<PAGE>   1
                                                                    EXHIBIT 10.1



                            REVOLVING LOAN AGREEMENT


                                     BETWEEN




                             ESSEX PORTFOLIO, L.P.,
                        a California limited partnership
                                       and
             BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION

                            Dated as of May 11, 1998


<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                    Page(s)
<S>     <C>                                                                         <C>
1.      DEFINITIONS.......................................................................1

2.      LINE OF CREDIT AMOUNT AND TERMS...................................................4

        2.1    Line of Credit.............................................................4
        2.2    Availability Period; Extension of Availability Period; Term-Out
               Option.....................................................................5
        2.3    Interest Rate..............................................................6
        2.4    Letters of Credit..........................................................6
        2.5    Survival...................................................................9

3.      FEES..............................................................................9

        3.1    Unused Fee.................................................................9
        3.2    Letter of Credit Fees......................................................9

4.      DISBURSEMENTS, PAYMENTS AND COSTS.................................................9

        4.1    Requests for Credit........................................................9
        4.2    Disbursements and Payments................................................10
        4.3    Telephone and Telefax Authorization.......................................11
        4.4    Taxes.  ..................................................................11
        4.5    Additional Costs..........................................................11

5.      UNENCUMBERED ASSET POOL..........................................................12

        5.1    Unencumbered Asset Pool and Unencumbered Asset Pool
               Property Defined..........................................................12
        5.2    Additions of Property to the Unencumbered Asset Pool......................12
        5.3    Removal of Property from the Unencumbered Asset Pool......................15
        5.4    Current Value of the Unencumbered Asset Pool..............................16
        5.5    Mortgage Value of Unencumbered Asset Pool Property........................17
        5.6    Use of the Unencumbered Asset Pool Property...............................17
        5.7    Income from Unencumbered Asset Pool Property..............................18

</TABLE>


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<PAGE>   3


<TABLE>
<S>     <C>                                                                         <C>
6.      CONDITIONS.......................................................................18

        6.1    Authorizations............................................................18
        6.2    Governing Documents.......................................................18
        6.3    Documents.................................................................18
        6.4    Insurance.................................................................18
        6.5    Legal Opinions............................................................19
        6.6    Good Standing.............................................................19
        6.7    Payment of Certain Outstanding Obligations................................19
        6.8    Payment of Fees...........................................................20
        6.9    Solvency Certificate......................................................20
        6.10   Other Items...............................................................20
        6.11   Conditions of Each Advance, Extension of Credit, or Issuance of
               Letter of Credit..........................................................20

7.      COVENANTS OF BORROWER............................................................21

        7.1    Covenants Relating to Unencumbered Asset Pool.............................21
        7.2    Payment of Expenses.......................................................23
        7.3    Total Amount Outstanding..................................................23
        7.4    Financial and Other Information; Certification............................23
        7.5    Notices...................................................................25
        7.6    Indemnity.................................................................26
        7.7    Negative Covenants........................................................26
        7.8    Development Covenants.....................................................28
        7.9    Performance of Acts.......................................................29
        7.10   Keeping Guarantor Informed................................................29
        7.11   Maximum Total Liabilities to Gross Asset Value of 50%.....................29
        7.12   Fixed Charge Coverage Ratio...............................................29
        7.13   Maximum Quarterly Dividends...............................................30
        7.14   Minimum Tangible Net Worth................................................30
        7.15   Negative Pledge...........................................................30
        7.16   Total Unencumbered Assets to Unsecured Debt...............................31
        7.17   Change in Ownership of Borrower or Management of the
               Unencumbered Asset Pool Property..........................................31
        7.18   Books and Records.........................................................31
        7.19   Audits....................................................................31
        7.20   Cooperation...............................................................32
        7.21   ERISA Plans...............................................................32
        7.22   Use of Proceeds...........................................................32
        7.23   Use of Proceeds - Ineligible Securities...................................32

</TABLE>


                                      -ii-

<PAGE>   4

<TABLE>
<S>     <C>                                                                         <C>
8.      REPRESENTATIONS AND WARRANTIES...................................................33

        8.1    Organization of Borrower..................................................33
        8.2    Authorization.............................................................33
        8.3    Enforceable Agreement.....................................................33
        8.4    Good Standing.............................................................33
        8.5    No Conflicts..............................................................33
        8.6    Financial Information.....................................................34
        8.7    Borrower Not a "Foreign Person"...........................................34
        8.8    Lawsuits..................................................................34
        8.9    Year 2000 Precautions.....................................................34
        8.10   Permits, Franchises.......................................................34
        8.11   Other Obligations.........................................................34
        8.12   Income Tax Returns........................................................35
        8.13   No Event of Default.......................................................35
        8.14   ERISA Plans...............................................................35
        8.15   Location of Borrower......................................................36

9.      DEFAULT AND REMEDIES.............................................................36

        9.1    Events of Default.........................................................36
        9.2    Remedies..................................................................37

10.     REFERENCE AND ARBITRATION........................................................38

11.     MISCELLANEOUS PROVISIONS.........................................................39

        11.1   No Waiver; Consents.......................................................39
        11.2   No Third Parties Benefitted...............................................39
        11.3   Notices.      ............................................................39
        11.4   Attorneys' Fees...........................................................39
        11.5   Participations and Syndications...........................................40
        11.6   Heirs, Successors and Assigns.............................................40
        11.7   Payments Set Aside........................................................40
        11.8   Interpretation............................................................41
        11.9   Miscellaneous.............................................................41
        11.10  Integration and Relation to Loan Commitment...............................41
        11.11  Actions...................................................................41
        11.12  Relationships with Other Bank Customers...................................42

</TABLE>

                                      -iii-

<PAGE>   5


<TABLE>
<CAPTION>
Exhibits:
<S>                                                    <C>
               Exhibit A...............................Existing Letters of Credit
               Exhibit B-1.............................Form of Letter of Credit
               Exhibit B-2.............................Letter of Credit Agreement
               Exhibit C...............................Request for Extension of Credit
               Exhibit D...............................Unencumbered Asset Pool
               Exhibit E...............................Compliance Certificate

</TABLE>


                                      -iv-

<PAGE>   6

                            REVOLVING LOAN AGREEMENT
                 $100,000,000 Unsecured Revolving Line of Credit


               THIS UNSECURED REVOLVING LOAN AGREEMENT, dated as of May 11, 1998
(the "Agreement"), is between ESSEX PORTFOLIO, L.P., a California limited
partnership ("Borrower"), ESSEX PROPERTY TRUST, INC., a Maryland corporation
operating as a real estate investment trust ("Guarantor"), and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION ("Bank").

                                    RECITALS

               To provide funds for the acquisition of residential apartment
property, for general working capital needs, for operating expenses, and for
other needs, Bank would like to make a loan of funds (the "Loan") to Borrower on
a revolving basis and Borrower would like to borrow funds from Bank on that
basis, all on the terms and conditions stated herein.

               The Loan will be evidenced by a promissory note (the "Note") of
even date herewith.

               Guarantor is the general partner of Borrower. Bank is only
willing to make the Loan if Guarantor will guaranty repayment of the obligations
of Borrower under the terms of this Agreement.

               Guarantor is willing to make such a guaranty (the "Guaranty") to
Bank as provided in this Agreement.

               This Agreement, the Note, the Guaranty and any modifications
thereto, and all other documents evidencing, securing or otherwise pertaining to
the Loan are referred to herein as the "Loan Documents."

                                    AGREEMENT

1.      DEFINITIONS.

                The following terms shall have the following definitions:

                "Availability Period" has the meaning given to it in Section
2.2(a).

                "Available Amount" has the meaning given to it in Section
2.1(b).


                                       -1-

<PAGE>   7

                "Capitalization Rate" means the then current Korpacz Real Estate
Investor Survey, Overall Cap Rate (OAR), Average, subject to quarterly
adjustment; the Capitalization Rate as of the date of this Agreement is 8.88%.

                "Commitment" shall have the meaning given to it in Section
2.1(b).

                "Consolidated Borrower" means Essex Property Trust, Inc., Essex
Portfolio, L.P., and each of their affiliates, aggregated and consolidated
according to GAAP.

                "Current Value of the Unencumbered Asset Pool" shall mean the
sum of the "Current Value" of each Unencumbered Asset Pool Property.

                "Current Value" shall have the meaning given to it in Section
5.4(b).

                "Debt Service" means the sum of (x) the aggregate interest
payments, Letter of Credit fees and other fees paid or payable in respect of or
relating to debt on a property, plus (y) the aggregate principal installments
paid and payable (but not payments due at maturity) in respect of or relating
thereto.

                "Existing Letters of Credit" shall have the meaning given to it
in Section 2.4(h).

                "GAAP" means generally accepted accounting principles (including
principles of consolidation), in effect from time to time.

                "Gross Asset Value" means the sum of (i) Consolidated Borrower's
most recent one quarter annualized earnings before interest, taxes, depreciation
and amortization all according to GAAP ("EBITDA") divided by the Capitalization
Rate, (ii) cash and marketable securities of Consolidated Borrower, (iii) 75% of
the acquisition costs of properties acquired by Consolidated Borrower during the
quarter, and (iv) 50% of the book value of all development in progress as
reported on Guarantor's 10K and 10Q.. For the calculation of Gross Asset Value,
EBITDA does not include gains on sale of assets, extraordinary gains and
charges, minority interest and income attributable to properties sold or
acquired during the quarter.

                "Letter of Credit" and "Letters of Credit" have the meanings
given to them in Section 2.1(a).

                "Letter of Credit Cap" has the meaning given to it in Section
2.4(a).

                "Line of Credit" has the meaning given to it in Section 2.1(a).




                                       -2-

<PAGE>   8



               "Mortgage Value" of an Unencumbered Asset Pool Property has the
meaning given to it in Section 5.5.

                "Net Operating Income" for a property means, for the relevant
period, the aggregate total cash revenues actually collected, from the normal
operation of a property (excluding all security deposits until such time as the
tenant or other user making such deposits is no longer entitled to return
thereof), plus amounts payable to unrelated third parties on behalf of the owner
of the property, if actually paid, plus the proceeds of any rental or business
interruption insurance actually received by the owner of the property with
respect to such property, from which there shall be deducted all costs and
expenses paid or payable by the owner and relating to such property (other than
Debt Service which is paid and payments made at maturity), including, without
limitation, (a) any charges paid in connection with the use, ownership or
operation of such property, (b) any cost of repairs and maintenance, (c) any
cost associated with the management of such property, (d) any payroll cost and
other expenses for general administration and overhead paid in connection with
the use, ownership or operation of such property, (e) current real estate taxes,
(f) any sums paid or subject to payment in the nature of a rebate, refund or
other adjustment to revenue previously collected, (g) all assessment bond
indebtedness (whether principal or interest) in respect of such property paid or
payable for the interval in question, and (h) any and all costs or expenses, or
whatever nature or kind, incurred in connection with the use, ownership or
operation of the property; provided, however, that such costs and expenses paid
or payable by Borrower and relating to such property shall not include tenant
improvement costs, leasing commissions or the costs and expenses of capital
improvements and capital repairs, other than the costs and expenses of capital
improvements and repairs that recur on an annual basis, or depreciation,
amortization or other non-cash expenses.

