EXHIBIT 10.1
FIFTH AMENDMENT TO
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
ESSEX PORTFOLIO, L.P.
Dated as of September 3, 1999
This Fifth Amendment to the First Amended and Restated Agreement of
Limited Partnership of Essex Portfolio, L.P., as amended (as amended, the
"Partnership Agreement"), dated as of the date shown above (the "Amendment"), is
executed by Essex Property Trust, Inc. a Maryland Corporation (the "Company"),
as the General Partner and on behalf of the existing Limited Partners of Essex
Portfolio, L.P. (the "Partnership"), and TMCT II, LLC, a Delaware limited
liability company ("LLC").
RECITALS
WHEREAS, the Partnership was formed pursuant to the Partnership
Agreement, which has been amended and restated as of September 30, 1997;
WHEREAS, on the date hereof, The Times Mirror Company, a Delaware
corporation ("Contributor"), has made a Capital Contribution of an
aggregate of $55,000,000, in cash, to the Partnership in exchange for which
LLC is entitled to receive an aggregate of 2,200,000 of the 9.25% Series E
Cumulative Redeemable Preferred Units (the "Series E Preferred Units") of
limited partnership interests in the Partnership with rights, preferences,
exchange and other rights, voting powers and restrictions, limitations as
to distributions, qualifications and terms and conditions as set forth
herein;
WHEREAS, pursuant to the authority granted to the General Partner
under the Partnership Agreement, the General Partner desires to amend the
Partnership Agreement to reflect (i) the issuance of the Series E Preferred
Units, (ii) the admission of LLC as an Additional Limited Partner and
holder of a certain number of Series E Preferred Units and (iii) certain
other matters described herein;
WHEREAS, LLC desires to become a party to the Partnership
Agreement as a Limited Partner and to be bound by all terms, conditions and
other provisions of this Amendment and the Partnership Agreement (as
amended by the Amendment).
NOW THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the General Partner hereby amends the Partnership
Agreement as follows:
1. Definitions. Capitalized terms used herein, unless otherwise
-----------
defined herein, shall have the same meanings as set forth in the Partnership
Agreement.
1
2. Admission of LLC. LLC is hereby admitted as an Additional Limited
----------------
Partner in accordance with Section 4.6 of the Partnership Agreement holding such
number of Series E Preferred Units as is set forth on Exhibit A, as amended.
LLC hereby agrees to become a party to the Partnership Agreement as a Limited
Partner and to be bound by all the terms, conditions and other provisions of the
Partnership Agreement, as amended by this Amendment. Pursuant to Section 4.6(b)
of the Partnership Agreement, the General Partner hereby consents to the
admission of LLC as an Additional Limited Partner of the Partnership. The
admission of LLC shall become effective as of the date of this Amendment which
shall also be the date on which the name of LLC is recorded on the books and
records of the Partnership.
3. Percentage Interest. Section 1.1 of the Partnership Agreement is
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hereby further amended to delete the definition of "Percentage Interest" in its
entirety and the following definition of "Percentage Interest" is hereby
substituted in its place:
"Percentage Interest" shall mean, with respect to any Partner other
than holders of Series B Preferred Units, Series C Preferred Units, Series
D Preferred Units or Series E Preferred Units, the undivided percentage
ownership interest of such Partner in the Partnership, as determined by
dividing the number of Partnership Units owned by such Partner by the total
number of Partnership Units then outstanding (excluding the Series A
Preferred Interest, the Series B Preferred Interest, the Series B
Partnership Units, Series C Preferred Interest, Series C Preferred Units,
Series D Preferred Interest and Series D Preferred Units, Series E
Preferred Interest and Series E Preferred Units).
4. Restatement of Exhibit A and Exhibit M. Exhibit A to the
--------------------------------------
Partnership Agreement is amended and restated by replacing such Exhibit A with
Exhibit A attached to this Amendment. Exhibit M to the Partnership Agreement is
amended and restated by replacing such Exhibit M with Exhibit M attached to this
Amendment.
5. Preferred Interest. Section 1.1 of the Partnership Agreement is
------------------
hereby amended to include the following definition of "Series E Preferred
Interest" after the "definition of "Series D Preferred Interest" and before the
definition of "Series A Preferred Stock."
"Series E Preferred Interest" shall mean the interest in the
Partnership received by the General Partner in connection with the issuance
of shares of Series E Preferred Stock, as and when issued, which Series E
Preferred Interest includes and shall include the right to receive
preferential distributions and certain other rights as set forth in this
Agreement.
6. Series E Preferred Stock. Section 1.1 of the Partnership
------------------------
Agreement is hereby amended to include the following definitions of "Series E
Preferred Stock" and "Series E Preferred Units" which are hereby inserted after
the definition of "Series D Preferred Units" and before the definition of "Stock
Incentive Plans":
2
"Series E Preferred Stock" shall mean the preferred stock of the
General Partner described in Article THIRD of the Articles Supplementary,
reclassifying 2,200,000 shares of Common Stock as 2,200,000 shares of 9.25%
Series E Cumulative Redeemable Preferred Stock to be filed with the
Department on or about September 3, 1999.
"Series E Preferred Units" shall mean the 9.25% Series E Cumulative
Redeemable Preferred Units of limited partnership interests in the
Partnership with rights, preferences, exchange and other rights, voting
powers and restrictions, limitations as to distributions, qualifications
and terms and conditions as set forth in Exhibit Q hereto.
7. Distributions. Section 6.2(a) of the Partnership Agreement is
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hereby deleted in its entirety, and the following is hereby substituted in the
place thereof:
(a) Distributions shall be made in accordance with the following
order of priority:
(i) First, on a pro rata basis, (based upon the same ratio that
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accrued distributions per share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock and per unit of Series B Preferred Units, Series C
Preferred Units, Series D Preferred Units and Series E Preferred Units
(which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such stock or units do not
have cumulative distribution rights) bear to each other) (v) to the General
Partner, on account of the Series A Preferred Interest, Series B Preferred
Interest, Series C Preferred Interest, Series D Preferred Interest and
Series E Preferred Interest until the total amount of distributions made
pursuant to this Section 6.2(a)(i)(v) equals the total amount of accrued
but unpaid distributions (if any) payable with respect to the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, the Series D Preferred Stock and the Series E Preferred Stock as of
the date of such distribution; (w) to the Limited Partners holding Series B
Preferred Units, on account of the Series B Preferred Units until the total
amount of distributions made pursuant to this Section 6.2(a)(i)(w) equals
the total amount of accrued but unpaid distributions (if any) payable with
respect to the Series B Preferred Units, in accordance with Exhibit N of
the Partnership Agreement, as of the date of such distribution; (x) to the
Limited Partners holding Series C Preferred Units, on account of the Series
C Preferred Units until the total amount of distributions made pursuant to
this Section 6.2(a)(i)(x) equals the total amount of accrued but unpaid,
distributions (if any) payable with respect to the Series C Preferred
Units, in accordance with Exhibit O of the Partnership Agreement, as of the
date of such distribution; (y) to the Limited Partners holding Series D
Preferred Units, on account of the Series D Preferred Units until the
distributions made pursuant to this Section 6.2(a)(i)(y) equals the total
amount of accrued but unpaid distributions (if any) payable with respect to
the Series D Preferred Units, in accordance with Exhibit P of the
Partnership Agreement, as of the date of such distribution; and (z) to the
Limited Partners holding Series E Preferred Units, on account of the Series
E Preferred Units until the distributions made pursuant to this Section
6.2(a)(i)(z) equals the total amount of accrued but unpaid distributions
(if
3
any) payable with respect to the Series E Preferred Units, in accordance
with Exhibit Q of the Partnership Agreement, as of the date of such
distribution.
(ii) Next, to the Partners, pro rata in accordance with the
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Partners' then Percentage Interests.
