such
excess shares. Subject to Maryland law, effective as of the date
that such shares have been transferred to the trust, the trustee
shall have the authority (at the trustees sole discretion
and subject to applicable law) (i) to rescind as void any
vote cast by a Prohibited Transferee prior to the discovery by
the Company that such shares have been transferred to the trust
and (ii) to recast such vote in accordance with the desires
of the trustee acting for the benefit of the Beneficiary.
However, if the Company has already taken irreversible corporate
action, then the trustee shall not have the authority to rescind
and recast such vote. Any dividend or other distribution paid to
the Prohibited Transferee or Prohibited Owner (prior to the
discovery by the Company that such shares had been automatically
transferred to a trust as described above) will be required to
be repaid to the trustee upon demand for distribution to the
Beneficiary. If the transfer to the trust as described above is
not automatically effective (for any reason) to prevent
violation of the Ownership Limit, then the Declaration of Trust
provides that the transfer of the excess shares will be void.
In addition, shares of beneficial interest of the Company held
in the trust shall be deemed to have been offered for sale to
the Company, or its designee, at a price per share equal to the
lesser of (i) the price per share in the transaction that
resulted in such transfer to the trust (or, in the case of a
devise or gift, the market value at the time of such devise or
gift) and (ii) the market value of such shares on the date
the Company, or its designee, accepts such offer. The Company
shall have the right to accept such offer until the trustee has
sold the shares of beneficial interest held in the trust. Upon
such a sale to the Company, the interest of the Beneficiary in
the shares sold shall terminate and the trustee shall distribute
the net proceeds of the sale to the Prohibited Owner.
The foregoing restrictions on transferability and ownership will
not apply if the Board of Trustees determines that it is no
longer in the best interests of the Company to attempt to
qualify, or to continue to qualify, as a REIT.
All certificates representing shares of beneficial interest
shall bear a legend referring to the restrictions described
above.
All persons who own, directly or by virtue of the attribution
provisions of the Internal Revenue Code, more than 5% (or such
lower percentage as provided in the rules and regulations
promulgated under the
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Internal Revenue Code) of the outstanding shares of beneficial
interest of the Company must give a written notice to the
Company within 30 days after the end of each taxable year
stating such persons name and address, the number of
shares owned by such person and a description of the manner in
which such shares are held. Any record holder who holds shares
as nominee for another person who is required to include in
gross income the distributions received on such shares must give
notice stating the name and address of such other person and the
number of shares of such other person with respect to which such
record holder is nominee. In addition, each shareholder will,
upon demand, be required to disclose to the Company in writing
such information with respect to the direct, indirect and
constructive ownership of shares of beneficial interest as the
Board of Trustees deems reasonably necessary to comply with the
provisions of the Internal Revenue Code applicable to a REIT or
to ensure compliance with the ownership limitations described
above.
These ownership limitations could have the effect of delaying,
deferring or preventing a takeover or other transaction in which
holders of some, or a majority, of Common Shares might receive a
premium for their Common Shares over the then prevailing market
price or which such holders might believe to be otherwise in
their best interest.
Preferred
Shares
General. The following description of the
Preferred Shares sets forth certain general terms and provisions
of the Preferred Shares to which any prospectus supplement may
relate.
The Board of Trustees is empowered by the Declaration of Trust
to designate and issue from time to time one or more series of
Preferred Shares without shareholder approval. The Board of
Trustees may determine the relative rights, preferences and
privileges of each series of Preferred Shares so issued. Because
the Board of Trustees has the power to establish the preferences
and rights of each series of Preferred Shares, it may afford the
holders of any series of Preferred Shares preferences, powers
and rights, voting or otherwise, senior to the rights of holders
of Common Shares. The Preferred Shares will, when issued, be
fully paid and non-assessable.
As of June 30, 2010, the Company had outstanding 324,966
Series E Preferred Shares (liquidation preference $25.00
per share), 22,459 Series H Preferred Shares (liquidation
preference $25.00 per share), 1,000,000 Series K Preferred
Shares (liquidation preference $50.00 per share) and 600,000
Series N Preferred Shares (liquidation preference $250.00
per share). The Series E Preferred Shares, Series H
Preferred Shares and Series N Preferred Shares are listed
on the New York Stock Exchange under the symbols
EQR-PrE, EQR-PrH and
EQR-PrN, respectively. Distributions on the
Series E Preferred Shares are cumulative from the date of
original issue and payable quarterly on the first business day
of January, April, July and October of each year, at the rate of
7.00% of the liquidation preference per annum of such shares.
Distributions on the Series H Preferred Shares and the
Series K Preferred Shares are cumulative from the date of
original issue and payable quarterly on the last day of March,
June, September and December of each year, at the rate of 7.00%
and 8.29%, respectively, of the liquidation preference per annum
of such shares. Distributions on the Series N Preferred
Shares are cumulative from the date of original issue and
payable quarterly on or about the fifteenth day of January,
April, July and October of each year, at the rate of 6.48% of
the liquidation preference per annum of such shares.
Each Series E Preferred Share is convertible at the option
of the holder thereof at any time into Common Shares, at a
conversion price of $22.47 per Common Share (equivalent to a
conversion rate of approximately 1.1128 Common Share for each
Series E Preferred Share), subject to adjustments under
certain conditions. The Series K Preferred Shares and the
Series N Preferred Shares may be redeemed for cash at the
option of the Company in whole or in part, at $50.00 per share
and $25.00 per share, respectively, plus accrued and unpaid
distributions, if any, to the redemption date. Each
Series H Preferred Share is convertible at the option of
the holder thereof at any time into Common Shares, at a
conversion price of $17.27 per Common Share (equivalent to a
conversion rate of approximately 1.448 Common Share for each
Series H Preferred Share), subject to adjustments under
certain conditions. The Series H Preferred Shares may be
redeemed for Common Shares at the option of the Company in whole
or in part, at a redemption price per share based upon the
contractual conversion rate, plus cash in respect of accrued and
unpaid distributions, if any, to the redemption
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date. The Series K Preferred Shares are not redeemable
prior to December 10, 2026. On or after December 10,
2026, the Series K Preferred Shares may be redeemed for
cash at the option of the Company in whole or in part, at a
redemption price equal to the liquidation price per share, plus
accrued and unpaid distributions, if any, to the redemption
date. The redemption price of the Series K Preferred Shares
(other than the portion thereof consisting of accrued and unpaid
distributions) is payable solely out of the sale proceeds of
other shares of beneficial interest of the Company which may
include other series of Preferred Shares. The Series N
Preferred Shares may be redeemed for cash at the option of the
Company in whole or in part, at a redemption price equal to the
liquidation price per share, plus accrued and unpaid
distributions, if any, to the redemption date.
The Series E Preferred Shares, the Series H Preferred
Shares, the Series K Preferred Shares and the Series N
Preferred Shares have no stated maturity and are not subject to
any sinking fund or mandatory redemption and, with the exception
of the Series E Preferred Shares and the Series H
Preferred Shares, are not convertible into any other securities
of the Company. The Company may redeem the Series K
Preferred Shares or the Series N Preferred Shares in
certain circumstances relating to maintenance of its status as a
REIT. The Series E Preferred Shares and Series H
Preferred Shares have been called for redemption in full on
November 1, 2010. See Redemption
and Restrictions on Ownership and
Transfer. The other terms of the Preferred Shares are
described generally below.
The prospectus supplement relating to any Preferred Shares
offered thereby will contain the specific terms thereof,
including, without limitation:
(1) The title and stated value of such Preferred Shares;
(2) The number of such Preferred Shares offered, the
liquidation preference per share and the offering price of such
Preferred Shares;
(3) The distribution rate(s), period(s) and /or payment
date(s) or method(s) of calculation thereof applicable to such
Preferred Shares;
(4) The date from which distributions on such Preferred
Shares shall accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any,
for such Preferred Shares;
(6) The provision for a sinking fund, if any, for such
Preferred Shares;
(7) The provision for redemption, if applicable, of such
Preferred Shares;
(8) Any listing of such Preferred Shares on any securities
exchange;
(9) The terms and conditions, if applicable, upon which
such Preferred Shares will be convertible into Common Shares,
including the conversion price (or manner of calculation
thereof);
(10) Whether interests in such Preferred Shares will be
represented by Depositary Shares;
(11) Any other specific terms, preferences, rights,
limitations or restrictions of such Preferred Shares;
(12) A discussion of all material federal income tax
considerations, if any, applicable to such Preferred Shares that
are not discussed in this prospectus;
(13) The relative ranking and preferences of such Preferred
Shares as to distribution rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company;
(14) Any limitations on issuance of any series of Preferred
Shares ranking senior to or on a parity with such series of
Preferred Shares as to distribution rights and rights upon
liquidation, dissolution or winding up of the affairs of the
Company; and
(15) Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to
preserve the status of the Company as a REIT.
9
Rank. Unless otherwise specified in the
applicable prospectus supplement, the Preferred Shares will,
with respect to distribution rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior
to all classes or series of Common Shares, and to all equity
securities ranking junior to such Preferred Shares; (ii) on
a parity with all equity securities issued by the Company the
terms of which specifically provide that such equity securities
rank on a parity with the Preferred Shares; and
(iii) junior to all equity securities issued by the Company
the terms of which specifically provide that such equity
securities rank senior to the Preferred Shares. The term
equity securities does not include convertible debt
securities.
Distributions. Holders of the Preferred Shares
of each series will be entitled to receive, when, as and if
declared by the Board of Trustees of the Company, out of assets
of the Company legally available for payment, cash distributions
(or distributions in kind or in other property if expressly
permitted and described in the applicable prospectus supplement)
at such rates and on such dates as will be set forth in the
applicable prospectus supplement. Each such distribution shall
be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be
fixed by the Board of Trustees of the Company.
Distributions on any series of Preferred Shares may be
cumulative or non-cumulative, as provided in the applicable
prospectus supplement. Distributions, if cumulative, will be
cumulative from and after the date set forth in the applicable
prospectus supplement. If the Board of Trustees of the Company
fails to declare a distribution payable on a distribution
payment date on any series of the Preferred Shares for which
distributions are non-cumulative, then the holders of such
series of the Preferred Shares will have no right to receive a
distribution in respect of the distribution period ending on
such distribution payment date, and the Company will have no
obligation to pay the distribution accrued for such period,
whether or not distributions on such series are declared payable
on any future distribution payment date.
Unless otherwise specified in the prospectus supplement, if any
Preferred Shares of any series are outstanding, no full
distributions shall be declared or paid or set apart for payment
on any shares of beneficial interest of the Company of any other
series ranking, as to distributions, on a parity with or junior
to the Preferred Shares of such series for any period unless
(i) if such series of Preferred Shares has a cumulative
distribution, full cumulative distributions have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on
the Preferred Shares of such series for all past distribution
periods and the then current distribution period or (ii) if
such series of Preferred Shares does not have a cumulative
distribution, full distributions for the then current
distribution period have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment
thereof set apart for such payment on the Preferred Shares of
such series. When distributions are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon
Preferred Shares of any series and the shares of any other
series of Preferred Shares ranking on a parity as to
distributions with the Preferred Shares of such series, all
distributions declared upon Preferred Shares of such series and
any other series of Preferred Shares ranking on a parity as to
distributions with such Preferred Shares shall be declared pro
rata so that the amount of distributions declared per share of
Preferred Shares of such series and such other series of
Preferred Shares shall in all cases bear to each other the same
ratio that accrued distributions per share on the Preferred
Shares of such series (which shall not include any accumulation
in respect of unpaid distributions for prior distribution
periods if such Preferred Shares do not have a cumulative
distribution) and such other series of Preferred Shares bear to
each other. No interest, or sum of money in lieu of interest,
shall be payable in respect of any distribution payment or
payments on Preferred Shares of such series which may be in
arrears.
Except as provided in the immediately preceding paragraph,
unless (i) if such series of Preferred Shares has a
cumulative distribution, full cumulative distributions on the
Preferred Shares of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past distribution
periods and the then current distribution period, and
(ii) if such series of Preferred Shares does not have a
cumulative distribution, full distributions on the Preferred
Shares of such series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment, for the then current
distribution period, no distributions (other than in Common
Shares or other shares of beneficial interest ranking junior to
the Preferred Shares of such series as to distributions and upon
liquidation) shall be declared or paid or set aside for payment
or other distribution upon
10
the Common Shares, or any other shares of beneficial interest of
the Company ranking junior to or on a parity with the Preferred
Shares of such series as to distributions or upon liquidation,
nor shall any Common Shares, or any other shares of beneficial
interest of the Company ranking junior to or on a parity with
the Preferred Shares of such series as to distributions or upon
liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other shares
of beneficial interest of the Company ranking junior to the
Preferred Shares of such series as to distributions and upon
liquidation).
If, for any taxable year, the Company elects to designate as
capital gain dividends (as defined in
Section 857 of the Internal Revenue Code of 1986, as
amended (the Internal Revenue Code)) any portion
(the Capital Gains Amount) of the dividends (within
the meaning of the Internal Revenue Code) paid or made available
for the year to holders of all classes of shares of beneficial
interest (the Total Dividends), then the portion of
the Capital Gains Amount that will be allocable to the holders
of Preferred Shares will be the Capital Gains Amount multiplied
by a fraction, the numerator of which will be the total
dividends (within the meaning of the Internal Revenue Code) paid
or made available to the holders of the Preferred Shares for the
year and the denominator of which shall be the Total Dividends.
Redemption. If so provided in the applicable
prospectus supplement, the Preferred Shares will be subject to
mandatory redemption or redemption at the option of the Company,
in whole or in part, in each case upon the terms, at the times
and at the redemption prices set forth in such prospectus
supplement.
The prospectus supplement relating to a series of Preferred
Shares that is subject to mandatory redemption will specify the
number of such Preferred Shares that shall be redeemed by the
Company in each year commencing after a date to be specified, at
a redemption price per share to be specified, together with an
amount equal to all accrued and unpaid distributions thereon
(which shall not, if such Preferred Shares do not have a
cumulative distribution, include any accumulation in respect of
unpaid distributions for prior distribution periods) to the date
of redemption. The redemption price may be payable in cash or
other property, as specified in the applicable prospectus
supplement. If the redemption price for Preferred Shares of any
series is payable only from the net proceeds of the issuance of
shares of beneficial interest of the Company, the terms of such
Preferred Shares may provide that, if no such shares of
beneficial interest shall have been issued or to the extent the
net proceeds from any issuance are insufficient to pay in full
the aggregate redemption price then due, such Preferred Shares
shall automatically and mandatorily be converted into the
applicable shares of beneficial interest of the Company pursuant
to conversion provisions specified in the applicable prospectus
supplement.
Notwithstanding the foregoing, unless (i) if such series of
Preferred Shares has a cumulative distribution, full cumulative
distributions on all Preferred Shares of any series shall have
been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for payment
for all past distribution periods and the current distribution
period and (ii) if such series of Preferred Shares does not
have a cumulative distribution, full distributions on the
Preferred Shares of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current
distribution period, no Preferred Shares of any series shall be
redeemed unless all outstanding Preferred Shares of such series
are simultaneously redeemed; provided, however, that the
foregoing shall not prevent the purchase or acquisition of
Preferred Shares of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding Preferred Shares of
such series. In addition, unless (i) if such series of
Preferred Shares has a cumulative distribution, full cumulative
distributions on all outstanding shares of any series of
Preferred Shares have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past distributions periods and the
then current distribution period, and (ii) if such series
of Preferred Shares does not have a cumulative distribution,
full distributions on the Preferred Shares of any series have
been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for payment
for the then current distribution period, the Company shall not
purchase or otherwise acquire directly or indirectly any
Preferred Shares of such series (except by conversion into or
exchange for shares of beneficial interest of the Company
ranking junior to the Preferred Shares of such series as to
distributions and upon liquidation); provided, however, that the
foregoing shall not prevent the purchase
11
or acquisition of Preferred Shares of such series to assist in
maintaining the REIT status of the Company or pursuant to a
purchase or exchange offer made on the same terms to holders of
all outstanding Preferred Shares of such series.
