-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WnR2GC7De/zK7Kbfp3qkcebXwZD9QyIjmUCArVmF4jFcaKUoKCUdUiJP7xlXGXf0 MbCy/PTSxiyD9mRFLwK46A== 0000950131-97-003442.txt : 19970520 0000950131-97-003442.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950131-97-003442 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITY RESIDENTIAL PROPERTIES TRUST CENTRAL INDEX KEY: 0000906107 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 363877868 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-27153 FILM NUMBER: 97605929 BUSINESS ADDRESS: STREET 1: TWO N RIVERSIDE PLZ STREET 2: STE 400 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124661300 MAIL ADDRESS: STREET 1: TWO N RIVERSIDE PLAZA STREET 2: SUITE 450 CITY: CHICAGO STATE: IL ZIP: 60606 S-3 1 FORM S-3 As filed with the Securities and Exchange Commission on May 14, 1997 Registration No. 333- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 EQUITY RESIDENTIAL PROPERTIES TRUST (Exact name of Registrant as specified in its charter) Maryland 36-3877868 (State or other jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 (312) 474-1300 (Address, including zip code, and telephone number, including area code, of Principal Executive Offices) Douglas Crocker II President and Chief Executive Officer Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 (312) 474-1300 (Name, address, including zip code, and telephone number, including area code, of agent for Service) Copies to: Ruth Pinkham Haring, Esq. Rosenberg & Liebentritt, P.C. Two North Riverside Plaza, Suite 1515 Chicago, Illinois 60606 Approximate date of commencement of proposed sale to the public: As soon as possible after the effective date of this Registration Statement and from time to time as determined by market conditions. If the only securities being registered on this Form are being offered pursuant to distribution or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_]
=================================================================================================================================== Proposed Maximum Proposed Maximum Title of Each Amount to be Aggregate Price Per Aggregate Offering Amount of Registration Class of Securities(1) Registered(2)(3) Security(4) Price(2)(4) Fee(5) - ----------------------------------------------------------------------------------------------------------------------------------- Preferred Shares of Beneficial Interest(6)...................... Common Shares of Beneficial Interest, $.01 par value(7)...... $500,000,000 (9) $500,000,000 $151,515 Depositary Shares, representing Preferred Shares(8)............... ===================================================================================================================================
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- (Footnotes from previous page) (1) This Registration Statement also covers delayed delivery contracts which may be issued by the Registrant under which the counterparty may be required to purchase Preferred Shares, Common shares or Depositary Shares. Such contracts may be issued together with the specific Securities to which they relate. In addition, Securities registered hereunder may be sold separately, together or as units with other Securities registered hereunder. (2) In U.S. Dollars or the equivalent thereof denominated in one or more foreign currencies or units of two or more foreign currencies or composite currencies (such as European Currency Units). (3) Pursuant to Rule 429 under the Securities Act of 1933, as amended, the Prospectus included in this Registration Statement relates also to $349,769,287 of Preferred Shares, Common Shares and Depositary Shares registered on Form S-3 Registration No. 333-12211. (4) Estimated solely for purposes of calculating the registration fee. No separate consideration will be received for Common Shares that are issued upon conversion of Preferred Shares or Depositary Shares registered hereunder. The aggregate maximum offering price of all Securities issued pursuant to this Registration Statement will not exceed $500,000,000. (5) The registration fee has been calculated in accordance with Rule 457(o) under the Securities Act of 1933, as amended. (6) Such indeterminate number of Preferred Shares as may from time to time be issued at indeterminate prices. (7) Such indeterminate number of Common Shares as may from time to time be issued at indeterminate prices or issuable upon conversion of Preferred Shares or Depositary Shares registered hereunder. (8) To be represented by Depositary Receipts representing an interest in all or a specified portion of a Preferred Share. (9) Omitted pursuant to General Instruction II.D of Form S-3 under the Securities Act of 1933, as amended. EXPLANATORY NOTE Pursuant to an effective Form S-4 Registration Statement No. 333-24653 filed by Equity Residential Properties Trust (the "Company"), the Company and Wellsford Residential Property Trust ("Wellsford") are soliciting the consent of each of their respective shareholders in connection with the proposed merger of the Company with Wellsford (the "Merger"). For federal income tax law purposes, the transaction has been structured as the Merger of the Company into Wellsford; however, as discussed with the Staff of the Division of Corporation Finance of the Securities and Exchange Commission, the transaction for securities law purposes represents the acquisition of the multifamily business of Wellsford by the Company, with the Company issuing its common shares of beneficial interest to the Wellsford shareholders as consideration for the acquired business. The shareholders' meetings of each of the Company and Wellsford are scheduled to take place on May 28, 1997 with the closing of the Merger scheduled for May 30, 1997. The Company intends that the securities to be registered pursuant to this Registration Statement will be available for sale by the Company subsequent to the Merger. Preliminary Prospectus dated May 14, 1997 Subject to Completion PROSPECTUS EQUITY RESIDENTIAL PROPERTIES TRUST $849,769,287 Preferred Shares, Common Shares and Depositary Shares Equity Residential Properties Trust (the "Company") may from time to time offer (i) in one or more series its preferred shares of beneficial interest, $0.01 par value per share ("Preferred Shares"); (ii) common shares of beneficial interest, $0.01 par value per share ("Common Shares"); and (iii) in one or more series its Preferred Shares represented by depositary shares (the "Depositary Shares"), with an aggregate public offering price of up to $849,769,287 (or its equivalent based on the exchange rate at the time of sale) in amounts, at prices and on terms to be determined at the time of offering. The Preferred Shares, Common Shares and Depositary Shares (collectively, the "Securities") may be offered, separately or together, in separate series (with respect to Preferred Shares and Depositary Shares) in amounts, at prices and on terms to be described in one or more supplements to this Prospectus (a "Prospectus Supplement"). The specific terms of the Securities in respect of which this Prospectus is being delivered will be set forth in the applicable Prospectus Supplement and will include, where applicable: (i) in the case of 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. 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 the status of the Company as a real estate investment trust for federal income tax purposes. The applicable Prospectus Supplement also will contain information, where applicable, about the material U.S. 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 the Company, 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. See "Risk Factors" beginning on page 5 for a discussion of certain factors relating to an investment in the Securities. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is May , 1997. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this Prospectus and the documents incorporated by reference herein and any accompanying Prospectus Supplement, including those set forth in "Risk Factors" and "Use of Proceeds" herein, constitute "forward- looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forwarding-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions which will, among other things, affect demand for multifamily properties, availability and credit worthiness of prospective tenants, lease rents and the availability of financing, adverse changes in the real estate markets including, among other things, competition with other companies, risks of real estate acquisition, governmental actions and initiatives, and environmental/safety requirements. See "Risk Factors". AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). The Registration Statement, the exhibits and schedules forming a part thereof and the reports, proxy statements and other information filed by the Company with the Commission in accordance with the Exchange Act can be inspected and copied at the Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: Seven World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site at http://www.sec.gov containing reports, proxy and information statements and other information regarding registrants, including the Company, that file electronically with the Commission. In addition, the Common Shares and certain of the Company's Cumulative Redeemable Preferred Shares of Beneficial Interest are listed on the New York Stock Exchange (the Common Shares are listed under the symbol "EQR") and similar information concerning the Company can be inspected and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. The Company has filed with the Commission a registration statement on Form S-3 (the "Registration Statement"), of which this Prospectus is a part, under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Securities offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement, certain portions of which have been omitted as permitted by the rules and regulations of the Commission. Statements contained in this Prospectus as to the contents of any contract or other documents are not necessarily complete, and in each instance reference is made to the copy of such contract or other documents filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference and the exhibits and schedules thereto. For further information regarding the Company and the Securities, reference is hereby made to the Registration Statement and such exhibits and schedules which may be obtained from the Commission at its principal office in Washington, D.C. upon payment of the fees prescribed by the Commission. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The documents listed below have been filed by the Company under the Exchange Act with the Commission and are incorporated herein by reference: a. The Company's Annual Report on Form 10-K, as amended by Form 10-K/A (filed on April 3, 1997), for the year ended December 31, 1996. b. The Company's Amended and Restated Declaration of Trust (the "Declaration of Trust") filed as Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the three- and six-month periods ended June 30, 1995. c. The Company's Amended and Restated Bylaws, filed as an exhibit to the Company's Registration Statement on Form S-11, No. 33-63158 dated July 26, 1993, as amended. d. The Company's Joint Proxy Statement/Prospectus/Information Statement dated April 25, 1997. 2 e. The description of the Company's Common Shares contained in the Company's Registration Statement on Form 8-A/A dated August 10, 1993. f. The Company's Quarterly Report on Form 10-Q for the three-month period ended March 31, 1997. g. The Company's Current Reports on Form 8-K dated May 23, 1996, November 15, 1996, January 17, 1997, March 12, 1997, March 17, 1997, March 19, 1997, March 20, 1997 and March 24, 1997 and the Company's Current Reports on Form 8-K/A dated May 23, 1996 and November 15, 1996. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of all Securities to which this Prospectus relates shall be deemed to be incorporated by reference in this Prospectus and to be part hereof from the date of filing such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained in the Prospectus (in the case of a statement in a previously filed document incorporated or deemed to be incorporated by reference herein), in any applicable Prospectus Supplement relating to a specific offering of Securities, or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus or any accompanying Prospectus Supplement. Subject to the foregoing, all information appearing in this Prospectus and each accompanying Prospectus Supplement is qualified in its entirety by the information appearing in the documents incorporated by reference. Copies of all documents which are incorporated herein by reference (not including the exhibits to such information, unless such exhibits are specifically incorporated by reference in such information) will be provided without charge to each person, including any beneficial owner, to whom this Prospectus is delivered upon written or oral request. Requests should be directed to Equity Residential Properties Trust, Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606, Attention: Cynthia McHugh (telephone number: (312) 474-1300). 3 As used herein, the term "Company" includes Equity Residential Properties Trust and those entities owned or controlled by it (collectively, the "Subsidiaries"), unless the context indicates otherwise. THE COMPANY General Equity Residential Properties Trust, one of the largest publicly traded real estate investment trusts ("REITs") (based on the aggregate market value of its outstanding equity capitalization), is a self-administered and self-managed equity REIT. The Company was organized as a Maryland real estate investment trust in March 1993 and commenced operations as a publicly traded company on August 18, 1993 upon completion of its initial public offering (the "IPO"). The Company was formed to continue the multifamily property business objectives and acquisition strategies of certain affiliated entities controlled by Mr. Samuel Zell, Chairman of the Board of Trustees of the Company. These entities had been engaged in the acquisition, ownership and operation of multifamily properties since 1969. The Company's senior executives average over 23 years of experience in the multifamily property business. The Company is the largest publicly traded REIT owner of multifamily properties (based on the number of apartment units owned and total revenues earned). All of the Company's interests in its multifamily properties (the "Properties") are held directly or indirectly by, and substantially all of its operations relating to the Properties are conducted through, ERP Operating Limited Partnership (the "Operating Partnership"). The Operating Partnership currently has four classes of limited partnership interests outstanding: (i) partnership interests ("OP Units"), which may be exchanged by the holders thereof for either common shares of beneficial interest of the Company, $0.01 par value per share ("Common Shares"), on a one-for-one basis or, at the Company's option, cash; (ii) 9 3/8% Cumulative Redeemable Preference Units ("9 3/8% Preference Units"); (iii) 9 1/8% Cumulative Redeemable Preference Units ("9 1/8% Series B Preference Units"); and (iv) 9 1/8% Series C Cumulative Redeemable Preference Units ("9 1/8% Series C Preference Units"). The 9 3/8% Preference Units, the 9 1/8% Series B Preference Units, and the 9 1/8% Series C Preference Units are owned by the Company and mirror the payments of distributions, including accrued and unpaid distributions upon redemption, and of the liquidating preference amount of the Company's 9 3/8% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $.01 par value per share (the "Series A Preferred Shares"), the Company's 9 1/8% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, $.01 par value per share (the "Series B Preferred Shares"), and the Company's 9 1/8% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, $.01 per value per share (the "Series C Preferred Shares"), respectively. The Company controls the Operating Partnership as the sole general partner and, as of May 1, 1997, owned approximately 88% of all of the Operating Partnership's outstanding partnership interests, excluding the 9 3/8% Preference Units, the 9 1/8% Series B Preference Units, and the 9 1/8% Series C Preference Units. It is the Company's policy that Equity Residential Properties Trust shall not incur indebtedness other than short-term trade, employee compensation, dividends payable or similar indebtedness that will be paid in the ordinary course of business, and that indebtedness shall instead be incurred by the Operating Partnership to the extent necessary to fund the business activities conducted by the Operating Partnership and its subsidiaries. The Company's corporate headquarters and executive offices are located at Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606, and its telephone number is (312) 474-1300. 4 RISK FACTORS Prospective investors should carefully consider, among other factors, the matters described below prior to making an investment decision regarding the Securities offered hereby. Adverse Consequences of Debt Financing and Preferred Shares General Risks. As of March 31, 1997, the Properties were subject to approximately $795.7 million of mortgage indebtedness and the Company's total debt equaled approximately $1.3 million, $288.2 million of which was floating rate debt. In addition, in June 1995, the Company issued 6,120,000 Series A Preferred Shares pursuant to a preferred share offering; in November 1995, the Company issued 5,000,000 depositary shares each representing a 1/10 fractional interest in a Series B Preferred Share pursuant to a depositary share offering; and in September 1996, the Company issued 4,600,000 depositary shares each representing a 1/10 fractional interest in a Series C Preferred Share pursuant to a depositary share offering (collectively, the "Preferred Share Offerings"). The Company used the proceeds from the Preferred Share Offerings to repay indebtedness and to acquire additional Properties. The Company is subject to the risks normally associated with debt or preferred equity financing, including the risk that the Company's cash flow will be insufficient to meet required payments of principal and interest, the risk that existing indebtedness may not be refinanced or that the terms of such refinancing will not be as favorable as the terms of current indebtedness and the risk that necessary capital expenditures for such purposes as renovations and other improvements may not be financed on favorable terms or at all. If the Company were unable to refinance its indebtedness on acceptable terms, or at all, the Company might be forced to dispose of one or more of the Properties on disadvantageous terms, which might result in losses to the Company and might adversely affect the cash available for distributions to shareholders. If interest rates or other factors at the time of the refinancing result in higher interest rates upon refinancing, the Company's interest expense would increase, which would affect the Company's ability to make distributions to its shareholders. Furthermore, if a Property is mortgaged to secure payment of indebtedness and the Company is unable to meet mortgage payments, the mortgagee could foreclose upon the Property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of income and asset value to the Company. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering the Company's ability to meet the REIT distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). Restrictions on the Company's Activities. A substantial portion of the Company's debt was issued pursuant to two different indentures (the "Indentures") which restrict the amount of indebtedness (including acquisition financing) the Company may incur. Accordingly, in the event that the Company is unable to raise additional equity or borrow money because of the debt restrictions in the indentures, the Company's ability to acquire additional properties may be limited. If the Company is unable to acquire additional properties, its ability to increase the distributions with respect to Common Shares, as it has done in the past, will be limited to management's ability to increase funds from operations, and thereby cash available for distributions, from the existing Properties in the Company's portfolio at such time. Bond Compliance Requirements. The Company owns several Properties that are subject to restrictive covenants or deed restrictions relating to current or previous tax-exempt bond financing and owns the bonds collateralized by several additional Properties. The Company has retained an independent outside consultant to monitor compliance with the restrictive covenants and deed restrictions that affect these Properties. The bond compliance requirements may have the effect of limiting the Company's income from certain of these Properties if the Company is required to lower its rental rates to attract low or moderate income tenants, or eligible/qualified tenants. Control and Influence by Significant Shareholders As of May 1, 1997, Mr. Zell, certain of the current holders (the "Zell Holders") of certain OP Units issued at the time of the IPO ("Original OP Units") to certain affiliates of Mr. Zell which contributed 33 of the Properties at the time of the IPO (the "Zell Original Owners"), Equity Properties Management Corp. ("EPMC") and other affiliates of Mr. Zell owned in the aggregate approximately 7.65% of the Common Shares (assuming that all of the partnership interests in the Operating Partnership are exchanged for Common Shares), and certain entities controlled by Starwood Capital Partners L.P. ("Starwood") and its affiliates which contributed 23 of the Properties at the time of the IPO (the "Starwood Original Owners") owned in the aggregate approximately 3.07% of the Common Shares (assuming that all of the OP Units are exchanged for Common Shares). The Starwood Original Owners, together with the Zell Original Owners, shall be referred to collectively as the "Original Owners." As of May 1, 1997, the Company had options outstanding to purchase approximately 3.4 million Common Shares which it has granted to certain officers, employees and trustees of the Company and 5 consultants to the Company, some of whom are affiliated with Mr. Zell, representing in the aggregate approximately 5.3% of the Common Shares (assuming that all such options are exercised for Common Shares and all of the outstanding OP Units are exchanged for Common Shares). Further, the consent of affiliates of Mr. Zell who are Zell Holders and of the Starwood Original Owners is required for certain amendments to the Operating Partnership's Fourth Amended and Restated ERP Operating Limited Partnership Agreement of Limited Partnership (the "Partnership Agreement"). Accordingly, Mr. Zell and the Starwood Original Owners may continue to have substantial influence over the Company, which influence might not be consistent with the interests of other shareholders, and on the outcome of any matters submitted to the Company's shareholders for approval. In addition, although there is no current agreement, understanding or arrangement for these shareholders to act together on any matter, these shareholders would be in a position to exercise significant influence over the affairs of the Company if they were to act together in the future. Potential Environmental Liability Affecting the Company Under various Federal, state and local environmental laws, ordinances and regulations, an owner of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on such property. These laws often impose environmental liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure properly to remediate such substances, may adversely affect the owner's ability to sell or rent the property or to borrow using the property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain laws impose liability for release of asbestos- containing materials ("ACMs") into the air and third parties may seek recovery from owners or operators of real properties for personal injury associated with ACMs. In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company or the Subsidiaries, as the case may be, may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as for certain other related costs, including governmental fines and injuries to persons and property. All of the Properties have been the subject of a Phase I and, in certain cases, a supplemental environmental assessment completed by qualified independent environmental consultant companies. The most recent environmental assessments for each of the Properties were conducted within the last five years. Environmental assessments were obtained prior to the acquisition by the Company of each of the Properties. These environmental assessments have not revealed, nor is the Company aware of, any environmental liability that the Company's management believes would have a material adverse effect on the Company's business, results of operations, financial condition or liquidity. No assurance can be given that existing environmental assessments with respect to any of the Properties reveal all environmental liabilities, that any prior owner of a Property did not create any material environmental condition not known to the Company, or that a material environmental condition does not otherwise exist as to any one or more Properties. General Real Estate Investment Considerations; Changes in Laws General. Real property investments are subject to varying degrees of risk and are relatively illiquid. Income from real property investments and the Company's resulting ability to make expected distributions to shareholders may be adversely affected by the general economic climate, local conditions such as oversupply of apartment units or a reduction in demand for apartment units in the area, the attractiveness of the Properties to tenants, zoning or other regulatory restrictions, the ability of the Company to provide adequate maintenance and insurance, and increased operating costs (including insurance premiums and real estate taxes). The Company's income would also be adversely affected if tenants were unable to pay rent or the Company were unable to rent apartment units on favorable terms. If the Company were unable to promptly relet units or renew the leases for a significant number of apartment units, or if the rental rates upon such renewal or reletting were significantly lower than expected rates, then the Company's funds from operations and ability to make expected distributions to shareholders may be adversely affected. In addition, certain expenditures associated with each equity investment (such as real estate taxes and maintenance costs) generally are not reduced when circumstances cause a reduction in income from the investment. Furthermore, real estate investments are relatively illiquid and, therefore, will tend to limit the ability of the Company to vary its portfolio promptly in response to changes in economic or other conditions. Changes in Laws. Increases in real estate taxes, income taxes and service or other taxes generally are not passed through to tenants under existing leases and may adversely affect the Company's funds from operations and its ability to make distributions to shareholders. Similarly, changes in laws increasing the potential liability for environmental conditions existing on properties or increasing 6 the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which would adversely affect the Company's funds from operations and its ability to make distributions to shareholders. Ownership Limit and Limits on Changes in Control 5% Ownership Limit; Inapplicability to Mr. Zell and Others. In order to maintain its qualification as a REIT under the Code, not more than 50% of the value of the outstanding shares of beneficial interest of the Company may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities). Certain beneficial owners of the Zell Holders and EPMC (i.e., beneficiaries of trusts established for the benefit of Mr. Zell and his family and trusts established for the benefit of the family of Mr. Robert Lurie, a deceased partner of Mr. Zell (the "Lurie Family Trusts")) and of the Starwood Original Owners (through their potential ownership rights of Common Shares) together constitute four individuals for purposes of this test and, under the Internal Revenue Service's (the "Service") rules applicable to determining percentages of ownership, will be deemed to own approximately 8.51% of the value of the outstanding shares of beneficial interest of the Company. Due to such concentration of ownership of the Company, ownership of more than 5% of the lesser of the number or value of the outstanding shares of beneficial interest of the Company by any single shareholder has been restricted, with certain exceptions, for the purpose of maintaining the Company's qualification as a REIT under the Code. Such restrictions in the Company's Declaration of Trust do not apply to the ownership of the 5,550,673 Common Shares subject to acquisition by the holders of Original OP Units and EPMC through the exchange of Original OP Units. Additionally, the Company's Declaration of Trust allows certain transfers of such Common Shares without the transferees being subject to the 5% ownership limit, provided such transfers do not result in an increased concentration