-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RaUEtgx2MHvNcsC6WlwwETi39wFuLDeozxPcAC/d/gFI5wXu85Il7OBSVT7yv2vQ gJ56GJfwKEJQ2/mplo0QTw== 0000891618-96-001237.txt : 19960717 0000891618-96-001237.hdr.sgml : 19960717 ACCESSION NUMBER: 0000891618-96-001237 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19960331 ITEM INFORMATION: Other events FILED AS OF DATE: 19960716 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESSEX PROPERTY TRUST INC CENTRAL INDEX KEY: 0000920522 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 770369576 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13106 FILM NUMBER: 96595590 BUSINESS ADDRESS: STREET 1: 7777 CALIFORNIA AVE CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154943700 MAIL ADDRESS: STREET 1: 755 PAGE MILL RD CITY: PALO ALTO STATE: CA ZIP: 94304 8-K 1 ESSEX PROPERTY TRUST 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------------------- FORM 8-K PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): July 15, 1996 (June 20, 1996) ESSEX PROPERTY TRUST, INC. (Exact name of Registrant as Specified in its Charter) MARYLAND (State or Other Jurisdiction of Incorporation) 1-13106 (Commission File Number) 77-0369576 (IRS Employer Identification No.) 777 CALIFORNIA AVENUE PALO ALTO , CA 94304 (415) 494-3700 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) 2 Item 5. OTHER EVENTS. Essex Property Trust, Inc. (the "Company") has entered into the following agreements: (i) a Stock Purchase Agreement dated as of June 20, 1996 as amended by Amendment No. 1 dated July 1, 1996 (as amended, the "Stock Purchase Agreement), among the Company and Tiger/Westbrook Real Estate Fund, L.P., a Delaware limited partnership and Tiger/Westbrook Real Estate Co-Investment Partnership, L.P., a Delaware limited partnership (Tiger/Westbrook Real Estate Fund, L.P. and Tiger/Westbrook Real Estate Co-Investment Partnership, L.P. are referred to herein collectively as "TW Equity"), (ii) a Registration Rights Agreement dated as of June 20, 1996, among the Company and TW Equity (the "Registration Rights Agreement"), (iii) a Loan Facility Agreement dated as of June 20, 1996 as amended by Amendment No. 1 dated July 1, 1996 (as amended, the "Loan Facility Agreement"), between the Company and T/W Essex Funding, L.L.C., a Delaware limited liability company and an affiliate of TW Equity ("TW Debt"), (iv) a Guarantee dated as of June 20, 1996, issued by Essex Portfolio, L.P. (the "Operating Partnership"), as to which the Company is general partner, in favor of the TW Debt, as reaffirmed by a Reaffirmation of Guarantee dated as of July 1, 1996 (as reaffirmed, the "Guarantee"), (v) a First Amendment to Investor Rights Agreement dated as of July 1, 1996 between George Marcus, The Marcus and Millichap Company and the Company (the "Investor Rights Amendment"), (vi) a financing letter dated as of July 1, 1996 among the Company, the Operating Partnership and TW Equity (the agreements listed in the foregoing clauses (i) through (vi) are referred to herein as the "Agreements"). In connection with the Stock Purchase Agreement, the Company has filed Articles Supplementary with the State Department of Assessments and Taxation of Maryland and has amended its Bylaws. Subject to the terms and conditions of the Stock Purchase Agreement, the Company will sell to TW Equity up to 1.6 million shares (the "Shares") of the Company's 8.75% Convertible Preferred Stock, Series 1996A (the "Preferred Stock") for a purchase price of $25.00 per share (the "Transaction"), representing an aggregate investment of $40 million. The investment will be consummated in two phases: (i) the purchase by TW Equity of 340,000 Shares, for an aggregate purchase price of $8.5 million, paid in cash, which purchase was completed on July 1, 1996 ("Phase 1"); and (ii) the purchase by TW Equity of up to 1,260,000 additional Shares ("Phase 2"), the purchase price for which will be comprised of (A) exchanging $11.5 million, constituting the outstanding principal balance of a loan (the "Loan"), in the maximum principal amount of $31.5 million (the "Maximum Loan Principal Amount"), made on July 1, 1996 by TW Debt for Shares, and (B) utilizing funds otherwise comprising the remainder of the Maximum Loan Principal Amount to acquire the remaining Shares, as more fully described in the Stock Purchase Agreement and the Loan Facility Agreement. Completion of the investment is scheduled to occur on or prior to June 20, 1997. From and after June 20, 1997, 25% of the authorized 1.6 million shares of Preferred Stock shall become convertible into Common Stock. Thereafter, at the beginning of each next three-month period, an additional 25% of the authorized 1.6 million shares of Preferred Stock shall become convertible into Common Stock, provided that, in the case of the voluntary or involuntary liquidation, dissolution or winding up of the Company, all outstanding shares of Preferred Stock shall, at the option of the holder thereof, become immediately convertible into Common Stock. The conversion price (the "Conversion Price") per share of Preferred Stock will initially be $21.875, subject to adjustment as more fully provided in the Articles Supplementary. 2 3 TW Equity's acquisition of 340,000 shares of Preferred Stock represents 5.8% of the outstanding shares of Common Stock on an as-converted basis (approximately 4.6% on a fully-diluted basis, based upon the number of partnership units in the Operating Partnership that may be exchanged for shares of Common Stock ("fully-diluted basis")). If TW Equity acquires all 1.6 million shares of Preferred Stock, as contemplated by the Transaction, and assuming no other changes in the outstanding Common Stock or Preferred Stock, TW Equity's Preferred Stock ownership will represent 22.6% of the outstanding shares of Common Stock on an as-converted basis (or 18.4% on a fully-diluted basis). The Transaction also involves a number of additional terms, as more fully described in the Agreements, including, without limitation: (i) the right of TW Equity and the other holders of Preferred Stock, if any, to nominate and elect, voting as a separate class, one director to the Board, and, under certain circumstances, to nominate and elect, voting as a separate class, additional directors to the Board; (ii) the grant to TW Equity of certain rights to information regarding the Company; (iii) limitations on the Company's ability to engage in certain transactions and corporate actions without the consent of TW Equity; (iv) provisions that restrict TW Equity from transferring the Shares except in accordance with applicable securities laws and subject to the ownership limits in the amended and restated Articles of Incorporation of the Company (the "Articles of Incorporation"); (v) the grant to TW Equity of certain additional rights to purchase, under certain circumstances, shares of the Company's capital stock in connection with future stock issuances by the Company; (vi) the grant to TW Equity of certain registration rights to enable TW Equity to resell the Shares to the public under certain conditions; and (viii) the right of TW Equity to purchase limited partnership interests in the Operating Company under certain circumstances in lieu of purchasing additional Shares. The Transaction will be subject to the vote of the Company's stockholders. The Company will also ask its stockholders to approve certain amendments to its Articles of Incorporation relating to (i) a change in the ownership limitation provision in the Articles of Incorporation to enable the completion of the Transaction and (ii) amendments to certain provisions in order to allow for a change in the composition of the Board of Directors in the event of a breach of certain protective provisions relating to the Preferred Stock. As more fully described in the Stock Purchase Agreement, the Company's and TW Equity's obligations to effect Phase 2 of the Transaction are subject to various mutual and unilateral conditions, including, without limitation, the following: (i) the Company's stockholders shall have approved the Transaction; (ii) the Company's stockholders shall have approved certain proposed amendment to the Articles of Incorporation; (iii) the Company shall continue to qualify as a REIT for federal income tax purposes; (iv) there shall have been no change or circumstance that has had or would reasonable be expected to have a material adverse effect on the financial condition, results of operations or business of the Company and its subsidiaries taken as a whole; and (v) various other customary conditions shall have been satisfied. Even if the stockholders do not approve the Transaction, the Company may still proceed to sell additional shares of Preferred Stock to TW Equity under the terms and conditions of the Stock Purchase Agreement. The foregoing description of the Transaction and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by the exhibits which are attached hereto and incorporated by reference. A copy of the Company's press releases, dated July 1, 1996 and June 21, 3 4 1996, related to the Transaction and to the transactions contemplated thereby are attached as Exhibits 99.1 and 99.2. 4 5 Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ESSEX PROPERTY TRUST, INC. July 16 , 1996 By: /s/ Mark J. Mikl ---------------- Mark J. Mikl Controller 5 6 EXHIBIT INDEX
EXHIBIT DESCRIPTION - --------------------- --------------------------------------------------------- 3.1 Articles Supplementary of Essex Property Trust, Inc. for the 8.75% Convertible Preferred Stock, Series 1996A 3.2 Amended and Restated Bylaws of Essex Property Trust, Inc. 10.1 Stock Purchase Agreement dated as of June 20, 1996 by and between Essex Property Trust, Inc. and Tiger/Westbrook Real Estate Fund, L.P. and Tiger/Westbrook Real Estate Co-Investment Partnership, L.P. 10.2 Amendment No. 1 to Stock Purchase Agreement dated as of July 1, 1996 by and between Essex Property Trust, Inc. and Tiger/Westbrook Real Estate Fund, L.P. and Tiger/Westbrook Real Estate Co-Investment Partnership, L.P. 10.3 First Amendment to Investor Rights Agreement dated July 1, 1996 by and between George M. Marcus and The Marcus Millichap Company 10.4 Loan Facility Agreement dated as of June 20, 1996 among Essex Property Trust, Inc. and T/W Essex Funding, L.L.C. 10.5 Amendment No. 1 to Loan Facility Agreement dated as of July 1, 1996 by and between Essex Property Trust, Inc. and T/W Essex Funding, L.L.C. 10.6 Guarantee dated as of June 20, 1996 of Essex Portfolio, L.P. to T/W Essex Funding, L.L.C. 10.7 Reaffirmation of Guarantee dated as of July 1, 1996 by Essex Portfolio, L.P. 10.8 Registration Rights Agreement, dated as of June 20, 1996
6 7 10.9 Letter Agreement, dated July 1, 1996, among Essex Property Trust, Inc., Essex Portfolio, L.P., Tiger/Westbrook Real Estate Fund, L.P. and Tiger/Westbrook Real Estate Co-Investment Partnership, L.P. 99.1 Press Release, dated July 1, 1996 99.2 Press Release, dated June 21, 1996
7 EX-3.1 2 ARTICLES SUPPLEMENTARY OF ESSEX PROPERTY TRUST 1 ESSEX PROPERTY TRUST, INC. ARTICLES SUPPLEMENTARY Reclassifying 1,600,000 shares of Common Stock as 1,600,000 shares of 8.75% CONVERTIBLE PREFERRED STOCK, SERIES 1996A Essex Property Trust, Inc., a corporation organized and existing under the laws of Maryland (the "Corporation"), does hereby certify to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority conferred upon the Board of Directors of the Corporation by Article FIFTH of its Charter (the "Charter") in accordance with Section 2-105 of the Maryland General Corporation Law (the "MGCL"), the Board of Directors of the Corporation, at a meeting held on June 26, 1996, duly adopted a resolution reclassifying 1,600,000 authorized but unissued shares of Common Stock (par value $.0001 per share) as Preferred Stock (par value $.0001 per share), designating such newly reclassified Preferred Stock as 8.75% Convertible Preferred Stock, Series 1996A, the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption as set forth below and authorizing the issuance of such series of Preferred Stock as set forth below. Upon any restatement of the Charter, Sections 1 through 11 of this Article FIRST shall become subsection (e) of Article FIFTH of the Charter. Section 1. Designation and Amount. Of the 670,000,000 authorized shares of Common Stock, 1,600,000 shares are reclassified and designated 8.75% Convertible Preferred Stock, Series 1996A (the "Series 1996A Stock"). 2 Section 2. Dividends and Distributions. (a) Holders of shares of Series 1996A Stock will be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the payment of dividends, cumulative cash dividends equal to the greater of (i) 8.75% of $25.00 per share (such $25.00, the "Stated Value") per annum (rounded up to the nearest whole cent), payable quarterly, in arrears, on the 15th day of January, April, July and October of each year, commencing October 15, 1996 (each a "Dividend Payment Date") or (ii) the dividend (determined as of the most recent dividend payment date for the Common Stock) paid with respect to each share of Common Stock multiplied by a fraction of which the numerator is the Conversion Price in effect as of such Dividend Payment Date and the denominator of which is the initial Conversion Price. The dividend will accrue daily on the basis of a 360-day year of twelve 30-day months, whether or not the Corporation has earnings or surplus, and the dividend payable to the holder of a share of Series 1996A Stock on the first Dividend Payment Date after the share is issued will be the accrued dividend calculated from the day the share is issued to the Dividend Payment Date. If any Dividend Payment Date is not a Business Day, the dividend due on that Dividend Payment Date will be paid on the Business Day immediately succeeding that Dividend Payment Date. As used with regard to the Series 1996A Stock, the term "Business Day" means a day on which both state and federally chartered banks in New York, New York are required to be open for general banking business. (b) Each dividend will be payable to holders of record of the Series 1996A Stock on a date (a "Record Date") selected by the Board of Directors which is not less than ten nor more than forty-five days before the Dividend Payment Date on which the dividend is to be paid. No Record Date will precede the close of business on the date the Record Date is fixed. (c) Unless and until all accrued dividends on the Series 1996A Stock under Section 2(a) through the last preceding Dividend Payment Date have been paid, the Corporation may not (i) declare or pay any dividend, make any distribution (other than a distribution payable solely in shares of Common Stock), or set aside any funds or assets for payment or distribution 2 3 with regard to any Junior Shares (as herein defined), (ii) redeem or purchase (directly or through subsidiaries), or set aside any funds or other assets for the redemption or purchase of, any Junior Shares or (iii) authorize, take or cause to be taken any action as general partner of Essex Portfolio L.P., a California limited partnership (the "Operating Partnership"), that will result in (A) the declaration or payment by the Operating Partnership of any distribution to its partners (other than distributions payable to the Corporation as general partner that will be used by the Corporation to fund the payment of dividends on the Series 1996A Stock (such distributions to the Corporation being referred to as "Authorized GP Distributions")), or set aside any funds or assets for payment of any distributions (other than Authorized GP Distributions) or (B) the redemption or purchase (directly or through subsidiaries), or the setting aside of any funds or other assets for the redemption or purchase of, any partnership interests in the Operating Partnership. As used with regard to the Series 1996A Stock, the term "Junior Shares" means all shares of Common Stock and all shares of any other class or series of stock of the Corporation to which the shares of Series 1996A Stock are prior in rank with regard to payment of dividends. (d) While any shares of Series 1996A Stock are outstanding, the Corporation may not pay any dividend, or set aside any funds for the payment of a dividend, with regard to any shares of any class or series of stock of the Corporation which ranks on a parity with the Series 1996A Stock as to payment of dividends unless at least a proportionate payment is made with regard to all accrued dividends together with all accrued but not yet due dividends (whether or not authorized) (collectively, "Accrued Dividends") on the Series 1996A Stock. A payment of dividends with regard to the Series 1996A Stock will be proportionate to a payment of a dividend with regard to another class or series of stock if the dividend per share of Series 1996A Stock is the same percentage of the Accrued Dividends with regard to a share of Series 1996A Stock that the dividend paid with regard to a share of stock of the other class or series is of the Accrued Dividends with regard to a share of stock of that other class or series. (e) Any dividend paid with regard to shares of Series 1996A Stock will be paid equally with regard to each outstanding share of Series 1996A Stock. 3 4 Section 3. Voting Rights. The voting rights of the holders of shares of Series 1996A Stock will be only the following: (a) (i) The holders of the Series 1996A Stock, voting as a separate class, shall have the right to elect one director of the Corporation (a "Series 1996A Director"), in addition to the other directors elected by the holders of Common Stock (the "Common Directors") or any holders of any other class or series of stock of the Corporation voting as a separate class with the holders of the Common Stock. (ii) The holders of the Series 1996A Stock, voting as a separate class, shall have the right, as specified below, to elect additional directors (and to fill vacancies occurring with respect to any director, so elected by the holders of the Series 1996A Stock) of the Corporation, in addition to the director elected pursuant to Section 3(a)(i) and in addition to the other directors elected by the holders of Common Stock or any holders of any other class or series of stock of the Corporation voting as a separate class with the holders of the Common Stock. (A) In the event of a Charter Breach, as hereinafter defined, the number of directors shall be increased by three directors, who shall be elected as soon as practicable pursuant to the Charter by the holders of the Series 1996A Stock, to serve until the next annual meeting of stockholders and until such directors' successors are elected and qualify. A Charter Breach shall mean a breach by the Corporation of Sections 3(b) or 3(c) hereof or any successor provisions contained in any amendment to or restatement of the Charter. (B) In the event of a Dividend Default, as hereinafter defined, or in the event of both a Dividend Default and a Charter Breach, the number of directors shall be increased by four directors, who shall be elected as soon as practicable pursuant to the Charter by the holders of the Series 1996A Stock, to serve until the next annual meeting of stockholders and until such directors' successors are elected and qualify. A Dividend Default shall occur if, at any time, dividends are not paid in full with respect to all shares of Series 1996A Stock on any four 4 5 Dividend Payment Dates such that dividends due on such four dates have not been fully paid and are outstanding in whole or in part at the same time. (C) In the event of a Dividend Default and/or a Charter Breach, the number of Series 1996A Directors elected at each subsequent annual meeting of shareholders shall be increased as provided in subparagraphs A and B above, e.g., if a Charter Breach has occurred, the holders of Series 1996A Stock shall elect four Series 1996A Directors at subsequent annual meetings and, if a Dividend Default has occurred, or if both a Dividend Default and a Charter Breach have occurred, the holders of Series 1996A Stock shall elect five Series 1996A Directors at subsequent annual meetings, subject to the classification required by Section 2.3 of the Bylaws. (iii) The holders of the Series 1996A Stock may exercise any right under Section 3(a)(i) or (ii) to elect a director either at a special meeting of the holders of the Series 1996A Stock or at an annual meeting of the stockholders of the Corporation held for the purpose of electing directors. (iv) Whenever the holders of the Series 1996A Stock have the right under Section 3(a)(i) or (ii) to elect a director, but have not done so, the Secretary of the Corporation will, upon the written request of the holders of record of at least 25% of the outstanding shares of Series 1996A Stock, call a special meeting of the holders of the Series 1996A Stock for the purpose of electing a director or directors, as the case may be. That meeting will be held at the earliest practicable date upon the notice required for annual meetings of stockholders of the Corporation (or such shorter notice as is agreed to in writing by the holders of all the outstanding shares of Series 1996A Stock before or within ten days after the meeting) at the place specified in the request for a meeting, or if there is none, at a place in New York, New York designated by the Secretary of the Corporation. If the meeting has not been called within fifteen days after delivery of the written request to the Secretary of the Corporation, or within twenty days after the request is mailed by registered mail, addressed to the Secretary of the Corporation at the Corporation's principal office, the holders of record of at least 25% of the 5 6 outstanding shares of Series 1996A Stock may designate in writing one holder to call the meeting at the expense of the Corporation, and the meeting may be called by that person upon the notice required for annual meetings of stockholders (or such shorter notice as is agreed to in writing by the holders of all the outstanding Series 1996A Stock before or within ten days after the meeting). Any holder of Series 1996A Stock or its representatives will have access to the stock ledger of the Corporation relating to the Series 1996A Stock for the purpose of causing a meeting of stockholders to be called in accordance with this Section 3(a)(iv). (v) A director elected in accordance with Section 3(a)(i) or (ii) will serve until the next annual meeting of stockholders of the Corporation and until his or her successor is elected and qualified by the holders of the Series 1996A Stock, except as otherwise provided in the Charter or Bylaws. (b) While any shares of Series 1996A Stock are outstanding, the Corporation will not, directly or indirectly, including through a merger or consolidation with any other corporation or otherwise, without approval of holders of at least 66-2/3% of the outstanding shares of Series 1996A Stock, voting separately as a class, (i) increase the number of authorized shares of Series 1996A Stock or authorize the issuance or issue of any shares of Series 1996A Stock other than to existing holders of Series 1996A Stock, (ii) increase the authorized number of shares of or create, reclassify or issue any class or series of stock ranking prior to or on a parity with the Series 1996A Stock either as to dividends or upon liquidation, (iii) amend, alter or repeal any of the provisions of the Charter so as to affect adversely the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series 1996A Stock, (iv) amend, alter or repeal (a) the final paragraph of Section 1.11, the final paragraph of Section 1.12, Section 2.2, Section 3.1, Section 6.7 or Section 8.6 of the Bylaws of the Corporation, (b) any other provision of the Bylaws relating to nomination, election, classification, qualification or removal of directors elected by the holders of Series 1996A Stock or size of the Board or (c) any other provision of the Bylaws in a manner which would adversely affect the rights of the holders of the 6 7 Series 1996A Stock, (v) authorize any reclassification of the Series 1996A Stock, (vi) except as otherwise provided herein, require the exchange of Series 1996A Stock for other securities, or (vii) effect a voluntary liquidation, dissolution or winding up of the Corporation, the sale of substantially all of the assets of the Corporation, the merger or consolidation of the Corporation or the Operating Partnership or recapitalization (except a merger of a wholly-owned subsidiary of the Corporation into the Corporation in which the Corporation's capitalization is unchanged as a result of such merger) of more than 40% of the Corporation's total market capitalization (market value of the Corporation's equity plus total indebtedness) in a single transaction or a series of related transactions, provided that successive offerings of the Corporation's equity or debt to the public shall not be considered related transactions. (c) While any shares of the Series 1996A Stock are outstanding, the Corporation and the Operating Partnership will not, directly or indirectly, including through a merger or consolidation with any other corporation or otherwise, without the approval of the holders of a majority of the outstanding shares of Series 1996A Stock, voting separately as a class, propose, authorize, take, or cause to be taken or allow to occur any of the following actions: (i) the sale, transfer or assignment, in a single transaction or series of transactions, of beneficial interests in or voting rights with respect to assets of the Corporation or the Operating Partnership or any other person (except that with respect to any such other person in which the Corporation or Operating Partnership has a minority interest such that a sale, transfer or assignment is not within the Corporation's or Operating Partnership's control, this prohibition shall not apply) owned directly or indirectly by the Corporation to the extent of the Corporation's attributed interest in such other person, having a fair market value (based on the value of the total consideration of each such transaction, including, without limitation, any debt assumed by any purchaser in connection therewith) in excess of $45,000,000 within any 90-day period or $125,000,000 within any 360-day period; (ii) the Corporation's termination of the election, or the taking of any action by the Corporation which would cause termination other than by election, of the Corporation as a real estate investment trust under the Internal Revenue Code of 1986, as 7 8 amended; (iii) any alteration in the Corporation's or the Operating Partnership's business such that (A) less than 65% of the Corporation's or the Operating Partnership's assets (in terms of book value plus accumulated depreciation) are located in the States of California, Oregon and Washington, (B) less than 80% of the Corporation's or the Operating Partnership's assets (in terms of book value plus accumulated depreciation) are located west of the Mississippi River or (C) less than 80% of the Corporation's or the Operating Partnership's assets (in terms of book value plus accumulated depreciation) are classified as multi-family residential properties; or (iv) any Change in Control of the Corporation or the Operating Partnership (as defined below). As used herein, the Corporation shall be deemed to have allowed a "Change of Control" of the Corporation or the Operating Partnership to have occurred if any of the following occur: (i) the Corporation takes or fails to take any action such that it ceases to be required to file reports under Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor to that Section; (ii) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange Act) is permitted by the Board or the Corporation to become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of either (a) 30% or more of the outstanding shares of Common Stock, or (b) 30% (by right to vote or grant or withhold any approval) of the outstanding securities of any other class or classes which individually or together have the power to elect a majority of the members of the Board; (iii) the Board determines to recommend the acceptance of any proposal set forth in a tender offer statement or proxy statement filed by any person with the Securities and Exchange Commission which indicates the intention on the part of that person to acquire, or acceptance of which would otherwise have the effect of that person acquiring, control of the Corporation; (iv) other than as a result of the death or disability of one or more of the directors within a three-month period, a majority of the members of the Board for any period of three consecutive months are not persons who (a) had been directors of the Corporation for at least the preceding 24 consecutive months or were elected by the holders of the Series 1996A Stock, voting separately as a class, or (b) when they initially were elected to the Board, (x) were nominated (if they were elected by the 8 9 stockholders) or elected (if they were elected by the directors) with the affirmative concurrence of 66-2/3% of the directors who were Continuing Directors at the time of the nomination or election by the Board and (y) were not elected as a result of an actual or threatened solicitation of proxies or consents by a person other than the Board or an agreement intended to avoid or settle such a proxy solicitation (the directors described in clauses (a) and (b) of this subsection (iv) being "Continuing Directors"); (v) the Corporation ceases to be the sole General Partner of the Operating Partnership or grants or sells to any third party the power to control or direct the actions of the Operating Partnership as if such third party were a general partner of the Operating Partnership; or (vi) the Operating Partnership is a party to any entity conversion or any merger or consolidation in which the Operating Partnership is not the surviving entity in such merger or consolidation. Section 4. Liquidation. Upon the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, the holders of the Series 1996A Stock will be entitled to receive out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, before any distribution is made to holders of any Junior Shares, an amount per share (the "Liquidation Preference") equal to 105% of the sum of (i) Stated Value plus (ii) all Accrued Dividends with regard to the Series 1996A Stock to the date of final distribution (whether or not declared). If, upon any liquidation, dissolution or winding-up of the Corporation, the assets of the Corporation, or proceeds of those assets, available for distribution to the holders of Series 1996A Stock and of shares of all other classes or series which are on a parity as to distributions on liquidation with the Series 1996A Stock are not sufficient to pay in full the Liquidation Preference to the holders of the Series 1996A Stock and any liquidation preference of all other classes or series which are on a parity as to distributions on liquidation with the Series 1996A Stock, then the assets, or the proceeds of those assets, which are available for distribution to the holders of Series 1996A Stock and of the shares of all other classes or series which are on a parity as to distributions on liquidation with the Series 1996A Stock will be distributed to the holders of the Series 1996A Stock and of the 9 10 shares of all other classes or series which are on a parity as to distributions on liquidation with the Series 1996A Stock ratably in accordance with the respective amounts of the liquidation preferences of the shares held by each of them. After payment of the full amount of the Liquidation Preference, the holders of Series 1996A Stock will not be entitled to any further distribution of assets of the Corporation. For the purposes of this Section, neither a consolidation or merger of the Corporation with another corporation, nor a sale or transfer of all or any part of the Corporation's assets for cash or securities, will be considered a liquidation, dissolution or winding-up of the Corporation. Section 5. Conversion Into Common Stock. (a) Optional Conversion. (i) Each holder of shares of Series 1996A Stock will have the right, at the holder's option, to convert all or any of the shares of Series 1996A Stock held of record by the holder into (A) a number of fully paid and non-assessable shares of Common Stock (calculated as to each conversion to the nearest 1/100th of a share) equal to Stated Value plus the amount, if any, of Accrued Dividends as of the effective date of the conversion, divided by the Conversion Price then in effect, or (B) such other securities or assets as the holder is entitled to receive in accordance with Section 5(e). (ii) Notwithstanding the provisions of Section 5(a)(i), the shares of Series 1996A Stock shall not be convertible into Common Stock until June 20, 1997, and beginning on such date a number of shares of Series 1996A Stock equal to 25% of the authorized shares of Series 1996A Stock, and then at the beginning of each of the next three three-month periods thereafter, an additional number of shares equal to 25% of such authorized shares shall become convertible into Common Stock as provided herein; provided, further, however, that, in the case of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, shares of Series 1996A Stock shall, at the option of the holder thereof, immediately become convertible into Common Stock as provided herein. (iii) The holder of each share of Series 1996A Stock to be converted must surrender the certificate representing that share to the conversion agent for the Series 10 11 1996A Stock appointed by the Corporation (which may be the Corporation itself), with the Notice of Election to Convert on the back of that certificate duly completed and signed, at the principal office of the conversion agent. If the shares issuable on conversion are to be issued in a name other than the name in which the Series 1996A Stock is registered, each share surrendered for conversion must be accompanied by an instrument of transfer, in form reasonably satisfactory to the Corporation, duly executed by the holder or the holder's duly authorized attorney and by funds in an amount sufficient to pay any transfer or similar tax which is required to be paid in connection with the transfer or evidence that such tax has been paid. (b) Mandatory Conversion. If after June 20, 2001, the closing price of the Common Stock on each of at least 20 Trading Days (as herein defined) (including the trading day immediately before the Notice of Mandatory Conversion) out of the preceding period of 30 consecutive Trading Days immediately prior to the Notice of Mandatory Conversion shall be greater than the Conversion Price in effect on each of such 20 Trading Days, the Corporation shall have the right, subject to the right of the holders under Section 7, to convert all, but not less than all, of the outstanding shares of Series 1996A Stock into a number of fully paid and non-assessable shares of Common Stock (calculated as to each conversion to the nearest 1/100th of a share) equal to Stated Value plus the amount, if any, of Accrued Dividends as of the effective date of the conversion, divided by the Conversion Price then in effect. In order to effect the mandatory conversion of the Series 1996A Stock, the Corporation shall mail a notice (the "Notice of Mandatory Conversion") to all holders of outstanding shares of Series 1996A Stock on a date (the "Mandatory Conversion Notice Date") at least 90 but not more than 120 days prior to the conversion date specified in the Notice of Mandatory Conversion (the "Mandatory Conversion Date"). If the Corporation gives a Notice of Mandatory Conversion, the outstanding shares of Series 1996A Stock will be automatically converted into shares of Common Stock at the close of business on the Mandatory Conversion Date regardless of whether the holders of shares of Series 1996A Stock actually surrender the certificates representing their shares of Series 1996A Stock for conversion. At the close of business on the Mandatory Conversion Date, 11 12 (i) the certificates representing the shares of Series 1996A Stock will cease to represent anything other than the right to receive the shares of Common Stock into which the shares of the Series 1996A Stock were automatically converted and (ii) the Corporation may, at its option (the exercise of which will be described in the Notice of Mandatory Conversion), either (A) deliver certificates representing the shares of Common Stock to which the holders of the Series 1996A Stock are entitled without requiring the surrender of the certificates which formerly represented shares of Series 1996A Stock, or (B) deliver certificates representing the shares of Common Stock when the holder surrenders the certificates which formerly represented the Series 1996A Stock and complies with the other requirements of subparagraph 5(a)(iii). (c) Conversion Procedures. (i) The effective time of the conversion under Section 5(a) shall be immediately prior to the close of business on the day when all the conditions in Section 5(a)(iii) have been satisfied. The effective time of the conversion under Section 5(b) shall, subject to the rights of holders under Section 5(a) and Section 7, be immediately prior to the close of business on the Mandatory Conversion Date. (ii) If shares are surrendered between the close of business on a dividend payment Record Date and the opening of business on the corresponding Dividend Payment Date ("Ex Record Date Shares"), the dividend with respect to those shares will be payable on the Dividend Payment Date to the holder of record of the Ex Record Date Shares on the dividend payment Record Date notwithstanding the surrender of the Ex Record Date Shares for conversion after the dividend payment Record Date and prior to the Dividend Payment Date. The Corporation will make no payment or adjustment for Accrued Dividends on Ex Record Date Shares, whether or not in arrears, or for dividends on the shares of Common Stock issued upon conversion of the Ex Record Date Shares, other than to make payment to the holder of record thereof on the Record Date. The provisions of this Section 5(c)(ii) shall not limit the obligation of the Corporation to issue shares of Common Stock in conversion of shares of Series 1996A Stock, including Ex Record Date Shares, at Stated Value plus Accrued Dividends, as elsewhere provided in these Articles. 12 13 (iii) Except as otherwise permitted in clause (ii)(B) of the last sentence of Section 5(b), as promptly as practicable after the effective time for conversion of shares of Series 1996A Stock, the Corporation will issue and will deliver to the holder at the office of the conversion agent, or on the holder's written order, a certificate or certificates representing the number of full shares of Common Stock issuable upon the conversion of the shares of Series 1996A Stock. Any fractional interest in respect of a share of Common Stock arising upon a conversion will be settled as provided in Section 5(d). (iv) Each conversion will be deemed to have been effected at the effective time provided in Section 5(c)(i), and the person in whose name a certificate for shares of Common Stock is to be issued upon a conversion will be deemed to have become the holder of record of the shares of Common Stock represented by that certificate at such effective time. All shares of Common Stock delivered upon conversion of Series 1996A Stock will upon delivery be duly and validly issued and fully paid and nonassessable, free of all liens and charges and not subject to any preemptive rights. The shares of Series 1996A Stock so converted will no longer be deemed to be outstanding and all rights of the holder with respect to those shares will immediately terminate, except the right to receive the shares of Common Stock or, if applicable, other securities, cash or other assets to be issued or distributed as a result of the conversion. (d) Fractional Shares. No fractional shares of Common Stock will be issued upon conversion of shares of Series 1996A Stock. Any fractional interest in a share of Common Stock resulting from conversion of shares of Series 1996A Stock will be paid in cash (computed to the nearest cent) based on the Current Market Price (as herein defined) of the Common Stock on the Trading Day next preceding the day of conversion. If more than one share of Series 1996A Stock is surrendered for conversion at substantially the same time by the same holder, the number of full shares of Common Stock issuable upon the conversion will be computed on the basis of all the shares of Series 1996A Stock surrendered at that time by that holder. 