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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 2, 1997
PRENTISS PROPERTIES TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
(State or Other Jurisdiction of
Incorporation or Organization)
1-14516 75-2661588
- ------------------------------------- ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
3890 West Northwest Highway, Suite 400, Dallas, Texas 75220
(Address of Registrant's Principal Executive Office)
(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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Item 2. ACQUISITION OF ASSETS
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On April 2, 1997, Prentiss Properties Acquisition Partners, L.P. (the
"Operating Partnership") of which Prentiss Properties Trust (the "Company")
serves as the sole general partner (through a wholly-owned subsidiary) and owns
an approximate 88.9% interest, completed an acquisition of six Class "A"
suburban office buildings in suburban Sacramento, California (the "Natomas
Properties"). The buildings total 564,606 square feet and are located two miles
from the state capital and have freeway access and visibility along Interstate
5, California's main north-south artery.
The buildings were purchased for a purchase price of approximately $78.7
million. The purchase price was paid primarily through borrowings under the
Company's line of credit provided by Bank One, Texas, N.A. and NationsBank of
Texas, N.A. with additional funds obtained pursuant to a mortgage loan the
Company entered into with an affiliate of Lehman Brothers Inc.
The properties were acquired pursuant to Agreements of Sale entered into
between Prentiss Properties Acquisition Partners, L.P. ("Purchaser") and 1740
Creekside Oaks Investors, 1750 Creekside Oaks Investors, 1760 Creekside Oaks
Investors, 2525 Natomas Investors, River City Bank, and 2495 Natomas Investors
(collectively, the "Seller").
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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(a) Financial Statements
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Financial Statements as required under Rule 3-14 of Regulation S-X are
included on pages F-32 through F-34 of registrant's registration statement dated
March 26, 1997 and are incorporated herein by reference.
(b) ProForma Financial Information
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Pro Forma Financial Statements as required are included on pages F-2
through F-11 of the registrant's registration statement dated March 26, 1997 and
are incorporated herein by reference.
(c) Exhibits
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10.1 - Agreement of Purchase and Sale and Escrow Instructions by and
between 1740 CREEKSIDE OAKS INVESTORS ("Seller") and Prentiss Properties
Acquisition Partners, L.P. ("Purchaser") dated February 17, 1997.
10.2 - Agreement of Purchase and Sale and Escrow Instructions by and
between 1750 CREEKSIDE OAKS INVESTORS ("Seller") and Prentiss Properties
Acquisition Partners, L.P. ("Purchaser") dated February 17, 1997.
10.3 - Agreement of Purchase and Sale and Escrow Instructions by and
between 1760 CREEKSIDE OAKS INVESTORS ("Seller") and Prentiss Properties
Acquisition Partners, L.P. ("Purchaser") dated February 17, 1997.
10.4 - Agreement of Purchase and Sale and Escrow Instructions by and
between RIVER CITY BANK ("Seller") and Prentiss Properties Acquisition Partners,
L.P. ("Purchaser") dated February 17, 1997.
10.5 - Agreement of Purchase and Sale and Escrow Instructions by and
between 2495 NATOMAS INVESTORS ("Seller") and Prentiss Properties Acquisition
Partners, L.P. ("Purchaser") dated February 17, 1997.
10.6 - Agreement of Purchase and Sale and Escrow Instructions by and
between 2525 NATOMAS INVESTORS ("Seller") and Prentiss Properties Acquisition
Partners, L.P. ("Purchaser") dated February 17, 1997.
23.1 - Consent of Independent Accountants.
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99.1 - ProForma Consolidated Balance Sheet and ProForma Consolidated
Statement of Income and related footnotes as included on pages F-2 through F-11
of the registrant's registration statement dated March 26, 1997, file number
333-23989.
99.2 - Audited Combined Statement of Revenues and Certain Operating
Expenses of the Natomas Properties and related footnotes as included on pages
F-32 through F-34 of the registrant's registration statement dated March 26,
1997, file number 333-23989.
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SIGNATURE
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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, thereunto duly authorized.
PRENTISS PROPERTIES TRUST
Date: June 11, 1997 By: /s/ Thomas P. Simon
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Thomas P. Simon, Vice President
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EXHIBIT 10.1
AGREEMENT OF PURCHASE AND SALE
AND ESCROW INSTRUCTIONS
(1740 CREEKSIDE OAKS DRIVE)
This Agreement of Purchase and Sale and Escrow Instructions ("AGREEMENT"),
dated for reference purposes as of February 17, 1997, is entered into by and
between 1740 CREEKSIDE OAKS INVESTORS, a California limited partnership
("SELLER"), and PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P. , a Delaware
limited partnership ("BUYER").
RECITALS
A. Seller is the owner of approximately 3.82 acres of land located in
the City of Sacramento, County of Sacramento, State of California ("LAND"), more
particularly described in EXHIBIT "A" hereto and made a part hereof for all
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purposes.
B. The Land has been improved with a two (2) story office building,
containing approximately 55,382 net rentable square feet and related
improvements.
C. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer the "PROPERTY" (as hereinafter defined in SECTION 1.8) on the terms and
conditions set forth herein.
D. In conjunction with its purchase of the Property, Buyer is also
purchasing the real properties located at the addresses ("ADDITIONAL
PROPERTIES") more particularly described in EXHIBIT "B" hereto and made a part
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hereof for all purposes, from the sellers (the "OTHER SELLERS") listed therein
pursuant to certain Agreements of Purchase and Sale and Escrow Instructions of
even date herewith ("ADDITIONAL PROPERTY AGREEMENTS"), the simultaneous purchase
of which shall be a condition concurrent to Buyer's purchase of the Property
hereunder.
NOW, THEREFORE, Seller and Buyer agree as follows:
AGREEMENT
ARTICLE I.
PROPERTY
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Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees
to purchase from Seller, subject to the terms and conditions set forth herein,
the following:
I.1. LAND. The Land;
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I.2. APPURTENANCES. All rights, privileges and easements appurtenant to
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the Land,
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including, without limitation, all minerals, oil, gas and other hydrocarbon
substances on and under the Land (to the extent owned by Seller) as well as all
development rights, air rights, water, water rights and water stock relating to
the Land and any other easements, rights-of-way or appurtenances, used in
connection with the beneficial use and enjoyment of the Land (all of which are
collectively referred to as the "APPURTENANCES");
I.3. IMPROVEMENTS. All buildings improvements and fixtures located on the
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Land, including, without limitation, all fixtures, apparatus, equipment and
appliances used in connection with the operation or occupancy thereof, such as
heating and air conditioning systems and facilities used to provide any utility
services, parking services, refrigeration, ventilation, trash disposal,
recreation or other services thereto (all of which are collectively referred to
as the "IMPROVEMENTS");
I.4. PERSONAL PROPERTY. All of the personal property owned by Seller
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located on or in or used in connection with the Property ("PERSONAL PROPERTY"),
including without limitation the items of tangible personal property consisting
of all furniture, fixtures, equipment, machinery and other personal property of
every kind and nature (excluding cash-on-hand) owned by Seller and located on or
used or useful in the operation of the Property, all of which will be assigned
pursuant to the Bill of Sale, as hereinafter defined, which Personal Property
includes the works of art listed on EXHIBIT "K" ("WORKS OF ART");
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I.5. INTANGIBLE PROPERTY. All of the right, title and interest of Seller
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in any intangible personal property owned by Seller and used exclusively in the
use and operation of the Improvements, and all warranties or guarantees received
by Seller from any contractors, subcontractors, suppliers or materialmen in
connection with any construction, repairs or alteration of the Improvements,
licenses, franchises, permits, tenant lists, advertising materials and other
similar rights relating to the use and operation of the Property (all of which
are collectively referred to as the "INTANGIBLE PROPERTY"), all of which shall
be assigned to Buyer pursuant to the Bill of Sale;
I.6. LEASES. The interest of Seller as landlord under all leases of space
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in the Improvements ("LEASES") in effect on the Closing Date;
I.7. SERVICE CONTRACTS. The interest of Seller under all current design
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contracts, space planning contracts, construction contracts, subcontracts and
purchase orders, utility contracts, water and sewer service contracts of any
nature, maintenance contracts, management contracts, mortgage documents,
certificates of occupancy, permits, soils reports, insurance policies, and other
contracts or documents of any nature relating to the Property which are to be
assigned to Buyer at the Closing ("SERVICE CONTRACTS"). All such Service
Contracts approved by Buyer shall be transferred and assigned to Buyer by the
Bill of Sale; and
I.8. PROPERTY. All of the items described in SECTIONS 1.1 through 1.7
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above are herein collectively referred to as the "PROPERTY." The items described
in SECTIONS 1.1, 1.2 and 1.3 are herein referred to collectively as the "REAL
PROPERTY."
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ARTICLE II.
PURCHASE PRICE
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II.1. PURCHASE PRICE. The purchase price for the Property shall be the sum
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of Six Million Nine Hundred Thousand and No/100ths Dollars ($6,900,000.00) (the
"PURCHASE PRICE"). A portion of the Purchase Price has been allocated to the
purchase of the Works of Art in the manner set forth on EXHIBIT "K" attached
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hereto and made a part hereof for all purposes.
II.2. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by Buyer
-------------------------
in cash by wire transfer on the Closing Date.
II.3. EARNEST MONEY.
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(a) Within two (2) business days following the Effective Date, Buyer shall
deposit, or cause to be deposited with First American Title Insurance Company,
located at 3030 LBJ Freeway, Suite 150, Dallas, Texas 75234; Attn: Jacqueline P.
Aul (the "TITLE COMPANY"), in cash, by certified or bank cashier's check made
payable to the Title Company, or by a confirmed wire transfer of funds, the sum
of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the "EARNEST MONEY")
in accordance with the terms of that certain letter agreement (the "EARNEST
MONEY LETTER") of even date herewith by and between Buyer, the Title Company,
Seller and the Other Sellers. The Earnest Money constitutes escrow deposit under
this Agreement and the Additional Property Agreements. The Earnest Money shall
be held and disbursed in accordance with the terms of the Earnest Money Letter.
(b) The term "EFFECTIVE DATE" shall mean the date upon which this Agreement
and the Additional Property Agreements have been fully executed and delivered by
Seller and Buyer and Seller and the Other Sellers, as the case may be, and one
duplicate original of each has been deposited with the Title Company.
II.4. LIQUIDATED DAMAGES. IN THE EVENT THAT THE SALE OF THE PROPERTY AS
------------------
CONTEMPLATED HEREUNDER IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS
AGREEMENT BY BUYER, THROUGH NO FAULT OF SELLER, THE EARNEST MONEY SHALL BE
IMMEDIATELY PAID BY TITLE COMPANY, ON BEHALF OF BUYER, TO SELLER AS LIQUIDATED
DAMAGES PURSUANT TO THE EARNEST MONEY LETTER. THE PARTIES ACKNOWLEDGE THAT
SELLER'S ACTUAL DAMAGES IN THE EVENT OF A DEFAULT BY BUYER WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR SIGNATURES
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES REASONABLE ESTIMATE OF SELLER'S DAMAGES FOR
BUYER'S FAILURE TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
AND THE ADDITIONAL PROPERTY AGREEMENTS AND AS SELLER'S EXCLUSIVE REMEDY AGAINST
BUYER IN THE EVENT OF A DEFAULT BY BUYER; PROVIDED, HOWEVER, NOTHING
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CONTAINED HEREIN SHALL PRECLUDE (A) SELLER FROM PURSUING ANY REMEDIES SET FORTH
IN SECTIONS 8.2, 8.5, 8.6, 11.2 and 11.5 WHICH SURVIVE THE TERMINATION OF THIS
AGREEMENT OR (B) THE RECOVERY OF ITS ATTORNEYS' FEES AND COSTS IN THE
PROSECUTION OR DEFENSE OF ANY ACTION BROUGHT UNDER THIS AGREEMENT, IF SELLER IS
ENTITLED TO RECEIVE SAME. THE LIQUIDATED DAMAGES SET FORTH HEREIN ABOVE ARE
DUPLICATIVE OF AND NOT IN ADDITION TO THE LIQUIDATED DAMAGES SET FORTH IN THE
EARNEST MONEY LETTER.
BUYER: SELLER:
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ARTICLE III.
TITLE TO PROPERTY
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III.1. TITLE TO REAL PROPERTY.
----------------------
III.1.1. At the Closing, Seller shall convey to Buyer fee simple
title to the Real Property, by execution and delivery of a Grant Deed ("DEED")
in the form attached hereto as EXHIBIT "C" and made a part hereof for all
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purposes.
III.1.2. On the Closing Date, Buyer shall receive from the Title
Company an ALTA Owner's Policy of Title Insurance, in a form to be selected by
Buyer, with liability in the full amount of the Purchase Price, insuring fee
simple title to the Real Property in Buyer, subject only to exceptions approved
by Buyer as provided in SECTION 4.1.1 hereof, together with the following
endorsements: (i) an endorsement deleting all general exceptions and deleting
exclusions from coverage relating to creditor's rights, (ii) 116.1 (survey),
(iii) 100 (modified), (iv) 123.1 (zoning), (v) 116.4 (contiguity), (vi) 103.7
(access), (vii) 100.29 (mineral rights), (viii) 103.1 (easements) (ix) 103.5
(water rights) and (ix) such other endorsements as may be reasonably requested
by Buyer ("TITLE POLICY"). The Title Policy shall provide full coverage against
mechanics and material men's liens arising out of the construction, repair or
alteration of any of the Improvements or any tenant improvements.
III.1.3. The Title Company shall obtain, if requested by Buyer and
at Buyer's cost, reinsurance agreements from such companies as Buyer may
request, which reinsurance agreements shall be in ALTA Facultative Reinsurance
Agreement Form (rev. 1961), and shall include direct access agreements, in such
amounts and in such form as shall otherwise be satisfactory to Buyer.
III.2. TITLE TO PERSONAL PROPERTY. At the Closing, Seller shall transfer
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title to the Personal Property pursuant to the Bill of Sale, in the form of Bill
of Sale and Assignment attached as EXHIBIT "D" hereto ("BILL OF SALE") and shall
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further transfer and assign all of Seller's rights in and to any Intangible
Property, pursuant to the Bill of Sale, and shall further transfer all of
Seller's rights, title and interest in and to the Leases pursuant to the
Assignment of Leases (as hereinafter defined). All such title and rights shall
be free of any liens,
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encumbrances or interests of third parties whatsoever.
ARTICLE IV.
CONDITIONS TO CLOSING
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IV.1. BUYER'S DUE DILIGENCE CONDITIONS. For a period beginning on the
--------------------------------
Effective Date and expiring at 5:00 p.m. on the thirtieth (30th) day thereafter
("CONTINGENCY PERIOD") Buyer, Buyer's agents, contractors, subcontractors,
employees and its counsel shall have the right to perform due diligence on the
Property pursuant to the terms of this SECTION 4.1 as follows:
IV.1.1. APPROVAL OF TITLE. Buyer's approval of the following matters
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relating to the title of the Property:
(a TITLE COMMITMENT. Buyer shall obtain (i) a title
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commitment ("COMMITMENT"), by the terms of which the Title Company
agrees to issue to Buyer, at Closing, the Title Policy in the amount
of the Purchase Price; (ii) a photocopy of all documents ("TITLE
DOCUMENTS") describing or evidencing all title exceptions shown on
the Commitment; and (iii) reports relating to judgment, UCC, and
Federal and State tax lien searches regarding the Seller and the
Property (collectively, the "REPORTS"), to be obtained by Buyer, but
to be paid for by Seller at the Closing.
(b SURVEY. Buyer shall secure an as-built survey ("SURVEY")
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of the Property, prepared by a registered land surveyor, duly
licensed in the State and certified to the Title Company and to the
Buyer in full ALTA/ASTM form.
(c REVIEW OF SURVEY AND COMMITMENT.
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(i As used herein, the term "TITLE OBJECTION PERIOD" shall
mean a period commencing on the first day following receipt by Buyer
of the Survey, the Commitment, the Reports and the Title Documents
and ending ten (10) days thereafter. All matters shown on the Survey
and exceptions listed in the Commitment or the Reports which are not
objected to by Buyer within the Title Objection Period, shall be
conclusively deemed to be acceptable to Buyer.
(ii In the event Buyer timely objects to any title
exception or Survey matter ("TITLE OBJECTION"), Seller may, but shall
not be obligated to, cure such Title Objection. Seller shall notify
Buyer, within five (5) days following receipt of the Title Objection,
of its decision as to whether or not it intends to cure the Title
Objection in question. In the event Seller notifies or its deemed to
have notified the Buyer that is unable or unwilling to cure any Title
Objection, Buyer may at its option (a) terminate this Agreement, or
(b) waive the Title Objections in question. The foregoing election
shall be made by Buyer in writing within ten (10) days following
Seller's notification. If any of the Title Objections consist of
delinquent taxes, delinquent assessments,
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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, Seller shall be
obligated to pay and discharge (or bond against in a manner
sufficient to cause the Title Company to insure over such Title
Objections) any such Title Objections. Bonds and assessments in
respect to improvements heretofore made to the Property which are
reflected in the Commitment shall not be deemed to be a Title
Objection.
(iii Seller hereby agrees that it shall not, after the
Effective Date, subject the Property to or permit or suffer to exist
any liens, encumbrances, covenants, conditions, restrictions,
easements or other title matters other than those in existence on the
date hereof or seek any zoning changes or take any other action which
may affect or modify the status of title without Buyer's prior
written consent. Notwithstanding the foregoing, Buyer shall not be
required to accept title to the Property subject to any matters which
may arise subsequent to the effective date of the Title Commitment,
Reports and Survey examined by Buyer during the period described
above.
(iv Notwithstanding anything herein to the contrary, in
any event Buyer's right to terminate this Agreement pursuant to any
provision of this SECTION 4.1.1 shall expire upon expiration of the
Contingency Period.
(v As used in this Agreement, the term "PERMITTED
EXCEPTIONS" shall mean all matters either shown on the Survey or
listed in the Commitment or the Reports to which Buyer does not raise
a Title Objection within the Title Objection Period or, having
objected, waives or is deemed to have waived in accordance with the
provisions of this SECTION 4.1.1, other than those Title Objections
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. It is understood and agreed that
the Property is being transferred hereunder free and clear of all
liens, claims and encumbrances except for the Permitted Exceptions.
(d TERMINATION OF THIS AGREEMENT. In the event of termination
-----------------------------
of this Agreement pursuant to this SECTION 4.1.1, the Earnest Money shall
be returned to Buyer and thereafter neither party shall have any further
rights or obligations hereunder.
IV.1.2. INSPECTIONS.
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(a Buyer and Buyer's agents, contractors, subcontractors or
employees, shall have the right to conduct any and all inspections,
investigations, tests and studies (including, without limitation,
investigations with regard to zoning, building codes and other governmental
regulations, architectural inspections,
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engineering tests, economic feasibility studies, soils, seismic and
geologic reports and environmental testing) with respect to the Property as
Buyer may elect to make or maintain. During the Contingency Period, Buyer
and its agents and consultants shall have access to: (1) the Property; (2)
the tenants for interviews, which interviews shall be coordinated by
Seller, with Seller or its representative present if Seller so elects; and
(3) the books and records relating to the ownership and operation of the
Property, for the purpose of making such inspections, tests, copies and
verifications as Buyer shall deem reasonably necessary.
(b Prior to any entry onto the Property by Buyer's agents,
contractors, subcontractors or employees, Buyer shall deliver to Seller a
Certificate of Insurance for Buyer's commercial general liability insurance
policy which evidences that Buyer is carrying a commercial general
liability insurance policy with a financially responsible insurance company
(at least A-X in the latest edition of Best's Insurance Guide), covering
----------------------
(i) the activities of Buyer, and Buyer's agents, contractors,
subcontractors and employees on or upon the Property, and (ii) Buyer's
indemnity obligations set forth in this Agreement. Such Certificate shall
evidence that such insurance policy shall have a per occurrence limit
(including umbrella) of at least Five Million and no/100 Dollars
($5,000,000.00) and an aggregate limit (including umbrella) of at least Ten
Million and no/100 Dollars ($10,000,000.00), shall name Seller as an
additional insured, shall be primary and non-contributing with any other
insurance available to Seller, shall be issued on an occurrence basis, and
shall contain a full waiver of subrogation clause. Seller shall be named as
an additional insured under such policy in such Certificate.
(c Within five (5) days after Effective Date, Seller shall
deliver or cause to be delivered to Buyer at its offices in Sacramento,
California, the Due Diligence Documents listed on EXHIBIT "E" attached
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hereto and made a part hereof for all purposes.
IV.1.3. AGREEMENTS. Buyer shall have approved the Leases, Service
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Contracts, Personal Property, and all other documents and materials to be
delivered to Buyer by Seller pursuant to the provisions of SECTION 4.1.2.
IV.1.4. INCOME TAX MATTERS. Buyer shall have received satisfactory
------------------
opinions from its legal counsel as to income tax matters in connection with the
transaction.
IV.1.5. AS-BUILT PLANS AND SPECIFICATIONS. Buyer and its architects,
---------------------------------
engineers and consultants shall have reviewed and approved the "AS-BUILT" plans
and specifications pursuant to which the Property was constructed, including the
confirmation of the net rentable area of the Property.
IV.1.6. PHYSICAL INSPECTION REPORTS. Buyer shall have obtained a
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physical inspection report and an environmental report with respect to the Land
(including surrounding areas) and Improvements constituting the Property
prepared in accordance with the
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specifications submitted by Buyer and prepared by third-party specialists
selected by Buyer, and Buyer shall then determine in its sole discretion whether
it is willing to purchase the Property in the physical and environmental
condition set forth in said reports.
IV.1.7. FINANCIAL INFORMATION. Buyer shall have (a) verified to its
---------------------
satisfaction the accuracy of the rent roll (the "RENT ROLL") attached hereto as
EXHIBIT "F" and the accuracy of projections and other financial data with
- -----------
respect to the Property which have been delivered to Buyer in the offering, (b)
determine that the creditworthiness of the tenants is within the reasonable
financial risk parameters of Buyer, (c) verify that it is willing to accept and
be bound by the actual terms of the Leases, and (d) verify that the Property has
sufficient automobile parking spaces (including, without limitation, handicap
spaces) to comply with the requirements of all governmental authorities and
ordinances and all tenant leases.
IV.1.8. APPROVAL BY BOARD OF DIRECTORS. Buyer shall have, within ten
------------------------------
(10) days following the Effective Date, obtained the approval of the Board of
Directors (the "BOARD") of Prentiss Properties Trust, a real estate investment
trust, which is a partner in Buyer. In the event the Board fails to approve the
transaction contemplated hereby Buyer shall so notify Seller in which event this
Agreement along with the Additional Property Agreements shall terminate and the
Earnest Money shall be returned to Buyer. The failure to notify Seller of
Buyer's election to terminate this Agreement in accordance with the provisions
of this SECTION 4.1.8 within such ten (10) day period shall be deemed to be an
election on the part of Buyer to waive such contingency.
