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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES AND EXCHANGE ACT of 1934
October 16, 1997
Date of Report
PRENTISS PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-14516 75-2661588
- ---------------------------- ------- ---------------
(State or other jurisdiction (Commission File No.) I.R.S. Employer
of incorporation) (Identification No.)
3890 West Northwest Highway, Suite 400
Dallas, Texas 75220
(Address of principal executive offices)
(214) 654-0886
(Registrant's telephone number, including area code)
N/A
(former name or former address, if changed since last report)
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EXPLANATORY NOTE:
This Current Report on Form 8-K is being filed to include in
the Registrant's filings under the Securities Exchange Act of 1934, as
amended, (i) certain material agreements relating to Registrant's
proposed acquisition of the assets of certain affiliated partnerships
of Terramics Property Associates; and (ii) certain information
previously filed under the Securities Act of 1933, as amended.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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Exhibit
Number Exhibit
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10.1 Contribution Agreement between Prentiss Properties
Acquisition Partners, L.P. , and certain Pennsylvania limited
partnerships named therein.
10.2 Contribution Agreement between Prentiss Properties
Acquisition Partners, L.P., and certain New Jersey limited
partnerships named therein.
10.3 Agreement to Acquire Limited Partnership Interests between
OTR and Prentiss Properties Acquisition Partners, L.P.
10.4 Agreement to Assign Property Agreements and Other Assets
between Terramics Management Company, Terramics Property
Associates, Terramics Property Company and Prentiss
Properties Acquisition Partners, L.P.
10.5 Stock Purchase Agreement among Southpoint Land Holdings,
Inc., Valleybrooke Land Holdings, Inc., certain shareholders
thereof and Prentiss Properties Limited, Inc.
10.6 Put and Call Option Agreement For Remaining Shares among
certain sellers named therein and Prentiss Properties
Limited, Inc.
10.7 Loan Agreement dated October 6, 1997, among Prentiss
Properties Limited, Inc., NationsBank of Texas, N.A. and
certain Lenders named therein.
99 Other Information
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PRENTISS PROPERTIES TRUST
Date: October 16, 1997 By: /s/ THOMAS F. AUGUST
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Name: Thomas F. August
Title: President and
Chief Operating Officer
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Exhibit Index
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Exhibit
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Number Exhibit
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Page
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10.1 Contribution Agreement among Prentiss Properties Acquisition
Partners, L.P., and certain Pennsylvania limited
partnerships named therein.
10.2 Contribution Agreement among Prentiss Properties Acquisition
Partners, L.P., and certain New Jersey limited partnerships
named therein.
10.3 Agreement to Acquire Limited Partnership Interests among OTR
and Prentiss Properties Acquisition Partners, L.P.
10.4 Agreement to Assign Property Agreements and Other Assets
among Terramics Management Company, Terramics Property
Associates, Terramics Property Company and Prentiss
Properties Acquisition Partners, L.P.
10.5 Stock Purchase Agreement among Southpoint Land Holdings,
Inc., Valleybrooke Land Holdings, Inc., certain shareholders
thereof and Prentiss Properties Limited, Inc.
10.6 Put and Call Option Agreement For Remaining Shares
among certain sellers named therein and Prentiss
Properties Limited, Inc.
10.7 Loan Agreement dated October 6, 1997, among Prentiss
Properties Limited, Inc., NationsBank of Texas, N.A. as
Administrative Agent, Bank One, Texas, N.A. as Documentation
Agent and certain lenders named therein.
99 Other Information
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Exhibit 10.1
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(Pennsylvania)
CONTRIBUTION AGREEMENT
among
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
a Delaware limited partnership
and
TERRAMICS/VALLEYBROOKE ASSOCIATES-I LIMITED PARTNERSHIP
TERRAMICS/VALLEYBROOKE ASSOCIATES-II LIMITED PARTNERSHIP
TERRAMICS/VALLEYBROOKE ASSOCIATES-III LIMITED PARTNERSHIP
TERRAMICS/SOUTHPOINT ASSOCIATES-I LIMITED PARTNERSHIP
TERRAMICS/SOUTHPOINT ASSOCIATES-II LIMITED PARTNERSHIP
TERRAMICS/SOUTHPOINT ASSOCIATES-III LIMITED PARTNERSHIP
TERRAMICS/SOUTHPOINT ASSOCIATES-V LIMITED PARTNERSHIP
all of which are Pennsylvania limited partnerships
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TABLE OF CONTENTS
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Page
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ARTICLE I. DEFINITIONS.......................................................2
1.1 Definitions............................................................2
ARTICLE II. TRANSFER OF PROPERTY; DEPOSIT; ACCOUNTING FOR
CONTRIBUTION VALUE; STUDY PERIOD....................................9
2.1 Transfer of Property..................................................9
2.2 Transfer Procedures...................................................9
2.3 Deposit..............................................................11
2.4 Study Period.........................................................11
ARTICLE III. PARTNERSHIPS' REPRESENTATIONS AND WARRANTIES...................16
3.1 Organization and Power...............................................16
3.2 Authorization, Execution and Disclosure..............................16
3.3 Non-contravention....................................................16
3.4 No Special Taxes.....................................................17
3.5 Compliance with Existing Laws........................................17
3.6 Personal Property....................................................17
3.7 Operating Agreements.................................................17
3.8 Condemnation Proceedings; Roadways...................................17
3.9 Actions or Proceedings...............................................18
3.10 Labor and Employment Matters........................................18
3.11 Financial Information and Submission Matters........................18
3.12 Bankruptcy..........................................................18
3.13 Hazardous Substances................................................18
3.14 Parties in Possession...............................................19
3.15 Leases..............................................................19
3.16 Leased Property.....................................................19
3.17 No Unpaid Charges...................................................19
3.18 Condition of Improvements...........................................19
3.19 Access..............................................................20
3.20 No Commitments......................................................20
3.21 Partnership Is Not A "Foreign Person"...............................20
3.22 Leasing Commissions.................................................20
3.23 Other Agreements....................................................20
3.24 List of Partners....................................................20
3.25 Ground Lease........................................................20
3.26 Existing Secured Indebtedness.......................................20
3.27 LIMITATIONS ON REPRESENTATIONS AND WARRANTIES.......................21
ARTICLE IV. PRENTISS' REPRESENTATIONS AND WARRANTIES........................22
4.1 Organization and Power...............................................22
4.2 Non-contravention....................................................23
4.3 Litigation...........................................................23
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4.4 Bankruptcy...........................................................23
4.5 Issuance of Units....................................................23
4.6 Securities Filings...................................................23
4.7 Absence of Certain Changes or Events.................................24
ARTICLE V. CONDITIONS PRECEDENT.............................................24
5.1 As to Prentiss' Obligations..........................................24
5.2 As to Partnership's Obligations......................................29
ARTICLE VI. COVENANTS OF PARTNERSHIPS.......................................29
6.1 Operating Agreements.................................................29
6.2 Warranties and Guaranties............................................29
6.3 Insurance............................................................29
6.4 Independent Audit....................................................30
6.5 Operation of Property Prior to Closing...............................30
6.6 No Marketing.........................................................32
6.7 Prospective Subscriber Questionnaires................................32
6.8 Delivery of Tax Information..........................................32
6.9 Information Regarding the Restrictions on Beneficial Ownership
of Units...........................................................32
6.10 Partnership Agreement...............................................33
6.11 Use of Name "Terramics".............................................33
ARTICLE VII. CLOSING........................................................33
7.1 Closing..............................................................33
7.2 Partnership's Deliveries.............................................33
7.3 Prentiss' Deliveries.................................................37
7.4 Mutual Deliveries....................................................38
7.5 Closing Costs........................................................38
7.6 Revenue and Expense Allocations......................................38
7.7 Delinquent Rents.....................................................40
7.8 Costs Associated with Certain Leasing Activities.....................40
ARTICLE VIII. GENERAL PROVISIONS............................................40
8.1 Condemnation.........................................................40
8.2 Risk of Loss.........................................................41
8.3 Broker...............................................................41
8.4 Bulk Sale............................................................41
8.5 Confidentiality......................................................42
ARTICLE IX. LIABILITY OF PARTIES; DEFAULT; TERMINATION RIGHTS...............42
9.1 Liability of Prentiss................................................42
9.2 Default by Partnership/Failure of Conditions Precedent...............43
9.3 Indemnification by Prentiss..........................................43
9.4 Default by Prentiss/Failure of Conditions Precedent..................43
9.5 Costs and Attorneys' Fees............................................44
9.6 Limitation of Liability..............................................44
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ARTICLE X. MISCELLANEOUS PROVISIONS.........................................44
10.1 Completeness; Modification..........................................44
10.2 Assignments.........................................................44
10.3 Successors and Assigns..............................................45
10.4 Days................................................................45
10.5 Governing Law.......................................................45
10.6 Counterparts........................................................45
10.7 Severability........................................................45
10.8 Costs...............................................................45
10.9 Notices.............................................................45
10.10 Escrow Agent.......................................................46
10.11 Incorporation by Reference.........................................47
10.12 Survival...........................................................47
10.13 Further Assurances.................................................47
10.14 No Partnership.....................................................47
10.15 Time of Essence....................................................47
10.16 Signatory Exculpation..............................................47
10.17 Rules of Construction..............................................47
</TABLE>
EXHIBITS
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Exhibit A - Land and associated Ground Leases
Exhibit B - Surveyor's Certificate
Exhibit C - Prospective Subscriber Questionnaire
Exhibit D - Existing Secured Indebtedness
Exhibit E - Registration Rights Agreement
Exhibit F - Limited Partner Signature Page
Exhibit G - Assignment of Ground Lease
Exhibit H - Bill of Sale
Exhibit I - Assignment and Assumption Agreement
Exhibit J - Assignment of Leases
Exhibit K - Tenant's Estoppel Certificate
Exhibit L - Permitted Title Exceptions
Exhibit M - Non-Included Assets
SCHEDULES
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Schedule 2 -Defects in Condition of Improvements
Schedule 2.2(a) -Contribution Value allocations including Unit allocations
Schedule 3 -Lease Agreements
Schedule 3.4 -Special Taxes and Assessments
Schedule 3.5-Qualifications to Legal Compliance
Schedule 3.13 -Underground Storage Tanks
Schedule 4 -Operating Agreements
Schedule 6.5(g) -New Leases Which Have Been Preapproved by Prentiss
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CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of this ___
day of September, 1997 among PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership ("Prentiss") and TERRAMICS/VALLEYBROOKE ASSOCIATES-
I LIMITED PARTNERSHIP, TERRAMICS/VALLEYBROOKE ASSOCIATES-II LIMITED PARTNERSHIP,
TERRAMICS/VALLEYBROOKE ASSOCIATES-III LIMITED PARTNERSHIP, TERRAMICS/SOUTHPOINT
ASSOCIATES-I LIMITED PARTNERSHIP, TERRAMICS/SOUTHPOINT ASSOCIATES-II LIMITED
PARTNERSHIP, TERRAMICS/SOUTHPOINT ASSOCIATES-III LIMITED PARTNERSHIP, and
TERRAMICS/SOUTHPOINT ASSOCIATES-V LIMITED PARTNERSHIP, all of which are
Pennsylvania limited partnerships (collectively, the "Partnerships" and each, a
"Partnership"), with joinders by Prentiss Properties Trust, a Maryland real
estate investment trust ("Company"), and Prentiss Properties I, Inc., a Delaware
corporation ("OP General Partner").
R E C I T A T I O N S:
A. Each Partnership is (or will prior to Closing become) the owner of a
leasehold estate in certain land and improvements in Chester County,
Pennsylvania, which comprise the office building projects commonly known as
"Southpoint" (in Tredyffrin Township) and Valleybrooke (in East Whiteland
Township). A description of the land which is the subject of each such leasehold
estate (hereinafter defined and referred to as the "Land"), and the
identification of the associated ground lease (hereinafter defined and referred
to individually as a "Ground Lease" and collectively as the "Ground Leases") is
set forth on Exhibit A attached hereto.
B. OTR, an Ohio general partnership acting on behalf of The State
Teachers Retirement Board of Ohio ("OTR"), owns an 89.999% limited partnership
interest in each Partnership as of the date hereof.
C. On the Closing Date (as hereinafter defined), the parties intend
that (1) Prentiss will acquire OTR's 89.999% limited partnership interest in
each Partnership and in six (6) other affiliated partnerships (collectively, the
"OTR Partnership Interests") pursuant to an Agreement to Acquire Limited
Partnership Interests dated September 26, 1997 between Prentiss and OTR (the
"OTR Agreement"), (2) Prentiss will transfer the Contribution Value to the
Partnerships, (3) the Partnerships will transfer the Property to Prentiss, and
(4) the Partnerships will transfer the Contribution Value to the partners
thereof (other than Prentiss).
D. This Agreement encompasses obligations, rights, covenants,
representations, warranties, actions and conditions applicable to all of the
Partnerships, and it is understood that performance by all Partnerships shall be
required by Prentiss as set forth herein. However, each Partnership has executed
this Agreement only with respect to its separate property interests and rights.
For purposes of convenience, references in this Agreement to "Partnership" shall
mean each Partnership, acting in its own separate capacity, regardless of
whether a particular referenced document or action may also encompass similar
requirements on the part of the other Partnerships. In such connection, it is
acknowledged that (i) each Partnership shall have
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responsibility under this Agreement only for its own obligations, covenants,
representations, warranties and actions, and in no event shall any Partnership
be liable or responsible for any of the obligations, covenants, representations,
warranties or actions of any other Partnership (except to the extent of the
specific conditions to Prentiss' obligations as set forth herein), and (ii) any
obligations, covenants, representations, warranties or actions of a Partnership
under this Agreement which relate or refer to the "Property," "Real Property,"
"Ground Lease," "Land," or any other real or personal property or rights or
interests therein, shall in fact apply, relate and refer only to the property or
property interests which are owned or leased by, or which are for the benefit
of, the particular Partnership in question and not any of the other
Partnerships.
NOW, THEREFORE, in consideration of the foregoing premises (all of
which are hereby incorporated into this Agreement as a part thereof) and in
consideration of the mutual covenants, promises and undertakings of the parties
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the parties, it is
agreed:
ARTICLE I.
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DEFINITIONS
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1.1 Definitions. The following terms shall have the indicated meanings:
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"Act of Bankruptcy" shall mean if a party hereto or any general
-----------------
partner thereof shall (a) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (b) admit in writing its
inability to pay its debts as they become due, (c) make a general assignment for
the benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect), (e) be adjudicated a bankrupt or insolvent, (f) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
(g) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case or proceeding
under the Federal Bankruptcy Code (as now or hereafter in effect), or (h) take
any corporate or partnership action for the purpose of effecting any of the
foregoing; or if a proceeding or case shall be commenced, without the
application or consent of a party hereto or any general partner thereof, in any
court of competent jurisdiction seeking (1) the liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of debts, of such
party or general partner, (2) the appointment of a receiver, custodian, trustee
or liquidator for such party or general partner or all or any substantial part
of its assets, or (3) other similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
and such proceeding or case shall continue undismissed for a period of sixty
(60) consecutive days; or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of sixty (60)
consecutive days.
"Applicable Laws" shall mean any applicable building, zoning,
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subdivision, environmental, health, safety or other governmental laws, statutes,
ordinances, resolutions, rules,
2
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codes, regulations, orders or determinations of any Governmental Authority or of
any insurance boards of underwriters (or other body exercising similar
functions), or any restrictive covenants or deed restrictions affecting the
Property or the ownership, operation, use, maintenance or condition thereof
(provided that there shall not be deemed to be a violation of, or noncompliance
with, a restrictive covenant or deed restriction if Prentiss shall obtain
insurance against loss or damage by reason of such violation or noncompliance
from the Title Company).
"Assignment and Assumption Agreement" shall mean one or more
-----------------------------------
assignment and assumption agreements whereby (a) Partnership (1) assigns and
Prentiss assumes the Operating Agreements that have not been terminated prior to
Closing in accordance herewith, (2) assigns all of Partnership's right, title
and interest in and to the Intangible Personal Property, to the extent
assignable, and (3) indemnifies, defends and holds Prentiss and its agents,
employees, officers, directors, shareholders and contractors harmless with
respect to all liabilities, claims, costs and expenses (including, without
limitation, reasonable attorneys' fees) arising out of defaults by Partnership
under such Operating Agreements accruing and occurring before the Closing Date;
and (b) Prentiss indemnifies, defends and holds Partnership harmless with
respect to all liabilities, claims, costs and expenses (including, without
limitation, reasonable attorneys' fees) arising out of defaults by Prentiss
under such Operating Agreements accruing and occurring from and after the
Closing Date, which assignment and assumption agreement shall be in the form of
Exhibit I hereto.
"Assignment of Ground Lease" shall mean that certain assignment and
--------------------------
assumption agreement, in the form of Exhibit G hereto, whereby (a) Partnership
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assigns to Prentiss and Prentiss assumes the Ground Lease, without release of
the Partnership by the lessor under the Ground Lease, and (b) (1) Partnership
indemnifies, defends and holds Prentiss harmless with respect to all
liabilities, claims, costs and expenses (including, without limitation,
reasonable attorneys' fees) arising out of defaults by the Partnership under the
Ground Lease accruing or occurring before the Closing Date, and (2) Prentiss
indemnifies, defends and holds Partnership harmless with respect to all
liabilities, claims, costs and expenses (including, without limitation,
reasonable attorneys' fees) arising out of defaults by Prentiss accruing and
occurring from and after the Closing Date.
"Assignment of Leases" shall mean the assignment agreement, in
--------------------
recordable form, whereby (a) Partnership (1) assigns and Prentiss assumes all of
Partnership's right, title and interest in and to the Leases, and (2)
indemnifies, defends and holds Prentiss and its agents, employees, officers,
directors, shareholders and contractors harmless with respect to all
liabilities, claims, costs and expenses (including, without limitation,
reasonable attorneys' fees) relating to defaults by Partnership under such
Leases occurring or accruing before the Closing Date; and (b) Prentiss
indemnifies, defends and holds Partnership harmless with respect to all
liabilities, claims, costs and expenses (including, without limitation,
reasonable attorneys' fees) arising out of defaults by Prentiss under such
Leases occurring and accruing from and after the Closing Date, which assignment
agreement shall be in the form of Exhibit J hereto.
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"Authorizations" shall mean all licenses, permits and approvals
--------------
required by any governmental or quasi-governmental agency, body, department,
commission, board, bureau, instrumentality or officer, or otherwise appropriate
with respect to the construction, ownership, operation, leasing, maintenance, or
use of the Property or any part thereof.
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"Bill of Sale - Personal Property" shall mean one or more bills of
--------------------------------
sale conveying title to the Tangible Personal Property and the Intangible
Personal Property from Partnership to Prentiss, which bill of sale shall be in
the form of Exhibit H hereto.
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"Broker" shall mean Realty Capital International, Inc.
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"Closing" shall mean the Closing of the transfer to Prentiss of the
-------
Ground Leases and interests in the Property pursuant to this Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
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"Closing Documents" shall mean the documents defined as such in
-----------------
Section 7.1 hereof.
"Company" shall mean Prentiss Properties Trust, a Maryland real
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estate investment trust.
"Contribution Value" shall mean the respective amounts allocable to
------------------
the assets of each Partnership to be acquired pursuant to this Agreement as are
set forth on Schedule 2.2(a) hereto, and which shall be payable in the manner
---------------
described in Section 2.2 hereof.
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"Partnership's Organizational Documents" shall mean the current
--------------------------------------
partnership agreement and certificate of limited partnership and all amendments
thereto of Partnership and the articles of incorporation and bylaws and all
amendments thereto or partnership agreement and all amendments thereto, as
applicable of Partnership's general partners.
"Deposit" shall mean all amounts deposited from time to time with
-------
Escrow Agent by Prentiss pursuant to Section 2.3 hereof, plus all interest or
-----------
other earnings that may accrue thereon. All cash Deposits shall be invested by
Escrow Agent in a commercial bank or banks acceptable to Prentiss at money
market rates, or in such other investments as shall be approved in writing by
the Partnerships and Prentiss. The Deposit shall be held and disbursed by Escrow
Agent in strict accordance with the terms and provisions of this Agreement.
"Environmental Damages" shall mean all third-party claims, judgments,
---------------------
damages, losses, penalties, fines, liabilities (including, without limitation,
punitive damages and strict liability), encumbrances, liens, costs and expenses
of investigation and defense of any claim, whether or not such is ultimately
defeated, and of any settlement or judgment, of whatever kind or nature,
contingent or otherwise, matured or unmatured, including, without limitation,
attorneys' fees and disbursements and consultants' fees, any of which arise as a
result of the existence of Hazardous Materials upon, about or beneath the
Property or migrating or threatening to migrate from the Property, or as a
result of the existence of a violation of Environmental Requirements pertaining
to the Property.
"Environmental Requirements" shall mean (i) all applicable statutes,
--------------------------
regulations, rules, policies, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, and similar items, of all Governmental
Authorities, and (ii) all judicial, administrative and regulatory
4
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decrees, judgments and orders, in each case of (i) and (ii) relating to the
protection of human health or the environment from Hazardous Materials and
health and safety of employees or the public from Hazardous Materials,
including, without limitation, all requirements thereof pertaining to reporting,
licensing, permitting, investigation and remediation of emissions, discharges,
releases or threatened releases of Hazardous Materials into the air, surface
water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
"Escrow Agent" shall mean Chicago Title Insurance Company, whose
------------
address is 7616 LBJ Freeway, Suite 300, Dallas, Texas 75251-1106, Attn: Sharon
L. Cooper.
"Excluded Assets" shall mean the real property subject to the Right
---------------
of First Opportunities Agreements.
"Existing Liens" shall have the meaning ascribed to such term in
--------------
Section 2.2 hereof.
- -----------
"Existing Notes" shall have the meaning ascribed to such term in
--------------
Section 2.2 hereof.
- -----------
"Existing Secured Indebtedness" shall mean that certain indebtedness
-----------------------------
secured by liens, assignments or security interests, encumbering the Property
which will not be discharged at Closing pursuant to the provisions of this
Agreement, which Existing Secured Indebtedness is described on Exhibit D
---------
attached hereto and made a part hereof.
"Financial Information" shall mean the financial information defined
---------------------
as such in Section 3.11 hereof.
------------
"FIRPTA Certificate" shall mean the affidavit of Partnership under
------------------
Section 1445 of the Internal Revenue Code, as amended, certifying that
Partnership is not a foreign corporation, foreign partnership, foreign trust,
foreign estate or foreign person (as those terms are defined in the Internal
Revenue Code and regulations promulgated thereunder), in form and substance
satisfactory to Prentiss.
"Governmental Authority" shall mean any federal, state, county,
----------------------
municipal or other government or any governmental or quasi-governmental agency,
department, commission, board, bureau, officer or instrumentality, foreign or
domestic, or any of them.
"Ground Lease" shall mean each existing or proposed ground lease, and
------------
all amendments thereto, under which each Partnership leases or will at Closing
lease the Real Property, as identified on Exhibit A hereto.
---------
"Ground Lessor" shall mean the lessor under each Ground Lease as
-------------
identified on Exhibit A hereto.
---------
"Hazardous Materials" shall mean any chemical substance: (i) which is
-------------------
or becomes defined as a "hazardous substance," "hazardous waste," "hazardous
material," "pollutant,"
5
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"contaminant," or "toxic," "explosive," "corrosive," "flammable," "infectious,"
"radioactive," "carcinogenic," or "mutagenic" material under any law,
regulation, rule, order, or other authority of the federal, state or local
governments, or any agency, department, commission, board, or instrumentality
thereof, regarding the protection of human health or the environment from such
chemical substances including, but not limited to, the following federal laws
and their amendments, analogous state and local laws, and any regulations
promulgated thereunder: the Clean Air Act, the Clean Water Act, the Oil
Pollution Control Act, the Comprehensive Environmental Response, Compensation,
and Liability Act of 1986, the Emergency Planning and Community Right to Know
Act, the Solid Waste Disposal Act, the Resource Conservation and Recovery Act,
the Safe Drinking Water Act, the Federal Insecticide, Fungicide and Rodenticide
Act, and the Toxic Substances Control Act, including, without limitation,
asbestos and gasoline and other petroleum products (including crude oil or any
fraction thereof); (ii) which contains gasoline, diesel fuel or other petroleum
hydrocarbons; (iii) which contains drinking biphenyls or asbestos or
asbestos-containing materials or urea formaldehyde foam insulation; or (iv)
consisting of radon gas; provided, however, the term "Hazardous Materials" shall
not include substances of kinds and in amounts ordinarily and customarily used
or stored in properties similar to the Property for the purposes of cleaning or
other maintenance or operations and otherwise in compliance with Environmental
Requirements.
"Improvements" shall mean all buildings, improvements, fixtures and
------------
other items of real estate located on the Land.
"Insurance Policies" shall mean all policies of insurance maintained
------------------
by or on behalf of Partnership pertaining to the Property, its operation, or any
part thereof.
"Intangible Personal Property" shall mean all intangible personal
----------------------------
property owned or possessed by Partnership and used in connection with the
ownership, operation, leasing, occupancy or maintenance of the Property,
including, without limitation, (1) Partnership's exclusive right to use the
trade name "Terramics" and all variations thereof (with the understanding,
however, that (i) affiliates of Partnerships and/or the partners thereof will
have the continuing right to use such trade name solely in connection with the
use of the current name of the entity or entities owning the Excluded Assets or
the Non-Included Assets and for regulatory or statutory compliance with respect
to any of such assets or entities owning such assets, and (ii) Partnerships
and/or the partners thereof will have the continuing right to use such trade
name in connection with the collection of any amounts receivable (provided,
after the Closing Date, no such party may pursue existing tenants of the
Property without Prentiss' prior written consent), the prosecution of any claims
or the maintenance of any defense, which are attributable to the ownership and
operation of the Property prior to Closing and for regulatory or statutory
compliance with respect to their prior interests in the Property), (2) the
Authorizations, (3) escrow accounts, utility and development rights and
privileges, general intangibles, business records, plans and specifications
pertaining to the Real Property and the Personal Property, and (4) any unpaid
award for taking by condemnation or any damage to the Land by reason of a change
of grade or location of or access to any street or highway.
"Land" shall mean each parcel of real estate which is subject to the
----
Ground Lease, situate in Chester County, Commonwealth of Pennsylvania, as more
particularly described on Exhibit A attached hereto, together with all
easements, rights, privileges, remainders, reversions
6
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and appurtenances thereunto belonging or in any way appertaining, and all of the
estate, right, title, interest, claim or demand whatsoever of Partnership
therein, in the streets and ways adjacent thereto and in the beds thereof,
either at law or in equity, in possession or expectancy, now or hereafter
acquired.
"Leased Property" shall mean all leased items of Tangible Personal
---------------
Property.
"Leasehold Estate" shall mean the leasehold estate created in the
----------------
Real Property and improvements situated thereon created pursuant to the Ground
Lease.
"Leases" shall mean all leases, tenancies and other rights of
------
occupancy or use for any portion of the Real Property, other than the Ground
Leases, together with any and all amendments thereto.
"Non-Included Assets" shall mean the properties described on Exhibit
------------------- -------
M hereto.
- -
"Operating Agreements" shall mean all management, service, supply and
--------------------
maintenance contracts, if any, in effect with respect to the Property and all
other contracts (other than the Ground Leases and Leases) that affect the
Property or are otherwise related to the construction, ownership, operation,
occupancy or maintenance of the Property, which Operating Agreements are
described on Schedule 4 attached hereto and made a part hereof.
----------
"Operating Partnership" shall mean Prentiss Properties Acquisition
---------------------
Partners, L.P., a Delaware limited partnership.
"OTR" shall have the meaning ascribed to such term in the Recitals to
---
this Agreement.
"OTR Agreement" shall have the meaning ascribed to such term in the
-------------
Recitals to this Agreement.
"Owner's Title Policy" shall mean an ALTA 1992 leasehold policy of
--------------------
title insurance issued to Prentiss by the Title Company, pursuant to which the
Title Company insures Prentiss' ownership of the Leasehold Estate (including the
marketability thereof) subject only to Permitted Title Exceptions and the Ground
Lease. The Owner's Title Policy shall insure Prentiss in the amount allocated by
Prentiss to the value of the Real Property interests to be acquired by Prentiss
from the Partnership. Prentiss may require such deletions of standard exceptions
and such title endorsements as are legally available and customarily required by
institutional investors purchasing property comparable to the Property in the
State where the Property is situated. The description of the Land in the Owner's
Title Policy shall be by courses and distances or by reference to a legal,
subdivided lot and shall be identical to the description shown on the Survey.
"Partnership Agreement" shall mean the Second Amended and Restated
---------------------
Agreement of Limited Partnership of Prentiss Properties Acquisition Partners,
L.P. as the same may be amended from time to time.
7
<PAGE>
"Permitted Title Exceptions" shall mean (i) those exceptions to title
--------------------------
to the Real Property that are set forth on Exhibit L hereto, and (ii) such other
exceptions to title as are satisfactory to Prentiss as determined pursuant to
Section 2.4(d) hereof.
- --------------
"Personal Property" shall mean collectively the Tangible Personal
-----------------
Property and the Intangible Personal Property.
"Prentiss' Objections" shall mean the objections defined as such in
--------------------
Section 2.4(d) hereof.
- --------------
"Property" shall mean collectively the Real Property and the Personal
--------
Property.
"Real Property" shall mean the Land and the Improvements.
-------------
"Registration Rights Agreement" shall mean the agreement in the form
-----------------------------
of Exhibit E hereto.
---------
"Study Period" shall mean the period commencing on August 6, 1997,
------------
and continuing through September 26, 1997. Except as expressly noted herein to
the contrary, time periods herein referred to shall mean the time periods as in
effect, from time to time, at Dallas, Texas.
"Submission Matters" shall mean all items Partnership is required to
------------------
deliver to Prentiss pursuant to Section 2.4(b) hereof.
--------------
"Survey" shall mean the survey defined as such in and prepared
------
pursuant to Section 2.4(d) hereof.
--------------
"Tangible Personal Property" shall mean the items of tangible
--------------------------
personal property consisting of all furniture, fixtures, equipment, machinery
and other personal property of every kind and nature located on or used or
useful in the ownership and operation of the Property and owned by Partnership,
including, without limitation, Partnership's interest as lessee with respect to
any such Tangible Personal Property.
"Title Commitment" shall mean the title commitment and exception
----------------
documents defined as such in Section 2.4(d) hereof.
--------------
"Title Company" shall mean Chicago Title Insurance Company, or
-------------
another title insurance underwriter selected by Prentiss.
"UCC Reports" shall mean the reports defined as such in Section
----------- -------
2.4(d) hereof.
- ------
"Unit Recipient" shall mean the direct or indirect owner of a
--------------
Partnership interest who will receive Units pursuant to Section 2.2(b) hereof.
"Units" shall mean "Partnership Units" in the Operating Partnership,
-----
as defined and described in the Operating Partnership's Partnership Agreement.
8
<PAGE>
"Utilities" shall mean public sanitary and storm sewers,
natural gas, telephone, public water facilities, electrical facilities and all
other utility facilities and services necessary or appropriate for the operation
and occupancy of the Property as an office building.
"Warranties and Guaranties" shall mean all equipment,
installer's, manufacturer's, contractors and similar warranties and guaranties
relating to the Improvements, or the Tangible Personal Property or any part
thereof.
ARTICLE II.
----------
TRANSFER OF PROPERTY; DEPOSIT; ACCOUNTING
-----------------------------------------
FOR CONTRIBUTION VALUE; STUDY PERIOD
------------------------------------
2.1 Transfer of Property. In consideration of, and subject to, the
--------------------
terms and conditions hereinafter set forth, each Partnership shall transfer the
Ground Lease and its interest in the Property to Prentiss.
2.2 Transfer Procedures. When the conditions to Closing set forth in
-------------------
Article V have been satisfied, the following shall occur and the parties agree
that the transaction contemplated hereby will be reported, for federal income
tax purposes, as a contribution by the remaining partners of the Partnership to
Prentiss of their interests in the Partnerships in exchange for the Contribution
Value and as a transfer of the Partnerships' interests in the Property to
Prentiss (in redemption of Prentiss' interests in the Partnerships):
(a) Prentiss shall receive a credit against the Contribution Value
in an amount equal to the amount of the cash Deposit.
(b) An allocable portion of the Contribution Value attributable to
each Partnership, as set forth on Schedule 2.2(a) hereto, shall be paid by
---------------
issuing to Partnership or any Unit Recipient designated by Partnership to
receive Units the number of Units calculated by dividing such allocable portion
of the Contribution Value by $25.50 and rounding the resulting number of Units
to the nearest integer (.50 rounded down). Prentiss shall be entitled to a
credit against the Contribution Value for unearned distributions on Units for
the period from the last distribution date through the Closing Date. In
connection with the foregoing, the parties acknowledge that (i) Prentiss has
established a minimum threshold for the issuance of Units to any one Unit
Recipient in the amount of One Million Dollars ($1,000,000), such threshold to
apply to all Units to be issued to such Unit Recipient under this Agreements and
under the Contribution Agreement of even date entered into among Prentiss,
various affiliates of Partnerships and the partners of such affiliates, (ii)
each Unit Recipient has agreed, by the terms of a separate agreement with
Prentiss, to furnish certain limited guarantees of the non-recourse indebtedness
of Prentiss, (iii) Prentiss has agreed with the Unit Recipients and
Partnerships, pursuant to the terms of a separate agreement, to restrict sales
or transfers of various components of the Real Property for certain time
periods, and (iv) Prentiss has further agreed with the Unit Recipients, pursuant
to the terms of a separate agreement, to allow certain transfers of Units for
family and estate planning purposes. Notwithstanding the foregoing provisions of
this Section, unless, at the Closing Date, the Unisource Conditions Precedent
(as hereinafter defined) shall have
9
<PAGE>
occurred, a number of Units having a value as of the Closing Date equal to
$150,000 shall be withheld from issuance and shall be issued upon the
satisfaction of the Unisource Conditions Precedent. The "Unisource Conditions
Precedent" means the occurrence of both of (i) the Date of Substantial
Completion (as defined under the lease dated February 1, 1997 between
Terramics/Southpoint Associates V Limited Partnership ["Partnership V"] and
Unisource Worldwide, Inc.) of the building ("Unisource Building") to be
constructed pursuant to such lease, and (ii) the taking of occupancy by
Unisource Worldwide, Inc. of such building for the commencement of actual
business operations therein. In connection with the foregoing, the parties
acknowledge that the Unisource Building being constructed by Partnership V has
not been completed and that a portion of the Existing Secured Indebtedness is a
construction loan in the maximum principal amount of $5,500,000 (the "Loan")
from First Union National Bank which has not been fully funded. Partnership V
shall be obligated to complete the Unisource Building and for any costs of such
completion in excess of the proceeds of the Loan. Prentiss shall be responsible
for repaying the Loan upon (a) completion of the Unisource Building, (b) the
satisfaction of the Unisource Conditions Precedent, and (c) the deliveries of
final lien releases by the contractor constructing the Unisource Building
(except to the extent an adequate monetary reserve is withheld for the delivery
of such lien releases). If the unpaid principal of the Loan upon satisfaction of
the conditions of the preceding sentence is less than $5,500,000, then Prentiss
shall pay to Partnership V or its designee(s) the amount by which $5,500,000
exceeds such unpaid balance. The provisions of this Paragraph shall survive
Closing.
(c) Prentiss shall accept the Property subject to, but in no way
assuming, the unpaid principal balances on the Closing Date of the promissory
note(s) evidencing the Existing Secured Indebtedness (the "Existing Note")
payable to the lienholder(s) described in Exhibit D attached hereto and made a
part hereof having approximate unpaid principal balances in the amounts
specified in Exhibit D, and subject to, but in no way assuming, the obligations
contained in the mortgages and other security instruments securing the Existing
Notes described in Exhibit D (said mortgages and other security instruments
being hereinafter collectively referred to as the "Existing Liens").
Notwithstanding the foregoing, (i) to the extent that any Existing Note or
Existing Liens (or the loan documents executed in connection therewith) create
personal liability for specified acts, omissions or occurrences ( such acts,
omissions or occurrences being referred to as "Carve-Out Activities" and the
associated personal liability being referred to as "Carve-Out Liability"), (A)
Prentiss shall, if Closing occurs, be responsible for any such Carve-Out
Liability attributable to Carve-Out Activities accruing and occurring from and
after the Closing Date, and shall and does hereby indemnify and hold Partnership
(and any of Partnership's principals who may have liability therefor) harmless
with respect thereto, and (B) Partnership shall and does hereby indemnify and
hold Prentiss harmless with respect to Carve-Out Liability attributable to
Carve-Out Activities accruing or occurring prior to the Closing Date, and (ii)
if and to the extent that any Existing Secured Indebtedness is paid off or
refinanced by Prentiss within 60 days following the Closing Date, and any
prepayment premium is required to be paid in connection therewith pursuant to
the presently existing terms of such Existing Secured Indebtedness, such
prepayment premium shall be the responsibility of Partnership and Prentiss shall
be entitled to create a cash reserve therefor out of the Contribution Value;
provided that any reduction which can be achieved in the prepayment premium due
to CIGNA on account of its Existing Secured Indebtedness below the amount due in
accordance with the existing loan documents shall be shared equally by Prentiss
and Partnerships. The provisions of this Paragraph shall survive Closing without
limitation.
10
<PAGE>
(d) Prentiss shall pay the balance of the Contribution Value, as
adjusted in the manner specified in Article VII and as set forth below, to
Partnership or other applicable party at Closing by making a wire transfer of
immediately available federal funds to the account of Partnership or other
applicable party as specified in writing by Partnership.
2.3 Deposit. Within three (3) days after the execution hereof by both
-------
Partnership and Prentiss and as a condition precedent to the effectiveness of
this Agreement, Prentiss shall deliver to Escrow Agent a wire transfer or check
in the sum of Fifty Dollars ($50.00) payable to the order of Partnership
representing the independent consideration for Partnership's execution of this
Agreement and agreement to provide Prentiss with the Study Period (which check
or the proceeds of which wire transfer shall thereafter be delivered by Escrow
Agent to Partnership). Prentiss has previously deposited with the Escrow Agent
the amount of $511,600, which sum has been deposited and invested in an interest
bearing account at a financial institution acceptable to Prentiss). If Prentiss
has not terminated this Agreement on or before the expiration of the Study
Period, Prentiss shall deliver to Escrow Agent a wire transfer or check in the
additional sum of $511,600 on or before 5:00 p.m. on the next business day
immediately following the last day of the Study Period. The proceeds of the wire
transfers or checks are referred to herein as the "Deposit" and Escrow Agent
shall hold and invest the Deposit pursuant to the terms, conditions and
provisions of this Agreement. All accrued interest on the Deposit shall become
part of the Deposit. The Deposit shall be returned to Prentiss if Prentiss,
prior to the end of the Study Period, notifies Partnerships in writing, pursuant
to Section 2.4 hereof, that Prentiss is electing to terminate this Agreement.
-----------
The Deposit (regardless of whether it is the proceeds of wire transfers or
checks) shall be either (a) applied at the Closing against the cash portion of
the Contribution Value, (b) returned to Prentiss pursuant hereto, or (c) paid to
Partnership pursuant hereto. For purposes of reporting earned interest with
respect to the Deposit, Prentiss' Federal Tax Identification Number is
75-2672997, and Partnership's Federal Tax Identification Number is 23-2257635.
2.4 Study Period.
------------
(a) Prentiss and its agents, contractors and duly authorized
representatives shall have the right, until 5:00 p.m., Dallas, Texas time on the
last day of the Study Period, and thereafter if Prentiss has elected not to
terminate this Agreement prior to the expiration of the Study Period, to enter
upon the Real Property and to perform, at Prentiss' expense, such economic,
surveying, engineering, topographic, environmental, marketing and other tests,
studies and investigations as Prentiss may deem appropriate. If such tests,
studies and investigations do not warrant, in Prentiss' sole, absolute and
unreviewable discretion, the purchase of the Property for the purposes
contemplated by Prentiss, then Prentiss may elect not to proceed with this
transaction and shall notify Partnership and Escrow Agent, in writing prior to
the expiration of the Study Period, that Prentiss has elected to terminate this
Agreement, in which event this Agreement automatically shall terminate, the
Deposit shall be promptly returned to Prentiss, and Prentiss and Partnership
shall be released from all further liability or obligation hereunder except
those which expressly survive a termination of this Agreement. If Prentiss does
not so notify Partnership of its determination to terminate this Agreement prior
to the expiration of the Study Period, then Prentiss shall be deemed to have
waived its right to terminate this Agreement pursuant to this Section 2.4.
-----------
11
<PAGE>
(b) The parties acknowledge that Partnership has delivered the
following to Prentiss or made same available to Prentiss for inspection and/or
copying at the location of the Property or Partnership's business office:
(1) Copies of all Leases in effect as of the date of this
Agreement, together with copies of all material correspondence received
from or sent to tenants of the Property.
(2) a Rent Roll (herein so called) certificate (with current
rent roll attached) for the Property containing the following
information with respect to each Lease: (i) a description of the space
occupied thereby (including square feet, type of space, floor, suite
number and tenant's pro rata share of expense and tax escalations),
(ii) tenant's name, (iii) the commencement date and expiration date
thereof, (iv) the base rental rate per square foot, (v) the amount of
fixed monthly rental, (vi) the amount of any percentage or other
additional rental and/or common area maintenance, tax, insurance and
operating expenses and any other charges payable thereunder, (vii) the
amount of any prepayment or delinquency in rental or other charges,
(viii) the amount of the security deposit or any other deposit
thereunder, (ix) any free rent, concessions, rebates, refunds, or other
inducements which any tenant will be entitled to receive after Closing,
(x) any options provided thereunder, including, without limitation, any
renewal options, expansion options, purchase options and rights of
first refusal, and (xi) any fees or commissions payable in regard to
such Lease. The Rent Roll shall be certified in writing by Partnership
on or prior to the expiration of the Study Period to the effect that it
is true, complete, and correct in all material respects as of the date
shown on the Rent Roll and that, to the best of Partnership's
knowledge, there has been no material adverse change with respect to
any item shown on the Rent Roll during the period from the date thereof
to the date of such certificate, except as shown thereon. Additionally,
(i) there shall be executed prior to Closing such amendments to the
leases with Valleybrooke Executive Suites as are necessary to conform
to the Rent Roll, such leases to be guaranteed, on a joint and several
basis, by the Principals as referred to in Paragraph 7.2(x) below;
provided, however, the guaranty shall be released if Prentiss exercises
its right to purchase such lease under the Right of First Opportunities
Agreement covering such lease, and (ii) Terramics/Southpoint
Associates-II Limited Partnership shall execute at Closing a rent
subsidy agreement satisfactory to Prentiss, whereby the rent for the
lease with Renal Treatment Center at Southpoint TWO shall be subsidized
by the payment of $19,229.06 per month until February 28, 1998, and
such rent subsidy agreement shall be guaranteed, on a joint and several
basis, by the Principals.
(3) To the extent in Partnership's possession or reasonably
available to Partnership, copies of all Authorizations including,
without limitation, all certificates of occupancy, permits,
authorizations, approvals (including drawings and enacting ordinances,
if any), special exceptions, variances, and licenses issued by
Governmental Authorities having jurisdiction over the Property and
copies of all certificates issued by the local board of fire
underwriters (or other body exercising similar functions) relating to
the Property. For the purpose of this Agreement any Submission Matters
in the possession of
12
<PAGE>
Partnership's management company shall be deemed to be "reasonably
available to Partnership."
(4) Operating and Financial Statements (herein so called)
showing all income and expenses, profits and losses of the Property for
the previous three (3) calendar years, which shall reflect (i) ad
valorem taxes for the City, County and State; (ii) expenses incurred
for such period for water, electricity, natural gas and other utility
charges; (iii) other operating expenses; (iv) total rents collected
from tenants for such periods; and (v) other revenue collected and the
nature of such revenue; and, to the extent in Partnership's possession
or reasonably available to Partnership, financial statements for the
Property for the previous three (3) calendar years, including, if
available, the reports of accountants thereon.
(5) A complete list of all Operating Agreements in effect as of
the date of this Agreement and complete copies of all such Operating
Agreements.
(6) The operating and capital expenditure budget for the
Property for the current calendar year and, to the extent in
Partnership's possession or reasonably available to Partnership, for
the previous three (3) calendar years.
(7) A complete list of all Tangible Personal Property.
(8) A complete list of all Leased Property (if any) and
complete copies of all lease agreements related thereto.
(9) To the extent in Partnership's possession or reasonably
available to Partnership, any information in Partnership's possession
or reasonably available to Partnership regarding current renditions or
assessments on the Property or notices relative to change in valuation
for ad valorem taxes.
(10) A complete list of all Warranties and Guaranties in effect
as of the date of this Agreement and complete copies of all such
Warranties and Guaranties.
(11) Copies of all soil tests, structural engineering tests,
inspection reports, asbestos surveys, masonry tests, percolation tests,
water, oil, gas, mineral, radon, formaldehyde, PCB or other
environmental tests, audits or reports, market studies and site plans
related to the Property in Partnership's possession or reasonably
available to Partnership, together with copies of any and all
correspondence, reports and other written documentation regarding the
environmental aspects of the property or any toxic substances or
equipment affecting or related to the Property.
(12) To the extent in Partnership's possession or reasonably
available to Partnership, copies of complete sets of all architectural,
mechanical, structural and/or electrical plans and specifications used
in connection with the construction of or alterations or repairs to the
Property.
13
<PAGE>
(13) To the extent in Partnership's possession or reasonably
available to Partnership, copies of as-built plans and specifications
for the Property.
(14) Parking, structural, mechanical or other engineering
reports or studies related to the Property, if any, in Partnership's
possession or reasonably available to Partnership.
(15) To the extent in the possession of Partnership or any
affiliate of Partnership or Partnership's property manager, copies of
credit reports and financial information on all tenants in possession
of any of the Property and of any guarantors of such tenants'
obligations.
(16) A copy of the Ground Lease, and all amendments thereto
(any proposed Ground Lease to be in effect at or prior to Closing to be
on substantially the same terms as the other Ground Leases for the
office project in question).
(17) Copies of all notices given to or received by Partnership
with respect to the Ground Lease.
(18) Copies of any and all loan documents securing Ground
Lessor's interest in the Ground Lease.
(19) Copies of Partnership's Organizational Documents.
(20) Copies of all documents evidencing or securing the
Existing Secured Indebtedness and copies of all correspondence from the
holder of the Existing Notes since the date of closing of the Existing
Secured Indebtedness.
After the Study Period and thereafter until the Closing, Partnership shall make
available to Prentiss, its agents, auditors, engineers, attorneys and other
designees, for inspection and/or copying, copies of any additional architectural
and engineering studies, surveys, title insurance policies, zoning and site plan
materials, material correspondence, environmental audits and reviews, and other
material information relating to the Property which are may come into
Partnership's possession or control.
(c) Prentiss shall indemnify and defend Partnership against any
loss, damage or claim for personal injury or property damage arising from the
entry upon the Property pursuant to this Section 2.4 by Prentiss or any agents,
-----------
contractors or employees of Prentiss. Prentiss, at its own expense, shall
restore any damage to the Property caused by any of the tests or studies made by
Prentiss. This provision shall survive any termination of this Agreement and a
closing of the transaction contemplated hereby.
(d) Prentiss shall obtain, at Prentiss' sole cost and expense, a
Survey of the Land and the Improvements, prepared by a Surveyor licensed to
practice in the Commonwealth of Pennsylvania, bearing a date not earlier than
thirty (30) days from the date of its delivery, containing the certificate
attached hereto as Exhibit B, and conforming to the requirements set forth in
---------
such certificate. Prentiss shall cause the Title Company to furnish to Prentiss,
at Prentiss'
14
<PAGE>
sole cost and expense, (i) a title insurance commitment bearing an effective
date subsequent to the date of this Agreement issued by the Title Company
covering the Real Property, binding the Title Company to issue its 1992 Form
ALTA Leasehold Policy of Title Insurance (without a creditors' rights
exception), in form approved for use in the state where the Property is located
in favor of Prentiss, showing title to the Leasehold Estate to be held currently
by Partnership in a good, marketable and insurable condition subject to the
Permitted Title Exceptions, together with legible copies of all documents
identified in such title insurance commitment as exceptions to title certified
as true and complete by the Title Company (collectively, the "Title
Commitment"), and (ii) reports of searches of the Uniform Commercial Code
records of both the county and State in which the Property is located
(collectively, the "UCC Reports") with respect to the state of title to the
Property. Within ten (10) business days after Prentiss' receipt of the Title
Commitment and Survey, Prentiss shall notify Partnership of any matters shown on
the Survey or identified in the Title Commitment or the UCC Reports, and which
are not included within the Permitted Title Exceptions, that Prentiss is
unwilling to accept (collectively, "Prentiss' Objections"). If any of Prentiss'
Objections consist of delinquent taxes, mortgages, deeds of trust, security
agreements, construction or mechanics' liens, tax liens or other liens or
charges in a fixed sum or capable of computation as a fixed sum, then, to that
extent, notwithstanding anything herein to the contrary, Partnership shall be
obligated to pay and discharge (or bond against in a manner sufficient to cause
the Title Company to insure over such Prentiss' Objections) any such Prentiss'
Objections (other than the documents securing the Existing Secured
Indebtedness), and Escrow Agent is authorized to pay and discharge at Closing
such Prentiss' Objections to the extent not paid and discharged or bonded
against at Closing. For such purposes, Partnership may use all or a portion of
the cash portion of the Contribution Value to close. Partnership shall not be
obligated to incur any expenses to cure any non-monetary Prentiss' Objections
unless Partnership agrees to cure such non-monetary Prentiss' Objections as
hereinafter provided. Partnership shall notify Prentiss within ten (10) days
after receipt of notice of Prentiss' Objections whether Partnership agrees to
cure such non-monetary Prentiss' Objections. If Partnership notifies Prentiss in
writing within such ten (10) day period that Partnership agrees to cure such
non-monetary Prentiss' Objections, Partnership shall correct such non-monetary
Prentiss' Objections on or before the Closing Date to the reasonable
satisfaction of Prentiss. If Partnership does not notify Prentiss within such
ten (10) day period of Partnership's agreement to cure such non-monetary
Prentiss' Objections, Partnership shall be deemed to have elected not to cure
such non-monetary Prentiss' Objections, and Prentiss shall elect (1) to waive
such non-monetary Prentiss' Objections without any abatement in the Contribution
Value or (2) to terminate this Agreement, in which case the Deposit shall be
promptly returned to Prentiss and the parties hereto shall be released from all
further obligations hereunder except those which expressly survive a termination
of this Agreement. Partnership shall not, after the date of this Agreement,
subject the Real Property to or permit or suffer to exist any liens,
encumbrances, covenants, conditions, restrictions, easements or other title
matters or seek any zoning changes or take any other action which may affect or
modify the status of title without Prentiss' prior written consent. The Existing
Secured Indebtedness and all title matters revealed by the Title Commitment, UCC
Reports and Survey and not objected to by Prentiss as provided above (other than
those rendering title defeasible and delinquent taxes, mortgages, deeds of
trust, security agreements and other liens and charges that are to be paid at
Closing as provided above) shall be deemed Permitted Title Exceptions.
Notwithstanding the foregoing, Prentiss shall not be required to take title to
the Real Property subject to any matters which may arise subsequent to the
effective date of the Title Commitment, UCC Reports and Survey. If a title
exception is disclosed by the Title Company which was not
15
<PAGE>
shown in the Title Commitment or Survey and was not the result of Partnership's
acts or omissions, then, unless Partnership notifies Prentiss in writing by the
earlier of the Closing Date or the date which is ten (10) days following the
date the Title Company has notified Prentiss and Partnership of such title
exception that Partnership agrees to take such action as may be necessary to
release such title exception on or before the Closing Date, Prentiss may (i)
terminate this Agreement by written notice to Partnership, in which event the
Deposit shall be promptly returned to Prentiss and the parties hereto shall be
released from all further obligations hereunder except those which expressly
survive a termination of this Agreement, or (ii) waive its objections to such
title exception without any abatement in the Contribution Value.
ARTICLE III.
-----------
PARTNERSHIPS' REPRESENTATIONS AND WARRANTIES
--------------------------------------------
To induce Prentiss to enter into this Agreement and to accept the
Property, and to pay the Contribution Value therefor, each Partnership hereby
makes the following representations and warranties with respect to the Property,
upon each of which Partnership acknowledges and agrees that Prentiss is entitled
to rely and has relied:
3.1 Organization and Power. Partnership is a limited partnership duly
----------------------
formed and is validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and is qualified to transact business in the
Commonwealth of Pennsylvania and has all requisite powers and all material
governmental licenses, authorizations, consents and approvals to carry on its
business as now conducted and to enter into and perform its obligations
hereunder and under any document or instrument required to be executed and
delivered on behalf of Partnership hereunder. Either (i) each Partnership has
previously made an election ("754 Election") under Section 754 of the Internal
Revenue Code of 1986, and all such elections are valid and currently in force,
or (ii) to the extent that a Partnership does not have a 754 Election in effect
at this time, such Partnership shall, if requested by Prentiss, file such
election on its 1997 Federal income tax return for the period beginning January
1, 1997 and ending on or after the Closing Date.
3.2 Authorization, Execution and Disclosure. Subject to approval of
---------------------------------------
OTR, this Agreement has been duly authorized by all necessary action on the part
of Partnership, has been duly executed and delivered by Partnership, constitutes
the valid and binding agreement of Partnership and is enforceable in accordance
with its terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting the
rights of creditors generally. Other than OTR, there is no other person or
entity who has an ownership interest in the Property or whose consent is
required in connection with Partnership's performance of its obligations
hereunder which has not been obtained. The persons executing this Agreement on
behalf of Partnership have the authority to do so. Partnership has not and will
not intentionally conceal any information regarding the Property which would
render any of Partnership's warranties or representations in this Agreement
materially misleading.
3.3 Non-contravention. The execution and delivery of, and the
-----------------
performance by Partnership of its obligations under, this Agreement do not and
will not (a) contravene, or constitute a default under, any provision of (i)
Partnership's Organizational Documents, (ii) applicable law or regulation or any
agreement, judgment, injunction, order, decree or other
16
<PAGE>
instrument binding upon Partnership or to which the Property is subject, the
result of which could have a material adverse effect on the value of the
Property or Partnership's ability to transfer its interests in the Property to
Prentiss and/or Partnership's ability to perform its obligations under this
Agreement, or (iii) result in the creation of any lien or other encumbrance on
any asset of Partnership. There are no outstanding agreements (written or oral)
pursuant to which Partnership (or any predecessor to or representative of
Partnership) has agreed to sell or has granted an option or right of first
refusal to purchase the Property or any part thereof, other than the right of
first refusal in favor of PQ Corporation in respect of the Southpoint THREE
property as set forth in its lease (which has been waived), and the purchase
option in favor of Unisource Worldwide, Inc. in respect of the Southpoint FIVE
property as set forth in its lease.
3.4 No Special Taxes. Except as set forth on Schedule 3.4 attached
---------------- ------------
hereto, Partnership has no knowledge of, nor has it received any notice of, any
special taxes or assessments relating to the Property or any part thereof or any
planned public improvements that may result in a special tax or assessment
against the Property.
3.5 Compliance with Existing Laws. To Partnership's knowledge,
-----------------------------
Partnership possesses all Authorizations, each of which is valid and in full
force and effect, and no provision, condition or limitation of any of the
Authorizations has been breached or violated. Partnership has no knowledge, nor
has it received notice within the past three years, of any existing or
threatened violation of any provision of any Applicable Laws including, but not
limited to, those of environmental agencies or insurance boards of underwriters
with respect to the ownership, operation, use, maintenance or condition of the
Property or any part thereof, or requiring any repairs or alterations to the
Property other than those that have been made prior to the date hereof, except
as set forth on Schedule 3.5 hereto.
------------
3.6 Personal Property. All of the Personal Property being conveyed by
-----------------
Partnership hereunder is free and clear of all liens and encumbrances except for
the Existing Secured Indebtedness and those which will be discharged by
Partnership at Closing, and Partnership has good and merchantable title thereto
and the right to convey same in accordance with the terms of this Agreement.
3.7 Operating Agreements. There are no management, service, supply,
--------------------
maintenance, employment or other contracts in effect with respect to the
Property of any nature whatsoever, written or oral, other than the Operating
Agreements listed on Schedule 4 hereof. To Partnership's knowledge, Partnership
----------
has performed all of its obligations under each of the Operating Agreements in
all material respects and no fact or circumstance has occurred which, by itself
or with the passage of time or the giving of notice or both, would constitute a
default under any of the Operating Agreements. To Partnership's knowledge, all
other parties to the Operating Agreements have performed all of their
obligations thereunder in all material respects, and are not in default
thereunder in any material respect. Partnership has received no notice of any
intention by any of the parties to any of the Operating Agreements to cancel the
same, nor has Partnership canceled any of same.
3.8 Condemnation Proceedings; Roadways. Partnership has received no
----------------------------------
notice of any condemnation or eminent domain proceeding pending or threatened
against the Property or any part thereof. Partnership has no knowledge of any
change or proposed change in the route, grade
17
<PAGE>
or width of, or otherwise affecting, any street, creek or road adjacent to or
serving the Real Property.
3.9 Actions or Proceedings. There is no action, suit or proceeding
----------------------
pending or known to Partnership to be threatened against or affecting
Partnership in any court, before any arbitrator or before or by any Governmental
Authority which (a) in any manner raises any question affecting the validity or
enforceability of this Agreement or any other agreement or instrument to which
Partnership is a party or by which it is bound and that is or is to be used in
connection with, or is contemplated by, this Agreement, (b) could materially and
adversely affect the business, financial position or results of operations of
Partnership or the Property, (c) could materially and adversely affect the
ability of Partnership to perform its obligations hereunder, or under any
document to be delivered pursuant hereto, (d) could create a lien on the
Property, any part thereof or any interest therein, (e) concerns any past or
present employee of Partnership or its managing agent or (f) could otherwise
materially and adversely affect the Property, any part thereof or any interest
therein or the use, operation, condition or occupancy thereof.
3.10 Labor and Employment Matters. Partnership is not a party to any
----------------------------
oral or written employment contracts or agreements with respect to the Property.
Partnership's management company employs its employees on an at-will basis,
without written contracts.
3.11 Financial Information and Submission Matters. To Partnership's
--------------------------------------------
knowledge, all of Partnership's financial information for the years 1994 through
1997, including, without limitation, all books and records and financial
statements ("Financial Information") is correct and complete in all material
respects and presents accurately the results of the operations of the Property
and the condition of Partnership for the periods indicated. Since the date of
the last financial statement included in Partnership's Financial Information,
there have been no material adverse change in the financial condition or in the
operations of the Partnership or the Property.
3.12 Bankruptcy. No Act of Bankruptcy has occurred with respect to
----------
Partnership.
3.13 Hazardous Substances. To Partnership's knowledge, neither
--------------------
Partnership nor any previous owner, tenant, occupant or user of the Property,
nor any other person, has engaged in or permitted any operations or activities
upon, or any use or occupancy of the Property or any portion thereof, for the
purpose of or in any way involving the handling, manufacture, treatment,
storage, use, generation, release, discharge, refining, dumping or disposal of
any Hazardous Materials on, under, in or about the Property in violation of any
Applicable Laws. To Partnership's knowledge, no Hazardous Materials have
migrated from or to the Property upon, about, or beneath other properties in
violation of any Environmental Requirements. To Partnership's knowledge, neither
the Property nor its existing or prior uses fail or failed to materially comply
with Environmental Requirements. Partnership has no knowledge of any permits,
licenses or other authorizations which are required under any Environmental
Requirements with regard to the current uses of the Property which have not been
obtained and complied with. To Partnership's knowledge, neither Partnership nor
any prior owner, occupant or user of the Property has received any written
notice concerning any alleged violation of Environmental Requirements in
connection with the Property or any liability for Environmental Damages in
connection with the Property for which Partnership (or Prentiss after Closing)
may be liable. To Partnership's knowledge, no Hazardous Materials are
constructed, deposited, stored or
18
<PAGE>
otherwise located on, under, in or about the Property in violation of any
Environmental Requirements. To Partnership's knowledge, there exists no writ,
injunction, decree, order or judgment outstanding, nor any lawsuit, claim,
proceeding, citation, summons or investigation, pending or threatened, relating
to any alleged violation of Environmental Requirements on the Property, or from
the suspected presence of Hazardous Materials thereon, or relating to any
Environmental Damages. Except as set forth on Schedule 3.13 attached hereto, to
-------------
Partnership's knowledge, no underground or above ground chemical treatment or
storage tanks, or gas or oil wells are located on the Property. The
representations and warranties made by Partnership in this Section 3.13 shall be
------------
subject to and shall be deemed to include the matters disclosed in the
environmental reports delivered by Partnership to Prentiss pursuant to Section
-------
2.4(b)(11) hereof and the matters disclosed in any environmental reports or
- ----------
studies obtained by Prentiss pursuant to Section 2.4(a) hereof.
--------------
3.14 Parties in Possession. There are no parties in possession of the
---------------------
Property except for tenants under written leases, copies of which will be
delivered to Prentiss pursuant to the terms hereof.
3.15 Leases. There are no leases, concessions or occupancy agreements
------
in effect with respect to the Real Property other than the Leases listed on
Schedule 3; and Schedule 3 attached hereto is a complete and correct list of all
- ---------- ----------
Leases in effect on the date of this Agreement. To Partnership's knowledge, no
party is in default under any Lease except as set forth on Schedule 3. To
----------
Partnership's knowledge, Partnership has performed all obligations heretofore
required of it under all of the Leases and there remain no unfulfilled
obligations of Partnership under the Leases as of the date hereof, the
nonperformance of which could entitle a tenant to damages under such Lease or
could cause Partnership to be in default under such Lease. No tenant has given
notice to Partnership of its intention to institute litigation with respect to
any Lease. None of the Leases and none of the rents or other amounts payable
thereunder have been assigned, pledged or encumbered except for any assignments,
pledges or encumbrances which will be fully released on or before the Closing
Date, except to the holders of the Existing Secured Indebtedness.
3.16 Leased Property. To Partnership's knowledge, all leases of the
---------------
Leased Property, if any, are in good standing and free from default, except to
the extent set forth in the Rent Roll.
3.17 No Unpaid Charges. There are no unpaid charges, debts,
-----------------
liabilities, claims or obligations arising from the construction, occupancy,
ownership, use or operation of the Property which could give rise to any
mechanic's or materialmen's or other statutory lien against the Property, or any
part thereof, or for which Prentiss will be responsible.
3.18 Condition of Improvements. To Partnership's knowledge, Partnership
-------------------------
has not received (i) any outstanding uncured notice from any third party (other
than a tenant) alleging that any of the Improvements are defective in design or
construction are not in substantially good condition and repair, have roof
leaks, or that any mechanical systems are not in reasonable working order and
repair, or that Partnership has failed to operate the Property in a commercially
reasonable manner consistent with a modern office building, nor (ii) from any
tenant of the Property, any outstanding uncured notice of any such defects which
constitute a material default on the part of the Partnership under any of the
Leases, except in either case for those matters set forth on Schedule 2 hereto;
provided, however, the foregoing representations and warranties shall
19
<PAGE>
not include any representation or warranty as to the aesthetic or other
subjective quality of the design of the Property or any system, element or
component thereof.
3.19 Access. Partnership has no knowledge of any pending or threatened
------
governmental proceeding or any other fact or condition which would limit or
result in the termination of the Property's existing access to and from public
streets or roads.
3.20 No Commitments. No commitments have been made to any Governmental
--------------
Authority, utility company, school board, church or other religious body, or any
homeowners' association or any other organization, group or individual, relating
to the Property which would impose an obligation upon Prentiss to make any
contribution or dedication of money or land or to construct, install or maintain
any improvements of a public or private nature on or off the Property. Without
limiting the generality of the foregoing, Partnership is not a party to any
paving agreements or undertakings, payback agreements, revenue bonds or utility
debt service agreements, except for any outstanding commitments to, and/or
security posted with, Tredyffrin Township for the completion of the Unisource
building on the Southpoint Five Parcel, which security shall remain the property
of Partnership.
3.21 Partnership Is Not A "Foreign Person". Partnership is not a
-------------------------------------
"foreign person" within the meaning of Section 1445 of the Internal Revenue
Code, as amended (i.e., Partnership is not a foreign corporation, foreign
partnership, foreign trust, foreign estate nor foreign person as those terms are
defined in the Internal Revenue Code and regulations promulgated thereunder).
3.22 Leasing Commissions. No brokerage or leasing commissions or other
-------------------
compensations are due or payable to any person, firm, corporation or other
entity with respect to or on account of any of the Leases or any extension or
renewals thereof, except as set forth on the Rent Roll to be delivered to
Prentiss pursuant to Section 2.4 hereof.
-----------
3.23 Other Agreements. There are no options, contracts or other
----------------
obligations outstanding for the sale, exchange or transfer of any of the
Property or any interest therein which would be superior to the rights of
Prentiss under this Agreement or which would survive Closing, except for the
purchase option of Unisource Worldwide, Inc. as set forth under its lease, and
except for the various rights of tenants to lease space by reason of rights of
renewal, first refusal, first offer, expansion and the like as set forth in the
Leases.
3.24 List of Partners. The list of partners in Partnership delivered by
----------------
Partnership to the Operating Partnership pursuant to Section 6.7 hereof is true,
-----------
correct and complete as of the date of this Agreement.
3.25 Ground Lease. The Ground Lease is valid and in full force and
------------
effect, and neither Partnership nor, to Partnership's knowledge, the Ground
Lessor is in default with respect thereto (with or without the giving of any
required notice and/or lapse of time).
3.26 Existing Secured Indebtedness. The only debt secured by liens on
-----------------------------
the Property, or any portion thereof, which will not be released and discharged
as of the Closing is the Existing Secured Indebtedness. The descriptions of the
Existing Secured Indebtedness, the Existing Note and Existing Liens on Exhibit D
---------
hereto are true and correct. Partnership is not in default under
20
<PAGE>
the Existing Note or the Existing Liens, and no event has occurred which, with
the passage of time or the giving of notice, or both, would constitute a default
thereunder.
3.27 LIMITATIONS ON REPRESENTATIONS AND WARRANTIES. PRENTISS HEREBY
---------------------------------------------
AGREES AND ACKNOWLEDGES THAT, EXCEPT AS SET FORTH IN THIS ARTICLE 3, OR AS
OTHERWISE EXPRESSLY STATED HEREIN OR IN THE DEED OR IN ANY DOCUMENTS EXECUTED IN
CONNECTION HEREWITH, NEITHER PARTNERSHIP, NOR ANY AGENT, ATTORNEY, EMPLOYEE OR
REPRESENTATIVE OF PARTNERSHIP, HAS MADE ANY REPRESENTATION WHATSOEVER REGARDING
THE SUBJECT MATTER OF THIS SALE, OR ANY PART THEREOF, INCLUDING (WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING) REPRESENTATIONS OR WARRANTIES AS TO
THE PHYSICAL NATURE OR CONDITION OF THE PROPERTY OR THE CAPABILITIES THEREOF,
AND THAT PRENTISS, IN EXECUTING, DELIVERING AND/OR PERFORMING THIS AGREEMENT,
DOES NOT RELY UPON ANY STATEMENT AND/OR INFORMATION TO WHOMEVER MADE OR GIVEN,
DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, BY ANY INDIVIDUAL, FIRM OR
CORPORATION EXCEPT THOSE EXPRESSLY CONTAINED HEREIN OR DELIVERED PURSUANT
THERETO OR IN ANY DOCUMENTS EXECUTED IN CONNECTION HEREWITH. EXCEPT AS OTHERWISE
PROVIDED HEREIN, PRENTISS AGREES TO TAKE THE PROPERTY "AS IS," AS OF THE DATE
HEREOF, REASONABLE WEAR AND TEAR EXCEPTED. IN ADDITION, EXCEPT AS SET FORTH
HEREIN, PARTNERSHIP MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING THE
COMPLIANCE WITH ANY ENVIRONMENTAL REQUIREMENTS, INCLUDING THE EXISTENCE IN OR ON
THE PROPERTY OF HAZARDOUS MATERIALS. THE PROVISIONS OF THIS PARAGRAPH SHALL
SURVIVE THE CLOSING OR ANY TERMINATION HEREOF.