in the ownership of the Company. The Company's Board of Trustees, upon receipt of a ruling from the Service, an opinion of counsel or other evidence satisfactory to the Board of Trustees and upon such other conditions as the Board of Trustees may direct, may also exempt a proposed transferee from this restriction. See "Description of Shares of Beneficial Interest--Common Shares--Restrictions on Transfer." The 5% ownership limit, as well as the ability of the Company to issue additional Common Shares or other shares of beneficial interest (which may have rights and preferences senior to the Common Shares), may discourage a change of control of the Company and may also (i) deter tender offers for the Common Shares, which offers may be advantageous to shareholders, and (ii) limit the opportunity for shareholders to receive a premium for their Common Shares that might otherwise exist if an investor were attempting to assemble a block of Common Shares in excess of 5% of the outstanding shares of beneficial interest of the Company or otherwise effect a change of control of the Company. Staggered Board. The Board of Trustees of the Company has been divided into three classes of trustees. As the term of each class expires, trustees for that class will be elected for a three-year term and the trustees in the other two classes will continue in office. The staggered terms for trustees may impede the shareholders' ability to change control of the Company even if a change in control were in the shareholders' interest. Preferred Shares. The Company's Declaration of Trust authorizes the Board of Trustees to issue up to 10,000,000 preferred shares of beneficial interest, $.01 par value per share ("Preferred Shares") and to establish the preferences and rights (including the right to vote and the right to convert into Common Shares) of any Preferred Shares issued. The power to issue Preferred Shares could have the effect of delaying or preventing a change in control of the Company even if a change in control were in the shareholders' interest. As of May 1, 1997, 7,080,000 Preferred Shares were issued and outstanding. Consequences of Failure to Qualify as a REIT Taxation as a Corporation. The Company believes that it has qualified and will continue to qualify as a REIT under the Code, commencing with its taxable year ended December 31, 1993. However, no assurance can be given that the Company was organized and has been operated and will be able to operate in a manner so as to qualify or remain so qualified. Qualification as a REIT involves the satisfaction of numerous requirements (some on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within the Company's control. If the Company were to fail to qualify as a REIT in any taxable year, the Company would be subject to Federal income tax (including any applicable alternative minimum tax) on its taxable income at corporate rates. Moreover, unless entitled to relief under certain statutory provisions, the Company also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. This treatment would reduce the net earnings of the Company available for investment or 7 distribution to shareholders because of the additional tax liability to the Company for the years involved. In addition, distributions to shareholders would no longer be required to be made. See "Federal Income Tax Considerations." Other Tax Liabilities. Even if the Company qualifies as a REIT, it will be subject to certain Federal, state and local taxes on its income and property. See "Federal Income Tax Considerations--Other Tax Considerations--State and Local Taxes." In addition, the Company's management operations, which are conducted through Equity Residential Properties Management Limited Partnership and Equity Residential Properties Management Limited Partnership II (collectively, the "Management Partnerships") generally will be subject to Federal income tax at regular corporate rates. See "Federal Income Tax Considerations--Other Tax Considerations." Consequences of Failure to Qualify as Partnerships. The Company believes that the Operating Partnership, the Management Partnerships and each of the other partnership and limited liability company Subsidiaries have been organized as partnerships and will qualify for treatment as such under the Code. If any of such Subsidiaries fails to qualify for such treatment under the Code, the Company would cease to qualify as a REIT, and such Subsidiary would be subject to Federal income tax (including any alternative minimum tax) on its income at corporate rates. See "Federal Income Tax Considerations--Taxation of the Company--Failure to Qualify" and "--Tax Aspects of the Company's Investments in Partnerships--General." Dependence on Key Personnel The Company is dependent on the efforts of its executive officers. While the Company believes that it could find replacements for these key personnel, the loss of their services could have a temporary adverse effect on the operations of the Company. None of these officers has entered into employment agreements with the Company. Distribution Requirements Potentially Increasing Indebtedness of the Company The Company may be required from time to time, under certain circumstances, to accrue as income for tax purposes interest and rent earned but not yet received. In such event, or upon the repayment by the Company or its Subsidiaries of principal on debt, the Company could have taxable income without sufficient cash to enable the Company to meet the distribution requirements of a REIT. Accordingly, the Company could be required to borrow funds or liquidate investments on adverse terms in order to meet such distribution requirements. See "Federal Income Tax Considerations--Taxation of the Company--Annual Distribution Requirements." Exemptions for Mr. Zell and Others from Maryland Business Combination Law which Tend to Inhibit Takeovers Under the Maryland General Corporation Law, as amended ("MGCL"), certain "business combinations" (including a merger, consolidation, share exchange or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland real estate investment trust and any person who beneficially owns 10% or more of the voting power of the trust's shares of beneficial interest or an affiliate of the trust who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the trust's shares of beneficial interest (an "Interested Shareholder"), or an affiliate of such Interested Shareholder, are prohibited for five years after the most recent date on which the Interested Shareholder becomes an Interested Shareholder. Thereafter, any such business combination must be recommended by the board of trustees of such trust and approved by the affirmative vote of at least (a) 80% of the votes entitled to be cast by holders of outstanding voting shares of beneficial interest of the trust and (b) two-thirds of the votes entitled to be cast by holders of voting shares of beneficial interest of the trust other than shares held by the Interested Shareholder with whom (or with whose affiliate) the business combination is to be effected, (unless, among other conditions, the holders of the common shares of the trust receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the Interested Shareholder for its common shares. As permitted by the MGCL, the Company has exempted any business combination involving Mr. Zell, the Zell Original Owners, EPMC and their respective affiliates and associates, present or future, or any other person acting in concert or as a group with any of the foregoing persons and, consequently, the five-year prohibition and the super-majority vote requirements will not apply to a business combination between any of them and the Company. As a result, Mr. Zell, the Zell Original Owners, EPMC, any present or future affiliate or associate of theirs or any other person acting in concert or as a group with any of the foregoing persons may be able to enter into business combinations with the Company, which may not be in the best interest of the shareholders, without compliance by the Company with the super-majority vote requirements and other provisions of the MGCL. 8 USE OF PROCEEDS Unless otherwise indicated in the accompanying Prospectus Supplement, the Company will contribute or otherwise transfer the net proceeds of any sale of Securities to the Operating Partnership in exchange for additional partnership interests in the Operating Partnership, the economic terms of which will be substantially identical to the Securities sold. The Operating Partnership will use such net proceeds for general business purposes including, without limitation, the repayment of certain outstanding debt and the acquisition of multifamily residential properties. DESCRIPTION OF SHARES OF BENEFICIAL INTEREST 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 Declaration of Trust (the "Declaration of Trust") and the amended and restated bylaws ("Bylaws") of the Company, each of which is incorporated herein by reference. The Declaration of Trust of the Company provides that the Company may issue up to 110,000,000 shares of beneficial interest, consisting of 100,000,000 Common Shares and 10,000,000 Preferred Shares. As of May 1, 1997, 53,746,768 Common Shares and 7,080,000 Preferred Shares were issued and outstanding. In addition, as of May 1, 1997, 7,321,356 Common Shares were issuable upon exchange of OP Units currently held by the Zell Holders, the Starwood Original Owners, EPMC and holders who were issued OP Units in exchange for the contribution of certain of the Properties to the Operating Partnership subsequent to the IPO. The OP Units are exchangeable on a one-for-one basis for Common Shares or, at the Company's option, cash. Both the Maryland REIT law and the Company's 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 status as a shareholder of the Company. The Company's Bylaws further provide that the Company shall indemnify each shareholder against any claim or liability to which the shareholder may become subject by reason of his being or having been a shareholder and that the Company shall reimburse each shareholder for all reasonable expenses incurred by him in connection with any such claim or liability. However, with respect to tort claims, contractual claims where shareholder liability is not so negated, claims for taxes and certain statutory liability, the shareholders may, in some jurisdictions, be personally liable to the extent that such claims are not satisfied by the Company. Inasmuch as the Company carries public liability insurance which it considers adequate, any risk of personal liability to shareholders is limited to situations in which the Company's assets plus its insurance coverage would be insufficient to satisfy the claims against the Company and its shareholders. Preferred Shares 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 Company's 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 nonassessable. The Company currently has outstanding 6,120,000 Series A Preferred Shares (liquidation preference $25.00 per share), 5,000,000 depositary shares representing a 1/10 fractional interest in 500,000 Series B Preferred Shares (liquidation preference $250.00 per share, equivalent to $25.00 per depositary share) and 4,600,000 depositary shares representing a 1/10 fractional interest in 460,000 Series C Preferred Shares (liquidation preference $250.00 per share, equivalent to $25.00 per depositary share) that are listed on the New York Stock Exchange under the symbols "EQR-PrA," "EQR-PrB," and "EQR-PrC," respectively. Distributions on the Series A Preferred Shares, the Series B Preferred Shares and the Series C 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 9 3/8%, 9 1/8% and 9 1/8%, respectively, of the liquidation preference per annum of such shares. The Series A Preferred Shares are not redeemable prior to June 1, 2000. On or after June 1, 2000, the Series A Preferred Shares may 9 be redeemed for cash at the option of the Company in whole or in part, at a redemption price of $25.00 per share, plus accrued and unpaid distributions, if any, thereon. The Series B Preferred Shares are not redeemable prior to October 15, 2005. On or after October 15, 2005, the Series B Preferred Shares may be redeemed for cash at the option of the Company in whole or in part, at a redemption price of $250.00 per share (equivalent to $25.00 per depositary share), plus accrued and unpaid distributions, if any, thereon. The Series C Preferred Shares are not redeemable prior to September 9, 2006. On or after September 9, 2006, the Series C Preferred C Shares may be redeemed for a cash at the option of the Company in whole or in part, at a redemption price of $250.00 per share (equivalent to $25.00 per depositary share), plus accrued and unpaid distributions, if any, thereon. The redemption price of such 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 A Preferred Shares, the Series B Preferred Shares and the Series C Preferred Shares have no stated maturity and are not subject to any sinking fund or mandatory redemption and are not convertible into any other securities of the Company. However, the Company may redeem Series A Preferred Shares, Series B Preferred Shares or Series C Preferred Shares in certain circumstances relating to maintenance of its status as a REIT for federal income tax purposes. See "--Redemption" and "--Restrictions on Transfer" below. 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 of the Company, 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. 10 Rank. Unless otherwise specified in the 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 of the Company, 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 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). 11 If, for any taxable year, the Company elects to designate as "capital gain dividends" (as defined in Section 857 of the Code) any portion (the "Capital Gains Amount") of the dividends (within the meaning of the 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 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 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 holder's 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 12 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 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 the Company's 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 13 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. Common Shares All Common Shares offered hereby will be duly authorized, fully paid and nonassessable. Subject to the preferential rights of any other shares of beneficial interest and to the provisions of the Company's 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 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. Subject to the provisions of the Company's Declaration of Trust regarding Excess Shares, each outstanding Common Share entitles the holder to one vote on all matters submitted to a vote of shareholders, including the election of Trustees, and, 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. 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 the Company's 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 dissolve, 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 REIT's declaration of trust. The Company's Declaration of Trust does not provide for a lesser percentage in such situations. 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 Code or the Maryland REIT law without the affirmative vote or written consent of the shareholders. The Company's Declaration of Trust permits such action by the Board of Trustees. The registrar and transfer agent for the Common Shares is Boston EquiServe Limited Partnership, an affiliate of The First National Bank of Boston. Restrictions on Transfer Because the Board of Trustees believes it is essential for the Company to continue 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 Code, more than 5% (the "Ownership Limit") of the lesser of the number of shares or value of the issued and outstanding shares of beneficial interest of the Company. The Board of Trustees, upon receipt of a ruling from the Service, an opinion of counsel or other evidence 14 satisfactory to the Board of Trustees and upon such other conditions as the Board of Trustees may direct, may also exempt a proposed transferee from the Ownership Limit. As a condition of such exemption, the intended transferee must give written notice to the Company of the proposed transfer no later than the fifteenth day prior to any transfer which, if consummated, would result in the intended transferee owning shares in excess of the Ownership Limit. Any transfer of Common or Preferred Shares that would (i) create a direct or indirect ownership of shares of beneficial interest in excess of the Ownership Limit, (ii) result in the shares of beneficial interest being owned by fewer than 100 persons, or (iii) result in the Company being "closely held" within the meaning of Section 856(h) of the Code, will be void ab initio, and the intended transferee will acquire no rights to the shares of beneficial interest. 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. The Company's Declaration of Trust exempts from the Ownership Limit certain of the beneficial owners of the Original Owners and EPMC, who would exceed the Ownership Limit as a result of the exchange of the OP Units for Common Shares, which OP Units were received by them at the time of the formation of the Company. These persons may also acquire additional shares of beneficial interest through the Company's Option and Award Plan, but in no event will such persons be entitled to acquire additional shares such that the five largest beneficial owners of the Company's shares of beneficial interest hold more than 50% in number or value of the total outstanding shares of beneficial interest. Any shares of beneficial interest the transfer of which would result in a person owning shares of beneficial interest in excess of the Ownership Limit or cause the Company to become "closely held" under Section 856(h) of the Code that is not otherwise permitted as provided above will constitute excess shares ("Excess Shares"), which will be transferred by operation of law to the Company as trustee for the exclusive benefit of the person or persons to whom the Excess Shares are ultimately transferred, until such time as the intended transferee retransfers the Excess Shares. While these Excess Shares are held in trust, they will not be entitled to vote or to share in any distributions or other distributions (except upon liquidation). Subject to the Ownership Limit, the Excess Shares may be retransferred by the intended transferee to any person (if the Excess Shares would not be Excess Shares in the hands of such person) at a price not to exceed the price paid by the intended transferee or, if the intended transferee did not give value for such Excess Shares (e.g., a transfer by gift or devise), the fair market value (as described below) at the time of the purported transfer that resulted in the Excess Shares, at which point the Excess Shares will automatically be exchanged for the shares of beneficial interest to which the Excess Shares are attributable. In addition, such Excess Shares held in trust are subject to purchase by the Company at a purchase price equal to the lesser of the price paid for the Excess Shares in the transaction that created such Excess Shares (or, in the case of a devise or gift, the fair market value at the time of such devise or gift) and the fair market value of the Common Shares to which such Excess Shares relate on the date the Company exercises its right to purchase. Fair market value will be the last sales price of such shares of beneficial interest reported on the New York Stock Exchange ("NYSE") on the trading day immediately preceding the relevant date, or if not then traded on the NYSE, the last reported sales price of such shares of beneficial interest on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over which such shares of beneficial interest may be traded, or if not then traded over any exchange or quotation system, then the fair market value of such shares of beneficial interest on the relevant date as determined in good faith by the Board of Trustees of the Company. The Company's right to purchase shall be for a period of 90 days after the later of the date of the purported transfer which resulted in the Excess Shares and the date the Board of Trustees determines in good faith that such a transfer has occurred. From and after the intended transfer to the intended transferee of the Excess Shares, the intended transferee shall cease to be entitled to distributions (except upon liquidation), voting rights and other benefits with respect to such shares except the right to payment of the purchase price for the shares or the retransfer of shares as provided above. Any distribution paid to a proposed transferee on Excess Shares prior to the discovery by the Company that such shares of beneficial interest have been transferred in violation of the provisions of the Company's Declaration of Trust shall be repaid to the Company upon demand. If the foregoing transfer restrictions are determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the intended transferee of any Excess Shares may be deemed, at the option of the Company, to have acted as an agent on behalf of the Company in acquiring such Excess Shares and to hold such Excess Shares on behalf of the Company. 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 Code, more than 5% (or such other percentage between 1/2 of 1% and 5% as provided in the rules and regulations promulgated under the Code) of the lesser of the number or value of the outstanding shares of beneficial interest of the Company must give a written notice to the Company by January 31 of each year. 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 15 with the provisions of the Code applicable to a REIT, to comply with the requirements of any taxing authority or governmental agency or to determine any such compliance. For the Company to qualify as a REIT under the Code, shares of beneficial interest must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the issued and outstanding shares of beneficial interest may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain tax-exempt entities) during the last half of a taxable year (other than the first year) or during a proportionate part of a shorter taxable year. Certain beneficial owners of the Zell Holders (i.e., beneficiaries of trusts established for the benefit of Mr. Zell and his family and the family of Mr. Robert Lurie, a deceased partner of Mr. Zell) and EPMC, together with the Starwood Original Owners (through their potential ownership of shares of beneficial interest) together constitute four individuals for purposes of this test and, under the Service's rules applicable to determining percentages of ownership, are deemed to own approximately 8.5% of the value of the outstanding shares of beneficial interest of the Company. 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. DESCRIPTION OF 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 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 filed as an exhibit to the Registration Statement of which this Prospectus is a part 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. 16 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 holder's 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 of Depositary Shares 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 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 of the Preferred Shares 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 holder's 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 of Preferred Shares 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 Company's status as a REIT. Nevertheless, if so 17 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 Depositary 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. 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 Company's 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 Company's 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, (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 or (iii) each share of the related Preferred Shares shall have been converted into shares of beneficial interest of the Company not so represented by Depositary 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. However, holders of Depositary Receipts will pay certain other transfer and other taxes and governmental charges as well as the fees and expenses of the Preferred Share Depositary for any duties requested by such holders to be performed which are outside of those expressly provided for in 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. 18 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. RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED SHARE DISTRIBUTIONS The following table sets forth the Company's ratios of earnings to combined fixed charges and preferred share distributions for the periods shown.
For the Years Ended December 31, -------------------------------- For the Three For the Three Months Ended Months Ended March 31, March 31, 1997 1996 1996 1995 1994 1993 1992 - ------------- ------------- ---- ---- ---- ---- ---- 1.72 1.53 1.59 1.54 2.18 1.25 .91