IV.1.9. CONTINGENCY NOTICE.
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(a) Prior to the expiration of the Contingency Period, Buyer shall
deliver to Seller and the Title Company a written notice ("CONTINGENCY
NOTICE") of its approval or disapproval of the Property, which shall be
subject to Buyer's sole and absolute discretion. In the event that Seller
does not receive a Contingency Notice approving the Property by the
expiration of the Contingency Period, this Agreement shall be deemed to
have been automatically terminated.
(b) Subject to the provisions of subparagraph (c) below, the
Contingency Notice for the Additional Properties must be consistent with
the Contingency Notice for the Property in respect to Buyer's approval or
disapproval of the Additional Properties. If the Contingency Notice is
inconsistent, this Agreement shall terminate.
(c) Notwithstanding the provisions of subparagraph (b) above, in
the event that (i) the Other Seller terminates the Additional Property
Agreement (the "2525 AGREEMENT") covering the Additional Property located
at 2525 Natomas Park Drive, Sacramento, California, pursuant to SECTION
2.1(c) thereof, or (ii) Buyer terminates the 2525 Agreement for any reason,
the effectiveness of this Agreement or the remaining Additional Property
Agreements shall not be affected. In the event of the termination of the
2525 Agreement pursuant to the foregoing provisions, this Agreement shall
remain in full force and effect, subject to the continued existence of the
remaining Additional Property Agreements.
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(d) Additionally, in the event that the Bannon Investors, one of the
Other Sellers under the Additional Property Agreements which owns that
certain tract of land known as Tract A, terminates its Additional Property
Agreement (the "TRACT A AGREEMENT") in accordance with the provisions of
SECTION 2.1(c) the Tract A Agreement, Buyer, at its option, may elect (i)
to terminate this Agreement and the remaining Additional Property
Agreements, in which event the Earnest Money shall be returned to Buyer, or
(ii) to keep this Agreement as well as the remaining Additional Property
Agreements in full force and effect, in which event the parties shall
consummate the transactions contemplated thereby in accordance with the
respective terms and conditions of this Agreement and the remaining
Additional Property Agreements.
IV.2. APPROVAL BY SELLER'S PARTNERS. As a condition to Seller's
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obligations to consummate the transaction contemplated hereby, Seller shall
have, within ten (10) days following the Effective Date, obtained the approval
of the limited partners and the other general partners (the "PARTNERS") of
Seller. In the event the Partners fail to approve the transaction contemplated
hereby Seller shall so notify Buyer within such ten (10) day period, in which
event this Agreement along with the Additional Property Agreements shall
terminate and the Earnest Money shall be returned to Buyer. The failure by
Seller to notify Buyer of Seller's election to terminate this Agreement in
accordance with the provisions of this SECTION 4.2, within such ten (10) day
period, shall be deemed to be an election on the part of Seller to waive such
contingency.
IV.3. BUYER'S CLOSING CONDITIONS. The following conditions are for the
--------------------------
benefit of Buyer and are conditions to the Closing, unless expressly waived by
Buyer on or before the Closing Date:
IV.3.1. TENANT ESTOPPEL CERTIFICATES. Seller shall deliver to Buyer a
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current estoppel letter in the substantially the form attached hereto as EXHIBIT
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"G" from tenants of the Property (and other occupants to the extent that Seller
- ---
has the contractual right to require such letters), in the aggregate
representing at least ninety percent (90%) of the occupied floor area of the
Property. In the event that Seller is unable to obtain an estoppel certificate
from any tenant which has leased less than ten thousand (10,000) square feet,
Seller shall furnish Buyer with a mutually acceptable, qualified estoppel
certificate concerning such Lease executed by Seller. Buyer shall provide Seller
with its desired form of estoppel certificates for each tenant on or before
twenty (20) days following the Effective Date. In addition, all tenants listed
on the Rent Roll or their subtenants occupying in excess of 10,000 square feet
of net rentable area will be in "material compliance" with the terms and
conditions of their respective leases (except for premises which may not yet be
ready for occupancy as the result of new leases or modified leases). The term
"material compliance" shall mean that the tenant is question is not more than
thirty (30) days in arrears in the payment of rent due under its lease and/or
the tenant in question has not filed for bankruptcy protection under applicable
law.
9
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4.3.2 SIMULTANEOUS CLOSING. Subject to the provisions of SECTION
--------------------
4.1.9, in respect to the termination of the 2525 Agreement and the Tract A
Agreement, the Closing of the transaction contemplated hereby shall be
contingent upon the simultaneous closing of the Additional Properties pursuant
to the terms and conditions of the Additional Property Agreements.
Notwithstanding the foregoing, in the event (a) any of the Additional Property
Agreements are terminated as a result of a Seller default, or in accordance with
ARTICLE IX of the Additional Property Agreements, Buyer shall have the option,
in its sole discretion, to terminate this Agreement and the Earnest Money shall
be returned to Buyer or Buyer may waive the simultaneous closing condition and
consummate the transaction contemplated herein and (b) the Tract A Agreement or
the 2525 Agreement is terminated by Buyer or applicable Other Seller pursuant to
SECTION 2.1(c) thereof, Buyer shall have the right to terminate this Agreement,
in its sole discretion, in which event the Earnest Money shall be returned to
Buyer or Buyer may consummate the transaction contemplated herein without regard
to such termination.
IV.3.2. TITLE INSURANCE. As of the Closing Date, the Title Company
---------------
shall have issued or shall have committed to issue the Title Policy to Buyer in
respect to the Property.
IV.3.3. NO MATERIAL CHANGE. There shall be no material adverse change
------------------
in any of the items approved by Buyer during the Contingency Period, including,
without limitation, the physical condition of the Property and title to the
Property.
IV.3.4. TERMINATION OF AGREEMENTS. On the Closing Date, all
-------------------------
management and leasing agreements with respect to the Property shall be
terminated and Seller shall be solely responsible for any termination fees due
to the present property manager. In addition, Seller shall deliver full releases
from any leasing agents for any and all commissions which may become payable
after the Closing Date with respect to any then existing lease whether currently
earned or payable by virtue of renewal or expansion options.
IV.3.5. DELIVERY OF LEASES/DOCUMENTS. Buyer shall have received
----------------------------
signed originals or copies, certified by Seller as being true and correct of all
leases and contracts, together with all exhibits thereto, and to the extent in
Seller's possession or reasonably obtainable all warranties, licenses, permits
and agreements, together with all exhibits thereto.
IV.4. SELLER'S CLOSING CONDITIONS. The following conditions are for the
---------------------------
benefit of Seller and are conditions to the Closing, unless expressly waived by
Seller on or before the Closing Date:
IV.4.1. SIMULTANEOUS CLOSING. Subject to the provisions of SECTION
--------------------
4.1.9 hereof, in respect to the termination of the 2525 Agreement and the Tract
A Agreement, the Closing shall be contingent upon the simultaneous closing of
the Additional Properties, pursuant to the terms and conditions of the
Additional Property Agreements.
IV.5. FAILURE OF CONDITION TO CLOSE TO ESCROW. In the event any of the
---------------------------------------
conditions
10
<PAGE>
set forth in ARTICLE IV are not timely satisfied or waived by the appropriate
party benefitting by the conditions in question, for a reason other than the
default of Buyer, this Agreement shall, at the option of the party benefitting
by the conditions in question, terminate, the Earnest Money shall be returned to
Buyer and, except as otherwise provided herein, the parties shall have no
further obligations hereunder.
ARTICLE V.
CLOSING AND ESCROW
------------------
V.1. DEPOSIT WITH THE TITLE COMPANY AND ESCROW INSTRUCTIONS. Upon
------------------------------------------------------
execution of this Agreement, the parties hereto shall deposit one duplicate
original of this Agreement with the Title Company and this instrument shall
serve as the instructions to the Title Company for consummation of the purchase
and sale contemplated hereby. Seller and Buyer agree to execute such additional
and supplementary escrow instructions as may be appropriate to enable the Title
Company to comply with the terms of this Agreement; provided, however, that in
the event of any conflict between the provisions of this Agreement and any
supplementary escrow instructions, the terms of this Agreement shall control.
V.2. CLOSING.
-------
V.2.1. The closing hereunder ("CLOSING") shall be held at the offices
of the Title Company. The execution and exchange of documents shall take place
at the Closing on or before the twentieth (20th) day following the expiration of
the Contingency Period ("CLOSING DATE"). Such date may not be otherwise extended
without the written approval of both Seller and Buyer.
V.2.2. In the event the Closing does not occur on or before the
Closing Date, the Title Company shall, unless it is notified by both parties to
the contrary within ten (10) days after the Closing Date, return to the
depositor thereof all documents which may have been deposited hereunder.
V.3. DELIVERY BY SELLER TO THE TITLE COMPANY. Prior to the Closing Date,
---------------------------------------
Seller shall deliver to the Title Company:
(a The Deed, duly executed and acknowledged by Seller, in recordable
form, and ready for recordation on the Closing Date;
(b A certification duly executed by Seller under penalty of perjury
in the form of, and upon the terms set forth in, the Transferor's Certification
of Non-Foreign Status ("FIRPTA CERTIFICATE"), setting forth Seller's address and
federal tax identification number and certifying that Seller is a "United States
Person" and that Seller is not a "foreign person" in accordance with and/or for
the purpose of the provisions of Section 7701 and 1445 (as may be amended) of
the Internal Revenue Code of 1954, as amended, and any regulations promulgated
thereunder. The FIRPTA Certificate shall be in the form attached hereto as
11
<PAGE>
EXHIBIT "H"; and
- -----------
(c An Assignment of Rights, Leases and Security Deposits ("ASSIGNMENT
OF LEASES"), in the form of EXHIBIT "I" duly executed by Seller, by which Seller
-----------
shall assign to Buyer all of Seller's interest in the Leases, together with the
interest of Seller in security deposits collected and held by Seller to secure
the performance of the duties and obligations of tenant under the Leases.
V.4. DELIVERY BY SELLER TO BUYER. On or before the Closing Date, Seller
---------------------------
shall deliver to the Title Company, for ultimate delivery to Buyer, the
following:
(a The Bill of Sale duly executed by Seller;
(b The Rent Roll, certified by Seller and current as of the Closing
Date;
(c A schedule of Service Contracts current as of the Closing Date;
(d Tenant Estoppel Certificates from those tenants specified pursuant
to SECTION 4.2.1, to the extent not previously delivered to Buyer.
(e Originals or copies, certified by Seller as being true and
correct, of all Leases, together with all exhibits thereto;
(f Originals of all Service Contracts and any unexpired warranties or
guaranties received by Seller from any contractors, subcontractors, suppliers or
materialmen in connection with any construction, repair or alteration of the
Improvements or any tenant improvements;
(g All instruction manuals, procedure manuals, manufacturer's
warranties and similar materials in Seller's possession which relate to the
Property;
(h Notices to tenants under the Leases, in the form of EXHIBIT "J"
-----------
attached hereto, duly executed by Seller;
(i All keys to the Property;
(j Such resolutions, authorizations, bylaws or other corporate and/or
partnership documents or agreements relating to Seller as shall be reasonably
required by the Title Company in connection with this transaction; and
(k Any other documents, instruments, data, records, correspondence or
agreements called for hereunder which have not previously been delivered.
The matters described in subparagraphs (e), (f), (g) and (i) shall be delivered
by making them available at the office of the property manager for the Property.
12
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V.5. DELIVERY BY BUYER TO THE TITLE COMPANY. On or before the Closing
--------------------------------------
Date, Buyer shall deliver to the Title Company, for ultimate delivery to Seller:
(a) The Purchase Price described in SECTION 2.1, plus any additional
sums necessary, if any, for Buyer to pay its costs, expenses and prorations
pursuant to this ARTICLE V; and
(b) The Assignment of Leases, duly executed in recordable form by
Buyer.
V.6. OTHER INSTRUMENTS. Seller and Buyer shall each deliver such other
-----------------
instruments as are reasonably required by the Title Company or otherwise
required to close the escrow and consummate the purchase of the Property in
accordance with the terms hereof.
V.7. CLOSE OF ESCROW. Provided that (a) the Title Company has received
---------------
all required documents, instruments and funds, (b) the Title Company has not
received written notice from either Buyer or Seller that any of the conditions
to Closing set forth in ARTICLE IV have not been satisfied or waived, (c) any of
the representations and warranties made by either Buyer or Seller are untrue
either as of the Closing Date and (d) the Title Company is able to deliver to
Buyer the Title Policy described in SECTION 3.1.1 hereof, the Title Company is
authorized and instructed on the Closing Date to:
(a Record the Deed and the Assignment of Leases with the Sacramento
County Recorder; and
(b Deliver to Seller the sum described in SECTION 2.1 to Seller, less
Seller's share of prorations and costs of escrow. The Title Company is
instructed to request that the amount of the Documentary Transfer Tax due be
shown on a separate paper and affixed to the Deed by the County Recorder after
the permanent record is made.
V.8. PRORATIONS AND APPORTIONMENTS.
-----------------------------
V.8.1. All revenues and all expenses of the Property shall be
prorated and apportioned as of 12:01 a.m. on the Closing Date, so that Seller
shall bear all expenses with respect to the Property and shall have the benefit
of all income with respect to the Property through and including the period
preceding the Closing Date. Any revenue or expense amount which cannot be
ascertained with certainty as of the Closing Date shall be prorated on the basis
of the parties' reasonable estimates of such amount (other than reimbursements
for operating expenses not billed currently to tenants) and shall be the subject
of a final proration thirty (30) days after the Closing Date or as soon
thereafter as the precise amounts can be ascertained. A statement setting forth
such agreed prorations shall be delivered to the Title Company. The Title
Company shall not be required to calculate any prorations.
V.8.2. Prepaid rents under the Leases shall be credited to Buyer.
Amounts
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for free rents, concessions, lease takeovers and similar matters not previously
paid or satisfied prior to the Closing Date shall be credited to Buyer. Rents in
arrears will not be prorated, but will be paid to Seller by Buyer when collected
by Buyer, such payment to occur every thirty (30) days following the Closing
Date. Except as expressly provided for in SECTION 5.10 below, the first monies
received by Buyer from each tenant after the Closing Date shall be applied first
to current rents and other sums due and thereafter shall be applied to rent in
arrears.
V.8.3. Expenses to be prorated shall include taxes (other than
personal property taxes on Personal Property), payments under any Service
Contracts (provided that any delinquent payments owing to Seller shall be
treated in the same manner as delinquent rents), gas, electricity and other
utility charges, any unfixed meter charges, if any (apportioned on the basis of
the last meter reading), license and permit fees and other expenses customarily
prorated. If possible, in lieu of prorating, utilities and other expenses shall
be contracted for in the name of Buyer as of the Closing Date, with Seller being
responsible directly to the utility provider and others for accrued and unpaid
expenses. No prorations in respect to personal property taxes on Personal
Property based upon Seller's warranty that no personal property taxes have been
assessed against the Personal Property for the previous five (5) years.
V.9. COMPUTATION OF CERTAIN PRORATIONS. Final proration of
---------------------------------
percentage rents and similar apportionable items which are dependent for their
calculation upon the economic performance of the Property (or a portion thereof)
over a specified interval of time shall be accomplished as follows:
(a The parties shall await the expiration of the specified interval
to determine the gross rents, gross receipts and other economic performance over
the entire interval and then prorate the item by allocating to Seller the
product of the rents or other similar apportionable item for the entire interval
multiplied by a fraction, the numerator of which is the number of days within
the specified interval which occur before the Closing Date and the denominator
of which is the number of days in the specified interval.
(b Operating expenses which are payable (or reimbursable) by any
present or past tenant of the Property or any portion thereof, shall not be
prorated hereunder. Buyer shall send customary statements for reimbursement of
operating expenses and taxes to tenants under the Leases after consulting with
Seller with respect to appropriate amounts due therefore, and shall remit to
Seller, upon receipt, Seller's prorated share thereof, determined as provided in
SECTION 5.9(a) above, to the extent Seller has previously paid or been charged
for the expenses relating to such reimbursement.
V.10. ARREARAGE. Seller reserves all claims and causes of action against
---------
tenants and others who are in arrears or who shall be obligated to pay monies in
the future which are for the benefit of Seller, and Buyer shall provide its
reasonable cooperation to Seller in pursuing such arrearage. Buyer shall use
reasonable efforts to collect all sums in arrears as of the closing Date due to
Seller, but shall not be required to commence or prosecute any litigation.
Seller may not commence and prosecute litigation against any tenant for rents in
arrears as
14
<PAGE>
long as such tenant remains a tenant of the Property, unless the statute of
limitations will expire within the succeeding sixty (60) day period. To the
extent that Buyer receives payments from tenants for sums due prior to the
Closing Date which can be verified based upon invoices or other applicable
billings, such payment, including rents, shall be promptly be remitted by Buyer
to Seller.
V.11. PAYMENT OF ADJUSTMENTS TO PRORATION. Either party owing the other
-----------------------------------
party a sum of money based on adjustments made to prorations after the Closing
Date shall promptly pay that sum to the other party, together with interest
thereon at the rate of ten percent (10%) per annum to the date of payment if
payment is not made within ten (10) days after mutual agreement of the amount
due.
V.12. COSTS AND EXPENSES. Seller shall pay the costs associated with
------------------
the issuance of a California Land Title Association Owner's Policy of Title
Insurance in the full amount of the Purchase Price, the UCC and litigation
searches, documentary stamp taxes, recording fees, transfer taxes, escrow fees
and all costs incurred to repay any liens. Buyer shall pay the incremental
increase in costs relating to ALTA coverage, the costs of all endorsements
thereto and the cost of the Survey. Seller and Buyer shall each pay the fees
and expenses of their respective legal counsel incurred in connection with the
transaction.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
As an inducement to Buyer to enter into this Agreement, Seller hereby
represents and warrants to and agrees with Buyer as follows:
VI.1. AUTHORITY OF SELLER. Seller is a California limited partnership,
-------------------
duly organized and validly existing and in good standing under the laws of the
State of California, and has the authority to own and convey the Property, and
execute this Agreement. All documents executed by Seller which are to be
delivered to Buyer at the Closing are or at the time of Closing will be duly
authorized, executed and delivered by Seller and do not and at the time of
Closing will not violate any provisions of any agreement or judicial order to
which Seller is a party or to which Seller or the Property is subject.
VI.2. CONDITION OF PROPERTY. To Seller's Knowledge, as hereinafter
---------------------
defined, there are no material physical or mechanical defects in the Property,
including, without limitation, the elevators, escalators, plumbing, heating, air
conditioning, ventilating, life safety and electrical systems, and to Seller's
Knowledge, all such items are in good operating condition and repair and are in
compliance with all applicable governmental laws, ordinances, regulations and
requirements, other than compliance with the requirements of the Americans With
Disabilities Act, with respect to which, Seller has commenced compliance in
accordance with the requirements thereof.
15
<PAGE>
VI.3. USE AND OPERATION. To Seller's Knowledge, the use and operation of
-----------------
the Property are in full compliance with applicable building codes, safety and
fire, environmental, zoning and land use laws, and other applicable local, state
and federal laws, ordinances, regulations and requirements, other than
compliance with the requirements of the Americans With Disabilities Act, with
respect to which Seller has commenced compliance in accordance with the
requirements thereof.
VI.4. LAND USE REGULATIONS. To Seller's Knowledge, there are no
--------------------
condemnation, environmental, zoning or other land use regulation proceedings,
either instituted, or planned to be instituted, which could detrimentally affect
the use or operation of the Property of its intended purpose or the value of the
Property, nor has Seller received notice of any special assessment proceedings
affecting the Property.
VI.5. LEASES. To Seller's Knowledge, the copies of the Leases to be made
------
available to Buyer pursuant to SECTION 4.1.2 are true and correct copies of all
Leases affecting the Property and are in full force and effect and there are no
other agreements, written or oral, with respect to the tenancies, except
subleases permitted by the respective Leases. To Seller's Knowledge:
(a) The information set forth in the Rent Roll is true and complete
as of the date such Rent Roll was made available to Buyer and there are no
leases of space in the Improvements and nonmaterial defaults under any of the
Leases which have not been disclosed to Buyer in writing.
(b) No tenant under any of the Leases has prepaid any rent or other
charges for more than the current month, except as disclosed to Buyer in
writing.
(c) No tenant under any of the Leases has any right or option to
purchase the Property or any portion thereof or interest therein, and there are
no outstanding agreements of sale with respect to the Property or any portion
thereof or any interest therein.
(d) Except as provided in the Leases and the Rent Roll, no tenant
under any of the Leases has the right to renew or extend any of the Leases or
has any options or rights of first refusal with respect to leasing of other
space, and no tenant under any of the Leases has the right to free rent, rebate,
allowance, concession, security or other deposit.
VI.6. BROKERAGE COMMISSIONS. Except as set forth in the Rent Roll or
---------------------
otherwise disclosed to Buyer in writing, there are no commissions, finder's fees
or other compensation owing or which may become owing to any broker or any other
person or entity with respect to any Lease or occupancy agreement including,
without limitation, any such compensation with respect to any future renewals,
extensions or expansions thereof.
VI.7. LITIGATION. Except as disclosed to Buyer in writing, there is no
----------
litigation pending or, to Seller's Knowledge, threatened, against Seller or any
basis therefor that arises out of the ownership of the Property or that might
detrimentally affect the use or operation of the Property for its intended
purpose or the value of the Property or adversely affect the ability
16
<PAGE>
of Seller to perform its obligations under this Agreement.
VI.8. USE AND OPERATION OF PROPERTY. To Seller's Knowledge, Seller knows
-----------------------------
of no facts which would prevent Buyer from using and operating the Property
after Closing in the manner in which the Property has been used, leased and
operated prior to the date hereof.
VI.9. OTHER RIGHTS. No other person presently has a right of first refusal
------------
or other right to purchase or finance all or any part of the Property. In
consideration of Buyer's execution and delivery of this Agreement, Seller agrees
that so long as this Agreement has not been terminated or expired, Seller will
not negotiate or otherwise pursue any offers on the Property nor execute any
other letter of intent or contract for the financing, sale or purchase of the
Property.
VI.10. EMPLOYEES. Seller has no employees. There are no employees of
---------
Seller's agent (including the property manager) engaged in the operation or
maintenance of the Property for whom Buyer will be responsible after the Closing
Date unless Buyer agrees to employ such employees after the Closing Date.