13 14 (e) Conversion Price. The "Conversion Price" per share of Series 1996A Stock will initially be $21.875, and will be adjusted as follows from time to time if any of the events described below occurs: (i) If the Corporation (A) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock, (B) subdivides its outstanding Common Stock into a greater number of shares, or (C) combines its outstanding Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to that event will be reduced so that the holder of a share of Series 1996A Stock surrendered for conversion after that event will receive the number of shares of Common Stock which the holder would have received if the share of Series 1996A Stock had been converted immediately before the happening of the event (or, if there is more than one such event, if the share of Series 1996A Stock had been converted immediately before the first of those events and the holder had retained all the Common Stock or other securities or assets received after the conversion). An adjustment made pursuant to this Section 5(e)(i) will become effective immediately after the record date in the case of a dividend or distribution, and will become effective immediately after the effective date in the case of a subdivision or combination. If such dividend or distribution is declared but is not paid or made, the Conversion Price then in effect will be appropriately readjusted. However, a readjustment of the Conversion Price will not affect any conversion which takes place before the readjustment. (ii) If the Corporation issues rights or warrants to the holders of its Common Stock as a class entitling them to subscribe for or purchase Common Stock at a price per share less than the Conversion Price at the record date for the determination of stockholders entitled to receive the rights or warrants, the Conversion Price in effect immediately before the issuance of the rights or warrants will be reduced in accordance with the equation set forth on Exhibit A hereto, which is hereby incorporated by reference herein. The adjustment provided for in this Section 5(e)(ii) will be made successively whenever any rights or warrants are issued, and will become effective immediately after each record date. In determining whether any rights or 14 15 warrants entitle the holders of the Common Stock to subscribe for or purchase shares of Common Stock at less than the Conversion Price, and in determining the aggregate sale price of the shares of Common Stock issuable on the exercise of rights or warrants, there will be taken into account any consideration received by the Corporation for the rights or warrants, with the value of that consideration, if other than cash, to be determined by the Board of Directors of the Corporation (whose determination, if made in good faith, will be conclusive). If any rights or warrants which lead to an adjustment of the Conversion Price expire or terminate without having been exercised, the Conversion Price then in effect will be appropriately readjusted. However, a readjustment of the Conversion Price will not affect any conversions which take place before the readjustment. (iii) If the Corporation distributes to the holders of its Common Stock as a class any shares of stock of the Corporation (other than Common Stock) or evidences of indebtedness or assets (other than cash dividends or distributions) or rights or warrants (other than those referred to in Section 5(e)(ii)) to subscribe for or purchase any of its securities, then, in each such case, the Conversion Price will be reduced so that it will equal the price determined by multiplying the Conversion Price in effect immediately prior to the record date for the distribution by a fraction of which the numerator is the Current Market Price of the Common Stock on the record date for the distribution less the then fair market value (as determined by the Board of Directors, whose determination, if made in good faith, will be conclusive) of the stock, evidences of indebtedness, assets, rights or warrants which are distributed with respect to one share of Common Stock, and of which the denominator is the Current Market Price of the Common Stock on that record date. Each adjustment will become effective immediately after the record date for the determination of the stockholders entitled to receive the distribution. If any distribution is declared but not made, or if any rights or warrants expire or terminate without having been exercised, effective immediately after the decision is made not to make the distribution or the rights or warrants expire or terminate, the Conversion Price then in effect will 15 16 be appropriately readjusted. However, a readjustment will not affect any conversions which take place before the readjustment. (iv) If the Corporation issues or sells (or the Operating Partnership issues or sells) any equity or debt securities which are convertible, directly or indirectly, into or exchangeable for shares of Common Stock ("Convertible Securities") or any rights, options (other than the issuance or exercise after the date hereof of stock options covering no more than 715,400 shares of Common Stock, subject to appropriate adjustment to the extent that the Corporation (A) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock, (B) subdivides its outstanding Common Stock into a greater number of shares, or (C) combines its outstanding Common Stock into a smaller number of shares, issued to employees or directors of the Corporation or its subsidiaries under the Corporation's existing employee stock incentive plans) or warrants to purchase Common Stock at a conversion, exchange or exercise price per share which is less than the Conversion Price, unless the provisions of Section 5(e)(ii) or (iii) are applicable, the Corporation will be deemed to have issued or sold, on the later of the date on which the Convertible Securities, rights, options or warrants are issued or the date on which they first may be converted, exchanged or exercised, the maximum number of shares of Common Stock into or for which the Convertible Securities may then be converted or exchanged or which are then issuable upon the exercise of the rights, options or warrants immediately prior to the close of business on the later of the date on which the Convertible Securities, rights, options or warrants are issued or the date on which they may first be converted, exchanged or exercised, and the Conversion Price shall be adjusted downward as if it were an event covered by Section 5(e)(v). However, no further adjustment of the Conversion Price will be made as a result of the actual issuance of shares of Common Stock upon conversion, exchange or exercise of the Convertible Securities, rights, options or warrants. If any Convertible Securities, rights, options or warrants to which this Section applies are redeemed, retired or otherwise extinguished or expire without any shares of Common Stock having been issued upon conversion, exchange or exercise thereof, effective immediately after 16 17 the Convertible Securities, rights, options or warrants expire, the Conversion Price then in effect will be readjusted to what it would have been if those Convertible Securities, rights, options or warrants had not been issued. However, a readjustment will not affect any conversion which takes place before the readjustment. For the purposes of this Section 5(e)(iv), (x) the price of shares of Common Stock issued or sold upon conversion or exchange of Convertible Securities or upon exercise of rights, options or warrants will be (A) the consideration paid to the Corporation for the Convertible Securities, rights, options or warrants, plus (B) the consideration paid to the Corporation upon conversion, exchange or exercise of the Convertible Securities, rights, options or warrants, with the value of the consideration, if other than cash, to be determined by the Board of Directors of the Corporation (whose determination, if made in good faith, will be conclusive) and (y) any change in the conversion or exchange price of Convertible Securities or the exercise price of rights, options or warrants will be treated as an extinguishment, when the change becomes effective, of the Convertible Securities, rights, options or warrants which had the old conversion, exchange or exercise price and an immediate issuance of new Convertible Securities, rights, options or warrants with the new conversion, exchange or exercise price. (v) If the Corporation issues or sells any Common Stock (other than on conversion or exchange of Convertible Securities or exercise of rights, options or warrants to which Section 5(e)(ii), (iii) or (iv) applies) for a consideration per share less than the Conversion Price on the date of the issuance or sale (or on exercise of options or warrants, for less than the Conversion Price on the day the options or warrants are issued), upon consummation of the issuance or sale, the Conversion Price in effect immediately prior to the issuance or sale will be reduced in accordance with the equation set forth on Exhibit A hereto, which is hereby incorporated by reference herein. (vi) If there is a reclassification or change of outstanding shares of Common Stock (other than a change in par value, or as a result of a subdivision or combination), or a merger or consolidation of the Corporation with any other entity that results in a 17 18 reclassification, change, conversion, exchange or cancellation of outstanding shares of Common Stock, or a sale or transfer of all or substantially all of the assets of the Corporation, upon any subsequent conversion of Series 1996A Stock, each holder of the Series 1996A Stock will be entitled to receive the kind and amount of securities, cash and other property which the holder would have received if the holder had converted the shares of Series 1996A Stock into Common Stock immediately before the first of those events and had retained all the securities, cash and other assets received as a result of all those events. In the event that a transaction may be viewed as causing this Section 5(e)(vi) to be applicable and 5(e)(iii) is also applicable, then Section 5(e)(iii) will be applied and this Section 5(e)(vi) will not be applied. (vii) For the purpose of any computation under this Section 5(e), the "Current Market Price" of the Common Stock on any date will be the average of the last reported sale prices per share of the Common Stock on each of the twenty consecutive Trading Days (as defined below) preceding the date of the computation. The last reported sale price of the Common Stock on each day will be (A) the last reported sale price of the Common Stock on the principal stock exchange on which the Common Stock is listed, or (B) if the Common Stock is not listed on a stock exchange, the last reported sale price of the Common Stock on the principal automated securities price quotation system on which sale prices of the Common Stock are reported, or (C) if the Common Stock is not listed on a stock exchange and sale prices of the Common Stock are not reported on an automated quotation system, the mean of the high bid and low asked price quotations for the Common Stock as reported by National Quotation Bureau Incorporated if at least two securities dealers have inserted both bid and asked quotations for the Common Stock on at least five of the ten preceding Trading Days. If the Common Stock is not traded or quoted as described in any of clause (A), (B) or (C), the Current Market Price of the Common Stock on a day will be the fair market value of the Common Stock on that day as determined by a member firm of the New York Stock Exchange, Inc. selected by the Board of Directors. As used with regard to the Series 1996A Stock, the term "Trading Day" means (x) if the Common Stock is listed on at least one stock exchange, a day on which there is trading on the 18 19 principal stock exchange on which the Common Stock is listed, (y) if the Common Stock is not listed on a stock exchange, but sale prices of the Common Stock are reported on an automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported, or (z) if the Common Stock is not listed on a stock exchange and sale prices of the Common Stock are not reported on an automated quotation system, a day on which quotations are reported by National Quotation Bureau Incorporated. (viii) No adjustment in the Conversion Price will be required unless the adjustment would require a change of at least 1% in the Conversion Price; provided, however, that any adjustments which are not made because of this Section 5(e)(viii) will be carried forward and taken into account in any subsequent adjustment; and provided, further, that any adjustment must be made in accordance with this Section 5 (without regard to this Section 5(e)(viii)) not later than the time the adjustment may be required in order to preserve the tax-free nature of a distribution to the holders of shares of Common Stock. All calculations under this Section 5 will be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. (ix) Whenever the Conversion Price is adjusted, the Corporation will promptly send each holder of record of Series 1996A Stock a notice of the adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which the adjustment becomes effective and containing a brief description of the events which caused the adjustment. (f) If any one of the events in Sections 5(e)(i) through 5(e)(vi) occurs, then the Corporation will mail to the holders of record of the Series 1996A Stock, at least 15 days before the applicable date specified below, a notice stating the applicable one of (i) the date on which a record is to be taken for the purpose of the dividend, distribution or grant of rights or warrants, or, if no record is to be taken, the date as of which the holders of Common Stock of record who will be entitled to the dividend, distribution or rights or warrants will be determined, (ii) the date on which it is expected the Convertible Securities will be issued or the date on which the change in the conversion, exchange or exercise price of the Convertible Securities, rights, 19 20 options or warrants will be effective, (iii) the date on which the Corporation anticipates selling Common Stock for less than the Conversion Price on the date of the sale (except that no notice need be given of the anticipated date of sale of Common Stock upon exercise of options or warrants which have been described in a notice to the holders of record of the Series 1996A Stock given at least 15 days before the options or warrants are exercised), or (iv) the date on which the reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of record of Common Stock will be entitled to exchange their shares of Common Stock for securities or other property deliverable upon the reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up. Failure to give any such notice or any defect in the notice will not affect the legality or validity of the reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up. (g) (i) The Corporation will at all times reserve and keep available, free from preemptive rights, out of the authorized but unissued shares of Common Stock, for the purpose of effecting conversion of the Series 1996A Stock, the maximum number of shares of Common Stock which the Corporation would be required to deliver upon the conversion of all the outstanding shares of Series 1996A Stock. For the purposes of this Section 5(g)(i), the number of shares of Common Stock which the Corporation would be required to deliver upon the conversion of all the outstanding shares of Series 1996A Stock will be computed as if at the time of the computation all the outstanding shares of Series 1996A Stock were held by a single holder. (i) Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value (if any) of the shares of Common Stock deliverable upon conversion of the Series 1996A Stock, the Corporation will take all corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at the adjusted Conversion Price. 20 21 (ii) The Corporation will seek to list the shares of Common Stock required to be delivered upon conversion of the Series 1996A Stock, prior to the delivery, upon each national securities exchange, if any, upon which the outstanding shares of Common Stock are listed at the time of delivery. (h) The Corporation will pay any documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversion of Series 1996A Stock; provided, however, that the Corporation will not be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the holder of record of the Series 1996A Stock to be converted and no such issue or delivery will be made unless and until the person requesting the issue or delivery has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that the tax has been paid. Section 12. Status. Upon any conversion, exchange or redemption of shares of Series 1996A Stock, the shares of Series 1996A Stock which are converted, exchanged or redeemed will be reclassified as authorized and unissued shares of Common Stock, and the number of shares of Series 1996A Stock which the Corporation will have authority to issue will be decreased by the conversion, exchange or redemption of shares of Series 1996A Stock, so that the shares of Series 1996A Stock which were converted, exchanged or redeemed may not be re-issued. Section 13. Redemption after Notice of Mandatory Conversion. (a) Notwithstanding anything to the contrary contained in Section 5(b), each holder of Series 1996A Stock will have the right, exercisable at any time after the Mandatory Conversion Notice Date but prior to the Mandatory Conversion Date, to require the Corporation to redeem any or all the shares of Series 1996A Stock owned of record by the holder, at a redemption price per share (the "Redemption Price") equal to the Redemption Percentage as defined below, multiplied by the sum of (i) Stated Value plus (ii) the sum of all Accrued Dividends with regard to the Series 1996A Stock through the Redemption Date, as herein 21 22 defined. As used herein, the "Redemption Percentage" shall mean the percentage specified in the following table:
Redemption Redemption Date Percentage --------------- ---------- Section 7. June 20, 2001 to June 19, 2002 105 Section 8. June 20, 2002 to June 19, 2003 104 Section 9. June 20, 2003 to June 19, 2004 103 Section 10. June 20, 2004 to June 19, 2005 102 Section 11. June 20, 2005 to June 19, 2006 101 Section 12. June 20, 2006 and thereafter 100
(a) In order to exercise a right to require the Corporation to redeem a holder's Series 1996A Stock, the holder must deliver a request for redemption, accompanied by the certificates representing the shares to be redeemed, to the Corporation at any time prior to the Mandatory Conversion Date. If a request for redemption is given with regard to shares of Series 1996A Stock, promptly (but in no event more than five Business Days) after the request for redemption is given to the Corporation, the Corporation will pay the holder cash equal to the Redemption Price of the shares. The date of such payment is referred to herein as the "Redemption Date." (b) (i) If a request for redemption accompanied by the certificates representing the shares to be redeemed is delivered to the Corporation, on the Redemption Date dividends will cease to accrue with regard to the shares of Series 1996A Stock to be redeemed, and at the close of business on that date the holders of those shares will cease to be stockholders with respect to those shares, will have no interest in or claims against the Corporation by virtue of the shares and will have no voting or other rights with respect to the shares. (i) The dividend with respect to a share of Series 1996A Stock which is the subject of a request for redemption delivered on a day which falls between the close of business on a dividend payment Record Date and the opening of business on the corresponding Dividend Payment Date will be payable on the Dividend Payment Date to the holder of record of 22 23 the share of Series 1996A Stock on the dividend payment Record Date notwithstanding the redemption of the share of Series 1996A Stock after the dividend payment Record Date and prior to the Dividend Payment Date. (c) At such time as there ceases to be in excess of 40,000 shares of Series 1996A Stock outstanding, the Corporation may at its option purchase all of the outstanding shares of the Series 1996A Stock from the holders thereof at a price equal to the greater of (a) 110% of the sum of the Stated Value of such shares together with all Accrued Dividends thereon and (b) the fair market value of such shares, which shall be equal to the fair market value of the Common Stock, as of such date, issuable upon conversion of such shares, together with all Accrued Dividends thereon. Section 8. Ranking. Subject to Section 3(b), the shares of Series 1996A Preferred Stock will, with respect to the payment of dividends and the distribution of assets on liquidation, dissolution or winding-up of the Corporation, rank prior to any other class or series of preferred stock or Common Stock issued by the Corporation. Section 9. Miscellaneous. (a) Except as otherwise expressly provided in these Articles Supplementary, whenever a notice or other communication is required or permitted to be given to holders of shares of Series 1996A Stock, the notice or other communication will be deemed properly given if deposited in the United States mail, postage prepaid, addressed to the persons shown on the books of the Corporation as the holders of the shares at the addresses as they appear in the books of the Corporation, as of the record date or dates determined in accordance with applicable law and with the Charter and Bylaws, as in effect from time to time. (b) Shares of Series 1996A Stock will not have any designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications or terms and conditions of redemption, other than those specifically set forth herein, in the Charter, and as may be provided under applicable law insofar as any such provision does not conflict with the terms hereof. 23 24 (c) The headings of the various subdivisions herein are for convenience only and will not affect the meaning or interpretation of any of the provisions herein. (d) Provided that the Corporation's Board of Directors determines that it is appropriate to submit to a vote of the holders of Series 1996A Stock, the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series 1996A Stock may be waived, and any of such provisions of the Series 1996A Stock may be amended, by the approval of holders of at least 66-2/3% of the outstanding shares of Series 1996A Stock, voting separately as a class. (e) Notwithstanding anything to the contrary contained in Section 3, Section 5 or Section 7 hereof, each holder of Series 1996A Stock hereby agrees that, in determining whether any holder of Series 1996A Stock has (i) voted to elect any director of the Corporation under Section 3(a), (ii) approved any action of the Corporation under Sections 3(b) or 3(c), (iii) elected to cause the conversion of holder's Series 1996A Stock into Common Stock or other securities or assets under Section 5, (iv) received any notice of the Corporation required by these Articles Supplementary, including without limitation notices required by Section (5)(e)(ix) and Section 5(f), or (v) elected to cause the redemption by the Corporation of such holder's Series 1996A Stock in the circumstances provided in Section 7, Tiger/Westbrook Real Estate Fund, L.P., and Tiger/Westbrook Real Estate Co-Investment Partnership, L.P., each a Delaware limited partnership (together with their respective successors, collectively the "Fund"), shall jointly but not severally have the right to grant or deny any such approvals, make or decline any such elections or receive any such notices with regard to all of the Series 1996A Stock held of record by each such holder and a notice received by the Fund and a document executed by the Fund causing the election of any director under Section 3(a), granting or denying approval to any action by the Corporation under Section 3(c), or electing or declining to the Corporation to effect the redemption of Series 1996A Stock in the circumstances provided in Section 7 shall determine the matter for all holders. Upon written notice by the Fund to the Company, the Fund may, or 24 25 upon the effectiveness of a registration statement filed with the Securities and Exchange Commission registering the sale of Series 1996A Stock pursuant to which all Series 1996A Stock has been disposed of, the Fund shall relinquish such powers over any or all of the shares of Series 1996A Stock. The foregoing provisions shall be implemented by execution by each holder of Series 1996A Stock of a proxy in favor of WBP I Holding Corp. and WBP II Holding Corp. acting as nominees for the Fund. Section 10. Permissible Distributions. In determining whether a distribution (other than upon voluntary or involuntary liquidation), by dividend, redemption or other acquisition of shares or otherwise, is permitted under the Maryland General Corporation Law, amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of Series 1996A Stock whose preferential rights upon dissolution are superior to those receiving the distribution shall not be added to the Corporation's total liabilities. Section 11. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. SECOND: The Series 1996A Stock has been reclassified by the Board of Directors under a power contained in the Charter. THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law. 25 26 FOURTH: The undersigned acknowledges these Articles Supplementary to be the act of the Corporation and states as to all matters and facts required to be verified under the oath that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and such statement is made under penalties for perjury. 26 27 IN WITNESS WHEREOF, these Articles Supplementary are executed on behalf of the Corporation by its President and attested by its Secretary this 1st day of July, 1996. ESSEX PROPERTY TRUST, INC. By: /s/ Keith Guericke -------------------------------- Name: Keith Guericke ------------------------ Title: President ----------------------- [SEAL] Attest: /s/ Michael Schall - ----------------------------- Name: Michael Schall ------------------------ Title: Secretary 27 28 Exhibit A to Essex Property Trust, Inc. Articles Supplementary ESSEX PROPERTY TRUST - SERIES 1996A PREFERRED STOCK ANTI-DILUTION CONVERSION PRICE ADJUSTMENT FORMULA PURSUANT TO SECTIONS 5(e)(ii) AND 5(e)(v) ("ADJUSTMENT FORMULA") OBJECTIVE: To keep the Series 1996A Preferred Stock holders' relative ownership percentage of shares constant (as compared to a transaction consummated at the Conversion Price), upon the issuance of a "New Dilutive Security" (see definition below), the then-applicable Conversion Price of the Series 1996A Preferred Stock will be adjusted as follows: PRIOR ANTI-DILUTION ADJUSTED CONVERSION PRICE ADJUSTMENT FORMULA CONVERSION PRICE ---------------- ------------------ ---------------- X x (A + B + C ) + EX = X- ------------------ (A + B + C-) + EX- \__ Must Be Solved for Per Calculation Included in Example Below ---------------------------------- DEFINITIONS: ----------- X - Conversion Price of Series 1996A Preferred Stock prior to issuance of "New Dilutive Security". "New Dilutive Security" - A common stock or common stock equivalent issuance at a price below X. X- - Conversion Price of Series 1996A Preferred Stock adjusted for issuance of "New Dilutive Security". A - The number of common stock equivalent shares outstanding which includes: (i) Common Stock issued and outstanding, (ii) all Dilutive (defined below) convertible securities outstanding, excluding Operating Partnership Units and the Series 1996A Stock and (iii) all Dilutive options issued and outstanding on an as-exercised basis (excluding stock options covering 715,400 shares of Common Stock) prior to issuance of "New Dilutive Security". For purposes of this definition, a security described under (ii) or (iii) will be considered "Dilutive" in all subsequent applications of the Adjustment Formula if it triggers the Adjustment Formula upon issuance. Moreover, a security described under (ii) will be considered "Dilutive" if at issuance the security is issued at a premium of 10% or less to the current Market Price of the Common Stock and a security described under (iii) will be considered "Dilutive" if at the time of a calculation under the Adjustment Formula the Common Stock equivalent price of the security reflects a premium of 10% or less to the Current Market Price of the common stock. The Current Market Price is defined herein. B - Shares of Common Stock issuable upon conversion of all convertible Operating Partnership Units outstanding prior to issuance of "New Dilutive Security". C - Shares of Common Stock issuable upon conversion of all outstanding Series 1996A Stock, assuming the prior Conversion Price, (or X). C- - Shares of Common Stock issuable upon conversion of all outstanding Series 1996A Preferred Stock, assuming the adjusted Conversion Price for the New Dilutive Security issuance (or X-). EX - "New Dilutive Security" equivalent common shares, assuming the prior Conversion Price, or X EX- - "New Dilutive Security" equivalent common shares, based on actual conversion of security For purposes of any calculation pursuant to this Exhibit A, common stock equivalent shares will be deemed to include the shares of Series 1996A Stock purchased pursuant to the certain Stock Purchase Agreement between the Corporation and the Buyer (as defined therein), dated June 20, 1996, as amended. Any calculation performed prior to the final purchase of shares of Series 1996A Stock pursuant to such Stock Purchase Agreement will be recalculated giving effect to all shares of Series 1996A Stock sold under such agreement as if such shares had been issued and outstanding at all times for purposes of the Adjustment Formula. 29 SCHEDULE A (CONTINUED) EXAMPLE: - ------- - -Assume a 2.5 million share common stock issuance at $20/share (the "New Dilutive Security") following an investment of $40 million in Series 1996A Stock at a $21.875 Conversion Price: SOLUTION: - - Prior to solving for C-, the following table must be created:
POST-NEW DILUTIVE POST-NEW DILUTIVE SECURITY ISSUANCE AS SECURITY ISSUANCE AS PRE-NEW DILUTIVE ISSUED AT $20 PER SHARE IF ISSUED AT SECURITY ISSUANCE AND UNADJUSTED $21.875 PER SHARE ---------------- ----------------------- -------------------- # OF SHARES PERCENTAGE # OF SHARES PERCENTAGE # OF SHARES % ----------- ---------- ----------- ---------- ----------- - SHARE CAPITALIZATION OF COMPANY Common Stock Equivalent Shares (A) 6,275,000 63.0% 6,275,000 50.4% 6,275,000 51.2% Convertible OP Units Outstanding (B) 1,855,000 18.6% 1,855,000 14.9% 1,855,000 15.1% 1996A Equivalent Common Stock (C) 1,828,571 18.4% 1,828,571 14.7% 1,828,571 14.9% New Dilutive Security Shares (EX-/EX) 0 0.0% 2,500,000 20.1% 2,285,714 18.7% --------- ----- --------- ----- --------- ----- TOTAL 9,958,571 100.0% 12,458,571 100.0% 12,244,285 100.0%
- - C- is the number of shares of Common Stock into which the outstanding shares of Series 1996A Stock must convert in order to maintain the Series 1996A Preferred Stock holders' ownership percentage at 14.9% (i.e., as if the issuance were done at the Conversion Price prior to the issuance (or X)) given the New Dilutive Security issuance at $20 per common share. To solve for C-, the following calculations must be made: # OF COMMON EQUIVALENT SHARES ----------------- Share Capitalization, post New Dilutive Security Issuance as issued at $20 per share and unadjusted 12,458,571 - - (C) (1,828,571) ---------- = Share Capitalization less 1996A equivalent Common Stock 10,630,000 /(100%-14.9%) or 100% less ownership holders 85.1% of Series 1996A Preferred Stock are to maintain = Total Share Capitalization Required for holders of Series 1996A Preferred Stock to maintain ownership percentage at 14.9% 12,495,592 x Required Buyer ownership percentage pursuant to above 14.9% = C- 1,865,592 30 SCHEDULE A (CONTINUED)
Given C-, one solves for X- as follows: Prior Adjusted Conversion Adjustment Formula Conversion Price or X Price or X- $21.875 x (6,275,000+1,855,000+1,828,571)+($50,000,000/$21.875) X- ----------------------------------------------------- (6,275,000+1,855,000+1,865,592)+($50,000,000/$20) = $21.875 x 98.0% = X- $21.44 = X-
Proof of Calculation: POST-NEW DILUTIVE SECURITY ISSUANCE AS ISSUED AT $20 PER SHARE AND AS ADJUSTED ------------------------- # OF SHARES % ----------- ----- SHARE CAPITALIZATION OF COMPANY Common Stock Equivalent Shares (A) 6,275,000 50.2% Convertible OP Units Outstanding (B) 1,855,000 14.8% 1996A Equivalent Common Stock (C-/C) 1,865,592 14.9% New Dilutive Security Shares (EX-/EX) 2,500,000 20.0% ---------- ------ TOTAL 12,495,592 100.0% EX-3.2 3 AMENDED AND RESTATED BYLAWS OF ESSEX 1 AMENDED AND RESTATED BYLAWS OF ESSEX PROPERTY TRUST, INC. a Maryland corporation as of July 1, 1996 2 TABLE OF CONTENTS PAGE ARTICLE I.....................................................................1 SECTION I.1 Annual Meetings.........................................1 SECTION I.2 Special Meetings........................................1 SECTION I.3 Place of Meetings.......................................1 SECTION I.4 Notice of Meetings; Waiver of Notice....................1 SECTION I.5 Quorum; Voting..........................................2 SECTION I.6 Adjournments............................................2 SECTION I.7 General Right to Vote; Proxies..........................2 SECTION I.8 List of Stockholders....................................2 SECTION I.9 Conduct of Business and Voting..........................2 SECTION I.10 Informal Action by Stockholders.........................3 SECTION I.11 Annual Meetings and Stockholder Proposals...............3 SECTION I.12 Business at Special Meetings of Stockholders............4 ARTICLE II....................................................................4 SECTION II.1 Function of Directors..................................5 SECTION II.2 Number of Directors....................................5 SECTION II.3 Election and Tenure of Directors.......................5 SECTION II.4 Removal of Director....................................5 SECTION II.5 Vacancy on Board.......................................5 SECTION II.6 Regular Meetings.......................................6 SECTION II.7 Special Meetings.......................................6 SECTION II.8 Notice of Meeting......................................6 SECTION II.9 Action by Directors....................................6 SECTION II.10 Meeting by Conference Telephone........................7 SECTION II.11 Compensation...........................................7 SECTION II.12 Advisory Directors.....................................7 ARTICLE III...................................................................7 SECTION III.1Committees..............................................7 SECTION III.2Committee Procedure.....................................7 ARTICLE IV....................................................................8 SECTION IV.1 Executive and Other Officers............................8 SECTION IV.2 Chairman of the Board...................................8 SECTION IV.3 President...............................................8 SECTION IV.4 Vice-Presidents.........................................9 SECTION IV.5 Secretary...............................................9 3 TABLE OF CONTENTS (continued) PAGE SECTION IV.6 Treasurer...............................................9 SECTION IV.7 Assistant and Subordinate Officers.....................10 SECTION IV.8 Election, Tenure and Removal of Officers...............10 SECTION IV.9 Compensation...........................................10 ARTICLE V....................................................................10 SECTION V.1 Conferring Divisional Titles...........................10 SECTION V.2 Effect of Divisional Titles............................10 ARTICLE VI...................................................................11 SECTION VI.1 Certificates for Stock.................................11 SECTION VI.2 Transfers..............................................11 SECTION VI.3 Record Dates and Closing of Transfer Books.............11 SECTION VI.4 Stock Ledger...........................................11 SECTION VI.5 Certification of Beneficial Owners.....................11 SECTION VI.6 Replacement Stock Certificates.........................12 SECTION VI.7 Exemption from Control Share Acquisition Statute.......12 ARTICLE VII..................................................................12 SECTION VII.1 Checks, Drafts, Etc...................................12 SECTION VII.2 Annual Statement of Affairs...........................12 SECTION VII.3 Fiscal Year...........................................12 SECTION VII.4 Dividends and Other Distributions.....................13 SECTION VII.5 Contracts.............................................13 ARTICLE VIII.................................................................13 SECTION VIII.1 Books and Records....................................13 SECTION VIII.2 Corporate Seal.......................................13 SECTION VIII.3 Bonds................................................13 SECTION VIII.4 Voting upon Shares in Other Corporations.............13 SECTION VIII.5 Execution of Documents...............................14 SECTION VIII.6 Amendments...........................................14 ARTICLE IX...................................................................14 4 AMENDED AND RESTATED ESSEX PROPERTY TRUST, INC. BYLAWS as of July 1, 1996 ARTICLE I. STOCKHOLDERS SECTION 1.1 Annual Meetings. The Corporation shall hold an annual meeting of its stockholders to elect directors and transact any other business within its powers, either at 10:00 a.m. on the last Thursday of May in each year if not a legal holiday, or at such other time on such other day falling on or before the 30th day thereafter as shall be set by the Board of Directors. Except as otherwise permitted by applicable law, any business may be considered at an annual meeting without the purpose of the meeting having been specified in the notice. Failure to hold an annual meeting does not invalidate the Corporation's existence or affect any otherwise valid corporate acts. SECTION 1.2 Special Meetings. The Chairman of the Board, the President or a majority of the Board of Directors may call special meetings of the stockholders. Special meetings of stockholders shall also be called by the Secretary of the Corporation upon the written request of the holders of shares entitled to cast not less than 25% of all the votes entitled to be cast at such meeting. Such request shall state the purpose of such meeting and the matters proposed to be acted on at such meeting. The Secretary shall inform such stockholders of the reasonably estimated cost of preparing and mailing notice of the meeting and, upon payment to the Corporation of such costs, the Secretary shall give notice to each stockholder entitled to notice of the meeting. Unless requested by stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any special meeting of the stockholders held during the preceding twelve months. SECTION 1.3 Place of Meetings. Meetings of stockholders shall be held at such place in the United States as is set from time to time by the Board of Directors. SECTION 1.4 Notice of Meetings; Waiver of Notice. Not less than 10 nor more than 90 days before each stockholders' meeting, the Secretary shall give written notice of the meeting to each stockholder entitled to vote at the meeting and each other stockholder entitled to notice of the meeting. The notice shall state the time and place of the meeting and, if the meeting is a special meeting or notice of the purpose is required by statute, the purpose of the meeting. Notice is given to a stockholder when it is personally delivered to him, left at his residence or usual place of business, or mailed to him at his address as it appears on the records of the Corporation. Notwithstanding the foregoing provisions, each person who is entitled to notice waives notice if he before or after the meeting signs a waiver of the notice which is filed with the records of stockholders' meetings, or is present at the meeting in person or by proxy. 1 5 SECTION 1.5 Quorum; Voting. Unless statute or the charter of the Corporation (the "Charter") provides otherwise, at a meeting of stockholders the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting constitutes a quorum, and a majority of all the votes cast at a meeting at which a quorum is present is sufficient to approve any matter which properly comes before the meeting, except that a plurality of all the votes cast at a meeting at which a quorum is present is sufficient to elect a director. SECTION 1.6 Adjournments. Whether or not a quorum is present, a meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice to a date not more than 120 days after the original record date. Any business which might have been transacted at the meeting as originally notified may be deferred and transacted at any such adjourned meeting at which a quorum shall be present. SECTION 1.7 General Right to Vote; Proxies. Unless the Charter provides for a greater or lesser number of votes per share or limits or denies voting rights, each outstanding share of stock, regardless of class, is entitled to one vote on each matter submitted to a vote at a meeting of stockholders. In all elections for directors, each share of stock may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A stockholder may vote the stock he owns of record either in person or by written proxy signed by the stockholder or by his duly authorized attorney in fact. Unless a proxy provides otherwise, it is not valid more than 11 months after its date. SECTION 1.8 List of Stockholders. At each meeting of stockholders, a true and complete list of all stockholders entitled to vote at such meeting, showing the number and class of shares held by each and certified by the transfer agent for such class or by the Secretary, shall be furnished by the Secretary. SECTION 1.9 Conduct of Business and Voting. At all meetings of stockholders, unless the voting is conducted by inspectors, the proxies and ballots shall be received, and all questions touching the qualification of voters and the validity of proxies, the acceptance or rejection of votes and procedures for the conduct of business not otherwise specified by these Bylaws, the Charter or law, shall be decided or determined by the chairman of the meeting. If demanded by stockholders, present in person or by proxy, entitled to cast at least 10% of all the votes entitled to be cast at the meeting, or if ordered by the chairman, the vote upon any election or question shall be taken by ballot and, upon like demand or order, the voting shall be conducted by two inspectors, in which event the proxies and ballots shall be received, and all questions touching the qualification of voters and the validity of proxies, the acceptance or rejection of votes and procedures for the conduct of business not otherwise specified by these Bylaws, the Charter or law shall be decided, by such inspectors. Unless so demanded or ordered, no vote need be by ballot and voting need not be conducted by inspectors. The stockholders at any meeting may choose an inspector or inspectors to act at such meeting, and in default of such election the chairman of the meeting may appoint an inspector or inspectors. No candidate for election as a director at a meeting shall serve as an inspector thereat. SECTION 1.10 Informal Action by Stockholders. Any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting if there is filed with the 2 6 records of stockholders' meetings a unanimous written consent which sets forth the action and is signed by each stockholder entitled to vote on the matter and a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote at it. SECTION 1.11 Annual Meetings and Stockholder Proposals. Nominations of individuals for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Section 1.11, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 1.11. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of the preceding paragraph of this Section 1.11, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to the secretary at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting. For purposes of applying this minimum to the 1995 annual meeting, the previous year's annual meeting shall be deemed to have taken place on May 20, 1994; provided that this sentence shall cease to be a part of the Bylaws after the holding of the 1995 annual meeting and any adjournment thereof. In the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to being before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (x) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (y) the number of shares of each class of stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. Notwithstanding anything in the second sentence of the preceding paragraph of this Section 1.11 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 70 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 1.1 shall also be considered timely, but only with respect to 3 7 nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following on which such public announcement is first made by the Corporation. Notwithstanding the preceding two paragraphs, for nominations of individuals for election as a "Series 1996A Director(s)" (as defined in Section 2.2), pursuant to clause (iii) of the first paragraph in this Section 1.11, to be properly brought before a meeting of stockholders, the holder of "Series 1996A Stock" (as defined in Section 2.2) shall deliver his or her nomination(s) to the Secretary of the Corporation at the principal executive offices not less than 60 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting. The Corporation shall promptly notify the holders of Series 1996A Stock if the date of the annual meeting is advanced by more than 30 days from such anniversary date, and any nomination shall be considered timely if delivered to the Secretary either within 60 days after receipt of such notice or not less than 60 days prior to the date of the annual meeting as contained in such notice. SECTION 1.12 Business at Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors had determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 1.12, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this Section 1.12. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position as specified in the Corporation's notice of meeting, if the stockholder's notice required by the second paragraph of Section 1.11 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the directors to be elected at such meeting. Notwithstanding the preceding paragraph, the procedure for electing one or more Series 1996A Directors shall be as set forth in Article First, Section 3 of the Articles Supplementary (Series 1996A Stock) (as defined in Section 2.2). Each request for a special meeting of the holders of Series 1996A Stock shall include the nominees for election as Series 1996A Directors. ARTICLE II. BOARD OF DIRECTORS SECTION 2.1 Function of Directors. The business and affairs of the Corporation shall be managed under the direction of its Board of Directors. All powers of the Corporation may be exercised by or under authority of the Board of Directors, except as conferred on or reserved to the stockholders by statute or by the Charter or Bylaws. 4 8 SECTION 2.2 Number of Directors. The Corporation shall have at least the minimum number of directors required by the Maryland General Corporation Law. The Corporation shall have a Board of Directors consisting of eleven directors. Ten of the eleven directors, hereinafter referred to as the "Common Directors," shall be elected by the holders of common stock and the holders of all classes or series of stock who vote together with the holders of common stock and the remaining director, hereinafter referred to as the "Series 1996A Director" shall be elected by the holders of the 8.75% Convertible Preferred Stock, Series 1996A (the "Series 1996A Stock"), voting separately as a class. The number of directors may be increased upon certain events as provided in Article First, Section 3 of the Articles Supplementary classifying 1,600,000 shares of Common Stock as shares of 8.75% Convertible Preferred Stock, Series 1996A (or Article FIFTH, subsection (e) of any restatement of the Charter) (the "Articles Supplementary (Series 1996A Stock)"). All directors shall be classified with respect to their respective terms of office as provided in Section 2.3 and each director shall serve until the expiration of his or her term and until his or her successor is elected and qualifies. SECTION 2.3 Election and Tenure of Directors. At the first annual meeting of stockholders, the directors shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, one class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1995, another class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1996 and another class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1997, with the members of each class to hold office until their successors are duly elected and qualify. At each annual meeting of the stockholders, the successors to the class of directors whose term expires at such meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and the other directors shall continue in office. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. SECTION 2.4 Removal of Director. Any director or the entire Board of Directors may be removed only in accordance with the provisions of the Charter. SECTION 2.5 Vacancy on Board. Subject to the rights of the holders of any class of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the entire Board of Directors, any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification or other causes, except removal from office, shall be filled by a majority of the directors then in office, whether or not sufficient to constitute a quorum, and any vacancies on the Board of Directors resulting from removal from office shall be filed by a vote of the stockholders or a majority of the directors then in office, whether or not sufficient to constitute a quorum. A director so elected by the stockholders shall hold office for the balance of the term of the removed director. A director so elected by the remaining directors shall hold office until the next 5 9 annual meeting of stockholders, at which time the stockholders shall elect a director to hold office for the balance of the term then remaining. SECTION 2.6 Regular Meetings. After each meeting of stockholders at which directors shall have been elected, the Board of Directors shall meet as soon as practicable for the purpose of organization and the transaction of other business. In the event that no other time and place are specified by resolution of the Board, the President or the Chairman, with notice in accordance with Section 2.8, the Board of Directors shall meet immediately following the close of, and at the place of, such stockholders' meeting. Any other regular meeting of the Board of Directors shall be held on such date and at any place as may be designated from time to time by the Board of Directors. SECTION 2.7 Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or the President or by a majority of the Board of Directors by vote at a meeting, or in writing with or without a meeting. A special meeting of the Board of Directors shall be held at such time and place as may be designated from time to time by the Board of Directors. In the absence of designation such meeting shall be held at such time and place as may be designated in the call. SECTION 2.8 Notice of Meeting. Except as provided in Section 2.6, the Secretary shall give notice to each director of each regular and special meeting of the Board of Directors. The notice shall state the time and place of the meeting. Notice is given to a director when it is delivered personally to him, left at his residence or usual place of business, or sent by telegraph, facsimile transmission or telephone, at least 24 hours before the time of the meeting or, in the alternative, by mail to his address as it shall appear on the records of the Corporation, at least 72 hours before the time of the meeting. Unless the Bylaws or a resolution of the Board of Directors provides otherwise, the notice need not state the business to be transacted at or the purposes of any regular or special meeting of the Board of Directors. No notice of any meeting of the Board of Directors need be given to any director who is present at the meeting except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened, or to any director who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives such notice. Any meeting of the Board of Directors, regular or special, may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement. SECTION 2.9 Action by Directors. Unless statute or the Charter or Bylaws require a greater proportion, the action of a majority of the directors present at a meeting at which a quorum is present is the action of the Board of Directors. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business. In the absence of a quorum, the directors present by majority vote and without notice other than by announcement may adjourn the meeting from time to time until a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting, if a unanimous 6 10 written consent which sets forth the action is signed by each member of the Board and filed with the minutes of proceedings of the Board. SECTION 2.10 Meeting by Conference Telephone. Members of the Board of Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at a meeting. SECTION 2.11 Compensation. By resolution of the Board of Directors a fixed sum and expenses, if any, for attendance at each regular or special meeting of the Board of Directors or of committees thereof, and other compensation for their services as such or on committees of the Board of Directors, may be paid to directors other than directors who are full-time employees of the Corporation. A director who serves the Corporation in any other capacity also may receive compensation for such other services, pursuant to a resolution of the Board of Directors. SECTION 2.12 Advisory Directors. The Board of Directors may by resolution appoint advisory directors to the Board, who may also serve as directors emeriti, and shall receive such compensation and reimbursement as the Board of Directors shall provide. Advisory directors or directors emeriti shall not have any right to vote as directors. ARTICLE III. COMMITTEES SECTION 3.1 Committees. The Board of Directors may appoint from among its members an Executive Committee and other committees composed of two or more directors and delegate to these committees any of the powers of the Board of Directors, except as prohibited by law. Each committee shall include the director elected by the holders of the Series 1996A Stock pursuant to Section 3(a)(i) of the Articles Supplementary (Series 1996A Stock), upon request by such director to the Board, unless the rules of any exchange on which the shares of Common Stock of the Corporation are listed would preclude membership of such director on such committee, in which case such director shall be permitted to have access to all meetings and proceedings of such committee and to review and retain copies of all documentation presented to the members of such committee relating to committee business. If the Board of Directors has given general authorization for the issuance of stock, a committee of the Board, in accordance with a general formula or method specified by the Board by resolution or by adoption of a stock option or other plan, may fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors under Sections 2-203 and 2-208 of the Corporations and Associations Article of the Annotated Code of Maryland. SECTION 3.2 Committee Procedure. Each committee may fix rules of procedure for its business. A majority of the members of a committee shall constitute a quorum for the transaction of business, and the action of a majority of those present at a meeting at which a quorum is present shall be the action of the committee. The members of a committee present at 7 11 any meeting, whether or not they constitute a quorum, may appoint a director to act in the place of an absent member. Any action required or permitted to be taken at a meeting of a committee may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the committee and filed with the minutes of proceedings of the committee. The members of a committee may conduct any meeting thereof by conference telephone in accordance with the provisions of Section 2.10. ARTICLE IV. OFFICERS SECTION 4.1 Executive and Other Officers. The Corporation shall have a President, a Secretary, and a Treasurer. It may also have a Chairman of the Board. The Corporation may also have one or more Vice-Presidents, including Executive Vice Presidents, as well as one or more assistant officers, and subordinate officers as may be established by the Board of Directors. A person may hold more than one office in the Corporation except that no person may serve concurrently as both President and Vice-President of the Corporation. The Chairman of the Board shall be a director; the other officers may be directors. The Board of Directors shall designate who shall serve as chief executive officer and who shall have general supervision of the business and affairs of the Corporation, and may designate a chief operating officer, who shall have supervision of the operations of the Corporation, and a chief financial officer, who, among other functions, shall have supervision of the finance, treasury and accounting functions of the Corporation. In the absence of any designation, the Chairman of the Board, if there be one, shall serve as chief executive officer and the President, if not the same person, shall serve as chief operating officer. If the Chairman of the Board and the President are the same person, any Executive Vice President or Vice President may serve as chief operating officer. In the absence of the Chairman of the Board, or if there be none, the President shall be the chief executive officer and any Executive Vice President or Vice President may serve as chief operating officer. SECTION 4.2 Chairman of the Board. The Chairman of the Board, if one be elected, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present. Unless otherwise provided by resolution of the Board of Directors, he shall be the chief executive officer of the Corporation and shall perform the duties customarily performed by chief executive officers, and may perform any duties of the President. In general, he shall perform all such duties as are from time to time assigned to him by the Board of Directors. SECTION 4.3 President. Unless otherwise provided by resolution of the Board of Directors, the President, in the absence of the Chairman of the Board, shall preside at all meetings of the Board of Directors and of the stockholders at which he shall be present. Unless otherwise provided by resolution of the Board of Directors, the President shall be the chief operating officer of the Corporation and shall perform the duties customarily performed by chief operating officers. He may sign and execute, in the name of the Corporation, all authorized deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall have been expressly delegated to some other officer or agent of the Corporation. In general, he shall perform such other duties usually performed by a president of a 8 12 corporation and such other duties as are from time to time assigned to him by the Board of Directors or the chief executive officer of the Corporation. SECTION 4.4 Vice-Presidents. The Vice-President or Vice-Presidents designated by the Board of Directors of the Corporation as Executive Vice-Presidents, at the request of the chief executive officer or the President, or in the President's absence or during his inability to act, shall perform the duties and exercise the functions of the President, and when so acting shall have the powers of the President. If there be more than one Executive Vice- President, the Board of Directors may determine which one or more of the Executive Vice-Presidents shall perform any of such duties or exercise any of such functions, or if such determination is not made by the Board of Directors, the chief executive officer or the President may make such determination; otherwise any of the Executive Vice-Presidents may perform any of such duties or exercise any of such functions. If there be no Vice-President or Vice-Presidents designated as Executive Vice-President, the Vice-President or Vice-Presidents, at the request of the chief executive officer or the President, or in the President's absence or during his inability to act, shall perform the duties and exercise the functions of the President, and when so acting shall have the powers of the President. If there be more than one Vice-President, the Board of Directors may determine which one or more of the Vice-Presidents shall perform any of such duties or exercise any of such functions, or if such determination is not made by the Board of Directors, the chief executive officer or the President may make such determination; otherwise, any of the Vice-Presidents may perform any of such duties or exercise any of such functions. The Vice-President or Vice-Presidents, including the Executive Vice-Presidents, shall have such other powers and perform such other duties, and have such additional descriptive designations in their titles (if any), as are from time to time assigned to them by the Board of Directors, the chief executive officer, or the President. SECTION 4.5 Secretary. The Secretary shall keep the minutes of the meetings of the stockholders, of the Board of Directors and of any committees; he shall see that all notices are duly given in accordance with the provisions of the Bylaws or as required by law; he shall be custodian of the records of the Corporation; he may witness any document on behalf of the Corporation, the execution of which is duly authorized, see that the corporate seal is affixed where such document is required or desired to be under the Corporation's seal, and, when so affixed, may attest the same; and, in general, he shall perform all duties incident to the office of a secretary of a corporation, and such other duties as are from time to time assigned to him by the Board of Directors, the chief executive officer, or the President. SECTION 4.6 Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by the Board of Directors; he shall render to the President and to the Board of Directors, whenever requested, an account of the financial condition of the Corporation; and, in general, he shall perform all the duties incident to the office of a treasurer of a corporation, and such other duties as are from time to time assigned to him by the Board of Directors, the chief executive officer, or the President. 9 13 SECTION 4.7 Assistant and Subordinate Officers. The assistant and subordinate officers of the Corporation are all officers below the office of Vice-President, Secretary, or Treasurer. The assistant or subordinate officers shall have such duties as are from time to time assigned to them by the Board of Directors, the chief executive officer, the President or any person designated as their superior officer by the committee or person electing them. SECTION 4.8 Election, Tenure and Removal of Officers. The Board of Directors shall elect the officers. The Board of Directors may from time to time authorize any committee or officer to appoint assistant and subordinate officers. Election or appointment of an officer, employee or agent shall not of itself create contract rights. All officers shall be elected or appointed to hold their offices, respectively, at the pleasure of the Board. The Board of Directors (or, as to any assistant or subordinate officer, any committee or officer authorized by the Board) may remove an officer at any time, if the Board (or any committee or officer authorized by the Board, as the case may be) in its judgment finds that the best interests of the Corporation will be served thereby. The removal of an officer does not prejudice any of his contract rights. The Board of Directors (or, as to any assistant or subordinate officer, any committee or officer authorized by the Board) may fill a vacancy which occurs in any office for the unexpired portion of the term. SECTION 4.9 Compensation. The Board of Directors shall have power to fix the salaries and other compensation and remuneration, of whatever kind, of all officers of the Corporation. No officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. The Board of Directors may authorize any committee or officer, upon whom the power of appointing assistant and subordinate officers may have been conferred, to fix the salaries, compensation and remuneration of such assistant and subordinate officers. ARTICLE V. DIVISIONAL TITLES SECTION 5.1 Conferring Divisional Titles. The Board of Directors may from time to time confer upon any employee of a division of the Corporation the title of President, Vice-President, Treasurer or Controller of such division or any other title or titles deemed appropriate, or may authorize the Chairman of the Board or the President to do so. Any such titles so conferred may be discontinued and withdrawn at any time by the Board of Directors, or by the Chairman of the Board or the President if so authorized by the Board of Directors. Any employee of a division designated by such a divisional title shall have the powers and duties with respect to such division as shall be prescribed by the Board of Directors, the Chairman of the Board or the President. SECTION 5.2 Effect of Divisional Titles. The conferring of divisional titles shall not create an office of the Corporation under Article IV unless specifically designated as such by the Board of Directors; but any person who is an officer of the Corporation may also have a divisional title. 10 14 ARTICLE VI. STOCK SECTION 6.1 Certificates for Stock. Except as otherwise proved by statute, each stockholder is entitled to certificates which represent and certify the shares of stock he holds in the Corporation. Each stock certificate shall include on its face the name of the Corporation, the name of the stockholder or other person to whom it is issued, and the class of stock and number of shares it represents. Each stock certificate shall be signed by the Chairman of the Board, the President, or a Vice-President, and countersigned by the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the actual corporate seal or a facsimile of it or in any other form, and the signatures may be either manual or facsimile signatures. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. SECTION 6.2 Transfers. The Board of Directors shall have power and authority to make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates of stock; and may appoint transfer agents and registrars thereof. The duties of transfer agent and registrar may be combined. SECTION 6.3 Record Dates and Closing of Transfer Books. Except as otherwise provided in Section 1.6, the Board of Directors may set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders, including which stockholders are entitled to notice of a meeting, vote at a meeting, receive a dividend or other distribution, or be allotted other rights. Except as otherwise provided in Section 1.6, the record date may not be prior to the close of business on the day the record date is fixed; the record date may not be more than 90 days before the date on which the action requiring the determination will be taken; the transfer books may not be closed for a period longer than 20 days; and, in the case of a meeting of stockholders, the record date or the closing of the transfer books shall be at least ten days before the date of the meeting. SECTION 6.4 Stock Ledger. The Corporation shall maintain a stock ledger which contains the name and address of each stockholder and the number of shares of stock of each class which the stockholder holds. The stock ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the stock ledger shall be kept at the offices of a transfer agent for the particular class of stock, or, if none, at the principal office in the State of Maryland or the principal executive offices of the Corporation. SECTION 6.5 Certification of Beneficial Owners. The Board of Directors may adopt by resolution a procedure by which a stockholder of the Corporation may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may certify; the purpose for which the certification may be made; the form of certification and the information to be contained in it; if the certification is with respect to a 11 15 record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board considers necessary or desirable. On receipt of a certification which complies with the procedure adopted by the Board in accordance with this Section, the person specified in the certification is, for the purpose set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification. SECTION 6I.6 Replacement Stock Certificates. The Board of Directors of the Corporation may determine the conditions for issuing a new stock certificate in place of one which is alleged to have been lost, stolen, or destroyed, or the Board of Directors may delegate such power to any officer or officers of the Corporation. In their discretion, the Board of Directors or such officer or officers may refuse to issue a new certificate (a) unless the owner of the lost, stolen or destroyed certificate gives a bond, with sufficient surety, to indemnify the Corporation against any loss or claim arising as the result of the issuance of the new certificate or (b) unless a court having jurisdiction in the premises orders the Corporation to issue a new certificate. SECTION 6.7 Exemption from Control Share Acquisition Statute. Notwithstanding any other provisions of the Charter or these Bylaws, Title 3, Subtitle 7 of the Corporations and Associations Article of the Annotated Code of Maryland (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition. ARTICLE VII. FINANCE SECTION 7.1 Checks, Drafts, Etc. All checks, drafts and orders for the payment of money, notes and other evidences of indebtedness, issued in the name of the Corporation, shall, unless otherwise provided by resolution of the Board of Directors, be signed by the President, a Vice-President or an Assistant Vice-President and countersigned by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary. SECTION 7.2 Annual Statement of Affairs. The President or chief accounting officer shall prepare annually a full and correct statement of the affairs of the Corporation, to include a balance sheet and a financial statement of operations for the preceding fiscal year. The statement of affairs shall be submitted at the annual meeting of the stockholders and, within 20 days after the meeting, placed on file at the Corporation's principal office. SECTION 7.3 Fiscal Year. The fiscal year of the Corporation shall be the twelve calendar months period ending December 31 in each year, unless otherwise provided by the Board of Directors. 12 16 SECTION 7.4 Dividends and Other Distributions. If authorized and declared by the Board of Directors at any meeting thereof, the Corporation may pay dividends and other distributions on its shares in cash, property, or in shares of the stock of the Corporation, unless such dividend or other distribution is contrary to law or to a restriction contained in the Charter. SECTION 7.5 Contracts. To the extent permitted by applicable law, and except as otherwise prescribed by the Charter or these Bylaws with respect to certificates for shares, the Board of Directors may authorize any officer, employee, or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation. Such authority may be general or confined to specific instances. ARTICLE VIII. SUNDRY PROVISIONS SECTION 8.1 Books and Records. The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of any executive or other committee when exercising any of the powers of the Board of Directors. The books and records of the Corporation may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the form of a reproduction. The original or a certified copy of the Bylaws, including any amendments to them, shall be kept at the principal office of the Corporation. SECTION 8.2 Corporate Seal. The Board of Directors shall provide a suitable seal, bearing the name of the Corporation, which shall be in the charge of the Secretary. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. If the Corporation is required to place its corporate seal to a document, it is sufficient to meet the requirement of any law, rule or regulation relating to a corporate seal to place the word "(Seal)" adjacent to the signature of the person authorized to sign the document on behalf of the Corporation. SECTION 8.3 Bonds. The Board of Directors may require any officer, agent or employee of the Corporation to give a bond to the Corporation, conditioned upon the faithful discharge of his duties, with one or more sureties and in such amount as may be satisfactory to the Board of Directors. SECTION 8.4 Voting upon Shares in Other Corporations. Stock of other corporations or associations, registered in the name of the Corporation, may be voted by the President, a Vice-President, or a proxy appointed by either of them. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution. 13 17 SECTION 8.5 Execution of Documents. A person who holds more than one office in the Corporation may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer. SECTION 8.6 Amendments. Except as otherwise provided in the Charter (including the Articles Supplementary (Series 1996A Stock)) or in Section 2.2, in accordance with the Charter, these Bylaws may be repealed, altered, amended or rescinded by vote of two-thirds of the Board of Directors at a meeting held in accordance with the provisions of these Bylaws. ARTICLE IX. INDEMNIFICATION AND ADVANCE FOR EXPENSES SECTION 9.1 To the maximum extent permitted by Maryland law in effect from time to time, the Corporation, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall indemnify, and shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to, (i) any individual who is a present, former or proposed director or officer of the Corporation and who is made a party to the proceeding by reason of his service in that capacity or (ii) any individual who, while a director of the Corporation and at the request of the Corporation, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made a party to the proceeding by reasons of his service in that capacity. The Corporation may, with the approval of its Board of Directors, provide such indemnification and advancement of expenses to a person who served as a predecessor of the Corporation in any of the capacities described in (i) or (ii) above and to any employee or agent of the Corporation or a predecessor of the Corporation. This Article shall not apply to any proceeding brought by a present or former director or officer. Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the bylaws or charter of the Corporation inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. 14 EX-10.1 4 STOCK PURCHASE AGREEMENT DATED JUNE 20,1996 1 STOCK PURCHASE AGREEMENT by and between TIGER/WESTBROOK REAL ESTATE FUND, L.P. and TIGER/WESTBROOK REAL ESTATE CO-INVESTMENT PARTNERSHIP, L.P., and ESSEX PROPERTY TRUST, INC., a Maryland corporation dated as of June 20, 1996 2 THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of June 20, 1996, is made by and between Essex Property Trust, Inc., a Maryland corporation (the "Company") and Tiger/Westbrook Real Estate Fund, L.P., a Delaware limited partnership, and Tiger/Westbrook Real Estate Co-Investment Partnership, L.P., a Delaware limited partnership (individually and collectively, "Buyer"). RECITALS: WHEREAS, Buyer wishes to purchase from the Company, and the Company wishes to issue and sell to Buyer, an aggregate of 280,000 shares of a newly authorized series of preferred stock of the Company designated as 8.75% Convertible Preferred Stock, Series 1996A (the "Preferred Stock"), having the terms set forth in the form of Company's Articles Supplementary attached as Exhibit A (the "Articles Supplementary") establishing the rights, privileges and preferences of the Preferred Stock, at a price of $25.00 per share; WHEREAS, an affiliate of Buyer and the Company have entered into that certain Loan Facility Agreement (the "Loan Agreement") as of even date herewith whereby T/W Essex Funding, L.L.C. ("Lender") has agreed to lend to the Company and the Company has agreed to borrow from the Lender up to an aggregate of $33,000,000 which borrowed funds shall under the circumstances set forth in the Loan Agreement be exchangeable for additional shares of Preferred Stock or, if the Company and Buyer so agree, Operating Partnership Units, subject to the terms and conditions set forth herein and therein; and WHEREAS, Buyer and the Company are entering into this Agreement to provide for such purchase and sale of the Preferred Stock and to establish various rights and obligations in connection therewith. AGREEMENT: ARTICLE 1 Definitions As used in this Agreement, the following terms shall have the following respective meanings: Capitalized terms used herein but not defined herein shall have the meanings set forth in the Loan Agreement. Section 1.1 "Action" shall mean any suit, arbitration, inquiry, proceeding or injunction by or before any Government Authority, court or arbitrator. Section 1.2 "Additional Purchase Price" shall mean the consideration payable by Buyer to the Company for the shares of Preferred Stock acquired by Buyer at any Initial Exchange Closing or any Subsequent Closing, consisting of an exchange of principal amount of the Loan, cash, or a combination thereof, as the case may be. 1 3 Section 1.3 "Affiliate" shall have the meaning ascribed thereto in Rule 12b-2 promulgated under the Exchange Act, and as in effect on the date hereof. Section 1.4 "Agreement" shall have the meaning set forth in the first paragraph hereof. Section 1.5 "Annual Report" shall have the meaning set forth in Section 3.1(e). Section 1.6 "Articles Supplementary" shall have the meaning set forth in the second paragraph hereof. Section 1.7 "Benefit Arrangements" shall have the meaning set forth in Section 3.15 (b). Section 1.8 "Blue Sky Laws" shall have the meaning set forth in Section 3.4(e). Section 1.9 "Buyer" shall have the meaning set forth in the first paragraph hereof. Section 1.10 "CERCLA" shall have the meaning set forth in Section 3.14(b). Section 1.11 "Charter Amendment" shall mean an amendment to the Company Charter mutually satisfactory to the Company and Buyer which provides that the Company may issue to the Buyer the Preferred Stock under the terms and conditions set forth herein. Section 1.12 "Closing Agreement" shall mean a written and legally binding agreement with a taxing authority relating to Taxes. Section 1.13 "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto, including all of the rules and regulations promulgated thereunder. Section 1.14 "Common Stock" shall mean the common stock, par value $.0001 per share, of the Company. Section 1.15 "Company" shall have the meaning set forth in the first paragraph hereof. Section 1.16 "Company Charter" shall mean the Articles of Amendment and Restatement of the Company, as in effect on the date hereof. Section 1.17 "Company Leases" shall mean all ground leases residential or shopping center leases relating to the Company Properties. Section 1.18 "Company Plan" shall have the meaning set forth in Section 3.15(a). Section 1.19 "Company Properties" shall mean all real property owned or leased by the Company or any of its Subsidiaries (collectively, and together with all buildings, structures and other improvements and fixtures located on or under such land and all easements, rights and other appurtenances to such land). 2 4 Section 1.20 "Company Registration Statement" shall have the meaning set forth in Section 3.5(a). Section 1.21 "Company Reports" shall have the meaning set forth in Section 3.5(a). Section 1.22 "Debt Instruments" shall mean all notes, mortgages, deeds of trust or similar instruments which evidence or secure any indebtedness. Section 1.23 "Election" shall have the meaning set forth in Section 3.10(b). Section 1.24 "Employee Benefit Plans" shall have the meaning set forth in Section 3.15(b). Section 1.25 "Employees" shall have the meaning set forth in Section 3.15(b). Section 1.26 "Environment" shall have the meaning set forth in Section 3.14(b). Section 1.27 "Environmental Laws" shall have the meaning set forth in Section 3.14(b). Section 1.28 "EPA" shall have the meaning set forth in Section 3.14(a). Section 1.29 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor thereto. Section 1.30 "ERISA Affiliates" shall mean, with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same "controlled group" as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA. Section 1.31 "Exchange Act" shall have the meaning set forth in Section 3.4(e). Section 1.32 "GAAP" shall have the meaning set forth in Section 3.5(b). Section 1.33 "Government Authority" shall mean any government or state (or any subdivision thereof) of or in the United States, or any agency, authority, bureau, commission, department or similar body or instrumentality thereof, or any governmental court or tribunal thereof. Section 1.34 "Hazardous Substance" shall have the meaning set forth in Section 3.14(b). Section 1.35 "HSR Act" shall have the meaning set forth in Section 3.4(e). Section 1.36 "Indemnified Party" shall mean Buyer or the Company, as the context may require. 3 5 Section 1.37 "Initial Closing" shall mean the consummation of the purchase and sale of shares of Preferred Stock pursuant to Section 2.1. Section 1.38 "Initial Closing Date" shall have the meaning set forth in Section 2.1. Section 1.39 "Initial Exchange Closing" shall mean any of the closings with respect to the issuance of Preferred Stock contemplated by Section 2.10 of the Loan Agreement. Section 1.40 "Initial Purchase Price" shall have the meaning set forth in Section 2.1. Section 1.41 "IRS" shall mean the Internal Revenue Service. Section 1.42 "Leases" shall have the meaning set forth in Section 3.15(h). Section 1.43 "Liabilities" shall mean, as to any person, all debts, adverse claims, liabilities and obligations, direct, indirect, absolute or contingent of such person, whether accrued, vested or otherwise, whether in contract, tort, strict liability or otherwise and whether or not actually reflected, or required by GAAP to be reflected, in such person's or entity's balance sheets or other books and records, including (i) obligations arising from non-compliance with any law, rule or regulation of any Government Authority or imposed by any court or any arbitrator of any kind, (ii) all indebtedness or liability of such person for borrowed money, or for the purchase price of property or services (including trade obligations), (iii) all obligations of such person as lessee under leases, capital or other, (iv) liabilities of such person in respect of plans covered by Title IV of ERISA, or otherwise arising in respect of plans for employees or former employees or their respective families or beneficiaries, (v) reimbursement obligations of such person in respect of letters of credit, (vi) all obligations of such person arising under acceptance facilities, (vii) all liabilities of other persons or entities, directly or indirectly, guaranteed, endorsed (other than for collection or deposit in the ordinary course of business) or discounted with recourse by such person or with respect to which the person in question is otherwise directly or indirectly liable, (viii) all obligations secured by any Lien on property of such person, whether or not the obligations have been assumed, and (ix) all other items which have been, or in accordance with GAAP would be, included in determining total liabilities on the liability side of the balance sheet. Section 1.44 "Liens" shall mean all liens, mortgages, deeds of trust, deeds to secure debt, security interests, pledges, claims, charges, easements and other encumbrances of any nature whatsoever. Section 1.45 "Loan" shall have the meaning set forth in the Loan Agreement. Section 1.46 "Loan Agreement" shall have the meaning set forth in Section 2.1. Section 1.47 "Material Adverse Effect" shall mean a material adverse effect on the financial condition, results of operations or business of the Company and its Subsidiaries (to the extent of the Company's interests therein) taken as a whole. 4 6 Section 1.48 "NYSE Advice" shall mean such advice as may be requested by, and reasonably acceptable to, Buyer and/or the Company regarding the Company's compliance with New York Stock Exchange listing requirements regarding the issuance of Preferred Stock in accordance with the transactions contemplated hereby. Section 1.49 "OP Subscription Agreement" shall mean an agreement mutually satisfactory to the Company and Buyer pertaining to Buyer's possible purchase of preferred Operating Partnership Units and reflecting the terms and conditions of an amendment to the Partnership Agreement mutually satisfactory to the Company and Buyer in accordance with Section 7.2. Section 1.50 "Operating Partnership" shall mean Essex Portfolio, L.P., a California limited partnership, or any successor thereto. Section 1.51 "Other Filings" shall have the meaning set forth in Section 5.1(b). Section 1.52 "Partnership Agreement" shall mean that certain Agreement of Limited Partnership of the Operating Partnership, dated as of March 15, 1994 as amended on April 15, 1994. Section 1.53 "Pension Plans" shall have the meaning set forth in Section 3.15(b). Section 1.54 "Permitted Liens" shall mean (i) Liens (other than Liens imposed under ERISA or any Environmental Law or in connection with any Environmental Claim) for taxes or other assessments or charges of Governmental Authorities that are not yet delinquent or that are being contested in good faith by appropriate proceedings, in each case, with respect to which adequate reserves or other appropriate provisions are being maintained by the Company or its Subsidiaries to the extent required by GAAP, (ii) statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and other Liens (other than Liens imposed under ERISA or any Environmental Law or in connection with any Environmental Claim) imposed by law and created in the ordinary course of business for amounts not yet overdue or which are being contested in good faith by appropriate proceedings, in each case, with respect to which adequate reserves or other appropriate provisions are being maintained by the Company or its Subsidiaries to the extent required by GAAP and which do not exceed $750,000 in the aggregate, (iii) the Company Leases, (iv) easements, rights-of-way, covenants and restrictions which are customary and typical for commercial or residential properties similar to the commercial and residential Company Properties, as the case may be, and which do not (x) interfere materially with the ordinary conduct of any Company Property or the business of the Company and its Subsidiaries as a whole or (y) detract materially from the value or usefulness of the Company Property to which they apply, (v) the other Liens relating to the Company's Camarillo property and (vi) such imperfections of title and encumbrances, if any, as would not, individually, or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Section 1.55 "Per Unit Purchase Price" shall have the meaning set forth in Section 2.3. 5 7 Section 1.56 "Per Share Purchase Price" shall mean the price of $25.00 per share for the Preferred Stock. Section 1.57 "person" shall mean any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization, other form of business or legal entity or Government Authority. Section 1.58 "Preferred Stock" shall have the meaning set forth in the second paragraph hereof. Section 1.59 "Proxy Statement" shall have the meaning set forth in Section 5.1(b). Section 1.60 "Registration Rights Agreement" shall have the meaning set forth in Section 2.2(a). Section 1.61 "Regulatory Filings" shall have the meaning set forth in Section 3.4(e). Section 1.62 "REIT" shall have the meaning set forth in Section 3.10(b). Section 1.63 "Release" shall have the meaning set forth in Section 3.14(c). Section 1.64 "REOC" shall have the meaning set forth in Section 3.15(h). Section 1.65 "REOC Qualification Date" shall have the meaning set forth in Section 3.14(d). Section 1.66 "SEC" shall have the meaning set forth in Section 3.5(a). Section 1.67 "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.68 "Securities Laws" shall have the meaning set forth in Section 3.5(a). Section 1.69 "Stockholders Agreement" shall have the meaning set forth in Section 2.2(a). Section 1.70 "Subsidiaries" shall mean, collectively, the Operating Partnership and any other company of which the Company is the direct or indirect general partner or as to which the Company has the right or power, direct or indirectly, to elect a majority of the board of directors or other persons performing similar functions or as to which the Company, directly or indirectly, has a majority economic ownership interest. Section 1.71 "Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether 6 8 disputed or not. The term "Tax" also includes any amounts payable pursuant to any tax sharing agreement to which any relevant entity is liable as a successor or pursuant to contract. Section 1.72 "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. Section 1.73 "Tax Ruling" shall mean a written ruling of a taxing authority relating to Taxes. Section 1.74 "Welfare Plans" shall have the meaning set forth in Section 3.15(b). ARTICLE 2 Purchase and Sale of Securities; Closings Section 2.1 "Initial Closing". Subject to the terms and conditions hereof, on the Initial Closing Date, the Company will sell, convey, assign, transfer and deliver, and Buyer will purchase and acquire from the Company, 280,000 shares of Preferred Stock at a price of $25.00 per share for an aggregate purchase price in immediately available funds of $7,000,000 (the "Initial Purchase Price"). The Initial Closing shall take place at the offices of Morrison & Foerster LLP, 755 Page Mill Road, Palo Alto, California, at 10:00 a.m. on such date as the parties hereto may mutually agree (the "Initial Closing Date"). Section 2.2 "Initial Closing Deliveries". (a) At the Initial Closing, and as a condition to the parties' obligations hereunder to effect the transactions contemplated hereby at the Initial Closing, the Company and Buyer shall enter into a registration rights agreement substantially in the form attached as Exhibit C (the "Registration Rights Agreement"), the Company, Buyer and Messrs. Marcus and Guericke each shall enter into a stockholders agreement substantially in the form attached as Exhibit D (the "Stockholders Agreement"). (b) In addition to the other things required to be done hereby including the delivery of the Diligence Fee, at the Initial Closing, the Company shall deliver, or cause to be delivered, to Buyer the following: (i) certificates representing the number of shares of Preferred Stock to be issued and delivered at the Initial Closing, free and clear of all Liens (unless created by Buyer or any of its Affiliates) with all necessary stock transfer and other documentary stamps attached, (ii) a certificate, dated the Initial Closing Date and validly executed by an appropriate officer of the Company, as contemplated by Section 7.1(a), (iii) evidence or copies of any consents, approvals, orders, qualifications or waivers required pursuant to Section 7.1, (iv) all certificates and other instruments and documents required by this Agreement to be delivered by the Company to Buyer at or prior to the Initial Closing, and (v) such other instruments reasonably requested by Buyer, as may be necessary or appropriate to confirm or carry out the provisions of this Agreement. 7 9 (c) In addition to the delivery of the Initial Purchase Price and the other things required to be done hereby, at the Initial Closing, Buyer shall deliver, or cause to be delivered, to the Company the following: (i) a certificate, dated the Initial Closing Date and validly executed by Buyer, as contemplated by Section 7.3(a), (ii) if not previously delivered to the Company, all other certificates, documents, instruments and writings required pursuant hereto to be delivered by or on behalf of Buyer at or before the Initial Closing, and (iii) such other instruments reasonably requested by the Company, as may be necessary or appropriate to confirm or carry out the provisions of this Agreement. Section 2.3 "Initial Exchange Closings and Subsequent Closings". (I) "Initial Exchange Closings" (a) Option A. If Option A is applicable, effective as of the Option A Maturity Date, (i) Buyer shall, or cause the Lender to, exchange $13,000,000 principal amount of the Loan for 520,000 shares of Preferred Stock to be issued by the Company (subject to the antidilution and "Organic Change" provisions of the Loan Agreement). (b) Option B. If Option B is applicable, effective as of the Option B Maturity Date, (i) Buyer shall, or cause the Lender to, exchange $13,000,000 principal amount of the Loan for 520,000 shares of Preferred Stock to be issued by the Company (subject to the anti-dilution and "Organic Change" provisions of the Loan Agreement). (c) Option C. If Option C is applicable, effective as of the Option C Maturity Date, Buyer shall, or cause the Lender to, exchange up to $1,500,000 principal amount of the Loan for 60,000 shares of Preferred Stock to be issued by the Company at an Additional Purchase Price of $25.00 per share (subject to the antidilution and "Organic Change" provisions of the Loan Agreement). (d) Option D. If Option D is applicable, effective as of the Option D Maturity Date, Buyer (i) shall or cause the Lender to, exchange $13,000,000 principal amount of the Loan for 520,000 shares of Preferred Stock to be issued by the Company (subject to the antidilution and "Organic Change" provisions of the Loan Agreement) and (ii) shall have the option to acquire up to an additional 240,000 shares of Preferred Stock to be issued by the Company at a per share Additional Purchase Price of $25.00 (subject to the antidilution and "Organic Change" provisions of the Loan Agreement). (II) "Subsequent Closings". If Option A or B is applicable, Buyer shall purchase from the Company an additional 800,000 shares of Preferred Stock at an Additional Purchase Price of $25.00 per share prior to June 20, 1997 (subject to the antidilution and "Organic Change" provisions of the Loan Agreement), pursuant to no more than three Subsequent Closings each involving the purchase of not less than 200,000 shares of Preferred Stock. (III) "Place of Closing". The consummation of each Subsequent Closing shall take place at the Palo Alto offices of Morrison & Foerster LLP at 10:00 a.m. on the Subsequent Closing Date or such other place as agreed upon by the parties. 8 10 Section 2.4 "Initial Exchange Closing and Subsequent Closing Deliveries". (a) At each Initial Exchange Closing and Subsequent Closing, the Company shall deliver or cause to be delivered, to Buyer the following (i) such documentation as may be reasonably required to be delivered by the Company pursuant to the terms of the Loan Agreement, (ii) certificates representing the number of shares of Preferred Stock free and clear of all Liens (unless created by Buyer or any of its Affiliates) with all necessary stock transfer and other documentary stamps attached, (iii) a certificate dated such Subsequent Closing Date and validly executed by an appropriate officer of the Company, as contemplated by Section 7.2(a), (iv) as to Subsequent Closings, evidence or copies of any consents, approvals, orders, qualifications or waivers required pursuant to Section 7.2, (v) all certificates and other instruments and documents required by this Agreement or the Loan Agreement to be delivered by the Company to Buyer at or prior to each Subsequent Closing, and (vi) such other instruments reasonably requested by Buyer as may be necessary or appropriate to confirm or carry out the provisions of this Agreement. (b) Buyer shall deliver to the Company, by wire transfer of immediately available funds in U.S. dollars to an account designated by the Company, the amount of the Additional Purchase Price in excess of the principal amount of the Loan exchanged therefore together with all interest or fees due to the Lender under the Loan Agreement, if any. In addition to the delivery of the Additional Purchase Price and the other things required to be done hereby, at the Initial Exchange Closing and each Subsequent Closing, Buyer shall deliver, or cause to be delivered, to the Company the following: (i) at each Subsequent Closing a certificate, dated such Subsequent Closing Date and validly executed by Buyer, as contemplated by Section 7.3(a), (ii) at the Initial Exchange Closing and each Subsequent Closing, if not previously delivered to the Company, all other certificates, documents, instruments and writings required pursuant hereto to be delivered by or on behalf of Buyer at or before each such closing, and (iii) such other instruments reasonably requested by the Company, as may be necessary or appropriate to confirm or carry out the provisions of this Agreement. Section 2.5 "Operating Partnership Units". Notwithstanding the foregoing, provided that the Company and Buyer shall have previously entered into the OP Subscription Agreement, Buyer may purchase such number of Operating Partnership Units in lieu of any shares of Preferred Stock on any Subsequent Closing Date on economically equivalent terms. At any Subsequent Closing at which Operating Partnership Units are to be purchased, Buyer shall deliver to the Company the Purchase Price for such Operating Partnership Units upon such terms and together with such other documentation set forth in Section 2.4(b) and the Company shall deliver to Buyer an amended and restated Partnership Agreement (in form and substance satisfactory to both Company and Buyer) and any other appropriate documents evidencing the Operating Partnership Units, such Operating Partnership Units to be free and clear of all Liens (unless created by Buyer or any of its Affiliates) together with such other appropriate documentation set forth in Section 2.4(a). Section 2.6 "Exchange of Preferred Stock for Units; Units for Preferred Stock". Provided that the Company and Buyer shall have previously entered into the OP Subscription Agreement, at any time and from time to time after the later of the Stockholder Approval Date and 9 11 the date on which the Partnership Agreement shall have been amended in accordance with Section 7.2: (a) Buyer shall have the right to exchange its shares of Preferred Stock into such number of Operating Partnership Units as is equal to the product of (i) the number of shares of Preferred Stock held by Buyer multiplied by (ii) the quotient of (x) the Per Share Purchase Price divided by (y) the Per Unit Purchase Price then in effect. Any accrued and unpaid dividends on Buyer's Preferred Stock may be exchanged into such number of Operating Partnership Units achieved by dividing the aggregate amount of such dividend accrued on the Preferred Stock by the Per Unit Purchase Price then in effect; (b) Buyer shall have the right to exchange its Operating Partnership Units into such number of shares of Preferred Stock as is equal to the product of (i) the number of Operating Partnership Units then held by Buyer multiplied by (ii) the quotient of (x) the Per Unit Purchase Price then in effect divided by (y) the Per Share Purchase Price. ARTICLE 3 Representations and Warranties of the Company The Company hereby represents and warrants to Buyer as follows: Section 3.1 "Organization and Qualification; Subsidiaries". (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland. The Company has all requisite corporate power and authority to enter into this Agreement, the Registration Rights Agreement, the Stockholders Agreement, the Loan Agreement and the Promissory Note and to perform its obligations hereunder and thereunder. The Company has all requisite governmental licenses, authorizations, consents and approvals to own, operate, lease and encumber its properties and carry on its business as now conducted, except where the failure to so have could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (b) The Operating Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of California. The Operating Partnership has all requisite partnership power and authority to enter into the Guarantee. The Operating partnership has all requisite governmental licenses, authorizations, consents and approvals to own, operate, lease and encumber its properties and carry on its business as now conducted, except where the failure to do so could not have, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (c) Each of the Subsidiaries of the Company is a corporation, partnership or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, and has the corporate or partnership power and authority to own its properties and carry on its business as it is now being conducted. Each of the Subsidiaries has all requisite governmental licenses, authorizations, consents and 10 12 approvals , except where the failure to could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (d) Each of the Company and its Subsidiaries is duly qualified to do business and in good standing in each jurisdiction in which the ownership of its property or the conduct of its business requires such qualification, except for any failures to be so qualified or to be in good standing as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (e) The Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 1995 (as amended, together with all information incorporated by reference therein, the "Annual Report") sets forth all information regarding the Company's Subsidiaries required to be stated therein. All of the outstanding shares of capital stock of, or other equity interest in, each of the Subsidiaries owned by the Company or the Operating Partnership are duly authorized, validly issued, fully paid and nonassessable, and are owned, directly or indirectly, by the Company free and clear of all Liens. Except as described in the Company Reports, there are no existing options, warrants, calls, subscriptions, convertible securities or other rights, agreements or commitments which obligate the Company or any of the Subsidiaries to issue, transfer or sell any shares of capital stock or equity interests in any of the Subsidiaries. (f) The financial statements to the Annual Report set forth a description of all allocations among the Company and any Subsidiary of the material expenses incurred by the Company and its Subsidiaries, taken as a whole as are required to be stated therein. Section 3.2 "Authority Relative to Agreements; Board Approval". (a) The execution, delivery and performance by the Company of this Agreement, the Registration Rights Agreement, the Stockholders Agreement, the Articles Supplementary, the Loan Agreement and the Promissory Note and the issuance and delivery of shares of Common Stock upon conversion of shares of Preferred Stock in accordance with the provisions of the Articles Supplementary and Bylaws of the Company, have been duly and validly authorized (or by the Initial Closing Date will have been authorized) by all necessary corporate action on the part of the Company. Each of this Agreement, the Registration Rights Agreement, the Stockholders Agreement, the Loan Agreement and the Promissory Note has been duly executed and delivered by the Company and constitutes the valid and legally binding obligations of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights or general principles of equity, subject to the approval of the Board of Directors to recommend to the stockholders that they approve the issue to Buyer of the Preferred Stock under the terms and conditions set forth herein, including approval of amendments to the Charter and Bylaws of the Company and the recommendation of any action to be taken by the stockholders. Upon issuance of any shares of Preferred Stock, the Articles Supplementary will constitute a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights or general principles of equity. 