Ratio of earnings to combined fixed charges and preferred share distributions represents the ratio of income before gain on disposition of properties, extraordinary items and allocation to Minority Interests plus fixed charges (principally interest expense incurred) to fixed charges and preferred share distributions. The reorganization and recapitalization of the Company effected in connection with the IPO in 1993 permitted the Company to significantly deleverage the Properties resulting in an improved ratio of earnings to combined fixed charges and preferred share distributions for periods subsequent to the IPO. FEDERAL INCOME TAX CONSIDERATIONS General The following discussion summarizes all material federal income tax considerations 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. As used in this section, the term "Company" refers solely to Equity Residential Properties Trust. 19 EACH PROSPECTIVE PURCHASER OF SECURITIES IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM, IN LIGHT OF HIS SPECIFIC OR UNIQUE CIRCUMSTANCES, OF THE PURCHASE, OWNERSHIP AND SALE OF SECURITIES IN AN ENTITY ELECTING TO BE TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS. Taxation of the Company General. The Company elected REIT status commencing with its taxable year ending December 31, 1993. In the opinion of Hogan & Hartson L.L.P., which has acted as special tax counsel to the Company, the Company was organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code for its taxable years ended December 31, 1993, December 31, 1994, December 31, 1995 and December 31, 1996, and the Company's current organization and method of operation should enable it to continue to meet the requirements for qualification and taxation as a REIT. It must be emphasized that this opinion is based on various assumptions relating to the organization and operation of the Company, the Operating Partnership, the Management Partnerships, Equity Residential Properties Management Corp., Equity Residential Properties Management Corp. II and Equity Residential Properties Management Corp. III (collectively, the "Management Corps."), the limited partnerships and limited liability companies (the "Financing Partnerships") that own the beneficial interest of certain Properties encumbered by mortgage financing, and various qualified REIT subsidiaries wholly owned by the Company (each a "QRS Corporation") (collectively, the Management Partnerships, the Management Corps., the Financing Partnerships and the QRS Corporations may be referred to as the "Subsidiary Entities"), and is conditioned upon certain representations made by the Company and the Operating Partnership as to certain relevant factual matters, including matters related to the organization, expected operation, and assets of the Company, the Operating Partnership and the Subsidiary Entities. The Company's qualification and taxation as a REIT depend upon the Company's ability to meet on a continuing basis, through actual annual operating and other results, the various requirements under the Code and described in the Prospectus with regard to, among other things, the sources of its gross income, the composition of its assets, the level of its dividends to shareholders, and the diversity of its share ownership. Hogan & Hartson L.L.P. will not review the Company's compliance with these requirements on a continuing basis. No assurance can be given that the actual results of the operations of the Company, the Operating Partnership, and the Subsidiary Entities, the sources of their income, the nature of their assets, the level of the Company's dividends to shareholders and the diversity of its share ownership for any given taxable year will satisfy the requirements under the Code for qualification and taxation as a REIT. In any year in which the Company qualifies as a REIT, generally it will not be subject to Federal income tax on that portion of its REIT taxable income or capital gain which is distributed to shareholders. This treatment substantially eliminates the "double taxation" (at both the corporate and shareholder levels) that generally results from the use of corporate investment vehicles. The Company may, however, be subject to tax at normal corporate rates upon any taxable income or capital gain not distributed. If the Company should fail to satisfy either the 75% or the 95% gross income test (as discussed below), and nonetheless maintains its qualification as a REIT because certain other requirements are met, it will be subject to a 100% tax on the greater of the amount by which it fails the 75% or the 95% test, multiplied by a fraction intended to reflect its profitability. The Company will also be subject to a tax of 100% on net income from any "prohibited transaction," as described below. In addition, if the Company should fail to distribute during each calendar year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income for such year, and (iii) any undistributed taxable income from prior years, the Company would be subject to a 4% excise tax on the excess of such required distribution over the amounts actually distributed. The Company may also be subject to the corporate "alternative minimum tax," as well as tax in certain situations and on certain transactions not presently contemplated. The Company will use the calendar year both for Federal income tax purposes and for financial reporting purposes. In order to qualify as a REIT, the Company must meet, among others, the following requirements: Share Ownership Test. Shares of beneficial interest of the Company must be held by a minimum of 100 persons for at least, approximately, 92% of the days in each taxable year subsequent to 1993. In addition, at all times during the second half of each taxable year subsequent to 1993, no more than 50% in value of the shares of beneficial interest of the Company may be owned, directly or indirectly and by applying certain constructive ownership rules, by five or fewer individuals. The Company believes that it has satisfied both of these tests, and it believes it will continue to do so. In order to help comply with the second of these tests, the Company has placed certain restrictions on the transfer of the Common Shares and Preferred Shares that are intended to prevent further concentration of share ownership. 20 Asset Tests. At the close of each quarter of the Company's taxable year, the Company must satisfy two tests relating to the nature of its assets. First, at least 75% of the value of the Company's total assets must be represented by any combination of interests in real property, interests in mortgages on real property, shares in other REITs, cash, cash items and certain government securities. Second, although the remaining 25% of the Company's assets generally may be invested without restriction, securities in this class may not exceed either (i) 5% of the value of the Company's total assets as to any one issuer, or (ii) 10% of the outstanding voting securities of any one issuer. Where the Company invests in a partnership, it will be deemed to own a proportionate share of the partnership's assets. The Company's investment in the Properties through its interest in the Operating Partnership will constitute qualified assets for purposes of the 75% asset test. The Operating Partnership owns none of the voting stock, but owns 100% of the non-voting stock of each of the Management Corps. By virtue of its partnership interest in the Operating Partnership, the Company is deemed to own its pro rata share of the assets of the Operating Partnership, including the stock of the Management Corps. as described above. The Operating Partnership has not and will not own more than 10% of the voting securities of the Management Corps. In addition, based upon its analysis of the estimated value of the stock of the Management Corps. owned by the Operating Partnership relative to the estimated value of the other assets owned by the Operating Partnership, the Company believes that its pro rata share of the stock of each Management Corp. held by the Operating Partnership has not exceeded and does not exceed 5% of the total value of the Company's assets. No independent appraisals, however, have been obtained to support this conclusion. This 5% limitation must be satisfied not only on the date that the Company first acquired stock of a Management Corp., but also at the end of each quarter in which the Company increases its interest in either of the Management Corps. (including as a result of increasing its interest in the Operating Partnership as the holders of OP Units exercise their exchange rights). Although the Company plans to take steps to ensure that it satisfies the 5% value test for any quarter with respect to which retesting is to occur, there can be no assurance that such steps will always be successful or will not require a reduction in the Operating Partnership's overall interest in the Management Corps. The Company's indirect interests as a general partner in the Financing Partnerships are held through the QRS Corporations, each of which is organized and operated as a "qualified REIT subsidiary" within the meaning of the Code. Qualified REIT subsidiaries are not treated as separate entities from their parent REIT. Instead, all assets, liabilities and items of income, deduction and credit of each QRS Corporation will be treated as assets, liabilities and items of the Company. Each QRS Corporation therefore will not be subject to Federal corporate income taxation, although it may be subject to state or local taxation. In addition, the Company's ownership of the voting stock of each QRS Corporation will not violate the general restriction against ownership of more than 10% of the voting securities of any issuer. Gross Income Tests. There are three separate percentage tests relating to the sources of the Company's gross income which must be satisfied for each taxable year. For purposes of these tests, where the Company invests in a partnership, the Company will be treated as receiving its share of the income and loss of the partnership, and the gross income of the partnership will retain the same character in the hands of the Company as it has in the hands of the partnership. 1. The 75% Test. At least 75% of the Company's gross income for each taxable year must be "qualifying income." Qualifying income generally includes (i) rents from real property (except as modified below); (ii) interest on obligations collateralized by mortgages on, or interests in, real property; (iii) gains from the sale or other disposition of interests in real property and real estate mortgages, other than gain from property held primarily for sale to customers in the ordinary course of the Company's trade or business ("dealer property"); (iv) distributions on shares in other REITs, as well as gain from the sale of such shares; (v) abatements and refunds of real property taxes; (vi) income from the operation, and gain from the sale, of property acquired at or in lieu of a foreclosure of the mortgage collateralized by such property ("foreclosure property"); (vii) commitment fees received for agreeing to make loans collateralized by mortgages on real property or to purchase or lease real property; and (viii) certain qualified temporary investment income attributable to the investment of new capital received by the Company in exchange for its shares (including the Securities offered hereby) during the one-year period following the receipt of such new capital. Rents received from a tenant will not, however, qualify as rents from real property in satisfying the 75% test (or the 95% gross income test described below) if the Company, or an owner of 10% or more of the Company, directly or constructively owns 10% or more of such tenant. In addition, if rent attributable to personal property leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as rents from real property. Moreover, an amount received or accrued will not qualify as rents from real property (or as interest income) for purposes of the 75% and 95% gross income tests if it is based in whole or in part on the income or profits of any person. Finally, for rents received to qualify as rents from real property, the Company generally must not operate or manage the property or furnish or render services to 21 tenants, other than through an "independent contractor" from whom the Company derives no revenue. The "independent contractor" requirement, however, does not apply to the extent that the services provided by the Company are "usually or customarily rendered" in connection with the rental of space for occupancy only, and are not otherwise considered "rendered to the occupant." The Company, through the Management Partnerships, provides certain services with respect to the Properties and any newly acquired multifamily residential properties. The Company believes that the services provided by the Management Partnerships are usually or customarily rendered in connection with the rental of space for occupancy only, and therefore that the provision of such services has not caused, and will not in the future cause the rents received with respect to the Properties to fail to qualify as rents from real property for purposes of the 75% and 95% gross income tests. 2. The 95% Test. At least 95% of the Company's gross income for the taxable year must be derived from the above-described qualifying income, or from dividends, interest or gains from the sale or disposition of stock or other securities that are not dealer property. Dividends (including the Company's share of dividends paid by the Management Corps.) and interest on any obligations not collateralized by an interest in real property and any payments made on behalf of the Company by a financial institution pursuant to a rate protection agreement will be included as qualifying income for purposes of the 95% gross income test, but not for purposes of the 75% test. For purposes of determining whether the Company complies with the 75% and 95% income tests, gross income does not include income from prohibited transactions. A "prohibited transaction" is a sale of dealer property, excluding certain dealer property held by the Company for at least four years and excluding foreclosure property. The Company's investment in the Properties, through the Operating Partnership, in major part gives rise to rental income qualifying under the 75% and 95% gross income tests. Gains on sales of the Properties or of the Company's interest in the Operating Partnership will generally qualify under the 75% and 95% gross income tests. The Company believes that the income on its other investments, including its indirect investment in the Management Corps., has not resulted in the Company failing the 75% or 95% gross income test for any year, and the Company anticipates that this will continue to be the case. Even if the Company fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, it may still qualify as a REIT for such year if it is entitled to relief under certain provisions of the Code. These relief provisions will generally be available if: (i) the Company's failure to comply was due to reasonable cause and not to willful neglect; (ii) the Company reports the nature and amount of each item of its income included in the tests on a schedule attached to its tax return; and (iii) any incorrect information on this schedule is not due to fraud with intent to evade tax. If these relief provisions apply, the Company, however, will still be subject to a 100% tax based upon the greater of the amount by which it fails either the 75% or 95% gross income test for that year, less certain adjustments. 3. The 30% Test. The Company must derive less than 30% of its gross income for each taxable year from the sale or other disposition of (i) real property held for less than four years (other than foreclosure property and involuntary conversions), (ii) stock or securities held for less than one year, and (iii) property in a prohibited transaction. The Company has not had and does not anticipate that it will have any substantial difficulty in complying with this test. Annual Distribution Requirements. The Company, in order to qualify as a REIT, is required to make dividend distributions (other than capital gain dividends) to its shareholders each year in an amount at least equal to (A) the sum of (i) 95% of the Company's REIT taxable income (computed without regard to the dividends paid deduction and the Company's net capital gain) and (ii) 95% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash income. Such distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before the Company timely files its tax return for such year and if paid on or before the first regular dividend payment after such declaration. To the extent that the Company does not distribute all of its net capital gain or distributes at least 95%, but less than 100%, of its REIT taxable income, as adjusted, it will be subject to tax on the undistributed amount at regular capital gains or ordinary corporate tax rates, as the case may be. The Company has made and intends to continue to make timely distributions sufficient to satisfy the annual distribution requirements. In this regard, the partnership agreement of the Operating Partnership authorizes the Company, as general partner, to take such steps as may be necessary to cause the Operating Partnership to distribute to its partners an amount sufficient to permit the Company to meet these distribution requirements. It is possible that the Company may not have sufficient cash or other liquid assets to meet the 95% dividend requirement, due to the payment of principal on debt or to timing differences between the actual receipt of income and actual payment of expenses on the one hand, and the inclusion of such income and deduction of such expenses in computing the Company's REIT taxable income on the other hand. To avoid any problem with the 95% distribution requirement, the Company will closely monitor the 22 relationship between its REIT taxable income and cash flow and, if necessary, will borrow funds (or cause the Operating Partnership or other affiliates to borrow funds) in order to satisfy the distribution requirement. Failure to Qualify. If the Company fails to qualify for taxation as a REIT in any taxable year and the relief provisions do not apply, the Company will be subject to tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates. Distributions to shareholders in any year in which the Company fails to qualify will not be required and, if made, will not be deductible by the Company. In such event, to the extent of current and accumulated earnings and profits, all distributions to shareholders will be taxable as ordinary income, and, subject to certain limitations in the Code, corporate distributees may be eligible for the dividends received deduction. Unless entitled to relief under specific statutory provisions, the Company also will be ineligible for qualification as a REIT for the four taxable years following the year during which qualification was lost. Tax Aspects of the Company's Investments in Partnerships General. The Company holds direct or indirect interests in the Operating Partnership, the Management Partnerships and certain Financing Partnerships (each individually a "Partnership" and, collectively, the "Partnerships"). The Company believes that each of the Partnerships qualifies as a partnership (as opposed to an association taxable as a corporation) for Federal income tax purposes. If any of the Partnerships were to be treated as an association, it would be taxable as a corporation and therefore subject to an entity-level tax on its income. In such a situation, the character of the Company's assets and items of gross income would change, which would preclude the Company from satisfying the asset tests and possibly the income tests (see "Federal Income Tax Considerations--Taxation of the Company--Asset Tests" and "--Gross Income Tests"), and in turn would prevent the Company from qualifying as a REIT. Tax Allocations with Respect to the Properties. Pursuant to Section 704(c) of the Code, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership (such as certain of the 69 Properties contributed at the time of the IPO (the "Initial Properties")) must be allocated in a manner such that the contributing partner is charged with, or benefits from, respectively, the unrealized gain or unrealized loss associated with the property at the time of the contribution. The amount of such unrealized gain or unrealized loss is generally equal to the difference between the fair market value and the adjusted tax basis of contributed property at the time of contribution (a "Book-Tax Difference"). Such allocations are solely for Federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners. The Operating Partnership was formed by way of contributions of appreciated property (including certain of the Initial Properties). Consequently, the Operating Partnership partnership agreement (as well as the Financing Partnerships agreements) requires such allocations to be made in a manner consistent with Section 704(c). As a result, certain limited partners of the Operating Partnership will be allocated lower amounts of depreciation deductions for tax purposes and increased taxable income and gain on sale by the Partnerships of the contributed assets (including certain of the Initial Properties). These allocations will tend to eliminate the Book-Tax Difference over the life of the Partnerships. However, the special allocation rules of Section 704(c) as applied by the Company do not always entirely rectify the Book-Tax Difference on an annual basis or with respect to a specific taxable transaction such as a sale. Thus, the carryover basis of the contributed assets in the hands of the Partnerships will cause the Company to be allocated lower depreciation and other deductions, and possibly greater amounts of taxable income in the event of a sale of such contributed assets in excess of the economic or book income allocated to it as a result of such sale. This may cause the Company to recognize taxable income in excess of cash proceeds, which might adversely affect the Company's ability to comply with the REIT distribution requirements. See "Federal Income Tax Considerations--Taxation of the Company--Annual Distribution Requirements." Sale of the Properties. The Company's share of any gain realized by the Operating Partnership on the sale of any dealer property generally will be treated as income from a prohibited transaction that is subject to a 100% penalty tax. See "Federal Income Tax Considerations--Taxation of the Company-- Gross Income Tests--The 95% Test." Under existing law, whether property is dealer property is a question of fact that depends on all the facts and circumstances with respect to the particular transaction. The Partnerships have held and intend to continue to hold the Properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing, owning and operating the Properties and other multifamily residential properties and to make such occasional sales of the Properties as are consistent with the Company's investment objectives. Based upon such investment objectives, the Company believes that in general the Properties should not be considered dealer property and that the amount of income from prohibited transactions, if any, will not be material. 23 Taxation of Taxable Domestic Shareholders General. As long as the Company qualifies as a REIT, distributions made to the Company's taxable domestic shareholders, with respect to their Securities out of current or accumulated earnings and profits (and not designated as capital gain dividends) will be taken into account by them as ordinary income and will not be eligible for the dividends received deduction for shareholders that are corporations. For purposes of determining whether distributions on the Securities are out of current or accumulated earnings and profits, the earnings and profits of the Company will be allocated first to the Preferred Shares and second to the Common Shares. There can be no assurance, however, that the Company will have sufficient earnings and profits to cover distributions on the Preferred Shares. Dividends that are designated as capital gain dividends will be taxed as long-term capital gains (to the extent that they do not exceed the Company's actual net capital gain for the taxable year) without regard to the period for which the shareholder has held its Securities. However, corporate shareholders may be required to treat up to 20% of certain capital gain dividends as ordinary income. For a discussion on the manner in which that portion of any dividends designated by the Company as capital gains dividends will be allocated among the holders of Preferred Shares and Common Shares, see "Description of Shares of Beneficial Interest--Preferred Shares--Distributions." To the extent that the Company makes distributions in excess of current and accumulated earnings and profits, these distributions are treated first as a tax-free return of capital to the shareholder, reducing the tax basis of a shareholder's Securities by the amount of such distribution (but not below zero), with distributions in excess of the shareholder's tax basis taxable as capital gains (if the Securities are held as a capital asset). In addition, any dividend declared by the Company in October, November or December of any year and payable to a shareholder of record on a specific date in any such month shall be treated as both paid by the Company and received by the shareholder on December 31 of such year, provided that the dividend is actually paid by the Company during January of the following calendar year. Shareholders may not include in their individual income tax returns any net operating losses or capital losses of the Company. In general, any loss upon a sale or exchange of Securities by a shareholder who has held such Securities for six months or less (after applying certain holding period rules) will be treated as a long-term capital loss, to the extent of distributions from the Company received by such shareholder are required to be treated by such shareholder as long-term capital gains. Additional Tax Consequences for Holders of Preferred Shares and Depositary Shares. If the Company offers 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. Taxation of Tax-Exempt Shareholders Most tax-exempt employees' pension trusts are not subject to Federal income tax except to the extent of their receipt of "unrelated business taxable income" as defined in Section 512(a) of the Code ("UBTI"). Distributions by the Company to a shareholder that is a tax-exempt entity should not constitute UBTI, provided that the tax-exempt entity has not financed the acquisition of its Securities with "acquisition indebtedness" within the meaning of the Code and the Securities are not otherwise used in an unrelated trade or business of the tax-exempt entity. In addition, for taxable years beginning on or after January 1, 1994, certain pension trusts that own more than 10% of a "pension-held REIT" must report a portion of the distribution that they receive from such a REIT as UBTI. The Company has not been and does 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 U.S. Federal income tax consequences of the ownership and disposition of Securities applicable to Non-U.S. Holders of such Securities. A "Non-U.S. Holder" is any person other than (i) a citizen or resident of the United States, (ii) 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 (iii) an estate or trust whose income is includable in gross income for U.S. Federal income tax purposes regardless of its source. The discussion is based on current law and is for general information only. Distributions From the Company. 1. Ordinary Dividends. The portion of dividends received by Non-U.S. Holders payable out of the Company's earnings and profits which are not attributable to capital gains of the Company or of the Operating Partnership and which are not effectively connected with a U.S. trade or business of the Non-U.S. Holder will be subject to U.S. withholding tax at the rate of 30% (unless reduced by an applicable treaty). In general, Non-U.S. Holders will not be considered engaged in a U.S. trade or business solely as a result of their ownership of Securities. In cases where the dividend income from a Non-U.S. Holder's investment in Securities is (or is treated as) effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or business, the Non-U.S. Holder generally 24 will be subject to U.S. tax at graduated rates, in the same manner as U.S. shareholders are taxed with respect to such dividends (and may also be subject to the 30% branch profits tax in the case of a Non-U.S. Holder that is a foreign corporation). 2. Non-Dividend Distributions. Distributions by the Company which are not dividends out of the earnings and profits of the Company will not be subject to U.S. income or withholding tax. If it cannot be determined at the time a distribution is made whether or not such distribution will be in excess of the Company's current and accumulated earnings and profits, the entire distribution will be subject to withholding at the rate applicable to dividends. However, the Non-U.S. Holder may seek a refund of such amounts from the Service if it is subsequently determined that such distribution was, in fact, in excess of current and accumulated earnings and profits of the Company. 3. Capital Gain Dividends. Under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), a distribution made by the Company to a Non-U.S. Holder, to the extent attributable to gains from dispositions of United States Real Property Interests ("USRPIs") such as the Properties beneficially owned by the Company ("USRPI Capital Gains"), will be considered effectively connected with a U.S. trade or business of the Non-U.S. Holder and subject to U.S. income tax at the rate applicable to U.S. individuals or corporations, without regard to whether such distribution is designated as a capital gain dividend. In addition, the Company will be required to withhold tax equal to 35% of the amount of dividends to the extent such dividends constitute USRPI Capital Gains. Distributions subject to FIRPTA may also be subject to a 30% branch profits tax in the hands of a foreign corporate shareholder that is not entitled to treaty exemption. Dispositions of Securities. Unless Securities constitute a USRPI, a sale of Securities by a Non-U.S. Holder generally will not be subject to U.S. taxation under FIRPTA. The Securities will not constitute a USRPI if the Company is 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 Securities is held directly or indirectly by Non-U.S. Holders. The Company believes that it has been and anticipates that it will continue to be a domestically controlled REIT, and therefore that the sale of Securities will not be subject to taxation under FIRPTA. Because the Securities will be publicly traded, however, no assurance can be given the Company will continue to be a domestically controlled REIT. If the Company does not constitute a domestically controlled REIT, a Non-U.S. Holder's sale of Securities generally will still not be subject to tax under FIRPTA as a sale of a USRPI provided that (i) the Securities are "regularly traded" (as defined by applicable Treasury regulations) on an established securities market and (ii) the selling Non-U.S. Holder held 5% or less of the Company's outstanding Securities at all times during a specified testing period. If gain on the sale of Securities were subject to taxation under FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S. shareholder with respect to such gain (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals) and the purchaser of Securities could be required to withhold 10% of the purchase price and remit such amount to the Service. Capital gains not subject to FIRPTA will nonetheless be taxable in the United States to a Non-U.S. Holder in two cases: (i) if the Non-U.S. Holder's investment in Securities is effectively connected with a U.S. trade or business conducted by such Non-U.S. Holder, the Non-U.S. Holder will be subject to the same treatment as a U.S. shareholder with respect to such gain, or (ii) if the Non-U.S. Holder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States, the nonresident alien individual will be subject to a 30% tax on the individual's capital gain. Other Tax Considerations The Management Corps. A portion of the cash to be used by the Operating Partnership to fund distributions to its partners, including the Company, is expected to come from the Management Corps. through payments of dividends on the non-voting stock of the Management Corps. held by the Operating Partnership. The Management Corps. pay Federal and state income tax at the full applicable corporate rates. The Management Corps. will attempt to minimize the amount of such taxes, but there can be no assurance whether or the extent to which measures taken to minimize taxes will be successful. To the extent that the Management Corps. are required to pay Federal, state or local taxes, the cash available for distribution by the Company to shareholders will be reduced accordingly. State and Local Taxes. The Company and its shareholders may be subject to state or local taxation in various jurisdictions, including those in which it or they transact business or reside. The state and local tax treatment of the Company and its shareholders may not conform to the Federal income tax consequences discussed above. Consequently, prospective shareholders should consult their own tax advisors regarding the effect of state and local tax laws on an investment in the shares of beneficial interest of the Company. 