VI.11. ENVIRONMENTAL. To Seller's Knowledge, the Property is not in
-------------
violation of any federal, state, local or administrative agency ordinance, law,
rule, regulation, order or requirement relating to environmental conditions or
Hazardous Material ("ENVIRONMENTAL LAWS"). Neither Seller, nor to Seller's
------------------
Knowledge, any third party, has (a) used, manufactured, generated, treated,
stored, disposed of, or released any Hazardous Material on, under or about the
Property or transported any Hazardous Material over the Property in violation of
the Environmental Laws, or (b) installed, used or removed any storage tank on,
from or in connection with the Property except in full compliance with all
Environmental Laws. To Seller's Knowledge, there are no storage tanks or wells
(whether existing or abandoned) located on, under or about the Property. To
Seller's Knowledge, the Property does not consist of any building materials that
contain Hazardous Material. For the purposes hereof, "HAZARDOUS MATERIAL" shall
mean any substance, chemical, waste or other material which is listed, defined
or otherwise identified as "hazardous" or "toxic" under any federal, state,
local or administrative agency ordinance or law.
VI.12. "AS-IS" SALE.
------------
(a) Except as set forth above, Buyer acknowledges that Seller makes no
representation or warranty, either express or implied, with respect to the
Property, its present condition or its fitness or suitability for any particular
purpose. In this respect, Buyer confirms that it is relying solely upon its
investigation of the condition of the Property, its title and all governmental
laws and ordinances which might affect its use and development. With the
exception of matters which Seller has affirmatively represented, actively
concealed or fraudulently represented at the time of sale and with the exception
of the warranties contained in the conveyance documents to be executed and
delivered by Buyer, Buyer hereby releases and forever discharges Seller, its
partners, employees and agents from any and all claims, rights, remedies and
causes of action of any nature or sort, known or unknown, past, present
17
<PAGE>
or future, which Buyer may have arising out of the condition of the Property
after the Closing Date.
(b) Buyer expressly waives the benefits and provisions of Section 1542 of
the Civil Code of the State of California, and any similar law of any state or
territory of the United States or other jurisdiction. Civil Code Section 1542
provides as follow:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
DEBTOR."
Initials of Buyer
-------------------
VI.13. SELLER'S KNOWLEDGE. The term "TO SELLER'S KNOWLEDGE," or variations
------------------
thereof, means the actual, present knowledge of the individual general partners
of Seller without any duty of inquiry or investigation, other than Seller's
obligation to make inquiry of its managing agent KCS Properties, Inc. in an
effort to determine that the employees of KCS Properties, Inc. responsible for
the day-to-day operation of the Property are not aware of any fact or
circumstance that would make any representation or warranty of Seller untrue in
any material respect.
VI.14. SURVIVAL. The representations and warranties of Seller contained
--------
herein shall survive the Closing Date, but shall terminate one (1) year after
the Closing Date. No liability shall arise thereunder unless suit shall be
filed against Seller as to the specific claim within such one (1) year period.
VI.15. SUBSEQUENT DISCLOSURES. In the event Buyer, prior to the Closing
----------------------
Date, becomes aware, from Seller or otherwise, of any inaccuracy in the
disclosures, information or representations previously provided to Buyer, which
will have a material, adverse effect on Buyer, Buyer may either (i) terminate
this transaction contemplated hereby, receive a refund of the applicable portion
of the Deposit, and to the extent available pursue any rights or claims that
Buyer may have against Seller as a result of any inaccuracy in the disclosures,
information or representations previously provided to Buyer or (ii) proceed with
the Closing, thereby waiving any rights that Buyer may have against Seller as a
result of any inaccuracy in the disclosures, information or representations
previously provided to Buyer. In no event shall Buyer be entitled to complete
the Closing hereunder and then bring an action against Seller for damages as a
result of any inaccuracy in the disclosures, information or representations
previously provided to Buyer.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
18
<PAGE>
VII.1. AUTHORITY OF BUYER. Buyer is duly organized and validly existing
------------------
under the laws of the State of Delaware and is in good standing and authorized
to do business under the laws of the State of California; this Agreement and all
documents executed by Buyer, which are to be delivered to Seller at the Closing
are or at the time of Closing will be (a) duly authorized, executed, and
delivered by Buyer, (b) be legal, valid, and binding obligations of Buyer, and
(c) not violate any provisions of any agreement or judicial order to which Buyer
is a party or to which it is subject.
VII.2. LITIGATION. There is no litigation pending or, to Buyer's knowledge,
----------
threatened, against Buyer or any basis therefor before any court or
administrative agency which might result in any material adverse change in the
business or financial condition of the Buyer.
ARTICLE VIII.
COVENANTS
---------
As matters as to which the Title Company need not be concerned, Seller and
Buyer covenant and agree with one another as follows:
VIII.1. INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify Buyer
-------------------------
and hold Buyer harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Buyer as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach of
covenant made by Seller in this Agreement or any document, certificate, or
exhibit given or delivered to Buyer pursuant to or in connection with this
Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring before
the Closing Date, or in any way related to or arising from any act, conduct,
omission, contract or commitment of Seller (or any of its agents or employees)
at any time or times before the Closing Date.
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.2. INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify Seller
------------------------
and hold Seller harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Seller as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach of
covenant made by Buyer in this Agreement or any document, certificate, or
exhibit given or delivered to
19
<PAGE>
Seller pursuant to or in connection with this Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring after
the Closing Date, or in any way related to or arising from any act, conduct,
omission, contract or commitment of Buyer (or any of its agents or employees) at
any time or times after the Closing Date.
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.3. MAINTENANCE. Seller shall, between the Seller's execution of this
-----------
Agreement and the Closing Date, at Seller's sole cost and expense, maintain the
Property in its present order, condition and repair, reasonable wear and tear
excepted, shall perform all work required to be done by the landlord under the
terms of any lease affecting the Property, and shall make all repairs,
maintenance and replacements of the Improvements and any Personal Property and
otherwise operate the Property in the same manner as before the making of this
Agreement, the same as though Seller were retaining the Property.
VIII.4. LEASES AND OTHER AGREEMENTS. Except as provided below, Seller
---------------------------
covenants and agrees that during the term of this Agreement, Seller or its
agents shall not amend or modify any Lease and shall not enter into any new
Lease, for any portion of the Property, without Buyer's prior written approval.
Seller's request for approval of any such new or modified Lease shall be
accompanied by the estimated cost of any tenant improvements associated
therewith and the amount of the real estate commission to be paid in conjunction
therewith. In the event that Buyer approves any new or modified Lease, upon the
Closing Date, Buyer shall be responsible for the cost of the tenant improvements
and the real estate commissions associated therewith prorated in an amount
proportional to the amount of rent paid thereunder before and after the Closing
Date. Buyer shall pay Seller on the Closing Date for any costs that Seller has
incurred for the tenant improvements and real estate commissions in excess of
its pro-rata share. Upon the Closing Date, all tenant improvement construction
contracts and brokerage agreements on such Leases shall be assigned to and
assumed by Buyer.
VIII.5. RETURN OF INFORMATION. In the event that Buyer does not purchase
---------------------
the Property, Buyer shall promptly return to Seller all information delivered by
Seller to Buyer in conjunction with this transaction.
VIII.6. CONFIDENTIALITY. Except as hereinafter provided, from and after the
---------------
execution of this Agreement, Buyer and Seller shall keep the terms, conditions
and provisions of this Agreement confidential and neither shall make any public
announcements hereof unless the other first approves of same in writing, nor
shall either disclose the terms, conditions and provisions hereof, or of any
data regarding the Property, except to persons who "need to know", such as their
respective officers, directors, employees, attorneys, accountants, engineers,
surveyors, consultants, property managers, financiers, partners, investors,
potential
20
<PAGE>
lessees and bankers and such other third parties whose assistance is required in
connection with the consummation of this transaction. Notwithstanding the
foregoing, it is acknowledged that Buyer is an affiliate of, a real estate
investment trust (the "REIT") and the REIT has and will seek to sell shares to
the general public; consequently, Buyer 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
Buyer or Buyer's attorneys to satisfy disclosure and reporting obligations of
Buyer, the REIT, or its affiliates. After Closing, Buyer shall be free to
disclose previously confidential information in its sole, unfettered discretion.
VIII.7. TAX DEFERRED EXCHANGE. Buyer acknowledges that Seller may desire to
---------------------
structure the sale of the Property as an exchange for like-kind property under
Section 1031 of the Internal Revenue Code of 1986 in order to defer recognition
of income on the disposition of the Property and/or other properties. Buyer
agrees to reasonably cooperate with Seller to accomplish such exchange and
Seller hereby agrees that any and all costs associated with said exchange shall
be borne solely by Seller and shall in no way be attributable to Buyer. Buyer
shall not be requested or required to take title to other property in
conjunction with such exchange.
VIII.8. TESTING SAMPLES. Any testing samples taken from the Property during
---------------
any inspection pursuant to this Agreement shall be divided and shared with
Seller. In the event that any test results or reports contain negative
information concerning the Property, Buyer shall promptly furnish Seller with
written correspondence summarizing the negative information including the name
and address of the consultant who discovered or learned of such information.
VIII.9. TERMINATION OF AGREEMENT. On the Closing Date, all management and
------------------------
leasing agreements with respect to the Property shall be terminated and Seller
shall be solely responsible for any termination fees due. In addition, Seller
shall deliver full releases from any leasing agents for any and all commissions
which may become payable after the Closing Date with respect to any then
existing lease whether currently earned or payable by virtue of renewal or
expansion options. Seller shall also terminate all Service Contracts which
Buyer fails to elect to assume, such election to be made prior to the expiration
of the Contingency Period.
VIII.10. TRANSFER TAX ON WORKS OF ART. In the event that any transfer tax
----------------------------
is due or payable on the Works of Art pursuant to Section 982 of the California
Civil Code, Seller agrees to pay such tax to the artist in conjunction with such
transfer.
VIII.11. CHANGES BEFORE CLOSING. In the event that any of the
----------------------
representations or warranties by either party contained herein change or become
untrue prior to the Closing Date, such party agrees to notify the other party of
such change or untruthfulness promptly upon learning of such matter.
VIII.12. INDEPENDENT AUDIT. Promptly following the execution of this
-----------------
21
<PAGE>
Agreement, Seller shall provide and shall cause its management company to
provide to Buyer's representatives and independent accounting firm access to
financial and other information relating to the Property in the possession of or
otherwise available to Seller, its affiliates or Seller's management company
which would be sufficient to enable Buyer's representatives and independent
accounting firm to prepare audited financial statements for the year 1996 and
the year to date in conformity with generally accepted accounting principles and
to enable them to prepare such statements, reports or disclosures as Buyer may
deem necessary or advisable. Seller shall also provide and/or shall cause its
management company to provide to Buyer's independent accounting firm 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. Seller shall authorize and shall cause its management company to
authorize any attorneys who have represented Seller or its management company in
material litigation pertaining to or affecting the Property to respond, at
Buyer's expense, to inquiries from Buyer's representatives and independent
accounting firm. If and to the extent Seller's financial statements pertaining
to the Property for any periods during the year 1996 and the year to date have
been audited, promptly after the execution of this Agreement Seller shall
provide Buyer with copies of such audited financial statements and shall
cooperate with Buyer's representatives and independent public accountants to
enable them to contact the auditors who prepared such audited financial
statements and to obtain, at Buyer's expense, a reissuance of such audited
financial statements. To the extent that Seller or its agents incur reasonable
expenses in connection with the performance of such audit, Buyer shall reimburse
Seller and its agents for such reasonable expenses.
ARTICLE IX.
LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION
--------------------------------------------
IX.1. DAMAGE OR DESTRUCTION.
---------------------
IX.1.1. In the event that the Improvements are damaged or destroyed
by fire or other casualty prior to the Closing Date and such damage or
destruction is estimated to cost Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) or less in the aggregate to repair or replace (as verified by an
architect or contractor reasonably selected by Buyer) then the Closing Date
shall occur as scheduled notwithstanding such damage or destruction and Seller
shall pay to Buyer an amount sufficient to restore or repair such damage
(retaining the right to any claim Seller may have against any insurance
carrier).
IX.1.2. In the event that any of the Improvements are damaged or
destroyed by fire or other casualty prior to the Closing Date, and such damage
or destruction is estimated to cost more than Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) in the aggregate to repair or replace (as verified
by an architect or contractor reasonably selected by Buyer), then either Seller
or Buyer shall have the option to (i) terminate this Agreement by written notice
to Seller within fifteen (15) days after the occurrence of the damage or
destruction and the Earnest Money shall be immediately returned to Buyer or (ii)
consummate the transaction contemplated hereby in which event Seller's insurance
proceeds shall be transferred and assigned to Buyer, with Seller remaining
responsible for any deductible.
22
<PAGE>
IX.2. CONDEMNATION. In the event that, prior to the Closing Date, a
------------
governmental entity shall commence any eminent domain proceeding to take any
material portion of the Property, then Buyer shall have the option to elect
either of the following:
(a) Terminate this Agreement by written notice to Seller within
fifteen (15) days of its receiving notice of such action of condemnation and the
Earnest Money shall be immediately returned to Buyer; or
(b) Elect to proceed with the transaction in which case the Purchase
Price shall not be reduced and Buyer shall be entitled to the net award paid to
Seller or Seller's mortgagee for such taking, if any, and Seller shall assign
and transfer to Buyer all right, title and interest in and to any awards, it
being expressly agreed that in such event Seller shall have no obligation to
repair or restore the Property or any portion thereof.
ARTICLE X.
DEFAULTS
--------
X.1. BUYER'S DEFAULT; SELLER'S REMEDIES. Buyer shall be deemed to be in
----------------------------------
default if, in respect to the transaction contemplated by this Agreement, at the
Closing, Buyer fails to deliver the Purchase Price or Buyer fails to meet,
comply with, or perform any covenant, agreement or obligation on the part of
Buyer within the time frames and in the manner required in this Agreement, for
any reason other than a default by Seller hereunder or termination of this
Agreement prior to Closing in accordance with the express terms and conditions
hereof. Seller's remedies shall be limited to the remedy set forth in
SECTION 2.4 hereof. Any default by Buyer hereunder shall be deemed a default
under each of the Additional Property Agreements.
X.2. SELLER'S DEFAULTS; BUYER'S REMEDIES.
-----------------------------------
X.2.1. SELLER'S DEFAULTS. Seller shall be deemed to be in default
-----------------
under this Agreement, if in respect to the transaction contemplated by this
Agreement, on or before the Closing, Seller shall have failed to meet, comply
with, or perform any covenant, agreement, or obligation on its part required in
this Agreement, within the time limits and in the manner required in this
Agreement, for any reason other than a default by Buyer hereunder or termination
of this Agreement prior to Closing pursuant to the express terms and conditions
hereof.
X.2.2. BUYER'S REMEDIES. If Seller is deemed to be in default
----------------
hereunder, Buyer may, at Buyer's option, do either one of the following:
(a) Terminate this Agreement by written notice delivered to
Seller on or before ten (10) days following occurrence of such default;
23
<PAGE>
(b) Seek and receive specific performance of Seller's
obligations hereunder to sell the Property for the Purchase Price and on
the terms set forth herein following the expiration of a five (5) day
period following the delivery of a written notice to Seller specifying the
default in question unless specific performance is not an available remedy
because Seller has voluntarily conveyed or encumbered the Property, in
which event Buyer may recover damages from Seller for any losses or costs
suffered by Buyer in connection with Seller's failure to perform its
obligations hereunder following the expiration of a five (5) day period
following the delivery of a written notice to Seller specifying the default
in question.
ARTICLE XI.
MISCELLANEOUS
-------------
XI.1. NOTICES. All notices or other communications required or permitted
-------
hereunder shall be in writing, and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or sent
by electronic facsimile and shall be deemed received upon the earlier of (I) if
personally delivered, the date of delivery to the address of the person to
receive such notice, (ii) if mailed, on the date of posting by the United States
Post Office, or (iii) if given by electronic facsimile, when received by the
other party.
If to Seller: 1740 Creekside Oaks Investors
c/o Kelly Broadcasting
3 Television Circle
Sacramento, California 95814
Attention: Scott Nichols
Telephone No.: (916) 446-3333
Facsimile No.: (916) 325-3711
with a copy to: KCS Properties, Inc.
1451 River Park Drive, Suite 230
Sacramento, California 95815
Attention: William P. Krum
Telephone No.: (916) 920-1225
Facsimile No.: (916) 920-1395
24
<PAGE>
with a copy to: Aguer-Pipgras Associates
1851 Heritage Lane, Suite 128
Sacramento, California 95815
Attention: Thomas C. Aguer
Telephone No.: (916) 649-2777
Facsimile No.: (916) 649-3636
with a copy to: Trainor Robertson
701 University Avenue, Suite 200
Sacramento, California 95825
Attention: Charles W. Trainor, Esquire
Telephone No.: (916) 929-7000
Facsimile No.: (916) 929-7111
25
<PAGE>
If to Buyer: Prentiss Properties Acquisition Partners, L.P.
3890 West Northwest Highway
Suite 400
Dallas, Texas 75220
Attention: Mark R. Doran
Telephone No.: (214) 654-5703
Facsimile No.: (214) 350-2437
with copies to: Snell, Brannian & Trent
8150 North Central Expressway, Suite 1800
Dallas, Texas 75201
Attention: Lawrence J. Brannian
Telephone No.: (214) 691-2500
Facsimile No.: (214) 691-2501
If to the Title
Company: First American Title Insurance Company
3030 LBJ Freeway, Suite 150
Dallas, Texas 75234
Attention: Ms. Jacqueline P. Aul
Telephone No.: (972) 620-7844
Facsimile No.: (972 241-7112
with copies to: First American Title Insurance Company
1860 Howe Avenue, Suite 100
Sacramento, California 95825
Attention: Ms. Lisa Blazquez
Telephone No.: (916) 920-3100
Facsimile No.: (916) 927-8712
or such other address as either party may from time to time specify in writing
to the other in the manner aforesaid.
XI.2. BROKERS AND FINDERS. In connection with the transaction contemplated
-------------------
by this Agreement, Seller has agreed to pay a brokerage commission to Aguer
Pipgras Associates ("APA") and The CAC Group ("CAC"). Buyer and Seller each
represent and warrant to the other that (other than Seller's employment of APA
and CAC, neither has employed any real estate agent, brokerage or finder in
connection with this transaction. Buyer has not agreed to pay any real estate
commission or finder's fee in connection with this transaction. In the event of
a claim or broker's fee, finder's fee, commission or other similar compensation
in connection herewith other than as set forth above, Buyer, if such claim is
based upon any agreement alleged to have been made by Buyer, hereby agrees to
indemnify and hold Seller harmless against any and all liability, loss, cost,
damage or expense (including reasonable attorneys' fees and costs) which Seller
may sustain or incur by reason of such claim, and Seller, if such claim is based
upon any agreement alleged to have been made by Seller, hereby agrees to
indemnify and hold Buyer harmless against any and all liability, loss, cost,
damage or expense (including reasonable attorneys' fees and costs) which Buyer
may sustain or incur by reason of such claim. The provisions of this
SECTION 11.2 shall survive the Closing.
26
<PAGE>
XI.3. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the permitted successors and assigns of the
parties hereto.
XI.4. AMENDMENTS. This Agreement may be amended or modified only by a
----------
written instrument executed by the party asserted to be bound thereby.
XI.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
------------------------------------------
representations and warranties made by each party herein shall survive the
Closing for a period of one (1) year and shall not merge into the Grant Deed and
the recordation thereof in the Official Records of Sacramento County,
California.
XI.6. CONSTRUCTION. Headings at the beginning of each section and
------------
subsection are solely for the convenience of the parties and are not a part of
the Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine and vice
versa. This Agreement shall not be construed as if it had been prepared by one
of the parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to paragraphs, sections, subparagraphs and
subsections are to this Agreement.
XI.7. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California. Any actions filed by
either party involving the other party shall be venued in Sacramento County,
California.
XI.8. PRIOR AGREEMENTS. This Agreement (including all Exhibits attached
----------------
hereto) together with the Earnest Money Letter is the final expression of, and
contains the entire agreements between the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented, superseded, canceled or
terminated nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein. The parties do not intend
to confer any benefit hereunder on any person, firm or corporation other than
the parties hereto and lawful assignees.
XI.9. ATTORNEYS' FEES. In the event of the bringing of any action or suit
---------------
by a party hereto against another party hereunder by reason of any breach of any
of the covenants, agreements or provisions on the part of the other party
arising out of this Agreement, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including actual attorneys' fees, accounting and
engineering fees, and any other professional fees resulting therefrom.
XI.10. TIME OF THE ESSENCE. Seller and Buyer hereby acknowledge and agree
-------------------
that time is strictly of the essence with respect to each and every term,
condition, obligation and provision hereof and that failure to timely perform
any of the terms, conditions, obligations or provisions hereof by either party
shall constitute a material breach of and a non-curable (but waivable) default
under this Agreement by the party so failing to perform.
27
<PAGE>
XI.11. RELATIONSHIP OF PARTIES. Nothing contained in this Agreement shall
-----------------------
be deemed or construed by the parties to create the relationship of principal
and agent, a partnership, joint venture or any other association between Buyer
and Seller.
XI.12. WAIVERS. No waiver of any breach of any covenant or provision herein
-------
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed an extension of
the time for performance of any other obligation or act except those of the
waiving party, which shall be extended by a period of time equal to the period
of the delay.
XI.13. PARTIAL INVALIDITY. If any term or provision 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 or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
such term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
XI.14. CONDITION PRECEDENT/CONCURRENT. This Agreement shall only be valid
------------------------------
if Buyer and Seller simultaneously execute the Additional Property Agreements
and this Agreement. Any default by Buyer under the terms of the Additional
Property Agreements shall give Seller the right to declare a default under this
Agreement.
XI.15. DAYS OF WEEK/TIME. In the event the date on which Buyer or Seller is
-----------------
required to take any action under the terms of this Agreement is not a business
day, the action shall be taken on the next succeeding business day. All times
referenced herein are the times of day in Sacramento, California on the date in
question.
XI.16. EXHIBITS/RECITALS. All exhibits referred to in this Agreement are
-----------------
attached and incorporated by this reference. All of the Recitals set forth
above are true and correct.
XI.17. POSSESSION. Possession of the Property shall be delivered to Buyer
----------
on the Closing Date, subject to the rights of any tenants or subtenants in the
Property.
XI.18. ASSIGNMENT. Buyer shall not assign, transfer or convey its rights
----------
and/or obligations under this Agreement and/or with respect to the Property to
any other party without the prior written consent of Seller, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the foregoing, Buyer
shall have the right to assign its rights under this Agreement to any affiliate
of Buyer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
28
<PAGE>
BUYER:
PRENTISS PROPERTIES ACQUISITION
PARTNERS, L.P., a Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By: /s/ MARK R. DORAN
---------------------------------------
Name: Mark R. Doran
Title: Executive Vice President
SELLER:
1740 CREEKSIDE OAKS INVESTORS, a California
limited partnership
By: /s/ JON S. KELLY
--------------------------------------------
Name: Jon S. Kelly
Title: Managing General Partner
The undersigned acknowledges receipt of this Agreement and agrees to act as
the Title Company hereunder.