                "Permitted Owner" has the meaning given to it in Section
5.2(b)(i).

                "Total Amount Outstanding" has the meaning given to it in
Section 2.1(b).

                "Unencumbered Asset Pool" shall have the meaning given to it in
Section 5.1.

                "Unencumbered Asset Pool Property" shall have the meaning given
to it in Section 5.1.

Terms capitalized in this Agreement and not defined in this Section 1 have the
meanings given to them elsewhere in this Agreement.


                                       -3-

<PAGE>   9

               2.     LINE OF CREDIT AMOUNT AND TERMS.

               2.1    Line of Credit.

               (a) During the Availability Period (as hereinafter defined), Bank
will provide a revolving line of credit (the "Line of Credit") to Borrower to
(i) make advances, and (ii) issue standby letters of credit (singly, a "Letter
of Credit" and, together with the Existing Letters of Credit referred to in
Section 2.4(h) below, the "Letters of Credit") for Borrower's account.

               (b) The maximum amount of the Line of Credit committed by Bank
(the "Commitment") is One Hundred Million and No/100ths Dollars
($100,000,000.00). Bank shall disburse funds under the Line of Credit in such
amounts as Borrower may request from time to time hereunder, but in no case
shall the sum of the total principal amount outstanding under the terms of this
Agreement (including the aggregate amount owing to Bank in connection with drawn
and unreimbursed Letters of Credit), plus the aggregate amount of outstanding
and undrawn Letters of Credit (the "Total Amount Outstanding"), exceed an
aggregate principal amount (the "Available Amount") equal to the smallest of the
following, tested at the beginning of each calendar quarter and at the time of
each draw hereunder:

        (x) an amount equal to fifty percent (50%) of the Current Value (as that
        term is defined in Section 5.4(b) below) of the Unencumbered Asset Pool
        Property (as that term is defined in Section 5.1 below); or

        (y) an amount equal to one hundred percent (100%) of the Mortgage Value
        (as that term is defined in Section 5.5 below) of the Unencumbered Asset
        Pool Property; or

        (z) $100,000,000.

               (c) If Bank at any time should determine that the Total Amount
Outstanding exceeds the Available Amount, Bank may make written demand on
Borrower at Bank's option, to post cash or other collateral satisfactory to Bank
in its sole discretion, or to repay principal hereunder, or both, in an amount
sufficient in Bank's reasonable judgment to cause the Total Amount Outstanding
to be equal to or less than the Available Amount. Borrower shall make any such
payment of principal or post any such collateral within thirty (30) days after
Bank's demand and direction to Borrower.


                                       -4-

<PAGE>   10

               (d) This is a revolving line of credit. During the Availability
Period, Borrower may repay and reborrow principal amounts.

               (e) Each advance must be for at least Five Hundred Thousand
Dollars ($500,000), or for the amount of the remaining Available Amount, if
less.

               (f) The issuance of a Letter of Credit pursuant to Section 2.4
hereof shall be considered an advance for all purposes hereunder, except that,
absent an express written agreement to the contrary, any drawn Letter of Credit
shall be repaid by Borrower to Bank on demand.

               2.2 Availability Period; Extension of Availability Period;
Term-Out Option.

               (a) The Line of Credit is available between the date of this
Agreement (the "Effective Date") through the end of the business day two years
from the Effective Date (the "Expiration Date"), or on the first business day
thereafter if that day falls on a day that is a week-end or a day on which the
Bank is not open for business in San Francisco, California. The period from the
Effective Date to the Expiration Date shall be the "Availability Period." If
there is an Event of Default (as defined in Section 9.1 below) then in addition
to Bank's other remedies, Bank may terminate the Availability Period and require
Borrower to immediately (i) repay amounts outstanding under the Loan, and (ii)
provide cash collateral for repayment of any outstanding Letter of Credit. If
Borrower has violated any covenant or agreement hereunder and the applicable
cure period has not yet expired, then it is within Bank's sole and absolute
discretion whether to continue to provide extensions of credit to Borrower
hereunder.

               (b) Borrower may request that Bank extend the Availability Period
for one year by giving written notice to Bank of such request no more than one
hundred twenty (120) and no less that ninety (90) days prior to the second
anniversary of the Effective Date, requesting a one year extension of the
Availability Period. Upon such request, Bank shall decide in its sole and
absolute discretion whether to extend the Availability Period, and shall give
notice to Borrower of its decision within sixty (60) days of the receipt of
Borrower's request. If, upon such request by Borrower, Bank decides to extend
the Availability Period, the Expiration Date shall then be extended by one year,
the new date of expiration shall be the "Extended Expiration Date", and the
Availability Period as so extended shall become the "Extended Availability
Period". If Bank decides not to extend the Availability Period, the Line of
Credit shall expire on the original Expiration Date.


                                       -5-

<PAGE>   11

               (c) Borrower may at its option convert the Line of Credit to an
amortizing term loan (the "Term Loan"). Borrower may exercise its option to
convert the Line of Credit to the Term Loan by giving Bank written notice of
Borrower's election not more than 120 days and not less than 45 days before the
Expiration Date (or the Extended Expiration Date, if the Availability Period has
been extended under Section 2.2(b)), and complying with all other terms of the
Loan Documents. If the Line of Credit is so converted to a Term Loan, then the
Expiration Date (or the Extended Expiration Date as the case may be) shall be
the "Conversion Date" for purposes of this Agreement and the first anniversary
of the Conversion Date shall be the "Term Loan Expiration Date." All terms and
conditions of the Loan Documents, including the application of the Available
Amount but excluding any provision giving Borrower the right to draw any amounts
under the Line of Credit or to arrange for the issuance of a Letter of Credit,
shall remain applicable to the Term Loan. If Borrower converts the Line of
Credit to the Term Loan, Borrower shall amortize a portion of the balance
outstanding hereunder by paying twenty percent (20%) of an amount that is the
sum of the following two amounts: (i) such balance, plus (ii) the total dollar
amount of all Letters of Credit then outstanding. The payment of that twenty
percent amount shall be made in eleven (11) equal monthly installments beginning
on the first day of the first month following the Conversion Date and ending
with the last payment due before the Term Loan Expiration Date. The balance of
the amount outstanding shall be paid in full on the Term Loan Expiration Date.

               (d) Borrower may cancel all or any portion of the Commitment by
the delivery to Bank of a notice of cancellation within the applicable time
periods and minimum amounts set forth in the Loan Documents for the repayment of
any amounts that are outstanding or, if there are no amounts outstanding at such
time, upon at least five (5) business days notice to Bank, whereupon, in either
event, such part of the Commitment so designated by Borrower shall terminate on
the date set forth in such notice of cancellation, and, if there are any Loans
then outstanding in excess of the Commitment after giving effect to such
termination, Borrower shall prepay such Loans outstanding on such date in
accordance with the requirements of the Loan Documents.

               2.3    Interest Rate.

               Borrower is executing a promissory note (the "Note") in the
amount of the Commitment evidencing the Loan and payable to Bank. The Note sets
forth the interest rate and certain other terms and conditions applicable to the
Loan.

               2.4    Letters of Credit.

               (a) From time to time during the Availability Period, but not
after the Expiration Date (or the Extended Expiration Date as the case may be)
or the


                                       -6-

<PAGE>   12



Conversion Date, Bank shall at the request of Borrower, issue Letters of Credit
in the form of Exhibit "B-1" under the terms of a Letter of Credit Agreement in
the form of Exhibit "B-2", for the account of Borrower, a Permitted Owner or an
entity controlled by a Permitted Owner, for any purpose directly relating to
Borrower's continuing operations, upon at least five (5) business days' prior
written notice from Borrower; provided, however, that at no time shall the
undrawn and the drawn and unreimbursed amount of all Letters of Credit exceed
Eleven Million Dollars ($11,000,000) (the "Letter of Credit Cap"). The Available
Amount shall be reduced by the amount of the outstanding Letters of Credit
undrawn and by the amount of the drawn and unreimbursed Letters of Credit. As
provided above, a Letter of Credit may be issued for the benefit of a Permitted
Owner, as that term is defined in Section 5.2(b)(i), or an entity controlled by
a Permitted Owner, but any such Letter of Credit shall be the responsibility of
and shall create obligations of the Borrower and any guarantor, including but
not limited to Guarantor.

               (b) Each Letter of Credit issued hereunder (including any
supplement, modification, amendment, renewal or extension thereof) shall be
issued pursuant to the terms and conditions of a Bank standard form Application
and Agreement for Letter(s) of Credit ("Letter of Credit Agreement") in a form
substantially the same as that attached hereto as Exhibit "B-2" executed by
Borrower; and each Letter of Credit shall be in form and substance and for the
purposes provided in this Agreement. Pursuant to the terms and conditions of
Bank's standard form of Letter of Credit Agreement, any drawings under a Letter
of Credit shall be repaid by Borrower to Bank on demand; and the Letter of
Credit Agreement will set forth all of the terms and conditions regarding the
issuance of a Letter of Credit and any draws thereunder.

               (c) The Letter of Credit Agreement shall set forth the rate of
interest on any draws thereunder. Any amount drawn shall be payable by Borrower
no later than the next business day after the date on which the amount is drawn.

               (d) Unless specifically approved by Bank in writing, each Letter
of Credit issued pursuant to this Agreement shall expire on or before the
Expiration Date (or the Extended Expiration Date as the case may be), provided,
however, that Letters of Credit in a total aggregate amount not to exceed Seven
Million Dollars ($7,000,000) may expire on or before a date that is twelve (12)
months after the Expiration Date (or the Extended Expiration Date as the case
may be), provided further that, at the Expiration Date (or the Extended
Expiration Date) Borrower will provide the cash collateral in the amount and
manner provided in Subsection 2.4(e) below in an amount equal to the face amount
of any such unexpired Letters of Credit.

               (e) If at any time there are Letters of Credit outstanding and
the Loan is canceled or expires by its terms and an extended term is not made
available to

                                       -7-

<PAGE>   13

Borrower by Bank, or an Event of Default (as hereinafter defined) occurs,
Borrower shall provide Bank with cash collateral in an amount at least equal to
the aggregate amount of all Letters of Credit outstanding, or another form of
collateral acceptable to Bank in its sole and absolute discretion. Borrower
agrees to execute or cause the execution of all documents reasonably required by
Bank at Borrower's sole cost and expense in connection with the Borrower's
delivery of collateral hereunder. Bank shall retain a security interest in such
collateral until the earlier occurrence of (a) a date fifteen (15) days after
the expiration of any outstanding Letter of Credit, provided that no further
extensions shall be granted, or (b) the cancellation of any outstanding Letter
of Credit by the respective beneficiaries, provided that written notice of such
cancellation has been received by Bank or the original Letter of Credit is
returned to Bank. In such an event, the amount of collateral retained by Bank
shall be adjusted as appropriate to reflect such expiration or cancellation, as
the case may be.