If fewer than all of the outstanding Preferred Shares of any
series are to be redeemed, the number of shares to be redeemed
will be determined by the Company and such shares may be
redeemed pro rata from the holders of record of such shares in
proportion to the number of such shares held or for which
redemption is requested by such holder (with adjustments to
avoid redemption of fractional shares) or by lot in a manner
determined by the Company.
Notice of redemption will be mailed at least 30 days but
not more than 60 days before the redemption date to each
holder of record of Preferred Shares of any series to be
redeemed at the address shown on the share transfer books of the
Company. Each notice shall state: (i) the redemption date;
(ii) the number and series of Preferred Shares to be
redeemed; (iii) the place or places where certificates for
such Preferred Shares are to be surrendered for payment of the
redemption price; (iv) that distributions on the shares to
be redeemed will cease to accrue on such redemption date; and
(v) the date upon which the holders conversion
rights, if any, as to such shares shall terminate. If fewer than
all of the Preferred Shares of any series are to be redeemed,
the notice mailed to each such holder thereof shall also specify
the number of Preferred Shares to be redeemed from each such
holder. If notice of redemption of any Preferred Shares has been
given and if the funds necessary for such redemption have been
set aside by the Company in trust for the benefit of the holders
of any Preferred Shares so called for redemption, then from and
after the redemption date distributions will cease to accrue on
such Preferred Shares, and all rights of the holders of such
shares will terminate, except the right to receive the
redemption price.
Liquidation Preference. Upon any voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the Company, then, before any distribution or payment
shall be made to the holders of any Common Shares or any other
class or series of shares of beneficial interest of the Company
ranking junior to the Preferred Shares in the distribution of
assets upon any liquidation, dissolution or winding up of the
Company, the holders of each series of Preferred Shares shall be
entitled to receive out of assets of the Company legally
available for distribution to shareholders liquidating
distributions in the amount of the liquidation preference per
share (set forth in the applicable prospectus supplement), plus
an amount equal to all distributions accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such Preferred
Shares do not have a cumulative distribution). After payment of
the full amount of the liquidating distributions to which they
are entitled, the holders of Preferred Shares will have no right
or claim to any of the remaining assets of the Company. In the
event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up, the available assets of the Company
are insufficient to pay the amount of the liquidating
distributions on all outstanding Preferred Shares and the
corresponding amounts payable on all shares of other classes or
series of shares beneficial interest of the Company ranking on a
parity with the Preferred Shares in the distribution of assets,
then the holders of the Preferred Shares and all other such
classes or series of shares of beneficial interest shall share
ratably in any such distribution of assets in proportion to the
full liquidating distributions to which they would otherwise be
respectively entitled.
If liquidating distributions shall have been made in full to all
holders of Preferred Shares, the remaining assets of the Company
shall be distributed among the holders of any other classes or
series of shares of beneficial interest ranking junior to the
Preferred Shares upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each
case according to their respective number of shares. For such
purposes, the consolidation or merger of the Company with or
into any other corporation, trust or entity, or the sale, lease
or conveyance of all or substantially all of the property or
business of the Company, shall not be deemed to constitute a
liquidation, dissolution or winding up of the Company.
Voting Rights. Holders of Preferred Shares
will not have any voting rights, except as set forth below or as
otherwise from time to time required by law or as indicated in
the applicable prospectus supplement.
Whenever distributions on any Preferred Shares shall be in
arrears for six or more quarterly periods, the holders of such
Preferred Shares (voting separately as a class with all other
series of Preferred Shares upon which like voting rights have
been conferred and are exercisable) will be entitled to vote for
the election of
12
two additional Trustees of the Company at a special meeting
called by the holders of record of at least ten percent (10%) of
any series of Preferred Shares so in arrears (unless such
request is received less than 90 days before the date fixed
for the next annual or special meeting of the shareholders) or
at the next annual meeting of shareholders, and at each
subsequent annual meeting until (i) if such series of
Preferred Shares has a cumulative distribution, all
distributions accumulated on such series of Preferred Shares for
the past distribution periods and the then current distribution
period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment or
(ii) if such series of Preferred Shares do not have a
cumulative distribution, four consecutive quarterly
distributions shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment. In
such case, the entire Board of Trustees of the Company will be
increased by two Trustees.
Unless provided otherwise for any series of Preferred Shares, so
long as any Preferred Shares remain outstanding, the Company
will not, without the affirmative vote or consent of the holders
of at least two-thirds of each series of Preferred Shares
outstanding at the time, given in person or by proxy, either in
writing or at a meeting (such series voting separately as a
class), (i) authorize or create, or increase the authorized
or issued amount of, any class or series of shares of beneficial
interest ranking prior to such series of Preferred Shares with
respect to the payment of distributions or the distribution of
assets upon liquidation, dissolution or winding up or reclassify
any authorized shares of beneficial interest of the Company into
such shares, or create, authorize or issue any obligation or
security convertible into or evidencing the right to purchase
any such shares; or (ii) amend, alter or repeal the
provisions of our Declaration of Trust or the
Articles Supplementary for such series of Preferred Shares,
whether by merger, consolidation or otherwise (an
Event), so as to materially and adversely affect any
right, preference, privilege or voting power of such series of
Preferred Shares or the holders thereof; provided, however, with
respect to the occurrence of any of the Events set forth in
(ii) above, so long as the Preferred Shares remain
outstanding with the terms thereof materially unchanged, taking
into account that upon the occurrence of an Event, the Company
may not be the surviving entity, the occurrence of any such
Event shall not be deemed to materially and adversely affect
such rights, preferences, privileges or voting power of holders
of Preferred Shares and provided further that (x) any
increase in the amount of the authorized Preferred Shares or the
creation or issuance of any other series of Preferred Shares, or
(y) any increase in the amount of authorized shares of such
series or any other series of Preferred Shares, in each case
ranking on a parity with or junior to the Preferred Shares of
such series with respect to payment of distributions or the
distribution of assets upon liquidation, dissolution or winding
up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior
to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding
Preferred Shares of such series shall have been redeemed or
called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
Conversion Rights. The terms and conditions,
if any, upon which any series of Preferred Shares is convertible
into Common Shares will be set forth in the applicable
prospectus supplement relating thereto. Such terms will include
the number of Common Shares into which the Preferred Shares are
convertible, the conversion price (or manner of calculation
thereof), the conversion period, provisions as to whether
conversion will be at the option of the holders of the Preferred
Shares or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the
event of the redemption of such series of Preferred Shares.
Registrar and Transfer Agent. The registrar
and transfer agent for the Preferred Shares will be set forth in
the applicable prospectus supplement.
Depositary
Shares
General. The Company may issue receipts
(Depositary Receipts) for Depositary Shares, each of
which will represent a fractional interest of a share of a
particular series of Preferred Shares, as specified in the
applicable prospectus supplement. Preferred Shares of each
series represented by Depositary Shares will be deposited under
a separate deposit agreement (each, a Deposit
Agreement) among the Company, the
13
depositary named therein (the Preferred Share
Depositary) and the holders from time to time of the
Depositary Receipts. Subject to the terms of the Deposit
Agreement, each owner of a Depositary Receipt will be entitled,
in proportion to the fractional interest of a share of a
particular series of Preferred Shares represented by the
Depositary Shares evidenced by such Depositary Receipt, to all
the rights and preferences of the Preferred Shares represented
by such Depositary Shares (including distribution, voting,
conversion, redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts
issued pursuant to the applicable Deposit Agreement. Immediately
following the issuance and delivery of the Preferred Shares by
the Company to the Preferred Share Depositary, the Company will
cause the Preferred Share Depositary to issue, on behalf of the
Company, the Depositary Receipts. Copies of the applicable form
of Deposit Agreement and Depositary Receipt may be obtained from
the Company upon request, and the following summary of the form
thereof is qualified in its entirety by reference thereto.
Distributions. The Preferred Share Depositary
will distribute all cash distributions received in respect of
the Preferred Shares to the record holders of Depositary
Receipts evidencing the related Depositary Shares in proportion
to the number of such Depositary Receipts owned by such holders,
subject to certain obligations of holders to file proofs,
certificates and other information and to pay certain charges
and expenses to the Preferred Share Depositary.
In the event of a distribution other than in cash, the Preferred
Share Depositary will distribute property received by it to the
record holders of Depositary Receipts entitled thereto, subject
to certain obligations of holders to file proofs, certificates
and other information and to pay certain charges and expenses to
the Preferred Share Depositary, unless the Preferred Share
Depositary determines that it is not feasible to make such
distribution, in which case the Preferred Share Depositary may,
with the approval of the Company, sell such property and
distribute the net proceeds from such sale to such holders.
No distribution will be made in respect of any Depositary Share
to the extent that it represents any Preferred Shares converted
into excess shares.
Withdrawal of Shares. Upon surrender of the
Depositary Receipts at the corporate trust office of the
Preferred Share Depositary (unless the related Depositary Shares
have previously been called for redemption or converted into
excess shares), the holders thereof will be entitled to delivery
at such office, to or upon such holders order, of the
number of whole or fractional Preferred Shares and any money or
other property represented by the Depositary Shares evidenced by
such Depositary Receipts. Holders of Depositary Receipts will be
entitled to receive whole or fractional shares of the related
Preferred Shares on the basis of the proportion of the Preferred
Shares represented by each Depositary Share as specified in the
applicable prospectus supplement, but holders of such Preferred
Shares will not thereafter be entitled to receive Depositary
Shares therefor. If the Depositary Receipts delivered by the
holder evidence a number of Depositary Shares in excess of the
number of Depositary Shares representing the number of Preferred
Shares to be withdrawn, the Preferred Share Depositary will
deliver to such holder at the same time a new Depositary Receipt
evidencing such excess number of Depositary Shares.
Redemption. Whenever the Company redeems
Preferred Shares held by the Preferred Share Depositary, the
Preferred Share Depositary will redeem as of the same redemption
date the number of Depositary Shares representing the Preferred
Shares so redeemed, provided the Company shall have paid in full
to the Preferred Share Depositary the redemption price of the
Preferred Shares to be redeemed plus an amount equal to any
accrued and unpaid distributions thereon to the date fixed for
redemption. The redemption price per Depositary Share will be
equal to the redemption price and any other amounts per share
payable with respect to the Preferred Shares. If fewer than all
the Depositary Shares are to be redeemed, the Depositary Shares
to be redeemed will be selected pro rata (as nearly as may be
practicable without creating fractional Depositary Shares) or by
any other equitable method determined by the Company that will
not result in the issuance of any excess shares.
From and after the date fixed for redemption, all distributions
in respect of the Preferred Shares so called for redemption will
cease to accrue, the Depositary Shares so called for redemption
will no longer be deemed
14
to be outstanding and all rights of the holders of the
Depositary Receipts evidencing the Depositary Shares so called
for redemption will cease, except the right to receive any
monies payable upon such redemption and any money or other
property to which the holders of such Depositary Receipts were
entitled upon such redemption upon surrender thereof to the
Preferred Share Depositary.
Voting Rights. Upon receipt of notice of any
meeting at which the holders of the Preferred Shares are
entitled to vote, the Preferred Share Depositary will mail the
information contained in such notice of meeting to the record
holders of the Depositary Receipts evidencing the Depositary
Shares which represent such Preferred Shares. Each record holder
of Depositary Receipts evidencing Depositary Shares on the
record date (which will be the same date as the record date for
the Preferred Shares) will be entitled to instruct the Preferred
Share Depositary as to the exercise of the voting rights
pertaining to the amount of Preferred Shares represented by such
holders Depositary Shares. The Preferred Share Depositary
will vote the amount of Preferred Shares represented by such
Depositary Shares in accordance with such instructions, and the
Company will agree to take all reasonable action which may be
deemed necessary by the Preferred Share Depositary in order to
enable the Preferred Share Depositary to do so. The Preferred
Share Depositary will abstain from voting the amount of
Preferred Shares represented by such Depositary Shares to the
extent it does not receive specific instructions from the
holders of Depositary Receipts evidencing such Depositary
Shares. The Preferred Share Depositary shall not be responsible
for any failure to carry out any instruction to vote, or for the
manner or effect of any such vote made, as long as any such
action or non-action is in good faith and does not result from
negligence or willful misconduct of the Preferred Share
Depositary.
Liquidation Preference. In the event of the
liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of each Depositary Receipt
will be entitled to the fraction of the liquidation preference
accorded each Preferred Share represented by the Depositary
Share evidenced by such Depositary Receipt, as set forth in the
applicable prospectus supplement.
Conversion. The Depositary Shares, as such,
are not convertible into Common Shares or any other securities
or property of the Company, except in connection with certain
conversions in connection with the preservation of the
Companys status as a REIT. Nevertheless, if so specified
in the applicable prospectus supplement relating to an offering
of Depositary Shares, the Depositary Receipts may be surrendered
by holders thereof to the Preferred Share Depositary with
written instructions to the Preferred Share Depositary to
instruct the Company to cause conversion of the Preferred Shares
represented by the Depositary Shares evidenced by such
Depositary Receipts into whole Common Shares, other Preferred
Shares (including excess shares) of the Company or other shares
of beneficial interest, and the Company has agreed that upon
receipt of such instructions and any amounts payable in respect
thereof, it will cause the conversion thereof utilizing the same
procedures as those provided for delivery of Preferred Shares to
effect such conversion. If the Depositary Shares evidenced by a
Depositary Receipt are to be converted in part only, a new
Depositary Receipt or Receipts will be issued for any Depositary
Shares not to be converted. No fractional Common Shares will be
issued upon conversion, and if such conversion will result in a
fractional share being issued, an amount will be paid in cash by
the Company equal to the value of the fractional interest based
upon the closing price of the Common Shares on the last business
day prior to the conversion.
Amendment and Termination of the Deposit
Agreement. The form of Depositary Receipt
evidencing the Depositary Shares which represent the Preferred
Shares and any provision of the Deposit Agreement may at any
time be amended by agreement between the Company and the
Preferred Share Depositary. However, any amendment that
materially and adversely alters the rights of the holders of
Depositary Receipts or that would be materially and adversely
inconsistent with the rights granted to the holders of the
related Preferred Shares will not be effective unless such
amendment has been approved by the existing holders of at least
a majority of the Depositary Shares evidenced by the Depositary
Receipts then outstanding. No amendment shall impair the right,
subject to certain exceptions in the Deposit Agreement, of any
holder of Depositary Receipts to surrender any Depositary
Receipt with instructions to deliver to the holder the related
Preferred Shares and all money and other property, if any,
represented thereby, except in order to comply with law. Every
holder of an outstanding Depositary Receipt at the time any such
amendment becomes effective shall be deemed, by continuing to
hold such Depositary Receipt, to consent and agree to such
amendment and to be bound by the Deposit Agreement as amended
thereby.
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The Deposit Agreement may be terminated by the Company upon not
less than 30 days prior written notice to the
Preferred Share Depositary if (i) such termination is
necessary to assist in maintaining the Companys status as
a REIT or (ii) a majority of each series of Preferred
Shares affected by such termination consents to such
termination, whereupon the Preferred Share Depositary shall
deliver or make available to each holder of Depositary Receipts,
upon surrender of the Depositary Receipts held by such holder,
such number of whole or fractional Preferred Shares as are
represented by the Depositary Shares evidenced by such
Depositary Receipts together with any other property held by the
Preferred Share Depositary with respect to such Depositary
Receipts. The Company has agreed that if the Deposit Agreement
is terminated to assist in maintaining the Companys status
as a REIT, then, if the Depositary Shares are listed on a
national securities exchange, the Company will use its best
efforts to list the Preferred Shares issued upon surrender of
the related Depositary Shares on a national securities exchange.
In addition, the Deposit Agreement will automatically terminate
if (i) all outstanding Depositary Shares shall have been
redeemed or (ii) there shall have been a final distribution
in respect of the related Preferred Shares in connection with
any liquidation, dissolution or winding up of the Company and
such distribution shall have been distributed to the holders of
Depositary Receipts evidencing the Depositary Shares
representing such Preferred Shares.
Charges of Preferred Share Depositary. The
Company will pay all transfer and other taxes and governmental
charges arising solely from the existence of the Deposit
Agreement. In addition, the Company will pay the fees and
expenses of the Preferred Share Depositary in connection with
the performance of its duties under the Deposit Agreement.