25 PLAN OF DISTRIBUTION The Company 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 such 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 for cash or assets in transactions that do not constitute a business combination with the meaning of Rule 145 promulgated under the Securities Act. The Company also may, from time to time, authorize underwriters acting as the Company's agents to offer and sell the Securities upon the terms and conditions as 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 the Company 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 the Company to underwriters or agents in connection with the offering of the Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in the applicable Prospectus Supplement. 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 to be underwriting discounts and commissions, under the Securities Act. Underwriters, dealers and agents may be entitled, under agreements entered into with the Company, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act. If so indicated in the applicable Prospectus Supplement, the Company will authorize dealers acting as the Company's agents to solicit offers by certain institutions to purchase Securities from the Company at the public offering price set forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and delivery on the date or dates stated in such Prospectus Supplement. Each Contract will be for an amount not less than, and the aggregate principal amount of Securities sold pursuant to Contracts shall be not less nor more than, the respective amounts stated in the applicable Prospectus Supplement. Institutions with whom Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions, and other institutions but will in all cases be subject to the approval of the Company. Contracts will not be subject to any conditions except (i) the purchase by an institution of the Securities covered by its Contracts shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which such institution is subject, and (ii) if the Securities are being sold to underwriters, the Company shall have sold to such underwriters the total principal amount of the Securities less the principal amount thereof covered by Contracts. Certain of the underwriters and their affiliates may engage in transactions with and perform services for the Company and its Subsidiaries in the ordinary course of business. 26 EXPERTS The Consolidated Financial Statements incorporated in this Prospectus by reference to the Company's Annual Report (Form 10-K, as amended by Form 10-K/A) for the year ended December 31, 1996; the Combined Statement of Revenue and Certain Expenses for the year ended December 31, 1995 of the 1996 Acquired Properties and Probable Properties, appearing in the Current Report of the Company on Form 8-K, as amended by Form 8-K/A, dated May 23, 1996; and the Combined Statement of Revenue and Certain Expenses for the year ended December 31, 1995 of the 1996 Acquired Properties, appearing in the Current Report of the Company on Form 8-K/A, dated November 15, 1996; have all been audited by Ernst & Young LLP, independent auditors, and the consolidated financial statements of the Company appearing in the Company's Annual Report (Form 10-K, as amended by Form 10-K/A) for each of the two years in the period ended December 31, 1995, have been audited by Grant Thornton LLP, independent auditors, as set forth in their respective reports thereon included therein and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such reports given upon the authority of such firms as experts in accounting and auditing. LEGAL MATTERS The legality of the Securities offered hereby will be passed upon for the Company by Rosenberg & Liebentritt, P.C., Chicago, Illinois. Rosenberg & Liebentritt, P.C. will rely on Hogan & Hartson L.L.P., Washington, D.C., as to certain matters of Maryland law. Certain federal income tax matters described under "Federal Income Tax Considerations" will be passed on for the Company by Hogan & Hartson L.L.P. With respect to any underwritten offering of Securities, certain legal matters will be passed upon for the underwriters by Hogan & Hartson L.L.P. Hogan & Hartson L.L.P. from time to time provides services to the Company and other entities controlled by Mr. Zell. Sheli Z. Rosenberg, a principal of Rosenberg & Liebentritt, P.C., is a trustee of the Company. The Company incurred legal fees to Rosenberg & Liebentritt, P.C. of approximately $725,000 in 1996 and, through March 31, 1997, approximately $200,000 in 1997. Attorneys of Rosenberg & Liebentritt, P.C. beneficially own less than 1% of the outstanding Common Shares, either directly or upon the exercise of options. 27 ================================================================================ No dealer, salesperson or other individual has been authorized to give any information or to make any representations not contained or incorporated by reference in this Prospectus in connection with the offering covered by this Prospectus. If given or made, such information or representations must not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, the Securities, in any jurisdiction where, or to any person to whom, it is unlawful to make any such offer or solicitation. Neither the delivery of this Prospectus nor any offer or sale made hereunder shall, under any circumstances, create an implication that there has not been any change in the facts set forth in this Prospectus or in the affairs of the Company since the date hereof. --------------------- TABLE OF CONTENTS PROSPECTUS Page ---- Special Note Regarding Forward- Looking Statements......................... 2 Available Information........................ 2 Incorporation of Certain Documents by Reference............................... 2 The Company.................................. 4 Risk Factors................................. 5 Use of Proceeds.............................. 9 Description of Shares of Beneficial Interest................................... 9 Description of Depositary Shares............. 16 Ratios of Earnings to Combined Fixed Charges and Preferred Share Distributions.. 19 Federal Income Tax Considerations............ 19 Plan of Distribution......................... 26 Experts...................................... 27 Legal Matters................................ 27 ================================================================================ ================================================================================ EQUITY RESIDENTIAL PROPERTIES TRUST $849,769,287 Preferred Shares Common Shares Depositary Shares PROSPECTUS May , 1997 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth those expenses for distribution to be incurred in connection with the issuance and distribution of the securities being registered. Registration Fee....................................... $151,515 Printing and Duplicating Expenses...................... 50,000 Legal Fees and Expenses................................ 150,000 Accounting Fees and Expenses........................... 100,000 Blue Sky Fees and Expenses............................. 17,500 Miscellaneous.......................................... 30,985 -------- Total.................................................. $500,000 ======== Item 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS Under Maryland law, a real estate investment trust formed in Maryland is permitted to eliminate, by provision in its Declaration of Trust, the liability of trustees and officers to the trust and its shareholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) acts or omissions established by a final judgment as involving active and deliberate dishonesty and being material to the matter giving rise to the proceeding. The Company's Declaration of Trust includes such a provision eliminating such liability to the maximum extent permitted by Maryland law. The Maryland REIT law, effective October 1, 1994, permits a Maryland real estate investment trust to indemnify and advance expenses to its trustees, officers, employees and agents to the same extent as permitted by the MGCL for directors and officers of Maryland corporations. In accordance with the MGCL, the Company's bylaws require it to indemnify (a) any present or former trustee, officer or shareholder or any individual who, while a trustee, officer or shareholder, served or is serving as a trustee, officer, director, shareholder or partner of another entity at the Company's express request who has been successful, on the merits or otherwise, in the defense of a proceeding to which he was made a party by reason of service in such capacity, against reasonable expenses incurred by him in connection with the proceeding, (b) any present or former trustee or officer or any individual who, while a trustee or officer served or is serving as a trustee, officer, director, shareholder or partner of another entity at the Company's express request against any claim or liability to which he may become subject by reason of service in such capacity unless it is established that (i) his act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, (ii) he actually received an improper personal benefit in money, property or services or (iii) in the case of a criminal proceeding, he had reasonable cause to believe that his act or omission was unlawful and (c) any present or former shareholder against any claim or liability to which he may become subject by reason of such status. In addition, the Company's bylaws require it to pay or reimburse, in advance of final disposition of a proceeding, reasonable expenses incurred by a present or former trustee, officer or shareholder or any individual who, while a trustee, officer or shareholder, served or is serving as a trustee, officer, director, shareholder or partner of another entity at the Company's express request made a party to a proceeding by reason of such status, provided that, in the case of a trustee or officer, the Company shall have received (1) a written affirmation by such person of his good faith belief that he has met the standard of conduct necessary for indemnification by the Company as authorized by the bylaws and (2) a written undertaking by or on his behalf to repay the amount paid or reimbursed by the Company if it shall ultimately be determined that the applicable standard of conduct was not met. The Company's bylaws also (x) permit the Company to provide indemnification and payment or reimbursement of expenses to a present or former trustee, officer or shareholder who served a predecessor of the Company or to any employee or agent of the Company or a predecessor of the Company, (y) provide that any indemnification and payment or reimbursement of the expenses permitted by the bylaws shall be furnished in accordance with the procedures provided for indemnification and payment or reimbursement of expenses under Section 2-418 of the MGCL for directors of Maryland corporations and (z) permit the Company to provide to the trustees and officers such other and further indemnification or payment or reimbursement of expenses to the fullest extent permitted by Section 2-418 of the MGCL for directors of Maryland corporations. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to trustees and officers of the Company pursuant to the foregoing provisions or otherwise, the Company has been advised that, although the validity and scope of the governing statute have not been tested in court, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In addition, indemnification may be limited by state securities laws. II-1 The partnership agreements of the Operating Partnership and the Management Partnerships also provide for indemnification of the Company and its officers and trustees to the same extent that indemnification is provided to officers and trustees of the Company in its Declaration of Trust, and limit the liability of the Company and its officers and trustees to the Operating Partnership and the Management Partnerships and their respective partners to the same extent that the liability of the officers and trustees of the Company to the Company and its shareholders is limited under the Company's Declaration of Trust. ITEM 16. Exhibits 1 Form of Standard Underwriting Provisions relating to Underwritten Securities 4.1 * - Amended and Restated Declaration of Trust, as amended 4.2 ** - Amended and Restated Bylaws 4.3 *** - Form of Deposit Agreement 5 - Opinion of Rosenberg & Liebentritt, P.C. 8 - Opinion of Hogan & Hartson L.L.P. regarding certain tax matters. 23.1 - Consent of Grant Thornton LLP 23.2 - Consent of Ernst & Young LLP 23.3 - Consent of Rosenberg & Liebentritt, P.C. (included in Exhibit 5) 23.4 - Consent of Hogan & Hartson L.L.P. (included in Exhibit 8) 24 - Power of Attorney (filed as part of the signature page to the Registration Statement) ---------------- * Included as an exhibit to the Company's Form 10-Q for the three months ended June 30, 1995, and incorporated herein by reference. ** Included as an exhibit to the Company's Form S-11 Registration Statement, File No. 33-63158, and incorporated herein by reference. *** Included as Exhibit 4.3 to the Company's Registration Statement on Form S-3, File No. 33-96792, and incorporated herein by reference. ITEM 17. Undertakings The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post- effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of Securities (if the total dollar value of Securities would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in this registration statement; provided, however, that subparagraphs (i) and (ii) above do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in the periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the Securities offered herein, and the offering of such Securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the Securities being registered which remain unsold at the termination of the offering. II-2 The undersigned Registrant hereby further undertakes that, for the purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the Securities offered herein, and the offering of such Securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to existing provisions or arrangements whereby the registrant may indemnify a trustee, officer or controlling person of the registrant against liabilities arising under the Securities Act of 1933, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a trustee, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on May 13, 1997. EQUITY RESIDENTIAL PROPERTIES TRUST By: /s/ Douglas Crocker II --------------------------------- Douglas Crocker II, President, Chief Executive Officer and Trustee POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below, hereby constitutes and appoints Douglas Crocker II and Sheli Z. Rosenberg, or either of them, his attorneys-in-fact and agents, with full power of substitution and resubstitution for him in any and all capacities, to sign any or all amendments or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith or in connection with the registration of the Securities under the Exchange Act, with the Securities and Exchange Commission, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of such attorneys-in- fact and agents or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated: Name Title Date - ---- ----- ---- /s/ Samuel Zell - --------------------------- Chairman of the Board of Trustees May 13, 1997 Samuel Zell /s/ Douglas Crocker II - --------------------------- President, Chief Executive Officer May 13, 1997 Douglas Crocker II and Trustee /s/ David J. Neithercut - --------------------------- Executive Vice President and Chief May 13, 1997 David J. Neithercut Financial Officer /s/ Michael J. McHugh - --------------------------- Senior Vice President, Chief May 13, 1997 Michael J. McHugh Accounting Officer and Treasurer /s/ Gerald A. Spector - --------------------------- Trustee May 13, 1997 Gerald A. Spector /s/ Sheli Z. Rosenberg - --------------------------- Trustee May 13, 1997 Sheli Z. Rosenberg /s/ James D. Harper, Jr. - --------------------------- Trustee May 13, 1997 James D. Harper, Jr. /s/ Errol R. Halperin - --------------------------- Trustee May 13, 1997 Errol R. Halperin /s/ John Alexander - --------------------------- Trustee May 13, 1997 John Alexander /s/ Barry S. Sternlicht - --------------------------- Trustee May 13, 1997 Barry S. Sternlicht /s/ B. Joseph White - --------------------------- Trustee May 13, 1997 B. Joseph White /s/ Henry H. Goldberg - --------------------------- Trustee May 13, 1997 Henry H. Goldberg II-4 EXHIBIT INDEX ------------- Exhibit Exhibit Number Description - --------- ----------- 1 Form of Standard Underwriting Provisions relating to Underwritten Securities 4.1 * Amended and Restated Declaration of Trust, as amended 4.2 ** Amended and Restated Bylaws 4.3 *** Form of Deposit Agreement 5 Opinion of Rosenberg & Liebentritt, P.C. 8 Opinion of Hogan & Hartson L.L.P. regarding certain tax matters 23.1 Consent of Grant Thornton LLP 23.2 Consent of Ernst & Young LLP 23.3 Consent of Rosenberg & Liebentritt, P.C. (included in Exhibit 5) 23.4 Consent of Hogan & Hartson L.L.P. (included in Exhibit 8) 24 Power of Attorney (filed as part of the signature page to the Registration Statement) - ------------- *Included as an exhibit to the Company's Form 10-Q for the three months ended June 30, 1995, and incorporated herein by reference. **Included as an exhibit to the Company's Form S-11 Registration Statement, File No. 33-63158, and incorporated herein by reference. ***Included as Exhibit 4.3 to the Company's Registration Statement on Form S-3, File No. 33-96792, and incorporated herein by reference. II-5 EX-1 2 FORM OF STANDARD UNDERWRITING PROVISIONS EQUITY RESIDENTIAL PROPERTIES TRUST (a Maryland real estate investment trust) Common Shares of Beneficial Interest, Preferred Shares of Beneficial Interest and Depositary Shares STANDARD UNDERWRITING PROVISIONS -------------------------------- May __, 1997 Equity Residential Properties Trust, a Maryland real estate investment trust ("EQR") may from time to time issue and sell Common Shares of Beneficial Interest, $.01 par value (the "Common Shares"), or one or more series of its Preferred Shares of Beneficial Interest, $.01 par value (the "Preferred Shares"), or Preferred Shares represented by depositary shares (the "Depositary Shares") represented by depositary receipts (the "Depositary Receipts"), in one or more offerings on terms to be determined at the time of sale (the Common Shares, the Preferred Shares, the Depositary Shares and the Depositary Receipts are collectively referred to herein as the "Securities"). Each series of Preferred Shares may vary, as to the specific number of shares, title, stated value, liquidation preference, issuance price, ranking, dividend rate or rates (or method of calculation), dividend payment dates, any redemption or sinking fund requirements, any conversion provisions and any other variable terms as set forth in the applicable articles supplementary to EQR's Declaration of Trust (the "Articles Supplementary") relating to such Preferred Shares and filed with the State Department of Assessments and Taxation of Maryland ("SDAT") pursuant to Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland (the "Maryland REIT Statute"). As used herein, "you" and "your," unless the context otherwise requires, shall mean the parties to whom the applicable Terms Agreement (as hereinafter defined) is addressed as co-managers with respect to Underwritten Securities (as hereinafter defined) purchased pursuant thereto. Whenever EQR determines to make an offering of Securities through you or through an underwriting syndicate managed by you, EQR will enter into an agreement (the "Terms Agreement") providing for the sale of such Securities (the "Underwritten Securities") to, and the purchase and offering thereof by, you and such other underwriters, if any, selected by you as have authorized you to enter into such Terms Agreement on their behalf (the "Underwriters," which term shall include you whether acting alone in the sale of the Underwritten Securities or as a member or members of an underwriting syndicate and any Underwriter substituted pursuant to Section 10 hereof). The Terms Agreement relating to the offering of Underwritten Securities shall specify the number of Underwritten Securities of each class or series to be initially issued (the "Initial Underwritten Securities"), whether the Initial Underwritten Securities shall be in the form of Depositary Shares and if so the fractional amount of Preferred Shares represented by each such Depositary Share, the names of the Underwriters participating in such offering (subject to substitution as provided in Section 10 hereof), the number of Initial Underwritten Securities which each such Underwriter severally agrees to purchase, the names of Underwriters acting as co-managers, if any, in connection with such offering, the price at which the Initial Underwritten Securities are to be purchased by the Underwriters from EQR, the initial public offering price, if any, of the Initial Underwritten Securities, the time and place of delivery and payment, any delayed delivery arrangements and any other variable terms of the Initial Underwritten Securities (including, but not limited to, current ratings (in the case of Preferred Shares and Depositary Shares only), designations, liquidation preferences, conversion provisions, redemption provisions, and sinking fund requirements applicable to the Initial Underwritten Securities). In addition, each Terms Agreement shall specify whether EQR has agreed to grant to the Underwriters an option to purchase additional Underwritten Securities to cover over-allotments, if any, and the number of Underwritten Securities subject to such option (the "Option Securities"). As used herein, the term "Underwritten Securities" shall include the Initial Underwritten Securities and all or any portion of the Option Securities agreed to be purchased by the Underwriters as provided herein, if any. The Terms Agreement, which shall be substantially in the form of Exhibit A hereto, may take the form of an exchange of any standard form of written telecommunication between you and EQR. Each offering of Underwritten Securities through you or through an underwriting syndicate managed by you will be governed by these Standard Underwriting Provisions as incorporated by reference into, and supplemented by, the applicable Terms Agreement, and such Terms Agreement shall inure to the benefit of and be binding upon each Underwriter participating in the offering of such Underwritten Securities. If the applicable Terms Agreement so provides, the Preferred Shares will be deposited by EQR against delivery of Depositary Receipts to be issued by the depositary (the "Depositary") named in a deposit agreement (the "Deposit Agreement"), to be entered into by and among EQR, the Depositary and the holders from time to time of the Depositary Receipts issued thereunder and evidencing Depositary Shares. If the Preferred Shares are not represented by Depositary Receipts, then all references herein to Depositary Receipts and Depositary Shares of any kind, to the Deposit Agreement or the Depositary, and to any agreements, instruments or persons related thereto shall be disregarded and all representations, conditions, opinions and other documents relating to the foregoing shall not apply to this Agreement for purposes of the applicable Terms Agreement. EQR has filed with the Securities and Exchange Commission (the "Commission") registration statements on Form S-3 (No. 33-96792 and No. 333- -2- ___________) for the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), and the offering thereof from time to time in accordance with Rule 415 of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations"), and EQR has filed such amendments thereto as may have been required prior to the execution of the applicable Terms Agreement. Such registration statements (as amended, if applicable) have been declared effective by the Commission. Such registration statements and the prospectuses constituting parts thereof (including each prospectus supplement relating to the offering of Underwritten Securities pursuant to Rule 415 of the 1933 Act Regulations (the "Prospectus Supplement")), including all documents incorporated therein by reference, as from time to time amended or supplemented pursuant to the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), or otherwise, are referred to herein as the "Registration Statement" and the "Prospectus," respectively; provided, that if any revised prospectus shall be provided to you by EQR for use in connection with the offering of Underwritten Securities which differs from the Prospectus on file at the Commission at the time the Registration Statement became effective (whether or not such revised prospectus is required to be filed by EQR pursuant to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus" shall refer to each such revised prospectus from and after the time it is first provided to you for such use; provided, further, that a Prospectus Supplement shall be deemed to have supplemented the Prospectus only with respect to the offering of Underwritten Securities to which it relates. If EQR files a registration statement with the Commission pursuant to Rule 462(b) of the 1933 Act Regulations (the "Rule 462 Registration Statement"), then, after such filing, all references to "Registration Statement" shall also be deemed to include the Rule 462 Registration Statement. If EQR elects to rely upon Rule 434 of the 1933 Act Regulations, then all references to "Prospectus" shall also be deemed to include the preliminary or final prospectus and the applicable term sheet or abbreviated term sheet (the "Term Sheet"), as the case may be, in the form first furnished to you by EQR in reliance upon Rule 434 of the 1933 Act Regulations, and all references to the date of the Prospectus shall mean the date of the Term Sheet. All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement or the Prospectus (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is or is deemed to be incorporated by reference in the Registration Statement or the Prospectus, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement or the Prospectus shall be deemed to mean and include the filing of any document under the 1934 Act which is or is deemed to be incorporated by reference in the Registration Statement or the Prospectus, as the case may be. For purposes hereof, all references to the Registration Statement, Prospectus, Term Sheet or preliminary prospectus or to any amendment or supplement to any of the foregoing shall be deemed to include any copy filed with the Commission -3- pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). EQR is the sole general partner of ERP Operating Limited Partnership, a limited partnership organized under the laws of the State of Illinois ("ERP"), and owns the percentage of ERP's partnership interests specified in the most recent Prospectus. ERP owns all of the issued and outstanding shares of preferred stock of Equity Residential Properties Management Corp., a Delaware corporation, Equity Residential Properties Management Corp. II, a Delaware corporation, and Equity Residential Properties Management Corp. III, a Delaware corporation (collectively, the "Management Corporations"). The term "subsidiary" or "subsidiaries," when used with respect to EQR, shall include (i) ERP, (ii) the Management Corporations, and (iii) any entity the operations of which are included in the consolidated financial statements for EQR for the most recent fiscal period included in the Prospectus. Section 1. Representations and Warranties. ------------------------------- (a) EQR and ERP, jointly and severally, represent and warrant to you and each other Underwriter named in the applicable Terms Agreement, as of the date thereof ("Representation Date"), as follows: (i) The Registration Statement and the Prospectus, at the time the Registration Statement and any post-effective amendment thereto (including the filing of EQR's most recent Annual Report on Form 10-K with the Commission (the "Form 10-K)) became effective, complied, and as of each Representation Date will comply, in all material respects with the requirements of the 1933 Act and 1933 Act Regulations; the Registration Statement, at the time the Registration Statement became effective, did not, and as of each Representation Date, will not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; the Prospectus, as of each Representation Date and Closing Time (as hereinafter defined), will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or Prospectus made in reliance upon and in conformity with information furnished to EQR in writing by any Underwriter concerning such Underwriter through you expressly for use in the Registration Statement or Prospectus. If EQR elects to rely upon Rule 434 of the 1933 Act Regulations, EQR will comply with the requirements of Rule 434. -4- (ii) Each preliminary prospectus, preliminary prospectus supplement and Prospectus Supplement filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied or will comply when so filed in all material respects with the 1933 Act and the 1933 Act Regulations. (iii) No stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued and no proceedings