               (f) Borrower shall pay to Bank an annual fee for each Letter of
Credit in an amount equal to the greater of one and one-half percent (1.5%) per
annum of the face amount of such letter of credit or Two Hundred Fifty Dollars
($250) plus any fees or costs related to the issuance thereof (which fee shall
be paid 1.35% to Bank as agent for itself and any other person to whom Bank may
sell an interest in the Loan or the Loan Documents under the terms of Section
11.5, and .15% to Bank as the issuing bank). The fee shall be paid in advance
quarterly in installments on the issuance date and every quarter during which
the Letter of Credit remains outstanding or has been drawn and remains
unreimbursed. Such fees shall be calculated on the basis of a three hundred
sixty (360) day year and actual days elapsed, which results in higher fees than
if a three hundred sixty-five (365) day year were used.

               (g) The Letters of Credit described in Exhibit "A" (the "Existing
Letters of Credit") remain outstanding as of the Effective Date and shall be
considered as Letters of Credit for all purposes under the terms of this
Agreement. Any reference to a Letter of Credit in this Agreement shall include
the Existing Letters of Credit. The Existing Letters of Credit will not be
canceled but shall remain outstanding and shall be considered as issued under
the terms of this Agreement. Any reference to a Letter of Credit Agreement made
in this Agreement shall be deemed to include a reference to the letter of credit
agreements under the terms of which the Existing Letters of Credit were issued.
The face amounts of the Existing Letters of Credit shall be deducted from the
Letter of Credit Cap and the Available Amount as if the Existing Letters of
Credit had been originally issued under the terms of this Agreement. Borrower
shall not be required to pay an issuance fee on account of the Existing Letters
of Credit but shall be required to pay an annual fee under the terms of Section
2.4(f) on account of each of the Existing Letters of Credit, due and payable on
each anniversary of the date of issuance thereof.


                                       -8-

<PAGE>   14

               2.5    Survival.

               The agreements and obligations of Borrower in this Article 2
shall survive the payment and performance of all other obligations.

               3.     FEES

               3.1       Unused Fee.

               Borrower shall pay Bank a fee (the "Unused Fee") based on the
Unused Amount of the Commitment. The Unused Amount of the Commitment shall be
the amount of the Commitment minus the sum of (i) any amounts disbursed and
unpaid and (ii) the total amount of any Letters of Credit outstanding and
undrawn. The Unused Fee shall be calculated quarterly and shall be paid in
arrears within 10 days of the date that Bank gives Borrower written notification
of the amount of the Unused Fee in the following amounts:

                      (a)    The Unused Fee shall be equal to twenty five one-
hundredths of one percent (.25%) per annum of the Unused Amount of the
Commitment if such Unused Amount is an average of fifty percent (50%) or less of
the Commitment for the quarter (such average to be based on the sum of the total
Unused Amount of the Commitment each day of the quarter, divided by the actual
number of days in the quarter); and

                      (b) The Unused Fee shall be equal to one hundred and
twenty five one-thousandths of one percent (.125%) of the Unused Amount of the
Commitment if such Unused Amount is an average of more than fifty percent (50%)
of the Commitment for the quarter (such average to be based on the sum of the
total Unused Amount of the Commitment each day of the quarter, divided by the
actual number of days in the quarter).

               3.2    Letter of Credit Fees.

               Borrower shall pay Bank the fees relating to the Letters of
Credit referred to in Section 2.4(f) above.

               4.     DISBURSEMENTS, PAYMENTS AND COSTS

               4.1 Requests for Credit. Each request for an extension of credit
will be made in writing in the form of Exhibit "C" attached hereto and made a
part hereof, or by another means acceptable to Bank. Borrower authorizes John D.
Eudy, Keith R. Guericke, Michael J. Schall, Mark J. Mikl or Jordan E. Ritter to
sign all Borrowing




                                       -9-

<PAGE>   15


Notices and other documents in connection with the administration of the Loan.
Borrower represents and warrants to Bank that the following signatures are
specimen signatures of the persons named in the preceding sentence:


---------------------------------
John D. Eudy


---------------------------------
Keith R. Guericke


---------------------------------
Michael J. Schall


---------------------------------
Mark J. Mikl


---------------------------------
Jordan E. Ritter

               4.2    Disbursements and Payments.

               Each disbursement by Bank and each payment by Borrower will be:

                      (a) made at Bank's branch (or other location) selected by
Bank in its reasonable discretion from time to time;

                      (b) made for the account of Bank's branch selected by Bank
in its reasonable discretion from time to time;

                      (c) made in immediately available funds, or such other
type of funds selected by Bank;

                      (d) evidenced by records kept by Bank.  In addition, Bank
may, at its discretion, require Borrower to sign one or more promissory notes.


                                      -10-

<PAGE>   16

               4.3    Telephone and Telefax Authorization.

               (a) Bank may honor telephone instructions or telefax instructions
from John D. Eudy, Keith Guericke, Michael J. Schall, Mark J. Mikl or Jordan E.
Ritter for advances or repayments or for the designation of optional interest
rates described in the Note given by any one of the individuals authorized to
sign loan agreements on behalf of Borrower, or any other individual designated
by any one of such authorized signers.

               (b) Advances and repayments will be either (i) deposited in and
repayments will be withdrawn from Borrower's account number 1422300648, or such
other of Borrower's accounts with Bank as designated in writing by Borrower, or
(ii) by wire transfer at Borrower's written direction, which written direction
may be telefaxed as set forth herein.

               (c) Borrower will provide written confirmation to Bank of any
telephone or telefax instructions within five (5) days. If there is a
discrepancy and Bank has already acted on the instructions, the telephone or
telefax instructions will prevail over the written confirmation.

               (d) Borrower indemnifies and excuses Bank (including its
officers, employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone or telefax instructions it
reasonably believes are made by any individual authorized by Borrower to give
such instructions, except to the extent such liability, loss, or cost results
directly from Bank's gross negligence or willful misconduct. This indemnity and
excuse will survive this Agreement's termination.

               4.4 Taxes. If any payments to Bank under this Agreement are made
from outside the United States, Borrower will not deduct any foreign taxes from
any payments it makes to Bank. If any such taxes are imposed on any payments
made by Borrower (including payments under this Subsection), Borrower will pay
the taxes and will also pay to Bank, at the time interest is paid, any
additional amount which Bank specifies as necessary to preserve the after-tax
yield Bank would have received if such taxes had not been imposed. Borrower will
confirm that it has paid the taxes by giving Bank official tax receipts (or
notarized copies) within 30 days after the due date.

               4.5 Additional Costs. Upon sixty days' notice, Borrower will pay
Bank, for Bank's costs or losses related to this Agreement arising from any
statute or regulation, or any request or requirement of a regulatory agency
which is applicable to all national banks or a class of all national banks. The
costs and losses will be allocated to the loan in a manner determined by Bank,
using any reasonable method.
The costs include the following:


                                      -11-

<PAGE>   17

               (a) any reserve or deposit requirements; and

               (b) any capital requirements relating to Bank's assets and
commitments for credit.


               5.     UNENCUMBERED ASSET POOL

               5.1     Unencumbered Asset Pool and Unencumbered Asset Pool
Property Defined.

               The "Unencumbered Asset Pool" shall mean the property listed on
Exhibit "D", plus any and all of the real and personal property added to the
Unencumbered Asset Pool under the terms of Section 5.2 below, minus any and all
of the real and personal property removed from the Unencumbered Asset Pool under
the terms of Section 5.3 below. "Unencumbered Asset Pool Property" shall mean
the real and personal property that makes up the Unencumbered Asset Pool at any
time.

               5.2     Additions of Property to the Unencumbered Asset Pool.

               (a) Borrower may from time to time request Bank to add a new
property ("the Nominated Property") to the Unencumbered Asset Pool. At the time
of any such request, Borrower shall deliver to Bank any documents that Bank
reasonably requests relating to the Nominated Property, including but not
limited to a Phase I Environmental Report, representations and warranties of
Borrower, a preliminary title report or other evidence of title, current
operating statements, rent rolls, and any items deemed necessary or proper for
Bank to determine that the Nominated Property meets the qualifications (the
"Unencumbered Asset Pool Tests") set forth in Subsection 5.2(b) below. At any
time that Borrower does not have a debt rating of at least BBB-/Baa3 from that
one of Moody's or Standard & Poor's that gives Borrower the lower rating, the
addition of any Nominated Property to the Unencumbered Asset Pool will be at
Bank' s sole and absolute discretion, even though the Nominated Property meets
all of the Unencumbered Asset Pool Tests. At any time that Borrower does have a
debt rating of at least BBB-/Baa3 from that one of Moody's or Standard & Poor's
that gives Borrower the lower rating, the addition of any Nominated Property to
the Unencumbered Asset Pool will be automatic if the Nominated Property meets
all of the Unencumbered Asset Pool Tests. As a condition to the addition of any
Nominated Property to the Unencumbered Asset Pool, Borrower shall have paid Bank
all reasonable attorneys' fees of Bank (including fees for in-house counsel) and
any other fees incurred by Bank in connection with approving the Nominated
Property.


                                      -12-

<PAGE>   18

               (b) Before Bank will consider adding a Nominated Property to the
Unencumbered Asset Pool, the Nominated Property must meet each of the following
Unencumbered Asset Pool Tests:

                      (i) The property must be owned in fee simple by Borrower,
or by a partnership wholly owned by Borrower and Essex Management Corporation
("EMC" and together with Borrower or any such partnership, a "Permitted Owner"),
provided that EMC and any such partnership shall provide to Bank its formation
documents and a guaranty in substantially the same form as the Payment Guaranty
(Revolving Loan) executed by Guarantor in favor of Bank of even date with this
Agreement.

                      (ii) The property must be an operating residential
apartment property (provided that a maximum of fifteen percent (15%) of the
property's revenue may be generated from retail activities, and a maximum of
five percent (5%) of the revenues of the property, when aggregated with the
revenue from all Unencumbered Asset Pool Property, may be generated from retail
activities);

                      (iii) A minimum of eighty percent (80%) of the property
must be leased and occupied according to GAAP on an individual basis, and
minimum of ninety percent (90%) of the property, when aggregated with all of the
Unencumbered Asset Pool Property, must be leased and occupied according to GAAP;

                      (iv) The property must have a Phase I environmental report
and any other environmental information required by Bank prepared by a qualified
firm reasonably acceptable to Bank in form reasonably acceptable to Bank and in
content acceptable to Bank, dated no earlier than December 1, 1993 if the
Nominated Property was owned by a Permitted Owner on the Effective Date, and
dated no earlier than one year prior to the date that the Nominated Property is
accepted into the UAP if the Nominated Property was not owned by a Permitted
Owner on the Effective Date.

                      (v) The property shall have no construction in progress or
proposed (excluding renovations that do not cause the property to breach the
minimum leasing and occupancy requirement set out above) except for properties
built in phases with separate legal lots with adequate parking provided;

                      (vi) At any time that Borrower does not have the debt
rating specified in Section 5.2(a) Bank shall, at its discretion, which right
may be waived, have inspected and approved the site (provided that, this
provision notwithstanding, the Bank shall have the right to visit and inspect
the site at any time that Borrower does have the debt rating specified in
Section 5.2(a), although such inspection and any approval of the site shall not
be an Unencumbered Asset Pool Test); and



                                      -13-

<PAGE>   19



                      (vii) The property shall be subject to no negative pledge
agreement in favor of any other person. There shall be no lien of any nature
upon or with respect to any such property, except the following permissible
liens:

                             (a) Liens for taxes, assessments or governmental
               charges or levies to the extent that the Permitted Owner is not
               yet required to pay the amount secured thereby; and

                             (b) Liens imposed by law, such as carrier's,
               warehouse man's, mechanic's, materialman's and other similar
               liens, arising in the ordinary course of business in respect of
               obligations that are not overdue or are being actively contested
               in good faith by appropriate proceedings, as long as the
               Permitted Owner has established and maintained adequate reserves
               for the payment of the same and, by reason of nonpayment, no
               property of the Permitted Owner is in danger of being lost or
               forfeited and easements; covenants, conditions and restrictions;
               reciprocal easement and access agreements and similar agreements
               relating to ownership and operation.