Neither the Partnership nor the Limited Partners shall have any
obligation to see that any funds distributed to the General Partner
pursuant to subparagraph (a)(i) of this Section 6.2 are in turn used by the
General Partner to pay dividends on the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, Series D Preferred
Stock or the Series E Preferred Stock (or any other Preferred Stock) or
that funds distributed to the General Partner pursuant to subparagraph
(a)(ii) of this Section 6.2 are in turn used by the General Partner to pay
dividends on the Common Stock or for any other purpose."
8. Distributions in Kind. Section 8.5 of the Partnership Agreement
---------------------
is hereby amended by adding the following sentence to the end of such section:
"Notwithstanding the foregoing, the Liquidating Trustee shall not
distribute to the holders of Series B Partnership Units, Series C
Partnership Units, Series D Partnership Units, Series E Partnership Units,
Series A Preferred Interest, Series B Preferred Interest, Series C
Preferred Interest, Series D Preferred Interest and Series E Preferred
Interest Partnership assets other than cash."
9. Exhibit E. Exhibit E to the Partnership Agreement is hereby
---------
deleted in its entirety, and the attached Exhibit E is hereby inserted in the
place thereof.
10. Exhibit Q. The Partnership Agreement is hereby amended by adding
---------
a new exhibit, Exhibit Q, a copy of which is attached hereto. Exhibit Q is
hereby inserted into the Partnership Agreement following Exhibit P.
11. Continuing Effect of Partnership Agreement. Except as modified
------------------------------------------
herein, the Partnership Agreement is hereby ratified and confirmed in its
entirety and shall remain and continue in full force and effect, provided,
however, that to the extent there shall be a conflict between the provisions of
the Partnership Agreement and this Amendment the provisions in this Amendment
will prevail. All references in any document to the Partnership Agreement shall
mean the Partnership Agreement, as amended hereby.
12. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement. Facsimile signatures shall be
deemed effective execution of this Agreement and may be relied upon as such by
the other party. In the event facsimile signatures are delivered, originals of
such signatures shall be delivered to the other party within three (3) business
days after execution.
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IN WITNESS WHEREOF, the General Partner and the LLC have executed this
Amendment as of the date indicated above.
GENERAL PARTNER
ESSEX PROPERTY TRUST, INC.,
a Maryland corporation as General Partner of Essex
Portfolio, L.P. and on behalf of the existing
Limited Partners
By:
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Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President and
Chief Financial Officer
LLC:
TMCT II, LLC
By: THE TIMES MIRROR COMPANY,
its Managing Member
By:
-----------------------------------------
Name:
---------------------------------------
Title:
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EXHIBIT A
PARTNERSHIP UNITS
(As of September 3, 1999)
PARTNERSHIP UNITS
-----------------
Units
-------
General Partner:
-----------------
Essex Property Trust, Inc. 16,615,924
Limited Partners:
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1. Essex Portfolio Management Company 15,941
2. Essex Property Corporation 9,909
3. GMMS Partners 43,414
4. M & M Projects, Inc. 128,138
5. SummerHill Homes 163,447
6. Xxxxx Xxxxxx 1,785
7. Xxxxxx and Xxxxxxxx Xxxxxx 2,242
8. Xxxxxxx X. Xxxxxx 2,564
9. Xxxxx Xxxxxxxxx Revocable Trust 5,771
10. Xxxx X. and Xxxxxx Xxxx 7,457
11. Xxxxxxx and Xxxxxxxx Xxxxxxxxxxx 2,675
12. Xxxxxx and Xxxxxxxxx Xxxxxxxxxxx, Trustees 4,697
Frangadakis Family Revocable Trust
13. Xxxxxxx and Xxxxxxxx Xxxxxxxxxxx, Trustees 24,334
Frangadakis Family Revocable Trust
14. Xxxxxx Xxxxxxxx 4,042
15. Xxxxxx and Xxxxxxxx Xxxxx 16,735
16. Xxxxx X. and Xxxxxx Xxxxxxxx 48,116
17. Xxxxxx X. Xxxxxxxxx 5,000
18. Xxxxxx X. and Xxxxxxx Xxxxx 5,643
19. Xxxxx Xxxxxxx 11,637
20. Xxxxxx X. Xxxxxx 1,136,227
21. Meistrich Family Trust UTA 12/6/90 4,042
22. Xxxxxxx X. Xxxxxx 1,785
23. Xxxxxxx X. and Xxxxxxx Xxxxxxxxx 73,099
24. J. Xxxxx and Xxxxxx Xxxxx 9,447
25. Xxxxxx Xxxxxxx 10,267
26. Xxxx Xxxxxxx Family Trust 10,267
27. G. Xxxxxxx Xxxxx 54,740
28. Xxxxxxx and Xxx Xxxxxx 26,388
29. J. Xxxxxxxx Xxxxxxxx 1,729
30. X.X. Xxxxxxx 2,889
31. Xxxxxxx Survivors Trust 7,687
32. Xxxxxxx X. Xxxxxxxx 1,278
33. The Way 1994 Living Trust Dtd. 11/2/94 2,226
34. Gay X. Xxxxxxxx 10,720
35. Xxxxx X. Xxxxxxxxx 15,849
36. 280 Euclid Properties, Ltd. 135,260
37. El Molino Properties, Ltd. 138,652
7.875% SERIES B PREFERRED UNITS*
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Limited Partner:
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Belair Real Estate Corporation 977,000
Belcrest Realty Corporation 623,000
9 1/8% SERIES C PREFERRED UNITS
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Limited Partner:
Belcrest Realty Corporation 420,000
Belair Real Estate Corporation 80,000
9.30 % SERIES D PREFERRED UNITS
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Limited Partner:
Belcrest Realty Corporation 1,000,000
Belair Real Estate Corporation 1,000,000
9.25 % SERIES E PREFERRED UNITS
-------------------------------
Limited Partner:
TMCT II, LLC 2,220,000
TOTAL PARTNERSHIP UNITS: 25,062,023
________________
EXHIBIT E
ALLOCATIONS
1. Allocation of Net Income and Net Loss.
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(a) Net Income. Except as otherwise provided herein, Net Income for
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any fiscal year or other applicable period shall be allocated in the following
order and priority:
(1) First, to the Partners, until the cumulative Net Income
allocated pursuant to this subparagraph (a)(1) for the current and all prior
periods equals the cumulative Net Loss allocated pursuant to subparagraph (b)(2)
hereof for all prior periods, among the Partners in the reverse order that such
Net Loss was allocated to the Partners pursuant to subparagraph (b)(2) hereof
(and, in the event of a shift of a Partner's interest in the Partnership, to the
Partners in a manner that most equitably reflects the successors in interest to
the Partners).
(2) Thereafter, the balance of the Net Income, if any, shall be
allocated to the Partners in accordance with their respective Percentage
Interests.
(b) Net Loss. Except as otherwise provided herein, Net Loss of the
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Partnership for each fiscal year or other applicable period shall be allocated
as follows:
(1) To the Partners in accordance with their respective
Percentage Interests.
(2) Notwithstanding subparagraph (b)(1) hereof, to the extent
any Net Loss allocated to a Partner under subparagraph (b)(1) hereof or this
subparagraph (b)(2) would cause such Partner (hereinafter, a "Restricted
Partner") to have an Adjusted Capital Account Deficit as of the end of the
fiscal year to which such Net Loss relates, such Net Loss shall not be allocated
to such Restricted Partner and instead shall be allocated to the other
Partner(s) (hereinafter, the "Permitted Partners") pro rata in accordance with
their relative Percentage Interests.