Each of the representations and warranties contained in this Article
III and its various subparagraphs are intended for the benefit of Prentiss and
may be waived in whole or in part. All rights and remedies arising in connection
with the untruth or inaccuracy of any such representations and warranties shall
survive the Closing of the transaction contemplated hereby as provided in
Section 10.12 hereof, except to the extent that Partnership gives Prentiss
- -------------
written notice prior to Closing of the untruth or inaccuracy of any
representation or warranty or Prentiss otherwise obtains actual knowledge prior
to Closing of the untruth or inaccuracy of any representation or warranty, and
Prentiss nevertheless elects to close this transaction. Prentiss shall be deemed
to have actual knowledge of the untruth or inaccuracy of any representation or
warranty only if (i) Prentiss receives written notice from Partnership
satisfying the foregoing requirements, or (ii) Thomas F. August, Michael V.
Prentiss and/or William J. Reister has actual knowledge of any such untruth or
inaccuracy, or (iii) the matter in question is disclosed in a tenant estoppel
certificate, Survey, Title Commitment, written environmental report or study, or
any other third party written report or study delivered to or obtained by
Prentiss prior to Closing. Except to the extent otherwise expressly provided in
the immediately preceding sentence, no investigation, audit, inspection, review
or the like conducted by or on behalf of Prentiss shall be deemed to terminate
the effect of any such representations, warranties and covenants, it being
understood that Prentiss has the right to rely thereon and that each such
representation and warranty constitutes a material inducement to Prentiss to
execute this Agreement and to close the transaction contemplated hereby and to
pay the Contribution Value to Partnership.
21
<PAGE>
If any of Partnership's representations and warranties made hereunder
are found or known by Prentiss to be incorrect prior to Closing to the extent
they affect the Property or its operation in any material respect, Prentiss
shall inform Partnership in writing and Prentiss' sole remedy, except as
otherwise expressly provided in clause (a)(ii) of the first sentence of Section
-------
9.2 hereof, shall be termination of this Agreement on account thereof and refund
- ---
of the Deposit. If Prentiss elects not to so terminate this Agreement, any
remedy of Prentiss for breach of warranties and representations made prior to
the Closing shall be deemed to be irrevocably waived. Notwithstanding anything
to the contrary contained in this Article, if Partnership breaches any
representation or warranty made by Partnership and if prior to Closing Prentiss
notifies Partnership that it elects to terminate this Agreement on account of
such breach, Partnership may by written notice to Prentiss given or before the
Closing Date agree to cure the breach (which breach must be cured on or before
the Closing Date unless a cash reserve is established for such purpose in an
amount equal to 125% of the amount reasonably estimated by Prentiss for cure),
and Prentiss shall thereupon be obligated to close the transaction and accept
such cure as Prentiss' sole remedy for such breach; provided that Prentiss shall
not be required to accept a cash reserve if the problem or breach in question
precludes a lender of Prentiss from closing a loan for any financing incidental
to this transaction.
The term "to Partnership's knowledge" or similar phrase shall mean the
knowledge of Henry C. Gulbrandsen, Jr., Peter O. Hausmann and/or Timothy J.
Weber following an inquiry of the personnel involved in the operation,
ownership, maintenance and management of the Property and of its current manager
for the Property, and such inquiry shall include the direction by Partnership to
its personnel and manager to perform a review of all relevant files in their
possession relating to the operation, ownership, maintenance and management of
the Property. Partnership covenants that if prior to Closing Partnership obtains
actual knowledge that any of the facts represented and warranted by Partnership
under this Agreement are or become untrue or inaccurate in any material respect,
it will promptly inform Prentiss in writing of its discovery.
ARTICLE IV.
-----------
PRENTISS' REPRESENTATIONS AND WARRANTIES
----------------------------------------
To induce Partnership to enter into this Agreement and to transfer its
interest in the Property, Prentiss (and Company and OP General Partner, by their
joinder herein, solely as to the representations and warranties relating to
Company, OP General Partner and their respective operations) hereby make the
following representations and warranties, upon each of which Prentiss (and the
Company and OP General Partner, by their joinder herein) acknowledge and agree
that Partnership is entitled to rely and has relied:
4.1 Organization and Power. Prentiss and OP General Partner are duly
----------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and have all corporate and/or partnership powers and all governmental
licenses, authorizations, consents and approvals required to carry on their
business as now conducted and to enter into and perform their obligations as
contemplated by this Agreement and any document or instrument required to be
executed and delivered as contemplated by this Agreement. The Partnership
Agreement of Prentiss which has been delivered to Partnership is a true and
correct copy thereof, including all
22
<PAGE>
exhibits and addenda thereto, and the same is in full force and effect in
accordance with its terms and has not been modified, supplemented or amended.
4.2 Non-contravention. The execution and delivery of this Agreement and
-----------------
the performance by Prentiss of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law or
regulation, or any agreement, judgment, injunction, order, decree or other
instrument binding upon Prentiss or OP General Partner or result in the creation
of any lien or other encumbrance on any asset of Prentiss or OP General Partner.
4.3 Litigation. There is no action, suit or proceeding, pending or
----------
known to be threatened, against or affecting Prentiss, OP General Partner or the
Company in any court or before any arbitrator or before any Governmental
Authority which (a) in any manner raises any question affecting the validity or
enforceability of this Agreement or any other agreement or instrument to which
Prentiss, OP General Partner or the Company is a party or by which it is bound
and that is to be used in connection with, or is contemplated by, this
Agreement, (b) could materially and adversely affect the business, financial
position or results of operations of Prentiss, OP General Partner or the
Company, or (c) could materially and adversely affect the ability of Prentiss to
perform its obligations hereunder, or under any document to be delivered
pursuant hereto.
4.4 Bankruptcy. No Act of Bankruptcy has occurred with respect to
----------
Prentiss, OP General Partner or the Company.
4.5 Issuance of Units. On the Closing Date, or such earlier date as
-----------------
required by this Agreement, the Partnership Agreement shall be amended to
provide for the issuance of the Units to Partnership and/or any Unit Recipient
which will receive Units. The Units to be issued in connection with the
transactions herein contemplated have been, or prior to the Closing Date will
have been, duly authorized for issuance by the Operating Partnership and by OP
General Partner on behalf of the Operating Partnership to Partnership and/or
such Unit Recipients which will receive Units, and on the Closing Date will be
validly issued. The rights and obligations of Unit holders will be set forth in
the Partnership Agreement, this Agreement and the Registration Rights Agreement.
4.6 Securities Filings. Each of the Company and the Operating
------------------
Partnership has filed all required documents with the SEC since January 1, 1997
including, without limitation, the Annual Report on Form 10-K for the year ended
December 31, 1996 of the Company and the Operating Partnership (collectively,
the "SEC Documents"). To the knowledge of the Company and Operating Partnership
(defined and limited for purposes of this Section 4.6 and Section 4.7 as
----------- -----------
information contained in any actual notice received by Company or the Operating
Partnership or information within the actual knowledge of Michael V. Prentiss,
Thomas F. August and/or William J. Reister ), (i) as of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Securities Act or Exchange Act, as the case may be, and, at the respective times
they were filed, none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, (ii) the consolidated financial statements
(including any notes thereto) of the Company included in the SEC Documents
complied as to form in all material respects with applicable
23
<PAGE>
accounting requirements and the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles (except, in the case of the unaudited statements, as permitted by
From 10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly
presented in all material respects the consolidated financial position of the
Company as at the respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein), and (iii) except as
disclosed in the SEC Documents or as required by generally accepted accounting
principles, the Company has not, since June 30, 1997, made any material change
in the accounting practices or policies applied in the preparation of financial
statements.
4.7 Absence of Certain Changes or Events. To the knowledge of Operating
------------------------------------
Partnership and Company, except as disclosed in SEC Documents filed with the SEC
prior to the date of this Agreement, since January 1, 1997, (a) neither the
Company nor the Operating Partnership has sustained any loss or interference
with its business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that has had a material adverse
effect on the Company or the Operating Partnership, and (b) there has been no
event causing a material adverse effect on the Company or the Operating
Partnership, excluding any changes and effects resulting from changes in
economic, regulatory or political conditions or changes in conditions generally
applicable to the industry in which the Company or the Operating Partnership is
involved.
ARTICLE V.
----------
CONDITIONS PRECEDENT
--------------------
5.1 As to Prentiss' Obligations. Prentiss' obligations hereunder are
---------------------------
subject to the satisfaction of the following conditions precedent:
(a) Partnership's Deliveries. Each Partnership shall have
------------------------
delivered to or for the benefit of Prentiss, on or before the Closing Date, all
of the documents and other information required of each Partnership pursuant to
Sections 7.2 and 7.4 hereof.
(b) Representations, Warranties and Covenants; Obligations of
---------------------------------------------------------
Partnership; Certificate. Each Partnership's representations and warranties made
- ------------------------
in this Agreement shall be true and correct in all material respects as of the
date hereof and as of the Closing Date as if then made; each Partnership shall
have performed in all material respects all of its covenants and other
obligations under this Agreement; and each Partnership shall have executed and
delivered to Prentiss at Closing a certificate, to the best of its knowledge and
belief, to the foregoing effect. Notwithstanding the foregoing, if there shall
be any changes in facts, circumstances or events occurring after the date hereof
and before the Closing Date which would render any Partnership representations
or warranties untrue in any material respect and of which Prentiss is notified
or has knowledge, (i) to the extent the status of the matter in question
nonetheless conforms to an express performance threshold set forth in this
Agreement (for example, tenant defaults which would not violate the condition of
subsection (h) below), then there shall be no effect caused thereby to the
rights and obligations of the parties, (ii) to the extent the status of the
matter in
24
<PAGE>
question is governed by an express provision elsewhere set forth in this
Agreement (for example, casualty damage), then such other express provision
shall govern, and (iii) for any other change which is not attributable to the
fault of Partnership and which can be cured by the expenditure of a reasonably
ascertainable sum of money in an amount less than $1,000,000, Partnership shall
have the option, in order to cause Prentiss to consummate the Closing, to
establish a monetary reserve as security for a cure equal to 125% of the amount
reasonably estimated by Prentiss to be necessary for such cure; provided that
Prentiss shall not be required to accept a monetary reserve if the matter in
question precludes a lender of Prentiss from closing a loan for any financing
incidental to this transaction.
(c) Title Insurance. Good and marketable title to the
---------------
Leasehold Estate in the Real Property shall be insurable as such by the Title
Company, subject only to Permitted Title Exceptions as determined in accordance
with Section 2.4 hereof and including, without limitation, all applicable
deletions of standard exceptions and endorsements permitted under applicable
state law which are customarily required by institutional investors purchasing
property comparable to the Property.
(d) Condition of Improvements. The Improvements and the
-------------------------
Tangible Personal Property (including but not limited to the mechanical systems,
plumbing, electrical, wiring, appliances, fixtures, heating, air conditioning
and ventilating equipment, elevators, boilers, equipment, roofs, structural
members and furnaces) shall be in substantially the same condition at Closing as
they are as of the date hereof, reasonable wear and tear excepted. Partnership
shall not have removed or caused or permitted to be removed any part or portion
of the Real Property or the Tangible Personal Property without Prentiss' prior
written consent unless the same is replaced, prior to Closing, with a similar
item of at least equal suitability, quality and value, free and clear of any
lien or security interest.
(e) Utilities. All of the Utilities shall be installed in and
---------
operating at the Property, and service shall be available for the removal of
garbage and other waste from the Property.
(f) Due Diligence Materials. All rent rolls, lists, schedules
-----------------------
and other documents prepared by Partnership and furnished to Prentiss pursuant
to the requirements of this Agreement shall be true and correct in all material
respects when so furnished, except for inaccuracies as to which Prentiss was
given written notice by Partnership or otherwise had actual knowledge prior to
the end of the Study Period.
(g) Unit Recipient Certifications. Each Unit Recipient
-----------------------------
(including within such definition for purposes of this subsection (g) a
Partnership, if and to the extent it is to receive any Units), shall deliver to
Prentiss a written statement wherein it shall represent, warrant and covenant as
follows:
(1) Unit Recipient is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). Unit Recipient understands the risks
of, and other considerations relating to, the acquisition of the Units.
Unit Recipient, by reason of its business and financial experience,
together with the business and financial experience of those persons,
if any, retained by it
25
<PAGE>
to represent or advise it with respect to its investment in the Units,
(i) has such knowledge, sophistication and experience in financial and
business matters and in making investment decisions of this type, that
it is capable of evaluating the merits and risks of an investment in
the Operating Partnership and of making an informed investment
decision, (ii) is capable of protecting its own interests or has
engaged representatives or advisors to assist it in protecting its
interests and (iii) is capable of bearing the economic risk of such
investment.
(2) The Units to be issued to each Unit Recipient
will be acquired by each Unit Recipient for its own account for
investment only and not with a view to, or with any intention of, a
distribution or resale thereof, in whole or in part, or the grant of
any participation therein until the Units are redeemed for Common Stock
of the Company following the lock-up period specified in the
Registration Rights Agreement and this Agreement in accordance with the
Partnership Agreement and the Registration Rights Agreement. Unit
Recipient shall confirm that all documents, records, and books
pertaining to investment in the Operating Partnership and requested
Unit Recipient have been made available or delivered to Unit Recipient.
Unit Recipient has had an opportunity to ask questions of and receive
answers from the Operating Partnership, or from a person or persons
acting on the Operating Partnership's behalf, concerning the terms and
conditions of the transaction contemplated by this Agreement and its
acquisition of Units. Unit Recipient has relied upon, and is making its
investment decisions, solely upon such information as has been provided
to Unit Recipient by the Operating Partnership. Unit Recipient was not
formed for the specific purpose of acquiring an interest in the
Operating Partnership.
(3) Unit Recipient acknowledges that (i) the Units to
be issued to Unit Recipient have not been registered under the
Securities Act or state securities laws by reason of a specific
exemption or exemptions from registration under the Securities Act and
applicable state securities laws, (ii) the Operating Partnership's
reliance on such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of Unit Recipient
referred to herein, and in the Prospective Subscriber Questionnaires
delivered to Prentiss pursuant to Section 6.7 hereto, (iii) such Units,
-----------
therefore, cannot be resold unless registered under the Securities Act
and applicable state securities laws, or unless an exemption from
registration is available, (iv) there is no public market for such
Units, and (v) the Operating Partnership has no obligation or intention
to register such Units for resale under the Securities Act or any state
securities laws or to take any action that would make available any
exemption from the registration requirements of such laws. Unit
Recipient hereby acknowledges that because of the restrictions on
transfer or assignment of such Units to be issued hereunder which are
set forth in this Agreement and in the Partnership Agreement, Unit
Recipient may have to bear the economic risk of the investment
commitment evidenced by this Agreement and any Units acquired hereby
for an indefinite period of time, and that, under the terms of the
Partnership Agreement of the Operating Partnership, as it will be in
effect on the Closing Date, Units will not be redeemable at the request
of the holder thereof for Common Stock of the Company prior to the
first (1st) anniversary of their issuance.
26
<PAGE>
(4) The address of Unit Recipient's residence or
principal place of business, as applicable, shall be set forth,
together with a statement as to whether such Unit Recipient has any
present intention of becoming a resident of any country, state or
jurisdiction other than the country and state in which it present
principal place of business or residence, as applicable, is sited.
(h) No Additional Proceedings; Tenant Defaults. Except for
------------------------------------------
matters as to which Prentiss was given written notice by Partnership or
otherwise had actual knowledge prior to the end of the Study Period, on the
Closing Date, there shall be no (a) litigation pending or threatened, seeking
(i) to enjoin the consummation of the transaction hereunder, (ii) to recover
title to the Property, or any part thereof or any interest therein, (iii) to
increase materially ad valorem taxes theretofore assessed against any of the
Property, (iv) to materially restrict the operation of the Property by reason of
the violation of any law, rule, regulation, restrictive covenant or zoning
ordinance that may be applicable to the Property, or (v) damages or other relief
by any tenant(s) on account of a default by one or more Partnerships under any
Leases which constitutes a Material Tenant Occurrence (as hereinafter defined),
or (b) monetary or other material default by any tenant(s) which constitute a
Material Tenant Occurrence. As used herein, "Material Tenant Occurrence" means
one or more events or occurrences involving one or more tenant(s) of the
Property (taken for this purpose as all of the Property encompassed by this
Agreement) who lease, in the aggregate, at least 7,500 rentable square feet of
area and who, by reason of the event(s) or occurrence(s) in question, are deemed
by Prentiss (in its reasonable business judgment) to be unlikely to continue
their tenancy or to substantially perform their lease obligations.
(i) Estoppel Letters. The estoppel letters to be delivered at
----------------
Closing pursuant to Section 7.2(g) hereof shall have been obtained and delivered
--------------
and shall reflect no facts at material variance with the facts disclosed on the
Rent Roll and records provided to Prentiss during the Study Period. For these
purposes, any changes in facts or circumstances occurring after delivery of the
Rent Roll which do not constitute a Material Tenant Occurrence, and which do not
result from a default on the part of Partnership(s), shall not be deemed
material.
(j) Offering of Units. There shall have been no change in any
-----------------
securities or related law or interpretation, nor any change in Partnership's or
any Unit Recipient's status as "accredited investors" under the Securities Act,
that would render consummation of the transfer of the Ground Leases for Units as
contemplated by this Agreement a violation of any such laws or interpretations
thereof.
(k) OTR Agreement. OTR shall have performed all of its
-------------
obligations under the OTR Agreement.
(l) Lender Estoppel Letters. The lender estoppel letters to be
-----------------------
delivered at Closing shall have been obtained and delivered and shall reflect no
facts at material variance with the facts represented and warranted by
Partnership to Prentiss hereunder.
(m) Simultaneous Closings. There shall occur, simultaneously
---------------------
with Closing hereunder, (1) closing under (i) the OTR Agreement, (ii) the
Contribution Agreement among Prentiss, certain affiliates of Partnerships and
the partners of such affiliates with respect to assets
27
<PAGE>
in New Jersey, and (iii) the Agreement to Assign Property Agreements and Other
Assets among Prentiss, Terramics Management Company, Terramics Property
Associates and Terramics Property Company, (2) the execution and delivery of the
Right of First Opportunities Agreement between Prentiss and certain affiliates
of Partnerships covering other assets owned by such affiliates, and (3) the
execution and delivery of any other agreements and the satisfaction of any other
conditions precedent which may be required by Prentiss as a condition to
proceeding to Closing and which are identified prior to the end of the Study
Period and are agreed to by Partnerships.
(n) Unisource Conditions. Terramics/Southpoint Associates V
--------------------
Limited Partnership ("Southpoint V") shall have delivered or cause to be
delivered the following, all of which must be in form and content reasonably
satisfactory to Prentiss: (i) evidence that Unisource Worldwide, Inc.
("Unisource") has approved final plans and specifications ("Plans") for the
Improvements being constructed on the portion of the Land which is the subject
of the Ground Lease in favor of Southpoint V (the "Unisource Building"); (ii) a
certificate from the architect which prepared the Plans ("Architect") certifying
that the construction of the Unisource Building as of the Closing Date has been
in substantial accordance with the Plans, that the Plans are in compliance with
Applicable Laws and that the Architect is not presently aware of any facts or
circumstances which would prevent the Unisource Building from being
substantially completed on or before December 1, 1997; (iii) a certificate from
the general contractor constructing the Unisource Building ("Contractor")
certifying that all Authorizations required for the current state of
construction of the Unisource Building have been obtained, that it is not aware
of any facts or circumstances which would prevent or delay Authorizations which
will be hereafter required for the completion and occupancy of the Unisource
Building, that no default or event which with the giving of notice, passage of
time or both could become a default has occurred under the construction contract
between the Contractor and Southpoint V for the construction of the Southpoint V
Building, that no liens or defaults have been claimed or threatened by
Contractor or any subcontractor or supplier in connection with Southpoint V
Building and that the Contractor is not presently aware of any facts or
circumstances which would prevent the Unisource Building from being
substantially completed on or before December 1, 1997; (iv) a certificate from
Southpoint V certifying that it has not received any notices from (x) Unisource
or any consultant, architect or other agent retained by Unisource alleging any
unremediated deviation of the construction of the Unisource Building from the
Plans or any other objectionable condition relative to the construction of the
Unisource Building and certifying whether any tenant delays, events of force
majeure or landlord delays have occurred in connection with the construction of
the Unisource Building which would prevent the Unisource Building from being
substantially completed on or before December 1, 1997, or (y) First Union
National Bank, the holder of the Existing Secured Indebtedness encumbering the
Unisource Building or any agent of or consultant to First Union National Bank,
alleging that Southpoint V is in default under any document evidencing or
securing such Existing Secured Indebtedness or that the construction of the
Unisource Building is objectionable.
Each of the conditions contained in this Section 5.1 are intended for
-----------
the benefit of Prentiss and may be waived in whole or in part, by Prentiss, but
only by an instrument in writing signed by Prentiss.
28
<PAGE>
5.2 As to Partnership's Obligations. Partnerships' obligations
-------------------------------
hereunder are subject to the satisfaction of the following conditions precedent:
(a) Prentiss' Deliveries. Prentiss shall have delivered to or
--------------------
for the benefit of Partnerships, on or before the Closing Date, all of the
documents and payments required of Prentiss pursuant to Sections 7.3 and 7.4
--------------------
hereof.
(b) Representations, Warranties and Covenants; Obligations of
----------------------------------------------------------
Prentiss. All of Prentiss' representations and warranties made in this Agreement
- --------
shall be true and correct in all material respects as of the date hereof and as
of the date of Closing as if then made and Prentiss shall have performed in all
material respects all of its covenants and other obligations under this
Agreement.
(c) Simultaneous Closing under OTR Agreement. There shall
----------------------------------------
occur, simultaneously with Closing hereunder, closing under the OTR Agreement;
provided, the foregoing shall not limit the remedy in favor of Prentiss set
forth in Section 9.2(c) hereof.
--------------
Each of the conditions contained in this Section are intended for the
benefit of Partnerships and may be waived in whole or in part, by Partnerships,
but only by an instrument in writing signed by Partnerships.
ARTICLE VI.
-----------
COVENANTS OF PARTNERSHIPS
-------------------------
To induce Prentiss to enter into this Agreement and to acquire the
Property, and to pay the Contribution Value therefor, each Partnership covenants
and agrees to the following:
6.1 Operating Agreements. Partnership shall not enter into any new
--------------------
management agreement, maintenance or repair contract, supply contract, lease in
which it is lessee or other agreements with respect to the Property, nor shall
Partnership enter into any agreements modifying the Operating Agreements in any
material respect, unless (a) any such agreement or modification is terminable
without substantial penalty on 30 days' notice or (b) Partnership has obtained
Prentiss' prior written consent to such agreement or modification. Partnership
agrees to cancel and terminate effective as of the Closing Date any Operating
Agreements which are terminable without substantial penalty if Prentiss requests
in writing prior to the expiration of the Study Period that such agreements be
so terminated.
6.2 Warranties and Guaranties. Partnership shall not release or modify
-------------------------
any Warranties and Guaranties, if any, except with the prior written consent of
Prentiss.
6.3 Insurance. Partnership shall pay all premiums on, and shall not
---------
cancel or voluntarily allow to expire, any of Partnership's Insurance Policies
unless such policy is replaced, without any lapse of coverage, by another policy
or policies providing coverage at least as extensive as the policy or policies
being replaced.
29
<PAGE>
6.4 Independent Audit. The parties acknowledge that Partnership and its
-----------------
management company have provided to Prentiss' representatives and independent
accounting firm access to financial and other information relating to the
Property in the possession of or otherwise available to Partnership, its
affiliates or Partnership's management company which is sufficient to enable
Prentiss' representatives and independent accounting firm to prepare, at
Prentiss' expense, audited financial statements for 1994, 1995 and 1996 in
conformity with generally accepted accounting principles and to enable them to
prepare such statements, reports or disclosures as Prentiss may deem necessary
or advisable. Partnership shall also provide and/or shall cause its management
company to provide to Prentiss' independent accounting firm, promptly following
execution of this Agreement, a signed representation letter which would be
sufficient to enable an independent public accountant to render an opinion on
the financial statements related to the Property. Partnership shall authorize
and shall cause its management company to authorize any attorneys who have
represented Partnership or its management company in material litigation
pertaining to or affecting the Property to respond, at Prentiss' expense, to
inquiries from Prentiss' representatives and independent accounting firm. If and
to the extent Partnership's financial statements pertaining to the Property for
any periods during the years 1994, 1995 or 1996 have been audited, promptly
after the execution of this Agreement Partnership shall provide Prentiss with
copies of such audited financial statements and shall cooperate with Prentiss'
representatives and independent public accountants to enable them to contact the
auditors who prepared such audited financial statements and to obtain, at
Prentiss' expense, a reissuance of such audited financial statements.
6.5 Operation of Property Prior to Closing. Partnership covenants and
--------------------------------------
agrees with Prentiss that, between the date of this Agreement and the date of
Closing:
(a) Subject to the restrictions contained herein, Partnership
shall operate the Property in substantially the same manner in which Partnership
operated the Property prior to the execution of this Agreement, so as to keep
the Property in good condition, reasonable wear and tear excepted.
(b) Partnership shall maintain its books of account and
records in the usual, regular and ordinary manner, in accordance with sound
accounting principles applied on a basis consistent with the basis used in
keeping its books in prior years.
(c) Partnership shall maintain in full force and effect all
Insurance Policies.
(d) Partnership shall punctually perform and discharge all
obligations and undertakings of Partnership under the Leases and shall not
permit a default by Partnership to occur thereunder.
(e) Partnership shall use and operate the Property in
compliance with Applicable Laws and the requirements of any mortgage, ground
lease, Lease, Operating Agreement and Insurance Policy affecting the Property.
(f) Partnership shall cause to be paid prior to delinquency
all ad valorem and other taxes due and payable with respect to the Property or
its operation.
30
<PAGE>
(g) Without the express prior written consent of Prentiss
(which shall not be unreasonably withheld), Partnership shall not: (i) enter
into new Leases of any kind or nature affecting the Property; or (ii) grant a
renewal or extension of any existing Lease, or consent to any assignment,
sublease or expansion of any existing lease or portion thereof which, by the
terms of any such Lease, requires Partnership's prior consent as a condition to
any such renewal, extension, assignment, sublease or expansion. Partnership
shall not, without the express written consent of Prentiss (which shall not be
unreasonably withheld), in any manner change, modify, extend, renew or terminate
any Lease except as required by the terms thereof, or waive in any material
respect any of the tenant's obligations under any Lease. Partnership shall not
apply all or any part of the security or damage deposit of a tenant under any
Lease to obligations of such tenant unless such tenant has vacated its portion
of the Property as of the Closing Date. Notwithstanding the foregoing, Prentiss
hereby approves the new Leases described in Schedule 6.5(g) hereto.
---------------
(h) Partnership shall cause all debts and liabilities for
labor, materials, services and equipment incurred in the construction, operation
and development of the property, including leasehold improvements, to be
promptly paid.
(i) Neither Partnership nor Partnership's managing agent shall
(1) make any agreements which shall be binding upon Prentiss with respect to the
Property or that otherwise cannot be terminated without penalty upon thirty (30)
days notice, or (2) reduce or cause to be reduced any rents or any other
revenues over which Partnership has operational control.
(j) Partnership shall promptly deliver to Prentiss upon
Prentiss' request such reports showing the revenue and expenses of the Property
as Partnership customarily keeps or receives internally for its own use.
(k) Except as required by the terms thereof or hereof,
Partnership shall not in any manner change, modify, extend, renew or terminate
any Operating Agreement which would be binding on Prentiss with respect to the
Property without the express written consent of Prentiss (which shall not be
unreasonably withheld).
(l) Partnership shall promptly advise Prentiss of any
litigation, arbitration or administrative hearing concerning or affecting the
Property of which Partnership obtains actual knowledge.
(m) Partnership shall immediately provide to Prentiss copies
of any and all notices received from Ground Lessor.
(n) Partnership shall maintain the Ground Lease in full force
and effect and not cause or permit a default by Partnership under (with or
without the giving of any required notice and/or lapse of time) the Ground
Lease.
(o) Partnership shall refrain from amending, altering or
terminating the partnership agreement of Partnership without the prior written
consent of Prentiss.
31
<PAGE>
(p) Partnership shall keep the Existing Note current, shall
comply with the terms and provisions of the Existing Note and Existing Liens and
shall immediately send Prentiss copies of all correspondence received from the
holder of the Existing Note. Partnership shall not modify any provisions of the
Existing Note or Existing Liens.
6.6 No Marketing. Partnership shall not market the Property for sale or
------------
enter into discussions or negotiations with potential purchasers of the Property
unless this Agreement has been terminated pursuant to its terms.
6.7 Prospective Subscriber Questionnaires. During the Study Period,
-------------------------------------
Partnership shall deliver to the Operating Partnership a definitive list of all
Unit Recipients to receive Units at the Closing, to the extent different from
those set forth on Schedule 2.2(a). Partnership and each other Unit Recipient
---------------
shall deliver to the Operating Partnership within the Study Period a completed
and duly executed Prospective Subscriber Questionnaire in substantially the form
attached hereto as Exhibit C, which Questionnaires shall confirm to the
---------
satisfaction of the Operating Partnership that each Unit Recipient is an
"accredited" investor within the meaning of Rule 501(a) promulgated under the
Securities Act. Partnership and each Unit Recipient shall also deliver to the
Operating Partnership, upon the Operating Partnership's reasonable request, such
other information, certificates and materials as the Operating Partnership may
reasonably request in connection with offering the Units without registration
under the Securities Act and the securities laws of applicable states and other
jurisdictions.
6.8 Delivery of Tax Information. In connection with the issuance of
---------------------------
Units to Partnership and any Unit Recipient, Partnership shall deliver to the
Operating Partnership during the Study Period, at Partnership's sole cost and
expense, prepared as of the date of this Agreement, depreciation and
amortization schedules for the assets constituting the Property, as kept for tax
purposes, showing original basis, accumulated depreciation or amortization,
original useful life of such assets, remaining useful life of such assets and
the date(s) when such assets were placed in service.
6.9 Information Regarding the Restrictions on Beneficial Ownership of
-----------------------------------------------------------------
Units. From the date of this Agreement until the Closing, and then so long as
- -----
Partnership or any Unit Recipient holds any Units, Partnership and each such
Unit Recipient shall notify the Operating Partnership in writing promptly upon
any change in the identity or number of its partners or of its indirect partners
as identified pursuant to this Agreement, and shall provide the information
called for in Section 6.8 hereof with respect to any such change. In addition,
-----------
so long as Partnership or any Unit Recipient holds any Units, without the prior
written consent of the Operating Partnership, Partnership and each Unit
Recipient shall not (i) admit additional partners, (ii) permit the transfer of
interests in Partnership and/or each Unit Recipient to a look-through entity (as
defined herein) or (iii) permit any transfer of interests in Partnership and/or
such Unit Recipients if, as a result of the admissions or transfers described in
(i) through (iii) the number of direct or indirect beneficial owners in
Partnership and such Unit Recipients would increase. Partnership and each Unit
Recipient shall use their best efforts to secure the compliance of any
look-through entities that hold direct or indirect interests of Partnership and
such Unit Recipients with the requirements of this Section as if such
requirements applied directly to such entities. Partnership and each Unit
Recipient acknowledge that the provisions of this Section are imposed to aid the
Operating Partnership in avoiding taxation as a corporation for federal income
tax purposes, agrees that
32
<PAGE>
monetary damages may be insufficient to remedy the potential harm caused by any
breach of the provisions of this Section, and agree that injunctive relief,
including specific performance or another equitable remedy would be an
appropriate remedy. The provisions of this Section shall survive the Closing.
6.10 Partnership Agreement. Partnership acknowledges that each Unit
---------------------
Recipient shall be bound by and subject to all terms of the Partnership
Agreement. At or prior to the Closing, Partnership shall deliver to the
Operating Partnership a Limited Partner Signature Page in substantially the form
attached hereto as Exhibit F executed by each Unit Recipient.
6.11 Use of Name "Terramics". Partnership covenants and agrees not to
-----------------------
transfer the right to use the name "Terramics" or variations thereof to any
party other than Prentiss.
The foregoing covenants of Partnership are for the benefit of Prentiss
or its assignee of its rights under this Agreement.
ARTICLE VII.
------------
CLOSING
-------
7.1 Closing. The Closing shall occur on a business day designated by
-------
Prentiss, with at least ten (10) days notice to Partnership (which such day
shall be no later than thirty (30) days following the expiration of the Study
Period). As more particularly described below, at the Closing the parties hereto
will meet to (i) execute all of the documents required to be delivered in
connection with the transactions contemplated hereby (the "Closing Documents"),
(ii) deliver the same to Escrow Agent to the extent a temporary escrow is
mutually agreed to or required, and (iii) take all other action required to be
taken in respect of the transactions contemplated hereby. The Closing will occur
at the offices of Blank Rome Comisky & McCauley, One Logan Square, Philadelphia,
Pennsylvania, or at such other place as Prentiss shall designate by written
notice to Partnership given at least five days prior to the Closing. At the
Closing, Prentiss shall deliver the balance of the Contribution Value to Escrow
Agent for disbursement to the intended recipients, Escrow Agent shall update the
title to the Property and, provided there has been no change in the status of
title as reflected in the Title Commitment and Survey which has not been waived
by Prentiss pursuant to Section 2.4(d) hereof, Escrow Agent shall record the
--------------
Assignment of Ground Lease, release and date, where appropriate, the Closing
Documents in accordance with the joint instructions of Partnership and Prentiss
and shall send, by wire transfer, all sums owing to Partnership hereunder to
Partnership and shall admit the designated Unit Recipients as partners of the
Operating Partnership in accordance with the Units to be issued pursuant to this
Agreement. As provided herein, the parties hereto will agree upon adjustments
and prorations to certain items which cannot be exactly determined at the
Closing and will make the appropriate adjustments with respect thereto.
Possession of the Property shall be delivered to Prentiss on the Closing Date,
subject only to Permitted Title Exceptions and the rights of tenants under the
Leases and guests in possession.
7.2 Partnership's Deliveries. At the Closing, Partnership shall deliver
------------------------
to Prentiss (or, in the case of records, files and the like, Partnership shall
make same available to Prentiss at the location of each Property or at
Partnership's regular business office) all of the following
33
<PAGE>
instruments, each of which shall have been duly executed and, where applicable,
acknowledged and/or sworn on behalf of Partnership and shall be dated as of the
Closing Date:
(a) The certificate required by Section 5.1(b) hereof.
--------------
(b) The Assignment of Ground Lease in the form of Exhibit G
---------
hereto.
(c) The Bill of Sale - Personal Property in the form of
Exhibit H hereto.
- ---------
(d) The Assignment and Assumption Agreement in the form of
Exhibit I hereto.
- ---------
(e) The Assignment of Leases in the form of Exhibit J hereto.
---------
(f) An updated certified Rent Roll dated as of the date
preceding the Closing Date.
(g) An estoppel letter in the form of Exhibit K hereto dated
---------
not more than forty (40) days prior to the Closing Date (i) from each of the
tenants under the Leases covering 10,000 square feet or more (including for such
purpose tenants who occupy more than one location where the aggregate of such
locations cover 10,000 square feet or more), and (ii) from tenants leasing, in
the aggregate, at least eighty five percent (85%) of the total rentable area of
all the Improvements covered by this Agreement. Partnership shall execute an
estoppel letter certifying to the matters specified in Exhibit K for any tenant
---------
which does not execute an estoppel letter; provided that (i) Partnership shall
be released from liability under its estoppel letter if and to the extent a
conforming estoppel letter is ultimately obtained from a tenant and delivered to
Prentiss, and (ii) Partnership shall not be obligated to make any warranties or
representations on behalf of a tenant concerning environmental matters.
(h) Such agreements, affidavits or other documents as may be
required by the Title Company to issue the Owner's Title Policy subject only to
the Permitted Title Exceptions and to eliminate such standard exceptions and to
issue the endorsements thereto described on Schedule 7.2 hereto.
------------
(i) The FIRPTA Certificate.
(j) All original Warranties and Guaranties in Partnership's
possession or reasonably available to Partnership.
(k) A valid, final and unconditional certificate of occupancy
for the Real Property and Improvements (not including the Unisource Worldwide,
Inc. building, which is under construction), issued by the appropriate
Governmental Authority, or letters from such Governmental Authority certifying
equivalent compliance.
(l) If Prentiss is assuming Partnership's obligations under
any or all of the Operating Agreements, the originals of such agreements, duly
assigned to Prentiss and with such
34
<PAGE>
assignment acknowledged and approved by the other parties to such Operating
Agreements to the extent required by such Operating Agreements.
(m) An assignment of each of the leases of the Leased Property
to Prentiss, together with (1) the written consent of the lessors of such leases
to such assignment, if required by such leases, and (2) executed originals of
all such leases in Partnership's possession or reasonably available to
Partnership.
(n) Executed originals of all Leases, leases of Leased
Property, permits and, to the extent in Partnership's possession or control,
Authorizations transferred or assigned to Prentiss at Closing as required
hereunder and any other documents or instruments affecting the Property or the
ownership and operation thereof.
(o) All current real estate and personal property tax bills in
Partnership's possession or under its control.
(p) All books, records, operating reports, appraisal reports,
files and other materials in Partnership's possession or control which are
necessary in Prentiss' discretion to maintain continuity of operation of the
Property.
(q) Written notice executed by Partnership notifying all
interested parties, including, without limitation, all tenants under any Leases,
that the Property has been conveyed to Prentiss effective as of the Closing Date
and directing that all payments, inquiries and the like be forwarded to Prentiss
at the address to be provided by Prentiss (or as otherwise directed by
Prentiss).
(r) A current UCC Report showing no financing statements by
Partnership as Debtor covering the Property except in favor of the holders of
the Existing Secured Indebtedness.
(s) Possession of the Property subject only to the Permitted
Title Exceptions.
(t) An opinion from Partnership's counsel stating that
Partnership has duly authorized, executed and delivered to Prentiss this
Agreement and all of the conveyance documents to be delivered by Partnership
hereunder.
(u) A limited partner signature page to the Partnership
Agreement in substantially the form attached hereto as Exhibit F, executed by
---------
each Unit Recipient.
(v) Any other document or instrument reasonably requested by
Prentiss in connection with the transactions contemplated hereby and which is
reasonably required to effectuate the transactions contemplated herein.
(w) An estoppel certificate executed by the present holder(s)
of the Existing Secured Indebtedness. Any and all fees and charges in connection
with obtaining such written consent or approval (specifically including, but not
limited to, loan transfer fees) shall be at Partnership's sole cost and expense.
In the event such estoppel certificate(s) is/are not received on or before the
Closing Date, Prentiss may terminate this Agreement at any time up to and
35
<PAGE>
including the Closing Date and receive a full refund of the Deposit and this
Agreement shall thereafter be null and void. If Prentiss elects not to so
terminate, Prentiss may extend the Closing Date for a period of time up to and
including thirty (30) days to allow Partnership to obtain such consents or
approvals. The estoppel certificate(s) must refer to Prentiss' proposed
acquisition of the interests in the Property, be dated not more than forty (40)
days prior to the Closing Date and recite: (i) the unpaid balance of principal
and accrued interest due on the Existing Note as of the date thereof; (ii) the
interest rate on the Existing Note; (iii) the amount and date of payment of the
next installment of principal and interest due on the Existing Note; (iv) the
maturity date of the Existing Note; (v) the amount of funds, if any, held in a
tax and insurance escrow under any of the Existing Liens; (vi) the amount and
date of payment of the next installment due under such tax and insurance escrow;
(vii) reference to the Existing Liens evidencing or securing the Existing Note;
(viii) that the Existing Note evidencing the Existing Secured Indebtedness is
current and that, to the best of the holder's knowledge, there are no defaults
thereunder nor any uncured notices of default sent by the holder; (ix) that the
holder(s) consent(s) to the assignment of the Ground Lease to Prentiss and that
the holder(s) will not accelerate the Existing Note evidencing the indebtedness
or declare a default under any instruments evidencing or securing the Existing
Secured Indebtedness by virtue thereof; (x) that the holder of the indebtedness
will not renew, extend or otherwise alter or modify the Existing Secured
Indebtedness or the Existing Liens securing the Existing Secured Indebtedness
without the consent of Prentiss; (xi) that the holder is the sole holder of the
Existing Note and the Existing Liens; (xii) the amount of holdbacks, if any,
retained by the holder(s) of the Existing Note; (xiii) that the holder of the
Existing Note agrees to send to Prentiss any notices which must be or may be
sent under the Existing Note or the Existing Liens; and (xiv) that (except in
the case of the CIGNA loan) the Existing Liens securing the Existing Note secure
only the Existing Note and secure no other indebtedness of Partnership to the
holder(s) of the Existing Note. Partnership agrees to use its best efforts to
satisfy this contingency and pay all costs and expenses imposed by the holder(s)
of the Existing Note in connection with such estoppel letters and consenting to
the transfer of the Property to Prentiss. Notwithstanding such best efforts, the
lender estoppel certificate shall be deemed acceptable if it contains, at a
minimum, the certifications which are customarily addressed by institutional
lenders for similarly requested estoppel certificates in connection with the
pay-off of a loan and/or transfer of the secured property. The estoppel
certificate from First Union National Bank, with respect to the Unisource
building loan, and from State Farm Insurance Company with respect to the PQ
Corporation building loan, must also contain the lender's agreement to waive the
applicability of certain requirements after Closing, as set forth in the request
letter previously delivered to said lender on behalf of Prentiss. If Prentiss
intends to pay off any Existing Secured Indebtedness within 60 days following
Closing, then the certificate from the lender need only contain a certification
as to the unpaid principal and accrued interest on the subject indebtedness as
of the date thereof together with a per diem amount of interest following the
date thereof and any applicable prepayment premiums, which would be necessary in
order to release any and all liens, assignments and security interests
encumbering the Property.
(x) Each Partnership as primary obligor, jointly and severally
with Peter O. Hausmann, Henry C. Gulbrandsen, Jr. and Timothy J. Weber (said 3
individuals being referred to as the "Principals") as sureties (each separate
Partnership together with the aforesaid Principals being referred to
collectively as "Indemnitors") shall execute and deliver to Prentiss an
Indemnity and Security Agreement, pursuant to which (i) Indemnitors shall
jointly and severally (without the obligation on the part of Prentiss to proceed
in any particular order against any of the
36
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Indemnitors) indemnify and hold Prentiss harmless from and against any and all
claims, costs, penalties, damages, losses, liabilities and expenses (including
reasonable attorneys' fees) that may be incurred by Prentiss as a result of any
breach by the indemnifying Partnership of any of its representations or
warranties or any of its express indemnities set forth herein or in any document
required to be delivered by Partnership (or by any affiliates of Partnership or
Principals) to Prentiss pursuant hereto, except for any breach of any
representation or warranty as to which Partnership has given Prentiss written
notice (or as to which Prentiss has knowledge) prior to the Closing Date and
Prentiss nevertheless consummated the Closing and (ii) Prentiss shall be granted
liens on and security interests in a portion of the Units to be issued by
Prentiss under this Agreement (such grant to be made pro-rata by all Unit
Recipients) in order to secure the obligations under the Indemnity and Security
Agreement. Indemnitors and the other Unit Recipients shall execute financing
statements evidencing the security interests created under the Indemnity and
Security Agreement. Notwithstanding the foregoing, (i) liability under the
Indemnity and Security Agreement for a particular indemnity, warranty or
representation shall extend only for the time corresponding to the survival
period of the underlying indemnity, representation or warranty (if any,
otherwise within the applicable legal limitation period), (ii) the aggregate
maximum liability of all Partnerships and Indemnitors under the Indemnity and
Security Agreement(s) and under any other indemnities, warranties and
representations set forth in this Agreement, including the maximum liability of
the affiliated partnerships and indemnitors under the Contribution Agreement of
even date herewith relating to certain New Jersey assets and partnership
interests, shall be $4,000,000 for any claims made within one (1) year after the
Closing Date, and ten percent (10%) of such amount thereafter, and recourse with
respect thereto shall, except as set forth in subsection (iv) below, be limited
to the Units pledged to Prentiss to secure same, (iii) the number of Units
pledged for such purpose shall be equivalent in value to 110% of the maximum
monetary liability established as aforesaid, such Units to be valued as such as
of the Closing Date based upon the market price for equivalent stock of Company
assuming no conversion restriction, and (iv) to the extent no claim was
theretofore made on account of the obligations under the Indemnity and Security
Agreement, the pledged Units shall be released on the first anniversary of the
Closing Date, and thereafter the Indemnitors shall have personal liability for
any remaining obligations thereunder for which the survival period is in excess
of 1 year (but only to the maximum aggregate liability of 10% of $4,000,000 as
set forth above); provided, however, there shall be no limitation of liability
applicable to the indemnities made in Section 2.2(c) hereof.
--------------
7.3 Prentiss' Deliveries.
--------------------
(a) At the Closing, Prentiss shall deliver to Escrow Agent
for disbursement to the intended recipients, or directly to the Unit Recipients
in the case of Units, the portion of the Contribution Value described in
Section 2.2 hereof.
- -----------
(b) At the Closing, Prentiss shall deliver to Partnership the
Assignment and Assumption Agreement and the Assignment of Leases, duly executed
by Prentiss.
(c) At the Closing, Prentiss shall deliver to Partnership (i)
all other documents and instruments referred to in this Agreement as are
required to be delivered by it, (ii) any other document or instrument reasonably
requested by Partnership in connection with the transactions contemplated
hereby, and (iii) an opinion from Prentiss' counsel stating that Prentiss has
duly
37
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authorized, executed and delivered to Partnerships this Agreement and all of the
documents to be delivered by Prentiss hereunder.
(d) At Closing, Prentiss shall cause to be executed and
delivered to Messrs. Gulbrandsen, Weber and Hausmann employment contracts with
Prentiss.
7.4 Mutual Deliveries. At the Closing, Prentiss and Partnership shall
-----------------
mutually execute and deliver each to the other:
(a) A final closing statement reflecting the Contribution
Value and the adjustments and prorations required hereunder and the allocation
of income and expenses required hereby.
(b) Such other and further documents, papers and instruments
as may be reasonably required by the parties hereto in connection with the
transactions contemplated hereby or their respective counsel.
(c) At or prior to the Closing, the Company and Partnership or
other Unit Recipient will enter into a Registration Rights Agreement in
substantially the form attached hereto as Exhibit E.
---------
7.5 Closing Costs. Except as is explicitly provided in this Agreement,
-------------
each party hereto shall pay its own legal fees and expenses. All transfer taxes
and surtaxes due with respect to the transfer of title shall be split equally by
Prentiss and Partnership. Partnership shall pay for the costs associated with
the releases of any deeds of trust, mortgages and other financing encumbering
the Property and for any costs associated with any corrective instruments,
subject to the provisions hereinabove contained relating to prepayment premiums
on Existing Secured Indebtedness. Prentiss shall pay all costs for title
searches, tax certificates and all premiums for the issuance of the Title Policy
and all endorsements thereto described on Schedule 7.2 hereto and deletions
------------
therefrom which are customarily required by institutional investors purchasing
property comparable to the Property; all costs of providing the matters
described in Sections 2.4(b) to Prentiss except for such matters to be paid for
---------------
by Partnership as therein provided; and one-half (1/2) of any escrow fees or
similar charges of the Escrow Agent. All other expenses incurred by Partnership
or Prentiss with respect to the Closing shall be borne and paid for exclusively
by the party incurring same, without reimbursement, except to the extent
otherwise specifically provided herein. The terms and provisions of this
Section 7.5 shall survive the Closing without limitation.
- -----------
7.6 Revenue and Expense Allocations. All revenues and expenses with
-------------------------------
respect to the Property, and applicable to the period of time before and after
Closing, determined in accordance with sound accounting principles consistently
applied, shall be allocated between Partnership and Prentiss as provided herein.
Partnership shall be entitled to all revenue and shall be responsible for all
expenses for the period of time up to but not including the date of Closing, and
Prentiss shall be entitled to all revenue and shall be responsible for all
expenses for the period of time from, after and including the date of Closing.
Such adjustments shall be shown on the closing statements (with such supporting
documentation as the parties hereto may require being attached as exhibits to
the closing statements) and shall increase or decrease (as the case may be) the
cash
38
<PAGE>
amount payable by Prentiss pursuant to Section 2.2 hereof. Without limiting the
-----------
generality of the foregoing, the following items of revenue and expense shall be
allocated at Closing:
(a) Current rents and escalation charges for taxes and operating
expenses..
(b) Real estate, personal property taxes and special assessments for
the fiscal or calendar year in which Closing occurs.
(c) Revenue and expenses under the Operating Agreements to be assigned
to and assumed by Prentiss.
(d) Utility charges (including, but not limited to, charges for water,
sewer and electricity).
(e) Municipal or other governmental improvement liens, which shall be
paid by Partnership at Closing where the work has physically commenced, and
which shall be assumed by Prentiss at Closing where the work has been
authorized, but not physically commenced.
(f) All other revenues and expenses of the Property, to the extent
customarily prorated by purchasers and sellers of office buildings in the county
in which the Property is located.
(g) Interest on the Existing Note.
Partnership shall pay or furnish a credit to Prentiss for (i) prepaid rents
and (ii) unforfeited security deposits together with interest thereon held by
Partnership under Leases.
Partnership shall pay or cause to be paid all real estate taxes and
installments for special assessments (prorated to the Closing Date) for the
Property due and payable in, or deferred with respect to the years prior to, the
year in which the Closing occurs. All installments for special assessments
(prorated to the Closing Date) pending, levied or due and payable on or prior to
the Closing Date shall be paid by Partnership on or before the Closing Date.
All subdivision and platting costs and expenses heretofore incurred by
Partnership, including, without limitation, all subdivision exactions, fees and
costs and all dedication of land for parks and other public uses or payment of
fees in lieu thereof, shall be paid by Partnership on or prior to the Closing
Date.
If accurate allocations cannot be made at Closing because current bills are
not obtainable (as, for example, in the case of utility bills and/or real estate
or personal property taxes), the parties shall allocate such revenue or expenses
at Closing on the best available information, subject to adjustment upon receipt
of the final bill or other evidence of the applicable revenue or expense. The
obligation to make the adjustment shall survive the closing of the transaction
contemplated by this Agreement. Any revenue received or expense incurred by
Partnership or Prentiss with respect to the Property after the date of Closing
shall be promptly allocated in the manner described herein and the parties shall
promptly pay or reimburse any amount due. The proration provisions of this
Agreement shall survive the closing of the transaction contemplated hereby for a
period of nine (9) months.
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<PAGE>
7.7 Delinquent Rents. Any rents or other amounts which are delinquent
----------------
as of the Closing shall not be adjusted or prorated at Closing, but Prentiss
shall make a reasonable attempt to collect such amounts for the benefit of
Partnership after the Closing; provided, however, that nothing contained herein
shall be construed to require Prentiss to institute any lawsuit or other
proceedings to collect such delinquent amounts. In this connection, the first
monies collected by Prentiss from tenants or other persons owing delinquent
rents or other amounts shall be applied to Prentiss' costs of collection, then
to the current rents or obligations of such person to Prentiss, and the balance,
if any, shall be delivered to Partnership.
7.8 Costs Associated with Certain Leasing Activities. Except as
------------------------------------------------
otherwise expressly set forth in this Section 7.8, all leasing commissions,
-----------
leasing expenses and capital costs of tenant improvements owing or which
could become due and owing with respect to Leases entered into on or before
the Closing Date shall be paid by Partnership when due, and Partnership
shall indemnify and hold harmless Prentiss for claims brought against the
Property or Prentiss arising therefrom, which indemnity shall survive the
Closing. Notwithstanding the foregoing: (i) Prentiss shall pay to
Partnership at the Closing an amount equal to the unamortized costs of all
leasing commissions paid to brokers other than affiliates of The Terramics
Management Company and capital improvement costs incurred in completing
tenant improvements pursuant to (a) Leases entered into by Partnership
which have been approved by Prentiss pursuant to Section 6.5(g) and (b)
--------------
renewals or extensions of existing Leases which have been approved by
Prentiss pursuant to Section 6.5(g), and (ii) if the lease with Renal
--------------
Treatment, for expansion into approximately 4,137 square feet of space in
Southpoint TWO, is not executed prior to Closing, Terramics/Southpoint
Associates II Limited Partnership agrees to remain responsible, from and
after Closing (without limitation on survival), for the capital costs of
tenant improvements and for brokerage commissions attributable to the first
re-leasing of such space (whether by Renal Treatment or any other tenant),
and the Principals shall guaranty such obligation on a joint and several
basis.
ARTICLE VIII.
-------------
GENERAL PROVISIONS
------------------
8.1 Condemnation. In the event of any actual or threatened taking,
------------
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, Partnership shall give written
notice thereof to Prentiss promptly after Partnership learns or receives notice
thereof. If all or any part of the Real Property is, or is to be, so condemned
or sold which has a material adverse effect on the use or value of the remaining
Property, Prentiss shall have the right to terminate this Agreement pursuant to
Section 9.2 hereof. If Prentiss elects not to terminate this Agreement, all
- -----------
proceeds, awards and other payments arising out of such condemnation or sale
(actual or threatened) shall be paid or assigned, as applicable, to Prentiss at
Closing, and there shall be no reduction in the Contribution Value. Partnership
shall not settle or compromise any such proceeding without Prentiss' written
consent. If Prentiss elects to terminate this Agreement by giving Partnership
written notice thereof prior to the Closing, the Deposit shall be promptly
returned to Prentiss and all rights and obligations of Partnership and
Prentiss hereunder (except those set forth herein which expressly survive a
termination of this Agreement) shall terminate immediately.
40
<PAGE>
8.2 Risk of Loss. If any loss or damage occurs to the Property by
------------
reason of casualty prior to Closing which is not, in the opinion of a reputable
contractor or engineer retained for such purpose, reasonably susceptible of
repair and restoration on or prior to December 31, 1997, Prentiss shall have
the right to terminate this Agreement pursuant to Section 9.2 hereof. If
-----------
Prentiss elects not to terminate this Agreement pursuant to the immediately
preceding sentence or a loss or damage occurs prior to Closing which is
reasonably susceptible of repair and restoration within the aforesaid time
period, then, at the option and election of Prentiss, (i) Closing shall be held
as scheduled and all unused insurance proceeds and rights to proceeds arising
out of such loss or damage shall be paid or assigned, as applicable, to Prentiss
at Closing and Prentiss shall receive as a credit against the Contribution Value
the amount of any deductibles under the policies of insurance covering such loss
or damage, and there shall be no further reduction in the Contribution Value, or
(ii) Closing shall be postponed for such reasonable time (but not beyond
December 31, 1997) as may be necessary to promptly and diligently complete the
repair and restoration, and Partnership shall utilize its best efforts to
effectuate same in a timely and efficient manner. If Prentiss elects to
terminate this Agreement pursuant to this Section 8.2 by giving Partnership
-----------
written notice thereof prior to the Closing, the Deposit shall be promptly
returned to Prentiss and all rights and obligations of Partnership and Prentiss
hereunder (except those set forth herein which expressly survive a termination
of this Agreement) shall terminate immediately.
8.3 Broker. The parties acknowledge that Broker has been the procuring
------
cause of this Agreement. It shall be the obligation of Partnership to pay
Broker its commission, when, as and if the transaction contemplated hereby
actually closes, in accordance with a separate agreement between the Broker and
Partnership. There is no other real estate broker involved in this transaction.
Prentiss warrants and represents to Partnership that Prentiss has not dealt with
any other real estate broker in connection with this transaction, nor has
Prentiss been introduced to the Property or to Partnership by any other real
estate broker, and Prentiss shall indemnify Partnership and hold Partnership
harmless from and against any claims, suits, demands or liabilities of any kind
or nature whatsoever arising on account of the claim of any other person, firm
or corporation to a real estate brokerage commission or a finder's fee as a
result of having dealt with Prentiss, or as a result of having introduced
Prentiss to Partnership or to the Property. In like manner, Partnership
warrants and represents to Prentiss that Partnership has not dealt with any
other real estate broker in connection with this transaction, nor has
Partnership been introduced to Prentiss by any other real estate broker, and
Partnership shall indemnify Prentiss and save and hold Prentiss harmless from
and against any claims, suits, demands or liabilities of any kind or nature
whatsoever arising on account of the claim of any person, firm or corporation to
a real estate brokerage commission or a finder's fee as a result of having dealt
with Partnership in connection with this transaction. This provision shall
survive any termination of this Agreement and a closing of the transaction
contemplated hereby.
8.4 Bulk Sale. It shall be the obligation of Partnership to comply with
---------
any bulk sale requirements, statutes, laws, ordinances and regulations
promulgated with respect thereto, if any, in the State in which the Property is
located, or in or by any governmental entity having jurisdiction with respect
thereto, and to provide proof of such compliance or proof that no such
compliance is required, to Prentiss, at or prior to Closing. In any event,
Partnership shall indemnify Prentiss and save and hold Prentiss harmless from
and against any claims, suits, demands, liabilities or obligations of any kind
or nature whatsoever, including all costs of
41
<PAGE>
defending same, and reasonable attorneys' fees paid or incurred in connection
therewith, arising out of or relating to any claim made by any third party or
any liability asserted by any third party that any applicable bulk sales law or
like statute has not been complied with. The provisions of this Section shall
survive the Closing of the transaction contemplated hereby.
8.5 Confidentiality. Except as hereinafter provided, from and after the
---------------
execution of this Agreement and until the information in question becomes
publicly known by disclosure on the part of Prentiss or Company, Prentiss and
Partnership shall keep the terms, conditions and provisions of this Agreement
confidential and neither shall disclose the terms, conditions and provisions
hereof, except to persons who "need to know", such as their respective officers,
directors, employees, attorneys, accountants, engineers, surveyors, consultants,
financiers, partners, investors and bankers, and such other third parties whose
assistance is required in connection with the consummation of this transaction
or as required by law or order of court of competent jurisdiction. Partnership
shall make no press release regarding the subject matter of this Agreement
without the prior written approval of Prentiss; and Prentiss shall issue no
press release regarding the subject matter of this Agreement without first
seeking Partnership's comments on same. Notwithstanding the foregoing, it is
acknowledged that Prentiss is, or is an affiliate of, a real estate investment
trust (the "REIT") and the REIT has, and the REIT, Prentiss or their affiliates
may, seek to sell securities to the general public; consequently, the REIT,
Prentiss and their affiliates shall have the absolute and unbridled right to
disclose any information regarding the transaction contemplated by this
Agreement required by law or as determined to be necessary or appropriate by
attorneys for each such entity to satisfy disclosure and reporting obligations
of each such entity. After Closing, Prentiss and Partnerships shall be free to
disclose previously confidential information in its sole, unfettered discretion.
ARTICLE IX.
-----------
LIABILITY OF PARTIES;
---------------------
DEFAULT; TERMINATION RIGHTS
---------------------------
9.1 Liability of Prentiss. Except for obligations expressly assumed or
---------------------
agreed to be assumed by Prentiss hereunder, Prentiss is not assuming any
obligations of Partnership or any liability for claims arising out of any act,
omission or occurrence which occurs, accrues or arises prior to the Closing
Date. Partnership, subject to the limitations of Section 7.2 (x) hereof, hereby
---------------
indemnifies and holds Prentiss harmless from and against any and all claims,
costs, penalties, damages, losses, liabilities and expenses (including
reasonable attorneys' fees) that may at any time be incurred by Prentiss as a
result of (1) obligations of Partnership relating to its operation of the
Property not expressly assumed or agreed to be assumed or taken subject to by
Prentiss hereunder, or (2) wrongful or negligent acts or omissions of
Partnership, its agents or employees with respect to the Property which occur,
accrue or arise prior to the Closing Date. Prentiss hereby indemnifies and
holds Partnership harmless from and against any and all claims, costs,
penalties, damages, losses, liabilities and expenses (including reasonable
attorneys' fees) that may at any time be incurred by Partnership as a result of
wrongful or negligent acts or omissions of Prentiss relating to the Property
which occur, accrue and arise from and after the Closing Date. The provisions of
this Section shall survive the Closing of the transaction contemplated hereby.
42
<PAGE>
9.2 Default by Partnership/Failure of Conditions Precedent. If any
------------------------------------------------------
condition set forth herein for the benefit of Prentiss cannot or will not be
satisfied prior to Closing, or upon the occurrence of any other event that would
entitle Prentiss to terminate this Agreement and its obligations hereunder, and
if Partnership fails to cure any such matter or satisfy that condition within
ten (10) business days after notice thereof from Prentiss (or such other time
period as may be explicitly provided for herein), Prentiss, at its option, may
elect (a) to terminate this Agreement, in which event (i) the Deposit shall be
promptly returned to Prentiss, (ii) if the condition which has not been
satisfied is a breach of a representation, warranty or covenant known by
Partnership to have been materially inaccurate or misleading when made, then
Partnership shall be obligated upon demand to reimburse Prentiss for Prentiss'
actual out-of-pocket inspection, financing and other costs related to Prentiss'
entering into this Agreement, inspecting the Property and preparing for a
Closing of the transaction contemplated hereby, including, without limitation,
Prentiss' attorneys' fees incurred in connection with the preparation,
negotiation and execution of this Agreement and in connection with Prentiss' due
diligence review, audits and preparation for a Closing; provided, the foregoing
shall not limit or include the sums which may be payable by Partnership pursuant
to Section 9.6 below, and (iii) all other rights and obligations of Partnership
-----------
and Prentiss hereunder (except those set forth herein which expressly survive a
termination of this Agreement) shall terminate immediately; (b) to proceed to
Closing; or (c) if the condition described in Section 5.1(k) of this Agreement
--------------
has not been satisfied on the Closing Date solely by reason of a default by OTR
thereunder, to terminate this Agreement, in which case Partnership agrees to pay
to Prentiss as liquidated damages, an amount equal to $1,350,000.00, the Deposit
shall be refunded to Prentiss, and thereafter no party to this Agreement shall
have any further rights or obligations except as otherwise expressly provided in
this Agreement. If Prentiss elects to proceed to Closing and there is either a
misrepresentation or breach of a warranty by Partnership (other than a breach of
a representation or warranty of which Prentiss had notice or actual knowledge
prior to the Closing and nevertheless elected to consummate the Closing) or the
breach of a covenant by Partnership or a failure by Partnership to perform its
obligations hereunder first discovered by Prentiss after the Closing Date,
Prentiss shall retain all remedies accruing as a result thereof, including, but
not limited to, the remedy of specific performance of Partnership's covenants
and obligations and the remedy of the recovery of all reasonable damages
resulting from Partnership's breach of warranty or covenant, subject to the
limitations of Section 7.2(x) hereof.
--------------
9.3 Indemnification by Prentiss. Prentiss hereby indemnifies and holds
---------------------------
Partnership harmless from and against any and all claims, costs, penalties,
damages, losses, liabilities and expenses (including reasonable attorneys' fees)
that may at any time be incurred by Partnership, whether incurred before or
after Closing, as a result of any inaccuracy or breach by Prentiss of any of its
representations, warranties, covenants or obligations set forth herein or in any
other document delivered by Prentiss pursuant hereto except for any breach or
inaccuracy of any representation or warranty as to which Prentiss has given
Partnership written notice prior to Closing of the untruth or inaccuracy or of
which Partnership otherwise had actual knowledge prior to the Closing and
nevertheless elected to consummate the Closing. The provisions of this Section
shall survive the Closing of the transaction contemplated hereby.
9.4 Default by Prentiss/Failure of Conditions Precedent. If any
---------------------------------------------------
condition set forth herein for the benefit of Partnership (other than a default
by Prentiss, OP General Partner or Company) cannot or will not be satisfied
prior to Closing, and if that condition is not satisfied within ten (10)
43
<PAGE>
business days after notice thereof from Partnership (or such other time period
as may be explicitly provided for herein), Partnership may, at its option, elect
either (a) to terminate this Agreement in which event the Deposit shall be
promptly returned to Prentiss and the parties hereto shall be released from all
further obligations hereunder except those which expressly survive a termination
of this Agreement, or (b) to waive its right to terminate, and instead, to
proceed to Closing. If, prior to Closing, Prentiss, OP General Partner or
Company defaults in performing any of its obligations under this Agreement and
such default is not cured within ten (10) business days after notice thereof
from Partnership, then Partnership's sole remedy for such default shall be
either (i) to terminate this Agreement and retain the Deposit as liquidated and
agreed-upon damages, it being acknowledged that actual damages would be
impossible to accurately estimate, or (ii) to pursue the remedy of specific
performance.
9.5 Costs and Attorneys' Fees. In the event of any litigation or
-------------------------
dispute between the parties arising out of or in any way connected with this
Agreement, resulting in any litigation, then the prevailing party in such
litigation shall be entitled to recover its costs of prosecuting and/or
defending same, including, without limitation, reasonable attorneys' fees at
trial and all appellate levels. The provisions of this Section shall survive
the Closing of the transaction contemplated hereby.
9.6 Limitation of Liability. Notwithstanding anything herein to the
-----------------------
contrary, except in the case of stipulated liquidated damages as set forth in
this Agreement, liability of each party hereto resulting from the breach or
default by either party shall be limited to actual damages incurred by the
injured party and the parties hereto hereby waive their rights to recover from
the other party consequential, punitive, exemplary, and speculative damages.
The provisions of this Section 9.6 shall survive the Closing of the transaction
-----------
contemplated hereby. Notwithstanding anything herein to the contrary, the
aggregate maximum liability of Prentiss for any indemnities, representations and
warranties set forth in this Agreement and in the Contribution Agreement of even
date herewith relating to certain New Jersey assets and all documents executed
by Prentiss in connection with this Agreement and such other Contribution
Agreement shall be $4,000,000.00 for any claims made within one (1) year after
the Closing Date and ten percent (10%) of such amount thereafter; provided,
however, there shall be no limitation of liability applicable to the indemnities
made in Section 2.2(c) hereof.
--------------
ARTICLE X.
----------
MISCELLANEOUS PROVISIONS
------------------------
10.1 Completeness; Modification. This Agreement constitutes the entire
--------------------------
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto. Any
waiver of rights under this Agreement shall be effective only if in writing and
duly executed and delivered by the party against whom such waiver is asserted.
10.2 Assignments. Prentiss may assign its rights hereunder without the
-----------
consent of Partnerships but upon notice to Partnerships to any affiliate of the
Operating Partnership or the Company, but only if (i) Partnerships obtain
substantially all of the economic and substantive
44
<PAGE>
rights and benefits contemplated to be obtained in the absence of such
assignment, and (ii) there is not thereby caused any material adverse federal
income effect to Partnerships or the Unit Recipients. In the event of such
permitted assignment, except as otherwise specified herein, such assignee shall
be deemed "Prentiss" hereunder; however, any such assignment shall not relieve
the original Prentiss of its obligations under this Agreement.
10.3 Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of the parties hereto and their respective successors and permitted
assigns.
10.4 Days. If any action is required to be performed, or if any notice,
----
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
10.5 Governing Law. This Agreement and all documents referred to herein
-------------
shall be governed by and construed and interpreted in accordance with the laws
of the Commonwealth of Pennsylvania.
10.6 Counterparts. To facilitate execution, this Agreement may be
------------
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear on each counterpart
hereof. All counterparts hereof shall collectively constitute a single
agreement.
10.7 Severability. If any term, covenant or condition of this
------------
Agreement, or the application thereof to any person or circumstance, shall to
any extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to other persons or
circumstances, shall not be affected thereby, and each term, covenant or
condition of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
10.8 Costs. Regardless of whether Closing occurs hereunder, and except
-----
as otherwise expressly provided herein, each party hereto shall be responsible
for its own costs in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, fees of attorneys, engineers
and accountants.
10.9 Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such copies
as designated below. Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.
45
<PAGE>
If to Partnership: c/o The Terramics Management Company
1180 West Swedesford Road, Suite 140
Berwyn, Pennsylvania 19312
Attention: Henry C. Gulbrandsen, Jr.
Fax No.: (610) 640-4853
With a copy to: Blank, Rome, Comisky & McCauley
One Logan Square
Philadelphia, Pennsylvania 19103
Attention: Michael Pollack
Fax No.: (215) 569-5555
If to Prentiss: Prentiss Properties Acquisition Partners, L.P.
3890 West Northwest Highway, Suite 400
Dallas, Texas 75220
Attention: Thomas F. August and William J. Reister
Fax No.: (214) 350-2408 or (214) 654-5826
With a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Attn: Randall M. Ratner, P.C.
