Document:

Exhibit 10.1

TERM LOAN AND JOINDER AGREEMENT

THIS TERM LOAN AND JOINDER AGREEMENT (this “Agreement”)
is made and entered into as of the 20th day of June, 2006 among APPLIED LNG TECHNOLOGIES USA, L.L.C., a
Delaware limited liability company (“Applied LNG”), ARIZONA LNG, L.L.C.,
a Nevada limited liability company (“Arizona LNG”), FLEET STAR, INC., a
Delaware corporation (“Fleet Star”), ALTERNATIVE FUELS TECHNOLOGIES,
LLC, a Texas limited liability company (“Alternative Fuels”), RENEWABLE
ALTERNATIVE FUELS, LLC, a Delaware limited liability company (“Renewable
Alternative”), APOLLO DRILLING, LLC, a Texas limited liability company (“Apollo
Drilling”; Applied LNG, Arizona LNG, Fleet Star, Alternative Fuels,
Renewable Alternative and Apollo Drilling are referred to herein individually
as a “Borrower” and collectively as the “Borrowers”), and FCC,
LLC, d/b/a FIRST CAPITAL, a Florida limited liability company (“Lender”).

W I  T  N  E  S  S
E  T  H:

WHEREAS, each Borrower
(other than Apollo Drilling) and Lender are parties to that certain Loan and
Security Agreement dated as of April 14, 2006 (as amended, restated, modified
or supplemented from time to time, the “Loan Agreement”); and

WHEREAS, Parent has acquired
a majority of the outstanding capital stock of SIAM IMPORTS, INC., a Nevada
corporation (“Siam”); and

WHEREAS, Siam owns 100% of
the membership interests of Apollo Drilling; and

WHEREAS, Borrowers have
requested that Apollo Drilling join the Loan Agreement as an additional
Borrower thereunder and that Lender make an additional term loan to Borrowers.

NOW, THEREFORE, in consideration of the foregoing
premises, and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

1.                                       Defined Terms.  All capitalized terms used herein and not
otherwise expressly defined herein shall have the respective meanings given to
such terms in the Loan Agreement.

2.                                       Joinder of Apollo
Drilling as a Borrower.  The Loan
Agreement is hereby amended to make Apollo Drilling an additional “Borrower”
thereunder as if it were initially a party thereto.  Apollo Drilling hereby acknowledges and
agrees that (a) it is familiar with the Loan Agreement and the other Loan
Documents, and (b) from and after the date hereof, it is jointly and severally
liable with each other Borrower for all outstanding Obligations.

3.                                       Grant of Security
Interest by Apollo Drilling.  Without
limiting the generality of Section 2 above, Apollo Drilling hereby pledges,
assigns and grants to Lender a lien on and security interest in all right,
title and interest of Apollo Drilling in and to the Collateral (including,
without limitation, all of its accounts, inventory, equipment (including all
drilling rigs and related equipment), general intangibles, chattel paper,
goods, instruments, investment property, letter-of-

 

credit
rights, letters of credit and deposit accounts, as each of the foregoing terms
are defined in the UCC, in each case whether now owned or existing or hereafter
acquired or arising) as security for all of the Obligations.

4.                                       Representations and
Warranties.  Borrowers hereby represent and
warrant to Lender as follows:

(a)                                  The following
information with respect to Apollo Drilling is true and correct:

	
  Exact Legal Name:

  	
   

  	
  Apollo Drilling, LLC

  
	
  Type of
  Organization:

  	
   

  	
  Limited Liability Company

  
	
  State of
  Organization:

  	
   

  	
  Texas

  
	
  Organizational
  ID Number:

  	
   

  	
  800611692

  

 

(b)                                 The following
information with respect to Siam is true and correct:

	
  Exact Legal Name:

  	
   

  	
  Siam Imports, Inc.

  
	
  Type of
  Organization:

  	
   

  	
  Corporation

  
	
  State of
  Organization:

  	
   

  	
  Nevada

  
	
  Organizational
  ID Number:

  	
   

  	
  C12599-2003

  

 

(c)                                  The chief executive office of each of Siam
and Apollo Drilling is located at 3001 Knox Street, Suite 403, Dallas, Texas
75205 (the “Headquarters”), and Apollo Drilling has not had any other chief
executive office other than the Headquarters. 
The chief executive office of Siam was formerly located at 4252 Bonita Road,
Bonita, California 91902.  All assets of
Siam are located at the Headquarters, and all assets of Apollo Drilling (other
than the Rigs, as defined below) are located at the Headquarters.  Two of the Rigs are located on the premises
of MCT Drilling Operations, Inc. at 800 West Rock Creek Road, Norman, Oklahoma 73069,
and the third Rig is located on the premises of Flying J Land 7 Cattle, Inc. at
P. O. Box 8, Nowata, Oklahoma 74048. 
None of the Rigs is currently on lease to any third party.

(d)                                 Apollo Drilling has good and marketable title
to each of the three drilling rigs described on Exhibit A
attached hereto (each, a “Rig”).  No such
Rig is subject to any Lien other than the security interest in favor of
Lender.  Parent purchased the Rigs from
MCT Drilling, Inc. and ReservoirEnergy Equipment in the ordinary course of
business and free and clear of all Liens. 
Parent contributed the Rigs to Apollo Drilling as a capital contribution
free and clear of all Liens.

(e)                                  Apollo Drilling is the sole subsidiary of
Siam.  Apollo Drilling has no
subsidiaries.  Siam owns 100% of the
outstanding membership interests of Apollo Drilling.  Parent owns 91.7% of the outstanding capital
stock of Siam, and public stockholders own the remaining 8.3% of the
outstanding capital stock of Siam.

Each of the foregoing representations and warranties
shall be deemed to supplement the representations and warranties under the Loan
Agreement.  Each request for a Loan or
other

 2
 

 

financial accommodation by any Borrower will be
deemed to be a reaffirmation of all of Borrowers’ warranties and
representations hereunder.

5.                                       Additional Term Loan.

(a)                                  In addition to the Term
Loan, upon the satisfaction of the conditions precedent specified below, Lender
shall make a term loan to Borrowers in the principal amount of $1,000,000 (“Term
Loan B”).  Lender will disburse Term Loan B by wire
transfer in immediately available funds to such account as may be agreed upon
by Borrowers and Lender.  Term Loan B
shall constitute part of the Obligations and shall be secured by all of the
Collateral.  All of the Collateral,
including the assets of Apollo Drilling, shall secure all of the
Obligations.  Any portion of Term Loan B
which is repaid may not be reborrowed.

(b)                                 Notwithstanding Item 9 of the Schedule to the
Loan Agreement, Term Loan B shall bear interest at a rate per annum equal to
the Prime Rate plus 3.00 (computed on the basis of the actual number of days
elapsed over a year of 360 days).

(c)                                  Borrowers shall make interest payments with
respect to Term Loan B on the first day of each calendar month, commencing on
July 1, 2006, and Borrowers shall make a payment of all outstanding principal
plus accrued interest with respect to Term Loan B on the earlier of (i)
December 20, 2006, and (ii) the termination of the Loan Agreement.

(d)                                 Borrowers shall have the right to prepay Term
Loan B in whole or in part from time to time without penalty.  Each
partial prepayment of Term Loan B shall be in a principal amount equal to
$10,000 or any integral multiple thereof.

(e)                                  Borrowers shall be
obligated to repay Term Loan B in full upon (i) termination of the Loan
Agreement, and (ii) any acceleration of the maturity of Term Loan B or the
facility for Revolving Loans contemplated by the Loan Agreement.  Additionally, Borrowers shall be required to
repay Term Loan B to the extent of any proceeds from any sale or other
disposition of any Rig or any other Equipment of Apollo Drilling (it being
understood that this clause (ii) shall not be construed to permit any Borrower
to sell or otherwise dispose of any Equipment without Lender’s prior written
consent), in each case within two Business Days of the receipt thereof.  Additionally, if at any time for any reason, the outstanding principal balance of Term
Loan B exceeds an amount equal to 65% of the orderly liquidation value of the
Rigs, net of anticipated liquidation costs and expenses, including reasonable
attorneys’ fees (which net orderly liquidation value shall be determined based
on the most recent appraisal obtained by Lender), on which Lender has a
perfected, first-priority security interest subject to no other Lien, Borrowers
will immediately, without notice or demand, repay Term Loan B in an amount
equal to such excess.

6.                                       Leases of Rigs.  Borrowers shall not lease or rent any Rig
without Lender’s prior written consent, which shall not be unreasonably
withheld.  Without limiting the right of
Lender to deny such consent, Borrowers shall not be entitled to lease or rent
any Rig without complying with the following requirements:

 3
 

 

(a)                                  Borrowers shall provide
the original of the lease or rental agreement and all related agreements,
documents and instruments with respect thereto (collectively, a “Lease”) to
Lender for its review, together with such other information as Lender may request
with respect thereto (including financial information with respect to the
proposed lessee (each, a “Lessee”)). 
Lender shall retain the original of each Lease in its possession and
control.

(b)                                 Each Lessee shall
execute and deliver to Lender such documentation as Lender may reasonably
request, including, without limitation: (i) an acknowledgment of Lender’s
security interest in the applicable Rig, (ii) an agreement that Lender may
repossess such Rig from such Lessee while a Default exists under the Loan
Agreement, regardless of whether or not such Lessee is in compliance with the
applicable Lease, (iii) an agreement that Lender may have reasonable access to
such Rig from time to time for purposes of inspections, examinations and
appraisals, (iv) an agreement that such Lessee shall provide to Lender such
information regarding the applicable Rig as Lender may reasonably request from
time to time, and (v) an agreement from such Lessee that it shall, from and
after demand by Lender therefor, pay all amounts due under the applicable Lease
directly to Lender for application to the Obligations.

(c)                                  Apollo Drilling, as secured party, shall
cause a UCC financing statement to be recorded in the appropriate jurisdiction
which names the applicable Lessee as the debtor thereunder and describes the
applicable Rig as the collateral thereunder.

(d)                                 Borrowers shall provide evidence satisfactory
to Lender that the applicable Rig is subject to insurance coverage under
policies owned by Borrowers of such types and amounts as Lender may require and
that the lease of such Rig does not invalidate any such policy.

7.                                       Power of Attorney.  Without limiting the generality of anything
contained in the Loan Agreement, each
Borrower hereby appoints and constitutes Lender as such Borrower’s
attorney-in-fact, while a Default exists, to exercise all of such Borrower’s
rights and remedies under any Lease.  All
acts of said attorney-in-fact are hereby authorized, ratified and approved, and
said attorney-in-fact will not be liable for any errors or mistake of fact or
law.  This power, being coupled with an
interest, is irrevocable while any of the Obligations remain unpaid or Lender
has any commitment to Borrowers under the Loan Agreement or otherwise.

8.                                       Conditions Precedent to
Term Loan B.  The effectiveness of the
obligation of Lender to advance Term Loan B to Borrowers is conditioned upon
the satisfaction of the following conditions precedent, in each case in a
manner and pursuant to documentation in form, substance and effect satisfactory
to Lender in its sole discretion:

(a)                                  Lender’s receipt of a
duly executed original of this Agreement from Borrowers and Guarantors;

(b)                                 Lender’s receipt of a
duly executed guaranty by Siam and each other Guarantor;

 4
 

 

(c)                                  Lender’s receipt of
evidence satisfactory to Lender that Lender has a perfected, first-priority
security interest in the assets of Apollo Drilling and Siam, subject to no
other Liens;

(d)                                 Lender’s receipt of
evidence satisfactory to Lender that all of the Collateral of Apollo Drilling
is covered by insurance of types and amounts satisfactory to Lender; and

(e)                                  such other instruments,
documents, agreements, certificates, opinions of counsel, appraisals,
acknowledgments and other items as Lender may request or require in its
discretion.

9.                                       Cross Default.  This Agreement and each guaranty, pledge
agreement and each other agreement, document and instrument executed and/or
delivered in connection herewith shall constitute a Loan Document.  Any default or event of default or any breach
of any representation, warranty, covenant or agreement by any Borrower
hereunder or any such other agreement executed and/or delivered in connection
herewith shall constitute a Default under the Loan Agreement and the other Loan
Documents.

10.                                 Restatement of
Representations and Warranties.  Borrowers
hereby restate, ratify and reaffirm each and every term, condition
representation and warranty heretofore made by them under or in connection with
the execution and delivery of the Loan Agreement, as amended hereby, and the other
Loan Documents, as fully as though such representations and warranties had been
made on the date hereof and with specific reference to this Agreement and the
Loan Documents.

11.                                 Reaffirmation of Loan
Agreement.  Each Borrower hereby acknowledges and agrees
that, except as expressly set forth herein, the Loan Agreement remains in full
force and effect as originally written and constitutes the legal, valid,
binding and enforceable obligation of Borrowers to Lender.

12.                                 Closing Fee and Other
Fees, Costs and Expenses.  In
consideration of the accommodations made by Lender hereunder, Borrowers jointly
and severally agree to pay to Lender (a) on the date hereof a closing fee in
the amount of $10,000, and (b) on demand all costs and expenses of Lender in
connection with the preparation, execution, delivery and enforcement of this
Agreement and the other Loan Documents and any other transactions contemplated
hereby and thereby, including, without limitation, the fees and out-of-pocket
expenses of legal counsel to Lender.

13.                                 No Default.  To induce Lender to enter into this
Agreement, Borrowers hereby represent and warrant that, as of the date hereof,
and after giving effect to the terms hereof, there exists no Default under the
Loan Agreement or any of the other Loan Documents.

14.                                 Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which, when so executed and delivered, shall be deemed to be an original and
all of which counterparts, taken together, shall constitute but one and the
same instrument.

 5
 

 

15.                                 Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the successors and permitted assigns of the parties
hereto.

16.                                 Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Oklahoma, other than its
laws respecting choice of law.

[SIGNATURES
ON NEXT PAGE]

 6
 

 

IN WITNESS WHEREOF, Borrowers and Lender have caused
this Agreement to be duly executed as of the date first above written.