(c) Notwithstanding Sections 1(a) and (b) above, on any date on which
any Series A Preferred Stock, any Series B Preferred Stock, any Series C
Preferred Stock, any Series D Preferred Stock, any Series E Preferred Stock or
any Series B Preferred Unit, any Series C Preferred Unit, any Series D Preferred
Unit or any Series E Preferred Unit (or other Preferred Stock or other Preferred
Units) is outstanding, Net Income and Net Loss shall be allocated as follows:
(1) Net Income for any fiscal year or other applicable period
shall be allocated in the following order and priority:
(i) First, to the Partners, until the cumulative Net Income
allocated pursuant to this subparagraph (c)(1)(i) for the current and all prior
periods equals the cumulative Net Loss allocated pursuant to subparagraphs
(c)(2)(iii) and (iv) hereof for all prior periods, among the Partners in the
reverse order that such Net Loss was allocated (and, in the
event of a shift of a Partner's interest in the Partnership, to the Partners in
a manner that most equitably reflects the successors in interest to such
Partners);
(ii) Second, on pari passu basis to the General Partner and
the holders of the Series B Preferred Units, Series C Preferred Units, Series D
Preferred Units and Series E Preferred Units, until the cumulative Net Income
allocated pursuant to this subparagraph (c)(1)(ii) for the current and all prior
periods equals the cumulative Net Loss allocated pursuant to subparagraph
(c)(2)(ii) hereof for all prior periods;
(iii) Third, on a pari passu basis, to (A) the General
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Partner until the cumulative amount of Net Income allocated pursuant to this
subparagraph (c)(1)(iii) equals the total amount of dividends paid on the Series
A Preferred Stock, the Series B Preferred Stock the Series C Preferred Stock,
the Series D Preferred Stock and the Series E Preferred Stock (and other
Preferred Stock) as of or prior to the date of such allocation plus the total
amount of accrued but unpaid dividends on the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock and the Series E Preferred Stock (and other Preferred Stock) as of such
date; (B) to the holders of Series B Preferred Units until the cumulative amount
of Net Income allocated pursuant to this subparagraph (c)(i)(iii) equals the
total amount of Priority Return paid on the Series B Preferred Units as of or
prior to the date of such allocation plus the total amount of accrued but unpaid
Priority Return on the Series B Preferred Units; (C) to the holders of Series C
Preferred Units until the cumulative amount of Net Income allocated pursuant to
this subparagraph (c)(i)(iii) equals the total amount of Priority Return paid on
the Series C Preferred Units as of or prior to the date of such allocation plus
the total amount of accrued but unpaid Priority Return on the Series C Preferred
Units; (D) to the holders of Series D Preferred Units until the cumulative
amount of Net Income allocated pursuant to this subparagraph (c)(i)(iii) equals
the total amount of Priority Return paid on the Series D Preferred Units as of
or prior to the date of such allocation plus the total amount of accrued but
unpaid Priority Return on the Series D Preferred Units; and (E) to the holders
of Series E Preferred Units until the cumulative amount of Net Income allocated
pursuant to this subparagraph (c)(i)(iii) equals the total amount of Priority
Return paid on the Series E Preferred Units as of or prior to the date of such
allocation plus the total amount of accrued but unpaid Priority Return on the
Series E Preferred Units.
(iv) Thereafter, the balance of the Net Income, if any,
shall be allocated to the Partners in accordance with their respective
Percentage Interests.
(2) Net Loss of the Partnership for each fiscal year or other
applicable period shall be allocated as follows:
(i) First, to the Partners in accordance with their
respective Percentage Interests until the Capital Account balances of the
Limited Partners (not including the holders of the Series B Preferred Units, the
Series C Preferred Units, the Series D Preferred Units and the Series E
Preferred Units) are reduced to zero (for purpose of this calculation, such
Partners' share of Partnership Minimum Gain shall be added back to their Capital
Accounts);
(ii) Second, on a pari passu basis, to (A) the General
Partner until its Capital Account balance has been reduced to zero (for purpose
of this calculation, such
Partner's share of Partnership Minimum Gain shall be added back to its Capital
Account); (B) to the holders of Series B Preferred Units until their Capital
Account balances have been reduced to zero (for purpose of this calculation,
such Partners' share of Partnership Minimum Gain shall be added back to their
Capital Accounts); (C) to the holders of Series C Preferred Units until their
Capital Account balances have been reduced to zero (for purposes of this
calculation, such Partners' share of Partnership Minimum Gain shall be added
back to their Capital Accounts); (D) to the holders of Series D Preferred Units
until their Capital Account balances have been reduced to zero (for purposes of
this calculation, such Partners' share of Partnership Minimum Gain shall be
added back to their Capital Accounts); and (E) to the holders of Series E
Preferred Units until their Capital Account balances have been reduced to zero
(for purposes of this calculation, such Partners' share of Partnership Minimum
Gain shall be added back to their Capital Accounts);
(iii) Thereafter, to the Partners in accordance with their
then Percentage Interests;
(iv) Notwithstanding subparagraph (c)(2)(iii) hereof, to
the extent any Net Loss allocated to a Partner under subparagraph (c)(2) would
cause such Partner (hereinafter, a "Restricted Partner") to have an Adjusted
Capital Account Deficit as of the end of the fiscal year to which such Net Loss
relates, such Net Loss shall not be allocated to such Restricted Partner and
instead shall be allocated to the other Partner(s) (hereinafter, the "Permitted
Partners") pro rata in accordance with their relative Percentage Interests.
(d) Book-Up and Capital Account Adjustments. On any day on which
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Series A Preferred Stock (or other Preferred Stock) is redeemed or converted
into Common Stock, the Partnership shall adjust the Gross Asset Values of all
Partnership assets to equal their respective gross fair market values and shall
allocate the amount of such adjustment as Net Income or Net Loss pursuant to
Section 1(c) hereof, provided, however, that if no Series A Preferred Stock (or
other Preferred Stock) is outstanding after such redemption or conversion, such
Net Income or Net Loss shall be allocated in such a manner that after such
allocation the Capital Accounts of the Partners are in proportion to their
Percentage Interests.
(e) Adjustment of Percentage Interests Upon Conversion of Convertible
-----------------------------------------------------------------
Preferred Stock to Common Stock. Upon the conversion of any Series A Preferred
-------------------------------
Stock to Common Stock of the General Partner, the Percentage Interests of the
Partners shall be adjusted in accordance with the provisions of Article 4 of the
Partnership Agreement as if, on the date of such conversion, the General Partner
had made an additional Capital Contribution to the Partnership in an amount
equal to the number of shares of Common Stock issued as a result of such
conversion multiplied by the fair market value of such shares on the date of
conversion, and provided that in calculating such adjustments, the General
Partner shall be deemed not to have incurred any expenses in connection with
raising the funds used to make such additional Capital Contribution.
2. Special Allocations.
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Notwithstanding any provisions of paragraph 1 of this Exhibit E, the
following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). If there is a
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net decrease in Partnership Minimum Gain for any Partnership fiscal year (except
as a result of conversion or refinancing of Partnership indebtedness, certain
capital contributions or revaluation of the Partnership property as further
outlined in Regulation Sections 1.704-2(d)(4), (f)(2) or (f)(3)), each Partner
shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to that Partner's share
of the net decrease in Partnership Minimum Gain. The items to be so allocated
shall be determined in accordance with Regulation Section 1.7042(f). This
paragraph (a) is intended to comply with the minimum gain chargeback requirement
in said section of the Regulations and shall be interpreted consistently
therewith. Allocations pursuant to this paragraph (a) shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant hereto.
(b) Minimum Gain Attributable to Partner Nonrecourse Debt. If there
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is a net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt
during any fiscal year (other than due to the conversion, refinancing or other
change in the debt instrument causing it to become partially or wholly
nonrecourse, certain capital contributions, or certain revaluations of
Partnership property as further outlined in Partnership income and gain for such
year (and, if necessary, subsequent years) in an amount equal to that Partner's
share of the net decrease in the Minimum Gain Attributable to Partner
Nonrecourse Debt. The items to be so allocated shall be determined in
accordance with Regulation Section 1.704-2(i)(4) and (j)(2). This paragraph (b)
is intended to comply with the minimum gain chargeback requirement with respect
to Partner Nonrecourse Debt contained in said section of the Regulations and
shall be interpreted consistently therewith. Allocations pursuant to this
paragraph (b) shall be made in proportion to the respective amounts required to
be allocated to each Partner pursuant hereto.