FIRST AMERICAN TITLE INSURANCE COMPANY
By: /s/ JACQUELINE P. AUL
---------------------------------------
Name: Jacqueline P. Aul
Title:
29
<PAGE>
EXHIBIT LIST
------------
Exhibit A Legal Description
Exhibit B Additional Properties
Exhibit C Grant Deed
Exhibit D Bill of Sale
Exhibit E Due Diligence Materials
Exhibit F Rent Roll
Exhibit G Tenant Estoppel
Exhibit H Transferor's Certification of Non-Foreign
Status
Exhibit I Assignment of Rights, Leases and Security
Deposits
Exhibit J Notices to Tenant
Exhibit K Works of Art
30
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
-----------------
The land situated in the State of California, County of Sacramento, City of
Sacramento and is described as follows:
Lot 2 as shown on the Parcel Map entitled "All of Parcel D, 103, P.M. 11,"
recorded in Book 115 of Parcel Maps, Map No. 25, records of said County.
EXCEPTING THEREFROM all minerals, oil, gas and other hydrocarbon substances
lying below a depth of 500 feet from the surface of said land and real property
whether now known to exist or hereafter discovered, without, however, any right
to use the surface of such land and real property or any other portion thereof
above a depth of 500 feet from the surface of such land and real property for
any purpose whatsoever, as reserved in that certain Deed recorded December 9,
1983 from Sacramento Savings & Loan Association to Christo D. Bardis et al.,
Serial #213662, Official Records, Sacramento County.
31
<PAGE>
EXHIBIT B
ADDITIONAL PROPERTIES
---------------------
1750 Creekside Oaks Investors 1750 Creekside Oaks Drive, Sacramento, CA
1760 Creekside Oaks Investors 1760 Creekside Oaks Drive, Sacramento, CA
2525 Natomas Investors 2525 Natomas Park Drive, Sacramento, CA
2495 Natomas Investors 2495 Natomas Park Drive, Sacramento, CA
River City Bank 2485 Natomas Park Drive, Sacramento, CA
Bannon Investors Tract A, Natomas Center, Sacramento, CA
Natomas Investors et al Tract D, Natomas Center, Sacramento, CA
<PAGE>
EXHIBIT C
GRANT DEED
----------
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MAIL TAX STATEMENTS TO:
GRANT DEED
----------
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
_______________, a _______________________ ("GRANTOR"), hereby grants to
____________________, a _______________________ ("GRANTEE"), that certain real
property ("LAND") located in the City of Sacramento, County of Sacramento, State
of California, more particularly described in Exhibit A attached hereto together
---------
with all right, title and interest of Grantor in and to all buildings and
improvements now located or hereafter constructed on the Land.
Grantor hereby further grants to Grantee all of Grantor's right, title and
interest in and to all easements, privileges and rights appurtenant to the real
property and pertaining or held and enjoyed in connection therewith and all of
Grantor's right, title and interest in and to any land lying in the bed of any
street, alley, road or avenue to the centerline thereof in front of or adjoining
the Land.
IN WITNESS WHEREOF, Grantor has executed this Grant Deed as of
______________, 19__.
---------------------------------------
By:
------------------------------------
<PAGE>
SEPARATE STATEMENT OF
DOCUMENTARY TRANSFER TAX
County Recorder
Sacramento County
Sacramento, California
Dear Sir:
In accordance with Revenue and Taxation Code Section 11932, it is required
that this statement of documentary transfer tax due should not be recorded with
the attached Deed, but be affixed to the Deed after recordation and before
return as directed on the Deed.
The Deed names _______________________, a _______________________, as
Grantor and ______________________, a ______________________ as Grantee. The
property being transferred is located in the City of Sacramento, County of
Sacramento, State of California.
The amount of documentary transfer tax due on the attached deed is
___________________ Dollars and _______________ Cents ($________________),
computed on the full value of the property (less the value of any liens and
encumbrances remaining on the property at the time of sale).
Very truly yours,
By
-----------------------------
<PAGE>
EXHIBIT D
BILL OF SALE
------------
Concurrently with the execution and delivery of this Bill of Sale (the
"Assignment"), 1740 CREEKSIDE OAKS INVESTORS, a California limited partnership
("Assignor"), is conveying to PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership ("Assignee"), by Grant Deed (the "Deed"), that
certain tract of land located in Sacramento County, California, being more
particularly described on Exhibit "A" attached hereto and made a part hereof for
-----------
all purposes, together with the improvements located thereon (collectively the
"Property").
Assignor desires to assign, transfer, and convey to Assignee certain
tangible personal property, together with certain contract rights, guaranties,
licenses, and other specified items of intangible property (but specifically
excluding cash), affixed or attached to the Property, except those owned by
tenants of the Property (such tangible and intangible properties herein below
specified being collectively called the "Assigned Properties").
NOW, THEREFORE, in consideration of the receipt of Ten Dollars ($10.00) and
other good and valuable consideration in hand paid by Assignee to Assignor, the
receipt and sufficiency of which are acknowledged and confessed by Assignor,
Assignor ASSIGNS, TRANSFERS, SETS OVER, and DELIVERS to Assignee, its successors
and assigns, subject to any and all matters of record in Sacramento County,
California, to the extent they affect the Property, all of the Assigned
Properties, including, without limitation of the generality of the foregoing,
the following:
1. All of the personal property owned by Assignor located on or in or
used in connection with the Property, including without limitation the items of
tangible personal property consisting of all furniture, fixtures, equipment,
machinery and other personal property of every kind and nature (excluding cash-
on-hand) located on or used or useful in the operation of the Property including
the works of art listed on Exhibit "B".
-----------
2. All of the right, title and interest of Assignor in any intangible
personal property owned by Assignor and used exclusively in the use and
operation of the Property, and all warranties or guarantees received by Assignor
from any contractors, subcontractors, suppliers or material men in connection
with any construction, repairs or alteration of the Property, licenses,
franchises, permits, tenant lists, advertising materials and other similar
rights relating to the use and operation of the Property.
3. The interest of Assignor under all current design contracts, space
planning contracts, construction contracts, subcontracts and purchase orders,
utility contracts, water and sewer service contracts of any nature, maintenance
contracts, management contracts, mortgage documents, certificates of occupancy,
permits, soils reports, insurance policies, and other contracts or documents of
any nature relating to the Property.
<PAGE>
4. The trade name "Natomas Corporate Center" (the "Trade Name"), on a
non-exclusive basis, and the business and good will of Assignor which were
acquired in connection with the Property.
TO HAVE AND TO HOLD the Assigned Properties unto Assignee, its successors,
and assigns, forever, and Assignor binds itself, its successors, and assigns, to
WARRANT and FOREVER DEFEND, all and singular, title to the Assigned Properties
(with the exception of the Trade Name) unto Assignee, its successors, and
assigns, against every person whomsoever lawfully claiming or to claim the same
or any part thereof, by, through or under Assignor but not otherwise.
Assignor shall not be responsible for the discharge and performance of any
duties or obligations to be performed and/or discharged in connection with the
Assigned Properties after the date hereof. By acceptance of this Assignment,
Assignee accepts and agrees to perform all of the terms, covenants, and
conditions in connection with the Assigned Properties required to be performed
by the owner thereof, from and after the date hereof, but not prior thereto, and
agrees to indemnify, save, and hold harmless Assignor from and against any and
all loss, liability, claims, or causes of action existing in favor of or
asserted by any party arising out of or relating to Assignee's failure to
perform any duties or obligations required by the owner of the Assigned
Properties after the date hereof.
Assignee shall not be responsible for the discharge and performance of any
duties or obligations required to be performed and/or discharged in connection
with the Assigned Properties prior to the date hereof. In such regard Assignor
agrees to indemnify and hold Assignee harmless from and against losses incurred
by Assignee as a result of claims brought against Assignee, as Assignor's
successor in interest to the Assigned Properties, relating to causes of action
arising from any failure by Assignor to perform or discharge its obligation as
the owner of the Assigned Properties prior to the date hereof.
Simultaneously with the execution and delivery of this Assignment, Assignor
has executed and delivered to Assignee the Deed and the specific conveyances
described in the recitals hereof.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment in
multiple counterparts, each of which shall have the same force and effect as an
original, but which shall constitute one and the same instrument, effective this
________ day of ____________, 1997.
<PAGE>
ASSIGNEE:
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
a Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By:
---------------------------------------
Name: Mark R. Doran
Title: Executive Vice President
ASSIGNOR:
1740 CREEKSIDE OAKS INVESTORS, a California
limited partnership
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
<PAGE>
EXHIBIT "A"
-----------
PROPERTY DESCRIPTION
<PAGE>
EXHIBIT "B"
-----------
WORKS OF ART
<PAGE>
EXHIBIT E
DUE DILIGENCE DOCUMENTS
-----------------------
1. Form Lease
2. All tenant leases and amendments
3. Leasing Status reports, weekly basis
4. Lease proposals
5. Service and Purchase Contracts
6. Equipment Leases
7. Union Contracts
8. Other Contracts and Agreements
9. Operating Licenses and Permits
10. Lease Commission Agreements and Schedules of Commissions Payable
11. Current Year Operating Budget
12. Operating Statements, past two years and current year, monthly basis
13. Receivables Report, update on monthly basis
14. Rent Roll, update on monthly basis
15. Billing Register, update on monthly basis
16. Escalation Work Papers and Base Year Amount Details
17. Utility Invoices, past two years and current monthly
18. Real Estate Tax Bills, past two years
19. Current Notice of Assessment Valuation
20. Tax Parcel Map
21. Real Estate Tax Consultant Report
22. Tenant Credit Reports (to the extent that they are in the tenant files) to
be reviewed at the Property during the Due Diligence Period
23. Tenant Financial Statements (to the extent that they are in the tenant
files) to be reviewed at the Property during the Due Diligence Period
24. Schedule of Capital and Tenant Improvements
25. Current Schedule of Insurance
26. Pending Insurance Claims
27. List of Personnel & Wages
28. Lease and Tenant Files, to be reviewed at the Property during the Due
Diligence Period
29. Vendor Files, to be reviewed at the Property during the Due Diligence
Period
30. Construction Files, to be reviewed at the Property during the Due Diligence
Period
31. Other Property Files, to be reviewed at the Property during the Due
Diligence Period
32. List of Personal Property
33. Demising/Leasing/Site Plan
34. Plans and Specifications, 2 sets of each
(a) Architectural
(b) Structural
(c) Civil
(d) Mechanical
(e) Landscaping
<PAGE>
(f) Sprinkler
(g) Tenant
35. Certificates of Occupancy, building and tenant
36. Construction Contracts
37. Guaranties & Warranties
38. Existing Reports
(a) Structural and Engineering
(b) Environmental and Asbestos
(c) Soils
(d) Radon
(e) Geotechnical
(f) Ground Water Monitoring
(g) Sprinkler Test
(h) Elevator Consultant
39. Preliminary Title Report issued by Stewart Title Guaranty
40. Underlying Recorded Documents
41. Existing Survey
<PAGE>
EXHIBIT F
RENT ROLL
---------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date
<PAGE>
EXHIBIT G
TENANT ESTOPPEL
---------------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date
<PAGE>
EXHIBIT H
TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
------------------------------------------------
To inform PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware
limited partnership ("TRANSFEREE"), that withholding of tax under Section 1445
of the Internal Revenue Code of 1986, as amended ("CODE"), will not be required
upon the transfer of certain real property to the Transferee by 1740 CREEKSIDE
OAKS INVESTORS, a California limited partnership ("TRANSFEROR"), the undersigned
hereby certifies the following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Code and the
Income Tax Regulations promulgated thereunder);
2. The Transferor's U.S. employer identification is _____________; and
3. The transferor's office address is _______________________________.
The Transferor understands that this Certification may be disclosed to the
Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
The Transferor understands that the Transferee is relying on this
Certification in determining whether withholding is required upon said transfer.
The Transferor hereby agrees to indemnify, defend and hold the Transferee
harmless from and against any and all obligations, liabilities, claims, losses,
actions, causes of action, rights, demands, damages, costs and expenses of every
kind, nature or character whatsoever (including, without limitation, actual
attorneys' fees and court costs) incurred by the Transferee as a result of: (i)
the Transferor's failure to pay U.S. federal income tax which the Transferor is
required to pay under applicable U.S. law; or (ii) any false or misleading
statement contained herein.
Under penalty of perjury I declare that I have examined this Certification
and to the best of my knowledge and belief it is true, correct and complete, and
I further declare that I have authority to sign this document on behalf of the
Transferor.
Dated: , 1997 1740 CREEKSIDE OAKS INVESTORS,
--------- a California limited partnership
By:
------------------------------------
By:
------------------------------------
<PAGE>
EXHIBIT I
ASSIGNMENT OF LEASES
--------------------
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
SPACE ABOVE THIS LINE FOR RECORDER'S USE
ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS
THIS ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS is made as of
__________________, 1997 by ____________, a ______________ ("Assignor"), in
favor of _____________, a _________________ ("Assignee"), with reference to
the following facts:
A. Assignor is the owner of that certain land ("Land") located in the
City of Sacramento, County of Sacramento, State of California more particularly
described in Schedule 1 hereto, and all rights, privileges and easements
appurtenant to the Land ("Appurtenances"), and all buildings and other
improvements thereon ("Improvements"). The Land, the Appurtenances, and the
Improvements are hereinafter referred to collectively as the "Real Property."
The Real Property is being conveyed to Assignee pursuant to a Grant Deed of even
date herewith, executed by Assignor in favor of Assignee which is being recorded
concurrently herewith.
B. Assignor, as owner of the Real Property, has an interest, as
landlord, in the tenant leases of space in the Improvements ("Leases"), which
are described in Schedule 2 hereto, and an interest in certain security deposits
collected and held by Assignor to secure the performance of the duties and
obligations of tenants under certain of the Leases ("Security Deposits").
C. Assignor desires to assign, transfer and convey to Assignee all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
NOW, THEREFORE, Assignor agrees as follows:
1. Assignor hereby assigns, transfers and conveys to Assignee, all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
<PAGE>
2. Assignor warrants and represents that:
(a) Schedule 2 hereto is a list of all of the leases affecting the Real
Property, other than subleases permitted by the respective leases; Assignor has
not executed or otherwise entered into any other leases, tenancies, occupancy
agreements or other agreements with respect to rights affecting possession of
the Real Property or any portion thereof; and there are no such agreements
executed or otherwise entered into by any third party, and
(b) the Leases are in full force and effect and there is no default on the
part of Assignor as landlord or on the part of any tenant, and there exists no
condition that with the passage of time or the giving of notice or both would
constitute such a default.
(c) Cross-Indemnity.
---------------
(i) By Assignor. Assignor indemnifies and holds harmless Assignee from
-----------
and against any and all loss, damage, liability, cost or expense, including,
without limitation, court costs and reasonable attorneys' fees, arising out of,
by reason of, or in connection with any action, suit, charge, complaint,
proceeding, obligation, undertaking or other similar matter arising out of or in
connection with any transaction, event, act or omission involving the Leases and
Security Deposits which occurred, accrued and/or arose prior to the date hereof.
(ii) By Assignee. Assignee indemnifies and holds harmless Assignor from
-----------
and against any and all loss, damage, liability, cost or expense, including,
without limitation, court costs and reasonable attorneys' fees, arising out of,
by reason of, or in connection with any action, suit, charge, complaint,
proceeding, obligation, undertaking or other similar matter arising out of or in
connection with any transaction, event, undertaking, act or omission involving
the Leases and Security Deposits which occurs, accrues and arises from and after
the date hereof.
3. The provisions of this Agreement of Rights, Leases and Security
Deposits shall be binding upon and inure to the benefit of Assignor and Assignee
and their respective successors and permitted assigns.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment of
Rights, Leases and Security Deposits as of the date first set forth above.
ASSIGNEE: ASSIGNOR:
BY: BY:
- ----------------------- -------------------------
ITS: ITS:
- ----------------------- -------------------------
DATE: DATE:
- ----------------------- -------------------------
<PAGE>
EXHIBIT J
NOTICES TO TENANT
-----------------
Premises: _______________________
Lease dated ______________ between ___________________ , a
Landlord, and __________________, a
, Tenant
This is to notify you that the undersigned has sold its fee interest in
the ____________ and in connection therewith has assigned its interest as
landlord under your lease to ______________, a ________________, whose address
is _________________________________.
You are further notified that commencing _______________, 1997, all rental
payments under your Lease shall be paid to ____________________, at the address
specified in the first paragraph hereof, unless you are otherwise notified in
writing by ______________________. You are further notified that all notices to
the Landlord pursuant to your lease should hereafter be sent to
__________________________ at the address specified in the first paragraph
hereof unless you are otherwise notified in writing by _______________________.
Very truly yours,
CERTIFIED MAIL,
RETURN RECEIPT REQUESTED.
<PAGE>
EXHIBIT K
WORKS OF ART
------------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date
<PAGE>
EXHIBIT 10.2
AGREEMENT OF PURCHASE AND SALE
AND ESCROW INSTRUCTIONS
(1750 CREEKSIDE OAKS DRIVE)
This Agreement of Purchase and Sale and Escrow Instructions ("AGREEMENT"),
dated for reference purposes as of February 17, 1997, is entered into by and
between 1750 CREEKSIDE OAKS INVESTORS, a California limited partnership
("SELLER"), and PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P. , a Delaware
limited partnership ("BUYER").
RECITALS
A. Seller is the owner of approximately 3.52 acres of land located in
the City of Sacramento, County of Sacramento, State of California ("LAND"), more
particularly described in EXHIBIT "A" hereto and made a part hereof for all
-----------
purposes.
B. The Land has been improved with a two (2) story office building,
containing approximately 61,724 net rentable square feet and related
improvements.
C. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer the "PROPERTY" (as hereinafter defined in SECTION 1.8) on the terms and
conditions set forth herein.
D. In conjunction with its purchase of the Property, Buyer is also
purchasing the real properties located at the addresses ("ADDITIONAL
PROPERTIES") more particularly described in EXHIBIT "B" hereto and made a part
-----------
hereof for all purposes, from the sellers (the "OTHER SELLERS") listed therein
pursuant to certain Agreements of Purchase and Sale and Escrow Instructions of
even date herewith ("ADDITIONAL PROPERTY AGREEMENTS"), the simultaneous purchase
of which shall be a condition concurrent to Buyer's purchase of the Property
hereunder.
NOW, THEREFORE, Seller and Buyer agree as follows:
AGREEMENT
ARTICLE I.
PROPERTY
--------
Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees
to purchase from Seller, subject to the terms and conditions set forth herein,
the following:
I.1. LAND. The Land;
----
I.2. APPURTENANCES. All rights, privileges and easements appurtenant to
-------------
the Land,
<PAGE>
including, without limitation, all minerals, oil, gas and other hydrocarbon
substances on and under the Land (to the extent owned by Seller) as well as all
development rights, air rights, water, water rights and water stock relating to
the Land and any other easements, rights-of-way or appurtenances, used in
connection with the beneficial use and enjoyment of the Land (all of which are
collectively referred to as the "APPURTENANCES");
I.3. IMPROVEMENTS. All buildings improvements and fixtures located on the
------------
Land, including, without limitation, all fixtures, apparatus, equipment and
appliances used in connection with the operation or occupancy thereof, such as
heating and air conditioning systems and facilities used to provide any utility
services, parking services, refrigeration, ventilation, trash disposal,
recreation or other services thereto (all of which are collectively referred to
as the "IMPROVEMENTS");
I.4. PERSONAL PROPERTY. All of the personal property owned by Seller
-----------------
located on or in or used in connection with the Property ("PERSONAL PROPERTY"),
including without limitation the items of tangible personal property consisting
of all furniture, fixtures, equipment, machinery and other personal property of
every kind and nature (excluding cash-on-hand) owned by Seller and located on or
used or useful in the operation of the Property, all of which will be assigned
pursuant to the Bill of Sale, as hereinafter defined,, which Personal Property
includes the works of art listed on EXHIBIT "K" ("WORKS OF ART");
-----------
I.5. INTANGIBLE PROPERTY. All of the right, title and interest of Seller
-------------------
in any intangible personal property owned by Seller and used exclusively in the
use and operation of the Improvements, and all warranties or guarantees received
by Seller from any contractors, subcontractors, suppliers or materialmen in
connection with any construction, repairs or alteration of the Improvements,
licenses, franchises, permits, tenant lists, advertising materials and other
similar rights relating to the use and operation of the Property (all of which
are collectively referred to as the "INTANGIBLE PROPERTY"), all of which shall
be assigned to Buyer pursuant to the Bill of Sale;
I.6. LEASES. The interest of Seller as landlord under all leases of space
------
in the Improvements ("LEASES") in effect on the Closing Date;
I.7. SERVICE CONTRACTS. The interest of Seller under all current design
-----------------
contracts, space planning contracts, construction contracts, subcontracts and
purchase orders, utility contracts, water and sewer service contracts of any
nature, maintenance contracts, management contracts, mortgage documents,
certificates of occupancy, permits, soils reports, insurance policies, and other
contracts or documents of any nature relating to the Property which are to be
assigned to Buyer at the Closing ("SERVICE CONTRACTS"). All such Service
Contracts approved by Buyer shall be transferred and assigned to Buyer by the
Bill of Sale; and
I.8. PROPERTY. All of the items described in SECTIONS 1.1 through 1.7
--------
above are herein collectively referred to as the "PROPERTY." The items described
in SECTIONS 1.1, 1.2 and 1.3 are herein referred to collectively as the "REAL
PROPERTY."
2
<PAGE>
ARTICLE II.
PURCHASE PRICE
--------------
II.1. PURCHASE PRICE. The purchase price for the Property shall be the sum
--------------
of Seven Million Seven Hundred Thousand and No/100ths Dollars ($7,700,000.00)
(the "PURCHASE PRICE"). A portion of the Purchase Price has been allocated to
the purchase of the Works of Art in the manner set forth on EXHIBIT "K" attached
-----------
hereto and made a part hereof for all purposes.
II.2. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by Buyer
-------------------------
in cash by wire transfer on the Closing Date.
II.3. EARNEST MONEY.
-------------
(a) Within two (2) business days following the Effective Date, Buyer
shall deposit, or cause to be deposited with First American Title Insurance
Company, located at 3030 LBJ Freeway, Suite 150, Dallas, Texas 75234; Attn.