	
   

  	
  APPLIED LNG TECHNOLOGIES
  USA, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Dennis
  McLaughlin, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARIZONA LNG,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Dennis
  McLaughlin, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FLEET STAR, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Dennis
  McLaughlin, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ALTERNATIVE
  FUELS TECHNOLOGIES, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Dennis
  McLaughlin, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RENEWABLE
  ALTERNATIVE FUELS, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Dennis
  McLaughlin, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  APOLLO DRILLING,
  LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  George Lowrance,
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FCC, LLC, d/b/a
  FIRST CAPITAL

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  John A. Curtis,
  Senior Vice President

  

 7
 

 

ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS

The undersigned, each a
guarantor of the indebtedness of APPLIED LNG TECHNOLOGIES USA, L.L.C., a
Delaware limited liability company (“Applied LNG”), ARIZONA LNG, L.L.C.,
a Nevada limited liability company (“Arizona LNG”), FLEET STAR, INC., a
Delaware corporation (“Fleet Star”), ALTERNATIVE FUELS TECHNOLOGIES,
LLC, a Texas limited liability company (“Alternative Fuels”), RENEWABLE
ALTERNATIVE FUELS, LLC, a Delaware limited liability company (“Renewable
Alternative”), and APOLLO DRILLING, LLC, a Texas limited liability company
(“Apollo Drilling”; Applied LNG, Arizona LNG, Fleet Star, Alternative
Fuels, Renewable Alternative and Apollo Drilling are referred to herein
individually as a “Borrower” and collectively as the “Borrowers”)
to FCC, LLC, d/b/a First Capital (the “Lender”) pursuant to a Guaranty
dated as of April 14, 2006 and a Guaranty of even date herewith (each, a “Guaranty”),
hereby (a) acknowledges receipt of the foregoing Agreement; (b) consents
to the terms and execution thereof; (c) agrees that each Guaranty to which it
is a party applies to Term Loan B described in the foregoing Agreement in
addition to the other obligations of each Borrower to Lender;
(d) reaffirms its obligations to Lender pursuant to the terms of each
Guaranty to which it is a party; and (e) acknowledges that Lender may
amend, restate, extend, renew or otherwise modify the Loan Agreement and any
indebtedness or agreement of Borrowers, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the
consent of the undersigned and without impairing the liability of the
undersigned under any Guaranty for all of each Borrower’s present and future
indebtedness to Lender.

	
  

  	
  APOLLO RESOURCES
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Dennis
  McLaughlin, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  J. Mark Ariail,
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  APOLLO LNG, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Dennis
  McLaughlin, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  J. Mark Ariail,
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  TXHLDM, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Dennis
  McLaughlin, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  SIAM IMPORTS,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  George Lowrance,
  Chief Executive Officer

  

 

 8
 

 

EXHIBIT A

 9Exhibit 4.1

 

 

ERP
OPERATING LIMITED PARTNERSHIP,

as Issuer,

and

J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION

(as successor in interest to Bank One Trust
Company, NA,

as successor to The First National Bank of Chicago),

as Trustee

SECOND SUPPLEMENTAL INDENTURE

Dated as of August 23, 2006

3.85%
Exchangeable Senior Notes due 2026

 

 

 

SECOND
SUPPLEMENTAL INDENTURE

THIS SECOND SUPPLEMENTAL INDENTURE (this “Second Supplemental Indenture”) is entered into as of August
23, 2006 among ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited
partnership (the “Partnership” or
“Issuer”), having its principal offices
at Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606, and J.P.
MORGAN TRUST COMPANY, NATIONAL ASSOCIATION (as successor in trust to Bank One
Trust Company, NA, as successor to The First National Bank of Chicago), a bank
duly organized and existing under the laws of the United States, as Trustee
hereunder (the “Trustee”), having a Corporate
Trust Office at 227 West Monroe Street, Suite 2600, Chicago,
Illinois 60606, Attention: Worldwide Securities Services.

WHEREAS, the Issuer and the Trustee entered into that
certain Indenture, dated as of October 1, 1994 (the “Original
Indenture”), and the First Supplemental Indenture thereto, dated as
of September 9, 2004 (the “First Supplemental
Indenture”), relating to the Issuer’s senior debt securities;

WHEREAS, pursuant to Section 901 of the
Indenture, the Issuer and the Trustee may enter into supplemental indentures to
establish the terms and provisions of a series of Securities issued pursuant to
the Indenture;

WHEREAS, pursuant to Section 301 of the
Indenture, the Issuer desires to establish the terms of a series of Securities
entitled the 3.85% Exchangeable Senior Notes due 2026” of the Partnership (the “Notes”);

WHEREAS, the Issuer desires under this Second
Supplemental Indenture to provide for exchange rights in respect of the Notes
on the terms herein set forth; and

WHEREAS, the Issuer and the Trustee have duly
authorized the execution and delivery of this Second Supplemental Indenture to
establish the terms of the Notes set forth herein, have done all things
necessary to make this Second Supplemental Indenture (together with the
Original Indenture and the First Supplemental Indenture, the “Indenture”) a valid agreement of the parties hereto, in
accordance with its terms, and the Issuer has complied with all covenants and
conditions precedent to the execution and delivery of this Second Supplemental
Indenture;

NOW, THEREFORE, in consideration of the premises and
the covenants and agreements contained herein, and for other good and valuable
consideration the receipt of which is hereby acknowledged, and for the equal
and proportionate benefit of the Holders of the Securities, the Issuer and the
Trustee agree as follows:

ARTICLE ONE 

DEFINITIONS

Section 1.01.          Definitions.  Capitalized terms used in this Second
Supplemental Indenture and not otherwise defined herein shall have the meanings
assigned to such terms in the Original Indenture or in the form of Note
attached as Exhibit A hereto.

“Additional Notes”
has the meaning provided in Section 2.02 hereof.

“Additional Shares”
has the meaning specified in Section 2.10.

 2
 

 

 

“Applicable Exchange Period”
means, with respect to an exchange of Notes, the 10 consecutive Trading Day
period commencing on the third Trading Day following the date the Notes are
tendered for exchange.

“Average Price”
means, with respect to an exchange of Notes, an amount equal to the average of
the Closing Sale Prices of Company Common Shares for each Trading Day in the
Applicable Exchange Period.

“Base Exchange Rate”
has the meaning specified in Section 2.14.

“Business Day”
means, with respect to any Note, any day, other than a Saturday, Sunday or any
other day on which banking institutions in The City of New York are authorized
or obligated by law or executive order to close.

“Change in Control”
means the consummation of any transaction or event (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) in connection with which more
than 50% of the Company Common Shares are exchanged for, converted into,
acquired for or constitutes solely the right to receive, consideration which is
not at least 90% shares of common stock (or depositary receipts or other
certificates representing common equity interests) that are (1) listed on, or
immediately after consummation of such transaction or event will be listed on,
a United States national securities exchange or (2) approved, or immediately
after the transaction or event will be approved, for quotation on the Nasdaq
Global Market or any similar United States system of automated dissemination of
quotations of securities prices.

“Change in Control Purchase
Date” has the meaning provided in Section 2.09 hereof.

“Change in Control Purchase
Notice” has the meaning provided in Section 2.09 hereof.

“Change in Control Purchase
Price” has the meaning provided in Section 2.09 hereof.

“Closing Sale Price”
of the Company Common Shares or other capital stock or similar equity interests
or other publicly traded securities on any date means the closing sale price
per share (or, if no closing sale price is reported, the average of the closing
bid and ask prices or, if more than one in either case, the average of the
average closing bid and the average closing ask prices) on such date as
reported on the principal U.S. securities exchange on which the Company Common
Shares or such other capital stock or similar equity interests or other
securities are traded or, if the Company Common Shares or such other capital
stock or similar equity interests or other securities are not listed on a U.S.
national or regional securities exchange, as reported by the Nasdaq National
Market or by the National Quotation Bureau Incorporated or another established
over-the-counter trading market in the United States. The Closing
Sale Price shall be determined without regard to after-hours trading or
extended market making. In the absence of the foregoing, the Partnership shall
determine the Closing Sale Price on such basis as it considers appropriate.

“Company” means
Equity Residential, a Maryland real estate trust, or its successors.

 3
 

 

 

“Company Common Shares”
means common shares of beneficial interest, par value $0.01 per share, of the
Company.

“Company Notice”
has the meaning provided in Section 2.09 hereof.

“Daily Share Amount”
has the meaning provided in Section 2.12 hereof.

“Declaration of Trust”
means the Amended and Restated Declaration of Trust of the Company.

“Depositary” has
the meaning provided in Section 2.03 hereof.

“Dividend Threshold
Amount” has the meaning specified in Section 2.14.

“Effective Date”
with respect to any Change in Control has the meaning specified in Section
2.10.

“Exchange Agent”
means the office or agency designated by the Partnership where the Notes may be
presented for exchange.

“Exchange Price”
means, as of any date of determination, for $1,000 principal amount of Notes,
the quotient obtained by dividing $1,000 by the Exchange Rate in effect as of
such date, rounded to the nearest $0.01, with $0.005 rounded upward.

“Exchange Rate”
means the number of Company Common Shares by reference to which the Exchange
Value shall be determined, which shall be initially 16.3934 Company Common
Shares for each $1,000 principal amount of Notes and as the same shall be
adjusted from time to time in accordance with the provisions hereof and of the
Notes.

“Exchange Value”
means, for each $1,000 principal amount of Notes, the product of (a) the
applicable Exchange Rate, multiplied by (b) the Average Price.

“Expiration Time”
has the meaning specified in Section 2.14.

“interest” means,
when used with reference to the Notes, any interest payable under the terms of
the Notes.

“Indenture” has
the meaning provided in the preamble of this Second Supplemental Indenture.

“Interest Payment Date”
has the meaning provided in Section 2.05 hereof.

“Net Amount” has
the meaning provided in Section 2.12 hereof.

“Net Cash Amount”
has the meaning provided in Section 2.12 hereof.

“Net Shares” has
the meaning provided in Section 2.12 hereof.

 4
 

 

 

“Notes” has the
meaning provided in Section 2.01 hereof, shall include any Additional Notes and
shall be substantially in the form attached as Exhibit A hereto.

“Optional Repurchase Date”
has the meaning provided in Section 2.08 hereof.

“Optional Repurchase Notice”
has the meaning provided in Section 2.08 hereof.

“Optional Repurchase Price”
has the meaning provided in Section 2.08 hereof.

“Partnership”
has the meaning specified in the first paragraph of this instrument until a
successor Person shall have become such pursuant to the applicable provisions
of the Indenture, and thereafter “Partnership” shall mean such successor
Person.

“Principal Return”
has the meaning provided in Section 2.12 hereof.

“Redemption Date”
means, with respect to any Note or portion thereof to be redeemed in accordance
with the provisions of Section 2.07 hereof, the date fixed for such redemption
in accordance with the provisions of Section 2.07 hereof.

“Redemption Price”
has the meaning provided in Section 2.07 hereof.

“Regular Record Date”
has the meaning provided in Section 2.05 hereof.

“Spin-Off”
has the meaning specified in Section 2.14.

“Stock Price”
has the meaning specified in Section 2.10.

“Trading Day”
means a day during which trading in securities generally occurs on the New York
Stock Exchange or, if Company Common Shares are not then listed on the New York
Stock Exchange, on the principal other U.S. national or regional securities
exchange on which Company Common Shares are then listed or, if Company Common
Shares are not then listed on a U.S. national or regional securities exchange,
on the Nasdaq National Market or, if Company Common Shares are not then quoted
on the Nasdaq National Market, on the principal other market on which Company
Common Shares are then traded.

“Trading Price”
means, with respect to the Notes on any date of determination, the average of
the secondary market bid quotations per $1,000 principal amount of Notes
obtained by the Trustee for a $5,000,000 principal amount of Notes at
approximately 3:30 p.m., New York City time, on such determination date from
two independent nationally recognized securities dealers selected by the
Partnership, which may include one or more of the Underwriters or any successor
to such entities.  If at least two such
bids cannot reasonably be obtained by the Trustee, but one such bid can
reasonably be obtained by the Trustee, then one bid shall be used. If the
Trustee cannot reasonably obtain at least one bid for a $5,000,000

 5
 

 

 

principal amount of Notes
from a nationally recognized securities dealer or, in the reasonable judgment
of the Partnership, the bid quotations are not indicative of the secondary
market value of the Notes, then the Trading Price per $1,000 principal amount
of Notes shall be deemed to be less than 98% of the product of the Closing Sale
Price of Company Common Shares and the Exchange Rate on such determination
date.

“Underwriters”
means Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of America
Securities LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co.
Incorporated (each, an “Underwriter”).

ARTICLE TWO

TERMS

Section 2.01.          Title.  The Notes shall constitute a series of
Securities designated as the “3.85% Exchangeable Senior Notes due 2026” of the
Partnership.

Section 2.02.          Aggregate
Principal Amount.  The aggregate
principal amount of Notes which may be authenticated and delivered under the
Indenture is initially limited in aggregate principal amount to $650,000,000,
except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes pursuant to Sections 304, 305,
306 or 1107 of the Indenture and except for any Notes which, pursuant to
Section 303 of the Indenture, are deemed never to have been authenticated and
delivered thereunder; provided that the Partnership may from time to time,
without the consent of the Holders of the Notes, increase the principal amount
of the Notes by issuing additional Securities (the “Additional Notes”), having the same terms and ranking equally
and ratably with the Notes in all respects and with the same CUSIP number as
the Notes, except for the difference in the issue price and interest accrued
prior to the issue date of such Additional Notes, provided that such Additional
Notes constitute part of the same issue as the Notes for U.S. federal income
tax purposes.  Any Additional Notes will
be treated as a single series with the Notes under the Indenture and shall have
the same terms as to status, redemption, repurchase, exchange and otherwise as
the Notes.

Section 2.03.          Registered
Securities in Book-Entry Form. 
The Notes shall be issuable in the form of one or more global Securities
registered in the name of The Depository Trust Company’s nominee, and shall be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York (the “Depositary”). The Notes
may be surrendered for registration of transfer and for exchange at the office
or agency of the Partnership or the Company (including the Trustee) maintained
for such purpose in the Borough of Manhattan, The City of New York, or at any
other office or agency maintained by the Partnership or the Company for such
purpose.

Section 2.04.          Stated
Maturity of Principal.  The Stated
Maturity of the principal of the Notes shall be August 15, 2026.