               Notwithstanding these requirements, two properties shall be
included as part of the Unencumbered Asset Pool, even though they do not meet
the Unencumbered Asset Pool Tests, with the following qualifications. That
property commonly known as Marina Cove shall be included in the Unencumbered
Asset Pool even though a portion of the property has been acquired by ground
lease and not by fee simple; that property must meet all of the other
Unencumbered Asset Pool Tests. That property commonly known as Windsor Terrace
shall be included in the Unencumbered Asset Pool even though twelve or fewer of
the units in that property are owned by a third party; that property must meet
all of the other Unencumbered Asset Pool Tests but the Net Operating Income for
the units owned by third parties shall not be used in the calculations for
determining Current Value, the Debt Service Coverage Ratio or any other amounts
referred to in this Agreement. As a further qualification, that property
commonly known as Wimbledon Woods, which is owned by Borrower but which is
leased to an affiliate of Borrower (and therefore does not meet the requirement
set out in Section 5.2(b)(iii)), shall be included as part of the Unencumbered
Asset Pool, if and only if it meets each of the other Unencumbered Asset Pool
Tests, and at least ninety eight percent (98%) of the Net Operating Income from
that property is distributed to Borrower on a periodic basis not less often than
annually.

               At any time that Borrower does not have the debt rating specified
in Section 5.2(a), if Bank does not accept a property meeting the Unencumbered
Asset Pool Tests as an Unencumbered Asset Pool Property, Bank shall indicate to
Borrower


                                      -14-

<PAGE>   20

the reason(s) for not accepting the property. Borrower may respond to the Bank's
concerns regarding a property and is not prohibited from resubmitting the
property for acceptance as an Unencumbered Asset Pool Property, provided,
however, that at any time that Borrower does not have the debt rating specified
in Section 5.2(a), Bank may still refuse to accept the property as an
Unencumbered Asset Pool Property in its sole discretion.

               5.3     Removal of Property from the Unencumbered Asset Pool.

               (a) Borrower may from time to time elect to remove an
Unencumbered Asset Pool Property from the Unencumbered Asset Pool. Borrower
shall make such an election by giving Bank notice in writing, setting forth the
identity of the Unencumbered Asset Pool Property and the requested date of
removal no less than thirty (30) days before the requested date of removal. With
such notice, Borrower shall also deliver a compliance certificate of Borrower
substantially similar to the form of Exhibit "E" signed and certified by an
authorized financial officer of Borrower (i) setting forth the information and
computations (in sufficient detail) to determine the Gross Asset Value (as that
term is defined in Section 1) after such removal and to establish that Borrower
will be in compliance with all financial covenants set forth in this Agreement
following such removal, (ii) stating specifically that the Total Amount
Outstanding after such removal will be less than or equal to the Available
Amount, and (iii) setting forth whether there exists or to the best of
Borrower's knowledge as of the date of such removal there will exist, any
default under this Agreement and, if any such default exists, specifying the
nature thereof and the action Borrower is taking and proposes to take with
respect thereto. At the time of any such removal, Borrower shall pay Bank all
reasonable attorneys' fees (including fees for in-house counsel) incurred by
Bank in connection with removing the property from the Unencumbered Asset Pool
and shall make any payments to continue compliance with the terms of this
Agreement, including but not limited to those relating to the requirement that
the Total Amount Outstanding not exceed the Available Amount, necessary as a
result of the requested removal. Borrower may not remove the Unencumbered Asset
Pool Property until it has complied with the terms of this Subsection.

               (b) Bank may, at its option, remove any property from the
Unencumbered Asset Pool if it determines in its sole discretion that the
property no longer meets the Unencumbered Asset Pool Tests, provided that Bank
first gives Borrower written notice that the property no longer meets the
Unencumbered Asset Pool Tests, together with the reason or reasons why it does
not, and gives Borrower thirty (30) days after receipt of such notice to cure
the defect. At the time of any such removal, Borrower shall pay Bank all
reasonable attorneys' fees (including fees for in-house counsel) incurred by
Bank in connection with removing the property from the Unencumbered Asset Pool,
and shall make any payments to continue compliance with


                                      -15-

<PAGE>   21

the terms of this Agreement, including but not limited to those relating to the
requirement that the Total Amount Outstanding not exceed the Available Amount,
necessary as a result of the requested removal. If the Unencumbered Asset Pool
as a whole fails to meet one of the aggregate tests set out in Subsection
5.2(b)(ii) or (iii) above, and any one of two or more properties might be
removed to maintain compliance of the Unencumbered Asset Pool as a whole with
the Unencumbered Asset Pool Tests, then Borrower shall select the property or
properties to be removed, provided that if it does not do so within ten days of
written request to do so from Bank, then Bank may in its sole discretion select
the property or properties to remove and so remove them.

               5.4  Current Value of the Unencumbered Asset Pool.

               (a) "Current Value of the Unencumbered Asset Pool" shall mean the
sum of the "Current Value" of each Unencumbered Asset Pool Property.

               (b) The "Current Value" of a property shall mean the following:

                             (1) For Unencumbered Asset Pool Property owned for
one year or more by a Permitted Owner and that has more than four quarters of
operating data (such data to be in the form that Borrower has provided to Bank
heretofore, which form shall be deemed to be acceptable to Bank, or in such
other form as may be acceptable to Bank), the Current Value shall be its Net
Operating Income for the most recent rolling four consecutive quarters of
operation (less reserves of $250 per unit for apartments), divided by the
Capitalization Rate as that term is defined in Section 1 of this Agreement.

                             (2) For Unencumbered Asset Pool Property that is
owned for one or more but less than four quarters by a Permitted Owner and that
has one or more but less than three quarters of operating data (such data to be
in the form that Borrower has provided to Bank heretofore, which form shall be
deemed to be acceptable to Bank, or in such other form as may be acceptable to
Bank), the Current Value shall be its Net Operating Income for the most recent
rolling consecutive quarters of operation (less reserves of $250 per unit for
apartments) annualized on a retroactive basis for four consecutive quarters of
operation, divided by the Capitalization Rate.

                             (3) For Unencumbered Asset Pool Property that is
owned for less than one quarter by a Permitted Owner and is operational and that
has less than one quarter of operating data (such data to be in the form that
Borrower has provided to Bank heretofore, which form shall be deemed to be
acceptable to Bank, or in such other form as may be acceptable to Bank), the
Current Value during the first




                                      -16-

<PAGE>   22

three month period of operations shall be seventy five percent (75%) of its
acquisition cost, determined according to GAAP. For Unencumbered Asset Pool
Property not developed by a Permitted Owner, the acquisition cost shall be the
purchase price of the Unencumbered Asset Pool Property set out in the agreement
for purchase and sale of the property. For Unencumbered Asset Pool Property
developed by a Permitted Owner, the Unencumbered Asset Pool Property shall be
valued at an amount equal to the development costs actually expended by the
Permitted Owner. For purposes hereof, development costs shall include the
acquisition cost and the hard and soft construction costs actually expended by
the Permitted Owner or its affiliates in connection with the development of the
Unencumbered Asset Pool Property, which hard and soft construction costs are
subject to review and approval by Bank in its sole discretion for purposes of
determining the value of the Unencumbered Asset Pool Property determined
according to GAAP.

               5.5     Mortgage Value of Unencumbered Asset Pool Property.

               The "Mortgage Value" of an Unencumbered Asset Pool Property held
for less than one calendar quarter is 37.5% of the purchase price of the
Property. The "Mortgage Value" of an Unencumbered Asset Pool Property held for
more than one calendar quarter is the maximum amount that could be advanced by
Bank hereunder in connection with such a property in order for Borrower to
maintain a debt service coverage ratio (the "Debt Service Coverage Ratio") of
1.75:1. The Debt Service Coverage Ratio shall be calculated using the Net
Operating Income for the Unencumbered Asset Pool Property for the four most
recent consecutive full calendar quarters (or on an annualized basis if the
Property has been held for less than four calendar quarters), less an amount to
reflect an annual capital expenditure reserve of $250 per apartment unit,
divided by a calculated debt service (the "Calculated Debt Service"). Calculated
Debt Service shall mean the sum of the interest and principal payments which
would be due over a period of twelve months calculated by using a
twenty-five-year amortization period, and an interest rate equal to the then
current seven-year U.S. Treasury rate plus 175 basis points (provided, however,
that in no event shall the interest rate used for such computation be less than
eight and one-quarter percent (8.25%) per annum).

               5.6    Use of the Unencumbered Asset Pool Property.

               Borrower shall hold the Unencumbered Asset Pool Property as
income property for lease to unaffiliated third parties provided that certain
units in an Unencumbered Asset Pool Property may be used by on-site managers and
other agents, provided that such use is reasonable and does not materially
impair the value of any Unencumbered Asset Pool Property.


                                      -17-

<PAGE>   23

               5.7 Income from Unencumbered Asset Pool Property.

               Borrower shall first apply all revenues derived from the
Unencumbered Asset Pool Property, including all income from leases, to pay costs
and expenses associated with the ownership, maintenance, operation and leasing
of the Unencumbered Asset Pool Property before using or applying such income for
any other purpose. No such income shall be distributed or paid to any partner,
shareholder or to any beneficiary or trustee, unless all such costs and expenses
which are then due have been paid when due.

               6. CONDITIONS TO DISBURSEMENTS

               Bank must receive the following items, in form and content
acceptable to Bank, before it is required to extend the initial credit or any
other credit to Borrower or to make any disbursements under this Agreement:

               6.1 Authorizations.

               Evidence that the execution, delivery and performance by Borrower
or Guarantor, as the case may be, of this Agreement, and the other Loan
Documents, have been duly authorized.

               6.2 Governing Documents.

               A copy of Borrower's current partnership agreement and
certificate of limited partnership and any amendments and modifications thereto
and of Guarantor's articles of incorporation and any amendments and
modifications thereto.

               6.3 Documents.

               The following documents, executed and acknowledged as
appropriate, all in form and substance satisfactory to Bank: (a) this Agreement;
(b) the Note; (c) the Guaranty; and (d) as to any disbursements after the first
disbursement such other documents, information regarding the Unencumbered Asset
Pool Property and other assurances as Bank may require.

               6.4 Insurance.

               If required by Bank, evidence of insurance coverage, as required
in Section 7.1(c) of this Agreement.


                                      -18-

<PAGE>   24

               6.5 Legal Opinions.

               If required by Bank, a written opinion from Borrower's legal
counsel and a written opinion from Guarantor's legal counsel, each covering such
matters as Bank may reasonably require. The legal counsel and the terms of the
opinion must be reasonably acceptable to Bank.