Jacqueline P. Aul (the "TITLE COMPANY"), in cash, by certified or bank cashier's
check made payable to the Title Company, or by a confirmed wire transfer of
funds, the sum of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the
"EARNEST MONEY") in accordance with the terms of that certain letter agreement
(the "EARNEST MONEY LETTER") of even date herewith by and between Buyer, the
Title Company, Seller and the Other Sellers. The Earnest Money constitutes
escrow deposit under this Agreement and the Additional Property Agreements. The
Earnest Money shall be held and disbursed in accordance with the terms of the
Earnest Money Letter.
(b) The term "EFFECTIVE DATE" shall mean the date upon which this
Agreement and the Additional Property Agreements have been fully executed and
delivered by Seller and Buyer and Seller and the Other Sellers, as the case may
be, and one duplicate original or each has been deposited with the Title
Company.
II.4. LIQUIDATED DAMAGES. IN THE EVENT THAT THE SALE OF THE PROPERTY AS
------------------
CONTEMPLATED HEREUNDER IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS
AGREEMENT BY BUYER, THROUGH NO FAULT OF SELLER, THE EARNEST MONEY SHALL BE
IMMEDIATELY PAID BY TITLE COMPANY, ON BEHALF OF BUYER, TO SELLER AS LIQUIDATED
DAMAGES PURSUANT TO THE EARNEST MONEY LETTER. THE PARTIES ACKNOWLEDGE THAT
SELLER'S ACTUAL DAMAGES IN THE EVENT OF A DEFAULT BY BUYER WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR SIGNATURES
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES REASONABLE ESTIMATE OF SELLER'S DAMAGES FOR
BUYER'S FAILURE TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
AND THE ADDITIONAL PROPERTY AGREEMENTS AND AS SELLER'S EXCLUSIVE REMEDY AGAINST
BUYER IN THE EVENT OF A DEFAULT BY BUYER; PROVIDED, HOWEVER, NOTHING
3
<PAGE>
CONTAINED HEREIN SHALL PRECLUDE (A) SELLER FROM PURSUING ANY REMEDIES SET FORTH
IN SECTIONS 8.2, 8.5, 8.6, 11.2 AND 11.5 WHICH SURVIVE THE TERMINATION OF THIS
AGREEMENT OR (B) THE RECOVERY OF ITS ATTORNEYS' FEES AND COSTS IN THE
PROSECUTION OR DEFENSE OF ANY ACTION BROUGHT UNDER THIS AGREEMENT, IF SELLER IS
ENTITLED TO RECEIVE SAME. THE LIQUIDATED DAMAGES SET FORTH HEREIN ABOVE ARE
DUPLICATIVE OF AND NOT IN ADDITION TO THE LIQUIDATED DAMAGES SET FORTH IN THE
EARNEST MONEY LETTER.
BUYER: ________________ SELLER: _________________
ARTICLE III.
TITLE TO PROPERTY
-----------------
III.1. TITLE TO REAL PROPERTY.
----------------------
III.1.1. At the Closing, Seller shall convey to Buyer fee simple
title to the Real Property, by execution and delivery of a Grant Deed ("DEED")
in the form attached hereto as EXHIBIT "C" and made a part hereof for all
-----------
purposes.
III.1.2. On the Closing Date, Buyer shall receive from the Title
Company an ALTA Owner's Policy of Title Insurance, in a form to be selected by
Buyer, with liability in the full amount of the Purchase Price, insuring fee
simple title to the Real Property in Buyer, subject only to exceptions approved
by Buyer as provided in SECTION 4.1.1 hereof, together with the following
endorsements: (i) an endorsement deleting all general exceptions and deleting
exclusions from coverage relating to creditor's rights, (ii) 116.1 (survey),
(iii) 100 (modified), (iv) 123.1 (zoning), (v) 116.4 (contiguity), (vi) 103.7
(access), (vii) 100.29 (mineral rights), (viii) 103.1 (easements) (ix) 103.5
(water rights) and (ix) such other endorsements as may be reasonably requested
by Buyer ("TITLE POLICY"). The Title Policy shall provide full coverage against
mechanics and material men's liens arising out of the construction, repair or
alteration of any of the Improvements or any tenant improvements.
III.1.3. The Title Company shall obtain, if requested by Buyer
and at Buyer's cost, reinsurance agreements from such companies as Buyer may
request, which reinsurance agreements shall be in ALTA Facultative Reinsurance
Agreement Form (rev. 1961), and shall include direct access agreements, in such
amounts and in such form as shall otherwise be satisfactory to Buyer.
III.2. TITLE TO PERSONAL PROPERTY. At the Closing, Seller shall transfer
--------------------------
title to the Personal Property pursuant to the Bill of Sale, in the form of Bill
of Sale and Assignment attached as EXHIBIT "D" hereto ("BILL OF SALE") and shall
-----------
further transfer and assign all of Seller's rights in and to any Intangible
Property, pursuant to the Bill of Sale, and shall further transfer all of
Seller's rights, title and interest in and to the Leases pursuant to the
Assignment of Leases (as hereinafter defined). All such title and rights shall
be free of any liens, encumbrances or interests of third parties whatsoever.
4
<PAGE>
ARTICLE IV.
CONDITIONS TO CLOSING
---------------------
IV.1. BUYER'S DUE DILIGENCE CONDITIONS. For a period beginning on the
--------------------------------
Effective Date and expiring at 5:00 p.m. on the thirtieth (30th) day thereafter
("CONTINGENCY PERIOD") Buyer, Buyer's agents, contractors, subcontractors,
employees and its counsel shall have the right to perform due diligence on the
Property pursuant to the terms of this SECTION 4.1 as follows:
IV.1.1. APPROVAL OF TITLE. Buyer's approval of the following
-----------------
matters relating to the title of the Property:
(a TITLE COMMITMENT. Buyer shall obtain (i) a title
----------------
commitment ("COMMITMENT"), by the terms of which the Title Company agrees
to issue to Buyer, at Closing, the Title Policy in the amount of the
Purchase Price; (ii) a photocopy of all documents ("TITLE DOCUMENTS")
describing or evidencing all title exceptions shown on the Commitment; and
(iii) reports relating to judgment, UCC, and Federal and State tax lien
searches regarding the Seller and the Property (collectively, the
"REPORTS"), to be obtained by Buyer, but to be paid for by Seller at the
Closing.
(b SURVEY. Buyer shall secure an as-built survey
------
("SURVEY") of the Property, prepared by a registered land surveyor, duly
licensed in the State and certified to the Title Company and to the Buyer
in full ALTA/ASTM form.
(c REVIEW OF SURVEY AND COMMITMENT.
-------------------------------
(i As used herein, the term "TITLE OBJECTION PERIOD"
shall mean a period commencing on the first day following receipt by
Buyer of the Survey, the Commitment, the Reports and the Title
Documents and ending ten (10) days thereafter. All matters shown on
the Survey and exceptions listed in the Commitment or the Reports
which are not objected to by Buyer within the Title Objection Period,
shall be conclusively deemed to be acceptable to Buyer.
(ii In the event Buyer timely objects to any title
exception or Survey matter ("TITLE OBJECTION"), Seller may, but shall
not be obligated to, cure such Title Objection. Seller shall notify
Buyer, within five (5) days following receipt of the Title Objection,
of its decision as to whether or not it intends to cure the Title
Objection in question. In the event Seller notifies or its deemed to
have notified the Buyer that is unable or unwilling to cure any Title
Objection, Buyer may at its option (a) terminate this Agreement, or
(b) waive the Title Objections in question. The foregoing election
shall be made by Buyer in writing within ten (10) days following
Seller's notification. If any of the Title Objections consist of
delinquent taxes, delinquent assessments,
5
<PAGE>
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, Seller shall be
obligated to pay and discharge (or bond against in a manner sufficient
to cause the Title Company to insure over such Title Objections) any
such Title Objections. Bonds and assessments in respect to
improvements heretofore made to the Property which are reflected in
the Commitment shall not be deemed to be a Title Objection.
(iii Seller hereby agrees that it shall not, after
the Effective Date, subject the Property to or permit or suffer to
exist any liens, encumbrances, covenants, conditions, restrictions,
easements or other title matters other than those in existence on the
date hereof or seek any zoning changes or take any other action which
may affect or modify the status of title without Buyer's prior written
consent. Notwithstanding the foregoing, Buyer shall not be required to
accept title to the Property subject to any matters which may arise
subsequent to the effective date of the Title Commitment, Reports and
Survey examined by Buyer during the period described above.
(iv Notwithstanding anything herein to the contrary,
in any event Buyer's right to terminate this Agreement pursuant to any
provision of this SECTION 4.1.1 shall expire upon expiration of the
Contingency Period.
(v As used in this Agreement, the term "PERMITTED
EXCEPTIONS" shall mean all matters either shown on the Survey or
listed in the Commitment or the Reports to which Buyer does not raise
a Title Objection within the Title Objection Period or, having
objected, waives or is deemed to have waived in accordance with the
provisions of this SECTION 4.1.1, other than those Title Objections
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. It is understood and agreed that
the Property is being transferred hereunder free and clear of all
liens, claims and encumbrances except for the Permitted Exceptions.
(d TERMINATION OF THIS AGREEMENT. In the event of
-----------------------------
termination of this Agreement pursuant to this SECTION 4.1.1, the Earnest
Money shall be returned to Buyer and thereafter neither party shall have
any further rights or obligations hereunder.
IV.1.2. INSPECTIONS.
-----------
(a Buyer and Buyer's agents, contractors, subcontractors
or employees, shall have the right to conduct any and all inspections,
investigations, tests and studies (including, without limitation,
investigations with regard to zoning, building codes and other governmental
regulations, architectural inspections,
6
<PAGE>
engineering tests, economic feasibility studies, soils, seismic and
geologic reports and environmental testing) with respect to the Property as
Buyer may elect to make or maintain. During the Contingency Period, Buyer
and its agents and consultants shall have access to: (1) the Property; (2)
the tenants for interviews, which interviews shall be coordinated by
Seller, with Seller or its representative present if Seller so elects; and
(3) the books and records relating to the ownership and operation of the
Property, for the purpose of making such inspections, tests, copies and
verifications as Buyer shall deem reasonably necessary.
(b Prior to any entry onto the Property by Buyer's
agents, contractors, subcontractors or employees, Buyer shall deliver to
Seller a Certificate of Insurance for Buyer's commercial general liability
insurance policy which evidences that Buyer is carrying a commercial
general liability insurance policy with a financially responsible insurance
company (at least A-X in the latest edition of Best's Insurance Guide),
----------------------
covering (i) the activities of Buyer, and Buyer's agents, contractors,
subcontractors and employees on or upon the Property, and (ii) Buyer's
indemnity obligations set forth in this Agreement. Such Certificate shall
evidence that such insurance policy shall have a per occurrence limit
(including umbrella) of at least Five Million and no/100 Dollars
($5,000,000.00) and an aggregate limit (including umbrella) of at least Ten
Million and no/100 Dollars ($10,000,000.00), shall name Seller as an
additional insured, shall be primary and non-contributing with any other
insurance available to Seller, shall be issued on an occurrence basis, and
shall contain a full waiver of subrogation clause. Seller shall be named
as an additional insured under such policy in such Certificate.
(c Within five (5) days after Effective Date, Seller
shall deliver or cause to be delivered to Buyer at its offices in
Sacramento, California, the Due Diligence Documents listed on EXHIBIT "E"
-----------
attached hereto and made a part hereof for all purposes.
IV.1.3. AGREEMENTS. Buyer shall have approved the Leases, Service
----------
Contracts, Personal Property, and all other documents and materials to be
delivered to Buyer by Seller pursuant to the provisions of SECTION 4.1.2.
IV.1.4. INCOME TAX MATTERS. Buyer shall have received
------------------
satisfactory opinions from its legal counsel as to income tax matters in
connection with the transaction.
IV.1.5. AS-BUILT PLANS AND SPECIFICATIONS. Buyer and its
---------------------------------
architects, engineers and consultants shall have reviewed and approved the "AS-
BUILT" plans and specifications pursuant to which the Property was constructed,
including the confirmation of the net rentable area of the Property.
IV.1.6. PHYSICAL INSPECTION REPORTS. Buyer shall have obtained a
---------------------------
physical inspection report and an environmental report with respect to the Land
(including surrounding areas) and Improvements constituting the Property
prepared in accordance with the
7
<PAGE>
specifications submitted by Buyer and prepared by third-party specialists
selected by Buyer, and Buyer shall then determine in its sole discretion whether
it is willing to purchase the Property in the physical and environmental
condition set forth in said reports.
IV.1.7. FINANCIAL INFORMATION. Buyer shall have (a) verified to
---------------------
its satisfaction the accuracy of the rent roll (the "RENT ROLL") attached hereto
as EXHIBIT "F" and the accuracy of projections and other financial data with
-----------
respect to the Property which have been delivered to Buyer in the offering, (b)
determine that the creditworthiness of the tenants is within the reasonable
financial risk parameters of Buyer, (c) verify that it is willing to accept and
be bound by the actual terms of the Leases, and (d) verify that the Property has
sufficient automobile parking spaces (including, without limitation, handicap
spaces) to comply with the requirements of all governmental authorities and
ordinances and all tenant leases.
IV.1.8. APPROVAL BY BOARD OF DIRECTORS. Buyer shall have, within
------------------------------
ten (10) days following the Effective Date, obtained the approval of the Board
of Directors (the "BOARD") of Prentiss Properties Trust, a real estate
investment trust, which is a partner in Buyer. In the event the Board fails to
approve the transaction contemplated hereby Buyer shall so notify Seller in
which event this Agreement along with the Additional Property Agreements shall
terminate and the Earnest Money shall be returned to Buyer. The failure to
notify Seller of Buyer's election to terminate this Agreement in accordance with
the provisions of this SECTION 4.1.8 within such ten (10) day period shall be
deemed to be an election on the part of Buyer to waive such contingency.
IV.1.9. CONTINGENCY NOTICE.
------------------
(a) Prior to the expiration of the Contingency Period, Buyer shall
deliver to Seller and the Title Company a written notice ("CONTINGENCY
NOTICE") of its approval or disapproval of the Property, which shall be
subject to Buyer's sole and absolute discretion. In the event that Seller
does not receive a Contingency Notice approving the Property by the
expiration of the Contingency Period, this Agreement shall be deemed to
have been automatically terminated.
(b) Subject to the provisions of subparagraph (c) below, the
Contingency Notice for the Additional Properties must be consistent with
the Contingency Notice for the Property in respect to Buyer's approval or
disapproval of the Additional Properties. If the Contingency Notice is
inconsistent, this Agreement shall terminate.
(c) Notwithstanding the provisions of subparagraph (b) above, in the
event that (i) the Other Seller terminates the Additional Property
Agreement (the "2525 AGREEMENT") covering the Additional Property located
at 2525 Natomas Park Drive, Sacramento, California, pursuant to SECTION
2.1(c) thereof, or (ii) Buyer terminates the 2525 Agreement for any reason,
the effectiveness of this Agreement or the remaining Additional Property
Agreements shall not be affected. In the event of the termination of the
2525 Agreement pursuant to the foregoing provisions, this Agreement shall
remain in full force and effect, subject to the continued existence of the
remaining Additional Property Agreements.
8
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(d) Additionally, in the event that the Bannon Investors, one of the
Other Sellers under the Additional Property Agreements. which owns that
certain tract of land known as Tract A, terminates its Additional Property
Agreement (the "TRACT A AGREEMENT") in accordance with the provisions of
SECTION 2.1(c) the Tract A Agreement, Buyer, at its option, may elect (i)
to terminate this Agreement and the remaining Additional Property
Agreements, in which event the Earnest Money shall be returned to Buyer, or
(ii) to keep this Agreement as well as the remaining Additional Property
Agreements in full force and effect, in which event the parties shall
consummate the transactions contemplated thereby in accordance with the
respective terms and conditions of this Agreement and the remaining
Additional Property Agreements.
IV.2. APPROVAL BY SELLER'S PARTNERS. As a condition to Seller's
-----------------------------
obligations to consummate the transaction contemplated hereby, Seller shall
have, within ten (10) days following the Effective Date, obtained the approval
of the limited partners and other general partners (the "PARTNERS") of Seller.
In the event the Partners fail to approve the transaction contemplated hereby,
Seller shall so notify Buyer within such ten (10) day period, in which event
this Agreement along with the Additional Property Agreements shall terminate and
the Earnest Money shall be returned to Buyer. The failure by Seller to notify
Buyer of Seller's election to terminate this Agreement in accordance with the
provisions of this SECTION 4.2, within such ten (10) day period, shall be deemed
to be an election on the part of Seller to waive such contingency.
IV.3. BUYER'S CLOSING CONDITIONS. The following conditions are for the
--------------------------
benefit of Buyer and are conditions to the Closing, unless expressly waived by
Buyer on or before the Closing Date:
IV.3.1. TENANT ESTOPPEL CERTIFICATES. Seller shall deliver to
----------------------------
Buyer a current estoppel letter substantially in the form attached hereto as
EXHIBIT "G" from tenants of the Property (and other occupants to the extent that
- -----------
Seller has the contractual right to require such letters), in the aggregate
representing at least ninety percent (90%) of the occupied floor area of the
Property. In the event that Seller is unable to obtain an estoppel certificate
from any tenant which has leased less than ten thousand (10,000) square feet,
Seller shall furnish Buyer with a mutually acceptable, qualified estoppel
certificate concerning such Lease executed by Seller. Buyer shall provide Seller
with its desired form of estoppel certificates for each tenant on or before
twenty (20) days following the Effective Date. In addition, all tenants listed
on the Rent Roll or their subtenants occupying in excess of 10,000 square feet
of net rentable area will be in "MATERIAL COMPLIANCE" with the terms and
conditions of their respective leases (except for premises which may not yet be
ready for occupancy as the result of new leases or modified leases). The term
"MATERIAL COMPLIANCE" shall mean that the tenant in question is not more than
thirty (30) days in arrears in the payment of rent due under its lease and/or
the tenant in question has not filed for bankruptcy protection under applicable
law.
9
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IV.3.2. SIMULTANEOUS CLOSING. Subject to the provisions of SECTION
--------------------
4.1.9, in respect to the termination of the 2525 Agreement and the Tract A
Agreement, the Closing of the transaction contemplated hereby shall be
contingent upon the simultaneous closing of the Additional Properties pursuant
to the terms and conditions of the Additional Property Agreements.
Notwithstanding the foregoing, in the event (a) any of the Additional Property
Agreements are terminated as a result of a Seller default, or in accordance with
ARTICLE IX of the Additional Property Agreements, Buyer shall have the option,
in its sole discretion, to terminate this Agreement and the Earnest Money shall
be returned to Buyer or Buyer may waive the simultaneous closing condition and
consummate the transaction contemplated herein and (b) the Tract A Agreement or
the 2525 Agreement is terminated by Buyer or applicable Other Seller pursuant to
SECTION 2.1(c) thereof, Buyer shall have the right to terminate this Agreement,
in its sole discretion, in which event the Earnest Money shall be returned to
Buyer or Buyer may consummate the transaction contemplated herein without regard
to such termination.
IV.3.3. TITLE INSURANCE. As of the Closing Date, the Title
---------------
Company shall have issued or shall have committed to issue the Title Policy to
Buyer in respect to the Property.
IV.3.4. NO MATERIAL CHANGE. There shall be no material adverse
------------------
change in any of the items approved by Buyer during the Contingency Period,
including, without limitation, the physical condition of the Property and title
to the Property.
IV.3.5. TERMINATION OF AGREEMENTS. On the Closing Date, all
-------------------------
management and leasing agreements with respect to the Property shall be
terminated and Seller shall be solely responsible for any termination fees due
to the present property manager. In addition, Seller shall deliver full
releases from any leasing agents for any and all commissions which may become
payable after the Closing Date with respect to any then existing lease whether
currently earned or payable by virtue of renewal or expansion options.
IV.3.6. DELIVERY OF LEASES/DOCUMENTS. Buyer shall have received
----------------------------
signed originals or copies, certified by Seller as being true and correct of all
leases and contracts, together with all exhibits thereto, and to the extent in
Seller's possession or reasonably obtainable all warranties, licenses, permits
and agreements, together with all exhibits thereto.
IV.4. SELLER'S CLOSING CONDITIONS. The following conditions are for the
---------------------------
benefit of Seller and are conditions to the Closing, unless expressly waived by
Seller on or before the Closing Date:
IV.4.1. SIMULTANEOUS CLOSING. Subject to the provisions of
--------------------
SECTION 4.1.9 hereof, in respect to the termination of the 2525 Agreement and
the Tract A Agreement, the Closing shall be contingent upon the simultaneous
closing of the Additional Properties, pursuant to the terms and conditions of
the Additional Property Agreements.
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IV.5. FAILURE OF CONDITION TO CLOSE TO ESCROW. In the event any of the
---------------------------------------
conditions set forth in ARTICLE IV are not timely satisfied or waived by the
appropriate party benefitting by the conditions in question, for a reason other
than the default of Buyer, this Agreement shall, at the option of the party
benefitting by the conditions in question, terminate, the Earnest Money shall be
returned to Buyer and, except as otherwise provided herein, the parties shall
have no further obligations hereunder.
ARTICLE V.
CLOSING AND ESCROW
------------------
V.1. DEPOSIT WITH THE TITLE COMPANY AND ESCROW INSTRUCTIONS. Upon
------------------------------------------------------
execution of this Agreement, the parties hereto shall deposit one duplicate
original of this Agreement with the Title Company and this instrument shall
serve as the instructions to the Title Company for consummation of the purchase
and sale contemplated hereby. Seller and Buyer agree to execute such additional
and supplementary escrow instructions as may be appropriate to enable the Title
Company to comply with the terms of this Agreement; provided, however, that in
the event of any conflict between the provisions of this Agreement and any
supplementary escrow instructions, the terms of this Agreement shall control.
V.2. CLOSING.
-------
V.2.1. The closing hereunder ("CLOSING") shall be held at the
offices of the Title Company. The execution and exchange of documents shall
take place at the Closing on or before the twentieth (20th) day following the
expiration of the Contingency Period ("CLOSING DATE"). Such date may not be
otherwise extended without the written approval of both Seller and Buyer.
V.2.2. In the event the Closing does not occur on or before the
Closing Date, the Title Company shall, unless it is notified by both parties to
the contrary within ten (10) days after the Closing Date, return to the
depositor thereof all documents which may have been deposited hereunder.