Section 2.05.          Interest.  The Notes shall bear interest at the rate of
3.85% per annum from August 23, 2006 or from the most recent Interest Payment
Date to which interest has been paid or provided for, as the case may be, and
will be payable semi-annually in arrears on February 15 and 

 6
 

 

 

August 15 of each year (each, an “Interest Payment Date”), commencing on February 15, 2007,
until the principal thereof is paid or duly made available for payment, to the
Persons in whose names such Notes are registered at the close of business on
the February 1 or August 1 (whether or not a Business Day) immediately
preceding the applicable Interest Payment Date (each, a “Regular Record Date”).  Interest payable on each Interest Payment
Date shall equal the amount of interest accrued for the period commencing on
and including the immediately preceding Interest Payment Date in respect of
which interest has been paid (or commencing on and including August 23, 2006,
if no interest has been paid) and ending on and including the day preceding
such Interest Payment Date.  Interest on
the Notes will be computed on the basis of a 360-day year consisting of
twelve 30-day months.

If the Partnership shall redeem the Notes in
accordance with the provisions of Section 2.07 hereof, or if a Holder shall
surrender a Note for repurchase by the Partnership in accordance with the
provisions of Section 2.08 or 2.09 hereof, subject to the next succeeding
sentence, accrued and unpaid interest (including Additional Interest, if any)
shall be payable to each Holder that shall have surrendered such Note for
redemption or repurchase, as the case may be. However, if an Interest Payment
Date shall fall on or prior to the Redemption Date or Optional Repurchase Date
or Change in Control Purchase Date, as the case may be, for a Note, accrued and
unpaid interest (including Additional Interest, if any) due on such Interest
Payment Date shall be payable instead to the Person in whose name such Note is
registered at the close of business on the related Regular Record Date.

Section 2.06.          Place
of Payment.  The principal of and the interest on and
other amounts payable on the Notes shall be payable at the office or agency of
the Company or the Partnership (including the Trustee) maintained for such
purpose in the Borough of Manhattan, The City of New York in the manner
specified in the Indenture.

Section 2.07.          Redemption.  The
Partnership shall not have the right to redeem any Notes prior to August 18,
2011, except to preserve the Company’s status as a real estate investment
trust.  If, at any time, the Partnership
determines it is necessary to redeem the Notes in order to preserve the Company’s
status as a real estate investment trust, the Partnership may, upon not less
than 30 nor more than 60 days’ prior written notice by mail to the Holders of
the Notes, redeem the Notes in whole or in part, for cash equal to 100% of the
principal amount of the Notes to be redeemed plus unpaid interest (including
Additional Interest, if any) accrued thereon up to, but excluding, the
Redemption Date. In such case, the Partnership shall provide the Trustee with
an Officers’ Certificate evidencing that the Board of Trustees of the Company
has, in good faith, made the determination that it is necessary to redeem the
Notes in order to preserve the Company’s status as a real estate investment
trust, and such other documents as may be required under the Indenture.

The Partnership shall have the right to redeem the
Notes, in whole or in part at any time or from time to time, on or after August
18, 2011 upon not less than 30 nor more than 60 days’ prior written notice by
mail to the Holders of the Notes, at a redemption price (“Redemption
Price”) for cash equal to 100% of the principal amount of the Notes
to be redeemed plus unpaid interest (and Additional Interest, if any) accrued
thereon up to, but excluding, the Redemption Date.

 7
 

 

 

Notwithstanding the foregoing, the Partnership may not
effectuate any redemption of the Notes unless (1) it elects to deliver solely
cash in respect of the Exchange Value owing upon the exchange of the Notes or
(2) at the time of notice of redemption to the Holders of the Notes sufficient
Company Common Shares that have been registered for sale by the Company under
the Securities Act are available to satisfy the Partnership’s election, if
applicable, to deliver Net Shares upon the exchange of the Notes.

If less than all the Notes are to be redeemed and the
Notes are not then held by the Depositary, the Trustee shall select the Notes
to be redeemed (in principal amounts of $1,000 and integral multiples thereof)
on a pro rata basis or by such other method
the Trustee considers fair and appropriate. 
The Trustee shall make the selection at least 30 days but not more than
60 days before the Redemption Date from Outstanding Notes not previously called
for redemption.  Notes and portions of
the principal amount thereof selected for redemption shall be in integral
multiples of $1,000.  The Trustee shall
notify the Partnership promptly of the Notes or portions of the principal
amount thereof to be redeemed.  If the
Trustee selects a portion of a Note for partial redemption and a Holder
exchanges a portion of the same Note in accordance with the provisions of
Section 2.11 hereof before termination of the exchange right with respect to
the portion of the Note so selected, the exchanged portion of such Note shall
be deemed to be from the portion selected for redemption.  Notes that have been exchanged during a
selection of Notes to be redeemed shall be treated by the Trustee as
Outstanding for the purpose of such selection.

In the event of any redemption in part, the
Partnership shall not be required to: (i) issue or register the transfer or
exchange of any Note during a period beginning at the opening of business 15
days before any selection of Notes for redemption and ending at the close of
business on the earliest date on which the relevant notice of redemption is
deemed to have been given to all Holders of Notes to be so redeemed, or
(ii) register the transfer or exchange of any Note so selected for redemption,
in whole or in part, except the unredeemed portion of any Note being redeemed
in part.

In addition to those matters set forth in Section 1104
of the Indenture, a notice of redemption sent to the Holders of Notes to be
redeemed in accordance with the provisions of the two preceding paragraphs
shall state:

(a)           the name and address of the Paying
Agent and Exchange Agent;

(b)           the then current Exchange Rate;

(c)           that Notes called for redemption may
be exchanged at any time prior to the close of business on the second Business
Day immediately preceding the Redemption Date; and

(d)           that Holders who wish to exchange
Notes must comply with the procedures relating thereto specified in Section
2.13 hereof.

The Partnership or one of its Affiliates may, to the
extent permitted by applicable law, at any time purchase Notes in the open
market, by tender at any price or by private agreement.  Any Note purchased by the Partnership or its Affiliates,
upon Partnership Request (x) after the date that is two years from the latest
issuance of the Notes may, to the extent permitted by applicable law, be
reissued or sold or 

 8
 

 

 

may be surrendered to the
Trustee for cancellation or (y) on or prior to the date referred to in clause
(x), will be surrendered to the Trustee for cancellation.  Any Notes surrendered for cancellation may
not be reissued or resold and will be canceled promptly.

Section 2.08.          Repurchase
Rights.  A Holder of Notes shall have the right to
require the Partnership to repurchase such Holder’s Notes, in whole or in part
(in principal amounts of $1,000 or an integral multiple thereof), on each of
August 18, 2011, August 15, 2016 and August 15, 2021 (each, an “Optional Repurchase Date”) for cash equal
to 100% of the principal amount of the Notes to be repurchased plus unpaid
interest (including Additional Interest, if any) accrued thereon up to, but
excluding, the Optional Repurchase Date (such amount, the “Optional Repurchase Price”), subject to
satisfaction by or on behalf of the Holder of the requirements set forth below.

On or before to the 30th day prior to each Optional
Repurchase Date, the Partnership shall provide a written notice by first-class
mail to the Trustee, any Paying Agent and all Holders (and to beneficial owners
as required by applicable law).  The
notice shall include a form of Optional Repurchase Notice to be completed by
the Holder and shall state:

(a)           the date by which the Optional
Repurchase Notice must be delivered to the Paying Agent;

(b)           the Optional Repurchase Date;

(c)           the Optional Repurchase Price;

(d)           the name and address of the Trustee,
the Paying Agent and the Exchange Agent;

(e)           that Notes must be surrendered to the
Paying Agent to collect payment of the Optional Repurchase Price;

(f)            that the Optional Repurchase Price
for any Note as to which an Optional Repurchase Notice has been duly given will
be paid within two Business Days after the later of the Optional Repurchase
Date or the time at which such Notes are surrendered to the Trustee or the Paying
Agent for repurchase;

(g)           that, unless the Partnership defaults
in making payment of the Optional Repurchase Price, interest on Notes
surrendered for repurchase will cease to accrue on and after the Optional
Repurchase Date;

(h)           that Notes in respect of which an Optional
Repurchase Notice is provided by a Holder shall not be exchangeable in
accordance with their terms even if otherwise exchangeable unless such Holder
validly withdraws such Optional Repurchase Notice in accordance with the
provisions of this Section 2.08; and

(i)            the CUSIP number of the Notes.

 9
 

 

 

The Partnership shall also disseminate a press release
through Dow Jones & Company, Inc. or Bloomberg Business News containing the
information specified in such notice or publish such information in a newspaper
of general circulation in The City of New York or on the Company’s website, or
through such other public medium as the Partnership shall deem appropriate at
such time.

A Holder may exercise its rights specified in this
Section 2.08 upon delivery of a written notice of repurchase (an “Optional Repurchase Notice”) to the Paying Agent during the
period beginning at any time from the opening of business on the date that is
30 days prior to the applicable Optional Repurchase Date until the close of
business on the third Business Day prior to such Optional Repurchase Date,
stating:

(a)           if
such Notes are in certificated form, the certificate number(s) of the Notes
which the Holder will deliver to be repurchased;

(b)           the
portion of the principal amount of the Notes to be repurchased, in integral
multiples of $1,000, provided that the remaining principal amount of Notes is
in an authorized denomination; and

(c)           that
such Notes shall be repurchased pursuant to the applicable provisions hereof
and the Notes.

The Paying Agent shall promptly notify the Partnership
and the Company in writing of the receipt by it of any Optional Repurchase
Notice.

Book-entry transfer of Notes in book-entry
form in compliance with appropriate procedures of the Depositary or delivery of
Notes in certificated form, together with all necessary endorsements, to the
Paying Agent shall be a condition to the receipt by the Holder of the Optional
Repurchase Price therefor.  Holders
electing to require the Partnership to repurchase Notes must effect such
transfer or delivery to the Paying Agent prior to the Optional Repurchase Date
to receive payment of the Optional Repurchase Price on or within two Business
Days after the Optional Repurchase Date. The Partnership shall pay the Optional
Repurchase Price within two Business Days after the later of the Optional
Repurchase Date or the time of such transfer or delivery of the Notes.

An Optional Repurchase Notice may be withdrawn in
whole or in part by a Holder by means of a written notice of withdrawal delivered
to the office of the Paying Agent prior to the close of business on the third
Business Day prior to the Optional Repurchase Date specifying:

(a)           the
Holder’s name;

(b)           the
principal amount of Notes in respect of which the Optional Repurchase Notice is
being withdrawn, which must be an integral multiple of $1,000;

(c)           if
the Notes subject to the notice of withdrawal are in certificated form, the
certificate number(s) of all Notes subject to the notice of withdrawal; and

 10
 

 

 

(d)           the
principal amount of Notes, if any, that remains subject to the Optional
Repurchase Notice, which must be an integral multiple of $1,000.

If Notes subject to the notice of withdrawal are in
book-entry form, the above notices must also comply with the applicable
procedures of the Depositary.

On or before 10:00 a.m. (New York City time) on the
Optional Repurchase Date, the Partnership shall deposit with the Paying Agent
(or if the Partnership or an Affiliate of the Partnership is acting as the
Paying Agent, shall segregate and hold in trust) money sufficient to pay the
aggregate Optional Repurchase Price of the Notes to be repurchased pursuant to
this Section 2.08. If the Paying Agent holds, in accordance with the terms of
the Indenture, money sufficient to pay the Optional Repurchase Price of such
Notes on the Optional Repurchase Date, then on and after such date, such Notes
shall cease to be Outstanding and interest on such Notes shall cease to accrue,
and all rights of the Holder of such Notes shall terminate (other than the right
to receive the Optional Repurchase Price after delivery or transfer of the
Notes to the Trustee or the Paying Agent for such purpose).  Such will be the case whether or not book-entry
transfer of the Notes in book-entry form is made and whether or not Notes
in certificated form, together with the necessary endorsements, are delivered
to the Paying Agent.  To the extent that
the aggregate amount of cash deposited by the Partnership hereunder exceeds the
aggregate Optional Repurchase Price, then, promptly after the Optional
Repurchase Date, the Trustee or Paying Agent, as the case may be, shall return
any such excess cash to the Partnership.

Notwithstanding the foregoing, no Notes may be
repurchased by the Partnership in accordance with the provisions of this
Section 2.08 if there has occurred and is continuing an Event of Default with
respect to the Notes (other than a default in the payment of the Optional
Repurchase Price).

To the extent legally required in connection with a
repurchase of Notes, the Partnership shall comply with the provisions of Rule
13e-4 and other tender offer rules under the Exchange Act then
applicable, if any, and will file with the Commission a Schedule TO or any
other schedule required under the Exchange Act.

The Partnership may arrange for a third party to
purchase Notes for which the Partnership has received a valid Optional
Repurchase Notice that has not been properly withdrawn, in the manner and
otherwise in compliance with the requirements set forth herein and in the
Notes. If a third party purchases any Notes under such circumstances, then
interest will continue to accrue on the Notes and such Notes will continue to
be Outstanding after the Optional Repurchase Date for all purposes of the
Indenture and will be fungible with all other Notes then Outstanding. The
Trustee or Paying Agent, as applicable, are hereby authorized to take actions
upon Partnership Request to effect such purchase upon delivery by the
Partnership to the Trustee or Paying Agent of such documents as may be required
under the Indenture.

Section 2.09.          Repurchase
at Option of Holders upon a Change in Control.  If a Change in
Control occurs at any time prior to August 18, 2011, a Holder of Notes shall
have the right to require the Partnership to repurchase such Holder’s Notes, in
whole or in part (in principal amounts of $1,000 or an integral multiple
thereof) for cash equal to 100% of the principal amount of the Notes to be
repurchased, plus unpaid interest (including Additional Interest, if any)
accrued thereon up to, but excluding, the Change in Control Purchase Date (such
amount, the “Change in Control Purchase Price”),
subject to satisfaction by or on behalf of the Holder of the requirements set
forth below.  If a Change in Control
occurs on or after August 18, 2011, Holders 

 11
 

 

 

of Notes will not have any right to require the Partnership to
repurchase its Notes, except in accordance with Section 2.08.