11 13 (b) The Executive Committee has determined to recommend to the Board of Directors of the Company that it recommend that the stockholders of the Company vote in favor of and approve the issuance to Buyer of Preferred Stock under the terms and conditions set forth herein. (c) The shares of Preferred Stock to be acquired pursuant to this Agreement have been duly authorized for issuance, and upon issuance and delivery by the Company in accordance with this Agreement will be duly and validly issued, fully paid and nonassessable. The shares of Common Stock issuable upon conversion of the Preferred Stock to be acquired pursuant to this Agreement will, upon issuance, be duly and validly issued, fully paid and nonassessable. (d) The conversion of the Preferred Stock pursuant to the terms of the Articles Supplementary, will not give any stockholder of the Company the right to demand payment for his shares under the Corporations & Associations Code of Maryland. (e) The Guaranty has been duly executed and delivered by the Operating Partnership and constitutes the valid and legally binding obligations of the Operating Partnership enforceable against the Operating Partnership in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or similar laws relating to creditors' rights or general principals of equity. Section 3.3 "Capital Stock and Voting Rights". (a) The authorized capital stock of the Company on the date hereof consists of 670,000,000 shares of Common Stock, and 330,000,000 shares of excess stock. As of the date hereof, there are 6,275,000 shares of Common Stock issued and outstanding, and no shares of any other class or series of stock issued and outstanding. All such issued and outstanding shares of Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. The Company has no outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities the holders of which have the right to vote) with the stockholders of the Company on any matter. Other than as set forth in the Company Reports, there are no existing options, warrants, calls, subscriptions, convertible securities, or other rights, agreements or commitments which obligate the Company to issue, transfer or sell directly or indirectly any shares of capital stock or other equity interests of the Company or which entitle any person to acquire from the Company any shares of capital stock or other equity interest of the Company. (b) Except for interests in the Subsidiaries of the Company, and except as set forth in the Company Reports, none of the Company or any of its Subsidiaries owns directly or indirectly any interest or investment (whether equity or debt) in any corporation, partnership, joint venture, business, trust or entity (other than investments in short-term investment securities), which would have a material effect on the business prospects and condition (financial or otherwise) and operations of the Company; 12 14 (c) The outstanding shares of Common Stock have been issued in accordance with the registration or qualification provisions of the Securities Act and relevant state securities laws or pursuant to valid exemptions thereto; (d) Except as set forth in the Company Reports, the Company is not obligated to register under the Securities Act any of its currently outstanding securities or any of its securities that may subsequently be issued. Section 3.4 "No Conflicts; No Defaults; Required Filings and Consents". Except as contemplated hereby, neither the execution and delivery by the Company hereof nor the consummation by the Company of the transactions contemplated hereby in accordance with the terms hereof, will: (a) Violate, conflict with, or result in a breach of, any provisions of the Company Charter or Bylaws of the Company; (b) Result in a breach or violation of, a default under, or the triggering of any payment or other obligations pursuant to, or accelerate vesting under, any of the Company stock option plans or Operating Partnership Unit option plans or similar compensation plan or any grant or award made under any of the foregoing; (c) Violate or conflict with any law, regulation, judgment, order, writ, decree or injunction applicable to the Company or its Subsidiaries except where any such violation or conflict, individually or in the aggregate, could not result in a Material Adverse Effect; (d) Except as set forth in Schedule 3.4, violate or conflict with or result in a breach of any provision of, or constitute a default (or any event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or in a right of termination or cancellation of, or accelerate the performance required by, or result in the creation of any Lien upon any of the properties of the Company or its Subsidiaries under, or result in being declared void, voidable or without further binding effect, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust or any license, franchise, permit, lease, contract, agreement or other instrument, commitment or obligation to which the Company or its Subsidiaries is a party, or by which the Company or its Subsidiaries or any of their properties is bound or affected which could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; or (e) Require any consent, approval or authorization of, or declaration, filing or registration with, any Government Authority, other than any filings required under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), state securities laws ("Blue Sky Laws") (collectively, the "Regulatory Filings"), and any filings required to be made with the Maryland State Department of Assessments and Taxation, the Recorder of Deeds or similar office in any applicable jurisdiction or any national securities exchange on which the Common Stock is listed. 13 15 Section 3.5 "SEC and Other Documents; Financial Statements; Undisclosed Liabilities". (a) The Company has delivered or made available to Buyer the registration statement of the Company filed with the Securities and Exchange Commission ("SEC") in connection with the Company's initial public offering of Common Stock, and all exhibits, amendments and supplements thereto (collectively, the "Company Registration Statement"), and each registration statement, report, proxy statement or information statement and all exhibits thereto prepared by it or relating to its properties since the effective date of the Company Registration Statement, each in the form (including exhibits and any amendments thereto) filed with the SEC (collectively, the "Company Reports"). The Company Reports were filed with the SEC in a timely manner and constitute all forms, reports and documents required to be filed by the Company under the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder (the "Securities Laws"). As of their respective dates, the Company Reports (i) complied as to form in all material respects with the applicable requirements of the Securities Laws and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. To the Company's knowledge, there is no unresolved violation asserted by any Government Authority with respect to any of the Company Reports. (b) Each of the balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) fairly presented the financial position of the entity or entities to which it relates as of its date and each of the statements of operations, stockholders' equity (deficit) and cash flows included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presented the results of operations, retained earnings or cash flows, as the case may be, of the entity or entities to which it relates for the periods set forth therein, in each case in accordance with United States generally accepted accounting principles ("GAAP") consistently applied during the periods involved, except as may be noted therein and except, in the case of the unaudited statements, normal recurring year-end adjustments which would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (c) Except as, and to the extent, set forth in the Company Reports or any Schedule hereto, to the Company's knowledge, none of the Company or any of its Subsidiaries has any Liabilities (nor do there exist any circumstances) that would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Section 3.6 "Litigation; Compliance With Law". (a) Except as disclosed in the Company Reports, there are no Actions pending or, to the Company's knowledge, threatened against the Company or any of its Subsidiaries that would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or result in any material change in the equity ownership of the Company, or which in any manner question the validity of this Agreement, the Loan Agreement, the Stockholders Agreement or the Registration Rights Agreement. 14 16 (b) None of the Company or its Subsidiaries is in violation of any law, rule, regulation, order, writ, decree or injunction of any Government Authority or any body having jurisdiction over them or any of their respective properties which could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Section 3.7 "Investment Company." The Company is not, and after giving effect to the sale and issuance of the Preferred Stock, will not be, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 3.8 "Solicitation; Access to Information." No form of general solicitation or general advertising was used by the Company or, to the best of its knowledge, any other person acting on its behalf, in respect of or in connection with the offer and sale of the Preferred Stock. Section 3.9 "Absence of Certain Changes or Events". Since March 31, 1996, the Company and each of its Subsidiaries has conducted its business only in the ordinary course of such business and has not acquired any real estate other than in the ordinary course of business or entered into any financing arrangements in connection therewith other than in the ordinary course of business, and there has not been (a) any change, circumstance or event that could reasonably be expected to result in a Material Adverse Effect, (b) any declaration, setting aside or payment of any dividend or other distribution with respect to the Common Stock other than any publicly declared quarterly dividends on the Common Stock, (c) any commitment, contractual obligation, borrowing, capital expenditure or transaction (each, a "Commitment") entered into by the Company or any of its Subsidiaries, other than Commitments which could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, or (d) any change in the Company's accounting principles, practices or methods which could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Section 3.10 "Tax Matters; REIT and Partnership Status". (a) The Company and each of its Subsidiaries have timely filed with the appropriate taxing authority all Tax Returns required to be filed by it or has timely requested extensions and such request has been granted and has not expired. Each such Tax Return is true, complete and correct in all material respects. Except as set forth on Schedule 3.10, the Company and its Subsidiaries have paid, within the time and manner prescribed by law all Taxes that are due and payable, except where the failure to do so could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company and each of its Subsidiaries have properly accrued all Taxes for such periods subsequent to the periods covered by such Tax Returns as required by GAAP. None of the Company or any of its Subsidiaries has executed or filed with the IRS or any other taxing authority any agreement now in effect extending the period for assessment or collection of any Tax. None of the Company or any of its Subsidiaries is a party to any pending action or proceedings by any taxing authority for assessment or collection of any Tax, and no claim for assessment or collection of any Tax has been asserted against it and no basis exists for any such claim or assessment. True and complete copies of all federal, state and local income or franchise Tax Returns filed by the Company and each of its Subsidiaries for 1994 and 1995 and all written communications between the relevant taxing authorities and Buyer relating 15 17 thereto have been delivered to Buyer or will be made available to representatives of Buyer. No claim of which the Company has received notice has been made by an authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Except as set forth on Schedule 3.10, there are no Tax Liens upon the assets of the Company or any Subsidiary. The Company has not received a Tax Ruling (other than the Tax Ruling previously received by the Company regarding its status as a REIT) or entered into a Closing Agreement with any Tax Authority that would have a continuing adverse effect after the Initial Closing Date. No event, transaction, act or omission has occurred which will result in the Company becoming liable to pay or to bear any Tax as a transferee, successor or otherwise which is primarily or directly chargeable or attributable to any other person, firm or company, which has not been properly accrued as required by GAAP and which could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company and each Subsidiary have no actual or contingent material liability (whether by reason of any indemnity, warranty, tax sharing agreement or otherwise) to any other person in respect of any actual, contingent or deferred liability of such person for Taxes. The Company and each Subsidiary have complied (and will comply) in all respects with the provisions of the Code relating to the payment and withholding of Taxes, including, without limitation, the withholding and reporting requirements under Code Sections 1441 through 1464, 3401 through 3606, and 6041 and 6049, as well as similar provisions under any other laws, and have, within the time and in the manner prescribed by law, withheld and paid over to the proper governmental authorities all amounts required in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party which could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (b) The Company (i) has in its federal income tax return for its tax year ended December 31, 1994 elected to be taxed as a real estate investment trust ("REIT") within the meaning of Section 856 of the Code (the "Election"), such Election has remained in effect, (ii) has complied (or will comply) with all applicable provisions of the Code relating to a REIT, for each of its taxable years, (iii) has operated, and intends to continue to operate, in such a manner as to qualify as a REIT for each of its taxable years, (iv) has not taken or omitted to take any action which could result in a challenge to its status as a REIT, and, no such challenge of which the Company has received notice is pending or threatened, and (v) will not be rendered unable to qualify as a REIT for federal income tax purposes as a consequence of the transactions contemplated hereby. As of the date hereof, (x) the Company is a "domestically-controlled" REIT within the meaning of Code Section 897(h)(4)(B), and (y) all non-domestic beneficial owners of Common Stock are set forth in Schedule 3.10 as of the date set forth therein. Except as set forth in the Company Reports, to the Company's knowledge no person or entity which would be treated as an "individual" for purposes of Section 542(a)(2) of the Code (as modified by Section 856(h) of the Code) owns or would be considered to own (taking into account the ownership attribution rules under Section 544 of the Code, as modified by Section 856(h) of the Code) in excess of 6% of the value of the outstanding equity interest in the Company. (c) Any amount or other entitlement that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated hereby by any employee, officer, or director of the Company or the Operating Partnership or any of 16 18 their Affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or plan currently in effect would not be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). (d) The disallowance of a deduction under Section 162(m) of the Code for employee remuneration will not apply to any amount paid or payable by the Company or any of its Subsidiaries under any contract, stock plan, program, arrangement or understanding currently in effect. (e) The Operating Partnership and each Subsidiary of the Company and the Operating Partnership organized as a partnership (and any other Subsidiary that files Tax Returns as a partnership for federal income tax purposes) have at all times been classified as partnerships for federal income tax purposes. Section 3.11 "Agreements, Etc." (a) Neither the Company nor any of its Subsidiaries is in default under or in violation of any provision of the Company Charter, the Bylaws of the Company or the Partnership Agreement (or equivalent documents) or any agreement filed as an exhibit to the Company Reports except where such default or violation would not result in a Material Adverse Effect. (b) Other than agreements relating to the Camarillo refinancing, all material agreements, as of the date hereof, entered into by the Company or any of its Subsidiaries, except for agreements entered into in the ordinary course of business, relating to the indebtedness of the Company, the development or construction of, additions or expansions to, or management or leasing services for commercial or residential buildings or other real properties which are currently in effect and under which the Company or any of its Subsidiaries currently has, or expects to incur, any material obligation and which are required to be described in the Company Reports, are described in the Company Reports. No payment, if any thereunder, are delinquent and no notice of such delinquency thereunder has been received by the Company, except where such default or violation would not result in a Material Adverse Effect. True and complete copies of such agreements with all amendments and supplements thereto have been delivered to Buyer. Section 3.12 "Financial Records; Company Charter and Bylaws; Corporate Records". (a) The books of account and other financial records of the Company and each of its Subsidiaries are in all material respects true and complete, have been maintained in accordance with good business practices, and are accurately reflected in all material respects, as required by GAAP, in the financial statements included in the Company Reports. Except as set forth in the notes thereto, all such financial statements were prepared in accordance with GAAP and fairly present the consolidated financial results of operation of the Company and its consolidated Subsidiaries as of the respective dates thereof and for respective periods covered thereby. Except as described in the Company Reports, the financial conditions of each Subsidiary are consolidated with those of the Company. 17 19 (b) The Company has previously delivered or made available to Buyer true and complete copies of the Company Charter and the Bylaws of the Company, as amended to date, the Partnership Agreement, and the charter, Bylaws, organization documents, partnership agreements and joint venture agreements of the Subsidiaries, and all amendments thereto. (c) The minute books and other records of corporate or partnership proceedings of the Company and each of its Subsidiaries will be made available to Buyer and contain in all material respects accurate records of all meetings and accurately reflect in all material respects all other corporate action of the stockholders and directors and any committees of the Board of Directors of the Company and its Subsidiaries which are corporations and all actions of the partners of the Operating Partnership and Subsidiaries which are partnerships, except for documentation of discussions relating to or in connection with the transactions contemplated hereby or matters related hereto. Section 3.13 "Properties". (a) The Company has the requisite power, right and authority to conduct its business as now conducted, or as proposed to be conducted by it, and to own and operate the Company Properties consistent with past practice and in compliance with applicable law and to enjoy uninterrupted ownership, operation and maintenance of the Company Properties, except where any such failure could not, individually, or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (b) Except as described in the Company Reports and except as to earthquake insurance, each of the Company and the Subsidiaries is insured by insurers of recognized financial responsibility against such losses and risks in such amounts as are prudent and customary in the Company's business, and none of Company and the Subsidiaries have any reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue it's business, at a cost that could not reasonably be expected to result in a Material Adverse Effect. (c) Each of the Company and the Subsidiaries possesses such certificates, authorizations or permits issued by the appropriate regulatory agencies or bodies necessary to conduct the business now conducted by it, or proposed to be conducted by it, and none of the Company or any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could reasonably be expected to result in a Material Adverse Effect. 3.14 "Environmental Matters". (a) Except as disclosed in the environmental reports set forth on Schedule 3.14 or in the Company Reports, (A) to the knowledge of the Company, the Environment at each Company Property is free of any Hazardous Substance except for any Hazardous Substance that could not reasonably be expected to have a Material Adverse Effect; 18 20 (B) none of the Company, or any Subsidiary and, to the knowledge of the Company, no prior owner of any Company Property has caused or suffered to occur any Release of any Hazardous Substance into the Environment on, in, under or from any Company Property in violation of any Environmental Law applicable to such Company Property in an amount that would reasonably be expected to have a Material Adverse Effect and no condition exists on, in or under any Company Property or, to the knowledge of the Company, any property adjacent to any Company Property that could reasonably be expected to result in the occurrence of material liabilities under, or any material violations of, any Environmental Law applicable to such Company Property, give rise to the imposition of any material Lien under any Environmental Law, or cause or constitute a material environmental hazard to any property, person or entity, except where such condition or violation could not result in a Material Adverse Effect; (C) neither of the Company, nor any Subsidiary is engaged in or intends to engage in any manufacturing or any other similar operations at any Company Property and, to the knowledge of the Company, no prior owner of any Company Property engaged in any manufacturing or any similar operations at any Company Property that (1) require the use, handling, transportation, storage, treatment or disposal of any Hazardous Substance (other than paints, stains, cleaning solvents, insecticides, herbicides, or other substances that are used in the ordinary course of operating any Property and in compliance with all applicable Environmental Laws) or (2) require permits or are otherwise regulated pursuant to any Environmental Law; (D) neither of the Company, nor any Subsidiary and, to the knowledge of the Company, no prior owner of any Company Property has received any notice of a claim under or pursuant to any Environmental Law applicable to a Company Property or under common law pertaining to Hazardous Substances on any Company Property or pertaining to other property at which Hazardous Substances generated at any Company Property have come to be located; (E) none of the Company or any Subsidiary and, to the best knowledge of the Company, no prior owner of any Company Property has received any notice from any Governmental Authority claiming any violation of any Environmental Law that is uncured or unremediated as of the date hereof; and (F) no Company Property (1) is included or proposed for inclusion on the National Priorities List issued pursuant to CERCLA (as defined below) by the United States Environmental Protection Agency (the "EPA") or on the Comprehensive Environmental Response, Compensation, and Liability Information System database maintained by the EPA as a potential CERCLA removal, remedial or response site or (2) is included or proposed for inclusion on, any similar list of potentially contaminated sites pursuant to any other applicable Environmental Law nor has the Company, or any Subsidiary received any written notice from the EPA or any other Governmental Authority proposing the inclusion of any Property on such list. (b) As used herein, "Hazardous Substance" shall include any hazardous substance, hazardous waste, toxic or dangerous substance, pollutant, asbestos-containing materials, PCBs, pesticides, explosives, radioactive materials, dioxins, urea formaldehyde insulation, pollutant or waste, including any such substance, pollutant or waste identified, listed or regulated under any Environmental Law (including, without limitation, materials listed in the United States Department of Transportation Optional Hazardous Material Table, 49 C.F.R. Section 172.101, as the same may now or hereafter be amended, or in the EPA's List of Hazardous Substances and Reportable Quantities, 40 C.F.R. Part 3202, as the same may now or hereafter be amended); "Environment" shall mean any surface water, drinking water, ground 19 21 water, land surface, subsurface strata, river sediment, buildings and structures; "Environmental Law" shall mean the Comprehensive Environmental Response, Compensation and Liability Act, as amended (42 U.S.C. Section 9601, et seq.,) ("CERCLA"), the Resource Conservation Recovery Act, as amended (42 U.S.C. Section 6901, et seq.), the Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.), the Clean Water Act, as amended (33 U.S.C. Section 1251, et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601 et seq.), the Toxic Substances Control Act, as amended (29 U.S.C. Section 651, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), together with all rules, regulations and orders promulgated thereunder and all other federal, state and local laws, ordinances, rules, regulations and orders relating to the protection of the environment from environmental effects; and "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, emanating or disposing of any Hazardous Substance into the Environment, including, without limitation, the abandonment or discard of barrels, containers, tanks (including, without limitation, underground storage tanks) or other receptacles containing or previously containing any Hazardous Substance or any release, emission, discharge or similar term, as those terms are defined or used in any Environmental Law. 3.15 "Employees and Employee Benefit Plans" (a) The Company Reports or Schedule 3.15(a) sets forth a complete and accurate list of all Employee Benefit Plans which affect Employees of the Company or any of its Subsidiaries. With respect to each Employee Benefit Plan and each material Benefit Arrangement (collectively, "Company Plan") (i) the Company and each of its Subsidiaries is in compliance in all material respects with the terms of each Company Plan and with the requirements prescribed by all applicable statutes, orders or government rules or regulations, (ii) the Company and each of its Subsidiaries has contributed all amounts due under each Company Plan, and (iii) none of the Company or any of its Subsidiaries has any funding commitment or other liabilities except as reserved for in the financial statements in or incorporated by reference into the Company Reports, and, in the case of clauses (i) through (iii), except for such matters as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. None of the Company or any of its Subsidiaries has made any commitment to establish any new Employee Benefit Plan, to modify any Employee Benefit Plan, or to increase benefits or compensation of Employees of the Company or any of its Subsidiaries (except for normal increases in compensation consistent with past practices), and to the Company's knowledge, no intention to do so has been communicated to Employees of the Company or any of its Subsidiaries. There are no pending or, to the Company's knowledge, anticipated claims against or otherwise involving any of the Company Plans or any fiduciaries thereof with respect to their duties to the Company Plans and no suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of Company Plan activities) has been brought against or with respect to any such Company Plans that can reasonably be expected to result in a Material Adverse Effect. (b) For purposes hereof, "Employee Benefit Plans" means each and all "employee benefit plans" as defined in Section 3(3) of ERISA maintained or contributed to by a party hereto or in which a party hereto participates or participated and which provides benefits to 20 22 Employees, including (i) any such plans that are "employee welfare benefit plans" as defined in Section 3(1) of ERISA, including retiree medical and life insurance plans ("Welfare Plans"), and (ii) any such plans that constitute "employee pension benefit plans" (including "multiemployer plans") as defined in Section 3(2) of ERISA ("Pension Plans"). "Benefit Arrangements" means life and health insurance, hospitalization, savings, bonus, deferred compensation, incentive compensation, holiday, vacation, severance pay, sick pay, sick leave, disability, tuition refund, service award, company car, scholarship, relocation, patent award, fringe benefit, individual employment, consultancy or severance contracts and agreements and other policies or practices of a party hereto providing employee or executive compensation or benefits to Employees, other than Employee Benefit Plans. "Employees" mean all current employees, former employees and retired employees of a party hereto or any of its Subsidiaries, including employees on disability, layoff or leave status. (c) Neither the Company nor any other employer that is (or at any relevant time was) part of a controlled group (as defined in Section 412(l)(8)(C) of the Code) of which the Company is (or at any relevant time was) a member maintains or has ever maintained a plan covered by Title IV of ERISA. Neither the Company nor any such employer has engaged in any transaction described in Section 4069 or Section 4212(c) of ERISA. (d) The Company represents and warrants that through its investment in the Operating Partnership of which it is the sole general partner and owner of 77.2% of the ownership interests therein, it has been actively engaged in the management or development of real estate in the ordinary course of its business at all times from the date of its first long-term investment that was not a short-term investment of funds pending long-term commitment, ("REOC Qualification Date") to and including the Initial Closing Date, and that it will continue to be so engaged in the management or development of real estate so long as Buyer has any interest in any equity or debt issued by the Company. (e) The Company represents and warrants that the "real estate" referenced above which was purchased on the REOC Qualification Date and thereafter includes the Company Properties. To the extent any of the Company Properties are subject to tenant leases (the "Leases"), the Company has substantial responsibilities under each of the Leases, and none of the Leases provide that substantially all management and maintenance activities with respect to the Property in question or any portion thereof are the responsibility of the tenant leases. (f) The Company represents that it has not merely passively assumed the risks of its real estate ownership, but that the return to its stockholders from its investment in the Properties has been and is based in part on the cash flow and capital appreciation of the Properties, and that such return depends in substantial part on the success of the Company's management and development efforts with respect to the Company Properties. (g) The Company represents and warrants that the employees of the Company perform most of the development and management functions of the real estate business described herein, except that the Company has employed independent contractors, each of which 21 23 is terminable without cause and without substantial penalty upon reasonable short notice, to perform certain of the day-to-day management activities associated with the Company Properties. In any event, the Company represents and warrants that it devotes substantial resources to such management and development activities and to the oversight of its independent contractors who perform such activities. (h) The Company covenants and warrants that it will comply with requirements, and take all procedural action and cause the Operating Partnership to take all procedural actions necessary, to maintain its status as a "real estate operating company" as such term is defined in 29 C.F.R. Section 2510.3-101 (a "REOC"). Specifically, but without limitation, the Company covenants that it has or it will establish an "annual valuation period" (as such term is defined in 29 C.F.R., Section 2510.3-101). The Company agrees to certify to Buyer its compliance with the requirements recited in this paragraph within 10 days after the close of each annual valuation period. Section 3.16 "Affiliate Transactions". The Company Reports set forth an accurate description of all transactions with Affiliates, which are required to be included therein. A true and complete copy of all agreements or contracts relating to any such transaction has been made available to Buyer. Except as set forth in the Company Reports, all such Affiliate transactions were conducted on an arm's-length basis. Section 3.17 "Maryland Takeover Law". The terms of Section 3-602 and Subtitle 7 of Title 3 of the Corporations & Associations Code of Maryland will not apply to Buyer or any transaction contemplated hereby. Section 3.18 "Brokers or Finders". No agent, broker, investment banker or other firm or person, including any of the foregoing that is an Affiliate of the Company, is or will be entitled to any broker's or finder's fee or any other commissions or similar fee from the Company in connection with this Agreement or any of the transactions contemplated hereby for which Buyer will be responsible except as a result of actions by Buyer. Section 3.19 "Knowledge Defined". As used herein, the phrase "to the Company's knowledge" (or words of similar import) shall include the actual knowledge after due inquiry of George Marcus, Keith Guericke, Michael J. Schall, and Jordan Ritter and includes any facts, matters or circumstances set forth in any written notice from any Government Authority, and also including any matter of which Buyer informs the Company in writing. The term "due inquiry" is hereby defined to mean such inquiry by the applicable person as such person would normally be reasonably expected to make in the ordinary course of his regular and usual duties as either an employee or as a board member, as the case may be, of the Company. 22 24 ARTICLE 4 Representations and Warranties of Buyer Each Buyer hereby represents and warrants to the Company, as follows: Section 4.1 "Organization". (a) Buyer is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has all requisite partnership power and authority to own, operate, lease and encumber its properties and carry on its business as now conducted, and to enter into this Agreement, the Stockholders Agreement and to perform its obligations hereunder and thereunder. Section 4.2 "Due Authorization". The execution, delivery and performance of this Agreement, the Registration Rights Agreement, and the Stockholders Agreement have been duly and validly authorized by all necessary partnership action on the part of Buyer. The execution, delivery and performance of the Loan Agreement has been duly and validly authorized by all necessary limited liability company action on the part of Lender. This Agreement has been duly executed and delivered by Buyer for itself and constitutes the valid and legally binding obligations of Buyer enforceable against Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights or general principles of equity. The Loan Agreement has been duly executed and delivered by the Lender for itself and constitutes the valid and legally binding obligations of the Lender enforceable against the Lender in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights or general principles of equity. Section 4.3 "Conflicting Agreements and Other Matters". Neither the execution and delivery of this Agreement nor the performance by Buyer of its obligations hereunder nor the execution and delivery of the Loan Agreement nor the performance by the Lender of its obligations thereunder will conflict with, result in a breach of the terms, conditions or provisions of, constitute a default under, result in the creation of any mortgage, security interest, encumbrance, Lien or charge of any kind upon any of the properties or assets of Buyer or Lender pursuant to, or require any consent, approval or other action by or any notice to or filing with any Government Authority pursuant to, the organizational documents or agreements of Buyer or Lender, or any agreement, instrument, order, judgment, decree, statute, law, rule or regulation by which Buyer or Lender is bound, except for filings after the Initial Closing, the Initial Exchange Closing or any Subsequent Closing under Section 13(d) of the Exchange Act. Section 4.4 "Acquisition for Investment; Sophistication; Source of Funds". Buyer is acquiring the Preferred Stock being purchased by it for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof, and Buyer has no present intention or plan to effect any distribution of shares of Preferred Stock, provided that the disposition of Preferred Stock owned by Buyer shall at all times be and remain within its control and, in the ordinary course of its affairs, the Buyer may effect transfer of any of its assets, including the Preferred Stock, subject to the provisions of this Agreement and the Registration Rights Agreement. Buyer is able to bear the economic risk of the acquisition of Preferred Stock pursuant hereto and can afford to sustain a total loss on such investment, and has such knowledge 23 25 and experience in financial and business matters that it is capable of evaluating the merits and risks of the proposed investment, and therefore has the capacity to protect its own interests in connection with the acquisition of Preferred Stock pursuant hereto. Section 4.5 "Brokers or Finders". No agent, broker, investment banker or other firm or person, including any of the foregoing that is an Affiliate of Buyer is or will be entitled to any broker's or finder's fee or any other commission or similar fee from Buyer in connection with this Agreement or any of the transactions contemplated hereby for which the Company will be responsible except as a result of actions by the Company. Section 4.6 "Investment Company Matters". Buyer is not and after giving effect to the purchase of Preferred Stock contemplated hereby will not be, an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. Section 4.7 "Accredited Investor". Buyer is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, as presently in effect. ARTICLE 5 Covenants Relating to Closings Section 5.1 "Taking of Necessary Action". (a) Each party hereto agrees to use commercially reasonable efforts promptly to take or cause to be taken all action and promptly to do or cause to be done all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, the Loan Agreement, the Registration Rights Agreement and the Stockholders Agreement, subject to the terms and conditions hereof and thereof, including, without limitation, to cause necessary or appropriate amendments to the Operating Partnership's Partnership Agreement; provided, however, this proviso shall not apply to a party's ability to exercise its discretionary rights hereunder to the extent such party's obligations hereunder are conditioned upon the performance of certain conditions precedent which shall be satisfactory to such party in such party's sole discretion. The Company shall use its best efforts promptly to take or cause to be taken all action and promptly to do or cause to be done all things necessary, proper or advisable under applicable laws or regulations to consummate and make effective the Charter Amendment and the IRS Approval. (b) As promptly as practicable after the date hereof, the Company shall prepare and file with the SEC a preliminary proxy statement (the "Proxy Statement") by which the Company's stockholders will be asked to approve the Charter Amendment and other matters in connection with the transactions contemplated hereby as the Company may reasonably suggest and the Buyer may reasonably request, which proposed Charter Amendment shall be in form and substance satisfactory to Buyer. The Proxy Statement as initially filed with the SEC, as it may be amended and refiled with the SEC and as it may be mailed to the Company's stockholders, shall be in form and substance reasonably satisfactory to Buyer. The Company shall use its reasonable 24 26 efforts to respond to any comments of the SEC, and to cause the Proxy Statement to be mailed to the Company's stockholders at the earliest practicable time. As promptly as practicable after the date hereof, the Company shall prepare and file any other filings required under the Exchange Act, the Securities Act or any other federal, state or local laws relating to this Agreement and the transactions contemplated hereby, including under the HSR Act (and shall promptly on request therefore provide Buyer with information requested by Buyer in connection with Buyer's HSR matters and filings) and state takeover laws (the "Other Filings"), and Buyer shall prepare and file any filings required by Buyer under the HSR Act and shall cooperate with the Company in the preparation of any such filings. The Company will notify Buyer promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff or any other government officials for amendments or supplements to the Proxy Statement or any Other Filing or for additional information and will supply Buyer with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC, or its staff or any other government officials, on the other hand, with respect to the Proxy Statement or any Other Filing. The Proxy Statement and any Other Filing shall comply in all material respects with all applicable requirements of law. Buyer shall provide the Company all information about Buyer required to be included or incorporated by reference in the Proxy Statement or any Other Filing and shall otherwise cooperate with the Company in taking the actions described in this paragraph. Whenever any event occurs which is required to be set forth in an amendment or supplement to the Proxy Statement or any Other Filing, the Company or Buyer, as the case may be, shall promptly inform the other party of such occurrence and cooperate in filing with the SEC or its staff or any other government officials, and/or mailing to stockholders of the Company, such amendment or supplement. The Proxy Statement shall include the recommendation of the Board of Directors of the Company that the stockholders of the Company vote in favor of and approve the Charter Amendment and the issuance of Preferred Stock pursuant to this Agreement. (c) Buyer agrees to assist the Company in its preparation of a submission to the IRS seeking IRS Approval, including information as to the nature of Buyer's investors, provided that Buyer may refuse information if it reasonably believes that not doing so would be adverse to its interests. Such submission shall be in form and substance reasonably satisfactory to Buyer. The Company will notify Buyer promptly of the receipt of any comments, notices or requests for additional information from IRS or its staff and will supply Buyer with copies of all correspondence between the Company or any of its representatives on one hand and the IRS or its staff on the other hand. (d) The Company shall call a meeting of its stockholders to be held as promptly as practicable for the purpose of voting upon the Charter Amendment and shall use its best efforts to cause the stockholder approval of the Charter Amendment by August 31, 1996. (e) The parties agree to negotiate in good faith whether to issue Operating Partnership Units to Buyer as contemplated hereby as promptly as practicable after the date hereof. In the event the parties mutually agree for the exchange of Operating Partnership Units, the Company shall propose and submit an amendment to the Partnership Agreement to the limited partners of the Operating Partnership to provide for the exchange of the Loan and Preferred Stock for Operating Partnership Units and shall seek a written consent or call a meeting to vote 25 27 thereon. The Company shall vote all of the Operating Partnership Units held by it at the time of such written consent or meeting in favor of such Amended Partnership Agreement. (f) The Company shall use its best efforts to obtain the requisite lender consents required hereby. Section 5.2 "Registration Rights Agreement". At the Initial Closing, the Company and Buyer shall enter into the Registration Rights Agreement. Section 5.3 "Stockholders Agreement". At the Initial Closing, the Company, Buyer and the Messrs. Marcus and Guericke shall enter into the Stockholders Agreement. Section 5.4 "Modification to Structure". The