V.3. DELIVERY BY SELLER TO THE TITLE COMPANY. Prior to the Closing Date,
---------------------------------------
Seller shall deliver to the Title Company:
(a The Deed, duly executed and acknowledged by Seller, in
recordable form, and ready for recordation on the Closing Date;
(b A certification duly executed by Seller under penalty of
perjury in the form of, and upon the terms set forth in, the Transferor's
Certification of Non-Foreign Status ("FIRPTA CERTIFICATE"), setting forth
Seller's address and federal tax identification number and certifying that
Seller is a "United States Person" and that Seller is not a "foreign person" in
accordance with and/or for the purpose of the provisions of Section 7701 and
1445 (as may be amended) of the Internal Revenue Code of 1954, as amended, and
any regulations promulgated thereunder. The FIRPTA Certificate shall be in the
form attached hereto as EXHIBIT "H"; and
-----------
11
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(c An Assignment of Rights, Leases and Security Deposits
("ASSIGNMENT OF LEASES"), in the form of EXHIBIT "I" duly executed by Seller, by
-----------
which Seller shall assign to Buyer all of Seller's interest in the Leases,
together with the interest of Seller in security deposits collected and held by
Seller to secure the performance of the duties and obligations of tenant under
the Leases.
V.4. DELIVERY BY SELLER TO BUYER. On or before the Closing Date, Seller
---------------------------
shall deliver to the Title Company, for ultimate delivery to Buyer, the
following:
(a The Bill of Sale duly executed by Seller;
(b The Rent Roll, certified by Seller and current as of the Closing
Date;
(c A schedule of Service Contracts current as of the Closing Date;
(d Tenant Estoppel Certificates from those tenants specified
pursuant to SECTION 4.2.1, to the extent not previously delivered to Buyer.
(e Originals or copies, certified by Seller as being true and
correct, of all Leases, together with all exhibits thereto;
(f Originals of all Service Contracts and any unexpired warranties
or guaranties received by Seller from any contractors, subcontractors, suppliers
or materialmen in connection with any construction, repair or alteration of the
Improvements or any tenant improvements;
(g All instruction manuals, procedure manuals, manufacturer's
warranties and similar materials in Seller's possession which relate to the
Property;
(h Notices to tenants under the Leases, in the form of EXHIBIT "J"
-----------
attached hereto, duly executed by Seller;
(i All keys to the Property;
(j Such resolutions, authorizations, bylaws or other corporate
and/or partnership documents or agreements relating to Seller as shall be
reasonably required by the Title Company in connection with this transaction;
and
(k Any other documents, instruments, data, records, correspondence
or agreements called for hereunder which have not previously been delivered.
The matters described in subparagraphs (e), (f), (g) and (i) shall be delivered
by making them available at the office of the property manager for the Property.
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<PAGE>
V.5. DELIVERY BY BUYER TO THE TITLE COMPANY. On or before the Closing
--------------------------------------
Date, Buyer shall deliver to the Title Company, for ultimate delivery to Seller:
(a) The Purchase Price described in SECTION 2.1, plus any additional
sums necessary, if any, for Buyer to pay its costs, expenses and prorations
pursuant to this ARTICLE V; and
(b) The Assignment of Leases, duly executed in recordable form by
Buyer.
V.6. OTHER INSTRUMENTS. Seller and Buyer shall each deliver such other
-----------------
instruments as are reasonably required by the Title Company or otherwise
required to close the escrow and consummate the purchase of the Property in
accordance with the terms hereof.
V.7. CLOSE OF ESCROW. Provided that (a) the Title Company has received
---------------
all required documents, instruments and funds, (b) the Title Company has not
received written notice from either Buyer or Seller that any of the conditions
to Closing set forth in ARTICLE IV have not been satisfied or waived, (c) any of
the representations and warranties made by either Buyer or Seller are untrue
either as of the Closing Date and (d) the Title Company is able to deliver to
Buyer the Title Policy described in SECTION 3.1.1 hereof, the Title Company is
authorized and instructed on the Closing Date to:
(a) Record the Deed and the Assignment of Leases with the Sacramento
County Recorder; and
(b) Deliver to Seller the sum described in SECTION 2.1 to Seller,
less Seller's share of prorations and costs of escrow. The Title Company
is instructed to request that the amount of the Documentary Transfer Tax
due be shown on a separate paper and affixed to the Deed by the County
Recorder after the permanent record is made.
V.8. PRORATIONS AND APPORTIONMENTS.
-----------------------------
V.8.1. All revenues and all expenses of the Property shall be
prorated and apportioned as of 12:01 a.m. on the Closing Date, so that Seller
shall bear all expenses with respect to the Property and shall have the benefit
of all income with respect to the Property through and including the period
preceding the Closing Date. Any revenue or expense amount which cannot be
ascertained with certainty as of the Closing Date shall be prorated on the basis
of the parties' reasonable estimates of such amount (other than reimbursements
for operating expenses not billed currently to tenants) and shall be the subject
of a final proration thirty (30) days after the Closing Date or as soon
thereafter as the precise amounts can be ascertained. A statement setting forth
such agreed prorations shall be delivered to the Title Company. The Title
Company shall not be required to calculate any prorations.
13
<PAGE>
V.8.2. Prepaid rents under the Leases shall be credited to Buyer.
Amounts for free rents, concessions, lease takeovers and similar matters not
previously paid or satisfied prior to the Closing Date shall be credited to
Buyer. Rents in arrears will not be prorated, but will be paid to Seller by
Buyer when collected by Buyer, such payment to occur every thirty (30) days
following the Closing Date. Except as expressly provided for in SECTION 5.10
below, the first monies received by Buyer from each tenant after the Closing
Date shall be applied first to current rents and other sums due and thereafter
shall be applied to rent in arrears.
V.8.3. Expenses to be prorated shall include taxes (other than
personal property taxes on Personal Property), payments under any Service
Contracts (provided that any delinquent payments owing to Seller shall be
treated in the same manner as delinquent rents), gas, electricity and other
utility charges, any unfixed meter charges, if any (apportioned on the basis of
the last meter reading), license and permit fees and other expenses customarily
prorated. If possible, in lieu of prorating, utilities and other expenses shall
be contracted for in the name of Buyer as of the Closing Date, with Seller being
responsible directly to the utility provider and others for accrued and unpaid
expenses. No prorations in respect to personal property taxes on Personal
Property based upon Seller's warranty that no personal property taxes have been
assessed against the Personal Property for the previous five (5) years.
V.9. COMPUTATION OF CERTAIN PRORATIONS. Final proration of percentage
---------------------------------
rents and similar apportionable items which are dependent for their calculation
upon the economic performance of the Property (or a portion thereof) over a
specified interval of time shall be accomplished as follows:
(a The parties shall await the expiration of the specified interval
to determine the gross rents, gross receipts and other economic performance
over the entire interval and then prorate the item by allocating to Seller
the product of the rents or other similar apportionable item for the entire
interval multiplied by a fraction, the numerator of which is the number of
days within the specified interval which occur before the Closing Date and
the denominator of which is the number of days in the specified interval.
(b Operating expenses which are payable (or reimbursable) by any
present or past tenant of the Property or any portion thereof, shall not be
prorated hereunder. Buyer shall send customary statements for
reimbursement of operating expenses and taxes to tenants under the Leases
after consulting with Seller with respect to appropriate amounts due
therefore, and shall remit to Seller, upon receipt, Seller's prorated share
thereof, determined as provided in SECTION 5.9(a) above, to the extent
Seller has previously paid or been charged for the expenses relating to
such reimbursement.
V.10. ARREARAGE. Seller reserves all claims and causes of action against
---------
tenants and others who are in arrears or who shall be obligated to pay monies in
the future which are for the benefit of Seller, and Buyer shall provide its
reasonable cooperation to Seller in pursuing
14
<PAGE>
such arrearage. Buyer shall use reasonable efforts to collect all sums in
arrears as of the closing Date due to Seller, but shall not be required to
commence or prosecute any litigation. Seller may not commence and prosecute
litigation against any tenant for rents in arrears as long as such tenant
remains a tenant of the Property, unless the statute of limitations will expire
within the succeeding sixty (60) days period. To the extent that Buyer receives
payments from tenants for sums due prior to the Closing Date, which can be
verified based upon invoices or other applicable billings, such payments,
including rents, shall be promptly remitted by Buyer to Seller.
V.11. PAYMENT OF ADJUSTMENTS TO PRORATION. Either party owing the other
-----------------------------------
party a sum of money based on adjustments made to prorations after the Closing
Date shall promptly pay that sum to the other party, together with interest
thereon at the rate of ten percent (10%) per annum to the date of payment if
payment is not made within ten (10) days after mutual agreement of the amount
due.
V.12. COSTS AND EXPENSES. Seller shall pay the costs associated with
------------------
the issuance of a California Land Title Association Owner's Policy of Title
Insurance in the full amount of the Purchase Price, the UCC and litigation
searches, documentary stamp taxes, recording fees, transfer taxes, escrow fees
and all costs incurred to repay any liens. Buyer shall pay the incremental
increase in costs relating to ALTA coverage, the costs of all endorsements
thereto and the cost of the Survey. Seller and Buyer shall each pay the fees and
expenses of their respective legal counsel incurred in connection with the
transaction.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
As an inducement to Buyer to enter into this Agreement, Seller hereby
represents and warrants to and agrees with Buyer as follows:
VI.1. AUTHORITY OF SELLER. Seller is a California limited partnership,
-------------------
duly organized and validly existing and in good standing under the laws of the
State of California, and has the authority to own and convey the Property, and
execute this Agreement. All documents executed by Seller which are to be
delivered to Buyer at the Closing are or at the time of Closing will be duly
authorized, executed and delivered by Seller and do not and at the time of
Closing will not violate any provisions of any agreement or judicial order to
which Seller is a party or to which Seller or the Property is subject.
VI.2. CONDITION OF PROPERTY. To Seller's Knowledge, as hereinafter
---------------------
defined, there are no material physical or mechanical defects in the Property,
including, without limitation, the elevators, escalators, plumbing, heating, air
conditioning, ventilating, life safety and electrical systems, and to Seller's
Knowledge, all such items are in good operating condition and repair and are in
compliance with all applicable governmental laws, ordinances, regulations and
requirements, other than compliance with the requirements of the Americans With
Disabilities Act, with respect to which Seller has commenced compliance in
accordance with the requirements thereof.
15
<PAGE>
VI.3. USE AND OPERATION. To Seller's Knowledge, the use and operation of
-----------------
the Property are in full compliance with applicable building codes, safety and
fire, environmental, zoning and land use laws, and other applicable local, state
and federal laws, ordinances, regulations and requirements, other than
compliance with the requirements of the Americans With Disabilities Act, with
respect to which Seller has commenced compliance in accordance with the
requirements thereof.
VI.4. LAND USE REGULATIONS. To Seller's Knowledge, there are no
--------------------
condemnation, environmental, zoning or other land use regulation proceedings,
either instituted, or planned to be instituted, which could detrimentally affect
the use or operation of the Property of its intended purpose or the value of the
Property, nor has Seller received notice of any special assessment proceedings
affecting the Property.
VI.5. LEASES. To Seller's Knowledge, the copies of the Leases to be made
------
available to Buyer pursuant to SECTION 4.1.2 are true and correct copies of all
Leases affecting the Property and are in full force and effect and there are no
other agreements, written or oral, with respect to the tenancies, except
subleases permitted by the respective Leases. To Seller's Knowledge:
(a) The information set forth in the Rent Roll is true and complete
as of the date such Rent Roll was made available to Buyer and there are no
leases of space in the Improvements and nonmaterial defaults under any of
the Leases which have not been disclosed to Buyer in writing.
(b) No tenant under any of the Leases has prepaid any rent or other
charges for more than the current month, except as disclosed to Buyer in
writing.
(c) No tenant under any of the Leases has any right or option to
purchase the Property or any portion thereof or interest therein, and there
are no outstanding agreements of sale with respect to the Property or any
portion thereof or any interest therein.
(d) Except as provided in the Leases and the Rent Roll, no tenant
under any of the Leases has the right to renew or extend any of the Leases
or has any options or rights of first refusal with respect to leasing of
other space, and no tenant under any of the Leases has the right to free
rent, rebate, allowance, concession, security or other deposit.
VI.6. BROKERAGE COMMISSIONS. Except as set forth in the Rent Roll or
---------------------
otherwise disclosed to Buyer in writing, there are no commissions, finder's fees
or other compensation owing or which may become owing to any broker or any other
person or entity with respect to any Lease or occupancy agreement including,
without limitation, any such compensation with respect to any future renewals,
extensions or expansions thereof.
VI.7. LITIGATION. Except as disclosed to Buyer in writing, there is no
----------
litigation pending or, to Seller's Knowledge, threatened, against Seller or any
basis therefor that arises
16
<PAGE>
out of the ownership of the Property or that might detrimentally affect the use
or operation of the Property for its intended purpose or the value of the
Property or adversely affect the ability of Seller to perform its obligations
under this Agreement.
VI.8. USE AND OPERATION OF PROPERTY. To Seller's Knowledge, Seller knows
-----------------------------
of no facts which would prevent Buyer from using and operating the Property
after Closing in the manner in which the Property has been used, leased and
operated prior to the date hereof.
VI.9. OTHER RIGHTS. No other person presently has a right of first refusal
------------
or other right to purchase or finance all or any part of the Property. In
consideration of Buyer's execution and delivery of this Agreement, Seller agrees
that so long as this Agreement has not been terminated or expired, Seller will
not negotiate or otherwise pursue any offers on the Property nor execute any
other letter of intent or contract for the financing, sale or purchase of the
Property.
VI.10. EMPLOYEES. Seller has no employees. There are no employees of
---------
Seller's agent (including the property manager) engaged in the operation or
maintenance of the Property for whom Buyer will be responsible after the Closing
Date unless Buyer agrees to employ such employees after the Closing Date.
VI.11. ENVIRONMENTAL. To Seller's Knowledge, the Property is not in
-------------
violation of any federal, state, local or administrative agency ordinance, law,
rule, regulation, order or requirement relating to environmental conditions or
Hazardous Material ("ENVIRONMENTAL LAWS"). Neither Seller, nor to Seller's
------------------
Knowledge, any third party, has (a) used, manufactured, generated, treated,
stored, disposed of, or released any Hazardous Material on, under or about the
Property or transported any Hazardous Material over the Property in violation of
the Environmental Laws, or (b) installed, used or removed any storage tank on,
from or in connection with the Property except in full compliance with all
Environmental Laws. To Seller's Knowledge, there are no storage tanks or wells
(whether existing or abandoned) located on, under or about the Property. To
Seller's Knowledge, the Property does not consist of any building materials that
contain Hazardous Material. For the purposes hereof, "HAZARDOUS MATERIAL" shall
mean any substance, chemical, waste or other material which is listed, defined
or otherwise identified as "hazardous" or "toxic" under any federal, state,
local or administrative agency ordinance or law.
17
<PAGE>
VI.12. "AS-IS" SALE.
------------
(a) Except as set forth above, Buyer acknowledges that Seller makes
no representation or warranty, either express or implied, with respect to
the Property, its present condition or its fitness or suitability for any
particular purpose. In this respect, Buyer confirms that it is relying
solely upon its investigation of the condition of the Property, its title
and all governmental laws and ordinances which might affect its use and
development. With the exception of matters which Seller has affirmatively
represented, actively concealed or fraudulently represented at the time of
sale and with the exception of the warranties contained in the conveyance
documents to be executed and delivered by Buyer, Buyer hereby releases and
forever discharges Seller, its partners, employees and agents from any and
all claims, rights, remedies and causes of action of any nature or sort,
known or unknown, past, present or future, which Buyer may have arising out
of the condition of the Property after the Closing Date.
(b) Buyer expressly waives the benefits and provisions of Section
1542 of the Civil Code of the State of California, and any similar law of
any state or territory of the United States or other jurisdiction. Civil
Code Section 1542 provides as follow:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
DEBTOR."
Initials of Buyer _________________
VI.13. SELLER'S KNOWLEDGE. The term "TO SELLER'S KNOWLEDGE," or
------------------
variations thereof, means the actual, present knowledge of the individual
general partners of Seller without any duty of inquiry or investigation, other
than Seller's obligation to make inquiry of its managing agent KCS Properties,
Inc. in an effort to determine that the employees of KCS Properties, Inc.
responsible for the day-to-day operation of the Property are not aware of any
fact or circumstance that would make any representation or warranty of Seller
untrue in any material respect.
VI.14. SURVIVAL. The representations and warranties of Seller
--------
contained herein shall survive the Closing Date, but shall terminate one (1)
year after the Closing Date. No liability shall arise thereunder unless suit
shall be filed against Seller as to the specific claim within such one (1) year
period.
VI.15. SUBSEQUENT DISCLOSURES. In the event Buyer, prior to the
----------------------
Closing Date, becomes aware, from Seller or otherwise, of any inaccuracy in the
disclosures, information or representations previously provided to Buyer, which
will have a material, adverse effect on Buyer, Buyer may either (i) terminate
this transaction contemplated hereby, receive a refund of the applicable portion
of the Deposit, and to the extent available pursue any rights or claims that
Buyer may have against Seller as a result of any inaccuracy in the disclosures,
information
18
<PAGE>
or representations previously provided to Buyer or (ii) proceed with the
Closing, thereby waiving any rights that Buyer may have against Seller as a
result of any inaccuracy in the disclosures, information or representations
previously provided to Buyer. In no event shall Buyer be entitled to complete
the Closing hereunder and then bring an action against Seller for damages as a
result of any inaccuracy in the disclosures, information or representations
previously provided to Buyer.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
VII.1. AUTHORITY OF BUYER. Buyer is duly organized and validly
------------------
existing under the laws of the State of Delaware and is in good standing and
authorized to do business under the laws of the State of California; this
Agreement and all documents executed by Buyer, which are to be delivered to
Seller at the Closing are or at the time of Closing will be (a) duly authorized,
executed, and delivered by Buyer, (b) be legal, valid, and binding obligations
of Buyer, and (c) not violate any provisions of any agreement or judicial order
to which Buyer is a party or to which it is subject.
VII.2. LITIGATION. There is no litigation pending or, to Buyer's
----------
knowledge, threatened, against Buyer or any basis therefor before any court or
administrative agency which might result in any material adverse change in the
business or financial condition of the Buyer.
ARTICLE VIII.
COVENANTS
---------
As matters as to which the Title Company need not be concerned, Seller and
Buyer covenant and agree with one another as follows:
VIII.1. INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify
-------------------------
Buyer and hold Buyer harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Buyer as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach of
covenant made by Seller in this Agreement or any document, certificate, or
exhibit given or delivered to Buyer pursuant to or in connection with this
Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring
before the Closing Date, or in any way related to or arising from any act,
conduct, omission, contract or commitment of Seller (or any of its agents
or employees) at any time or times before the Closing Date.
19
<PAGE>
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.2. INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify
------------------------
Seller and hold Seller harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Seller as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach of
covenant made by Buyer in this Agreement or any document, certificate, or
exhibit given or delivered to Seller pursuant to or in connection with this
Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring
after the Closing Date, or in any way related to or arising from any act,
conduct, omission, contract or commitment of Buyer (or any of its agents or
employees) at any time or times after the Closing Date.
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.3. MAINTENANCE. Seller shall, between the Seller's execution of
-----------
this Agreement and the Closing Date, at Seller's sole cost and expense, maintain
the Property in its present order, condition and repair, reasonable wear and
tear excepted, shall perform all work required to be done by the landlord under
the terms of any lease affecting the Property, and shall make all repairs,
maintenance and replacements of the Improvements and any Personal Property and
otherwise operate the Property in the same manner as before the making of this
Agreement, the same as though Seller were retaining the Property.
VIII.4. LEASES AND OTHER AGREEMENTS. Except as provided below, Seller
---------------------------
covenants and agrees that during the term of this Agreement, Seller or its
agents shall not amend or modify any Lease and shall not enter into any new
Lease, for any portion of the Property, without Buyer's prior written approval.
Seller's request for approval of any such new or modified Lease shall be
accompanied by the estimated cost of any tenant improvements associated
therewith and the amount of the real estate commission to be paid in conjunction
therewith. In the event that Buyer approves any new or modified Lease, upon the
Closing Date, Buyer shall be responsible for the cost of the tenant improvements
and the real estate commissions associated therewith prorated in an amount
proportional to the amount of rent paid thereunder before and after the Closing
Date. Buyer shall pay Seller on the Closing Date for any costs that Seller has
incurred for the tenant improvements and real estate commissions in excess of
its pro-rata share. Upon the Closing Date, all tenant improvement construction
contracts and brokerage agreements on such Leases shall be assigned to and
assumed by Buyer.
20
<PAGE>
VIII.5. RETURN OF INFORMATION. In the event that Buyer does not
---------------------
purchase the Property, Buyer shall promptly return to Seller all information
delivered by Seller to Buyer in conjunction with this transaction.
VIII.6. CONFIDENTIALITY. Except as hereinafter provided, from and after
---------------
the execution of this Agreement, Buyer and Seller shall keep the terms,
conditions and provisions of this Agreement confidential and neither shall make
any public announcements hereof unless the other first approves of same in
writing, nor shall either disclose the terms, conditions and provisions hereof,
or of any data regarding the Property, except to persons who "need to know",
such as their respective officers, directors, employees, attorneys, accountants,
engineers, surveyors, consultants, property managers, financiers, partners,
investors, potential lessees and bankers and such other third parties whose
assistance is required in connection with the consummation of this transaction.
Notwithstanding the foregoing, it is acknowledged that Buyer is an affiliate of,
a real estate investment trust (the "REIT") and the REIT has and will seek to
sell shares to the general public; consequently, Buyer 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 Buyer or Buyer's attorneys to satisfy disclosure and reporting
obligations of Buyer, the REIT, or its affiliates. After Closing, Buyer shall be
free to disclose previously confidential information in its sole, unfettered
discretion.
VIII.7. TAX DEFERRED EXCHANGE. Buyer acknowledges that Seller may
---------------------
desire to structure the sale of the Property as an exchange for like-kind
property under Section 1031 of the Internal Revenue Code of 1986 in order to
defer recognition of income on the disposition of the Property and/or other
properties. Buyer agrees to reasonably cooperate with Seller to accomplish such
exchange and Seller hereby agrees that any and all costs associated with said
exchange shall be borne solely by Seller and shall in no way be attributable to
Buyer. Buyer shall not be requested or required to take title to other property
in conjunction with such exchange.
VIII.8. TESTING SAMPLES. Any testing samples taken from the Property
---------------
during any inspection pursuant to this Agreement shall be divided and shared
with Seller. In the event that any test results or reports contain negative
information concerning the Property, Buyer shall promptly furnish Seller with
written correspondence summarizing the negative information including the name
and address of the consultant who discovered or learned of such information.
21
<PAGE>
VIII.9. TERMINATION OF AGREEMENT. On the Closing Date, all management
------------------------
and leasing agreements with respect to the Property shall be terminated and
Seller shall be solely responsible for any termination fees due. In addition,
Seller shall deliver full releases from any leasing agents for any and all
commissions which may become payable after the Closing Date with respect to any
then existing lease whether currently earned or payable by virtue of renewal or
expansion options. Seller shall also terminate all Service Contracts which
Buyer fails to elect to assume, such election to be made prior to the expiration
of the Contingency Period.