Within 20 days after the occurrence of a Change in
Control, the Partnership shall mail a written notice of the particular Change
in Control and of the repurchase right arising as a result of such Change in
Control (the “Company Notice”) by first-class
mail to the Trustee, any Paying Agent and to each Holder (and to beneficial
owners as required by applicable law).  The
notice shall include a form of Change in Control Purchase Notice to be
completed by the Holder and shall state:

(a)           briefly, the events causing a Change
in Control and the date of such Change in Control;

(b)           the date by which the Change in
Control Purchase Notice must be delivered to the Paying Agent;

(c)           the date on which the Partnership
will repurchase Notes upon a Change in Control, which must be not less than 15
days nor more than 30 days after the date of the Company Notice (such date, the
“Change in Control Purchase Date”);

(d)           the Change in Control Purchase Price;

(e)           the name and address of the Trustee,
the Paying Agent and the Exchange Agent;

(f)            that Notes in respect of which a
Change in Control Purchase Notice is provided by a Holder shall not be
exchangeable unless such Holder validly withdraws such Change in Control
Purchase Notice in accordance with the provisions of this Section 2.09;

(g)           that Notes must be surrendered to the
Paying Agent to collect payment of the Change in Control Purchase Price;

(h)           that the Change in Control Purchase
Price for any Note as to which a Change in Control Purchase Notice has been
duly given will be paid within two Business Days after the later of the Change
in Control Purchase Date or the time at which such Notes are surrendered for
repurchase;

(i)            that, unless the Partnership
defaults in making payment of the Change in Control Purchase Price, interest on
Notes surrendered for repurchase will cease to accrue on and after the Change
in Control Purchase Date; and

(j)            the CUSIP number of the Notes.

The Partnership shall also disseminate a press release
through Dow Jones & Company, Inc. or Bloomberg Business News announcing the
occurrence of such Change in Control or publish such information in a newspaper
of general circulation in The City of New York or on 

 12
 

 

 

the Company’s website, or
through such other public medium as the Partnership shall deem appropriate at
such time.

A Holder may exercise its rights specified in this
Section 2.09 upon delivery of a written notice of such Holder’s exercise of its
repurchase right (a “Change in Control Purchase
Notice”) to the Trustee (or any Paying Agent), at any time prior to
the close of business on the third Business Day prior to the Change in Control
Purchase Date, stating:

(a)           if
such Notes are in certificated form, the certificate number(s) of the Notes
which the Holder will deliver to be repurchased;

(b)           the
portion of the principal amount of the Notes to be repurchased, in multiples of
$1,000, provided that the remaining principal amount of Notes is in an
authorized denomination; and

(c)           that
such Note shall be repurchased pursuant to the applicable provisions hereof and
of the Notes.

The Trustee or any Paying Agent shall promptly notify
the Partnership and the Company in writing of the receipt by it of any Change
in Control Purchase Notice.

Book-entry transfer of Notes in book-entry form in
compliance with appropriate procedures of the Depositary or delivery of Notes
in certificated form (together with all necessary endorsements) to the Paying
Agent shall be a condition to the receipt by the Holder of the Change in
Control Purchase Price therefor.  Holders
electing to require the Partnership to repurchase Notes must effect such transfer
or delivery to the Paying Agent prior to the Change in Control Purchase Date to
receive payment of the Change in Control Purchase Price on or within two
Business Days after the Change in Control Purchase Date. The Partnership shall
pay the Change in Control Purchase Price within two Business Days after the
later of the Change in Control Purchase Date or the time of such transfer or
delivery of the Notes.

A Change in Control Purchase Notice may be withdrawn
in whole or in part by a Holder by means of a written notice of withdrawal
delivered to the office of the Paying Agent prior to the close of business on
the third Business Day prior to the Change in Control Purchase Date specifying:

(a)           the
Holder’s name;

(b)           the
principal amount of Notes in respect of which the Change in Control Purchase
Notice is being withdrawn, which must be an integral multiple of $1,000;

(c)           if
the Notes subject to the notice of withdrawal are in certificated form, the
certificate number(s) of all Notes subject to the notice of withdrawal; and

(d)           the
principal amount of Notes, if any, that remains subject to the Change in
Control Purchase Notice, which must be an integral multiple of $1,000.

 13
 

 

 

If Notes subject to the notice of withdrawal are in
book-entry form, the above notices must also comply with the applicable procedures
of the Depositary.

On or before 10:00 a.m. (New York City time) on the
second Business Day following the Change in Control Purchase Date, the
Partnership shall deposit with the Paying Agent (or if the Partnership or an
Affiliate of the Partnership is acting as the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the aggregate Change in Control Purchase
Price of the Notes to be repurchased pursuant to this Section 2.09. If the
Paying Agent holds, in accordance with the terms of the Indenture, money
sufficient to pay the Change in Control Purchase Price of such Notes on the
Change in Control Purchase Date, then, on and after such date, such Notes shall
cease to be Outstanding and interest on such Notes shall cease to accrue and all
rights of the Holders of such Notes shall terminate (other than the right to
receive the Change in Control Purchase Price after delivery or transfer of the
Notes).  Such will be the case whether or
not book-entry transfer of the Notes in book-entry form is made and
whether or not Notes in certificated form, together with the necessary
endorsements, are delivered to the Paying Agent.  To the extent that the aggregate amount of
cash deposited by the Partnership hereunder exceeds the aggregate Change in
Control Purchase Price, then, promptly after the Change in Control Purchase
Date, upon Partnership Request, the Trustee or Paying Agent, as the case may
be, shall return any such excess cash to the Partnership.

Notwithstanding the foregoing, no Notes may be repurchased
by the Partnership in accordance with the provisions of this Section 2.09 if
there has occurred and is continuing an Event of Default with respect to the
Notes (other than a default in the payment of the Change in Control Purchase
Price).

To the extent legally required in connection with a
repurchase of Notes, the Partnership shall comply with the provisions of Rule
13e-4 and other tender offer rules under the Exchange Act then
applicable, if any, and will file with the Commission a Schedule TO or any
other required schedule under the Exchange Act.

The Partnership may arrange for a third party to
purchase Notes for which the Partnership has received a valid Change in Control
Purchase Notice that has not been properly withdrawn, in the manner and otherwise
in compliance with the requirements set forth herein and in the Notes. If a
third party purchases any Notes under such circumstances, then interest will
continue to accrue on the Notes and such Notes will continue to be Outstanding
after the Change in Control Purchase Date for all purposes of the Indenture and
will be fungible with all other Notes then Outstanding. The Trustee or Paying
Agent, as applicable, are hereby authorized to take actions upon Partnership
Request to effect such purchase upon delivery by the Partnership to the Trustee
or Paying Agent of such documents as may be required under the Indenture.

Section 2.10.          Make
Whole Amount.  If a Change in Control occurs prior to August
18, 2011 and a Holder elects to exchange its Notes in connection with such
Change in Control pursuant to Section 2.11(d), the Partnership shall increase
the applicable Exchange Rate for such Notes surrendered for exchange by a
number of additional Company Common Shares (the “Additional Shares”) as specified below.  An exchange of Notes shall be deemed for
these purposes to be “in connection with” such a Change in Control if the
notice of exchange of the Notes is received by the Exchange Agent on any date
from and including the date that is the Effective Date (as defined below) of
such Change in Control up to and including the 30th Business Day following the
Effective Date of such Change in Control.

 14
 

 

 

The number of Additional Shares will be determined by
reference to the table below and is based on the date on which such Change in
Control transaction becomes effective (the “Effective
Date”) and the price (the “Stock Price”)
paid per Company Common Share in such Change in Control transaction.  If holders of Company Common Shares receive
only cash in a Change in Control transaction, the Stock Price shall be the cash
amount paid per Company Common Share.  In
all other cases, the Stock Price shall be the average of the Closing Sale
Prices of Company Common Shares on the 10 consecutive Trading Days up to but
excluding the Effective Date.

The Stock Prices set forth in the first row of the
table (i.e., the column headers) will be adjusted as of any date on which the
Exchange Rate of the Notes is adjusted. 
The adjusted Stock Prices will equal the Stock Prices applicable immediately
prior to such adjustment multiplied by a fraction, the numerator of which is
the Exchange Rate immediately prior to the adjustment giving rise to the Stock
Price adjustment and the denominator of which is the Exchange Rate as so
adjusted.  In addition, the number of
Additional Shares will be subject to adjustment in the same manner as the
Exchange Rate in accordance with the provisions of Section 2.14 hereof.

The following table sets
forth the Stock Price and number of Additional Shares to be received per $1,000
principal amount of Notes:

	
  Effective

  	
   

  	
  Stock Price

  	
   

  
	
  Date

  	
   

  	
  $47.64

  	
   

  	
  $60.00

  	
   

  	
  $70.00

  	
   

  	
  $80.00

  	
   

  	
  $90.00

  	
   

  	
  $100.00

  	
   

  	
  $125.00

  	
   

  	
  $150.00

  	
   

  
	
  August 23, 2006

  	
   

  	
  4.5973

  	
   

  	
  2.1819

  	
   

  	
  1.2716

  	
   

  	
  0.7948

  	
   

  	
  0.5353

  	
   

  	
  0.3858

  	
   

  	
  0.2145

  	
   

  	
  0.1438

  	
   

  
	
  August 15, 2007

  	
   

  	
  4.5973

  	
   

  	
  2.0534

  	
   

  	
  1.1280

  	
   

  	
  0.6666

  	
   

  	
  0.4289

  	
   

  	
  0.2998

  	
   

  	
  0.1637

  	
   

  	
  0.1096

  	
   

  
	
  August 15, 2008

  	
   

  	
  4.5973

  	
   

  	
  1.8779

  	
   

  	
  0.9466

  	
   

  	
  0.5144

  	
   

  	
  0.3104

  	
   

  	
  0.2089

  	
   

  	
  0.1145

  	
   

  	
  0.0767

  	
   

  
	
  August 15, 2009

  	
   

  	
  4.5973

  	
   

  	
  1.6313

  	
   

  	
  0.7100

  	
   

  	
  0.3347

  	
   

  	
  0.1837

  	
   

  	
  0.1212

  	
   

  	
  0.0691

  	
   

  	
  0.0463

  	
   

  
	
  August 15, 2010

  	
   

  	
  4.5973

  	
   

  	
  1.2502

  	
   

  	
  0.3850

  	
   

  	
  0.1335

  	
   

  	
  0.0694

  	
   

  	
  0.0507

  	
   

  	
  0.0320

  	
   

  	
  0.0211

  	
   

  
	
  August 18, 2011

  	
   

  	
  4.5973

  	
   

  	
  0.2733

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  

The exact Stock Prices
and Effective Dates may not be set forth on the table, in which case:

(a)           if the Stock Price is between two
Stock Price amounts in the table or the Effective Date is between two dates in
the table, the Additional Shares will be determined by straight-line
interpolation between the number of Additional Shares set forth for the higher
and lower Stock Price amounts and the two dates, as applicable, based on a 365-day
year;

(b)           if the Stock Price is equal to or in
excess of $150.00 per Company Common Share (subject to adjustment as specified
in the second preceding paragraph), no Additional Shares will be issued upon an
exchange of Notes; and

(c)           if the Stock Price is less than
$47.64 per Company Common Share (subject to adjustment as specified in the
second preceding paragraph), no Additional Shares will be issued upon an
exchange of Notes.

Notwithstanding the foregoing, in no event shall the
total number of Company Common Shares issuable upon an exchange of Notes exceed
20.9907 shares per $1,000 principal amount 

 15
 

 

 

of Notes, subject to
adjustment in the same manner as the Exchange Rate pursuant to Section 2.14
hereof.

Section 2.11.          Exchange
Rights.

Subject to the restrictions on ownership of Company
Common Shares as set forth in Section 2.15 hereof and to the conditions set
forth herein, Holders may surrender their Notes for exchange for cash and, if
applicable, Company Common Shares or, at the Partnership’s option, cash in lieu
of all or any portion of such Company Common Shares, at the applicable Exchange
Rate prior to the close of business on the second Business Day immediately
preceding the Stated Maturity of the Notes at any time on or after August 15,
2025 and also under any of the circumstances set forth in this Section 2.11.

(a)  Exchange Upon Satisfaction of Market Price
Condition. A Holder may surrender any of its Notes for exchange
during any calendar quarter beginning after September 30, 2006 (and only during
such calendar quarter) if, and only if, the Closing Sale Price of Company
Common Shares for at least 20 Trading Days (whether or not consecutive) in the
period of 30 consecutive Trading Days ending on the last Trading Day of the
preceding calendar quarter is more than 130% of the Exchange Price per Company
Common Share in effect on the applicable Trading Day.  The Board of Trustees of the Company shall
make appropriate adjustments, in its good faith determination, to account for
any adjustment to the Exchange Rate that becomes effective, or any event
requiring an adjustment to the Exchange Rate where the ex-dividend date
of the event occurs, during that 30 consecutive Trading Day period.

(b)  Exchange Upon Satisfaction of Trading Price
Condition. A Holder may surrender any of its Notes for exchange
during the five consecutive Trading Day period following any ten consecutive
Trading Day period in which the Trading Price per $1,000 principal amount of
Notes (as determined following a reasonable request by a Holder of the Notes)
was less than 98% of the product of the Closing Sale Price of Company Common
Shares multiplied by the Exchange Rate.

The Trustee shall have no obligation to determine the
Trading Price of the Notes unless the Partnership shall have requested such
determination, and the Partnership shall have no obligation to make such
request unless a Holder provides the Partnership with written reasonable
evidence that the Trading Price per $1,000 principal amount of the Notes would
be less than 98% of the product of the Closing Sale Price of Company Common
Shares and the Exchange Rate, whereupon the Partnership shall instruct the
Trustee to determine the Trading Price of the Notes beginning on the next Trading
Day and on each successive Trading Day until the Trading Price is greater than
or equal to 98% of the product of the Closing Sale Price of Company Common
Shares and the Exchange Rate.