(c) Qualified Income Offset. In the event a Limited Partner
-----------------------
unexpectedly receives any adjustments, allocations or distributions described in
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), and such Limited
Partner has an Adjusted Capital Account Deficit, items of Partnership income and
gain shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate the Adjusted Capital Account Deficit as quickly as
possible. This paragraph (c) is intended to constitute a "qualified income
offset" under Regulation Section 1.704-l(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
(d) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal
----------------------
year or other applicable period shall be allocated to the Partners in accordance
with their respective Percentage Interests.
(e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
------------------------------
for any fiscal year or other applicable period shall be specially allocated to
the Partner that bears the economic risk of loss for the debt (i.e., the Partner
Nonrecourse Debt) in respect of which such Partner Nonrecourse Deductions are
attributable (as determined under Regulation Section 1.704-2(b)(4) and (i)(1)).
(f) Curative Allocations. It is the intent of the Partnership that,
--------------------
to the extent possible, the Capital Account balances of the Partners be in
proportion to the Partners' Percentage Interests. Thus, items of "book" income,
gain, loss, and deduction shall be allocated among the Partners so that, to the
extent possible, the resulting Partners' Capital Account
balances bear this relationship. This subparagraph (f) is intended to minimize
to the extent possible and to the extent necessary any economic distortions
which may result from application of the Regulatory Allocations and shall be
interpreted in a manner consistent therewith. For purposes hereof, "Regulatory
Allocations" shall mean the allocations provided under paragraph 1(b)(2) and
this paragraph 2 (save subparagraphs (d) and (f) hereof).
3. Tax Allocations.
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(a) Generally. Subject to paragraphs (b) and (c) hereof, items of
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income, gain, loss, deduction and credit to be allocated for income tax purposes
(collectively, "Tax Items") shall be allocated among the Partners on the same
basis as their respective book items.
(b) Sections 1245/1250 Recapture. If any portion of gain from the
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sale of property is treated as gain which is ordinary income by virtue of the
application of Code Section 1245 or 1250 ("Affected Gain"), then (A) such
Affected Gain shall be allocated among the Partners in the same proportion that
the depreciation and amortization deductions giving rise to the Affected Gain
were allocated and (B) other Tax Items of gain of the same character that would
have been recognized, but for the application of Code Sections 1245 and/or 1250,
shall be allocated away from those Partners who are allocated Affected Gain
pursuant to Clause (A) so that, to the extent possible, the other Partners are
allocated the same amount, and type, of capital gain that would have been
allocated to them had Code Sections 1245 and/or 1250 not applied; provided,
however, that the net amount of Tax Items allocated to each Partner shall be the
same as if this paragraph 3(a) did not exist. For purposes hereof, in order to
determine the proportionate allocations of depreciation and amortization
deductions for each fiscal year or other applicable period, such deductions
shall be deemed allocated on the same basis as Net Income and Net Loss for such
respective period.
(c) Allocations Respecting Section 704(c) and Revaluations. If any
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Partnership property is subject to Code Section 704(c) or is reflected in the
Capital Accounts of the Partners and on the books of the Partnership at a book
value that differs from the adjusted tax basis of such property, then the tax
items with respect to such property shall, in accordance with the requirements
of Regulations Section 1.704-1(b)(4)(i), be shared among the Partners in a
manner that takes account of the variation between the adjusted tax basis of the
applicable property and its book value in the same manner as variations between
the adjusted tax basis and fair market value of property contributed to the
Partnership are taken into account in determining the Partners' share of tax
items under Code Section 704(c). The General Partner is authorized to choose
any reasonable method permitted by the Regulations pursuant to Code Section
704(c), including the "remedial allocation" method, the "curative allocation"
method and the traditional method; provided that the General Partner agrees to
use reasonable efforts to minimize the amount of taxable income in excess of
book income allocated to the holders of the Series B Preferred Units, the Series
C Preferred Units, the Series D Preferred Units and the Series E Preferred
Units.
(d) Code Section 752 Specification. Pursuant to Regulations Section
------------------------------
1.752-3, the Partners' interest in Partnership profits for purposes of
determining the Partners' shares of excess nonrecourse liabilities shall be
their Percentage Interests.
EXHIBIT M
ADDRESSES OF PARTNERS
PARTNERSHIP UNIT HOLDERS
------------------------
Essex Portfolio Management Company Essex Property Corporation
000 Xxxxxxxxxx Xxxxxx 000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000 Xxxx Xxxx, XX 00000
GMMS Partners M & M Projects, Inc.
000 Xxxxxxxxxx Xxxxxx 000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000 Xxxx Xxxx, XX 00000
SummerHill Homes Xxxxx Xxxxxx
000 Xxxxxxxxxx Xxxxxx 0000 Xxxxxxxxx #000
Xxxx Xxxx, XX 00000 Xxxxxxxxx, XX 00000
Xxxxxx and Xxxxxxxx Xxxxxx Xxxxxxx X. Xxxxxx
460 Xxxxxxx 000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000 Xxxx Xxxx, XX 00000
Belair Capital Fund LLC Xxxxx Xxxxxxxxx, Trustee
c/o Xxxxx Xxxxx Management Xxxxx Xxxxxxxxx Revocable Trust
00 Xxxxxxx Xxxxxx 0000 Xxxxxxxx Xxxx Xxxx #000
Xxxxxx, Xxxxxxxxxxxxx 00000 Xxxxxxxx, XX 00000
Attention: Xx. Xxxx Xxxxxx
Fax: 000-000-0000
Xxxxxxx and Xxxxxxxx Xxxxxxxxxxx Xxxx X. and Xxxxxx Xxxx
00000 Xxxxx Xxxxxx 000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000 Xxxx Xxxx, XX 00000
Xxxxxxx and Xxxxxxxx Xxxxxxxxxxx, Trustees Xxxxxx and Xxxxxxxxx Xxxxxxxxxxx, Trustees
Frangadakis Family Revocable Trust Frangadakis Family Revocable Trust
00000 Xxxxx Xxxxxx 0000 Xxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
Xxxxx X. and Xxxxxx Xxxxxxxx Xxxxxx Xxxxxxxx
00000 Xxxxxxxx Xxx 000 Xxxxxxxxx Xxx
Xxxxxxxx, XX 00000 Xxx Xxxxxxx, XX 00000
Xxxxxx X. and Xxxxxxx Xxxxx Xxxxxx and Xxxxxxxx Xxxxx
0000 Xxxxxx Xxxxxx 00000 Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000 X. Xxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxx Xxxxxx X. Xxxxxxxxx
0000 Xxxxxxxxx # 000 0000 Xxxxxxx Xxxxxx #000
Xxxxxxxxx, XX 00000 Xxxxxxx, XX 00000
J. Xxxxx and Xxxxxx Xxxxx Xxxxx Xxxxxxx
000 Xx Xxxxxx Xxx 000 Xxxxxxxxxxx Xxx
Xxxxxxxx, XX 00000 Xxxx Xxxx, XX 00000
Xxxx and Xxxxx Xxxxxxx, Trustees Xxxxxx X. Xxxxxx
Xxxx Xxxxxxx Family Trust 000 Xxxxxxxxxx Xxxxxx
00000 Xxxxx Xxxxxx, Xxxxx 0 Xxxx Xxxx, XX 00000
Xxxxxxxxx, XX 00000
Xxxxxxx and Xxx Xxxxxx Xxxxxxx Xxxxxxxxx
0000 Xxxxx Xxxxx 0000 X. Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000 Xx Xxxxx, XX 00000
Xxxxxxx X. and Xxxxxxx Xxxxxxxxx G. Xxxxxxx Xxxxx
2626 Hanover X.X. Xxx 0000
Xxxx Xxxx, XX 00000 Xxxxxxxxx, XX 00000
Xxxxxx Xxxxxxx Xxxxx and Xxxxx Xxxxxxx, Trustees
00000 Xxxxx Xxxxxx, Xxxxx 0 Xxxxxxx Survivors Trust
Xxxxxxxxx, XX 00000 000 Xxxxxxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
X.X. Xxxxxxx J. Xxxxxxxx Xxxxxxxx
00000 Xxxxxxx Xxxx Xxxxx 000 Xxxxxx Xxxxx #0
Xxxxxx, XX 00000 Xxx Xxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxx X.X. Xxxxxxx
Marcus & Millichap 00000 Xxxxxxx Xxxx Xxxxx
0000 X. Xxxx Xxxx #000 Xxxxxx, XX 00000
Xxxxxxx, XX 00000
Gay A. Xxxxxxxx Xxxxxxx and Xxxxxxxx Way, Trustees
341 Seville The Way 1994 Living Trust Dtd. 11/2/94
Xxx Xxxxx, XX 00000 000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Belcrest Realty Corporation Xxxxx X. Xxxxxxxxx
c/o Xxxxx Xxxxx Management 000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxx Xxxxx Xxxxxxxx Xxx Xxxxx, XX 00000
000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xx. Xxxx Xxxxxx
Xxxxxx Real Estate Corporation 280 Euclid Properties, Ltd.
