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