               6.6 Good Standing.

               If required by Bank, Certificates of Good Standing for Borrower
and Guarantor from their respective states of organization and from any other
state in which Borrower or Guarantor, as the case may be, is required to qualify
to conduct its business.

               6.7 Payment of Certain Outstanding Obligations.

               Payment in full and satisfaction of all of the following
obligations of Borrower and Guarantor:

                      (1) All obligations above Ten Million Dollars
        ($10,000,000) arising from, and all conditions relating to the
        modification of, that Amended and Restated Secured Revolving Loan
        Agreement between Bank and Borrower dated February 12, 1996, and the
        cancellation or other satisfaction of all outstanding letters of credit
        relating thereto (at the time of such payment and satisfaction, Bank
        shall release all liens and encumbrances securing that Amended and
        Restated Secured Revolving Loan Agreement, except for the 777 California
        Deed of Trust and the Apple Deed of Trust, as those terms are defined in
        that Amended and Restated Secured Revolving Loan Agreement);

                      (2) All obligations arising from, and all conditions
        relating to the termination of, that Unsecured Line of Credit Agreement
        between Bank and Borrower dated February 11, 1997, and the cancellation
        or other satisfaction of all outstanding letters of credit relating
        thereto; and

                      (3) That certain unsecured bridge line of credit to Union
        Bank of California, N.A. in the amount of Twenty-Five Million Dollars
        ($25,000,000) (to be demonstrated by documentation satisfactory to
        Bank).



                                      -19-

<PAGE>   25

               6.8 Payment of Fees.

               Payment of the fees and expenses of preparation of this Agreement
including but not limited to attorneys' fees and costs, the review of the Phase
I reports, and any and all other fees due from Borrower to Bank.

               6.9 Solvency Certificate.

               If required by Bank, a solvency certificate from Borrower in form
and substance reasonably satisfactory to Bank.

               6.10 Other Items.

               Any other items that Bank reasonably requires.

               6.11 Conditions of Each Advance, Extension of Credit, or Issuance
of Letter of Credit.

               Before each extension of credit (including but not limited to the
issuance of each Letter of Credit), including the first:

               (a) Bank shall have received a request for extension of credit in
the form of Exhibit "C";

               (b) The requested extension of credit shall not cause the Total
Amount Outstanding to exceed the Available Amount;

               (c) Bank shall have received a certificate from Borrower in the
form of Exhibit "E" and described in Section 7.4(e), representing, among other
things, that the requested extension of credit shall not cause the Total Amount
Outstanding to exceed the Available Amount and that Borrower is in compliance
with all other material covenants that it has made in this Agreement;

               (d) The representations and warranties of Borrower set forth in
Article 9 of this Agreement shall be true and correct in all material respects
on and as of such borrowing with the same force and effect and if made on and as
of such borrowing; and

               (e) No Event of Default or event that after notice and the
passage of time would constitute and Event of Default shall exist or result from
such borrowing.


                                      -20-

<PAGE>   26



               7. COVENANTS OF BORROWER.

               Borrower promises to keep each of the following covenants:

               7.1 Covenants Relating to Unencumbered Asset Pool.

                      (a)    Compliance with Law and Improvements to
Unencumbered Asset Pool Property.

                      Borrower shall comply with all existing and future laws
(including Environmental Laws, as hereafter defined), regulations, orders,
building restrictions and requirements of, and all agreements with and
commitments to, all governmental, judicial or legal authorities having
jurisdiction over Borrower or Borrower's business, including those pertaining to
the construction, sale, leasing or financing of the Unencumbered Asset Pool
Property, the environmental condition of the Unencumbered Asset Pool Property
and with all recorded covenants and restrictions affecting the Unencumbered
Asset Pool Property (all collectively, the "Requirements"). "Environmental Laws"
means all federal, state, and local laws, ordinances and regulations relating to
any Hazardous Substance (as defined in Section 7.1(b) below) applicable to the
Unencumbered Asset Pool Property, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1802, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901 et seq., the Toxic Substance Control Act of 1976, as
amended, 15 U.S.C. Section 2601 et seq., the Clean Water Act, 33 U.S.C. 466 et
seq., as amended, and the Clean Air Act, 42 U.S.C. Section 7401 et seq.
Notwithstanding any provision in this Subsection to the contrary (i) Borrower
shall have a right to contest all existing and future Requirements (other than
those relating to Environmental Laws) before complying therewith, and (ii)
Borrower shall have a right to contest all existing and future Requirements
relating to Environmental Laws for one year, before complying therewith.

                      (b)    Site Visits.

                      Borrower and Guarantor shall allow Bank access to the
Unencumbered Asset Pool Property at any reasonable time upon reasonable written
notice by Bank to Borrower for the purposes of inspecting the Unencumbered Asset
Pool Property, and, upon reasonable belief by Bank of the existence of a matter
that should be investigated, taking soil or groundwater samples, and conducting
tests, among other things, to investigate for the presence of Hazardous
Substances, as defined herein. Borrower and Guarantor shall also allow Bank to
examine, copy and audit its and their books and records. Bank is under no duty
to visit or observe the


                                      -21-

<PAGE>   27



Unencumbered Asset Pool Property, or to examine any books or records. Any site
visit, observation or examination by Bank shall be solely for the purpose of
protecting Bank's interests and preserving Bank's rights under the Loan
Documents. Bank owes no duty of care to protect Borrower or any other party
against, or to inform Borrower, Guarantor, or any other party of, any adverse
condition affecting the Unencumbered Asset Pool Property, including any defects
in the design or construction of any improvements on the Unencumbered Asset Pool
Property or the presence of any Hazardous Substances on the Unencumbered Asset
Pool Property. For purposes of this Agreement, a "Hazardous Substance" is
defined to mean any substance, material or waste, including asbestos and
petroleum (including crude oil or any fraction thereof), which is or becomes
designated, classified or regulated as "toxic," "hazardous," a "pollutant" or
similar designation under any federal, state or local law, regulation or
ordinance.

                      (c)    Insurance.

                      Borrower shall maintain the following insurance:

                             (1)    Special Form property damage insurance in
non-reporting form on the Unencumbered Asset Pool Property, with a policy limit
in an amount not less than the full insurable value of each Property on a
replacement cost basis, including tenant improvements, if any. The policy shall
include a business interruption (or rent loss, if more appropriate) endorsement
in the amount of six months' principal and interest payments, taxes and
insurance premiums, a lender's loss payable endorsement (438 BFU) in favor of
Bank, and any other endorsements reasonably required by Bank.

                             (2) Comprehensive General Liability coverage with
such limits as Bank may reasonably require. This policy shall name Bank as an
additional insured. Coverage shall be written on an occurrence basis, not claims
made.

                             All policies of insurance required by Bank must be
issued by companies reasonably approved by Bank and otherwise be reasonably
acceptable to Bank as to amounts, forms, risk coverages and deductibles. In
addition, each policy (except workers' compensation) must provide Bank at least
thirty (30) days' prior notice of cancellation, non-renewal or modification. If
Borrower fails to keep any such coverage in effect while the Loan is
outstanding, Bank may procure the coverage at Borrower's expense. Borrower shall
reimburse Bank, on demand, for all premiums advanced by Bank, which advances
shall be considered to be additional loans to Borrower hereunder at the Default
Rate provided in the Note.


                                      -22-

<PAGE>   28

                      (d) Preservation of Rights.

                      Borrower shall obtain and preserve all rights, privileges
and franchises necessary or desirable for the operation of the Unencumbered
Asset Pool Property and the conduct of Borrower's business. Borrower shall
maintain all of the Unencumbered Asset Pool Property in good condition. Borrower
shall, at Borrower's sole cost and expense, follow all recommendations in any
asbestos survey conducted with respect to any Unencumbered Asset Pool Property
regarding safety conditions for and maintenance of any asbestos containing
materials ("ACM"), including, without limitation, any recommendation to
institute an operations and maintenance plan (the "O&M Plan").

               7.2    Payment of Expenses.

        Borrower shall pay all reasonable costs and expenses incurred by Bank in
connection with the making, disbursement and administration of the Loan
(including the cost of any documentation fees, but excluding other costs and
expenses of ordinary collection and servicing administration while the Loan is
not in default), as well as any revisions, extensions, renewals or "workouts" of
the Loan, and in the exercise of any of Bank's rights or remedies under this
Agreement. Such costs and expenses include fees for environmental services
(including only those services performed by Bank employees and the cost of those
services that the Bank incurs because it believes that such services are
required), legal fees and expenses of Bank's counsel and any other reasonable
fees and costs for services, regardless of whether such services are furnished
by Bank's employees or by independent contractors. Borrower acknowledges that
none of the fees described in Section 3 include amounts payable by Borrower
under this Section 7.2. All such sums incurred by Bank and not immediately
reimbursed by Borrower within fifteen (15) days of written notice by Bank shall
be considered an additional loan to Borrower hereunder at the Default Rate
provided in the Note.

               7.3    Total Amount Outstanding.

               Borrower shall not permit the Total Amount Outstanding as defined
in Section 2.1(b) to exceed the Available Amount as defined in Section 2.1(b).

               7.4    Financial and Other Information; Certification.

               Consolidated Borrower shall provide to Bank the following
financial information and statements prepared on a consolidated basis:

                                      -23-

<PAGE>   29

               (a) Within one hundred twenty (120) days of Borrower's fiscal
year end, Borrower's annual report.

               (b) If requested by Bank, copies of Borrower's and Guarantor's
federal income tax return (with all schedule K-1's attached), within 15 days of
filing, and, if requested by Bank, copies of any extensions of the filing date.

               (c) Within 60 days after the end of each calendar quarter, an
operating statement and rent roll for each Unencumbered Asset Pool Property and
Permitted Owner in form and substance reasonably satisfactory to Bank.

               (d) Copies of Guarantor's Form 10-K Annual Report within 95 days
of fiscal year end , the financial statements contained therein to be prepared
on a consolidated basis according to GAAP, to include Borrower and Guarantor, to
be certified by the chief financial officer of Borrower, and to be audited (with
an unqualified opinion) by KPMG Peat Marwick, or another Certified Public
Accountant ("CPA") acceptable to Bank.

               (e) Copies of Guarantor's Form 10-Q Quarterly Report within 60
days after the end of each calendar quarter except fiscal year end, copies of
any and all Form 8-K filings immediately upon filing with the Securities and
Exchange Commission, and copies of all statements, reports and notices sent or
made available generally by Borrower or Guarantor to their respective security
holders at the time they are so sent or made available, any financial statements
contained therein to be certified by the chief financial officer of Borrower,
and (to the extent appropriate) to be prepared on a consolidated basis according
to GAAP and to include Borrower and Guarantor.

               (f) At the time of each advance, each extension of credit, and
each issuance of a letter of credit hereunder and within 60 days of the end of
each quarter and in addition within 120 days of the end of each year, a
compliance certificate of Borrower in the form of Exhibit "E"signed and
certified by an authorized financial officer of Borrower (i) setting forth the
information and computations (in sufficient detail) to determine the Gross Asset
Value (as that term is defined in Section 1) and to establish that Borrower is
in compliance with all financial covenants set forth in this Agreement at the
end of the period covered by the financial statements then being furnished, (ii)
stating specifically that the Total Amount Outstanding is less than or equal to
the Available Amount, and (iii) setting forth whether there existed as of the
date of such financial statements and whether there exists as of the date of the
certificate, any default under this Agreement and, if any such default exists,
specifying the nature thereof and the action Borrower is taking and proposes to
take with respect thereto.