Resignation and Removal of Depositary. The
Preferred Share Depositary may resign at any time by delivering
to the Company notice of its election to do so, and the Company
may at any time remove the Preferred Share Depositary, any such
resignation or removal to take effect upon the appointment of a
successor Preferred Share Depositary. A successor Preferred
Share Depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a
bank or trust company having its principal office in the United
States and having a combined capital and surplus of at least
$50,000,000.
Miscellaneous. The Preferred Share Depositary
will forward to holders of Depositary Receipts any reports and
communications from the Company which are received by the
Preferred Share Depositary with respect to the related Preferred
Shares.
Neither the Preferred Share Depositary nor the Company will be
liable if it is prevented from or delayed in, by law or any
circumstances beyond its control, performing its obligations
under the Deposit Agreement. The obligations of the Company and
the Preferred Share Depositary under the Deposit Agreement will
be limited to performing their duties thereunder in good faith
and without negligence (in the case of any action or inaction in
the voting of Preferred Shares represented by the Depositary
Shares), gross negligence or willful misconduct, and the Company
and the Preferred Share Depositary will not be obligated to
prosecute or defend any legal proceeding in respect of any
Depositary Receipts, Depositary Shares or Preferred Shares
represented thereby unless satisfactory indemnity is furnished.
The Company and the Preferred Share Depositary may rely on
written advice of counsel or accountants, or information
provided by persons presenting Preferred Shares represented
thereby for deposit, holders of Depositary Receipts or other
persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be
genuine and signed by a proper party.
In the event the Preferred Share Depositary shall receive
conflicting claims, requests or instructions from any holders of
Depositary Receipts, on the one hand, and the Company, on the
other hand, the Preferred Share Depositary shall be entitled to
act on such claims, requests or instructions received from the
Company.
Warrants
Equity Residential may issue warrants for the purchase of our
Common Shares or Preferred Shares by this prospectus. Warrants
may be issued independently, together with any other securities
offered by any prospectus supplement or through a dividend or
other distribution to the shareholders of Equity Residential and
may be attached to or separate from such securities. We may
issue warrants under a warrant agreement to be entered into
between us and a warrant agent. We will name any warrant agent
in the applicable prospectus
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supplement. The warrant agent will act solely as our agent in
connection with the warrants of a particular series and will not
assume any obligation or relationship of agency or trust for or
with any holders or beneficial owners of warrants. In the
applicable prospectus supplement, we will describe the terms of
the warrants and applicable warrant agreement, including, where
applicable, the following:
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the title of such warrants;
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their aggregate number;
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the price or prices at which we will issue them;
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the designation, number and terms of the preferred shares or
common shares that can be purchased upon exercise of them;
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the designation and terms of the other securities, if any, with
which such warrants are issued and the number of such warrants
issued with each such security;
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the date, if any, on and after which they and the related
preferred shares or common shares, if any, will be separately
transferable;
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the price at which each share of preferred share or common share
that can be purchased upon exercise of such warrants may be
purchased;
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the date on which the right to exercise them shall commence and
the date on which such right shall expire;
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the minimum or maximum amount of such warrants which may be
exercised at any one time;
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information with respect to book-entry procedures, if any;
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a discussion of certain federal income tax
considerations; and
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any other terms of such warrants, including terms, procedures,
and limitations relating to the transferability, exchange, and
exercise of such warrants.
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Share
Purchase Contracts
We may issue share purchase contracts, including contracts
obligating holders to purchase from us and us to sell to the
holders, a specified number of shares of common shares,
preferred shares or depositary shares at a future date or dates.
Alternatively, the share purchase contracts may obligate us to
purchase from holders, and obligate holders to sell to us, a
specified or varying number of common shares, preferred shares
or depositary shares. The consideration per share of common
shares or preferred shares or per depositary share may be fixed
at the time the share purchase contracts are issued or may be
determined by a specific reference to a formula set forth in the
share purchase contracts. The share purchase contracts may
provide for settlement by delivery by us or on our behalf of
shares of the underlying security, or they may provide for
settlement by reference or linkage to the value, performance or
trading price of the underlying security. The share purchase
contracts may be issued separately or as part of share purchase
units consisting of a share purchase contract and debt
securities, preferred shares or debt obligations of third
parties, including U.S. treasury securities, other share
purchase contracts or common shares, or other securities or
property, securing the holders obligations to purchase or
sell, as the case may be, the common shares, preferred shares,
depository shares or other security or property under the share
purchase contracts. The share purchase contracts may require us
to make periodic payments to the holders of the share purchase
units or vice versa, and such payments may be unsecured or
prefunded on some basis and may be paid on a current or on a
deferred basis. The share purchase contracts may require holders
to secure their obligations thereunder in a specified manner and
may provide for the prepayment of all or part of the
consideration payable by holders in connection with the purchase
of the underlying security or other property pursuant to the
share purchase contracts.
The securities related to the share purchase contracts may be
pledged to a collateral agent for our benefit pursuant to a
pledge agreement to secure the obligations of holders of share
purchase contracts to purchase the underlying security or
property under the related share purchase contracts. The rights
of holders of share
17
purchase contracts to the related pledged securities will be
subject to our security interest therein created by the pledge
agreement. No holder of share purchase contracts will be
permitted to withdraw the pledged securities related to such
share purchase contracts from the pledge arrangement.
EQR
Debt Securities
The EQR Debt Securities may be senior or subordinated, may be
convertible into Common Shares, and will be issued pursuant to
an indenture, dated as of a date prior to such issuance (the
EQR Indenture.)
Guarantees
of ERP Debt Securities
At its sole option, Equity Residential may guarantee (either
fully or unconditionally or in a limited manner) the due and
punctual payment of the principal of, and any premium and
interest on, one or more series of ERP Debt Securities of ERP
Operating Limited Partnership, whether at maturity, by
acceleration, redemption, repayment or otherwise, in accordance
with the terms of such guarantee and the indenture. The
particular terms of the guarantee, if any, will be set forth in
a prospectus supplement and supplemental indenture relating to
the guaranteed ERP Debt Securities.
DESCRIPTION
OF ERP OPERATING LIMITED PARTNERSHIP SECURITIES
ERP
Debt Securities
General. The following description sets forth
certain general terms and provisions of the ERP Debt Securities
to which any prospectus supplement may relate. The particular
terms of the ERP Debt Securities being offered and the extent to
which such general provisions may apply will be described in a
prospectus supplement relating to such ERP Debt Securities.
Please note that in this section entitled Description of
ERP Operating Limited Partnership Securities, references
to we, our and us refer to
ERP Operating Limited Partnership, as the issuer of the ERP
Securities, unless the context requires otherwise.
The ERP Debt Securities may be senior or subordinated debt
securities, and may be exchangeable for Common Shares. The Debt
Securities and the ERP Debt Securities will be issued pursuant
to an indenture, dated as of October 1, 1994 (the
original indenture), as supplemented by the first
supplemental indenture, dated as of September 9, 2004, the
second supplemental indenture thereto, dated as of
August 23, 2006, and the third supplemental indenture
thereto, dated as of June 4, 2007 (the Third
Supplemental Indenture), between us and The Bank of New
York Mellon Trust Company, N.A., as successor in trust to
J.P. Morgan Trust Company, National Association, as
successor in trust to Bank One Trust Company, NA, as
successor to The First National Bank of Chicago, as trustee
(collectively, the Indenture). The Indenture has
been filed as an exhibit to the registration statement of which
this prospectus is a part and is available for inspection at the
corporate trust office of the trustee at 2 N. LaSalle
Street, Suite 1020, Chicago, Illinois 60602, or as
described above under Where You Can Find More Information
About Us. The Indenture is subject to, and governed by,
the Trust Indenture Act of 1939, as amended. The statements
made hereunder relating to the Indenture and the ERP Debt
Securities to be issued thereunder are summaries of certain
provisions thereof and do not purport to be complete and are
subject to, and are qualified in their entirety by reference to,
all provisions of the Indenture and the ERP Debt Securities.
Capitalized terms used in this prospectus that are not defined
herein have the meanings set forth in the Indenture. All section
references appearing below refer to sections of the Indenture or
to the Third Supplemental Indenture.
ERP Operating Limited Partnership is the only obligor with
respect to the ERP Debt Securities and neither any limited or
general partner of ERP Operating Limited Partnership, including
Equity Residential, in its individual capacity and as general
partner of ERP Operating Limited Partnership, nor any principal,
shareholder, officer, director, trustee or employee of any
limited or general partner of ERP Operating Limited Partnership
or of any successor of any limited or general partner of ERP
Operating Limited Partnership has any obligation for payment of
the ERP Debt Securities or for any of ERP Operating Limited
Partnerships obligations, covenants or agreements
contained in the ERP Debt Securities or the Indenture except in
the event that the ERP Debt Securities are specifically
guaranteed by Equity Residential, at its sole option, as set
forth
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in an applicable prospectus supplement. By accepting the ERP
Debt Securities, you waive and release all liability of this
kind. The waiver and release are part of the consideration for
the issuance of ERP Debt Securities.
The ERP Debt Securities may be issued in one or more series, as
determined by the Board of Trustees of Equity Residential, as
our general partner, or as established in the Indenture or in
one or more supplements to the Indenture. All ERP Debt
Securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened,
without the consent of the holders of the ERP Debt Securities of
such series, for issuances of additional ERP Debt Securities of
such series (Section 301).
There may be more than one Trustee under the Indenture, each
with respect to one or more series of ERP Debt Securities. Any
Trustee under the Indenture may resign or be removed with
respect to one or more series of ERP Debt Securities, and a
successor Trustee may be appointed to act with respect to that
series (Section 608). In the event that two or more persons
are acting as Trustee with respect to different series of ERP
Debt Securities, each shall be a Trustee of a trust under the
applicable Indenture separate and apart from the trust
administered by any other Trustee (Section 609). Except as
otherwise indicated in the Indenture, any action described in
the Indenture to be taken by the Trustee may be taken by each
Trustee with respect to, and only with respect to, the one or
more series of ERP Debt Securities for which it is Trustee under
the Indenture.
The prospectus supplement will contain the specific terms
relating to the series of ERP Debt Securities being offered,
including without limitation:
(1) the title of the ERP Debt Securities;
(2) the aggregate principal amount of the ERP Debt
Securities and any limit on the aggregate principal amount;
(3) the percentage of the principal amount at which the ERP
Debt Securities will be issued and, if other than the principal
amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof;
(4) the date or dates, or the method for determining the
date or dates, on which the principal of the ERP Debt Securities
will be payable;
(5) the rate or rates, which may be fixed or variable, or
the method by which the rate or rates shall be determined, at
which the ERP Debt Securities will bear interest, if any;
(6) the date or dates, or the method for determining the
date or dates, from which any interest on the ERP Debt
Securities will accrue, the interest payment dates on which any
interest will be payable, the regular record dates for the
interest payment dates, or the method by which such dates shall
be determined, the person to whom interest shall be payable, and
the basis upon which interest shall be calculated if other than
that of a
360-day year
of twelve
30-day
months;
(7) the place or places where, if other than or in addition
to the Borough of Manhattan, City of New York,
(x) the principal of (and premium and make-whole amounts,
if any) and interest, if any, on ERP Debt Securities will be
payable,
(y) ERP Debt Securities may be surrendered for conversion
or registration of transfer or exchange and
(z) notices or demands to or upon us in respect of ERP Debt
Securities and the Indenture may be served;
(8) the period or periods within which, the price or prices
at which and the terms and conditions upon which ERP Debt
Securities may be redeemed, in whole or in part, at our option,
if we are to have this option;
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(9) our obligation, if any, to redeem, repay or purchase
ERP Debt Securities at the option of a holder thereof, and the
period or periods within which or the date or dates on which,
the price or prices as to which and the terms and conditions
upon which the ERP Debt Securities will be redeemed, repaid or
purchased, in whole or in part, pursuant to this obligation;
(10) if other than the Trustee under the Indenture, the
identity of each security registrar for our registered
securities
and/or any
person authorized by us to pay the principal of (and premium, if
any) or interest on any securities or coupons on our behalf;
(11) if other than United States dollars, the currency or
currencies in which the ERP Debt Securities are denominated and
payable, which may be a foreign currency or units of two or more
foreign currencies or a composite currency or currencies, and
the terms and conditions relating thereto;
(12) whether the amount of payments of principal (and
premium, if any) or interest, if any, on the ERP Debt Securities
may be determined with reference to an index, formula or other
method, the basis for such formula, if any, and the manner in
which amounts shall be determined;
(13) provisions, if any, granting special rights to the
holders of our securities of the series upon the occurrence of
such events as may be specified;
(14) any additions to, modifications of or deletions from
the terms of the ERP Debt Securities with respect to the events
of default or covenants set forth in the Indenture;
(15) whether the ERP Debt Securities will be issued in
certificated or book-entry form;
(16) whether the ERP Debt Securities will be in registered
or bearer form and, if in registered form, the denominations
thereof if other than $1,000 and any integral multiple thereof
and, if in bearer form, the denominations thereof and the terms
and conditions relating thereto;
(17) if the securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of
a temporary security of such series) only upon receipt of
certain certificates or other documents or satisfaction of other
conditions, then the form
and/or terms
of such certificates, documents or conditions;
(18) the applicability, if any, of the defeasance and
covenant defeasance provisions of Article Fourteen of the
Indenture;
(19) whether and under what circumstances we will pay
additional amounts as contemplated in the Indenture in respect
of any tax, assessment or governmental charge and, if so,
whether we will have the option to redeem the ERP Debt
Securities in lieu of making such payment; and
(20) any other terms of the ERP Debt Securities not
inconsistent with the provisions of the Indenture
(Section 301).
The ERP Debt Securities may provide for less than the entire
principal amount thereof to be payable upon declaration of
acceleration of the maturity (Original Issue Discount
Securities). Special United States federal income tax,
accounting and other considerations applicable to Original Issue
Discount Securities will be described in the applicable
prospectus supplement.
Except as set forth below under Certain Covenants
and Other Indenture Covenants That Only Apply To Certain
Previously Issued ERP Debt Securities, the Indenture does
not contain any other provisions that would limit our ability to
incur indebtedness or that would afford holders of ERP Debt
Securities protection in the event of a highly leveraged or
similar transaction involving us or in the event of a change of
control. However, restrictions on ownership and transfers of
Equity Residentials common shares and preferred shares of
beneficial interest are designed to preserve Equity
Residentials status as a REIT and, therefore, may act to
prevent or hinder a change of control. You should refer to the
applicable prospectus supplement for information concerning any
deletions from, modifications of or additions to the events of
default or our covenants that are described below, including any
addition of a covenant or other provision providing event risk
or similar protection.
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Denominations, Interest, Registration and
Transfer. Unless otherwise described in the
applicable prospectus supplement, the registered securities of
any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 302).
Unless otherwise specified in the applicable prospectus
supplement, the principal of (and premium, if any) and interest
on any series of ERP Debt Securities will be payable at the
corporate trust office of the Trustee, located at
2 N. LaSalle Street, Suite 1020, Chicago,
Illinois 60602; provided that, at our option, payment of
interest may be made by check mailed to the address of the
person entitled thereto as it appears in the security register
or by wire transfer of funds to such person at an account
maintained within the United States (Sections 301, 305,
306, 307 and 1002).
Any interest not punctually paid or duly provided for on any
interest payment date with respect to a debt security will
forthwith cease to be payable to the holder on the applicable
regular record date and may either be paid to the person in
whose name the debt security is registered at the close of
business on a special record date for the payment of the
defaulted interest to be fixed by the Trustee, notice whereof
shall be given to the holder of the debt security not less than
ten days prior to the special record date, or may be paid at any
time in any other lawful manner, all as more completely
described in the Indenture (Section 307).