for that purpose have been instituted or, to the knowledge of EQR, threatened by the Commission or by the state securities authority of any jurisdiction. No order preventing or suspending the use of the Prospectus has been issued and no proceedings for that purpose have been instituted or, to the knowledge of EQR or ERP, threatened by the Commission or by the state securities authority of any jurisdiction. Any request on the part of the Commission for additional information has been complied with. (iv) The accountants who certified the financial statements and supporting schedules included or incorporated by reference in the Registration Statement and the Prospectus are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (v) The consolidated financial statements and related notes included or incorporated by reference in the Registration Statement and the Prospectus present fairly the financial position of EQR and its consolidated subsidiaries as at the dates indicated and the results of their operations specified, and except as may otherwise be stated in the Registration Statement and Prospectus, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout such periods. The supporting schedules included or incorporated by reference in the Registration Statement present fairly in accordance with GAAP the information required to be stated therein. The financial information and statistical data included in the Registration Statement and the Prospectus present fairly the information included therein and have been prepared on a basis consistent with that of the financial statements included in the Registration Statement and the Prospectus. The pro forma financial statements included in the Registration Statement and Prospectus comply in all material respects with the applicable requirements of Rule 11-02 of Regulation S-X of the Commission and the pro forma adjustments have been properly applied to the historical amounts in the compilation of such statements and the assumptions used in the preparation thereof are, in the opinion of EQR, reasonable. -5- (vi) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated or contemplated therein, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, assets or business affairs of EQR and its subsidiaries, considered as a single enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Change"), (B) there have been no material transactions entered into by EQR or any of its subsidiaries, other than transactions in the ordinary course of business, which are material with respect to EQR and its subsidiaries considered as a single enterprise, (C) neither EQR nor any of its subsidiaries has incurred any material obligation or liability, direct, contingent or otherwise and (D) except for (i) regular quarterly distributions on EQR's common shares of beneficial interest, $.01 par value, and preferred shares of beneficial interest, $.01 par value and (ii) as disclosed in the Prospectus, there has been no dividend or distribution of any kind declared, paid or made by EQR on any class of its shares of beneficial interest. (vii) EQR has been duly formed and is validly existing as a real estate investment trust in good standing under the laws of the State of Maryland with power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under the applicable Terms Agreement. (viii) EQR is duly qualified or registered as a foreign organization to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by the nature of its business or its ownership or leasing of property, except where the failure to so qualify would not have a material adverse effect on the condition, financial or otherwise, or the earnings, assets or business affairs of EQR and its subsidiaries considered as a single enterprise (a "Material Adverse Effect"). (ix) Each subsidiary of EQR has been duly formed and is validly existing and in good standing as a partnership, corporation or limited liability company ("LLC") under the laws of its jurisdiction of organization, with partnership, corporation or LLC power and authority to carry on its business and to own or lease its properties as described in the Prospectus and is duly qualified or registered as a foreign partnership, corporation or LLC in good standing and authorized to do business in each jurisdiction in which such qualification is required whether by the nature of its business or its -6- ownership or leasing of property, except where the failure to so qualify would not have a Material Adverse Effect. (x) The Common Shares have been duly authorized for issuance and sale to the Underwriters pursuant hereto and, when issued and delivered as provided herein and in the applicable Terms Agreement, the Common Shares will be validly issued, fully paid and non- assessable; the Preferred Shares have been duly authorized and classified for issuance and sale to the Underwriters pursuant hereto and when Articles Supplementary setting the terms of the Preferred Shares are duly executed and filed for record with the SDAT and the Preferred Shares are duly paid for, sold and issued, and certificates therefor are duly executed, countersigned and delivered as provided herein and in the applicable Terms Agreement or any Delayed Delivery Contract, the Preferred Shares will be validly issued, fully paid and non-assessable; when Depositary Receipts evidencing any Depositary Shares are issued and delivered against deposit of Preferred Shares and against payment for the Depositary Shares pursuant hereto, the Terms Agreement relating to the Depositary Shares and the Deposit Agreement, the Preferred Shares will be validly issued, fully paid and non-assessable, and the Depositary Receipts will be legally issued and will entitle the holders thereof to the rights specified in the Depositary Receipts and the Deposit Agreement; the Preferred Shares, if applicable, conform to the Articles Supplementary; the Underwritten Securities being sold pursuant to the applicable Terms Agreement conform, in all material respects, to the descriptions thereof contained in the Prospectus; and the issuance of the Underwritten Securities is not subject to preemptive or similar rights. (xi) If applicable, the Deposit Agreement conforms in all material respects to all statements relating thereto contained in the Prospectus. Before the Closing Time for any Depositary Shares, the Deposit Agreement will be duly authorized and executed by EQR, and assuming due authorization, execution and delivery by the Depositary, the Deposit Agreement will constitute a valid and legally binding instrument of EQR enforceable against EQR in accordance with its terms, except as (A) the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, (B) the availability of equitable remedies may be limited by equitable principles of general applicability, and (C) rights to indemnity and contribution thereunder may be limited by state or federal securities laws or the public policy underlying such laws. -7- (xii) If applicable, the Common Shares issuable upon conversion of any of the Preferred Shares or the Depositary Shares have been duly and validly authorized and reserved for issuance upon such conversion by all necessary action and such shares, when issued upon such conversion, will be duly and validly issued and will be fully paid and non-assessable, and the issuance of such shares upon such conversion will not be subject to preemptive or other similar rights; the Common Shares issuable upon conversion of any of the Preferred Shares or the Depositary Shares will conform in all material respects to the descriptions thereof in the Prospectus. (xiii) The authorized, issued and outstanding shares of beneficial interest of EQR are as set forth in the Prospectus (except for subsequent issuances, if any, pursuant to reservations, agreements, employee benefit plans, dividend reinvestment plans, employee and trustee share option plans or the exercise of convertible securities referred to in the Registration Statement); the issued and outstanding Common Shares and the Preferred Shares have been duly authorized and validly issued and are fully paid and non-assessable; and none of such shares of beneficial interest were issued in violation of preemptive or other similar rights of any securityholder of EQR. (xiv) Except for transactions described in the Prospectus, there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance (except for subsequent issuances, if any, pursuant to reservations, agreements, employee benefit plans, dividend reinvestment plans, employee and trustee share option plans or the exercise of convertible securities referred to in the Registration Statement) or registration under the 1933 Act of, any shares of beneficial interest or capital stock of, or partnership or other equity interest in, EQR or any subsidiary of EQR except for multifamily property acquisition agreements with respect to the sale or issuance of Common Shares or OP Units or registration of Common Shares or Common Shares underlying OP Units which are not material in amount. (xv) All of the issued and outstanding shares of beneficial interest or capital stock and partnership interests, as the case may be, of each subsidiary have been validly issued and fully paid and are owned by EQR, and/or a subsidiary as described in the Registration Statement, and/or certain affiliated entities, in each case free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. EQR owns no direct or indirect equity interest in any entity other than its subsidiaries, except for such interests as, in the -8- aggregate, are not material to the condition, financial or otherwise, or the earnings, assets or business affairs of EQR and its subsidiaries considered as a single enterprise. (xvi) Each of EQR and ERP has full power and authority to enter into and to perform its obligations under the applicable Terms Agreement, the Deposit Agreement, if applicable, and the Delayed Delivery Contracts (as defined in Section 2 hereof), if any, and as of each Representation Date, the applicable Terms Agreement, Deposit Agreement, if applicable, and the Delayed Delivery Contracts, if any, will have been, duly authorized, executed and delivered by each of EQR and ERP, and each is or will be a valid and binding obligation of EQR and ERP, enforceable against EQR and ERP in accordance with its terms, except as (A) the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, (B) the availability of equitable remedies may be limited by equitable principles of general applicability and (C) rights to indemnity and contribution hereunder may be limited by state or federal securities laws or the public policy underlying such laws. (xvii) There is no action, suit or proceeding before or by any court or governmental agency or body now pending, or, to the knowledge of EQR or ERP, threatened, against or affecting EQR or any of its subsidiaries which is required to be disclosed in the Prospectus (other than as disclosed therein) or which might result in any Material Adverse Change or which might materially and adversely affect the properties or assets thereof or which might materially and adversely affect the consummation of the applicable Terms Agreement or any Deposit Agreement or the Delayed Delivery Contracts or the transactions contemplated herein or therein; all pending legal or governmental proceedings to which EQR or any of its subsidiaries is a party or of which any of their properties or assets is the subject which are not described in the Prospectus, including ordinary routine litigation incidental to the business, could not, considered in the aggregate, reasonably be expected to result in a Material Adverse Effect; and there are no contracts or documents of EQR or any of its subsidiaries which would be required to be filed as exhibits to the Registration Statement by the 1933 Act or the 1933 Act Regulations which have not been filed as exhibits to the Registration Statement, except for Articles Supplementary, as applicable, which will be filed on Form 8-K as soon as practicable after the applicable Representation Date. -9- (xviii) None of EQR or any of its subsidiaries is required to own or possess any trademarks, service marks, trade names or copyrights to conduct the business operated by it as of any Representation Date, other than those the failure to possess or own would not have a Material Adverse Effect; and none of EQR or any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any trademarks, service marks, trade names or copyrights or of any facts or circumstances which would render any trademarks, service marks, trade names or copyrights invalid or inadequate to protect the interest of EQR or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect. (xix) No authorization, approval or consent of any court or governmental authority or agency is required that has not been obtained in connection with the consummation by EQR of the transactions contemplated hereby, the applicable Terms Agreement or any Deposit Agreement, except such as may be required under the 1933 Act, the 1933 Act Regulations or state securities law. (xx) Each of EQR and its subsidiaries has all consents, authorizations, approvals, orders, certificates and permits (collectively, "Governmental Licenses") of and from, and has made all declarations and filings with, all federal, state, local and other governmental authorities, all self-regulatory organizations and all courts and other tribunals required for it to own, lease, license and use its properties and assets and to conduct its business in the manner described in the Registration Statement and the Prospectus, except to the extent that the failure to obtain or file would not have a Material Adverse Effect; and all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not result in a Material Adverse Effect; and none of EQR or any of its subsidiaries has received any written notice of proceedings relating to the revocation or modification of any such consent, authorization, approval, order, certificate or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xxi) The documents incorporated or deemed to be incorporated by reference in the Prospectus, when they became effective or at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 10 1934 Act and the rules and regulations of the Commission under the 1934 Act (the "1934 Act Regulations"), and, when read together with the other information in the Prospectus, at the date of the Prospectus, as of each Representation Date, at the time the Registration Statement became effective, and at the Closing Time or during the period specified in Section 3(f), did not and will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (xxii) Each of EQR and its subsidiaries is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; and neither EQR nor ERP has any reason to believe that EQR or any of its subsidiaries will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its businesses at a cost that would not have a Material Adverse Effect, except as described in or contemplated by the Registration Statement and the Prospectus. (xxiii) None of EQR or any of its subsidiaries is in violation of its charter documents, bylaws, LLC agreements or partnership agreements, or in default in the performance of any material obligation, agreement or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which it or any of them is a party or by which it or any of them may be bound, or to which any of their properties or assets is subject, which default in performance would result in a Material Adverse Effect; and the execution, delivery and performance of the applicable Terms Agreement or any Deposit Agreement and any other agreement or instrument entered into or issued or to be entered into or issued by EQR in connection with the transactions contemplated herein or therein and the consummation of the transactions contemplated hereby or thereby, including the issuance, sale and delivery of the Underwritten Securities and the use of proceeds described in the Prospectus, have been duly authorized by all necessary action and do not and will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of EQR or any of its subsidiaries, pursuant to any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which EQR or any of its subsidiaries is a party or by which it or any of them may be bound or affected, or to which any of their properties or assets is subject, nor will -11- such action result in any violation of the provisions of the partnership agreement, LLC agreement or charter or bylaws of EQR or any of its subsidiaries, or any applicable law, regulation, ruling, order, judgment, administrative regulation or administrative or court decree. (xxiv) Neither EQR nor ERP has taken or will take, directly or indirectly, any action prohibited by Regulation M. (xxv) The assets of EQR do not constitute "plan assets" under the Employee Retirement Income Security Act of 1974, as amended. (xxvi) Except as otherwise described in the Prospectus, each of EQR and its subsidiaries has good and marketable title in fee simple to all real property and good title to all personal property (including mortgage investments) owned by it which is material to the business of EQR and its subsidiaries, considered as a single enterprise, in each case free and clear of all liens, claims, encumbrances and defects except such as are described in general in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by EQR or any of its subsidiaries; and any real property and buildings held under lease by EQR or any of its subsidiaries are held by it under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by EQR or such subsidiaries, in each case except as described in or contemplated by the Registration Statement and the Prospectus. (xxvii) Each of EQR and its subsidiaries has obtained title insurance on all of the properties owned by each of them covering risks and in amounts that are commercially reasonable for the assets owned by them and that are consistent with the types and amounts of insurance typically maintained by current owners of similar properties, and in each case such title insurance is in full force and effect. (xxviii) The mortgages and deeds of trust encumbering the properties and assets described in general in the Prospectus are not convertible and are not cross-defaulted or cross-collateralized to any property not owned by EQR or any of its subsidiaries; except as disclosed in the Prospectus, none of EQR or any of its subsidiaries holds participating interests in such mortgages and deeds of trust. (xxix) Each of the partnership agreements and LLC agreements to which EQR or any of its subsidiaries is a party has been duly authorized, executed and delivered by such party and constitutes the -12- valid agreement thereof, enforceable in accordance with its terms, except as (A) the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and (B) the availability of equitable remedies may be limited by equitable principles of general applicability; and the execution, delivery and performance of any of such agreements did not, at the time of execution and delivery, and does not constitute a breach of, or default under, the partnership agreement, charter, bylaws or other governing documents of such party or any material contract, lease or other instrument to which such party is a party or by which its properties may be bound or any law, administrative regulation or administrative or court decree. (xxx) Except as otherwise stated in the Registration Statement and the Prospectus or as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither EQR nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (B) EQR and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against EQR or any of its subsidiaries and (D) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting EQR or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws. (xxxi) EQR has operated and intends to continue to operate in such a manner as to qualify to be taxed as a "real estate investment 13 trust" under the Internal Revenue Code of 1986, as amended (the "Code"). (xxxii) Each of EQR and its subsidiaries has filed all federal, state, local and foreign income tax returns which have been required to be filed and has paid all taxes required to be paid and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except in all cases for any such tax, assessment, fine or penalty that is being contested in good faith and except in any case in which the failure to file or pay such taxes would not have a Material Adverse Effect. (xxxiii) Neither EQR nor any subsidiary is, or as a result of the transactions contemplated by the Prospectus would be, required to make any filing or to register under the Investment Company Act of 1940, as amended, or is or will become a "holding company" or a "subsidiary company" of a "registered holding company," as defined in the Public Utility Holding Company Act of 1935, as amended. (xxxiv) No labor dispute with the employees of EQR, or any of EQR's subsidiaries exists, or to the knowledge of EQR or ERP, is imminent. (b) Any certificate signed by any officer of EQR or of any subsidiary and delivered to you or to counsel for the Underwriters shall be deemed a representation and warranty by EQR or such subsidiary to each Underwriter participating in such offering as to the matters covered thereby on the date of such certificate. Section 2. Purchase and Sale. ------------------ (a) The several commitments of the Underwriters to purchase the Underwritten Securities pursuant to the applicable Terms Agreement shall be deemed to have been made on the basis of the representations and warranties herein contained and shall be subject to the terms and conditions set forth herein or in the applicable Terms Agreement. (b) In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, EQR may grant, if so provided in the applicable Terms Agreement relating to the Initial Underwritten Securities, an option to the Underwriters named in such Terms Agreement, severally and not jointly, to purchase up to the number of Option Securities set forth therein at the same price per Option Security as is applicable to the Initial Underwritten Securities. Such option, if granted, will expire 30 days or such lesser number of days as may be specified in the applicable Terms Agreement -14- after the Representation Date relating to the Initial Underwritten Securities, and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial Underwritten Securities upon notice by you to EQR setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a "Date of Delivery") shall be determined by you, but shall not be later than seven full business days and not be earlier than two full business days after the exercise of said option, unless otherwise agreed upon by you and EQR. If the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the number of Initial Underwritten Securities each such Underwriter has agreed to purchase as set forth in the applicable Terms Agreement bears to the total number of Initial Underwritten Securities, subject to such adjustments as you in your discretion shall make to eliminate any sales or purchases of fractional Option Securities. (c) Payment of the purchase price for, and delivery of, the Underwritten Securities to be purchased by the Underwriters shall be made at such place as shall be agreed upon by you and EQR, at 10:00 A.M., New York City time, no later than the third (fourth, if the pricing occurs after 4:30 p.m. (New York City time) on any given business day) business day (unless postponed in accordance with the provisions of Section 10 hereof) following the date of the applicable Terms Agreement or at such other time as shall be agreed upon by you and EQR (each such time and date being referred to as a "Closing Time"). In addition, if any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates representing, such Option Securities, shall be made at such place as shall be agreed upon by you and EQR on each Date of Delivery as specified in the notice from you to EQR. Unless otherwise specified in the applicable Terms Agreement, payment shall be made to EQR by wire transfer to accounts designated by EQR of immediately available funds payable to the order of EQR or ERP against delivery to you for the respective accounts of the Underwriters of the Underwritten Securities to be purchased by them. The Underwritten Securities or, if applicable, Depositary Receipts evidencing the Depositary Shares, shall be in such authorized denominations and registered in such names as you may request in writing at least two business days prior to the applicable Closing Time or Date of Delivery, as the case may be. The Underwritten Securities, which may be in temporary form, will be made available for examination and packaging by you on or before the first business day prior to the applicable Closing Time or Date of Delivery, as the case may be. If authorized by the applicable Terms Agreement, the Underwriters named therein may solicit offers to purchase Underwritten Securities from EQR pursuant to delayed delivery contracts ("Delayed Delivery Contracts") substantially -15- in the form of Exhibit B hereto with such changes therein as EQR may approve. As compensation for arranging Delayed Delivery Contracts, EQR will pay to you at Closing Time, for the respective accounts of the Underwriters, a fee specified in the applicable Terms Agreement for each of the Underwritten Securities for which Delayed Delivery Contracts are made at the applicable Closing Time as is specified in the applicable Terms Agreement. Any Delayed Delivery Contracts are to be with institutional investors of the types described in the Prospectus. At the applicable Closing Time, EQR will enter into Delayed Delivery Contracts (for not less than the minimum number of Underwritten Securities per Delayed Delivery Contract specified in the applicable Terms Agreement) with all purchasers proposed by the Underwriters and previously approved by EQR as provided below, but not for an aggregate number of Underwritten Securities in excess of that specified in the applicable Terms Agreement. The Underwriters will not have any responsibility for the validity or performance of Delayed Delivery Contracts. You shall submit to EQR, at least three business days prior to the applicable Closing Time, the names of any institutional investors with which it is proposed that EQR will enter into Delayed Delivery Contracts and the number of Underwritten Securities to be purchased by each of them, and EQR will advise you, at least two business days prior to the applicable Closing Time, of the names of the institutions with which the making of Delayed Delivery Contracts is approved by EQR and the number of Underwritten Securities to be covered by each such Delayed Delivery Contract. The number of Underwritten Securities agreed to be purchased by the several Underwriters pursuant to the applicable Terms Agreement shall be reduced by the number of Underwritten Securities covered by Delayed Delivery Contracts, as to each Underwriter as set forth in a written notice delivered by you to EQR; provided, however, that the total number of Underwritten Securities to be purchased by all Underwriters shall be the total number of Underwritten Securities covered by the applicable Terms Agreement, less the number of Underwritten Securities covered by Delayed Delivery Contracts. Section 3. Covenants. ---------- Each of EQR and ERP covenants with you, and with each Underwriter participating in the offering of Underwritten Securities, as follows. (a) Immediately following the execution of the applicable Terms Agreement, EQR will prepare a Prospectus Supplement setting forth the number of Underwritten Securities covered thereby and their terms not otherwise specified in the Prospectus pursuant to which the Underwritten Securities are being issued, the names of the Underwriters participating in the offering and the number of Underwritten Securities which each severally has agreed to purchase, the names of the Underwriters acting as co-managers in connection with the offering, the price at -16- which the Underwritten Securities are to be purchased by the Underwriters from EQR, the initial public offering price, if any, the selling concession and reallowance, if any, any delayed delivery arrangements, and such other information as you and EQR deem appropriate in connection with the offering of the Underwritten Securities; and EQR will promptly transmit copies of the Prospectus Supplement to the Commission for filing pursuant to Rule 424(b) of the 1933 Act Regulations within the time period required by such Rule and will furnish to the Underwriters named therein as many copies of the Prospectus and such Prospectus Supplement as you shall reasonably request and the Prospectus and any Prospectus Supplement shall be identical to any electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (b) EQR will notify you immediately, and confirm such notice in writing, of (i) the effectiveness of any amendment to the Registration Statement, (ii) the transmittal to the Commission for filing of any Prospectus Supplement or other supplement or amendment to the Prospectus or any document to be filed pursuant to the 1934 Act, (iii) the receipt of any comments from the Commission, (iv) any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, and (v) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of the Prospectus or the initiation of any proceedings for any of such purposes; and EQR will make every