                                      -24-

<PAGE>   30

               (g) Borrower's and Guarantor's one-year calendar budget (showing
month-by-month projections) within 30 days of Borrower's fiscal year end.

               (h) General information on the status of projects under
development directly or indirectly by Borrower or by Guarantor prepared on a
quarterly basis.

               (i) General information on projected acquisitions of property by
Borrower and Guarantor over the next twelve (12) months, delivered to Bank on a
quarterly basis.

               (j) Any other financial or other information concerning
Borrower's and Guarantor's affairs and properties as Bank may reasonably
request, to be furnished promptly upon such request.

               7.5    Notices.

               Borrower shall promptly notify Bank in writing of any knowledge
it has of:

               (a) any litigation affecting Borrower, Guarantor or the
Unencumbered Asset Pool Property, and/or any entity directly owning any
development property where the aggregate amount at risk or at issue (including
litigation costs and attorneys fees and expenses, but excluding claims which, in
Bank's reasonable judgment, are expected to be covered by insurance) exceeds
five million dollars ($5,000,000);

               (b) any notice that any property or Borrower's or Guarantor's
business fails in any material respect to comply with any applicable law,
regulation or court order, where the failure to comply could have a material
adverse effect on Borrower or Guarantor;

               (c) any material adverse change in the physical condition of the
Unencumbered Asset Pool Property or Borrower's or Guarantor's financial
condition or operations or other circumstance that materially adversely affects
Borrower's intended use of the Unencumbered Asset Pool Property or Borrower's
ability to repay the Loan;

               (d) any failure to comply with this Agreement; and

               (e) any change in Borrower's or Guarantor's name, legal
structure, place of business to a state other than the State of California, or
chief executive office to a state other than the State of California if Borrower
or Guarantor has more than one place of business.


                                      -25-

<PAGE>   31

               7.6    Indemnity.

               Borrower agrees to indemnify, defend with counsel reasonably
acceptable to Bank, and hold Bank harmless from and against all liabilities,
claims, actions, damages, costs and expenses (including all reasonable legal
fees and expenses of Bank's counsel) except to the extent of those resulting
from Bank's gross negligence or willful misconduct, arising out of or resulting
from the ownership, operation, or use of the Unencumbered Asset Pool Property,
whether such claims are based on theories of derivative liability, comparative
negligence or otherwise. Notwithstanding anything to the contrary in any other
Loan Document, the provisions of this Section 7.6 shall survive the termination
of this Agreement, and repayment of the Loan.

               7.7    Negative Covenants.

               (a) Without Bank's prior written consent, which consent shall not
be unreasonably withheld or delayed, neither Borrower nor Guarantor shall:

                      (1) engage in any business activities that would result in
               less than seventy percent (70%) of the Gross Asset Value being
               derived from multifamily residential apartments;

                      (2) other than in the ordinary course of Borrower's or
               Guarantor's business, lease all or a substantial part of
               Borrower's or Guarantor's business or Borrower's or Guarantor's
               assets;

                      (3) enter into or invest in any consolidation, merger,
               pool, syndicate or other combination unless Borrower is the
               surviving entity and control of Borrower has not changed.

                      (4) change the legal structure of Borrower from a limited
               partnership that is an operating partnership whose sole general
               partner is Guarantor, change the legal structure of Guarantor
               from a publicly traded real estate investment trust under the
               provisions of Internal Revenue Code Sections 856 and 857, or
               change the legal structure of Borrower and Guarantor as a
               so-called UpREIT, or without notifying Bank thirty days ahead of
               time change Borrower's place of business or chief executive
               office if Borrower or Guarantor has more than one place of
               business;

                      (5) change Borrower's general partner from Guarantor or
               allow Guarantor to suffer a change in its executive management
               such that Keith Guericke is no longer Chief Executive Officer,
               George M. Marcus is no


                                      -26-

<PAGE>   32

               longer Chairman of the Board of Directors or Michael J. Schall is
               no longer Chief Financial Officer, unless such executive
               management is replaced by parties reasonably acceptable to Bank
               within sixty (60) days; or

                      (6) dispose of a substantial part of Borrower's or
               Guarantor's business or Borrower's or Guarantor's assets.

               (b) Borrower and Guarantor shall not in any case:

                      (1) form additional unconsolidated down-REITs for property
               acquisition unless they comply on an on-going basis with each of
               the following conditions:

                             (i) EMC or any wholly owned subsidiary of Guarantor
                      or Borrower shall be the sole general partner of and have
                      the controlling interest in any such partnership;

                             (ii) Guarantor and/or Borrower and/or EMC shall
                      have sole control of each property and entity;

                             (iii) limited partners shall receive only units
                      and/or cash for value contributed;

                             (iv) all assets, liabilities and income shall be
                      fully consolidated into the financial statements of
                      Guarantor for purposes of the conditions and covenants set
                      out in this Agreement; and

                             (v) the total of all down-REIT properties shall not
                      exceed fifteen percent (15%) of the Gross Asset Value.

                      (2) liquidate or dissolve Borrower's or Guarantor's 
               business; or

                      (3) dispose of all of Borrower's or Guarantor's business
               or Borrower's or Guarantor's assets.


                                      -27-

<PAGE>   33

               7.8     Development Covenants.

               Borrower and Guarantor shall not in any case:

                      (1) on a consolidated basis at any time, have properties
               under development or entitled or unentitled land, in combination
               (at projected total cost), that exceed 35% of Gross Asset Value,
               as that term is defined in Section 1;

                      (2) on a consolidated basis at the end of any quarter have
               any single property under development that exceeds five percent
               (5%) of Gross Asset Value (at projected total cost); or

                      (3) on a consolidated basis at any time have entitled and
               unentitled land that exceeds seven and one-half percent (7.5%) of
               Gross Asset Value or unentitled land that exceeds three percent
               (3%) of Gross Asset Value.

               For the purpose of calculating the development limits contained
               in subsections (1), (2), and (3) above (the "Development
               Limits"), costs of projects developed in partnership with a third
               party in which Borrower or the Guarantor holds a limited
               partnership interest are to be included as follows:

                      Projects: (i) that are to be owned 100% in fee simple by
                      Borrower, Guarantor, or a wholly owned subsidiary thereof,
                      or by EMC prior to attainment of stabilized occupancy of
                      not less than ninety percent (90%); or (ii) for which the
                      Borrower or Guarantor will possess contingent or direct
                      liability for the completion or leasing of said project
                      are to be included at one hundred percent (100%) of the
                      projected total cost of the Project; and

                      Projects: (i) that are not to be owned 100% in fee simple
                      by Borrower prior to attainment of stabilized occupancy of
                      not less than ninety percent (90%); and (ii) for which
                      Borrower or Guarantor possesses no direct or contingent
                      liability for the completion and leasing of said project
                      are to be included at the amount of (A) non-refundable
                      deposits; (B) capital contributions; (C) loans to
                      partners; and (D any other direct obligations and indirect
                      obligations of Guarantor or Borrower.


                                      -28-

<PAGE>   34

               7.9    Performance of Acts.

               Upon request by Bank, Borrower shall perform all acts which may
be necessary or advisable to carry out the intent of the Loan Documents.

               7.10   Keeping Guarantor Informed.

               Borrower shall keep Guarantor (and any other person giving a
guaranty to Bank with regard to the Loan), in its capacity as guarantor,
informed of Borrower's financial condition and business operations and all other
circumstances which may affect Borrower's ability to pay or perform its
obligations under the Loan Documents. In addition, Borrower shall deliver to
Guarantor all of the financial information required to be furnished to Bank
hereunder.

               7.11   Maximum Total Liabilities to Gross Asset Value of 50%.

               The Total Liabilities of Guarantor and Borrower on a consolidated
basis at the end of each quarter shall not exceed 50% of the Gross Asset Value
of Guarantor and Borrower on a consolidated basis. "Total Liabilities" means all
current, long term and contingent liabilities including, but not limited to,
recourse and nonrecourse mortgage debt, capitalized leases, letters of credit,
unsecured debt, guaranties, purchase obligations (defined as nonrefundable
deposits and non-contingent obligations), subordinated debt and unfunded
obligations of Borrower reported in accordance with GAAP, Borrower's pro rata
share of non-recourse liabilities held in partnerships and joint ventures and
l00% of all liabilities of uncombined affiliates which are recourse to Borrower
or Guarantor, excluding nonrecourse debt on properties held by partnerships
which Borrower has a minority interest other than down-REITs. The term "Total
Liabilities" does not include that portion of minority interests attributable to
ownership in Borrower by persons other than Borrower.

               7.12   Fixed Charge Coverage Ratio.

               Quarterly EBITDA (excluding gains on sale of assets,
extraordinary gains and losses, and minority interest) divided by Fixed Charges
shall not be less than 1.60:1.0. "Fixed Charges" means interest expense,
capitalized interest expense, preferred stock dividends, scheduled principal
payments excluding balloon payments, and recurring capital expenditures of
$62.50 per quarter per unit (computed on an average units owned basis).



                                      -29-

<PAGE>   35

               7.13   Maximum Quarterly Dividends.

               Guarantor shall not declare or pay any distributions or dividends
except from cash flow available for distributions or dividends and earned during
the immediately preceding fiscal year, and in any event, not in excess of
ninety-five percent (95%) of Funds From Operations (as generally defined by the
National Association of Real Estate Investment Trusts) ("FFO") on a rolling
four-quarter basis. The total of common and preferred stock dividends in any
quarter may exceed FFO for the quarter only to the extent necessary for
Guarantor to retain its status as a real estate investment trust under the
provisions of Internal Revenue Code Sections 856 and 857.

               7.14   Minimum Tangible Net Worth.

               Guarantor shall maintain minimum quarterly Tangible Net Worth of
$300,000,000 plus seventy five percent (75%) of the gross proceeds of any
additional equity offered or sold after June 30, 1997. Tangible Net Worth shall
be calculated according to GAAP.

               7.15   Negative Pledge.

               (a) (i) Borrower shall not create, assume, or allow any security
interest or lien (including judicial liens) on any Unencumbered Asset Pool
Property, except:

                             (1) Liens for taxes, assessments or governmental
charges or levies to the extent that the Permitted Owner is not yet required to
pay the amount secured thereby and easements; covenants, conditions and
restrictions; reciprocal easement and access agreements and similar agreements
relating to ownership and operation; and

                             (2) Liens imposed by law, such as carrier's,
warehouse man's, mechanic's, materialman's and other similar liens, arising in
the ordinary course of business in respect of obligations that are not overdue
or are being actively contested in good faith by appropriate proceedings, as
long as the Permitted Owner has established and maintained adequate reserves for
the payment of the same and, by reason of nonpayment, no property of the
Permitted Owner is in danger of being lost or forfeited; and

                      (ii)   Borrower shall not create, assume, or allow any 
negative pledge agreement in favor of any other person affecting or relating to
any Unencumbered Asset Pool Property.