c/o Xxxxx Xxxxx Management c/o Xxxxxxx X. Xxxxxx & Company
The Xxxxx Xxxxx Building 00000 Xxxxxxxxxx Xxxxxxxxx
000 Xxxxx Xxxxxx Xxx Xxxxxxx, XX 00000
Xxxxxx, XX 00000
Attn: Xx. Xxxx Xxxxxx
El Xxxxxx Properties, Ltd. TMCT II, LLC
c/o Xxxxxxx X. Xxxxxx & Company c/o The Times Mirror Company
00000 Xxxxxxxxxx Xxxxxxxxx its managing member
Xxx Xxxxxxx, XX 00000 000 Xxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
EXHIBIT Q
DESCRIPTION OF PREFERENCES, OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DISTRIBUTIONS,
QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION
OF THE SERIES E PREFERRED UNITS
1. Definitions.
In addition to those terms defined in the Agreement, the following
definitions shall be for all purposes, unless otherwise clearly indicated to the
contrary, applied to the terms used in the Agreement and this Exhibit P:
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York, New
York are not required to be open.
"Distribution Payment Date" shall have the meaning set forth in
Section 2(C) hereof.
"Parity Units" means (i) the Series A Preferred Interest, (ii) the
Series B Preferred Interest, (iii) the Series C Preferred Interest, (iv) the
Series D Preferred Interest; (v) the Series E Preferred Interest and (vi) any
class or series of Partnership Interests of the Partnership now or hereafter
authorized, issued or outstanding expressly designated by the Partnership to
rank on a parity with Series E Preferred Units with respect to distributions or
rights upon voluntary or involuntary liquidation, winding-up or dissolution of
the Partnership, or both, as the context may require.
"Priority Return" means, an amount equal to 9.25% per annum,
determined on the basis of a 360 day year of twelve 30 day months (and for any
period shorter than a full quarterly period for which distributions are
computed, the amount of distribution payable will be computed based on the ratio
of the actual number of days elapsed in such quarterly period to ninety (90)
days), cumulative to the extent not distributed for any given distribution
period pursuant to Section 6.2(a) of the Partnership Agreement, of the stated
value of $25.00 per Series E Preferred Unit, commencing on the date of issuance
of the Series E Preferred Units.
"Series E Preferred Stock" means the 9.25% Series E Cumulative
Redeemable Preferred Stock (liquidation preference $25.00 per share), $.0001 par
value, issued by the General Partner.
"Series E Preferred Unit" means a Partnership Unit issued by the
Partnership to certain Persons. The Series E Partnership Units shall constitute
a series of Partnership Units. The Series E Preferred Units shall have the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms and conditions of
redemption as are set forth in this Exhibit Q.
"Set apart for payment" shall mean irrevocably placing such funds in a
separate account or delivering such funds to a disbursing, paying or other
similar agent.
2. Terms of Series E Preferred Units.
A. Number. The number of authorized Series E Preferred Units shall be
------
2,200,000.
B. Ranking. The Series E Preferred Units will, with respect to
-------
distributions and rights upon voluntary or involuntary liquidation, winding-up
or dissolution of the Partnership, rank senior to all classes or series of
Partnership Interests (as defined in the Partnership Agreement) of the
Partnership now or hereafter authorized, issued or outstanding, other than (i)
the Series A Preferred Interest, the Series B Preferred Interest, the Series C
Preferred Interest, the Series D Preferred Interest, and the Series E Preferred
Interest, with which it shall rank on a parity, and (ii) any class or series of
Partnership Interests or Partnership Units expressly designated as ranking on a
parity with or senior to the Series A Preferred Units, Series B Preferred Units,
Series C Preferred Units, Series D Preferred Units, and the Series E Preferred
Units as to distributions and rights upon voluntary or involuntary liquidation,
winding-up or dissolution of the Partnership.
C. Distributions.
-------------
(i) Subject to the rights of the holders of the Parity Units as
to the payments of distributions, holders of Series E Preferred Units will
be entitled to receive, when, as and if declared by the Partnership, acting
through the Company as the sole general partner of the Partnership,
cumulative preferential cash distributions at the rate per annum of 9.25%
of the original Capital Contribution per Series E Preferred Unit.
Distributions shall be cumulative, shall accrue from the original date of
issuance (the "Issue Date") and shall be payable (A) quarterly in arrears
(such quarterly periods, for purposes of payment and accrual shall be the
quarterly periods ending on the dates specified in this sentence and not
calendar quarters), on the 1st day of March, June, September and December
of each year, commencing on December 1, 1999 and (B) in the event of (i) an
exchange of Series E Preferred Units into shares of Series E Preferred
Stock, or (ii) upon a redemption of Series E Preferred Units, on the
exchange date or redemption date (each a "Distribution Payment Date"). The
amount of distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months and for any period shorter
than a full quarterly period for which distributions are computed, the
amount of the distribution payable will be computed based on the ratio of
the actual number of days elapsed in such quarterly period to ninety (90)
days. If any date on which distributions are to be made on the Series E
Preferred Units is not a Business Day, then payment of the distribution to
be made on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on
such date. Distributions on the Series E Preferred Units will be made to
the holders of record of the Series E Preferred Units on the relevant
record dates, which, unless otherwise provided by the Company
with respect to any distribution, will be 15 Business Days prior to the
relevant Distribution Payment Date.
(ii) No distributions on the Series E Preferred Units shall be
declared or paid or set apart for payment by the Partnership at such time
as the terms and provisions of any agreement of the Partnership, including
any agreement relating to its indebtedness, prohibits such declaration,
payment or setting apart for payment or provides that such declaration,
payment or setting apart for payment would constitute a breach thereof or a
default thereunder, of if such declaration, payment or setting apart for
payment shall be restricted or prohibited by law.
(iii) Notwithstanding the foregoing, distributions on the Series
E Preferred Units will accrue whether or not the terms and provisions set
forth in Section 2.C(ii) hereof at any time prohibit the current payment of
distributions, whether or not the Company or Partnership has earnings,
whether or not there are funds legally available for the payment of such
distributions and whether or not such distributions are authorized.
Accrued but unpaid distributions on the Series E Preferred Units will
accumulate as of the Distribution Payment Date on which they first become
payable. Accumulated and unpaid distributions will not bear interest.