Subject to certain limitations imposed upon ERP Debt Securities
issued in book-entry form, the ERP Debt Securities of any series
will be exchangeable for other ERP Debt Securities of the same
series and of a like aggregate principal amount and tenor of
different authorized denominations upon surrender of the ERP
Debt Securities at the corporate trust office of the Trustee
referred to above. In addition, subject to certain limitations
imposed upon ERP Debt Securities issued in book-entry form, the
ERP Debt Securities of any series may be surrendered for
conversion, registration of transfer or exchange thereof at the
corporate trust office of the Trustee. Every debt security
surrendered for conversion, registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of
transfer. No service charge will be made for any registration of
transfer or exchange of any ERP Debt Securities, but we may
require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith
(Section 305). If the applicable prospectus supplement
refers to any paying, transfer or other agent (in addition to
the Trustee) initially designated by us with respect to any
series of ERP Debt Securities, we may at any time rescind the
designation of any agent or approve a change in the location
through which any agent acts, except that we will be required to
maintain a transfer agent in each place of payment for the
applicable series. We may at any time designate additional
transfer agents with respect to any series of ERP Debt
Securities (Section 1002).
Neither we nor the Trustee shall be required to:
(1) issue, register the transfer of or exchange ERP Debt
Securities of any series during a period beginning at the
opening of business 15 days before any selection of ERP
Debt Securities of that series to be redeemed and ending at the
close of business on the day of mailing of the relevant notice
of redemption;
(2) register the transfer of or exchange any debt security,
or portion thereof, called for redemption, except the unredeemed
portion of any debt security being redeemed in part; or
(3) issue, register the transfer of or exchange any debt
security that has been surrendered for repayment at the option
of the holder, except the portion, if any, of the debt security
not to be so repaid (Section 305).
Merger, Consolidation or Sale. We may
consolidate with, or sell, lease or convey all or substantially
all of our assets to, or merge with or into any other entity,
provided that
(1) we will be the continuing entity, or the successor
entity will be an entity organized and existing under the laws
of the United States or a state thereof and will expressly
assume payment of the principal of and premium (if any) and any
interest (including all additional amounts, if any, payable
pursuant to Section 1012) on all of the ERP Debt
Securities and the due and punctual performance and observance
of all of the covenants and conditions contained in the
Indenture;
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(2) immediately after giving effect to the transaction and
treating any indebtedness which becomes our obligation or the
obligation of any of our subsidiaries as a result thereof as
having been incurred by us, or our subsidiary at the time of
such transaction, no event of default under the Indenture, and
no event which after notice or the lapse of time, or both, would
become an event of default, shall have occurred and be
continuing; and
(3) an officers certificate of Equity Residential, as
our general partner, and a legal opinion covering these
conditions shall have been delivered to the Trustee
(Sections 801 and 803).
Certain Covenants. This section describes
promises we make with respect to our securities issued pursuant
to the Indenture. ERP Debt Securities issued under the Indenture
prior to June 4, 2007, the date of the Third Supplemental
Indenture, have the benefits of certain covenants which are more
restrictive on us and our subsidiaries than the covenants
applicable to the ERP Debt Securities issued after June 4,
2007, including ERP Debt Securities offered pursuant to this
prospectus . See Other Indenture Covenants That
Only Apply to Certain Previously Issued ERP Debt
Securities.
Covenants
Contained in Third Supplemental Indenture.
Limitation on Outstanding Debt. We will not,
and will not permit any subsidiary to, incur any Debt, other
than intercompany Debt (representing Debt to which the only
parties are Equity Residential, us
and/or any
of our Subsidiaries (but only so long as such Debt is held
solely by any of Equity Residential, us and any subsidiary))
that is subordinate in right of payment of the ERP Debt
Securities, if, immediately after giving effect to the
incurrence of the additional Debt and the application of the
proceeds of that Debt, our total Debt would exceed 65% of our
Total Assets at the reporting date.
Ratio of Consolidated EBITDA to Annual Service
Charge. We will not, and will not permit any
subsidiary to, incur any Debt if the ratio of Consolidated
EBITDA to the Maximum Annual Service Charge for the four
consecutive fiscal quarters most recently ended prior to the
incurrence of the additional Debt is less than 1.5, on a pro
forma basis after giving effect to the incurrence of the
additional Debt and to the application of the proceeds from that
Debt, and calculated on the assumption that:
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the additional Debt and any other Debt incurred by us and our
Subsidiaries since the first day of the applicable four-quarter
period and the application of the proceeds of that Debt,
including to refinance other Debt, had occurred at the beginning
of that period;
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the repayment or retirement of any other Debt repaid or retired
by us and our Subsidiaries since the first day of that
four-quarter period occurred at the beginning of that period,
except that in determining the amount of Debt repaid or retired,
the amount of Debt under any revolving credit facility will be
computed based upon the average daily balance of that Debt
during that period;
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in the case of Acquired Debt or Debt incurred in connection with
any acquisition since the first day of that four-quarter period,
the related acquisition had occurred as of the first day of that
period with the appropriate adjustments with respect to the
acquisition being included in that pro forma calculation;
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any income earned as a result of any increase in Total Assets
since the end of that four-quarter period had been earned, on an
annualized basis, for that period; and
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in the case of any acquisition or disposition of any asset or
group of assets by us or any of our Subsidiaries since the first
day of that four-quarter period, whether by merger, stock
purchase or sale, or asset purchase or sale, the acquisition or
disposition or any related repayment of Debt had occurred as of
the first day of that period with the appropriate adjustments
with respect to the acquisition or disposition being included in
that pro forma calculation.
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Secured Debt. In addition to the foregoing
limitations on the incurrence of Debt, we will not, and will not
permit any subsidiary to, incur any Debt secured by any
mortgage, lien, charge, pledge, encumbrance or security interest
of any kind upon any of our property or the property of any
subsidiary if, immediately after giving effect to the incurrence
of the additional Debt and the application of the proceeds from
that Debt, the aggregate principal amount of all of our
outstanding Debt and the Debt of our subsidiaries on a
consolidated
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basis which is secured by any mortgage, lien, charge, pledge,
encumbrance or security interest on our property or the property
of any subsidiary is greater than 40% of our Total Assets.
Unencumbered Assets. In addition to the
covenants described above, the Third Supplemental Indenture also
requires us to maintain Total Unencumbered Assets of not less
than 125% of the aggregate outstanding principal amount of our
Unsecured Debt.
For purposes of the foregoing covenants regarding the limitation
on the incurrence of Debt, Debt shall be deemed to be
incurred by us and our subsidiaries on a
consolidated basis whenever we or any of our subsidiaries on a
consolidated basis shall create, assume, guarantee or otherwise
become liable in respect thereof (Third Supplemental Indenture).
In this section entitled Covenants Contained
in the Third Supplemental Indenture, we use several terms
that have special meanings relevant to the promises we make for
the benefit of the holders of ERP Debt Securities issued after
June 4, 2007. We define these terms as follows:
Acquired Debt means Debt of an entity
(i) existing at the time such entity becomes a subsidiary
or (ii) assumed in connection with the acquisition of
assets from such entity, in each case, other than Debt incurred
in connection with, or in contemplation of, such entity becoming
a subsidiary or such acquisition. Acquired Debt shall be deemed
to be incurred on the date of the related acquisition of assets
from any entity or the date the acquired entity becomes a
subsidiary (Third Supplemental Indenture).
Debt means any indebtedness of ours or any
subsidiary, whether or not contingent, in respect of
(1) borrowed money or evidenced by bonds, notes, debentures
or similar instruments,
(2) indebtedness secured by any mortgage, pledge, lien,
charge, encumbrance or any security interest existing on
property owned by us or any subsidiary,
(3) letters of credit or amounts representing the balance
deferred and unpaid of the purchase price of any property except
any such balance that constitutes an accrued expense or trade
payable, or
(4) any lease of property by us or any subsidiary as lessee
which is reflected on our consolidated balance sheet as a
capitalized lease in accordance with GAAP, in the case of items
of indebtedness incurred under (1) through (3) above
to the extent that any such items (other than letters of credit)
would appear as a liability on our consolidated balance sheet in
accordance with GAAP, and also includes, to the extent not
otherwise included, any obligation of ours or any subsidiary to
be liable for, or to pay, as obligor, guarantor or otherwise,
other than for purposes of collection in the ordinary course of
business, indebtedness of another person other than us or any
subsidiary, it being understood that Debt shall be deemed to be
incurred by us and our subsidiaries on a consolidated basis
whenever we or our subsidiaries shall create, assume, guarantee
or otherwise become liable in respect thereof (Section 101).
Capitalization Rate means 6.75% (Third
Supplemental Indenture).
Capitalized Property Value means, as of any
date, the aggregate sum of all Property EBITDA for each of our
properties for the prior four quarters and capitalized at the
applicable Capitalization Rate, provided, however, that if the
value of a particular property calculated in accordance with
this definition is less than the undepreciated book value of
that property determined in accordance with GAAP, the
undepreciated book value shall be used in lieu thereof with
respect to that property (Third Supplemental Indenture).
Consolidated EBITDA means, for any period of
time, without duplication, net earnings or losses, including the
net incremental gains or losses on sales of condominium units,
vacant land and other non-depreciated real property and
excluding net derivative gains or losses and gains or losses on
dispositions of REIT depreciable real estate investments as
reflected in the reports filed by us under the 1934 Act,
before deductions by us and our Subsidiaries, including amounts
reported in discontinued operations, for (1) interest
expense, including prepayment penalties; (2) provision for
taxes based on income; (3) depreciation, amortization and
all other non-cash items, as we determine in good faith,
deducted in arriving at net income or loss;
(4) extraordinary items; (5) non-recurring items, as
we determine in good faith; and (6) minority interest. In
each case for such period, we will reasonably determine the
amounts in accordance with GAAP, except to the
23
extent GAAP is not applicable with respect to the determination
of non-cash and non-recurring items. Consolidated EBITDA will be
adjusted, without duplication, to give pro forma effect:
(a) in the case of any assets having been
placed-in-service
or removed from service since the beginning of the period and on
or prior to the date of determination, to include or exclude, as
the case may be, any Consolidated EBITDA earned or eliminated as
a result of the placement of such assets in service or removal
of those assets from service as if the placement of those assets
in service or removal of those assets from service occurred at
the beginning of the period; and (b) in the case of any
acquisition or disposition of any asset or group of assets since
the beginning of the period and on or prior to the date of
determination, including, without limitation, by merger, or
share or asset purchase or sale, to include or exclude, as the
case may be, any Consolidated EBITDA earned or eliminated as a
result of the acquisition or disposition of those assets as if
the acquisition or disposition occurred at the beginning of the
period (Third Supplemental Indenture).
Maximum Annual Service Charge for any period
means the amount payable (including, if determined on a pro
forma basis, the maximum amount which may become payable) in any
12-month
period for interest on Debt (Section 101).
Property EBITDA is defined as, for any period
of time, without duplication, net earnings or losses, excluding
net derivative gains or losses and gains or losses on
dispositions of real estate, before deductions by us and our
Subsidiaries, including amounts reported in discontinued
operations, for (1) interest expense, including prepayment
penalties; (2) provision for taxes based on income;
(3) depreciation, amortization and all other non-cash
items, as we determine in good faith by us, deducted in arriving
at net income or loss; (4) extraordinary items;
(5) non-recurring items, as determined in good faith by us;
and (6) minority interest. In each case for the relevant
period, we will reasonably determine the amounts in accordance
with GAAP, except to the extent GAAP is not applicable with
respect to the determination of non-cash and non-recurring
items. For purposes of this definition, Property EBITDA will not
include corporate level general and administrative expenses and
other corporate expenses such as land holding costs, employee
and trustee stock and stock option expense and pursuit cost
write-offs as we determine in good faith (Third Supplemental
Indenture).
Stabilized Property means (1) with
respect to an acquisition of an income producing property, a
property becomes stabilized when we or our Subsidiaries have
owned the property for at least 4 full quarters and
(2) with respect to new construction or redevelopment
property, a property becomes stabilized 4 full quarters after
the earlier of (a) 18 months after substantial
completion of construction or redevelopment, and (b) the
quarter in which the physical occupancy level of the property is
at least 93% (Third Supplemental Indenture).
Total Assets mean, solely for the purposes of
the covenants contained in the Third Supplemental Indenture, the
sum of: (1) for Stabilized Properties, Capitalized Property
Value; and (2) for all other assets of ours and our
Subsidiaries, undepreciated book value as determined in
accordance with GAAP (but excluding accounts receivable and
intangibles) (Third Supplemental Indenture). With respect to the
covenants described under the caption Covenants
Contained in the Indenture Applicable to the ERP Debt
Securities the term Total Assets has the
meaning set forth below in that section.
Total Unencumbered Assets means the
sum of: (1) the Capitalized Property Values of Stabilized
Properties not subject to an encumbrance and (2) for all
other assets of ours and our Subsidiaries not subject to an
encumbrance, undepreciated book value of such assets as
determined in accordance with GAAP (but excluding accounts
receivable and intangibles) (Third Supplemental Indenture).
Unsecured Debt means all Debt of ours and our
Subsidiaries except Secured Debt (Third Supplemental Indenture).
Covenants
contained in the Indenture Applicable to the ERP Debt
Securities.
Restrictions on Distributions. We will not
make any distribution in respect of our partnership interests,
by reduction of capital or otherwise (other than distributions
payable in securities evidencing interests in our capital for
the purpose of acquiring interests in real property or
otherwise) if, immediately after the distribution
24
the aggregate of all distributions made since March 31,
1993 shall exceed our and our subsidiaries Funds from
Operations from March 31, 1993 until the end of the
calendar quarter covered in our Annual Report on
Form 10-K
or Quarterly Report on
Form 10-Q,
as the case may be, most recently filed with the SEC (or, if
such filing is not permitted under the Exchange Act, with the
Trustee) prior to the distribution; provided, however, that the
foregoing limitation shall not apply to any distribution which
is necessary to maintain Equity Residentials status as a
REIT under the Internal Revenue Code, if the aggregate principal
amount of all of our outstanding Debt and the Debt of our
subsidiaries on a consolidated basis at such time is less than
60% of Adjusted Total Assets (as defined in the original
indenture, Section 1004). Notwithstanding the foregoing, we
will not be prohibited from making the payment of any
distribution within 30 days of the declaration thereof if
at such date of declaration the payment would have complied with
the provisions of the immediately preceding paragraph
(Section 1005).
Funds from Operations for any period means
our Consolidated Net Income for the period without giving effect
to depreciation and amortization, gains or losses from
extraordinary items, gains or losses on sales of real estate,
gains or losses on investments in marketable securities and any
provision/benefit for income taxes for such period, plus funds
from operations of unconsolidated joint ventures, all determined
on a consistent basis in accordance with GAAP (Section 101).
Consolidated Net Income for any period means
the amount of our consolidated net income (or loss) and that of
our subsidiaries for such period determined on a consolidated
basis in accordance with GAAP (Section 101).
Total Assets as of any date means the sum of
(1) our and our subsidiaries Undepreciated Real
Estate Assets and (2) all other assets of ours and our
subsidiaries on a consolidated basis determined in accordance
with GAAP (but excluding intangibles and accounts receivable)
(Section 101).
Undepreciated Real Estate Assets as of any
date means the amount of real estate assets of ours and our
subsidiaries on such date, before depreciation and amortization
determined on a consolidated basis in accordance with GAAP
(Section 101).
Existence. Except as permitted under
Merger, Consolidation or Sale, we will do or cause
to be done all things necessary to preserve and keep in full
force and effect our existence, rights and franchises; provided,
however, that we shall not be required to preserve any right or
franchise if we determine that its preservation is no longer
desirable in the conduct of our business, and that the loss
thereof is not disadvantageous in any material respect to the
holders of the ERP Debt Securities (Section 1006).
Maintenance of Properties. We will cause all
of our properties used or useful in the conduct of our business
or the business of any of our subsidiaries to be maintained and
kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in our judgment may be necessary so
that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided,
however, that we shall not be prevented from selling or
otherwise disposing of properties for value in the ordinary
course of business (Section 1007).
Insurance. We will and will cause each of our
subsidiaries to keep all insurable properties insured against
loss or damage at least equal to their then fully insurable
value with financially sound and reputable insurers
(Section 1008).