(c)  Exchange Upon Notice of Redemption.
A Holder may surrender for exchange any of the Notes called for redemption at
any time prior to the close of business on the second Business Day prior to the
Redemption Date, even if the Notes are not otherwise exchangeable at such
time.  The right to exchange Notes
pursuant to this clause (c) will expire after the close of business on the
second Business Day prior to the Redemption Date unless the Partnership
defaults in making the payment due upon redemption.  A Holder may exchange fewer than all of 

 16
 

 

 

its Notes so long as the
Notes exchanged are an integral multiple of $1,000 principal amount and the
remaining principal amount of Notes is in an authorized denomination. However,
if a Holder has already delivered an Optional Repurchase Notice or a Change in
Control Purchase Notice with respect to a Note, such Holder may not surrender
such Note for exchange until it has withdrawn such notice in accordance with
the applicable provisions of Section 2.08 or 2.09 hereof, as the case may be.

(d)  Exchange Upon Specified Transactions.
If the Company elects to:

(i)            distribute to all holders of Company
Common Shares rights entitling them to purchase, for a period expiring within
45 days, Company Common Shares at less than the Closing Sale Price of Company
Common Shares on the Trading Day immediately preceding the declaration date of
the distribution; or

(ii)           distribute to all holders of Company
Common Shares assets, debt securities or certain rights to purchase securities
of the Partnership or the Company, which distribution has a per share value exceeding
15% of the Closing Sale Price of Company Common Shares on the Trading Day
immediately preceding the declaration date of such distribution,

the Partnership shall notify the Holders of the Notes
in writing at least 20 days prior to the ex-dividend date for such
distribution.  Following the giving of
such notice, Holders may surrender their Notes for exchange at any time until
the earlier of the close of business on the Business Day prior to the ex-dividend
date or an announcement that such distribution will not take place; provided, however, that a Holder may not exercise this right
to exchange if the Holder may participate, on an as-exchanged basis, in
the distribution without an exchange of Notes. The ex-dividend date is
the first date upon which a sale of the Company Common Shares does not
automatically transfer the right to receive the relevant distribution from the
seller of Company Common Shares to its buyer.

In addition, if the Partnership or the Company is
party to a consolidation, merger or binding share exchange pursuant to which
all of the Company Common Shares would be exchanged for cash, securities or
other property that is not otherwise a Change in Control, a Holder may
surrender Notes for exchange at any time from and including the date that is 15
Business Days prior to the Effective Date of the transaction up to and
including five Business Days after the actual date of such transaction.  The Partnership shall notify the Holders as
promptly as practicable following the date it publicly announces such
transaction (but in no event less than 15 Business Days prior to the
anticipated effective time of such transaction).

If a Change in Control occurs, a Holder will have the
right to exchange its Notes at any time from and including the Effective Date
of such transaction up to and including the 30th Business Day following the
Effective Date of the transaction, provided that, if a Holder has already
delivered an Optional Repurchase Notice or a Change in Control Purchase Notice
with respect to a Note, such Holder may not surrender such Note for exchange
until it has withdrawn such notice in accordance with the applicable provisions
of Section 2.08 or 2.09 hereof, as the case may be. The Partnership will notify
the Holders as promptly as practicable following the date 

 17
 

 

 

that it publicly
announces such Change in Control (but in no event later than five Business Days
prior to the Effective Date of such Change in Control).

If the Partnership or the Company is a party to a
consolidation, merger or binding share exchange pursuant to which all of the
Company Common Shares are exchanged for cash, securities or other property,
then at the Effective Date of the transaction any exchange of Notes and the
Exchange Value will be based on, and determined by reference to, the kind and
amount of cash, securities or other property that the Holder would have
received if such Holder had exchanged its Notes for Company Common Shares
immediately prior to the Effective Date of the transaction.  For purposes of the foregoing, where a
consolidation, merger or binding share exchange involves a transaction that
causes Company Common Shares to be converted into the right to receive more
than a single type of consideration based upon any form of stockholder
election, such consideration will be deemed to be the weighted average of the
types and amounts of consideration received by the holders of Company Common
Shares that affirmatively make such an election. If a Change of Control occurs
prior to August 18, 2011, the Partnership will adjust the Exchange Rate for
Notes tendered for exchange in connection with such a Change in Control
transaction, as described in Section 2.10 hereof.

(e)  Exchange Upon Delisting of Company Common Shares. A Holder
of Notes may surrender any of its Notes for exchange at any time beginning on
the first Business Day after the Company Common Shares have ceased to be listed
on a U.S. national or regional securities exchange or quoted on the Nasdaq
Global Market for a 30 consecutive Trading Day period.

Section 2.12.          Exchange
Settlement.  Upon an exchange of Notes, the Partnership
shall deliver, in respect of each $1,000 principal amount of Notes tendered for
exchange in accordance with their terms:

(a)           cash in an amount (the “Principal Return”) equal to the lesser of
(1) the principal amount of the Notes surrendered for exchange and (2) the
Exchange Value, and

(b)           if the Exchange Value is greater than
the Principal Return, an amount (the “Net
Amount”) in cash or Company Common Shares with an aggregate value
equal to the difference between the Exchange Value and the Principal Return.

The Partnership may elect to deliver any portion of
the Net Amount in cash (the “Net Cash Amount”)
or Company Common Shares, and any portion of the Net Amount the Partnership
elects to deliver in Company Common Shares (the “Net Shares”)
will be the sum of the Daily Share Amounts for each Trading Day during the
Applicable Exchange Period.  Prior to the
close of business on the second Trading Day following the date on which Notes
are tendered for exchange, the Partnership shall inform the Holders of such
Notes of its election to pay cash for all or a portion of the Net Amount and,
if applicable, the portion of the Net Amount that will be paid in cash and the
portion that will be delivered in the form of Net Shares.

The Partnership shall deliver cash in lieu of any
fractional Company Common Shares issuable in connection with payment of the Net
Shares based upon the Average Price.

The “Daily Share Amount”
for each $1,000 principal amount of Notes and each Trading Day in the
Applicable Exchange Period is equal to the greater of:

 18

 

 

(a)           zero; and

(b)           a number
of Company Common Shares determined by the following formula:

where

CSP means the Closing
Sale Price of Company Common Shares on such Trading Day, and

ER means the applicable
Exchange Rate

The Partnership will determine the Exchange Value,
Principal Return, Net Amount, Net Cash Amount and the number of Net Shares, as
applicable, promptly after the end of the Applicable Exchange Period.  The Partnership shall pay the Principal
Return and cash in lieu of fractional shares, and deliver Net Shares or pay the
Net Cash Amount, as applicable, no later than the third Business Day following
the last Trading Day of the Applicable Exchange Period.

If the Partnership elects to deliver Company Common
Shares in respect of any portion of the Exchange Value owing upon an exchange
of Notes and the Partnership does not deliver a prospectus satisfying the
requirements of the Securities Act relating to such shares in connection
therewith, the Partnership agrees to issue to Holders additional settlement
consideration of 0.03 Company Common Shares for each Company Common Share that
would otherwise have been due upon exchange. 
Any additional settlement consideration will be delivered at the time of
the delivery of the Company Common Shares that are otherwise due upon
exchange.  

Section 2.13.           Exchange Procedures.  To
exchange Notes, a Holder must satisfy the requirements set forth in this
Section 2.13.

To exchange the Notes, a Holder must (a) complete
and manually sign the irrevocable exchange notice on the reverse of the Note
(or complete and manually sign a facsimile of such notice) and deliver such
notice to the Exchange Agent at the office maintained by the Exchange Agent for
such purpose, (b) with respect to Notes which are in certificated form, surrender
the Notes to the Exchange Agent, or, if the Notes are in book-entry form,
comply with the appropriate procedures of the Depositary, (c) furnish
appropriate endorsements and transfer documents if required by the Exchange
Agent, the Company or the Trustee and (d) pay any transfer or similar tax,
if required. The date on which the Holder satisfies all such requirements shall
be deemed to be the date on which the applicable Notes shall have been tendered
for exchange. 

Notes in respect of which a Holder has delivered an
Optional Repurchase Notice or Change in Control Purchase Notice may be
exchanged only if such notice is timely withdrawn in accordance with the terms
of Section 2.08 or Section 2.09, as the case may be.

 19
 

 

 

In case any Note shall be surrendered for partial
exchange, the Partnership shall execute and the Trustee shall authenticate and
deliver to, or upon the written order of, the Holder of the Note so
surrendered, without charge to such holder, a new Note or Notes in authorized
denominations in an aggregate principal amount equal to the portion of the
surrendered Notes not surrendered for exchange. 
A Holder may exchange fewer than all of such Holder’s Notes so long as
the Notes exchanged are an integral multiple of $1,000 principal amount.

Upon surrender of a Note for exchange by a Holder,
such Holder shall deliver to the Partnership cash equal to the amount that the
Partnership is required to deduct and withhold under applicable law in
connection with the exchange; provided, however,
if the Holder does not deliver such cash, the Partnership may deduct and
withhold from the amount of consideration otherwise deliverable to such Holder
the amount required to be deducted and withheld under applicable law.

Upon the exchange of an interests in a Note issued in
the form of a global Security, the Trustee, as custodian for the Depositary and
at the direction of the Trustee, shall make a notation on such global Security
as to the reduction in the principal amount represented thereby.

Upon exchange of a Note, a Holder will not receive any
cash payment representing accrued and unpaid interest on such Note, except as
specified in the immediately preceding paragraph.  Instead, upon an exchange of Notes, the
Partnership will deliver to tendering Holders only the consideration specified
in Section 2.12. Delivery of cash and Company Common Shares, if any, required
by Section 2.12 upon an exchange of Notes will be deemed to satisfy the
Partnership’s obligation to pay the principal of the Notes and any accrued and unpaid
interest. Accordingly, upon an exchange of Notes, any accrued and unpaid
interest will be deemed paid in full rather than cancelled, extinguished or
forfeited. In no event will the Exchange Rate be adjusted to account for
accrued and unpaid interest on the Notes.

Holders of Notes at the close of business on a Regular
Record Date for an interest payment will receive payment of interest payable on
the corresponding Interest Payment Date notwithstanding the exchange of such
Notes at any time after the close of business on the applicable Regular Record
Date.  Notes tendered for exchange by a
Holder after the close of business on any Regular Record Date for an interest
payment and on or prior to the corresponding Interest Payment Date must be
accompanied by payment of an amount equal to the interest that such Holder is
to receive on such Notes on such Interest Payment Date; provided,
however, that no such payment shall be required to be made (1) if
such Notes have been called for redemption on a Redemption Date that is after
such Regular Record Date and on or prior to such Interest Payment Date or (2)
with respect to overdue interest, if any overdue interest exists at the time of
exchange with respect to such Notes.  

Upon exchange of a Note, the Partnership, if it elects
to deliver Net Shares, will pay any documentary, stamp or similar issue or
transfer tax due on the issue of the Net Shares upon such exchange unless the
tax is due because the Holder requests the Net Shares to be issued or delivered
to a Person other than the Holder, in which case the Holder must pay the tax
due prior to the delivery of such Net Shares. Certificates representing Company
Common Shares will not be issued or delivered unless all taxes and duties, if
any, payable by the Holder have been paid.

 20
 

 

 

A Holder of Notes, as such, shall not be entitled to
any rights of a holder of Company Common Shares.  Such Holder shall only acquire such rights
upon the delivery by the Partnership, at its option, of Net Shares in accordance
with the provisions of Section 2.12 in connection with the exchange by a Holder
of Notes.

If a Holder exchanges more than one Note at the same
time, the number of Net Shares, if any, issuable upon the exchange shall be
based on the total principal amount of the Notes surrendered for exchange.

The Company shall, prior to issuance of any Notes
hereunder, and from time to time as may be necessary, reserve out of its
authorized but unissued common stock a sufficient number of Company Common
Shares to permit the exchange of the Notes at the applicable Exchange
Rate.  Any Company Common Shares
delivered upon an exchange of Notes shall be newly issued shares or treasury
shares, shall be duly and validly issued and fully paid and nonassessable and
shall be free from preemptive rights and free of any lien or adverse claim.

The Company shall endeavor promptly to comply with all
federal and state securities laws regulating the issuance and delivery of
Company Common Shares, if any, upon an exchange of Notes and shall cause to
have listed or quoted all such Company Common Shares on each U.S. national
securities exchange or over-the-counter or other domestic market on
which the Company Common Shares are then listed or quoted.

Except as set forth herein, no other payment or
adjustment for interest shall be made upon exchange of Notes. 

The Partnership shall notify the Trustee as soon as
reasonably practicable of the occurrence of any event specified in
Section 2.11 that would enable Holders of Notes to exchange their Notes in
accordance with their terms and the terms of the Indenture.

Section 2.14.          Exchange
Rate Adjustments.  The Exchange Rate shall be adjusted from time
to time as follows:

(a)           If
the Company issues Company Common Shares as a dividend or distribution on
Company Common Shares to all holders of Company Common Shares, or if the
Company effects a share split or share combination, the Exchange Rate will be
adjusted based on the following formula:

ER1 = ER0 x OS1/OS0

where

ER0 =      the
Exchange Rate in effect immediately prior to the adjustment relating to such
event 

ER1 =      the
new Exchange Rate in effect taking such event into account

OS0 =     the
number of Company Common Shares outstanding immediately prior to such event

OS1 =     the
number of Company Common Shares outstanding immediately after such event.

 21
 

 

 

Any adjustment made
pursuant to this clause (a) shall become effective on the date that is
immediately after (x) the date fixed for the determination of shareholders
entitled to receive such dividend or other distribution or (y) the date on
which such split or combination becomes effective, as applicable. If any
dividend or distribution described in this clause (a) is declared but not so
paid or made, the new Exchange Rate shall be readjusted to the Exchange Rate
that would then be in effect if such dividend or distribution had not been
declared.