(iv) So long as any Series E Preferred Unit is outstanding, no
distribution of cash or other property shall be authorized, declared, paid
or set apart for payment on or with respect to any class or series of
Partnership Interests ranking junior to the Series E Preferred Units as
provided in this Section 2 (such Partnership Interests, collectively,
"Junior Units"), nor shall any cash or other property be set aside for or
applied to the purchase, redemption or other acquisition for consideration
of any Series E Preferred Units, any Parity Units with respect to
distributions or any Junior Units, unless, in each case, all distributions
accumulated on all Series E Preferred Units and all classes and series of
outstanding Parity Units as to payment of distributions have been paid in
full. The foregoing sentence will not prohibit (i) distributions payable
solely in Junior Units, (ii) the exchange of Junior Units or Parity Units
into Common Stock or Preferred Stock of the Company in accordance with the
exchange rights of such Junior Units or Parity Units, or (iii) the
redemption, purchase or other acquisition of Junior Units made for purposes
of and in compliance with requirements of an employee incentive or benefit
plan of the Company or any subsidiary of the Partnership or the Company.
(v) So long as distributions have not been paid in full (or a sum
sufficient for such full payment is not so set apart for payment) upon the
Series E Preferred Units, all distributions authorized and declared on the
Series E Preferred Units and all classes or series of outstanding Parity
Units shall be authorized and declared so that the amount of distributions
authorized and declared per share of Series E Preferred Units and such
other classes or series of Parity Units shall in all cases bear to each
other the same ratio that accrued distributions per share on the Series E
Preferred Units and such other classes or series of Parity Units (which
shall not include any accumulation in respect of unpaid distributions for
prior distribution periods if such class or series of Parity Units do not
have cumulative distribution rights) bear to each other.
(vi) Holders of Series E Preferred Units shall not be entitled to
any distributions, whether payable in cash, other property or otherwise, in
excess of the full cumulative distributions described herein.
D. Allocation of Net Income.
------------------------
With respect to the Series E Preferred Units, the net income of
the Partnership will be allocated as provided in Exhibit E to the
Partnership Agreement.
E. Liquidation.
-----------
Subject to the rights of holders of any series of Parity Units
with respect to rights upon any voluntary or involuntary liquidation
dissolution or winding-up of the Partnership, upon any voluntary or
involuntary liquidation, dissolution or winding up of the Partnership, the
holders of the Series E Preferred Units will be entitled to receive out of
the assets of the Partnership legally available for distribution or the
proceeds thereof, after payment or provision for debts and other
liabilities of the Partnership, an amount equal to their respective Capital
Account balances. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Partnership, stating the
payment date or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable, shall be given by (i)
fax and (ii) by first class mail, postage pre-paid, not less than 30 and
not more than 60 days prior to the payment date stated therein, to each
record holder of the Series E Preferred Units at the respective addresses
of such holders as the same shall appear on the transfer records of the
Partnership. Without limiting Section 2.I hereof, the consolidation or
merger of the Partnership with or into any corporation, trust or other
entity (or of any corporation, trust or other entity with or into the
Partnership) shall not be deemed to constitute a liquidation, dissolution,
winding-up or termination of the Partnership.
F. Optional Redemption.
-------------------
(i) The Series E Preferred Units may not be redeemed prior to
September 3, 2004. On or after such date, subject to the terms and
conditions of any Parity Preferred Stock or any Parity Units, the
Partnership shall have the right to redeem the Series E Preferred Units, in
whole or in part, from time to time, upon not less than 30 nor more than 60
written days' notice, at a redemption price, payable in cash, equal to the
Capital Account balance of such holders of Series E Preferred Units (the
"Redemption Price"); provided; however that such redemption shall not be
permitted if such Redemption Price shall be less than the original Capital
Contribution of such Partner and the cumulative Priority Return to the
redemption date to the extent not previously distributed.
(ii) Except in connection with a liquidation, dissolution,
winding-up or termination of the Partnership as described under
"Liquidation" above, the Redemption Price of the Series E Preferred Units
(other than the portion thereof consisting of accumulated but unpaid
distributions) will be payable solely out of the sale proceeds of capital
stock of the Company, which will be contributed by the Company to the
Partnership as an additional capital contribution, or out of the sale
proceeds of limited partner interests of the Partnership and from no other
source. For purposes of the preceding sentence, "capital stock" means any
equity securities (including Common Stock and Preferred Stock (as such
terms are defined in the Charter)), shares, participation or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable for equity securities) or
options to purchase any of the foregoing. Unless previously redeemed, the
Series E Preferred Units will be redeemed for cash upon termination of the
Partnership. Unless sooner dissolved, the Partnership will terminate on
December 31, 2054. The Series E Preferred Units will not be subject to any
sinking fund.
(iii) If the Partnership gives a notice of redemption in respect
of Series E Preferred Units (which notice will be irrevocable) then, by
12:00 noon, New York City time, on the redemption date, the Partnership
will deposit irrevocably in trust for the benefit of the Series E Preferred
Units being redeemed funds sufficient to pay the applicable Redemption
Price and will give irrevocable instructions and authority to pay such
Redemption Price to the holders of the Series E Preferred Units. If the
Series E Preferred Units are evidenced by a certificate and if fewer than
all Series E Preferred Units evidenced by any certificate are being
redeemed, a new certificate shall be issued upon surrender of the
certificate evidencing all Series E Preferred Units, evidencing the
unredeemed Series E Preferred Units without cost to the holder thereof. On
and after the date of redemption, distributions will cease to accumulate on
the Series E Preferred Units or portions thereof called for redemption,
unless the Partnership defaults in the payment thereof. If any date fixed
for redemption of Series E Preferred Units is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business
Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of the Series E Preferred Units is improperly
withheld or refused and not paid by the Partnership, distributions on such
Series E Preferred Units will continue to accumulate from the original
redemption date to the date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the applicable Redemption Price. If fewer than all the Series
E Preferred Units are to be redeemed, the Series E Preferred Units to be
redeemed shall be selected pro rata (as nearly as practicable without
creating fractional units).
(iv) The Partnership may not redeem fewer than all the
outstanding Series E Preferred Units unless all accumulated and unpaid
distributions have been paid on all Series E Preferred Units for all
quarterly distribution periods terminating on or prior to the date of
redemption.
(v) Notice of redemption will be (i) faxed, and (ii) mailed by
the Partnership, postage prepaid, not less than 30 nor more than 60 days
prior to the redemption date, addressed to the respective holders of record
of the Series E Preferred Units to be redeemed at their respective
addresses as they appear on the transfer records
of the Partnership. No failure to give or defect in such notice shall
affect the validity of the proceedings for the redemption of any Series E
Preferred Units except as to the holders to whom notice was defective or
not given. Each notice shall state: (i) the redemption date, (ii) the
Redemption Price, (iii) the aggregate number of Series E Preferred Units to
be redeemed; (iv) the place or places where the Series E Preferred Units
are to be surrendered for payment of the Redemption Price; (v) that
distributions on the Series E Preferred Units to be redeemed will cease to
accumulate on such redemption date and (vi) that payment of the Redemption
Price will be made upon presentation and surrender of such Series E
Preferred Units. If fewer than all of the Series E Preferred Units held by
any holder are to be redeemed, the notice mailed to such holder shall also
specify then number of Series E Preferred Units to be redeemed from such
holder.
G. Exchange Rights.
---------------
(i) Unless called for redemption as described above under
"Optional Redemption," Series E Preferred Units will be exchangeable in
whole or in part at anytime on or after the tenth anniversary of the Issue
Date, at the option of the holders thereof, for authorized but previously
unissued shares of the Company's Series E Preferred Stock at an exchange
price of $25.00 per share of Series E Preferred Stock (equivalent to an
exchange rate of one share of Series E Preferred Stock for each Series E
Preferred Unit), subject to adjustment as described below (the "Exchange
Price"), provided that the Series E Preferred Units will become immediately
exchangeable at any time in whole or in part at the option of the holders
for Series E Preferred Units:
(y) if at any time full distributions shall not have been timely
made on any outstanding Series E Preferred Units with respect to any six
(6) prior quarterly distribution periods, whether or not consecutive,
provided, however, that a distribution in respect of Series E Preferred
Units shall be considered timely made if made within two (2) Business Days
after the applicable Distribution Payment Date if at the time of such
payment there shall not be any prior quarterly distribution periods in
respect of which full distributions were not timely made or
(z) upon receipt by holders of Series E Preferred Units of (A)
notice from the General Partner that the General Partner or a subsidiary of
the General Partner has become aware of facts that will or likely will
cause the Partnership to become a "publicly traded partnership" (a "PTP")
within the meaning of Section 7704 of the Internal Revenue Code of 1986, as
amended, and (B) an opinion rendered by independent counsel to the General
Partner familiar with such matter (or, in the event of a conflict, other
reputable independent counsel designated by such General Partner counsel),
addressed to a holder or holders of Series E Preferred Units, that the
Partnership is, or likely is, or upon the occurrence of a defined event in
the immediate future will be or likely will be, a PTP.