Payment of Taxes and Other Claims. We will pay
or discharge or cause to be paid or discharged, before the same
shall become delinquent:
(1) all taxes, assessments and governmental charges levied
or imposed upon us or any of our subsidiaries or upon our or our
subsidiaries income, profits or property, and
(2) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon our or our
subsidiaries property; provided, however, that we will not
be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good
faith by appropriate proceedings (Section 1009).
25
Provision of Financial Information. The
holders of the ERP Debt Securities will be provided with copies
of our annual reports and quarterly reports. Whether or not we
are subject to Section 13 or 15(d) of the Exchange Act, we
will, to the extent permitted under the Exchange Act, file with
the SEC the annual reports, quarterly reports and other
documents which we would have been required to file with the SEC
pursuant to Section 13 or 15(d) if we were so subject, such
documents to be filed with the SEC on or prior to the respective
dates by which we would have been required so to file such
documents if we were so subject. We will also in any event
(1) within 15 days of each required filing date
(x) transmit by mail to all holders of ERP Debt Securities,
as their names and addresses appear in the security register,
without cost to such holders, copies of the annual reports and
quarterly reports which we would have been required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act
if we were subject to those Sections and (y) file with the
Trustee copies of the annual reports, quarterly reports and
other documents which we would have been required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act
if we were subject to those Sections, and
(2) if filing such documents by us with the SEC is not
permitted under the Exchange Act, promptly upon written request
and payment of the reasonable cost of duplication and delivery,
supply copies of the documents to any prospective holder
(Section 1010).
As used herein,
Make-Whole Amount means, in connection with
any optional redemption or accelerated payment of any series of
ERP Debt Securities, the excess, if any, of (1) the
aggregate present value as of the date of the redemption or
accelerated payment of each dollar of principal being redeemed
or paid and the amount of interest (exclusive of interest
accrued to the date of redemption or accelerated payment) that
would have been payable in respect of that dollar if such
redemption or accelerated payment had not been made, determined
by discounting, on a semiannual basis, such principal and
interest at the Reinvestment Rate (determined on the third
Business Day preceding the date such notice of redemption is
given or declaration of acceleration is made) from the
respective dates on which the principal and interest would have
been payable if the redemption or accelerated payment had not
been made, over (2) the aggregate principal amount of the
series of ERP Debt Securities being redeemed or paid.
Reinvestment Rate means 0.25% (one-fourth of
one percent) plus the yield under the heading Week
Ending published in the most recent Statistical Release
under the caption Treasury Constant Maturities for
the maturity (rounded to the nearest month) corresponding to the
remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly
corresponds to such maturity, yields for the two published
maturities most closely corresponding to such maturity shall be
calculated pursuant to the immediately preceding sentence and
the Reinvestment Rate shall be interpolated or extrapolated from
such yields on a straight-line basis, rounding in each of such
relevant periods to the nearest month. For the purposes of
calculating the Reinvestment Rate, the most recent Statistical
Release published prior to the date of determination of the
Make-Whole Amount shall be used.
Statistical Release means the statistical
release designated H.15(519) or any successor
publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United
States government securities adjusted to constant maturities,
or, if such statistical release is not published at the time of
any determination under the Indenture, then such other
reasonably comparable index which shall be designated by us.
subsidiary means a corporation, a limited
liability company or a partnership, a majority of the
outstanding voting stock or limited liability company or
partnership interests, as the case may be, of which is owned,
directly or indirectly, by us or by one or more other of our
subsidiaries. For the purposes of this definition,
voting stock means stock or interests having
voting power for the election of directors, managing members or
trustees, whether at all times or only so long as no senior
class of stock or interests has such voting power by reason of
any contingency (Section 101).
26
Other Indenture Covenants That Only Apply to Certain
Previously Issued ERP Debt Securities. The
covenants set forth in Section 1004 of the original
indenture and Article Two of the second supplemental
indenture (the non-applicable covenants) do not
apply to the ERP Debt Securities offered pursuant to this
prospectus. We do have outstanding ERP Debt Securities which
have the benefits of the non-applicable covenants, which are
more restrictive on us and our subsidiaries.
Additional Covenants
and/or
Modifications to the Covenants Described
Above. Any additional covenants
and/or
modifications to the covenants described above with respect to
any series of ERP Debt Securities will be set forth in the
prospectus supplement relating thereto.
Events of Default, Notice and
Waiver. Indenture provides that the following
events are events of default with respect to the ERP
Debt Securities issued thereunder:
(1) default in the payment of any interest on or Additional
Amounts with respect to any debt security of such series when
due and payable and continuance of such default for a period of
30 days;
(2) default in the payment of the principal of (or premium,
if any, on) any debt security of such series at its maturity;
(3) default in the performance, or breach, of any other
covenant or warranty of ours contained in the Indenture (other
than a covenant or warranty added to the Indenture solely for
the benefit of a series of ERP Debt Securities issued thereunder
other than such series), continued for 60 days after
written notice as provided in the applicable Indenture;
(4) a default under any bond, debenture, note or other
evidence of indebtedness of ours, or under any mortgage,
indenture or other instrument of ours under which there may be
issued or by which there may be secured any indebtedness of ours
(or by any subsidiary, the repayment of which we have guaranteed
or for which we are directly responsible or liable as obligor or
guarantor on a full recourse basis) whether such indebtedness
now exists or shall hereafter be created, which default shall
constitute a failure to pay an aggregate principal amount
exceeding $10,000,000 of such indebtedness when due and payable
after the expiration of any applicable grace period with respect
thereto and shall have resulted in such indebtedness in an
aggregate principal amount exceeding $10,000,000 becoming or
being declared due and payable prior to the date on which it
would otherwise have become due and payable, without such
indebtedness having been discharged, or such acceleration having
been rescinded or annulled, within a period of 10 days
after there shall have been given to us by the trustee or by the
holders of at least 10% in principal amount of the outstanding
ERP Debt Securities of that series a written notice specifying
such default and requiring us to cause such indebtedness to be
discharged or cause such acceleration to be rescinded or
annulled;
(5) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator
or trustee of ours, any Significant Subsidiary or all or
substantially all of our or their property; and
(6) any other event of default provided with respect to the
ERP Debt Securities of a particular series. (Section 501).
Significant Subsidiary means any subsidiary
of ours which is a Significant Subsidiary (within
the meaning of
Regulation S-X,
promulgated under the Securities Act).
If an event of default under the Indenture with respect to ERP
Debt Securities of any series at the time outstanding occurs and
is continuing, then in every such case the Trustee or the
holders of not less than 25% of the principal amount of the
outstanding ERP Debt Securities of that series will have the
right to declare the principal of (or, if the ERP Debt
Securities of that series are original issue discount securities
or indexed securities, such portion of the principal amount as
may be specified in the terms thereof) and premium (if any) on
all of the ERP Debt Securities of that series to be due and
payable immediately by written notice thereof to us (and to the
Trustee if given by the holders). However, at any time after
such a declaration of acceleration with respect to ERP Debt
Securities of any series has been made, but before a judgment or
decree for payment of the money due has been obtained by the
Trustee, the holders of not less than a majority in principal
amount
27
of outstanding ERP Debt Securities of that series may rescind
and annul such declaration and its consequences if
(1) we shall have paid or deposited with the Trustee all
required payments of the principal of and premium (if any) and
interest on the outstanding ERP Debt Securities of such series
that have become due otherwise than by such declaration of
acceleration, plus certain fees, expenses, disbursements and
advances of the Trustee, and
(2) all events of default, other than the non-payment of
accelerated principal or interest, with respect to the ERP Debt
Securities of such series have been cured or waived as provided
in the Indenture (Section 502).
The Indenture also provides that the holders of not less than a
majority in principal amount of the outstanding ERP Debt
Securities of any series may waive any past default with respect
to such series and its consequences, except a default
(x) in the payment of the principal of or premium (if any)
or interest on or Additional Amounts payable in respect of any
debt security of such series or (y) in respect of a
covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the holder of each
outstanding debt security of such series affected thereby
(Section 513).
The Trustee will be required to give notice to the holders of
ERP Debt Securities within 90 days of a default under the
Indenture, unless the default shall have been cured or waived;
provided, however, that the Trustee may withhold notice to the
holders of any series of ERP Debt Securities of any default with
respect to that series (except a default in the payment of the
principal of or premium (if any) or interest on or any
Additional Amounts with respect to any debt security) if and so
long as the responsible officers of the Trustee consider such
withholding to be in the interest of those holders
(Section 601).
The Indenture provides that no holders of ERP Debt Securities of
any series may institute any proceedings, judicial or otherwise,
with respect to the Indenture or for any remedy thereunder,
except in the case of failure of the Trustee, for 60 days,
to act after it has received a written request to institute
proceedings in respect of an event of default from the holders
of not less than 25% in principal amount of the outstanding ERP
Debt Securities of such series, as well as an offer of indemnity
reasonably satisfactory to it (Section 507). This provision
will not prevent, however, any holder of ERP Debt Securities
from instituting suit for the enforcement of payment of the
principal of and premium (if any) and interest on such ERP Debt
Securities at the respective due dates thereof
(Section 508).
Subject to provisions in the Indenture relating to its duties in
case of default, the Trustee is under no obligation to exercise
any of its rights or powers under the Indenture at the request
or direction of any holders of any series of ERP Debt Securities
then outstanding under the Indenture, unless such holders shall
have offered to the Trustee reasonable security or indemnity
(Section 602). The holders of not less than a majority in
principal amount of the outstanding ERP Debt Securities of any
series shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the
Trustee, or of exercising any trust or power conferred upon the
Trustee. However, the Trustee may refuse to follow any direction
which is in conflict with any law or the Indenture, which may
involve the Trustee in personal liability or which may be unduly
prejudicial to the holders of ERP Debt Securities of such series
not joining therein (Section 512).
Within 120 days after the end of each fiscal year, we must
deliver to the Trustee a certificate, signed by one of several
specified officers of Equity Residential as to the
officers knowledge of our compliance with all conditions
and covenants under the Indenture, and, in the event of any
noncompliance, specifying each instance of noncompliance and the
nature and status thereof (Section 1011).
Modification of the Indenture. Modifications
and amendments of the Indenture may be made only with the
consent of the holders of not less than a majority in principal
amount of all outstanding ERP Debt Securities issued under the
Indenture which are affected by the modification or amendment;
provided,
28
however, that no such modification or amendment may, without the
consent of the holder of each outstanding debt security affected
thereby:
(1) change the stated maturity of the principal of (or
premium, if any, on), or any installment of principal of or
interest on, any debt security;
(2) reduce the principal amount of, or the rate or amount
of interest on, or premium payable upon the redemption of, any
debt security;
(3) adversely affect any right of repayment at the option
of the holder of any debt security;
(4) change the place of payment, or the currency, for
payment of principal of any debt security or any premium or
interest on any debt security;
(5) impair the right to institute suit for the enforcement
of any payment on or with respect to any debt security on or
after the stated maturity thereof (or in the case of redemption
or repayment at the option of the holder, on or after the
redemption date or repayment date);
(6) reduce the above-stated percentage of outstanding ERP
Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof
or certain defaults and consequences thereunder or to reduce the
quorum or voting requirements set forth in the Indenture; or
(7) modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past defaults or
certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions
may not be modified or waived without the consent of the holder
of each outstanding debt security affected thereby
(Section 902).
The holders of not less than a majority in principal amount of
outstanding ERP Debt Securities of each series affected thereby
have the right to waive our compliance with certain covenants in
the Indenture (Section 1013).
Modifications and amendments of the Indenture may be permitted
to be made by us and the Trustee without the consent of any
holders of ERP Debt Securities for any of the following purposes:
(1) to evidence the succession of another person as obligor
under the Indenture;
(2) to add to our covenants for the benefit of the holders
of all or any series of ERP Debt Securities or to surrender any
right or power conferred upon us in Indenture;
(3) to add events of default for the benefit of the holders
of all or any series of ERP Debt Securities;
(4) to change or eliminate any of the provisions of the
Indenture, provided that any such change or elimination shall
become effective only when there is no debt security outstanding
of any series created prior to the modification or amendment
which is entitled to the benefit of such provision;
(5) to secure the ERP Debt Securities;
(6) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trusts
under the Indenture by more than one Trustee;
(7) to cure any ambiguity, defect or inconsistency in the
Indenture, provided that such action shall not adversely affect
the interests of holders of ERP Debt Securities of any series
issued under the Indenture in any material respect; or
(8) to supplement any of the provisions of the Indenture to
the extent necessary to permit or facilitate defeasance and
discharge of any series of ERP Debt Securities, provided that
such action shall not adversely affect the interests of the
holders of the ERP Debt Securities of any series in any material
respect (Section 901).
The Indenture provides that in determining whether the holders
of the requisite principal amount of outstanding ERP Debt
Securities have given any request, demand, authorization,
direction, notice, consent or
29
waiver thereunder or whether a quorum is present at a meeting of
holders of ERP Debt Securities, ERP Debt Securities owned by us,
or by any other obligor upon the ERP Debt Securities or any
affiliate of ours, Equity Residential or of any other obligor,
shall be disregarded.
The Indenture contains provisions for convening meetings of the
holders of ERP Debt Securities of a series (Section 1501).
A meeting may be called at any time by the Trustee, and also,
upon request, by us or by the holders of at least 10% in
principal amount of the outstanding ERP Debt Securities of such
series, or in any such case, upon notice given as provided in
the Indenture (Section 1502). Except for any consent that
must be given by the holder of each debt security affected by
certain modifications and amendments of the Indenture, any
resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the
affirmative vote of the holders of a majority in principal
amount of the outstanding ERP Debt Securities of that series;
provided, however, that, except as referred to above, any
resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be
made, given or taken by the holders of a specified percentage,
which is less than a majority, in principal amount of the
outstanding ERP Debt Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum
is present by the affirmative vote of the holders of such
specified percentage in principal amount of the outstanding ERP
Debt Securities of that series. Any resolution passed or
decision taken at any meeting of holders of ERP Debt Securities
of any series duly held in accordance with the Indenture will be
binding on all holders of ERP Debt Securities of that series.
The quorum at any meeting called to adopt a resolution, and at
any reconvened meeting, will be persons holding or presenting a
majority in principal amount of the outstanding ERP Debt
Securities of a series; provided, however, that if any action is
to be taken at such meeting with respect to a consent or waiver
which may be given by the holders of not less than a specified
percentage in principal amount of the outstanding ERP Debt
Securities of a series, the persons holding or representing such
specified percentage in principal amount of the outstanding ERP
Debt Securities will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be
taken at a meeting of holders of ERP Debt Securities of any
series with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that the
Indenture expressly provides may be made, given or taken by the
holders of a specified percentage in principal amount of all
outstanding ERP Debt Securities affected thereby, or of the
holders of any series and one or more additional series:
(1) there shall be no minimum quorum requirement for the
meeting; and
(2) the principal amount of the outstanding ERP Debt
Securities of the series that vote in favor of the request,
demand, authorization, direction, notice, consent, waiver or
other action shall be taken into account in determining whether
such request, demand, authorization, direction, notice, consent,
waiver or other action has been made, given or taken under the
Indenture (Section 1504).
Discharge, Defeasance and Covenant
Defeasance. We may discharge certain obligations
to holders of any series of ERP Debt Securities that either have
become due and payable or will become due and payable within one
year (or scheduled for redemption within one year) by
irrevocably depositing with the Trustee, in trust, funds in an
amount sufficient to pay and discharge the entire indebtedness
on such ERP Debt Securities in respect of principal and premium
(if any) and interest to the date of such deposit (if such ERP
Debt Securities have become due and payable) or to the stated
maturity or redemption date, as the case may be
(Section 401).