Fax No.: (214) 969-4343
If to Escrow Agent: Chicago Title Insurance Company
7616 LBJ Freeway, Suite 300
Dallas, Texas 75251-1106
Attn: Sharon L. Cooper
or to such other address as the intended recipient may have specified in a
notice to the other party. Any party hereto may change its address or designate
different or other persons or entities to receive copies by notifying the other
party and Escrow Agent in a manner described in this Section.
10.10 Escrow Agent. Escrow Agent referred to in the definition thereof
------------
contained in Section 1.1 hereof has agreed to act as such for the convenience of
-----------
the parties without fee or other charges for such services as Escrow Agent.
Escrow Agent shall not be liable: (a) to any of the parties for any act or
omission to act except for its own willful misconduct; (b) for any legal effect,
insufficiency, or undesirability of any instrument deposited with Escrow Agent
or exchanged by the parties hereunder; (c) for any loss or impairment of funds
that have been deposited in escrow while those funds are in the course of
collection, or while those funds are on deposit in a financial institution, if
such loss or impairment results from the failure, insolvency or suspension of a
financial institution; (d) for the expiration of any time limit or other
consequence of delay, unless a properly executed written instruction, accepted
by Escrow Agent, has
instructed Escrow Agent to comply with said time limit; (e) for the default,
error, action or omission of either party to the escrow. Escrow Agent, in its
capacity as escrow agent, shall be entitled to rely on any document or paper
received by it, believed by such Escrow Agent, in good faith, to be
46
<PAGE>
bona fide and genuine. In the event of any dispute as to the disposition of the
Deposit or any other monies held in escrow, or of any documents held in escrow,
Escrow Agent may, if such Escrow Agent so elects, interplead the matter by
filing an interpleader action in a court of general jurisdiction in the county
or circuit where the Real Property is located (to the jurisdiction of which both
parties do hereby consent), and pay into the registry of the court the Deposit,
or deposit any such documents with respect to which there is a dispute in the
Registry of such court, whereupon such Escrow Agent shall be relieved and
released from any further liability as Escrow Agent hereunder.
10.11 Incorporation by Reference. All of the exhibits attached hereto
--------------------------
are by this reference incorporated herein and made a part hereof.
10.12 Survival. All of the representations, warranties, covenants and
--------
agreements of Partnership and Prentiss made in, or pursuant to, this Agreement
shall survive Closing for a period of twelve (12) months and shall not merge
into the Deed or any other document or instrument executed and delivered in
connection herewith; provided that the provisions of Section 7.5, and any other
-----------
provisions which are expressly stated to survive Closing without limitation,
shall survive the Closing without limitation.
10.13 Further Assurances. Partnership and Prentiss each covenant and
------------------
agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions described herein. Partnership and Prentiss agree
to promptly correct any defect, error or omission which may be discovered in the
contents of this Agreement or in any of the Exhibits or Schedules hereto.
10.14 No Partnership. This Agreement does not and shall not be
--------------
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Partnership and Prentiss
specifically established hereby.
10.15 Time of Essence. Time is of the essence with respect to every
---------------
provision hereof.
10.16 Signatory Exculpation. The signatory(ies) for Prentiss is/are
---------------------
executing this Agreement in his/their capacity as representative of Prentiss and
not individually and, therefore, shall have no personal or individual liability
of any kind in connection with this Agreement and the transactions contemplated
by it.
10.17 Rules of Construction. The following rules shall apply to the
---------------------
construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and the
neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
47
<PAGE>
(c) The table of contents and headings contained herein are solely for
convenience of reference and shall not constitute a part of this Agreement nor
shall they affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and revised (or
requested revisions of) this Agreement and have participated in the preparation
of this Agreement, and therefore any usual rules of construction requiring that
ambiguities are to be resolved against a particular party shall not be
applicable in the construction and interpretation of this Agreement or any
exhibits hereto.
(e) As used herein, the term or phrases "Effective Date," "date of
this Agreement" or "date hereof" shall mean the first date Escrow Agent is in
receipt of this Agreement executed by Partnership and Prentiss.
IN WITNESS WHEREOF, Partnerships and Prentiss have caused this Agreement to
be executed in their names by their respective duly authorized representatives.
Prentiss:
--------
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership
By: Prentiss Properties I, Inc., a Delaware
corporation, its general partner
By:
---------------------------------
Name:
-------------------------------
Title:
-----------------------------
Date of Execution: , 1997
------------
Partnerships:
------------
TERRAMICS/VALLEYBROOKE ASSOCIATES-I
LIMITED PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
------------------------------------
Authorized Partner
48
<PAGE>
TERRAMICS/VALLEYBROOKE ASSOCIATES-
II LIMITED PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
------------------------------------
Authorized Partner
TERRAMICS/VALLEYBROOKE ASSOCIATES-
III LIMITED PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
------------------------------------
Authorized Partner
TERRAMICS/SOUTHPOINT ASSOCIATES-I
LIMITED PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
------------------------------------
Authorized Partner
TERRAMICS/SOUTHPOINT ASSOCIATES-II
LIMITED PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
------------------------------------
Authorized Partner
49
<PAGE>
TERRAMICS/SOUTHPOINT ASSOCIATES-III LIMITED
PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
----------------------------------
Authorized Partner
TERRAMICS/SOUTHPOINT ASSOCIATES-V LIMITED
PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
----------------------------------
Authorized Partner
Date of Execution: , 1997
-------------
50
<PAGE>
JOINDER BY COMPANY AND OP GENERAL PARTNER
-----------------------------------------
The undersigned join in this agreement to evidence their consent to the
provisions hereof and to confirm the representations, warranties and
certifications contained in this agreement which are expressly stated to be made
by them by their joinder.
PRENTISS PROPERTIES TRUST
By:
----------------------------------------------
Its:
---------------------------------------------
PRENTISS PROPERTIES I, INC.
By:
----------------------------------------------
Its:
---------------------------------------------
51
<PAGE>
RECEIPT OF ESCROW AGENT
-----------------------
Chicago Title Insurance Company, as Escrow Agent, acknowledges receipt of
the sum of $__________ by check or by wire transfer, from Prentiss as described
in Section 2.3 of the foregoing Agreement of Purchase and Sale, said check or
-----------
wire transfer to be held pursuant to the terms and provisions of said Agreement.
DATED this _____ day of __________, 1997.
CHICAGO TITLE INSURANCE COMPANY
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
52
<PAGE>
Exhibit 10.2
------------
(New Jersey)
CONTRIBUTION AGREEMENT
among
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
a Delaware limited partnership
and
WOODLAND FALLS ASSOCIATES-I LIMITED PARTNERSHIP
WOODLAND FALLS ASSOCIATES-III LIMITED PARTNERSHIP
WOODLAND FALLS ASSOCIATES-IV LIMITED PARTNERSHIP
LAKE CENTER ASSOCIATES-II LIMITED PARTNERSHIP
LAKE CENTER ASSOCIATES-IV LIMITED PARTNERSHIP
TERRAMICS/CENTERPOINTE ASSOCIATES LIMITED PARTNERSHIP
all of which are New Jersey limited partnerships
and
TERRAMICS PROPERTY ASSOCIATES, a Pennsylvania limited partnership
TPC INVESTORS I LIMITED PARTNERSHIP, a Pennsylvania limited partnership
TERRAMICS/JK LIMITED PARTNERSHIP, a Pennsylvania limited partnership
TERRAMICS/WOODLAND LIMITED PARTNERSHIP, a New Jersey limited partnership
TERRAMICS EQUITY LIMITED PARTNERSHIP, a New Jersey limited partnership
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE I. DEFINITIONS........................................................4
1.1 Definitions.......................................................4
ARTICLE II. TRANSFER OF PROPERTY; DEPOSIT; ACCOUNTING FOR CONTRIBUTION VALUE;
STUDY PERIOD.....................................................10
2.1 Transfer of Property.............................................10
2.2 Transfer Procedures.............................................10
2.3 Deposit..........................................................12
2.4 Study Period.....................................................12
ARTICLE III. PARTNERSHIPS' AND CONTRIBUTORS' REPRESENTATIONS AND
WARRANTIES......................................................16
3.1 Organization and Power...........................................17
3.2 Authorization, Execution and Disclosure..........................17
3.3 Non-contravention................................................17
3.4 No Special Taxes.................................................18
3.5 Compliance with Existing Laws....................................18
3.6 Personal Property................................................18
3.7 Operating Agreements.............................................18
3.8 Condemnation Proceedings; Roadways...............................18
3.9 Actions or Proceedings...........................................19
3.10 Labor and Employment Matters....................................19
3.11 Financial Information and Submission Matters....................19
3.12 Bankruptcy......................................................19
3.13 Hazardous Substances............................................19
3.14 Parties in Possession...........................................20
3.15 Leases..........................................................20
3.16 Leased Property.................................................20
3.17 No Unpaid Charges...............................................20
3.18 Condition of Improvements.......................................20
3.19 Access..........................................................20
3.20 No Commitments..................................................20
3.21 "Foreign Person.................................................21
3.22 Leasing Commissions.............................................21
3.23 Other Agreements................................................21
3.24 Partners........................................................21
3.25 Existing Secured Indebtedness...................................21
3.26 LIMITATIONS ON REPRESENTATIONS AND WARRANTIES...................22
ARTICLE IV. PRENTISS' REPRESENTATIONS AND WARRANTIES.........................23
4.1 Organization and Power...........................................23
4.2 Non-contravention................................................24
4.3 Litigation.......................................................24
i
<PAGE>
4.4 Bankruptcy.......................................................24
4.5 Issuance of Units................................................24
4.6 Securities Filings..............................................24
4.7 Absence of Certain Changes or Events.............................25
ARTICLE V. CONDITIONS PRECEDENT..............................................25
5.1 As to Prentiss' Obligations......................................25
5.2 As to Contributors' Obligations..................................29
ARTICLE VI. COVENANTS OF PARTNERSHIPS AND CONTRIBUTORS.......................30
6.1 Operating Agreements.............................................30
6.2 Warranties and Guaranties........................................30
6.3 Insurance........................................................30
6.4 Independent Audit................................................30
6.5 Operation of Property Prior to Closing...........................31
6.6 No Marketing.....................................................32
6.7 Prospective Subscriber Questionnaires............................32
6.8 Delivery of Tax Information......................................33
6.9 Information Regarding the Restrictions on Beneficial
Ownership of Units...............................................33
6.10 Partnership Agreement...........................................33
6.11 Use of Name "Terramics..........................................33
6.12 Partnership Interests...........................................33
ARTICLE VII. CLOSING.........................................................34
7.1 Closing..........................................................34
7.2 Partnership's Deliveries.........................................34
7.3 Prentiss' Deliveries.............................................38
7.4 Mutual Deliveries................................................38
7.5 Closing Costs....................................................39
7.6 Revenue and Expense Allocations..................................39
7.7 Delinquent Rents.................................................40
7.8 Costs Associated with Certain Leasing Activities.................40
ARTICLE VIII. GENERAL PROVISIONS.............................................41
8.1 Condemnation.....................................................41
8.2 Risk of Loss.....................................................41
8.3 Broker...........................................................42
8.4 Bulk Sale........................................................42
8.5 Confidentiality..................................................42
ARTICLE IX. LIABILITY OF PARTIES; DEFAULT; TERMINATION RIGHTS................43
9.1 Liability of Prentiss............................................43
9.2 Default by Partnership/Failure of Conditions Precedent...........43
9.3 Indemnification by Prentiss......................................44
9.4 Default by Prentiss/Failure of Conditions Precedent..............44
9.5 Costs and Attorneys' Fees........................................44
9.6 Limitation of Liability..........................................45
ii
<PAGE>
ARTICLE X. MISCELLANEOUS PROVISIONS..........................................45
10.1 Completeness; Modification......................................45
10.2 Assignments.....................................................45
10.3 Successors and Assigns..........................................45
10.4 Days............................................................45
10.5 Governing Law...................................................46
10.6 Counterparts....................................................46
10.7 Severability....................................................46
10.8 Costs...........................................................46
10.9 Notices.........................................................46
10.10 Escrow Agent...................................................47
10.11 Incorporation by Reference.....................................47
10.12 Survival.......................................................48
10.13 Further Assurances.............................................48
10.14 No Partnership.................................................48
10.15 Time of Essence................................................48
10.16 Signatory Exculpation..........................................48
10.17 Rules of Construction..........................................48
EXHIBITS
- --------
Exhibit A - Land
Exhibit B - Surveyor's Certificate
Exhibit C - Prospective Subscriber Questionnaire
Exhibit D - Existing Secured Indebtedness
Exhibit E - Registration Rights Agreement
Exhibit F - Limited Partner Signature Page
Exhibit G - Not Used
Exhibit H - Bill of Sale
Exhibit I - Assignment and Assumption Agreement
Exhibit J - Assignment of Leases
Exhibit K - Tenant's Estoppel Certificate
Exhibit L - Permitted Title Exceptions
Exhibit M - Non-Included Assets
SCHEDULES
- ---------
Schedule 1.1 - Excluded Partnership Property
Schedule 2 - Defects in Condition of Improvements
Schedule 2.2(a) - Contribution Value allocations including Unit allocations
Schedule 3 - Lease Agreements
Schedule 3.4 - Special Taxes and Assessments
Schedule 3.5 - Qualifications to Legal Compliance
Schedule 3.13 - Underground Storage Tanks
Schedule 4 - Operating Agreements
Schedule 6.5(g) - New Leases Which Have Been Preapproved by Prentiss
iii
<PAGE>
CONTRIBUTION AGREEMENT
----------------------
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of this _____
---------
day of September, 1997 among PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership ("Prentiss") and WOODLAND FALLS ASSOCIATES-I
--------
LIMITED PARTNERSHIP, WOODLAND FALLS ASSOCIATES-III LIMITED PARTNERSHIP, WOODLAND
FALLS ASSOCIATES-IV LIMITED PARTNERSHIP, LAKE CENTER ASSOCIATES-II LIMITED
PARTNERSHIP, LAKE CENTER ASSOCIATES-IV LIMITED PARTNERSHIP, and
TERRAMICS/CENTERPOINTE ASSOCIATES LIMITED PARTNERSHIP, all of which are New
Jersey limited partnerships (collectively, the "Partnerships" and each, a
------------
"Partnership"), and TERRAMICS PROPERTY ASSOCIATES, a Pennsylvania limited
-----------
partnership, TPC INVESTORS I LIMITED PARTNERSHIP, a Pennsylvania limited
partnership, TERRAMICS/JK LIMITED PARTNERSHIP, a Pennsylvania limited
partnership, TERRAMICS/WOODLAND LIMITED PARTNERSHIP, a New Jersey limited
partnership, and TERRAMICS EQUITY LIMITED PARTNERSHIP, a New Jersey limited
partnership, all of which are Pennsylvania limited partnerships (collectively,
the "Contributors" and each, a "Contributor"), with joinders by PRENTISS
------------ -----------
PROPERTIES TRUST, a Maryland real estate investment trust ("Company"), and
-------
PRENTISS PROPERTIES I, INC., a Delaware corporation ("OP General Partner").
------------------
R E C I T A T I O N S:
---------------------
A. Each Partnership is the owner of a fee estate in certain land and
improvements in the State of New Jersey which collectively comprise the office
building projects commonly known as "Woodland Falls" (in Cherry Hill Township,
--------------
Camden County), "Lake Center" (in Evesham Township, Burlington County), and
-----------
"Centerpointe" (in Mount Laurel Township, Burlington County). A description of
------------
the land upon which each such project is situate (hereinafter defined and
referred to as the "Land"), and the identification of each Partnership owner
----
thereof is set forth on Exhibit A attached hereto. Each Contributor is, or will
---------
on or prior to Closing become, a partner in one or more of the Partnerships, and
the Contributors are or will on or prior to Closing collectively comprise all of
the general and limited partners of the Partnerships other than OTR. Terramics
Property Associates is the sole general partner of each Partnership.
B. OTR, an Ohio general partnership acting on behalf of The State
Teachers Retirement Board of Ohio ("OTR"), owns an 89.999% limited partnership
---
interest in each Partnership as of the date hereof.
C. On the Closing Date (as hereinafter defined), Prentiss will acquire
OTR's 89.999% limited partnership interest in each Partnership and in seven (7)
other affiliated partnerships pursuant to an Agreement to Acquire Limited
Partnership Interests dated September ___, 1997 between Prentiss and OTR (the
"OTR Agreement").
-------------
D. Prentiss is desirous of acquiring all of the partnership interests
of Contributors in the Partnerships and their corresponding right, title and
interest in the Property, and the Contributors are desirous of contributing such
interests to Prentiss, for the Contribution Value and upon the terms and
conditions hereinafter set forth. In connection therewith, Contributors have
caused Partnerships to furnish certain certifications, representations and
warranties required.
2
<PAGE>
by Prentiss as a condition to the transactions referred to herein, with the
understanding, however, that recourse for any default, misrepresentation or
breach of warranty by a Partnership shall be governed by the provisions of
Recitation Paragraph E below.
E. This Agreement encompasses obligations, rights, covenants,
representations, warranties, actions and conditions (collectively,
"Undertakings") applicable to all of the Contributors and Partnerships, and it
------------
is understood that performance by all Contributors and Partnerships shall be
required by Prentiss as set forth herein. However, each Contributor and
Partnership has executed this Agreement only with respect to its separate
partnership interests, property interests and/or rights. For purposes of
convenience, references in this Agreement to "Partnership" or "Contributor"
----------- -----------
shall mean each Partnership or Contributor, acting in its own separate capacity,
regardless of whether a particular referenced document or action may also
encompass similar requirements on the part of the other Partnerships or
Contributors. In such connection, it is acknowledged that (i) each Partnership
and each Contributor shall have responsibility under this Agreement only for its
own Undertakings, and in no event shall any Partnership or Contributor be liable
or responsible for any of the Undertakings of any other Partnership or
Contributor (except to the extent of the specific conditions to Prentiss'
obligations as set forth herein and except to the extent of the sharing of
responsibility for Partnership obligations as hereinafter set forth in this
Paragraph), (ii) any Undertakings of a Partnership or Contributor under this
Agreement which relate or refer to the "Partnership," "Property," "Real
----------- -------- ----
Property," "Land," or any other real or personal property or rights or interests
- -------- ----
therein, shall in fact apply, relate and refer only to the partnership
interests, property or property interests which are owned by, or which are for
the benefit of, the particular Partnership or Contributor in question and not
any of the other Partnerships or Contributors, (iii) as among Contributors, it
has been agreed and it is herein confirmed that liability for any Undertakings
of a Partnership is to shared by Contributors having ownership interests in such
Partnership in proportion to their respective partnership interests therein, but
neither this provision nor any other provision of this Agreement is intended to
otherwise alter the status or liability of any general or limited partner of a
Partnership as provided in the relevant limited partnership act of New Jersey,
(iv) any cure of any breach of warranty or misrepresentation by a Partnership or
of any failure by a Partnership to perform a Partnership's obligations under
this Agreement, whether such cure is effectuated prior to or after Closing,
shall be effectuated so as to impact only the Excluded Partnership Property and
Liabilities (as hereinafter defined), and in no event so as to diminish, reduce
or adversely affect any of the assets of the Partnerships which are intended to
be owned by the Partnerships upon Closing, it being understood that Contributors
shall be obligated to make such contributions or to take such other action as
may be necessary to comply with this requirement, and (v) with respect to the
defined terms "Partnership" or "Partnerships," the singular and plural may be
----------- ------------
used interchangeably, consistent with the provisions of this Recitation
Paragraph E and the preceding Paragraph D.
NOW, THEREFORE, in consideration of the foregoing premises (all of
which are hereby incorporated into this Agreement as a part thereof) and in
consideration of the mutual covenants, promises and undertakings of the parties
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the parties, it is
agreed:
3
<PAGE>
ARTICLE I.
----------
DEFINITIONS
-----------
1.1 Definitions. The following terms shall have the indicated meanings:
-----------
"Act of Bankruptcy" shall mean if a party hereto or any general
-----------------
partner thereof shall (a) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (b) admit in writing its
inability to pay its debts as they become due, (c) make a general assignment for
the benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect), (e) be adjudicated a bankrupt or insolvent, (f) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
(g) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case or proceeding
under the Federal Bankruptcy Code (as now or hereafter in effect), or (h) take
any corporate or partnership action for the purpose of effecting any of the
foregoing; or if a proceeding or case shall be commenced, without the
application or consent of a party hereto or any general partner thereof, in any
court of competent jurisdiction seeking (1) the liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of debts, of such
party or general partner, (2) the appointment of a receiver, custodian, trustee
or liquidator for such party or general partner or all or any substantial part
of its assets, or (3) other similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
and such proceeding or case shall continue undismissed for a period of sixty
(60) consecutive days; or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of sixty (60)
consecutive days.
"Applicable Laws" shall mean any applicable building, zoning,
---------------
subdivision, environmental, health, safety or other governmental laws, statutes,
ordinances, resolutions, rules, codes, regulations, orders or determinations of
any Governmental Authority or of any insurance boards of underwriters (or other
body exercising similar functions), or any restrictive covenants or deed
restrictions affecting the Property or the ownership, operation, use,
maintenance or condition thereof (provided that there shall not be deemed to be
a violation of, or noncompliance with, a restrictive covenant or deed
restriction if Prentiss shall obtain insurance against loss or damage by reason
of such violation or noncompliance from the Title Company).
"Assignment and Assumption Agreement" shall mean one or more
-----------------------------------
assignment and assumption agreements whereby (a) Contributor (1) relinquishes
and assigns to Partnership and Prentiss all right, title and interest which
Contributor may have in the Operating Agreements that have not been terminated
prior to Closing in accordance herewith, (2) relinquishes and assigns to
Partnership and Prentiss all of Contributor's right, title and interest in and
to the Intangible Personal Property, to the extent assignable, and (3)
indemnifies, defends and holds Prentiss and its agents, employees, officers,
directors, shareholders and contractors harmless with respect to all
liabilities, claims, costs and expenses (including, without limitation,
reasonable attorneys' fees) arising out of defaults by Partnership under such
Operating Agreements accruing and occurring
4
<PAGE>
before the Closing Date; and (b) Prentiss indemnifies, defends and holds
Contributor harmless with respect to all liabilities, claims, costs and expenses
(including, without limitation, reasonable attorneys' fees) arising out of
defaults by Prentiss under such Operating Agreements accruing and occurring from
and after the Closing Date, which assignment and assumption agreement shall be
in the form of Exhibit I hereto.
---------
"Assignment of Leases" shall mean the assignment agreement, in
--------------------
recordable form, whereby (a) Contributor (1) relinquishes and assigns to
Partnership and Prentiss all right, title and interest which Contributor may
have in and to the Leases, and (2) indemnifies, defends and holds Prentiss and
its agents, employees, officers, directors, shareholders and contractors
harmless with respect to all liabilities, claims, costs and expenses (including,
without limitation, reasonable attorneys' fees) relating to defaults by
Partnership under such Leases occurring or accruing before the Closing Date; and
(b) Prentiss indemnifies, defends and holds Contributor harmless with respect to
all liabilities, claims, costs and expenses (including, without limitation,
reasonable attorneys' fees) arising out of defaults by Prentiss under such
Leases occurring and accruing from and after the Closing Date, which assignment
agreement shall be in the form of Exhibit J hereto.
---------
"Authorizations" shall mean all licenses, permits and
--------------
approvals required by any governmental or quasi-governmental agency, body,
department, commission, board, bureau, instrumentality or officer, or otherwise
appropriate with respect to the construction, ownership, operation, leasing,
maintenance, or use of the Property or any part thereof.
"Bill of Sale - Personal Property" shall mean one or more
--------------------------------
bills of sale relinquishing and conveying to Partnership and Prentiss all right,
title and interest which Contributor may have in the Tangible Personal Property
and the Intangible Personal Property, which bill of sale shall be in the form of
Exhibit H hereto.
- ---------
"Broker" shall mean Realty Capital International, Inc.
------
"Closing" shall mean the Closing of the transfer to Prentiss
-------
of the interests in the Partnerships and Property pursuant to this Agreement.
"Closing Date" shall mean the date on which the Closing
------------
occurs.
"Closing Documents" shall mean the documents defined as such
-----------------
in Section 7.1 hereof.
"Company" shall mean Prentiss Properties Trust, a Maryland
-------
real estate investment trust.
"Contribution Value" shall mean the respective amounts
------------------
allocable to each Contributor to be acquired pursuant to this Agreement as are
set forth on Schedule 2.2(a) hereto, and which shall be payable in the manner
described in Section 2.2 hereof.
"Contributor's and Partnership's Organizational Documents"
--------------------------------------------------------
shall mean the current partnership agreement and certificate of limited
partnership and all amendments thereto of each Contributor and Partnership and
the articles of incorporation and bylaws and all amendments
5
<PAGE>
thereto or partnership agreement and all amendments thereto, as applicable of
Contributor's and Partnership's general partners.
"Deposit" shall mean all amounts deposited from time to time
-------
with Escrow Agent by Prentiss pursuant to Section 2.3 hereof, plus all interest
-----------
or other earnings that may accrue thereon. All cash Deposits shall be invested
by Escrow Agent in a commercial bank or banks acceptable to Prentiss at money
market rates, or in such other investments as shall be approved in writing by
the Contributors and Prentiss. The Deposit shall be held and disbursed by Escrow
Agent in strict accordance with the terms and provisions of this Agreement.
"Environmental Damages" shall mean all third-party claims,
---------------------
judgments, damages, losses, penalties, fines, liabilities (including, without
limitation, punitive damages and strict liability), encumbrances, liens, costs
and expenses of investigation and defense of any claim, whether or not such is
ultimately defeated, and of any settlement or judgment, of whatever kind or
nature, contingent or otherwise, matured or unmatured, including, without
limitation, attorneys' fees and disbursements and consultants' fees, any of
which arise as a result of the existence of Hazardous Materials upon, about or
beneath the Property or migrating or threatening to migrate from the Property,
or as a result of the existence of a violation of Environmental Requirements
pertaining to the Property.
"Environmental Requirements" shall mean (i) all applicable
--------------------------
statutes, regulations, rules, policies, ordinances, codes, licenses, permits,
orders, approvals, plans, authorizations, and similar items, of all Governmental
Authorities, and (ii) all judicial, administrative and regulatory decrees,
judgments and orders, in each case of (i) and (ii) relating to the protection of
human health or the environment from Hazardous Materials and health and safety
of employees or the public from Hazardous Materials, including, without
limitation, all requirements thereof pertaining to reporting, licensing,
permitting, investigation and remediation of emissions, discharges, releases or
threatened releases of Hazardous Materials into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.
"Escrow Agent" shall mean Chicago Title Insurance Company,
------------
whose address is 7616 LBJ Freeway,Suite 300, Dallas, Texas 75251-1106,
Attn: Sharon L. Cooper.
"Excluded Assets" shall mean the real property subject to the
---------------
Right of First Opportunities Agreements.
"Excluded Partnership Property and Liabilities" shall mean the
---------------------------------------------
assets, rights, liabilities and obligations of the Partnerships relating to the
operation, management, development and ownership of the Property prior to
Closing which are to be distributed, assigned, or assumed to or by Contributors
prior to Closing as set forth in Section 7.1 below.
"Existing Liens" shall have the meaning ascribed to such term
--------------
in Section 2.2 hereof.
"Existing Notes" shall have the meaning ascribed to such term
--------------
in Section 2.2 hereof.
6
<PAGE>
"Existing Secured Indebtedness" shall mean that certain
-----------------------------
indebtedness secured by liens, assignments or security interests, encumbering
the Property which will not be discharged at Closing pursuant to the provisions
of this Agreement, which Existing Secured Indebtedness is described on Exhibit D
attached hereto and made a part hereof.
"Financial Information" shall mean the financial information
---------------------
defined as such in Section 3.11 hereof.
"FIRPTA Certificate" shall mean the affidavit of Contributor
------------------
under Section 1445 of the Internal Revenue Code, as amended, certifying that
Contributor is not a foreign corporation, foreign partnership, foreign trust,
foreign estate or foreign person (as those terms are defined in the Internal
Revenue Code and regulations promulgated thereunder), in form and substance
satisfactory to Prentiss.
"Governmental Authority" shall mean any federal, state,
----------------------
county, municipal or other government or any governmental or quasi-governmental
agency, department, commission, board, bureau, officer or instrumentality,
foreign or domestic, or any of them.
"Hazardous Materials" shall mean any chemical substance: (i)
-------------------
which is or becomes defined as a "hazardous substance," "hazardous waste,"
"hazardous material," "pollutant," "contaminant," or "toxic," "explosive,"
"corrosive," "flammable," "infectious," "radioactive," "carcinogenic," or
"mutagenic" material under any law, regulation, rule, order, or other authority
of the federal, state or local governments, or any agency, department,
commission, board, or instrumentality thereof, regarding the protection of human
health or the environment from such chemical substances including, but not
limited to, the following federal laws and their amendments, analogous state and
local laws, and any regulations promulgated thereunder: the Clean Air Act, the
Clean Water Act, the Oil Pollution Control Act, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1986, the Emergency Planning and
Community Right to Know Act, the Solid Waste Disposal Act, the Resource
Conservation and Recovery Act, the Safe Drinking Water Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Toxic Substances Control
Act, including, without limitation, asbestos and gasoline and other petroleum
products (including crude oil or any fraction thereof); (ii) which contains
gasoline, diesel fuel or other petroleum hydrocarbons; (iii) which contains
drinking biphenyls or asbestos or asbestos-containing materials or urea
formaldehyde foam insulation; or (iv) consisting of radon gas; provided,
however, the term "Hazardous Materials" shall not include substances of kinds
-------------------
and in amounts ordinarily and customarily used or stored in properties similar
to the Property for the purposes of cleaning or other maintenance or operations
and otherwise in compliance with Environmental Requirements.
"Improvements" shall mean all buildings, improvements,
------------
fixtures and other items of real estate located on the Land.
"Insurance Policies" shall mean all policies of insurance
------------------
maintained by or on behalf of Partnership pertaining to the Property, its
operation, or any part thereof.
7
<PAGE>
"Intangible Personal Property" shall mean all intangible
----------------------------
personal property owned or possessed by Partnership and used in connection with
the ownership, operation, leasing, occupancy or maintenance of the Property,
including, without limitation, (1) Partnership's and Contributor's exclusive
right to use the trade name "Terramics" and all variations thereof, with the
---------
understanding, however, that (i) Contributors and affiliates of Partnerships
and/or the partners thereof will have the continuing right to use such trade
name solely in connection with the use of the current name of the entity or
entities owning the Excluded Assets or the Non-Included Assets and for
regulatory or statutory compliance with respect to any of such assets or
entities owning such assets, and (ii) Partnerships and/or the partners thereof
shall have the continuing right to use such trade name solely in connection with
the collection of accounts receivable (provided, from and after the Closing
Date, no such party may pursue existing tenants of the Property for delinquent
rents without Prentiss' prior written consent), the prosecution of claims and
the maintenance of any defense which are related to the Excluded Partnership
Property and Liabilities and for regulatory or statutory compliance with respect
to any previously owned assets, (2) the Authorizations, (3) escrow accounts (not
including, however, any escrow deposits for a tax, charge or obligation which is
attributable to a period prior to Closing or which is encompassed within the
Excluded Partnership Property and Liabilities), utility and development rights
and privileges, general intangibles, business records, plans and specifications
pertaining to the Real Property and the Personal Property, and (4) any unpaid
award for taking by condemnation or any damage to the Land by reason of a change
of grade or location of or access to any street or highway.
"Land" shall mean each parcel of real estate which is owned by
----
a Partnership, as more particularly described on Exhibit A attached hereto,
---------
together with all easements, rights, privileges, remainders, reversions and
appurtenances thereunto belonging or in any way appertaining, and all of the
estate, right, title, interest, claim or demand whatsoever of Partnership
therein, in the streets and ways adjacent thereto and in the beds thereof,
either at law or in equity, in possession or expectancy, now or hereafter
acquired.
"Leased Property" shall mean all leased items of Tangible
---------------
Personal Property.
"Leases" shall mean all leases, tenancies and other rights of
------
occupancy or use for any portion of the Real Property, together with any and all
amendments thereto.
"Non-Included Assets" shall mean the properties described on
-------------------
Exhibit M hereto.
- ---------
"Operating Agreements" shall mean all management, service,
--------------------
supply and maintenance contracts, if any, in effect with respect to the Property
and all other contracts that affect the Property or are otherwise related to the
construction, ownership, operation, occupancy or maintenance of the Property,
which Operating Agreements are described on Schedule 4 attached hereto and made
-----------
a part hereof.
"Operating Partnership" shall mean Prentiss Properties
---------------------
Acquisition Partners, L.P., a Delaware limited partnership.
"OTR" shall have the meaning ascribed to such term in the
---
Recitals to this Agreement.
8
<PAGE>
"OTR Agreement" shall have the meaning ascribed to such term
-------------
in the Recitals to this Agreement.
"Owner's Title Policy" shall mean an ALTA 1992 owner's policy
--------------------
of title insurance issued to Partnerships, at Prentiss' request, by the Title
Company, pursuant to which the Title Company insures Partnerships' ownership of
the Real Property (including the marketability thereof) subject only to
Permitted Title Exceptions but without imputation of any acts of Contributors or
OTR as the prior partners of the Partnerships. The Owner's Title Policy shall
insure each Partnership in the amount allocated by Prentiss to the value of the
Real Property interests in the Property. Prentiss may require such deletions of
standard exceptions and such title endorsements as are legally available and
customarily required by institutional investors purchasing property comparable
to the Property in the State where the Property is situated. The description of
the Land in the Owner's Title Policy shall be by courses and distances or by
reference to a legal, subdivided lot and shall be identical to the description
shown on the Survey.
"Partnership Agreement" shall mean the Second Amended and
---------------------
Restated Agreement of Limited Partnership of Prentiss Properties Acquisition
Partners, L.P. as the same may be amended from time to time.
"Permitted Title Exceptions" shall mean (i) those exceptions
--------------------------
to title to the Real Property that are set forth on Exhibit L hereto, and (ii)
---------
such other exceptions to title as are satisfactory to Prentiss as determined
pursuant to Section 2.4(d) hereof.
--------------
"Personal Property" shall mean collectively the Tangible
-----------------
Personal Property and the Intangible Personal Property.
"Prentiss' Objections" shall mean the objections defined as
--------------------
such in Section 2.4(d) hereof.
--------------
"Property" shall mean collectively the Real Property and the
--------
Personal Property.
"Real Property" shall mean the Land and the Improvements.
-------------
"Registration Rights Agreement" shall mean the agreement in
-----------------------------
the form of Exhibit E hereto.
"Study Period" shall mean the period commencing on August 6,
------------
1997, and continuing through September 26, 1997. Except as expressly noted
herein to the contrary, time periods herein referred to shall mean the time
periods as in effect, from time to time, at Dallas, Texas.
"Submission Matters" shall mean all items Contributor and
------------------
Partnership are required to deliver to Prentiss pursuant to Section 2.4(b)
--------------
hereof.
"Survey" shall mean the survey defined as such in and prepared
------
pursuant to Section 2.4(d) hereof.
--------------
9
<PAGE>
"Tangible Personal Property" shall mean the items of tangible
--------------------------
personal property consisting of all furniture, fixtures, equipment, machinery
and other personal property of every kind and nature located on or used or
useful in the ownership and operation of the Property and owned by Partnership,
including, without limitation, Partnership's interest as lessee with respect to
any such Tangible Personal Property.
"Title Commitment" shall mean the title commitment and
----------------
exception documents defined as such in Section 2.4(d) hereof.
--------------
"Title Company" shall mean Chicago Title Insurance Company, or
-------------
another title insurance underwriter selected by Prentiss.
"UCC Reports" shall mean the reports defined as such in
-----------
Section 2.4(d) hereof.
"Unit Recipient" shall mean the direct or indirect owner of a
--------------
Partnership interest who will receive Units pursuant to Section 2.2(b) hereof.
"Units" shall mean "Partnership Units" in the Operating
-----
Partnership, as defined and described in the Operating Partnership's Partnership
Agreement.
"Utilities" shall mean public sanitary and storm sewers,
---------
natural gas, telephone, public water facilities, electrical facilities and all
other utility facilities and services necessary or appropriate for the operation
and occupancy of the Property as an office building.
"Warranties and Guaranties" shall mean all equipment,
-------------------------
installer's, manufacturer's, contractors and similar warranties and guaranties
relating to the Improvements, or the Tangible Personal Property or any part
thereof.
ARTICLE II.
-----------
TRANSFER OF PROPERTY; DEPOSIT; ACCOUNTING
-----------------------------------------
FOR CONTRIBUTION VALUE; STUDY PERIOD
------------------------------------
2.1 Transfer of Property. In consideration of, and subject to, the
--------------------
terms and conditions hereinafter set forth, each Contributor shall transfer to
Prentiss all of its right, title and interest in the Partnership and in the
Property, including without limitation its entire Partnership interest and all
rights in the capital, profits and losses of the Partnership allocable to the
period from and after Closing, but not including any interest in the Excluded
Partnership Property and Liabilities.
2.2 Transfer Procedures. When the conditions to Closing set forth in
-------------------
Article V have been satisfied, the following shall occur and the transaction
contemplated hereby will be treated, for federal income tax purposes, as a
contribution by the Contributors to Prentiss of their interests in the
Partnerships in exchange for the Contribution Value:
(a) Prentiss shall receive a credit against the Contribution
Value in an amount equal to the amount of the cash Deposit.
10
<PAGE>
(b) An allocable portion of the Contribution Value
attributable to each Contributor, as set forth on Schedule 2.2(a) hereto, shall
be paid by issuing to Contributor or any Unit Recipient designated to receive
Units the number of Units calculated by dividing such allocable portion of the
Contribution Value by $25.50 and rounding the resulting number of Units to the
nearest integer (.50 rounded down). Prentiss shall be entitled to a credit
against the Contribution Value for unearned distributions on Units for the
period from the last distribution date through the Closing Date. In connection
with the foregoing, the parties acknowledge that (i) Prentiss has established a
minimum threshold for the issuance of Units to any one Unit Recipient in the
amount of One Million Dollars ($1,000,000), such threshold to apply to all Units
to be issued to such Unit Recipient under this Agreements and under the
Contribution Agreement of even date entered into among Prentiss and various
affiliates of Partnerships, (ii) each Unit Recipient has agreed, by the terms of
a separate agreement with Prentiss, to furnish certain limited guarantees of the
nonrecourse indebtedness of Prentiss, (iii) Prentiss has agreed with the Unit
Recipients and Partnerships, pursuant to the terms of a separate agreement, to
restrict sales or transfers of various components of the Real Property for
certain time periods, and (iv) Prentiss has further agreed with the Unit
Recipients, pursuant to the terms of a separate agreement, to allow certain
transfers of Units for family and estate planning purposes.
(c) Prentiss acknowledges that at Closing the Property shall
remain subject to, but Prentiss shall not personally assume, the unpaid
principal balances on the Closing Date of the promissory note(s) evidencing the
Existing Secured Indebtedness (the "Existing Note") payable to the lienholder(s)
-------------
described in Exhibit D attached hereto and made a part hereof having approximate
---------
unpaid principal balances in the amounts specified in Exhibit D, and subject to,
---------
but without assumption by Prentiss of, the obligations contained in the
mortgages and other security instruments securing the Existing Notes described
in Exhibit D (said mortgages and other security instruments being hereinafter
---------
collectively referred to as the "Existing Liens"). Notwithstanding the
--------------
foregoing, (i) to the extent that any Existing Note or Existing Liens (or the
loan documents executed in connection therewith) create personal liability for
specified acts, omissions or occurrences ( such acts, omissions or occurrences
being referred to as "Carve-Out Activities" and the associated personal
--------------------
liability being referred to as "Carve-Out Liability"), (A) if Closing occurs,
-------------------
Prentiss shall be responsible for any such Carve-Out Liability attributable to
Carve-Out Activities accruing and occurring from and after the Closing Date, and
shall and does hereby indemnify and hold Contributor (and any of Partnership's
principals who may have liability therefor) harmless with respect thereto, and
(B) Contributor shall and does hereby indemnify and hold Prentiss harmless with
respect to Carve-Out Liability attributable to Carve-Out Activities accruing or
occurring prior to the Closing Date, and (ii) if and to the extent that any
Existing Secured Indebtedness is paid off or refinanced by Prentiss within 60
days following the Closing Date, and any prepayment premium is required to be
paid in connection therewith pursuant to the presently existing terms of such
Existing Secured Indebtedness, such prepayment premium shall be the
responsibility of Contributor and Prentiss shall be entitled to create a cash
reserve therefor out of the Contribution Value; provided that any reduction
which can be achieved in the prepayment premium due to CIGNA on account of its
Existing Secured Indebtedness below the amount due in accordance with the
existing loan documents shall be shared equally by Prentiss and Contributors.
The provisions of this Paragraph shall survive Closing without limitation.
11
<PAGE>
(d) Prentiss shall pay the balance of the Contribution Value,
as adjusted in the manner specified in Article VII and as set forth below, to
Contributor or other applicable party at Closing by making a wire transfer of
immediately available federal funds to the account of Contributor or other
applicable party as specified in writing by Contributor.
2.3 Deposit. Within three (3) days after the execution hereof by the
-------
parties, and as a condition precedent to the effectiveness of this Agreement,
Prentiss shall deliver to Escrow Agent a wire transfer or check in the sum of
Fifty Dollars ($50.00) payable to the order of Contributor representing the
independent consideration for Contributor's execution of this Agreement and
agreement to provide Prentiss with the Study Period (which check or the proceeds
of which wire transfer shall thereafter be delivered by Escrow Agent to
Contributor). Prentiss has previously deposited with the Escrow Agent the amount
of $287,775.50, which sum has been deposited and invested in an interest bearing
account at a financial institution acceptable to Prentiss). If Prentiss has not
terminated this Agreement on or before the expiration of the Study Period,
Prentiss shall deliver to Escrow Agent a wire transfer or check in the
additional sum of $287,775.50 on or before 5:00 p.m. on the next business day
immediately following the last day of the Study Period. The proceeds of the wire
transfers or checks are referred to herein as the "Deposit" and Escrow Agent
-------
shall hold and invest the Deposit pursuant to the terms, conditions and
provisions of this Agreement. All accrued interest on the Deposit shall become
part of the Deposit. The Deposit shall be returned to Prentiss if Prentiss,
prior to the end of the Study Period, notifies Contributors in writing, pursuant
to Section 2.4 hereof, that Prentiss is electing to terminate this Agreement.
-----------
The Deposit (regardless of whether it is the proceeds of wire transfers or
checks) shall be either (a) applied at the Closing against the cash portion of
the Contribution Value, (b) returned to Prentiss pursuant hereto, or (c) paid to
Contributor pursuant hereto. For purposes of reporting earned interest with
respect to the Deposit, Prentiss' Federal Tax Identification Number is
75-2672997, and Contributor's Federal Tax Identification Number is 23-2257635.
2.4 Study Period.
------------
(a) Prentiss and its agents, contractors and duly
authorized representatives shall have the right, until 5:00 p.m., Dallas, Texas
time on the last day of the Study Period, and thereafter if Prentiss has elected
not to terminate this Agreement prior to the expiration of the Study Period, to
enter upon the Real Property and to perform, at Prentiss' expense, such
economic, surveying, engineering, topographic, environmental, marketing and
other tests, studies and investigations as Prentiss may deem appropriate. If
such tests, studies and investigations do not warrant, in Prentiss' sole,
absolute and unreviewable discretion, the purchase of the Property for the
purposes contemplated by Prentiss, then Prentiss may elect not to proceed with
this transaction and shall notify Contributors and Escrow Agent, in writing
prior to the expiration of the Study Period, that Prentiss has elected to
terminate this Agreement, in which event this Agreement automatically shall
terminate, the Deposit shall be promptly returned to Prentiss, and Prentiss,
Partnerships and Contributors shall be released from all further liability or
obligation hereunder except those which expressly survive a termination of this
Agreement. If Prentiss does not so notify Contributors of its determination to
terminate this Agreement prior to the expiration of the Study Period, then
Prentiss shall be deemed to have waived its right to terminate this Agreement
pursuant to this Section 2.4.
-----------
12
<PAGE>
(b) The parties acknowledge that Partnerships or
Contributors have delivered the following to Prentiss or made same available to
Prentiss for inspection and/or copying at the location of the Property or
Partnerships' business office:
(1) Copies of all Leases in effect as of the date
of this Agreement, together with copies of all material correspondence
received from or sent to tenants of the Property.
(2) a Rent Roll (herein so called) certificate
(with current rent roll attached) for the Property containing the
following information with respect to each Lease: (i) a description of
the space occupied thereby (including square feet, type of space,
floor, suite number and tenant's pro rata share of expense and tax
escalations), (ii) tenant's name, (iii) the commencement date and
expiration date thereof, (iv) the base rental rate per square foot, (v)
the amount of fixed monthly rental, (vi) the amount of any percentage
or other additional rental and/or common area maintenance, tax,
insurance and operating expenses and any other charges payable
thereunder, (vii) the amount of any prepayment or delinquency in rental
or other charges, (viii) the amount of the security deposit or any
other deposit thereunder, (ix) any free rent, concessions, rebates,
refunds, or other inducements which any tenant will be entitled to
receive after Closing, (x) any options provided thereunder, including,
without limitation, any renewal options, expansion options, purchase
options and rights of first refusal, and (xi) any fees or commissions
payable in regard to such Lease. The Rent Roll shall be certified in
writing by the applicable Partnership on or prior to the expiration of
the Study Period to the effect that it is true, complete, and correct
in all material respects as of the date shown on the Rent Roll and
that, to the best of Partnership's knowledge, there has been no
material adverse change with respect to any item shown on the Rent Roll
during the period from the date thereof to the date of such
certificate, except as shown thereon.
(3) To the extent in Partnership's possession or
reasonably available to Partnership, copies of all Authorizations
including, without limitation, all certificates of occupancy, permits,
authorizations, approvals (including drawings and enacting ordinances,
if any), special exceptions, variances, and licenses issued by
Governmental Authorities having jurisdiction over the Property and
copies of all certificates issued by the local board of fire
underwriters (or other body exercising similar functions) relating to
the Property. For the purpose of this Agreement any Submission Matters
in the possession of Partnership's management company shall be deemed
to be "reasonably available to Partnership."
(4) Operating and Financial Statements (herein so
called) showing all income and expenses, profits and losses of the
Property for the previous three (3) calendar years, which shall reflect
(i) ad valorem taxes for the City, County and State; (ii) expenses
incurred for such period for water, electricity, natural gas and other
utility charges; (iii) other operating expenses; (iv) total rents
collected from tenants for such periods; and (v) other revenue
collected and the nature of such revenue; and, to the extent in
Partnership's possession or reasonably available to Partnership,
financial statements for the Property for the previous three (3)
calendar years, including, if available, the reports of accountants
thereon.
13
<PAGE>
(5) A complete list of all Operating Agreements in
effect as of the date of this Agreement and complete copies of all such
Operating Agreements.
(6) The operating and capital expenditure budget
for the Property for the current calendar year and, to the extent in
Partnership's possession or reasonably available to Partnership, for
the previous three (3) calendar years.
(7) A complete list of all Tangible Personal
Property.
(8) A complete list of all Leased Property (if
any) and complete copies of all lease agreements related thereto.
(9) To the extent in Partnership's possession or
reasonably available to Partnership, any information in Partnership's
possession or reasonably available to Partnership regarding current
renditions or assessments on the Property or notices relative to change
in valuation for ad valorem taxes.
(10) A complete list of all Warranties and
Guaranties in effect as of the date of this Agreement and complete
copies of all such Warranties and Guaranties.
(11) Copies of all soil tests, structural engineering
tests, inspection reports, asbestos surveys, masonry tests, percolation
tests, water, oil, gas, mineral, radon, formaldehyde, PCB or other
environmental tests, audits or reports, market studies and site plans
related to the Property in Partnership's possession or reasonably
available to Partnership, together with copies of any and all
correspondence, reports and other written documentation regarding the
environmental aspects of the property or any toxic substances or
equipment affecting or related to the Property.
(12) To the extent in Partnership's possession or
reasonably available to Partnership, copies of complete sets of all
architectural, mechanical, structural and/or electrical plans and
specifications used in connection with the construction of or
alterations or repairs to the Property.
(13) To the extent in Partnership's possession or
reasonably available to Partnership, copies of as-built plans and
specifications for the Property.
(14) Parking, structural, mechanical or other
engineering reports or studies related to the Property, if any, in
Partnership's possession or reasonably available to Partnership.
(15) To the extent in the possession of Partnership
or any affiliate of Partnership or Partnership's property manager,
copies of credit reports and financial information on all tenants in
possession of any of the Property and of any guarantors of such
tenants' obligations.
14
<PAGE>
(16) Copies of Contributor's and Partnership's
Organizational Documents.
(17) Copies of all documents evidencing or
securing the Existing Secured Indebtedness and copies of all
correspondence from the holder of the Existing Notes since the date of
closing of the Existing Secured Indebtedness.
After the Study Period and thereafter until the Closing, Partnerships shall make
available to Prentiss, its agents, auditors, engineers, attorneys and other
designees, for inspection and/or copying, copies of any additional architectural
and engineering studies, surveys, title insurance policies, zoning and site plan
materials, material correspondence, environmental audits and reviews, and other
material information relating to the Property which are may come into any of the
Partnership's possession or control.
(c) Prentiss shall indemnify and defend Partnerships and
Contributors against any loss, damage or claim for personal injury or property
damage arising from the entry upon the Property pursuant to this Section 2.4 by
-----------
Prentiss or any agents, contractors or employees of Prentiss. Prentiss, at its
own expense, shall restore any damage to the Property caused by any of the tests
or studies made by Prentiss. This provision shall survive any termination of
this Agreement and a closing of the transaction contemplated hereby.
(d) Prentiss shall obtain, at Prentiss' sole cost and
expense, a Survey of the Land and the Improvements, prepared by a Surveyor
licensed to practice in the Commonwealth of Pennsylvania, bearing a date not
earlier than thirty (30) days from the date of its delivery, containing the
certificate attached hereto as Exhibit B, and conforming to the requirements set
---------
forth in such certificate. Prentiss shall cause the Title Company to furnish to
Partnership, at Prentiss' sole cost and expense, (i) a title insurance
commitment bearing an effective date subsequent to the date of this Agreement
issued by the Title Company covering the Real Property, binding the Title
Company to issue its 1992 Form ALTA Owner's Policy of Title Insurance (without a
creditors' rights exception), in form approved for use in the state where the
Property is located in favor of Partnership, showing title to the Real Estate to
be held currently by Partnership in a good, marketable and insurable condition
subject to the Permitted Title Exceptions, together with legible copies of all
documents identified in such title insurance commitment as exceptions to title
certified as true and complete by the Title Company (collectively, the "Title
-----
Commitment"), and (ii) reports of searches of the Uniform Commercial Code
- ----------
Records (collectively, the "UCC Reports") of (x) both the county and State in
-----------
which the Property is located with respect to the state of title to the Property
and (y) in the name of each Contributor and Donald H. Albrecht in the State in
which each resides or has its principal place of business. Within ten (10)
business days after Prentiss' receipt of the Title Commitment and Survey,
Prentiss shall notify Contributor and Partnership of any matters shown on the
Survey or identified in the Title Commitment or the UCC Reports, and which are
not included within the Permitted Title Exceptions, that Prentiss is unwilling
to accept (collectively, "Prentiss' Objections"). If any of Prentiss' Objections
--------------------
consist of delinquent taxes, mortgages, deeds of trust, security agreements,
construction or mechanics' liens, tax liens or other liens or charges in a fixed
sum or capable of computation as a fixed sum, then, to that extent,
notwithstanding anything herein to the contrary, Contributor shall be obligated
to pay and discharge (or bond against in a manner sufficient to cause the Title
Company to insure over such Prentiss' Objections) any such
15
<PAGE>
Prentiss' Objections (other than the documents securing the Existing Secured
Indebtedness), and Escrow Agent is authorized to pay and discharge at Closing
such Prentiss' Objections to the extent not paid and discharged or bonded
against at Closing. For such purposes, Partnership may use all or a portion of
the cash portion of the Contribution Value to close. Neither Contributor nor
Partnership shall be obligated to incur any expenses to cure any non-monetary
Prentiss' Objections unless Contributor or Partnership agrees to cure such non-
monetary Prentiss' Objections as hereinafter provided. Partnership or
Contributor shall notify Prentiss within ten (10) days after receipt of notice
of Prentiss' Objections whether Partnership agrees to cure such non-monetary
Prentiss' Objections. If Partnership or Contributor notifies Prentiss in writing
within such ten (10) day period that either agrees to cure such non-monetary
Prentiss' Objections, Partnership or Contributor shall correct such non-monetary
Prentiss' Objections on or before the Closing Date to the reasonable
satisfaction of Prentiss. If Partnership or Contributor does not notify Prentiss
within such ten (10) day period of its agreement to cure such non-monetary
Prentiss' Objections, Partnership and Contributor shall be deemed to have
elected not to cure such non-monetary Prentiss' Objections, and Prentiss shall
elect (1) to waive such non-monetary Prentiss' Objections without any abatement
in the Contribution Value or (2) to terminate this Agreement, in which case the
Deposit shall be promptly returned to Prentiss and the parties hereto shall be
released from all further obligations hereunder except those which expressly
survive a termination of this Agreement. Partnership shall not, after the date
of this Agreement, subject the Real Property to or permit or suffer to exist any
liens, encumbrances, covenants, conditions, restrictions, easements or other
title matters or seek any zoning changes or take any other action which may
affect or modify the status of title without Prentiss' prior written consent.
The Existing Secured Indebtedness and all title matters revealed by the Title
Commitment, UCC Reports and Survey and not objected to by Prentiss as provided
above (other than those rendering title defeasible and delinquent taxes,
mortgages, deeds of trust, security agreements and other liens and charges that
are to be paid at Closing as provided above) shall be deemed Permitted Title
Exceptions. Notwithstanding the foregoing, Prentiss shall not be required to
take title to the Real Property subject to any matters which may arise
subsequent to the effective date of the Title Commitment, UCC Reports and
Survey. If a title exception is disclosed by the Title Company which was not
shown in the Title Commitment or Survey and was not the result of Partnership's
acts or omissions, then, unless Partnership notifies Prentiss in writing by the
earlier of the Closing Date or the date which is ten (10) days following the
date the Title Company has notified Prentiss and Partnership of such title
exception that Partnership agrees to take such action as may be necessary to
release such title exception on or before the Closing Date, Prentiss may (i)
terminate this Agreement by written notice to Partnership, in which event the
Deposit shall be promptly returned to Prentiss and the parties hereto shall be
released from all further obligations hereunder except those which expressly
survive a termination of this Agreement, or (ii) waive its objections to such
title exception without any abatement in the Contribution Value.
ARTICLE III.
-----------
PARTNERSHIPS' AND CONTRIBUTORS' REPRESENTATIONS AND WARRANTIES
--------------------------------------------------------------
To induce Prentiss to enter into this Agreement and to accept the
Property, and to pay the Contribution Value therefor, each Partnership (and the
Contributors owning partnership interests in each such Partnership with respect
to the representations and warranties of a Partnership) hereby make the
following representations and warranties with respect to the Property, upon each
16
<PAGE>
of which Partnerships and Contributors acknowledges and agrees that Prentiss is
entitled to rely and has relied:
3.1 Organization and Power. Partnership, Terramics/Woodland Limited
----------------------
Partnership and Terramics Equity Limited Partnership are limited partnerships
duly formed and are validly existing and in good standing under the laws of the
State of New Jersey and are qualified to transact business in the State of New
Jersey. Terramics Property Associates ("TPA"), TPC Investors I Limited
---
Partnership and Terramics/JK Limited Partnership are limited partnerships duly
formed and are validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and TPA is qualified to transact business in the
State of New Jersey. Partnership and Contributor have all requisite powers and
all material governmental licenses, authorizations, consents and approvals to
carry on its business as now conducted and to enter into and perform their
respective obligations hereunder and under any document or instrument required
to be executed and delivered on behalf of Partnership and/or Contributor
hereunder. Either (i) each Partnership has previously made an election ("754
---
Election") under Section 754 of the Internal Revenue Code of 1986, and all such
- --------
elections are valid and currently in force, or (ii) to the extent that a
Partnership does not have a 754 Election in effect at this time, such
Partnership shall, if requested by Prentiss, file such election on its 1997
Federal income tax return for the period beginning January 1, 1997 and ending on
or after the Closing Date.
3.2 Authorization, Execution and Disclosure. Subject to approval of
---------------------------------------
OTR, this Agreement has been duly authorized by all necessary action on the part
of Partnership and Contributor, has been duly executed and delivered by
Partnership and Contributor, constitutes the valid and binding agreement of
Partnership and Contributor, and is enforceable in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting the rights of creditors
generally. Other than OTR, there is no other person or entity who has an
ownership interest in the Property or whose consent is required in connection
with Partnership's or Contributor's performance of its obligations hereunder
which has not been obtained. The persons executing this Agreement on behalf of
Partnership and Contributor have the authority to do so. Neither Contributor nor
Partnership has nor will intentionally conceal any information regarding the
Property which would render any of Partnership's or Contributor's warranties or
representations in this Agreement materially misleading.
3.3 Non-contravention. The execution and delivery of, and the
-----------------
performance by Partnership and Contributor of its obligations under, this
Agreement do not and will not (a) contravene, or constitute a default under, any
provision of (i) Partnership's or Contributor's Organizational Documents, (ii)
applicable law or regulation or any agreement, judgment, injunction, order,
decree or other instrument binding upon Partnership or Contributor or to which
the Property is subject, the result of which could have a material adverse
effect on the value of the Property or Contributor's ability to transfer its
interests in the Partnerships or Property to Prentiss and/or Partnership's or
Contributor's ability to perform its obligations under this Agreement, or (iii)
result in the creation of any lien or other encumbrance on any asset of
Partnership or Contributor. There are no outstanding agreements (written or
oral) pursuant to which Partnership or Contributor (or any predecessor to or
representative of Partnership or Contributor) has agreed to sell or has granted
an option or right of first refusal to purchase the Property or any part
thereof.
17
<PAGE>
3.4 No Special Taxes. Except as set forth on Schedule 3.4 attached
----------------
hereto, neither Partnership nor Contributors have knowledge of, nor have they
received any notice of, any special taxes or assessments relating to the
Property or any part thereof or any planned public improvements that may result
in a special tax or assessment against the Property.
3.5 Compliance with Existing Laws. To Partnership's knowledge,
-----------------------------
Partnership possesses all Authorizations, each of which is valid and in full
force and effect, and no provision, condition or limitation of any of the
Authorizations has been breached or violated. Partnership has no knowledge, nor
has it received notice within the past three years, of any existing or
threatened violation of any provision of any Applicable Laws including, but not
limited to, those of environmental agencies or insurance boards of underwriters
with respect to the ownership, operation, use, maintenance or condition of the
Property or any part thereof, or requiring any repairs or alterations to the
Property other than those that have been made prior to the date hereof, except
as set forth on Schedule 3.5 hereto.
------------
3.6 Personal Property. All of the Personal Property is owned by
-----------------
Partnership free and clear of all liens and encumbrances except for the Existing
Secured Indebtedness and those which will be discharged by Partnership at
Closing, and Partnership has good and merchantable title thereto.
3.7 Operating Agreements. There are no management, service, supply,
--------------------
maintenance, employment or other contracts in effect with respect to the
Property of any nature whatsoever, written or oral, other than the Operating
Agreements listed on Schedule 4 hereof. To Partnership's knowledge, Partnership
----------
has performed all of its obligations under each of the Operating Agreements in
all material respects and no fact or circumstance has occurred which, by itself
or with the passage of time or the giving of notice or both, would constitute a
default under any of the Operating Agreements. To Partnership's knowledge, all
other parties to the Operating Agreements have performed all of their
obligations thereunder in all material respects, and are not in default
thereunder in any material respect. Partnership has received no notice of any
intention by any of the parties to any of the Operating Agreements to cancel the
same, nor has Partnership canceled any of same.
3.8 Condemnation Proceedings; Roadways. Partnership has received no
----------------------------------
notice of any condemnation or eminent domain proceeding pending or threatened
against the Property or any part thereof. Partnership has no knowledge of any
change or proposed change in the route, grade or width of, or otherwise
affecting, any street, creek or road adjacent to or serving the Real Property.
3.9 Actions or Proceedings. There is no action, suit or proceeding
----------------------
pending or known to Partnership to be threatened against or affecting
Partnership or Contributor in any court, before any arbitrator or before or by
any Governmental Authority which (a) in any manner raises any question affecting
the validity or enforceability of this Agreement or any other agreement or
instrument to which Partnership or Contributor is a party or by which it is
bound and that is or is to be used in connection with, or is contemplated by,
this Agreement, (b) could materially and adversely affect the business,
financial position or results of operations of Partnership, Contributor or the
Property, (c) could materially and adversely affect the ability of Partnership
or Contributor
18
<PAGE>
to perform its obligations hereunder, or under any document to be delivered
pursuant hereto, (d) could create a lien on the Property, any part thereof or
any interest therein, (e) concerns any past or present employee of Partnership
or its managing agent or (f) could otherwise materially and adversely affect the
Property, any part thereof or any interest therein or the use, operation,
condition or occupancy thereof.
3.10 Labor and Employment Matters. Partnership is not a party to any
----------------------------
oral or written employment contracts or agreements with respect to the Property.
Partnership's management company employs its employees on an at-will basis,
without written contracts.
3.11 Financial Information and Submission Matters. To Partnership's
--------------------------------------------
knowledge, all of Partnership's financial information for the years 1994 through
1997, including, without limitation, all books and records and financial
statements ("Financial Information") is correct and complete in all material
---------------------
respects and presents accurately the results of the operations of the Property
and the condition of Partnership for the periods indicated. Since the date of
the last financial statement included in Partnership's Financial Information,
there have been no material adverse change in the financial condition or in the
operations of the Partnership or the Property.
3.12 Bankruptcy. No Act of Bankruptcy has occurred with respect to
----------
Partnership or Contributor.
3.13 Hazardous Substances. To Partnership's knowledge, neither
--------------------
Partnership nor any previous owner, tenant, occupant or user of the Property,
nor any other person, has engaged in or permitted any operations or activities
upon, or any use or occupancy of the Property or any portion thereof, for the
purpose of or in any way involving the handling, manufacture, treatment,
storage, use, generation, release, discharge, refining, dumping or disposal of
any Hazardous Materials on, under, in or about the Property in violation of any
Applicable Laws. To Partnership's knowledge, no Hazardous Materials have
migrated from or to the Property upon, about, or beneath other properties in
violation of any Environmental Requirements. To Partnership's knowledge, neither
the Property nor its existing or prior uses fail or failed to materially comply
with Environmental Requirements. Partnership has no knowledge of any permits,
licenses or other authorizations which are required under any Environmental
Requirements with regard to the current uses of the Property which have not been
obtained and complied with. To Partnership's knowledge, neither Partnership nor
any prior owner, occupant or user of the Property has received any written
notice concerning any alleged violation of Environmental Requirements in
connection with the Property or any liability for Environmental Damages in
connection with the Property for which Partnership (or Prentiss after Closing)
may be liable. To Partnership's knowledge, no Hazardous Materials are
constructed, deposited, stored or otherwise located on, under, in or about the
Property in violation of any Environmental Requirements. To Partnership's
knowledge, there exists no writ, injunction, decree, order or judgment
outstanding, nor any lawsuit, claim, proceeding, citation, summons or
investigation, pending or threatened, relating to any alleged violation of
Environmental Requirements on the Property, or from the suspected presence of
Hazardous Materials thereon, or relating to any Environmental Damages. Except as
set forth on Schedule 3.13 attached hereto, to Partnership's knowledge, no
-------------
underground or above ground chemical treatment or storage tanks, or gas or oil
wells are located on the Property. The representations and warranties made by
Partnership in this Section 3.13 shall be subject to and shall be deemed to
------------
include the matters disclosed in the
19
<PAGE>
environmental reports delivered by Partnership to Prentiss pursuant to Section
-------
2.4(b)(11) hereof and the matters disclosed in any environmental reports or
- ----------
studies obtained by Prentiss pursuant to Section 2.4(a) hereof.
--------------
3.14 Parties in Possession. There are no parties in possession of the
---------------------
Property except for tenants under written leases, copies of which will be
delivered to Prentiss pursuant to the terms hereof.
3.15 Leases. There are no leases, concessions or occupancy agreements
------
in effect with respect to the Real Property other than the Leases listed on
Schedule 3; and Schedule 3 attached hereto is a complete and correct list of all
- ---------- ----------
Leases in effect on the date of this Agreement. To Partnership's knowledge, no
party is in default under any Lease except as set forth on Schedule 3. To
----------
Partnership's knowledge, Partnership has performed all obligations heretofore
required of it under all of the Leases and there remain no unfulfilled
obligations of Partnership under the Leases as of the date hereof, the
nonperformance of which could entitle a tenant to damages under such Lease or
could cause Partnership to be in default under such Lease. No tenant has given
notice to Partnership of its intention to institute litigation with respect to
any Lease. None of the Leases and none of the rents or other amounts payable
thereunder have been assigned, pledged or encumbered except for any assignments,
pledges or encumbrances which will be fully released on or before the Closing
Date, except to the holders of the Existing Secured Indebtedness.
3.16 Leased Property. To Partnership's knowledge, all leases of the
---------------
Leased Property, if any, are in good standing and free from default, except to
the extent set forth in the Rent Roll.
3.17 No Unpaid Charges. There are no unpaid charges, debts,
-----------------
liabilities, claims or obligations arising from the construction, occupancy,
ownership, use or operation of the Property which could give rise to any
mechanic's or materialmen's or other statutory lien against the Property, or any
part thereof, or for which Prentiss will be responsible.
3.18 Condition of Improvements. To Partnership's knowledge, Partnership
-------------------------
has not received (i) any outstanding uncured notice from any third party (other
than a tenant) alleging that any of the Improvements are defective in design or
construction are not in substantially good condition and repair, have roof
leaks, or that any mechanical systems are not in reasonable working order and
repair, or that Partnership has failed to operate the Property in a commercially
reasonable manner consistent with a modern office building, nor (ii) from any
tenant of the Property, any outstanding uncured notice of any such defects which
constitute a material default on the part of the Partnership under any of the
Leases, except in either case for those matters set forth on Schedule 2 hereto;
----------
provided, however, the foregoing representations and warranties shall not
include any representation or warranty as to the aesthetic or other subjective
quality of the design of the Property or any system, element or component
thereof.
3.19 Access. Partnership has no knowledge of any pending or threatened
------
governmental proceeding or any other fact or condition which would limit or
result in the termination of the Property's existing access to and from public
streets or roads.
3.20 No Commitments. No commitments have been made to any Governmental
--------------
Authority, utility company, school board, church or other religious body, or any
homeowners'
20
<PAGE>
association or any other organization, group or individual, relating to the
Property which would impose an obligation upon Prentiss to make any contribution
or dedication of money or land or to construct, install or maintain any
improvements of a public or private nature on or off the Property. Without
limiting the generality of the foregoing, Partnership is not a party to any
paving agreements or undertakings, payback agreements, revenue bonds or utility
debt service agreements.
3.21 "Foreign Person". Neither Contributor nor Partnership is a
----------------
"foreign person" within the meaning of Section 1445 of the Internal Revenue
--------------
Code, as amended (i.e., neither Contributor nor Partnership is a foreign
corporation, foreign partnership, foreign trust, foreign estate nor foreign
person as those terms are defined in the Internal Revenue Code and regulations
promulgated thereunder).
3.22 Leasing Commissions. No brokerage or leasing commissions or other
-------------------
compensations are due or payable to any person, firm, corporation or other
entity with respect to or on account of any of the Leases or any extension or
renewals thereof, except as set forth on the Rent Roll to be delivered to
Prentiss pursuant to Section 2.4 hereof.
-----------
3.23 Other Agreements. There are no options, contracts or other
----------------
obligations outstanding for the sale, exchange or transfer of any of the
Property or any interest therein which would be superior to the rights of
Prentiss under this Agreement or which would survive Closing, except for the
various rights of tenants to lease space by reason of rights of renewal, first
refusal, first offer, expansion and the like as set forth in the Leases.