reasonable effort to prevent the issuance of any such stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (c) At any time when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act in connection with sales of the Underwritten Securities, EQR will give you notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b) of the 1933 Act Regulations), any Term Sheet or any amendment or supplement to the Prospectus (including any revised prospectus which EQR proposes for use by you in connection with the offering of Underwritten Securities which differs from the prospectus on file at the Commission at the time the Registration Statement became effective, whether or not such revised prospectus is required to be filed pursuant to Rule 424(b) of the 1933 Act Regulations), whether pursuant to the 1933 Act, 1934 Act or otherwise, and will furnish you with copies of any such amendment or supplement a reasonable amount of time prior to such proposed filing or preparation, as the case may be, and will not file or prepare any such amendment or supplement or other documents in a form to which you or counsel for the Underwriters shall reasonably object. (d) EQR will deliver to you as many conformed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and -17- documents incorporated or deemed to be incorporated by reference therein) as you reasonably request. (e) EQR will furnish to each Underwriter, from time to time during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act in connection with sales of the Underwritten Securities, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request for the purposes contemplated by the 1933 Act, the 1933 Act Regulations, the 1934 Act or the 1934 Act Regulations. (f) EQR will comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Underwritten Securities as contemplated in the applicable Terms Agreement and in the Registration Statement and the Prospectus. If at any time when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act in connection with sales of the Underwritten Securities any event shall occur or condition exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or counsel for EQR, to amend or supplement the Prospectus in order that the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of either such counsel, at any such time to amend or supplement the Registration Statement or the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, then EQR will promptly prepare and file with the Commission such amendment or supplement in form and substance reasonably satisfactory to counsel for the Underwriters, whether by filing documents pursuant to the 1933 Act, the 1934 Act or otherwise, as may be necessary to correct such untrue statement or omission or to make the Registration Statement and Prospectus comply with such requirements. (g) EQR will endeavor, in cooperation with the Underwriters, to qualify the Underwritten Securities and the Common Shares issuable upon conversion of the Preferred Shares or the Depositary Shares, if any, for offering and sale under the applicable securities laws and real estate syndication laws of such states and other jurisdictions of the United States as you may designate; provided, however, that EQR shall not be obligated to (i) qualify as a foreign corporation in any jurisdiction where it is not so qualified, (ii) file any general consent to service of process or (iii) take any action that would subject it to income taxation in any such jurisdiction. In each jurisdiction in which the Underwritten Securities or the Common Shares issuable upon conversion of the Preferred Shares or the Depositary Shares, if any, have been so qualified, EQR will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for so long as may be required for the distribution of the Underwritten Securities. -18- (h) With respect to each sale of Underwritten Securities, EQR will make generally available to its security holders as soon as practicable, but not later than 90 days after the close of the period covered thereby, an earning statement (in form complying with the provisions of Rule 158 of the 1933 Act Regulations) covering a 12-month period beginning not later than the first day of EQR's fiscal quarter next following the "effective date" (as defined in such Rule 158) of the Registration Statement. (i) EQR, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act in connection with sales of the Underwritten Securities, will file all documents required to be filed with the Commission pursuant to Section 13, 14 or 15 of the 1934 Act within the time periods prescribed by the 1934 Act and the 1934 Act Regulations. (j) EQR will not, between the date of the applicable Terms Agreement and the termination of any trading restrictions or the applicable Closing Time, whichever is later, with respect to the Underwritten Securities covered thereby, without your prior written consent, offer or sell, grant any option for the sale of, or enter into any agreement to sell, any securities of the same class or series or ranking on a parity with such Underwritten Securities (other than the Underwritten Securities which are to be sold pursuant to such Terms Agreement) or, if such Terms Agreement relates to Underwritten Securities that are convertible into Common Shares, any Common Shares or any security convertible into Common Shares (except for Common Shares issued pursuant to reservations, multifamily property acquisition agreements, employee benefit plans, dividend reinvestment plans, or employee and trustee share options plans), except as may otherwise be provided in the applicable Terms Agreement. (k) EQR will reserve and keep available at all times, free of preemptive rights, Common Shares for the purpose of enabling EQR to satisfy any obligations to issue such shares upon conversion of the Preferred Shares or the Depositary Shares, as the case may be. (l) If requested by you, EQR will use its reasonable best efforts to list the Underwritten Securities and the Common Shares issuable upon conversion of the Underwritten Securities, if any, on the New York Stock Exchange or such other national exchange on which the Underwritten Securities or Common Shares, as the case may be, are then listed. (m) On or prior to the Closing Time, EQR will cause Articles Supplementary relating to the Preferred Shares or Preferred Shares represented by Depositary Shares, if any, to be filed for record with the SDAT in accordance with the Maryland REIT Statute. -19- (n) EQR will use its reasonable best efforts to meet the requirements to qualify as a "real estate investment trust" under the Code. (o) If requested by you, EQR will cause, or have caused, the officers of EQR to enter into lock-up agreements in form and substance satisfactory to the Underwriters. (p) Except for the authorization of actions permitted to be taken by the Underwriters as contemplated herein or in the Prospectus, EQR will not (i) take, directly or indirectly, any action designed to cause or to result in, or that might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of EQR to facilitate the sale or resale of the Underwritten Securities, (ii) sell, bid for or purchase the Underwritten Securities or pay any person any compensation for soliciting purchases of the Underwritten Securities or (iii) pay or agree to pay to any person any compensation for soliciting another to purchase any other securities of EQR. Section 4. Payment of Expenses. -------------------- EQR will pay all expenses incident to the performance of its obligations under the applicable Terms Agreement or any Deposit Agreement, including (i) the printing and filing of the Registration Statement as originally filed and of each amendment thereto, (ii) the filing of these Standard Underwriting Provisions and the applicable Terms Agreement, (iii) the preparation, issuance and delivery of the Underwritten Securities to the Underwriters, (iv) to the extent applicable, the fees and disbursements of EQR's counsel and accountants, (v) the qualification of the Underwritten Securities and the Common Shares issuable upon conversion of the Preferred Shares or the Depositary Shares, if any, under securities laws and real estate syndication laws in accordance with the provisions of Section 3(g), including filing fees and the fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey, (vi) the printing and delivery to the Underwriters of copies of the Registration Statement as originally filed and of each amendment thereto, and of the Prospectus and any amendments or supplements thereto, (vii) the printing and delivery to the Underwriters of copies of the applicable Deposit Agreement, if any, (viii) any fees charged by nationally recognized statistical rating organizations for the rating of the Underwritten Securities, (ix) the fees and expenses, if any, incurred with respect to the listing of the Underwritten Securities and the Common Shares issuable upon conversion of the Preferred Shares or the Depositary Shares, if any, on any national securities exchange or quotation system, (x) the fees and expenses, if any, incurred with respect to any filing with the National Association of Securities Dealers, Inc. ( including fees and disbursements of counsel for the Underwriters in connection therewith), (xi) the costs and expenses of the deposit of Preferred Shares under any Deposit Agreement in exchange for Depositary Receipts, including the charges of the Depositary in connection therewith; (xii) the -20- fees and expenses of the Depositary, including the fees and disbursements of counsel for the Depositary, and (xiii) the costs and charges of any transfer agent or registrar. If the applicable Terms Agreement is terminated by you in accordance with the provisions of Section 5 or Section 9(a)(i) or 9(a)(iv), EQR shall reimburse the Underwriters named in such Terms Agreement for all of their out- of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters. SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. ---------------------------------------- The several obligations of the Underwriters to purchase Underwritten Securities pursuant to the applicable Terms Agreement are subject to the accuracy of the representations and warranties of EQR and ERP herein contained, to the accuracy of the statements of officers of EQR and ERP made in any certificate pursuant to the provisions hereof, to the performance by EQR and ERP of all of its covenants and other obligations hereunder, and to the following further conditions: (a) At the applicable Closing Time, (i) no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, (ii) any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel for the Underwriters, (iii) the rating assigned by any nationally recognized statistical rating organization to any Preferred Shares of EQR or debt securities of ERP as of the date of the applicable Terms Agreement shall not have been lowered since such date nor shall any such rating organization have publicly announced that it has placed any Preferred Shares of EQR or debt securities of ERP on what is commonly termed a "watch list" for possible downgrading, and (iv) there shall not have come to your attention any facts that would cause you to believe that the Prospectus, together with the applicable Prospectus Supplement, at the time it was required to be delivered to purchasers of the Underwritten Securities, included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at such time, not misleading. A prospectus containing information relating to the description of the Underwritten Securities and the Common Shares issuable upon conversion of the Preferred Shares or the Depositary Shares, if any, the specific method of distribution and similar matters shall have been filed with the Commission in accordance with Rule 424 (or any required post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A), or, if EQR has elected to rely upon Rule 434 of the 1933 Act Regulations, a Term Sheet shall have been filed with the Commission in accordance with Rule 424(b)(7). - 21 - (b) At the applicable Closing Time, you shall have received: (1) The favorable opinion, dated as of the applicable Closing Time, of Rosenberg & Liebentritt, P.C., counsel for EQR and its subsidiaries, in form and substance satisfactory to counsel for the Underwriters, to the effect that: (i) EQR is a real estate investment trust duly formed and existing under and by virtue of the laws of the State of Maryland and is in good standing with the SDAT; EQR has the power and authority to own, lease and operate its properties and conduct its business as described in the Prospectus; and, to counsel's knowledge, is duly qualified and in good standing and authorized to transact business in any jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified or in good standing will not have a Material Adverse Effect. (ii) Each of EQR's subsidiaries has been duly formed and is validly existing and in good standing under the laws of the jurisdiction of its formation, has the power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus, and, to counsel's knowledge, is duly qualified and in good standing and authorized to transact business in any jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified or in good standing will not have a material adverse effect on such subsidiary's condition, financial or otherwise, earnings, assets, business affairs or business prospects; all of the issued and outstanding shares of beneficial interest, capital stock, LLC interests and partnership interests of each subsidiary have been duly authorized and validly issued, are fully paid and with respect to the shares of capital stock, LLC interests and partnership interests owned by EQR, are owned by EQR or another subsidiary, to such counsel's knowledge, directly, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. -22- (iii) The authorized, issued and outstanding shares of beneficial interest of EQR are as set forth in the Prospectus (except for subsequent issuances, if any, pursuant to reservations, agreements, employee benefit plans, dividend reinvestment plans, employee and trustee share option plans or the exercise of convertible securities referred to in the Registration Statement) and such shares of beneficial interest are duly authorized validly issued, fully paid and non-assessable. (iv) The Underwritten Securities and, if applicable, the deposit of the Preferred Shares in accordance with the provisions of a Deposit Agreement, have been duly authorized for issuance and sale pursuant to this Agreement and such Underwritten Securities, when issued and delivered by EQR pursuant to this Agreement against payment of the consideration set forth in the applicable Terms Agreement or the Delayed Delivery Contracts, if any, will be validly issued, fully paid and non-assessable; the terms of the Underwritten Securities being sold pursuant to the applicable Terms Agreement conform in all material respects to the description of the Underwritten Securities set forth under "Description of Shares of Beneficial Interest" in the Prospectus and under "Description of Common Shares of Beneficial Interest," "Description of Preferred Shares of Beneficial Interest" or "Description of Depositary Shares," or other similar caption, as the case may be, in the Prospectus Supplement; and the issuance of the Underwritten Securities is not subject to any statutory preemptive rights or, to counsel's knowledge, any contractual rights to subscribe for more shares. If applicable, the form of certificate used to evidence the Underwritten Securities complies with all applicable statutory requirements. -23- (v) If applicable, the Common Shares issuable upon conversion of any of the Preferred Shares or Depositary Shares have been duly authorized and reserved for issuance upon such conversion by all necessary action and such shares, when issued upon such conversion will be validly issued and will be fully paid and non- assessable, and the issuance of such shares upon such conversion will not be subject to any statutory preemptive rights or, to counsel's knowledge, any contractual rights to subscribe for more shares; and the Common Shares issuable upon conversion of the Preferred Shares or the Depositary Shares conform in all material respects to the descriptions thereof in the Prospectus. (vi) The applicable Deposit Agreement, if any, has been duly authorized, executed and delivered by EQR and (assuming due authorization, execution and delivery of the Deposit Agreement by the Depositary) constitutes a valid and binding obligation of EQR enforceable in accordance with its terms except as (A) the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, (B) the availability of equitable remedies may be limited by equitable principles of general applicability, and (C) rights to indemnity and contribution thereunder may be limited by state or federal securities laws or the public policy underlying such laws; and the Deposit Agreement, if any, conforms in all material respects to all statements relating thereto contained in the Prospectus. (vii) Each of the applicable Terms Agreement and the Delayed Delivery Contracts, if any, has been duly authorized, executed and delivered by EQR and ERP, and each of EQR and ERP has the power and authority to perform its obligations hereunder and thereunder. (viii) The execution and delivery of the applicable Terms Agreement by each of EQR and ERP, and the performance by each of EQR and ERP of its obligations thereunder and the consummation of the transactions contemplated hereby and thereby, do not result in a violation of any provision of the Declaration of Trust, bylaws or partnership agreement of EQR or ERP or of the Maryland REIT statute or, to counsel's knowledge, any other applicable law, administrative regulation or administrative or court decree, and will not, to counsel's knowledge, conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of EQR or any of its subsidiaries pursuant to any agreement or other instrument that is binding upon EQR or any subsidiary, or to which any of their properties or assets is subject. -24- (ix) The Registration Statement is effective under the 1933 Act and, to counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been initiated or threatened by the Commission. (x) No consent, approval, authorization or order of, or qualification with, any governmental body or agency and no consent, approval, or authorization of any person other than EQR and ERP is required for the performance by each of EQR and ERP of its obligations under this Agreement and the applicable Terms Agreement, except such as may be required under the federal securities laws and the securities or Blue Sky laws of various states in connection with the offer and sale of the Underwritten Securities. (xi) There are no (A) legal or governmental proceedings pending or, to the knowledge of such counsel, threatened which are required to be disclosed in the Registration Statement, other than those disclosed therein, and all pending legal or governmental proceedings to which EQR or any of its subsidiaries is a party or to which any of their property is subject which are not described in the Registration Statement, including ordinary routine litigation incidental to the business, are, considered in the aggregate, not material or (B) to counsel's knowledge, statutes, regulations, contracts, indentures, mortgages, loan agreements, notes, leases, instruments or other documents that are required to be described in the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required, except for the Articles Supplementary which will be filed on Form 8-K as soon as practicable after the applicable Representation Date. (xii) None of EQR or any of its subsidiaries is required to be registered under the 1940 Act. -25- (xiii) The information (A) in the Prospectus under the heading "Description of Shares of Beneficial Interest" and (B) in EQR's Annual Report on Form 10-K for the most recent fiscal year then ended under the caption "Legal Proceedings," to the extent that it constitutes matters of law, summaries of legal matters, documents or proceedings, or legal conclusions, has been reviewed by such counsel and is correct in all material respects. (xiv) The Registration Statement and Prospectus (except for financial statements and schedules included therein, as to which such counsel need not express any opinion), excluding the documents incorporated by reference therein, as of their respective effective or issue dates comply as to form in all material respects with the requirements for registration statements on Form S-3 under the 1933 Act and the 1933 Act Regulations. (xv) To their knowledge, EQR and each of its subsidiaries has consents, authorizations, approvals, orders, certificates and permits of and from, and has made all declarations and filings with , all federal, state, local, and other governmental authorities, all self-regulatory organizations, and all courts and other tribunals, necessary to own, lease, license and use its properties and assets and to conduct its business in the manner described in the Registration Statement and the Prospectus, except to the extent that the failure to obtain or file would not have a material adverse effect on the condition, financial or otherwise, or the earnings, assets, business affairs or business prospects of EQR and its subsidiaries considered as a single enterprise. -26- (xvi) To their knowledge, except as described in the Prospectus, there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any shares of beneficial interest or capital stock of or other equity interest in EQR or any subsidiary of EQR except for multifamily property acquisition agreements with respect to the sale or issuance of Common Shares or OP Units which are not material in amount. (xvii) Each document filed pursuant to the 1934 Act (other than the financial statements, schedules and other financial and statistical data, as to which no opinion need be rendered) and incorporated or deemed to be incorporated by reference in the Prospectus complied when so filed as to form in all material respects with the 1934 Act and the 1934 Act Regulations. (xviii) The Articles Supplementary relating to the Preferred Shares and the Depositary Shares, if any, have been filed for record with the SDAT pursuant to the Maryland REIT Statute and the number of Preferred Shares and the title, par value, liquidation preference, ranking, dividend rate or rates (or method of calculation), dividend payment dates, redemption or sinking fund requirements, conversion provisions and other terms of the Preferred Shares have been set forth therein. -27- (2) The favorable opinion, dated as of the applicable Closing Time, of Hogan & Hartson L.L.P., counsel for the Underwriters and Maryland and special tax counsel to EQR, substantially to the effect specified in subparagraphs (i) first two clauses only, as to applicable Maryland law, (iv), (v), (vi), (vii), (viii), as to applicable Maryland law and administrative regulations (other than Maryland securities laws and regulations), (ix), (x) as to any Maryland governmental body or agency, (xiv), and (xviii) of Section 5(b)(1), and to the effect that (A) EQR was organized and has operated in conformity with the requirements for qualification and taxation as a real estate investment trust under the Internal Revenue Code of 1986, as amended, for each of its taxable years ended since December 31, 1993, and EQR's current organization and method of operations should enable it to continue to meet the requirements for qualification and taxation as a real estate investment trust and (B) the discussion in the Prospectus under the heading "Federal Income Tax Considerations" and in the Prospectus Supplement under the heading "Taxation of Holders of Common Shares of Beneficial Interest," or "Taxation of Holders of Preferred Shares of Beneficial Interest," or "Taxation of Holders of Depositary Shares," or other similar caption, as the case may be, to the extent that it constitutes matters of federal income tax law or legal conclusions related thereto, is correct in all material respects. (3) In rendering their opinions required by subsections (b)(1) and (b)(2), respectively, of this Section 5, Rosenberg & Liebentritt, P.C. and Hogan & Hartson L.L.P. shall each additionally state (which shall not constitute an opinion) that no facts have come to the attention of such counsel which cause them to believe that the Registration Statement or any post-effective amendment thereto (except for financial statements and supporting schedules and other financial information and data included therein or omitted therefrom, as to which such counsel need not express any view), at the time the Registration Statement or any post-effective amendment thereto (including the filing of EQR's Annual Report on Form 10-K with the Commission) became effective or at the date of the applicable Terms Agreement, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus or any amendment or supplement thereto (except as aforesaid) as of the date of the applicable Terms Agreement or at the applicable Closing Time, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. -28- In giving their opinions required by this Section 5(b), such counsel (A) may rely as to all matters of fact, upon certificates and written statements of officers and employees of and accountants for EQR and (B) may rely as to the qualification and good standing of each of EQR or any of its subsidiaries to do business in any state or jurisdiction, upon certificates of appropriate government officials or opinions of counsel in such jurisdictions, which opinions shall be in form and substance satisfactory to counsel for the Underwriters. In giving their belief required in Section 5(b)(3), such counsel may state that their belief is based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments and supplements thereto and review and discussion of the contents thereof, but are without independent check or verification except as specified. (c) At the applicable Closing Time, there shall not have been, since the date of the applicable Terms Agreement or since the respective dates as of which information is given in the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, assets, business affairs or business prospects of EQR and its subsidiaries considered as a single enterprise, whether or not arising in the ordinary course of business; and you shall have received a certificate of the Chief Executive Officer, the President or the Chief Financial Officer of EQR, dated as of such Closing Time, on behalf of EQR and ERP, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Section 1 are true and correct with the same force and effect as though such Closing Time were a Representation Date, (iii) EQR has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to Closing Time and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission. As used in this Section 5(c), the term "Prospectus" means the Prospectus in the form first used to confirm sales of the Underwritten Securities. (d) At the time of execution of the applicable Terms Agreement, you shall have received from EQR's independent public accountants, a letter dated such date, in form and substance satisfactory to you, to the effect that (i) they are independent accountants with respect to EQR and its subsidiaries within the meaning of the 1933 Act and the 1933 Act Regulations; (ii) it is their opinion that the consolidated financial statements and supporting schedules included or incorporated by reference in the Registration Statement and the Prospectus and covered by their opinions therein comply in form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act Regulations; (iii) based upon limited procedures set forth in detail in such letter, and except as otherwise set forth in such letter, nothing has come to their attention which causes them to believe that at a specified date not more than five days prior to the date of the applicable Terms Agreement, there has been any change in the shares of beneficial interest of EQR or in the consolidated long term debt of EQR or any decrease in the net assets of EQR, as compared with the amounts shown in the most recent consolidated balance sheet included or incorporated by reference in the -29- Registration Statement and the Prospectus or, during the period from the date of the most recent consolidated statement of operations included or incorporated by reference in the Registration Statement and the Prospectus to a specified date not more than five days prior to the date of the applicable Terms Agreement, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated revenues, or decrease in net income or net income per share of beneficial interest of EQR, except in all instances for changes, increases or decreases which the Registration Statement and the Prospectus disclose have occurred or may occur; and (iv) in addition to the audit referred to in their opinions and the limited procedures referred to in clause (iii) above, they have carried out certain specified procedures with respect to certain amounts, percentages and financial information which are included in the Registration Statement and the Prospectus and which are specified by you, and have found such amounts, percentages and financial information to be in agreement with relevant accounting, financial and other records of EQR and its subsidiaries identified in such letter. (e) At the applicable Closing Time, you shall have received from EQR's independent public accountants, a letter dated as of the applicable Closing Time to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (d) of this Section, except that the "specified date" referred to shall be a date not more than five days prior to the applicable Closing Time. (f) At the applicable Closing Time, counsel for the Underwriters shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Underwritten Securities as herein contemplated and related proceedings, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by EQR in connection with the issuance and sale of the Underwritten Securities as herein contemplated shall be reasonably satisfactory in form and substance to you and counsel for the Underwriters. (g) At Closing Time and at any relevant Date of Delivery, the Underwritten Securities shall have the ratings accorded by any "nationally recognized statistical rating organization", as defined by the Commission for purposes of Rule 436(g)(2) of the 1933 Act Regulations, if and as specified in the applicable Terms Agreement, and EQR shall have delivered to you a letter, dated as of such date, from each such rating organization, or other evidence satisfactory to you, confirming that the Underwritten Securities have such ratings. Since the time of execution of such Terms Agreement, there shall not have occurred a downgrading in the rating assigned to the Underwritten Securities or any of EQR's other securities by any such rating organization, and no such rating organization shall have publicly announced that it has under surveillance or review its rating of the Underwritten Securities or any of EQR's other securities. -30- (h) At Closing Time, the Underwritten Securities shall have been approved for listing, subject only to official notice of issuance, if and as specified in the applicable Terms Agreement. (i) On the date of the applicable Terms Agreement, you shall have received, in form and substance satisfactory to it, each lock-up agreement, if any, specified in such Terms Agreement as being required to be delivered by the persons listed therein. (j) If the Underwriters exercise their option provided in a Terms Agreement as set forth in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of EQR and ERP contained herein and the statements in any certificates furnished by EQR or ERP hereunder shall be true and correct as of each Date of Delivery, and you shall have received: (1) A certificate, dated such Date of Delivery, of the Chief Executive Officer, the President or the Chief Financial Officer of EQR, in their capacities as such, on behalf of EQR and ERP, confirming that the certificate delivered at Closing Time pursuant to Section 5(c) hereof remains true and correct as of such Date of Delivery. (2) The favorable opinion of Rosenberg & Liebentritt, P.C., counsel for EQR, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities and otherwise substantially to the same effect as the opinions required of them by Section 5(b)(1) and the belief required by Section 5(b)(3) hereof. (3) The favorable opinion of Hogan & Hartson L.L.P., counsel for the Underwriters and Maryland and special tax counsel for EQR, dated such Date of Delivery, relating to the Option Securities and otherwise to the same effect as the opinion required by Section 5(b)(2) and the belief required by Section 5(b)(3) hereof. (4) A letter from EQR's independent public accountants, in form and substance satisfactory to you and dated such Date of Delivery, substantially the same in scope and substance as the letter furnished to you pursuant to Section 5(d) hereof, except that the "specified date" in the letter furnished pursuant to this Section 5(j)(4) shall be a date not more than five days prior to such Date of Delivery. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, the applicable Terms Agreement may be terminated by you by notice to EQR at any time at or prior to the applicable Closing Time, and such termination shall be without liability of any party to any -31- other party except as provided in Section 4 hereof and except that Sections 1, 6, 7 and 8 shall survive any such termination and remain in full force and effect. Section 6. Indemnification. ---------------- (a) Each of EQR and ERP hereby agrees, jointly and severally, to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and any director, officer, employee or affiliate thereof, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (or any amendment or supplement thereto), or the omission, or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation or of any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided that (subject to Section 6(d) below), any such settlement is effected with the written consent of EQR and ERP; and (iii) against any and all expense whatsoever as incurred (including, without limitation, the fees and other charges of counsel chosen by you) reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent such loss, liability, claim, damage or expense arises out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written -32- information furnished to EQR by any Underwriter concerning such Underwriter through you expressly for use in the Registration Statement (or any amendment thereto) and the Prospectus (or any amendment or supplement thereto). (b) Each Underwriter severally agrees to indemnify and hold harmless EQR and ERP, and each person, if any, who controls EQR or ERP within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and any trustee, officer, employee or affiliate thereof, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section 6, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to EQR by any Underwriter concerning such Underwriter through you expressly for use in the Registration Statement (or any amendment thereto) and the Prospectus (or any amendment or supplement thereto). (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by you, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by EQR. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. -33- (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. Section 7. Contribution. ------------- If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect benefits received by EQR, on the one hand, and the Underwriters, on the other hand, from the offering of the Underwritten Securities pursuant to the applicable Terms Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of EQR, on the one hand, and of the Underwriters, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by EQR, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Underwritten Securities pursuant to the applicable Terms Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of such Underwritten Securities (before deducting expenses) received by EQR and the total underwriting discount received by the Underwriters, in each case as set forth on the cover of the Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet, bear to the aggregate initial public offering price of such Underwritten Securities as set forth on such cover. The relative fault of EQR, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by EQR or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. -34- EQR and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Underwritten Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Underwriter, and each trustee of EQR, each officer of EQR who signed the Registration Statement, and each person, if any, who controls EQR within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as EQR. The Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Underwritten Securities set forth opposite their respective names in the applicable Terms Agreement, and not joint. Section 8. Representations, Warranties and Agreements to Survive ----------------------------------------------------- Delivery. - -------- All representations, warranties and agreements included in the applicable Terms Agreement, or included in certificates of officers of EQR or ERP submitted pursuant thereto, shall remain operative and in full force and effect, regardless of any termination of the applicable Terms Agreement or investigation made by or on behalf of any Underwriter or any controlling person, or by or on behalf of EQR or ERP, and shall survive delivery of and payment for the -35- Underwritten Securities until the obligations relating to all Underwritten Securities have been fully satisfied in accordance with their terms. Section 9. Termination of Terms Agreement. ------------------------------- (a) You may terminate the applicable Terms Agreement, by notice to EQR, at any time at or prior to the applicable Closing Time if (i) there has been, since the date of such Terms Agreement or since the respective dates as of which information is given in the Prospectus, any Material Adverse Change, or (ii) there has occurred any material adverse change in the financial markets in the United States or any outbreak of hostilities or other calamity or crisis or escalation of any existing hostilities or any change or development involving a prospective change in national political, financial or economic conditions, in each case, the effect of which is such as to make it, in your judgment, impracticable to market the Underwritten Securities or enforce contracts for the sale of the Underwritten Securities, or (iii) trading in any of the securities of EQR has been suspended by the Commission or any exchange or any over-the- counter market, or if trading generally on either the New York Stock Exchange, the American Stock Exchange or in the Nasdaq National Market has been suspended or limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by either of said exchanges or by such system or by order of the Commission, the NASD, or any other governmental authority, or (iv) if a banking moratorium has been declared by Federal or New York authorities, or (v) the rating assigned by any nationally recognized statistical rating organization to any Preferred Shares of EQR as of the date of the applicable Terms Agreement shall have been lowered since such date or if any such rating organization shall have publicly announced that it has placed any Preferred Shares of EQR on what is commonly termed a "watch list" for possible downgrading. As used in this Section 9(a), the term "Prospectus" means the Prospectus in the form first used to confirm sales of the Underwritten Securities. (b) In the event of any such termination, (x) the covenants set forth in Section 3 with respect to any offering of Underwritten Securities shall remain in effect so long as any Underwriter owns any such Underwritten Securities purchased from EQR pursuant to the applicable Terms Agreement and (y) the covenant set forth in Section 3(h) hereof, the provisions of Section 4 hereof, the indemnity and contribution agreements set forth in Section 6 and 7 hereof, and the provisions of Sections 8 and 13 hereof shall remain in effect. Section 10. Default by One or More of the Underwriters. ------------------------------------------- If one or more of the Underwriters shall fail at the applicable Closing Time or the relevant Date of Delivery, as the case may be, to purchase the Underwritten Securities which it or they are obligated to purchase under the applicable Terms Agreement (the "Defaulted Securities"), then you shall have the -36- right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, you shall not have completed such arrangements within such 24-hour period, then: (a) If the total number of Defaulted Securities does not exceed 10% of the total number of Underwritten Securities to be purchased pursuant to such Terms Agreement, the non-defaulting Underwriters named in such Terms Agreement shall be obligated to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or (b) If the total number of Defaulted Securities exceeds 10% of the total number of Underwritten Securities to be purchased pursuant to such Terms Agreement, the applicable Terms Agreement (or, with respect to the Underwriters' exercise of any applicable over-allotment option for the purchase of Option Securities on a Date of Delivery after the Closing Time, the obligations of the Underwriters to purchase, and EQR to sell, such Option Securities on such Date of Delivery) shall terminate without liability on the part of any non-defaulting Underwriter. No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default under this Agreement and the applicable Terms Agreement. In the event of any such default which does not result in a termination of the applicable Terms Agreement, either you or EQR shall have the right to postpone the applicable Closing Time for a period not exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectus or in any other documents or arrangements. Section 11. Notices. -------- All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed as set forth in the applicable Terms Agreement; notices to EQR and ERP shall be directed to them at Two North Riverside Plaza, Suite 600, Chicago, Illinois 60606, attention of Douglas Crocker II, with a copy to Ruth Pinkham Haring, Esq., Rosenberg & Liebentritt, P.C., Two North Riverside Plaza, Suite 1515, Chicago, Illinois 60606. -37- Section 12. Parties. ------- The applicable Terms Agreement shall inure to the benefit of and be binding upon you and EQR and ERP and any Underwriter who becomes a party to such Terms Agreement, and their respective successors. Nothing expressed or mentioned in the applicable Terms Agreement is intended or shall be construed to give any person, firm or corporation, other than those referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of such Terms Agreement or any provision therein contained. The applicable Terms Agreement and all conditions and provisions thereof are intended to be for the sole and exclusive benefit of the parties hereto and thereto and their respective successors and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Underwritten Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase. Section 13. Governing Law and Time. ---------------------- The applicable Terms Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said State. Specified times of day refer to New York City time. Section 14. Counterparts. ------------ The applicable Terms Agreement may be executed in one or more counterparts, and if executed in more than one counterpart the executed counterparts shall constitute a single instrument. -38- Exhibit A EQUITY RESIDENTIAL PROPERTIES TRUST (a Maryland real estate investment trust) Common Shares of Beneficial Interest, Preferred Shares of Beneficial Interest and Depositary Shares TERMS AGREEMENT To: Equity Residential Properties Trust Two North Riverside Plaza Chicago, Illinois 60606 Ladies and Gentlemen: We understand that Equity Residential Properties Trust, a Maryland real estate investment trust (the "Company"), proposes to issue and sell [_____ Common Shares of Beneficial Interest, par value $.01 per share (the "Common Shares")] [_____ Preferred Shares of Beneficial Interest, par value $.01 per share (the "Preferred Shares")] [in the form of _____ depositary shares (the "Depositary Shares") each representing ____ of a Preferred Share] (such securities also being hereinafter referred to as the "Initial Underwritten Securities"). Subject to the terms and conditions set forth or incorporated by reference herein, we [the underwriters named below (the "Underwriters")] offer to purchase, severally and not jointly, the number of Underwritten Securities [opposite their names set forth below at the purchase price set forth below, and a proportionate share of Option Underwritten Securities set forth below, to the extent any are purchased. Number Underwriter of Initial Underwritten Securities Total [$] The Underwritten Securities shall have the following terms: [Common Shares] Title: Number of shares: Number of Option Underwritten Securities: Initial public offering price per share: $ Purchase price per share: $ Listing requirements: Black-out provisions: Lock-up provisions: Other terms and conditions: Closing date and location: [Preferred Shares] Title: Rank: Ratings: Number of shares: Number of Option Underwritten Securities: Dividend rate (or formula) per share: $ Dividend payment dates: Stated value: $ Liquidation preference per share: $ Redemption provisions: Sinking fund requirements: Conversion provisions: Listing requirements: Black-out provisions: Initial public offering price per share: $____ plus accumulated dividends, if any, from _____ Purchase price per share: $____ plus accumulated dividends, if any, from _____ Other terms and conditions: Closing date and location: [Depositary Shares] Title: Fractional Amount of Preferred Shares represented by each Depositary Share: Ratings: Rank: Number of shares: Number of Option Underwritten Securities: Dividend rate (or formula) per share: Dividend payment dates: Liquidation preference per share: Redemption provisions: Sinking fund requirements: Conversion provisions: Listing requirements: Black-out provisions: Initial public offering price per share: $____ plus accumulated dividends, if any, from _____ Purchase price per share: $____ plus accumulated dividends, if any, from _____ Other terms and conditions: Closing date and location: All of the provisions contained in the document attached as Annex I entitled "EQUITY RESIDENTIAL PROPERTIES TRUST -- Common Shares of Beneficial Interest, Preferred Shares of Beneficial Interest and Depositary Shares-- Standard Underwriting Provisions" are hereby incorporated by reference in their entirety herein and shall be deemed to be a part of this Terms Agreement to the same extent as if such provisions had been set forth in full herein. Terms defined in such document are used herein as therein defined. Please accept this offer no later than _____ o'clock P.M. (New York City time) on _____________ by signing a copy of this Terms Agreement in the space set forth below and returning the signed copy to us. Very truly yours, By: ---------------------------------- Authorized Signatory [Acting on behalf of itself and the other named Underwriters.] Accepted: EQUITY RESIDENTIAL PROPERTIES TRUST By: -------------------------------- Name: Title: Exhibit B EQUITY RESIDENTIAL PROPERTIES TRUST (a Maryland real estate investment trust) [Title of Securities] DELAYED DELIVERY CONTRACT _______________ __, 1997 Equity Residential Properties Trust Two North Riverside Plaza Chicago, Illinois 60606 Attention: Ladies and Gentlemen: The undersigned hereby agrees to purchase from Equity Residential Properties Trust. (the "Company"), and the Company agrees to sell to the undersigned on ______________ __, 19__ (the "Delivery Date"), ________________________ [principal amount] shares of the Company's [insert title of security] (the "Securities"), offered by the Company's Prospectus dated ________________ __, 19__, as supplemented by its Prospectus Supplement dated ______________ __, 19__, receipt of which is hereby acknowledged, at a purchase price of [$_____ per share] [__% of the principal amount thereof, plus accrued interest from ____________ __, 19__,] to the Delivery Date, and on further terms and conditions set forth in this contract. Payment for the Securities which the undersigned has agreed to purchase on the Delivery Date shall be made to the Company or its order by [certified or official bank check in New York Clearing House] [same day] funds at the office of __________________________________________, on the Delivery Date, upon delivery to the undersigned of the Securities to be purchased by the undersigned in definitive form and in such denominations and registered in such names as the undersigned may designate in written or telegraphic communication addressed to the Company not less than five full business days prior to the Delivery Date. The obligation of the undersigned to take delivery of and make payment for the Securities on the Delivery Date shall be subject only to the conditions that (1) the purchase of the Securities to be made by the undersigned shall not on the Delivery Date be prohibited under the laws of the jurisdiction to which the undersigned is subject and (2) the Company, on or before _________________ __, 19__, shall have sold to the Underwriters of the Securities (the "Underwriters") such principal amount of the Securities as is sold to them pursuant to the Terms Agreement dated _______________ __, 19__ between the Company and the Underwriters. The obligation of the undersigned to take delivery of and make payment for the Securities shall not be affected by the failure of any purchaser to take delivery of and make payments for the Securities pursuant to other contracts similar to this contract. The undersigned represents and warrants to you that its investment in the Securities is not, as of the date hereof, prohibited under the laws of any jurisdiction to which the undersigned is subject and which govern such investment. Promptly after completion of the sale to the Underwriters, the Company will mail or deliver to the undersigned at its address set forth below notice to such effect, accompanied by a copy of the opinions of counsel for the Company delivered to the Underwriters in connection therewith. By the execution hereof, the undersigned represents and warrants to the Company that all necessary corporate action for the due execution and delivery of this contract and the payment for and purchase of the Securities has been taken by it and no further authorization or approval of any governmental or other regulatory authority is required for such execution, delivery, payment or purchase, and that, upon acceptance hereof by the Company and mailing or delivery of a copy as provided below, this contract will constitute a valid and binding agreement of the undersigned in accordance with its terms. This contract will inure to the benefit of and be binding upon the parties hereto and their respective successors, but will not be assignable by either party hereto without the written consent of the other. It is understood that the Company will not accept Delayed Delivery Contracts for an aggregate principal amount of Securities in excess of $________ and that the acceptance of any Delayed Delivery Contract is in the Company's sole discretion and, without limiting the foregoing, need not be on a first- come, first-served basis. If this contract is acceptable to the Company, it is requested that the Company sign the form of acceptance on a copy hereof and mail or deliver a signed copy hereof to the undersigned at its address set forth below. This will become a binding contract between the Company and the undersigned when such copy is so mailed or delivered. This Delayed Delivery Contract shall be governed by the laws of the State of New York. Yours very truly, ___________________________________ (Name of Purchaser) By:________________________________ (Title) ___________________________________ ___________________________________ (Address) Accepted as of the date first above written. EQUITY RESIDENTIAL PROPERTIES TRUST By:________________________________ Name: Title: PURCHASER - PLEASE COMPLETE AT TIME OF SIGNING The name and telephone number of the representative of the Purchaser with whom details of delivery on the Delivery Date may be discussed are as follows: (Please print.) Telephone No. Name (including Area Code) ---- --------------------- EX-5 3 OPINION OF ROSENBERG & LIEBENTRITT EXHIBIT 5 [ROSENBERG & LIEBENTRITT, P.C. LETTERHEAD] Direct Dial: 312/466-3612 May 14, 1997 Board of Trustees Equity Residential Properties Trust Two North Riverside Plaza Suite 400 Chicago, Illinois 60606 Ladies and Gentlemen: We are acting as counsel to Equity Residential Properties Trust, a Maryland real estate investment trust (the "Company"), in connection with its registration statement on Form S-3 (the "Registration Statement") filed with the Securities and Exchange Commission relating to the proposed public offering of up to $500,000,000 in aggregate amount of its common shares of beneficial interest, $.01 par value per share ("Common Shares") and one or more series of its (i) preferred shares of beneficial interest, $.01 par value per share (the "Preferred Shares") and (ii) depositary shares representing fractional interests in Preferred Shares (the "Depositary Shares" and, together with the Preferred Shares and Common Shares, the "Securities"), all of which Securities may be offered and sold by the Company from time to time as set forth in the prospectus which forms a part of the Registration Statement (the "Prospectus"), and as to be set forth in one or more supplements to the Prospectus (each, a "Prospectus Supplement"). This opinion letter is furnished to you at your request to enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. (S) 229.601(b)(5), in connection with the Registration Statement. We assume that the classification, terms and conditions, amount, issuance and sale of the Securities to be offered from time to time will be duly authorized and determined by proper action by the Board of Trustees of the Company consistent with the procedures and terms described in the Registration Statement (each, a "Board Action") and in accordance with the Company's Amended and Restated Declaration of Trust, as amended (the "Declaration of Trust"), and applicable Maryland law. We further assume that prior to any issuance of Preferred Shares or Depositary Shares, appropriate articles supplementary shall be filed for recordation with the Maryland State Department of Board of Trustees Equity Residential Properties Trust May 14, 1997 Page 2 Assessments and Taxation (each, "Articles Supplementary"). We further assume that any Depositary Shares will be issued by the Depositary (as defined below) under one or more deposit agreements (each, a "Deposit Agreement"), each to be between the Company and a financial institution identified therein as the depositary (each, a "Depositary"). For purposes of this opinion letter, we have examined copies of the following documents: 1. An executed copy of the Registration Statement. 2. The Declaration of Trust, as amended, as certified by the Secretary of the Company on the date hereof as then being complete, accurate and in effect. 3. The Amended and Restated Bylaws of the Company, as certified by the Secretary of the Company on the date hereof as then being complete, accurate and in effect. 4. The form of Deposit Agreement between the Company and the financial institution to be named therein, filed as Exhibit 4.3 to the Registration Statement. 5. Resolutions of the Board of Trustees of the Company adopted on March 26, 1997, as certified by the Secretary of the Company on the date hereof as then being complete, accurate and in effect, relating to the filing of the Registration Statement and related matters. In our examination of the aforesaid documents, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the accuracy and completeness of all documents submitted to us, the authenticity of all original documents, and the conformity to authentic original documents of all documents submitted to us as certified, telecopied, photostatic, or reproduced copies. We have also assumed the accuracy, completeness and authenticity of the foregoing certifications of trust officers and statements of fact, on which we are relying, and have made no independent investigations thereof. This opinion letter is given, and all statements herein are made, in the context of the foregoing. Board of Trustees Equity Residential Properties Trust May 14, 1997 Page 3 We call your attention to the fact that our firm only requires lawyers to be qualified to practice law in the State of Illinois and, in rendering the foregoing opinions, we express no opinion with respect to any laws relevant to this opinion other than the laws and regulations identified herein. With respect to the opinions below that relate to the laws of the State of Maryland, with your consent, we rely solely on the opinion of Hogan & Hartson L.L.P., a copy of which is attached hereto as Exhibit A. Based upon, subject to and limited by the foregoing, we are of the opinion that, as of the date hereof: 1. When the Registration Statement has become effective under the Securities Act of 1933, as amended (the "Act"), and when a series of the Preferred Shares has been classified by applicable Board Action, in accordance with the terms of the Declaration of Trust and applicable law, and appropriate Articles Supplementary have been filed, and, when issuance of such Preferred Shares has been appropriately authorized by applicable Board Action and following issuance of any such series of Preferred Shares against payment of valid consideration therefor in accordance with the terms of such Board Action and any applicable underwriting or purchase agreement, as contemplated by the Registration Statement and/or the applicable Prospectus Supplement, such Preferred Shares will be validly issued, fully paid and non-assessable under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland (the "Maryland REIT Statute"). 2. A Deposit Agreement (when the final terms thereof have been duly established) substantially in the form of Exhibit 4.3 to the Registration Statement, when duly authorized, executed and delivered by the Company, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws effecting creditors' rights (including, without limitation, the effect of statutory and other laws regarding fraudulent conveyances, fraudulent transfers and preferential transfers) and as may be limited by the exercise of judicial discretion and the application of principles of equity, including, without limitation, requirements of good faith, fair dealing, conscionability and Board of Trustees Equity Residential Properties Trust May 14, 1997 Page 4 materiality (regardless of whether the Deposit Agreement is considered in a proceeding in equity or at law). 