The Indenture provides that, if the provisions of
Article Fourteen of the Indenture are made applicable to
the ERP Debt Securities of or within any series pursuant to
Section 301 of the Indenture, we may elect either
(1) to defease and be discharged from any and all
obligations with respect to such ERP Debt Securities (except for
the obligations to register the transfer or exchange of such ERP
Debt Securities, to replace temporary or mutilated, destroyed,
lost or stolen ERP Debt Securities, to maintain an office or
agency in respect of such ERP Debt Securities and to hold moneys
for payment in trust) (referred to herein as
defeasance) (Section 1402), or
30
(2) to be released from its obligations with respect to
such ERP Debt Securities under Sections 1004 to 1010,
inclusive, of the Indenture (being the restrictions described
under Certain Covenants) and any omission to comply
with such obligations shall not constitute a default or an event
of default with respect to such ERP Debt Securities (referred to
herein as covenant defeasance) (Section 1403),
in either case upon the irrevocable deposit by us with the
Trustee, in trust, of an amount, in cash or Government
Obligations (as defined below), or both, which through the
scheduled payment of principal and interest in accordance with
their terms will provide money in an amount sufficient without
reinvestment to pay the principal of and premium (if any) and
interest on such ERP Debt Securities on the scheduled due dates
therefor.
Such a trust may only be established if, among other things, we
have delivered to the applicable Trustee an opinion of counsel
(as specified in the Indenture) to the effect that the holders
will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of defeasance or covenant
defeasance and will be subject to U.S. federal income tax
on the same amounts, in the same manner and at the same times as
would have been the case if the defeasance or covenant
defeasance had not occurred, and the opinion of counsel, in the
case of defeasance, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable United
States federal income tax law occurring after the date of the
Indenture (Section 1404).
Government Obligations means securities that
are (1) direct obligations of the United States of America,
for the payment of which its full faith and credit is pledged or
(2) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of
America, that are not callable or redeemable at the option or
the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to
any Government Obligation or specific payment of interest on or
principal of any Government Obligation held by the custodian for
the account of the holder of a depository receipt, provided that
(except as required by law) the custodian is not authorized to
make any deduction from the amount payable to the holder of the
depository receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced
by the depository receipt.
In the event we effect covenant defeasance with respect to any
ERP Debt Securities, and those ERP Debt Securities are declared
due and payable because of the occurrence of any event of
default other than the event of default described in
clause (3) under Events of Default, Notice and
Waiver with respect to Sections 1004 to 1010,
inclusive, of the Indenture (which Sections would no longer be
applicable to such ERP Debt Securities), the amount of
Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on such ERP Debt Securities at the
time of their stated maturity but may not be sufficient to pay
amounts due on such ERP Debt Securities at the time of the
acceleration resulting from the event of default. However, we
would remain liable to make payment of such amounts due at the
time of acceleration.
The applicable prospectus supplement may further describe the
provisions, if any, permitting such defeasance or covenant
defeasance including any modifications to the provisions
described above, with respect to the ERP Debt Securities of or
within a particular series.
Optional Redemption of Securities. Unless
otherwise indicated in the prospectus supplement relating to any
series of ERP Debt Securities, the ERP Debt Securities may be
redeemed at any time at our option, in whole or in part, at the
redemption price set forth in the prospectus supplement to be
determined at the time the ERP Debt Securities are issued.
From and after notice has been given as provided in the
Indenture, if funds for the redemption of any ERP Debt
Securities called for redemption shall have been made available
on the redemption date, such ERP Debt Securities will cease to
bear interest on the date fixed for such redemption specified in
such notice and the only right of the holders of the ERP Debt
Securities will be to receive payment of the redemption price.
Notice of optional redemption of any ERP Debt Securities will be
given to holders at their addresses, as shown in the security
register, not more than 60 nor less than 30 days prior to
the date fixed for redemption.
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The notice of redemption will specify, among other items, the
redemption price and the principal amount of the ERP Debt
Securities held by the holder to be redeemed.
If we elect to redeem ERP Debt Securities, we will notify the
Trustee at lease 45 days prior to the redemption date (or
such shorter period as satisfactory to the Trustee) of the
aggregate principal amount of ERP Debt Securities to be redeemed
and the redemption date. If less than all the ERP Debt
Securities are to be redeemed, the Trustee shall select the ERP
Debt Securities to be redeemed in such manner as it shall deem
fair and appropriate.
Subordination. If the ERP Debt Securities are
subordinated debt securities, they may be subordinated to all or
a portion of the senior debt securities issued and outstanding
or issued in the future.
Book-Entry System. Unless otherwise indicated
in the prospectus supplement, the ERP Debt Securities will
initially be issued in the form of one or more global ERP Debt
Securities, in registered form, without coupons. Unless
otherwise specified in the prospectus supplement, The Depository
Trust Company (DTC) will act as depository for
the global ERP Debt Securities. The global ERP Debt Securities
will be issued as fully-registered securities registered in the
name of Cede & Co. (DTCs partnership nominee) or
such other name as may be requested by an authorized
representative of DTC. You should refer to the prospectus
supplement for more detailed information with respect to the
issuance of definitive securities and the terms thereof, and the
terms of the depositary arrangements we have made with respect
to any global security.
So long as the depository, or its nominee, is the registered
owner of a global debt security, such depository or such
nominee, as the case may be, will be considered the owner of
such global debt security for all purposes under the Indenture,
including for any notices and voting. Except in limited
circumstances, the owners of beneficial interests in one or more
global ERP Debt Securities will not be entitled to have such
securities registered in their names, will not receive or be
entitled to receive physical delivery of any such securities and
will not be considered the registered holder thereof under the
Indenture. Accordingly, each person holding a beneficial
interest in a global debt security must rely on the procedures
of the depository and, if such person is not a direct
participant, on procedures of the direct participant through
which such person holds its interest, to exercise any of the
rights of a registered owner of such security.
The laws of some jurisdictions may require that some purchasers
of securities take physical delivery of securities in definitive
form. These laws may impair the ability to transfer or pledge
beneficial interests in global ERP Debt Securities.
Global ERP Debt Securities may be exchanged in whole for
certificated securities only if the depository notifies us that
it is unwilling or unable to continue as depository for the
global ERP Debt Securities or the depository has ceased to be a
clearing agency registered under the 1934 Act and, in
either case, we thereupon fail to appoint a successor depository
within 90 days of our receipt of notice of such an event.
DTC is under no obligation to provide its services as depositary
for the global ERP Debt Securities of any series and may
discontinue providing its services at any time. We may also
decide to discontinue use of the system of book-entry-only
transfers through DTC (or a successor securities depository). In
any such case, we have agreed to notify the trustee in writing
that, upon surrender by the direct participants and indirect
participants of their interest in such global ERP Debt
Securities, certificated securities representing such ERP Debt
Securities will be delivered to DTC and issued to each person
that such direct participants and indirect participants and the
depository identify as being the beneficial owner of such global
ERP Debt Securities.
The following is based solely on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New
York Banking Law, a banking organization within the
meaning of the New York Banking Law, a member of the Federal
Reserve System, a clearing corporation within the
meaning of the New York Uniform Commercial Code, and a
clearing agency registered pursuant to the
provisions of Section 17A of the 1934 Act. DTC holds
securities that its direct participants deposit with DTC. DTC
also facilitates the post-trade settlement among direct
participants of sales and other securities transactions in
deposited securities, through electronic computerized book-entry
transfers and pledges between direct participants
accounts. This eliminates the need for physical movement of
securities certificates. Direct participants include both
32
U.S. and
non-U.S. securities
brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust &
Clearing Corporation (DTCC). DTCC is the holding
company for DTC, National Securities Clearing Corporation and
Fixed Income Clearing Corporation, all of which are registered
clearing agencies. DTCC is owned by the users of its regulated
subsidiaries. Access to the DTC system is also available to
others such as both U.S. and
non-U.S. securities
brokers and dealers, banks, trust companies, and clearing
corporations that clear through or maintain a custodial
relationship with a direct participant, either directly or
indirectly, which are referred to as indirect participants and,
together with direct participants, the participants. The DTC
rules applicable to its participants are on file with the SEC.
Purchases of ERP Debt Securities through the DTC system must be
made by or through direct participants, which will receive a
credit for such purchases of ERP Debt Securities on the records
maintained by DTC or its nominee. The ownership interest of each
actual purchaser of each debt security is in turn to be recorded
on the direct and indirect participants records. These
beneficial owners will not receive written confirmation from DTC
of their purchase; however, we expect that they receive written
confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the direct or
indirect participant through which the beneficial owner entered
into the transaction. Transfers of ownership interests in the
ERP Debt Securities are to be accomplished by entries made on
the books of direct and indirect participants acting on behalf
of beneficial owners. Beneficial owners will not receive
certificates representing their ownership interests in the ERP
Debt Securities, except in the event that use of the book-entry
system for the ERP Debt Securities is discontinued or in other
limited circumstances.
To facilitate subsequent transfers, all ERP Debt Securities
deposited by direct participants with DTC are registered in the
name of DTCs partnership nominee, Cede & Co., or
such other name as may be requested by an authorized
representative of DTC. The deposit of ERP Debt Securities with
DTC and their registration in the name of Cede & Co.
or such other DTC nominee does not effect any change in
beneficial ownership. DTC has no knowledge of the actual
beneficial owners of the ERP Debt Securities. DTCs records
reflect only the identity of the direct participants to whose
accounts such ERP Debt Securities are credited, which may or may
not be the beneficial owners. The direct and indirect
participants will remain responsible for keeping account of
their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants,
and by direct participants and indirect participants to
beneficial owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in
effect from time to time. Beneficial owners of ERP Debt
Securities may wish to take certain steps to augment
transmission to them of notices of significant events with
respect to the ERP Debt Securities, such as redemptions,
tenders, defaults, and proposed amendments to documents. For
example, beneficial owners of global ERP Debt Securities may
wish to ascertain that the nominee holding the ERP Debt
Securities for their benefit has agreed to obtain and transmit
notices to beneficial owners, in the alternative, beneficial
owners may wish to provide their names and addresses to the
registrar and request that copies of the notices be provided
directly to them.
Redemption notices shall be sent to DTC. If less than all of the
ERP Debt Securities of a series are being redeemed, DTCs
practice is to determine by lot the amount of the interest of
each direct participant in such issue to be redeemed.
In any case where a vote may be required with respect to the ERP
Debt Securities of any series, neither DTC nor Cede &
Co. (nor any other DTC nominee) will consent or vote with
respect to the global ERP Debt Securities unless authorized by a
direct participant in accordance with DTCs procedures.
Under its usual procedures, DTC mails an omnibus proxy to us as
soon as possible after the record date. The omnibus proxy
assigns Cede & Co.s consenting or voting rights
to those direct participants identified in a listing attached to
the omnibus proxy and to whose accounts the ERP Debt Securities
are credited on the record date.
Principal, interest and premium payments, if any, on the global
ERP Debt Securities will be made to Cede & Co., as
nominee of DTC, or such other nominee as may be requested by an
authorized representative of DTC. DTCs practice is to
credit direct participants accounts upon DTCs
receipt of funds and corresponding detail information from us or
the trustee, on the applicable payment date in accordance with
33
their respective holdings shown on DTCs records. We also
expect that payments by participants to beneficial owners will
be governed by standing instructions and customary practices, as
is the case with securities held for the accounts of customers
in bearer form or registered in street name, and
will be the responsibility of such participant and not of DTC,
the trustee or us, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of
principal, interest and premium, if any, to Cede & Co.
is the responsibility of the trustee and us. Disbursement of
such payments to direct participants is the responsibility of
DTC, and disbursement of such payments to the beneficial owners
shall be the responsibility of the participants.
The information in this section concerning DTC and DTCs
book-entry system has been obtained from sources, including DTC,
that we believe to be reliable; however, we take no
responsibility for the accuracy of this information.
The underwriters of ERP Debt Securities may be direct
participants of DTC. The descriptions of the operations and
procedures set forth above are provided solely as a matter of
convenience. These operations and procedures are solely within
the control of the respective settlements systems and are
subject to change from time to time. None of the trustee, us or
any agent for payment on or registration of transfer or exchange
of any debt security will have any responsibility or liability
for any aspect of the records relating to or payments made on
account of beneficial interests in such debt security or for
maintaining, supervising or reviewing any records relating to
such beneficial interests.
Guarantees
of EQR Debt Securities
At its sole option, ERP Operating Partnership may guarantee
(either fully or unconditionally or in a limited manner) the due
and punctual payment of the principal of, and any premium and
interest on, one or more series of EQR Debt Securities, whether
at maturity, by acceleration, redemption, repayment or
otherwise, in accordance with the terms of such guarantee and
the indenture for such EQR Debt Securities, dated as of a date
prior to their issuance. The particular terms of the guarantee,
if any, will be set forth in a prospectus supplement and
supplemental indenture relating to the guaranteed EQR Debt
Securities.
FEDERAL
INCOME TAX CONSIDERATIONS RELATED TO COMMON SHARES
General
The following discussion summarizes all the federal income tax
considerations anticipated to be material to a holder of Common
Shares. The applicable prospectus supplement will contain
information about additional federal income tax considerations,
if any, relating to Securities other than Common Shares. The
following discussion, which is not exhaustive of all possible
tax considerations, does not give a detailed discussion of any
state, local or foreign tax considerations. Nor does it discuss
all of the aspects of federal income taxation that may be
relevant to a prospective shareholder in light of his or her
particular circumstances or to certain types of shareholders
(including insurance companies, tax-exempt entities, financial
institutions or broker-dealers, foreign corporations and persons
who are not citizens or residents of the United States) who are
subject to special treatment under the federal income tax laws.
The specific tax attributes of a particular shareholder could
have a material impact on the tax considerations associated with
the purchase, ownership and disposition of common shares.
Therefore, it is essential that each prospective shareholder
consult with his or her own tax advisors with regard to the
application of the federal income tax laws to the
shareholders personal tax situation, as well as any tax
consequences arising under the laws of any state, local or
foreign taxing jurisdiction.
EACH PROSPECTIVE PURCHASER OF SECURITIES IS ADVISED TO CONSULT
WITH HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO HIM OR HER, IN LIGHT OF HIS OR HER SPECIFIC OR
UNIQUE CIRCUMSTANCES, OF THE PURCHASE, OWNERSHIP AND SALE OF
SECURITIES IN AN ENTITY ELECTING TO BE TAXED AS A REIT,
INCLUDING THE
34
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF
SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
The information in this section is based on the current Internal
Revenue Code, current, temporary and proposed Treasury
regulations, the legislative history of the Internal Revenue
Code, current administrative interpretations and practices of
the Internal Revenue Service, including its practices and
policies as set forth in private letter rulings, which are not
binding on the Internal Revenue Service, and existing court
decisions. Future legislation, regulations, administrative
interpretations and court decisions could change current law or
adversely affect existing interpretations of current law. Any
change could apply retroactively. Thus, it is possible that the
Internal Revenue Service could challenge the statements in this
discussion, which do not bind the Internal Revenue Service or
the courts, and that a court could agree with the Internal
Revenue Service.
Our
Taxation
We elected REIT status beginning with the year that ended
December 31, 1992. In any year in which we qualify as a
REIT, we generally will not be subject to federal income tax on
the portion of our REIT taxable income or capital gain that we
distribute to our shareholders. This treatment substantially
eliminates the double taxation that applies to most
corporations, which pay a tax on their income and then
distribute dividends to shareholders who are in turn taxed on
the amount they receive. We elected taxable REIT subsidiary
status for certain of our corporate subsidiaries, primarily
those engaged in condominium conversion and sale activities. We
will be subject to federal income taxes for activities performed
by our taxable REIT subsidiaries.
We will be subject to federal income tax at regular corporate
rates upon our REIT taxable income or capital gain that we do
not distribute to our shareholders. In addition, we will be
subject to a 4% excise tax if we do not satisfy specific REIT
distribution requirements. We could also be subject to the
alternative minimum tax on our items of tax
preference. In addition, any net income from prohibited
transactions (i.e., dispositions of property, other than
property held by a taxable REIT subsidiary, held primarily for
sale to customers in the ordinary course of business) will be
subject to a 100% tax. We could also be subject to a 100%
penalty tax on certain payments received from or on certain
expenses deducted by a taxable REIT subsidiary if any such
transaction is not respected by the Internal Revenue Service. If
we fail to satisfy the 75% gross income test or the 95% gross
income test (described below) but have maintained our
qualification as a REIT because we satisfied certain other
requirements, we will still generally be subject to a 100%
penalty tax on the amount by which we fail such gross income
test. If we fail to satisfy any of the REIT asset tests
(described below) by more than a de minimis amount, due
to reasonable cause, and we nonetheless maintain our REIT
qualification because of specified cure provisions, we will be
required to pay a tax equal to the greater of $50,000 or the
highest corporate tax rate multiplied by the net income
generated by the non-qualifying assets. If we fail to satisfy
any provision of the Internal Revenue Code that would result in
our failure to qualify as a REIT (other than a violation of the
REIT gross income or asset tests described below) and the
violation is due to reasonable cause, we may retain our REIT
qualification but we will be required to pay a penalty of
$50,000 for each such failure. Moreover, we may be subject to
taxes in certain situations and on certain transactions that we
do not presently contemplate.