3.24 Partners. The list of partners in Partnership delivered by
--------
Partnership to the Operating Partnership pursuant to Section 6.7 hereof is true,
-----------
correct and complete as of the date of this Agreement. Each Contributor is the
record and beneficial owner of, and has good title to, its respective
partnership interest in Partnership, free and clear of all liens, security
interests, assignments, options and adverse claims to title of any kind or
character, and such partnership interest is not the subject of any agreement
providing for the sale and transfer thereof. All tax returns for federal, state
and local income, excise, sales and use, personal property and franchise taxes
required by law to be filed by the Partnerships prior to the date of this
Agreement have been filed (or extensions to file have been obtained), and all
taxes, if any, shown on such returns, together with any interest or penalties
thereon, have been paid. All such tax returns required by law to be filed by the
Partnerships prior to the Closing will be paid (or extensions to file will be
obtained), and all taxes, if any, shown on such returns, together with any
interests or penalties thereon, will be paid. None of the Partnerships have
engaged in any business other than owning, leasing and operating the Property.
None of the Partnerships own, directly or indirectly, any capital stock or
interest in any partnership, corporation or other entity or business enterprise
other than the Property. Other than the partnership interests in favor of
Contributor and OTR, there are no partnership interests or other ownership
interests in the Partnerships, and there are no obligations of any of the
Partnerships to issue any interests in any of the Partnerships other than the
partnership interests in Contributor and OTR.
3.25 Existing Secured Indebtedness. The only debt secured by liens on
-----------------------------
the Property, or any portion thereof, which will not be released and discharged
as of the Closing is the Existing Secured Indebtedness. The descriptions of the
Existing Secured Indebtedness, the Existing Note
21
<PAGE>
and Existing Liens on Exhibit D hereto are true and correct. Partnership is not
in default under the Existing Note or the Existing Liens, and no event has
occurred which, with the passage of time or the giving of notice, or both, would
constitute a default thereunder.
3.26 LIMITATIONS ON REPRESENTATIONS AND WARRANTIES. PRENTISS HEREBY
---------------------------------------------
AGREES AND ACKNOWLEDGES THAT, EXCEPT AS SET FORTH IN THIS ARTICLE 3, OR AS
OTHERWISE EXPRESSLY STATED HEREIN OR IN ANY DOCUMENTS EXECUTED IN CONNECTION
HEREWITH, NEITHER PARTNERSHIP NOR CONTRIBUTOR, NOR ANY AGENT, ATTORNEY, EMPLOYEE
OR REPRESENTATIVE OF PARTNERSHIP OR CONTRIBUTOR, HAS MADE ANY REPRESENTATION
WHATSOEVER REGARDING THE SUBJECT MATTER OF THIS TRANSACTION, OR ANY PART
THEREOF, INCLUDING (WITHOUT LIMITING THE GENERALITY OF THE FOREGOING)
REPRESENTATIONS OR WARRANTIES AS TO THE PHYSICAL NATURE OR CONDITION OF THE
PROPERTY OR THE CAPABILITIES THEREOF, AND THAT PRENTISS, IN EXECUTING,
DELIVERING AND/OR PERFORMING THIS AGREEMENT, DOES NOT RELY UPON ANY STATEMENT
AND/OR INFORMATION TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR
IN WRITING, BY ANY INDIVIDUAL, FIRM OR CORPORATION EXCEPT THOSE EXPRESSLY
CONTAINED HEREIN OR DELIVERED PURSUANT THERETO OR IN ANY DOCUMENTS EXECUTED IN
CONNECTION HEREWITH. EXCEPT AS OTHERWISE PROVIDED HEREIN, PRENTISS AGREES TO
ACCEPT THE PROPERTY AND INTERESTS THEREIN "AS IS," AS OF THE DATE HEREOF,
REASONABLE WEAR AND TEAR EXCEPTED. IN ADDITION, EXCEPT AS SET FORTH HEREIN,
PARTNERSHIP AND CONTRIBUTOR MAKE NO REPRESENTATIONS OR WARRANTIES REGARDING THE
COMPLIANCE WITH ANY ENVIRONMENTAL REQUIREMENTS, INCLUDING THE EXISTENCE IN OR ON
THE PROPERTY OF HAZARDOUS MATERIALS. THE PROVISIONS OF THIS PARAGRAPH SHALL
SURVIVE THE CLOSING OR ANY TERMINATION HEREOF.
Each of the representations and warranties contained in this Article III and its
-----------
various subparagraphs are intended for the benefit of Prentiss and may be waived
in whole or in part. All rights and remedies arising in connection with the
untruth or inaccuracy of any such representations and warranties shall survive
the Closing of the transaction contemplated hereby as provided in Section 10.12
-------------
hereof, except to the extent that Partnership or Contributor gives Prentiss
written notice prior to Closing of the untruth or inaccuracy of any
representation or warranty or Prentiss otherwise obtains actual knowledge prior
to Closing of the untruth or inaccuracy of any representation or warranty, and
Prentiss nevertheless elects to close this transaction. Prentiss shall be deemed
to have actual knowledge of the untruth or inaccuracy of any representation or
warranty only if (i) Prentiss receives written notice from Partnership or
Contributor satisfying the foregoing requirements, or (ii) Thomas F. August,
Michael V. Prentiss and/or William J. Reister has actual knowledge of any such
untruth or inaccuracy, or (iii) the matter in question is disclosed in a tenant
estoppel certificate, Survey, Title Commitment, written environmental report or
study, or any other third party written report or study delivered to or obtained
by Prentiss prior to Closing. Except to the extent otherwise expressly provided
in the immediately preceding sentence, no investigation, audit, inspection,
review or the like conducted by or on behalf of Prentiss shall be deemed to
terminate the effect of any such representations,
22
<PAGE>
warranties and covenants, it being understood that Prentiss has the right to
rely thereon and that each such representation and warranty constitutes a
material inducement to Prentiss to execute this Agreement and to close the
transaction contemplated hereby and to pay the Contribution Value to
Partnership.
If any of Partnership's or Contributor's representations and warranties made
hereunder are found or known by Prentiss to be incorrect prior to Closing to the
extent they affect the Property or its operation in any material respect,
Prentiss shall inform Partnership and Contributor in writing and Prentiss' sole
remedy, except as otherwise expressly provided in clause (a)(ii) of the first
sentence of Section 9.2 hereof, shall be termination of this Agreement on
-----------
account thereof and refund of the Deposit. If Prentiss elects not to so
terminate this Agreement, any remedy of Prentiss for breach of warranties and
representations made prior to the Closing shall be deemed to be irrevocably
waived. Notwithstanding anything to the contrary contained in this Article, if
Partnership or Contributor breaches any representation or warranty and if prior
to Closing Prentiss notifies Partnership or Contributor that it elects to
terminate this Agreement on account of such breach, Partnership or Contributor
may by written notice to Prentiss given or before the Closing Date agree to cure
the breach (which breach must be cured on or before the Closing Date unless a
cash reserve is established for such purpose in an amount equal to 125% of the
amount reasonably estimated by Prentiss for cure), and Prentiss shall thereupon
be obligated to close the transaction and accept such cure as Prentiss' sole
remedy for such breach; provided that Prentiss shall not be required to accept a
cash reserve if the problem or breach in question precludes a lender of Prentiss
from closing a loan for any financing incidental to this transaction.
The term "to Partnership's knowledge" or "to Contributor's knowledge" or similar
-------------------------- ---------------------------
phrase shall mean the knowledge of Henry C. Gulbrandsen, Jr., Peter O. Hausmann
and/or Timothy J. Weber following an inquiry of the personnel involved in the
operation, ownership, maintenance and management of the Property and of its
current manager for the Property, and such inquiry shall include the direction
by Partnership to its personnel and manager to perform a review of all relevant
files in their possession relating to the operation, ownership, maintenance and
management of the Property. Partnership and Contributor covenant that if prior
to Closing either shall obtain actual knowledge that any of the facts
represented and warranted by Partnership or Contributor under this Agreement are
or become untrue or inaccurate in any material respect, they will promptly
inform Prentiss in writing of the discovery.
ARTICLE IV.
-----------
PRENTISS' REPRESENTATIONS AND WARRANTIES
----------------------------------------
To induce Contributors to enter into this Agreement and to transfer
their interests in the Partnerships and Property, Prentiss (and Company and OP
General Partner, by their joinder herein, solely as to the representations and
warranties relating to Company, OP General Partner and their respective
operations) hereby make the following representations and warranties, upon each
of which Prentiss (and the Company and OP General Partner, by their joinder
herein) acknowledge and agree that Partnership and Contributor are entitled to
rely and have relied:
4.1 Organization and Power. Prentiss and OP General Partner are duly
----------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and have all
23
<PAGE>
corporate and/or partnership powers and all governmental licenses,
authorizations, consents and approvals required to carry on their business as
now conducted and to enter into and perform their obligations as contemplated by
this Agreement and any document or instrument required to be executed and
delivered as contemplated by this Agreement. The Partnership Agreement of
Prentiss which has been delivered to Partnership is a true and correct copy
thereof, including all exhibits and addenda thereto, and the same is in full
force and effect in accordance with its terms and has not been modified,
supplemented or amended.
4.2 Non-contravention. The execution and delivery of this Agreement and
-----------------
the performance by Prentiss of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law or
regulation, or any agreement, judgment, injunction, order, decree or other
instrument binding upon Prentiss or OP General Partner or result in the creation
of any lien or other encumbrance on any asset of Prentiss or OP General Partner.
4.3 Litigation. There is no action, suit or proceeding, pending or
----------
known to be threatened, against or affecting Prentiss, OP General Partner or the
Company in any court or before any arbitrator or before any Governmental
Authority which (a) in any manner raises any question affecting the validity or
enforceability of this Agreement or any other agreement or instrument to which
Prentiss, OP General Partner or the Company is a party or by which it is bound
and that is to be used in connection with, or is contemplated by, this
Agreement, (b) could materially and adversely affect the business, financial
position or results of operations of Prentiss, OP General Partner or the
Company, or (c) could materially and adversely affect the ability of Prentiss to
perform its obligations hereunder, or under any document to be delivered
pursuant hereto.
4.4 Bankruptcy. No Act of Bankruptcy has occurred with respect to
----------
Prentiss, OP General Partner or the Company.
4.5 Issuance of Units. On the Closing Date, or such earlier date as
-----------------
required by this Agreement, the Partnership Agreement shall be amended to
provide for the issuance of the Units to Partnership and/or any Unit Recipient
which will receive Units. The Units to be issued in connection with the
transactions herein contemplated have been, or prior to the Closing Date will
have been, duly authorized for issuance by the Operating Partnership and by OP
General Partner on behalf of the Operating Partnership to Partnership and/or
such Unit Recipients which will receive Units, and on the Closing Date will be
validly issued. The rights and obligations of Unit holders will be set forth in
the Partnership Agreement, this Agreement and the Registration Rights Agreement.
4.6. Securities Filings. Each of the Company and the Operating
------------------
Partnership has filed all required documents with the SEC since January 1, 1997
including, without limitation, the Annual Report on Form 10-K for the year ended
December 31, 1996 of the Company and the Operating Partnership (collectively,
the "SEC Documents"). To the knowledge of the Company and Operating Partnership
(defined and limited for purposes of this Section 4.6 and Section 4.7 as
---------------------------
information contained in any actual notice received by Company or the Operating
Partnership or information within the actual knowledge of Michael V. Prentiss,
Thomas F. August and/or William J. Reister), (i) as of their respective dates,
the SEC Documents complied in all material
24
<PAGE>
respects with the requirements of the Securities Act or Exchange Act, as the
case may be, and, at the respective times they were filed, none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, (ii) the consolidated financial statements (including any notes
thereto) of the Company included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except, in the case of
the unaudited statements, as permitted by From 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly presented in all material respects the
consolidated financial position of the Company as at the respective dates
thereof and the consolidated results of their operations and their consolidated
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein), and (iii) except as disclosed in the SEC Documents or as
required by generally accepted accounting principles, the Company has not, since
June 30, 1997, made any material change in the accounting practices or policies
applied in the preparation of financial statements.
4.7 Absence of Certain Changes or Events. To the knowledge of Operating
------------------------------------
Partnership and Company, except as disclosed in SEC Documents filed with the SEC
prior to the date of this Agreement, since January 1, 1997, (a) neither the
Company nor the Operating Partnership has sustained any loss or interference
with its business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that has had a material adverse
effect on the Company or the Operating Partnership, and (b) there has been no
event causing a material adverse effect on the Company or the Operating
Partnership, excluding any changes and effects resulting from changes in
economic, regulatory or political conditions or changes in conditions generally
applicable to the industry in which the Company or the Operating Partnership is
involved.
ARTICLE V.
----------
CONDITIONS PRECEDENT
--------------------
5.1 As to Prentiss' Obligations. Prentiss' obligations hereunder are
---------------------------
subject to the satisfaction of the following conditions precedent:
(a) Partnership's Deliveries. Each Partnership and Contributor
------------------------
shall have delivered to or for the benefit of Prentiss, on or before the Closing
Date, all of the documents and other information required of them pursuant to
Sections 7.2 and 7.4 hereof.
- --------------------
(b) Representations, Warranties and Covenants; Obligations of
---------------------------------------------------------
Partnership; Certificate. Each Partnership's and Contributor's representations
- ------------------------
and warranties made in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date as if then made; each
Partnership and Contributor shall have performed in all material respects all of
its covenants and other obligations under this Agreement; and each Partnership
and Contributor shall have executed and delivered to Prentiss at Closing a
certificate, to the best of their knowledge and belief, to the foregoing effect.
Notwithstanding the foregoing,
25
<PAGE>
if there shall be any changes in facts, circumstances or events occurring after
the date hereof and before the Closing Date which would render any Partnership
or Contributor representations or warranties untrue in any material respect and
of which Prentiss is notified or has knowledge, (i) to the extent the status of
the matter in question nonetheless conforms to an express performance threshold
set forth in this Agreement (for example, tenant defaults which would not
violate the condition of subsection (h) below), then there shall be no effect
caused thereby to the rights and obligations of the parties, (ii) to the extent
the status of the matter in question is governed by an express provision
elsewhere set forth in this Agreement (for example, casualty damage), then such
other express provision shall govern, and (iii) for any other change which is
not attributable to the fault of Contributor or Partnership and which can be
cured by the expenditure of a reasonably ascertainable sum of money in an amount
less than $1,000,000, Partnership or Contributor shall have the option, in order
to cause Prentiss to consummate the Closing, to establish a monetary reserve as
security for a cure equal to 125% of the amount reasonably estimated by Prentiss
to be necessary for such cure; provided that Prentiss shall not be required to
accept a monetary reserve if the matter in question precludes a lender of
Prentiss from closing a loan for any financing incidental to this transaction.
(c) Title Insurance. Good and marketable title to the Real
---------------
Property shall be insurable as such by the Title Company, subject only to
Permitted Title Exceptions as determined in accordance with Section 2.4 hereof
-----------
and including, without limitation, all applicable deletions of standard
exceptions and endorsements permitted under applicable state law which are
customarily required by institutional investors purchasing property comparable
to the Property.
(d) Condition of Improvements. The Improvements and the
-------------------------
Tangible Personal Property (including but not limited to the mechanical systems,
plumbing, electrical, wiring, appliances, fixtures, heating, air conditioning
and ventilating equipment, elevators, boilers, equipment, roofs, structural
members and furnaces) shall be in substantially the same condition at Closing as
they are as of the date hereof, reasonable wear and tear excepted. Partnership
shall not have removed or caused or permitted to be removed any part or portion
of the Real Property or the Tangible Personal Property without Prentiss' prior
written consent unless the same is replaced, prior to Closing, with a similar
item of at least equal suitability, quality and value, free and clear of any
lien or security interest.
(e) Utilities. All of the Utilities shall be installed in and
---------
operating at the Property, and service shall be available for the removal of
garbage and other waste from the Property.
(f) Due Diligence Materials. All rent rolls, lists, schedules
-----------------------
and other documents prepared by Contributor or Partnership and furnished to
Prentiss pursuant to the requirements of this Agreement shall be true and
correct in all material respects when so furnished, except for inaccuracies as
to which Prentiss was given written notice by Partnership or Contributor or
otherwise had actual knowledge prior to the end of the Study Period.
(g) Unit Recipient Certifications. Each Unit Recipient (including
-----------------------------
within such definition for purposes of this subsection (g) a Partnership, if and
to the extent it is to receive any Units), shall deliver to Prentiss a written
statement wherein it shall represent, warrant and covenant as follows:
26
<PAGE>
(1) Unit Recipient is an "accredited
----------
investor" within the meaning of Rule 501(a) promulgated under
--------
the Securities Act of 1933, as amended (the "Securities Act").
--------------
Unit Recipient understands the risks of, and other
considerations relating to, the acquisition of the Units. Unit
Recipient, by reason of its business and financial experience,
together with the business and financial experience of those
persons, if any, retained by it to represent or advise it with
respect to its investment in the Units, (i) has such
knowledge, sophistication and experience in financial and
business matters and in making investment decisions of this
type, that it is capable of evaluating the merits and risks of
an investment in the Operating Partnership and of making an
informed investment decision, (ii) is capable of protecting
its own interests or has engaged representatives or advisors
to assist it in protecting its interests and (iii) is capable
of bearing the economic risk of such investment.
(2) The Units to be issued to each Unit
Recipient will be acquired by each Unit Recipient for its own
account for investment only and not with a view to, or with
any intention of, a distribution or resale thereof, in whole
or in part, or the grant of any participation therein until
the Units are redeemed for Common Stock of the Company
following the lock-up period specified in the Registration
Rights Agreement and this Agreement in accordance with the
Partnership Agreement and the Registration Rights Agreement.
Unit Recipient shall confirm that all documents, records, and
books pertaining to investment in the Operating Partnership
and requested Unit Recipient have been made available or
delivered to Unit Recipient. Unit Recipient has had an
opportunity to ask questions of and receive answers from the
Operating Partnership, or from a person or persons acting on
the Operating Partnership's behalf, concerning the terms and
conditions of the transaction contemplated by this Agreement
and its acquisition of Units. Unit Recipient has relied upon,
and is making its investment decisions, solely upon such
information as has been provided to Unit Recipient by the
Operating Partnership. Unit Recipient was not formed for the
specific purpose of acquiring an interest in the Operating
Partnership.
(3) Unit Recipient acknowledges that (i) the
Units to be issued to Unit Recipient have not been registered
under the Securities Act or state securities laws by reason of
a specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws, (ii) the
Operating Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the
representations and warranties of Unit Recipient referred to
herein, and in the Prospective Subscriber Questionnaires
delivered to Prentiss pursuant to Section 6.7 hereto, (iii)
-----------
such Units, therefore, cannot be resold unless registered
under the Securities Act and applicable state securities laws,
or unless an exemption from registration is available, (iv)
there is no public market for such Units, and (v) the
Operating Partnership has no obligation or intention to
register such Units for resale under the Securities Act or any
state securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws. Unit Recipient hereby acknowledges that because of
27
<PAGE>
the restrictions on transfer or assignment of such Units to be
issued hereunder which are set forth in this Agreement and in
the Partnership Agreement, Unit Recipient may have to bear the
economic risk of the investment commitment evidenced by this
Agreement and any Units acquired hereby for an indefinite
period of time, and that, under the terms of the Partnership
Agreement of the Operating Partnership, as it will be in
effect on the Closing Date, Units will not be redeemable at
the request of the holder thereof for Common Stock of the
Company prior to the first (1st) anniversary of their
issuance.
(4) The address of Unit Recipient's
residence or principal place of business, as applicable, shall
be set forth, together with a statement as to whether such
Unit Recipient has any present intention of becoming a
resident of any country, state or jurisdiction other than the
country and state in which it present principal place of
business or residence, as applicable, is sited.
(h) No Additional Proceedings; Tenant Defaults. Except for
------------------------------------------
matters as to which Prentiss was given written notice by Partnership or
otherwise had actual knowledge prior to the end of the Study Period, on the
Closing Date, there shall be no (a) litigation pending or threatened, seeking
(i) to enjoin the consummation of the transaction hereunder, (ii) to recover
title to the Property, or any part thereof or any interest therein, (iii) to
increase materially ad valorem taxes theretofore assessed against any of the
Property, (iv) to materially restrict the operation of the Property by reason of
the violation of any law, rule, regulation, restrictive covenant or zoning
ordinance that may be applicable to the Property, or (v) damages or other relief
by any tenant(s) on account of a default by one or more Partnerships under any
Leases which constitutes a Material Tenant Occurrence (as hereinafter defined),
or (b) monetary or other material default by any tenant(s) which constitute a
Material Tenant Occurrence. As used herein, "Material Tenant Occurrence" means
one or more events or occurrences involving one or more tenant(s) of the
Property (taken for this purpose as all of the Property encompassed by this
Agreement) who lease, in the aggregate, at least 7,500 rentable square feet of
area and who, by reason of the event(s) or occurrence(s) in question, are deemed
by Prentiss (in its reasonable business judgment) to be unlikely to continue
their tenancy or to substantially perform their lease obligations.
(i) Estoppel Letters. The estoppel letters to be delivered at
----------------
Closing pursuant to Section 7.2(g) hereof shall have been obtained and delivered
--------------
and shall reflect no facts at material variance with the facts disclosed on the
Rent Roll and records provided to Prentiss during the Study Period. For these
purposes, any changes in facts or circumstances occurring after delivery of the
Rent Roll which do not constitute a Material Tenant Occurrence, and which do not
result from a default on the part of Partnership(s), shall not be deemed
material.
(j) Offering of Units. There shall have been no change in any
-----------------
securities or related law or interpretation, nor any change in Partnership's or
any Unit Recipient's status as "accredited investors" under the Securities Act,
that would render consummation of the transfer of the partnership interests for
Units as contemplated by this Agreement a violation of any such laws or
interpretations thereof.
28
<PAGE>
(k) OTR Agreement. OTR shall have performed all of its obligations
-------------
under the OTR Agreement.
(l) Lender Estoppel Letters. The lender estoppel letters to be
-----------------------
delivered at Closing shall have been obtained and delivered and shall reflect no
facts at material variance with the facts represented and warranted to Prentiss
hereunder.
(m) Simultaneous Closings. There shall occur, simultaneously
---------------------
with Closing hereunder, (1) closing under (i) the OTR Agreement, (ii) the
Contribution Agreement among Prentiss, certain affiliates of Partnerships and
the partners of such affiliates with respect to assets in Pennsylvania, and
(iii) the Agreement to Assign Property Agreements and Other Assets among
Prentiss, Terramics Management Company, Terramics Property Associates and
Terramics Property Company, and (2) the execution and delivery of the Right of
First Opportunities Agreements between Prentiss and certain affiliates of
Partnerships covering other assets owned by such affiliates, and (3) the
execution and delivery of any other agreements and the satisfaction of any other
conditions precedent which may be required by Prentiss as a condition to
proceeding to Closing and which are identified prior to the end of the Study
Period and agreed to by Contributors.
Each of the conditions contained in this Section 5.1 are intended for the
-----------
benefit of Prentiss and may be waived in whole or in part, by Prentiss, but only
by an instrument in writing signed by Prentiss.
5.2 As to Contributors' Obligations. Contributors' obligations
-------------------------------
hereunder are subject to the satisfaction of the following conditions precedent:
(a) Prentiss' Deliveries. Prentiss shall have delivered to or
--------------------
for the benefit of Contributors, on or before the Closing Date, all of the
documents and payments required of Prentiss pursuant to Sections 7.3 and 7.4
--------------------
hereof.
(b) Representations, Warranties and Covenants; Obligations of
---------------------------------------------------------
Prentiss. All of Prentiss' representations and warranties made in this Agreement
- --------
shall be true and correct in all material respects as of the date hereof and as
of the date of Closing as if then made and Prentiss shall have performed in all
material respects all of its covenants and other obligations under this
Agreement.
(c) Simultaneous Closing under OTR Agreement. There shall
----------------------------------------
occur, simultaneously with Closing hereunder, closing under the OTR Agreement;
provided, the foregoing shall not limit the remedy in favor of Prentiss set
forth in Section 9.2(c) hereof.
--------------
Each of the conditions contained in this Section are intended for the benefit of
Contributors and may be waived in whole or in part, by Contributors, but only by
an instrument in writing signed by Contributors.
29
<PAGE>
ARTICLE VI.
-----------
COVENANTS OF PARTNERSHIPS AND CONTRIBUTORS
------------------------------------------
To induce Prentiss to enter into this Agreement and to pay the
Contribution Value to Contributors, each Partnership (and each Contributor shall
cause each Partnership to comply with the following, provided, such agreement by
Contributor shall not alter any Contributor's status as a limited partner under
applicable partnership law as to any third party) covenants and agrees to the
following:
6.1 Operating Agreements. Partnership shall not enter into any new
--------------------
management agreement, maintenance or repair contract, supply contract, lease in
which it is lessee or other agreements with respect to the Property, nor shall
Partnership enter into any agreements modifying the Operating Agreements in any
material respect, unless (a) any such agreement or modification is terminable
without substantial penalty on 30 days' notice or (b) Partnership has obtained
Prentiss' prior written consent to such agreement or modification. Partnership
agrees to cancel and terminate effective as of the Closing Date any Operating
Agreements which are terminable without substantial penalty if Prentiss requests
in writing prior to the expiration of the Study Period that such agreements be
so terminated.
6.2 Warranties and Guaranties. Partnership shall not release or modify
-------------------------
any Warranties and Guaranties, if any, except with the prior written consent of
Prentiss.
6.3 Insurance. Partnership shall pay all premiums on, and shall not
---------
cancel or voluntarily allow to expire, any of Partnership's Insurance Policies
unless such policy is replaced, without any lapse of coverage, by another policy
or policies providing coverage at least as extensive as the policy or policies
being replaced.
6.4 Independent Audit. The parties acknowledge that Partnership and its
-----------------
management company have provided to Prentiss' representatives and independent
accounting firm access to financial and other information relating to the
Property in the possession of or otherwise available to Partnership, its
affiliates or Partnership's management company which is sufficient to enable
Prentiss' representatives and independent accounting firm to prepare, at
Prentiss' expense, audited financial statements for 1994, 1995 and 1996 in
conformity with generally accepted accounting principles and to enable them to
prepare such statements, reports or disclosures as Prentiss may deem necessary
or advisable. Partnership shall also provide and/or shall cause its management
company to provide to Prentiss' independent accounting firm, promptly following
execution of this Agreement, a signed representation letter which would be
sufficient to enable an independent public accountant to render an opinion on
the financial statements related to the Property. Partnership shall authorize
and shall cause its management company to authorize any attorneys who have
represented Partnership or its management company in material litigation
pertaining to or affecting the Property to respond, at Prentiss' expense, to
inquiries from Prentiss' representatives and independent accounting firm. If and
to the extent Partnership's financial statements pertaining to the Property for
any periods during the years 1994, 1995 or 1996 have been audited, promptly
after the execution of this Agreement Partnership shall provide Prentiss with
copies of such audited financial statements and shall cooperate with Prentiss'
representatives and independent public accountants to enable them to contact the
auditors who prepared such
30
<PAGE>
audited financial statements and to obtain, at Prentiss' expense, a reissuance
of such audited financial statements.
6.5 Operation of Property Prior to Closing. Partnership covenants and
--------------------------------------
agrees with Prentiss that, between the date of this Agreement and the date of
Closing (and each Contributor shall cause each Partnership to comply with the
following, provided, such agreement shall not alter Contributor's status as a
limited partner under applicable partnership law as to any third party):
(a) Subject to the restrictions contained herein, Partnership
shall operate the Property in substantially the same manner in which Partnership
operated the Property prior to the execution of this Agreement, so as to keep
the Property in good condition, reasonable wear and tear excepted.
(b) Partnership shall maintain its books of account and
records in the usual, regular and ordinary manner, in accordance with sound
accounting principles applied on a basis consistent with the basis used in
keeping its books in prior years.
(c) Partnership shall maintain in full force and effect all
Insurance Policies.
(d) Partnership shall punctually perform and discharge all
obligations and undertakings of Partnership under the Leases and shall not
permit a default by Partnership to occur thereunder.
(e) Partnership shall use and operate the Property in
compliance with Applicable Laws and the requirements of any mortgage, Lease,
Operating Agreement and Insurance Policy affecting the Property.
(f) Partnership shall cause to be paid prior to delinquency
all ad valorem and other taxes due and payable with respect to the Property or
its operation.
(g) Without the express prior written consent of Prentiss
(which shall not be unreasonably withheld), Partnership shall not: (i) enter
into new Leases of any kind or nature affecting the Property; or (ii) grant a
renewal or extension of any existing Lease, or consent to any assignment,
sublease or expansion of any existing lease or portion thereof which, by the
terms of any such Lease, requires Partnership's prior consent as a condition to
any such renewal, extension, assignment, sublease or expansion. Partnership
shall not, without the express written consent of Prentiss (which shall not be
unreasonably withheld), in any manner change, modify, extend, renew or terminate
any Lease except as required by the terms thereof, or waive in any material
respect any of the tenant's obligations under any Lease. Partnership shall not
apply all or any part of the security or damage deposit of a tenant under any
Lease to obligations of such tenant unless such tenant has vacated its portion
of the Property as of the Closing Date. Notwithstanding the foregoing, Prentiss
hereby approves the new Leases described in Schedule 6.5(g) hereto.
(h) Partnership shall cause all debts and liabilities for labor,
materials, services and equipment incurred in the construction, operation and
development of the property, including leasehold improvements, to be promptly
paid.
31
<PAGE>
(i) Neither Partnership nor Partnership's managing agent shall
(1) make any agreements which shall be binding upon Prentiss with respect to the
Property or that otherwise cannot be terminated without penalty upon thirty (30)
days notice, or (2) reduce or cause to be reduced any rents or any other
revenues over which Partnership has operational control.
(j) Partnership shall promptly deliver to Prentiss upon Prentiss'
request such reports showing the revenue and expenses of the Property as
Partnership customarily keeps or receives internally for its own use.
(k) Except as required by the terms thereof or hereof, Partnership
shall not in any manner change, modify, extend, renew or terminate any Operating
Agreement which would be binding on Prentiss with respect to the Property
without the express written consent of Prentiss (which shall not be unreasonably
withheld).
(l) Partnership shall promptly advise Prentiss of any litigation,
arbitration or administrative hearing concerning or affecting the Property of
which Partnership obtains actual knowledge.
(m) Partnership shall refrain from amending, altering or
terminating the partnership agreement of Partnership without the prior written
consent of Prentiss.
(n) Partnership shall keep the Existing Note current, shall comply
with the terms and provisions of the Existing Note and Existing Liens and shall
immediately send Prentiss copies of all correspondence received from the holder
of the Existing Note. Partnership shall not modify any provisions of the
Existing Note or Existing Liens.
6.6 No Marketing. Partnership shall not market the Property for sale
------------
or enter into discussions or negotiations with potential purchasers of the
Property, nor shall Contributor market any interests in the Partnership for sale
or enter into discussions or negotiations with potential purchasers of such
interests, unless this Agreement has been terminated pursuant to its terms.
6.7 Prospective Subscriber Questionnaires. During the Study Period,
-------------------------------------
Contributors shall deliver to the Operating Partnership a definitive list of all
Unit Recipients to receive Units at the Closing, to the extent different from
those set forth on Schedule 2.2(a). Each Unit Recipient shall deliver to the
---------------
Operating Partnership within the Study Period a completed and duly executed
Prospective Subscriber Questionnaire in substantially the form attached hereto
as Exhibit C, which Questionnaires shall confirm to the satisfaction of the
---------
Operating Partnership that each Unit Recipient is an "accredited" investor
within the meaning of Rule 501(a) promulgated under the Securities Act. Each
Unit Recipient shall also deliver to the Operating Partnership, upon the
Operating Partnership's reasonable request, such other information, certificates
and materials as the Operating Partnership may reasonably request in connection
with offering the Units without registration under the Securities Act and the
securities laws of applicable states and other jurisdictions.
32
<PAGE>
6.8 Delivery of Tax Information. In connection with the issuance of
---------------------------
Units to Contributor and any Unit Recipient, Partnership shall deliver to the
Operating Partnership during the Study Period, at Partnership's sole cost and
expense, prepared as of the date of this Agreement, depreciation and
amortization schedules for the assets constituting the Property, as kept for tax
purposes, showing original basis, accumulated depreciation or amortization,
original useful life of such assets, remaining useful life of such assets and
the date(s) when such assets were placed in service.
6.9 Information Regarding the Restrictions on Beneficial Ownership of
-----------------------------------------------------------------
Units. From the date of this Agreement until the Closing, and then so long as
- -----
any Unit Recipient holds any Units, each such Unit Recipient shall notify the
Operating Partnership in writing promptly upon any change in the identity or
number of its partners or of its indirect partners as identified pursuant to
this Agreement, and shall provide the information called for in Section 6.8
-----------
hereof with respect to any such change. In addition, so long as any Unit
Recipient holds any Units, without the prior written consent of the Operating
Partnership, each Unit Recipient shall not (i) admit additional partners, (ii)
permit the transfer of interests in Partnership and/or each Unit Recipient to a
look-through entity (as defined herein) or (iii) permit any transfer of
interests in such Unit Recipients if, as a result of the admissions or transfers
described in (i) through (iii) the number of direct or indirect beneficial
owners in such Unit Recipients would increase. Each Unit Recipient shall use its
best efforts to secure the compliance of any look-through entities that hold
direct or indirect interests of Contributor and such Unit Recipients with the
requirements of this Section as if such requirements applied directly to such
entities. Each Unit Recipient acknowledges that the provisions of this Section
are imposed to aid the Operating Partnership in avoiding taxation as a
corporation for federal income tax purposes, agrees that monetary damages may be
insufficient to remedy the potential harm caused by any breach of the provisions
of this Section, and agree that injunctive relief, including specific
performance or another equitable remedy would be an appropriate remedy.
The provisions of this Section shall survive the Closing.
6.10 Partnership Agreement. At or prior to the Closing, each Unit
---------------------
Recipient shall deliver to the Operating Partnership a Limited Partner Signature
Page in substantially the form attached hereto as Exhibit F executed by each
---------
Unit Recipient.
6.11 Use of Name "Terramics". Partnership covenants and agrees not to
-----------------------
transfer the right to use the name "Terramics" or variations thereof to any
party other than Prentiss.
6.12 Partnership Interests. Contributor agrees that it shall not sell,
----------------------
transfer or assign, or create, grant or permit to exist a lien or security
interest in, its partnership interest in the Partnership. Partnership shall
prepare any tax returns or reports of the Partnership which are required to be
filed by the Partnership for any taxable period of the Partnership that ends on
or before the Closing Date. Upon Prentiss' reasonable request, for a period of
three (3) years after the Closing, or, in the event of a governmental
investigation or audit, at any time, Contributor shall make all of the
Contributor's records with respect to Contributor (as they relate to the
Property or the Partnership), the Partnership or the Property available to
Prentiss for inspection, copying and audit by Prentiss' designated accountants.
The foregoing covenants of Partnership and Contributors are for the
benefit of Prentiss or its assignee of its rights under this Agreement.
33
<PAGE>
ARTICLE VII.
------------
CLOSING
-------
7.1 Closing. The Closing shall occur on a business day designated by
-------
Prentiss, with at least ten (10) days notice to Contributors (which such day
shall be no later than thirty (30) days following the expiration of the Study
Period). At or prior to Closing, the Partnerships shall have transferred, to or
for the benefit of the Contributors, the Excluded Partnership Property and
Liabilities, such that the only assets and liabilities of the Partnerships shall
be (i) the Property, (ii) the Leases, (iii) the Operating Agreements, (iv) the
Existing Secured Indebtedness, (v) the other assets and rights which Prentiss is
to acquire at Closing, and the other liabilities and obligations which Prentiss
is to assume or which the Partnership or its assets shall be subject to, as
expressly set forth in this Agreement, and (vi) the rights, powers, privileges
and attendant obligations pertaining to items (i) through (v) above.
As more particularly described below, at the Closing the parties hereto
will meet to (i) execute all of the documents required to be delivered in
connection with the transactions contemplated hereby (the "Closing Documents"),
(ii) deliver the same to Escrow Agent to the extent a temporary escrow is
mutually agreed to or required, and (iii) take all other action required to be
taken in respect of the transactions contemplated hereby. The Closing will occur
at the offices of Blank Rome Comisky & McCauley, One Logan Square, Philadelphia,
Pennsylvania, or at such other place as Prentiss shall designate by written
notice to Partnership given at least five days prior to the Closing. At the
Closing, Prentiss shall deliver the balance of the Contribution Value to Escrow
Agent for disbursement to the intended recipients, Escrow Agent shall update the
title to the Property and, provided there has been no change in the status of
title as reflected in the Title Commitment and Survey which has not been waived
by Prentiss pursuant to Section 2.4(d) hereof, Escrow Agent shall release and
date, where appropriate, the Closing Documents in accordance with the joint
instructions of Contributors and Prentiss and shall send, by wire transfer, all
sums owing to Contributors hereunder to Contributors and shall admit the
designated Unit Recipients as partners of the Operating Partnership in
accordance with the Units to be issued pursuant to this Agreement. As provided
herein, the parties hereto will agree upon adjustments and prorations to certain
items which cannot be exactly determined at the Closing and will make the
appropriate adjustments with respect thereto.
7.2 Partnership's Deliveries. At the Closing, Partnership and/or
------------------------
Contributor shall deliver to Prentiss (or, in the case of records, files and the
like, Partnership shall make same available to Prentiss at the location of each
Property or at Partnership's regular business office) all of the following
instruments, each of which shall have been duly executed and, where applicable,
acknowledged and/or sworn on behalf of Partnership and shall be dated as of the
Closing Date:
(a) The certificate required by Section 5.1(b) hereof.
--------------
(b) The Bill of Sale - Personal Property in the form of
Exhibit H hereto.
---------
(c) The Assignment and Assumption Agreement in the form
of Exhibit I hereto.
---------
34
<PAGE>
(d) The Assignment of Leases in the form of Exhibit J hereto.
(e) An updated certified Rent Roll dated as of the date
preceding the Closing Date.
(f) An estoppel letter in the form of Exhibit K hereto dated
---------
not more than forty (40) days prior to the Closing Date (i) from each of the
tenants under the Leases covering 10,000 square feet or more (including for such
purpose tenants who occupy more than one location where the aggregate of such
locations cover 10,000 square feet or more), and (ii) from tenants leasing, in
the aggregate, at least eighty five percent (85%) of the total rentable area of
all the Improvements covered by this Agreement. The Contributors of each
applicable Partnership shall execute an estoppel letter certifying to the
matters specified in Exhibit K for any tenant which does not execute an estoppel
---------
letter; provided that (i) Contributors shall be released from liability under
such estoppel letter if and to the extent a conforming estoppel letter is
ultimately obtained from a tenant and delivered to Prentiss, and (ii)
Contributors shall not be obligated to make any warranties or representations on
behalf of a tenant concerning environmental matters.
(g) Such agreements, affidavits or other documents as may be
required by the Title Company to issue the Owner's Title Policy subject only to
the Permitted Title Exceptions and to eliminate such standard exceptions and to
issue the endorsements thereto described on Schedule 7.2 hereto.
------------
(h) The FIRPTA Certificate.
(i) All original Warranties and Guaranties in Partnership's
possession or reasonably available to Partnership.
(j) A valid, final and unconditional certificate of
occupancy for the Real Property and Improvements issued by the appropriate
Governmental Authority, or letters from such Governmental Authority certifying
equivalent compliance.
(k) The originals of all Operating Agreements to remain in
effect at Closing.
(l) Executed originals of all Leases, leases of Leased
Property, permits and, to the extent in Partnership's possession or control,
Authorizations as required hereunder and any other documents or instruments
affecting the Property or the ownership and operation thereof.
(m) All current real estate and personal property tax bills in
Partnership's possession or under its control.
(n) All books, records, operating reports, appraisal reports,
files and other materials in Partnership's possession or control which are
necessary in Prentiss' discretion to maintain continuity of operation of the
Property.
(o) Written notice executed by Partnership notifying all
interested parties, including, without limitation, all tenants under any Leases
directing that all payments, inquiries
35
<PAGE>
and the like be forwarded to the address to be provided by Prentiss (or as
otherwise directed by Prentiss).
(p) A current UCC Report showing no financing statements by
Partnership or Contributor as Debtor covering the Property or Partnership
interests to be acquired by Prentiss, except in favor of the holders of the
Existing Secured Indebtedness.
(q) An opinion from Partnership's and Contributor's counsel
stating that Partnership and Contributor have duly authorized, executed and
delivered to Prentiss this Agreement and all of the documents to be delivered by
Partnership and Contributor hereunder.
(r) A limited partner signature page to the Partnership
Agreement in substantially the form attached hereto as Exhibit F, executed by
each Unit Recipient..
(s) Any other document or instrument reasonably requested by
Prentiss in connection with the transactions contemplated hereby and which is
reasonably required to effectuate the transactions contemplated herein.
(t) An estoppel certificate executed by the present
holder(s) of the Existing Secured Indebtedness. Any and all fees and charges in
connection with obtaining such written consent or approval (specifically
including, but not limited to, loan transfer fees) shall be at Partnership's
sole cost and expense. In the event such estoppel certificate(s) is/are not
received on or before the Closing Date, Prentiss may terminate this Agreement at
any time up to and including the Closing Date and receive a full refund of the
Deposit and this Agreement shall thereafter be null and void. If Prentiss elects
not to so terminate, Prentiss may extend the Closing Date for a period of time
up to and including thirty (30) days to allow Partnership to obtain such
consents or approvals. The estoppel certificate(s) must refer to Prentiss'
proposed acquisition of the interests in the Partnerships, be dated not more
than forty (40) days prior to the Closing Date and recite: (i) the unpaid
balance of principal and accrued interest due on the Existing Note as of the
date thereof; (ii) the interest rate on the Existing Note; (iii) the amount and
date of payment of the next installment of principal and interest due on the
Existing Note; (iv) the maturity date of the Existing Note; (v) the amount of
funds, if any, held in a tax and insurance escrow under any of the Existing
Liens; (vi) the amount and date of payment of the next installment due under
such tax and insurance escrow; (vii) reference to the Existing Liens evidencing
or securing the Existing Note; (viii) that the Existing Note evidencing the
Existing Secured Indebtedness is current and that, to the best of the holder's
knowledge, there are no defaults thereunder nor any uncured notices of default
sent by the holder; (ix) that the holder(s) consent(s) to the assignment of the
Partnership interests to Prentiss and that the holder(s) will not accelerate the
Existing Note evidencing the indebtedness or declare a default under any
instruments evidencing or securing the Existing Secured Indebtedness by virtue
thereof; (x) that the holder of the indebtedness will not renew, extend or
otherwise alter or modify the Existing Secured Indebtedness or the Existing
Liens securing the Existing Secured Indebtedness without the consent of
Prentiss; (xi) that the holder is the sole holder of the Existing Note and the
Existing Liens; (xii) the amount of holdbacks, if any, retained by the holder(s)
of the Existing Note; (xiii) that the holder of the Existing Note agrees to send
to Prentiss any notices which must be or may be sent under the Existing Note or
the Existing Liens; and (xiv) that (except in the case of the CIGNA loan) the
Existing Liens securing the Existing Note secure only the Existing Note and
secure no other
36
<PAGE>
indebtedness of Partnership to the holder(s) of the Existing Note. Partnership
agrees to use its best efforts to satisfy this contingency and pay all costs and
expenses imposed by the holder(s) of the Existing Note in connection with such
estoppel letters and consenting to the transfer of the Property to Prentiss.
Notwithstanding such best efforts, the lender estoppel certificate shall be
deemed acceptable if it contains, at a minimum, the certifications which are
customarily addressed by institutional lenders for similarly requested estoppel
certificates in connection with the pay-off of a loan and/or transfer of the
secured property. If Prentiss intends to pay off any Existing Secured
Indebtedness within 60 days following Closing, then the certificate from the
lender need only contain a certification as to the unpaid principal and accrued
interest on the subject indebtedness as of the date thereof together with a per
diem amount of interest following the date thereof and any applicable prepayment
premiums, which would be necessary in order to release any and all liens,
assignments and security interests encumbering the Property.
(u) Each group of Contributors who are the partners in a
particular Partnership, as primary obligors, jointly and severally with Peter O.
Hausmann, Henry C. Gulbrandsen, Jr. and Timothy J. Weber (said 3 individuals
being referred to as the "Principals") as sureties (each separate group of
Contributors together with the Principals being referred to collectively as
"Indemnitors") shall execute and deliver to Prentiss an Indemnity and Security
Agreement, pursuant to which (i) Indemnitors shall jointly and severally
(without the obligation on the part of Prentiss to proceed in any particular
order against any of the Indemnitors) indemnify and hold Prentiss harmless from
and against any and all claims, costs, penalties, damages, losses, liabilities
and expenses (including reasonable attorneys' fees) that may be incurred by
Prentiss as a result of any breach by the Contributor or Partnership of any of
its representations or warranties or any of its express indemnities set forth
herein or in any document required to be delivered by Partnership (or by any
affiliates of Partnership or Principals) or Contributor to Prentiss pursuant
hereto, except for any breach of any representation or warranty as to which
Partnership or Contributor has given Prentiss written notice (or as to which
Prentiss has knowledge) prior to the Closing Date and Prentiss nevertheless
consummated the Closing and (ii) Prentiss shall be granted liens on and security
interests in a portion of the Units to be issued by Prentiss under this
Agreement (such grant to be made pro-rata by all Unit Recipients) in order to
secure the obligations under the Indemnity and Security Agreement. Indemnitors
and the other Unit Recipients shall execute financing statements evidencing the
security interests created under the Indemnity and Security Agreement.
Notwithstanding the foregoing, (i) liability under the Indemnity and Security
Agreement for a particular indemnity, warranty or representation shall extend
only for the time corresponding to the survival period of the underlying
indemnity, representation or warranty (if any, otherwise within the applicable
legal limitation period), (ii) the aggregate maximum liability of all
Partnerships, Contributors and Indemnitors under the Indemnity and Security
Agreement(s) and under any other indemnities, warranties and representations set
forth in this Agreement, including the maximum liability of the affiliated
partnerships and indemnitors under the Contribution Agreement of even date
herewith relating to certain Pennsylvania assets, shall be $4,000,000 for any
claims made within one (1) year after the Closing Date, and ten percent (10%) of
such amount thereafter, and recourse with respect thereto shall, except as set
forth in subsection (iv) below, be limited to the Units pledged to Prentiss to
secure same, (iii) the number of Units pledged for such purpose shall be
equivalent in value to 110% of the maximum monetary liability established as
aforesaid, such Units to be valued as such as of the Closing Date based upon the
market price for equivalent stock of Company assuming no conversion restriction,
and (iv) to the extent no claim was theretofore made on
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account of the obligations under the Indemnity and Security Agreement, the
pledged Units shall be released on the first anniversary of the Closing Date,
and thereafter the Indemnitors shall have personal liability for any remaining
obligations thereunder for which the survival period is in excess of 1 year (but
only to the maximum aggregate liability of 10% of $4,000,000 as set forth
above); provided, however, there shall be no limitation of liability applicable
to the indemnities made in Section 2.2(c) hereof.
--------------
(v) The Principals shall execute a guaranty in favor of
Woodland Falls Associates-IV Limited Partnership guarantying, on a joint and
several basis, the obligations of Valleybrooke Executive Suites, Inc. under its
Lease at Woodland Falls Corporate Park; provided, the guaranty shall be released
if Prentiss exercises its right to purchase such lease under the Right of First
Opportunity Agreement covering such lease.
(w) Contributor shall execute assignments of partnership
interests in the Partnerships to Prentiss and Prentiss Properties Limited, Ltd.
7.3 Prentiss' Deliveries.
--------------------
(a) At the Closing, Prentiss shall deliver to Escrow Agent
for disbursement to the intended recipients, or directly to the Unit Recipients
in the case of Units, the portion of the Contribution Value described in Section
-------
2.2 hereof.
- ---
(b) At the Closing, Prentiss shall deliver to Contributors
the Assignment and Assumption Agreement and the Assignment of Leases, duly
executed by Prentiss.
(c) At the Closing, Prentiss shall deliver to Contributors
(i) all other documents and instruments referred to in this Agreement as are
required to be delivered by it, (ii) any other document or instrument reasonably
requested by Contributors in connection with the transactions contemplated
hereby, and (iii) an opinion from Prentiss' counsel stating that Prentiss has
duly authorized, executed and delivered to Partnerships this Agreement and all
of the documents to be delivered by Prentiss hereunder.
(d) At Closing, Prentiss shall cause to be executed and
delivered to Messrs. Gulbrandsen, Weber and Hausmann employment contracts with
Prentiss.
7.4 Mutual Deliveries. At the Closing, Prentiss and Contributors shall
-----------------
mutually execute and deliver each to the other:
(a) A final closing statement reflecting the Contribution
Value and the adjustments and prorations required hereunder and the allocation
of income and expenses required hereby.
(b) Such other and further documents, papers and
instruments as may be reasonably required by the parties hereto in connection
with the transactions contemplated hereby or their respective counsel.
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<PAGE>
(c) At or prior to the Closing, the Company and Unit Recipients
will enter into a Registration Rights Agreement in substantially the form
attached hereto as Exhibit E.
7.5 Closing Costs. Except as is explicitly provided in this Agreement,
-------------
each party hereto shall pay its own legal fees and expenses. References in this
Agreement to payment obligations of Contributors either must be paid out of the
funds of each Contributor or, if made by the Partnerships, must be paid solely
from the Excluded Partnership Assets and Liabilities, except for the prorations
to be made under this Agreement as of the Closing Date. All transfer taxes and
surtaxes due with respect to the transfer of partnership interests or other
transactions required hereunder shall be split equally by Prentiss and
Contributors. Contributors shall pay for the costs associated with the releases
of any deeds of trust, mortgages and other financing encumbering the Property
and for any costs associated with any corrective instruments, subject to the
provisions hereinabove contained relating to prepayment premiums on Existing
Secured Indebtedness. Prentiss shall pay all costs for title searches, tax
certificates and all premiums for the issuance of the Title Policy and all
endorsements thereto described on Schedule 7.2 hereto and deletions therefrom
which are customarily required by institutional investors purchasing property
comparable to the Property; all costs of providing the matters described in
Sections 2.4(b) to Prentiss except for such matters to be paid for by
Partnership as therein provided; and one-half (1/2) of any escrow fees or
similar charges of the Escrow Agent. All other expenses incurred by Contributors
or Prentiss with respect to the Closing shall be borne and paid for exclusively
by the party incurring same, without reimbursement, except to the extent
otherwise specifically provided herein. The terms and provisions of this Section
7.5 shall survive the Closing without limitation.
7.6 Revenue and Expense Allocations. All revenues and expenses with
-------------------------------
respect to the Property, and applicable to the period of time before and after
Closing, determined in accordance with sound accounting principles consistently
applied, shall be allocated between Contributors and Prentiss as provided
herein. Contributors shall be entitled to all revenue and shall be responsible
for all expenses for the period of time up to but not including the date of
Closing, and Prentiss shall be entitled to all revenue and shall be responsible
for all expenses for the period of time from, after and including the date of
Closing. Such adjustments shall be shown on the closing statements (with such
supporting documentation as the parties hereto may require being attached as
exhibits to the closing statements) and shall increase or decrease (as the case
may be) the cash amount payable by Prentiss pursuant to Section 2.2 hereof.
Without limiting the generality of the foregoing, the following items of revenue
and expense shall be allocated at Closing:
(a) Current rents and escalation charges for taxes and
operating expenses.
(b) Real estate, personal property taxes and special
assessments for the fiscal or calendar year in which Closing occurs.
(c) Revenue and expenses under the Operating Agreements to
remain in effect after Closing.
(d) Utility charges (including, but not limited to, charges
for water, sewer and electricity).
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(e) Municipal or other governmental improvement liens, which
shall be paid prior to Closing where the work has physically commenced, and
which shall remain in effect at Closing where the work has been authorized, but
not physically commenced.
(f) All other revenues and expenses of the Property, to the
extent customarily prorated by purchasers and sellers of office buildings in the
county in which the Property is located.
(g) Interest on the Existing Note.
Contributors shall pay or furnish a credit to Prentiss for (i) prepaid rents and
(ii) unforfeited security deposits together with interest thereon held by
Partnership under Leases.
Contributors shall pay or cause to be paid all real estate taxes and
installments for special assessments (prorated to the Closing Date) for the
Property due and payable in, or deferred with respect to the years prior to, the
year in which the Closing occurs. All installments for special assessments
(prorated to the Closing Date) pending, levied or due and payable on or prior to
the Closing Date shall be paid by Contributors on or before the Closing Date.
All unpaid subdivision and platting costs and expenses heretofore incurred by
Partnership, including, without limitation, all subdivision exactions, fees and
costs and all dedication of land for parks and other public uses or payment of
fees in lieu thereof, shall be paid by Contributors on or prior to the Closing
Date.
If accurate allocations cannot be made at Closing because current bills are not
obtainable (as, for example, in the case of utility bills and/or real estate or
personal property taxes), the parties shall allocate such revenue or expenses at
Closing on the best available information, subject to adjustment upon receipt of
the final bill or other evidence of the applicable revenue or expense. The
obligation to make the adjustment shall survive the closing of the transaction
contemplated by this Agreement. Any revenue received or expense incurred by
Contributors, Partnership or Prentiss with respect to the Property after the
date of Closing shall be promptly allocated in the manner described herein and
the parties shall promptly pay or reimburse any amount due. The proration
provisions of this Agreement shall survive the closing of the transaction
contemplated hereby for a period of nine (9) months.
7.7 Delinquent Rents. Any rents or other amounts which are delinquent
----------------
as of the Closing shall not be adjusted or prorated at Closing, but Prentiss
shall make a reasonable attempt to collect such amounts for the benefit of
Contributors after the Closing; provided, however, that nothing contained herein
shall be construed to require Prentiss to institute any lawsuit or other
proceedings to collect such delinquent amounts. In this connection, the first
monies collected by Prentiss from tenants or other persons owing delinquent
rents or other amounts shall be applied to Prentiss' costs of collection, then
to the current rents or obligations of such person to Prentiss, and the balance,
if any, shall be delivered to Contributors.
7.8 Costs Associated with Certain Leasing Activities. Except as
------------------------------------------------
otherwise expressly set forth in this Section 7.8, all leasing commissions,
-----------
leasing expenses and capital costs of tenant improvements owing or which could
become due and owing with respect to Leases entered into on or before the
Closing Date shall be paid by Partnership when due, and Contributor shall
indemnify and hold harmless Prentiss for claims brought against the Property or
Prentiss arising
40
<PAGE>
therefrom, which indemnity shall survive the Closing. Notwithstanding the
foregoing, Prentiss shall pay to Contributor at the Closing an amount equal to
the unamortized costs of all leasing commissions paid to brokers other than
affiliates of The Terramics Management Company and capital improvement costs
incurred in completing tenant improvements pursuant to (a) Leases entered into
by Partnership which have been approved by Prentiss pursuant to Section 6.5(g)
and (b) renewals or extensions of existing Leases which have been approved by
Prentiss pursuant to Section 6.5(g).
ARTICLE VIII.
------------
GENERAL PROVISIONS
------------------
8.1 Condemnation. In the event of any actual or threatened taking,
------------
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, Partnership shall give written
notice thereof to Prentiss promptly after Partnership learns or receives notice
thereof. If all or any part of the Real Property is, or is to be, so condemned
or sold which has a material adverse effect on the use or value of the remaining
Property, Prentiss shall have the right to terminate this Agreement pursuant to
Section 9.2 hereof. If Prentiss elects not to terminate this Agreement, all
proceeds, awards and other payments arising out of such condemnation or sale
(actual or threatened) shall be paid or assigned, as applicable, to Prentiss at
Closing, and there shall be no reduction in the Contribution Value. Partnership
shall not settle or compromise any such proceeding without Prentiss' written
consent. If Prentiss elects to terminate this Agreement by giving Partnership
written notice thereof prior to the Closing, the Deposit shall be promptly
returned to Prentiss and all rights and obligations of Partnership, Contributor
and Prentiss hereunder (except those set forth herein which expressly survive a
termination of this Agreement) shall terminate immediately.
8.2 Risk of Loss. If any loss or damage occurs to the Property by
------------
reason of casualty prior to Closing which is not, in the opinion of a reputable
contractor or engineer retained for such purpose, reasonably susceptible of
repair and restoration on or prior to December 31, 1997, Prentiss shall have the
right to terminate this Agreement pursuant to Section 9.2 hereof. If Prentiss
-----------
elects not to terminate this Agreement pursuant to the immediately preceding
sentence or a loss or damage occurs prior to Closing which is reasonably
susceptible of repair and restoration within the aforesaid time period, then, at
the option and election of Prentiss, (i) Closing shall be held as scheduled and
all unused insurance proceeds and rights to proceeds arising out of such loss or
damage shall be paid or assigned, as applicable, to Prentiss at Closing and
Prentiss shall receive as a credit against the Contribution Value the amount of
any deductibles under the policies of insurance covering such loss or damage,
and there shall be no further reduction in the Contribution Value, or (ii)
Closing shall be postponed for such reasonable time (but not beyond December 31,
1997) as may be necessary to promptly and diligently complete the repair and
restoration, and Partnership shall utilize its best efforts to effectuate same
in a timely and efficient manner. If Prentiss elects to terminate this Agreement
pursuant to this Section 8.2 by giving Partnership written notice thereof prior
to the Closing, the Deposit shall be promptly returned to Prentiss and all
rights and obligations of Partnership, Contributor and Prentiss hereunder
(except those set forth herein which expressly survive a termination of this
Agreement) shall terminate immediately.
41
<PAGE>
8.3 Broker. The parties acknowledge that Broker has been the procuring
------
cause of this Agreement. It shall be the obligation of Contributor to pay Broker
its commission, when, as and if the transaction contemplated hereby actually
closes, in accordance with a separate agreement between the Broker and
Partnership. There is no other real estate broker involved in this transaction.
Prentiss warrants and represents to Partnership and Contributor that Prentiss
has not dealt with any other real estate broker in connection with this
transaction, nor has Prentiss been introduced to the Property or to Partnership
by any other real estate broker, and Prentiss shall indemnify Contributor and
hold Contributor harmless from and against any claims, suits, demands or
liabilities of any kind or nature whatsoever arising on account of the claim of
any other person, firm or corporation to a real estate brokerage commission or a
finder's fee as a result of having dealt with Prentiss, or as a result of having
introduced Prentiss to Partnership or to the Property. In like manner,
Contributor warrants and represents to Prentiss that neither Contributor nor
Partnership has dealt with any other real estate broker in connection with this
transaction, nor has Partnership or Contributor been introduced to Prentiss by
any other real estate broker, and Contributor shall indemnify Prentiss and save
and hold Prentiss harmless from and against any claims, suits, demands or
liabilities of any kind or nature whatsoever arising on account of the claim of
any person, firm or corporation to a real estate brokerage commission or a
finder's fee as a result of having dealt with Partnership or Contributor in
connection with this transaction. This provision shall survive any termination
of this Agreement and a closing of the transaction contemplated hereby.
8.4 Bulk Sale. It shall be the obligation of Partnership and
---------
Contributor to comply with any bulk sale requirements, statutes, laws,
ordinances and regulations promulgated with respect thereto, if any, in the
State in which the Property is located, or in or by any governmental entity
having jurisdiction with respect thereto, and to provide proof of such
compliance or proof that no such compliance is required, to Prentiss, at or
prior to Closing. In any event, Contributor shall indemnify Prentiss and save
and hold Prentiss harmless from and against any claims, suits, demands,
liabilities or obligations of any kind or nature whatsoever, including all costs
of defending same, and reasonable attorneys' fees paid or incurred in connection
therewith, arising out of or relating to any claim made by any third party or
any liability asserted by any third party that any applicable bulk sales law or
like statute has not been complied with. The provisions of this Section shall
survive the Closing of the transaction contemplated hereby.
8.5 Confidentiality. Except as hereinafter provided, from and after the
---------------
execution of this Agreement and until the information in question becomes
publicly known by disclosure on the part of Prentiss or Company, Prentiss,
Contributor and Partnership shall keep the terms, conditions and provisions of
this Agreement confidential and neither shall disclose the terms, conditions and
provisions hereof, except to persons who "need to know", such as their
respective officers, directors, employees, attorneys, accountants, engineers,
surveyors, consultants, financiers, partners, investors and bankers, and such
other third parties whose assistance is required in connection with the
consummation of this transaction or as required by law or order of court of
competent jurisdiction. Neither Contributor nor Partnership shall make any press
release regarding the subject matter of this Agreement without the prior written
approval of Prentiss; and Prentiss shall issue no press release regarding the
subject matter of this Agreement without first seeking Partnership's comments on
same. Notwithstanding the foregoing, it is acknowledged that Prentiss is, or is
an affiliate of, a real estate investment trust (the "REIT") and the REIT has,
----
and the REIT, Prentiss or their affiliates may, seek to sell securities to the
general public;
42
<PAGE>
consequently, the REIT, Prentiss and their affiliates shall have the absolute
and unbridled right to disclose any information regarding the transaction
contemplated by this Agreement required by law or as determined to be necessary
or appropriate by attorneys for each such entity to satisfy disclosure and
reporting obligations of each such entity. After Closing, Prentiss, Contributor
and Partnerships shall be free to disclose previously confidential information
in its sole, unfettered discretion.
ARTICLE IX.
----------
LIABILITY OF PARTIES;
---------------------
DEFAULT; TERMINATION RIGHTS
---------------------------
9.1 Liability of Prentiss. Except for obligations expressly assumed or
---------------------
agreed to be assumed by Prentiss hereunder, Prentiss is not assuming any
obligations of Partnership, Contributor or any liability for claims arising out
of any act, omission or occurrence which occurs, accrues or arises prior to the
Closing Date. Contributor, subject to the limitations of Section 7.2(u) hereof,
--------------
hereby indemnifies and holds Prentiss harmless from and against any and all
claims, costs, penalties, damages, losses, liabilities and expenses (including
reasonable attorneys' fees) that may at any time be incurred by Prentiss as a
result of (1) obligations of Partnership or Contributor relating to the
operation of the Property not expressly assumed or agreed to be assumed or taken
subject to by Prentiss hereunder, or (2) wrongful or negligent acts or omissions
of Partnership, its agents or employees with respect to the Property which
occur, accrue or arise prior to the Closing Date. Prentiss hereby indemnifies
and holds Contributor harmless from and against any and all claims, costs,
penalties, damages, losses, liabilities and expenses (including reasonable
attorneys' fees) that may at any time be incurred by Contributor as a result of
wrongful or negligent acts or omissions of Prentiss relating to the Property
which occur, accrue and arise from and after the Closing Date. The provisions of
this Section shall survive the Closing of the transaction contemplated hereby.
9.2 Default by Partnership/Failure of Conditions Precedent. If any
------------------------------------------------------
condition set forth herein for the benefit of Prentiss cannot or will not be
satisfied prior to Closing, or upon the occurrence of any other event that would
entitle Prentiss to terminate this Agreement and its obligations hereunder, and
if Partnership or Contributor fails to cure any such matter or satisfy that
condition within ten (10) business days after notice thereof from Prentiss (or
such other time period as may be explicitly provided for herein), Prentiss, at
its option, may elect (a) to terminate this Agreement, in which event (i) the
Deposit shall be promptly returned to Prentiss, (ii) if the condition which has
not been satisfied is a breach of a representation, warranty or covenant known
by Partnership or Contributor to have been materially inaccurate or misleading
when made, then Partnership shall be obligated upon demand to reimburse Prentiss
for Prentiss' actual out-of-pocket inspection, financing and other costs related
to Prentiss' entering into this Agreement, inspecting the Property and preparing
for a Closing of the transaction contemplated hereby, including, without
limitation, Prentiss' attorneys' fees incurred in connection with the
preparation, negotiation and execution of this Agreement and in connection with
Prentiss' due diligence review, audits and preparation for a Closing; provided,
the foregoing shall not limit or include the sums which may be payable by
Partnership pursuant to Section 9.6 below, and (iii) all other rights and
-----------
obligations of Partnership, Contributor and Prentiss hereunder (except those set
forth herein which expressly survive a termination of this Agreement) shall
terminate immediately;
43
<PAGE>
(b) to proceed to Closing; or (c) if the condition described in Section 5.1(k)
--------------
of this Agreement has not been satisfied on the Closing Date solely by reason of
a default by OTR thereunder, to terminate this Agreement, in which case
Contributor agrees to pay to Prentiss an amount equal to $1,350,000.00, as
liquidated damages, the Deposit shall be refunded to Prentiss, and thereafter no
party to this Agreement shall have any further rights or obligations except as
otherwise expressly provided in this Agreement. If Prentiss elects to proceed to
Closing and there is either a misrepresentation or breach of a warranty by
Partnership or Contributor (other than a breach of a representation or warranty
of which Prentiss had notice or actual knowledge prior to the Closing and
nevertheless elected to consummate the Closing) or the breach of a covenant by
Partnership or Contributor or a failure by Partnership or Contributor to perform
its obligations hereunder first discovered by Prentiss after the Closing Date,
Prentiss shall retain all remedies accruing as a result thereof, including, but
not limited to, the remedy of specific performance of Partnership's covenants
and obligations and the remedy of the recovery of all reasonable damages
resulting from Partnership's breach of warranty or covenant, subject to the
limitations of Section 7.2(u) hereof.
--------------
9.3 Indemnification by Prentiss. Prentiss hereby indemnifies and holds
---------------------------
Contributor harmless from and against any and all claims, costs, penalties,
damages, losses, liabilities and expenses (including reasonable attorneys' fees)
that may at any time be incurred by Contributor, whether incurred before or
after Closing, as a result of any inaccuracy or breach by Prentiss of any of its
representations, warranties, covenants or obligations set forth herein or in any
other document delivered by Prentiss pursuant hereto except for any breach or
inaccuracy of any representation or warranty as to which Prentiss has given
Contributor written notice prior to Closing of the untruth or inaccuracy or of
which Contributor otherwise had actual knowledge prior to the Closing and
nevertheless elected to consummate the Closing. The provisions of this Section
shall survive the Closing of the transaction contemplated hereby.
9.4 Default by Prentiss/Failure of Conditions Precedent. If any
---------------------------------------------------
condition set forth herein for the benefit of Partnership or Contributor (other
than a default by Prentiss, OP General Partner or Company) cannot or will not be
satisfied prior to Closing, and if that condition is not satisfied within ten
(10) business days after notice thereof from Partnership or Contributor (or such
other time period as may be explicitly provided for herein), Contributors may,
at their option, elect either (a) to terminate this Agreement in which event the
Deposit shall be promptly returned to Prentiss and the parties hereto shall be
released from all further obligations hereunder except those which expressly
survive a termination of this Agreement, or (b) to waive their right to
terminate, and instead, to proceed to Closing. If, prior to Closing, Prentiss,
OP General Partner or Company defaults in performing any of its obligations
under this Agreement and such default is not cured within ten (10) business days
after notice thereof from Partnership, then Contributor's sole remedy for such
default shall be either (i) to terminate this Agreement and retain the Deposit
as liquidated and agreed-upon damages, it being acknowledged that actual damages
would be impossible to accurately estimate, or (ii) to pursue the remedy of
specific performance.
9.5 Costs and Attorneys' Fees. In the event of any litigation or
-------------------------
dispute between the parties arising out of or in any way connected with this
Agreement, resulting in any litigation, then the prevailing party in such
litigation shall be entitled to recover its costs of prosecuting and/or
defending same, including, without limitation, reasonable attorneys' fees at
trial and all appellate
44
<PAGE>
levels. The provisions of this Section shall survive the Closing of the
transaction contemplated hereby.
9.6 Limitation of Liability. Notwithstanding anything herein to the
-----------------------
contrary, except in the case of stipulated liquidated damages as set forth in
this Agreement, liability of each party hereto resulting from the breach or
default by either party shall be limited to actual damages incurred by the
injured party and the parties hereto hereby waive their rights to recover from
the other party consequential, punitive, exemplary, and speculative damages. The
provisions of this Section 9.6 shall survive the Closing of the transaction
-----------
contemplated hereby. Notwithstanding anything herein to the contrary, the
aggregate maximum liability of Prentiss for any indemnities, representations and
warranties set forth in this Agreement and in the Contribution Agreement of even
date herewith relating to certain Pennsylvania assets and in all documents
executed by Prentiss in connection with this Agreement and such other
Contribution Agreement shall be $4,000,000 for any claims made within one (1)
year after the Closing Date and ten percent (10%) of such amount thereafter;
provided, however, there shall be no limitation of liability applicable to the
indemnities made in Section 2.2(c) hereof.
--------------
ARTICLE X.