(b)           If
the Company issues to all holders of Company Common Shares any rights,
warrants, options or other securities entitling them for a period of not more
than 45 days after the date of issuance thereof to subscribe for or purchase
Company Common Shares, or issues to all holders of Company Common Shares
securities convertible into Company Common Shares for a period of not more than
45 days after the date of issuance thereof, in either case at an exercise price
per Company Common Share or a conversion price per Company Common Share less
than the Closing Sale Price of Company Common Shares on the Business Day
immediately preceding the time of announcement of such issuance, the Exchange
Rate will be adjusted based on the following formula:

ER1 = ER0 x
(OS0+X)/(OS0+Y)

where

ER0 =      the
Exchange Rate in effect immediately prior to the adjustment relating to such
event

ER1 =      the
new Exchange Rate taking such event into account

OS0 =     the
number of Company Common Shares outstanding immediately prior to such event

X =          the
total number of Company Common Shares issuable pursuant to such rights,
warrants, options, other securities or convertible securities

Y =          the
number of Company Common Shares equal to the quotient of (A) the aggregate
price payable to exercise such rights, warrants, options, other securities or
convertible securities and (B) the average of the Closing Sale Prices of
Company Common Shares for the 10 consecutive Trading Days prior to the Business
Day immediately preceding the date of announcement for the issuance of such
rights, warrants, options, other securities or convertible securities.

For purposes of this
clause (b), in determining whether any rights, warrants, options, other securities
or convertible securities entitle the holders to subscribe for or purchase, or
exercise a conversion right for, Company Common Shares at less than the
applicable Closing Sale Price of Company Common Shares, and in determining the
aggregate

 22
 

 

 

exercise or conversion
price payable for such Company Common Shares, there shall be taken into account
any consideration received by the Company for such rights, warrants, options,
other securities or convertible securities and any amount payable on exercise
or conversion thereof, with the value of such consideration, if other than
cash, to be determined by the Board of Trustees of the Company.  If any right, warrant, option, other security
or convertible security described in this clause (b) is not exercised or converted
prior to the expiration of the exercisability or convertibility thereof, the
new Exchange Rate shall be readjusted to the Exchange Rate that would then be
in effect if such right, warrant, option, other security or convertible
security had not been so issued.

(c)           If
the Company distributes shares of capital stock, evidences of indebtedness or
other assets or property of the Company to all holders of Company Common
Shares, excluding:

(i)            dividends,
distributions, rights, warrants, options, other securities or convertible
securities referred to in clause (a) or (b) above,

(ii)           dividends
or distributions paid exclusively in cash, and

(iii)          Spin-Offs
described below in this paragraph (c),

then the Exchange Rate
will be adjusted based on the following formula:

ER1 =      ER0
x SP0/(SP0-FMV)

where

ER0 =      the
Exchange Rate in effect immediately prior to the adjustment relating to such
event

ER1 =      the
new Exchange Rate taking such event into account

SP0 =      the
average of the Closing Sale Prices of Company Common Shares for the 10
consecutive Trading Days prior to the Business Day immediately preceding the
earlier of the record date or the ex-dividend date for such distribution

FMV=     the
fair market value (as determined in good faith by the Board of Trustees of the
Company) of the shares of capital stock, evidences of indebtedness, assets or
property distributed with respect to each outstanding Company Common Share on
the earlier of the record date or the ex-dividend date for such
distribution.

An adjustment to
the Exchange Rate made pursuant to the immediately preceding paragraph shall be
made successively whenever any such distribution is made and shall become
effective on the day immediately after the date fixed for the determination of
holders of Company Common Shares entitled to receive such distribution.

 23
 

 

 

If the Company
distributes to all holders of Company Common Shares capital stock of any class
or series, or similar equity interest, of or relating to a subsidiary or other
business unit of the Company (a “Spin-Off”),
the Exchange Rate in effect immediately before the close of business on the
date fixed for determination of holders of Company Common Shares entitled to
receive such distribution will be adjusted based on the following formula:

ER1 =      ER0
x (FMV0+MP0)/MP0

where

ER0 =      the
Exchange Rate in effect immediately prior to the adjustment relating to such
event

ER1 =      the
new Exchange Rate taking such event into account

FMV0 =          the
average of the Closing Sale Prices of the capital stock or similar equity interest
distributed to holders of Company Common Shares applicable to one Company
Common Share over the first 10 consecutive Trading Days after the effective
date of the Spin-Off

MP0 =            the
average of the Closing Sale Prices of Company Common Shares over the first 10
consecutive Trading Days after the effective date of the Spin-Off.

An adjustment to
the Exchange Rate made pursuant to the immediately preceding paragraph will
occur on the 10th Trading Day from and including the effective date of the Spin-Off.

If any such
dividend or distribution described in this clause (c) is declared but not paid
or made, the new Exchange Rate shall be readjusted to be the Exchange Rate that
would then be in effect if such dividend or distribution had not been declared.

(d)           The Exchange Rate will be adjusted on the
basis of all cash dividends and distributions that the Company pays to all or
substantially all holders of Company Common Shares in respect of any quarterly
fiscal period based on the following formula:

ER1 = ER0 ×          SP0
- T 

SP0 - C 

where,

ER0 =              the
Exchange Rate in effect immediately prior to the record date for such
distribution (provided that if a distribution were to result in a downward
adjustment to the Exchange Rate, ER0 shall mean the Exchange Rate in effect on,
and calculated to, the record date for such distribution without regard to the 

 24
 

 

 

limitation
on the exchange rate set forth in paragraph (f) below and in such case, ER1
shall equal the lower of ER1 as calculated on such basis and the Exchange Rate
determined in accordance with clause (f));

ER1 =              the
Exchange Rate in effect immediately after the record date for such
distribution;

SP0 =              the
average of the Closing Sale Prices of Company Common Shares over the ten
consecutive Trading Day period ending on the Business Day immediately preceding
the record date for such distribution (or, if earlier, the “ex-date” relating
to such distribution);

T =                  the
Dividend Threshold Amount, which shall initially be $0.4425 per quarter and
which amount shall be appropriately adjusted from time to time for any share
dividends on, or subdivisions or combinations of, Company Common Shares;
provided, that if an Exchange Rate Adjustment is required to be made as a
result of a distribution that is not a quarterly dividend either in whole or in
part, the Dividend Threshold Amount shall be deemed to be zero; and

C =                  the
amount in cash per share that the Company distributes to holders of Company
Common Shares in the applicable fiscal quarter.

Notwithstanding
the foregoing, in no event will the Exchange Rate be adjusted pursuant to this
clause (d) to a rate that is below the Base Exchange Rate.  The “Base Exchange Rate” at any time means
the initial Exchange Rate of 16.3934 Company Common Shares per $1,000 principal
amount of Notes as adjusted to the date of determination based on all
adjustments to the Exchange Rate exclusive of adjustments to the Exchange Rate
made pursuant to this clause (d). 
Accordingly, if the Exchange Rate were to be increased following the
payment of one or more cash dividends in a fiscal quarter in excess of the
Dividend Threshold Amount, the Exchange Rate could thereafter be reduced if the
Company were to pay one or more cash dividends in a subsequent fiscal quarter
in an aggregate amount that is less than the Dividend Threshold Amount,
provided that any such adjustment will not result in the Exchange Rate being
reduced to a rate that is below the Base Exchange Rate.

An adjustment to
the Exchange Rate made pursuant to this clause (d) shall become effective on the
date immediately after the date fixed for the determination of holders of
Company Common Shares entitled to receive such dividend or distribution. If any
dividend or distribution described in this clause (d) is declared but not so
paid or made, the new Exchange Rate shall be readjusted to the Exchange Rate
that would then be in effect if such dividend or distribution had not been
declared.

 25
 

 

 

(e)           If
the Company or any of its subsidiaries makes a payment in respect of a tender
offer or exchange offer for Company Common Shares to the extent that the cash
and value of any other consideration included in the payment per Company Common
Share exceeds the Closing Sale Price of a Company Common Share on the Trading
Day next succeeding the last date on which tenders or exchanges may be made
pursuant to such tender or exchange offer (the “Expiration Time”), the Exchange Rate will be adjusted based on
the following formula:

ER1 = ER0 x (AC + (SP1 x
OS1))/(SP1 x OS0)

where

ER0 =      the
Exchange Rate in effect immediately prior to the adjustment relating to such
event

ER1 =      the
new Exchange Rate taking such event into account

AC =       the
aggregate value of all cash and any other consideration (as determined by the
Board of Trustees of the Company) paid or payable for Company Common Shares
purchased in such tender or exchange offer

OS0 =     the
number of Company Common Shares outstanding immediately prior to the date such
tender or exchange offer expires

OS1 =     the
number of Company Common Shares outstanding immediately after such tender or
exchange offer expires (after giving effect to the purchase or exchange of
shares pursuant to such tender or exchange offer)

SP1 =      the
average of the Closing Sale Prices of Company Common Shares for the 10
consecutive Trading Days commencing on the Trading Day next succeeding the date
such tender or exchange offer expires.

If the application
of the foregoing formula would result in a decrease in the Exchange Rate, no
adjustment to the Exchange Rate will be made. 
For the avoidance of doubt, for purposes of this paragraph (e), the
terms “tender offer” and “exchange offer” shall not include open market
purchases of Company Common Shares at prevailing market prices by the Company
or its Affiliate pursuant to the Company’s share repurchase programs.

Any adjustment to
the Exchange Rate made pursuant to this clause (e) shall become effective on
the date immediately following the Expiration Time.  If the Company or one of its subsidiaries is
obligated to purchase Company Common Shares pursuant to any such tender or
exchange offer but is permanently prevented by applicable law from effecting
any such purchase or all such purchases are rescinded, the new 

 26
 

 

 

Exchange Rate shall be
readjusted to be the Exchange Rate that would be in effect if such tender or
exchange offer had not been made.

(f)            Notwithstanding
the foregoing, in the event of an adjustment to the Exchange Rate pursuant to
clause (d) or (e) above, in no event will the Exchange Rate exceed 20.9907 per
$1,000 principal amount of Notes, subject to adjustment pursuant to clauses
(a), (b) and (c) above.

(g)           If
the Company has in effect a rights plan while any Notes remain Outstanding,
Holders of Notes will receive, upon an exchange of Notes in respect of which
the Partnership has elected to deliver Net Shares, in addition to such Net
Shares, rights under the Company’s shareholder rights agreement unless, prior
to exchange, the rights have expired, terminated or been redeemed or unless the
rights have separated from the Company Common Shares. If the rights provided
for in the rights plan adopted by the Company have separated from the Company
Common Shares in accordance with the provisions of the applicable shareholder
rights agreement so that Holders of Notes would not be entitled to receive any
rights in respect of Company Common Shares that the Partnership elects to
deliver as Net Shares upon exchange of Notes, the Exchange Rate will be
adjusted at the time of separation as if the Company had distributed to all
holders of Company Common Shares capital stock, evidences of indebtedness or
other assets or property pursuant to clause (c) above, subject to readjustment
upon the subsequent expiration, termination or redemption of the rights. In
lieu of any such adjustment, the Company may amend such applicable shareholder
rights agreement to provide that upon an exchange of Notes the Holders will
receive, in addition to Company Common Shares that the Partnership elects to
deliver as Net Shares upon such exchange, the rights which would have attached
to such Company Common Shares if the rights had not become separated from the
Company Common Shares under such applicable shareholder rights agreement. To
the extent that the Company adopts any future shareholder rights agreement,
upon an exchange of Notes in respect of which the Partnership elects to deliver
Company Common Shares as Net Shares, a Holder of Notes shall receive, in
addition to such Company Common Shares, the rights under the future shareholder
rights agreement whether or not the rights have separated from Company Common
Shares at the time of exchange and no adjustment will be made in accordance
with clause (c) or otherwise.

In addition to the
adjustments pursuant to clauses (a) through (g) above, the Partnership may
increase the Exchange Rate in order to avoid or diminish any income tax to
holders of Company Common Shares resulting from any dividend or distribution of
capital stock (or rights to acquire Company Common Shares) or from any event
treated as such for income tax purposes. The Partnership may also, from time to
time, to the extent permitted by applicable law, increase the Exchange Rate by
any amount for any period if the Partnership has determined that such increase
would be in the best interests of the Partnership or the Company.  If the Partnership makes such determination,
it will be conclusive and Partnership will mail to the Trustee and the Holders
of the Notes a notice of the increased Exchange Rate and the period during
which it will be in effect at least fifteen (15) days prior to the date the
increased Exchange Rate takes effect in accordance with applicable law.

 27
 

 

 

If, in connection
with any adjustment to the Exchange Rate as set forth in this Section 2.14 a
Holder shall be deemed for U.S. federal tax purposes to have received a distribution
or an Additional Interest payment, the Partnership may set off any withholding
tax it or the Company reasonably believes it is required to collect with
respect to any such deemed distribution or payment against cash payments of
interest in accordance with the provisions of Section 2.05 hereof or from cash
and Company Common Shares, if any, otherwise deliverable to a Holder upon an
exchange of Notes in accordance with the provisions of Section 2.12 hereof or a
redemption or repurchase of a Note in accordance with the provisions of Section
2.07, 2.08 or 2.09 hereof.

The Partnership
will not make any adjustment to the Exchange Rate if Holders of the Notes are
permitted to participate, on an as-exchanged basis, in the transactions
described above.

Notwithstanding
anything to the contrary contained herein, in addition to the other events set
forth herein on account of which no adjustment to the Exchange Rate shall be
made, the applicable Exchange Rate shall not be adjusted for:

(i)            the issuance of any
Company Common Shares pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on securities of
the Partnership or those of the Company and the investment of additional
optional amounts in Company Common Shares under any plan;

(ii)           the
issuance of any Company Common Shares or options or rights to purchase those
shares pursuant to any present or future employee, trustee or consultant
benefit plan, employee agreement or arrangement or program of the Partnership
or the Company;

(iii)          the
issuance of any Company Common Shares pursuant to any option, warrant, right,
or exercisable, exchangeable or convertible security outstanding as of the date
the Notes were first issued;

(iv)          a
change in the par value of Company Common Shares;

(v)           accumulated
and unpaid dividends or distributions;

(vi)          as
a result of a tender offer solely to holders of fewer than 100 Company Common
Shares; and

(vii)         the
issuance of limited partnership units by the Partnership and the issuance of
Company Common Shares or the payment of cash upon redemption of such limited
partnership units.

No adjustment in the Exchange Rate will be required
unless the adjustment would require an increase or decrease of at least 1% of
the Exchange Price. If the adjustment is not made because the adjustment does
not change the Exchange Price by at least 1%, then the adjustment that is not
made will be carried forward and taken into account in any future adjustment.
All 

 28
 

 

 

required calculations
will be made to the nearest 1/10,000th of a share.  Notwithstanding the foregoing, if the Notes
are called for redemption, all adjustments not previously made will be made on
the applicable Redemption Date.  