parties agree to negotiate in good faith modification to the structure of the Operating Partnership and/or the Operating Partnership's investments in, and ownership of, the Property of the Company, (a) to avoid the imposition of a corporate tax on any income of the Operating Partnership, (b) to minimize the effects of UBTI on a direct or indirect investor of the Buyer or (c) to assist Buyer in respect of requirements pertinent to Buyer under ERISA. Unless and until such date Buyer has distributed to its investors aggregate funds exceeding 50% of the net acquisition cost of all assets which it has purchased to such date, the Company and the Operating Partnership, considered as a single entity, or any entity in which the partners and/or the Company and the Operating Partnership, considered as a single entity, owns an interest and which owns any portion of the Property, shall qualify as and/or remain an "operating company" under the plan asset rules of ERISA at 29 C.F.R. 2510.3-101 provided that such actions shall not have a material adverse ffect on Operating Partnership limited partners, considered as a whole. Section 5.5 "Designation of Directors". (a) The Company shall use its best efforts to cause the stockholders of the Company to approve and adopt an amendment to the Company Charter, which permits the termination of Directors such that, upon a failure by the Company to pay dividends on the Preferred Stock in accordance with the Articles Supplementary or in the event of certain breaches thereof: (i) the holders of Preferred Stock shall have the power to cause the removal or resignation of such requisite number of Directors and to appoint the designees to fill such vacancies or, alternatively, (ii) that the Company shall increase the number of authorized directors of its Board of Directors and appoint such persons designated by the holders of Preferred Stock to fill such newly-created vacancies. (b) The Company shall cause the committees of the Board of Directors to include Preferred Stockholder director designees, as set forth in the Articles Supplementary. Section 5.6 "Listing of Preferred Stock". Upon the request of the Buyer, the Company shall use commercially reasonable efforts to list the Preferred Stock on such securities exchanges as may be mutually agreeable between the parties, including, without limitation, the Singapore, Amsterdam and Luxembourg Securities Exchanges, provided that the cost thereof including any 26 28 periodic reporting or listing costs shall be borne by the Buyer and provided further that in the Company's reasonable discretion such listing shall not have an adverse effect on the Company. Section 5.7 "Public Announcements, Confidentiality". (a) Subject to each party's disclosure obligations imposed by law and any stock exchange or similar rules and the confidentiality provisions contained in Section 5.7(b), the Company and Buyer will cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to this Agreement, the Registration Rights Agreement, the Stockholders Agreement and any of the transactions contemplated hereby or thereby. (b) Buyer agrees that all information provided to Buyer or any of its representatives pursuant to this Agreement shall be kept confidential, and Buyer shall not disclose such information to any persons other than the directors, officers, employees, financial advisors, legal advisors, accountants, consultants and affiliates of Buyer who reasonably need to have access to the confidential information and who are advised of the confidential nature of such information; provided, however, the foregoing obligation of Buyer shall not (i) relate to any information that (1) is or becomes generally available other than as a result of unauthorized disclosure by Buyer or by persons to whom Buyer has made such information available, (2) is or becomes available to Buyer on a non-confidential basis from a third party that is not, to Buyer's knowledge, bound by any other confidentiality agreement with the Company, or (ii) prohibit disclosure of any information if required by law, rule, regulation, court order or other legal or governmental process. (c) The Company agrees that all information provided to the Company or any of its representatives pursuant to this Agreement shall be kept confidential, and the Company shall not disclose such information to any persons other than the directors, officers, employees, financial advisors, legal advisors, accountants, consultants and affiliates of the Company who reasonably need to have access to the confidential information and who are advised of the confidential nature of such information; provided, however, the foregoing obligation of the Company shall not (i) relate to any information that (1) is or becomes generally available other than as a result of unauthorized disclosure by the Company or by persons to whom the Company has made such information available, (2) is or becomes available to the Company on a non-confidential basis from a third party that is not, to the Company's bound by any other confidentiality agreement with Buyer, or (ii) prohibit disclosure of any information if requested by law, rule, regulation, court order or other legal or governmental process. Section 5.8 "Information and Access". For so long as Buyer owns 100,000 shares or more of Preferred Stock, the Company and its Subsidiaries shall afford to Buyer and Buyer's accountants, counsel and other representatives full and reasonable access during normal business hours (and at such other times as the parties may mutually agree) to its properties, books, contracts, commitments, records and personnel and, during such period, shall furnish promptly to Buyer (x) a copy of each report, schedule and other document filed or received by it pursuant to the requirements of the Securities Laws, and (y) all other information concerning its business, personnel and the Company Properties as Buyer may reasonably request. Buyer and its 27 29 accountants, counsel and other representatives shall, in the exercise of the rights described in this Section, not unduly interfere with the operation of the business of the Company or its Subsidiaries. Section 5.9 "Notification of Certain Matters". Each of Buyer and the Company shall use its good faith efforts to notify the other party in writing of its discovery of any matter that would render any of such party's or the other party's representations and warranties contained herein untrue or incorrect in any material respect, but the failure of either party to so notify the other party shall not be deemed a breach of this Agreement. ARTICLE 6 Certain Additional Covenants Section 6.1 "Resale". Buyer acknowledges and agrees that the securities that Buyer acquires hereunder will not, as of the relevant Closing thereof, be registered under the Securities Act or the securities laws of any state and that it may be sold or otherwise disposed of only in one or more transactions registered under the Securities Act and, where applicable, state securities laws or as to which an exemption from the registration requirements of the Securities Act and, where applicable, state securities laws is available. Section 6.2 "Use of Funds". The Company shall use the funds received pursuant to the terms hereof, first to repay outstanding indebtedness (of either the Company or the Operating Partnership) and second for the acquisition or development by the Operating Partnership of assets. Section 6.3 "REIT Status". From and after the date hereof and so long as Buyer owns 10% or more of the Company's outstanding Common Stock (for purposes of this provision, the Company's convertible securities, including Preferred Stock, shall be treated as Common Stock on an as-converted basis), the Company will elect to be taxed as a REIT in its federal income tax returns for each of its tax years, will comply with all applicable laws, rules and regulations of the Code relating to a REIT, and will not take any action or fail to take any action which would result in the loss of its status as a REIT for federal income tax purposes. Section 6.4 "Affiliated Transactions". All transactions by and between the Company and any Affiliate of the Company shall be conducted on an arm's-length basis, and if any such transaction involves a cost to the Company to such Affiliate in excess of $500,000 in a single transaction, or in excess of an aggregate $1,000,000 for a series of transactions with all Affiliates in any twelve-month period, shall be on terms and conditions no less favorable (when all aspects of the transactions are considered) to the Company than could be obtained from non-related persons except as disclosed in the Company Reports. Section 6.5 "Loan Agreement Covenants". The Company agrees to take such actions necessary or as may be requested by Buyer to afford Buyer the rights set forth in the Loan Agreement, which is incorporated herein by reference, and hereby authorizes Buyer to take such actions as are reasonably necessary to accomplish such rights. The Buyer agrees to cause Lender to take such actions necessary or as may be requested by the Company to afford the Company the rights set forth in the Loan Agreement, which is incorporated herein by reference, and hereby authorizes the Company to take such actions as are reasonably necessary to accomplish such rights. 28 30 ARTICLE 7 Conditions to Closings Section 7.1 "Conditions of Purchase at Initial Closing". The obligations of Buyer to purchase and pay for the Preferred Stock at the Initial Closing are subject to satisfaction or waiver of each of the following conditions precedent: (a) "Representations and Warranties; Covenants". The representations and warranties of the Company contained herein shall have been true and correct in all respects on and as of the date hereof, and shall be true and correct in all respects on and as of the date of the Initial Closing with the same effect as though such representations and warranties had been made on and as of the date of the Initial Closing (except for representations and warranties that speak as of a specific date or time other than the date of the Initial Closing), other than, in all such cases, such failures to be true and/or correct as would not in the aggregate reasonably be expected to have a Material Adverse Effect; provided, however, that if any of the representations and warranties is already qualified in any respect by materiality or as to Material Adverse Effect for purposes of this Section 7.1(a) such materiality or Material Adverse Effect qualification will be in all respects ignored (but subject to the overall standard as to Material Adverse Effect set forth immediately prior to this proviso). The covenants and agreements of the Company to be performed on or before the date of the Initial Closing in accordance with this Agreement shall have been duly performed in all respects, other than (except for the Company's obligation to deliver the relevant shares of Preferred Stock at the Initial Closing, and for the covenants set forth in Sections 5.2, 5.3 and 6.3 as to which the proviso set forth in this other-than clause shall not apply) for such failures to have been performed as would not in the aggregate reasonably be expected to have a Material Adverse Effect (provided, however, that if any such covenant or agreement is already qualified in any respect by materiality or as to Material Adverse Effect for purposes of determining whether this condition has been satisfied, such materiality or Material Adverse Effect qualification will be in all respects ignored and such covenant or agreement shall have been performed in all respects without regard to such qualification (but subject to the overall exception as to Material Adverse Effect set forth immediately prior to this proviso)). The Company shall have delivered to Buyer at the Initial Closing a certificate of an appropriate officer in form and substance reasonably satisfactory to Buyer dated the date of the Initial Closing to such effect. In making any determination as to Material Adverse Effect under this Section 7.1(a) or under Section 7.2(a), the matters set forth in each such Section shall be aggregated and considered together. (b) "Preferred Stock; Articles Supplementary". The Articles Supplementary shall have been duly filed with the State Department of Assessments and Taxation of the State of Maryland and shall be in full force and effect in form and substance satisfactory to Buyer. 29 31 (c) "Consents". The Company shall have obtained the consents set forth in Schedule 3.4. (d) "No Injunction". There shall not be in effect any order, decree or injunction of a court or agency of competent jurisdiction which enjoins or prohibits consummation of the transactions contemplated hereby and there shall be no pending Actions which could reasonably be expected to have a Material Adverse Effect on the ability of the Company to consummate the transactions contemplated hereby or to issue the Preferred Stock. (e) "Proceedings". All corporate and other proceedings to be taken by the Company in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in form and substance to Buyer and Buyer shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. (f) "Opinion of Counsel". Buyer shall have received an opinion from Morrison & Foerster LLP substantially in form and substance reasonably satisfactory to Buyer. (g) "Bylaws". The Company shall have adopted the amendments to the Company's Bylaws relating to alterations to the size and composition of the Board of Directors in form and substance reasonably satisfactory to Buyer. (h) "Resolutions". Buyer shall have received a certified copy or resolutions of the Board of Directors in form and substance satisfactory to Buyer, relating to the Buyer's and its Affiliates' exemption from the provisions of Section 3 - 602 of the Maryland Corporations and Associations Code. (i) "Registration Rights Agreement". Buyer shall have received the Registration Rights Agreement executed by the Company, in form and substance reasonably satisfactory to Buyer. (j) "Stockholders Agreement". Buyer shall have received the Stockholders Agreement executed by the Company, in form and substance reasonably satisfactory to Buyer. (k) "Disclosure Statement". Buyer shall have received from the Company a Disclosure Statement attaching all Schedules to the Agreement. (l) "NYSE Advice". Buyer shall have received the NYSE Advice. (m) "Maryland Counsel Opinion". If requested by Buyer, Buyer shall have received an opinion of the Company's Maryland counsel in form and substance reasonably satisfactory to Buyer. (n) "Amendment to Investor Rights Agreement". Buyer shall have received from the Company a copy of an amendment to that certain Investor Rights Agreement 30 32 dated as of June 13, 1994 between the Company and the investors party thereto, whereby such investors shall have agreed that their rights thereunder shall be subordinated to the rights of holders of Preferred Stock; (o) "Appointment of Buyer's Designees to Board of Directors and Committees". The Buyer's designee shall have been appointed to the Board of Directors and to all committees pursuant to the terms of the Bylaws and Articles Supplementary. (p) "Preemptive Rights Agreements". Buyer and Company shall have executed an agreement providing for preemptive rights of Buyer, in form and substance reasonably satisfactory to Buyer. Section 7.2 "Conditions of Purchase at Subsequent Closings". The obligations of Buyer to purchase and pay for the shares of Preferred Stock at each Subsequent Closing are subject to satisfaction or waiver of each of the following conditions precedent: (a) "Representations and Warranties; Covenants". The representations and warranties of the Company contained herein shall have been true and correct in all respects on and as of the date hereof, and as of the Initial Closing Date. The covenants and agreements of the Company to be performed on or before the relevant Subsequent Closing Date in accordance with this Agreement shall have been duly performed in all respects, other than (except for the Company's obligation to deliver the relevant shares of Preferred Stock at the relevant Subsequent Closing, as to which the proviso set forth in this other-than clause shall not apply) for such failures to have been performed as would not in the aggregate reasonably be expected to have a Material Adverse Effect, provided, however, that if any such covenant or agreement is already qualified in any respect by materiality or as to Material Adverse Effect for purposes of determining whether this condition has been satisfied, such materiality or Material Adverse Effect or qualification will be in all respects ignored and such covenant or agreement shall have been performed in all respects without regard to such qualification (but subject to the overall exception as to Material Adverse Effect set forth immediately prior to this proviso). The Company shall have delivered to Buyer at the relevant Subsequent Closing a certificate of an appropriate officer in form and substance reasonably satisfactory to Buyer dated the relevant Subsequent Closing Date to such effect. (b) "No Material Adverse Change". Since the Initial Closing Date, there shall not have been any change, circumstance or event which has had or could reasonably be expected to have a Material Adverse Effect. (c) "Operating Partnership Agreement". If Operating Partnership Units are to be purchased by Buyer, the Partnership Agreement shall have been duly and validly amended and restated so that it is in a form which is satisfactory to both the Company and Buyer (the "Amended Partnership Agreement") by the requisite vote or consent of the partners of the Operating Partnership, all as required by and in accordance with the Partnership Agreement. (d) "Amended Company Charter; Modification of Ownership Limit". As to Subsequent Closings under Option A or Option B, the Charter Amendment shall have been approved by the requisite vote of holders of Common Stock, all as required by and in accordance 31 33 with the Company Charter, and duly filed with the State Department of Assessments and Taxation of the State of Maryland and shall be in full force and effect. (e) "No Injunction". There shall not be in effect any order, decree or injunction of a court or agency of competent jurisdiction which enjoins or prohibits consummation of the transactions contemplated hereby and there shall be no pending Actions which could reasonably be expected to have a Material Adverse Effect on the ability of the Company to consummate the transactions contemplated hereby or to issue the Preferred Stock. (f) "Proceedings". All corporate and other proceedings to be taken by the Company in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in form and substance to Buyer and Buyer shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. (g) "REIT Status". The Company shall have elected to be taxed as a REIT in its most recent federal income tax return, and shall be in compliance with all applicable laws, rules and regulations, including the Code, necessary to permit it to be taxed as a REIT. The Company shall not have taken any action or have failed to take any action which would reasonably be expected to, alone or in conjunction with any other factors, result in the loss of its status as a REIT for federal income tax purposes. (h) "Opinion of Counsel". Buyer shall have received an opinion from Morrison & Foerster LLP in such form and substance reasonably satisfactory to Buyer. (i) "IRS Approval". As to the Initial Exchange Closing under Option D, the IRS Approval shall have been obtained and shall be in full force and effect. (j) "Certain Conditions Still True". The conditions precedent set forth in Sections 7.1(c), (e), (h) and (i) shall continue to be satisfied or waived in all respects on and as of each relevant Closing Date. With respect to the Initial Exchange Closing and each Subsequent Closing: (k) "HSR Act". Any waiting period applicable to the consummation of the transactions contemplated hereby under the HSR Act shall have expired or beenterminated, and no action shall have been instituted by the United States Department of Justice or the United States Federal Trade Commission challenging or seeking to enjoin the consummation of the transactions contemplated hereby, which action shall not have been withdrawn or terminated, or the Company and Buyer shall have mutually concluded that no filing under the HSR Act is required with respect to the transactions contemplated hereby. Section 7.3 "Conditions of Sale". The obligation of the Company to issue and sell any Preferred Stock at any closing (including the Initial Closing) is subject to satisfaction or waiver of each of the following conditions precedent: 32 34 (a) "Representations and Warranties; Covenants". The representations and warranties of Buyer contained herein shall have been true and correct in all respects on and as of the date hereof and as of the date of the Initial Closing, other than, in all such cases, such failures to be true and/or correct as would not in the aggregate reasonably be expected to have a Material Adverse Effect on the Company or Buyer's ability to consummate the transactions contemplated hereby; provided, however, that if any of the representations and warranties is already qualified in any respect by materiality or as to Material Adverse Effect for purposes of this Section 7.3(a) such materiality or Material Adverse Effect qualification will be in all respects ignored (but subject to the overall standard as to Material Adverse Effect set forth immediately prior to this proviso). The covenants and agreements of Buyer to be performed on or before the relevant Closing Date in accordance with this Agreement shall have been duly performed in all respects, other than (except for Lender's obligations under the Loan Agreement, Buyer's obligation to pay the relevant Purchase Price at the relevant Closing, including any Closing under Section 2.5(b), and except for Buyer's covenants set forth in Sections 5.2 and 5.3, as to which the proviso set forth in this other-than clause shall not apply) for such failures to have been performed as would not in the aggregate reasonably be expected to have a Material Adverse Effect on the Company or Buyer's ability to consummate the transactions contemplated hereby (provided, however, that if any such covenant or agreement is already qualified in any respect by materiality or as to Material Adverse Effect for purposes of determining whether this condition has been satisfied, such materiality or Material Adverse Effect qualification will be in all respects ignored and such covenant or agreement shall have been performed in all respects without regard to such qualification (but subject to the overall exception as to Material Adverse Effect set forth immediately prior to this proviso)). Buyer shall have delivered to the Company at the relevant Closing a certificate of an appropriate officer in form and substance reasonably satisfactory to the Company dated the relevant Closing Date to such effect. (b) "No Injunction". There shall not be in effect any order, decree or injunction of a court or agency of competent jurisdiction which enjoins or prohibits consummation of the transactions contemplated hereby and there shall be no pending Actions which would reasonably be expected to have a material adverse effect on the ability of Buyer to consummate the transactions contemplated hereby or to acquire the Preferred Stock. (c) "Consents". The Company shall have obtained the consents set forth in Schedule 3.4. (d) "Proceedings". All corporate and other proceedings to be taken by Buyer in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in form and substance to the Company and the Company shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. (e) "Opinion of Counsel". The Company shall have received an opinion from counsel to Buyer in form and substance reasonably satisfactory to the Company. 33 35 (f) "Bylaws". The Company shall have adopted the amendments to the Company's Bylaws relating to alterations to the size and composition of the Board of Directors. (g) "Registration Rights Agreement". The Company shall have received the Registration Rights Agreement executed by the Buyer in form and substance satisfactory to the Company. (h) "Stockholders Agreement". The Company shall have received the Stockholders Agreement executed by the Buyer in form and substance satisfactory to the Company. With respect to any Subsequent Closing only: (x) "Amended Company Charter; Modification of Ownership Limit". As to Subsequent Closings under Option A or Option B, the Charter Amendment shall have been approved by the requisite vote of holders of Common Stock, all as required by and in accordance with the Company Charter, and duly filed with the State Department of Assessments and Taxation of the State of Maryland and shall be in full force and effect. (y) "Operating Partnership Agreement". If Operating Partnership Units are to be purchased by Buyer, the Partnership Agreement shall have been duly and validly amended and restated as the Amended Partnership Agreement by the requisite vote or consent of the partners of the Operating Partnership, all as required by and in accordance with the Partnership Agreement. (z) "HSR Act". Any waiting period applicable to the consummation of the transactions contemplated hereby under the HSR Act shall have expired or been terminated, and no action shall have been instituted by the United States Department of Justice or the United States Federal Trade Commission challenging or seeking to enjoin the consummation of the transactions contemplated hereby, which action shall not have been withdrawn or terminated, or the Company and Buyer shall have mutually concluded that no filing under the HSR Act is required with respect to the transactions contemplated hereby. ARTICLE 8 Survival; Indemnification Section 8.1 "Survival". All representations, warranties and (except as provided by the last sentence of this Section 8.1) covenants and agreements of the parties contained herein, including indemnity or indemnification agreements contained herein, or in any Schedule or Exhibit hereto, or any certificate, document or other instrument delivered in connection herewith shall survive the Initial Closing until 18 months after the Initial Closing. No Action or proceeding may be brought with respect to any of the representations and warranties, or any of the covenants or agreements which survive until 18 months after the Initial Closing, unless written notice thereof, setting forth in reasonable detail the claimed misrepresentation or breach of warranty or breach of covenant or agreement, shall have been delivered to the party alleged to have breached such representation or warranty or such covenant or agreement prior to 18 months after the Initial Closing; provided, however, that, if Buyer shall have complied with this Section 8.1, the damages 34 36 for breach by the Company of any of the representations and warranties, or any of the covenants or agreements which survive until 18 months after the Initial Closing, shall be measured with respect to all of Buyer's purchases of Preferred Stock hereunder and not with respect only to Buyer's purchases hereunder made during the period ending 18 months after the Initial Closing, but such measurement shall not in any event include any shares of Preferred Stock that Buyer may have purchased other than from the Company. Notwithstanding the foregoing, those covenants or agreements that contemplate or may involve actions to be taken or obligations in effect after the Initial Closing shall survive in accordance with their terms, and representations and warranties of the Company contained in Section 3.10 herein shall survive until the running of the applicable statutes of limitations. Section 8.2 "Indemnification by Buyer or the Company". (a) Subject to Section 8.1, from and after any Closing Date, Buyer shall indemnify and hold harmless the Company, its successors and assigns, from and against any and all damages, claims, losses, expenses, costs, obligations, and liabilities, including liabilities for all reasonable attorneys' fees and expenses (including attorney and expert fees and expenses incurred to enforce the terms of this Agreement) (collectively, "Loss and Expenses") suffered, directly or indirectly, by the Company by reason of, or arising out of, (i) any breach as of the date made or deemed made or required to be true of any representation or warranty made by Buyer in or pursuant to this Agreement, or (ii) any failure by Buyer to perform or fulfill any of its covenants or agreements set forth herein. Notwithstanding any other provision of this Agreement to the contrary, in no event shall Loss and Expenses include a party's incidental or consequential damages. (b) Subject to Section 8.1, from and after any Closing Date, the Company shall indemnify and hold harmless Buyer, its successors and assigns, from and against any and all Loss and Expenses, suffered, directly or indirectly, by Buyer by reason of, or arising out of, (i) any breach as of the date made or deemed made or required to be true of any representation or warranty made by the Company in or pursuant to this Agreement and any statements made in any certificate delivered pursuant to this Agreement, or (ii) any failure by the Company to perform or fulfill any of its covenants or agreements set forth herein. Notwithstanding any other provision of this Agreement to the contrary, in no event shall Loss and Expenses include a party's incidental or consequential damages. (c) Notwithstanding the foregoing, (i) neither Buyer nor the Company shall be responsible for any Loss and Expenses as provided by paragraphs (a) and (b), respectively, of this Section 8.2, until the cumulative aggregate amount of such Loss and Expenses suffered by Buyer or the Company, as the case may be, exceeds $1,000,000, and only to the extent such Losses and Expenses exceed $1,000,000, in which case Buyer or the Company, as the case may be, shall then be liable for all such Loss and Expenses, and (ii) the cumulative aggregate indemnity obligation of each of Buyer and the Company under this Section 8.2 shall in no event exceed $40,000,000. Except with respect to third-party claims being defended in good faith or claims for indemnification with respect to which there exists a good faith dispute, the indemnifying party shall satisfy its obligations hereunder within 30 days of receipt of a notice of claim under this Article 8. 35 37 Section 8.3 "Third-Party Claims". If a claim by a third party is made against an Indemnified Party and if such Indemnified Party intends to seek indemnity with respect thereto under this Article, such Indemnified Party shall promptly notify the indemnifying party in writing of such claims setting forth such class in reasonable detail. The indemnifying party shall have 20 days after receipt of such notice to undertake, through counsel of its own choosing and at its own expense, the settlement or defense thereof, and the Indemnified Party shall cooperate with it in connection therewith; provided, however, that the Indemnified Party may participate in such settlement or defense through counsel chosen by such Indemnified Party, provided that the fees and expenses of such counsel shall be borne by such Indemnified Party. The Indemnified Party shall not pay or settle any claim which the indemnifying party is contesting. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such claim, provided that in such event it shall waive any right to indemnity therefor by the indemnifying party. If the indemnifying party does not notify the Indemnified Party within 20 days after the receipt of the Indemnified Party's notice of a claim of indemnity hereunder that it elects to undertake the defense thereof, the Indemnified Party, with the Indemnifying Party's consent not to be unreasonably withheld or delayed, shall have the right to contest, settle or compromise the claim but shall not thereby waive any right to indemnity therefor pursuant to this Agreement. ARTICLE 9 Miscellaneous Section 9.1 "Counterparts". This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other party. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section, provided receipt of copies of such counterparts is confirmed. Section 9.2 "Governing Law". THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. Section 9.3 "Consequential Damages". In no event will either party be liable to the other in contract, tort or otherwise for any consequential, indirect, exemplary, incidental or special damages arising out of or relating to this Agreement. Section 9.4 "Entire Agreement". This Agreement (including agreements incorporated herein) and the Schedules and Exhibits hereto contain the entire agreement between the parties with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to herein. This Agreement is not intended to confer upon any person not a party hereto (and their successors and assigns) any rights or remedies hereunder. Section 9.5 "Notices". All notices and other communications hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by 36 38 documented overnight delivery service or, to the extent receipt is confirmed, telecopy, telefax or other electronic transmission service to the appropriate address or number as set forth below. Notices to the Company shall be addressed to: with a copy to: Essex Property Trust, Inc. 777 California Avenue Palo Alto, CA 94304 Attn: Keith Guericke with a copy to: Michael Schall Essex Property Trust, Inc. 777 California Avenue Palo Alto, CA 94304 and another copy to: Jordan Ritter Essex Property Trust, Inc. 777 California Avenue Palo Alto, CA 94304 or at such other address and to the attention of such other person as the Company may designate by written notice to Buyer. Notices to Buyer shall be addressed to: with a copy to: Patrick K. Fox General Counsel Westbrook Partners, L.L.C. 14400 North Dallas Parkway, #200 Dallas, Texas 75240 with a copy to: Keith Gelb Vice President Westbrook Partners, L.L.C. 11150 Santa Monica Boulevard Los Angeles, California 90023 and another copy to: Allen Curtis Greer, II Rogers & Wells 200 Park Avenue New York, New York 10166 Section 9.6 "Successors and Assigns". This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 9.7 "Headings". The Section, Article and other headings contained in this Agreement are inserted for convenience of reference only and will not affect the meaning or 37 39 interpretation of this Agreement. All references to Sections or Articles contained herein mean Sections or Articles of this Agreement unless otherwise stated. Section 9.8 "Amendments and Waivers". This Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought. Either party hereto may, only by an instrument in writing, waive compliance by the other party hereto with any term or provision hereof on the part of such other party hereto to be performed or compiled with. The waiver by any party hereto of a breach of any term or provision hereof shall not be construed as a waiver of any subsequent breach. Section 9.9 "Interpretation; Absence of Presumption". (a) For the purposes hereof, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof', "herein", and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules and Exhibits hereto) and not to any particular provision of this Agreement, and Article, Section, paragraph, Exhibit and Schedule references are to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise specified, (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless the context otherwise requires or unless otherwise specified, (iv) the word "or" shall not be exclusive, and (v) provisions shall apply, when appropriate, to successive events and transactions. (b) This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party, drafting or causing any instrument to be drafted. Section 9.10 "Severability". Any provision hereof which is invalid or unenforceable shall be ineffective to the extent of such invalidity or unenforceability, without affecting in any way the remaining provisions hereof. Section 9.11 "Further Assurances". The Company and Buyer agree that, from time to time, whether before, at or after any Closing Date, each of them will execute and deliver such further instruments of conveyance and transfer and take such other action as may be necessary to carry out the purposes and intents hereof. Section 9.12 "Specific Performance". Buyer and the Company each acknowledge that, in view of the uniqueness of the parties hereto, the parties hereto would not have an adequate remedy at law for money damages in the event that this Agreement were not performed in accordance with its terms, and therefore agree that the parties hereto shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which the parties hereto may be entitled at law or in equity. 38 40 Section 9.13 "Schedules". Any matter set forth on any Schedule shall be deemed to be referred to on all other Schedules to which such matter logically relates and where such reference would be appropriate and can reasonably be inferred from the matters disclosed on the first Schedule as if set forth on such other Schedules. Section 9.14 "Expenses". Except as set forth in this Agreement, whether or not any purchase of Preferred Stock contemplated hereby is consummated, all reasonable legal and other costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Company. * * * 39 41 IN WITNESS WHEREOF, this Agreement has been signed by, or on behalf of each of the parties hereto as of the day first above written. TIGER/WESTBROOK REAL ESTATE FUND, L.P., a Delaware limited partnership By: Tiger/Westbrook Real Estate Partners Management, L.L.C., a Delaware limited liability company, General Partner By: Westbrook Real Estate Fund I, L.L.C., a Delaware limited liability company, Managing Member By: /s/ W. H. Walton --------------------------------- William H. Walton III, Managing Member TIGER/WESTBROOK REAL ESTATE CO- INVESTMENT PARTNERSHIP, L.P., a Delaware limited partnership By: Tiger/Westbrook Real Estate Partners Management, L.L.C., a Delaware limited liability company, General Partner By: Westbrook Real Estate Fund I, L.L.C., a Delaware limited liability company, Managing Member By: /s/ W. H. Walton ----------------------------- William H. Walton III, Managing Member 42 ESSEX PROPERTY TRUST, INC. By: /s/ Jordan E. Ritter ------------------------ Name: Jordan E. Ritter Title: Vice President EX-10.2 5 AMENDMENT #1 TO THE STOCK PURCHASE AGREEMENT 1 AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT THIS AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT ("Amendment"), dated as of July 1, 1996, is made by and between Essex Property Trust, Inc., a Maryland corporation (the "Company"), and Tiger/Westbrook Real Estate Fund, L.P., a Delaware limited partnership, and Tiger/Westbrook Real Estate Co-Investment Partnership, L.P., a Delaware limited partnership (individually and collectively, and including any nominee or nominees in whose name securities may be held, "Buyer"). R E C I T A L S: WHEREAS, the parties hereto entered into that certain Stock Purchase Agreement, dated as of June 20, 1996 (the "Stock Purchase Agreement"), whereby, subject to certain conditions, the Company agreed to sell to the Buyer and the Buyer agreed to purchase from the Company an aggregate of 280,000 shares of a newly authorized series of preferred stock of the Company designated as 8.75% Convertible Preferred Stock, Series 1996A (the "Preferred Stock"), having the terms set forth in the form of Company's Articles Supplementary attached as Exhibit A thereto (the "Articles Supplementary") establishing the rights, privileges and preferences of the Preferred Stock, at a price of $25.00 per share; WHEREAS, an affiliate of Buyer and the Company entered into that certain Loan Facility Agreement, dated as of June 20, 1996, as amended to the date hereof (as amended, the "Loan Agreement"), whereby T/W Essex Funding, L.L.C. (the "Lender"), agreed to lend to the Company and the Company agreed to borrow from the Lender up to an aggregate of $31,500,000, and portions of such borrowed funds were, under the circumstances set forth in the Loan Agreement, to be repaid or exchangeable for additional shares of Preferred Stock or, if the Company and Buyer so agree, Operating Partnership Units or other interests, subject to the terms and conditions set forth therein; WHEREAS, the parties hereto desire, among other things, to provide that the Buyer shall purchase an aggregate of 340,000 shares of Preferred Stock at the Initial Closing (as defined herein) and may, subject to the terms and conditions hereof, of the Stock Purchase Agreement and the Loan Agreement, purchase up to an aggregate of 1,600,000 shares of Preferred Stock; and WHEREAS, the parties hereto have agreed, among other things, to amend and modify the Stock Purchase Agreement as set forth herein. AGREEMENTS: NOW, THEREFORE, in consideration of the foregoing premises and covenants hereinafter set forth, and other good and valuable consideration had and received, the parties hereto, upon the terms and subject to the conditions contained herein, hereby agree as follows: 1 2 1. Definitions; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Stock Purchase Agreement has the meaning ascribed to such term in the Stock Purchase Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference contained in the Stock Purchase Agreement shall from and after the date hereof refer to the Stock Purchase Agreement as amended hereby. 2. Amendment to Preamble to Definitions. The Preamble to the Definitions in Article I of the Stock Purchase Agreement shall be amended by adding "All references in this Agreement to any other agreement or instrument shall include such other agreement or instrument as the same may be amended, modified, reaffirmed or supplemented on or before the date hereof in accordance with the terms thereof." immediately following the first sentence thereof. 3. Amendment to Section 2.1. Section 2.1 of the Stock Purchase Agreement is hereby amended (a) by deleting the term "280,000" in the third line thereof and inserting the term "340,000" in its place and stead, and (b) by deleting the term "$7,000,000" in the fourth line thereof and inserting the term "$8,500,000" in its place and stead. 4. Amendment to Section 2.2(b). Section 2.2(b) of the Stock Purchase Agreement shall be amended by deleting the words "including the delivery of the Diligence Fee," in the first and second lines thereof. 5. Amendment to Section 2.3(I)(a). Section 2.3(I)(a) of the Stock Purchase Agreement shall be amended (a) by deleting the term "$13,000,000" in the second line thereof and inserting the term "$11,500,000" in its place and stead, and (b) by deleting the term "520,000" in the third line thereof and inserting the term "460,000" in its place and stead. 6. Amendment to Section 2.3(I)(b). Section 2.3(I)(b) of the Stock Purchase Agreement shall be amended (a) by deleting the term "$13,000,000" in the second line thereof and inserting the term "$11,500,000" in its place and stead, and (b) by deleting the term "520,000" in the third line thereof and inserting the term "460,000" in its place and stead. 7. Amendment to Section 2.3(I)(c). Section 2.3(I)(c) of the Stock Purchase Agreement shall be deleted in its entirety. 8. Amendment to Section 2.3(I)(d). Section 2.3(I)(d) of the Stock Purchase Agreement shall be amended (a) by deleting the term "$13,000,000" in the second line thereof and inserting the term "$11,500,000" in its place and stead, and (b) by deleting the term "520,000" in the third line thereof and inserting the term "460,000" in its place and stead and (c) by deleting the term "240,000" in the fifth line thereof and inserting the term "280,000" in its place and stead. 9. Amendment to Section 5.1(d). Section 5.1(d) of the Stock Purchase Agreement shall be amended by deleting the words "August 31" in the third line thereof and inserting the words "September 30" in their place and stead. 10. Amendment to Article 5. Article 5 of the Stock Purchase Agreement shall be amended to add the following new Section 5.10: 2 3 "Section 5.10 Stockholders Agreements. The Company agrees that it shall not knowingly permit the transfer, or knowingly allow the Operating Partnership to permit the transfer, of the interests restricted from transfer pursuant to the terms of the Stockholders Agreements each dated July 1, 1996 among Mr. Guericke, the Company and Buyer and among Mr. Marcus, the Company and Buyer, respectively. If the Operating Partnership is requested to transfer Partnership Units of the Operating Partnership now held by either of Messrs. Marcus or Guericke directly, or indirectly by the person or persons holding of record as reflected in the Company's 1996 Proxy Statement, the Company will make reasonable inquiries and use its reasonable efforts to ascertain that any such transfer is not in violation of the terms of the applicable Stockholders Agreement. The Company will also monitor the Form 4 and Form 5 Reports that each of Messrs. Marcus or Guericke files with the Securities and Exchange Commission to ascertain that their transfers are in compliance with the terms of the applicable Stockholders Agreement." 