----------
MISCELLANEOUS PROVISIONS
------------------------
10.1 Completeness; Modification. This Agreement constitutes the entire
--------------------------
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto. Any
waiver of rights under this Agreement shall be effective only if in writing and
duly executed and delivered by the party against whom such waiver is asserted.
10.2 Assignments. Prentiss may assign its rights hereunder without the
-----------
consent of Contributors but upon notice to Contributors, to any affiliate of the
Operating Partnership or the Company, but only if (i) Contributors obtain
substantially all of the economic and substantive rights and benefits
contemplated to be obtained in the absence of such assignment, and (ii) there is
not thereby caused any material adverse federal income effect to Contributors or
the Unit Recipients; provided, however, Prentiss shall be permitted to require
that Contributor assign a limited partnership interest of no more than one
percent (1%) in each Partnership to Prentiss Properties Limited, Inc., a
Delaware corporation. In the event of such permitted assignment, except as
otherwise specified herein, such assignee shall be deemed "Prentiss" hereunder;
however, any such assignment shall not relieve the original Prentiss of its
obligations under this Agreement.
10.3 Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of the parties hereto and their respective successors and permitted
assigns.
10.4 Days. If any action is required to be performed, or if any notice,
----
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required,
45
<PAGE>
and such notice, consent or other communication shall be deemed to be given, on
the first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.
10.5 Governing Law. This Agreement and all documents referred to herein
-------------
shall be governed by and construed and interpreted in accordance with the laws
of the State of New Jersey.
10.6 Counterparts. To facilitate execution, this Agreement may be executed
------------
in as many counterparts as may be required. It shall not be necessary that the
signature on behalf of both parties hereto appear on each counterpart hereof.
All counterparts hereof shall collectively constitute a single agreement.
10.7 Severability. If any term, covenant or condition of this Agreement,
------------
or the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
10.8 Costs. Regardless of whether Closing occurs hereunder, and except as
-----
otherwise expressly provided herein, each party hereto shall be responsible for
its own costs in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, fees of attorneys, engineers
and accountants.
10.9 Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such copies
as designated below. Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.
If to Partnership or Contributor: c/o The Terramics Management Company
1180 West Swedesford Road, Suite 140
Berwyn, Pennsylvania 19312
Attention: Henry C. Gulbrandsen, Jr.
Fax No.: (610) 640-4853
With a copy to: Blank, Rome, Comisky & McCauley
One Logan Square
Philadelphia, Pennsylvania 19103
Attention: Michael Pollack
Fax No.: (215) 569-5555
46
<PAGE>
If to Prentiss: Prentiss Properties Acquisition Partners, L.P.
3890 West Northwest Highway, Suite 400
Dallas, Texas 75220
Attention: Thomas F. August and
William J. Reister
Fax No.: (214) 350-2408 or (214) 654-5826
With a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Attn: Randall M. Ratner, P.C.
Fax No.: (214) 969-4343
If to Escrow Agent: Chicago Title Insurance Company
7616 LBJ Freeway, Suite 300
Dallas, Texas 75251-1106
Attn: Sharon L. Cooper
or to such other address as the intended recipient may have specified in a
notice to the other party. Any party hereto may change its address or designate
different or other persons or entities to receive copies by notifying the other
party and Escrow Agent in a manner described in this Section.
10.10 Escrow Agent. Escrow Agent referred to in the definition thereof
------------
contained in Section 1.1 hereof has agreed to act as such for the convenience of
the parties without fee or other charges for such services as Escrow Agent.
Escrow Agent shall not be liable: (a) to any of the parties for any act or
omission to act except for its own willful misconduct; (b) for any legal effect,
insufficiency, or undesirability of any instrument deposited with Escrow Agent
or exchanged by the parties hereunder; (c) for any loss or impairment of funds
that have been deposited in escrow while those funds are in the course of
collection, or while those funds are on deposit in a financial institution, if
such loss or impairment results from the failure, insolvency or suspension of a
financial institution; (d) for the expiration of any time limit or other
consequence of delay, unless a properly executed written instruction, accepted
by Escrow Agent, has instructed Escrow Agent to comply with said time limit; (e)
for the default, error, action or omission of either party to the escrow. Escrow
Agent, in its capacity as escrow agent, shall be entitled to rely on any
document or paper received by it, believed by such Escrow Agent, in good faith,
to be bona fide and genuine. In the event of any dispute as to the disposition
of the Deposit or any other monies held in escrow, or of any documents held in
escrow, Escrow Agent may, if such Escrow Agent so elects, interplead the matter
by filing an interpleader action in a court of general jurisdiction in the
county or circuit where the Real Property is located (to the jurisdiction of
which both parties do hereby consent), and pay into the registry of the court
the Deposit, or deposit any such documents with respect to which there is a
dispute in the Registry of such court, whereupon such Escrow Agent shall be
relieved and released from any further liability as Escrow Agent hereunder.
10.11 Incorporation by Reference. All of the exhibits attached hereto
--------------------------
are by this reference incorporated herein and made a part hereof.
47
<PAGE>
10.12 Survival. All of the representations, warranties, covenants and
--------
agreements of Partnership and Prentiss made in, or pursuant to, this Agreement
shall survive Closing for a period of twelve (12) months and shall not merge
into any document or instrument executed and delivered in connection herewith;
provided that the last sentence of Section 6.12 shall survive for three (3)
------------
years following the Closing Date, and the provisions of Section 7.5, and any
-----------
other provisions which are expressly stated to survive Closing without
limitation, shall survive the Closing without limitation.
10.13 Further Assurances. Contributors and Prentiss each covenant and
------------------
agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions described herein. Contributors and Prentiss agree
to promptly correct any defect, error or omission which may be discovered in the
contents of this Agreement or in any of the Exhibits or Schedules hereto.
10.14 No Partnership. This Agreement does not and shall not be
--------------
construed to create a partnership, joint venture or any other relationship
between the parties hereto except the relationship of Contributors and Prentiss
specifically established hereby.
10.15 Time of Essence. Time is of the essence with respect to every
---------------
provision hereof.
10.16 Signatory Exculpation. The signatory(ies) for Prentiss is/are
---------------------
executing this Agreement in his/their capacity as representative of Prentiss and
not individually and, therefore, shall have no personal or individual liability
of any kind in connection with this Agreement and the transactions contemplated
by it.
10.17 Rules of Construction. The following rules shall apply to the
---------------------
construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as
the singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
(c) The table of contents and headings contained herein are
solely for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) Each party hereto and its counsel have reviewed and
revised (or requested revisions of) this Agreement and have participated in the
preparation of this Agreement, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party shall
not be applicable in the construction and interpretation of this Agreement or
any exhibits hereto.
48
<PAGE>
(e) As used herein, the term or phrases "Effective Date,"
--------------
"date of this Agreement" or "date hereof" shall mean the first date Escrow Agent
---------------------- -----------
is in receipt of this Agreement executed by Contributors, Partnerships and
Prentiss.
IN WITNESS WHEREOF, Partnerships, Contributors and Prentiss have caused
this Agreement to be executed in their names by their respective duly authorized
representatives.
Prentiss:
--------
PRENTISS PROPERTIES ACQUISITION
PARTNERS, L.P., a Delaware limited partnership
By: Prentiss Properties I, Inc., a Delaware
corporation, its general partner
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Date of Execution: , 1997
--------------
Partnerships:
------------
WOODLAND FALLS ASSOCIATES-I LIMITED
PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
------------------------------------
Authorized Partner
WOODLAND FALLS ASSOCIATES-III LIMITED
PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
-----------------------------------
Authorized Partner
WOODLAND FALLS ASSOCIATES-IV LIMITED
PARTNERSHIP
49
<PAGE>
By: Terramics Property Associates, General
Partner
By:
-----------------------------------
Authorized Partner
LAKE CENTER ASSOCIATES-II LIMITED PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
-----------------------------------
Authorized Partner
LAKE CENTER ASSOCIATES-IV LIMITED
PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
----------------------------------
Authorized Partner
TERRAMICS/CENTERPOINTE ASSOCIATES
LIMITED PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
-----------------------------------
Authorized Partner
Contributors:
------------
TERRAMICS PROPERTY ASSOCIATES
By:
------------------------------------
Authorized Partner
TPC INVESTORS I LIMITED PARTNERSHIP
50
<PAGE>
By: Terramics Property Associates, General
Partner
By:
-----------------------------------
Authorized Partner
TERRAMICS/ JK LIMITED PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
-----------------------------------
Authorized Partner
TERRAMICS/WOODLAND LIMITED
PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
-----------------------------------
Authorized Partner
TERRAMICS/EQUITY LIMITED PARTNERSHIP
By: Terramics Property Associates, General
Partner
By:
-----------------------------------
Authorized Partner
Date of Execution: , 1997
------------------
51
<PAGE>
JOINDER BY COMPANY AND OP GENERAL PARTNER
The undersigned join in this agreement to evidence their consent to the
provisions hereof and to confirm the representations, warranties and
certifications contained in this agreement which are expressly stated to be made
by them by their joinder.
PRENTISS PROPERTIES TRUST
By:
------------------------------------
Its:
------------------------------------
PRENTISS PROPERTIES I, INC.
By:
-----------------------------------
Its:
-----------------------------------
52
<PAGE>
RECEIPT OF ESCROW AGENT
-----------------------
Chicago Title Insurance Company, as Escrow Agent, acknowledges receipt
of the sum of $ __________ by check or by wire transfer, from Prentiss as
described in Section 2.3 of the foregoing Agreement of Purchase and Sale, said
-----------
check or wire transfer to be held pursuant to the terms and provisions of said
Agreement.
DATED this________day of_________________________, 1997.
CHICAGO TITLE INSURANCE COMPANY
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
53
<PAGE>
Exhibit 10.3
------------
AGREEMENT TO ACQUIRE LIMITED PARTNERSHIP INTERESTS
--------------------------------------------------
This AGREEMENT TO ACQUIRE LIMITED PARTNERSHIP INTERESTS (this "Agreement")
in the limited partnerships described on Exhibit A attached hereto
---------
(individually, a "Partnership" and collectively, the "Partnerships") is entered
into this ____ day of September, 1997 by and between OTR, an Ohio general
partnership, acting as nominee for The State Teachers Retirement System of Ohio
("OTR") and Prentiss Properties Acquisition Partners, L.P., a Delaware limited
partnership ("PPAP").
WITNESSETH
A. Pursuant to each Partnership Agreement described on Exhibit B, the
---------
Partnerships were formed (individually, a "Partnership Agreement" and
collectively, the "Partnership Agreements").
B. OTR owns an 89.999% limited partnership interest in each Partnership.
C. PPAP, each Partnership and all of the partners in each Partnership
owning real property in the State of New Jersey, other than OTR, have entered
into certain Contribution Agreements (individually a "Contribution Agreement"
and collectively, the "Contribution Agreements"), pursuant to which PPAP will
acquire (i) all of the partnership interests in the Partnerships owning real
property in the State of New Jersey, other than the limited partnership
interests owned by OTR, and (ii) the leasehold estates owned by the Partnerships
leasing real property in the Commonwealth of Pennsylvania.
D. PPAP desires to purchase and accept, and OTR desires to transfer and
assign, an 89.999% limited partnership interest in each Partnership (the
"Assigned Interests").
AGREEMENTS
For and in consideration of Ten Dollars ($10.00), the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Closing Date/Purchase Price. On the date on which the transactions
---------------------------
described in the Contribution Agreements are to be consummated (the "Closing
Date"), PPAP shall purchase and accept, and OTR shall transfer and assign, the
Assigned Interests for a purchase price of FORTY-NINE MILLION ONE HUNDRED
TWENTY-ONE THOUSAND SIX HUNDRED AND NO/100 DOLLARS ($49,121,600.00) (the
"Purchase Price"). Notwithstanding anything in this Agreement to the contrary,
if the transactions described in the Contribution Agreements are not consummated
by November 15, 1997 or such later date (which in no event may be later than
December 31, 1997) if the closing date is extended under the Contribution
Agreements, then OTR may terminate this Agreement by written notice to PPAP and
Escrow Agent, in which event the parties hereto shall have no further rights or
obligations hereunder and the Earnest Money (as
1
<PAGE>
hereinafter defined) (a) shall be returned by Escrow Agent to PPAP if PPAP is
entitled to the return of its earnest money deposit under the Contribution
Agreements and (b) shall be paid to OTR if the Partnerships are entitled to such
earnest money under the Contribution Agreements.
2. Earnest Money. Simultaneously herewith, PPAP has deposited with
-------------
Chicago Title Insurance Company, 7616 LBJ Freeway, Suite 300, Dallas, Texas
75251-1106, Attention: Ms. Sharon L. Cooper (the "Escrow Agent") the sum of FIVE
HUNDRED FIFTY THOUSAND SIX HUNDRED TWENTY-FOUR AND 50/100 DOLLARS ($550,624.50)
as the earnest money deposit under this Agreement (the "Initial Earnest Money
Deposit"). If PPAP does not terminate the Contribution Agreements on or before
the expiration of the feasibility period therein provided, Buyer shall deposit
with the Escrow Agent an additional sum of FIVE HUNDRED FIFTY THOUSAND SIX
HUNDRED TWENTY-FOUR AND 50/100 DOLLARS ($550,624.50) as an additional earnest
money deposit under this Agreement (the "Additional Earnest Money Deposit").
The Initial Earnest Money Deposit and the Additional Earnest Money Deposit,
together with any interest or other income earned thereon (collectively, the
"Earnest Money"), shall be held, invested and disbursed pursuant to the
respective terms and provisions hereof. Whenever the Earnest Money is to be
disbursed by the Escrow Agent, OTR and PPAP agree promptly to execute and
deliver such notice or notices as shall be necessary or, in the opinion of the
Escrow Agent, appropriate, to authorize the Escrow Agent to make such
disbursement. The Earnest Money shall be invested by Escrow Agent in a
commercial bank or banks acceptable to PPAP at money market rates or in such
other investments as shall be approved in writing by PPAP and OTR.
3. Closing. The consummation of the purchase and sale of the Assigned
-------
Interests (the "Closing") shall take place on the Closing Date beginning at
10:00 a.m. at the office of the Escrow Agent, or at such other date and time as
may be mutually acceptable to OTR and PPAP. OTR and PPAP agree to provide such
documents and letters of instruction as will be necessary to conduct the Closing
in escrow with the Escrow Agent. Each party shall pay its own legal and
accounting fees in connection with this transaction, and PPAP shall pay the fees
of the Escrow Agent. The Purchase Price shall be paid to OTR at the Closing by
making a wire transfer of immediately available Federal funds to the account of
OTR.
4. OTR's Obligations at Closing. At the Closing, OTR shall execute,
----------------------------
acknowledge and deliver to PPAP an Assignment of Limited Partnership Interests
(the "Assignment") in the form attached hereto as Exhibit C.
---------
5. PPAP's Obligations at Closing. On the Closing Date, PPAP shall execute
-----------------------------
and deliver to OTR counterparts of the Assignment.
6. Representations and Warranties of OTR. OTR hereby represents and
-------------------------------------
warrants to PPAP, as of the date hereof, that: (a) OTR is a general partnership
duly organized and validly existing under the laws of the State of Ohio and has
the power and authority to execute this Agreement and the Assignment as provided
herein; (b) (i) The State Teachers Retirement System of Ohio is the beneficial
owner, and (ii) OTR is the legal owner and holder, of the Assigned Interests;
(c) OTR has the power and authority to convey good title to the Assigned
Interests
2
<PAGE>
pursuant to the Assignment; (d) the Assigned Interests are not subject to any
lien or assessment by or in favor of any of OTR's or The State Teachers
Retirement System of Ohio's creditors; (e) to the best of OTR's knowledge, OTR
has fully performed all duties and obligations required of OTR as the owner of
the Assigned Interests pursuant to the Partnership Agreements, and OTR, to its
knowledge, is not in default under any of the Partnership Agreements; and (f)
this Agreement has been duly authorized, executed and delivered by OTR and is
enforceable against OTR in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization, arrangement or other similar
laws affecting the rights of creditors generally. OTR hereby indemnifies and
holds PPAP harmless from and against any and all losses, liabilities, expenses
(including reasonable attorneys' fees), claims, demands and causes of action
arising out of or relating to (i) any failure by OTR to fully perform all duties
and obligations required of OTR as the owner of the Assigned Interests on or
before the Closing Date, or (ii) any breach of any representation and warranty
made in this Agreement or in the Assignment.
7. Representations and Warranties of PPAP. PPAP hereby represents and
--------------------------------------
warrants to OTR, as of the date hereof, that (a) PPAP is a limited partnership
duly organized and validly existing under the laws of the State of Delaware and
has the power and authority (i) to execute this Agreement and the Assignment as
provided herein and (ii) to perform its obligations under this Agreement and (b)
this Agreement has been duly authorized, executed and delivered by PPAP and is
enforceable against PPAP in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization, arrangement or other similar
laws affecting the rights of creditors generally. PPAP hereby indemnifies and
holds OTR harmless from and against any and all losses, liabilities, expenses
(including reasonable attorneys' fees), claims, demands and causes of action
arising out of or relating to any breach of any representation and warranty made
in this Agreement.
8. Conditions Precedent to PPAP's Obligations. The obligations of PPAP
------------------------------------------
hereunder to consummate the transactions contemplated hereby are subject to (a)
PPAP acquiring, pursuant to the terms of the Contribution Agreements on the
Closing Date(i) all of the partnership interests in the Partnerships owning real
property in the State of New Jersey, other than the limited partnership
interests owned by OTR, and (ii) the leasehold estates owned by the Partnerships
leasing real property in the Commonwealth of Pennsylvania, (b) PPAP receiving a
UCC lien search of the Ohio Secretary of State Records showing that the Assigned
Interests are free and clear of any lien or security interest, and (c) all
representations and warranties made by OTR in Section 6 above being true and
---------
correct as of the Closing Date.
9. Conditions Precedent to OTR's Obligations. The obligations of OTR
-----------------------------------------
hereunder to consummate the transactions contemplated hereby are subject to (i)
there being no Act of Bankruptcy (as defined in the Contribution Agreements)
having occurred with respect to PPAP, and (ii) all representations and
warranties made by PPAP in Section 7 above being true and correct as of the
---------
Closing Date.
10. Remedies. Each party shall have all remedies available at law or in
--------
equity for the other's breach of this Agreement; provided, however, in strict
-------- -------
derogation of the foregoing, in the event the conditions precedent to PPAP's
obligations under this Agreement have been satisfied,
3
<PAGE>
and PPAP thereafter fails, refuses or is unable to close the transactions
contemplated hereby, the Escrow Agent is directed to immediately pay the Earnest
Money to OTR within three (3) business days following written demand by OTR to
the Escrow Agent (which written demand shall be a certification by OTR that it
is entitled to the Earnest Money pursuant to this Section 10 and must be
----------
simultaneously sent to PPAP), which shall constitute OTR's sole and exclusive
remedy for such failure, refusal or inability, the Earnest Money being intended
not as a penalty, but as liquidated damages.
11. Permitted Termination. Upon the delivery of written notice to OTR,
---------------------
PPAP may terminate this Agreement and receive a full refund of the Earnest Money
if PPAP has terminated the Contribution Agreements and received a refund of the
Earnest Money deposited thereunder.
12. Time of the Essence. Time is of the essence with respect to the
-------------------
performance of each and every provision of this Agreement.
13. Successors and Assigns. Neither party may assign its rights hereunder
----------------------
without the prior written consent of the other party; however, PPAP may assign
its rights under this Agreement to any affiliate of PPAP, but any such
assignment shall not relieve PPAP of its obligations under this Agreement.
Subject to the foregoing, this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
14. Governing Law. The interpretation, construction and performance of
-------------
this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania
and any question arising thereunder shall be construed or determined according
to such law.
15. Entire Agreement; Modification. This Agreement, together with the
------------------------------
exhibits hereto, contains all representations, warranties and covenants of the
parties with respect to the transaction contemplated herein. This Agreement may
be modified or amended only by a written instrument duly executed by both
parties.
16. OTR Exculpation. PPAP acknowledges that this Agreement and the
---------------
documents contemplated hereby will be executed by a general partner of OTR, not
individually, but on behalf of and as nominee and agent for the State Teachers
Retirement Board of Ohio ("Board"); and PPAP hereby waives any right to bring a
cause of action against the party executing this Agreement or any such document
on behalf of OTR. All persons dealing with OTR must look solely to the Board's
assets for the enforcement of any claim against OTR, and the obligations of OTR
hereunder are not binding upon, nor shall resort be had to the private property
of any of the trustees, officers, employees or agents of OTR or the Board. PPAP
further agrees that the obligations of OTR hereunder shall not constitute
personal obligations of any of the partners, trustees, officers, employees,
agents or representatives of OTR or the Board and shall not create or involve
any claim against or personal liability of any of them, and PPAP will look
solely to the assets of the Board for satisfaction of any liability of OTR under
this Agreement and the documents contemplated hereby. The limitation contained
in this Section shall apply to any and all agreements and documents, past,
present and future, executed by OTR in connection with the transaction
contemplated herein.
4
<PAGE>
17. Escrow Agent. Escrow Agent referred to in Section 2 hereof has
------------ ---------
agreed to act as such for the convenience of the parties without fee or other
charges for such services as Escrow Agent. Escrow Agent shall not be liable:
(a) to any of the parties for any act or omission to act except for its own
willful misconduct; (b) for any legal effect, insufficiency, or undesirability
of any instrument deposited with Escrow Agent or exchanged by the parties
hereunder; (c) for any loss or impairment of funds that have been deposited in
escrow while those funds are in the course of collection, or while those funds
are on deposit in a financial institution, if such loss or impairment results
from the failure, insolvency or suspension of a financial institution; (d) for
the expiration of any time limit or other consequence of delay, unless a
properly executed written instruction, accepted by Escrow Agent, has instructed
Escrow Agent to comply with said time limit; (e) for the default, error, action
or omission of either party to the escrow. Escrow Agent, in its capacity as
escrow agent, shall be entitled to rely on any document or paper received by it,
believed by such Escrow Agent, in good faith, to be bona fide and genuine. In
the event of any dispute as to the disposition of the Earnest Money Deposit or
any other monies held in escrow, or of any documents held in escrow, Escrow
Agent may, if such Escrow Agent so elects, interplead the matter by filing an
interpleader action in a court of general jurisdiction in the county or circuit
in the Commonwealth of Pennsylvania (to the jurisdiction of which both parties
do hereby consent), and pay into the registry of the court the Earnest Money, or
deposit any such documents with respect to which there is a dispute in the
registry of such court, whereupon such Escrow Agent shall be relieved and
released from any further liability as Escrow Agent hereunder.
18. Prepayment of OTR Debt. PPAP agrees to prepay on the Closing
----------------------
Date the debt in favor of OTR secured by liens on the real property to be
acquired by PPAP pursuant to the Contribution Agreement.
EXECUTED to be effective as of the date first above written.
OTR, an Ohio general partnership, acting as
nominee for The State Teachers Retirement System
of Ohio
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
5
<PAGE>
Prentiss Properties Acquisition Partners, L.P., a
Delaware limited partnership
By: Prentiss Properties I, Inc., a Delaware
corporation, its general partner
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
RECEIPT OF ESCROW AGENT
-----------------------
Chicago Title Insurance Company, as Escrow Agent, acknowledges receipt of the
sum of $550,624.50 by check or by wire transfer, from PPAP as described in
Section 2 of the foregoing Agreement to Acquire Limited Partnership Interests,
- ---------
said check or wire transfer to be held pursuant to the terms and provisions of
said Agreement.
DATED this _________ day of _________________________, 1997.
CHICAGO TITLE INSURANCE COMPANY
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
6
<PAGE>
Exhibit 10.4
------------
AGREEMENT TO ASSIGN PROPERTY
----------------------------
AGREEMENTS AND OTHER ASSETS
---------------------------
This Agreement to Assign Property Agreements and Other Assets (this
"Agreement") is entered into as of September __, 1997, by and between Terramics
Management Company, a Pennsylvania corporation ("Terramics"), Terramics Property
Associates, a Pennsylvania limited partnership ("TPA"), Terramics Property
Company, a Pennsylvania corporation ("TPC") and Prentiss Properties Acquisition
Partners, L.P., a Delaware limited partnership ("Prentiss"):
RECITALS:
--------
A. Terramics is a party to those certain Property Management Agreements
and Development Agreements listed or described on Exhibit A attached hereto
---------
(collectively, the "Property Agreements"), pursuant to which Terramics was
retained by the owners of the real properties described in the Property
Agreements (the "Properties") to provide property management services and
development services on the terms and conditions set forth therein. Terramics
owns the furniture, fixture and equipment described on Exhibit B attached hereto
---------
(the "FF&E").
B. Pursuant to the terms of those certain Contribution Agreements dated as
of even date herewith (the "Contribution Agreements") by and between each of the
limited partnerships described on Exhibit C hereto (the "Partnerships"), certain
---------
partners thereof and Prentiss Properties Acquisition Partners, L.P. ("PPAP"),
PPAP has agreed to acquire effective as of the closing date of the Contribution
Agreements (the "Closing Date") (i) all of the partnership interests in the
Partnerships owning real property in the State of New Jersey other than the
limited partnership interests owned in the Partnerships by OTR, an Ohio general
partnership acting on behalf of The State Teachers Retirement System of Ohio
("OTR"), and (ii) the leasehold estates owned by the Partnerships which lease
real property in the Commonwealth of Pennsylvania. On the Closing Date and
immediately prior to the consummation of the transactions described in the
Contribution Agreements, PPAP will acquire the 89.999% limited partnership
interests owned by OTR in the Partnerships pursuant to an Agreement to Acquire
Limited Partnership Interests dated September __, 1997 (the "OTR Agreement")
between OTR and PPAP.
C. Simultaneously with the consummation of the transactions described in
the Contribution Agreements, for the consideration described below, Prentiss
desires to acquire, and Terramics desires to contribute to Prentiss, the
Property Agreements and FF&E, and Terramics, TPA and TPC desire to contribute to
Prentiss the name "Terramics" and variations thereof (with the understanding,
however, that (i) affiliates of the Partnership and/or the partners thereof will
have the continuing right to use such tradename solely in connection with the
current name of the entity or entities owning any of the Excluded Assets (as
defined in the Contribution Agreements) or the Non-Included Assets (as defined
in the Contribution Agreements) and for regulatory or
1
<PAGE>
statutory compliance with respect to any of such assets or entities owning such
assets and (ii) Partnerships and/or the partners thereof shall have the
continuing right to use such trade name solely in connection with the collection
of accounts receivable [provided, from and after the Closing Date, no such party
may pursue existing tenants of the Properties for delinquent rents without
Prentiss' prior written consent], the prosecution of the claims and the
maintenance of any defense which are related to the Excluded Partnership
Property and Liabilities [as defined in the Contribution Agreement executed in
connection with the New Jersey Properties] and for regulatory or statutory
compliance with respect to any previously owned assets) and goodwill owned by
Terramics, TPA desires to contribute to Prentiss all of TPA's goodwill and
franchise value (the "TPA Assets") and TPC desires to contribute to Prentiss the
personal property described on Exhibit D attached hereto (the "TPC Assets") (the
---------
Property Agreements, FF&E, the rights of Terramics, TPA and TPC to the use of
the name "Terramics" [subject to the exclusions described above], the TPA Assets
and the TPC Assets are herein collectively called the "Terramics Assets").
AGREEMENTS:
----------
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Terramics, TPA and TPC the
parties agree as follows:
1. Closing Date/Purchase Price. On the Closing Date, Prentiss shall
---------------------------
acquire, and Terramics, TPA and TPC shall contribute, the Terramics Assets for a
contribution value ("Contribution Value") of $5,004,400.00, which shall be
allocated among the Property Agreements identified on Exhibit A as Third Party
---------
Property Agreements, FF&E, the TPA Assets and the remainder of Terramics Assets
prior to the Closing Date in a manner reasonably acceptable to the parties
hereto. When all of the conditions set forth herein have been satisfied to the
consummation of the transactions described herein, the following shall occur and
the transactions contemplated hereby will be treated as a contribution of the
Terramics Assets by Terramics, TPA and TPC to Prentiss for federal income tax
purposes:
(i) $4,834,341.00 of the Contribution Value shall be paid by
issuing to Terramics or any Unit Recipient (as hereinafter defined) the number
of Units (as hereinafter defined) calculated by dividing $4,834,341.00 by $25.50
and rounding the resulting number of Units to the nearest integer (.50 rounded
down). Prentiss shall be entitled to a credit against the Contribution Value for
unearned distributions on Units for the period from the last distribution date
through the Closing Date.
(ii) Prentiss shall pay the balance of the Contribution Value, as
adjusted in the manner specified in Paragraph 16 below, to Terramics on the
------------
Closing Date by making a wire transfer of immediately available federal funds to
the account of Terramics or other applicable party as specified in writing by
Terramics.
2
<PAGE>
The term "Units", as used herein, shall mean "Partnership Units" in PPAP, as
defined and described in the Second Amended and Restated Agreement of Limited
Partnership of Prentiss Properties Acquisition Partners, L.P., as amended (the
"Partnership Agreement").
2. Assignment. On the Closing Date, Terramics shall assign, transfer and
----------
deliver to Prentiss all of Terramics' right, title and interest in, under and to
the Property Agreements attributable to the period from and after the Closing
Date pursuant to an Assignment and Assumption Agreement (the "Assignment").
Without limiting the generality of the foregoing, the Assignment shall include:
(a) The right to collect, receive and retain all sums which may
become due or which Terramics may now or hereafter be entitled to demand or
claim arising or issuing from or out of the Property Agreements including all
fees and payments due or to become due, which are earned and payable for the
period from and after the Closing Date;
(b) All claims, powers, privileges and remedies of Terramics under
the Property Agreements which are attributable for the period from and after the
Closing Date;
(c) All rights of Terramics under the Property Agreements which are
attributable for the period from and after the Closing Date to:
(i) exercise any remedies, powers, actions and elections
(including without limitation any election of remedies);
(ii) give or receive any notices, consents, waivers and
approvals;
(iii) accept any payments or prepayments from a third party;
(iv) exercise any right of termination of any of the Property
Agreements; and
(v) exercise the full power and authority to file and prosecute
any claims and to take any action which Prentiss may deem necessary or advisable
in connection with or under any Property Agreements, including without
limitation claims for damages arising out of or for breach of or default under
any Property Agreements and all rights of Terramics to receive the proceeds of
any insurance, indemnity, warranty or guaranty with respect to any of the
Property Agreements; and
(d) Pursuant to the Assignment, Terramics shall indemnify, defend and
hold Prentiss and its officers, directors, employees, agents, successors,
assigns and affiliates harmless from and against any and all claims,
liabilities, losses, damages, costs, settlements, awards and expenses (including
without limitation, reasonable attorneys' fees and costs, court costs and expert
witness fees) that Prentiss or any of such persons may incur by reason of or in
connection with or arising out of any claims or demands whatsoever that may be
asserted against Prentiss or any of such persons by any owner of any of the
Properties (individually, an "Owner" and
3
<PAGE>
collectively, the "Owners") or by any third party based on: (i) any obligations
to be performed or discharged by Terramics under any of the Property Agreements
prior to the Closing Date or relating to acts or omissions of Terramics, its
agents or employees which occur, accrue or arise under the Property Agreements
before the Closing Date, or (ii) any breach by Terramics, TPA or TPC of any of
the representations, warranties and covenants of Terramics, TPA or TPC contained
in this Agreement. Pursuant to the Assignment, Prentiss shall indemnify, defend
and hold Terramics and its officers, directors, employees, agents, successors,
assigns and affiliates harmless from and against any and all claims,
liabilities, losses, damages, costs, settlements, awards and expenses (including
without limitation, reasonable attorneys' fees and costs, court costs and expert
witness fees) that Terramics or any of such persons may incur by reason of or in
connection with or arising out of any claims or demands whatsoever that may be
asserted against Terramics or any of such persons by any Owner or by any third
party based on any obligations to be performed or discharged by Prentiss under
any of the Property Agreements from and after the Closing Date or relating to
acts or omissions arising and accruing under the Property Agreements from and
after the Closing Date.
(e) Notwithstanding anything in this Agreement to the contrary,
Terramics is not assigning to Prentiss any profits payable to the owners of the
Excluded Assets or the Non-Included Assets or ownership interests in the
Excluded Assets or the Non-Included Assets. Prentiss will be entering into
Rights of First Opportunities Agreements with the owners of the Excluded Assets
on the Closing Date (the "Rights of First Opportunities Agreements").
3. Additional Documents. Terramics agrees to execute and deliver on the
--------------------
Closing Date, at its cost, upon request by Prentiss, any documents necessary to
cause the specific assignment of any particular Property Agreement, a special
warranty bill of sale conveying to Prentiss the FF&E and remaining Terramics
Assets and any other documents whatsoever, the execution of which are necessary
or desirable in the reasonable judgment of Prentiss to carry out the purposes of
this Agreement. In addition, TPA and TPC agree to execute and deliver on the
Closing Date, at their cost, a special warranty bill of sale conveying to
Prentiss the TPA Assets and the TPC Assets.
4. Consent of Owners. Terramics agrees to obtain on or before the Closing
-----------------
Date the written consent of each Owner to the Assignment of the Property
Agreements by obtaining a written Consent to Assignment in substantially the
form of Exhibit E attached hereto.
---------
5. Future Payments. Terramics agrees to notify all of the Owners that all
---------------
payments to be made under the Property Agreements from and after the Closing
Date shall be made directly to Prentiss. In the event and to the extent that
Terramics receives any payments from any of the Owners after the Closing Date
which are attributable to the period commencing on the Closing Date, Terramics
agrees to hold such proceeds in trust for Prentiss and to forward to Prentiss
promptly the full amount of any such payments received by Terramics without any
offset, holdback or other reduction. In addition, if Terramics shall at any
time become aware of any default or breach by any Owner under any of the
Property Agreements, Terramics shall advise Prentiss promptly thereof.
4
<PAGE>
6. Representations and Warranties.
------------------------------
(a) Terramics represents and warrants to Prentiss that:
(i) The copies of the Property Agreements delivered to
Prentiss are true, correct and complete. Terramics has good title to its
interest in each of the Property Agreements, the FF&E and the remaining
Terramics Assets, free and clear of all liens and security interests and has
full right, power and authority to assign and transfer the same, subject to any
required consent of an Owner or PQ Corporation in the case of the Property
Agreements;
(ii) No other person or entity has any right, title, interest
or option or claim in or to any of the Property Agreements (other than the
rights of the Owners), the FF&E or the remaining Terramics Assets, and Terramics
has not previously sold, assigned, mortgaged, pledged or otherwise transferred
or encumbered any of its right, title or interest therein;
(iii) The Property Agreements are in full force and effect, and
have not been cancelled or terminated by either Terramics or the applicable
Owner;
(iv) No default on the part of Terramics exists under any
Property Agreement and no event has occurred and is continuing and no condition
exists that constitutes or would constitute a default under any obligation of
Terramics under any Property Agreement either with or without notice or lapse of
time or both. To the best knowledge of Terramics, no material default on the
part of any Owner or any other party to any Property Agreement exists under any
Property Agreement, and no condition exists that constitutes or would constitute
a default by any Owner or any other party under any Property Agreement either
with or without notice or lapse of time or both.
(v) All fees payable to Terramics and all other sums due to
Terramics under the Property Agreements through the last day of the calendar
month which has most recently ended have been collected in full, except as
disclosed on Exhibit F hereto, and no demand for any refund or reimbursement of
---------
any such payment or any payment previously received by Terramics has been
delivered or threatened by any Owner or successor thereto; provided, Terramics
is reserving the right to compensation and/or any preferential distributions for
the period prior to the Closing Date attributable to Okehocking Associates.
(vi) To the knowledge of Terramics, none of the Owners has any
offset, deduction, counterclaim or other basis for decreasing or failing to pay
any fee or other payment required to be made under the Property Agreements.
(vii) No fees or other amounts payable to Terramics under the
Property Agreements have been paid more than thirty (30) days in advance.
(viii) In the event all or a portion of the Contribution Value is
to be paid by issuing Units, Terramics represents, warrants and covenants as
follows:
5
<PAGE>
(1) Terramics and any direct or indirect owner of
Terramics which will receive Units (a "Unit Recipient") is an "accredited
--------------
investor" within the meaning of Rule 501(a) promulgated under the Securities Act
of 1933, as amended (the "Securities Act"). Terramics and each Unit Recipient
--------------
understands the risks of, and other considerations relating to, the purchase of
the Units. Terramics and each Unit Recipient, by reason of its business and
financial experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with respect to
its investment in the Units, has such knowledge, sophistication and experience
in financial and business matters and in making investment decisions of this
type, that it (1) is capable of evaluating the merits and risks of an investment
in PPAP and of making an informed investment decision, (2) is capable of
protecting its own interests or has engaged representatives or advisors to
assist it in protecting its interests and (3) is capable of bearing the economic
risk of such investment.
(2) The Units to be issued to Terramics and each Unit
Recipient will be acquired by Terramics and each Unit Recipient for its own
account for investment only and not with a view to, or with any intention of, a
distribution or resale thereof, in whole or in part, or the grant of any
participation therein until the Units are redeemed for Common Stock of Prentiss
Properties Trust (the "Company") following the lock-up period specified in the
Registration Rights Agreement (as hereinafter defined) and this Agreement in
accordance with the Partnership Agreement and the Registration Rights Agreement.
Terramics confirms that all documents, records, and books pertaining to
investment in PPAP and requested by Terramics or any Unit Recipient have been
made available or delivered to Terramics and such Unit Recipient. Terramics and
each Unit Recipient has had an opportunity to ask questions of and receive
answers from PPAP, or from a person or persons acting on PPAP's behalf,
concerning the terms and conditions of the transaction contemplated by this
Agreement and its acquisition of Units. Terramics and each Unit Recipient has
relied upon, and is making its investment decisions, solely upon such
information as has been provided to Terramics and such Unit Recipient by PPAP.
Neither Terramics nor any Unit Recipient was formed for the specific purpose of
acquiring an interest in PPAP.
(3) Terramics and each Unit Recipient acknowledges that
(1) the Units to be issued to Terramics and each Unit Recipient have not been
registered under the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the Securities Act and
applicable state securities laws, (2) PPAP's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of Terramics and each Unit Recipient contained herein, and in the
Prospective Subscriber Questionnaires delivered to PPAP pursuant to Paragraph
---------
13(e) hereof, (3) such Units, therefore, cannot be resold unless registered
- -----
under the Securities Act and applicable state securities laws, or unless an
exemption from registration is available, (4) there is no public market for such
Units, and (5) PPAP has no obligation or intention to register such Units for
resale under the Securities Act or any state securities laws or to take any
action that would make available any exemption from the registration
requirements of such laws. Terramics and each Unit Recipient hereby acknowledges
that because of the restrictions on transfer or assignment of such Units to be
issued hereunder which are set forth in this Agreement and in the Partnership
Agreement, Terramics and such Unit Recipient may have to bear the economic risk
of the investment commitment evidenced by this Agreement and any Units purchased
hereby for an indefinite period of time, and that, under the terms of the
Partnership Agreement of PPAP, as it will be in effect
6
<PAGE>
on the Closing Date, Units will not be redeemable at the request of the holder
thereof for Common Stock of the Company prior to the first (1st) anniversary of
their issuance.
(4) The address set forth for Terramics below is the
address of the Terramics' principal place of business or residence, as
applicable, and Terramics has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which
principal place of business or residence, as applicable, is sited.
(b) TPA represents and warrants as to the TPA Assets, and TPC
represents and warrants as to the TPC Assets, that each has good title thereto,
that no other person or entity has any right, title, interest, option or claim
therein, and that neither has sold, assigned, mortgaged, pledged, encumbered or
otherwise transferred such assets.
The representations and warranties set forth hereinabove shall survive the
closing of the transactions described in this Agreement (the "Closing") for a
period of one (1) year following the Closing Date.
7. Acceptance of Assignment. Prentiss hereby agrees to accept the
------------------------
Assignment of the Property Agreements on the Closing Date, and agrees to perform
and fulfill all the terms and conditions required to be performed by Terramics
thereunder from and after the Closing Date.
8. Attorneys' Fees. If any controversy, claim or dispute between
---------------
the parties hereto arising out of or relating to this Assignment, or the breach
or enforcement thereof, results in any litigation, arbitration or any other
administrative or adversarial proceeding, the prevailing party shall be entitled
to recover from the non-prevailing party its expenses, including reasonable
attorneys' fees and costs, court costs and witness fees incurred in connection
with any related investigation.
9. Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the parties and their respective successors and assigns.
10. Governing Law. This Assignment shall be governed by and construed and
-------------
interpreted in accordance with the laws of the Commonwealth of Pennsylvania.
11. Entire Agreement. This Assignment and the exhibits hereto contain the
----------------
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior or contemporaneous negotiations, correspondence,
understandings, letters of intent and agreements whether written or oral,
between or among the parties.
12. Subsequent Communications. Terramics shall deliver to Prentiss
-------------------------
promptly all notices, reports, certificates and other communications received by
Terramics after the Closing Date relating to the Property Agreements or with
respect to the Properties that are subject to the Property Agreements. This
Paragraph shall survive the Closing Date.
13. Covenants of Terramics. Terramics covenants with Prentiss as
----------------------
follows:
7
<PAGE>
(a) From and after the date hereof through the Closing Date,
Terramics shall not modify, amend or terminate any of the Property Agreements or
convey any interest of Terramics in the FF&E or any of the remaining Terramics
Assets.
(b) Terramics shall perform all obligations to be performed by
Terramics under the Property Agreements from the date hereof to the Closing
Date.
(c) Terramics shall not accept any fee or other amount payable to
Terramics under the Property Agreements more than thirty (30) days in advance.
(d) Terramics shall diligently conduct its business and operations
with respect to the Terramics Assets owned by Terramics as presently conducted
and only in the ordinary course, as consistent with past practices.
(e) Within ten (10) days following the date hereof, Terramics shall
deliver to PPAP a definitive list of all Unit Recipients to receive Units at the
Closing. Terramics and each other Unit Recipient shall deliver to PPAP within
ten (10) days following the date hereof a completed and duly executed
Prospective Subscriber Questionnaire in substantially the form attached hereto
as Exhibit H, which Questionnaires shall confirm to the satisfaction of PPAP
---------
that each Unit Recipient is an "accredited" investor within the meaning of Rule
501(a) promulgated under the Securities Act. Within ten (10) days following the
date hereof, Terramics shall deliver to PPAP definitive instructions regarding
issuance of Units to Terramics and the Unit Recipients. Terramics and each Unit
Recipient shall also deliver to PPAP, upon PPAP's reasonable request, such other
information, certificates and materials as PPAP may reasonably request in
connection with offering the Units without registration under the Securities Act
and the securities laws of applicable states and other jurisdictions.
(f) In connection with the issuance of Units to Terramics and any
Unit Recipient, Terramics shall deliver to PPAP within ten (10) days following
the date hereof, at Terramics' sole cost and expense, prepared as of the date of
this Agreement, depreciation and amortization schedules for the assets
constituting the Terramics Assets, as kept for tax purposes, showing original
basis, accumulated depreciation or amortization, original useful life of such
assets, remaining useful life of such assets and the date(s) when such assets
were placed in service.
(g) From the date of this Agreement until the Closing, and then so
long as Terramics or any Unit Recipient holds any Units, Terramics and each such
Unit Recipient shall notify PPAP in writing promptly upon any change in the
identity or number of its partners or of its indirect partners as identified
pursuant to this Agreement, and shall provide the information called for in
subparagraph (f) above with respect to any such change. In addition, so long as
Terramics or any Unit Recipient holds any Units, without the prior written
consent of PPAP, Terramics and each Unit Recipient shall not (i) admit
additional partners, (ii) permit the transfer of interests in Terramics and/or
each Unit Recipient to a look-through entity (as defined herein) or (iii) permit
any transfer of interests in Terramics and/or such Unit Recipients if, as a
result of the admissions or transfers described in (i) through (iii) the number
of direct or indirect beneficial owners in Terramics and such Unit Recipients
would increase. Terramics and each Unit Recipient shall use their best efforts
to secure the compliance
8
<PAGE>
of any look-through entities that hold direct or indirect interests of Terramics
and such Unit Recipients with the requirements of this subparagraph as if such
requirements applied directly to such entities. Terramics and each Unit
Recipient acknowledge that the provisions of this subparagraph are imposed to
aid PPAP in avoiding taxation as a corporation for federal income tax purposes,
agrees that monetary damages may be insufficient to remedy the potential harm
caused by any breach of the provisions of this subparagraph, and agree that
injunctive relief, including specific performance or another equitable remedy
would be an appropriate remedy. The provisions of this subparagraph shall
survive the Closing.
(h) Terramics acknowledges that each Unit Recipient shall be bound by
and subject to all terms of the Partnership Agreement. At or prior to the
Closing, Terramics shall deliver to PPAP a Limited Partner Signature Page in
substantially the form attached hereto as Exhibit I executed by each Unit
---------
Recipient.
TPC and TPA covenant that, from and after the date hereof through the Closing
Date, neither will convey any interest in the TPA Assets or TPC Assets nor grant
any lien or security interest thereon.
14. Conditions to Closing of Prentiss. The obligations of Prentiss
---------------------------------
under this Agreement are, at the option of Prentiss, subject to satisfaction, at
or prior to the Closing, of the following conditions ("Prentiss' Conditions
Precedent") (any one or more which may be waived, but only by an instrument in
writing signed by Prentiss):
(a) The representations and warranties of Terramics, TPA and TPC
shall be true and correct in all material respects on and as of the Closing
Date.
(b) Terramics shall have fully performed and complied in all material
respects with all obligations to be performed and complied with by Terramics on
or before the Closing under the Property Agreements.
(c) Terramics, TPA and TPC shall deliver to Prentiss certificates
dated as of the Closing Date and executed by Terramics, TPA and TPC stating that
the representations and warranties made in this Agreement are accurate in all
material respects as of the Closing Date and that all covenants, agreements and
conditions required by this Agreement to be performed by Terramics, TPA and TPC
have been performed on or prior to the Closing Date.
(d) The closing of the transactions contemplated by the Contribution
Agreements and the OTR Agreement shall have occurred prior to or simultaneously
with the Closing.
(e) Terramics, TPA and TPC shall deliver to Prentiss any other
documents, instruments or agreements reasonably necessary to effectuate the
transactions contemplated by this Agreement.
15. Conditions to Closing of Terramics. The obligations of Terramics, TPA
----------------------------------
and TPC under this Agreement are, at the option of Terramics, TPA and TPC,
subject to the
9
<PAGE>
satisfaction, at or prior to the Closing, of the following conditions (the
"Terramics' Conditions Precedent") (any one or more of which may be waived, but
only by an instrument in writing signed by Terramics):
(a) Prentiss shall fully perform and comply with all covenants, terms
and agreements to be performed or complied with by it on or before the Closing
under this Agreement.
(b) Prentiss shall deliver to Terramics a certificate dated as of the
Closing Date and executed by Prentiss stating that all covenants, agreements and
conditions required by this Agreement to be performed by Prentiss have been
performed on or prior to the Closing Date.
(c) Prentiss shall deliver to Terramics the following:
(i) An amendment to the Partnership Agreement to be executed
by Terramics or the Unit Recipients specifying the number of Units to be issued
to Terramics or such Unit Recipients in partial payment of the Contribution
Value;
(ii) A Registration Rights Agreement in the form of Exhibit G
---------
executed by the Terramics with respect to the Units to be issued to Terramics or
the Unit Recipients on the Closing Date; and
(iii) Any other documents, instruments or agreements reasonably
necessary to effectuate the transactions contemplated by this Agreement.
16. Closing and Prorations. The Closing contemplated herein shall close on
----------------------
the same date as the closing of the transactions contemplated in the
Contribution Agreements. At the Closing, all revenues and expenses with respect
to the Property Agreements and applicable to the period of time before and after
Closing, determined in accordance with sound accounting principles consistently
applied, shall be allocated between Terramics and Prentiss as provided herein.
Terramics shall be entitled to all revenue and shall be responsible for all
expenses payable under the Property Agreements for the period of time up to but
not including the Closing Date, and Prentiss shall be entitled to all revenue
payable under the Property Agreements and shall be responsible for all expenses
for the period of time from, after and including the Closing Date. If accurate
allocations cannot be made at Closing because current bills are not obtainable,
the parties shall allocate such revenue or expenses at Closing on the best
available information, subject to adjustment upon receipt of the final bill or
other evidence of the applicable revenue or expense. The obligation to make the
adjustment shall survive the Closing of the transaction contemplated by this
Agreement. Any revenue received or expense incurred by Terramics or Prentiss
with respect to the Property Agreements after the Closing Date shall be promptly
allocated in the manner described herein and the parties shall promptly pay or
reimburse any amount due. The proration provisions of this Agreement shall
survive the closing of the transaction contemplated hereby for a period of six
(6) months.
10
<PAGE>
IN WITNESS WHEREOF, this Assignment has been duly executed by the parties
hereto as of the date and year first above written.
TERRAMICS MANAGEMENT COMPANY, a
Pennsylvania corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
TERRAMICS PROPERTY ASSOCIATES, a
Pennsylvania limited partnership
By:
-------------------------------------
Name:
-----------------------------------
Title: General Partner
TERRAMICS PROPERTY COMPANY, a
Pennsylvania corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address:
c/o Terramics Property Company
1180 West Swedesford Road, Suite 140
Berwyn, Pennsylvania 19312
11
<PAGE>
PRENTISS PROPERTIES ACQUISITION
PARTNERS, L.P., a Delaware limited partnership
By: Prentiss Properties I, Inc.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address:
3890 W. Northwest Highway, Suite 400
Dallas, Texas 75220
Document #53244 v.3
013072-0056
12
<PAGE>
Exhibit 10.5
------------
STOCK PURCHASE AGREEMENT
among
HENRY C. GULBRANDSEN, JR.,
PETER O. HAUSMANN,
and
TIMOTHY J. WEBER
"Sellers"
and
SOUTHPOINT LAND HOLDINGS, INC.,
a Pennsylvania corporation,
"X Corporation"
and
VALLEYBROOKE LAND HOLDINGS, INC.,
a Pennsylvania corporation,
"Y Corporation"
and
PRENTISS PROPERTIES LIMITED, INC.,
a Delaware corporation
"Purchaser"
Dated as of
____________________, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINED TERMS..................................................... 1
2. PURCHASE AND SALE OF THE PURCHASED STOCK.......................... 2
3. THE PURCHASE PRICE................................................ 2
4. REPRESENTATIONS AND WARRANTIES OF SELLERS......................... 3
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER....................... 5
6. COVENANTS OF SELLERS AND CORPORATIONS............................. 5
7. ACCESS TO INFORMATION............................................. 7
8. CONFIDENTIALITY................................................... 7
9. CONDITIONS TO CLOSING OF PURCHASER................................ 8
10. CONDITIONS TO CLOSING OF SELLERS.................................. 9
11. CLOSING........................................................... 9
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Legal Description of the Land
Exhibit B Common Names of Development Parcels on the Land
Exhibit C Sellers' Respective Ownership in X Corporation and Y Corporation
Exhibit D Description of Contribution Agreement
Exhibit E Schedule of Leases
Exhibit F List of Personal Property
Exhibit G Put and Call Option Agreement for Remaining Shares
Exhibit H Articles of Incorporation, By-laws of X Corporation and Y
Corporation
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
September ___, 1997, among PRENTISS PROPERTIES LIMITED, INC., a Delaware
corporation ("Purchaser"), SOUTHPOINT LAND HOLDINGS, INC., a Pennsylvania
corporation ("X Corporation"), VALLEYBROOKE LAND HOLDINGS, INC., a Pennsylvania
corporation ("Y Corporation" and, collectively with X Corporation, the
"Corporations"), HENRY C. GULBRANDSEN, JR., PETER O. HAUSMANN and TIMOTHY J.
WEBER. The named individuals are hereinafter collectively referred to as
"Sellers" and individually as "Seller."
RECITALS:
WHEREAS, X Corporation and Y Corporation hold title to those certain
parcels of real property located in the Commonwealth of Pennsylvania and more
particularly described in Exhibit A attached hereto (collectively, the "Land"),
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which Land includes those development parcels commonly known by the names listed
on Exhibit B, together with any improvements located thereon (collectively, the
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"Improvements");
WHEREAS, Sellers collectively own 100 shares of the common stock, par value
$1.00 per share, of X Corporation (the "X Corporation Common Stock") and 100
shares of the common stock, $1.00 par value per share, of Y Corporation (the "Y
Corporation Common Stock") respectively, as set forth in Exhibit C, which stock
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in the aggregate represents all of the outstanding shares (the "Outstanding
Shares") of capital stock of each of X Corporation and Y Corporation; and
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from Sellers, an aggregate of 89 shares of X Corporation Common Stock
(from each Seller in proportion to his ownership in X Corporation) (the
"Purchased X Corporation Common Stock") and an aggregate of 89 shares of Y
Corporation Common Stock (from each Seller in proportion to his ownership of Y
Corporation) (the "Purchased Y Corporation Common Stock"), in each case
representing eighty-nine percent (89%) of the Outstanding Shares of X
Corporation and Y Corporation, respectively, for the price and on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Recitals, the
representations, warranties, covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINED TERMS. For purposes of this Agreement, the following terms
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shall have the meanings set forth below:
(a) "Contribution Agreement" means that Contribution Agreement
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described on Exhibit D.
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(b) "Effective Date" means the date this Agreement is fully executed
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and delivered by Purchaser and Sellers.
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(c) "Escrow Agreement" means the Escrow Agreement dated as of the
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Closing Date among the Purchaser, Sellers and an escrow agent selected by
Purchaser who is reasonably satisfactory to Sellers, as escrow agent.
(d) "Leases" means collectively all of the Corporations' right,
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title, estate and interest in and to the unexpired leases covering the Land and
Improvements as of the Closing Date, together with any and all amendments,
modifications or supplements thereto, which Leases are identified in the
Schedule of Leases attached hereto as Exhibit E.
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(e) "Personal Property" means all personal property and fixtures (if
-----------------
any) owned by the Corporations and located on the Real Property and used or
useful in the operation of the Real Property including, without limitation, to
the extent owned by the Corporations, all of the Corporations' right, title and
interest in and to all plans, specifications, drawings and other technical
descriptions prepared for the development, construction, repair or alteration of
the Land and the Improvements, and all amendments and modifications thereof, and
all other property described in Exhibit F attached hereto.
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(f) "Property" means the Real Property and the Personal Property.
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(g) "Real Property" means the Land, the Improvements and all rights,
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privileges, easements and appurtenances to the Land and the Improvements, if
any, including, without limitation, all of the Corporations' right, title and
interest, if any, in and to all easements, rights-of-way and other appurtenances
used or connected with the beneficial use or enjoyment of the Land and the
Improvements.
2. PURCHASE AND SALE OF THE PURCHASED STOCK. On the Closing Date (as
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hereinafter defined), subject to the terms and conditions set forth in this
Agreement, (i) Sellers shall sell, convey, assign and transfer to Purchaser (or
Purchaser's nominee) the Purchased X Corporation Common Stock and the Purchased
Y Corporation Common Stock (collectively, the "Purchased Stock") and (ii)
Purchaser shall purchase, acquire and accept from Sellers the Purchased Stock,
free and clear of all liens, security interests, options and adverse claims of
any kind or character.
3. THE PURCHASE PRICE. The purchase price for the Purchased Stock is
------------------
Five Thousand Six Hundred Seven and No/100 Dollars ($5,607.00) (the "Purchase
Price"). The Purchase Price for the Purchased X Corporation Common Stock shall
be Two Thousand Four Hundred Three and No/100 Dollars ($2,403.00) (the "X
Corporation Common Stock Purchase Price"), which shall be paid by making a wire
transfer of immediately available Federal funds to the account of Sellers. The
Purchase Price for the Purchased Y Corporation Common Stock shall be Three
Thousand Two Hundred Four and No/100 Dollars ($3,204.00) (the "Y Corporation
Common Stock Purchase Price"), which shall be paid by making a wire transfer of
immediately available Federal funds to the account of Sellers. Each component of
the X Corporation Common Stock Purchase Price and the Y Corporation Common Stock
Purchase Price shall be paid to each of the Sellers in proportion to their
respective ownership of X Corporation Common Stock and Y Corporation Common
Stock, respectively, as set forth on Exhibit C hereto.
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4. REPRESENTATIONS AND WARRANTIES OF SELLERS. Each Seller represents and
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warrants to Purchaser (and to Purchaser's nominee), for himself and with respect
to the Corporations, that the following matters are true and correct as of the
execution of this Agreement and will also be true and correct as of the Closing:
(a) X Corporation is a corporation, duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and has
its chief executive office at 1180 West Swedesford Road, Suite 140, Berwyn,
Pennsylvania 19312. Y Corporation is a corporation, duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has its chief executive office at 1180 West Swedesford Road, Suite 140,
Berwyn, Pennsylvania 19312. Neither Corporation is qualified to do business in
a state other than its state of incorporation.
(b) This Agreement is, and all the documents executed by the
Corporations that are to be delivered to Purchaser at the Closing will be, duly
authorized, executed, and delivered by the Corporations and enforceable against
the Corporations in accordance with their respective terms, subject to the
effect of applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or similar laws affecting the rights of creditors generally.
(c) This Agreement is, and all the documents executed by Sellers that
are to be delivered to Purchaser at the Closing will be, duly authorized,
executed, and delivered by Sellers and enforceable against the Sellers in
accordance with their respective terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting the rights of creditors generally.
(d) The authorized equity securities of X Corporation consist solely
of 1,000 shares of X Corporation Common Stock, of which 100 shares are issued
and outstanding. The authorized equity securities of Y Corporation consist
solely of 1,000 shares of Y Corporation Common Stock, of which 100 shares are
issued and outstanding. The Outstanding Shares of each Corporation are duly
authorized, validly issued, fully paid and nonassessable. Each Seller is the
record and beneficial owner of, and has good title to, their respective
Outstanding Shares of each of the Corporations, as set forth on Exhibit C
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hereto, free and clear of all liens, claims, security interests, assignments,
options, voting trusts, proxies, voting agreements, understandings or
arrangements with respect to voting, and adverse claims to title of any kind or
character. Except as provided in this Agreement, there are no outstanding
subscriptions, options, warrants, calls or rights of any kind relating to or
providing for the issuance, sale, delivery or transfer of securities of any
class of X Corporation or Y Corporation issued or granted by, or binding upon
any Seller or the Corporations (including any right of conversion or exchange
under any outstanding security or other instrument).
(e) There are no actions, suits, or proceedings pending or, to the
best of each Seller's knowledge, threatened against the Corporations or
otherwise affecting the Corporations, at law or in equity, or before or by any
federal, state, municipal, or other governmental court, department, commission,
board, bureau, agency, or instrumentality, domestic or foreign.
(f) None of Sellers nor either of the Corporations has received any
notice of any violation of any ordinance, regulation, law, statute, building
code, zoning ordinance, or
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environmental laws pertaining to the Property or any portion thereof or of any
pending zoning change or special assessment pertaining to the Property.
(g) None of Sellers nor either of the Corporations has received any
notice of condemnation of the Property or any portion thereof.
(h) (A) (i) Exhibit E lists and/or Sellers have delivered to Purchaser
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(prior to Closing with written evidence of the specific documents delivered)
copies of all the agreements, instruments and documents which constitute the
Leases, (ii) there are no outstanding assignments by Sellers or the Corporations
of Sellers' interest in the Corporations or the Corporations' interest in the
Leases except for the liens evidencing the Existing Secured Indebtedness (as
defined in the Contribution Agreement), (iii) there are no earned and unpaid
leasing commissions or fees due and payable prior to the Closing (or which will
become due and payable after the Closing) with respect to the Leases, and (iv)
the Leases are in full force and effect and have not been modified, amended or
altered; and (B) the Corporations, as landlord, are not in default under any of
the Leases and, to the best of each Seller's knowledge and except as may be
otherwise disclosed to Purchaser in writing prior to the Closing, the tenant
under each of the Leases is not in default thereunder.
(i) Neither of the Corporations has any liabilities or obligations,
whether disclosed or undisclosed, and whether accrued, absolute, contingent,
direct, indirect or otherwise other than the Existing Secured Indebtedness.
Sellers have delivered to Purchaser, if prepared, financial statements for the
past three (3) years (including balance sheet, income statement, statement of
cash flows, and all notes thereto) (the "Financial Statements") and federal and
state tax returns for the past three (3) years (the "Tax Returns") for each of
the Corporations. To the best of Sellers' knowledge, the Financial Statements
are correct and complete in all material respects and present fairly the
financial condition and results of operations of the Corporations as of the
dates and for the periods indicated and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis, and the
Tax Returns are correct and complete in all material respects. Since the date
of the last Financial Statement, there have been no material adverse change in
the financial condition or in the operations of either of the Corporations.
(j) No consent, waiver or approval by any third party is required in
connection with the execution and delivery by each Seller of this Agreement or
the performance by each Seller of the obligations to be performed by such Seller
under this Agreement.
(k) The Corporations do not have and have never had any employees.
(l) All tax returns for federal, state and local income, excise, sales
and use, personal property and franchise taxes required by law to be filed by
the Corporations prior to the Effective Date (including, without limitation, the
Tax Returns) have been filed (or extensions to file have been obtained), and all
taxes, if any, shown on such returns, together with any interest or penalties
thereon, have been paid. All such tax returns required by law to be filed by the
Corporations prior to the Closing will be filed (or extensions to file will be
obtained), and all taxes, if any, shown on such returns, together with any
interest or penalties thereon, will have been paid.
(m) There are no outstanding contracts made by Sellers or the
Corporations for the construction or repair of any improvements to the Real
Property which have not been fully paid for or provided for, and Sellers shall
cause the Corporations to discharge all mechanics' or
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materialmen's liens arising from any labor or materials furnished to the Real
Property prior to the Closing pursuant to contracts entered into by Sellers or
the Corporations.
(n) The Corporations have not engaged in any business or activities
other than the business of owning, leasing and operating the Property.
(o) The Corporations do not own directly or indirectly any capital
stock or interest in any partnership, corporation or other entity. The
Corporations do not own, directly or indirectly, any assets other than the
Property.
(p) Attached hereto as Exhibit H are complete and correct copies of
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the articles of incorporation and the by-laws, each as amended to date, of the
Corporations. Such articles of incorporation and by-laws are in full force and
effect and neither Corporation is in violation or breach of any of the
provisions of the foregoing. The execution and delivery of this Agreement by
Sellers and the Corporations, and the performance of this Agreement by Sellers
and the Corporations, will not: (i) conflict with or result in a breach of the
articles of incorporation or by-laws of the Corporations; (ii) violate, or
conflict with, or constitute a default under, or result in the creation or
imposition of any security interest, lien or encumbrance upon any assets of
either Corporation under any mortgage, indenture or agreement to which Sellers
or the Corporations are a party or by which Sellers or the Corporations are
bound; or (iii) violate any statute or law or any judgment, decree, order, writ,
injunction, regulation or rule or any court or governmental authority.
The representations and warranties set forth hereinabove shall survive the
Closing of this Agreement for a period of one (1) year.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
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and warrants to Sellers that the following matters are true and correct as of
the execution of this Agreement and will also be true and correct as of the
Closing:
(a) Purchaser is a corporation, duly formed, validly existing and in
good standing under the laws of the State of Delaware.
(b) This Agreement is, and all documents executed by Purchaser which
are to be delivered to Sellers at the Closing will be, duly authorized,
executed, and delivered by Purchaser, and enforceable against Purchaser in
accordance with their respective terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting the rights of creditors generally.
The representations and warranties set forth hereinabove shall survive the
Closing of this Agreement for a period of one (1) year.
6. COVENANTS OF SELLERS AND CORPORATIONS. Sellers covenant with
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Purchaser, as follows:
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(a) From the Effective Date through the Closing, except as otherwise
permitted by the prior written consent of Purchaser, the Corporations shall, and
Sellers shall cause the Corporations to:
(i) diligently conduct their business and operations as
presently conducted and only in the ordinary course, as consistent with past
practices;
(ii) neither enter into any new leases, nor amend, modify or
extend the existing Leases;
(iii) keep the Corporations insured under a comprehensive
general liability policy;
(iv) refrain from incurring any additional liabilities or
obligations, whether accrued, absolute, contingent, direct, indirect or
otherwise; and
(v) not sell, exchange, dispose of or encumber any of the
assets of the Corporations, or purchase or acquire in any manner any additional
assets.
(b) Sellers shall not, and shall cause the Corporations not to:
(i) issue, sell, or pledge, or authorize the issuance, sale or pledge of, or
issue options or rights to subscribe to, or enter into any contract or
commitment to issue or sell (upon conversion or otherwise), any shares of the
Corporations' capital stock or securities, or allow the Corporations to split,
subdivide or in any way reclassify any shares or securities of the Corporations;
(ii) merge or consolidate, or agree to merge or consolidate, with or into any
other entity; or (iii) dissolve or liquidate all or any portion of the
Corporations' businesses or assets.
(c) Sellers shall take all actions necessary cause the Purchaser's
Conditions Precedent set forth in Section 9 to be satisfied on or before
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Closing.
(d) From the Effective Date through Closing, neither Sellers nor the
Corporations shall amend the Corporations' articles of incorporation or by-laws
or change in any manner the rights of the capital stock of the Corporations.
(e) From the Effective Date through Closing, neither Sellers nor the
Corporations shall cancel any debts or waive any claims or rights to value of
the Corporations, except for fair and equivalent value in the ordinary course of
business and consistent with past practices.
(f) From the Effective Date through the Closing, the Corporations
shall, and Sellers shall cause the Corporations to, comply in all material
respects with all applicable laws.
(g) From the Effective Date through Closing, the Corporations shall,
and Sellers shall cause the Corporations to, maintain books of account and
records of the Corporations in the usual, regular and ordinary manner of the
Corporations.
(h) Each Seller agrees that, after the Effective Date, he shall not
sell, transfer or assign, or create, grant or permit to exist a lien, security
interest in, claim on, or grant any option or
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right to acquire, or grant a proxy, or enter into a voting agreement or voting
trust or similar agreement or understanding with respect to his respective
Outstanding Shares, except as contemplated by this Agreement.
(i) Each Seller agrees that he will, at any time and from time to
time after the Closing, upon the reasonable request of Purchaser and at
Purchaser's cost and expense, do, execute, acknowledge and deliver, or cause to
be done, executed, acknowledged and delivered, all such further acts, deeds,
assignments, transfers, conveyances and assurances as may be reasonably required
for better assigning, transferring and conveying the Purchased Stock to
Purchaser.
(j) After the Closing, Sellers shall prepare any tax returns or
reports of the Corporations which are required to be filed by the Corporations
for any taxable period of the Corporations that ends on or before the Closing.
(k) Upon Purchaser's reasonable request, for a period of three (3)
years after the Closing, or, in the event of a governmental investigation or
audit, at any time, Sellers shall make all of Sellers' records with respect to
the Corporations or the Property available to Purchaser for inspection, copying
and audit by Purchaser's designated accountants or representatives.
The covenants set forth hereinabove shall survive the Closing of this
Agreement.
7. ACCESS TO INFORMATION. Prior to Closing, the Corporations shall and
Sellers shall cause the Corporations to: (i) give Purchaser and its authorized
representatives, including but not limited to its lenders, legal counsel,
accountants and management, reasonable access to all offices, warehouses and
other facilities, including the Real Property, and to all books and records of
the Corporations, (ii) permit Purchaser and/or its authorized representatives to
make such inspections as they may reasonably request, and (iii) cause the
officers of the Corporations to furnish Purchaser and/or its authorized
representatives with such financial and operating data and other information
with respect to the business and properties, including the Property, of the
Corporations as they may from time to time reasonably request.
8. CONFIDENTIALITY. Except as hereinafter provided, from and after the
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Effective Date, Purchaser, the Corporations and Sellers shall keep the terms,
conditions and provisions of this Agreement confidential and the parties shall
not make any public announcements hereof unless the other parties first approve
of same in writing, and none of the parties hereto shall disclose the terms,
conditions and provisions hereof, except to persons who "need to know," such as
the respective officers, directors, employees, attorneys, accountants,
consultants, financiers, partners, investors and bankers, of the parties hereto,
and such other third parties whose assistance is required in connection with the
consummation of these transactions or as required by law or order of court of
competent jurisdiction. Notwithstanding the foregoing, it is acknowledged that
Purchaser is an affiliate of the Company and the Company has and will seek to
sell shares to the general public; consequently, Purchaser and the Company shall
have the right to disclose any information regarding the transactions
contemplated by this Agreement required by law or as determined to be necessary
or appropriate by the Company, Purchaser or their attorneys to satisfy
disclosure and reporting obligations of the Company, Purchaser or their
affiliates. After Closing, Purchaser shall be free to disclose previously
confidential information in its sole discretion. The provisions of this Section
shall survive the termination of this Agreement.