Our qualification and taxation as a REIT depend upon our ability
to satisfy on a continuing basis, through actual annual
operating and other results, various requirements under the
Internal Revenue Code, with regard to, among other things, the
sources of our gross income, the composition of our assets, the
level of our dividends to shareholders, and the diversity of our
share ownership. We believe that we have qualified as a REIT for
each of our taxable years commencing with our taxable year ended
December 31, 1992, and that our current structure and
method of operation is such that we will continue to qualify as
a REIT.
DLA Piper LLP (US) has provided an opinion to the effect that we
were organized and have operated in conformity with the
requirements for qualification and taxation as a REIT under the
Internal Revenue Code for its taxable years ended
December 31, 1992 through December 31, 2009, and that
our current organization and method of operation should enable
us to continue to meet the requirements for qualification and
taxation as a REIT for our taxable year ending December 31,
2010 and thereafter. It must be emphasized that this opinion is
based on various assumptions and factual representations made by
us and the Operating Partnership
35
relating to our organization, prior and expected operations, the
Operating Partnership, and all of the various partnerships,
limited liability companies and corporate entities in which we
presently have an ownership interest, or in which we had an
ownership interest in the past. DLA Piper LLP (US) will not
review our compliance with these requirements on a continuing
basis. No assurance can be given that the actual results of our
operations, the Operating Partnership, and the subsidiary
entities, the sources of their gross income, the composition of
their assets, the level of our dividends to shareholders and the
diversity of our share ownership for any given taxable year will
satisfy the requirements under the Internal Revenue Code for
qualification and taxation as a REIT.
If we fail to qualify for taxation as a REIT in any taxable year
and the relief provisions described herein do not apply, we will
be subject to tax on our taxable income at regular corporate
rates. We also may be subject to the corporate alternative
minimum tax. As a result, our failure to qualify as a REIT
would significantly reduce the cash we have available to
distribute to our shareholders. Unless entitled to statutory
relief, we would be disqualified as a REIT for the four taxable
years following the year during which qualification was lost. It
is not possible to state whether we would be entitled to
statutory relief.
Our qualification and taxation as a REIT depend on our ability
to satisfy various requirements under the Internal Revenue Code.
We are required to satisfy these requirements on a continuing
basis through actual annual operating and other results.
Accordingly, there can be no assurance that we will be able to
continue to operate in a manner so as to remain qualified as a
REIT.
Ownership of Taxable REIT Subsidiaries by
Us. The Internal Revenue Code provides that REITs
may own greater than ten percent of the voting power and value
of the securities of taxable REIT subsidiaries or
TRSs, which are corporations subject to tax as a
regular C corporation that have elected, jointly
with a REIT, to be a TRS. Generally, a taxable REIT subsidiary
may own assets that cannot otherwise be owned by a REIT and can
perform impermissible tenant services (discussed below), which
would otherwise taint our rental income under the REIT income
tests. However, the REIT will be obligated to pay a 100% penalty
tax on some payments that we receive or on certain expenses
deducted by our TRSs if the economic arrangements between us,
our tenants and the TRS are not comparable to similar
arrangements among unrelated parties. A TRS may also receive
income from prohibited transactions without incurring the 100%
federal income tax liability imposed to REITs. Income from
prohibited transactions may include the purchase and sale of
land, the purchase and sale of completed development properties
and the sale of condominium units.
TRSs pay federal and state income tax at the full applicable
corporate rates. The amount of taxes paid on impermissible
tenant services income and the sale of real estate held
primarily for sale to customers in the ordinary course of
business may be material in amount. The TRSs will attempt to
minimize the amount of these taxes, but we cannot guarantee
whether, or the extent to which, measures taken to minimize
these taxes will be successful. To the extent that these
companies are required to pay taxes, less cash may be available
for distributions to shareholders.
Share Ownership Test and Organizational
Requirement. In order to qualify as a REIT, our
shares of beneficial interest must be held by a minimum of
100 persons for at least 335 days of a taxable year
that is 12 months, or during a proportionate part of a
taxable year of less than 12 months. Also, not more than
50% in value of our shares of beneficial interest may be owned
directly or indirectly by applying certain constructive
ownership rules, by five or fewer individuals during the last
half of each taxable year. In addition, we must meet certain
other organizational requirements, including, but not limited
to, that (i) the beneficial ownership in us is evidenced by
transferable shares and (ii) we are managed by one or more
trustees. We believe that we have satisfied all of these tests
and all other organizational requirements and that we will
continue to do so in the future. In order to ensure compliance
with the 100 person test and the 50% share ownership test
discussed above, we have placed certain restrictions on the
transfer of our shares that are intended to prevent further
concentration of share ownership. However, such restrictions may
not prevent us from failing these requirements, and thereby
failing to qualify as a REIT.
36
Gross Income Tests. To qualify as a REIT, we
must satisfy two gross income tests:
(1) At least 75% of our gross income for each taxable year
must be derived directly or indirectly from rents from real
property, investments in real estate
and/or real
estate mortgages, dividends paid by another REIT and from some
types of temporary investments; and
(2) At least 95% of our gross income for each taxable year
must be derived from any combination of income qualifying under
the 75% test and dividends, non-real estate mortgage interest
and gain from the sale or disposition of stock or securities.
To qualify as rents from real property for the purpose of
satisfying the gross income tests, rental payments must
generally be received from unrelated persons and not be based on
the net income of the resident. Also, the rent attributable to
personal property must not exceed 15% of the total rent. We may
generally provide services to residents without
tainting our rental income only if such services are
usually or customarily rendered in connection with
the rental of real property and not otherwise considered
impermissible services. If such services are
impermissible, then we may generally provide them without
deriving non-qualified income only if they are considered de
minimis in amount, or are provided through an independent
contractor from whom we derive no revenue and that meets other
requirements, or through a taxable REIT subsidiary.
We believe that the services provided to residents by us either
are usually or customarily rendered in connection with the
rental of real property and not otherwise considered
impermissible, or, if considered impermissible services, will
meet the de minimis test or will be provided by an
independent contractor or taxable REIT subsidiary. However, we
cannot provide any assurance that the Internal Revenue Service
will agree with these positions.
If we fail to satisfy one or both of the gross income tests for
any taxable year, we may nevertheless qualify as a REIT for the
year if we are entitled to relief under certain provisions of
the Internal Revenue Code. In this case, a penalty tax would
still be applicable as discussed above. Generally, it is not
possible to state whether in all circumstances we would be
entitled to the benefit of these relief provisions and in the
event these relief provisions do not apply, we will not qualify
as a REIT.
Asset Tests. In general, at the close of each
quarter of our taxable year, we must satisfy four tests relating
to the nature of our assets:
(1) At least 75% of the value of our total assets must be
represented by real estate assets (which include for this
purpose shares in other real estate investment trusts) and
certain cash related items;
(2) Not more than 25% of the value of our total assets may
be represented by securities other than those in the 75% asset
class;
(3) Except for equity investments in other REITs, qualified
REIT subsidiaries (i.e., corporations owned 100% by a REIT that
are not TRSs or REITs), or taxable REIT subsidiaries:
(a) the value of any one issuers securities owned by
us may not exceed 5% of the value of our total assets and
(b) we may not own more than 10% of the value of or the
voting securities of any one issuer; and
(4) Not more than 25% (20% for taxable years ending before
December 31, 2008) of the value of our total assets
may be represented by securities of one or more taxable REIT
subsidiaries.
The 10% value test described in clause (3)(b) above does not
apply to certain debt securities that fall within a safe harbor
under the Internal Revenue Code. Under the safe harbor, the
following are not considered securities held by us
for purposes of this 10% value test: (i) straight debt
securities, (ii) any loan of an individual or an estate,
(iii) certain rental agreements for the use of tangible
property, (iv) any obligation to pay rents from real
property, (v) any security issued by a state or any
political subdivision thereof, foreign government or Puerto Rico
only if the determination of any payment under such security is
not based on the profits of another entity or payments on any
obligation issued by such other entity, or (vi) any
security issued by a REIT. The timing and payment of interest or
principal on a security qualifying as straight debt may be
subject to a contingency provided that (A) such contingency
does not change the effective yield to maturity,
37
not considering a de minimis change which does not exceed
the greater of
1/4
of 1% or 5% of the annual yield to maturity or we own $1,000,000
or less of the aggregate issue price or value of the particular
issuers debt and not more than 12 months of unaccrued
interest can be required to be prepaid or (B) the
contingency is consistent with commercial practice and the
contingency is effective upon a default or the exercise of a
prepayment right by the issuer of the debt. If we hold
indebtedness from any issuer, including a REIT, the indebtedness
will be subject to, and may cause a violation of, the asset
tests, unless it is a qualifying real estate asset or otherwise
satisfies the above safe harbor. We currently own equity
interests in certain entities that have elected to be taxed as
REITs for federal income tax purposes and are not publicly
traded. If any such entity were to fail to qualify as a REIT, we
would not meet the 10% voting stock limitation and the 10% value
limitation and we would fail to qualify as a REIT. We believe
that we and each of the REITs we own an interest in have and
will comply with the foregoing asset tests for REIT
qualification. However, we cannot provide any assurance that the
Internal Revenue Service will agree with our determinations.
If we fail to satisfy the 5% or 10% asset tests described above
after a
30-day cure
period provided in the Internal Revenue Code, we will be deemed
to have met such tests if the value of our non-qualifying assets
is de minimis (i.e., does not exceed the lesser of 1% of
the total value of our assets at the end of the applicable
quarter or $10,000,000) and we dispose of the non-qualifying
assets within six months after the last day of the quarter in
which the failure to satisfy the asset tests is discovered. For
violations due to reasonable cause and not willful neglect that
are in excess of the de minimis exception described
above, we may avoid disqualification as a REIT under any of the
asset tests, after the
30-day cure
period, by disposing of sufficient assets to meet the asset test
within such six month period, paying a tax equal to the greater
of $50,000 or the highest corporate tax rate multiplied by the
net income generated by the non-qualifying assets and disclosing
certain information to the Internal Revenue Service. If we
cannot avail ourselves of these relief provisions, or if we fail
to timely cure any noncompliance with the asset tests, we would
cease to qualify as a REIT.
Annual Distribution Requirements. To qualify
as a REIT, we are generally required to distribute dividends,
other than capital gain dividends, to our shareholders each year
in an amount at least equal to 90% of our REIT taxable income.
These distributions must be paid either in the taxable year to
which they relate, or in the following taxable year if declared
before we timely file our tax return for the prior year and if
paid with or before the first regular dividend payment date
after the declaration is made. We intend to make timely
distributions sufficient to satisfy our annual distribution
requirements. To the extent that we do not distribute all of our
net capital gain or distribute at least 90%, but less than 100%
of our REIT taxable income, as adjusted, we are subject to tax
on these amounts at regular corporate rates. We will be subject
to a 4% excise tax on the excess of the required distribution
over the sum of amounts actually distributed and amounts
retained for which federal income tax was paid, if we fail to
distribute during each calendar year at least the sum of:
(1) 85% of our REIT ordinary income for the year;
(2) 95% of our REIT capital gain net income for the year;
and (3) any undistributed taxable income from prior taxable
years. A REIT may elect to retain rather than distribute all or
a portion of its net capital gains and pay the tax on the gains.
In that case, a REIT may elect to have its shareholders include
their proportionate share of the undistributed net capital gains
in income as long-term capital gains and receive a credit for
their share of the tax paid by the REIT. For purposes of the 4%
excise tax described above, any retained amounts would be
treated as having been distributed.
Ownership of Partnership Interests By Us. As a
result of our ownership of the Operating Partnership, we will be
considered to own and derive our proportionate share of the
assets and items of income of the Operating Partnership,
respectively, for purposes of the REIT asset and income tests,
including its share of assets and items of income of any
subsidiaries that are partnerships or limited liability
companies.
State and Local Taxes. We may be subject to
state or local taxation in various jurisdictions, including
those in which we transact business or reside. Our state and
local tax treatment may not conform to the federal income tax
treatment discussed above. Consequently, prospective
shareholders should consult their own tax advisors regarding the
effect of state and local tax laws on an investment in common
shares.
38
Taxation
of Domestic Shareholders Subject to United States
Tax
General. If we qualify as a REIT,
distributions made to our taxable domestic shareholders with
respect to their common shares, other than capital gain
distributions and distributions attributable to taxable REIT
subsidiaries, will be treated as ordinary income to the extent
that the distributions come out of earnings and profits. These
distributions will not be eligible for the dividends received
deduction for shareholders that are corporations nor will they
constitute qualified dividend income under the
Internal Revenue Code, meaning that such dividends will be taxed
at marginal rates applicable to ordinary income rather than the
special capital gain rates applicable to qualified dividend
income distributed to shareholders who satisfy applicable
holding period requirements. In determining whether
distributions are out of earnings and profits, we will allocate
our earnings and profits first to preferred shares and second to
the common shares. The portion of ordinary dividends which
represent ordinary dividends we receive from a TRS, will be
designated as qualified dividend income to REIT
shareholders and are eligible for preferential tax rates if paid
to our non-corporate shareholders.
To the extent we make distributions to our taxable domestic
shareholders in excess of our earnings and profits, such
distributions will be considered a return of capital. Such
distributions will be treated as a tax-free distribution and
will reduce the tax basis of a shareholders common shares
by the amount of the distribution so treated. To the extent such
distributions cumulatively exceed a taxable domestic
shareholders tax basis, such distributions are taxable as
a gain from the sale of shares. Shareholders may not include in
their individual income tax returns any of our net operating
losses or capital losses.
Dividends declared by a REIT in October, November, or December
are deemed to have been paid by the REIT and received by its
shareholders on December 31 of that year, so long as the
dividends are actually paid during January of the following
year. However, this treatment only applies to the extent of the
REITs earnings and profits existing on December 31.
To the extent the shareholder distribution paid in January
exceeds available earnings and profits as of December 31,
the excess is treated as a distribution taxable to shareholders
in the year paid. As such, for tax reporting purposes, January
distributions paid to our shareholders may be split between two
tax years.
Distributions made by us that we properly designate as capital
gain dividends will be taxable to taxable domestic shareholders
as gain from the sale or exchange of a capital asset held for
more than one year. This treatment applies only to the extent
that the designated distributions do not exceed our actual net
capital gain for the taxable year. It applies regardless of the
period for which a domestic shareholder has held his or her
common shares. Despite this general rule, corporate shareholders
may be required to treat up to 20% of certain capital gain
dividends as ordinary income.
Generally, we will classify a portion of our designated capital
gain dividends as a 15% rate gain distribution and the remaining
portion as an unrecaptured Section 1250 gain distribution.
A 15% rate gain distribution would be taxable to taxable
domestic shareholders that are individuals, estates or trusts at
a maximum rate of 15%. An unrecaptured Section 1250 gain
distribution would be taxable to taxable domestic shareholders
that are individuals, estates or trusts at a maximum rate of 25%.
If, for any taxable year, we elect to designate as capital gain
dividends any portion of the dividends paid or made available
for the year to holders of all classes of shares of beneficial
interest, then the portion of the capital gains dividends that
will be allocable to the holders of common shares will be the
total capital gain dividends multiplied by a fraction. The
numerator of the fraction will be the total dividends paid or
made available to the holders of the common shares for the year.
The denominator of the fraction will be the total dividends paid
or made available to holders of all classes of shares of
beneficial interest.
We may elect to retain (rather than distribute as is generally
required) net capital gain for a taxable year and pay the income
tax on that gain. If we make this election, shareholders must
include in income, as long-term capital gain, their
proportionate share of the undistributed net capital gain.