11. Addition of Article 10. The Stock Purchase Agreement shall be amended by inserting the following Article 10 therein: "ARTICLE 10 "Preemptive Right "10.1 Preemptive Right. For so long as any shares of Preferred Stock are outstanding, the Buyer shall have the rights set forth in this Article 10 as if it was the holder of record and beneficially of all such outstanding shares. The rights set forth herein are in favor of the Buyer and its successors and assigns, provided that any exercise procedures to be accomplished hereunder shall be performed by the Buyer or its nominee and no other person may accomplish such procedures or seek to exercise the preemptive right set forth in this Article 10. Absent an express assignment of the rights of the Buyer under this Article 10, no transfer by the Buyer of shares of Preferred Stock shall affect the rights of the Buyer hereunder. "The Buyer shall have, as if it were the holder of each and every of the issued and outstanding shares of Preferred Stock, at any time and from time to time the preemptive right to purchase, in the case of the proposed issuance by the Company of, or the proposed granting by the Company of shares of, any class of the Company's stock ("Capital Stock"), or any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or securities convertible into or exchangeable for Common Stock (including, without limitation, interests in the Operating Partnership) (such rights or options being hereinafter referred to as "Options" and such convertible or exchangeable stock or securities being hereinafter referred to as "Convertible Securities"). On each occasion that the Company proposes to issue Capital Stock, Options or Convertible Securities, or any of the foregoing, the Company shall give to the 3 4 Buyer prior written notice (the "Company Notice") of its intention, by first class mail, postage prepaid, addressed at its last address as shown by the records of the Company, describing the same, the price and the specific terms (or in the context of an offering of Capital Stock, Convertible Securities or Options to the public, a range of price and terms) upon which the Company proposes to issue the same. The Buyer shall have fifteen (15) days from the date of the receipt by the Buyer of the Company Notice to deliver a notice (the "Rights Exercise Notice") notifying the Company of the Buyer's intention to purchase all or a part of its pro rata share of shares or other securities represented by Capital Stock, Options or Convertible Securities, or any of the foregoing, in accordance herewith, for the price and upon the terms specified by the Company Notice, such pro rata share to be that number of such shares or securities or Capital Stock, Options or Convertible Securities, or any of the foregoing, as shall bear the same proportion to the aggregate number of such shares or securities or Capital Stock, Options or Convertible Securities, or any of the foregoing, to be issued or sold as (i) the number of shares of Common Stock as are issuable upon conversion of the Preferred Stock issued and outstanding on the date of the Company Notice bears to (ii) the sum of (A) the total number of shares of Common Stock issued and outstanding on the date of the Company Notice and (B) the number of shares of Common Stock issuable upon conversion or exercise of the Preferred Stock and any Convertible Securities or Options, or both, issued and outstanding on the date of the Company Notice, and at a price or prices no less favorable to the Buyer than the price or prices at which such Capital Stock, Convertible Securities or Options are proposed to be offered for sale to others, provided, however, that the purchase of such Capital Stock, Convertible Securities or Options shall be consummated prior to the later of (x) thirty (30) days after the date of the Rights Exercise Notice and (y) the date the Company consummates the issuance of the Capital Stock, Convertible Securities or Options described in the Company Notice. If, in connection with any proposed issue of Capital Stock, Convertible Securities or Options, the Buyer fails to exercise in full its preemptive right as set forth in this Article 10 then, subject to the next following sentence, the Company may sell the unsold Capital Stock, Convertible Securities or Options at any time within 180 days (60 days in the case of a public offering) thereafter at a price and upon terms no more favorable to the purchasers thereof than specified in the Company Notice; provided, that the Company shall not sell or grant, or permit conversion under, any Capital Stock, Convertible Securities or Options, or any of the foregoing, after such 180 - day period (or 60 - day period in the case of a public offering) without renewed compliance with this Section 10.1; provided, further, that in the case of an underwritten public offering of Securities, if in the opinion of the Company and the underwriter, such renewed compliance by the Company with the procedural requirements hereunder (i.e., timing of notices, etc.) would otherwise impede the consummation of such public offering, the parties agree to take such further action as may be reasonably necessary to effectuate such offering while preserving Buyer's substantive preemptive right hereunder. 4 5 "10.2 Certain Exclusions. The provisions of this Section 10 shall not apply to any shares of any class of the Company's Capital Stock or Options or Convertible Securities, or both (i) issuable upon conversion of any Preferred Stock; (ii) issuable upon conversion of Convertible Securities or the exercise of Options, or both, if the Buyer was offered the opportunity to purchase such shares or securities, or Convertible Securities or Options, or both, pursuant to this Article 10, and declined the same, or as to which the Buyer was not given such opportunity by reason of the application of this Article 10; (iii) issuable in connection with stock splits, stock dividends or recapitalizations as to the effects of which adjustment will be made as provided elsewhere herein or in the Articles Supplementary pertaining to the Preferred Stock; or (iv) issuable to employees and prospective employees pursuant to any plan or pattern of employee equity participation or issuable in connection with the Company's Dividend Reinvestment Plan. "10.3 Adjustments Prior to the Defining Event. Notwithstanding the foregoing, in the event the Company delivers the Company Notice to the Buyer on a date prior to the earliest to occur of (A) December 15, 1996, (B) the Stockholder Approval Date, (C) the later of (x) the Stockholder Rejection Date and (y) the IRS Approval Date (the earliest to occur of (A), (B) and (C), above, shall hereinafter be referred to as the "Defining Event"), the following shall apply: (i) subject to subsections (iv) and (v), below, the Buyer shall have the preemptive right to purchase all or part of its pro rata share of Capital Stock, Options or Convertible Securities (collectively, "Securities"), which pro rata share shall equal such number of Securities which bears the same proportion to the aggregate number of Securities to be issued or sold as (a) the number of shares issuable upon conversion of 800,000 shares of Preferred Stock bears to (b) the sum of (I) the total number of shares of Common Stock issued and outstanding on the date of the Company Notice and (II) the number of shares of Common Stock issuable upon conversion of 800,000 shares of Preferred Stock and any Convertible Securities or Options issued and outstanding on the date of the Company Notice; (ii) the Buyer's Rights Exercise Notice must be delivered to the Company within fifteen (15) days of receipt by the Buyer of the Company Notice; (iii) the Buyer must consummate any purchases hereunder on or prior to the later of (a) forty-five (45) days after the Defining Event and (b) the date the Company consummates the issuance of the Securities specified in the Company Notice; 5 6 (iv) if and to the extent that on the date of or following the Defining Event, the Buyer is prevented or prohibited from the exercise in full or in part of its preemptive right to purchase any Securities due to restrictions on the ownership by the Buyer (or any group of holders with which such the Buyer may be affiliated or may be deemed to be affiliated) of any of such Securities, whether under applicable Maryland law, provisions of the Company's Charter, any Articles Supplementary thereto or ByLaws, or by reason of restrictions applicable for purposes of the Company's continued qualification as a 'real estate investment trust' for purposes of the Internal Revenue Code of 1986, as amended from time to time (the "Exercise Restriction"), such number of Securities required to be purchased pursuant to such preemptive right shall automatically be reduced to such amount as to not exceed the Exercise Restriction. (v) Provided further, notwithstanding Section 10.3(i), in the event that, after the date of the Defining Event, the Company issues Securities (the date of such issuance, the "Issuance Date") specified in the Company Notice applicable to such securities and such Company Notice was dated a date before the date of the Defining Event, the Buyer shall have the preemptive right to purchase all or part of its pro rata share of Securities which pro rata share shall equal such number of Securities which bears the same proportion to the aggregate number of Securities sold on the Issuance Date as (a) the number of shares issuable upon conversion of the issued and outstanding Preferred Stock on the Issuance Date bears to (b) the sum of (I) the total number of shares of Common Stock issued and outstanding on the Issuance Date and (II) the number of shares of Common Stock issuable upon conversion of the issued and outstanding Preferred Stock on the Issuance Date and any other Securities issued and outstanding on the Issuance Date." 12. Amendment to Section 9.2. Section 9.2 of the Stock Purchase Agreement is hereby amended by deleting Section 9.2 in its entirety and inserting in lieu thereof: "(a) OTHER THAN WITH RESPECT TO THE PROVISIONS OF ARTICLE 10, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. ARTICLE 10 OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT OR OF ANY COURT OF THE STATE OF MARYLAND WHICH IS LOCATED IN THE CITY BALTIMORE, MARYLAND, IN ANY 6 7 ACTION, SUIT OR PROCEEDING BROUGHT AND RELATED TO OR IN CONNECTION WITH THE RIGHTS AND OBLIGATIONS SET FORTH IN ARTICLE 10 OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY ARTICLE 10 AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THE RIGHTS AND OBLIGATIONS SET FORTH IN ARTICLE 10 OR ANY DOCUMENT OR ANY INSTRUMENT REFERRED TO THEREIN OR THE SUBJECT MATTER HEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT. "(b) The parties to this Agreement agree to use their best efforts to cause the provisions of Section 9.2(a) to be observed. "(c) The parties hereto knowingly, voluntarily and expressly waive all right to trial by jury in any action, proceeding or counterclaim enforcing or defending any rights arising out of or relating to this Agreement or the transactions contemplated hereby. Each of the parties acknowledge that the provisions of this Section 9.2(c) have been bargained for and that it has been represented by counsel in connection therewith." 13. Full Force and Effect. Except as specifically amended and modified hereby, the Stock Purchase Agreement shall remain in full force and effect and no party hereto waives any of its rights under the Stock Purchase Agreement. 14. Counterparts. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other party. Copies of executed counterparts have been signed by each party hereto and delivered to the other party. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section, provided receipt of copies of such counterparts is confirmed. 7 8 15. Consequential Damages. In no event will either party be liable to the other in contract, tort or otherwise for any consequential, indirect, exemplary, incidental or special damages arising out of or relating to this Amendment. 16. Entire Agreement. The Stock Purchase Agreement, as amended hereby (including agreements incorporated herein or therein), and the Schedules and Exhibits thereto contain the entire agreement between the parties with respect to the subject matter hereof and thereof and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to herein or therein. This Amendment is not intended to confer upon any person not a party hereto (and their successors and assigns) any rights or remedies hereunder. 17. Successors and Assigns. Except as otherwise provided herein, this Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 18. Headings. The Section headings contained in this Amendment are inserted for convenience of reference only and will not affect the meaning or interpretation of this Amendment. 19. Amendments and Waivers. This Amendment may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought. Either party hereto may, only by an instrument in writing, waive compliance by the other party hereto with any term or provision hereof on the part of such other party hereto to be performed or complied with. The waiver by any party hereto of a breach of any term or provision hereof shall not be construed as a waiver of any subsequent breach. 20. Absence of Presumption. This Amendment shall be construed without regard to any presumption or rule requiring construction or interpretation against the party, drafting or causing any instrument to be drafted. 21. Severability. Any provision hereof which is invalid or unenforceable shall be ineffective to the extent of such invalidity or unenforceability, without affecting in any way the remaining provisions hereof. 22. Further Assurances. The Company and Buyer agree that, from time to time, each of them will execute and deliver such further instruments of conveyance and transfer and take such other action as may be necessary to carry out the purposes and intents hereof. 23. Specific Performance. Buyer and the Company each acknowledge that, in view of the uniqueness of the parties hereto, the parties hereto would not have an adequate remedy at law for money damages in the event that this Amendment were not performed in accordance with its terms, and therefore agree that the parties hereto shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which the parties hereto may be entitled at law or in equity. 8 9 24. Expenses. Whether or not any purchase of Preferred Stock contemplated hereby is consummated, all reasonable legal and other costs and expenses incurred in connection with this Amendment and the transactions contemplated hereby shall be paid by the Company. * * * 10 IN WITNESS WHEREOF, the parties have duly executed, or have caused their duly authorized officer or representative to execute, this Amendment No. 1 to Stock Purchase Agreement as of the date first above written. TIGER/WESTBROOK REAL ESTATE FUND, L.P., a Delaware limited partnership By: Tiger/Westbrook Real Estate Partners Management, L.L.C., a Delaware limited liability company, General Partner By: Westbrook Real Estate Fund I, L.L.C., a Delaware limited liability company, Managing Member By: /s/ W.H. Walton III ------------------------------------------- William H. Walton III, Managing Member By: /s/ Paul D. Kazilionis ------------------------------------------- Paul D. Kazilionis Managing Member TIGER/WESTBROOK REAL ESTATE CO-INVESTMENT PARTNERSHIP, L.P., a Delaware limited partnership By: Tiger/Westbrook Real Estate Partners Management, L.L.C., a Delaware limited liability company, General Partner By: Westbrook Real Estate Fund I, L.L.C., a Delaware limited liability company, Managing Member By: /s/ W.H. Walton III ------------------------------------------- William H. Walton III, Managing Member By: /s/ Paul D. Kazilionis ------------------------------------------- Paul D. Kazilionis Managing Member 9 11 ESSEX PROPERTY TRUST, INC. By: /s/ Michael Schall ------------------------------------------------------ Name: Michael Schall --------------------------------------------- Title: CFO -------------------------------------------- 10 EX-10.3 6 FIRST AMENDMENT TO INVESTOR RIGHTS AGREEMENT 1 FIRST AMENDMENT TO INVESTOR RIGHTS AGREEMENT This First Amendment (the "Amendment") to the Investor Rights Agreement dated June 13, 1994 (the "Agreement") among George M. Marcus, Essex Property Trust, Inc., a Maryland corporation (the "Company"), and certain other individuals (Mr. Marcus and such other individuals, the "Holders"), pursuant to which the Company has granted certain registration rights to the Holders, is executed as of this 1st day of July, 1996, by and between the Company, George M. Marcus, and The Marcus and Millichap Company (Mr. Marcus and The Marcus and Millichap Company are collectively referred to as the "Investor"); the Investor in the aggregate holds more than seventy percent (70%) of the outstanding Registrable Securities. Capitalized terms used herein shall have the meaning set forth in the Agreement, unless otherwise specified. A. Amendment Pursuant to Section B(6) of the Agreement, the parties hereto hereby agree that Section A(11) of the Agreement is hereby amended in its entirety to read as follows: "11. Limitations on Subsequent Registration Rights. From and after the date hereof, the Company shall not enter into any agreement granting any holder or prospective holder of any securities of the Company registration rights with respect to such securities unless such new registration rights, including standoff obligations, are subordinate to the registration rights granted Holders hereunder; provided, however, that the registration rights of the Holders of the Registrable Securities shall be subordinate to the registration rights of the holders of the Company's 8.75% Convertible Preferred Stock, Series 1996A (the `Preferred Stock') as of the initial date of issuance of shares of the Preferred Stock." This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. B. Miscellaneous 1. Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Amendment shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Amendment, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Amendment, except as expressly provided in this Amendment. 2. Governing Law. This Amendment shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California. 3. Titles and Subtitles. The titles and subtitles used in this Amendment are used for convenience only and are not to be considered in construing or interpreting this Amendment. 4. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Amendment, the prevailing party shall be entitled to reasonable attorneys' fees, costs and disbursements in addition to any other relief to which such party may be entitled. 2 IN WITNESS WHEREOF, this First Amendment to the Agreement has been executed as of July 1, 1996. INVESTOR (Representing more than 70% of the outstanding Registrable Securities): /s/ George M. Marcus ------------------------------------------- George M. Marcus Essex Property Trust, Inc. By: /s/ Michael Schall ---------------------------------------- Its: CFO --------------------------------------- 3 IN WITNESS WHEREOF, this First Amendment to the Agreement has been executed as of July 1, 1996. INVESTOR THE MARCUS AND MILLICHAP COMPANY By: /s/ George M. Marcus ---------------------------- Its: Chairman --------------------------- EX-10.4 7 LOAN FACILITY AGREEMENT 1 LOAN FACILITY AGREEMENT Dated as of June 20, 1996 among ESSEX PROPERTY TRUST, INC., as Borrower and T/W ESSEX FUNDING, L.L.C., as Lender 2 LOAN FACILITY AGREEMENT dated as of June 20, 1996, among Essex Property Trust, Inc., a Maryland corporation (the "Borrower") and T/W Essex Funding, L.L.C., a Delaware limited liability company (the "Lender"). W I T N E S S E T H: WHEREAS, the Borrower and certain affiliates of the Lender (collectively, the "Buyer") have entered into a Stock Purchase Agreement dated as of the date hereof (as the same may be amended, restated or supplemented from time to time, the "Stock Purchase Agreement"), pursuant to which Buyer has agreed to purchase up to 1,600,000 shares of convertible preferred stock of the Borrower on the terms and subject to the conditions contained therein; and WHEREAS, the terms of the Stock Purchase Agreement provide for the execution and delivery of this Agreement simultaneously with the closing of the initial transactions contemplated thereby; NOW, THEREFORE, the Borrower and the Lender hereby agree as follows: ARTICLE 1 DEFINED TERMS 1.1 Definitions. Each term defined in this Section 1.1, when used in this Agreement, has the meaning indicated below. Capitalized terms used herein but not defined herein shall have the meanings given to them in the Stock Purchase Agreement. "Agreement" shall mean this Loan Agreement, as amended, restated, modified or supplemented from time to time. "Applicable Rate" shall mean the greater of (i) 8.75% per annum, and (ii) the rate which is equal to the quarterly dividend on the Common Stock, annualized, divided by $ 21.875. "Appreciated Stock Price" shall mean (i) with respect to Loans that are paid in full by the Borrower on or prior to December 31, 1996, the average of the closing price (as reported in The Wall Street Journal, absent manifest error) of Borrower's Common Stock for the twenty consecutive Business Days immediately preceding, but not including, the earlier of the date of payment or December 31, 1996, and (ii) with respect to Loans that are paid or mature on February 28, 1997, or are paid or mature on April 30, 1997, as the case may be, the average of the closing price (as reported in The Wall Street Journal, absent manifest error) of Borrower's Common Stock for any twenty consecutive Business Days, as selected by the Lender, from and including December 1, 1996, through but not including the Option C Maturity Date. "Business Day" shall mean any day on which both state and federally chartered banks in New York, New York are required to be open for general banking business. "Code" shall mean the Internal Revenue Code of 1986, as amended. 1 3 "Dollars" or "$" shall mean the lawful currency of the United States of America and, in relation to any amount to be advanced or paid hereunder, funds having same day value. "Event of Default" shall mean each of the events set forth in Section 6.1 hereof. "Exchange Price" shall have the meaning set forth in Section 2.11 hereof. "Guarantee" shall mean the guarantee to be executed and delivered by the Guarantor, substantially in the form of Exhibit B hereto. "Guarantor" shall mean Essex Portfolio L.P., a California limited partnership, of which the Borrower is the sole general partner. "Indebtedness" shall mean for any person all indebtedness or other obligations of such person for borrowed money and all indebtedness of such person with respect to any other items (other than accounts payable in the ordinary course of business, income taxes payable, deferred taxes and deferred credits) which would, all in accordance with generally accepted accounting principles, be classified as a liability on the balance sheet of such person. "Initial Commitment" means $13,000,000. "Initial Exchange Closing" shall have the meaning set forth in Section 2.10 below. "Judicial Prohibition Maturity Date" shall mean if a Judicial Prohibition Maturity Event has occurred, notwithstanding any other provision of this Agreement, December 31, 1996; provided, however, Borrower may, in its sole discretion, by delivery of written notice of same to Lender on or prior to December 20, 1996 (unless the applicable Judicial Prohibition Maturity Event shall have occurred on or after December 20, 1996, in which case not later than three Business Days after such occurrence but in no event later than December 30, 1996), extend the date for repayment of the Loans from the Judicial Prohibition Maturity Date (assuming there exists a Judicial Prohibition Maturity Event on such date and, if not, Lender and Buyer shall follow the procedures for the appropriate Option, and there shall be no extension) to February 28, 1997; and, provided, further, Borrower may also, in its sole discretion, by delivery of written notice of same to Lender not later than February 20, 1997, further extend such date to April 30, 1997. "Judicial Prohibition Maturity Event" shall mean an event whereby the Lender is estopped from the exercise of any Option otherwise available as a result of judicial process other than as a result of an action or claim brought by the Lender itself or by Buyer, or by any other person in collusion with the Lender or Buyer, and such estoppel shall remain in effect until and including December 30, 1996. IRS Approval Date" shall mean the date of receipt by the Borrower of a Private Letter Ruling from the Internal Revenue Service as required by Article EIGHTH(a)(9) of the Articles of Amendment and Restatement of the Borrower enabling the Borrower to exempt Lender's affiliates from the Ownership Limit as defined in such Articles of Amendment and 2 4 Restatement ("IRS Approval"), provided, however, such event shall have occurred, if at all, on or prior to December 15, 1996. "Loan" shall mean each loan to be made by the Lender to the Borrower pursuant to Article II hereof. "Note" shall mean a promissory note of the Borrower in registered form payable to the order of the Lender evidencing the Loans, substantially in the form of Exhibit A hereto, and any promissory note or notes issued in substitution thereof. "Notice of Occurrence" shall have the meaning set forth in Section 2.10. "Obligations" shall mean any and all of the debts, obligations and liabilities of the Borrower provided for or arising under this Agreement, whether now existing or hereafter arising, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred. "Option A" shall mean the Lender's obligation (absent the existence of a Judicial Prohibition Maturity Event which is not discharged prior to the Judicial Prohibition Maturity Date) (i) to exchange the Loan comprising the Initial Commitment for Preferred Stock pursuant to Section 2.11 hereof, and (ii) to utilize the funds otherwise comprising the Subsequent Commitment to acquire Preferred Stock in accordance with the Stock Purchase Agreement, in each case if the Stockholder Approval Date has occurred. "Option B" shall mean the Lender's obligation (absent the existence of a Judicial Prohibition Maturity Event which is not discharged prior to the Judicial Prohibition Maturity Date) (i) to exchange the Loan comprising the Initial Commitment for Preferred Stock pursuant to Section 2.11 hereof, and (ii) to utilize the funds otherwise comprising the Subsequent Commitment to acquire Preferred Stock in accordance with the Stock Purchase Agreement, in each case if the IRS Approval Date shall have occurred prior to the Stockholder Approval Date and the Stockholder Approval Date shall have occurred. "Option C" shall mean (i) the Lender's option to exchange up to $1,500,000 principal amount of the Loan comprising the Initial Commitment for Preferred Stock pursuant to Section 2.11 hereof, and (ii) the automatic reduction of the Subsequent Commitment to zero if, but only if, (x) (A) the IRS Approval Date shall not have occurred on or before December 15, 1996, and (B) the Stockholder Rejection Date shall have occurred, or (y) the Stock Purchase Agreement shall be terminated for any reason or any material provision thereof shall have ceased to be in full force and effect such that the Buyer under the Stock Purchase Agreement shall not be able to realize the material benefits thereof. "Option D" shall mean (i) the Lender's obligation (absent the existence of a Judicial Prohibition Maturity Event which is not discharged prior to the Judicial Prohibition Maturity Date) to exchange the Loan comprising the Initial Commitment for Preferred Stock pursuant to Section 2.11 hereof, (ii) the Lender's option to exchange up to $6,000,000 in Loans comprising the Subsequent Commitment for Preferred Stock pursuant to Section 2.11 hereof, and 3 5 (iii) the automatic reduction of the balance of the Subsequent Commitment to zero upon the Lender's exercise of, or failure to exercise, the option set forth in (ii) above if, but only if, (x) the IRS Approval Date shall have occurred, and (y) the Stockholder Rejection Date shall have occurred. "Option A Event" shall mean the occurrence of the Stockholder Approval Date provided that the IRS Approval Date shall not have first occurred. "Option B Event" shall mean the occurrence of the Stockholder Approval Date provided that the IRS Approval Date shall have first occurred. "Option C Event" shall mean either (i) (A) the IRS Approval Date shall not have occurred on or prior to December 15, 1996, and (B) the Stockholder Rejection Date shall have occurred, or (ii) the Stock Purchase Agreement shall have terminated for any reason or any material provision thereof shall have ceased to be in full force and effect such that Buyer under the Stock Purchase Agreement shall not be able to realize the material benefits thereof. "Option D Event" shall mean the IRS Approval Date shall have occurred and the Stockholder Rejection Date shall have occurred. "Option A Maturity Date" shall mean the Stockholder Approval Date. "Option B Maturity Date" shall mean the Stockholder Approval Date. "Option C Maturity Date" shall mean (i) December 16, 1996, in respect of that portion of the Loan which comprised part of the Initial Commitment which is exchanged for Preferred Stock, if any (i.e., pursuant to Option C, up to $1,500,000), and (ii) with respect to the balance of the Loan, December 31, 1996; provided, however, if the Borrower shall have notified the Lender on or before December 20, 1996, that it requests an extension, the Option C Maturity Date shall be extended to February 28, 1997; and provided, further, that if the Borrower shall have notified the Lender on or before February 20, 1997, that it requests another extension, the Option C Maturity Date shall be further extended to April 30, 1997. "Option D Maturity Date" shall mean (i) the Shareholder Rejection Date if the IRS Approval Date precedes the Stockholder Rejection Date or (ii) the IRS Approval Date if the Stockholder Rejection Date precedes the IRS Approval Date. "Options" shall mean each of Option A, Option B, Option C and Option D, one of which shall be available in accordance with the definitions thereof upon the conditions set forth therein. "Organic Change" shall have the meaning set forth in Section 2.11 hereof. "Register" shall meant the Note Register maintained by Borrower or by Borrower's bank. 4 6 "Related Document" shall mean any agreement, certificate or other document executed by the parties hereto in connection with this Agreement. "Stock Purchase Agreement" shall have the meaning set forth in the first recital hereof. "Stockholder Approval Date" shall mean the date, which shall be on or prior to October 30, 1996, on which the stockholders of the Borrower have duly approved all necessary amendments to the Company Charter in form and substance satisfactory to the Lender and Buyer, permitting issuance to Affiliates of the Lender on and after the Initial Closing Date of up to 1,600,000 shares of Preferred Stock and covering such other matters as the Borrower, the Lender and Buyer mutually agree should be properly presented for approval by the Borrower's stockholders. "Stockholder Rejection Date" shall mean the earlier to occur of (i) the date on which the stockholders of the Borrower have duly rejected any necessary transaction contemplated by this Agreement and by the Stock Purchase Agreement; and (ii) October 30, 1996. "Subsequent Commitment" means initially $20,000,000, as such amount may be reduced pursuant to Section 2.9 hereof by stock purchase or as otherwise provided herein. "TWREF" means Tiger/Westbrook Real Estate Fund, L.P., a Delaware limited partnership. ARTICLE 2 TERMS OF THE LOANS; FEES 2.1 The Loans. On the terms and subject to the conditions of this Agreement, the Lender shall make Loans to the Borrower of (i) an amount equal to the amount of the Initial Commitment on July 1, 1996, and (ii) in accordance with the applicable Option, the Subsequent Commitment on the Option A Maturity Date if an Option A Event has occurred, the Option B Maturity Event if an Option B Event has occurred, or the Option D Maturity Date if an Option D Event has occurred. 2.2 Disbursement of Loan Proceeds. (a) The Lender shall make the Loan proceeds of the Initial Commitment available to the Borrower by transferring the amount thereof by 12:00 noon (New York time) on July 1, 1996, and, in accordance with the applicable Option, fifteen Business Days after the Lender's receipt of a notice from the Borrower specifying the date and amount of each Loan representing all or any part of the Subsequent Commitment, in the case of the Loans representing the Subsequent Commitment, to a bank account held by the Borrower at the Borrower's bank and for credit to the account so identified on the signature page hereto. Upon the Lender's receipt of any such notice in respect of any Loan representing the Subsequent Commitment, the Lender shall have the right either to make such Loan or to have the Buyer purchase Preferred Stock under the Stock Purchase Agreement. However, upon the applicable event that gives rise to any such finding 5 7 of the Subsequent Commitment as a Loan, the principal amount of such Loan shall be deemed to be immediately exchanged into Preferred Stock. (b) The Loan representing the Initial Commitment shall be made by a single disbursement on July 1, 1996, and, in accordance with the applicable Option, the Loans representing the Subsequent Commitment shall, in the case of an Option A Event or an Option B Event, be made in no more than three disbursements of not less than $5,000,000 per disbursement on any date from and including the Stockholder Approval Date to June 20, 1997, and, in the case of an Option D Event, be made in one disbursement on the Option D Maturity Date; provided, however, that, in the case of Option A and Option B, the Borrower shall be deemed to have requested, and the Lender shall fund, Loans comprising the unutilized portion of the Subsequent Commitment on June 20, 1997. (c) Notwithstanding the provisions of Section 2.1 hereof and this Section 2.2, in the event that each of the Lender and Buyer have reviewed and approved the certificate of limited partnership of the Guarantor, the agreement of limited partnership of the Guarantor and any and all amendments to any of the foregoing and are satisfied, in their sole discretion, with the provisions thereof (including a provision that the ownership of a preferred limited partnership interest Guarantor will not require any indirect investors of Lender to treat any income allocated to it from Guarantor as unrelated business taxable income under the Code), the Borrower will be permitted to request the Lender to exchange, and the Lender will, upon receipt of such request from the Borrower, exchange, the Loan representing the Initial Commitment for limited partnership interests in the Guarantor on such terms as the Lender and the Guarantor shall mutually agree (reflecting the economics contemplated in the Stock Purchase Agreement). 2.3 Repayment of Principal. The Borrower shall not be permitted to prepay any amounts outstanding hereunder at any time. The Borrower shall repay the principal amount of the Loans on the Option A Maturity Date if an Option A Event has occurred, the Option B Maturity Date if an Option B Event has occurred, the Option C Maturity Date if an Option C Event has occurred, or the Option D Maturity Date if an Option D Event has occurred (i) in Dollars, but only if an Option C Event has occurred, and (ii) in Preferred Stock as provided in Sections 2.10 and 2.11 hereof if an Option A Event, Option B Event or Option D Event has occurred. The Borrower shall, notwithstanding the foregoing, repay the principal amount of the Loans, in Dollars, on the Judicial Prohibition Maturity Date if a Judicial Prohibition Maturity Event shall have been in continuous effect since the occurrence of an Option A Event, Option B Event or Option D Event, as the case may be, with result that any of Option A, Option B or Option D, as applicable, shall not have been exercised on or prior to the Judicial Prohibition Maturity Date. 2.4 Rate of Interest. The Borrower shall pay interest on the unpaid principal amount of the Loans from and including the date of each Loan to but not including the date on which such Loan is paid in full at the Applicable Rate, which shall be calculated and paid as specified in the definition of Applicable Rate. Notwithstanding the foregoing, if the Borrower shall fail to pay when due (whether at scheduled maturity, on acceleration or otherwise) any principal amount owing under this Agreement, the Borrower will pay interest on the amount in default from the date of such default until paid at the rate specified in Section 6.4 hereof. Notwithstanding any other 6 8 provisions contained in this Agreement, neither the Applicable Rate nor any dividends payable on any Preferred Stock shall begin to accrue until the date Lender or Buyer, as the case may be, actually funds the amount to be funded for the Loan or Preferred Stock related thereto. 2.5 Payment of Interest. Accrued interest on the Loans shall be payable quarterly in arrears on the last day of each calendar quarter, and on the Option A Maturity Date, Option B Maturity Date, Option C Maturity Date or the Option D Maturity Date, as the case may be, except that default interest shall be payable on demand. 2.6 Computation of Interest. Interest payable under this Agreement shall be computed on the basis of a year of 360 days and twelve 30-day months. 2.7 Manner of Payments. Each payment by the Borrower under this Agreement shall be made by transferring the amount thereof in Dollars (unless otherwise specified in Section 2.03 hereof) to the Lender's bank account at the Lender's bank and for credit to the account so identified on the signature page hereto, not later than 1:00 p.m. (New York City time) on the date on which such payment shall become due. Each such payment shall be made without set-off or counterclaim and free and clear of, and without deduction for, any taxes, duties, levies, imposts or other charges of a similar nature. 2.8 Extension of Payments. If any payment under this Agreement shall become due on a day which is not a Business Day, the due date thereof shall be extended to the next following day which is a Business Day, and such extension shall be taken into account in computing the amount of any interest then due and payable hereunder. 2.9 Reduction of the Subsequent Commitment. The Subsequent Commitment shall be automatically reduced by (i) the principal amount of each Loan (other than the Initial Commitment, which shall already have been exchanged in full for Preferred Stock), and (ii) amounts expended by Buyer in any purchase of Preferred Stock representing the Subsequent Commitment under the Stock Purchase Agreement or, if applicable, in any acquisition of limited partnership interests in the Guarantor, in each case after the Initial Closing Date, (ii) in the case of an Option C Event or Option D Event, the Subsequent Commitment shall be reduced as provided under Option C and Option D, respectively, and (iii) in the event of the existence of a Judicial Prohibition Maturity Event on the Judicial Prohibition Maturity Date, the amount of the then unutilized portion thereof. 2.10 Procedures for Option Events. (a) Within two Business Days following the occurrence of an Option A Event, Option B Event, Option C Event or Option D Event, Borrower shall provide Lender written notice of such occurrence (the "Notice of Occurrence"), such notice specifying the type of Option which has occurred. In the case of an Option A Event or Option B Event, the closing whereby the Loan comprising the Initial Commitment shall be exchanged for Preferred Stock shall be held on the third Business Day following Lender's receipt of the Notice of Occurrence; provided, however, the Loan shall be deemed exchanged as of the Option A Maturity Date or the Option B Maturity Date, as the case may be. In the case of an Option C Event, Lender shall deliver a written notice to Borrower within three Business Days of Lender's receipt of the Notice of Occurrence, which 7 9 written notice shall specify Lender's election with respect to its option to exchange up to $1,500,000 of the Loan which comprised part of the Initial Commitment for Preferred Stock and shall specify the amount, if any, up to $1,500,000 which Lender intends to exchange. The closing of such an exchange shall take place on the second Business Day following the date Lender's written notice is received by Borrower; provided, however, that up to $1,500,000 comprising the portion of the Initial Commitment shall be deemed exchanged as of the date Lender makes such election. In the case of an Option D Event, Lender shall deliver a written notice to Borrower within three Business Days of receipt of the Notice of Occurrence which written notice shall specify Lender's election with respect to the exchange of up to $6,000,000 of the Subsequent Commitment for Preferred Stock. The closing of such an exchange of up to $6,000,000 together with the exchange of the Loan comprising the Initial Commitment shall take place fifteen Business Days following the date Lender's written notice is received by Borrower; provided, however, the Loan comprising the Initial Commitment shall be deemed exchanged as of the Option D Maturity Date, and up to $6,000,000 Loan comprising the portion of the Subsequent Commitment shall be deemed exchanged as of the date Lender makes such election. Any such closing pursuant to this Section 2.10(a) shall be referred to as an "Initial Exchange Closing". (b) In the case of Option A or Option B, each closing relating to the funding of the Subsequent Commitment (or any portion thereof), and its automatic exchange into Preferred Stock, shall be held fifteen Business Days following Lender's receipt of a written notice from Buyer setting forth Buyer's request for such an exchange and the principal amount of Loan to be exchanged thereby. If any portion of the Subsequent Commitment remains as of June 20, 1997, the Loan, borrowing and exchange with respect to such amount shall be held on June 20, 1997. Each such closing pursuant to this Section 2.10(b) shall be referred to as a "Subsequent Closing", and the date of any such Subsequent Closing shall be referred to as a "Subsequent Closing Date". (c) All closings relating to the foregoing shall be held on such date specified in this Section 2.10 at the Palo Alto offices of Morrison & Foerster or such other date and place as the parties mutually agree. 2.11 Exchange; Construction. References to exchanges of Loans for Preferred Stock shall refer to exchanges of the outstanding principal amount of the Loans (but not any accrued and unpaid interest thereon) for fully paid and nonassessable shares of Preferred Stock. Exchange of the Loans for Preferred Stock shall be at a price (the "Exchange Price") of $25 per share. If the Borrower at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Preferred Stock into a greater number of shares, the corresponding Exchange Price in effect immediately prior to such subdivision shall be proportionately reduced, and if the Borrower at any time combines (by reverse stock split or otherwise) its outstanding shares of Preferred Stock into a smaller number of shares, the corresponding Exchange Price in effect immediately prior to such combination shall be proportionately increased. Lender may cause an exchange to occur in its name or in the name of its nominee, including Buyer. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company's assets to another person or other transaction which is effected in such a manner that holders of Preferred Stock are entitled to receive (either directly or 8 10 upon subsequent liquidation) stock, securities or assets with respect to, in exchange for or upon conversion of Preferred Stock is referred to herein as an "Organic Change." Prior to the consummation of any Organic Change, the Borrower shall make appropriate provisions (in form and substance reasonably satisfactory to the Lender) to insure that the Lender shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Preferred Stock immediately theretofore acquirable and receivable upon the exchange of the Loan, such shares of stock, securities or assets as the Lender would have received in connection with such Organic Change if the Lender had exchanged the Loan or converted the Preferred Stock issuable upon exchange of the Loans immediately prior to such Organic Change. In each such case, the Borrower shall also make appropriate provisions (in form and substance reasonably satisfactory to the Lender) to insure that the provisions of this paragraph and the immediately preceding paragraph shall thereafter be applicable to the Loans. The Borrower shall not effect any such Organic Change unless, prior to the consummation thereof, the successor corporation (if other than the Borrower) resulting from such Organic Change or the corporation purchasing assets in such Organic Change assumes by written instrument (in form reasonably satisfactory to the Lender) the obligation to deliver to the Lender such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Lender may be entitled to acquire. Each Loan shall be exchangeable by the Lender to the extent set forth above and upon the occurrence of any event which requires or permits the Lender to exchange loans under the Initial Commitment and/or the Subsequent Commitment for Preferred Stock, and, upon the occurrence of any such event, the rights of the Lender as Lender in respect of each exchanged Loan shall cease, and the Buyer (or such other nominee as Lender shall utilize) shall thereafter be treated for all purposes as the record holder of the equivalent amount of Preferred Stock at such time. At each closing described above, the Borrower shall issue and shall deliver at such office or at such other address requested by the Lender a certificate or certificates in blank or in such name as Lender shall direct for the number of full and fractional shares of Preferred Stock issuable upon exchange and Lender hereby consents to all such shares of Preferred Stock being issued and delivered. The issuance of certificates for shares of Preferred Stock upon exchange of each Loan shall be made without charge to the Lender or to Buyer for any issuance tax in respect thereof or other cost incurred by the Borrower in connection with such exchange and the related issuance of shares of Preferred Stock. Upon exchange of each Loan, the Borrower shall take all such actions as are necessary in order to insure that the Preferred Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable. The Borrower's obligations on the Option A Maturity Date, the Option B Maturity Date, the Option C Maturity Date or the Option D Maturity Date, as the case may be, shall be governed by the terms of the Stock Purchase Agreement as if such exchange were a purchase and sale of Preferred Stock thereunder. 2.12 Use of Proceeds. The Borrower shall use the proceeds of each Loan for lending to the Guarantor to acquire properties and to reduce outstanding Indebtedness of the Guarantor. 