VIII.10. TRANSFER TAX ON WORKS OF ART. In the event that any transfer
----------------------------
tax is due or payable on the Works of Art pursuant to Section 982 of the
California Civil Code, Seller agrees to pay such tax to the artist in
conjunction with such transfer.
VIII.11. CHANGES BEFORE CLOSING. In the event that any of the
----------------------
representations or warranties by either party contained herein change or become
untrue prior to the Closing Date, such party agrees to notify the other party of
such change or untruthfulness promptly upon learning of such matter.
VIII.12. INDEPENDENT AUDIT. Promptly following the execution of this
-----------------
Agreement, Seller shall provide and shall cause its management company to
provide to Buyer's representatives and independent accounting firm access to
financial and other information relating to the Property in the possession of or
otherwise available to Seller, its affiliates or Seller's management company
which would be sufficient to enable Buyer's representatives and independent
accounting firm to prepare audited financial statements for the year 1996 and
the year to date in conformity with generally accepted accounting principles and
to enable them to prepare such statements, reports or disclosures as Buyer may
deem necessary or advisable. Seller shall also provide and/or shall cause its
management company to provide to Buyer's independent accounting firm 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. Seller shall authorize and shall cause its management company to
authorize any attorneys who have represented Seller or its management company in
material litigation pertaining to or affecting the Property to respond, at
Buyer's expense, to inquiries from Buyer's representatives and independent
accounting firm. If and to the extent Seller's financial statements pertaining
to the Property for any periods during the year 1996 and the year to date have
been audited, promptly after the execution of this Agreement Seller shall
provide Buyer with copies of such audited financial statements and shall
cooperate with Buyer's representatives and independent public accountants to
enable them to contact the auditors who prepared such audited financial
statements and to obtain, at Buyer's expense, a reissuance of such audited
financial statements. To the extent that Seller or its agents incur reasonable
expenses in connection with the performance of such audit, Buyer shall reimburse
Seller and its agents for such reasonable expenses.
22
<PAGE>
ARTICLE IX.
LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION
--------------------------------------------
IX.1. DAMAGE OR DESTRUCTION.
---------------------
IX.1.1. In the event that the Improvements are damaged or destroyed
by fire or other casualty prior to the Closing Date and such damage or
destruction is estimated to cost Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) or less in the aggregate to repair or replace (as verified by an
architect or contractor reasonably selected by Buyer) then the Closing Date
shall occur as scheduled notwithstanding such damage or destruction and Seller
shall pay to Buyer an amount sufficient to restore or repair such damage
(retaining the right to any claim Seller may have against any insurance
carrier).
IX.1.2. In the event that any of the Improvements are damaged or
destroyed by fire or other casualty prior to the Closing Date, and such damage
or destruction is estimated to cost more than Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) in the aggregate to repair or replace (as verified
by an architect or contractor reasonably selected by Buyer), then either Seller
or Buyer shall have the option to (i) terminate this Agreement by written notice
to Seller within fifteen (15) days after the occurrence of the damage or
destruction and the Earnest Money shall be immediately returned to Buyer or (ii)
consummate the transaction contemplated hereby in which event Seller's insurance
proceeds shall be transferred and assigned to Buyer, with Seller remaining
responsible for any deductible.
IX.2. CONDEMNATION. In the event that, prior to the Closing Date, a
------------
governmental entity shall commence any eminent domain proceeding to take any
material portion of the Property, then Buyer shall have the option to elect
either of the following:
(a) Terminate this Agreement by written notice to Seller within
fifteen (15) days of its receiving notice of such action of condemnation
and the Earnest Money shall be immediately returned to Buyer; or
(b) Elect to proceed with the transaction in which case the Purchase
Price shall not be reduced and Buyer shall be entitled to the net award
paid to Seller or Seller's mortgagee for such taking, if any, and Seller
shall assign and transfer to Buyer all right, title and interest in and to
any awards, it being expressly agreed that in such event Seller shall have
no obligation to repair or restore the Property or any portion thereof.
23
<PAGE>
ARTICLE IX.
DEFAULTS
--------
X.1. BUYER'S DEFAULT; SELLER'S REMEDIES. Buyer shall be deemed to be in
----------------------------------
default if, in respect to the transaction contemplated by this Agreement, at the
Closing, Buyer fails to deliver the Purchase Price or Buyer fails to meet,
comply with, or perform any covenant, agreement or obligation on the part of
Buyer within the time frames and in the manner required in this Agreement, for
any reason other than a default by Seller hereunder or termination of this
Agreement prior to Closing in accordance with the express terms and conditions
hereof. Seller's remedies shall be limited to the remedies set forth in SECTION
2.4 hereof. Any default by Buyer hereunder shall be deemed a default under each
of the Additional Property Agreements.
X.2. SELLER'S DEFAULTS; BUYER'S REMEDIES.
-----------------------------------
X.2.1. SELLER'S DEFAULTS. Seller shall be deemed to be in
------------------
default under this Agreement, if in respect to the transaction contemplated by
this Agreement, on or before the Closing, Seller shall have failed to meet,
comply with, or perform any covenant, agreement, or obligation on its part
required in this Agreement, within the time limits and in the manner required in
this Agreement, for any reason other than a default by Buyer hereunder or
termination of this Agreement prior to Closing pursuant to the express terms and
conditions hereof.
X.2.2. BUYER'S REMEDIES. If Seller is deemed to be in default
-----------------
hereunder, Buyer may, at Buyer's option, do either one of the following:
(a) Terminate this Agreement by written notice delivered to Seller
on or before ten (10) days following occurrence of such default;
(b) Seek and receive specific performance of Seller's obligations
hereunder to sell the Property for the Purchase Price and on the terms set
forth herein following the expiration of a five (5) day period following
the delivery of a written notice to Seller specifying the default in
question unless specific performance is not an available remedy because
Seller has voluntarily conveyed or encumbered the Property, in which event
Buyer may recover damages from Seller for any losses or costs suffered by
Buyer in connection with Seller's failure to perform its obligations
hereunder following the expiration of a five (5) day period following the
delivery of a written notice to Seller specifying the default in question.
ARTICLE XI.
MISCELLANEOUS
-------------
XI.1. NOTICES. All notices or other communications required or permitted
-------
hereunder shall be in writing, and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or sent
by electronic facsimile and shall be deemed received upon the earlier of (I) if
personally delivered, the date of delivery to the address of
24
<PAGE>
the person to receive such notice, (ii) if mailed, on the date of posting by the
United States Post Office, or (iii) if given by electronic facsimile, when
received by the other party.
25
<PAGE>
If to Seller: 1750 Creekside Oaks Investors
c/o Kelly Broadcasting
3 Television Circle
Sacramento, California 95814
Attention: Scott Nichols
Telephone No.: (916) 446-3333
Facsimile No.: (916) 325-3711
with a copy to: KCS Properties, Inc.
1451 River Park Drive, Suite 230
Sacramento, California 95815
Attention: William P. Krum
Telephone No.: (916) 920-1225
Facsimile No.: (916) 920-1395
with a copy to: Aguer-Pipgrass Associates
1851 Heritage Lane, Suite 128
Sacramento, California 95815
Attention: Thomas C. Aguer
Telephone No.: (916) 649-2777
Facsimile No.: (916) 649-3636
with a copy to: Trainor Robertson
701 University Avenue, Suite 200
Sacramento, California 95825
Attention: Charles W. Trainor, Esquire
Telephone No.: (916) 929-7000
Facsimile No.: (916) 929-7111
If to Buyer: Prentiss Properties Acquisition Partners, L.P.
3890 West Northwest Highway
Suite 400
Dallas, Texas 75220
Attention: Mark R. Doran
Telephone No.: (214) 654-5703
Facsimile No.: (214) 350-2437
with copies to: Snell, Brannian & Trent
8150 North Central Expressway, Suite 1800
Dallas, Texas 75201
Attention: Lawrence J. Brannian
Telephone No.: (214) 691-2500
Facsimile No.: (214) 691-2501
26
<PAGE>
If to the Title Company: First American Title Insurance Company
3030 LBJ Freeway, Suite 150
Dallas, Texas 75234
Attention: Ms. Jacqueline P. Aul
Telephone No.: (972) 620-7844
Facsimile No.: (972) 241-7112
with copies to: First American Title Insurance Company
1860 Howe Avenue, Suite 100
Sacramento, California 95825
Attention: Ms. Lisa Blazquez
Telephone No.: (916) 920-3100
Facsimile No.: (916) 927-8712
or such other address as either party may from time to time specify in writing
to the other in the manner aforesaid.
XI.2. BROKERS AND FINDERS. In connection with the transaction contemplated
-------------------
by this Agreement, Seller has agreed to pay a brokerage commission to Aguer
Pipgras Associates ("APA") and The CAC Group ("CAC"). Buyer and Seller each
represent and warrant to the other that (other than Seller's employment of APA
and CAC, neither has employed any real estate agent, brokerage or finder in
connection with this transaction. Buyer has not agreed to pay any real estate
commission or finder's fee in connection with this transaction. In the event of
a claim or broker's fee, finder's fee, commission or other similar compensation
in connection herewith other than as set forth above, Buyer, if such claim is
based upon any agreement alleged to have been made by Buyer, hereby agrees to
indemnify and hold Seller harmless against any and all liability, loss, cost,
damage or expense (including reasonable attorneys' fees and costs) which Seller
may sustain or incur by reason of such claim, and Seller, if such claim is based
upon any agreement alleged to have been made by Seller, hereby agrees to
indemnify and hold Buyer harmless against any and all liability, loss, cost,
damage or expense (including reasonable attorneys' fees and costs) which Buyer
may sustain or incur by reason of such claim. The provisions of this SECTION
11.2 shall survive the Closing.
XI.3. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the permitted successors and assigns of the
parties hereto.
XI.4. AMENDMENTS. This Agreement may be amended or modified only by a
----------
written instrument executed by the party asserted to be bound thereby.
XI.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
------------------------------------------
representations and warranties made by each party herein shall survive the
Closing for a period of one (1) year and shall not merge into the Grant Deed and
the recordation thereof in the Official Records of Sacramento County,
California.
XI.6. CONSTRUCTION. Headings at the beginning of each section and
------------
subsection are
27
<PAGE>
solely for the convenience of the parties and are not a part of the Agreement.
Whenever required by the context of this Agreement, the singular shall include
the plural and the masculine shall include the feminine and vice versa. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to paragraphs, sections, subparagraphs and subsections
are to this Agreement.
XI.7. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California. Any actions filed by
either party involving the other party shall be venued in Sacramento County,
California.
XI.8. PRIOR AGREEMENTS. This Agreement (including all Exhibits attached
----------------
hereto) together with the Earnest Money Letter is the final expression of, and
contains the entire agreements between the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented, superseded, canceled or
terminated nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein. The parties do not intend
to confer any benefit hereunder on any person, firm or corporation other than
the parties hereto and lawful assignees.
XI.9. ATTORNEYS' FEES. In the event of the bringing of any action or suit
---------------
by a party hereto against another party hereunder by reason of any breach of any
of the covenants, agreements or provisions on the part of the other party
arising out of this Agreement, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including actual attorneys' fees, accounting and
engineering fees, and any other professional fees resulting therefrom.
XI.10. TIME OF THE ESSENCE. Seller and Buyer hereby acknowledge and
-------------------
agree that time is strictly of the essence with respect to each and every term,
condition, obligation and provision hereof and that failure to timely perform
any of the terms, conditions, obligations or provisions hereof by either party
shall constitute a material breach of and a non-curable (but waivable) default
under this Agreement by the party so failing to perform.
XI.11. RELATIONSHIP OF PARTIES. Nothing contained in this Agreement
-----------------------
shall be deemed or construed by the parties to create the relationship of
principal and agent, a partnership, joint venture or any other association
between Buyer and Seller.
XI.12. WAIVERS. No waiver of any breach of any covenant or provision
-------
herein contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension
of time for performance of any obligation or act shall be deemed an extension of
the time for performance of any other obligation or act except those of the
waiving party, which shall be extended by a period of time equal to the period
of the delay.
28
<PAGE>
XI.13. PARTIAL INVALIDITY. If any term or provision 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 or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each such term and provision of this Agreement shall be valid and be enforced to
the fullest extent permitted by law.
XI.14. DISCLOSURE. Thomas C. Aguer, one of the general partners of
----------
Seller, hereby discloses that he has an ownership interest in Seller and is a
licensed California real estate broker.
XI.15. CONDITION PRECEDENT/CONCURRENT. This Agreement shall only be
------------------------------
valid if Buyer and Seller simultaneously execute the Additional Property
Agreements and this Agreement. Any default by Buyer under the terms of the
Additional Property Agreements shall give Seller the right to declare a default
under this Agreement.
XI.16. DAYS OF WEEK/TIME. In the event the date on which Buyer or
-----------------
Seller is required to take any action under the terms of this Agreement is not a
business day, the action shall be taken on the next succeeding business day.
All times referenced herein are the times of day in Sacramento, California on
the date in question.
XI.17. EXHIBITS/RECITALS. All exhibits referred to in this Agreement
-----------------
are attached and incorporated by this reference. All of the Recitals set forth
above are true and correct.
XI.18. POSSESSION. Possession of the Property shall be delivered to
----------
Buyer on the Closing Date, subject to the rights of any tenants or subtenants in
the Property.
XI.19. ASSIGNMENT. Buyer shall not assign, transfer or convey its
----------
rights and/or obligations under this Agreement and/or with respect to the
Property to any other party without the prior written consent of Seller, which
consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, Buyer shall have the right to assign its rights under this Agreement
to any affiliate of Buyer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
PRENTISS PROPERTIES ACQUISITION
PARTNERS, L.P., a Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By:
---------------------------------------
Name: Mark R. Doran
Title: Executive Vice President
29
<PAGE>
SELLER:
1750 CREEKSIDE OAKS INVESTORS, a California
limited partnership
By:
---------------------------------------
Name: Jon S. Kelly
Title: Managing General Partner
The undersigned acknowledges receipt of this Agreement and agrees to act as
the Title Company hereunder.
FIRST AMERICAN TITLE INSURANCE COMPANY
By:
---------------------------------------
Name: Jacqueline P. Aul
Title:
------------------------------------
30
<PAGE>
EXHIBIT LIST
------------
Exhibit A Legal Description
Exhibit B Additional Properties
Exhibit C Grant Deed
Exhibit D Bill of Sale
Exhibit E Due Diligence Materials
Exhibit F Rent Roll
Exhibit G Tenant Estoppel
Exhibit H Transferor's Certification of Non-Foreign
Status
Exhibit I Assignment of Rights, Leases and Security
Deposits
Exhibit J Notices to Tenant
Exhibit K Works of Art
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
-----------------
The land situated in the State of California, County of Sacramento, City of
Sacramento and is described as follows:
Parcel 1 as shown on the Parcel Map entitled "All of Parcel D, 103 P.M., 11,"
recorded in Book 115 of Parcel Maps, Map No. 25, records of said County.
EXCEPTING THEREFROM all minerals, oil, gas and other hydrocarbon substances
lying below a depth of 500 feet from the surface of said land and real property,
whether now known to exist or hereafter discovered, without, however, any right
to use the surface of such land and real property or any other portion thereof
above a depth of 500 feet from the surface of such land and real property for
any purpose whatsoever, as reserved in that certain Deed recorded December 9,
1983 from Sacramento Savings & Loan Association to Christo D. Bardis et al.,
Serial #213662, Official Records of Sacramento County.
<PAGE>
EXHIBIT B
ADDITIONAL PROPERTIES
---------------------
1740 Creekside Oaks Investors 1740 Creekside Oaks Drive, Sacramento, CA
1760 Creekside Oaks Investors 1760 Creekside Oaks Drive, Sacramento, CA
2525 Natomas Investors 2525 Natomas Park Drive, Sacramento, CA
2495 Natomas Investors 2495 Natomas Park Drive, Sacramento, CA
River City Bank 2485 Natomas Park Drive, Sacramento, CA
Bannon Investors Tract A, Natomas Center, Sacramento, CA
Natomas Investors et al Tract D, Natomas Center, Sacramento, CA
<PAGE>
EXHIBIT C
GRANT DEED
----------
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MAIL TAX STATEMENTS TO:
GRANT DEED
----------
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
_______________, a _______________________ ("GRANTOR"), hereby grants to
____________________, a _______________________ ("GRANTEE"), that certain real
property ("LAND") located in the City of Sacramento, County of Sacramento, State
of California, more particularly described in Exhibit A attached hereto together
---------
with all right, title and interest of Grantor in and to all buildings and
improvements now located or hereafter constructed on the Land.
Grantor hereby further grants to Grantee all of Grantor's right, title and
interest in and to all easements, privileges and rights appurtenant to the real
property and pertaining or held and enjoyed in connection therewith and all of
Grantor's right, title and interest in and to any land lying in the bed of any
street, alley, road or avenue to the centerline thereof in front of or adjoining
the Land.
IN WITNESS WHEREOF, Grantor has executed this Grant Deed as of
______________, 19__.
-------------------------------------
By:
----------------------------------
<PAGE>
SEPARATE STATEMENT OF
DOCUMENTARY TRANSFER TAX
County Recorder
Sacramento County
Sacramento, California
Dear Sir:
In accordance with Revenue and Taxation Code Section 11932, it is required
that this statement of documentary transfer tax due should not be recorded with
the attached Deed, but be affixed to the Deed after recordation and before
return as directed on the Deed.
The Deed names _______________________, a _______________________, as
Grantor and ______________________, a ______________________ as Grantee. The
property being transferred is located in the City of Sacramento, County of
Sacramento, State of California.
The amount of documentary transfer tax due on the attached deed is
___________________ Dollars and _______________ Cents ($________________),
computed on the full value of the property (less the value of any liens and
encumbrances remaining on the property at the time of sale).
Very truly yours,
By
-----------------------
<PAGE>
EXHIBIT D
BILL OF SALE
------------
Concurrently with the execution and delivery of this Bill of Sale (the
"Assignment"), 1750 CREEKSIDE OAKS INVESTORS, a California limited partnership
("Assignor"), is conveying to PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership ("Assignee"), by Grant Deed (the "Deed"), that
certain tract of land located in Sacramento County, California, being more
particularly described on Exhibit "A" attached hereto and made a part hereof for
-----------
all purposes, together with the improvements located thereon (collectively the
"Property").
Assignor desires to assign, transfer, and convey to Assignee certain
tangible personal property, together with certain contract rights, guaranties,
licenses, and other specified items of intangible property (but specifically
excluding cash), affixed or attached to the Property, except those owned by
tenants of the Property (such tangible and intangible properties herein below
specified being collectively called the "Assigned Properties").
NOW, THEREFORE, in consideration of the receipt of Ten Dollars ($10.00) and
other good and valuable consideration in hand paid by Assignee to Assignor, the
receipt and sufficiency of which are acknowledged and confessed by Assignor,
Assignor ASSIGNS, TRANSFERS, SETS OVER, and DELIVERS to Assignee, its successors
and assigns, subject to any and all matters of record in Sacramento County,
California, to the extent they affect the Property, all of the Assigned
Properties, including, without limitation of the generality of the foregoing,
the following:
1. All of the personal property owned by Assignor located on or in or
used in connection with the Property, including without limitation the items of
tangible personal property consisting of all furniture, fixtures, equipment,
machinery and other personal property of every kind and nature (excluding cash-
on-hand) located on or used or useful in the operation of the Property including
the works of art listed on Exhibit "B".
-----------
2. All of the right, title and interest of Assignor in any intangible
personal property owned by Assignor and used exclusively in the use and
operation of the Property, and all warranties or guarantees received by Assignor
from any contractors, subcontractors, suppliers or material men in connection
with any construction, repairs or alteration of the Property, licenses,
franchises, permits, tenant lists, advertising materials and other similar
rights relating to the use and operation of the Property.
3. The interest of Assignor under all current design contracts, space
planning contracts, construction contracts, subcontracts and purchase orders,
utility contracts, water and sewer service contracts of any nature, maintenance
contracts, management contracts, mortgage documents, certificates of occupancy,
permits, soils reports, insurance policies, and other contracts or documents of
any nature relating to the Property.
<PAGE>
4. The trade name "Natomas Corporate Center" (the "Trade Name"), on a
non-exclusive basis, and the business and good will of Assignor which were
acquired in connection with the Property.
TO HAVE AND TO HOLD the Assigned Properties unto Assignee, its successors,
and assigns, forever, and Assignor binds itself, its successors, and assigns, to
WARRANT and FOREVER DEFEND, all and singular, title to the Assigned Properties
(with the exception of the Trade Name) unto Assignee, its successors, and
assigns, against every person whomsoever lawfully claiming or to claim the same
or any part thereof, by, through or under Assignor but not otherwise.
Assignor shall not be responsible for the discharge and performance of any
duties or obligations to be performed and/or discharged in connection with the
Assigned Properties after the date hereof. By acceptance of this Assignment,
Assignee accepts and agrees to perform all of the terms, covenants, and
conditions in connection with the Assigned Properties required to be performed
by the owner thereof, from and after the date hereof, but not prior thereto, and
agrees to indemnify, save, and hold harmless Assignor from and against any and
all loss, liability, claims, or causes of action existing in favor of or
asserted by any party arising out of or relating to Assignee's failure to
perform any duties or obligations required by the owner of the Assigned
Properties after the date hereof.
Assignee shall not be responsible for the discharge and performance of any
duties or obligations required to be performed and/or discharged in connection
with the Assigned Properties prior to the date hereof. In such regard Assignor
agrees to indemnify and hold Assignee harmless from and against losses incurred
by Assignee as a result of claims brought against Assignee, as Assignor's
successor in interest to the Assigned Properties, relating to causes of action
arising from any failure by Assignor to perform or discharge its obligation as
the owner of the Assigned Properties prior to the date hereof.
Simultaneously with the execution and delivery of this Assignment, Assignor
has executed and delivered to Assignee the Deed and the specific conveyances
described in the recitals hereof.