Whenever the Exchange Rate is adjusted as herein
provided, the Company or the Partnership shall as promptly as reasonably
practicable file with the Trustee and any Exchange Agent other than the Trustee
an Officers’ Certificate setting forth the Exchange Rate after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
Promptly after delivery of such certificate, the Company or the Partnership
shall prepare a notice of such adjustment of the Exchange Rate setting forth
the adjusted Exchange Rate and the date on which each adjustment becomes effective
and shall mail such notice of such adjustment of the Exchange Rate to the
Holders of the Notes upon request within 20 Business Days of the Effective Date
of such adjustment. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.

For purposes of this Section 2.14, the number of
Company Common Shares at any time outstanding shall not include shares held in
the treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of Company Common Shares.

Notwithstanding anything in this Section 2.14 to the
contrary, in no event shall the Exchange Rate be adjusted so that the Exchange
Price would be less than $0.01.

Except as described in this Section 2.14, the Exchange
Rate shall not be adjusted.  

Section 2.15.          Ownership
Limit; Withholding.  Notwithstanding
any other provision of the Notes or the Indenture, no Holder of Notes shall be
entitled to exchange such Notes for Company Common Shares to the extent that
receipt of such shares would cause such Holder (together with such Holder’s Affiliates)
to exceed the ownership limit contained in the Declaration of Trust of the
Company as in effect from time to time.

At the Maturity of the principal of the Notes, whether
at Stated Maturity or upon earlier redemption or repurchase of Notes or
otherwise, and as otherwise required by law, the Partnership may deduct and
withhold from the amount of consideration otherwise deliverable to such Holder
the amount required to be deducted and withheld under applicable law.

Section 2.16.          Satisfaction
and Discharge.  The provisions of
ARTICLE FOURTEEN of the Indenture shall not be applicable to the Notes.  The Partnership may satisfy and discharge its
obligations under the Indenture by delivering to the Trustee for cancellation
all Outstanding Notes or by depositing with the Trustee, the Paying Agent or
the Exchange Agent, if applicable, after the Notes have become due and payable,
whether on the date of the Stated Maturity of the principal amount of the
Notes, any Redemption Date, Optional Repurchase Date or Change in Control
Repurchase Date or upon exchange or otherwise, cash or Company Common Shares in
accordance with the terms hereof sufficient to pay all of the Outstanding Notes
and paying all other sums payable under the Notes and the Indenture in respect
of the Notes.

 29
 

 

 

Section 2.17.          Events
of Default; Waiver of Past Defaults.

(a)           Subparagraph
(4) of Section 501 of the Original Indenture is modified and amended for
purposes of the Notes to read as follows: 

“(4)         a default
under any bond, debenture, note or other evidence of recourse indebtedness of
the Partnership, or under any mortgage, indenture or other instrument of the
Partnership (including a default with respect to Securities of any series other
than the Notes) under which there may be issued or by which there may be
secured any recourse indebtedness of the Partnership (or by any Subsidiary the
repayment of which the Partnership has guaranteed or for which the Partnership
is directly responsible or liable as obligor or guarantor), whether such
indebtedness now exists or shall hereafter be created, which default shall
constitute a failure to pay an aggregate principal amount exceeding $50,000,000
of such indebtedness when due and payable after the expiration of any
applicable grace period with respect thereto and shall have resulted in such
indebtedness in an aggregate principal amount exceeding $50,000,000 becoming or
being declared due and payable prior to the date on which it would otherwise
have become due and payable, without such indebtedness having been discharged,
or such acceleration having been rescinded or annulled, within a period of
10 days after there shall have been given, by registered or certified
mail, to the Partnership by the Trustee or to the Partnership and the Trustee
by the Holders of at least 25% in principal amount of the Outstanding Notes of
a written notice specifying such default and requiring the Partnership to cause
such indebtedness to be discharged or cause such acceleration to be rescinded
or annulled and stating that such notice is a “Notice of Default” hereunder;”

(b)           Section
501 of the Original Indenture is further modified and amended for purposes of
the Notes to add the following Events of Default:

“default in the delivery when due of the Exchange
Value, on the terms set forth herein and in the Notes, upon exercise of a
Holder’s exchange right in accordance with the terms hereof and of the Notes
and the continuation of such default for 10 days;”

- and -

“failure of the Partnership to provide a Company
Notice within 20 days after the occurrence of a Change in Control as provided
in Section 2.09 of the Second Supplemental Indenture.”

(c)           Section
508 of the Original Indenture is modified and amended for purposes of the Notes
to read as follows:

“SECTION
508.  Unconditional Right of Holders
to Receive Principal, Interest and Exchange Value.  Notwithstanding any other provision in this
Indenture, the Holder of any Note shall have the right which is absolute and
unconditional to receive payment of the principal of, and (subject to Sections
305 and 307) interest on, and the Exchange Value owing upon exchange of, such
Note on the respective Stated Maturity or Maturities specified in the Note (or,
in the case of redemption, on the Redemption Date, in the case of repayment, on
the Repayment Date or, in the case of an exchange, on the due date for the
delivery of such Exchange Value specified in the Notes) and to institute suit
for the 

 30
 

 

 

enforcement
of any such payment or delivery and such rights shall not be impaired without
the consent of such Holder.

(d)           Section
513 of the Indenture is modified and amended for purposes of the Notes to add
the following as clause (3):

(3)  “in respect
of the failure by the Partnership to exchange any Notes in accordance with the
provisions of this Indenture.”

Section 2.18.          Modification.  

                New
subparagraphs (4) and (5) are hereby added to Section 902 to read as follows:

“(4)           make any
change that impairs or adversely affects the rights of a Holder to exchange
Notes in accordance herewith, or

(5)           impair the
right to institute suit for the enforcement of the delivery of the Exchange
Value as required by the Indenture upon an exchange of Notes.”

Section 2.19.          Certain
Covenants Not Applicable to the Notes. 
The Notes shall not be entitled to the benefits of the covenants set
forth in Sections 1004 and 1005 of the Indenture or the benefits of the
covenants set forth in the First Supplemental Indenture.

Section 2.20.          Calculations
in Respect of the Notes.  Except as otherwise specifically
stated herein or in the Notes, all calculations to be made in respect of the
Notes or the Exchange Rate shall be the obligation of the Partnership. All
calculations made by the Partnership or its agent as contemplated pursuant to
the terms hereof and of the Notes shall be made in good faith and be final and
binding on the Partnership and the Holders absent manifest error. The
Partnership shall provide a schedule of calculations to the Trustee, and the
Trustee shall be entitled to rely upon the accuracy of the calculations by the
Partnership without independent verification. 
The Trustee shall forward calculations made by the Partnership it
receives to any Holder of Notes upon request within 20 Business Days after the
effective date of any adjustment.

Section 2.21.          Authorized
Denominations.  The Notes shall be issued in
denominations of $1,000 and integral multiples thereof and payments of
principal of and interest on, the Notes shall be made in U.S. dollars.

Section 2.22.          Exchange
Agent, Paying Agent and Securities Registrar.  J.P. Morgan Trust
Company, National Association, is hereby appointed as Exchange Agent, Paying
Agent and the Security Registrar for the Notes. The Security Register for the
Notes will be maintained by the Security Registrar in a manner readily
available to it in the Borough of Manhattan, The City of New York.  The rights, privileges, protections,
immunities and benefits given to the Trustee pursuant to the Indenture,
including, without limitation, its right to be indemnified, are extended to,
and shall be enforceable by, the Trustee in each of its capacities with respect
to the Notes.

Section 2.23.          No
Sinking Fund.  No sinking fund is
provided for the Notes.  

 31
 

 

 

Section 2.24.          No
Security Interest Created.  Nothing
in this Indenture or in the Notes, express or implied, shall be construed to
constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in any
jurisdiction.  

ARTICLE THREE

FORM OF NOTES

Section 3.01.          Form
of Notes.  The Notes and the Trustee’s
certificate of authentication to be borne by such Notes shall be substantially
in the form set forth in Exhibit A hereto. Any of the Notes may have such
letters, numbers or other marks of identification and such notations, legends,
endorsements or changes as the officers executing the same may approve
(execution thereof to be conclusive evidence of such approval) and as are not
inconsistent with the provisions of the Indenture, or as may be required by the
Depositary or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed, or to conform to usage, or to indicate any special limitations or
restrictions to which any particular Notes are subject.

ARTICLE FOUR

MISCELLANEOUS

Section 4.01.          Relation
to Original Indenture.  This Second
Supplemental Indenture supplements and amends the Original Indenture and the
First Supplemental Indenture and shall be a part and subject to all the terms
thereof. Except as supplemented and amended hereby, all of the terms,
provisions and conditions of the Original Indenture and the First Supplemental
Indenture and the Securities issued thereunder shall continue in full force and
effect.

Section 4.02.          Concerning
the Trustee.  The Trustee shall not
be responsible for any recital herein as such recitals shall be taken as
statements solely of the Issuer, or the validity of the execution by the Issuer
of this Second Supplemental Indenture. The Trustee makes no representations as
to the validity or sufficiency of this instrument or the terms of the Notes.
All of the provisions contained in the Indenture in respect of the rights,
privileges, immunities, powers and duties of the Trustee shall be applicable in
respect of the Second Supplemental Indenture as fully and with like force and
effect as though fully set forth herein.

Section 4.03.          Effect
of Headings.  The Article and Section
headings herein are for convenience of reference only and shall not affect the
construction hereof.

Section 4.04.          Counterparts.  This Second Supplemental Indenture may be
executed in counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same instrument.

Section 4.05.          Governing
Law.  This Second Supplemental
Indenture shall be governed by and construed in accordance with the laws of the
State of New York.

[signature pages
follow]

 32
 

 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Second Supplemental Indenture to be duly executed as of the day and year
first above written.

	
   

  	
  ERP OPERATING LIMITED

  
	
   

  	
  PARTNERSHIP, as
  Issuer of the Notes

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Equity Residential, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donna Brandin

  	
   

  
	
   

  	
   

  	
  Name: Donna
  Brandin

  
	
   

  	
   

  	
  Title: Executive
  Vice President and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  J.P. MORGAN TRUST COMPANY, NATIONAL

  ASSOCIATION, as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Janice Ott Rotunno

  	
   

  
	
   

  	
   

  	
  Name: Janice Ott
  Rotunno

  
	
   

  	
   

  	
  Title: Vice
  President

  
						

 

 33

 

Exhibit A

[FORM OF NOTE]

[Include only for Global
Notes]

UNLESS THIS NOTE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.

UNLESS AND UNTIL THIS
NOTE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS NOTE
MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE THEREOF OR BY A
NOMINEE THEREOF TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE
TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH SUCCESSOR.

 A - 1
 

 

 

	
  NO.
  1

  	
  PRINCIPAL AMOUNT

  
	
   

  	
   

  
	
  CUSIP NO. 26884A AV5

  	
  $650,000,000

  

 

ERP OPERATING LIMITED PARTNERSHIP

3.85% Exchangeable Senior Note due 2026

ERP Operating Limited
Partnership, a limited partnership duly organized and existing under the laws
of the State of Illinois (the “Issuer,” which term shall include any successor
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to Cede & Co., or its registered assigns, the principal sum
of Six Hundred Fifty Million Dollars ($650,000,000) on August 15, 2026 unless
redeemed, repurchased or exchanged prior to such date in accordance with the
terms hereof and of the Indenture.

This Note shall bear
interest as specified on the reverse hereof. 
This Note is exchangeable for the consideration specified on the reverse
hereof.  This Note is subject to redemption
by the Issuer at its option and to repurchase by the Issuer at the option of
the Holder as specified on the reverse hereof.

Reference is hereby made
to the further provisions of this Note set forth on the reverse hereof, which
further provisions shall for all purposes have the same effect as if set forth
at this place.

This Note shall not be
entitled to the benefits of the Indenture or be valid or become obligatory for
any purpose until the certificate of authentication hereon shall have been
signed by the Trustee.

 A - 2
 

 

IN WITNESS WHEREOF, the
Issuer has caused this Note to be signed manually or by facsimile by an
authorized signatory.

Dated:
August 23, 2006

	
   

  	
   ERP OPERATING LIMITED
  PARTNERSHIP

  
	
   

  	
   

  	
  as Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: Equity Residential, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the
Securities of the series designated therein referred to in the within-mentioned
Indenture.

	
  

  	
  J.P. MORGAN TRUST COMPANY, NATIONAL

  ASSOCIATION, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  

 

 A - 3
 

 

 

[REVERSE OF NOTE]

ERP OPERATING LIMITED PARTNERSHIP

3.85% Exchangeable Senior Note due 2026

This Note is one of a
duly authorized issue of notes, debentures, bonds, or other evidences of
indebtedness of the Issuer (hereinafter called the “Securities”) of the series
hereinafter specified, all issued or to be issued under and pursuant to an
Indenture, dated as of October 1, 1994 (as amended and supplemented by the
First Supplemental Indenture, dated as of September 9, 2004, and the Second
Supplemental Indenture, dated as of August 23, 2006, and as further amended or
supplemented from time to time, the “Indenture”), duly executed and delivered
by the Issuer to J.P. Morgan Trust Company, National Association, as trustee
(the “Trustee,” which term includes any successor trustee under the Indenture
with respect to the series of Securities of which this Note is a part), and
reference is hereby made to the Indenture, and all modifications and amendments
and indentures supplemental thereto relating to the Notes, for a description of
the rights, limitations of rights, obligations, duties, and immunities
thereunder of the Trustee, the Issuer and the Holders of the Notes and the
terms upon which the Notes are authenticated and delivered.  The Securities may be issued in one or more
series, which different series may be issued in various aggregate principal
amounts, may mature at different times, may accrue interest (if any) at
different rates or formulas and may otherwise vary as provided in the
Indenture.  This Note is one of a series
of Securities designated as the “3.85% Exchangeable Senior Notes due 2026” of
the Issuer, initially limited (except as permitted under the Indenture) in
aggregate principal amount to $650,000,000. The Issuer may from time to time,
without the consent of the Holders of the Notes, increase the principal amount of
the Notes by issuing additional Securities (the “Additional Notes”), having the
same terms and ranking equally and ratably with the Notes in all respects and
with the same CUSIP number as the Notes, except for the difference in the issue
price and interest accrued prior to the issue date of such Additional Notes,
provided that such Additional Notes constitute part of the same issue as the
Notes for U.S. federal income tax purposes. 
Any Additional Notes will be treated as a single series with the Notes under
the Indenture and shall have the same terms as to status, redemption,
repurchase, exchange and otherwise as the Notes. Terms used herein without
definition and which are defined in the Indenture have the meanings assigned to
them in the Indenture.