Shareholders will be treated as having paid their proportionate
share of the tax paid by us on these gains. Accordingly, they
will receive a tax credit or refund for the amount. Shareholders
will increase the basis in their common shares by the difference
39
between the amount of capital gain included in their income and
the amount of the tax they are treated as having paid. Our
earnings and profits will be adjusted appropriately.
In general, a shareholder will recognize gain or loss for
federal income tax purposes on the sale or other disposition of
common shares in an amount equal to the difference between:
(a) the amount of cash and the fair market value of any
property received in the sale or other disposition; and
(b) the shareholders adjusted tax basis in the common
shares.
The gain or loss will be capital gain or loss if the common
shares were held as a capital asset. Generally, the capital gain
or loss will be long-term capital gain or loss if the common
shares were held for more than one year.
In general, a loss recognized by a shareholder upon the sale of
common shares that were held for six months or less, determined
after applying certain holding period rules, will be treated as
long-term capital loss to the extent that the shareholder
received distributions that were treated as long-term capital
gains.
Taxation
of Domestic Tax-Exempt Shareholders
Most tax-exempt organizations are not subject to federal income
tax except to the extent of their unrelated business taxable
income, which is often referred to as UBTI. Unless a
tax-exempt shareholder holds its common shares as debt financed
property or uses the common shares in an unrelated trade or
business, distributions to the shareholder should not constitute
UBTI. Similarly, if a tax-exempt shareholder sells common
shares, the income from the sale should not constitute UBTI
unless the shareholder held the shares as debt financed property
or used the shares in a trade or business.
However, for tax-exempt shareholders that are social clubs,
voluntary employee benefit associations, supplemental
unemployment benefit trusts, and qualified group legal services
plans, income from owning or selling common shares will
constitute UBTI unless the organization is able to properly
deduct amounts set aside or placed in reserve so as to offset
the income generated by its investment in common shares. These
shareholders should consult their own tax advisors concerning
these set aside and reserve requirements which are set forth in
the Internal Revenue Code.
In addition, certain pension trusts that own more than 10% of a
pension-held REIT must report a portion of the
distributions that they receive from the REIT as UBTI. We have
not been and do not expect to be treated as a pension-held REIT
for purposes of this rule.
Taxation
of Foreign Shareholders
The following is a discussion of certain anticipated United
States federal income tax consequences of the ownership and
disposition of common shares applicable to a foreign
shareholder. For purposes of this discussion, a foreign
shareholder is any person other than:
(a) a citizen or resident of the United States;
(b) a corporation or partnership created or organized in
the United States or under the laws of the United States or of
any state thereof; or
(c) an estate or trust whose income is includable in gross
income for United States federal income tax purposes regardless
of its source.
Distributions by Us. Distributions by us to a
foreign shareholder that are neither attributable to gain from
sales or exchanges by us of United States real property
interests nor designated by us as capital gains dividends will
be treated as dividends of ordinary income to the extent that
they are made out of our earnings and profits. These
distributions ordinarily will be subject to withholding of
United States federal income tax on a gross basis at a 30% rate,
or a lower treaty rate, unless the dividends are treated as
effectively connected with the conduct by the foreign
shareholder of a United States trade or business. Please note
that under certain
40
treaties lower withholding rates generally applicable to
dividends do not apply to dividends from REITs. Dividends that
are effectively connected with a United States trade or business
will be subject to tax on a net basis at graduated rates, and
are generally not subject to withholding. Certification and
disclosure requirements must be satisfied before a dividend is
exempt from withholding under this exemption. A foreign
shareholder that is a corporation also may be subject to an
additional branch profits tax at a 30% rate or a lower treaty
rate.
We expect to withhold United States income tax at the rate of
30% on any distributions made to a foreign shareholder unless:
(a) a lower treaty rate applies and any required form or
certification evidencing eligibility for that reduced rate is
filed with us; or
(b) the foreign shareholder files an IRS
Form W-8ECI
with us claiming that the distribution is effectively connected
income.
A distribution in excess of our current or accumulated earnings
and profits will not be taxable to a foreign shareholder to the
extent that the distribution does not exceed the adjusted basis
of the shareholders common shares. Instead, the
distribution will reduce the adjusted basis of the common
shares. To the extent that the distribution exceeds the adjusted
basis of the common shares, it will give rise to gain from the
sale or exchange of the shareholders common shares. The
tax treatment of this gain is described below.
We intend to withhold at a rate of 30%, or a lower applicable
treaty rate, on the entire amount of any distribution not
designated as a capital gain distribution. In such event, a
foreign shareholder may seek a refund of the withheld amount
from the Internal Revenue Service if it is subsequently
determined that the distribution was, in fact, in excess of our
earnings and profits, and the amount withheld exceeded the
foreign shareholders United States tax liability with
respect to the distribution.
Any capital gain dividend with respect to any class of our stock
which is regularly traded on an established
securities market, will be treated as an ordinary dividend
described above, if the foreign shareholder did not own more
than 5% of such class of stock at any time during the one year
period ending on the date of the distribution. Foreign
shareholders generally will not be required to report
distributions received from us on United States federal income
tax returns and all distributions treated as dividends for
United States federal income tax purposes, including any capital
gain dividends, will be subject to a 30% United States
withholding tax (unless reduced or eliminated under an
applicable income tax treaty), as described above. In addition,
the branch profits tax will no longer apply to such
distributions.
Distributions to a foreign shareholder that we designate at the
time of the distributions as capital gain dividends, other than
those arising from the disposition of a United States real
property interest, generally will not be subject to United
States federal income taxation unless:
(a) the investment in the common shares is effectively
connected with the foreign shareholders United States
trade or business, in which case the foreign shareholder will be
subject to the same treatment as domestic shareholders, except
that a shareholder that is a foreign corporation may also be
subject to the branch profits tax, as discussed above; or
(b) the foreign shareholder is a nonresident alien
individual who is present in the United States for 183 days
or more during the taxable year and has a tax home
in the United States, in which case the nonresident alien
individual will be subject to a 30% tax on the individuals
capital gains.
Except as described above, under the Foreign Investment in Real
Property Tax Act (FIRPTA), distributions to a
foreign shareholder that are attributable to gain from sales or
exchanges of United States real property interests will cause
the foreign shareholder to be treated as recognizing the gain as
income effectively connected with a United States trade or
business. This rule applies whether or not a distribution is
designated as a capital gain dividend. Accordingly, foreign
shareholders generally would be taxed on these distributions at
the same rates applicable to United States shareholders, subject
to a special alternative minimum tax in the case of nonresident
alien individuals. In addition, a foreign corporate shareholder
might be subject to the
41
branch profits tax discussed above. We are required to withhold
35% of these distributions. The withheld amount can be credited
against the foreign shareholders United States federal
income tax liability.
Although the law is not entirely clear on the matter, it appears
that amounts we designate as undistributed capital gains in
respect of the common shares held by United States shareholders
would be treated with respect to foreign shareholders in the
same manner as actual distributions of capital gain dividends.
Under that approach, foreign shareholders would be able to
offset as a credit against the United States federal income tax
liability their proportionate share of the tax paid by us on
these undistributed capital gains. In addition, foreign
shareholders would be able to receive from the Internal Revenue
Service a refund to the extent their proportionate share of the
tax paid by us were to exceed their actual United States federal
income tax liability.
Foreign Shareholders Sales of Common
Shares. Gain recognized by a foreign shareholder
upon the sale or exchange of common shares generally will not be
subject to United States taxation unless the shares constitute a
United States real property interest within the
meaning of FIRPTA. The common shares will not constitute a
United States real property interest so long as we are a
domestically controlled REIT. A domestically controlled REIT is
a REIT in which at all times during a specified testing period
less than 50% in value of its stock is held directly or
indirectly by foreign shareholders. We believe that we are a
domestically controlled REIT. Therefore, we believe that the
sale of common shares will not be subject to taxation under
FIRPTA. However, because common shares and preferred shares are
publicly traded, we cannot guarantee that we will continue to be
a domestically controlled REIT. In any event, gain from the sale
or exchange of common shares not otherwise subject to FIRPTA
will be subject to United States tax, if either:
(a) the investment in the common shares is effectively
connected with the foreign shareholders United States
trade or business, in which case the foreign shareholder will be
subject to the same treatment as domestic shareholders with
respect to the gain; or
(b) the foreign shareholder is a nonresident alien
individual who is present in the United States for 183 days
or more during the taxable year and has a tax home in the United
States, in which case the nonresident alien individual will be
subject to a 30% tax on the individuals capital gains.
Even if we do not qualify as or cease to be a domestically
controlled REIT, gain arising from the sale or exchange by a
foreign shareholder of common shares still would not be subject
to United States taxation under FIRPTA as a sale of a United
States real property interest if:
(a) the class or series of shares being sold is
regularly traded, as defined by applicable IRS
regulations, on an established securities market such as the New
York Stock Exchange; and
(b) the selling foreign shareholder owned 5% or less of the
value of the outstanding class or series of shares being sold
throughout the five-year period ending on the date of the sale
or exchange.
If gain on the sale or exchange of common shares were subject to
taxation under FIRPTA, the foreign shareholder would be subject
to regular United States income tax with respect to the gain in
the same manner as a taxable United States shareholder, subject
to any applicable alternative minimum tax, a special alternative
minimum tax in the case of nonresident alien individuals and the
possible application of the branch profits tax in the case of
foreign corporations. The purchaser of the common shares would
be required to withhold and remit to the Internal Revenue
Service 10% of the purchase price.
Information
Reporting Requirement and Backup Withholding
We will report to our domestic shareholders and the Internal
Revenue Service the amount of distributions paid during each
calendar year and the amount of tax withheld, if any. Under
certain circumstances, domestic shareholders may be subject to
backup withholding. Backup withholding will apply only if such
domestic shareholder fails to furnish certain information to us
or the Internal Revenue Service. Backup withholding will not
apply with respect to payments made to certain exempt
recipients, such as corporations and tax-exempt organizations.
Domestic shareholders should consult their own tax advisors
regarding their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption.
Backup withholding
42
is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a domestic shareholder
will be allowed as a credit against such persons United
States federal income tax liability and may entitle such person
to a refund, provided that the required information is timely
furnished to the Internal Revenue Service.
Additional
Tax Consequences for Holders of Preferred Shares and Depositary
Shares
If we offer one or more series of Preferred Shares or Depositary
Shares, then there may be additional tax consequences for the
holders of such Preferred Shares or Depositary Shares. For a
discussion of any such additional consequences, see the
applicable prospectus supplement.
Sunset
of Reduced Tax Rate Provisions
Several of the tax considerations described herein are subject
to a sunset provision. The sunset provisions generally provide
that for taxable years beginning after December 31, 2010,
certain provisions that are currently in the Internal Revenue
Code will revert back to a prior version of those provisions.
These provisions include provisions related to the reduced
maximum income tax rate for long-term capital gains of 15%
(rather than 20%) for taxpayers taxed at individual rates, the
application of the 15% tax rate to qualified dividend income,
the reduced maximum income tax rate for ordinary income of 35%
(rather than 39.6%) for taxpayers taxed at individual rates and
certain other tax rate provisions described herein. Shareholders
are urged to consult their own tax advisors regarding the effect
of sunset provisions in their particular circumstances.
Recent
Legislation
Medicare Tax on Unearned Income. Newly enacted
legislation requires certain U.S. shareholders that are
individuals, estates or trusts to pay an additional 3.8% tax on,
among other things, dividends on and capital gains from the sale
or other disposition of stock for taxable years beginning after
December 31, 2012. U.S. shareholders should consult
their tax advisors regarding the effect, if any, of this
legislation on their ownership and disposition of Common Shares.
New Legislation Relating to Foreign
Accounts. Newly enacted legislation may impose
withholding taxes on certain types of payments made to
foreign financial institutions and certain other
non-U.S. shareholders.
Under this legislation, the failure to comply with additional
certification, information reporting and other specified
requirements could result in withholding tax being imposed on
payments of dividends and sales proceeds to
U.S. shareholders that own the shares through foreign
accounts or foreign intermediaries and certain
non-U.S. shareholders.
The legislation imposes a 30% withholding tax on dividends on,
and gross proceeds from the sale or other disposition of, our
stock paid to a foreign financial institution or to a foreign
nonfinancial entity, unless (i) the foreign financial
institution undertakes certain diligence and reporting
obligations or (ii) the foreign non-financial entity either
certifies it does not have any substantial U.S. owners or
furnishes identifying information regarding each substantial
U.S. owner. In addition, if the payee is a foreign
financial institution, it generally must enter into an agreement
with the U.S. Treasury that requires, among other things,
that it undertake to identify accounts held by certain
U.S. persons or
U.S.-owned
foreign entities, annually report certain information about such
accounts, and withhold 30% on payments to certain other account
holders. The legislation applies to payments made after
December 31, 2012. Holders of Common Shares should consult
their tax advisors regarding this legislation.
PLAN OF
DISTRIBUTION
We may sell the Securities to one or more underwriters for
public offering and sale by them or may sell the Securities to
investors directly or through agents. Any underwriter or agent
involved in the offer and sale of the Securities will be named
in the applicable prospectus supplement.
Underwriters may offer and sell the Securities at a fixed price
or prices, which may be changed, at prices related to the
prevailing market prices at the time of sale or at negotiated
prices. We may, from time to time, authorize underwriters acting
as our agents to offer and sell the Securities upon the terms
and conditions as
43
are set forth in the applicable prospectus supplement. In
connection with the sale of the Securities, underwriters may be
deemed to have received compensation from us in the form of
underwriting discounts or commissions and may also receive
commissions from purchasers of the Securities for whom they may
act as agent. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form
of discounts, concessions or commissions from the underwriters
and/or
commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by us to underwriters or
agents in connection with the offering of the Securities will be
set forth in the applicable prospectus supplement. The
prospectus supplement may further state that such underwriters
may allow discounts, concessions or commissions to participating
dealers. Underwriters, dealers and agents participating in the
distribution of the Securities may be deemed to be underwriters,
and any discounts and commissions received by them and any
profit realized by them on resale of the Securities may be
deemed underwriting discounts and commissions, under the
Securities Act. Underwriters, dealers and agents may be
entitled, under agreements entered into with us, to
indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If the applicable prospectus supplement indicates, we will
authorize underwriters or other persons acting as our agents to
solicit offers by certain institutions to purchase Securities
from us at the public offering price set forth in the prospectus
supplement pursuant to delayed delivery contracts providing for
payment and delivery on the date or dates stated in the
prospectus supplement. The amount of each contract and the
aggregate principal amount of Securities sold pursuant to
contracts shall be the respective amounts stated in the
applicable prospectus supplement. Contracts, when authorized,
may be made with institutions such as commercial and savings
banks, insurance companies, pension funds, investment companies,
educational and charitable institutions, and other institutions
but will in all cases be subject to our approval. Contracts will
not be subject to any conditions except (1) the purchase by
an institution shall not at the time of delivery be prohibited
under the laws of any jurisdiction in the United States to which
an institution is subject, and (2) if the Securities are
being sold to underwriters, we shall have sold to those
underwriters the total principal amount of the Securities less
the principal amount thereof covered by contracts.
Some of the underwriters, dealers or agents and their affiliates
may be customers of, engage in transactions with and perform
services for us and our subsidiaries in the ordinary course of
business.
EXPERTS
Ernst & Young LLP, independent registered public
accounting firm, has audited the consolidated financial
statements and schedules of Equity Residential and ERP Operating
Limited Partnership included in their Current Reports on
Form 8-K
dated September 14, 2010, and the effectiveness of Equity
Residentials and ERP Operating Limited Partnerships
internal control over financial reporting as of
December 31, 2009, as set forth in their reports, which are
incorporated by reference in this prospectus and elsewhere in
the registration statement. These financial statements and
schedules are incorporated by reference in reliance on
Ernst & Young LLPs reports, given on their
authority as experts in accounting and auditing.
LEGAL
MATTERS
The legality of the Securities offered hereby and certain tax
matters will be passed upon for us by DLA Piper LLP (US),
Chicago, Illinois.
44
Equity Residential
2,750,000 Common Shares
PROSPECTUS SUPPLEMENT
July 18, 2011