                                      -30-

<PAGE>   36



               (b) Borrower shall have the right to contest in good faith by
appropriate legal or administrative proceeding the validity of any prohibited
lien, encumbrance or charge affecting its properties so long as (i) no Event of
Default exists, (ii) Borrower first deposits with Bank a bond or other security
satisfactory to Bank in the amount reasonably required by Bank; (iii) Borrower
immediately commences its contest of such lien, encumbrance or charge, and
continuously pursues the contest in good faith and with due diligence; (iv)
foreclosure of the lien, encumbrance or charge is stayed; and (v) Borrower pays
any judgment rendered for the lien claimant or other third party, unless such
judgment has been stayed as the result of an appeal, within thirty (30) days
after the entry of the judgment. Borrower will discharge or elect to contest and
post an appropriate bond or other security within thirty (30) days of written
demand by Bank.

               7.16   Total Unencumbered Assets to Unsecured Debt.

               The amount of the total unsecured debt of the Borrower and the
Guarantor on a consolidated basis shall not be more than fifty percent (50%) of
the total Current Value of the unencumbered real estate assets of the Borrower
and the Guarantor.

               7.17   Change in Ownership of Borrower or Management of the
Unencumbered Asset Pool Property.

               Borrower shall not cause, permit or suffer (a) any change of the
general partner of Borrower, (b) any change of the party acting as guarantor of
the Loan, or (c) any person or entity other than Guarantor or an affiliate of
Guarantor to manage the Unencumbered Asset Pool Property.

               7.18   Books and Records.

               Borrower shall maintain adequate books and records.

               7.19   Audits.

               Borrower shall allow Bank and its agents to inspect Borrower's
properties and examine, audit and make copies of books and records at any
reasonable time upon reasonable notice to Borrower. If any of Borrower's
properties, books or records are in the possession of a third party, Borrower
authorizes that third party to permit Bank or its agents to have access to
perform inspections or audits and to respond to Bank's requests for information
concerning such properties, books and records.


                                      -31-

<PAGE>   37

               7.20   Cooperation.

               Borrower shall take any action reasonably requested by Bank to
carry out the intent of this Agreement.

               7.21   ERISA Plans.

               Borrower shall give prompt written notice to Bank of:

               (a) The occurrence of any reportable event under Section 4043(b)
of ERISA which requires 30 days' notice.

               (b) Any action by Borrower to terminate or withdraw from a Plan
or the filing of any notice of intent to terminate under Section 4041 of ERISA.

               (c) Any notice of noncompliance made with respect to a Plan under
Section 4041(b) of ERISA.

               (d) The commencement of any proceeding with respect to a Plan
under Section 4042 of ERISA.

               7.22   Use of Proceeds.

               Borrower shall use the proceeds of the Loan only (i) for
repayment at the time of the initial funding of all obligations above
$10,000,000 to Bank arising from that Secured Revolving Line of Credit Agreement
dated February 12, 1996, and obligations to Union Bank of California, N.A.
arising from that certain Unsecured Line of Credit Agreement, dated February 11,
1997, (ii) for acquisition of real and personal property, (iii) for working
capital in Borrower's business, and (iv) for repayment of other debt of
Borrower.

               7.23   Use of Proceeds - Ineligible Securities.

               Borrower shall not use any proceeds of the Loan, directly or
indirectly, to purchase or carry, or reduce or retire any loan incurred to
purchase or carry any "Margin Stock" (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System) or to extend credit to others
for the purpose of purchasing or carrying any Margin Stock.



                                      -32-

<PAGE>   38



               8.     REPRESENTATIONS AND WARRANTIES.

               When Borrower and Guarantor sign this Agreement, and until Bank
is repaid in full, Borrower and Guarantor make the following representations and
warranties. Each request for an extension of credit constitutes a renewed
representation and warranty.

               8.1 Organization of Borrower.

               Borrower is a limited partnership duly formed and existing under
the laws of California.

               8.2    Authorization.

               The execution and compliance with this Agreement and each Loan
Document to which Borrower is a party are within Borrower's powers, have been
duly authorized, and do not conflict with any of Borrower's organizational
papers.

               8.3    Enforceable Agreement.

               This Agreement is a legal, valid and binding agreement of
Borrower, enforceable against Borrower in accordance with its terms, and it and
any other Loan Document to which it is a party, when executed and delivered,
will be similarly legal, valid, binding and enforceable, except as the same may
be limited by insolvency, bankruptcy, reorganization, or other laws relating to
or affecting the enforcement of creditors' rights or by general equitable
principles.

               8.4    Good Standing.

               In each state in which Borrower does business, it is properly
licensed, in good standing, and, where required, in compliance with fictitious
name statutes.

               8.5    No Conflicts.

               Neither Borrower nor the Unencumbered Asset Pool Property are in
violation of, nor do the terms of this Agreement or any other Loan Document
conflict with, any regulation or ordinance, any order of any court or
governmental entity, or any covenant or agreement affecting Borrower or the
Unencumbered Asset Pool Property. There are no claims, actions, proceedings or
investigations pending or, to the best knowledge of Borrower, threatened against
Borrower or affecting the Unencumbered Asset Pool Property except for those
previously disclosed by Borrower to Bank in writing.


                                      -33-

<PAGE>   39

               8.6    Financial Information.

               All financial information which has been and will be delivered to
Bank, including all information relating to the financial condition of Borrower,
Guarantor and the Unencumbered Asset Pool Property, did as of its date fairly
and accurately represent the financial condition being reported on. All such
information was and will be prepared in accordance with generally accepted
accounting principles consistently applied, unless otherwise noted. Since
December 31, 1997, there has been no material adverse change in the financial
condition of Borrower, Guarantor or the Unencumbered Asset Pool Property.

               8.7    Borrower Not a "Foreign Person".

               Borrower is not a "foreign person" within the meaning of Section
1445(f)(3) of the Internal Revenue Code of 1986, as amended from time to time.

               8.8    Lawsuits.

               There is no lawsuit, tax claim or other dispute pending or to the
best of Borrower's knowledge threatened against Borrower which, if lost, would
materially impair Borrower's financial condition or ability to repay the Loan.

               8.9    Year 2000 Precautions.

               Borrower reasonably anticipates that all of its computer
applications that are material to its business and operations will on a timely
basis be able to perform properly date-sensitive functions for all dates before
and after January 1, 2000.

               8.10   Permits, Franchises.

               Borrower possesses all permits, memberships, franchises,
contracts and licenses required and all trademark rights, trade name rights,
patent rights and fictitious name rights necessary to enable it to conduct the
business in which it is now engaged.

               8.11   Other Obligations.

               Borrower is not in material default (taking into account all
applicable cure periods, if any) on any material obligation for borrowed money,
any purchase money obligation or any other material lease, commitment, contract,
instrument or obligation.


                                      -34-

<PAGE>   40

               8.12   Income Tax Returns.

               Borrower has no knowledge of any pending assessments or
adjustments of its income tax for any year.

               8.13   No Event of Default.

               There is no event which is, or with notice or lapse of time or
both would be, a default under this Agreement.

               8.14   ERISA Plans.

               (a) Borrower has fulfilled its obligations, if any, under the
minimum funding standards of ERISA and the Code with respect to each Plan and is
in compliance in all material respects with the presently applicable provisions
of ERISA and the Code, and has not incurred any liability with respect to any
Plan under Title IV of ERISA.

               (b) No reportable event has occurred under Section 4043(b) of
ERISA for which the applicable authorities require 30 days' notice.

               (c) No action by Borrower to terminate or withdraw from any Plan
has been taken and no notice of intent to terminate a Plan has been filed under
Section 4041 of ERISA.

               (d) No proceeding has been commenced with respect to a Plan under
Section 4042 of ERISA, and no event has occurred or condition exists which might
constitute grounds for the commencement of such a proceeding.

               (e) The following terms have the meanings indicated for purposes
of this Agreement:

                      (1) "Code" means the Internal Revenue Code of 1986, as
               amended from time to time.

                      (2) "ERISA" means the Employee Retirement Income Security
               Act of 1974, as amended from time to time.

                      (3) "PBGC" means the Pension Benefit Guaranty Corporation
               established pursuant to Subtitle A of Title IV of ERISA.


                                      -35-

<PAGE>   41

                      (4) "Plan" means any employee pension benefit plan
               maintained or contributed to by Borrower and insured by the
               Pension Benefit Guaranty Corporation under Title IV of ERISA.

               8.15   Location of Borrower.

               Borrower's place of business (or, if Borrower has more than one
place of business, its chief executive office) is located at the address listed
under Borrower's signature on this Agreement or at such other place as to which
Borrower has notified Bank in writing.

               9.     DEFAULT AND REMEDIES.

               9.1 Events of Default.

               Borrower will be in default under this Agreement upon the
occurrence of any one or more of the following events ("Event of Default"):

               (a) Borrower fails to make any payment due hereunder, or fails to
make any payment demanded by Bank under any Loan Document, within fifteen (15)
days after the date due or demanded; or

               (b) Borrower fails to comply with any covenant contained in this
Agreement other than those referred to in clause (a), and does not either cure
that failure within thirty (30) days after written notice from Bank, or, if the
default cannot be cured in thirty (30) days, within a reasonable time; or

               (c) Borrower or Guarantor becomes insolvent or the subject of any
bankruptcy or other voluntary proceeding, in or out of court, for the adjustment
of debtor-creditor relationships; or the subject of any involuntary proceeding,
in court, for the adjustment of debtor-creditor relationships, where such
proceeding is not dismissed within sixty (60) days of commencement; or

               (d)    Borrower or Guarantor dissolves or liquidates; or

               (e) Any representation or warranty made or given in any of the
Loan Documents proves to be false or misleading in any material respect; or

               (f) Guarantor breaches or fails to comply with any covenant
contained in this Agreement and does not cure that failure within thirty (30)
days after written notice from Bank, or, if the default cannot be cured in
thirty (30) days, within a reasonable time; or


                                      -36-

<PAGE>   42

               (g) An Event of Default occurs under any of the Loan Documents;
or

               (h) A final non-appealable judgment or order is entered against
Borrower or Guarantor that materially adversely affects Borrower's intended use
of the Unencumbered Asset Pool Property or Borrower's or Guarantor's ability to
repay the Loan.

               (i) Borrower or Guarantor fails to meet the conditions of, or
fails after the expiration of applicable cure periods, if any, to perform any
obligation under, any other agreement Borrower has with Bank or any affiliate of
Bank, including the obligations of Borrower or Guarantor, as the case may be,
under or with respect to Borrower's obligations under the Existing Letters of
Credit. For the purposes of this section, "affiliated with" means in control of,
controlled by or under common control with; or

               (j) Borrower or Guarantor defaults (taking into account
applicable cure periods, if any) in connection with any credit such person has
with any lender, if the default consists of the failure to make a payment when
due or gives the other lender the right to accelerate any obligation that is
with recourse to Borrower or Guarantor in excess of $5,000,000; or

               (k) There is a material adverse change in Borrower's or
Guarantor's financial condition, or event or condition that materially impairs
Borrower's intended use of the Unencumbered Asset Pool Property which materially
impairs Borrower's or Guarantor's ability to repay the Loan; or

               (l) The Guarantor shall no longer qualify as a real estate
investment trust under the provisions of Code Sections 856 and 857; or

               (m) Borrower or Guarantor is in default under (i) the
Reimbursement Agreement between Borrower, Guarantor, and Bank dated as of
November 1, 1995, or the terms of any letter of credit issued thereunder, or
(ii) the Reimbursement Agreement between Borrower, Guarantor, and Bank dated as
of May 1, 1995, or the terms of any letter of credit issued thereunder.