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9. CONDITIONS TO CLOSING OF PURCHASER. The obligations of Purchaser
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under this Agreement are, at the option of Purchaser, subject to the
satisfaction, at or prior to the Closing, of the following conditions (the
"Purchaser's Conditions Precedent") (any one or more of which may be waived, but
only by an instrument in writing signed by Purchaser):
(a) The representations and warranties of Sellers shall be true and
correct in all material respects on and as of the Closing Date.
(b) Sellers shall, and shall have caused the Corporations to, have
fully performed and complied with all covenants, terms, and agreements to be
performed and complied with by them on or before the Closing.
(c) Sellers and the Corporations shall deliver to Purchaser
certificates dated the Closing Date and executed by each Seller or officer,
respectively, each stating that the representations made by it or him in this
Agreement are accurate in all material respects as of the Closing Date and that
all covenants, agreements and conditions required by this Agreement to be
performed have been performed on or prior to the Closing Date.
(d) The closing of the transactions contemplated by the
Contribution Agreements shall have occurred simultaneously with the Closing.
(e) Sellers shall have executed and delivered the Put and Call
Option Agreement for Remaining Shares in the form attached hereto as Exhibit G
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and the Escrow Agreement with respect to the eleven percent (11%) of the
Outstanding Shares of each of X Corporation and Y Corporation which will
continue to be owned by Sellers after the Closing.
(f) Sellers shall have delivered to Purchaser the following:
(i) Stock certificates representing the Purchased Stock, each
accompanied by stock powers duly executed in blank or duly executed instruments
of transfer by the requisite Sellers, and any other documents necessary to
transfer to Purchaser good title to the Purchased Stock, free and clear of all
liens, security interests, assignments, options and adverse claims of any kind
or character;
(ii) The resignations of the members of the board of directors
and all officers of X Corporation and Y Corporation;
(iii) Any other documents, instruments or agreements reasonably
necessary to effectuate the purchase of the Purchased Stock contemplated by this
Agreement;
(iv) All minute books, stock ledgers, and other records or
books of any kind relating to the Corporations; and
(v) To the extent not previously delivered to Purchaser,
originals of the Leases, the Personal Property, and any other documents required
to be delivered by Sellers or the Corporations under the terms of this Agreement
or, if such originals are not available, copies certified by Sellers to be true,
correct and complete copies of such originals.
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10. CONDITIONS TO CLOSING OF SELLERS. The obligations of Sellers under
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this Agreement are, at the option of Sellers, subject to the satisfaction, at or
prior to the Closing, of the following conditions (the "Sellers' Conditions
Precedent") (any one or more of which may be waived, but only by an instrument
in writing signed by all Sellers):
(a) The representations and warranties of Purchaser shall be true and
correct in all material respects on and as of the Closing Date.
(b) Purchaser shall have fully performed and complied with all
covenants, terms, and agreements to be performed and complied with by it on or
before the Closing.
(c) Purchaser shall deliver to Sellers a certificate dated the
Closing Date and executed by Purchaser stating that the representations made by
it in this Agreement are accurate in all material respects as of the Closing
Date and that all covenants, agreements and conditions required by this
Agreement to be performed have been performed on or prior to the Closing Date.
(d) Purchaser shall have delivered to Sellers the following:
(i) The Purchase Price; and
(ii) Any other documents, instruments or agreements reasonably
necessary to effectuate the purchase of the Purchased Stock contemplated by this
Agreement.
(e) Purchaser shall have made the following capital contributions to
be used by the Corporations to prepay on the Closing Date the principal amount
of the indebtedness owed by the Corporations to OTR, an Ohio general
partnership, which indebtedness is attributable to the Land:
(i) $48,400 to X Corporation; and
(ii) $9,000 to Y Corporation.
The Sellers shall make capital contributions to the Corporations on or
before the Closing Date in an amount sufficient to pay all accrued but unpaid
interest due to OTR on such indebtedness.
11. CLOSING"11. The closing (the "Closing") of the purchase and sale of
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the Purchased Stock contemplated herein shall close on the same date as the
closing of the transactions contemplated in the Contribution Agreement.
12. MISCELLANEOUS.
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(a) This Agreement is the entire Agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, whether oral or written, between the parties with respect to
the matters contained in this Agreement. Any waiver, modification, consent or
acquiescence with respect to any provision of this Agreement
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shall be set forth in writing and duly executed by or on behalf of the party to
be bound thereby. No waiver by any party of any breach hereunder shall be deemed
a waiver of any other or subsequent breach.
(b) This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which when taken together shall
constitute one and the same instrument.
(c) Time is of the essence in the performance of and compliance with
each of the provisions and conditions of this Agreement.
(d) Any communication, notice or demand of any kind whatsoever which
either party may be required or may desire to give to or serve upon the other
shall be in writing and delivered by personal service (including express or
courier service), or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
Purchaser: Prentiss Properties Acquisition Partners, L.P.
3890 West Northwest Highway, Suite 400
Dallas, Texas 75220
Attention: Thomas F. August and William J. Reister
Telecopy: (214) 350-2408 or (214) 654-5826
With a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201-4675
Attention: Randall M. Ratner, P.C.
Telecopy: (214) 969-4343
Sellers: Henry C. Gulbrandsen, Jr.
Peter O. Hausmann
Timothy J. Weber
c/o The Terramics Management Company
1180 West Swedesford Road, Suite 140
Berwyn, Pennsylvania 19312
Telecopy: (610) 640-4843
With a copy to: Michael Pollack
Blank, Rome, Comisky & McCauley
One Logan Square
Philadelphia, Pennsylvania 19103
Telephone: (215) 569-5670
Telecopy: (215) 569-5692
Any party may change its address for notice by written notice given to the
other in the manner provided in this Section. Any such communication, notice or
demand shall be deemed to have been duly given or served on the date of
confirmed receipt.
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(e) Wherever possible, each provision of this Agreement shall be
interpreted in such a manner as to be valid under applicable law, but, if any
provision of this Agreement shall be invalid or prohibited thereunder, such
invalidity or prohibition shall be construed as if such invalid or prohibited
provision had not been inserted herein and shall not affect the remainder of
such provision or the remaining provisions of this Agreement.
(f) The language in all parts of this Agreement shall be in all cases
construed simply according to its fair meaning and not strictly for or against
any of the parties hereto. Section headings of this Agreement are solely for
convenience of reference and shall not govern the interpretation of any of the
provisions of this Agreement. References to "Sections" are to Sections of this
Agreement, unless otherwise specifically provided.
(g) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, without regard to the
principles of conflicts of laws thereof, as to all matters, including but not
limited to, matters of validity, construction, effect, performance and remedies.
(h) If any action is brought by either party against the other party,
relating to or arising out of this Agreement, the transactions described herein
or the enforcement hereof, the prevailing party shall be entitled to recover
from the other party reasonable attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.
(i) This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and to their respective transferees, successors, and
assigns. Neither this Agreement nor any of the rights or obligations of Sellers
or Purchaser hereunder shall be transferred or assigned by Sellers or Purchaser
without the prior written consent of the non-assigning party; provided, however,
Purchaser may assign Purchaser's interest hereunder, or designate as the entity
taking title to the Purchased Stock, the parent of Purchaser, one or more
subsidiaries or affiliates of Purchaser or of entities to whom Purchaser
provides investment management services without Sellers' prior written consent.
(j) If any of the dates specified in this Agreement shall fall on a
Saturday, a Sunday, or a holiday, then the date of such action shall be deemed
to be extended to the next business day.
(k) All costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.
(l) This Agreement may be terminated at any time by the mutual consent
of all parties and shall terminate automatically, if the Closing has not
occurred on or before December 31, 1997.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
X CORPORATION:
SOUTHPOINT LAND HOLDINGS, INC.
By:
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Name:
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Title:
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Y CORPORATION:
VALLEYBROOKE LAND HOLDINGS, INC.
By:
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Name:
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Title:
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SELLERS:
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Henry C. Gulbrandsen, Jr.
--------------------------------------------
Peter O. Hausmann
--------------------------------------------
Timothy J. Weber
PURCHASER:
PRENTISS PROPERTIES LIMITED, INC., a Delaware
corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
-12-
<PAGE>
EXHIBIT C
---------
Stock Ownership
---------------
<TABLE>
<CAPTION>
Southpoint Land Valleybrooke Land
Holdings, Inc. Holdings, Inc.
-------------- --------------
<S> <C> <C>
Henry C. Gulbrandsen, Jr. 23 23
Peter O. Hausmann 54 54
Timothy J. Weber 23 23
-- --
TOTAL 100 shares 100 shares
</TABLE>
<PAGE>
Exhibit 10.6
------------
PUT AND CALL OPTION AGREEMENT
FOR REMAINING SHARES
among
HENRY C. GULBRANDSEN, JR.,
PETER O. HAUSMANN,
and
TIMOTHY J. WEBER
"Sellers"
and
PRENTISS PROPERTIES LIMITED, INC.,
a Delaware corporation
"Purchaser"
Dated as of
____________________, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINED TERMS..............................................................2
2. PUT AND CALL OPTIONS/OPTION PURCHASE.......................................2
3. REPRESENTATIONS AND WARRANTIES OF SELLERS..................................3
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER................................4
5. COVENANTS OF SELLERS AND CORPORATIONS......................................4
6. CONDITIONS TO CLOSING OF PURCHASER.........................................5
7. CONDITIONS TO CLOSING OF SELLERS...........................................5
</TABLE>
EXHIBITS
Exhibit A Legal Description of the Land
Exhibit B Common Names of Development Parcels on the Land
Exhibit C Sellers' Respective Ownership in X Corporation and Y Corporation
Exhibit D Description of Contribution Agreement
i
<PAGE>
PUT AND CALL OPTION AGREEMENT
-----------------------------
FOR REMAINING SHARES
--------------------
THIS PUT AND CALL OPTION AGREEMENT FOR REMAINING SHARES (this "Agreement")
is entered into as of ____________________, 1997, among PRENTISS PROPERTIES
LIMITED, INC., a Delaware corporation ("Purchaser"), HENRY C. GULBRANDSEN, JR.,
PETER O. HAUSMANN and TIMOTHY J. WEBER. The named individuals are hereinafter
collectively referred to as "Sellers" and individually as "Seller."
RECITALS:
WHEREAS, Southpoint Land Holdings, Inc., a Pennsylvania corporation ("X
Corporation") and Valleybrooke Land Holdings, Inc., a Pennsylvania corporation
("Y Corporation") hold title to those certain parcels of real property located
in the Commonwealth of Pennsylvania and more particularly described in Exhibit A
---------
attached hereto (collectively, the "Land"), which Land includes those
development parcels commonly known by the names listed on Exhibit B, together
---------
with any improvements located thereon (collectively, the "Improvements") (X
Corporation and Y Corporation are herein collectively called the
"Corporations");
WHEREAS, prior to consummating a transaction with Purchaser, Sellers
collectively owned 100 shares of the common stock, par value $1.00 per share, of
X Corporation (the "X Corporation Common Stock") and 100 shares of the common
stock, $1.00 par value per share, of Y Corporation (the "Y Corporation Common
Stock") respectively, as set forth in Exhibit C, which stock in the aggregate
---------
represents all of the outstanding shares (the "Outstanding Shares") of capital
stock of each of X Corporation and Y Corporation; and
WHEREAS, on the date hereof Sellers have sold to Purchaser, and
Purchaser has purchased from Sellers, an aggregate of 89 shares of X Corporation
Common Stock (from each Seller in proportion to his ownership in X Corporation)
(the "Purchased X Corporation Common Stock") and an aggregate of 89 shares of Y
Corporation Common Stock (from each Seller in proportion to his ownership of Y
Corporation) (the "Purchased Y Corporation Common Stock"), in each case
representing eighty-nine percent (89%) of the Outstanding Shares of X
Corporation and Y Corporation, respectively (the Purchased X Corporation Common
Stock and the Purchased Y Corporation Common Stock are collectively referred to
as the "Purchased Stock"); and
WHEREAS, Sellers desire to hold an option to sell, and Purchaser
desires to hold an option to purchase, the remaining eleven percent (11%) of the
Outstanding Shares in each of X Corporation and Y Corporation, respectively, for
the price and on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Recitals, the
representations, warranties, covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
-1-
<PAGE>
1. DEFINED TERMS. For purposes of this Agreement, the following terms
--------------
shall have the meanings set forth below:
(a) "Contribution Agreement" means that Contribution Agreement
----------------------
described on Exhibit D.
---------
(b) "Effective Date" means the date this Agreement is fully
--------------
executed and delivered by Purchaser and Sellers.
(c) "Escrow Agreement" means the Escrow Agreement dated as of the
----------------
Closing Date (as defined in the Contribution Agreement) among the
Purchaser, Sellers and an escrow agent selected by Purchaser who is reasonably
satisfactory to Seller, as escrow agent ("Escrow Agent"), pursuant to which
Sellers have endorsed and delivered all of the Remaining Shares to the Escrow
Agent.
(d) "Real Property" means the Land, the Improvements and all
-------------
rights, privileges, easements and appurtenances to the Land and the
Improvements, if any, including, without limitation, all of the Corporations'
right, title and interest, if any, in and to all easements, rights-of-way and
other appurtenances used or connected with the beneficial use or enjoyment of
the Land and the Improvements.
2. PUT AND CALL OPTIONS/OPTION PURCHASE
------------------------------------
(a) At any time after the third anniversary of the date of Closing
of this Agreement (the "Initial Closing Date"), Purchaser (or Purchaser's
nominee) shall have the right to buy (the "Call Option") and the Sellers shall
have the right to cause Purchaser (or Purchaser's nominee) to buy (the "Put
Option") all, but not less than all, of an aggregate of 11 shares of X
Corporation Common Stock (as adjusted for any stock splits, reverse stock
splits, or combinations subsequent to the Initial Closing Date) and an aggregate
of 11 shares of Y Corporation Common Stock (as adjusted for any stock splits,
reverse stock splits, or combinations subsequent to the Closing), such shares
representing eleven percent (11%) of the Outstanding Shares of each of X
Corporation and Y Corporation, respectively (the "Remaining Shares").
(b) In the event that Purchaser wishes to exercise the Call
Option, Purchaser shall send written notice to the Sellers specifying: (A) that
it wishes to purchase the Remaining Shares from the Sellers in accordance with
the terms and conditions contained herein and (B) a time, place and date, which
is not later than thirty (30) business days and not earlier than fifteen (15)
business days from the date such notice is given (the "Call Closing Date"), for
the closing of such sale (the "Call Closing").
(c) In the event that Sellers wish to exercise the Put Option, the
Sellers shall send written notice to Purchaser specifying: (A) that Sellers wish
to cause Purchaser to purchase the Remaining Shares from Sellers in accordance
with the terms and conditions contained herein and (B) a time, place and date,
which is not later than thirty (30) business days and not earlier than fifteen
(15) business days from the date such notice is given (the "Put Closing Date").
The Call Closing Date or the Put Closing Date, as applicable, is herein referred
to as the "Closing Date").
-2-
<PAGE>
(d) Upon the exercise of either the Put Option or the Call Option,
each Seller shall certify in writing to Purchaser (and to Purchaser's nominee)
that the following is true and correct as of the Put Closing Date or Call
Closing Date, as the case may be:
(i) The Remaining Shares of each Corporation are duly
authorized, validly issued, fully paid and nonassessable. Each Seller is the
record and beneficial owner of, and has good title to, their respective
Remaining Shares of each of the Corporations, as set forth on Exhibit C hereto,
---------
free and clear of all liens, claims, security interests, assignments, options,
voting trusts, proxies, voting agreements, understandings, or arrangements with
respect to voting and adverse claims to title of any kind or character.
(ii) Each Seller has full authority to transfer the Remaining
Shares to Purchaser.
(e) The purchase price for the Remaining Shares (the "Option
Price") is Six Hundred Ninety-Three and No/100 Dollars ($693.00). The Option
Price for the Remaining Shares of X Corporation shall be Two Hundred
Ninety-Seven and No/100 Dollars ($297.00) (the "X Corporation Option Price"),
which shall be paid by making a wire transfer of immediately available Federal
funds to the account of Seller. The Option Price for the Remaining Shares of Y
Corporation shall be Three Hundred Ninety-Six and No/100 Dollars ($396.00) (the
"Y Corporation Option Price"), which shall be paid by making a wire transfer of
immediately available Federal funds to the account of Seller.
(f) On the Call Closing Date or the Put Closing Date, as the case
may be, Purchaser shall deliver to Sellers any documents, instruments, or
agreements reasonably necessary to effectuate the purchase of the Remaining
Shares contemplated by this Section 2.
---------
(g) On the Call Closing Date or the Put Closing Date as the case
may be, Sellers shall deliver to Purchaser: (i) Stock Certificates representing
the Remaining Shares, each accompanied by stock powers duly executed in blank or
duly executed instruments of transfer by the requisite Sellers, and any other
documents necessary to transfer to Purchaser good title to the Remaining Shares,
free and clear of all liens, security interests, assignments, options and
adverse claims of any kind or character, and (ii) the certificate contemplated
in Section 2(d), dated the Put Closing Date or Call Closing Date, as the case
------------
may be, and executed by each Seller.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS. Each Seller represents
-----------------------------------------
and warrants to Purchaser (and to Purchaser's nominee), for himself and with
respect to the Corporations, that the following matters are true and correct as
of the execution of this Agreement and will also be true and correct as of the
Closing Date:
(a) X Corporation is a corporation, duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has its chief executive office at 1180 West Swedesford Road, Suite 140,
Berwyn, Pennsylvania 19312. Y Corporation is a corporation, duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has its chief executive office at 1180 West Swedesford Road,
-3-
<PAGE>
Suite 140, Berwyn, Pennsylvania 19312. Neither Corporation is qualified to do
business in a state other than its state of incorporation.
(b) This Agreement is, and all the documents executed by Sellers
that are to be delivered to Purchaser at the Closing will be, duly authorized,
executed, and delivered by Sellers and enforceable against the Sellers in
accordance with their respective terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting the rights of creditors generally.
(c) Each Seller is the record and beneficial owner of, and has
good title to, their respective Remaining Shares of each of the Corporations, as
set forth on Exhibit C hereto, free and clear of all liens, claims, security
---------
interests, assignments, options, voting trusts, proxies, voting agreements,
understandings or arrangements with respect to voting, and adverse claims to
title of any kind or character. Except as provided in this Agreement, there are
no outstanding subscriptions, options, warrants, calls or rights of any kind
relating to or providing for the issuance, sale, delivery or transfer of the
Remaining Shares (or any portion thereof).
(d) No consent, waiver or approval by any third party is required
in connection with the execution and delivery by each Seller of this Agreement
or the performance by each Seller of the obligations to be performed by such
Seller under this Agreement.
The representations and warranties set forth hereinabove shall survive
the Closing Date for a period of one (1) year.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
-------------------------------------------
and warrants to Sellers that the following matters are true and correct as of
the execution of this Agreement and will also be true and correct as of the
Closing Date:
(a) Purchaser is a corporation, duly formed, validly existing and
in good standing under the laws of the State of Delaware.
(b) This Agreement is, and all documents executed by Purchaser
which are to be delivered to Sellers at the Closing will be, duly authorized,
executed, and delivered by Purchaser, and enforceable against Purchaser in
accordance with their respective terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting the rights of creditors generally.
The representations and warranties set forth hereinabove shall survive
the Closing Date for a period of one (1) year.
5. COVENANTS OF SELLERS AND CORPORATIONS. Sellers covenant with
-------------------------------------
Purchaser, as follows:
(a) Sellers shall take all actions necessary cause the
Purchaser's Conditions Precedent set forth in Section 6 to be satisfied on or
---------
before the Closing Date.
-4-
<PAGE>
(b) Each Seller agrees that, after the Initial Closing Date, he
shall not sell, transfer or assign, or create, grant or permit to exist a lien,
security interest in, claim on, or grant any option or right to acquire, or
grant a proxy, or enter into a voting agreement or voting trust or similar
agreement or understanding with respect to his respective Remaining Shares,
except as contemplated by this Agreement.
(c) Each Seller agrees that he will, at any time and from time to
time after the Closing Date, upon the reasonable request of Purchaser and at
Purchaser's cost and expense, do, execute, acknowledge and deliver, or cause to
be done, executed, acknowledged and delivered, all such further acts, deeds,
assignments, transfers, conveyances and assurances as may be reasonably required
for better assigning, transferring and conveying the Remaining Stock to
Purchaser.
The covenants set forth hereinabove shall survive the Closing Date.
6. CONDITIONS TO CLOSING OF PURCHASER. The obligations of Purchaser
----------------------------------
under this Agreement are, at the option of Purchaser, subject to the
satisfaction, at or prior to the Closing Date, of the following conditions (the
"Purchaser's Conditions Precedent") (any one or more of which may be waived, but
only by an instrument in writing signed by Purchaser):
(a) The representations and warranties of Sellers shall be true
and correct in all material respects on and as of the Closing Date.
(b) Sellers shall have fully performed and complied with all
covenants, terms, and agreements to be performed and complied with by them on or
before the Closing Date.
(c) Sellers shall deliver to Purchaser certificates dated the
Closing Date and executed by each Seller stating that the representations made
by it or him in this Agreement are accurate in all material respects as of the
Closing Date and that all covenants, agreements and conditions required by this
Agreement to be performed have been performed on or prior to the Closing Date.
(d) Sellers shall have delivered to Purchaser the following:
(i) Stock certificates representing the Remaining Shares,
each accompanied by stock powers duly executed in blank or duly executed
instruments of transfer by the requisite Sellers, and any other documents
necessary to transfer to Purchaser good title to the Remaining Shares, free and
clear of all liens, security interests, assignments, options and adverse claims
of any kind or character;
(ii) Any other documents, instruments or agreements
reasonably necessary to effectuate the purchase of the Remaining Shares
contemplated by this Agreement;
7. CONDITIONS TO CLOSING OF SELLERS. The obligations of Sellers under
--------------------------------
this Agreement are, at the option of Sellers, subject to the satisfaction, at or
prior to the Closing Date, of the following conditions (the "Sellers' Conditions
Precedent") (any one or more of which may be waived, but only by an instrument
in writing signed by all Sellers):
-5-
<PAGE>
(a) The representations and warranties of Purchaser shall be true
and correct in all material respects on and as of the Closing Date.
(b) Purchaser shall have fully performed and complied with all
covenants, terms, and agreements to be performed and complied with by it on or
before the Closing Date.
(c) Purchaser shall deliver to Sellers a certificate dated the
Closing Date and executed by Purchaser stating that the representations made by
it in this Agreement are accurate in all material respects as of the Closing
Date and that all covenants, agreements and conditions required by this
Agreement to be performed have been performed on or prior to the Closing Date.
(d) Purchaser shall have delivered to Sellers the following:
(i) The Option Price; and
(ii) Any other documents, instruments or agreements reasonably
necessary to effectuate the purchase of the Remaining Shares contemplated by
this Agreement.
8. MISCELLANEOUS.
-------------
(a) This Agreement is the entire Agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, whether oral or written, between the parties with
respect to the matters contained in this Agreement. Any waiver, modification,
consent or acquiescence with respect to any provision of this Agreement shall be
set forth in writing and duly executed by or on behalf of the party to be bound
thereby. No waiver by any party of any breach hereunder shall be deemed a waiver
of any other or subsequent breach.
(b) This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which when taken together
shall constitute one and the same instrument.
(c) Time is of the essence in the performance of and compliance
with each of the provisions and conditions of this Agreement.
(d) Any communication, notice or demand of any kind whatsoever
which either party may be required or may desire to give to or serve upon the
other shall be in writing and delivered by personal service (including express
or courier service), or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
Purchaser: Prentiss Properties Acquisition Partners, L.P.
3890 West Northwest Highway, Suite 400
Dallas, Texas 75220
Attention: Thomas F. August and William J. Reister
Telecopy: (214) 350-2408 or (214) 654-5826
-6-
<PAGE>
With a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201-4675
Attention: Randall M. Ratner, P.C.
Telecopy: (214) 969-4343
Sellers: Henry C. Gulbrandsen, Jr.
Peter O. Hausmann
Timothy J. Weber
c/o The Terramics Management Company
1180 West Swedesford Road, Suite 140
Berwyn, Pennsylvania 19312
Telecopy: (610) 640-4843
With a copy to: Michael Pollack
Blank, Rome, Comisky & McCauley
One Logan Square
Philadelphia, Pennsylvania 19103
Telephone: (215) 569-5670
Telecopy: (215) 569-5692
Any party may change its address for notice by written notice given to
the other in the manner provided in this Section. Any such communication, notice
or demand shall be deemed to have been duly given or served on the date of
confirmed receipt.
(e) Wherever possible, each provision of this Agreement shall be
interpreted in such a manner as to be valid under applicable law, but, if any
provision of this Agreement shall be invalid or prohibited thereunder, such
invalidity or prohibition shall be construed as if such invalid or prohibited
provision had not been inserted herein and shall not affect the remainder of
such provision or the remaining provisions of this Agreement.
(f) The language in all parts of this Agreement shall be in all
cases construed simply according to its fair meaning and not strictly for or
against any of the parties hereto. Section headings of this Agreement are solely
for convenience of reference and shall not govern the interpretation of any of
the provisions of this Agreement. References to "Sections" are to Sections of
this Agreement, unless otherwise specifically provided.
(g) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
the principles of conflicts of laws thereof, as to all matters, including but
not limited to, matters of validity, construction, effect, performance and
remedies.
(h) If any action is brought by either party against the other
party, relating to or arising out of this Agreement, the transactions described
herein or the enforcement hereof, the prevailing party shall be entitled to
recover from the other party reasonable attorneys' fees, costs and expenses
incurred in connection with the prosecution or defense of such action.
-7-
<PAGE>
(i) This Agreement shall be binding upon and inure to the benefit
of each of the parties hereto and to their respective transferees, successors,
and assigns. Neither this Agreement nor any of the rights or obligations of
Sellers or Purchaser hereunder shall be transferred or assigned by Sellers or
Purchaser without the prior written consent of the non-assigning party;
provided, however, Purchaser may assign Purchaser's interest hereunder, or
designate as the entity taking title to the Remaining Shares, the parent of
Purchaser, one or more subsidiaries or affiliates of Purchaser or of entities to
whom Purchaser provides investment management services without Sellers' prior
written consent.
(j) If any of the dates specified in this Agreement shall fall on
a Saturday, a Sunday, or a holiday, then the date of such action shall be deemed
to be extended to the next business day.
(k) All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
SELLERS:
--------------------------------------
Henry C. Gulbrandsen, Jr.
--------------------------------------
Peter O. Hausmann
--------------------------------------
Timothy J. Weber
PURCHASER:
PRENTISS PROPERTIES LIMITED, INC.,
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-8-
<PAGE>
Exhibit 10.7
CREDIT AGREEMENT
among
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
as Borrower
NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent
BANK ONE, TEXAS, N.A.,
as Documentation Agent
and
THE LENDERS NAMED HEREIN,
as Lenders
$133,000,000
As of
October 6, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS AND TERMS............................................1
1.1 Definitions......................................................1
1.2 Time References.................................................11
1.3 Other References................................................11
1.4 Accounting Principles...........................................11
SECTION 2 TERM LOANS......................................................11
SECTION 3 TERMS OF PAYMENT................................................12
3.1 Notes and Payments..............................................12
3.2 Interest and Principal Payments.................................12
3.3 Interest Options................................................13
3.4 Selection of Interest Option....................................13
3.5 Default Rate....................................................14
3.6 Interest Recapture..............................................14
3.7 Interest Calculations...........................................14
3.8 Maximum Rate....................................................14
3.9 Order of Application............................................15
3.10 Sharing of Payments, Etc........................................15
3.11 Booking Borrowings..............................................15
3.12 Basis Unavailable or Inadequate for the Eurodollar Rate.........15
3.13 Additional Costs................................................16
3.14 Change in Governmental Requirement..............................16
3.15 Funding Loss....................................................17
3.16 Foreign Lenders.................................................17
3.17 Fees............................................................17
3.18 Extension of Maturity Date......................................17
SECTION 4 SECURITY........................................................18
4.1 Guaranty........................................................18
4.2 Liens on Pool Properties........................................18
4.3 Collateral Documents............................................18
4.4 Leases..........................................................18
SECTION 5 CONDITIONS PRECEDENT............................................18
SECTION 6 REPRESENTATIONS AND WARRANTIES..................................19
6.1 Purpose of Credit Facility......................................19
6.2 Existence, Good Standing, Authority and Compliance..............20
6.3 Authorization and Contravention.................................20
6.4 Binding Effect..................................................20
6.5 Financial Statements; Fiscal Year...............................20
6.6 Litigation......................................................20
6.7 Taxes...........................................................20
6.8 Environmental Matters...........................................21
6.9 Employee Plans..................................................21
6.10 Properties; Liens...............................................21
6.11 Locations.......................................................21
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
6.12 Government Regulations..........................................22
6.13 Transactions with Affiliates....................................22
6.14 Insurance.......................................................22
6.15 Labor Matters...................................................22
6.16 Solvency........................................................22
6.17 Full Disclosure.................................................22
6.18 Exemption from ERISA; Plan Assets...............................22
SECTION 7 AFFIRMATIVE COVENANTS...........................................22
7.1 Items to be Furnished...........................................22
7.2 Use of Proceeds.................................................24
7.3 Books and Records...............................................24
7.4 Inspections.....................................................24
7.5 Taxes...........................................................24
7.6 Payment of Obligations..........................................24
7.7 Expenses........................................................24
7.8 Maintenance of Existence, Assets, and Business..................24
7.9 Insurance.......................................................24
7.10 Preservation and Protection of Rights...........................25
7.11 Environmental Laws..............................................25
7.12 INDEMNIFICATION.................................................25
7.13 REIT Status.....................................................26
7.14 ERISA Exemptions................................................26
7.15 Listed Company..................................................26
SECTION 8 NEGATIVE COVENANTS..............................................26
8.1 Payment of Obligations..........................................26
8.2 Employee Plans..................................................26
8.3 Liens...........................................................26
8.4 Transactions with Affiliates....................................27
8.5 Compliance with Governmental Requirements and Documents.........27
8.6 Loans, Advances and Investments.................................28
8.7 Dividends and Distributions.....................................28
8.8 Sale of Assets..................................................28
8.9 Mergers and Dissolutions........................................28
8.10 Assignment......................................................28
8.11 Fiscal Year and Accounting Methods..............................28
8.12 New Businesses..................................................28
8.13 Government Regulations..........................................28
8.14 Pledgors........................................................29
8.15 Amendment of Constituent Documents..............................29
SECTION 9 FINANCIAL COVENANTS.............................................29
SECTION 10 DEFAULT 29
10.1 Payment of Obligation...........................................29
10.2 Covenants.......................................................29
10.3 Debtor Relief...................................................29
10.4 Judgments and Attachments.......................................29
10.5 Government Action...............................................30
10.6 Misrepresentation...............................................30
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
10.7 Default Under Other Agreements..................................30
10.8 Validity and Enforceability of Loan Documents...................30
10.9 Management Changes..............................................30
10.10 Change in Control...............................................30
10.11 Plan Assets.....................................................31
SECTION 11 RIGHTS AND REMEDIES.............................................31
11.1 Remedies Upon Default...........................................31
11.2 Waivers. ......................................................31
11.3 Performance by Administrative Agent.............................31
11.4 Not in Control..................................................31
11.5 Course of Dealing...............................................31
11.6 Cumulative Rights...............................................31
11.7 Application of Proceeds.........................................32
11.8 Certain Proceedings.............................................32
SECTION 12 AGENTS AND THE LENDERS..........................................32
12.1 Agents..........................................................32
12.2 Expenses........................................................34
12.3 Proportionate Absorption of Losses..............................34
12.4 Delegation of Duties; Reliance..................................34
12.5 Limitation of Agents' Liability.................................34
12.6 Default.........................................................35
12.7 Collateral Matters..............................................35
12.8 Limitation of Liability.........................................37
12.9 Relationship of Lenders.........................................37
12.10 Benefits of Agreement...........................................37
12.11 Approval of Lenders.............................................37
SECTION 13 MISCELLANEOUS...................................................38
13.1 Headings........................................................38
13.2 Nonbusiness Days; Time..........................................38
13.3 Communications..................................................38
13.4 Form and Number of Documents....................................38
13.5 Survival........................................................38
13.6 Governing Law...................................................38
13.7 Invalid Provisions..............................................38
13.8 Venue; Service of Process; Jury Trial...........................38
13.9 Amendments, Consents, Conflicts and Waivers.....................39
13.10 Multiple Counterparts...........................................40
13.11 Successors and Assigns; Participations..........................40
13.12 Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances...........................................42
13.13 Entirety........................................................42
13.14 Effectiveness...................................................42
</TABLE>
(iii)
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1 Parties, Addresses, Term Loans, and Wiring Information
Schedule 2-A Initial Pool Properties
Schedule 2-B Initial Terramics Pool Properties
Schedule 2-C Secondary Terramics Pool Properties
Schedule 5 Conditions Precedent
Schedule 6.2 Jurisdictions of Incorporation, Business,
and Jurisdictions
Schedule 6.6 Litigation
Schedule 6.8 Environmental Matters
Schedule 6.11 Chief Executive Office
Schedule 6.13 Affiliates Transactions
Exhibit A Compliance Certificate
Exhibit B Conversion Request
Exhibit C Form of Guaranty
Exhibit D Form of Note
Exhibit E Form of Assignment and Acceptance
(iv)
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of October 6, 1997, among PRENTISS
PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware limited partnership
("Borrower"), each of the lenders that are a signatory hereto or that becomes a
signatory hereto as provided in Section 13.11(c) (individually, together with
its successors and assigns, a "Lender" and collectively, the "Lenders"),
NATIONSBANK OF TEXAS, N.A., as Administrative Agent for the Lenders (in such
capacity, together with its successors and assigns, the "Administrative Agent"),
and BANK ONE, TEXAS, N.A., for itself and as Documentation Agent for the Lenders
(in such capacity, together with its successors and assigns, the "Documentation
Agent").
R E C I T A L S:
- - - - - - - -
1. Borrower has requested that the Lenders extend to Borrower, in one or
more advances as described herein, a term loan not to exceed the principal
amount of $133,000,000.00.
2. The Lenders are willing to extend the requested credit on the terms
and subject to the conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1 DEFINITIONS AND TERMS.
1.1 Definitions. Unless otherwise indicated, as used in the Loan
Documents:
"Accumulated Depreciation" means, for any Person as of any date, the amount
of accumulated depreciation deducted from the amount of assets of such Person,
as reflected in the relevant financial statements of such Person and determined
in accordance with GAAP.
"Adjusted Net Operating Income" means, for the Pool Properties as of any
determination date, (a) any cash rentals, proceeds, expense reimbursements, or
income to be received from the Pool Properties (but excluding security or other
deposits, late fees, early lease termination (to the extent that such
termination payments exceed the rentals otherwise payable during the applicable
measurement period for the applicable lease if the applicable lease had not been
terminated) or other penalties, and other charges of a non-recurring nature)
during the twelve (12) month period following the date of determination, based
upon leases existing and rents in effect on the date of determination where
tenants are paying rent in accordance with the terms of such leases, and which
are not in material default, less (b) all cash costs and expenses that the
Companies incurred as a result of, or in connection with, the development,
operation, or leasing of the Pool Properties (but excluding tenant improvement
costs, commission expenses, and principal and interest payments during such
period) during the twelve (12) month period ending on the date of determination,
less (c) to the extent exceeding the amounts for the applicable cash costs and
expenses incurred by the Companies pursuant to (b) above, appropriate accruals
for items such as taxes, insurance, or other expenses reasonably determined by
Administrative Agent, a management fee at the greater of actual fees paid or two
percent (2%) of rents and a capital improvement reserve of $1.00 per square
foot, all as determined in accordance with accounting principles reasonably
acceptable to Administrative Agent, consistently applied.
"Administrative Agent" is defined in the preamble.
"Affiliate" of a Person means any other individual or entity who directly
or indirectly controls,
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or is controlled by, or is under common control with, that Person. For purposes
of this definition "control," "controlled by," and "under common control with"
mean possession, directly or indirectly, of power to direct (or cause the
direction of) management or policies (whether through ownership of voting
securities or other ownership interests, by contract, or otherwise).
"Agents" means Administrative Agent and Documentation Agent and "Agent"
means any of the Agents.
"Agreement" means this Credit Agreement, as amended, supplemented, or
restated from time to time.
"Appraised Value" means, with respect to the Pool Properties, as of any
date, the appraised value of the Pool Properties pursuant to an appraisal
commissioned by and addressed to Administrative Agent (acceptable to
Administrative Agent as to form, substance, and appraisal date), prepared by a
professional appraiser acceptable to Administrative Agent and having the minimum
qualifications required under all applicable regulations governing
Administrative Agent and the Lenders.
"Approved Costs" means, for any Pool Property, the sum of the acquisition
costs of such Pool Property (or the stock, partnership interests, or other
ownership interests in the Pledgor of such Pool Property), whether in the form
of cash, property, liabilities assumed, or other consideration.
"Assumed Debt Service" means, as of any date, the greater of (a) the
product of (i) the Fixed Constant, and (ii) the outstanding principal balance of
the Term Loans as of such date, or (b) the product of (i) the Variable Constant,
and (ii) the outstanding principal balance of the Term Loans as of such date.
"Base Rate" means, for any day, the greater of (a) the sum of the Federal
Funds Rate plus one-half of one percent (0.5%), or (b) the annual interest rate
most recently announced by Administrative Agent as its prime rate (or, if the
Person then acting as Administrative Agent under this Agreement is not a bank
organized under the Governmental Requirements of the United States or any State,
then the rate announced by NationsBank of Texas, N.A., or any successor thereof,
as its prime rate) in effect at its principal office, automatically fluctuating
upward and downward with and as specified in each announcement without special
notice to Borrower or any other Person (which prime rate may not necessarily
represent the lowest or best rate actually charged to a customer).
"Base Rate Borrowing" means a Borrowing bearing interest at the Base Rate.
"Borrowing" means (without duplication) any amount disbursed by (a) the
Lenders to or on behalf of Borrower under the Loan Documents, or (b) any Lender
in accordance with, and to satisfy the obligations of Borrower under, any Loan
Document.
"Business Day" means (a) for all purposes, any day other than Saturday,
Sunday, and any other day that commercial banks are authorized by any
Governmental Requirement to be closed in Texas or New York, and (b) for purposes
of any Eurodollar Borrowing, a day that satisfies the requirements of clause (a)
and is a day when commercial banks are open for domestic or international
business in London.
"Capital Lease" of any Person means any capital lease or sublease that has
been (or under GAAP should be) capitalized on a balance sheet of any Person.
"Change in Control" means, with respect to Borrower, the transfer of
beneficial ownership of the outstanding partnership interests of Borrower such
that PPT owns, directly or indirectly, less than
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fifty-one percent (51%) of the outstanding partnership interests of Borrower.
"CIGNA" means Connecticut General Life Insurance Company.
"CIGNA Financing" means a Debt Issuance from CIGNA prior to the Third
Advance, secured by the Secondary Terramics Pool Properties, the Net Proceeds of
which do not exceed $60,000,000.00 in the aggregate.
"Closing Date" means the date this Agreement is fully executed and
delivered.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Collateral" means any property taken by Administrative Agent as Collateral
under the Collateral Documents.
"Collateral Documents" means the deeds of trust, mortgages, indemnity deeds
of trust, assignments of rents and leases, security agreements, financing
statements, and other loan and collateral documents creating, evidencing, and
perfecting Liens in the Pool Properties in favor of Administrative Agent, for
the benefit of the Lenders. The Collateral Documents for the Pool Properties
shall be consistent with the forms used in connection with the Revolving Credit
Agreement and include, without limitation, (a) a Deed of Trust, Assignment,
Security Agreement, and Financing Statement, (b) an Assignment of Leases and
Rents, and (c) Uniform Commercial Code Financing Statements.
"Companies" means, without duplication, (a) PPT, (b) Borrower, and (c) each
of their respective Consolidated Affiliates, and "Company" means any one of the
Companies.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit A and signed by a Responsible Officer of Borrower and PPT.
"Consolidated Affiliate" means, in respect of any Person, any other Person
in whom such Person holds an equity or ownership interest and whose financial
results would be consolidated under GAAP with the financial results of such
Person on the consolidated financial statements of such Person.
"Constant Annual Percent" means the percent of a principal amount of a loan
required to be paid each year in order to amortize such loan at maturity as well
as to pay the amount of interest due at each installment, which installments
shall be equal monthly installments of principal and interest.
"Constituent Documents" means, with respect to any Company, its articles or
certificate of incorporation, bylaws, partnership agreements, organizational
documents, limited liability company agreements, trust agreement, or such other
document as may govern such entity's formation or organization.
"Conversion Request" means a request substantially in the form of
Exhibit B.
"Current Financials" means, at any time, the consolidated Financial
Statements of the Companies most recently delivered to Administrative Agent
under Section 7.1(a) or 7.1(b), as the case may be.
"Debt Issuance" means the issuance or incurrence by any Company of any
Liabilities other than (a) accounts payable and other short-term liabilities not
in the nature of indebtedness incurred in the
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ordinary course of such Company's business, and (b) a loan to a Company in an
amount not to exceed $35,000,000.00 and secured by the World Savings Center and
Colonnade II properties owned by such Company.
"Debtor Relief Laws" means Title 11 of the United States Code and all other
applicable state or federal liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar Governmental Requirements affecting creditors' Rights in
effect from time to time.
"Default" is defined in Section 10.
"Defaulting Lender" means, as of any date, any Lender that has defaulted on
any of its obligations under this Agreement, which default has not been cured or
waived as of such date.
"Default Rate" means an annual rate of interest equal from day-to-day to
the lesser of (a) the then-existing Base Rate plus four (4%), and (b) the
Maximum Rate.
"Distribution" means, with respect to any shares of any capital stock,
equity securities, or other ownership interests issued by a Person, (a) the
retirement, redemption, purchase, or other acquisition for value of such
securities or interests by such Person, (b) the declaration or payment of any
dividend on or with respect to such securities or interests by such Person, (c)
any loan or advance by that Person to, or other investment by that Person in,
the holder of any of such securities or interests, and (d) any other payment by
that Person with respect to such securities or interests.
"Documentation Agent" is defined in the preamble..
"Eligible Assignee" means any of the following entities: (a) a commercial
bank organized under the laws of the United States, or any state thereof; (b) a
commercial bank organized under the laws of any other country which is a member
of the Organization for Economic Cooperation and Development, or a political
subdivision of any such country, provided that such bank is acting through a
branch or agency located in the United States, in the country in which it is
organized, or in another country which is also a member of the Organization for
Economic Cooperation and Development; (c) the central bank of any country which
is a member of the Organization for Economic Cooperation and Development; and
(d) any other Person approved by Agents and, so long as no Default or Potential
Default exists, Borrower.
"Employee Plan" means an employee pension benefit plan covered by Title IV
of ERISA and established or maintained by Borrower or any of its Consolidated
Affiliates.
"Ending Calendar Month" is defined in Section 3.4(a).
"Environmental Law" means any and all Governmental Requirements pertaining
to health or the environment in effect in any and all jurisdictions in which
Borrower or any of its Consolidated Affiliates is conducting or at any time has
conducted business, or where any property of Borrower or any of its Consolidated
Affiliates is located, including, without limitation, the Oil Pollution Act of
1990, as amended, ("OPA"), the Clean Air Act, as amended, the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980, as amended,
("CERCLA"), the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, ("RCRA"), the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous
Materials Transportation Act, as amended, and
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other environmental conservation or protection Governmental Requirements. The
term "oil" has the meaning specified in OPA, the terms "hazardous substance" and
"release" (or "threatened release") have the meanings specified in CERCLA, and
the terms "solid waste" and "disposal" (or "disposed") have the meanings
specified in RCRA; provided, however, that (i) in the event either OPA, CERCLA
or RCRA is amended so as to broaden the meaning of any term defined thereby,
such broader meaning shall apply subsequent to the effective date of such
amendment, and (ii) to the extent the Governmental Requirements of the state in
which any property of Borrower or its any of its Consolidated Subsidiaries is
located establish a meaning for "oil," "hazardous substance," "release," "solid
waste" or "disposal" which is broader than that specified in either OPA, CERCLA
or RCRA, such broader meaning shall apply.
"Equity Issuance" means the issuance or sale by any Company of any capital
stock, partnership, profits, capital, or member interests, or options, warrants,
or other right to subscribe for or otherwise acquire shares of capital stock or
partnership, profits, capital, or member interests, of such Company, other than
the issuance by Borrower of partnership interests in Borrower to sellers of
properties or non-cash assets as a partial payment of the purchase price of such
assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Eurodollar Rate" means, for any Eurodollar Borrowing for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first
(1st) day of such Interest Period for a term comparable to such Interest Period.
If for any reason such rate is not available, then the term "Eurodollar Rate"
shall mean, for any Eurodollar Borrowing for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first (1st) day of such Interest Period for a term comparable
to such Interest Period; provided, however, if more than one rate is specified
on Reuters Screen LIBO Page, then the applicable rate shall be the arithmetic
mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of
1%).
"Eurodollar Borrowing" means a Borrowing bearing interest at the sum of the
Eurodollar Rate plus one and three-quarters of one percent (1.75%).
"Extended Maturity Date" means April 6, 1999.
"Extension Request" is defined in Section 3.18.
"Federal Funds Rate" means, on any day, the annual rate (rounded upwards,
if necessary, to the nearest 0.01%) determined by Administrative Agent (which
determination is conclusive and binding, absent manifest error) to be equal to
the weighted average of the rates on overnight federal funds transactions with
member banks of the Federal Reserve System arranged by federal funds brokers as
published by the Federal Reserve Bank of New York on the next successive
Business Day; provided, however, that (a) if such determination date is not a
Business Day, then the Federal Funds Rate for such day shall be the rate for
such transactions on the next preceding Business Day as published on the next
successive Business Day, or (b) if those rates are not published for any
Business Day, then the Federal Funds Rate shall be the average of the quotations
at approximately 10:00 a.m. on such Business Day received by Administrative
Agent from three (3) federal funds brokers of recognized standing selected by
Administrative Agent in its sole discretion.
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"Financial Statements" of a Person means balance sheets, and statements of
earnings, shareholders' equity and cash flow prepared (a) according to GAAP, (b)
except as stated in Section 1.4, in comparative form to prior year-end figures
or corresponding periods of the preceding fiscal year, as applicable, and (c) on
a consolidated basis if that Person had any Consolidated Affiliates during the
applicable period.
"Fixed Constant" means 10.07%.
"Funding Loss" means, without duplication, any loss, expense, or costs
incurred by any Lender (including any loss, expense, or cost incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such
Lender to make or maintain any portion of any Borrowing as a Eurodollar
Borrowing) when (a) Borrower fails or refuses (for any reason other than any
Lender's failure to comply with this Agreement) to take any Borrowing that it
has requested under this Agreement, or (b) Borrower prepays or pays any
Borrowing or converts any Borrowing to a Borrowing of another Type, in each
case, before the last day of the applicable Interest Period.
"Funds from Operations" means, for any Person for any period, Net Income
before such Person's Share of the Net Income or loss of any Unconsolidated
Affiliate, plus any and all cash distributions received by such Person
representing such Person's Share of the Net Income of any Unconsolidated
Affiliate, plus depreciation and amortization (exclusive of amortization of
financing costs), all as determined in accordance with GAAP; provided that there
shall not be included in such calculation (a) any proceeds of any insurance
policy other than rental or business interruption insurance received by such
Person, (b) any gain or loss which is classified as "extraordinary" in
accordance with GAAP, or (c) any capital gains and taxes on capital gains.
"GAAP" means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board that are applicable on the date of this
Agreement, subject to changes permitted by Section 1.4.
"Governmental Authority" means any (a) local, state, or federal judicial,
executive, or legislative instrumentality, (b) private arbitration board or
panel acting through binding arbitration or mediation, or (c) central bank.
"Governmental Requirement" means all applicable statutes, laws, treaties,
ordinances, rules, regulations, orders, writs, injunctions, decrees, judgments,
opinions, and interpretations of any Governmental Authority.
"Guarantors" means PPT and Pledgors, and "Guarantor" means any one of the
Guarantors.
"Guaranty" means an Unconditional Guaranty of Payment dated of even date
herewith, executed by each Guarantor in favor of Agents and the Lenders, and
substantially in the form of Exhibit C.
"Hazardous Substance" means any substance (a) the presence of which
requires removal, remediation, or investigation under any Environmental Law, or
(b) that is defined or classified as a hazardous waste, hazardous material,
pollutant, contaminant, or toxic or hazardous substance under any Environmental
Law.
"Initial Advance" has the meaning set forth in Section 2.
"Initial Pool Properties" means the Pool Properties described in
Schedule 2-A.
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"Initial Terramics Pool Properties" means the Pool Properties listed in
Schedule 2-B.
"Interest Period" has the meaning set forth in Section 3.4(a).
"Lenders" is defined in the preamble.
"Liabilities" means (without duplication), for any Person, (a) any
indebtedness, liabilities, or obligations required by GAAP to be classified upon
such Person's balance sheet as liabilities, (b) any liabilities secured (or for
which the holder of the Liability has an existing Right, contingent or
otherwise, to be so secured) by any Lien existing on property owned or acquired
by that Person, (c) any obligations that have been (or under GAAP should be)
capitalized for financial reporting purposes, including all Capital Leases, (d)
any guaranties, endorsements and other contingent obligations with respect to
Liabilities or obligations of others, (e) all indebtedness, obligations, or
other liabilities in respect of interest rate contracts and foreign currency
exchange agreements on a mark-to-market basis, (f) such Person's Share of any
Liabilities of Unconsolidated Affiliates (other than of Broadmoor Austin
Associates), and (g) any minority interests in Consolidated Affiliates (other
than minority interests reflected in the Financial Statements of PPT relating to
units of partnership interests in Borrower), and "Liability" means any of the
Liabilities.
"Lien" means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind and any other
substantially similar arrangement for a creditor's claim to be satisfied from
assets or proceeds prior to the claims of other creditors or the owners.
"Litigation" means any action by or before any Governmental Authority.
"Loan Documents" means (a) this Agreement, certificates, and reports
delivered under this Agreement, and exhibits and schedules to this Agreement,
(b) the Notes, (c) the Guaranties, (d) the Collateral Documents, if executed,
and (e) all other agreements, documents, and instruments executed by any Obligor
in favor of Administrative Agent, Documentation Agent, or the Lenders (or any
Agent on behalf of the Lenders) ever delivered in connection with or under this
Agreement or otherwise delivered in connection with all or any part of the
Obligation, and (e) all renewals, extensions and restatements of, and amendments
and supplements to, any of the foregoing.
"Material Adverse Event" means any circumstance or event that, individually
or collectively with other circumstances or events, reasonably is expected to
result in any (a) material impairment of the ability of any Obligor to perform
any of its payment or other obligations under any Loan Document, (b) material
impairment of the ability of any Agent or any Lender to enforce (i) any of the
obligations of any Obligor under this Agreement or the other Loan Documents, or
(ii) any of their respective Rights under the Loan Documents, or (c) material
and adverse effect on the financial condition of Borrower, PPT, or the
Companies, taken as a whole.
"Maximum Amount" and "Maximum Rate" respectively mean, for an Agent or a
Lender, the maximum non-usurious amount and the maximum non-usurious rate of
interest that, under applicable Governmental Requirement, such Agent or Lender
is permitted to contract for, charge, take, reserve, or receive on the
Obligation.
"Moody's" means Moody's Investors Service, Inc. or, if Moody's no longer
publishes ratings, another ratings agency acceptable to Administrative Agent.
"Multiemployer Plan" means a multiemployer plan as defined in Sections
3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code to which Borrower or
any of its Consolidated Affiliates (or any
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Person that, for purposes of Title IV of ERISA, is a member of Borrower's
controlled group or is under common control with Borrower within the meaning of
Section 414 of the Code) is making, or has made, or is accruing, or has accrued,
an obligation to make contributions.
"Net Income" means, for any Person for any period, the net earnings (or
loss) after taxes of such Person, determined in accordance with GAAP.
"Net Proceeds" means, with respect to any Equity Issuance or Debt Issuance
by any Company, the amount of cash received by such Company in connection with
such transaction after deducting therefrom the aggregate, without duplication,
of the following amounts to the extent properly attributable to such
transaction: (a) brokerage commissions, attorneys' fees, finder's fees,
financial advisory fees, accounting fees, underwriting fees, investment banking
fees, and other similar commissions and fees (and expenses and disbursements of
any of the foregoing), in each case, to the extent paid or payable by such
Company; (b) printing and related expenses and filing, recording, or
registration fees or charges or similar fees or charges paid by such Company;
and (c) taxes paid or payable by such Company to any Governmental Authority as a
result of such transaction; provided that with respect to any Debt Issuance that
refinances existing Liabilities, "Net Proceeds" shall be limited to the excess
of the Net Proceeds of such Debt Issuance over such existing Liabilities;
provided further that, with respect to any Equity Issuance to a Person advised
by Heitman Management Corporation in connection with Borrower's ownership of
Cumberland Office Park in Atlanta, Georgia, "Net Proceeds" shall be limited to
the excess of the Net Proceeds of such Equity Issuance over the amount required
to be paid under the Revolving Credit Agreement in order to release such
property from the Borrowing Base defined in the Revolving Credit Agreement.
"Notes" means one of the promissory notes substantially in the form of the
attached Exhibit D, and "Note" means any one of the Notes.
"Obligation" means all present and future indebtedness and obligations, and
all renewals, increases, and extensions thereof, or any part thereof, now or
hereafter owed to any Agent or any Lender by Borrower under any Loan Document,
together with all interest accruing thereon, fees, costs, and expenses
(including all reasonable attorneys' fees and expenses incurred in the
enforcement or collection thereof) payable under the Loan Documents or in
connection with the protection of Rights under the Loan Documents.
"Obligors" means Borrower and Guarantors, and "Obligor" means any one of
the Obligors.
"Participant" is defined in Section 13.11(b).
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereof, established under ERISA.
"Permitted Distributions" means, for (a) Borrower for any fiscal year of
Borrower, an amount not to exceed ninety-five percent (95%) of Borrower's Funds
from Operations for such fiscal year, and (b) PPT for any fiscal year of PPT, an
amount not to exceed ninety-five percent (95%) of PPT's Funds from Operations
for such fiscal year.
"Permitted Liens" is defined in Section 8.3.
"Person" means any individual, entity, or Governmental Authority.
"Pledgors" means each Company (other than Borrower) that owns one or more
of the Pool
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Properties, and "Pledgor" means any one of the Pledgors.
"Pool Properties" means (a) prior to the Second Advance, the Initial Pool
Properties, (b) after the Second Advance and before the Third Advance, the
Initial Pool Properties and the Initial Terramics Pool Properties, and (c) after
the Third Advance, the Initial Pool Properties, the Initial Terramics Pool
Properties, and the Secondary Terramics Pool Properties, and "Pool Property"
means any one of the Pool Properties.
"Post-Foreclosure Plan" is defined in Section 12.7 herein.
"Potential Default" means the occurrence of any event or the existence of
any circumstance that could, upon notice or lapse of time or both, become a
Default.
"PPT" means Prentiss Properties Trust, a Maryland real estate investment
trust.
"Pro Rata" and "Pro Rata Share" means, for any Lender, the percentage
obtained by dividing (a) the aggregate unpaid principal amount of such Lender's
Note by (b) the aggregate unpaid principal amount of all Notes of all Lenders.
"Protective Advance" means all sums expensed as reasonably determined by
the Administrative Agent to be necessary: (a) to protect the priority, validity
and enforceability of the Liens in the Collateral and the instruments evidencing
or securing the Collateral and the Obligation; and/or (b) to (i) prevent the
value of the Collateral from being materially diminished (assuming the lack of
such a payment within the necessary time frame could potentially cause the
Collateral to lose value), or (ii) protect the security of any of the Collateral
from being materially impaired, including, without limitation, any amounts
expended in accordance with Sections 12.2 and 12.7 of this Agreement and any
Post-Foreclosure Plan. Administrative Agent agrees to exercise its reasonable
best efforts to notify Borrower at least five (5) days prior to incurring any
such expenditures, except in the case of exigent circumstances.
"Purchaser" is defined in Section 13.11(c).
"REIT" means a "real estate investment trust" for purposes of the Code.
"Representatives" means representatives, officers, directors, employees,
attorneys, and agents.
"Required Lenders" means, as of any date, any combination of Lenders (other
than any Defaulting Lenders) who collectively hold sixty-six and two-thirds
percent (66-2/3%) of the outstanding principal balance of the Term Loans (other
than of any Defaulting Lenders).
"Reserve Requirement" means, with respect to any Eurodollar Borrowing for
the relevant Interest Period, the actual aggregate reserve requirements
(including all basic, supplemental, emergency, special, marginal and other
reserves required by applicable Governmental Requirement) applicable to a member
bank of the Federal Reserve System for eurocurrency fundings or liabilities.
"Responsible Officer" means, for any Person, any chairman, president, chief
executive officer, chief financial officer, controller, secretary, executive
vice president, or senior vice president of such Person.
"Revolving Credit Agreement" means that certain Credit Agreement dated as
of October 17, 1996 between Borrower, Administrative Agent (as Documentation
Agent), Documentation Agent (as Administrative Agent), and the Lenders named
therein, as modified, amended, renewed, extended, or
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restated from time to time.
"Rights" means rights, remedies, powers, privileges, and benefits.
"Scheduled Maturity Date" means April 6, 1998.
"Second Advance" has the meaning set forth in Section 2.
"Secondary Terramics Pool Properties" means the Pool Properties listed in
Schedule 2-C.
"S & P" means Standard & Poor's Rating Group, a division of McGraw Hill,
Inc., a New York corporation, or, if S & P no longer publishes ratings, then
another ratings agency acceptable to Agent.
"Share" means, for any Person, such Person's share of the assets,
liabilities, revenues, income, losses, or expenses of an Unconsolidated
Affiliate based upon such Person's percentage ownership of such Unconsolidated
Affiliate.
"Solvent" means, as to a Person, that (a) the aggregate fair market value
of its assets exceeds its Liabilities, (b) it has sufficient cash flow to enable
it to pay its Liabilities as they mature, and (c) it does not have unreasonably
small capital to conduct its businesses.
"Taxes" means, for any Person, taxes, assessments, or other governmental
charges or levies imposed upon it, its income, or any of its properties,
franchises, or assets.
"Term Loan" means, for a Lender, the amount (which is subject to reduction
and cancellation as provided in this Agreement) stated beside such Lender's name
on Schedule 1 as most recently amended under this Agreement, as the same may be
increased or decreased from time to time by further assignment pursuant to
Section 13.11, and "Term Loans" means the Term Loans of all Lenders in the
aggregate maximum amount of $133,000,000.00.
"Third Advance" has the meaning set forth in Section 2.
"Total Assets" means, for any Person, as of any date, such Person's (a)
consolidated total assets determined in accordance with GAAP, plus (b)
Accumulated Depreciation, minus (c) investments in Unconsolidated Affiliates
(other than of Broadmoor Austin Associates) included in the determination of
Total Assets in (a) above, plus (d) such Person's Share of any total assets
determined in accordance with GAAP of Unconsolidated Affiliates (other than of
Broadmoor Austin Associates).
"Type" means any type of Borrowing determined with respect to the
applicable interest option.
"Unconsolidated Affiliate" means any Person in whom Borrower or PPT holds a
voting equity or ownership interest and whose financial results would not be
consolidated under GAAP with the financial results of Borrower or PPT on the
consolidated financial statements of Borrower or PPT.
"Variable Constant" means, as of any date, a variable Constant Annual
Percent utilizing (i) a rate of interest equal to two percent (2%) in excess of
the most recent rate published on such date in the United States Federal Reserve
Statistical Release (H.15) for 10-year Treasury Constant Maturities, and (ii) a
twenty-five (25) year amortization.
1.2 Time References. Unless otherwise specified in the Loan Documents (a)
time references are to time in Dallas, Texas, and (b) in calculating a period
from one date to another, the word
Credit Agreement
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"from" means "from and including" and the word "to" or "until" means "to but
excluding."
1.3 Other References. Unless otherwise specified in the Loan Documents
(a) where appropriate, the singular includes the plural and vice versa, and
words of any gender include each other gender, (b) headings and caption
references may not be construed in interpreting provisions, (c) monetary
references are to currency of the United States of America, (d) section,
paragraph, annex, schedule, exhibit, and similar references are to the
particular Loan Document in which they are used, (e) references to "telecopy,"
"facsimile," "fax," or similar terms are to facsimile or telecopy transmissions,
(f) references to "including" mean including without limiting the generality of
any description preceding that word, (g) the rule of construction that
references to general items that follow references to specific items are limited
to the same type or character of those specific items is not applicable in the
Loan Documents, (h) references to any Person include that Person's heirs,
personal representatives, successors, trustees, receivers, and permitted
assigns, (i) references to any Governmental Requirement include every amendment
or supplement to it, rule and regulation adopted under it, and successor or
replacement for it, and (j) references to any Loan Document or other document
include every renewal and extension of it, amendment and supplement to it, and
replacement or substitution for it.
1.4 Accounting Principles. Under the Loan Documents, unless otherwise
stated, (a) GAAP determines all accounting and financial terms and compliance
with financial covenants, (b) GAAP in effect on the date of this Agreement
determines compliance with financial covenants, (c) otherwise, all accounting
principles applied in a current period must be comparable in all material
respects to those applied during the preceding comparable period, and (d) all
accounting and financial terms and compliance with financial covenants must be
for the Companies, on a consolidated basis, as applicable. If there is a change
in GAAP after the date hereof, the Compliance Certificate shall include
calculations setting forth the adjustments from the relevant financial items as
shown in the Current Financials, based on the then-current GAAP, to the
corresponding financial items based on GAAP as used in the Current Financials
delivered to Administrative Agent and the Lenders on or prior to the date
hereof, so as to demonstrate how such financial covenant compliance was derived
from the Current Financials.
SECTION 2 TERM LOANS. Subject to the terms and conditions set forth in this
Agreement, the Term Loans shall be funded in (a) one (1) advance, on or about
the date hereof, in an aggregate amount not to exceed $66,305,000.00 (the
"Initial Advance"), (b) in one (1) advance, on or before the Scheduled Maturity
Date, in an aggregate amount not to exceed $9,185,000.00 (the "Second Advance"),
and (c) in one (1) advance, on or before the Scheduled Maturity Date, in an
aggregate amount not to exceed $57,510,000.00 (the "Third Advance").
Notwithstanding the foregoing, (i) the Second Advance shall be reduced by an
amount equal to the excess, if any, of any Net Proceeds of any Debt Issuance
(other than the CIGNA Financing) or Equity Issuance on or after the Closing Date
over the outstanding principal balance of the Notes as of the date of such Debt
Issuance or Equity Issuance, and (ii) the Third Advance shall be reduced by an
amount equal to (A) the excess, if any, of any Net Proceeds of any Debt Issuance
or Equity Issuance on or after the Closing Date over the outstanding principal
balance of the Notes as of the date of such Debt Issuance or Equity Issuance,
less (B) the amount of any reduction in the Second Advance, if any, pursuant to
subsection (i) above. The Term Loans shall bear interest from time to time in
accordance with selections made by Borrower from time to time pursuant to
Section 3.4. Borrower may not reborrow any portion of the Term Loans.
SECTION 3 TERMS OF PAYMENT.
3.1 Notes and Payments.
(a) The Term Loans shall be evidenced by the Notes, one payable to each
Lender in the
Credit Agreement
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stated principal amount of its Term Loan.
(b) Borrower must make each payment and prepayment on the Obligation,
without offset, counterclaim, or deduction, to Administrative Agent's principal
office in Dallas, Texas, in funds that will be available for immediate use by
Administrative Agent by 12:00 noon on the day due. Payments received after such
time shall be deemed received on the next Business Day. Administrative Agent
shall pay to each Lender any payment to which such Lender is entitled on the
same day Administrative Agent receives the funds from Borrower if Administrative
Agent receives the payment or prepayment before 12:00 noon, and otherwise before
12:00 noon on the following Business Day. If and to the extent that
Administrative Agent does not make payments to the Lenders when due, then
Administrative Agent shall be obligated to pay to the Lenders such unpaid
amounts together with interest at the Federal Funds Rate from the due date until
(but not including) the payment date.
3.2 Interest and Principal Payments.
(a) Interest Payments. Accrued interest on the unpaid principal balance
of the Notes is due and payable on the first (1st) day of each calendar month
during the term of this Agreement, commencing on November 1, 1997, and on the
Scheduled Maturity Date or the Extended Maturity Date (if the Scheduled Maturity
Date is extended as provided in Section 3.18).
(b) Principal Payments.
(i) If the Scheduled Maturity Date is not extended to the Extended
Maturity Date, as provided in Section 3.18, then the unpaid principal
balance of the Notes is due and payable on the Scheduled Maturity Date.
(ii) If the Scheduled Maturity Date is extended to the Extended
Maturity Date, as provided in Section 3.18, then Borrower shall repay the
unpaid principal balance of the Notes (A) in three (3) quarterly
instalments, on July 1, 1998, October 1, 1998, and January 1, 1999, each in
the amount of $375,000.00, and (ii) in one (1) final installment, on the
Extended Termination Date, in the amount of the unpaid principal balance of
the Notes as of such date.
(c) Voluntary Prepayment. Borrower may voluntarily repay or prepay all or
any part of the unpaid principal balance of the Notes at any time without
premium or penalty, subject to the following conditions:
(i) Administrative Agent must receive Borrower's written payment
notice by 11:00 a.m. on (A) the Business Day preceding the date of payment
of a Eurodollar Borrowing, and (B) the Business Day preceding the date of
payment of a Base Rate Borrowing, which shall specify the payment date and
the Type and amount of the Borrowing(s) to be paid, and which shall
constitute an irrevocable and binding obligation of Borrower to make a
repayment or prepayment on the designated date;
(ii) each partial repayment or prepayment must be in a minimum amount
of at least $1,000,000.00 or a greater integral multiple of $100,000.00,
or, if less, the unpaid principal balance of the Notes; and
(iii) Borrower shall pay any related Funding Loss upon demand.
(d) Mandatory Prepayment. Notwithstanding anything contained herein or in
the Notes to the contrary, Borrower shall prepay the unpaid principal balance of
the Notes in an amount equal to the Net Proceeds of any Debt Issuance or Equity
Issuance on or after the Closing Date, other than the
Credit Agreement 12
<PAGE>
CIGNA Financing.
3.3 Interest Options. Except as specifically otherwise provided, each
Borrowing shall bear interest, if applicable, at an annual rate equal to the
lesser of (a) the Base Rate or the Eurodollar Rate plus one and three-quarters
of one percent (1.75%) (in each case as designated or deemed designated by
Borrower and, in the case of Eurodollar Borrowings, for the Interest Period
designated by Borrower), and (b) the Maximum Rate. Each change in the Base Rate
and the Maximum Rate is effective, without notice to Borrower or any other
Person, upon the effective date of change.
3.4 Selection of Interest Option.
(a) When Borrower requests any Eurodollar Borrowing, Borrower shall elect
the applicable interest period (each an "Interest Period"), which may be, at
Borrower's option, one (1), two (2), or three (3) months during the period of
time from the date hereof to the Scheduled Maturity Date, and one (1), two (2),
three (3), or six (6) months during the period of time from the Scheduled
Maturity Date to the Extended Maturity Date, if applicable, subject to the
following conditions: (i) each Interest Period applicable to any Borrowing
commences on the day on or after the day when the next preceding applicable
Interest Period expires; (ii) if any Interest Period for a Eurodollar Borrowing
begins on a day for which there exists no numerically corresponding Business Day
in the calendar month at the end of the Interest Period ("Ending Calendar
Month"), then the Interest Period ends on the next succeeding Business Day of
the Ending Calendar Month, unless there is no succeeding Business Day in the
Ending Calendar Month in which case the Interest Period ends on the next
preceding Business Day of the Ending Calendar Month; and (iii) no Interest
Period for any portion of Term Loans may extend beyond the scheduled repayment
date for that portion of the Term Loans.