9 11 2.13 Fees. In the event that the Stockholder Rejection Date shall have occurred, the Borrower shall pay to the Lender a prepayment fee on such Stockholder Rejection Date equal to the product of (i) the Appreciated Stock Price minus $21.875 times (ii) a fraction, the numerator of which is the amount of Loans outstanding on such date and the denominator of which is $21.875. ARTICLE 3 CONDITIONS PRECEDENT 3.1 Conditions. As conditions precedent to the Lender's obligation to make the initial Loan, the Lender shall have received (i) the Note and a counterpart of this Agreement, each duly executed by the Borrower, (ii) the Guarantee, duly executed by the Guarantor, (iii) all other documents that are required to be delivered by the Borrower pursuant to Articles 2 and 7 of the Stock Purchase Agreement on or prior to the Initial Closing and evidence reasonably satisfactory to the Lender that all other conditions precedent to such Initial Closing have been met. As conditions precedent to the Lender's obligation to make each Loan (including the initial Loan), (i) no Event of Default or event which, with the giving of notice or lapse of time or both, shall have occurred and be continuing or shall result from the making of such Loan, (ii) there shall not have been a failure of a representation or warranty incorporated by reference herein to be true when made and where such failure would have or could reasonably be expected to have had a Material Adverse Effect, and (iii) the Stock Purchase Agreement shall not have terminated for any reason nor shall any material provision thereof have ceased to be in full force and effect other than by the mutual consent of the parties to the Stock Purchase Agreement such that the TWREF under the Stock Purchase Agreement shall not be able to realize the material benefits thereof. In the case of Option A and Option B, as a condition precedent to the Lender's obligation to make any Loan in respect of a Subsequent Commitment, since March 31, 1996, there shall not have been any change, circumstance or event which has or could reasonably be expected to have a Material Adverse Effect. ARTICLE 4 REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties. The Borrower repeats and restates all of the representations and warranties set forth in Article 3 of the Stock Purchase Agreement for the benefit of Lender, all of which are deemed to be incorporated by reference into this Agreement as if such representations and warranties were set forth in full herein. ARTICLE 5 COVENANTS 5.1 Covenants. For so long as any of the Obligations shall be outstanding hereunder, the Borrower covenants and agrees as follows: (a) If the Lender or TWREF has a reasonable basis to believe that a Material Adverse Effect has occurred, each of the Lender and TWREF may conduct audits of income and 10 12 expenses to verify the amounts of such items as stated in any financial statements, reports or projections furnished to Lender and TWREF under this Agreement or any Related Document at the Lender's expense. The Borrower will keep adequate records and books of account with respect to each of the Properties, in which proper entries, reflecting all of the financial transactions with respect to such Properties, are made in accordance with generally accepted accounting principles applied on a consistent basis. (b) The Borrower shall take such actions as are reasonably necessary or as are reasonably requested by the Lender or TWREF to afford the Lender and TWREF the following rights, and hereby authorizes Lender and TWREF to take such actions as are reasonably necessary to accomplish such rights: (i) The right routinely to consult with and advise the management of the Borrower regarding significant business activities and business and financial developments of the Borrower, as well as to communicate directly with the Borrower's independent certified public accountants and tax advisors. The Borrower hereby authorizes those advisors of the Borrower to disclose to the Lender and TWREF any and all financial statements, other supporting financial documents and schedules, including copies of auditor response letters and management letters with respect to the business, financial condition and other affairs of the Borrower. Borrower will deliver authorizing letters to its advisors confirming the above. (ii) The right to examine the books and records of the Borrower at any time upon reasonable notice, and, at Lender's or TWREF's expense, to conduct audits of income and expenses to verify the amounts of such items as stated in any financial statements or reports furnished to Lender and TWREF under this Agreement or any related documents. (iii) The right to receive quarterly unaudited and yearly audited financial reports, including balance sheets, statements of income, shareholders' equity and cash flow, a management report, schedules of outstanding indebtedness and a monthly report displaying by property gross income, net operating income, cash flow and, on an aggregate basis, FFO and Adjusted FFO per share, and copies of all filings with the Securities and Exchange Commission promptly when same have been filed. In addition, by virtue of TWREF's representation on the several committees of the Borrower (including the Executive Committee and the Audit Committee) and the Board of Directors of the Borrower, as provided in or by reference in the Stock Purchase Agreement, Lender and TWREF will be consulted and given an opportunity to advise Borrower (and such committees and the 11 13 Board) as to financing matters, property acquisitions and dispositions and operating budget and capital expenditure matters. (c) In addition to the foregoing, the Borrower agrees that all of the covenants set forth in Articles 5 and 6 of the Stock Purchase Agreement are incorporated by reference into this Agreement as if such affirmative covenants were set forth in full herein and agrees to comply with all such covenants. ARTICLE 6 EVENTS OF DEFAULT 6.1 Events of Default. If any one or more of the following events (an "Event of Default") shall occur and be continuing, the Lender shall be entitled to exercise the remedies set forth in Section 6.2 hereof: (a) Failure of the Borrower to pay when due (i) the principal of or interest on the Loan or (ii) any other amount payable hereunder if the failure to pay any such amount continues for five Business Days after receipt of notice thereof; or (b) Default in the performance of any material covenant or obligation contained or incorporated by reference herein or in the Stock Purchase Agreement or any document or instrument delivered hereunder or thereunder if the failure to perform such covenant continues for 15 Business Days after receipt of notice thereof; provided, however, that Borrower shall have a reasonable time to cure same if such cure cannot reasonably be accomplished in 15 Business Days but is being diligently pursued; or (c) The entry of a decree or order for relief in respect of the Borrower by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Borrower or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (d) The commencement by the Borrower of a voluntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or other similar law, or the consent by it to the entry of an order for relief in an involuntary case under any such law or the consent by it to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Borrower or of any substantial part of its property, or the making by it of a general assignment for the benefit of creditors, or the failure of the Borrower generally to pay its debts as such debts become due or the taking of any corporate action in furtherance of any of the foregoing; or 12 14 (e) Any of the assets of the Borrower shall be attached for execution or become subject to the order of any court or any other process for execution and attachment and such attachment, order or process shall remain in effect and undischarged for 60 days. 6.2 Default Remedies. If any Event of Default shall occur and be continuing, then and in every such event, and at any time thereafter during the continuance of such Event of Default the Lender may (i) terminate the Initial Commitment and the Subsequent Commitment, and (ii) declare the Loans to be forthwith due and payable, whereupon the Loans shall become forthwith due and payable both as to principal and interest together with all other amounts payable by the Borrower under this Agreement which may be due or accrued and unpaid, in each case without presentment, demand, protest or any other notice of any kind, all of which are expressly waived. 6.3 Set-Off. The Lender is hereby authorized at any time and from time to time, upon the occurrence and during the continuance of any Event of Default, without prior notice to the Borrower, to the fullest extent permitted by law, to set off and apply any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or monies at any time held and other indebtedness at any time owing by the Lender to or for the account of the Borrower against any and all of the amounts owing by the Borrower under this Agreement whether or not the Lender shall have made any demand hereunder or thereunder. 6.4 Default Interest. If the Borrower shall fail to pay when due any amount owing to the Lender under this Agreement, then to the extent permitted by law the Borrower will pay to the Lender on demand interest on the amount in default from the date such payment became due until payment in full at a rate equal to the sum of the amount due under Section 2.4 of this Agreement plus 4% per annum. ARTICLE 7 GENERAL PROVISIONS 7.1 Expenses; Indemnification The Borrower agrees to pay all reasonable out-of-pocket costs and expenses, including the reasonable fees and disbursements of counsel, incurred by the Lender in connection with the preparation, execution and delivery of this Agreement and the Related Documents, and any amendments and waivers hereof or thereof. The Borrower agrees to pay any reasonable legal or other expenses incurred by the Lender in connection with investigating, defending or participating in any loss, claim, damage, liability or other proceeding in connection with the enforcement of this Agreement or any of the Related Documents and the collection of any amounts owing hereunder or thereunder; provided that the Borrower shall not be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Lender or its Affiliates or any of their respective agents or employees. 7.2 Cumulative Rights; No Waiver. The rights, powers and remedies of the Lender hereunder are cumulative and in addition to all rights, powers and remedies provided under any and all agreements between the Borrower and the Lender, at law, in equity or otherwise. Neither any delay nor any omission by the Lender to exercise any right, power or remedy shall operate as a 13 15 waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise thereof or any exercise of any other right, power or remedy. 7.3 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other party. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section, provided receipt of copies of such counterparts is confirmed. 7.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS AGREEMENT OR ANY DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER HEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT. THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS AGREEMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK. 7.5 Entire Agreement. This Agreement (including agreements incorporated herein), the Schedule and the Exhibits hereto contain the entire agreement between the parties with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to herein. This Agreement is not intended to confer upon any person not a party hereto (and their successors and assigns) any rights or remedies hereunder. 7.6 Notices. All notices and other communications hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented overnight delivery service or, to the extent receipt is confirmed, telecopy, telefax or other electronic 14 16 transmission service to the appropriate address or number as set forth below. Notices to the Borrower shall be addressed to: Essex Property Trust, Inc. 777 California Avenue Palo Alto, CA 94304 Attn: Keith Guericke with a copy to: Michael Schall Essex Property Trust, Inc. 777 California Avenue Palo Alto, CA 94304 and another copy to: Jordan Ritter Essex Property Trust, Inc. 777 California Avenue Palo Alto, CA 94304 Notices to the Lender shall be addressed to: Patrick K. Fox General Counsel Westbrook Partners, L.L.C. 14400 North Dallas Parkway, #200 Dallas, Texas 75240 with a copy to: Keith Gelb Vice President Westbrook Partners, L.L.C. 11150 Santa Monica Boulevard Los Angeles, California 90023 and another copy to: Allen Curtis Greer, II Rogers & Wells 200 Park Avenue New York, New York 10166 or at such other address and to the attention of such other person as either party may designate by written notice to the other party delivered in accordance with this Section. 15 17 7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Except as specifically provided by the Stock Purchase Agreement, the Borrower shall not be permitted to assign any of its rights hereunder to any third party, other than to one or more Affiliates of the Borrower of which the Borrower, directly or indirectly, beneficially owns 98% or more of the voting power and the economic interests, provided that such Affiliates agree to be bound hereby , and provided that the Borrower shall remain liable hereunder, and provided that any bona fide financial institution to which the Borrower or any permitted transferee has transferred (including upon foreclosure of a pledge) shares of Company Stock for the purpose of securing bona fide indebtedness of the Borrower shall also be entitled to enforce the rights of the Borrower hereunder. The Lender may assign, or grant participations in, all or any part of its rights and interests herein and in the Note to any Person without the consent of, or notice of, the Borrower. 7.8 Headings. The Section, Article and other headings contained in this Agreement are inserted for convenience of reference only and will not affect the meaning or interpretation of this Agreement. All references to Sections or Articles contained herein mean Sections or Articles of this Agreement unless otherwise stated. 7.9 Amendments and Waivers. This Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought. Either party hereto may, only by an instrument in writing, waive compliance by the other party hereto with any term or provision hereof on the part of such other party hereto to be performed or complied with. The waiver by any party hereto of a breach of any term or provision hereof shall not be construed as a waiver of any subsequent breach. 7.10 Interpretation; Absence of Presumption. (a) For the purposes hereof, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof," "herein," and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Exhibits hereto) and not to any particular provision of this Agreement, and Article, Section, paragraph and Exhibit references are to the Articles, Sections, paragraphs and Exhibit to this Agreement unless otherwise specified, (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless the context otherwise requires or unless otherwise specified, (iv) the word "or" shall not be exclusive, and (v) provisions shall apply, when appropriate, to successive events and transactions. (b) This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party, drafting or causing any instrument to be drafted. 7.11 Severability. Any provision hereof which is invalid or unenforceable shall be ineffective to the extent of such invalidity or unenforceability, without affecting in any way the remaining provisions hereof. 7.12 Further Assurances. The Borrower agrees that, from time to time, it will take such action as may reasonably be necessary to carry out the purposes and intents hereof. 16 18 7.13 Waiver of Jury Trial. The parties hereto knowingly, voluntarily and expressly waive all right to trial by jury in any action, proceeding or counterclaim enforcing or defending any rights arising out of or relating to this Agreement or the transactions contemplated hereby. Each of the Borrower and the Lender acknowledges that the provisions of this Section 7.13 have been bargained for and that it has been represented by counsel in connection therewith. 7.14 Maximum Interest Rate. In no event shall the rate of any interest or fee exceed the maximum rate permissible for corporate borrowers by applicable law (the "Maximum Rate"). If, in any month, any rate for any such interest or fee, absent such limitation, would have exceeded the Maximum Rate, then the rate for that month shall be the Maximum Rate, and, if in future months, that interest rate would otherwise be less than the Maximum Rate, then that interest rate shall remain at the Maximum Rate until such time as the amount of interest paid hereunder equals the amounts which would have been paid if the same had not been limited by the Maximum Rate. In the event that, upon payment in full of the Obligations, the total amount of interest and fees paid or accrued under the terms of this Agreement is less than the total amount of interest which would have been paid or accrued if the rates set forth in this Agreement had at all times been in effect, then the Borrower agrees, to the extent permitted by applicable law, to pay to the Lender an amount equal to the difference between (a) the lesser of (i) the amount of interest which would have been charged if the Maximum Rate had, at all times, been in effect, and (ii) the amount of interest and fees which would have accrued had the rates set forth in this Agreement, at all times, been in effect, and (b) the amount of interest and fees actually paid or accrued under this Agreement (up to the maximum amount of such shortfall). In addition to the foregoing provisions of this Section 7.14, the Borrower agrees that in the event the rate of interest or fees hereunder (to the extent that such fees are or are deemed by a court of competent jurisdiction to be a payment for the use of money) exceeds the Maximum Rate at any time of determination, the Lender shall have the right, but not the obligation, to the extent permitted by applicable law, to apply such excess retroactively in respect of interest or such fees such that the rate of interest or such fees hereunder is less than the Maximum Rate at such time. 7.15 Note Register. The Note or Notes are issued in registered form only and the Lender shall maintain or cause to be maintained the Note Register. 17 19 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date first above written. LENDER: BORROWER: T/W ESSEX FUNDING, L.L.C., ESSEX PROPERTY TRUST, INC., a limited liability company a Maryland corporation By: ESSEX/TW FUNDING CORP., By: /s/ Jordan E. Ritter as Managing member --------------------------------- Name: Jordan E. Ritter ------------------------------- Title: Vice President ------------------------------ By: /s/ Jeffrey M. Kaplan ------------------------------- Name: Jeffrey M. Kaplan -------------------------- Title: Vice President ------------------------- By: /s/ Patricia K. Fox ------------------------------- Name: Patricia K. Fox -------------------------- Title: Secretary ------------------------- Lender Bank: Borrower Bank: - --------------------------------------- ------------------------------------ - --------------------------------------- ------------------------------------ - --------------------------------------- ------------------------------------ Acct. No.: Acct. No.: ----------------------------- -------------------------- Call Advice: Call Advice: --------------------------- ------------------------ Telephone: Telephone: ----------------------------- -------------------------- Facsimile: Facsimile: ----------------------------- -------------------------- NOTE REGISTER NOTE HOLDER PRINCIPAL AMOUNT - -------------------------------------------------------------------------------- R-1 T/W Essex Funding, L.L.C. $33,000,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 18 EX-10.5 8 AMENDMENT #1 TO LOAN FACILITY AGREEMENT 1 AMENDMENT NO. 1 TO LOAN FACILITY AGREEMENT THIS AMENDMENT NO. 1 TO LOAN FACILITY AGREEMENT ("Amendment"), dated as of July 1, 1996, is made by and between Essex Property Trust, Inc., a Maryland corporation (the "Borrower"), and T/W Essex Funding, L.L.C., a Delaware limited liability company (the "Lender"). RECITALS: WHEREAS, the Lender and the Borrower entered into that certain Loan Facility Agreement, dated as of June 20, 1996 (the "Loan Agreement"), whereby the Lender agreed to lend to the Company and the Company agreed to borrow from the Lender up to an aggregate of $33,000,000; WHEREAS, the Borrower and certain affiliates of the Lender (such affiliates, collectively, the "Buyer") entered into that certain Stock Purchase Agreement, dated as of June 20, 1996, as amended to the date hereof (as so amended, the "Stock Purchase Agreement"), whereby, subject to certain conditions, the Borrower has agreed to sell to the Buyer and the Buyer has agreed to purchase from the Borrower an aggregate of up to 1,600,000 shares of a newly authorized series of preferred stock of the Borrower designated as 8.75% Convertible Preferred Stock, Series 1996A (the "Preferred Stock"), having the terms set forth in the form of Borrower's Articles Supplementary attached as Exhibit A thereto (the "Articles Supplementary") establishing the rights, privileges and preferences of the Preferred Stock, at a price of $25.00 per share; WHEREAS, the parties hereto desire, among other things, to reduce the amount available under the Loan Agreement to $31,500,000; WHEREAS, the Buyer and the Borrower have agreed, among other things, to enter into Amendment No. 1 to the Stock Purchase Agreement dated as of June 20, 1996; and WHEREAS, the parties hereto have agreed, among other things, to amend and modify the Loan Agreement as set forth herein. AGREEMENTS: NOW, THEREFORE, in consideration of the foregoing premises and covenants hereinafter set forth, and other good and valuable consideration had and received, the parties hereto, upon the terms and subject to the conditions contained herein, hereby agree as follows: 1. Definitions; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Loan Agreement has the meaning ascribed to such term in the Loan Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and 1 2 each other similar reference contained in the Loan Agreement shall from and after the date hereof refer to the Loan Agreement as amended hereby. 2. Amendment to Definitions. (a) The preamble to Section 1.1 shall be amended by adding "All references in this Agreement to any other agreement or instrument shall include such other agreement or instrument as the same may be amended, modified, reaffirmed or supplemented from time to time in accordance with the terms thereof." immediately following the first sentence thereof." (b) The definition of "Initial Commitment" in the Loan Agreement shall be amended by restating it in its entirety as follows: "'Initial Commitment' means $11,500,000." (c) The definition of "Option C" in the Loan Agreement shall be amended by deleting the words "(i) the Lender's option to exchange up to $1,500,000 principal amount of the Loan comprising the Initial Commitment for Preferred Stock pursuant to Section 2.11 hereof, and (ii) "in the first through third lines thereof. (d) The definition of "Option D" in the Loan Agreement shall be amended by deleting the term "$6,000,000" in the fourth line thereof and inserting the term "$7,000,000" in its place and stead. (e) The definition of "Option C Maturity Date" shall be amended by restating it in its entirety as follows: "'Option C Maturity Date' shall mean December 31, 1996; provided, however, if the Borrower shall have notified the Lender on or before December 20, 1996, that it requests an extension, the Option C Maturity Date shall be extended to February 28, 1997; and provided, further, that if the Borrower shall have notified the Lender on or before February 20, 1997, that it requests another extension, the Option C Maturity Date shall be further extended to April 30, 1997." 3. Amendment to Section 2.10(a). Section 2.10(a) of the Loan Agreement shall be amended by restating it in its entirety as follows: "2.10(a) Procedures for Option Events. Within two Business Days following the occurrence of an Option A Event, Option B Event, Option C Event or Option D Event, Borrower shall provide Lender written notice of such occurrence (the "Notice of Occurrence"), such notice specifying the type of Option which has occurred. In the case of an Option A Event or Option B Event, the closing whereby the Loan comprising the Initial Commitment shall be exchanged for Preferred Stock shall be held on the third Business Day following Lender's receipt of the Notice of Occurrence; provided, however, the Loan shall be deemed exchanged as of the Option A Maturity Date or the Option B Maturity Date, as the case may be. In the case of an Option D Event, Lender shall deliver a written notice to Borrower within three Business Days of receipt of the Notice of Occurrence which written notice shall specify Lender's election with respect to the 2 3 exchange of up to $7,000,000 of the Subsequent Commitment for Preferred Stock. The closing of such an exchange of up to $7,000,000 together with the exchange of the Loan comprising the Initial Commitment shall take place fifteen Business Days following the date Lender's written notice is received by Borrower; provided, however, the Loan comprising the Initial Commitment shall be deemed exchanged as of the Option D Maturity Date, and up to $7,000,000 Loan comprising the portion of the Subsequent Commitment shall be deemed exchanged as of the date Lender makes such election. Any such closing pursuant to this Section 2.10(a) shall be referred to as an 'Initial Exchange Closing'." 4. Amendment to Section 2.11. Section 2.11 of the Loan Agreement shall be amended by deleting the words "the Option C Maturity Date" in the second line of the last paragraph thereof. 5. Amendment to Note Register and Replacement of Note. The Note Register on page 18 of the Loan Agreement shall be amended by deleting "$33,000,000" in the Principal Amount column and inserting in lieu thereof "$31,500,000." The Borrower has executed and delivered a Note in the principal amount of $31,500,000, but otherwise identical to the Note previously executed, and the Lender will, on the receipt of same at closing proceedings in New York City, cancel and surrender to the Borrower the Note reflecting a principal amount of $33,000,000. 6. Full Force and Effect. Except as specifically amended and modified hereby, the Loan Agreement shall remain in full force and effect and no party hereto waives any of its rights under the Loan Agreement. 7. Expenses; Indemnification. The Borrower agrees to pay all reasonable out-of-pocket costs and expenses, including the reasonable fees and disbursements of counsel, incurred by the Lender in connection with the preparation, execution and delivery of this Amendment and any amendments and waivers hereof. The Borrower agrees to pay any reasonable legal or other expenses incurred by the Lender in connection with investigating, defending or participating in any loss, claim, damage, liability or other proceeding in connection with the enforcement of this Amendment and the collection of any amounts owing hereunder or thereunder; provided that the Borrower shall not be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Lender or its Affiliates or any of their respective agents or employees. 8. Cumulative Rights; No Waiver. The rights, powers and remedies of the Lender hereunder are cumulative and in addition to all rights, powers and remedies provided under any and all agreements between the Borrower and the Lender, at law, in equity or otherwise. Neither any delay nor any omission by the Lender to exercise any right, power or remedy shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise thereof or any exercise of any other right, power or remedy. 9. Counterparts. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become 3 4 effective when one or more counterparts have been signed by each party hereto and delivered to the other party. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section, provided receipt of copies of such counterparts is confirmed. 10. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS AGREEMENT OR ANY DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER HEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT. THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS AMENDMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK. 11. Entire Agreement. The Loan Agreement, as amended hereby (including agreements incorporated herein), the Schedule and the Exhibits thereto contain the entire agreement between the parties with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to herein. This Amendment is not intended to confer upon any person not a party hereto (and their successors and assigns) any rights or remedies hereunder. 12. Successors and Assigns. The Loan Agreement, as amended hereby, shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Except as specifically provided by the Stock Purchase Agreement, the Borrower shall not be permitted to assign any of its rights hereunder to any third party, other than to one or more Affiliates of the Borrower of which the Borrower, directly or indirectly, beneficially owns 98% or more of the voting power and the economic interests, provided that such Affiliates agree to be bound hereby, and provided that the Borrower shall remain liable hereunder, and provided that any bona fide financial institution to which the Borrower or any permitted transferee has 4 5 transferred (including upon foreclosure of a pledge) shares of capital stock for the purpose of securing bona fide indebtedness of the Borrower shall also be entitled to enforce the rights of the Borrower hereunder. The Lender may assign, or grant participations in, all or any part of its rights and interests herein and in the Note to any Person without the consent of or notice of the Borrower. 13. Headings. The Section headings contained in this Amendment are inserted for convenience of reference only and will not affect the meaning or interpretation of this Amendment. 14. Amendments and Waivers. This Amendment may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought. Either party hereto may, only by an instrument in writing, waive compliance by the other party hereto with any term or provision hereof on the part of such other party hereto to be performed or complied with. The waiver by any party hereto of a breach of any term or provision hereof shall not be construed as a waiver of any subsequent breach. 15. Interpretation; Absence of Presumption. This Amendment shall be construed without regard to any presumption or rule requiring construction or interpretation against the party, drafting or causing any instrument to be drafted. 16. Severability. Any provision hereof which is invalid or unenforceable shall be ineffective to the extent of such invalidity or unenforceability, without affecting in any way the remaining provisions hereof. 17. Further Assurances. The Borrower agrees that, from time to time, it will take such action as may reasonably be necessary to carry out the purposes and intents hereof. 18. Waiver of Jury Trial. The parties hereto knowingly, voluntarily and expressly waive all right to trial by jury in any action, proceeding or counterclaim enforcing or defending any rights arising out of or relating to this Amendment or the transactions contemplated hereby. Each of the Borrower and the Lender acknowledges that the provisions of this Section have been bargained for and that it has been represented by counsel in connection therewith. * * * 5 6 IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed on the date first above written. LENDER: BORROWER: T/W ESSEX FUNDING, L.L.C., ESSEX PROPERTY TRUST, INC., a a Delaware limited liability company Maryland corporation By: ESSEX/TW FUNDING CORP., as Managing Member By: /s/ Michael Schall --------------------------------- Name: Michael Schall -------------------------- Title: CFO ------------------------- By: /s/ Jeffrey M. Kaplan ----------------------------- Name: Jeffrey M. Kaplan ---------------------- Title: Vice President --------------------- 6 EX-10.6 9 GUARANTEE DATED JUNE 20,1996 1 GUARANTEE GUARANTEE, dated as of June 20, 1996 (the "Guarantee"), from ESSEX PORTFOLIO L.P., a California limited partnership (the "Guarantor"), to T/W ESSEX FUNDING, L.L.C., a Delaware limited liability company (the "Lender"). W I T N E S S E T H: WHEREAS, the Guarantor wishes to induce the Lender to enter into a Loan Facility Agreement (as amended, modified or supplemented from time to time, the "Loan Agreement") with Essex Property Trust, Inc. (the "Borrower"); WHEREAS, the Borrower is the general partner of the Guarantor; and WHEREAS, the proceeds of the loan made under such Loan Agreement will be used by such Borrower to lend to the Guarantor to acquire certain properties and to reduce certain outstanding indebtedness of the Guarantor; and WHEREAS, the Lender is unwilling to enter into the Loan Agreement unless the Guarantor enters into this Guarantee; NOW, THEREFORE, in order to induce the Lender to enter into the Loan Agreement and the transactions contemplated thereby, the Guarantor hereby agrees as follows: 1. Guarantee. (a) The Guarantor unconditionally and irrevocably guarantees to the Lender the due and punctual performance of and compliance by the Borrower of its obligations, covenants and undertakings contained in or arising under the Loan Agreement, including but not limited to, the full and punctual payment by the Borrower, and the indefeasible receipt by the Lender thereof, when due, whether at the stated due date, by acceleration or otherwise, of any and all obligations, liabilities, indebtedness and other amounts of every kind arising out of the Loan Agreement and all amounts in respect of indemnities payable by the Borrower under the Loan Agreement, howsoever created, arising or evidenced, voluntary or involuntary, whether direct or indirect, absolute or contingent, now or hereafter existing or owing to the Lender (all the foregoing obligations and undertakings of the Borrower are collectively referred to hereinafter as the "Obligations"). 2 (b) This Guarantee is an absolute, unlimited and continuing guaranty of performance, payment and indefeasible receipt (and not of collection) of the Obligations. This Guarantee is in no way conditioned upon any attempt to collect from the Borrower or upon any other event or contingency, and shall be binding upon and enforceable against the Guarantor without regard to the validity or enforceability of the Loan Agreement or of any term thereof. Upon the failure for any reason of the Borrower to duly and punctually pay or perform any Obligation under the Loan Agreement, or, despite such payment or performance by the Borrower, upon the failure of the Lender to receive the full amount of such payment or performance, the Guarantor shall immediately pay or perform the same directly to the Lender. (c) In case the Loan Agreement shall be rejected or terminated by the Borrower (as debtor in possession or otherwise), any trustee, receiver or liquidating agent or custodian of the Borrower or the Borrower's respective properties in any bankruptcy, insolvency, reorganization, arrangement, composition, readjustment, liquidation, assignment for the benefit of creditors, dissolution or similar case or proceeding, the Guarantor's obligations hereunder shall continue to the same extent as if such agreement had not been so rejected or terminated. The Guarantor agrees that this Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time any payment to the Borrower or the Lender of the Obligations or any part thereof is avoided, repaid or must otherwise be returned by the Borrower or the Lender in, or as a result of, any claim, demand, action or proceeding made or commenced upon the insolvency, bankruptcy, arrangement, composition, readjustment, liquidation, assignment for the benefit of creditors or similar case or proceeding or reorganization of the Borrower, or otherwise, as though such payment to the Lender had not been made. (d) The Guarantor shall pay all reasonable costs, expenses and damages incurred (including, without limitation, reasonable attorneys' fees and disbursements) of the Lender in connection with the enforcement of the Obligations to the extent that such costs, expenses and damages are not indefeasibly paid by the Borrower, and in connection with the enforcement of the obligations of the Guarantor under this Guarantee. 2. Guarantee Not Subject to Set-Off, etc. The obligations of the Guarantor hereunder shall not be subject to any counterclaim, setoff, deduction or defense (other than payment, performance or affirmative discharge, release or termination of this Guarantee by the beneficiaries thereof) based upon any claim the Guarantor may have against the Lender or the Borrower or any other Person and shall remain in full force and effect without regard to, and shall not be released, discharged, reduced or in any way affected by any circumstance or condition (whether or not the Guarantor shall have any knowledge or notice thereof) whatsoever which might constitute a legal or equitable discharge or defense including, but not limited to, (a) the amending, modifying or supplementing, expressly or impliedly, of the Loan Agreement or any other agreement referred to in the foregoing, or any other instrument applicable to the Borrower or to its Obligations (as defined in the related Loan Agreement), or to any part thereof; (b) any failure on the part of the Borrower to perform or comply with any term of the Loan Agreement or any failure of any other Person to perform or comply with any term of the Loan Agreement or any other agreement as aforesaid; (c) any waiver, consent, change, extension, indulgence or other action or any action or inaction under or in respect of the Loan Agreement or any other agreement as aforesaid, or this Guarantee (except for any 3 written waiver or modification of the provisions of this Guarantee signed by the parties hereto), whether or not the Lender, the Guarantor or the Borrower has notice or knowledge of any of the foregoing; (d) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation, assignment for the benefit of creditors or similar case or proceeding with respect to the Guarantor, the Borrower or their respective properties or their creditors, or any action taken by any trustee or receiver or by any court in any such proceeding; (e) any furnishing or acceptance of additional security or any release of any security (and the Guarantor authorizes the Lender to furnish, accept or release said security); (f) any lien, charge or encumbrance on or affecting the Guarantor's or the Borrower's respective assets and properties; (g) any act, omission or breach on the part of the Lender under the Loan Agreement or on the part of the Borrower under the Loan Agreement or any other agreement at any time existing between the Lender and the Borrower or any other law, governmental regulation or other agreement applicable to the Lender, the Borrower or any Obligation; (h) any claim as any result of any other dealings among the Lender, the Guarantor, or the Borrower or any of them; (i) the assignment or transfer of this Guarantee, the Loan Agreement (in each case in accordance with and subject to the terms thereof) or any other agreement or instrument referred to in the Loan Agreement or applicable to the Borrower or the Obligations by the Borrower or the Lender to any other Person; or (j) any change in the name of the Lender, the Borrower or any other Person referred to herein. 3. Waiver. The Guarantor unconditionally waives: (a) notice of any of the matters referred to in Section 2 hereof; (b) all notices which may be required by statute, rule of law or otherwise to preserve any rights against the Guarantor hereunder, including, without limitation, notice of the acceptance of this Guarantee, or the creation, renewal, extension, modification or accrual of the Obligations or notice of any other matters relating thereto, any presentment, demand, notice of dishonor, protest or nonpayment of any damages or other amounts payable under the Loan Agreement; (c) any requirement for the enforcement, assertion or exercise of any right, remedy, power or privilege under or in respect of the Loan Agreement, including, without limitation, diligence in collection or protection of or realization upon the Obligations or any part thereof or any collateral therefor; (d) any requirement of diligence; (e) any requirement to mitigate the damages resulting from a default by the Borrower under the Loan Agreement; (f) the occurrence of every other condition precedent to which the Guarantor may otherwise be entitled, except as provided in the Loan Agreement; and (g) the right to require the Lender to proceed against the Borrower or any other Person liable on the Obligations, to proceed against or exhaust security held from the Borrower or any other Person, or to pursue any other remedy in the Lender's power whatsoever, and the Guarantor waives the right to have the property of the Borrower first applied to the discharge of the Obligations. The Lender may, at its election, exercise any right or remedy it may have against the Borrower or any security held by the Lender, including, without limitation, the right to foreclose upon any such security by judicial or nonjudicial sale, without affecting or impairing in any way the liability of the Guarantor hereunder, except to the extent the Obligations have been indefeasibly received or satisfied, and the Guarantor waives any defense arising out of the absence, impairment or loss of any right of reimbursement, contribution or subrogation (to the extent not otherwise effectively waived herein) or any other right or remedy of the Guarantor against the Borrower or any such security, whether resulting from such election by the Lender or otherwise. The Guarantor 4 waives any defense arising by reason of any disability or other defense of the Borrower (which, in each case, may nevertheless be asserted in a separate action or proceeding against the Lender or any other party), or by reason of the cessation from any cause whatsoever of the liability, either in whole or in part, of any Borrower to the Lender for its obligations under the Loan Agreement (in each case, other than as a result of indefeasible receipt, performance or affirmative discharge, release or termination of this Guarantee by the beneficiaries thereof). The Guarantor understands that the Lender's exercise of certain rights and remedies contained in the Loan Agreement may affect or eliminate, to the extent not otherwise effectively waived herein, the Guarantor's rights of subrogation against the Borrower and that the Guarantor may therefore incur partially or totally nonreimbursable liability hereunder; nevertheless, the Guarantor hereby authorizes and empowers the Lender, its successors, endorsees and/or assignees, to exercise in its or their sole discretion, any rights and remedies, or any combination thereof, which may then be available, it being the purpose and intent of the Guarantor that its obligations hereunder shall be absolute, independent and unconditional under any and all circumstances. The Guarantor assumes the responsibility for being and keeping informed of the financial condition of the Borrower and of all other circumstances bearing upon the risk of nonpayment or nonreceipt of the Obligations and agrees that the Lender shall not have any duty to advise the Guarantor of information regarding any condition or circumstance or any change in such condition or circumstance. The Guarantor acknowledges that the Lender has not made any representation to the Guarantor concerning the financial condition of the Borrower. 4. Representations and Warranties of the Guarantor. The Guarantor repeats and restates all of the representations and warranties of the Operating Partnership, as defined in the Stock Purchase Agreement, set forth in Article 3 of the Stock Purchase Agreement, all of which are deemed to be incorporated by reference into this Guarantee as if such representations and warranties were set forth in full herein. 5. Payments. Each payment by the Guarantor to the Lender under this Guarantee shall be made by transferring the amount thereof in immediately available funds without setoff or counterclaim; provided that, no such payment shall be deemed a waiver of any rights the Guarantor may have. 6. Parties. This Guarantee shall inure to the benefit of the Lender and its successors, assigns or transferees, and shall be binding upon the Guarantor and its successors and assigns. The Guarantor may not delegate any of its duties under this Guarantee without the prior written consent of the Lender and any Person to whom the Lender has assigned this Guarantee. Upon notice to the Guarantor, the Lender and its successors, assigns and transferees may assign its or their rights and benefits under this Guarantee to any financial institution providing financing to the Lender in connection with the Loan Agreement. 7. Notices. All notices, demands and other communications from and between the Lender and the Guarantor under this Guarantee shall be in writing (including telecopier) and shall be delivered or sent to the address or telecopier number shown below, or to such other address or 5 telecopier number as any party hereto may by written notice to the other parties have designated for such purpose. Any such notice, demand or other communication shall not be effective until actually received. If to the Lender: Patrick K. Fox Principal & General Counsel Westbrook Partners, LLC 14400 North Dallas Parkway, #200 Dallas, Texas 75240 with a copy to: Keith Gelb Vice President Westbrook Partners, LLC 11150 Santa Monica Boulevard Los Angeles, California 90025 and another copy to: Allen Curtis Greer, II Rogers & Wells 200 Park Avenue New York, New York 10166 If to the Guarantor: Essex Property Trust, Inc. 777 California Avenue Palo Alto, CA 94304 Attention: Keith Guericke with a copy to: Michael Schall Essex Property Trust, Inc. 777 California Avenue Palo Alto, CA 94304 6 and another copy to: Jordan Ritter Essex Property Trust, Inc. 777 California Avenue Palo Alto, CA 94304 8. Remedies. The Guarantor stipulates that the remedies at law in respect of any default or threatened default by the Guarantor in the performance of or compliance with any of the terms of this Guarantee are not and will not be adequate, and that any of such terms may be specifically enforced by a decree for specific performance or by an injunction against violation of any such terms or otherwise. 9. Rights to Deal with the Lender. At any time and from time to time, without terminating, affecting or impairing the validity of this Guarantee or the obligations of the Guarantor hereunder, the Lender may deal with the Borrower in the same manner and as fully and as if this Guarantee did not exist and shall be entitled, among other things, to consent to any grant by the Borrower, without notice or demand and without affecting the Guarantor's liability hereunder, to grant extensions of time to perform, renew, compromise, accelerate or otherwise change the time for payment of or to otherwise change (or to consent to the change of) the terms of payment or any part thereof contained in or arising under the Loan Agreement, or to waive any Obligation of the Borrower to perform, any act or acts as the Lender may deem advisable. 10. Subrogation. The Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to be subrogated to the rights of the payee against the Borrower with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by the Borrower in respect thereof until such obligations have been performed and paid in full. 11. Survival of Representations, Warranties, etc. All representations, warranties, covenants and agreements made herein and in statements or certificates delivered pursuant hereto shall survive any investigation or inspection made by or on behalf of the Lender and shall continue in full force and effect until all of the obligations of the Guarantor under this Guarantee shall be fully performed in accordance with the terms hereof, and until the indefeasible receipt and performance in full of all Obligations. 7 12. Governing Law and Consent to Jurisdiction; Waiver of Jury Trial. (a) THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK] IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS GUARANTEE OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTEE OR ANY DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER HEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT. THE GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS GUARANTEE OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK. (b) The parties hereto knowingly, voluntarily and expressly waive all right to trial by jury in any action, proceeding or counterclaim enforcing or defending any rights arising out of or relating to this Guarantee or the transactions contemplated hereby. The Guarantor acknowledges that the provisions of this Section 12(b) have been bargained for and that it has been represented by counsel in connection therewith. 13. Miscellaneous. If any term of this Guarantee or any application thereof shall be invalid or unenforceable, the remainder of this Guarantee and any other application of such term shall not be affected thereby. Any term of this Guarantee may be amended, modified, waived, discharged or terminated only by an instrument in writing signed by the Guarantor and the Lender, and consented to by any assignee. The headings in this Guarantee are for purposes of reference only and shall not limit or define the meaning hereof. This Guarantee may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Capitalized terms used herein and not defined shall have the respective meanings assigned to such terms in the Loan Agreement. 