               9.2    Remedies.

               If an Event of Default occurs under this Agreement, Bank may
exercise any right or remedy which it has under any of the Loan Documents, or
which is otherwise available at law or in equity or by statute, and all of
Bank's rights and remedies shall be cumulative. All of Borrower's obligations
under the Loan Documents shall become immediately due and payable without notice
of default,


                                      -37-

<PAGE>   43

presentment or demand for payment, protest or notice of nonpayment or dishonor,
or other notices or demands of any kind or character, all at Bank's option,
exercisable in its sole discretion.

               10.    REFERENCE AND ARBITRATION.

               10.1 Mandatory Arbitration. Except as provided below, any
controversy or claim between or among the parties, including those arising out
of or relating to this Agreement or the other Loan Documents and any claim based
on or arising from an alleged tort, shall at the request of any party be
determined by arbitration. The arbitration shall be conducted in accordance with
the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any
choice of law provision in this Agreement, and under the Commercial Rules of the
American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered into any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy or
claim to arbitration if any other party contests such action for judicial
relief.

               10.2 Judicial Reference. Subject to subsection 10.1 above, in any
judicial action between or among the parties, including but not limited to any
action or cause of action arising out of or relating to this Agreement or the
other Loan Documents or based on or arising from an alleged tort, all decisions
of fact and law shall at the request of any party be referred to a referee in
accordance with California Code of Civil Procedure Sections 638 et seq. The
parties shall designate to the court a referee or referees selected under the
auspices of the AAA in the same manner as arbitrators are selected in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single referee, shall be an active attorney or retired judge.
Judgment upon the award rendered by such referee(s) shall be entered in the
court in which such proceeding was commenced in accordance with California Code
of Civil Procedure Sections 644 and 645.

               10.3 Provisional Remedies, Self-Help. No provision of this
Agreement shall limit the right of any party to this Agreement to exercise
self-help remedies such as setoff, or obtaining provisional or ancillary
remedies from a court of competent jurisdiction before, after, or during the
pendency of any arbitration or other proceeding. The exercise of a remedy does
not waive the right of either party to resort to arbitration or reference.


                                      -38-

<PAGE>   44

               11.    MISCELLANEOUS PROVISIONS.

               11.1   No Waiver; Consents.

        No alleged waiver by Bank shall be effective unless in writing, and no
waiver shall be construed as a continuing waiver. No waiver shall be implied
from any delay or failure by Bank to take action on account of any default of
Borrower. Consent by Bank to any act or omission by Borrower shall not be
construed as a consent to any other or subsequent act or omission.

               11.2   No Third Parties Benefitted.

               This Agreement is made and entered into for the sole protection
and benefit of Bank and Borrower and their successors and assigns. No trust fund
is created by this Agreement and no other persons or entities shall have any
right of action under this Agreement or any right to the Loan funds.

               11.3   Notices.

               All notices given under this Agreement shall be in writing and
shall be effectively served upon delivery; or if mailed, upon the first to occur
of receipt or the expiration of forty-eight (48) hours after deposit in
certified United States mail, postage prepaid; or twenty-four (24) hours after
deposit with overnight courier, prepaid, sent to the party at its address
appearing below its signature; or upon confirmation of receipt, if sent by
facsimile transmission to the party at the number appearing below its signature
and followed by delivery of a hard copy of such notice by United States mail as
above. Those addresses or numbers may be changed by either party by written
notice to the other party.

               11.4   Attorneys' Fees.

               If any lawsuit, reference or arbitration is commenced which
arises out of, or which relates to this Agreement, the Loan Documents or the
Loan, including any alleged tort action, regardless of which party commences the
action, the prevailing party shall be entitled to recover from each other party
such sums as the court, referee or arbitrator may adjudge to be reasonable
attorneys' fees in the action or proceeding, in addition to costs and expenses
otherwise allowed by law. Any such attorneys' fees incurred by either party in
enforcing a judgment in its favor under this Agreement shall be recoverable
separately from and in addition to any other amount included in such judgment,
and such attorneys fees obligation is intended to be severable from the other
provisions of this Agreement and to survive and not be merged into any such
judgment. In all other situations, including any bankruptcy or other voluntary
or


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<PAGE>   45

involuntary proceeding, in or out of court, for the adjustment of
debtor-creditor relationships, Borrower agrees to pay all of Bank's costs and
expenses, including attorneys' fees, which may be incurred in any effort to
collect or enforce the Loan or any part of it or any term of any Loan Document.
Attorneys fees shall include the allocated costs for services of in-house
counsel.

               11.5   Participations and Syndications.

               Bank may at any time syndicate the Loan or sell to one or more
persons or entities participating interests in the Loan and/or any interest of
Bank under any of the Loan Documents and may provide financial information about
the Borrower to actual or potential participants or assignees, without notice to
or consent of Borrower.

               11.6   Heirs, Successors and Assigns.

               The terms of this Agreement shall bind and benefit the heirs,
legal representatives, successors and assigns of the parties; provided, however,
that Borrower may not assign this Agreement without the prior written consent of
Bank. Bank shall have the right to transfer the Loan to any other persons or
entities without the consent of or notice to Borrower. Without the consent of or
notice to Borrower, Bank may disclose to any prospective purchaser of any
securities issued by Bank, and to any prospective or actual purchaser of any
interest in the Loan or any other loans made by Bank to Borrower (in the case of
a prospective purchase of an interest in the Loan or any other loan, upon Bank's
receiving its standard confidentiality letter from the prospective purchaser of
the interest in the Loan or any other loan), any financial or other information
relating to Borrower, the Loan or the Unencumbered Asset Pool Property.

               11.7   Payments Set Aside.

               To the extent that Borrower makes a payment or payments or
transfers any assets to Bank, and such payment or payments or transfer or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party in connection with any insolvency proceeding, or otherwise, then:
(i) any and all obligations owed to Bank and any and all remedies available to
Bank under the terms of the Loan Documents or in law or equity against Borrower
shall be automatically revived and reinstated to the extent (and only to the
extent) of any recovery permitted under clause (ii) below; and (ii) Bank shall
be entitled to recover (and shall be entitled to file a proof of claim to obtain
such recovery in any applicable bankruptcy, insolvency, receivership or
fraudulent conveyance or fraudulent transfer proceeding) either: (x) the amount
of the payments or the value of the transfer or (y) if the transfer has been
undone and the assets returned


                                      -40-

<PAGE>   46

in whole or in part, the value of the consideration paid to or received by
Borrower for the initial asset transfer, plus in each case any deferred interest
from the date of the disgorgement to the date of distribution to Bank in any
bankruptcy, insolvency, receivership or fraudulent conveyance or fraudulent
transfer proceeding, and any costs and expenses due and owing, including,
without limitation, any reasonable attorneys' fees incurred by Bank in
connection with the exercise by Bank of its rights under this Section 11.7.

               11.8   Interpretation.

               The language of this Agreement shall be construed as a whole
according to its fair meaning, and not strictly for or against any party. The
word "include(s)" means "include(s), without limitation," and the word
"including" means "including, but not limited to."

               11.9   Miscellaneous.

               This Agreement may not be modified or amended except by a written
agreement signed by the parties. The invalidity or unenforceability of any one
or more provisions of this Agreement shall in no way affect any other provision.
If Borrower consists of more than one person or entity, each shall be jointly
and severally liable to Bank for the faithful performance of this Agreement and
the other Loan Documents. Time is of the essence in the performance of this
Agreement and the other Loan Documents. This Agreement shall be governed by
California law. This Agreement may be executed in one or more counterparts, each
of which shall, for all purposes be deemed an original and all such counterparts
taken together, shall constitute one and the same instrument.

               11.10  Integration and Relation to Loan Commitment.

               The Loan Documents fully state all of the terms and conditions of
the parties' agreement regarding the matters mentioned in or incidental to this
Agreement. The Loan Documents supersede all oral negotiations and prior writings
concerning the subject matter of the Loan Documents, including any loan
commitment issued to Borrower.

               11.11  Actions.

               Bank shall have the right, but not the obligation, to commence,
appear in, and defend any action or proceeding which might affect its rights,
duties or liabilities relating to the Loan, the Unencumbered Asset Pool
Property, or any of the Loan Documents. Borrower shall pay promptly on demand
all of Bank's reasonable


                                      -41-

<PAGE>   47

out-of-pocket costs, expenses, and legal fees and expenses of Bank's counsel
incurred in those actions or proceedings.

               11.12  Relationships with Other Bank Customers.

               From time to time, Bank may have business relationships with
Borrower's customers, suppliers, contractors, tenants, partners, shareholders,
officers or directors, with businesses offering products or services similar to
those of Borrower, or with persons seeking to invest in, borrow from or lend to
Borrower. Borrower agrees that in no event shall Bank be obligated to disclose
to Borrower any information concerning any other Bank customer. Borrower further
agrees that Bank may extend credit to those parties and may take any action it
may deem necessary to collect any such credit, regardless of any effect the
extension or collection of such credit may have on Borrower's financial
condition or operations.


                                      -42-

<PAGE>   48

               IN WITNESS WHEREOF, Borrower and Bank have executed this
Agreement as of the date first above written.

ESSEX PORTFOLIO, L.P., a California limited partnership

               By ESSEX PROPERTY TRUST, INC.,
               a Maryland corporation, General Partner


               By ______________________________

               Name ____________________________

               Title  ____________________________


               925 East Meadow Drive
               Palo Alto, CA 94303
               Attn:  John F. Burkart, Michael J. Schall and Jordan E. Ritter
               Facsimile:    (650) 494-8743

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION

               By ______________________________

               Name ____________________________

               Title  ____________________________

               By ______________________________

               Name ____________________________

               Title  ____________________________

        Address:

        Bank of America N.T. & S.A.
        San Francisco CRESG c/o Unit 8940
        50 California Street, 11th Floor
        San Francisco, CA 94111
        Facsimile:    (415) 445-4096




                                      -43-

<PAGE>   49

               IN WITNESS WHEREOF, Borrower and Bank have executed this
Agreement as of the date first above written.

ESSEX PORTFOLIO, L.P., a California limited partnership

               By ESSEX PROPERTY TRUST, INC.,
               a Maryland corporation, General Partner


               By ______________________________

               Name ____________________________

               Title  ____________________________


               925 East Meadow Drive
               Palo Alto, CA 94303
               Attn:  John F. Burkart, Michael J. Schall and Jordan E. Ritter
               Facsimile:    (650) 494-8743

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION

               By ______________________________

               Name ____________________________

               Title  ____________________________

               By ______________________________

               Name ____________________________

               Title  ____________________________

        Address:

        Bank of America N.T. & S.A.
        San Francisco CRESG c/o Unit 8940
        50 California Street, 11th Floor
        San Francisco, CA 94111
        Facsimile:    (415) 445-4096




                                      -43-