Series E Preferred Units may be exchanged for Series E Preferred
Stock in whole or in part at the option of any holder prior to the tenth
anniversary of the Issue Date and after the third anniversary thereof if
such holder delivers to the Partnership and the Company either (i) a
private letter ruling addressed to a holder of Series E Preferred
Units or (ii) an opinion of independent counsel reasonably acceptable to
the Company based on the enactment of temporary or final Treasury
Regulations or the publication of a Revenue Ruling, in either case to the
effect that an exchange of the Series E Preferred Units at such earlier
time would not cause the Series E Preferred Units to be considered "stock
and securities" within the meaning of section 351(e) of the Code for
purposes of determining whether the holder of such Series E Preferred Units
is an "investment company" under section 721(b) of the Code if an exchange
is permitted at such earlier date.
The Series E Preferred Units will become exchangeable in whole or
in part at the option of the holders of the Series E Preferred Units if, at
any time such holders conclude based on results or projected results that
there exists (in the reasonable judgment of such holders) an imminent and
substantial risk that such holders' interest in the Partnership represents
or will represent more than 19.0% of the total profits of or capital
interests in the Partnership for a taxable year, (ii) such holders deliver
to the General Partner an opinion of nationally recognized independent
counsel, reasonably acceptable to the General Partner to the effect that
there is a substantial risk that their interest in the Partnership does not
or will not satisfy the 19.0% limit and (iii) the General Partner agrees
with the conclusions referred to in clauses (i) and (ii) of this sentence,
such agreement not to be unreasonably withheld.
(ii) Notwithstanding anything to the contrary set forth in
2.G(i), if an Exchange Notice (as defined herein) has been delivered to the
General Partner, then the General Partner may, at its option, elect to
redeem or cause the Partnership to redeem all or a portion of the
outstanding Series E Preferred Units for cash in an amount equal to the
original Capital Contribution per Series E Preferred Unit and all accrued
and unpaid distributions thereon to the date of redemption. The General
Partner may exercise its option to redeem the Series E Preferred Units for
cash pursuant to this 2.G(ii) by giving each holder of record of Series E
Preferred Units notice of its election to redeem for cash, within fifteen
(15) Business Days after receipt of the Exchange Notice, by (i) fax, and
(ii) registered mail, postage paid, at the address of each holder as it may
appear on the records of the Partnership stating (i) the redemption date,
which shall be no later than sixty (60) days following the receipt of the
Exchange Notice, (ii) the Redemption Price, (iii) the place or places where
the Series E Preferred Units are to be surrendered for payment of the
Redemption Price, (iv) that distributions on the Series E Preferred Units
will cease to accrue on such redemption date; (v) that payment of the
Redemption Price will be made upon presentation and surrender of the Series
E Preferred Units and (vi) the aggregate number of Series E Preferred Units
to be redeemed, and if fewer than all of the outstanding Series E Preferred
Units are to be redeemed, the number of Series E Preferred Units to be
redeemed held by such holder, which number shall equal such holder's pro
rata share (based on the percentage of the aggregate number of outstanding
Series E Preferred Units the total number of Series E Preferred Units held
by such holder represents) of the aggregate number of Series E Preferred
Units being redeemed. The redemption of Series E Preferred Units described
in this Section 2.G(iii) shall be subject to the provisions of Section
2.F.(ii) and (iii); provided, however, that the term "Redemption Price" in
such Sections shall be read to mean the original Capital
Contribution per Series E Preferred Unit being redeemed plus all accrued
and unpaid distributions to the redemption date.
(iii) In the event an exchange of all or a portion of the Series
E Preferred Units pursuant to Section 2.G(i) would violate the Ownership
Limit of the General Partner set forth in Article EIGHTH of the Charter,
the General Partner will give written notice thereof to each holder of
record of Series E Preferred Units exercising such exchange right, within
fifteen (15) Business Days following receipt of the Exchange Notice, by (i)
fax, and (ii) mail, postage prepaid, at the address of each such holder set
forth in the records of the Partnership. In such event, each holder of
Series E Preferred Units exercising its exchange right, shall be entitled
to exchange a number of Series E Preferred Units which would comply with
the Ownership Limit of the General Partner set forth in Article EIGHTH of
the Charter and any Series E Preferred Units not so exchanged (the "Excess
Units") shall be redeemed by the Partnership for cash in an amount equal to
the original Capital Contribution per Excess Unit, plus any accrued and
unpaid distributions thereon to the date of redemption. The written notice
of the General Partner shall state (i) the number of Excess Units held by
such holder, (ii) the Redemption Price of the Excess Units, (iii) the date
on which such Excess Units shall be redeemed, which date shall be no later
than ninety (90) days following the receipt of the Exchange Notice, except
as provided below, (iv) the place or places where such Excess Units are to
be surrendered for payment of the Redemption Price, (iv) that distributions
on the Excess Units will cease to accrue on such redemption date, and (v)
that payment of the Redemption Price will be made upon presentation and
surrender of such Excess Units. The redemption of Series E Preferred Units
described in this Section 2.G(iii) shall be subject to the provisions of
Section 2.F(ii) and (iii); provided, however, that the term "Redemption
Price" in such Sections shall be read to mean the original Capital
Contribution per Series E Preferred Unit being redeemed plus all accrued
and unpaid distributions to the redemption date. The Partnership may at
its option delay the payment of cash to effect redemption of Series E
Preferred Units pursuant to this Section 2.G(iii) for up to two hundred
seventy (270) days following the end of the 90 day period set forth in
clause (iii) above of this Section 2.G(iii), provided that during such two
hundred seventy (270) day period, the General Partner shall pay, in
addition to the Redemption Price of the Excess Units and any accrued and
unpaid distribution with respect to the Excess Units, to the holder of such
Excess Units an amount equal to 1 1/4% per annum of the original Capital
Contribution per such Excess Unit from the end of such 90 day period
through the date of redemption.
To the extent the General Partner would not be able to pay the
cash set forth above in exchange for the Excess Units, and to the extent
consistent with the Charter, the General Partner agrees that it will grant
to the holders of the Series E Preferred Units exceptions to the Beneficial
Ownership Limit and Constructive Ownership Limit set forth in the Charter
sufficient to allow such holders to exchange all of their Series E
Preferred Units for Series E Preferred Stock, provided such holders furnish
to the General Partner representations acceptable to the General Partner in
its sole and absolute discretion which assure the General Partner that such
exceptions will not jeopardize the General Partner's tax status as a REIT
for purposes of federal and applicable state law.
(iv) Any exchange shall be exercised pursuant to a notice of
exchange (the "Exchange Notice") delivered to the General Partner by the
holder who is exercising such exchange right, by (i) fax, and (ii) by mail,
postage prepaid. The exchange of Series E Preferred Units, or a specified
portion thereof, may be effected after the fifteenth (15th) Business Day
following receipt by the General Partner of the Exchange Notice by
delivering certificates, if any, representing such Series E Preferred Units
to be exchanged together with written notice of exchange and a proper
assignment of such Series E Preferred Units to the office of the Company
maintained for such purpose. Currently, such office is Essex Property
Trust, Inc., 000 X. Xxxxxx Xxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000.