3. When the Registration Statement has become effective under the Act and when a series of Preferred Shares (underlying a series of Depositary Shares) has been classified by applicable Board Action, in accordance with the terms of the Declaration of Trust and applicable law, and appropriate Articles Supplementary have been filed with respect to such Preferred Shares, and when issuance of such Preferred Shares and the execution and delivery of a Deposit Agreement have been appropriately authorized by applicable Board Action, and when the depositary receipts representing the Depositary Shares (the "Depositary Receipts") in the form contemplated and authorized by a Deposit Agreement have been duly executed and delivered by the Depositary against payment of valid consideration therefor in accordance with the terms of the Deposit Agreement and any applicable underwriting or purchase agreement, as contemplated by the Registration Statement and/or the applicable Prospectus Supplement, such Depositary Shares will be validly issued and will entitle the holders thereof to the rights specified in the Depositary Receipts and the Deposit Agreement for such Depositary Receipts. 4. When the Registration Statement has become effective under the Act, upon due authorization by Board Action of an issuance of Common Shares, and following issuance of any such Common Shares against payment for valid consideration therefor in accordance with the terms of such Board Action, and any applicable underwriting or purchase agreement as contemplated by the Registration Statement and/or the applicable Prospectus Supplement such Common Shares will be validly issued, fully paid and non-assessable under the Maryland REIT Statute. To the extent that the obligations of the Company and the rights of any holder of Depositary Shares under any Deposit Agreement may be dependent upon such matters, we assume for purposes of this opinion that the applicable Depositary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Depositary is duly qualified to engage in the activities contemplated by the Deposit Agreement; that the Deposit Agreement has been duly authorized, executed and delivered by the Depositary and constitutes a valid and binding obligation of the Board of Trustees Equity Residential Properties Trust May 14, 1997 Page 5 Depositary enforceable against the Depositary in accordance with its terms; that the Depositary is in compliance, with respect to acting as a Depositary under the Deposit Agreement, with all applicable laws and regulations; and that the Depositary has the requisite organizational and legal power and authority to perform its obligations under the Deposit Agreement. The opinion expressed in Paragraph (2) above shall be understood to mean only that if there is a default in performance of an obligation, (i) if a failure to pay or other damage can be shown and (ii) if the defaulting party can be brought into a court which will hear the case and apply the governing law, then, subject to the availability of defenses and to the exceptions set forth in Paragraph (2), the court will provide a money damage (or perhaps injunctive or specific performance) remedy. We assume no obligation to advise you of any changes in the foregoing subsequent to the delivery of this opinion letter. This opinion letter has been prepared solely for your use in connection with the filing of the Registration Statement on the date of this opinion letter and should not be quoted in whole or in part or otherwise be referred to, nor filed with or furnished to any governmental agency or other person or entity, without the prior written consent of this firm. We hereby consent (i) to be named in the Registration Statement, and in the Prospectus, as attorneys who will pass upon the legality of the Securities to be sold thereunder and (ii) to the filing of this opinion as an Exhibit to the Registration Statement. Very truly yours, ROSENBERG & LIEBENTRITT, P.C. By: /s/ Ruth Pinkham Haring ----------------------- Vice President EX-5.1 4 OPINION OF HOGAN & HARTSON L.L.P. May 14, 1997 Rosenberg & Liebentritt, P.C. Two North Riverside Plaza Suite 1515 Chicago, Illinois 60606 Ladies and Gentlemen: We are acting as special Maryland counsel to Equity Residential Properties Trust, a Maryland real estate investment trust (the "Company"), in connection with its registration statement on Form S-3 (the "Registration Statement") filed with the Securities and Exchange Commission relating to the proposed public offering of up to $500,000,000 in aggregate amount of its common shares of beneficial interest, $.01 par value (the "Common Shares"), one or more series of its (i) preferred shares of beneficial interest, $.01 par value (the "Preferred Shares"), and (ii) depositary shares representing fractional interests in Preferred Shares (the "Depositary Shares," and, together with the Common Shares, and Preferred Shares, the "Securities"), all of which Securities may be offered and sold by the Company from time to time as set forth in the prospectus which forms a part of the Registration Statement (the "Prospectus"), and as to be set forth in one or more supplements to the Prospectus (each, a "Prospectus Supplement"). This opinion letter is furnished to you at your request to enable the Company to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. (S) 229.601(b)(5), in connection with the Registration Statement. We assume that the classification, terms and conditions, amount, issuance and sale of the Securities to be offered from time to time will be duly authorized and determined by proper action of the Board of Trustees of the Company consistent with the procedures and terms described in the Registration Statement (each, a "Board Action") and in accordance with the Company's Amended and Restated Declaration of Trust (the "Declaration of Trust"), and applicable Maryland law. We further assume that (i) prior to any issuance of Preferred Shares or Depositary Shares, appropriate articles supplementary shall be filed for Rosenberg & Liebentritt, P.C. May 14, 1997 Page 2 recordation with the Maryland State Department of Assessments and Taxation (each, "Articles Supplementary") and (ii) any Depositary Shares will be issued by the Depositary (as defined below) under one or more deposit agreements (each, a "Deposit Agreement"), each to be between the Company and a financial institution identified therein as the depositary (each, a "Depositary"). For purposes of this opinion letter, we have examined copies of the following documents: 1. An executed copy of the Registration Statement. 2. The Declaration of Trust, as amended, as certified by the Secretary of the Company on the date hereof as being complete, accurate and in effect. 3. The Amended and Restated Bylaws of the Company, as certified by the Secretary of the Company on the date hereof as being complete, accurate and in effect. 4. Resolutions of the Board of Trustees of the Company adopted on March 26, 1997, as certified by the Secretary of the Company on the date hereof as being complete, accurate and in effect, relating to the filing of the Registration Statement and related matters. In our examination of the aforesaid documents, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the accuracy and completeness of all documents submitted to us, the authenticity of all original documents and the conformity to authentic original documents of all documents submitted to us as copies (including telecopies). We also have assumed the accuracy, completeness and authenticity of the foregoing certifications of trust officers and statements of fact, on which we are relying, and have made no independent investigations thereof. This opinion letter is given, and all statements herein are made, in the context of the foregoing. This opinion letter is based as to matters of law solely on Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland (the "Maryland REIT Statute") and with respect to paragraph 2, Maryland contract law (but not including any statutes, ordinances, administrative decisions, rules or Rosenberg & Liebentritt, P.C. May 14, 1997 Page 3 regulations of any political subdivision of the State of Maryland). We express no opinion herein as to any other laws, statutes, regulations, or ordinances. Based upon, subject to and limited by the foregoing, we are of the opinion that, as of the date hereof: 1. When the Registration Statement has become effective under the Securities Act of 1933, as amended (the "Act"), and when a series of the Preferred Shares has been classified by applicable Board Action, in accordance with the terms of the Declaration of Trust and applicable law, and appropriate Articles Supplementary have been filed, and when issuance of such Preferred Shares has been appropriately authorized by applicable Board Action and, following issuance of any such series of Preferred Shares against payment of valid consideration therefor in accordance with the terms of such Board Action and any applicable underwriting or purchase agreement, as contemplated by the Registration Statement and/or the applicable Prospectus Supplement, such Preferred Shares will be validly issued, fully paid and non-assessable. 2. When the Registration Statement has become effective under the Act and when a series of Preferred Shares underlying a series of Depositary Shares has been classified by applicable Board Action, in accordance with the terms of the Declaration of Trust and applicable law, and appropriate Articles Supplementary have been filed with respect to such Preferred Shares, and when issuance of such Preferred Shares and the execution and delivery of a Deposit Agreement have been appropriately authorized by applicable Board Action, and when the depositary receipts representing the Depositary Shares (the "Depositary Receipts") in the form contemplated and authorized by a Deposit Agreement have been duly executed and delivered by the Depositary against payment of valid consideration therefor in accordance with the terms of the Deposit Agreement and any applicable underwriting or purchase agreement, as contemplated by the Registration Statement and/or the applicable Prospectus Supplement, such Depositary Shares, to the extent governed by Maryland law, will be validly issued. 3. When the Registration Statement has become effective under the Act, upon due authorization by Board Action of an issuance of Common Shares, and following issuance of any such Common Shares against payment Rosenberg & Liebentritt, P.C. May 14, 1997 Page 4 of valid consideration therefor in accordance with the terms of such Board Action and any applicable underwriting or purchase agreement, as contemplated by the Registration Statement and/or the applicable Prospectus Supplement, such Common Shares will be validly issued, fully paid and non- assessable. To the extent that the obligations of the Company and the rights of any holder of Depositary Shares under any Deposit Agreement may be dependent upon such matters, we assume for purposes of this opinion that the applicable Depositary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Depositary is duly qualified to engage in the activities contemplated by the Deposit Agreement; that the Deposit Agreement has been duly authorized, executed and delivered by the Depositary and constitutes a valid and binding obligation of the Depositary enforceable against the Depositary and the Company in accordance with its terms; that the Depositary is in compliance, with respect to acting as a Depositary under the Deposit Agreement, with all applicable laws and regulations; and that the Depositary has the requisite organizational and legal power and authority to perform its obligations under the Deposit Agreement. We assume no obligation to advise you of any changes in the foregoing subsequent to the delivery of this opinion letter. This opinion letter has been prepared solely for your use in connection with the filing by the Company of the Registration Statement on the date of this opinion letter and should not be quoted in whole or in part or otherwise be referred to, nor filed with or furnished to any governmental agency or other person or entity, without the prior written consent of this firm. We hereby consent to the reference to this firm under the caption "Legal Matters" in the prospectus constituting a part of the Registration Statement. In giving this consent, we do not thereby admit that we are an "expert" within the meaning of the Act. Very truly yours, /S/ Hogan & Hartson L.L.P. HOGAN & HARTSON L.L.P. EX-8 5 OPINION OF HOGAN & HARTSON L.L.P. May 14, 1997 Board of Trustees Equity Residential Properties Trust Two North Riverside Plaza, Suite 400 Chicago, Illinois 60606 Ladies and Gentlemen: We have acted as special tax counsel to Equity Residential Properties Trust, a Maryland real estate investment trust (the "Company"), in connection with its registration statement on Form S-3 (the "Registration Statement") filed with the Securities and Exchange Commission relating to the proposed public offering of up to $500,000,000 in aggregate amount of its (i) common shares of beneficial interest, $.01 par value (the "Common Shares"), (ii) one or more series of its preferred shares of beneficial interest, $.01 par value (the "Preferred Shares"), (iii) depositary shares representing fractional interests in Preferred Shares (the "Depositary Shares," and, together with the Common Shares, and Preferred Shares, the "Securities"), all of which Securities may be offered and sold by the Company from time to time as set forth in the prospectus which forms a part of the Registration Statement (the "Prospectus"), and as to be set forth in one or more supplements to the Prospectus. In connection with the registration of the Preferred Shares, Common Shares and Depositary Shares, we have been asked to provide an opinion regarding certain federal income tax matters related to the Company. Capitalized terms used in this letter and not otherwise defined herein have the meaning set forth in the Registration Statement. The opinion set forth in this letter is based on relevant provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations thereunder (including proposed and temporary Regulations), and interpretations of the foregoing as expressed in court decisions, the legislative history, and existing administrative rulings and practices of the Internal Revenue Service (including its practices and policies in issuing private letter rulings, which are not binding on the Internal Revenue Service except with respect to a taxpayer that receives such a ruling), all as of the date hereof. These provisions and interpretations are subject to Equity Residential Properties Trust May 14, 1997 Page 2 change, which may or may not be retroactive in effect, that might result in modifications of our opinion. Our opinion does not foreclose the possibility of a contrary determination by the Internal Revenue Service or a court of competent jurisdiction, or of a contrary position by the Internal Revenue Service or the Treasury Department in regulations or rulings issued in the future. In rendering our opinion, we have examined such statutes, regulations, records, certificates and other documents as we have considered necessary or appropriate as a basis for such opinion, including the following: (1) the Registration Statement; (2) the Amended and Restated Declaration of Trust of the Company (the "Declaration of Trust") as in effect on the date hereof; (3) the Fourth Amended and Restated ERP Operating Limited Partnership Agreement of Limited Partnership, dated September 30, 1995; (4) the Equity Residential Properties Management Limited Partnership Agreement of Limited Partnership, dated July 23, 1993 and the Equity Residential Properties Management Limited Partnership II Agreement of Limited Partnership, dated November 3, 1994 (collectively, these two partnerships will be referred to as the "Management Partnerships"); (5) the articles of incorporation, by-laws and stock ownership information of the three Management Corps.; (6) the partnership agreements or limited liability company agreements of the Financing Partnerships and all other partnerships or limited liability companies in which the Operating Partnership has an interest (collectively, the "Subsidiary Partnerships") other than Subsidiary Partnerships formed after January 1, 1997 (for a list of the Subsidiary Partnerships, see Exhibit A); and (7) the articles of incorporation, by-laws and stock ownership information of the QRS Corporations (for a list of the QRS Corporations, see Exhibit B). The opinion set forth in this letter also is premised on certain written representations of the Company and the Operating Partnership made to us. In our review, we have assumed, with your consent, that all of the representations and statements set forth in the documents we reviewed are true and correct, and all of the obligations imposed by any such documents on the parties thereto have been and will be performed or satisfied in accordance with their terms. Moreover, we have assumed that the Company, the Operating Partnership, and the Subsidiary Entities (as defined in the Prospectus) each have been and will continue to be operated in the manner described in the relevant partnership agreement, limited liability company agreement, articles of incorporation or other organizational documents and in the Prospectus. We also have assumed the genuineness of all signatures, the proper execution of all documents, the Equity Residential Properties Trust May 14, 1997 Page 3 authenticity of all documents submitted to us as originals, the conformity to originals of documents submitted to us as copies, and the authenticity of the originals from which any copies were made. For the purposes of our opinion, we have not made an independent investigation of the facts set forth in the documents we reviewed. We consequently have assumed that the information presented in such documents or otherwise furnished to us accurately and completely describes all material facts relevant to our opinion. No facts have come to our attention, however, that would cause us to question the accuracy and completeness of such facts or documents in a material way. We assume for the purposes of this opinion that the Company is a validly organized and duly incorporated real estate investment trust under the laws of the State of Maryland, that the Management Corps. and the QRS Corporations are validly organized and duly incorporated corporations under the laws of the states in which they are incorporated, and that the Operating Partnership, the Management Partnerships, and the Financing Partnerships are duly organized and validly existing partnerships or limited liability companies under the laws of the states in which they are organized. Based upon, and subject to, the foregoing and the next paragraph below, we are of the opinion that: 1. The Company was organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code for its taxable years ended December 31, 1993, December 31, 1994, December 31, 1995, and December 31, 1996, and the Company's current organization and method of operation should enable it to continue to meet the requirements for qualification and taxation as a REIT; and 2. The discussion in the Prospectus under the heading "Federal Income Tax Considerations," to the extent that it constitutes matters of law or legal conclusions, is correct in all material respects. The Company's qualification and taxation as a REIT depend upon the Company's ability to meet on a continuing basis, through actual annual operating Equity Residential Properties Trust May 14, 1997 Page 4 and other results, the various requirements under the Code and described in the Prospectus with regard to, among other things, the sources of its gross income, the composition of its assets, the level of its distributions to stockholders, and the diversity of its share ownership. Hogan & Hartson L.L.P. will not review the Company's compliance with these requirements on a continuing basis. No assurance can be given that the actual results of the operations of the Company, the Operating Partnership, and the Subsidiary Entities, the sources of their income, the nature of their assets, the level of the Company's distributions to shareholders and the diversity of its share ownership for any given taxable year will satisfy the requirements under the Code for qualification and taxation as a REIT. In this regard, we note that the Company has entered into an Agreement and Plan of Merger regarding the planned acquisition of the multifamily property business of Wellsford Residential Property Trust, a Maryland REIT ("Wellsford"), through the tax-free merger of the Company and Wellsford (the "Merger"). As a condition of the Merger, the Company will receive an opinion of counsel that the Merger will not affect the Company's qualification and taxation as a REIT. We have not made any assessment of the immediate or future impact of the Merger upon the ability of the Company to maintain its qualification as a REIT, and we express no opinion with respect to such matter. Our opinion is subject to change as a result of the Merger and its impact on the Company's ability to maintain its qualification as a REIT. For a discussion relating the law to the facts and the legal analysis underlying the opinion set forth in this letter, we incorporate by reference the discussion of federal income tax issues, which we assisted in preparing, in the section of the Prospectus under the heading "Federal Income Tax Considerations." We note that the Prospectus does not necessarily address all of the federal income tax considerations that may be relevant to a holder of Securities, depending upon the particular form and economic terms of the Securities when issued. It is our understanding that in the event the Company issues Securities, the Company will prepare an additional supplement to the Prospectus, which supplement, together with the Prospectus, will address the federal income tax considerations that are likely to be material to a holder of such Securities. We assume no obligation to advise you of any changes in the foregoing subsequent to the date of this opinion letter, and we are not undertaking to update the opinion letter from time to time. This opinion letter has been prepared solely for your use in connection with the filing of the Registration Statement on the date Equity Residential Properties Trust May 14, 1997 Page 5 of this opinion letter and should not be quoted in whole or in part or otherwise be referred to, nor filed with or furnished to any governmental agency or other person or entity, without the prior written consent of this firm. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of the name of our firm therein. Very truly yours, /s/ Hogan & Hartson L.L.P. Hogan & Hartson L.L.P. Exhibit A SUBSIDIARY PARTNERSHIPS 1. EQR-Emerald Place Financing Limited Partnership; 2. EQR-Essex Place Financing Limited Partnership; 3. EQR-Tanasbourne Terrace Financing Limited Partnership; 4. EQR-Reserve Square Limited Partnership; 5. Country Club Associates Limited Partnership; 6. Second Country Club Associates Limited Partnership; 7. Second Georgian Woods Limited Partnership; 8. Greenwich Woods Associates Limited Partnership; 9. Artery Northampton Limited Partnership; 10. Third Towne Centre Limited Partnership; 11. Fourth Towne Centre Limited Partnership; 12. EQR-BS Financing Limited Partnership; 13. EQR-Chaparral Creek GP Limited Partnership; 14. E-Chaparral Associates Limited Partnership; 15. EQR-Lincoln Green I and II GP Limited Partnership; 16. E-G One Associates; 17. E-G Two Associates; 18. EQR-Lodge (OK) GP Limited Partnership; 19. E-Lodge Associates; 20. EQR-Stonebrook GP Limited Partnership; 21. E-Stonebrook Associates; 22. EQR-Sleepy Hollow Financing Limited Partnership; 23. EQR-EOI Financing Limited Partnership; 24. EQR-Continental Villas Financing Limited Partnership; 25. EQR-Doral Financing Limited Partnership; 26. EQR-Governor's Place Financing Limited Partnership; Exhibit A 27. EQR-Plantation Financing Limited Partnership; 28. EQR-Valley Park South Financing Limited Partnership; 29. EQR-Yorktowne Financing Limited Partnership; 30. EQR-SWN Line Financing Limited Partnership; 31. EQR-Arbors Financing Limited Partnership; 32. EQR-Breton Hammocks Financing Limited Partnership; 33. EQR-Met Financing Limited Partnership; 34. EQR-Met CA Financing Limited Partnership; 35. EQR-Wellington Hill Financing Limited Partnership; 36. Equity-Chaparral Venture Limited Partnership; 37. Equity-Green I Venture; 38. Equity-Green II Venture; 39. Equity-Lodge Venture Limited Partnership; 40. Equity-Stonebrook Venture Limited Partnership; 41. Georgian Woods Annex Associates; 42. EQR-Camellero Financing Limited Partnership; 43. EQR-Arizona, L.L.C.; 44. EQR-Washington, L.L.C.; 45. EQR-Wellington, L.L.C.; 46. EQR-Oregon, L.L.C.; 47. EQR-Waterfall, L.L.C.; 48. Multifamily Portfolio LP Limited Partnership; 49. EQR-California, L.C.C.; 50. EQR-Plantation, L.L.C.; 51. EQR-ArtBHolder, L.L.C.; 52. EQR-ArtCapLoan, L.L.C.; 53. EQR-Keystone Financing G.P.; 54. Country Ridge General Partnership; -2- Exhibit A 55. Rosehill Pointe General Partnership; 56. EQR-Canter Chase General Partnership; 57. Hunter's Glen General Partnership; 58. Sunny Oak Village General Partnership; 59. EQR-Pine Meadows Garden General Partnership; 60. EQR-Bond Partnership; 61. EQR-Park Place I General Partnership; 62. EQR-Park Place II General Partnership; 63. Songbird General Partnership; 64. Cedar Crest General Partnership; 65. EQR-Creekside Oaks General Partnership; 66. EQR-Village Oaks General Partnership; 67. EQR-Lakeville Resort General Partnership; 68. EQR-Trails at Dominion General Partnership; 69. EQR-Virginia, L.L.C.; 70. EQR-Dartmouth Woods General Partnership; and 71. Wadlington Investments General Partnership. - 3 - Exhibit B QRS CORPORATIONS 1. ERP-QRS BS, Inc.; 2. ERP-QRS Chaparral Creek, Inc.; 3. ERP-QRS Lincoln Green, Inc.; 4. ERP-QRS Lodge (OK), Inc.; 5. ERP-QRS Stonebrook, Inc.; 6. ERP-QRS Sleepy Hollow, Inc.; 7. ERP-QRS EOI, Inc.; 8. ERP-QRS Continental Villas, Inc.; 9. ERP-QRS Doral, Inc.; 10. ERP-QRS Governor's Place, Inc.; 11. ERP-QRS Plantation, Inc.; 12. ERP-QRS Valley Park South, Inc.; 13. ERP-QRS Yorktowne, Inc.; 14. ERP-QRS SWN Line, Inc.; 15. ERP-QRS Arbors, Inc.; 16. ERP-QRS Breton Hammocks, Inc.; 17. ERP-QRS Emerald Place, Inc.; 18. ERP-QRS Essex Place, Inc.; 19. ERP-QRS Met, Inc.; 20. ERP-QRS Met CA, Inc.; 21. ERP-QRS Wellington Hill, Inc.; 22. ERP-QRS Tanasbourne Terrace, Inc.; 23. ERP-QRS Reserve Square, Inc.; 24. ERP-QRS Camellero, Inc.; 25. QRS-LLC, Inc.; 26. QRS-Waterfall, Inc.; Exhibit B 27. QRS-ArtBHolder, Inc.; 28. QRS-ArtCapLoan, Inc.; 29. ERP-QRS Rosehill Pointe, Inc.; 30. ERP-QRS Country Ridge, Inc.; 31. ERP-QRS Lakeville Resort, Inc.; 32. ERP-QRS Park Place I, Inc.; 33. ERP-QRS Park Place II, Inc.; 34. ERP-QRS Sunny Oak Village, Inc.; 35. ERP-QRS Pine Meadows Garden, Inc.; 36. ERP-QRS Hunter's Glen, Inc.; 37. ERP-QRS Canter Chase, Inc.; 38. QRS-Bond, Inc.; 39. ERP-QRS Songbird, Inc.; 40. ERP-QRS Cedar Crest, Inc.; 41. ERP-QRS Creekside Oaks, Inc.; 42. ERP-QRS Village Oaks, Inc.; 43. ERP-QRS Lakeville Resort, Inc.; 44. ERP-QRS Trails at Dominion, Inc.; 45. ERP-QRS Dartmouth Woods, Inc.; and 46. Wadlington, Inc. - 2 - EX-23.1 6 CONSENT OF GRANT THORNTON LLP Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We have issued our report dated February 14, 1996 (except for Note 20, as to which the date is March 14, 1996) accompanying the consolidated financial statements of Equity Residential Properties Trust as of December 31, 1995 and for each of the two years in the period then ended. We consent to the incorporation by reference of the above report in the Registration Statement of Equity Residential Properties Trust on Form S-3, and to the use of our name as it appears under the caption "Experts." GRANT THORNTON LLP Chicago, Illinois May 14, 1997 EX-23.2 7 CONSENT OF ERNST & YOUNG LLP CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3 No.333-12211) and related Prospectus of Equity Residential Properties Trust (the "Company") and to the incorporation by reference therein of our report dated February 12, 1997, except for Note 19, as to which the date is March 20, 1997, with respect to the consolidated financial statements and schedule of the Company included in its Annual Report (Form 10-K, as amended by Form 10-K/A), for the year ended December 31, 1996; our report dated November 7, 1996, with respect to the Combined Statement of Revenue and Certain Expenses of the 1996 Acquired Properties for the year ended December 31, 1995, included in the Current Report of the Company on Form 8-K/A, dated November 15, 1996; and our report dated May 17, 1996 with respect to the Combined Statement of Revenue and Certain Expenses of the 1996 Acquired Properties and Probable Properties for the year ended December 31, 1995, included in the Current Report of the Company on Form 8-K/A, dated May 23, 1996, filed with the Securities and Exchange Commission. Ernst & Young LLP Chicago, Illinois May 12, 1997 -----END PRIVACY-ENHANCED MESSAGE-----