(b) Borrower may (i) on the last day of the applicable Interest Period (or
at any other time, subject to payment of any Funding Loss) convert all or part
of a Eurodollar Borrowing to a Base Rate Borrowing, (ii) at any time convert all
or part of a Base Rate Borrowing to a Eurodollar Borrowing, and (iii) on the
last day of an Interest Period, elect a new Interest Period for a Eurodollar
Borrowing. Any such conversion may be accomplished by delivering a Conversion
Request to Administrative Agent no later than 11:00 a.m. (A) on the third (3rd)
Business Day before (x) the conversion date for conversion to a Eurodollar
Borrowing, and (y) the last day of the Interest Period, for the election of a
new Interest Period, and (B) one (1) Business Day before the last day of the
Interest Period for conversion to a Base Rate Borrowing. Absent Borrower's
notice of conversion or election of a new Interest Period, a Eurodollar
Borrowing shall be converted to a Base Rate Borrowing when the applicable
Interest Period expires.
(c) Notwithstanding anything to the contrary contained in this Section 3.4,
(i) each Eurodollar Borrowing with respect to the Term Loans shall be in a
minimum amount of $1,000,000.00 or a greater integral multiple of $100,000.00,
(ii) no more than five (5) Interest Periods shall be in effect at any one time
with respect to Eurodollar Borrowings, and (iii) Borrower may not request a
Eurodollar Borrowing if the interest rate applicable thereto under Section 3.3
would exceed the Maximum Rate in effect on the first day of the Interest Period
applicable to such Borrowing, but may give notice of the rate that it would have
selected, which notice shall be controlling for purposes of Section 3.7.
3.5 Default Rate. If permitted by applicable law, all past-due principal
and interest accruing on any of the foregoing bears interest from the date due
(stated or by acceleration) at the Default Rate until paid, regardless of
whether payment is made before or after entry of a judgment.
3.6 Interest Recapture. If the designated interest rate applicable to any
Borrowing exceeds the Maximum Rate, then the interest rate on that Borrowing is
limited to the Maximum Rate, provided
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that any subsequent reductions in the designated rate shall not reduce the
interest rate thereon below the Maximum Rate until the total amount of accrued
interest equals the amount of interest that would have accrued if that
designated rate had always been in effect. If at maturity (stated or by
acceleration), or at final payment of the Notes, the total interest paid or
accrued is less than the interest that would have accrued if the designated
rates had always been in effect, then, at that time and to the extent permitted
by applicable law, Borrower shall pay an amount equal to the difference between
(a) the lesser of the amount of interest that would have accrued if the
designated rates had always been in effect and the amount of interest that would
have accrued if the Maximum Rate had always been in effect, and (b) the amount
of interest actually paid or accrued on the Notes.
3.7 Interest Calculations.
(a) Interest shall be calculated on the basis of actual number of days
elapsed (including the first day but excluding the last day) but computed as if
each calendar year consisted of 360 days for all Borrowings (unless the
calculation would result in an interest rate greater than the Maximum Rate, in
which event interest shall be calculated on the basis of a year of 365 or 366
days, as the case may be). All interest rate determinations and calculations by
Administrative Agent are conclusive and binding absent manifest error.
(b) The provisions of this Agreement relating to calculation of the Base
Rate and the Eurodollar Rate are included only for the purpose of determining
the rate of interest or other amounts to be paid under this Agreement that are
based upon those rates. Each Lender may fund and maintain its funding of all or
any part of each Borrowing as it selects.
3.8 Maximum Rate. Regardless of any provision contained in any Loan
Document or any document related thereto, it is the intent of the parties to
this Agreement that no Agent nor any Lender contract for, charge, take, reserve,
receive, or apply, as interest on all or any part of the Obligation any amount
in excess of the Maximum Rate or the Maximum Amount or receive any unearned
interest in violation of any applicable law, and, if any Agent or any Lender
ever does so, then any excess shall be treated as a partial repayment or
prepayment of principal and any remaining excess shall be refunded to Borrower.
In determining if the interest paid or payable exceeds the Maximum Rate,
Borrower, Agents and the Lenders shall, to the maximum extent permitted under
applicable law, (a) treat all Borrowings as but a single extension of credit
(and the Lenders and Borrower agree that is the case and that provision in this
Agreement for multiple Borrowings is for convenience only), (b) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest, (c)
exclude voluntary repayments or prepayments and their effects, and (d) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the Obligation. If, however, the Obligation is paid in full
before the end of its full contemplated term, and if the interest received for
its actual period of existence exceeds the Maximum Amount, then the Lenders
shall refund any excess (and the Lenders may not, to the extent permitted by
applicable law, be subject to any penalties provided by any Governmental
Requirements for contracting for, charging, taking, reserving, or receiving
interest in excess of the Maximum Amount). If the Governmental Requirements of
the State of Texas are applicable for purposes of determining the "Maximum Rate"
or the "Maximum Amount," then those terms mean the "weekly rate ceiling" from
time to time in effect under Article 5069-1.D, Title 79, Revised Civil Statutes
of Texas, as amended.
3.9 Order of Application. Any payments (including proceeds from the
exercise of any Rights) shall be applied in the following order: (a) to all fees
and expenses for which any Agent or the Lenders have not been paid or reimbursed
in accordance with the Loan Documents (and if such payment is less than all
unpaid or unreimbursed fees and expenses, then the payment shall be paid against
unpaid and unreimbursed fees and expenses in the order of incurrence or due
date); (b) to accrued interest on the
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Term Loans; and (c) to the remaining Obligation in the order and manner as the
Required Lenders deem appropriate. Each payment or prepayment shall be
distributed to each Lender in accordance with its Pro Rata Share of such payment
or prepayment.
3.10 Sharing of Payments, Etc. If any Lender obtains any amount (whether
voluntary, involuntary, or otherwise) that exceeds the part of that payment that
such Lender is then entitled to receive under the Loan Documents, then such
Lender shall purchase from the other Lenders participations that will cause the
purchasing Lender to share the excess amount ratably with each other Lender. If
all or any portion of any excess amount is subsequently recovered from the
purchasing Lender, then the purchase shall be rescinded and the purchase price
restored to the extent of the recovery. Borrower agrees that any Lender
purchasing a participation from another Lender under this Section may, to the
fullest extent permitted by applicable law, exercise all of its Rights of
payment with respect to that participation as fully as if such Lender were the
direct creditor of Borrower in the amount of that participation.
3.11 Booking Borrowings. To the extent permitted by applicable law, any
Lender may make, carry, or transfer its Borrowings at, to, or for the account of
any of its branch offices or the office of any of its Affiliates. However, no
Affiliate is entitled to receive any greater payment under Section 3.13 than the
transferor Lender would have been entitled to receive with respect to those
Borrowings, and a transfer may not be made if, as a direct result of it, Section
3.13 or 3.14 would apply to any of the Obligation. If any of the conditions of
Sections 3.13 or 3.14 ever apply to a Lender, then such Lender shall, to the
extent possible, carry or transfer its Borrowings at, to, or for the account of
any of its branch offices or the office or branch of any of its Affiliates so
long as the transfer is consistent with the other provisions of this Section,
does not create any burden or adverse circumstance for such Lender that would
not otherwise exist, and eliminates or ameliorates the conditions of Sections
3.13 or 3.14 as applicable.
3.12 Basis Unavailable or Inadequate for the Eurodollar Rate.
(a) Determination by Administrative Agent. If Administrative Agent
determines that the basis for determining the applicable rate is not available,
Administrative Agent shall promptly notify Borrower and the Lenders of that
determination (which is conclusive and binding on Borrower absent manifest
error), and all Borrowings shall bear interest at the Base Rate. Until
Administrative Agent notifies Borrower that such circumstances no longer exist,
the Lenders' commitments under this Agreement to make, or to convert to,
Eurodollar Borrowings shall be suspended.
(b) Determination by Lender. If any Lender determines that for the Term
Loans made to Borrower hereunder and for other similar loans made by such Lender
to similar borrowers the resulting rate does not accurately reflect the cost to
such Lender of making or converting Borrowings at that rate for the applicable
Interest Period, then such Lender shall promptly notify Administrative Agent and
Borrower, and all Borrowings of such Lender shall bear interest at the Base
Rate. Until Administrative Agent notifies Borrower that such circumstances no
longer exist, such Lender's commitment under this Agreement to make, or to
convert to, Eurodollar Borrowings shall be suspended.
3.13 Additional Costs.
(a) Reserves. With respect to any Eurodollar Borrowing, if (i) any
change in present Governmental Requirement, any change in the interpretation or
application of any present Governmental Requirement, or any future Governmental
Requirement imposes, modifies, or deems applicable (or if compliance by any
Lender with any such requirement of any Governmental Authority results in) any
such requirement that any reserves (including any marginal, emergency,
supplemental or special
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reserves) be maintained, and (ii) those reserves reduce any sums receivable by
such Lender under this Agreement or increase the costs incurred by such Lender
in advancing or maintaining any portion of any Eurodollar Borrowing, then
(unless the effect is already reflected in the rate of interest then applicable
under this Agreement) such Lender (through Administrative Agent) shall deliver
to Borrower a certificate setting forth in reasonable detail the calculation of
the amount necessary to compensate it for its reduction or increase (which
certificate is conclusive and binding absent manifest error), and Borrower shall
promptly pay that amount to such Lender upon demand.
(b) Capital Adequacy. With respect to any Borrowing, if any change in
present Governmental Requirement or any future Governmental Requirement
regarding capital adequacy or compliance by Administrative Agent or any Lender
with any request, directive or requirement now existing or hereafter imposed by
any Governmental Authority regarding capital adequacy, or any change in its
written policies or in the risk category of this transaction, reduces the rate
of return on its capital as a consequence of its obligations under this
Agreement to a level below that which it otherwise could have achieved (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by it to be material (and it may, in determining the amount, use
reasonable assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method), then (unless the effect is already
reflected in the rate of interest then applicable under this Agreement)
Administrative Agent or such Lender (through Administrative Agent) shall notify
Borrower and deliver to Borrower a certificate setting forth in reasonable
detail the calculation of the amount necessary to compensate it (which
certificate is conclusive and binding absent manifest error), and Borrower shall
promptly pay that amount to Administrative Agent or such Lender upon demand.
(c) Taxes. Any Taxes payable by Administrative Agent or any Lender or
ruled (by a Governmental Authority) payable by Administrative Agent or any
Lender in respect of this Agreement or any other Loan Document shall, if
permitted by Governmental Requirement, be paid by Borrower, together with
interest and penalties, if any (except for Taxes imposed on or measured by the
overall net income of Administrative Agent or such Lender). Administrative
Agent or such Lender (through Administrative Agent) shall notify Borrower and
deliver to Borrower a certificate setting forth in reasonable detail the
calculation of the amount of payable Taxes, which certificate is conclusive and
binding (absent manifest error), and Borrower shall promptly pay that amount to
Administrative Agent for its account or the account of such Lender, as the case
may be. If Administrative Agent or such Lender subsequently receives a refund
of the Taxes paid to it by Borrower, then the recipient shall promptly pay the
refund to Borrower.
(d) Survival. The provisions of this Section 3.13 shall survive the
satisfaction and payment of the Obligation and termination of this Agreement.
3.14 Change in Governmental Requirement. If any Governmental Requirement
makes it unlawful for any Lender to make or maintain Eurodollar Borrowings, then
such Lender shall promptly notify Borrower and Administrative Agent, and (a) as
to undisbursed funds, that requested Borrowing shall be made as a Base Rate
Borrowing, and (b), as to any outstanding Borrowing, (i) if maintaining the
Borrowing until the last day of the applicable Interest Period is unlawful, the
Borrowing shall be converted to a Base Rate Borrowing as of the date of notice,
and Borrower shall pay any related Funding Loss, or (ii) if not prohibited by
all Governmental Requirements, the Borrowing shall be converted to a Base Rate
Borrowing as of the last day of the applicable Interest Period, or (iii) if any
conversion will not resolve the unlawfulness, Borrower shall promptly prepay the
Borrowing, without penalty, together with any related Funding Loss.
3.15 Funding Loss. Borrower Agrees To Indemnify Each Lender Against, And
Pay To It Upon Demand, Any Funding Loss Of Such Lender. When any Lender demands
that
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Borrower pay any Funding Loss, such Lender shall deliver to Borrower and
Administrative Agent a certificate setting forth in reasonable detail the basis
for imposing Funding Loss and the calculation of the amount, which calculation
is conclusive and binding absent manifest error. The provisions of this Section
3.15 shall survive the satisfaction and payment of the Obligation and
termination of this Agreement.
3.16 Foreign Lenders. Each Lender that is organized under the Governmental
Requirements of any jurisdiction other than the United States of America or any
State thereof (a) represents to Administrative Agent and Borrower that (i) no
Taxes are required to be withheld by Administrative Agent or Borrower with
respect to any payments to be made to it in respect of the Obligation, and (ii)
it has furnished to Administrative Agent and Borrower two (2) duly completed
copies of U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8, or any
other tax form acceptable to Administrative Agent (wherein it claims entitlement
to complete exemption from U.S. federal withholding tax on all interest payments
under the Loan Documents), and (b) covenants to (i) provide Administrative Agent
and Borrower a new tax form upon the expiration or obsolescence of any
previously delivered form according to Governmental Requirement, duly executed
and completed by it, and (ii) comply from time to time with all Governmental
Requirements with regard to the withholding tax exemption. If any of the
foregoing is not true or the applicable forms are not provided, then Borrower or
Administrative Agent (without duplication) may deduct and withhold from interest
payments under the Loan Documents United States federal income tax at the full
rate applicable under the Code.
3.17 Fees.
(a) Treatment of Fees. The fees described in this Section 3.17 (i) are
not compensation for the use, detention, or forbearance of money, (ii) are in
addition to, and not in lieu of, interest and expenses otherwise described in
this Agreement, (iii) are payable in accordance with Section 3.1(b), (iv) are
non-refundable, (v) to the fullest extent permitted by applicable law, bear
interest, if not paid when due, at the Default Rate, and (vi) are calculated on
the basis of actual number of days (including the first day but excluding the
last day) elapsed, but computed as if each calendar year consisted of 360 days,
unless computation would result in an interest rate in excess of the Maximum
Rate in which event the computation is made on the basis of a year of 365 or 366
days, as the case may be. The fees described in this Section 3.17 are in all
events subject to the provisions of Section 3.8.
(b) Agent Fees. Borrower shall pay to each Agent, solely for their own
accounts, the fees described in the letter agreement between Borrower and Agents
dated the same date as this Agreement, as such letter agreement may be modified
or amended from time to time.
(c) Extension Fee. Upon extension of the Scheduled Maturity Date to the
Extended Maturity Date, as provided in Section 3.18, Borrower agrees to pay
Administrative Agent, on or before the Scheduled Maturity Date, for the ratable
account of Lenders, an extension fee equal to one-fourth of one percent (.25%)
of the outstanding principal balance of the Notes as of the Scheduled Maturity
Date.
3.18 Extension of Maturity Date. If no Default or Potential Default
exists, Borrower may request the extension of the Scheduled Maturity Date to the
Extended Maturity Date by making such request in writing (an "Extension
Request") to Administrative Agent at least forty-five (45) days prior to the
Scheduled Maturity Date. The Scheduled Maturity Date shall be extended to the
Extended Maturity Date only if: (a) all of the conditions precedent set forth in
Section 5 have been satisfied as of the Scheduled Maturity Date; (b) Borrower
pays to Administrative Agent the extension fee set forth in Section 3.17(c); (c)
Borrower grants to Administrative Agent first priority Liens in the Pool
Properties and provides Administrative Agent with Collateral Documents and such
documentation as Administrative Agent reasonably requests to show that Borrower
has good and marketable title to the
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Pool Properties; (d) the outstanding principal balance of the Notes as of the
Scheduled Maturity Date do not exceed sixty-five percent (65%) of either (i) the
Appraised Value of the Pool Properties, or (ii) the Approved Cost of the Pool
Properties; (e) as of the Scheduled Maturity Date, the ratio of (i) Adjusted Net
Operating Income, to (ii) Assumed Debt Service, is not less than 1.25 to 1.0;
and (f) as of the Scheduled Maturity Date, no Material Adverse Event has
occurred.
SECTION 4 SECURITY.
4.1 Guaranty. Each Guarantor shall, pursuant to a Guaranty,
unconditionally guarantee in favor of Agents and the Lenders the full payment
and performance of the Obligation.
4.2 Liens on Pool Properties. If, on the Scheduled Maturity Date, Borrower
has not repaid the unpaid principal of and interest on the Term Loans, then
Borrower and Pledgors shall grant to Administrative Agent, for the benefit of
the Lenders, as security for the payment and performance of the Obligation, a
valid, enforceable, perfected, first priority, and (except for Permitted Liens)
only Lien in and to the Pool Properties.
4.3 Collateral Documents. The Liens described in Section 4.2 shall be
granted pursuant to, and more fully described in, the Collateral Documents,
which Administrative Agent can require Borrower to execute pursuant to Section
4.2. Borrower shall be liable for, and shall reimburse Administrative Agent for,
all "due diligence" expenses related to the execution of such Collateral
Documents, including, but not limited to, attorneys' fees and recording
expenses. Without limiting the foregoing, Borrower shall provide to
Administrative Agent, at Borrower's expense, a mortgagee policy of title
insurance for the Pool Properties and an appraisal of each Pool Property,
prepared in accordance with written instructions from Administrative Agent by a
third-party appraiser engaged directly by Administrative Agent. If the unpaid
principal balance of the Term Loans has not been paid in full on or before
January __, 1998, then Borrower agrees that Agents may, at Borrower's expense,
commence due diligence with respect to the Pool Properties and preparation of
Collateral Documents.
4.4 Leases. If the Liens described in Section 4.2 shall be granted
pursuant to, and more fully described in, the Collateral Documents, then all
leases with respect to the Pool Properties shall be subject to the provisions of
Section 4.3 of the Revolving Credit Agreement.
SECTION 5 CONDITIONS PRECEDENT.
(a) Initial Advance. Lenders will not be obligated to fund the Initial
Advance unless: (i) Administrative Agent has timely received all of the items
described on Schedule 5 with respect to Borrower, PPT, and each Pledgor owning
the Initial Pool Properties; (ii) Agents shall have received all applicable
fees; and (iii) Borrower shall have acquired good and indefeasible title to the
Initial Pool Properties, which Initial Pool Properties shall be subject to, and
comply with, the requirements of Section 8.3.
(b) Second Advance. Lenders shall not be obligated to fund the Second
Advance unless: (i) all of the conditions precedent to the Initial Advance have
been satisfied; (ii) Borrower shall have acquired good and indefeasible title to
the Initial Terramics Pool Properties, which Initial Terramics Pool Properties
shall be subject to, and comply with, the requirements of Section 8.3; (iii)
Agents have received property condition reports and environmental assessments
with respect to the Initial Terramics Pool Properties acceptable to, and
approved by, Agents; (iv) Agents have received copies of the acquisition
documents with respect to the Initial Terramics Pool Properties acceptable to
Agents; and (v) Administrative Agent has timely received all of the items
described on Schedule 5 with respect to each Pledgor owning the Initial
Terramics Pool Properties.
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(c) Third Advance. Lenders shall not be obligated to fund the Third
Advance unless: (i) all of the conditions precedent to the Initial Advance and
the Second Advance have been satisfied; (ii) Borrower shall have acquired good
and indefeasible title to the Secondary Terramics Pool Properties, which
Secondary Terramics Pool Properties shall be subject to, and comply with, the
requirements of Section 8.3; (iii) Agents shall have received property condition
reports and environmental assessments with respect to the Secondary Terramics
Pool Properties acceptable to, and approved by, Agents; (iv) Agents shall have
received copies of the acquisition documents with respect to the Secondary
Terramics Pool Properties acceptable to Agents; (v) Administrative Agent has
timely received all of the items described on Schedule 5 with respect to each
Pledgor owning the Secondary Terramics Pool Properties; and (vi) the CIGNA
Financing has not occurred.
(d) All Advances and Borrowings. Lender shall not be obligated to (i) fund
the First Advance, the Second Advance, or the Third Advance, (ii) convert any
Base Rate Borrowing to a Eurodollar Borrowing, (iii) continue any Eurodollar
Borrowing for a successive Interest Period, or (iii) extend the Scheduled
Maturity Date to the Extended Maturity Date (as provided in Section 3.18),
unless, as of the date of such advance, Borrowing, or extension: (A) all of the
representations and warranties in the Loan Documents are true and correct in all
material respects (unless they speak to a specific date or are based on facts
which have changed by transactions expressly contemplated or permitted by this
Agreement); (B) no Default, Potential Default, or Material Adverse Event exists;
and (C) such advance, Borrowing, or extension is permitted by all Governmental
Requirements.
(e) Generally. Each condition precedent in this Agreement (including those
on Schedule 5) is material to the transactions contemplated by this Agreement,
and time is of the essence with respect to each condition precedent. Lenders may
fund any Borrowing without all conditions being satisfied, but, to the extent
permitted by Governmental Requirements, such funding shall not be deemed to be a
waiver of the requirement that each condition precedent be satisfied as a
prerequisite for any subsequent funding or issuance, unless Lenders specifically
waive each item in writing.
SECTION 6 REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Agents and the Lenders as follows:
6.1 Purpose of Credit Facility. Borrower shall use the proceeds of the
Initial Advance to pay a portion of the outstanding principal balance under the
Revolving Credit Agreement. Borrower shall use the proceeds of the Second
Advance to acquire the Initial Terramics Pool Properties (or the stock,
partnership interests, or other ownership interests in one or more Pledgors of
the Initial Terramics Pool Properties). Borrower shall use the proceeds of the
Third Advance to acquire the Secondary Terramics Pool Properties (or the stock,
partnership interests, or other ownership interest in one or more Pledgors of
the Secondary Terramics Pool Properties) or to refinance existing Liabilities
incurred in connection with the acquisition of the Secondary Terramics Pool
Properties (or the stock, partnership interests, or other ownership interest in
one or more Pledgors of the Secondary Terramics Pool Properties). Borrower is
not engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended. No part of the proceeds of the Term Loans shall be
used, directly or indirectly, for a purpose that violates any Governmental
Requirement, including the provisions of Regulation U.
6.2 Existence, Good Standing, Authority and Compliance. Each Obligor is
duly formed, validly existing and in good standing under the Governmental
Requirements of the jurisdiction in which it is incorporated or formed as
identified on the attached Schedule 6.2 (as supplemented from time to time).
Each Obligor (a) is duly qualified to transact business and is in good standing
as a foreign trust,
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corporation, limited liability company, partnership, or other entity in each
jurisdiction where the nature and extent of its business and properties require
due qualification and good standing, which jurisdictions are identified on the
attached Schedule 6.2 (as supplemented from time to time to reflect changes as a
result of transactions permitted by the Loan Documents), except where the
failure to so qualify could not result in a Material Adverse Event, (b)
possesses all requisite authority, permits, and power to conduct its business as
is now being, or is contemplated by this Agreement to be, conducted, and (c) is
in compliance with all applicable Governmental Requirements.
6.3 Authorization and Contravention. The execution and delivery by each
Obligor of each Loan Document or related document to which it is a party, and
the performance by it of its obligations thereunder, (a) are within its trust,
corporate, limited liability company, or partnership power, (b) have been duly
authorized by all necessary trust, corporate, limited liability company, or
partnership action of such Person, (c) require no action by or filing with any
Governmental Authority, (d) do not violate any provision of its Constituent
Documents, (e) do not violate any provision of any Governmental Requirement or
order of any Governmental Authority applicable to it, (f) do not violate any
material agreements to which it is a party, or (g) do not result in the creation
or imposition of any Lien on any asset of any Company, other than pursuant to
the Loan Documents.
6.4 Binding Effect. Upon execution and delivery by all parties thereto,
each Loan Document to which it is a party shall constitute a legal and binding
obligation of each Obligor, enforceable against such Obligor in accordance with
its terms, subject to applicable Debtor Relief Laws and general principles of
equity.
6.5 Financial Statements; Fiscal Year. The Current Financials were
prepared in accordance with GAAP and present fairly, in all material respects,
the consolidated financial condition, results of operations, and cash flows of
the Companies as of, and for the portion of the fiscal year ending on the date
or dates thereof (subject only to normal audit adjustments). All material
liabilities of the Companies as of the date or dates of the Current Financials
are reflected therein or in the notes thereto. Except for transactions directly
related to, or specifically contemplated by, the Loan Documents or disclosed in
the Current Financials, no subsequent material adverse changes have occurred in
the consolidated financial condition of the Companies from that shown in the
Current Financials. The fiscal year of each Company ends on December 31.
6.6 Litigation. Except as disclosed on the attached Schedule 6.6, no
Company is subject to, or aware of the threat of, any Litigation that is
reasonably likely to be determined adversely to such Company or the Companies,
taken as a whole or, if so adversely determined, is a Material Adverse Event. No
outstanding and unpaid final and non-appealable judgments against any Company
exist which could result in a Material Adverse Event.
6.7 Taxes.
(a) All Tax returns of each Company required to be filed have been filed
(or extensions have been granted) before delinquency, and all Taxes imposed upon
each Company that are due and payable have been paid before delinquency or are
being contested in good faith by appropriate proceedings diligently conducted
and for which reserves in accordance with GAAP or otherwise reasonably
acceptable to Administrative Agent have been provided.
(b) As of the date hereof, no United States federal income tax returns of
the "affiliated group" (as defined in the Code) of which any Company is a member
have been examined and closed. The members of such affiliated group have filed
all United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
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<PAGE>
such returns or pursuant to any assessment received by or any of them (except
for taxes being contested in good faith by appropriate proceedings diligently
conducted and for which reserves in accordance with GAAP or otherwise acceptable
to Administrative Agent have been provided). The charges, accruals and reserves
on the books of the Companies in respect of taxes or other governmental charges
are, in the opinion of the Companies, adequate.
(c) PPT qualifies as a REIT.
6.8 Environmental Matters. Except as disclosed on Schedule 6.8 and as
specifically disclosed to Administrative Agent in a written environmental report
or other writing delivered by Borrower to Administrative Agent prior to the date
of execution hereof, (a) no environmental condition or circumstance exists that
materially and adversely affects any Pool Property, (b) no Obligor has received
any report of any Obligor's violation of any Environmental Law that has not been
remedied, (c) no Obligor knows that any Obligor is under any obligation to
remedy any violation of any Environmental Law, or (d) no Pool Property of any
Obligor is used for, or to the knowledge of Borrower has been used for, storage,
treatment or disposal of any Hazardous Substance, except for (i) the storage and
use of cleaning and maintenance materials, used and stored in commercially
reasonable quantities and in compliance with applicable Environmental Laws, and
(ii) light manufacturing and distribution activities of tenants, in compliance
with applicable Environmental Laws, provided that such tenants are not primarily
engaged in the treatment, processing, recycling or disposal of any Hazardous
Substance, or for any other use that would give rise to the release of any
Hazardous Substance on such facility. Each Obligor has taken prudent steps to
determine that each Pool Property does not violate any Environmental Law.
6.9 Employee Plans. Except where occurrence or existence could not
reasonably be expected to result in a Material Adverse Event, (a) no Employee
Plan has incurred an "accumulated funding deficiency" (as defined in Section 302
of ERISA or Section 412 of the Code), (b) no Company has incurred liability
under ERISA to the PBGC in connection with any Employee Plan (other than
required insurance premiums, all of which have been paid), (c) no Company has
withdrawn in whole or in part from participation in a Multiemployer Plan, (d) no
Company has engaged in any "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the Code), and (e) no "reportable event" (as defined
in Section 4043 of ERISA) has occurred, excluding events for which the notice
requirement is waived under applicable PBGC regulations.
6.10 Properties; Liens. Each Company has good title to all of its
properties reflected in the Current Financials (except for properties that are
obsolete or that have been disposed in the ordinary course of business or, after
the date of this Agreement, as otherwise permitted by Section 8.8 or Section
8.9).
6.11 Locations. Each Obligor's chief executive office is located at the
address on Schedule 6.11 (as supplemented from time to time). Each such
Company's books and records are located at its chief executive office.
6.12 Government Regulations. No Company is subject to regulation under the
Investment Company Act of 1940, as amended, or the Public Utility Holding
Company Act of 1935, as amended.
6.13 Transactions with Affiliates. Except as disclosed on Schedule 6.13 (as
supplemented from time to time if the disclosures are approved by Administrative
Agent), no Company is a party to a material transaction with any of its
Affiliates, other than transactions in the ordinary course of business and upon
fair and reasonable terms not materially less favorable than it could obtain or
could become entitled to in an arm's-length transaction with a Person that was
not its Affiliate.
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6.14 Insurance. Each Company maintains with financially sound, responsible,
and reputable insurance companies or associations (or, as to workers'
compensation or similar insurance, with an insurance fund or by self-insurance
authorized by the jurisdictions in which it operates) insurance concerning its
properties and businesses against casualties and contingencies and of types and
in amounts (and with co-insurance and deductibles) as is customary in the case
of similar businesses.
6.15 Labor Matters. No actual or, to Borrower's knowledge, threatened
strikes, labor disputes, slow downs, walkouts, or other concerted interruptions
of operations by the employees of any Company that could reasonably be expected
to result in a Material Adverse Event exist. All payments due from any Company
for employee health and welfare insurance have been paid or accrued as a
liability on its books, other than any nonpayments that are not, individually or
collectively, a Material Adverse Event.
6.16 Solvency. Each Obligor is, and after giving effect to the Term Loans,
will be, Solvent.
6.17 Full Disclosure. Each material fact or condition relating to the
financial condition or business of the Companies which could reasonably be
expected to result in a Material Adverse Event has been disclosed to
Administrative Agent. All information previously furnished, furnished on the
date of this Agreement, and furnished in the future, by any Company to
Administrative Agent in connection with the Loan Documents (a) was, is, and will
be, true and accurate in all material respects or based on good faith estimates
on the date the information is stated or certified, and (b) did not, does not,
and will not, fail to state any material fact the existence of which or the
omission of which could be or result in a Material Adverse Event
6.18 Exemption from ERISA; Plan Assets. PPT is a "real estate operating
company" within the meaning of 29 C.F.R. (S) 2510.3-101(e) (or any successor
regulation) and the assets of the Companies would not be deemed "plan assets" as
defined in 29 C.F.R. (S) 2510.3-101(a)(1) (or any successor regulation) of any
Employee Plan or Multiemployer.
SECTION 7 AFFIRMATIVE COVENANTS. Until the Obligation is paid in full, Borrower
covenants and agrees as follows:
7.1 Items to be Furnished. Borrower shall cause the following to be
furnished to Administrative Agent (with sufficient copies for each Lender):
(a) Annual Financial Statements.
(i) Promptly after preparation, and no later than ninety (90) days
after the last day of each fiscal year of PPT, Financial Statements of PPT
showing the consolidated financial condition and results of operations of
PPT as of, and for the year ended on, that last day, accompanied by: (A)
the unqualified opinion of the firm of an accounting firm of nationally-
recognized independent certified public accountants, based on an audit
using generally accepted auditing standards, that the Financial Statements
of PPT were prepared in accordance with GAAP and present fairly, in all
material respects, the consolidated financial condition and results of
operations of PPT; (B) a certificate from the accounting firm to
Administrative Agent indicating that during its audit it obtained no
knowledge of any Default or Potential Default or, if it obtained knowledge,
the nature and period of existence thereof; and (C) a Compliance
Certificate with respect to such Financial Statements.
(ii) Promptly after preparation, and no later than ninety (90) days
after the last day
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of each fiscal year of Borrower, Financial Statements of Borrower showing
the consolidated financial condition and results of operations of Borrower
as of, and for the year ended on, that last day, accompanied by: (A) a
certificate of a Responsible Officer of Borrower stating that the Financial
Statements of Borrower were prepared in accordance with GAAP and present
fairly, in all material respects, the consolidated financial condition and
results of operations of Borrower; and (B) a Compliance Certificate with
respect to such Financial Statements.
(b) Periodic Financial Statements. Promptly after preparation, and no
later than forty-five (45) days after the last day of each fiscal quarter
(except the last) of Borrower and PPT: (i) Financial Statements of Borrower and
PPT showing the consolidated financial condition and results of operations of
Borrower and PPT for the fiscal quarter and for the period from the beginning of
the current fiscal year to the last day of the fiscal quarter; and (ii) a
Compliance Certificate with respect to the Financial Statements.
(c) Other Reports.
(i) Promptly after receipt, a copy of each interim or special audit
report and management letter issued by independent accountants with respect
to Borrower and PPT or their financial records.
(ii) Promptly upon its becoming available, each press release and each
regular or periodic report and any registration statement or prospectus in
respect thereof filed by Borrower or PPT with, or received by Borrower or
PPT in connection therewith from, any securities exchange or the Securities
and Exchange Commission, or any successor agency thereof, including,
without limitation, each Form 10-K, 10-Q, and S-8 filed with the Securities
and Exchange Commission.
(iii) Promptly after the mailing or delivery thereof, copies of all
material reports or other information from Borrower or PPT to its
shareholders or partners (other than reports or other information delivered
only to Responsible Officers or other employees of Borrower or PPT).
(d) Notices. Notice, promptly after a Responsible Officer of Borrower
knows of (i) the existence and status of any Litigation that, if determined
adversely to any Company, could reasonably be expected to result in a Material
Adverse Event, (ii) any change in any material fact or circumstance represented
or warranted by any Company in any Loan Document which could be or result in a
Material Adverse Event, (iii) the receipt by any Company of notice of any
violation or alleged violation of ERISA or any Environmental Law (which
individually or collectively with other violations or allegations could
reasonably be expected to result in a Material Adverse Event), or (iv) a Default
or Potential Default, specifying the nature thereof and what action Borrower has
taken, is taking, or proposes to take.
(e) Change in Control. Promptly upon any Change in Control, notice of
such event together with a description of the transaction giving rise thereto.
(f) Other Information. Promptly upon reasonable request by Administrative
Agent, information (not otherwise required to be furnished under the Loan
Documents) respecting the business affairs, assets, and liabilities of the
Companies and opinions, certifications, and documents in addition to those
mentioned in this Agreement.
7.2 Use of Proceeds. Borrower shall use the proceeds of Borrowings only
for the purposes represented in this Agreement.
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7.3 Books and Records. Borrower shall, and shall cause each Company to,
maintain books,records, and accounts necessary to prepare financial statements
in accordance with GAAP.
7.4 Inspections. Upon reasonable notice and during normal business hours,
Borrower shall, and shall cause each Company to, allow Administrative Agent (or
its Representatives) to inspect any of their respective properties (subject to
the inspection rights in any tenant leases), to review reports, files, and other
records and to make and take away copies, and to discuss in the presence of
Borrower or such other Company any of its affairs, conditions and finances with
its other creditors, directors, officers, employees, or representatives from
time to time, during reasonable business hours.
7.5 Taxes. Borrower shall, and shall cause each Company to, promptly pay
prior to delinquency any and all Taxes, other than Taxes that are being
contested in good faith by lawful proceedings diligently conducted, against
which reserves or other provisions required by GAAP have been made, and in
respect of which levy and execution of any Lien have been and continue to be
stayed.
7.6 Payment of Obligations. Borrower shall, and shall cause each Company
to, promptly pay (or renew and extend) all of their respective material
obligations as they become due (unless any such obligations are being contested
in good faith by appropriate proceedings).
7.7 Expenses. Borrower shall promptly pay following demand (a) all costs,
fees, and expenses paid or incurred by Agents in connection with the
arrangement, syndication, and negotiation of the loan evidenced by this
Agreement and the other Loan Documents and the negotiation, preparation,
delivery, and execution of the Loan Documents and any related amendment, waiver,
or consent (including in each case the reasonable fees and expenses of Agents'
counsel), and (b) all costs, fees, and expenses of Agents and, after a Default,
the Lenders incurred by any Agent or, after a Default, any Lender in connection
with the enforcement of the obligations of any Obligor arising under the Loan
Documents or the exercise of any Rights arising under the Loan Documents
(including reasonable attorneys' fees, expenses, and costs paid or incurred in
connection with any workout or restructure and any action taken in connection
with any Debtor Relief Laws), all of which shall be a part of the Obligation and
shall bear interest, if not paid upon demand, at the Default Rate until repaid.
7.8 Maintenance of Existence, Assets, and Business. Each Obligor shall (a)
maintain its trust, partnership, limited liability company, or corporate
existence in good standing in its state of organization, and (b) except where
not a Material Adverse Event (i) maintain its authority to transact business in
good standing in all other states, (ii) maintain all licenses, permits,
franchises, and Governmental Requirements necessary for its business, and (iii)
keep all of its material assets that are useful in and necessary to its business
in good working order and condition (ordinary wear and tear excepted) and make
all necessary repairs and replacements.
7.9 Insurance. Borrower shall, and shall cause each Company to, maintain
with financially sound, responsible, and reputable insurance companies or
associations (or, as to workers' compensation or similar insurance, with an
insurance fund or by self-insurance authorized by the jurisdictions in which it
operates) insurance reasonably acceptable to Administrative Agent concerning its
properties and businesses against casualties and contingencies and of types and
in amounts (and with co-insurance and deductibles) as is customary in the case
of similar businesses. At Administrative Agent's request, Borrower shall, and
shall cause each Company to, deliver to Administrative Agent evidence of
insurance for each policy of insurance and evidence of payment of all premiums.
7.10 Preservation and Protection of Rights. Borrower shall, and shall cause
each Company to, perform the acts and duly authorize, execute, acknowledge,
deliver, file, and record any additional
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writings as any Agent may reasonably deem necessary or appropriate to preserve
and protect the Rights of Agents and the Lenders under any Loan Document.
7.11 Environmental Laws. Borrower shall, and shall cause each Obligor to,
(a) operate and manage the Pool Properties and otherwise conduct its affairs in
compliance with all Environmental Laws, except to the extent noncompliance could
not reasonably be expected to result in a Material-Adverse Event, (b) promptly
deliver to Administrative Agent a copy of any notice received from any
Governmental Authority alleging that any Pool Property is not in compliance with
any Environmental Law, and (c) promptly deliver to Administrative Agent a copy
of any notice received from any Governmental Authority alleging that any
potential environmental Liability exists with respect to any Pool Property.
7.12 Indemnification.
(a) As used in this section: (i) "Indemnitor" means the Companies; (ii)
"Indemnitee" means each Agent, each Lender, each present and future Affiliate of
----------
each Agent or any Lender, each present and future Representative of each Agent,
any Lender, or any of those Affiliates, and each present and future successor
and assign of each Agent, any Lender, or any of those Affiliates or
Representatives; and (iii) "Indemnified Liabilities" means all present and
-----------------------
future, known and unknown, fixed and contingent, administrative, investigative,
judicial, and other claims, demands, actions, causes of action, investigations,
suits, proceedings, amounts paid in settlement, damages, judgments, penalties,
court costs, liabilities, and obligations -- and all present and future costs,
expenses, and disbursements (including, without limitation, all reasonable
attorneys' fees and expenses whether or not suit or other proceeding exists or
any Indemnitee is party to any suit or other proceeding) in any way related to
any of the foregoing -- that may at any time be imposed on, incurred by, or
asserted against any Indemnitee and in any way relating to or arising out of any
(A) Loan Document or transaction contemplated by any Loan Document, (B)
Environmental Liability in any way related to any Company, or any act, omission,
status, ownership, or other relationship, condition, or circumstance
contemplated by, created under, or arising pursuant to or in connection with any
Loan Document, or (C) Indemnitee's sole or concurrent ordinary negligence.
---------------------------------------------------
(b) Each Indemnitor shall jointly and severally indemnify each Indemnitee
from and against, protect and defend each Indemnitee from and against, hold each
Indemnitee harmless from and against, and on demand pay or reimburse each
Indemnitee for, all Indemnified Liabilities.
(c) The foregoing provisions (i) are not limited in amount even if that
amount exceeds the Obligation, (ii) include, without limitation, reasonable fees
and expenses of attorneys and other costs and expenses of Litigation or
preparing for Litigation and damages or injury to Persons, property, or natural
resources arising under any statutory or common law, punitive damages, fines,
and other penalties, and (iii) are not affected by the source or origin of any
Hazardous Substance, and (iv) are not affected by any Indemnitee's
investigation, actual or constructive knowledge, course of dealing, or waiver.
(d) No Indemnitee is entitled to be indemnified under the Loan Documents
for its or any of its Representatives' own fraud, gross negligence, or willful
misconduct.
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(e) The provisions of and indemnification and other undertakings under
this section survive the foreclosure of any Lien or any transfer in lieu of that
foreclosure, the satisfaction of the Obligation, the termination of the Loan
Documents, and the release of any or all Liens.
7.13 REIT Status. At all times, PPT (including its organization and method
of operations and those of its Consolidated Affiliates) shall qualify as a REIT.
7.14 ERISA Exemptions. PPT shall qualify as a "real estate operating
company" under the 29 C.F.R. (S) 2510.3-101(e) (or any successor regulation) or
other appropriate exemption such that its assets shall not be deemed "plan
assets" as defined in 29 C.F.R. (S) 2510.3-101(a)(1) (or any successor
regulation) of any Employee Plan or Multiemployer Plan.
7.15 Listed Company. The common shares of beneficial interest of PPT shall
at all times be listed for trading and be traded on either the New York Stock
Exchange or American Stock Exchange.
SECTION 8 NEGATIVE COVENANTS. Until the Obligation is paid in full, Borrower
covenants and agrees as follows:
8.1 Payment of Obligations. Borrower shall not, and shall not permit any
Company to, voluntarily prepay principal of, or interest on, any Liabilities
other than the Obligation, if a Default exists.
8.2 Employee Plans. Except where a Material Adverse Event would not
result, Borrower shall not, and shall not permit any Company to, permit any of
the events or circumstances described in Section 6.10 to exist or occur.
8.3 Liens. Borrower shall not, and shall not permit any Company to, (a)
create, incur, or suffer or permit to be created or incurred or to exist any
Lien upon the Pool Properties, except Permitted Liens, or (b) enter into or
permit to exist any arrangement or agreement that directly or indirectly
prohibits any Company from creating or incurring any Lien on the Pool Properties
except the Loan Documents. The following are "Permitted Liens":
(i) Liens granted to Administrative Agent, for the ratable benefit
of the Lenders, to secure the Obligation;
(ii) pledges or deposits made to secure payment of worker's
compensation (or to participate in any fund in connection with worker's
compensation insurance), unemployment insurance, pensions or social
security programs;
(iii) encumbrances consisting of zoning restrictions, easements,
restrictive covenants, or other restrictions on the use of real property,
provided that such items do not materially impair the use of such property
for the purposes intended and none of which is violated in any material
respect by existing or proposed structures or land use;
(iv) Liens imposed by mandatory provisions of any Governmental
Requirement such as for materialmen's, mechanic's, warehousemen's, and
other like Liens arising in the ordinary course of business, securing
payment of any Liability whose payment is not yet due or that is being
contested in good faith by appropriate proceedings diligently conducted,
and for which reserves in accordance with GAAP or other security (and
otherwise reasonably acceptable to Administrative Agent) have been
provided;
Credit Agreement 26
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(v) Liens for taxes, assessments and governmental charges or
assessments that are not yet due and payable or that are being contested in
good faith by appropriate proceedings diligently conducted, and for which
reserves in accordance with GAAP or other security (and otherwise
reasonably acceptable to Administrative Agent) have been provided;
(vi) Liens securing assessments or charges payable to a property
owner association or similar entity, which assessments are not yet due and
payable or that are being contested in good faith by appropriate
proceedings diligently conducted, and for which reserves in accordance with
GAAP or other security (and otherwise reasonably acceptable to
Administrative Agent) have been provided; and
(vii) Liens in favor of CIGNA securing Liabilities that have been
paid in full and for which Lien releases and other agreements reasonably
acceptable to Administrative Agent have been executed and delivered to
Administrative Agent.
If Lenders make the Third Advance, then, prior to the Scheduled Maturity
Date, Borrower may, in connection with a Debt Issuance secured by the Secondary
Terramics Pool Properties, request that the Lenders release the Secondary
Terramics Pool Properties from the negative pledge set forth in this Section 8.3
and release any Guaranty of each Pledgor of the Secondary Terramics Pool
Properties, subject to the following conditions precedent:
(A) no Potential Default or Default exists or would result from
such release or Debt Issuance; and
(B) Borrower prepays the Term Loans in an amount equal to the
greater of (1) sixty-five percent (65%) of the Approved Cost of the
Terramics Pool Properties to be released, or (2) the Net Proceeds of such
Debt Issuance.
8.4 Transactions with Affiliates. Except as disclosed on Schedule 6.14
(as supplemented from time to time to reflect changes as a result of
transactions permitted by this Agreement or approved by the Required Lenders),
Borrower shall not, and shall not permit any Company to, enter into any material
transaction with any of its Affiliates, other than transactions in the ordinary
course of business and upon fair and reasonable terms not materially less
favorable than it could obtain or could become entitled to in an arm's-length
transaction with a Person that was not its Affiliate.
8.5 Compliance with Governmental Requirements and Documents. Borrower
shall not, and shall not permit any Company to, (a) violate the provisions of
any Governmental Requirements applicable to it or of any material agreement to
which it is a party if that violation alone, or when aggregated with all other
violations, could reasonably be expected to result in Material Adverse Event,
(b) violate the provisions of its trust agreement, partnership agreement,
charter, or bylaws, or (c) repeal, replace or amend any provision of its
Constituent Documents if that action could reasonably be expected to result in a
Material Adverse Event.
8.6 Loans, Advances and Investments. Neither Borrower nor PPT shall,
directly or indirectly, have or make any investments in: (a) properties
consisting of raw land exceeding in the aggregate three percent (3%) of the
Companies' Total Assets; (b) properties under construction having actual and
budgeted costs exceeding in the aggregate twenty percent (20%) of the Companies'
Total Assets; (c) except for Borrower's investment in Broadmoor Austin
Associates, partnerships, joint ventures and similar entities accounted for on
an equity basis (determined in accordance with GAAP) exceeding in the aggregate
twelve and one-half percent (12.5%) of the Companies' Total Assets; (d)
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loans, mortgages, advances, and extensions of credit to Persons exceeding in the
aggregate ten percent (10%) of the Companies' Total Assets; (e) the stock of any
Person exceeding in the aggregate five percent (5%) of the Companies' Total
Assets; or (f) the investments described in (a) through (e) above exceeding in
the aggregate thirty-five percent (35%) of the Companies' Total Assets.
8.7 Dividends and Distributions. Borrower shall not, and shall not permit
any Company to, declare, make, or pay any Distribution other than (a) Permitted
Distributions, and (b) Distributions declared, made, or paid by (i) Borrower or
PPT wholly in the form of its capital stock or partnership interests, (ii) any
Company (other than Borrower) to Borrower or to PPT. Borrower shall not, and
shall not permit any Company to, enter into or permit to exist any arrangement
or agreement (other than this Agreement) that prohibits it from paying
distributions to its shareholders or partners.
8.8 Sale of Assets. Except as otherwise permitted by the Loan Documents,
Borrower shall not, and shall not permit any Company to, sell, assign, lease,
transfer or otherwise dispose of any of its assets, other than (a) to Borrower
or PPT, (b) occasional sales, leases or other dispositions of immaterial assets
for consideration not less than fair market value, (c) sales, leases or other
dispositions of assets that are obsolete or have negligible fair market value,
(d) sales of equipment for a fair and adequate consideration (but if replacement
equipment is necessary for the proper operation of the business of the seller,
the seller must promptly replace the sold equipment), and (e) sales or other
transfers of assets, so long as both prior to and after giving effect to any
such sale or other transfer, no Material Adverse Event, Potential Default, or
Default exists.
8.9 Mergers and Dissolutions. Borrower shall not, and shall not permit
any Company to, merge or consolidate with any other Person or liquidate, wind up
or dissolve (or suffer any liquidation or dissolution); provided, however, that
the foregoing shall not operate to prevent mergers or consolidations of any
Company into Borrower or another Company (if such transaction does not reduce
the net worth of the Companies determined in accordance with GAAP).
8.10 Assignment. Borrower shall not, and shall not permit any Company to,
assign or transfer any of its Rights, duties, or obligations under any of the
Loan Documents.
8.11 Fiscal Year and Accounting Methods. Without the prior written consent
of Administrative Agent, Borrower shall not, and shall not permit any Company
to, change its fiscal year or its method of accounting (other than immaterial
changes in methods or as required by GAAP).
8.12 New Businesses. Borrower shall not, and shall not permit any Company
to, engage in any type of business except the types of businesses in which they
are presently engaged and any other reasonably related business.
8.13 Government Regulations. Borrower shall not, and shall not permit any
Company to, conduct its business in a way that it becomes regulated under the
Investment Company Act of 1940, as amended, or the Public Utility Holding
Company Act of 1935, as amended.
8.14 Pledgors. No Pledgor shall: (a) create, incur, assume, guarantee, or
suffer to exist any Liabilities, other than (i) the Obligation, (ii) trade
payables created in the ordinary course of business, (iii) endorsements of
negotiable instruments in the ordinary course of business, (iv) contingent
Liabilities covered by reserves or insurance, and (v) equipment leases incurred
in the ordinary course of business; or (b) create, incur, or suffer or permit to
be created or incur or exist any Lien upon any of its Assets, except Permitted
Liens.
8.15 Amendment of Constituent Documents. Borrower shall not permit any
amendment of
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any Company's Constituent Documents, if any, which would materially and
adversely affect Agents or Lenders or their respective Rights under the Loan
Documents.
SECTION 9 FINANCIAL COVENANTS. So long as Administrative Agent and
Documentation Agent are obligated to loan money to Borrower under the Revolving
Credit Agreement, Borrower shall comply with the covenants set forth in Section
9 of the Revolving Credit Agreement. If either Administrative Agent or
Documentation Agent is no longer a party to the Revolving Credit Agreement,
pursuant to Section 13.11 therein or otherwise, or if the Revolving Credit
Agreement is terminated, then Borrower shall comply with the covenants set forth
in Section 9 of the Revolving Credit Agreement in effect at the time that either
Administrative Agent or Documentation Agent, as applicable, is no longer a party
to the Revolving Credit Agreement or as of the date of termination of the
Revolving Credit Agreement, as applicable.
SECTION 10 DEFAULT. The term "Default" means the occurrence of any one or more
of the following events:
10.1 Payment of Obligation. The failure of Borrower or PPT to pay any
principal of or any interest on the Obligation when it becomes due and payable
under the Loan Documents, and (a) for the first (1st) such failure, if any,
occurring in the first (1st) twelve (12) months of this Agreement, such failure
shall continue for three (3) days after written notice thereof from
Administrative Agent to Borrower, and (b) for any other such failures, such
failure shall continue for five (5) days after such payment became due and
payable.
10.2 Covenants. The failure of Borrower (and, if applicable, any Company)
to punctually and properly perform, observe, and comply with: (a) any covenant
or agreement contained in Sections 7.1; or (b) any other covenant or agreement
contained in any Loan Document (other than the covenants to pay the principal of
and interest on the Obligation and the covenants in (a) preceding), and such
failure shall continue (i) for thirty (30) days after the earlier to occur of
the date (A) Borrower knows of, or (B) Borrower receives notice from
Administrative Agent of, such failure, or (ii) sixty (60) days after such
earlier date if such failure is not capable of being cured within thirty (30)
days and Borrower is diligently pursuing cure thereof.
10.3 Debtor Relief. Any Company (a) is not Solvent, (b) fails to pay its
Liabilities generally as they become due, (c) voluntarily seeks, consents to, or
acquiesces in the benefit of any Debtor Relief Law, or (d) becomes a party to or
is made the subject of any proceeding provided for by any Debtor Relief Law,
other than as a creditor or claimant, that could suspend or otherwise adversely
affect the Rights of any Agent or any Lender granted in the Loan Documents
(unless, if the proceeding is involuntary, the applicable petition is dismissed
within sixty (60) days after its filing).
10.4 Judgments and Attachments. Any Company fails, within sixty (60) days
after entry, to pay, bond, or otherwise discharge any judgment or order for the
payment of money in excess of $1,000,000.00 (individually or collectively) or
any warrant of attachment, sequestration, or similar proceeding against such
Company's assets having a value (individually or collectively) of $1,000,000.00
unless such judgment, order for payment, warrant of attachment, sequestration,
or similar proceeding is (a) stayed on appeal, (b) diligently contested in good
faith by appropriate proceedings and adequate reserves have been set aside on
its books in accordance with GAAP, or (c) covered by insurance acceptable to
Administrative Agent.
10.5 Government Action. (a) A final non-appealable order is issued by any
Governmental Authority (including the United States Justice Department)
requiring any Company to divest all or a substantial portion of its assets under
any antitrust, restraint of trade, unfair competition, industry
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regulation, or similar Governmental Requirements, or (b) any Governmental
Authority seizes or otherwise appropriates, or takes custody or control of, all
or any substantial portion of the assets of any Company, other than through
condemnation proceeding.
10.6 Misrepresentation. Any material representation or warranty made by
any Company contained in any Loan Document at any time proves to have been
incorrect in any material respect when made and such misrepresentation shall
continue for thirty (30) days after the earlier to occur of the date (a)
Borrower knows of, or (b) Borrower receives notice from Administrative Agent of,
such misrepresentation.
10.7 Default Under Other Agreements.
(a) Any Company shall fail to make any payment in respect of (i) any
recourse Liability in excess of $1,000,000.00 when due or within any applicable
grace period, or (ii) non-recourse Liability in excess of $25,000,000.00 when
due or within any applicable grace period; or
(b) The acceleration of the maturity of (i) any recourse Liability in
excess of $1,000,000.00 of any Company, or (ii) any non-recourse Liability in
excess of $25,000,000.00 of any Company, or default shall occur in the payment
of any such Liabilities of any Company, or in respect of any note or credit
agreement relating to any such Liabilities and such default shall continue for
more than the period of grace, if any, specified therein or otherwise granted by
the lender thereof.
10.8 Validity and Enforceability of Loan Documents. Except in accordance
with its terms or as otherwise expressly permitted by this Agreement, any Loan
Document at any time after its execution and delivery ceases to be in full force
and effect in any material respect or is declared by a Governmental Authority to
be null and void or its validity or enforceability is contested by any Company,
or any Company denies that it has any further liability or obligations under any
Loan Document to which it is a party.
10.9 Management Changes. Individuals who were directors or trustees of PPT
on the date hereof shall cease to constitute a majority of the board of
directors of PPT, unless the Term Loans are extended pursuant to Section 3.18,
whereupon during any period of twelve (12) consecutive calendar months,
individuals who were directors or trustees of PPT on the first day of such
period shall cease to constitute a majority of the board of directors of PPT;
provided, however, that the directors or trustees of PPT may include new or
replacement directors or trustees that (i) are an officer or employee of an
Affiliate, (ii) are required in order (as a practical matter) for the majority
of the board of directors or trustees of PPT to be independent directors or
trustees, or (iii) are independent directors or trustees that are replacing
another independent director or trustee whose term has expired or who has
voluntarily resigned.
10.10 Change in Control. A Change in Control shall occur.
10.11 Plan Assets. The assets of the Companies at any time constitute
assets, within the meaning of ERISA, the Code and the respective regulations
promulgated thereunder, of any Employee Plan or Multiemployer Plan.
SECTION 11 RIGHTS AND REMEDIES.
11.1 Remedies Upon Default.
(a) Debtor Relief. If a Default (i) occurs under Section 10.3(c) or (ii)
occurs and is
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continuing under Section 10.3(a), (b) or (d), then the entire unpaid balance of
the Obligation automatically becomes due and payable without any action of any
kind whatsoever.
(b) Other Defaults. If a Default occurs and is continuing, subject to the
terms of Section 13.9(b), then Administrative Agent, upon the request of the
Required Lenders, may do any one or more of the following: (i) if the maturity
of the Obligation has not already been accelerated under Section 11.1(a),
declare the entire unpaid balance of all or any part of the Obligation
immediately due and payable, whereupon it is due and payable; (ii) reduce any
claim to judgment; and (iii) exercise any and all other legal or equitable
Rights afforded by the Loan Documents, the Governmental Requirements of the
State of Texas, or any other applicable jurisdiction.
11.2 Waivers. To the extent permitted by applicable law, each Company
waives presentment and demand for payment, protest, notice of intention to
accelerate, notice of acceleration, and notice of protest and nonpayment, and
agrees that its liability with respect to all or any part of the Obligation is
not affected by any renewal or extension in the time of payment of all or any
part of the Obligation, by any indulgence, or by any release or change in any
security for the payment of all or any part of the Obligation.
11.3 Performance by Administrative Agent. If any covenant, duty, or
agreement of Borrower is not performed in accordance with the terms of the Loan
Documents, Administrative Agent may, while a Default exists, at its option,
perform, or attempt to perform that covenant, duty, or agreement on behalf of
Borrower (and any amount expended by Administrative Agent in its performance or
attempted performance is payable by Borrower to Administrative Agent on demand,
becomes part of the Obligation, and bears interest at the Default Rate from the
date of Administrative Agent's expenditure until paid). However, neither
Administrative Agent nor any Lender assumes or shall have, except by its express
written consent, any liability or responsibility for the performance of any
covenant, duty, or agreement of Borrower.
11.4 Not in Control. None of the covenants or other provisions contained
in any Loan Document shall, or shall be deemed to, give Agents or the Lenders
the Right to exercise control over the assets (including real property),
affairs, or management of any Company.
11.5 Course of Dealing. The acceptance by Agents or any Lender of any
partial payment on the Obligation shall not be deemed to be a waiver of any
Default then existing. No waiver by any Agent or any Lender of any Default shall
be deemed to be a waiver of any other then-existing or subsequent Default. No
delay or omission by any Agent or any Lender in exercising any Right under the
Loan Documents will impair that Right or be construed as a waiver thereof or any
acquiescence therein, nor will any single or partial exercise of any Right
preclude other or further exercise thereof or the exercise of any other Right
under the Loan Documents or otherwise .
11.6 Cumulative Rights. All Rights available to Agents and the Lenders
under the Loan Documents are cumulative of and in addition to all other Rights
granted to Agents and the Lenders at law or in equity, whether or not the
Obligation is due and payable and whether or not Agents or the Lenders have
instituted any suit for collection, foreclosure, or other action in connection
with the Loan Documents.
11.7 Application of Proceeds. Any and all proceeds ever received by any
Agent or any Lender from the exercise of any Rights pertaining to the Obligation
shall be applied to the Obligation according to Section 3.4.
11.8 Certain Proceedings. Borrower shall promptly execute and deliver, or
cause the
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execution and delivery of, all applications, certificates, instruments, and all
other documents and papers any Agent reasonably requests in connection with the
obtaining of any consent, approval, registration, qualification, permit,
license, or authorization of any Governmental Authority or other Person
necessary or appropriate for the effective exercise of any Rights under the Loan
Documents. Because Borrower agrees that Agents' and the Lenders' remedies at law
for failure of Borrower to comply with the provisions of this paragraph would be
inadequate and that failure would not be adequately compensable in damages,
Borrower agrees that the covenants of this paragraph may be specifically
enforced.
SECTION 12 AGENTS AND THE LENDERS.
12.1 Agents.
(a) Appointment. Each Lender appoints Administrative Agent (including,
without limitation, each successor Agent in accordance with this Section 12) as
its nominee and agent to act in its name and on its behalf (and Administrative
Agent and each such successor accepts that appointment): (i) to act as its
nominee and on its behalf in and under all Loan Documents; (ii) to arrange the
means whereby its funds are to be made available to Borrower under the Loan
Documents; (iii) to take any action that it properly requests under the Loan
Documents (subject to the concurrence of other Lenders as may be required under
the Loan Documents); (iv) to receive all documents and items to be furnished to
it under the Loan Documents; (v) to promptly distribute to it all Financial
Statements, notices received hereunder, and other items specifically required to
be delivered to it hereunder, and, upon request, such other material
information, requests, documents, and items received under the Loan Documents;
(vi) to promptly distribute to it its ratable part of each payment or prepayment
(whether voluntary or otherwise) in accordance with the terms of the Loan
Documents; and (vii) to deliver to the appropriate Persons requests, demands,
approvals, and consents received from it. However, Administrative Agent may not
be required to take any action that exposes it to personal liability or that is
contrary to any Loan Document or applicable Governmental Requirement.
(b) Successor. Administrative Agent may assign all of its Rights and
obligations as Administrative Agent under the Loan Documents to any of its
Affiliates, which Affiliate shall then be the successor Administrative Agent
under the Loan Documents. Administrative Agent may also voluntarily resign by
giving thirty (30) days' prior written notice to Borrower and Lenders, and shall
resign upon the request of the Required Lenders for cause (i.e., Administrative
Agent is continuing to fail to perform its responsibilities as Administrative
Agent under the Loan Documents). If the initial or any successor Administrative
Agent ever ceases to be a party to this Agreement or if the initial or any
successor Administrative Agent ever resigns (whether voluntarily or at the
request of the Required Lenders), then the Required Lenders shall (which, if no
Default or Potential Default exists, is subject to Borrower's approval that may
not be unreasonably withheld) appoint the successor Administrative Agent from
among the Lenders (other than the resigning Administrative Agent). If the
Required Lenders fail to appoint a successor Administrative Agent within thirty
(30) days after the resigning Administrative Agent has given notice of
resignation or the Required Lenders have removed the resigning Administrative
Agent, then the resigning Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent (which, if no Default or Potential
Default exists, is subject to Borrower's approval that may not be unreasonably
withheld), which must be a commercial bank having a combined capital and surplus
of at least $1,000,000,000.00 (as shown on its most recently published statement
of condition) and whose debt obligations (or whose parent's debt obligations)
are rated not less than Baa1 by Moody's or BBB+ by S & P. Upon its acceptance
of appointment as successor Administrative Agent, the successor Administrative
Agent succeeds to and becomes vested with all of the Rights of the prior
Administrative Agent, and the prior Administrative Agent is discharged from its
duties and obligations of Administrative Agent under the Loan Documents, and
each Lender shall execute the documents that any Lender, the resigning or
removed Administrative Agent, or the successor Administrative Agent
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reasonably request to reflect the change. After any Administrative Agent's
resignation or removal as Administrative Agent under the Loan Documents, the
provisions of this Section inure to its benefit as to any actions taken or not
taken by it while it was Administrative Agent under the Loan Documents. If
Borrower fails to respond to any written request for any consent required in
this Section 12.1(b) within ten (10) days after the date that Borrower receives
such request, then Borrower shall be deemed to have given its consent to such
request.
(c) Rights as Lender. Each Agent, in its capacity as a Lender, has the
same Rights under the Loan Documents as any other Lender and may exercise those
Rights as if it were not acting as an Agent. The term "Lender," unless the
context otherwise indicates, includes Agents. Administrative Agent's
resignation or removal does not impair or otherwise affect any Rights that it
has or may have in its capacity as an individual Lender. Each Lender and
Borrower agree that Agents are not a fiduciary for Lenders or for Borrower but
are simply acting in the capacities described in this Agreement to alleviate
administrative burdens for Borrower and Lenders, that Agents have no duties or
responsibilities to Lenders or Borrower except those expressly set forth in the
Loan Documents, and that each Agent in its capacity as a Lender has the same
Rights as any other Lender.
(d) Other Activities. Any Agent or any Lender may now or in the future be
engaged in one or more loan, letter of credit, leasing, or other financing
transactions with Borrower or another Company, act as trustee or depositary for
Borrower or another Company, or otherwise be engaged in other transactions with
Borrower (collectively, the "other activities") not the subject of the Loan
Documents. Without limiting the Rights of Lenders specifically set forth in the
Loan Documents, no Agent nor any Lender is responsible to account to the other
Lenders for those other activities, and no Lender shall have any interest in any
other Lender's activities, any present or future guaranties by or for the
account of Borrower that are not contemplated by or included in the Loan
Documents, any present or future offset exercised by any Agent or any Lender in
respect of those other activities, any present or future property taken as
security for any of those other activities, or any property now or hereafter in
any Agent's or any other Lender's possession or control that may be or become
security for the obligations of Borrower arising under the Loan Documents by
reason of the general description of indebtedness secured or of property
contained in any other agreements, documents, or instruments related to any of
those other activities (but, if any payments in respect of those guaranties or
that property or the proceeds thereof is applied by any Agent or any Lender to
reduce the Obligation, then each Lender is entitled to share ratably in the
application as provided in the Loan Documents).
(e) Documentation Agent. Documentation Agent shall have no rights,
duties, or obligations hereunder, except as specifically provided in this
Agreement. Documentation Agent (a) may voluntarily resign by notice to
Administrative Agent, the Lenders, and Borrower, and (b) shall resign upon the
request of the Required Lenders for cause. Upon the resignation of Documentation
Agent, the Required Lenders may elect to designate a successor Documentation
Agent (which, if no Default or Potential Default exists, is subject to
Borrower's approval that may not be unreasonably withheld), which must be a
Lender who is a commercial bank having a combined capital and surplus of at
least $1,000,000,000.00 (as shown on its most recently published statement of
condition) and whose debt obligations (or whose parent's debt obligations) are
rated not less than Baa1 by Moody's or BBB+ by S & P.
12.2 Expenses. Should Administrative Agent commence any proceeding or in
any way seek to enforce its Rights under the Loan Documents, each Lender, upon
demand therefor from time to time, shall contribute its share (based on its Pro
Rata Share) of the reasonable costs and/or expenses of any such enforcement or
acquisition, including, but not limited to, fees of receivers or trustees, court
costs, title company charges, filing and recording fees, appraisers' fees and
fees and expenses of attorneys to the extent not otherwise reimbursed by
Borrower. Without limiting the generality of the foregoing, each Lender shall
contribute its share (based on its Pro Rata Share) of all reasonable costs and
expenses
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incurred by Administrative Agent (including reasonable attorneys' fees and
expenses) if Administrative Agent employs counsel for advice or other
representation (whether or not any suit has been or shall be filed) with respect
to any of the Loan Documents, or to enforce any rights of Administrative Agent
or any of Borrower's or any other Company's obligations under any of the Loan
Documents, but not with respect to any dispute between Administrative Agent and
any other Lender(s). Any loss of principal and interest resulting from any
Default shall be shared by Lenders in accordance with their respective Pro Rata
Shares. It is understood and agreed that Administrative Agent determines that it
is necessary to engage counsel for the Lenders from and after the occurrence of
a Potential Default or Default, said counsel shall be selected by Administrative
Agent and written notice of the same shall be delivered to the Lenders.
12.3 Proportionate Absorption of Losses. Except as otherwise provided in
the Loan Documents, nothing in the Loan Documents gives any Lender any advantage
over any other Lender insofar as the Obligation is concerned or relieves any
Lender from ratably absorbing any losses sustained with respect to the
Obligation (except to the extent unilateral actions or inactions by any Lender
result in Borrower or any other obligor on the Obligation having any credit,
allowance, setoff, defense, or counterclaim solely with respect to all or any
part of that Lender's Pro Rata Share of the Obligation).
12.4 Delegation of Duties; Reliance. Lenders may perform any of their
duties or exercise any of their Rights under the Loan Documents by or through
Administrative Agent, and Lenders and Administrative Agent may perform any of
their duties or exercise any of their Rights under the Loan Documents by or
through their respective Representatives. Administrative Agent, Lenders, and
their respective Representatives (a) are entitled to rely upon (and shall be
protected in relying upon) any written or oral statement believed by it or them
to be genuine and correct and to have been signed or made by the proper Person
and, with respect to legal matters, upon opinion of counsel selected by
Administrative Agent or that Lender (but nothing in this clause (a) permits
Administrative Agent to rely on (i) oral statements if a writing is required by
this Agreement or (ii) any other writing if a specific writing is required by
this Agreement), (b) are entitled to deem and treat each Lender as the owner and
holder of its portion of the Obligation for all purposes until, written notice
of the assignment or transfer is given to and received by Administrative Agent
(and any request, authorization, consent, or approval of any Lender is
conclusive and binding on each subsequent holder, assignee, or transferee of or
Participant in that Lender's portion of the Obligation until that notice is
given and received), (c) are not deemed to have notice of the occurrence of a
Default unless a Responsible Officer of Administrative Agent, who handles
matters associated with the Loan Documents and transactions thereunder, has
actual knowledge or Administrative Agent has been notified by a Lender or
Borrower, and (d) are entitled to consult with legal counsel (including counsel
for Borrower), independent accountants, and other experts selected by
Administrative Agent and are not liable for any action taken or not taken in
good faith by it in accordance with the advice of counsel, accountants, or
experts.