1.             INTEREST

The Notes shall bear
interest at the rate of 3.85% per annum from August 23, 2006 or from the most
recent Interest Payment Date (as defined below) to which interest has been paid
or duly provided for, as the case may be, payable semi-annually in arrears on
February 15 and August 15 of each year (each, an “Interest Payment Date”),
commencing on February 15, 2007, until the principal hereof is paid or duly
made available for payment.  Interest
payable on each Interest Payment Date shall equal the amount of interest
accrued for the period commencing on and including the immediately preceding
Interest Payment Date in respect of which interest has been paid or duly
provided for (or commencing on and including August 23, 2006, if no interest
has been paid or duly provided for) and ending on and including the day
preceding such Interest Payment Date. 
Interest on the Notes will be computed on the basis of a 360-day year
consisting of twelve 30-day months

2.             METHOD
OF PAYMENT

Except as provided in the
Indenture, the Issuer shall pay interest on the Notes to the Persons who are
Holders of record of Notes at the close of business (whether or not a Business
Day) on the February 1 and August 1 immediately preceding the applicable
Interest Payment Date (each, a “Regular Record Date”).  Holders must surrender Notes to a Paying
Agent and

 A - 4
 

 

comply with the other
terms of the Indenture to collect the principal amount, Redemption Price,
Optional Repurchase Price or Change in Control Purchase Price of the Notes,
plus, if applicable, accrued and unpaid interest (including Additional
Interest, if any) payable as herein provided at maturity, upon redemption at
the Issuer’s option or repurchase at the Holder’s option.  The Issuer shall pay, in money of the United
States that at the time of payment is legal tender for payment of public and
private debts, all amounts due in cash with respect to the Notes on the dates
and in the manner provided in this Note and the Indenture.

3.             PAYING
AGENT, EXCHANGE AGENT AND SECURITY REGISTRAR

Initially, the Trustee
shall act as Paying Agent, Exchange Agent and Security Registrar.  The Issuer hereby initially designates the
Corporate Trust Office of the Trustee in New York, New York as the office to be
maintained by it where this Note may be presented for payment, registration of
transfer or exchange, where notices or demands to or upon the Issuer or Equity
Residential in respect of this Note or the Indenture may be served and where
the Notes may be surrendered for exchange in accordance with the provisions of
paragraph 6 hereof and the Indenture. 
The Issuer may appoint and change any Paying Agent, Exchange Agent,
Security Registrar or co-registrar or approve a change in the office through
which any Paying Agent acts without notice, other than notice to the Trustee.

4.             REDEMPTION
BY THE ISSUER

The Issuer
shall not have the right to redeem any Notes prior to August 18, 2011, except
to preserve the status of Equity Residential as a real estate investment
trust.  If the Issuer determines it is
necessary to redeem the Notes in order to preserve the status of Equity
Residential as a real estate investment trust, the Issuer may redeem the Notes
then Outstanding, in whole or in part, at 100% of the principal amount of the
Notes to be redeemed plus unpaid interest (including Additional Interest, if
any) accrued thereon to, but excluding, the Redemption Date.

The Issuer shall have the
right to redeem the Notes for cash, in whole or in part at any time or from
time to time, on or after August 18, 2011 at 100% of the principal amount of
the Notes to be redeemed plus unpaid interest accrued thereon to, but
excluding, the Redemption Date (the “Redemption Price”).

Notice of redemption at
the option of the Issuer shall be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Notes to be redeemed at the
Holder’s registered address. Notes in denominations larger than $1,000
principal amount may be redeemed in part but only in integral multiples of
$1,000 principal amount.

Notwithstanding the
foregoing, the Issuer may not effectuate any redemption of the Notes unless (1)
it elects to deliver solely cash in respect of the Exchange Value deliverable
upon the exchange of the Notes or (2) sufficient Company Common Shares that
have been registered for sale by the Company under the Securities Act are
available to satisfy the Issuer’s election, if applicable, to deliver Net
Shares upon the exchange of the Notes.

 A - 5
 

 

5.             OPTIONAL
REPURCHASE RIGHTS;

REPURCHASE AT OPTION OF HOLDER UPON A CHANGE IN CONTROL

(a)           Subject
to the terms and conditions of the Indenture, a Holder shall have the right to
require the Issuer to repurchase all of its Notes, or any portion of the
principal amount thereof that is equal to $1,000 or an integral multiple
thereof, on each of August 18, 2011, August 15, 2016 and August 15, 2021 (each,
an “Optional Repurchase Date”) for cash equal to 100% of the principal amount
of the Notes to be repurchased plus unpaid interest accrued thereon to, but
excluding, such Optional Repurchase Date (the “Optional Repurchase Price”),
upon delivery to the Paying Agent of an Optional Repurchase Notice containing
the information set forth in the Indenture, from the opening of business on the
date that is 30 days prior to such Optional Repurchase Date until the close of
business on the third Business Day prior to such Optional Repurchase Date and
upon compliance with the other terms of the Indenture.

(b)           If
a Change in Control occurs at any time prior to August 18, 2011, a Holder shall
have the right, at such Holder’s option and subject to the terms and conditions
of the Indenture, to require the Issuer to repurchase all or any of such Holder’s
Notes having a principal amount equal to $1,000 or an integral multiple thereof
on the date (the “Change in Control Purchase Date”) specified by the Issuer in
the Company Notice (which date shall be no earlier than 15 days and no later
than 30 days after the date of such Company Notice) for cash equal to the 100%
of the principal amount of the Notes to be repurchased plus unpaid interest
accrued thereon to, but excluding, the Change in Control Purchase Date (the “Change
in Control Purchase Price”).

(c)           Holders
have the right to withdraw any Optional Repurchase Notice or Change in Control
Purchase Notice, as the case may be, by delivery to the Paying Agent of a
written notice of withdrawal in accordance with the provisions of the
Indenture.

(d)           If
the Paying Agent holds, in accordance with the terms of the Indenture, money
sufficient to pay the Optional Repurchase Price or Change in Control Purchase
Price of such Notes on the Optional Repurchase Date or Change in Control
Purchase Date, as the case may be, then, on and after such date, such Notes
shall cease to be Outstanding and interest on such Notes shall cease to accrue,
and all other rights of the Holder shall terminate (other than the right to
receive the Optional Repurchase Price or Change in Control Purchase Price upon
delivery or transfer of the Notes).

6.             EXCHANGE

The Notes shall be
exchangeable into the consideration specified in the Indenture at such times,
upon compliance with such conditions and upon the terms set forth in the
Indenture.

The initial
Exchange Rate shall be 16.3934 Company Common Shares per $1,000 principal
amount of Notes, subject to adjustment in certain circumstances as specified in
the Indenture.  Notes tendered for
exchange by a Holder after the close of business on any Regular Record Date for
an interest payment and on or prior to the corresponding Interest Payment Date
must be accompanied by payment of an amount equal to the interest that such
Holder is to receive on such Notes on such Interest Payment Date; provided, however, that no such payment

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shall be required
(1) if such Notes have been called for redemption on a Redemption Date that is
after such Regular Record Date and on or prior to such Interest Payment Date or
(2) with respect to overdue interest, if any overdue interest exists at the
time of exchange with respect to such Notes.

The Exchange Rate
applicable to each Note a notice of exchange in respect of which is received by
the Exchange Agent from and including the Effective Date of a Change in Control
up to and including the 30th Business Day following the Effective Date of such
Change in Control shall be increased by the number of Additional Shares
specified in the Indenture.

To exchange this
Note, the Holder must (a) complete and manually sign the irrevocable
exchange notice set forth below (or complete and manually sign a facsimile of
such notice) and deliver such notice to the Exchange Agent at the office
maintained by the Exchange Agent for such purpose, (b) if this Note is in
certificated form, surrender such Note to the Exchange Agent, (c) furnish
appropriate endorsements and transfer documents if required by the Exchange
Agent, Issuer or the Trustee and (d) pay any transfer or similar tax, if
required. The date on which the Holder satisfies all such requirements shall be
deemed to be the date on which this Note shall have been tendered for exchange.

If the Holder has
delivered an Optional Repurchase Notice or a Change in Control Purchase Notice
requiring the Issuer to repurchase all or a portion of this Note pursuant to
paragraph 5 hereof, then this Note (or portion hereof subject to such Optional
Repurchase Notice or Change in Control Purchase Notice) may be exchanged only
if the Optional Repurchase Notice or Change in Control Purchase Notice is
withdrawn in accordance with the terms of the Indenture.

7.             RANKING

The Notes are
senior unsecured obligations of the Issuer and shall rank pari passu in right
of payment with all other senior unsecured indebtedness of the Issuer from time
to time outstanding.

8.             DEFAULTED
INTEREST

Except as
otherwise specified herein or in the Indenture, any Defaulted Interest on this
Note shall forthwith cease to be payable to the Holder hereof on the relevant
Regular Record Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Issuer as provided for in Section 307 of the
Indenture.

9.             DENOMINATIONS;
TRANSFER; EXCHANGE

This
Note is issuable only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples thereof.  This Note may be exchanged for a like
aggregate principal amount of Notes of other authorized denominations at the
office or agency of the Issuer in The City of New York, in the manner and
subject to the limitations provided herein and in the Indenture, but without
the payment of any charge except for any tax or other governmental charge
imposed in connection therewith. Upon due presentment for registration of
transfer of this Note at the office or agency of the Issuer in The City of New
York, one or more new Notes of

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authorized
denominations in an equal aggregate principal amount will be issued to the transferee
in exchange therefor but without payment of any charge except for any tax or
other governmental charge imposed in connection therewith.  In the event of any redemption in part, the
Issuer shall not be required to: (i) issue or register the transfer or exchange
of any Note during a period beginning at the opening of business 15 days before
any selection of Notes for redemption and ending at the close of business on
the earliest date on which the relevant notice of redemption is deemed to have
been given to all Holders of Notes to be so redeemed, or (ii) register the
transfer or exchange of any Note so selected for redemption, in whole or in
part, except the unredeemed portion of any Note being redeemed in part.

10.           PERSONS
DEEMED OWNERS

The Holder of this
Note may be treated as the owner of this Note for all purposes, and none of the
Issuer, the Trustee or any authorized agent of the Issuer or the Trustee shall
be affected by any notice to the contrary, except as required by law.

11.           DEFAULTS
AND REMEDIES

If an Event of
Default occurs and is continuing, the Trustee, or the Holders of not less than
25% in aggregate principal amount of the Notes at the time Outstanding, may
declare the principal amount and any accrued and unpaid interest, of all the
Notes to be due and payable in the manner and with the effect provided in the
Indenture.

12.           CERTAIN
COVENANTS NOT TO APPLY

The Notes shall not be entitled to the benefits of the
covenants set forth in Sections 1004 and 1005 of the Indenture or the benefits
of the covenants set forth in the First Supplemental Indenture.

13.           TRUSTEE
AND AGENT DEALINGS WITH THE COMPANY

The Trustee,
Paying Agent, Exchange Agent and Securities Registrar under the Indenture, each
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with and collect obligations owed to it by the
Issuer or their respective Affiliates and may otherwise deal with the Issuer or
its Affiliates with the same rights it would have if it were not Trustee, Paying
Agent, Exchange Agent or Registrar.

14.           CALCULATIONS
IN RESPECT OF THE NOTES

Except as
otherwise specifically stated herein or in the Indenture, all calculations to
be made in respect of the Notes shall be the obligation of the Issuer. All
calculations made by the Issuer or its agent as contemplated pursuant to the
terms hereof and of the Indenture shall be final and binding on the Issuer and
the Holders absent manifest error. The Issuer shall provide a schedule of
calculations to the Trustee, and the Trustee shall be entitled to rely upon the
accuracy of the calculations by the Issuer without independent
verification.  The Trustee shall forward
calculations made by and received from the Issuer to any Holder of Notes upon
request.

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15.           GOVERNING
LAW

The Indenture and
this Note shall be governed by and construed in accordance with the laws of the
State of New York.

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ASSIGNMENT

FOR VALUE RECEIVED, the
undersigned hereby sell(s), assign(s) and transfer(s) unto                                                                                                                                                  .

PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

 

(Please print or Typewrite Name and Address

Including Postal Zip Code of Assignee)

 

the within Note and all
rights thereunder, and hereby irrevocably constitutes and appoints

 

to transfer said Note on
the books of the Issuer, with full power of substitution in the premises.

Dated:                                                    

	
  Signature Guaranteed

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  NOTICE: Signature must be guaranteed by an eligible
  Guarantor Institution (banks, stockbrokers, savings and loan associations and
  credit unions) with membership in an approved signature guarantee medallion
  program pursuant to Securities and Exchange Commission Rule 17Ad-15.

  	
   

  	
  NOTICE: The signature to this Assignment must
  correspond with the name as written upon the face of the within Note in every
  particular, without alteration or enlargement or any change whatever.

  

 

 A - 10
 

 

 

EXCHANGE NOTICE

To exchange this Note as
provided in the Indenture, check the box: 
o

To exchange only part of
this Note, state the principal amount to be exchanged (must be $1,000 or an
integral multiple of $1,000):  $                        .

If, in the event the
Issuer delivers Net Shares and you want the stock certificate made out in
another person’s name, fill in the form below:

 

(Insert assignee’s soc. sec. or tax I.D. no.)

 

 

(Print or type assignee’s name, address and zip code)

 

	
  

  	
   

  	
  Your Signature:

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Sign exactly as your name appears on the

  other side of this Note)

  
	
   

  	
   

  	
   

  
	
  (1)Signature
  guaranteed by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  

 

(1)           Signature
must be guaranteed by an eligible Guarantor Institution (banks, stockbrokers,
savings and loan associations and credit unions) with membership in an approved
signature guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15.

 A - 11

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