(v) Each exchange will be deemed to have been effected
immediately prior to the close of business on the date on which such Series
E Preferred Units to be exchanged (together with all required
documentation) shall have been surrendered and notice shall have been
received by the Company as aforesaid and the exchange shall be at the
Exchange Price in effect at such time and on such date. The right to
exchange Series E Preferred Units called for redemption will terminate upon
receipt by the holder of such Series E Preferred Units of a notice of
redemption from the Partnership that pertains to such Series E Preferred
Units.
(vi) In the event of an exchange of Series E Preferred Units into
shares of Series E Preferred Stock, an amount equal to the accrued and
unpaid distributions to the date of exchange on any Series E Preferred
Units tendered for exchange shall accrue on the shares of the Series E
Preferred Stock into which such Series E Preferred Units are exchanged and
the Series E Preferred Units so exchanged shall no longer be outstanding.
(vii) Fractional shares of Series E Preferred Stock are not to
be issued upon exchange but, in lieu thereof, the Company will pay a cash
adjustment based upon the fair market value of the Series E Preferred Stock
on the day prior to the exchange date as determined in good faith by the
Board of Directors of the Company.
H. Exchange Price Adjustments.
--------------------------
(i) The Exchange Price is subject to adjustment upon certain
events, including (i) subdivisions, combinations and reclassification of
the Series E Preferred Stock, and (ii) distributions to all holders of
Series E Preferred Stock of evidences of indebtedness of the Company or
assets (including securities, but excluding dividends and distributions
paid in cash out of equity applicable to the Series E Preferred Stock).
(ii) In case the Company shall be a party to any transaction
(including, without limitation, a merger, consolidation, statutory share
exchange, tender offer for all or substantially all of the Company's
capital stock or sale of all or substantially all of the Company's assets),
in each case as a result of which the Series E Preferred Stock will be
converted into the right to receive shares of capital stock, other
securities or other property (including cash or any combination thereof),
each Series E Preferred Unit, will thereafter be exchangeable into the kind
and amount of shares of capital stock and other securities and property
receivable (including cash or any combination thereof) upon the
consummation of such transaction by a holder of that number of shares of
Series E Preferred Stock or fraction thereof into which one Series E
Preferred Unit was exchangeable immediately prior to such transaction. The
Company may not become a party to any such transaction unless the terms
thereof are consistent with the foregoing.
(iii) No adjustment of the Exchange Price is required to be made
in any case until cumulative adjustments amount to 1% or more of the
Exchange Price. Any adjustments not so required to be made will be carried
forward and taken into subsequent adjustments.
I. Voting Rights.
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(i) Holders of the Series E Preferred Units will not have any
voting rights or rights to consent to any matters, except as set forth
below.
(ii) So long as any Series E Preferred Units remains outstanding,
the Partnership shall not, without the affirmative vote of the holders
(other than the General Partner) of at least two-thirds (2/3) of the Series
E Preferred Units outstanding at the time (i) authorize or create, or
increase the authorized or issued amount of, any class or series of
Partnership Interests ranking prior to the Series E Preferred Units with
respect to payment of distributions or rights upon liquidation, dissolution
or winding-up or reclassify any Partnership Interests of the Partnership
into any such Partnership Interest, or create, authorize or issue any
obligations or security convertible into or evidencing the right to
purchase any such Partnership Interest, (ii) amend, alter or repeal the
provisions of the Partnership Agreement, whether by merger, consolidation
or otherwise, that would materially and adversely affect the powers,
special rights, preferences, privileges or voting power of the Series E
Preferred Units or the holders thereof, provided that any increase in the
amount of Partnership Interests or the creation or issuance of any other
class or series of Partnership Interests ranking junior to or on a parity
with the Series E Preferred Units with respect to payment of distributions
and the distribution of assets upon liquidation, dissolution or winding up
shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers; provided that, with respect to
Parity Preferred Units issued to any "affiliate" of the Partnership (as
such term is defined in Rule 144 of the General Rules and Regulations under
the Securities Act of 1933), such Parity Preferred Units are issued in
connection with a larger issuance to non-affiliates of Parity Preferred
Units of the same series and with the same terms as such Parity Preferred
Units, or (iii) consolidate, amalgamate, merge into or with, or convey,
transfer or lease its assets substantially as an entirety to, any General
Partner or other entity, unless (a) the Partnership is the surviving entity
and the Series E Preferred Units remain outstanding with the terms thereof
unchanged or, (b) the resulting surviving or transferee entity is a
partnership, limited liability company or other pass-through entity
organized under the laws of any state and substitutes the Series E
Preferred Units for other interests in such entity having substantially the
same terms and rights as the Series E Preferred Units, including with
respect to distributions, voting rights and rights upon liquidation,
dissolution or winding-up, or (c) such merger, consolidation, amalgamation
or asset transfer does not adversely affect the powers, special rights,
preferences and privileges of the holders of the Series E Preferred Units
in any material
respect. However, the Partnership may create additional classes and series
of Parity Units and Junior Units, increase the authorized number of Parity
Units and Junior Units and issue additional classes and series of Parity
Units and Junior Units without the consent of any holders of the Series E
Preferred Units; provided that, with respect to Parity Preferred Units
issued to any "affiliate" of the Partnership (as such term is defined in
Rule 144 of the General Rules and Regulations under the Securities Act of
1933), such Parity Preferred Units are issued in connection with a larger
issuance to non-affiliates of Parity Preferred Units of the same series and
with the same terms as such Parity Preferred Units.
While any Series E Preferred Units are outstanding, the General
Partner shall not take any action that under Section 6(c) of the Series E
Articles Supplementary requires the affirmative vote of the holders of at
least two-thirds (2/3) of the outstanding shares and/or units (voting as a
single class and on an as-exchanged for Series E Preferred Stock basis)
comprising the Series E Preferred Stock and/or Series E Preferred Units
unless it has obtained such requisite vote of the Series Preferred Stock
and Series E Preferred Units.
In addition to the foregoing, the Partnership will not enter into
any contract, mortgage, loan or other agreement that directly prohibits or
restricts the ability of a Series E Limited Partner to exercise its rights
set forth herein to effect in full an exchange or redemption pursuant to
Section 2(G), except with the affirmative vote of the holders (other than
the General Partner) of at least two-thirds (2/3) of the Series E Preferred
Units outstanding at that time.
J. Restrictions on Ownership and Transfer.
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Each holder of the Series E Preferred Units shall be permitted to
transfer its Series E Preferred Units if such transfer is in accordance
with the provisions and restrictions on Transfers of Limited Partnership
Interests set forth in Sections 9.2(b) and 9.3 (other than 9.3(ii)) of the
Partnership Agreement; provided, however, that upon any Transfer by a
holder of Series E Preferred Units to any Controlled Entity, such
transferee shall, subject to compliance with Section 9.3 and clauses (A),
(B) and (D) of Section 9.2 of the Partnership Agreement, be admitted as a
Substituted Limited Partner.
No transfer of the Series E Preferred Units is permitted without
the consent of the General Partner, which consent may be given or withheld
in its sole and absolute discretion, if such transfer would result in more
than four (4) partners holding all outstanding Series E Preferred Units
within the meaning of Treasury Regulation Section 1.7704-1(h)(1)(ii);
provided, however, that the General Partner's consent may not be
unreasonably withheld if (a) the General Partner has received reasonable
prior notice of the proposed transfer, (b) such transfer would not result
in more than four (4) partners holding all outstanding Series E Preferred
Units within the meaning of such Treasury Regulation Sections and (c) the
General Partner is relying on a provision other than Treasury Regulation
Section 1.7704-1(h) to avoid classification of Operating Partnership as a
PTP. In addition, no transfer may be made to any person if such transfer
would cause the exchange of the Series E Preferred Units for Series E
Preferred Stock, as
provided herein, to be required to be registered under the Securities Act,
or any state securities laws. Notwithstanding anything in this Agreement to
the contrary, the Series E Preferred Units shall be freely transferable to
LLC, which shall upon such transfer be admitted as a limited partner
hereunder.