12.5 Limitation of Agents' Liability.
(a) Exculpation. No Agent nor any of their Affiliates or Representatives
will be liable for any action taken or omitted to be taken by it or them under
the Loan Documents in good faith and believed by it or them to be within the
discretion or power conferred upon it or them by the Loan Documents or be
responsible for the consequences of any error of judgment (except for fraud,
gross negligence, or willful misconduct), and no Agent nor any of its Affiliates
or Representatives has a fiduciary relationship with any Lender by virtue of the
Loan Documents (but nothing in this Agreement negates the obligation of
Administrative Agent to account for funds received by it for the account of any
Lender).
(b) Indemnity. Unless indemnified to its satisfaction against loss, cost,
liability, and
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expense, no Agent may be compelled to do any act under the Loan Documents or to
take any action toward the execution or enforcement of the powers thereby
created or to prosecute or defend any suit in respect of the Loan Documents. If
an Agent requests instructions from the Lenders, or the Required Lenders, as the
case may be, with respect to any act or action in connection with any Loan
Document, such Agent is entitled to refrain (without incurring any liability to
any Person by so refraining) from that act or action unless and until it has
received instructions. In no event, however, may any Agent or any of its
Representatives be required to take any action that it or they determine could
incur for it or them criminal or onerous civil liability. Without limiting the
generality of the foregoing, no Lender has any right of action against any Agent
as a result of such Agent's acting or refraining from acting under this
Agreement in accordance with instructions of the Required Lenders.
(c) Reliance. No Agent is not responsible to any Lender or any
Participant for, and each Lender represents and warrants that it has not relied
upon any Agent in respect of, (i) the creditworthiness of Borrower or PPT and
the risks involved to that Lender, (ii) the effectiveness, enforceability,
genuineness, validity, or the due execution of any Loan Document (except by such
Agent), (iii) any representation, warranty, document, certificate, report, or
statement made therein (except by such Agent) or furnished thereunder or in
connection therewith, (iv) observation of or compliance with any of the terms,
covenants, or conditions of any Loan Document on the part of any Company. Each
Lender agrees to indemnify each Agent and its Representatives and hold them
harmless from and against (but limited to such Lender's Pro Rata Share of) any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, reasonable expenses, and reasonable disbursements of
any kind or nature whatsoever that may be imposed on, asserted against, or
incurred by them in any way relating to or arising out of the Loan Documents or
any action taken or omitted by them under the Loan Documents if such Agent and
its Representatives are not reimbursed for such amounts by any Company.
Although each Agent and its Representatives have the right to be indemnified
under this Agreement for its or their own ordinary negligence, each Agent and
its Representatives do not have the right to be indemnified under this Agreement
for its or their own fraud, gross negligence, or willful misconduct.
12.6 Default. While a Default exists, the Lenders agree to promptly confer
in order that the Required Lenders or the Lenders, as the case may be, may agree
upon a course of action for the enforcement of the Rights of the Lenders.
Administrative Agent is entitled to act or refrain from taking any action
(without incurring any liability to any Person for so acting or refraining)
unless and until it has received instructions from Required Lenders. In actions
with respect to any Company's property, Administrative Agent is acting for the
ratable benefit of each Lender.
12.7 Collateral Matters. So long as Borrower grants to Administrative
Agent, for the benefit of Lenders, a Lien in the Pool Properties as provided in
Section 4.2 herein:
(a) Each Lender authorizes and directs Administrative Agent to enter into
the Loan Documents and agrees that any action taken by Administrative Agent
concerning the Collateral (with the consent or at the request of the Required
Lenders) in accordance with any Loan Document, that Administrative Agent's
exercise (with the consent or at the request of the Required Lenders) of powers
concerning the Collateral in any Loan Document, and that all other reasonably
incidental powers are authorized and binding upon all Lenders.
(b) Administrative Agent is authorized on behalf of all Lenders, without
the necessity of any notice to or further consent from any Lender, from time to
time before a Default or Potential Default, to take any action with respect to
any Collateral or Loan Documents related to the Collateral that may be
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<PAGE>
necessary to perfect and maintain Administrative Agent's Liens in the
Collateral, including, without limitation, making Protective Advances; provided,
however, Administrative Agent shall not, without the consent of the Required
Lenders, make any Protective Advances during any one (1) calendar year in excess
of the sum of (i) amounts expended to pay real estate taxes, assessments, and
governmental charges or levies imposed upon the Collateral, (ii) amounts
expended to pay insurance premiums for policies of insurance related to the
Collateral, and (iii) $250,000.00.
(c) Except to use the same standard of care that it ordinarily uses for
collateral for its sole benefit, Administrative Agent has no obligation
whatsoever to any Lender or to any other Person to assure that the Collateral
exists or is owned by any Company or is cared for, protected, or insured or has
been encumbered or that Administrative Agent's Liens, if applicable, have been
or will be properly or sufficiently or lawfully created, perfected, protected,
or enforced or are entitled to any particular priority.
(d) Administrative Agent shall exercise the same care and prudent
judgment with respect to the Collateral and the Loan Documents as it normally
and customarily exercises in respect of similar collateral and security
documents.
(e) Lenders irrevocably authorize Administrative Agent, at its option and
in its discretion, to release any Liens upon any Collateral (i) constituting
property being disposed of as permitted under any Loan Document or (ii) if
approved, authorized, or ratified in writing by the Required Lenders. Upon
request by Administrative Agent at any time, Lenders shall confirm in writing
Administrative Agent's authority to release particular Collateral under this
clause (e).
(f) In the event any or all of the Collateral is acquired by
Administrative Agent as the result of a foreclosure or the acceptance of a deed
or assignment in lieu of foreclosure, or is retained in satisfaction of all or
any part of the Obligation, title to any such Collateral or any portion thereof
shall be held in the name of Administrative Agent or a nominee or subsidiary of
Administrative Agent (which in any case is authorized to do business in the
state in which such Collateral is located), as agent, for the ratable benefit of
Administrative Agent and the Lenders. Administrative Agent shall prepare a
recommended course of action for such Collateral (the "Post-Foreclosure Plan"),
which shall be subject to the approval of the Required Lenders, or shall take
such action as directed by the Required Lenders. Administrative Agent shall
manage, operate, repair, administer, complete, construct, restore, or otherwise
deal with the Collateral acquired and administer all transactions relating
thereto, including, without limitation, employing a management agent and other
agents, contractors, and employees, including agents of the sale of such
Collateral, and the collecting of rents and other sums from such Collateral and
paying the expenses of such Collateral. Upon demand therefor from time to time,
each Lender will contribute its share (based on its Pro Rata Share) of all
reasonable costs and expenses incurred by Administrative Agent pursuant to the
Post-Foreclosure Plan in connection with the construction, operation,
management, maintenance, leasing and sale of such Collateral. In addition,
Administrative Agent shall render or cause to be rendered by the managing agent,
to each of the Lenders, monthly, an income and expense statement for such
Collateral, and each of the Lenders shall promptly contribute its Pro Rata Share
of any operating loss for such Collateral, and such other expenses and operating
reserves as Administrative Agent shall deem reasonably necessary pursuant to and
in accordance with the Post-Foreclosure Plan. To the extent there is net
operating income from such Collateral, Administrative Agent shall, in accordance
with the Post-Foreclosure Plan, determine the amount and timing of distributions
to the Lenders. All such distributions shall be made to the Lenders in
accordance with their respective Pro Rata Shares. The Lenders acknowledge that
if title to any Collateral is obtained by Administrative Agent or its nominee,
such Collateral will not be held as a permanent investment but will be
liquidated as soon as practicable. Administrative Agent shall undertake to sell
such Collateral, at such price and upon such terms and conditions as the
Required Lenders shall reasonably determine to be most advantageous. Any
purchase money mortgage or deed of trust taken in
36
<PAGE>
connection with the disposition of such Collateral in accordance with the
immediately preceding sentence shall name Administrative Agent, as agent for the
Lenders, as the beneficiary or mortgagee. In such case, Administrative Agent and
the Lenders shall enter into an agreement with respect to such purchase money
mortgage defining the rights of the Lenders in the same Pro Rata Shares as
provided hereunder, which agreement shall be in all material respects similar to
this Agreement insofar as this Agreement is appropriate or applicable.
12.8 Limitation of Liability. No Lender or any Participant will incur any
liability to any other Lender or Participant except for acts or omissions in bad
faith, and neither Administrative Agent nor any Lender or Participant will incur
any liability to any other Person for any act or omission of any other Lender or
any Participant.
12.9 Relationship of Lenders. The Loan Documents do not create a
partnership or joint venture among Agents and the Lenders or among the Lenders.
12.10 Benefits of Agreement. None of the provisions of this Section inure
to the benefit of any Company or any other Person except Agents and the Lenders.
Therefore, no Company nor any other Person is responsible or liable for,
entitled to rely upon, or entitled to raise as a defense -- in any manner
whatsoever -- the failure of any Agent or any Lender to comply with these
provisions.
12.11 Approval of Lenders.
(a) All communications from Administrative Agent to the Lenders
requesting the Lenders' determination, consent, approval, or disapproval (i)
shall be given in the form of a written notice to each Lender, (ii) shall be
accompanied by a description of the matter or thing as to which such
determination, approval, consent, or disapproval is requested, or shall advise
each Lender where such matter or thing may be inspected, or shall otherwise
describe the matter or issue to be resolved, (iii) shall include, if reasonably
requested by a Lender and to the extent not previously provided to such Lender,
written materials and a summary of all oral information provided to
Administrative Agent by Borrower in respect of the matter or issue to be
resolved, and (iv) shall include Administrative Agent's recommended course of
action or determination in respect thereof. Each Lender shall reply promptly,
but in any event (x) within thirty (30) days (or such lesser period as may be
required under the Loan Documents for Administrative Agent to respond) for those
matters requiring the consent by all Lenders, and (y) within fifteen (15)
Business Days (or such lesser period as may be required under the Loan Documents
for Administrative Agent to respond) for those matters requiring the consent by
the Required Lenders, in each instance, after receipt of the request therefore
by Administrative Agent (in either event, the "Lender Reply Period").
(b) Unless a Lender shall give written notice to Administrative Agent
that it objects to the recommendation or determination of Administrative Agent
(together with a written explanation of the reasons behind such objection)
within the Lender Reply Period, such Lender shall be deemed to have approved of
or consented to such recommendation or determination.
SECTION 13 MISCELLANEOUS.
13.1 Headings. The headings, captions and arrangements used in any of the
Loan Documents are, unless specified otherwise, for convenience only and shall
not be deemed to limit, amplify or modify the terms of the Loan Documents, nor
affect the meaning thereof.
13.2 Nonbusiness Days; Time. Any payment or action that is due under any
Loan Document on a non-Business Day may be delayed until the next-succeeding
Business Day (but interest shall
37
<PAGE>
continue to accrue on any applicable payment until payment is in fact made)
unless the payment concerns a Eurodollar Borrowing, in which case if the next-
succeeding Business Day is in the next calendar month, then such payment shall
be made on the next-preceding Business Day.
13.3 Communications. Unless otherwise specifically provided, whenever any
Loan Document requires or permits any consent, approval, notice, request, demand
or other communication from one party to another, communication must be in
writing (which may be by telex or telecopy) to be effective and shall be deemed
to have been given (a) if by telex, when transmitted to the appropriate telex
number and the appropriate answerback is received, (b) if by telecopy, when
transmitted to the appropriate telecopy number (and all communications sent by
telecopy must be confirmed promptly thereafter by telephone; but any requirement
in this parenthetical shall not affect the date when the telecopy shall be
deemed to have been delivered), (c) if by mail, on the fifth (5th) Business Day
after it is enclosed in an envelope and properly addressed, stamped, sealed,
certified mail, return receipt requested, and deposited in the appropriate
official postal service, or (d) if by any other means, when actually delivered.
Until changed by notice pursuant to this Agreement, the address (and telecopy
number) for each party to a Loan Document is set forth on the attached
Schedule 1.
13.4 Form and Number of Documents. The form, substance, and number of
counterparts of each writing to be furnished under this Agreement must be
satisfactory to Agents and their counsel.
13.5 Survival. All covenants, agreements, undertakings, representations
and warranties made in any of the Loan Documents survive all closings under the
Loan Documents and, except as otherwise indicated, are not affected by any
investigation made by any party.
13.6 Governing Law. Except as expressly provided in a Loan Document, the
Governmental Requirements (other than conflict-of-laws provisions) of the State
of Texas and of the United States of America govern the Rights and duties of the
parties to the Loan Documents and the validity, construction, enforcement and
interpretation of the Loan Documents.
13.7 Invalid Provisions. Any provision in any Loan Document held to be
illegal, invalid or unenforceable is fully severable; the appropriate Loan
Document shall be construed and enforced as if that provision had never been
included; and the remaining provisions shall remain in full force and effect and
shall not be affected by the severed provision. Agents, the Lenders, and
Borrower agree to negotiate, in good faith, the terms of a replacement provision
as similar to the severed provision as may be possible and be legal, valid and
enforceable. However, if the provision held to be illegal, invalid or
unenforceable is a material part of this Agreement, such invalid, illegal or
unenforceable provision shall be, to the extent permitted by applicable law,
replaced by a clause or provision judicially construed and interpreted to be as
similar in substance and content to the original terms of such illegal, invalid
or unenforceable clause or provision as the context thereof would reasonably
allow, so that such clause or provision would thereafter be legal, valid and
enforceable.
13.8 Venue; Service of Process; Jury Trial. EACH PARTY TO ANY LOAN
DOCUMENT, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS (AND IN THE CASE
OF BORROWER, FOR EACH OF ITS CONSOLIDATED AFFILIATES), (a) IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF
TEXAS, (b) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS AND THE
OBLIGATION BROUGHT IN DISTRICT COURTS OF DALLAS COUNTY, TEXAS, OR IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, (c)
IRREVOCABLY WAIVES ANY CLAIMS THAT
Credit Agreement 38
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ANY LITIGATION BROUGHT IN ANY OF THE AFOREMENTIONED COURTS HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM, (d) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THOSE COURTS IN ANY LITIGATION BY THE MAILING OF COPIES THEREOF BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, BY HAND-DELIVERY, OR
BY DELIVERY BY A NATIONALLY RECOGNIZED COURIER SERVICE, AND SERVICE SHALL BE
DEEMED COMPLETE UPON DELIVERY OF THE LEGAL PROCESS AT ITS ADDRESS SET FORTH IN
THIS AGREEMENT, (e) IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY
PARTY TO ANY LOAN DOCUMENT ARISING OUT OF OR IN CONNECTION WITH THE LOAN
DOCUMENTS OR THE OBLIGATION MAY BE BROUGHT IN ONE OF THE AFOREMENTIONED COURTS,
AND (f) IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY LOAN DOCUMENT. The scope of each of the foregoing waivers is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Borrower (for itself and on behalf of each of its
Consolidated Affiliates) acknowledges that these waivers are a material
inducement to Administrative Agent's and each Lender's agreement to enter into a
business relationship, that Administrative Agent and each Lender has already
relied on these waivers in entering into this Agreement, and that Administrative
Agent and each Lender will continue to rely on each of these waivers in related
future dealings. Borrower (for itself and on behalf of each of its Consolidated
Affiliates) further warrants and represents that it has reviewed these waivers
with its legal counsel, and that it knowingly and voluntarily agrees to each
waiver following consultation with legal counsel. THE WAIVERS IN THIS SECTION
13.8 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
SUPPLEMENTS, OR REPLACEMENTS TO OR OF THIS OR ANY OTHER LOAN DOCUMENT. In the
event of Litigation, this Agreement may be filed as a written consent to a trial
by the court.
13.9 Amendments, Consents, Conflicts and Waivers.
(a) Required Lenders. Unless otherwise specifically provided, (i) the
provisions of this Agreement may be amended, modified, or waived, only by an
instrument in writing executed by Borrower and the Required Lenders and
supplemented only by documents delivered or to be delivered in accordance with
the express terms of this Agreement, and (ii) the Collateral Documents may only
be the subject of an amendment, modification, or waiver that has been approved
by Administrative Agent and Borrower.
(b) All Lenders. Except as specifically otherwise provided in this
Section 13.9, any amendment to or consent or waiver under this Agreement or any
Loan Document that purports to accomplish any of the following must be by an
instrument in writing executed by Borrower and executed (or approved, as the
case may be) by each Lender: (i) extends the Scheduled Maturity Date or the
Extended Maturity Date; (ii) extends the due date or decreases the amount of any
scheduled payment or amortization of the Obligation beyond the date specified in
the Loan Documents; (iii) decreases any rate or amount of interest, fees, or
other sums payable to Agents or Lenders under this Agreement (except such
reductions as are contemplated by this Agreement); (iv) changes the definition
of "Term Loan," "Term Loans," "Required Lenders," or "Pro Rata Share"; (v)
increases any one or more Lenders' Loans; (vi) waives compliance with, amends,
or fully or partially releases any Guaranty or any Collateral except as set
forth in Section 8.3; (vii) permits any Obligor to assign any of its Rights or
obligations hereunder or under any of the Loan Documents; (viii) waives or
amends any of the conditions precedent to the extension of the Scheduled
Maturity Date to the Extended Maturity Date set forth in Section 3.18(c); or
(ix) changes this clause (b) or any other matter specifically requiring the
consent of
Credit Agreement 39
<PAGE>
all Lenders under this Agreement.
(c) Agents. No amendment, modification, consent or waiver which modifies
the rights, duties, or obligations of any Agent shall be effective without the
consent of such Agent.
(d) Conflicts. Any conflict or ambiguity between the terms and
provisions of this Agreement and terms and provisions in any other Loan Document
is controlled by the terms and provisions of this Agreement.
(e) Course of Dealing. No course of dealing or any failure or delay by
any Agent, any Lender, or any of their respective Representatives with respect
to exercising any Right of any Agent or any Lender under this Agreement operates
as a waiver thereof. A waiver must be in writing and signed by the Required
Lenders or the Lenders, as appropriate, to be effective, and a waiver will be
effective only in the specific instance and for the specific purpose for which
it is given.
13.10 Multiple Counterparts. Any Loan Document may be executed in a number
of identical counterparts, each of which shall be deemed an original for all
purposes and all of which constitute, collectively, one agreement; but, in
making proof of thereof, it shall not be necessary to produce or account for
more than one counterpart. Each Lender need not execute the same counterpart of
this Agreement so long as identical counterparts are executed by Borrower, each
Lender, and each Agent. This Agreement shall become effective when counterparts
of this Agreement have been executed and delivered to Administrative Agent by
each Lender, each Agent, and Borrower, or, in the case only of the Lenders, when
Administrative Agent has received telecopied, telexed or other evidence
satisfactory to it that each Lender has executed and is delivering to
Administrative Agent a counterpart of this Agreement.
13.11 Successors and Assigns; Participations.
(a) Each Loan Document binds and inures to the benefit of the parties
thereto, any intended beneficiary thereof, and each of their respective
successors and permitted assigns. No Lender may transfer, pledge, assign, sell
any participation in, or otherwise encumber its portion of the Obligation,
except as permitted by this Section 13.4.
(b) Subject to the provisions of this Section and in accordance with
applicable law, any Lender may, in the ordinary course of its commercial banking
business, at any time sell to one or more Eligible Assignees (each a
"Participant") participating interests in its portion of the Obligation;
provided that each such participation is not less than $10,000,000.00. The
selling Lender shall remain a "Lender" under this Agreement (and the Participant
shall not constitute a "Lender" under this Agreement) and its obligations under
this Agreement shall remain unchanged. The selling Lender shall remain solely
responsible for the performance of its obligations under the Loan Documents and
shall remain the holder of its share of the Term Loans for all purposes under
this Agreement. Borrower and Administrative Agent shall continue to deal solely
and directly with the selling Lender in connection with such Lender's Rights and
obligations under the Loan Documents. Participants have no Rights under the
Loan Documents, other than certain voting Rights as provided below. Subject to
the following, each Lender may obtain (on behalf of its Participants) the
benefits of Section 3 with respect to all participations in its part of the
Obligation outstanding from time to time so long as Borrower is not obligated to
pay any amount in excess of the amount that would be due to such Lender under
Section 3 calculated as though no participations have been made. No Lender may
sell any participating interest under which the Participant has any Rights to
approve any amendment, modification or waiver of any Loan Document, except to
the extent the amendment, modification or waiver extends the due date for
payment of any principal, interest or fees due under the Loan Documents, or
reduces the interest rate or the amount of principal or fees applicable to the
Obligation (except reductions contemplated by this Agreement).
Credit Agreement 40
<PAGE>
However, if a Participant is entitled to the benefits of Section 3 or a Lender
grants Rights to its Participants to approve amendments to or waivers of the
Loan Documents respecting the matters described in the previous sentence, then
such Lender must include a voting mechanism in the relevant participation
agreement whereby a majority of its portion of the Obligation (whether held by
it or participated) shall control the vote for all of such Lender's portion of
the Obligation. Except in the case of the sale of a participating interest to
another Lender, the relevant participation agreement shall prohibit the
Participant from transferring, pledging, assigning, selling participations in,
or otherwise encumbering its portion of the Obligation.
(c) Subject to the provisions of this Section, any Lender having a Term
Loan equal to or greater than $10,000,000.00 may at any time, in the ordinary
course of its commercial banking business, (i) without the consent of Borrower
or Agents, assign all or any part of its Rights and obligations under the Loan
Documents to any of its Affiliates (each a "Purchaser"), and (ii) upon the prior
written consent of Agents, and so long as no Default or Potential Default
exists, Borrower, such consents not to be unreasonably withheld, assign to any
Eligible Assignee (each of which is also a "Purchaser") a proportionate part
(not less than $10,000,000.00 and an integral multiple of $1,000,000.00) of all
or any part of its Rights and obligations under the Loan Documents; provided
that unless the Lender granting such assignment is assigning all of its Term
Loan and Note hereunder, after giving effect to such assignment, the Lender
granting such assignment shall retain a Term Loan of at least $10,000,000.00.
Notwithstanding the foregoing, each Agent shall, at all times prior to its
resignation or replacement as an Agent hereunder, retain a minimum Term Loan of
$25,000,000.00. In each case, the Purchaser shall assume those Rights and
obligations under an assignment agreement substantially in the form of the
attached Exhibit E. Upon (i) delivery of an executed copy of the assignment
agreement to Borrower and Administrative Agent and (ii) payment of a fee of
$3,000.00 from the transferor to Administrative Agent, from and after the
assignment's effective date (which shall be after the date of delivery), the
Purchaser shall for all purposes be a Lender party to this Agreement and shall
have all the Rights and obligations of a Lender under this Agreement to the same
extent as if it were an original party to this Agreement with commitments as set
forth in the assignment agreement, and the transferor Lender shall be released
from its obligations under this Agreement to a corresponding extent, and, except
as provided in the following sentence, no further consent or action by Borrower,
the Lenders or Administrative Agent shall be required. Upon the consummation of
any transfer to a Purchaser under this clause (c), the then-existing Schedule 1
shall automatically be deemed to reflect the name, address, and Term Loan of
such Purchaser, Administrative Agent shall deliver to Borrower and the Lenders
an amended Schedule 1 reflecting those changes, Borrower shall execute and
deliver to each of the transferor Lender and the Purchaser a Note in the face
amount of its respective Term Loan following transfer, and, upon receipt of its
new Note, the transferor Lender shall return to Borrower the Note previously
delivered to it under this Agreement. A Purchaser is subject to all the
provisions in this Section as if it were a Lender signatory to this Agreement as
of the date of this Agreement.
(d) Any Lender may at any time, without the consent of Borrower or
Administrative Agent, assign all or any part of its Rights under the Loan
Documents to a Federal Reserve Bank without releasing the transferor Lender from
its obligations thereunder.
(e) Until the Scheduled Maturity Date, each Agent shall identify and
solicit prospective Purchasers or Participants to be assignees of or
participants in the Rights and obligations of each Agent under this Agreement
(in such capacity, "Syndicating Lenders") in an amount of up to $73,000,000.00.
During such period, the Syndicating Lenders shall (i) not solicit or enter into
any such assignment or participation except as provided in this Section
13.11(e), and (ii) refer each prospective Purchaser or Participant that
expresses an interest in purchasing or acquiring any such assignment or
participation to the other Syndicating Lender. Each Syndicating Lender, upon
identifying any prospective Purchaser or Participant desiring to be an assignee
of or participant in any portion of the Rights and obligations of the
Credit Agreement 41
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Syndicating Lenders under this Agreement, shall deliver written notice to the
other Syndicating Lender of the terms of such transaction ("Proposed Syndication
Transaction"). Each Syndicating Lender shall have the right to participate in
such Proposed Syndication Transaction on the terms set forth in such notice by
so notifying the other Syndicating Lender within five (5) days of receiving such
notice. The assignment or participation effected by such Proposed Syndication
Transaction shall be allotted equally to each participating Syndicating Lender.
Notwithstanding anything contained to the contrary in Section 13.11(c), the
aggregate assignments to a Purchaser by the Syndicating Lenders shall be in an
aggregate amount of not less $10,000,000.00 or a greater integral multiple of
$1,000,000.00.
(f) No Lender may assign or participate all or any portion of its Rights
or obligations under this Agreement to any Company or any Affiliate of any
Company.
(g) Borrower acknowledges that the Syndicating Lenders may use their
Affiliates (other than a real estate development or management company) (and in
the case of Documentation Agent, may use NationsBanc Capital Markets, Inc.) to
assist in the syndication of their Rights and obligations under this Agreement.
Borrower acknowledges and consents that the Syndicating Lenders may share
information relating to Borrower, PPT, and the other Companies or the
transactions contemplated hereby with their respective Affiliates (other than a
real estate development or management company), and that such Affiliates may
likewise share information relating to Borrower, PPT, and the other Companies or
such transactions with the Syndicating Lenders.
13.12 Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. Borrower's obligations under the Loan Documents remain in full
force and effect until the Obligation is paid in full (except for provisions
under the Loan Documents which by their terms expressly survive payment of the
Obligation and termination of the Loan Documents). If at any time any payment
of the principal of or interest on any Note or any other amount payable by
Borrower or any other obligor on the Obligation under any Loan Document is
rescinded or must be restored or returned upon the insolvency, bankruptcy or
reorganization of Borrower or otherwise, the obligations of Borrower under the
Loan Documents with respect to that payment shall be reinstated as though the
payment had been due but not made at that time.
13.13 Entirety. THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS (EACH
AS AMENDED IN WRITING FROM TIME TO TIME) EXECUTED BY BORROWER, ANY LENDER OR ANY
AGENT REPRESENT THE FINAL AGREEMENT AMONG BORROWER, THE LENDERS AND AGENTS AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
13.14 Effectiveness. This Agreement is executed on October 6, 1997, but
shall not be effective until executed by all parties hereto and delivered to and
accepted by Administrative Agent, and the other conditions set forth in Section
5 have been satisfied or waived by the Lenders in writing.
Credit Agreement 42
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SIGNATURE PAGE TO CREDIT AGREEMENT DATED AS OF OCTOBER 6, 1997
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE AGENT,
BANK ONE, TEXAS, N.A., AS DOCUMENTATION AGENT,
AND THE LENDERS DEFINED THEREIN
EXECUTED as of the day and year first mentioned.
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
a Delaware limited partnership,
as Borrower
By: PRENTISS PROPERTIES I, INC.,
General Partner
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Credit Agreement
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT DATED AS OF OCTOBER 6, 1997
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE AGENT,
BANK ONE, TEXAS, N.A., AS DOCUMENTATION AGENT,
AND THE LENDERS DEFINED THEREIN
NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent and a Lender
By:
----------------------------------------
Rick C. Bower
Vice President
Credit Agreement
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT DATED AS OF OCTOBER 6, 1997
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE AGENT,
BANK ONE, TEXAS, N.A., AS DOCUMENTATION AGENT,
AND THE LENDERS DEFINED THEREIN
BANK ONE, TEXAS, N.A.,
as Documentation Agent and a Lender
By:
-----------------------------------
Roderick Washington
Vice President
Credit Agreement
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT DATED AS OF OCTOBER 6, 1997
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE AGENT,
BANK ONE, TEXAS, N.A., AS DOCUMENTATION AGENT,
AND THE LENDERS DEFINED THEREIN
CRESTAR BANK, as a Lender
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
Credit Agreement
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT DATED AS OF OCTOBER 6, 1997
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE AGENT,
BANK ONE, TEXAS, N.A., AS DOCUMENTATION AGENT,
AND THE LENDERS DEFINED THEREIN
COMERICA BANK - TEXAS, as a Lender
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
Credit Agreement
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT DATED AS OF OCTOBER 6, 1997
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE AGENT,
BANK ONE, TEXAS, N.A., AS DOCUMENTATION AGENT,
AND THE LENDERS DEFINED THEREIN
THE FIRST NATIONAL BANK OF CHICAGO, as a Lender
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
Credit Agreement
<PAGE>
Exhibit 99
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Other Information
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THE FOLLOWING INFORMATION RELATES TO (I) PRENTISS PROPERTIES TRUST, (II)
PRENTISS PROPERTIES I, INC. (THE "GENERAL PARTNER"), (III) PRENTISS PROPERTIES
ACQUISITION PARTNERS, L.P. (THE "OPERATING PARTNERSHIP") AND (IV) PRENTISS
PROPERTIES LIMITED, INC. (THE "MANAGER")(COLLECTIVELY, INCLUDING AFFILIATED
ENTITIES THROUGH WHICH THE OPERATING PARTNERSHIP OWNS INTERESTS IN PROPERTIES,
THE "COMPANY").
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of certain investment, financing and other
policies of the Company. These policies have been determined by the Company's
Board of Trustees and may be amended or revised from time to time without the
approval of the Company's shareholders, except (i) the Company may not change
its policy of holding its assets and conducting its businesses only through the
Operating Partnership and its subsidiaries, including the General Partner and
the Manager, or joint ventures in which it or a subsidiary is a partner, without
the consent of the limited partners of the Operating Partnership (the "Limited
Partners") as provided in the Operating Partnership Agreement, (ii) changes in
certain policies with respect to conflicts of interest must be
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consistent with legal requirements, and (iii) the Company cannot take any action
intended to terminate its qualification as a real estate investment trust (a
"REIT") without the approval of the holders of a majority of the Company's
outstanding common shares of beneficial interest, par value $.01 per share (the
"Common Shares").
INVESTMENT POLICIES
The Company will conduct all of its investment activities through the
Operating Partnership and its subsidiaries, including joint ventures in which it
is a partner. The Company's investment objectives are to provide quarterly cash
distributions and achieve long-term capital appreciation through increases in
the value of the Company.
The Company may purchase income-producing office, industrial and other
types of properties for long-term investment, expand and improve the Properties
or other properties purchased, or sell such real estate properties, in whole or
in part, when circumstances warrant. The Company may also participate with
third parties in property ownership, through joint ventures or other types of
co-ownership. Equity investments may be subject to existing mortgage financing
and other indebtedness or such financing or indebtedness as may be incurred in
connection with acquiring or refinancing these investments. Debt service with
respect to such financing or indebtedness will have a priority over any
distributions with respect to the Common Shares.
While the Company's current portfolio consists of, and the Company's
business objectives emphasize, equity investments in office and industrial real
estate, the Company may, at the discretion of the Board of Trustees, invest in
other types of equity real estate investments, mortgages (including
participation in convertible mortgages) and other real estate interests. Other
than the limitations described in the succeeding paragraph, future development
or investment activities will not be limited to any geographic area or product
type or to a specified percentage of the Company's assets. While the Company
intends to diversify in terms of property location, size and market, the Company
does not have any limit on the amount or percentage of its assets that may be
invested in any one property or any one market area.
Subject to the limitations on ownership of certain types of assets and the
gross income tests imposed by the Internal Revenue Code of 1986, as amended (the
"Code"), the Company also may invest in the securities of other REITs, other
entities engaged in real estate activities or other issuers, including for the
purpose of exercising control over such entities. The Company may enter into
joint ventures or partnerships for the purpose of obtaining an equity interest
in a particular property in accordance with the Company's investment policies.
Such investments may permit the Company to own interests in larger assets
without unduly restricting diversification and, therefore, add flexibility in
structuring its portfolio. The Company will not enter into a joint venture or
partnership to make an investment that would not otherwise meet its investment
policies. Investments in such securities are also subject to the Company's
policy not to be treated as an investment company under the Investment Company
Act of 1940.
FINANCING POLICIES
The Company's Board of Trustees has adopted a policy to limit the Company's
total outstanding indebtedness (the "Debt Limitation"). The Debt Limitation is
a policy of incurring debt only if upon such incurrence the ratio of the
Company's combined indebtedness, including its pro rata share of debt incurred
by joint ventures in which the Company is a co-venturer ("Joint Venture Debt"),
would be 50% or less of the Company's total market capitalization. The ratio,
which is based, in part, upon the aggregate market value of the outstanding
Common Shares and units of limited partnership interest in the Operating
Partnership ("Units"), will fluctuate with changes in the price of the Common
Shares, and the issuance of additional Common Shares, Units or preferred shares
of beneficial interest, par value of $.01 per share ("Preferred Shares"), if
any, and will differ from a debt to book capitalization ratio, which is based
upon book values. A company's debt to book capitalization ratio may not reflect
the current income potential of its assets and operations, and the Company
believes that a debt to total market capitalization ratio provides a more
appropriate indication of leverage for a company whose assets are primarily
income-producing real estate. The Company's Declaration of Trust and Bylaws do
not, however, limit the amount or percentage of indebtedness that the Company
may incur. Accordingly, the Board of Trustees could alter or eliminate this
policy at will. The Company may from time to time modify its debt policy in
light of current economic conditions, relative costs of debt and equity capital,
market values of its properties, general conditions in the market for debt and
equity securities, fluctuations in the market price of Common Shares, growth
opportunities, the Company's continued REIT
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qualification requirements and other factors. Accordingly, the Company may
increase or decrease its debt to market capitalization ratio beyond the limits
described above.
To the extent that the Board of Trustees decides to obtain additional
capital, the Company may raise such capital through additional equity offerings
(including offerings of senior securities), debt financings or retention of cash
available for distribution (subject to provisions in the Code concerning
taxability of undistributed REIT income), or a combination of these methods. As
long as the Operating Partnership is in existence, the net proceeds of the sale
of Common Shares by the Company will be transferred to the Operating Partnership
in exchange for that number of Units in the Operating Partnership equal to the
number of Common Shares sold by the Company. The Company presently anticipates
that any additional borrowings would be made through the Operating Partnership,
although the Company may incur indebtedness directly and loan the proceeds to
the Operating Partnership. Borrowings may be unsecured or may be secured by any
or all of the assets of the Company, the Operating Partnership or any existing
or new property owning partnership and may have full or limited recourse to all
or any portion of the assets of the Company, the Operating Partnership or any
existing or new property owning partnership. Indebtedness incurred by the
Company may be in the form of bank borrowings, purchase money obligations to
sellers of properties, publicly or privately placed debt instruments or
financing from institutional investors or other lenders. The proceeds from any
borrowings by the Company may be used for working capital, to refinance existing
indebtedness or to finance acquisitions, expansions or the development of new
properties, and for the payment of distributions. Other than restrictions that
may be imposed by lenders from time to time in connection with outstanding
indebtedness, the Company has no established limit on the number or amount of
mortgages that may be placed on any single property or on its portfolio as a
whole.
CONFLICT OF INTEREST POLICIES
The Company has adopted certain policies and entered into certain
agreements designed to minimize potential conflicts of interest. The Company's
Board of Trustees is subject to certain provisions of Maryland law, which are
designed to eliminate or minimize certain potential conflicts of interest.
However, there can be no assurance that these policies always will be successful
in eliminating the influence of such conflicts, and if they are not successful,
decisions could be made that might fail to reflect fully the interests of all
shareholders.
DECLARATION OF TRUST AND BYLAW PROVISIONS
The Company's Declaration of Trust, with limited exceptions, requires that
a majority of the Company's Board of Trustees be comprised of persons who are
not officers or employees of the Company or any "Affiliate" (as defined in the
Securities Exchange Act of 1934, as amended), or Affiliates of any lessee of any
property of the Company ("Independent Trustees"). The Declaration of Trust
provides that such Independent Trustee requirement may not be amended, altered,
changed or repealed without the affirmative vote of at least two-thirds of all
of the votes entitled to be cast on the matter by the holders of the outstanding
voting shares of the Company. In addition, the Company's Bylaws provide that any
transaction involving the Company, including the purchase, sale, lease or
mortgage of any real estate asset or any other transaction, in which a trustee
or officer of the Company, or any Affiliate of the foregoing, has any direct or
indirect interest other than solely as a result of his status as a trustee,
officer or shareholder of the Company, must be approved by a majority of the
trustees, including a majority of the Independent Trustees, even if the
Independent Trustees constitute less than a quorum. The Declaration of Trust
also includes a provision permitting each Trustee, including Independent
Trustees, to engage in the type of business activities conducted by the Company
without first presenting any investment opportunities to the Company even though
such investment opportunities may be within the scope of the Company's
investment policies. These provisions are subject to any non-competition
agreements that may exist.
EMPLOYMENT AGREEMENTS
Michael V. Prentiss and Thomas F. August have each entered into an
employment and noncompetition agreement with the Company that will, subject to
certain limited exceptions, prohibit them from engaging in activities that
compete with the Company's businesses during the term of their employment by the
Company and for a period ending two years after the termination of their
employment with the Company.
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THE OPERATING PARTNERSHIP
A conflict of interest may arise between the Company and the other Limited
Partners, including Messrs. Prentiss and August and Dennis J. Dubois (the
"Prentiss Principals"), due to the possibility that a disproportionately large
share of any gain recognized from the sale of any of the Properties contributed
by the Limited Partners, directly or indirectly, to the Operating Partnership
will be allocated to the Limited Partners. The Operating Partnership Agreement
gives the General Partner, a wholly-owned subsidiary of the Company, full,
complete and exclusive discretion in managing and controlling the business of
the Operating Partnership and in making all decisions affecting the business and
assets of the Operating Partnership. In addition, the Company's Bylaws provide
that any transaction (including the sale of a real estate asset) involving the
Company in which an advisor, trustee, officer or shareholder of the Company, or
any Affiliate of the foregoing, has a direct or indirect interest other than
solely as a result of his status as an advisor, trustee, officer, or shareholder
of the Company, must be approved by a majority of the Independent Trustees.
Pursuant to the Operating Partnership's Second Amended Restated Agreement of
Limited Partnership (the "Operating Partnership Agreement") the Limited Partners
have agreed that in the event of any conflict in the fiduciary duties owed by
the Company to its shareholders, and by the General Partner to such Limited
Partners, the General Partner will fulfill its fiduciary duties to such Limited
Partners by acting in the best interests of the Company's shareholders. In
addition, the General Partner is not responsible for any misconduct or
negligence on the part of its agents, provided that the General Partner
appointed such agents in good faith.
PROVISIONS OF MARYLAND LAW
Pursuant to Maryland law (the jurisdiction under which the Company is
organized), each trustee is required to discharge his duties in good faith, with
the care an ordinarily prudent person in a like position would exercise under
similar circumstances and in a manner he reasonably believes to be in the best
interest of the Company. In addition, under Maryland law, a contract or
transaction between the Company and any of its trustees or between the Company
and a corporation, firm or other entity in which a trustee is a director or has
a material financial interest is not void or voidable solely because of (a) the
common directorship or interest, (b) the presence of the trustee at the meeting
of the Board or a committee of the Board that authorizes or approves or ratifies
the contract or transaction or (c) the counting of the vote of the trustee for
the authorization, approval or ratification of the contract or transaction if
(i) after disclosure of the interest, the transaction is authorized, approved or
ratified, by the affirmative vote of a majority of the disinterested trustees,
or by the affirmative vote of a majority of the votes cast by shareholders
entitled to vote other than the votes of shares owned of record or beneficially
by the interested trustee or corporation, firm or other entity, or (ii) the
transaction is fair and reasonable to the Company.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
The Company has authority to offer shares of beneficial interest or other
securities and to repurchase or otherwise reacquire its shares or any other
securities and may engage in such activities in the future. The Company expects
to issue Common Shares to holders of Units upon exercise of their Exchange
Rights (as defined below under "Operating Partnership Agreement"). The Company
may issue Preferred Shares from time to time, in one or more series, as
authorized by the Board of Trustees without the need for shareholder approvals.
The Company has not engaged in trading, underwriting or agency distribution or
sale of securities of other issuers, nor has the Company invested in the
securities of other issuers other than the Operating Partnership for the purpose
of exercising control and does not intend to do so in the future. The Company
makes and intends to continue to make investments in such a way that it will not
be treated as an investment company under the Investment Company Act of 1940.
The Company's policies with respect to such activities may be reviewed and
modified or amended from time to time by the Company's Board of Trustees without
approval of shareholders.
At all times, the Company intends to make investments in such a manner
consistent with the requirements of the Code for the Company to qualify as a
REIT unless, because of changing circumstances or changes in the Code (or in
Treasury Regulations), the Company's Board of Trustees, with the consent of the
holders of two-thirds of the outstanding Common Shares, determines that it is no
longer in the best interests of the Company to qualify as a REIT.
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WORKING CAPITAL RESERVES
The Company will maintain working capital reserves in amounts that the
Board of Trustees determines to be adequate to meet normal contingencies in
connection with the operation of the Company's business and investments.
FORMATION TRANSACTIONS
The Company was formed to continue and expand the national acquisition,
property management, leasing, development and construction businesses of its
predecessors and to acquire 87 properties. Prior to or simultaneous with the
closing of the IPO, the Company engaged in the transactions described below,
(the "Formation Transaction") which were designed to consolidate the ownership
of the properties and the office and industrial property management, leasing
development and construction businesses of the Company's predecessors (the
"Prentiss Properties Service Business") in the Company, to facilitate the IPO
and to enable the Company to qualify as a REIT commencing with its short taxable
year ending December 31, 1996.
The Formation Transactions included the following, which occurred in
connection with the closing of the IPO:
. The Company sold to the public 16,000,000 Common Shares and issued 1,879,897
Common Shares to The American Airlines, Inc. Master Fixed Benefit Trust, the
Ameritech Pension Trust and Public Employee Retirement System of Idaho
(collectively, the "Continuing Investors") in exchange for a portion of their
interests in the Operating Partnership. The Company transferred (i)
approximately 29.7% of the net proceeds of the IPO to the former limited
partners of the Operating Partnership, which include the Continuing Investors,
in exchange for the remaining portion of their interests in the Operating
Partnership, (ii) 70.1% directly to the Operating Partnership in exchange for
Units, and (iii) approximately 0.2% of the net proceeds of the IPO to the
General Partner, which the General Partner contributed to the Operating
Partnership in exchange for a 0.2% general partnership interest in the Operating
Partnership.
. The Operating Partnership was an affiliate of the Prentiss Properties Limited,
Inc, ("PPL" and, together with PPL's affiliates and the Prentiss Principals, the
"Prentiss Group"). The Prentiss Group members who collectively serve as the
limited partners of the Operating Partnership contributed to the Operating
Partnership all of their interests in the Properties and certain management
contracts of PPL in exchange for 3,295,995 Units. The various Prentiss Group
interests were accounted for at their historical cost with any excess paid
recorded as a distribution.
. The interests of the pre-IPO limited partners of the Operating Partnership
were acquired by the Company in exchange for Common Shares and cash. The pre-
IPO limited partners received $87.4 million in cash and 1,879,897 Common Shares
for their interests. The acquisition of the Continuing Investors' interests
were accounted for using purchase accounting based on the cash paid and the
value of the Common Shares issued to them, resulting in an incremental increase
in the basis of the real estate formerly owned by members of the Prentiss Group.
. The Prentiss Group member that served as general partner of the Operating
Partnership prior to the IPO converted its interest into a limited partnership
interest and distributed the Units representing such interest to its partners,
all of whom are members of the Prentiss Group and are limited partners of the
Operating Partnership.
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. The Units received by the Prentiss Group in connection with the Formation
Transactions had a total value of approximately $65.9 million based on the IPO
offering price of $20 per Common Share and are redeemable for cash or Common
Shares on a one for one basis, no earlier than October 22, 1998, two years after
the closing date of the IPO.
. Mr. Prentiss, the Chairman and Chief Executive Officer of the Company,
contributed cash in an amount equal to 5% of the equity value of the Manager in
exchange for all of the voting common stock of the Manager, which stock
represents 5% of the ownership interest in such company. The Manager recorded
the receipt of cash and the 5% voting interest. The Manager is included in the
Company's financial information under the equity method of accounting due to the
Operating Partnership's ownership of a non-controlling, non-voting interest in
the Manager.
. The Operating Partnership contributed a portion of the Prentiss Properties
Service Business as required for the Company to maintain its status as a REIT to
the Manager in exchange for all of the non-voting common stock of the Manager,
which stock represents 95% of the ownership interest in such company, and
promissory notes in the aggregate principal amount of $34.75 million, bearing
interest at an annual rate of 13%. Accrued interest on the outstanding
principal balance of the notes is paid monthly. No principal on the notes is
due in the first three years, after which time 10% of the initial principal
balance will be repaid each year for 10 years. Due to the affiliation of the
Manager and the Operating Partnership, the Notes have been classified in
the Company's shareholders' equity. Due to the capital nature of this
transaction, interest income and expense amounts are recorded directly to
shareholders' equity.
. The Operating Partnership borrowed $56.2 million from an affiliate of Lehman
Brothers, Inc. ("Lehman") to fund the acquisition of a portion of the Company's
acquisition of its initial portfolio of properties.
. The Operating Partnership used approximately $55.0 million of the net
proceeds of the IPO to acquire interests in certain properties from an affiliate
of Lehman, and used approximately $62.9 million of the net proceeds of the IPO
to repay mortgage loans made by an affiliate of Lehman and secured by certain of
such properties.
. The Operating Partnership used approximately $147.2 million of the net
proceeds of the IPO (and the proceeds from the loans from an affiliate of
Lehman) to acquire certain properties from an affiliate of the Prentiss Group.
. The Operating Partnership used approximately $36.2 million of the net
proceeds of the IPO to repay indebtedness secured by certain properties held by
the Operating Partnership prior to the IPO or acquired from the Prentiss Group.
. The Operating Partnership used approximately $33.3 million of the net
proceeds of the IPO (and the proceeds from the loans from an affiliate of
Lehman) to acquire certain properties from a third party.
. The Operating Partnership used approximately $1.3 million of the net proceeds
of the IPO to pay prepayment penalties associated with all of the debt to be
repaid in the Formation Transactions. The accounting treatment for the
prepayment penalties will be a charge to equity.
. The Company sold an additional 2,400,000 Common Shares to cover the IPO
underwriter's over-allotments. The Company used the net proceeds of
approximately $44.6 million of the sale of these Common Shares to repay
indebtedness owed to an affiliate of Lehman incurred in connection with the
acquisition of certain properties.
CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
COMPANY'S DECLARATION OF TRUST AND BYLAWS
The following summary of certain provisions of Maryland law and of the
Declaration of Trust and Bylaws of the Company is subject to and qualified in
its entirety by reference to Maryland law and to the Declaration of Trust and
Bylaws of the Company.
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CLASSIFICATION OF THE BOARD OF TRUSTEES
The Bylaws provide that the number of trustees of the Company may be
established by the Board of Trustees but may not be fewer than three nor more
than nine. There are currently seven members of the Board of Trustees. The Board
of Trustees may increase or decrease the number of trustees by a vote of at
least 80% of the members of the Board of Trustees, provided that the number of
trustees shall never be less than the number required by Maryland law and that
the tenure of office of a trustee shall not be affected by any decrease in the
number of trustees. Any vacancy will be filled, including a vacancy created by
an increase in the number of trustees, at any regular meeting or at any special
meeting called for that purpose, by a majority of the remaining trustees.
Pursuant to the Declaration of Trust, the Board of Trustees is divided into
three classes of trustees. Trustees of each class are chosen for three-year
terms upon the expiration of their current terms and each year one class of
trustees will be elected by the shareholders. The Company believes that
classification of the Board of Trustees will help to assure the continuity and
stability of the Company's business strategies and policies as determined by the
Board of Trustees. Holders of Common Shares will have no right to cumulative
voting in the election of trustees. Consequently, at each annual meeting of
shareholders, the holders of a majority of the Common Shares are able to elect
all of the successors of the class of trustees whose terms expire at that
meeting.
The classified board provision could have the effect of making the
replacement of incumbent trustees more time consuming and difficult. At least
two annual meetings of shareholders, instead of one, will generally be required
to effect a change in a majority of the Board of Trustees. The staggered terms
of trustees may reduce the possibility of a tender offer or an attempt to change
control of the Company or other transaction that might involve a premium price
for holders of Common Shares, even though a tender offer, change of control or
other transaction might be in the best interest of the shareholders.
REMOVAL OF TRUSTEES
The Declaration of Trust provides that a trustee may be removed with or
without cause upon the affirmative vote of at least two-thirds of the votes
entitled to be cast in the election of trustees. This provision, when coupled
with the provision in the Bylaws authorizing the Board of trustees to fill
vacant trusteeships, precludes shareholders from removing incumbent trustees,
except upon a substantial affirmative vote, and filling the vacancies created by
such removal with their own nominees.
BUSINESS COMBINATIONS
Under Maryland law, as applicable to Maryland real estate investment
trusts, certain "business combinations" (including a merger, consolidation,
share exchange or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities) between a Maryland real estate investment
trust and any person who beneficially owns ten percent or more of the voting
power of the trust's shares or an affiliate of the trust who, at any time within
the two-year period prior to the date in question, was the beneficial owner of
ten percent or more of the voting power of the then outstanding voting stock of
the Company (an "Interested Shareholder") or an affiliate of such an Interested
Shareholder are prohibited for five years after the most recent date on which
the Interested Shareholder becomes an Interested Shareholder. Thereafter, any
such business combination must be recommended by the board of trustees of such
trust and approved by the affirmative vote of at least (a) 80% of the votes
entitled to be cast by holders of outstanding voting shares of beneficial
interest of the trust and (b) two-thirds of the votes entitled to be cast by
holders of voting shares of the trust other than shares held by the Interested
Shareholder with whom (or with whose affiliate) the business combination is to
be effected, unless, among other conditions, the trust's common shareholders
receive a minimum price (as defined in the Maryland General Corporate Law) for
their shares and the consideration is received in cash or in the same form as
previously paid by the Interested Shareholder for its shares. These provisions
of Maryland law do not apply, however, to business combinations that are
approved or exempted by the board of trustees of the trust prior to the time
that the Interested Shareholder becomes an Interested Shareholder.
CONTROL SHARE ACQUISITIONS
Maryland law, as applicable to Maryland real estate investment trusts,
provides that control shares (as defined below) of a Maryland real estate
investment trust acquired in a "control share acquisition" have no voting rights
except to the extent approved by
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a vote of two-thirds of the votes entitled to be cast on the matter, excluding
shares of beneficial interest owned by the acquiror, by officers or by trustees
who are employees of the trust. "Control Shares" are voting shares of beneficial
interest which, if aggregated with all other such shares of beneficial interest
previously acquired by the acquiror or in respect of which the acquiror is able
to exercise or direct the exercise of voting power (except solely by virtue of a
revocable proxy), would entitle the acquiror to exercise voting power in
electing trustees within one of the following ranges of voting power: (i) one-
fifth or more but less than one-third, (ii) one-third or more but less than a
majority, or (iii) a majority or more of all voting power. Control Shares do not
include shares the acquiring person is then entitled to vote as a result of
having previously obtained shareholder approval. A "control share acquisition"
means the acquisition of Control Shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the Board of Trustees to call a special meeting of shareholders to be
held within 50 days of demand to consider the voting rights of the Control
Shares. If no request for a meeting is made, the trust may itself present the
question at any shareholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the Company may redeem any or all
of the Control Shares (except those for which voting rights have previously been
approved) for fair value determined, without regard to the absence of voting
rights for the Control Shares, as of the date of the last control share
acquisition by the acquiror or of any meeting of shareholders at which the
voting rights of such shares are considered and not approved. If voting rights
for Control Shares are approved at a shareholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to vote, all other
shareholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition.
The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the trust is a party to the
transaction or (b) to acquisitions approved or exempted by the declaration of
trust or bylaws of a trust.
The Bylaws of the Company contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of the
Company's Common or Preferred Shares. There can be no assurance that such
provision will not be amended or eliminated at any time in the future.
AMENDMENT
The Declaration of Trust may be amended with the approval of at least a
majority of all of the votes entitled to be cast on the matter, provided, that
certain provisions of the Declaration of Trust regarding (i) the Company's Board
of Trustees, (ii) the restrictions on transfer of the Common Shares or Preferred
Shares, (iii) amendments to the Declaration of Trust by the Board of Trustees
and the shareholders of the Company, and (iv) the termination of the Company,
may not be amended, altered, changed or repealed without the approval of two-
thirds of all of the votes entitled to be cast on these matters. In addition,
the Declaration of Trust may be amended by the Board of Trustees, without
shareholder approval, to conform the Declaration of Trust to Maryland law, as
applicable to real estate investment trusts. The Company's Bylaws may be amended
or altered exclusively by the Board of Trustees.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Maryland law permits a Maryland real estate investment trust to include in
its Declaration of Trust a provision limiting the liability of its trustees and
officers to the trust and its shareholders for money damages except for
liability resulting from (a) actual receipt of an improper benefit or profit in
money, property or services or (b) active and deliberate dishonesty established
by a final judgment as being material to the cause of action. The Declaration of
Trust of the Company contains such a provision which limits such liability to
the maximum extent permitted by Maryland law.
The Declaration of Trust of the Company authorizes it, to the maximum
extent permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former
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trustee or officer or (b) any individual who, while a trustee of the Company and
at the request of the Company, serves or has served another real estate
investment trust, corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a trustee, director, officer, partner of
such real estate investment trust, corporation, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a trustee, director,
officer or partner of such real estate investment trust, corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
from and against any claim or liability to which such person may become subject
or which such person may incur by reason of his status as a present or former
shareholder, trustee, or officer of the Company. The Bylaws of the Company
obligate it, to the maximum extent permitted by Maryland law, to indemnify and
to pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any present or former trustee or officer who is made a party
to the proceeding by reason of his service in that capacity, or (b) any
individual who, while a trustee of the Company and at the request of the
Company, serves or has served another real estate investment trust corporation,
partnership, joint venture, trust, employee benefit plan or any other enterprise
as a trustee, director, officer or partner of such real estate investment trust
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise and who is made a party to the proceeding by reason of his
service in that capacity against any claim or liability to which he may become
subject by reason of such status. The Declaration of Trust and Bylaws also
permit the Company to indemnify and advance expenses to any person who served a
predecessor of the Company in any of the capacities described above and to any
employee or agent of the Company or a predecessor of the Company. The Bylaws
require the Company to indemnify each trustee or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity.
Maryland law permits a Maryland real estate investment trust to indemnify
and advance expenses to its trustees, officers, employees and agents to the same
extent as permitted for directors and officers of Maryland corporations.
Maryland law permits a corporation to indemnify its present and former directors
and officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation. In
accordance with Maryland law, the Bylaws of the Company require it, as a
condition to advancing expenses, to obtain (a) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by the Bylaws
and (b) a written statement by or on his behalf to repay the amount paid or
reimbursed by the Company if it shall ultimately be determined that the standard
of conduct was not met.
OPERATIONS
The Company is generally prohibited from engaging in certain activities,
including incurring consolidated indebtedness, in the aggregate, in excess of
the Debt Limitation and acquiring or holding property or engaging in any
activity that would cause the Company to fail to qualify as a REIT.
DISSOLUTION OF THE COMPANY
Pursuant to the Company's Declaration of Trust, and subject to the
provisions of any class or series of shares of beneficial interest of the
Company then outstanding, the shareholders of the Company, at any meeting
thereof, may dissolve the Company by the affirmative vote of two-thirds of all
of the votes entitled to be cast on the matter.
ADVANCE NOTICE OF TRUSTEE NOMINATIONS AND NEW BUSINESS
The Bylaws of the Company provide that (a) with respect to an annual
meeting of shareholders, nominations of persons for election to the Board of
Trustees and the proposal of business to be considered by shareholders may be
made only (i) pursuant to the Company's notice of the meeting, (ii) by the Board
of Trustees or (iii) by a shareholder who is entitled to vote at the meeting and
has complied with the advance notice procedures set forth in the Bylaws and (b)
with respect to special meetings of shareholders of the Company, only
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the business specified in the Company's notice of meeting may be brought before
the meeting of shareholders and nominations of persons for election to the Board
of Trustees may be made only (i) pursuant to the Company's notice of the
meeting, (ii) by the Board of Trustees or, (iii) provided that the Board of
Trustees has determined that trustees shall be elected at such meeting, by a
shareholder who is entitled to vote at the meeting and has complied with the
advance notice provisions set forth in the Bylaws.
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
DECLARATION OF TRUST AND BYLAWS
The provisions of the Declaration of Trust on classification of the Board
of Trustees, the removal of trustees and the restrictions on the transfer of
shares of beneficial interest and the advance notice provisions of the Bylaws
could have the affect of delaying, deferring or preventing a transaction or a
change in control of the Company that might involve a premium price for holders
of Common Shares or otherwise be in their best interest. Also, if the
resolution of the Board of Trustees opting out of the business combination
statute or the provisions of the Bylaws electing not to be governed by the
control share acquisition statute are rescinded, such statutes could have a
similar effect.
MARYLAND ASSET REQUIREMENTS
To maintain its qualification as a Maryland real estate investment trust,
Maryland law requires at least 75% of the value of the Company's assets to be
held, directly or indirectly, in real estate assets, mortgages or mortgage
related securities, government securities, cash and cash equivalent items,
including high-grade short term securities and receivables. Maryland law also
prohibits the Company from using or applying land for farming, agricultural,
horticultural or similar purposes.
OPERATING PARTNERSHIP AGREEMENT
The following summary of the material terms of the Operating Partnership
Agreement is qualified in its entirety by reference to the Operating Partnership
Agreement, which is filed as an exhibit to the Company's Form S-11 Registration
Statement filed with the Commission on August 9, 1996, as amended by subsequent
filings with the Commission on September 18, 1996, and October 11, 1996.
MANAGEMENT
The Operating Partnership has been organized as a Delaware limited
partnership pursuant to the terms of the Operating Partnership Agreement.
Pursuant to the Operating Partnership Agreement, the General Partner, as the
sole general partner of the Partnership, has full, exclusive and complete
responsibility and discretion in the management and control of the Operating
Partnership, and the Limited Partners have no authority in their capacity as
Limited Partners to transact business for, or participate in the management
activities or decisions of, the Operating Partnership except as required by
applicable law. However, any amendment to the Operating Partnership Agreement
that would (i) adversely affect the Exchange Rights (as defined herein), (ii)
adversely affect the Limited Partners' rights to receive cash distributions,
(iii) alter the Operating Partnership's allocations of income or loss, or (iv)
impose on the Limited Partners any obligations to make additional contributions
to the capital of the Operating Partnership, requires the consent of Limited
Partners (other than the General Partner) holding more than two-thirds of the
Units held by such partners.
TRANSFERABILITY OF INTERESTS
The General Partner may not voluntarily withdraw from the Operating
Partnership or transfer or assign its interest in the Operating Partnership
unless the transaction in which such withdrawal or transfer occurs results in
the Limited Partners receiving
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property in an amount equal to the amount they would have received had they
exercised their Exchange Rights immediately prior to such transaction, or unless
the successor to the General Partner contributes substantially all of its assets
to the Operating Partnership in return for an interest in the Operating
Partnership. With certain limited exceptions, the Limited Partners may not
transfer their interests in the Operating Partnership, in whole or in part,
without the written consent of the General Partner, which consent the General
Partner may withhold in its sole discretion. The General Partner may not consent
to any transfer that would cause the Operating Partnership to be treated as a
corporation for federal income tax purposes.
The Company may not engage in any transaction resulting in a change of
control of the Company (a "Transaction") unless in connection with the
Transaction the Limited Partners receive or have the right to receive cash or
other property equal to the product of the number of shares of Common Stock into
which each Unit is then exchangeable and the greatest amount of cash, securities
or other property paid in the Transaction to the holder of one Common Share in
consideration of one Common Share. If, in connection with the Transaction, a
purchase, tender or exchange offer shall have been made to and accepted by the
holders of more than fifty (50%) of the outstanding Common Shares, each holder
of Units will receive, or will have the right to elect to receive, the greatest
amount of cash, securities, or other property which such holder would have
received had it exercised its right to redemption and received shares of Common
Stock in exchange for its Units immediately prior to the expiration of such
purchase, tender or exchange offer and had thereupon accepted such purchase,
tender or exchange offer.
Notwithstanding the foregoing paragraph, the Company may merge, or
otherwise combine its assets, with another entity if, immediately after such
merger or other combination, substantially all of the assets of the surviving
entity, other than Units held by the Company, are contributed to the Operating
Partnership as a capital contribution in exchange for Units with a fair market
value, as reasonably determined by the Company, equal to the agreed value of the
assets so contributed.
In respect of any Transaction described in the preceding two paragraphs,
the Company is required to use its commercially reasonable efforts to structure
such Transaction to avoid causing the Limited Partners to recognize gain for
federal income tax purposes by virtue of the occurrence of or their
participation in such Transaction, provided such efforts are consistent with the
exercise of the Board of Trustees' fiduciary duty under applicable law.
CAPITAL CONTRIBUTION
Following any issuance and sale of the Company's shares of beneficial
interest by the Company, the Company will contribute the net proceeds of such
sale to the Operating Partnership. The Company and the General Partner will be
deemed to have made a capital contribution to the Operating Partnership in the
amount of the gross proceeds of such sale, and the Operating Partnership will be
deemed to have paid simultaneously any underwriter's discount and other expenses
paid or incurred in connection with such offering.
The Operating Partnership Agreement provides that if the Operating
Partnership requires additional funds at any time or from time to time in excess
of funds available to the Operating Partnership from borrowing or capital
contributions, the General Partner or the Company may borrow such funds from a
financial institution or other lender and lend such funds to the Operating
Partnership on the same terms and conditions as are applicable to the General
Partner's or the Company's, as applicable, borrowing of such funds. Moreover,
the General Partner is authorized to cause the Operating Partnership to issue
partnership interests for less than fair market value if the Company (i) has
concluded in good faith that such issuance is in the best interest of the
Company and the Operating Partnership and (ii) the General Partner makes a
capital contribution in an amount equal to the proceeds of such issuance. Under
the Operating Partnership Agreement, the General Partner generally is obligated
to contribute or cause the Company to contribute the proceeds of a share
offering by the Company as additional capital to the Operating Partnership.
Upon such contribution, the General Partner or the Company, as applicable, will
receive additional Units and the General Partner's or the Company's, as
applicable, percentage interest in the Operating Partnership will be increased
on a proportionate basis based upon the amount of such additional capital
contributions. Conversely, the percentage interests of the Limited Partners
will be decreased on a proportionate basis in the event of additional capital
contributions by the General Partner or the Company. In addition, if the
General Partner or the Company contributes additional capital to the Operating
Partnership, the General Partner will revalue the property of the Operating
Partnership to its fair market value (as determined by the General Partner) and
the capital accounts of the
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partners will be adjusted to reflect the manner in which the unrealized gain or
loss inherent in such property (that has not been reflected in the capital
accounts previously) would be allocated among the partners under the terms of
the Operating Partnership Agreement if there were a taxable disposition of such
property for such fair market value on the date of the revaluation.
EXCHANGE RIGHTS
Pursuant to the Operating Partnership Agreement, the Limited Partners
(other than the Company) have exchange rights ("Exchange Rights") that enable
them to cause the Operating Partnership to exchange their Units for cash, or at
the option of the General Partner, Common Shares on a one-for-one basis. The
exchange price will be paid in cash in the event that the issuance of Common
Shares to the exchanging Limited Partner would (i) result in any person owning,
directly or indirectly, Common Shares in excess of the Ownership Limitation,
(ii) result in shares of beneficial interest of the Company being owned by fewer
than 100 persons (determined without reference to any rules of attribution),
(iii) result in the Company being "closely held" within the meaning of Section
856(h) of the Code, (iv) cause the Company to own, actually or constructively,
10% or more of the ownership interest in a tenant of the Company's or the
Operating Partnership's real property, within the meaning of Section
856(d)(2)(B) of the Code, or (v) cause the acquisition of Common Shares by such
redeeming Limited Partner to be "integrated" with any other distribution of
Common Shares for purposes of complying with the Securities Act. The Exchange
Rights may be exercised by the Limited Partners (with the exception of the
Continuing Investors, who may not exercise their exchange rights until October
22, 1998) at any time after one year from the date they acquired such Units,
provided that each Limited Partner may not make more than two exchanges during
each calendar year and each Limited Partner may not exercise the Exchange Right
for less than 1,000 Units or, if such Limited Partner holds less than 1,000
Units, all of the Units held by such Limited Partner. As of September 30, 1997,
the aggregate number of Common Shares issuable upon exercise of the Exchange
Rights was 3,295,995. The number of Common Shares issuable upon exercise of the
Exchange Rights will be adjusted upon the occurrence of share splits, mergers,
consolidations or similar pro rata share transactions, which otherwise would
have the effect of diluting the ownership interests of the Limited Partners or
the shareholders of the Company.
REGISTRATION RIGHTS
For a description of certain registration rights held by the Limited
Partners, see "Shares Available for Future Sale."
OPERATIONS
The Operating Partnership Agreement requires that the Operating Partnership
be operated in a manner that will enable the Company to satisfy the requirements
for being classified as a REIT for federal tax purposes, to avoid any federal
income or excise tax liability imposed by the Internal Revenue Code of 1986, as
amended (the "Code"), and to ensure that the Operating Partnership will not be
classified as a "publicly traded partnership" for purposes of Section 7704 of
the Code.
In addition to the administrative and operating costs and expenses incurred
by the Operating Partnership, the Operating Partnership will pay all
administrative costs and expenses of the Company and the General Partner
(collectively, the "Company Expenses") and the Company Expenses will be treated
as expenses of the Operating Partnership. The Company Expenses generally will
include (i) all expenses relating to the formation and continuity of existence
of the Company and the General Partner, (ii) all expenses relating to the public
offering and registration of securities by the Company, (iii) all expenses
associated with the preparation and filing of any periodic reports by the
Company under federal, state or local laws or regulations, (iv) all expenses
associated with compliance by the Company and the General Partner with laws,
rules and regulations promulgated by any regulatory body and (v) all other
operating or administrative costs of the General Partner incurred in the
ordinary course of its business on behalf of the Partnership.
DISTRIBUTIONS
The Operating Partnership Agreement provides that the Operating Partnership
shall distribute cash from operations (including net sale or refinancing
proceeds, but excluding net proceeds from the sale of the Operating
Partnership's property in connection with the liquidation of the Operating
Partnership) on a quarterly (or, at the election of the General Partner, more
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frequent) basis, in amounts determined by the General Partner in its sole
discretion, to the partners in accordance with their respective percentage
interests in the Operating Partnership. Upon liquidation of the Operating
Partnership, after payment of, or adequate provision for, debts and obligations
of the Operating Partnership, including any partner loans, any remaining assets
of the Operating Partnership will be distributed to all partners with positive
capital accounts in accordance with their respective positive capital account
balances.
ALLOCATIONS
Income, gain and loss of the Operating Partnership for each fiscal year
generally is allocated among the partners in accordance with their respective
interests in the Operating Partnership, subject to compliance with the
provisions of Code Sections 704(b) and 704(c) and regulations promulgated
thereunder.
TERM
The Operating Partnership shall continue until December 31, 2050, or until
sooner dissolved upon (i) the bankruptcy, dissolution or withdrawal of the
General Partner (unless the Limited Partners elect to continue the Operating
Partnership), (ii) the sale or other disposition of all or substantially all the
assets of the Operating Partnership, (iii) the redemption of all limited
partnership interests in the Partnership (other than those held by the Company,
if any), or (iv) the election by the General Partner.
FIDUCIARY DUTY
The Limited Partners have agreed that in the event of any conflict in the
fiduciary duties owed by the Company to its shareholders and by the General
Partner to such Limited Partners, the General Partner will fulfill its fiduciary
duties to such Limited Partners by acting in the best interests of the Company's
shareholders.
TAX MATTERS
Pursuant to the Operating Partnership Agreement, the General Partner is the
tax matters partner of the Operating Partnership and, as such, has authority to
handle tax audits and to make tax elections under the Code on behalf of the
Operating Partnership.
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