8 IN WITNESS WHEREOF, the undersigned have caused this Guarantee to be executed and delivered as of the day and year first above written. ESSEX PORTFOLIO L.P., a California limited partnership, as Guarantor By: Essex Property Trust, Inc., a Maryland corporation General Partner By: /s/ Jordan E. Ritter ---------------------------------------- Name: Jordan E. Ritter --------------------------------- Title: Vice President -------------------------------- Acknowledged and Agreed: T/W ESSEX FUNDING, L.L.C. By: Essex/TW Funding Corp., a Delaware corporation Managing Member By: /s/ Jeffrey Kaplan ------------------------------- Name: Jeffrey Kaplan ------------------------ Title: Vice President ----------------------- EX-10.7 10 REAFFIRMATION OF GUARANTEE 1 REAFFIRMATION OF GUARANTEE THIS REAFFIRMATION OF GUARANTEE ("Reaffirmation"), dated as of July 1, 1996, is made by ESSEX PORTFOLIO, L.P., a California limited partnership (the "Guarantor"). W I T N E S S E T H: WHEREAS, Essex Property Trust, Inc. (the "Borrower") previously entered into that certain Loan Facility Agreement (the "Loan Agreement") dated as of June 20, 1996, with T/W Essex Funding, L.L.C., a Delaware limited liability company (the "Lender"); WHEREAS, pursuant to that certain Guarantee (the "Guarantee"), dated as of June 20, 1996, the Guarantor guaranteed to the Lender that, among other things, the due and punctual performance of and compliance by the Borrower of its obligations, covenants and undertakings contained in or arising under the Loan Agreement; WHEREAS, pursuant to that certain Amendment No. 1 to the Loan Facility Agreement (the "Amendment"), dated as of even date herewith, by and between the Borrower and Lender, Lender has agreed, among other things, to amend and modify the Loan Agreement as set forth therein. In order to induce Lender to enter into the Amendment, Guarantor desires to reaffirm the Guarantee. NOW, THEREFORE, in consideration of the foregoing, and in order to induce the Lender to enter into the Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and further acknowledging that Lender intends to rely on the Guarantee of the Guarantor hereunder, the Guarantor hereby agrees as follows: 1. Guarantor represents that it has reviewed the Amendment and all other documents required to be delivered by Borrower to Lender in connection with the Amendment. 2. Guarantor reaffirms all its obligations under the Guarantee. 3. Guarantor acknowledges and agrees that such Guarantee remains in full force and effect, and such Guarantee is hereby ratified and confirmed. 4. Guarantor acknowledges and agrees that nothing contained in this Reaffirmation shall be construed as a limitation of or derogation from any of the terms and provisions of the Guarantee. * * * 1 2 IN WITNESS WHEREOF, the Guarantor has duly executed this REAFFIRMATION OF GUARANTEE as of July 1, 1996. GUARANTOR: ESSEX PORTFOLIO L.P., a California limited partnership, as Guarantor By: Essex Property Trust, Inc., a Maryland corporation General Partner By: /s/ Michael Schall -------------------------------------- Name: Michael Schall -------------------------------- Title: CFO ------------------------------- Acknowledged and Agreed: T/W ESSEX FUNDING, L.L.C. By: Essex/TW Funding Corp., a Delaware corporation Managing Member By: /s/ Keith Gelb ---------------------------- Name: Keith Gelb ---------------------- Title: ---------------------- 2 EX-10.8 11 THE REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.8 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT is made as of this 20th day of June 1996, by and between Essex Property Trust, Inc., a Maryland corporation (the "Company"), and Tiger/Westbrook Real Estate Fund, L.P., a Delaware limited partnership, and Tiger/Westbrook Real Estate Co-Investment Partnership, L.P., a Delaware limited partnership (collectively, and including any nominee or nominees in whose name securities may be held, the "Investor"). RECITALS WHEREAS, the Company and the Investor are parties to a Stock Purchase Agreement, as amended on the date hereof (as amended, the "Stock Purchase Agreement") of even date herewith relating to the purchase by Investor of certain shares of the Company's 8.75% Convertible Preferred Stock, Series 1996A; WHEREAS, in order to induce the Investor to invest funds in the Company pursuant to the Stock Purchase Agreement and to induce the Company to enter into the Stock Purchase Agreement, the Investor and the Company hereby agree that this Agreement shall govern the rights of the Investor to cause the Company to register shares of Preferred Stock and Common Stock issuable to the Investor upon conversion of the Preferred Stock or otherwise as provided herein; WHEREAS, the Company has entered into an amendment, of even date herewith, a copy of which is attached hereto as Exhibit A-1, to that certain Investor Rights Agreement dated as of June 13, 1994 (as amended, the "Existing Investor Rights Agreement", a copy of which is attached hereto as Exhibit A-2), between the Company and the investors party thereto (collectively, the "Existing Rights Holders"), whereby the Existing Rights Holders have agreed their rights thereunder shall be subordinated to the rights of the Investor hereunder; NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Definition. As used in this Agreement, the following: 1.1 The term "Common Stock" shall mean the Common Stock of the Company, par value $.0001 per share. 1.2 The term "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 1.3 The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. 1.4 The term "NYSE" shall mean the New York Stock Exchange. 1 2 1.5 The terms "register," "registered," and "registration: refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document. 1.6 The term "Registrable Securities" means (i) the Preferred Stock, (ii) Common Stock issuable or issued upon conversion of the Preferred Stock and (iii) any Common Stock of the Company issued as a dividend or distribution or issuable upon the conversion or exercise of any warrant, right or other security which is issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, such Preferred Stock or Common Stock; provided, however, that shares of Preferred Stock or such Common Stock or other securities shall not be treated as Registrable Securities (A) if such securities are sold by an entity or person in a transaction in which the registration rights are not assigned, (B) if a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities have been disposed of in accordance with such registration statement, (C) if such securities have been sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction pursuant to an effective registration statement or pursuant to Rule 144 ("Rule 144") under the Securities Act, or (D) if on the date of the proposed sale, in the opinion of counsel to the Company such securities may be sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all other restrictions and legends with respect thereto are removed upon the consummation of such sale. 1.7 The term "Preferred Stock" shall mean the 8.75% Convertible Preferred Stock, Series 1996A of the Company, par value $.0001 per share. 1.8 The term "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. 2. Requested Registration 2.1 Requested Registration. As to all but not less than all of the Preferred Stock purchased by the Investor, at any time after the Investor has completed its purchase of Preferred Stock under the Stock Purchase Agreement, and with respect to shares of Common Stock that are Registrable Securities under this Agreement only after the eight-month anniversary of the date of this Agreement, and from time to time thereafter, if the Company shall receive from the Investor on behalf of the Investor and the other holders of Registrable Securities a written request for the Company to effect any registration, qualification or compliance with respect to Registrable Securities with respect to, if a requested registration of Preferred Stock (and underlying Common Stock if necessary to permit the Preferred Stock to be registered in accordance within the rules and regulations of the Commission), all of the Preferred Stock then held by Investor and all other holders of Preferred Stock (but at least $7,000,000 in expected aggregate offering price (as determined based on the number of shares of Common Stock into which such Preferred Stock is convertible and the highest closing price of the Common Stock on a public exchange within five business days of such written request) to the public, net of underwriters' discounts and commissions), and, if a requested registration of Common Stock, no 2 3 less than 25% of the Registrable Securities (but at least $7,000,000 in expected aggregate offering price (as determined based on the highest closing price of the Common Stock on a public exchange within five business days of such written request) to the public, net of underwriters' discounts and commissions) then held by the Investor, the Company will use its best efforts to effect all such registrations, qualifications and compliances within 120 days of such request (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under the applicable blue sky or other state securities laws and appropriate compliance with regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of such Investor's Registrable Securities as are specified in such request; provided that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 2: (a) other than with respect to Registrable Securities; (b) in an particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; (c) if the Company has already effected one registration for the Investor pursuant to this Section during the immediately preceding twelve-month period; or (d) if at the time of the request to register Registrable Securities the Company gives notice within 30 days of such request that it is engaged, or has fixed plans to engage within 60 days of the time of the request, in a registered public offering as to which the Investor may include Registrable Securities pursuant to Section 5 and provided that the Company may not exercise this right more than once in any twelve-month period. 2.2 Underwriting. If the Investor intends to distribute the Registrable Securities covered by its request by means of an underwritten public offering, it shall so advise the Company and the Investor shall designate the underwriter to be considered as the lead underwriter to be employed in connection therewith subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed. The Company shall (together with the Investor if legally required) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 2.2, if the underwriter (in an underwritten offering in which such securities are to be distributed by or through one or more underwriters of recognized standing under underwriting terms customary for such transactions) advises the Company and the Investor in writing that, in its belief the amount of securities requested to be included in such registration or offering exceeds the amount which can be sold in (or during the time of) such offering without delaying or jeopardizing the success of the offering (but not including adjustments to the price per share of such securities to be sold, which shall remain in the sole discretion of the Investor) the number of Registrable Securities of the Investor to be included in the registration and underwriting shall be reduced as such underwriter, the Investor and the Company may agree. If the Investor disapproves of the terms of any such underwriting, the Investor may elect to withdraw therefrom 3 4 by written notice to the Company and the underwriter. The Registrable Securities so withdrawn shall also be withdrawn from registration. If the underwriter has not limited the number of Registrable Securities to be underwritten, the Company may include securities for its own account or the account of others in such registration if the underwriter so agrees and if the number of Registrable Securities which would otherwise have been included in such registration and underwriting will not thereby be limited, and, in the reasonable belief of such underwriter, if the per share sales price for the Registrable Securities will not thereby be materially and adversely affected. 3. Shelf Registration. 3.1 Shelf Registration; Obligation to File and Maintain. As to all but not less than all of the Preferred Stock purchased by the Investor, at any time after the Investor has completed its purchase of Preferred Stock under the Stock Purchase Agreement, and, with respect to any shares of the Common Stock that are Registrable Securities under this Agreement only at any time after the eight-month anniversary of the date of this Agreement, and from time to time thereafter, promptly upon the written request of the Investor, the Company will use its best efforts to file with the Commission a registration statement or statements under the Securities Act for the offering on a continuous or delayed basis in the future of Registrable Securities in such amount and type as aforesaid (collectively, the "Shelf Registration"). The Shelf Registration shall be on an appropriate form and the Shelf Registration and any form of prospectus included therein or prospectus supplement relating thereto shall reflect such plan of distribution or method of sale as the Investor may from time to time notify the Company, including the sale of some or all of the Registrable Securities in a public offering or, if requested by the Investor, subject to receipt by the Company of such information (including information relating to purchasers) as the Company reasonably may require, (i) in a transaction constituting an offering outside the United States which is exempt from the registration requirements of the Securities Act in which the Company undertakes to effect registration of such shares as soon as possible after the completion of such offering in order to permit such shares freely to be tradeable in the United States, (ii) in a transaction constituting a private placement under Section 4(2) of the Securities Act in connection with which the Company undertakes to register such shares after the conclusion of such placement to permit such shares freely to be tradeable by the purchasers thereof, or (iii) in a transaction under Rule 144A of the Securities Act in connection with which the Company undertakes to register such shares after the conclusion of such transaction to permit such shares freely to be tradeable by the purchasers thereof. The Company shall use its best efforts to keep the Shelf Registration continuously effective for the period beginning on the date on which the Shelf Registration is declared effective and ending on the first date that there are no Registrable Securities (provided that the Company may terminate the effectiveness of a Shelf Registration on the second anniversary of the date of effectiveness thereof plus a number of days equal to the number of days in all Registration Suspension Periods relating to such Shelf Registration). During the period during which the Shelf Registration is effective, the Company shall supplement or make amendments to the Shelf Registration, if required by the Securities Act or if reasonably requested by the Investor or an underwriter of Registrable Securities, including to reflect any specific plan or distribution or method of sale, and shall use its reasonable best efforts to have such supplements and amendments declared effective, if required, as soon as practicable after filing. 4 5 Once any registration statement filed pursuant to this Section 3 has been declared effective, any period during which the Company fails to keep such registration statement effective and usable for resale of Registrable Securities for the period required by Section 7(b) shall be referred to as a "Registration Suspension Period." A Registration Suspension Period shall commence on and include the date that the Company gives written notice to the Investor of its determination that such registration statement is no longer effective or usable for resale of Registrable Securities (the "Suspension Notice") to and including the date when the Company notifies the Investor that the use of the prospectus included in such registration statement may be resumed for the disposition of Registrable Securities. 3.2 Minimum. The Company shall not be required to comply with a request by the Investor pursuant to Section 3, except to the extent that the Registrable Securities to be included in any such registration statement aggregate at least $7,000,000 in expected offering price to the public as determined based on the highest closing price of the Common Stock on a public exchange within five business days of such written request, net of underwriters' discounts and commissions or are such lesser amount of Registrable Securities as shall constitute all of the Registrable Securities then outstanding. The obligations of the Company under this Section 3 shall terminate if the Investor and its assignees hereunder do not hold at least the lesser of (i) 200,000 shares of Preferred Stock (or such number of shares of Common Stock as shall have resulted from a conversion thereof)(subject to adjustment to give effect to stock splits, stock dividends and other similar transactions occurring after the date hereof) or (ii) 12.5% of the total amount of shares of Preferred Stock that the Investor purchases pursuant to the Stock Purchase Agreement. 3.3 Underwriting. Any and all underwriters or other agents involved in any sale of Registrable Securities pursuant to a registration statement contemplated by this Section 3 shall include such underwriter(s) or other agent(s) as selected by the Investor and approved of by the Company, which approval shall not be unreasonably withheld or delayed. 4. Delay of Registration. If the Company shall furnish to the Investor a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for a registration statement required under Section 2 or 3 to be filed on or before the date filing would be required and it is therefore essential to defer the filing of such registration statement, then the Company may direct that such request for registration be delayed for a period not in excess of 60 days, such right to delay a request to be exercised by the Company not more than once in any twelve-month period. 5. Company Registration. 5.1 Notice of Registration. The Investor will have no rights under this Section 5 until the first anniversary of the date of this Agreement. From time to time thereafter, if the Company shall register (or shall determine to issue under a shelf registration statement already on file) any of its Common Stock (or any other security junior to the Preferred Stock), either for its own account or the account of a security holder or holders (other than the Investor), other than a registration (i) relating to employee stock option or purchase plans, (ii) relating to a 5 6 transaction pursuant to Rule 145 under the Securities Act, (iii) pursuant to a registration form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of Common Stock or (iv) of primary shares of Common Stock by the Company on a form that does not permit both primary and secondary shares to be included in the same registration statement, the Company will: (a) promptly give to the Investor written notice thereof; and (b) include in such registration and in any underwriting involved therein, all shares of the Common Stock that are Registrable Securities under this Agreement specified in a written request, made within 20 days after receipt of such written notice from the Company, by the Investor. 5.2 Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Investor as a part of the written notice given pursuant to Section 5.1, the right of the Investor to registration pursuant to Section 5 shall be conditioned upon such Investor's participation in such underwriting and the inclusion of such Investor's Registrable Securities in the underwriting to the extent provided herein. The Investor shall (together with the Company and other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Section 5.2, if the underwriter advises the Company in writing that marketing factors require a limitation of the number of shares to be underwritten, the number of Registrable Securities of the Investor to be included in the registration and underwriting shall be reduced provided that the shares of other holders of securities of the Company included in the registration and underwriting shall be reduced prior to any reduction in the number of shares of Registrable Securities of the Investor that may be included in the registration and underwriting. The Registrable Securities so withdrawn shall also be withdrawn from registration. 6. Expenses of Registration. All expenses incurred in connection with any registration, qualification or compliance pursuant to this Agreement, including without limitation, all registration, filing and qualification fees, printing expenses, fees and disbursements of counsel for the Company, expenses of any special audits incidental to or required by such registration, qualification or compliance and the reasonable fees and disbursements of one counsel for the Investor shall be borne by the Company. The Company shall not be required to pay underwriters' discounts, commissions, or stock transfer taxes relating to Registrable Securities. 7. Registration Procedures. In the case of each registration, qualification or compliance effected by the Company pursuant to this Agreement in which the Investor is participating, the Company will keep the Investor advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. At its expense (except as otherwise provided in Section 6 above), the Company will: (a) prepare and file with the Commission the requisite registration statement (including a prospectus therein) to effect such registration and use its best efforts to 6 7 cause such registration statement to become effective, provided that before filing such registration statement or any amendments or supplements thereto, the Company will furnish to Investor and counsel selected by Investor copies of all documents required to be filed, which documents will be subject to review by such counsel before such filing is made, and the Company will comply with any reasonable request made by such counsel to make changes to any information contained in such filing or in such documents relating to Investor; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until, in the case of Section 2, the earlier of such time as all of such securities have been disposed of and the date which is 180 days after the date of initial effectiveness of such registration statement, or in the case of Section 3, the termination of the period during which the Shelf Registration is required to be kept effective; (c) furnish to the Investor and to the underwriters of the securities being registered such number of copies of the registration statement, preliminary prospectus, final prospectus and other documents incident thereto as such underwriters and the investor from time to time may reasonably request; (d) use its best efforts to register or qualify the securities covered by such registration statement under such state securities or blue sky laws of such jurisdictions as such the Investor may reasonably request, and keep such registration or qualification in effect for so long as such registration statement remains in effect; (e) enter into a written underwriting agreement in customary form and substance reasonably satisfactory to the Company, the Investor and the managing underwriter or underwriters of the public offering of such securities, if the offering is to be underwritten, in whole or in part; (f) notify the Investor, at any time when a prospectus relating thereto covered by such registration statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and, at the request of Investor properly prepare and furnish to Investor a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made; (g) furnish, at the request of the Investor, if the Investor is requesting registration of Registrable Securities pursuant to this Agreement, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration 7 8 pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statements with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Investor, reasonably satisfactory in form and substance to the Investor, and (ii) a letter dated such date, from the independent certified public accountants of the Company, who have certified the Company's financial statements included in such registration statement; covering substantially the same matters with respect to such registration statement (and the prospectus contained therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, all as are customarily covered as opinions of various counsel and in accountants' "comfort" letters delivered to underwriters in underwritten public securities offerings; (h) list all Registrable Securities covered by such registration statement on the NYSE or such other securities exchange as may be mutually agreed upon by the parties and such securities exchange; (i) provide a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement; (j) comply or continue to comply in all material respects with the Securities Act and the Exchange Act and with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act, and not file any amendment or supplement to such registration statement or prospectus to which the Investor shall have reasonably objected on the grounds that such amendment or supplement to such registration statement or prospectus to which the Investor shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act, having been furnished with a copy thereof at the earliest practicable date; and (k) in connection with preparation and filing of a registration statement under the Securities Act, furnish to the Investor, its underwriters, if any, and their respective counsel, the opportunity to participate in the preparation of such registration statement, each prospectus included therein as filed with the Commission, and each amendment thereof or supplement thereto, and shall give each of them access to its books and records and such opportunities to discuss the business of the Company with its officers, its counsel and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of Investor's and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. 8 9 The Company shall also have the obligations with regard to listing of Preferred Stock as specified in the Stock Purchase Agreement. The parties anticipate that any registration pursuant to this Agreement shall be a registration on Form S-3 (or a substantially equivalent registration form under the Securities Act subsequently adopted by the Commission that permits inclusion or incorporation by reference to other documents filed by the Company with the Commission), but agree that should Form S-3 not be available to the Company such unavailability does not alter the rights of the Investor or the obligations of the Company hereunder. 8. Indemnification. 8.1 Indemnification by the Company. In the event of any registration of any Registrable Securities pursuant to this Agreement under the Securities Act, the Company will, and hereby does, indemnify and hold harmless Investor, each other person who participates as an underwriter in the offering or sale of such securities and each other person who controls any such underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which Investor or any such underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company will reimburse Investor and each such underwriter and controlling person for any reasonable legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceedings; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by Investor or any other person who participates as an underwriter in the offering or sale of such securities, in either case, specifically stating that it is for use in the preparation thereof, and provided, further, that the Company shall not be liable to any person who participates as an underwriter in the offering or sale of Registrable Securities or any other person, if any, who controls such underwriter within the meaning of the Securities Act in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such person's failure to send or give a copy of the final prospectus or supplement to the persons asserting an untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf 9 10 of Investor or any such underwriter or controlling person and shall survive the transfer of such securities by Investor. 8.2 Indemnification by Investor. The Company may require, as a condition to including any Registrable Securities in any registration statement, that the Company shall have received an undertaking satisfactory to it from Investor to indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 8) the Company, each director of the Company, each officer of the Company and each other person, if any, who controls the Company within the meaning of the Securities Act, and each other person who participates as an underwriter in the offering or sale of such securities and each other person who controls any such underwriter within the meaning of the Securities Act with respect to any untrue statement or alleged untrue statement of a material fact in or omission or alleged omission to state a material fact from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by Investor specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer, or controlling person and shall survive the transfer of such securities by Investor. 8.3 Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the proceeding paragraphs of this Section 8, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligation under the preceding paragraphs of this Section 8, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to the indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. 8.4 Other Indemnification. Indemnification similar to that specified in the preceding paragraphs of this Section 8 (with appropriate modifications) shall be given by the Company and Investor with respect to any required registration or other qualification or securities under any federal or state law or regulation of any governmental authority other than under the Securities Act. 10 11 8.5 Indemnification Payments. The indemnification required by this Section 8 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. 8.6 Contribution. If, for any reason, for the foregoing indemnity is unavailable, or is insufficient to hold harmless an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of the expense, loss, damage or liability, (i) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, among other things, whether the untrue or alleged statement of a material fact or omission relates to information supplied by the indemnifying party on the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission), or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, in the proportion as is appropriate to reflect not only the relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation. 9. Information by Investor. If the Investor's Registrable Securities are included in any registration, the Investor shall furnish to the Company such information regarding the Investor and the distribution proposed by the Investor as the Company may reasonably request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement. 10. Reporting. With a view to making available to the Investor the benefits of certain rules and regulations of the Commission which may permit the sale of Registrable Securities to the public without registration or through short form registration forms the Company agrees to: (a) use its best efforts to make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times; (b) use its best efforts to file with the Commission in a timely manner all reports and other documents required to the Company under the Securities Act and the Securities Exchange Act; and (c) furnish to the Investor, so long as the Investor owns any Registrable Securities, forthwith upon written request a written statement by the Company that it has complied with the reporting requirements of said Rule 144, the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as the Investor may reasonably request in availing itself of any rule or regulation of the Commission permitting the Investor to sell any such securities without registration. 11 12 11. Transfer of Registration Rights. The rights to cause the Company to register securities granted by the Company hereunder may be assigned or otherwise conveyed to a transferee or assignee of Registrable Securities; provided that (i) only the Investor may request, on behalf of itself and other holders of Registrable Securities, registration pursuant to this Agreement, (ii) such transfer is effected in accordance with applicable federal and state securities laws, (iii) such transferee or assignee becomes a party to this Agreement or agrees in writing to be subject to the terms hereof to the same extent as if it were the Investor hereunder, and (iv) the Company is given written notice by the Investor of said transfer, stating the name and address of said transferee and identifying the securities with respect to which such registration rights are being assigned. 12. Delivery of Shares. The Company agrees that any time after the Company delivers to the Investor an opinion of counsel to the Company (reasonably satisfactory to Investor) or Investor arranges for the delivery to the Company of an opinion of counsel (reasonably satisfactory to the Company), to the effect that the Registrable Securities may be sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and legends with respect thereto (other than those required by the Charter of the Company in effect on the date hereof) are removed upon the consummation of such sale, the Investor may request that its certificates evidencing such Registrable Securities be exchanged by the Company for certificates free and clear of all transfer restrictions and legends (other than those required by the charter of the Company in effect on the date hereof, unless deleted from the Charter after the date hereof and before any such delivery). The Company agrees to deliver such legend free shares to the Investor within three days of the Investor's request therefor. Should the Company fail to deliver such certificates within such three day period, the Company agrees to indemnify the Investor for all losses sustained by the Investor as a result of any decrease in value of such Registrable Securities from such date beginning on the third day following the Investor's request for exchange and continuing until such date as new certificates, free and clear of all legends, has been delivered to the Investor. 13. Miscellaneous. 13.1 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 13.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of California. 13.3 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed or original, but all of which together shall constitute one and the same instrument. 12 13 13.4 Title and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing and interpreting this Agreement. 13.5 Notices. Except as otherwise provided, all notices and other communications required as permitted hereunder shall be in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Postal Service, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address as such party may designate for ten (10) days' advance written notice to the other parties. 13.6 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of the Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Investor. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities and the Company. 13.7 Entire Agreement. This Agreement and the other documents and agreements referred to therein constitute the entire understanding and agreement among the parties with regard to the subject matter hereof and thereof. 13.8 Severability. If one or more provisions of this Agreement are determined to be unenforceable under applicable law, such provisions shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 13.9 Attorneys' Fees. If any action of law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and disbursements in addition to any other relief to which such party may be entitled. 13 14 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ESSEX PROPERTY TRUST, INC. TIGER/WESTBROOK REAL ESTATE FUND, L.P., a Delaware limited partnership By: Tiger/Westbrook Real Estate Partners By: /s/ Keith Guericke Management, L.L.C., a Delaware limited ------------------------ liability company, General Partner Address: By: Westbrook Real Estate Fund I, L.L.C., 777 California Avenue a Delaware limited liability company, Palo Alto, CA 94340 Managing Member Tel:_______________________ Fax:_______________________ By: /s/ William H. Walton III --------------------------------- William H. Walton III, Managing Member By: /s/ Paul D. Kazilionis -------------------------------- Paul D. Kazilion Managing Member TIGER/WESTBROOK REAL ESTATE CO- INVESTMENT PARTNERSHIP, L.P., a Delaware limited partnership By: Tiger/Westbrook Real Estate Partners Management, L.L.C., a Delaware limited liability company, General Partner By: Westbrook Real Estate Fund I, L.L.C., a Delaware limited liability company, Managing Member By: /s/ William H. Walton III --------------------------------- William H. Walton III, Managing Member By: /s/ Paul D. Kazilionis -------------------------------- Paul D. Kazilionis Managing Member 14 EX-10.9 12 LETTER AGREEMENT DATED JULY 1,1996 1 EXHIBIT 10.9 ESSEX PROPERTY TRUST, INC. 777 California Avenue Palo Alto, CA 94304 July 1, 1996 Tiger/Westbrook Real Estate Fund, L.P. Tiger/Westbrook Real Estate Co-Investment Partnership, L.P. c/o Westbrook Partners, L.L.C. 101 Park Avenue 47th Floor New York, NY 10178 Attention: Mr. Keith Gelb Re: Purchase of 8.75% Convertible Preferred Stock, Series 1996A (the "Preferred Stock"), in accordance with that certain Stock Purchase Agreement between Essex Property Trust, Inc. ("Essex"), and each of you, dated as of June 20, 1996, as amended (as amended, the "Stock Purchase Agreement"), and the facility arrangements created pursuant to that certain Loan Facility Agreement, dated as of June 20, 1996, as amended (as amended, the "Loan Agreement"), between Essex and T/W Essex Funding, L.L.C. ("Funding"), and guaranteed by Essex Portfolio, L.P. (the "Operating Partnership") Gentlemen: This will confirm to you the binding agreement of Essex and the Operating Partnership that: (a) each will use its best efforts to cause a meeting of the shareholders of Essex to occur on or before September 30, 1996, as contemplated in the Stock Purchase Agreement, (b) each will use reasonable efforts to secure the approval by the shareholders of Essex in requisite number to confirm and approve the arrangements contemplated by the Stock Purchase Agreement and the Loan Agreement, and (c) each will use reasonable efforts to obtain from the Internal Revenue Service a ruling of the type and to the effect contemplated by Essex's Article Eighth (9)(a) of Essex' Articles of Amendment and Restatement, and 2 July 1, 1996 Page 2 (d) upon and after the date of the Defining Event (as defined in the Stock Purchase Agreement) neither Essex nor the Operating Partnership will solicit or receive from any third party, including, without limitation, in any public offering or private offering, funds in exchange for equity interests or interests convertible into or exchangeable for equity interests in either Essex or the Operating Partnership, until any Option (as defined in the Loan Agreement) has been exercised and all funds available thereunder have been requested by Essex in accordance therewith (and, in connection with Option D as set forth in the Loan Agreement, if it shall be in effect, Funding shall have been permitted to exercise its option to provide, and if so exercising shall have provided, additional funds) provided that these restrictions will not apply to (i) a public offering of Essex's Common Stock as to which the related preliminary prospectus supplement or prospectus supplement pursuant to Essex's existing shelf registration statement or a new registration statement is filed with the Securities and Exchange Commission prior to the Defining Event or (ii) transactions in which Essex or the Operating Partnership solicit and receive only non-cash consideration (including, without limitation, real estate). Each of Essex and the Operating Partnership understand that this letter is being given to each of you in consideration of your investment pursuant to the Stock Purchase Agreement and commitments thereunder and the commitments of Funding pursuant to the Loan Agreement, which is good and valuable consideration received by each of Essex and Operating Partnership for the undertakings made herein. This letter is to be deemed amendatory to the Stock Purchase Agreement with respect to the terms hereof, with the Stock Purchase Agreement being otherwise confirmed in its entirety, and shall be enforceable against each of the undersigned as therein provided. Sincerely, ESSEX PROPERTY TRUST, INC. By: /s/ Keith Guericke ------------------------------ President ESSEX PORTFOLIO, L.P. By: Essex Property Trust, Inc., as General Partner By: /s/ Keith Guericke ----------------------- President 3 July 1, 1996 Page 3 ACCEPTED: TIGER/WESTBROOK REAL ESTATE FUND, L.P., a Delaware limited partnership By: Tiger/Westbrook Real Estate Partners Management, L.L.C., a Delaware limited liability company, General Partner By: Westbrook Real Estate Fund I, L.L.C. a Delaware limited liability company, Managing Member By: /s/ William H. Walton III --------------------------------------- William H. Walton III, Managing Member By: /s/ Paul D. Kazilionis -------------------------------------- Paul D. Kazilionis, Managing Member TIGER/WESTBROOK REAL ESTATE CO-INVESTMENT PARTNERSHIP, L.P., a Delaware limited partnership By: Tiger/Westbrook Real Estate Partners Management, L.L.C., a Delaware limited liability company, General Partner By: Westbrook Real Estate Fund I, L.L.C. a Delaware limited liability company, Managing Member By: /s/ William H. Walton III ---------------------------------------- William H. Walton III, Managing Member By: /s/ Paul D. Kazilionis ---------------------------------------- Paul D. Kazilionis, Managing Member EX-99.1 13 PRESS RELEASE DATED JULY 1, 1996 1 EXHIBIT 99.1 NEWS RELEASE FOR: ESSEX PROPERTY TRUST, INC. (NYSE Symbol: "ESS") CONTACT: Keith Guericke FOR RELEASE: IMMEDIATELY (415) 494-3700 ESSEX PROPERTY TRUST, INC. CLOSES $40 MILLION CONVERTIBLE PREFERRED STOCK TRANSACTION PALO ALTO, Calif. July 1, 1996 -- Essex Property Trust (NYSE: ESS) today completed the initial funding of the previously announced sale of the company's Series 1996A Cumulative Convertible Preferred Stock to Tiger/Westbrook Real Estate Fund, L.P. A New York-based investment fund, Tiger/Westbrook has real estate assets under management in excess of $1.6 billion. The transaction involves the issuance of 1.6 million shares of stock at $25 per share for aggregate proceeds of $40 million, paying a preferred dividend of 8.75%. The shares of preferred stock are convertible into common stock at $21.875 per share, reflecting a conversion premium of approximately 5% above the average closing price of the common stock for the 30 trading days preceding the announcement of the transaction. Pursuant to the agreement, Essex received $20 million today, with the remaining $20 million to be funded at Essex's request upon shareholder approval. The delayed funding mechanism allows Essex to flexibly match Tiger/Westbrook capital infusions with its investment activity. Essex intends to use the proceeds to acquire properties located in its target markets, which include Northern California's Silicon Valley, Seattle, Portland and Southern California, and to reduce outstanding indebtedness. Essex Property Trust, Inc. is a fully integrated real estate operating company. Self-administered and self-managed, Essex focuses on multifamily residential properties in the San Francisco, Seattle and Portland metropolitan areas, and selected Southern California markets. Essex has ownership interests in 22 multifamily properties (4,832 units), accounting for approximately 89% of its revenue. EX-99.2 14 PRESS RELEASE DATED JUNE 21, 1996 1 EXHIBIT 99.2 NEWS RELEASE FOR: ESSEX PROPERTY TRUST, INC. (NYSE Symbol: "ESS") CONTACT: Keith Guericke FOR RELEASE: IMMEDIATELY (415) 494-3700 ESSEX PROPERTY TRUST ANNOUNCES PRIVATE PLACEMENT OF $40 MILLION OF CONVERTIBLE PREFERRED STOCK PALO ALTO, Calif. June 21, 1996 -- Essex Property Trust, Inc. (NYSE: ESS) announced today that it has entered into a definitive agreement to sell $40 million of the Company's Series 1996A Cumulative Convertible Preferred Stock to Tiger/Westbrook Real Estate Fund, L.P. The 1.6 million shares of preferred stock have been priced at $25.00 per share and will pay a preferred dividend of 8.75%. In addition, Essex will assume property management for approximately 800 multifamily units which the Tiger/Westbrook fund recently acquired in Ventura County, California. The preferred stock, a portion of which is subject to shareholder approval, will be sold in stages as required by Essex. As a temporary disbursement mechanism, the commitment can be partially funded in the form of an unsecured convertible note, with financial terms consistent with the preferred stock. The note automatically converts to preferred stock upon receipt of stockholder approval which is expected by late summer. The shares of preferred stock are convertible into common stock at $21.875 per share of common stock, reflecting a conversion premium of approximately 5% above the average closing price of the common stock for the 30 trading days preceding the agreement. The preferred stock sale is subject to customary closing conditions. Essex intends to use the proceeds of the sale to reduce outstanding indebtedness and acquire properties located in its target markets, which include Northern California's Silicon Valley, Seattle, Portland and Southern California. On a pro forma basis, Essex's market equity capitalization would increase 23% to $215 million, and Essex's debt to market capitalization ratio would decrease to approximately 40%. Tiger/Westbrook Real Estate Fund, L.P. is a private New York-based investment fund that has real estate assets under management in excess of $1.6 billion. Keith Guericke, President of Essex commented: "The Tiger/Westbrook investment represents the strongest possible endorsement for the company and its strategy of identifying and investing in recovering markets in the western United States. Tiger/Westbrook is a highly sophisticated and successful real estate investor who, as a result of our discussions and their diligence, has decided to make a significant equity 2 investment in the company. To complement our presence in Silicon Valley and other strong western markets, we will aggressively pursue acquisitions in Southern California, which we believe will benefit from the current economic recovery in the western United States. Given our 20 year history of acquiring, managing, developing and disposing of multi-family properties, Essex is uniquely positioned to identify the strongest submarket opportunities." Paul D. Kazilionis, a Managing Principal of Westbrook Partners, commented that: "This is an excellent opportunity to invest in Essex's strong markets, experienced management team and quality multifamily assets which will provide synergies with our other investment activities." Essex Property Trust, Inc. is a fully integrated real estate operating company. Self-administered and self-managed, Essex focuses on multifamily residential properties in the San Francisco, Seattle and Portland metropolitan areas, and selected Southern California markets. Essex has an ownership interest in 23 multifamily properties (4,924 units), accounting for approximately 89% of its revenue. -----END PRIVACY-ENHANCED MESSAGE-----