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment in
multiple counterparts, each of which shall have the same force and effect as an
original, but which shall constitute one and the same instrument, effective this
__________ day of ____________, 1997.
ASSIGNEE:
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By:
--------------------------------------------
Name: Mark R. Doran
Title: Executive Vice President
ASSIGNOR:
1750 CREEKSIDE OAKS INVESTORS, a California
limited partnership
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
<PAGE>
EXHIBIT "A"
-----------
PROPERTY DESCRIPTION
<PAGE>
EXHIBIT "B"
-----------
WORKS OF ART
<PAGE>
EXHIBIT E
DUE DILIGENCE DOCUMENTS
-----------------------
1. Form Lease
2. All tenant leases and amendments
3. Leasing Status reports, weekly basis
4. Lease proposals
5. Service and Purchase Contracts
6. Equipment Leases
7. Union Contracts
8. Other Contracts and Agreements
9. Operating Licenses and Permits
10. Lease Commission Agreements and Schedules of Commissions Payable
11. Current Year Operating Budget
12. Operating Statements, past two years and current year, monthly basis
13. Receivables Report, update on monthly basis
14. Rent Roll, update on monthly basis
15. Billing Register, update on monthly basis
16. Escalation Work Papers and Base Year Amount Details
17. Utility Invoices, past two years and current monthly
18. Real Estate Tax Bills, past two years
19. Current Notice of Assessment Valuation
20. Tax Parcel Map
21. Real Estate Tax Consultant Report
22. Tenant Credit Reports (to the extent that they are in the tenant files) to
be reviewed at the Property during the Due Diligence Period
23. Tenant Financial Statements (to the extent that they are in the tenant
files) to be reviewed at the Property during the Due Diligence Period
24. Schedule of Capital and Tenant Improvements
25. Current Schedule of Insurance
26. Pending Insurance Claims
27. List of Personnel & Wages
28. Lease and Tenant Files, to be reviewed at the Property during the Due
Diligence Period
29. Vendor Files, to be reviewed at the Property during the Due Diligence
Period
30. Construction Files, to be reviewed at the Property during the Due Diligence
Period
31. Other Property Files, to be reviewed at the Property during the Due
Diligence Period
32. List of Personal Property
33. Demising/Leasing/Site Plan
34. Plans and Specifications, 2 sets of each
(a) Architectural
(b) Structural
(c) Civil
(d) Mechanical
(e) Landscaping
<PAGE>
(f) Sprinkler
(g) Tenant
35. Certificates of Occupancy, building and tenant
36. Construction Contracts
37. Guaranties & Warranties
38. Existing Reports
(a) Structural and Engineering
(b) Environmental and Asbestos
(c) Soils
(d) Radon
(e) Geotechnical
(f) Ground Water Monitoring
(g) Sprinkler Test
(h) Elevator Consultant
39. Preliminary Title Report issued by Stewart Title Guaranty
40. Underlying Recorded Documents
41. Existing Survey
<PAGE>
EXHIBIT F
RENT ROLL
---------
To be delivered to Buyer and/or Seller within 5 business days
of the Effective Date
<PAGE>
EXHIBIT G
TENANT ESTOPPEL
---------------
To be delivered to Buyer and/or Seller within 5 business days
of the Effective Date
<PAGE>
EXHIBIT H
TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
------------------------------------------------
To inform PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware
limited partnership ("TRANSFEREE"), that withholding of tax under Section 1445
of the Internal Revenue Code of 1986, as amended ("CODE"), will not be required
upon the transfer of certain real property to the Transferee by 1750 CREEKSIDE
OAKS INVESTORS, a California limited partnership ("TRANSFEROR"), the undersigned
hereby certifies the following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Code and the
Income Tax Regulations promulgated thereunder);
2. The Transferor's U.S. employer identification is ________________;
and
3. The transferor's office address is _______________________________.
The Transferor understands that this Certification may be disclosed to the
Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
The Transferor understands that the Transferee is relying on this
Certification in determining whether withholding is required upon said transfer.
The Transferor hereby agrees to indemnify, defend and hold the Transferee
harmless from and against any and all obligations, liabilities, claims, losses,
actions, causes of action, rights, demands, damages, costs and expenses of every
kind, nature or character whatsoever (including, without limitation, actual
attorneys' fees and court costs) incurred by the Transferee as a result of: (i)
the Transferor's failure to pay U.S. federal income tax which the Transferor is
required to pay under applicable U.S. law; or (ii) any false or misleading
statement contained herein.
Under penalty of perjury I declare that I have examined this Certification
and to the best of my knowledge and belief it is true, correct and complete, and
I further declare that I have authority to sign this document on behalf of the
Transferor.
Dated:__________, 1997 1750 CREEKSIDE OAKS INVESTORS, A
CALIFORNIA LIMITED PARTNERSHIP
BY:
----------------------------------
BY:
----------------------------------
<PAGE>
EXHIBIT I
ASSIGNMENT OF LEASES
--------------------
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
SPACE ABOVE THIS LINE FOR RECORDER'S USE
ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS
THIS ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS is made as of ____,
1997 by ____, a ________ ("Assignor"), in favor of __, a ________ ("Assignee"),
with reference to the following facts:
A. Assignor is the owner of that certain land ("Land") located in the
City of Sacramento, County of Sacramento, State of California more particularly
described in Schedule 1 hereto, and all rights, privileges and easements
appurtenant to the Land ("Appurtenances"), and all buildings and other
improvements thereon ("Improvements"). The Land, the Appurtenances, and the
Improvements are hereinafter referred to collectively as the "Real Property."
The Real Property is being conveyed to Assignee pursuant to a Grant Deed of even
date herewith, executed by Assignor in favor of Assignee which is being recorded
concurrently herewith.
B. Assignor, as owner of the Real Property, has an interest, as
landlord, in the tenant leases of space in the Improvements ("Leases"), which
are described in Schedule 2 hereto, and an interest in certain security deposits
collected and held by Assignor to secure the performance of the duties and
obligations of tenants under certain of the Leases ("Security Deposits").
C. Assignor desires to assign, transfer and convey to Assignee all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
NOW, THEREFORE, Assignor agrees as follows:
1. Assignor hereby assigns, transfers and conveys to Assignee, all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
<PAGE>
2. Assignor warrants and represents that:
(a) Schedule 2 hereto is a list of all of the leases affecting the Real
Property, other than subleases permitted by the respective leases; Assignor has
not executed or otherwise entered into any other leases, tenancies, occupancy
agreements or other agreements with respect to rights affecting possession of
the Real Property or any portion thereof; and there are no such agreements
executed or otherwise entered into by any third party, and
(b) the Leases are in full force and effect and there is no default on the
part of Assignor as landlord or on the part of any tenant, and there exists no
condition that with the passage of time or the giving of notice or both would
constitute such a default.
(c) Cross-Indemnity.
---------------
(i) By Assignor. Assignor indemnifies and holds harmless Assignee
-----------
from and against any and all loss, damage, liability, cost or expense,
including, without limitation, court costs and reasonable attorneys' fees,
arising out of, by reason of, or in connection with any action, suit, charge,
complaint, proceeding, obligation, undertaking or other similar matter arising
out of or in connection with any transaction, event, act or omission involving
the Leases and Security Deposits which occurred, accrued and/or arose prior to
the date hereof.
(ii) By Assignee. Assignee indemnifies and holds harmless Assignor
-----------
from and against any and all loss, damage, liability, cost or expense,
including, without limitation, court costs and reasonable attorneys' fees,
arising out of, by reason of, or in connection with any action, suit, charge,
complaint, proceeding, obligation, undertaking or other similar matter arising
out of or in connection with any transaction, event, undertaking, act or
omission involving the Leases and Security Deposits which occurs, accrues and
arises from and after the date hereof.
3. The provisions of this Agreement of Rights, Leases and Security
Deposits shall be binding upon and inure to the benefit of Assignor and Assignee
and their respective successors and permitted assigns.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment of
Rights, Leases and Security Deposits as of the date first set forth above.
ASSIGNEE: ASSIGNOR:
BY: BY:
- ------------------------------ --------------------------------
ITS: ITS:
- ------------------------------ --------------------------------
DATE: DATE:
- ------------------------------ --------------------------------
<PAGE>
EXHIBIT J
NOTICES TO TENANT
-----------------
Premises: _______________________
Lease dated ___________ between ___________, a
Landlord, and _______, a
, Tenant
This is to notify you that the undersigned has sold its fee interest in the
__________ connection therewith has assigned its interest as landlord under your
lease to and in _________, a __________, whose address is _____________.
You are further notified that commencing ____________ payments under your
Lease shall be paid to _______________ paragraph hereof, unless you are
otherwise notified in writing by notified that all notices to the Landlord
pursuant to your lease should hereafter be sent to, 1997, all rental notified
in writing by, at the address specified in the first. You are further at the
address specified in the first paragraph hereof unless you are otherwise.
Very truly yours,
CERTIFIED MAIL,
RETURN RECEIPT REQUESTED.
<PAGE>
EXHIBIT K
WORKS OF ART
------------
To be delivered to Buyer and/or Seller within 5 business days
of the Effective Date
<PAGE>
EXHIBIT 10.3
AGREEMENT OF PURCHASE AND SALE
AND ESCROW INSTRUCTIONS
(1760 CREEKSIDE OAKS DRIVE)
This Agreement of Purchase and Sale and Escrow Instructions ("AGREEMENT"),
dated for reference purposes as of February 17, 1997, is entered into by and
between 1760 CREEKSIDE OAKS INVESTORS, a California limited partnership
("SELLER"), and PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P. , a Delaware
limited partnership ("BUYER").
RECITALS
A. Seller is the owner of approximately 4.23 acres of land located in
the City of Sacramento, County of Sacramento, State of California ("LAND"), more
particularly described in EXHIBIT "A" hereto and made a part hereof for all
-----------
purposes.
B. The Land has been improved with a two (2) story office building,
containing approximately 59,462 net rentable square feet and related
improvements.
C. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer the "PROPERTY" (as hereinafter defined in SECTION 1.8) on the terms and
conditions set forth herein.
D. In conjunction with its purchase of the Property, Buyer is also
purchasing the real properties located at the addresses ("ADDITIONAL
PROPERTIES") more particularly described in EXHIBIT "B" hereto and made a part
-----------
hereof for all purposes, from the sellers (the "OTHER SELLERS") listed therein
pursuant to certain Agreements of Purchase and Sale and Escrow Instructions of
even date herewith ("ADDITIONAL PROPERTY AGREEMENTS"), the simultaneous purchase
of which shall be a condition concurrent to Buyer's purchase of the Property
hereunder.
NOW, THEREFORE, Seller and Buyer agree as follows:
AGREEMENT
ARTICLE I.
PROPERTY
--------
Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees
to purchase from Seller, subject to the terms and conditions set forth herein,
the following:
I.1. LAND. The Land;
----
I.2. APPURTENANCES. All rights, privileges and easements appurtenant to
-------------
the Land,
<PAGE>
including, without limitation, all minerals, oil, gas and other hydrocarbon
substances on and under the Land (to the extent owned by Seller) as well as all
development rights, air rights, water, water rights and water stock relating to
the Land and any other easements, rights-of-way or appurtenances, used in
connection with the beneficial use and enjoyment of the Land (all of which are
collectively referred to as the "APPURTENANCES");
I.3. IMPROVEMENTS. All buildings improvements and fixtures located on
------------
the Land, including, without limitation, all fixtures, apparatus, equipment and
appliances used in connection with the operation or occupancy thereof, such as
heating and air conditioning systems and facilities used to provide any utility
services, parking services, refrigeration, ventilation, trash disposal,
recreation or other services thereto (all of which are collectively referred to
as the "IMPROVEMENTS");
I.4. PERSONAL PROPERTY. All of the personal property owned by Seller
-----------------
located on or in or used in connection with the Property ("PERSONAL PROPERTY"),
including without limitation the items of tangible personal property consisting
of all furniture, fixtures, equipment, machinery and other personal property of
every kind and nature (excluding cash-on-hand) owned by Seller and located on or
used or useful in the operation of the Property, all of which will be assigned
pursuant to the Bill of Sale, as hereinafter defined, which Personal Property
includes the works of art listed on EXHIBIT "K" ("WORKS OF ART");
-----------
I.5. INTANGIBLE PROPERTY. All of the right, title and interest of Seller
-------------------
in any intangible personal property owned by Seller and used exclusively in the
use and operation of the Improvements, and all warranties or guarantees received
by Seller from any contractors, subcontractors, suppliers or materialmen in
connection with any construction, repairs or alteration of the Improvements,
licenses, franchises, permits, tenant lists, advertising materials and other
similar rights relating to the use and operation of the Property (all of which
are collectively referred to as the "INTANGIBLE PROPERTY"), all of which shall
be assigned to Buyer pursuant to the Bill of Sale;
I.6. LEASES. The interest of Seller as landlord under all leases of
------
space in the Improvements ("LEASES") in effect on the Closing Date;
I.7. SERVICE CONTRACTS. The interest of Seller under all current design
-----------------
contracts, space planning contracts, construction contracts, subcontracts and
purchase orders, utility contracts, water and sewer service contracts of any
nature, maintenance contracts, management contracts, mortgage documents,
certificates of occupancy, permits, soils reports, insurance policies, and other
contracts or documents of any nature relating to the Property which are to be
assigned to Buyer at the Closing ("SERVICE CONTRACTS"). All such Service
Contracts approved by Buyer shall be transferred and assigned to Buyer by the
Bill of Sale; and
I.8. PROPERTY. All of the items described in SECTIONS 1.1 through 1.7
--------
above are herein collectively referred to as the "PROPERTY." The items described
in SECTIONS 1.1, 1.2 and 1.3 are herein referred to collectively as the "REAL
PROPERTY."
ARTICLE II.
2
<PAGE>
PURCHASE PRICE
--------------
II.1. PURCHASE PRICE. The purchase price for the Property shall be the
--------------
sum of Six Million Five Hundred Thousand and No/100ths Dollars ($6,500,000.00)
(the "PURCHASE PRICE"). A portion of the Purchase Price has been allocated to
the purchase of the Works of Art in the manner set forth on EXHIBIT "K" attached
-----------
hereto and made a part hereof for all purposes.
II.2. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by
-------------------------
Buyer in cash by wire transfer on the Closing Date.
II.3. EARNEST MONEY.
-------------
(a) Within two (2) business days following the Effective Date, Buyer
shall deposit, or cause to be deposited with First American Title Insurance
Company, located at 3030 LBJ Freeway, Suite 150, Dallas, Texas 75234; Attn.
Jacqueline P. Aul (the "TITLE COMPANY"), in cash, by certified or bank cashier's
check made payable to the Title Company, or by a confirmed wire transfer of
funds, the sum of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the
"EARNEST MONEY") in accordance with the terms of that certain letter agreement
(the "EARNEST MONEY LETTER") of even date herewith by and between Buyer, the
Title Company, Seller and the Other Sellers. The Earnest Money constitutes
escrow deposit under this Agreement and the Additional Property Agreements. The
Earnest Money shall be held and disbursed in accordance with the terms of the
Earnest Money Letter.
(b) The term "EFFECTIVE DATE" shall mean the date upon which this
Agreement and the Additional Property Agreements have been fully executed and
delivered by Seller and Buyer and Seller and the Other Sellers, as the case may
be, and one duplicate original or each has been deposited with the Title
Company.
II.4. LIQUIDATED DAMAGES. IN THE EVENT THAT THE SALE OF THE PROPERTY AS
------------------
CONTEMPLATED HEREUNDER IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS
AGREEMENT BY BUYER, THROUGH NO FAULT OF SELLER, THE EARNEST MONEY SHALL BE
IMMEDIATELY PAID BY TITLE COMPANY, ON BEHALF OF BUYER, TO SELLER AS LIQUIDATED
DAMAGES PURSUANT TO THE EARNEST MONEY LETTER. THE PARTIES ACKNOWLEDGE THAT
SELLER'S ACTUAL DAMAGES IN THE EVENT OF A DEFAULT BY BUYER WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR SIGNATURES
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES REASONABLE ESTIMATE OF SELLER'S DAMAGES FOR
BUYER'S FAILURE TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
AND THE ADDITIONAL PROPERTY AGREEMENTS AND AS SELLER'S EXCLUSIVE REMEDY AGAINST
BUYER IN THE EVENT OF A DEFAULT BY BUYER; PROVIDED, HOWEVER, NOTHING
3
<PAGE>
CONTAINED HEREIN SHALL PRECLUDE (A) SELLER FROM PURSUING ANY REMEDIES SET FORTH
IN SECTIONS 8.2, 8.5, 8.6, 11.2 AND 11.5 WHICH SURVIVE THE TERMINATION OF THIS
AGREEMENT OR (B) THE RECOVERY OF ITS ATTORNEYS' FEES AND COSTS IN THE
PROSECUTION OR DEFENSE OF ANY ACTION BROUGHT UNDER THIS AGREEMENT, IF SELLER IS
ENTITLED TO RECEIVE SAME. THE LIQUIDATED DAMAGES SET FORTH HEREIN ABOVE ARE
DUPLICATIVE OF AND NOT IN ADDITION TO THE LIQUIDATED DAMAGES SET FORTH IN THE
EARNEST MONEY LETTER.
BUYER: SELLER:
-------------------- ------------------
ARTICLE III.
TITLE TO PROPERTY
-----------------
III.1. TITLE TO REAL PROPERTY.
----------------------
III.1.1. At the Closing, Seller shall convey to Buyer fee simple
title to the Real Property, by execution and delivery of a Grant Deed ("DEED")
in the form attached hereto as EXHIBIT "C" and made a part hereof for all
-----------
purposes.
III.1.2. On the Closing Date, Buyer shall receive from the Title
Company an ALTA Owner's Policy of Title Insurance, in a form to be selected by
Buyer, with liability in the full amount of the Purchase Price, insuring fee
simple title to the Real Property in Buyer, subject only to exceptions approved
by Buyer as provided in SECTION 4.1.1 hereof, together with the following
endorsements: (i) an endorsement deleting all general exceptions and deleting
exclusions from coverage relating to creditor's rights, (ii) 116.1 (survey),
(iii) 100 (modified), (iv) 123.1 (zoning), (v) 116.4 (contiguity), (vi) 103.7
(access), (vii) 100.29 (mineral rights), (viii) 103.1 (easements) (ix) 103.5
(water rights) and (ix) such other endorsements as may be reasonably requested
by Buyer ("TITLE POLICY"). The Title Policy shall provide full coverage against
mechanics and material men's liens arising out of the construction, repair or
alteration of any of the Improvements or any tenant improvements.
III.1.3. The Title Company shall obtain, if requested by Buyer and
at Buyer's cost, reinsurance agreements from such companies as Buyer may
request, which reinsurance agreements shall be in ALTA Facultative Reinsurance
Agreement Form (rev. 1961), and shall include direct access agreements, in such
amounts and in such form as shall otherwise be satisfactory to Buyer.
III.2. TITLE TO PERSONAL PROPERTY. At the Closing, Seller shall transfer
--------------------------
title to the Personal Property pursuant to the Bill of Sale, in the form of Bill
of Sale and Assignment attached as EXHIBIT "D" hereto ("BILL OF SALE") and shall
-----------
further transfer and assign all of Seller's rights in and to any Intangible
Property, pursuant to the Bill of Sale, and shall further transfer all of
Seller's rights, title and interest in and to the Leases pursuant to the
Assignment of Leases (as hereinafter defined). All such title and rights shall
be free of any liens, encumbrances or interests of third parties whatsoever.
4
<PAGE>
ARTICLE IV.
CONDITIONS TO CLOSING
---------------------
IV.1. BUYER'S DUE DILIGENCE CONDITIONS. For a period beginning on the
--------------------------------
Effective Date and expiring at 5:00 p.m. on the thirtieth (30th) day thereafter
("CONTINGENCY PERIOD") Buyer, Buyer's agents, contractors, subcontractors,
employees and its counsel shall have the right to perform due diligence on the
Property pursuant to the terms of this SECTION 4.1 as follows:
IV.1.1. APPROVAL OF TITLE. Buyer's approval of the following
-----------------
matters relating to the title of the Property:
(a TITLE COMMITMENT. Buyer shall obtain (i) a title
----------------
commitment ("COMMITMENT"), by the terms of which the Title Company agrees
to issue to Buyer, at Closing, the Title Policy in the amount of the
Purchase Price; (ii) a photocopy of all documents ("TITLE DOCUMENTS")
describing or evidencing all title exceptions shown on the Commitment; and
(iii) reports relating to judgment, UCC, and Federal and State tax lien
searches regarding the Seller and the Property (collectively, the
"REPORTS"), to be obtained by Buyer, but to be paid for by Seller at the
Closing.
(b SURVEY. Buyer shall secure an as-built survey
------
("SURVEY") of the Property, prepared by a registered land surveyor, duly
licensed in the State and certified to the Title Company and to the Buyer
in full ALTA/ASTM form.
(c REVIEW OF SURVEY AND COMMITMENT.
-------------------------------
(i As used herein, the term "TITLE OBJECTION
PERIOD" shall mean a period commencing on the first day following
receipt by Buyer of the Survey, the Commitment, the Reports and the
Title Documents and ending ten (10) days thereafter. All matters
shown on the Survey and exceptions listed in the Commitment or the
Reports which are not objected to by Buyer within the Title
Objection Period, shall be conclusively deemed to be acceptable to
Buyer.
(ii In the event Buyer timely objects to any
title exception or Survey matter ("TITLE OBJECTION"), Seller may,
but shall not be obligated to, cure such Title Objection. Seller
shall notify Buyer, within five (5) days following receipt of the
Title Objection, of its decision as to whether or not it intends to
cure the Title Objection in question. In the event Seller notifies
or its deemed to have notified the Buyer that is unable or unwilling
to cure any Title Objection, Buyer may at its option (a) terminate
this Agreement, or (b) waive the Title Objections in question. The
foregoing election shall be made by Buyer in writing within ten (10)
days following Seller's notification. If any of the Title Objections
consist of delinquent taxes, delinquent assessments,
5
<PAGE>
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, Seller shall be
obligated to pay and discharge (or bond against in a manner
sufficient to cause the Title Company to insure over such Title
Objections) any such Title Objections. Bonds and assessments in
respect to improvements heretofore made to the Property which are
reflected in the Commitment shall not be deemed to be a Title
Objection.
(iii Seller hereby agrees that it shall not,
after the Effective Date, subject the Property to or permit or
suffer to exist any liens, encumbrances, covenants, conditions,
restrictions, easements or other title matters other than those in
existence on the date hereof or seek any zoning changes or take any
other action which may affect or modify the status of title without
Buyer's prior written consent. Notwithstanding the foregoing, Buyer
shall not be required to accept title to the Property subject to any
matters which may arise subsequent to the effective date of the
Title Commitment, Reports and Survey examined by Buyer during the
period described above.
(iv Notwithstanding anything herein to the
contrary, in any event Buyer's right to terminate this Agreement
pursuant to any provision of this SECTION 4.1.1 shall expire upon
expiration of the Contingency Period.
(v As used in this Agreement, the term
"PERMITTED EXCEPTIONS" shall mean all matters either shown on the
Survey or listed in the Commitment or the Reports to which Buyer
does not raise a Title Objection within the Title Objection Period
or, having objected, waives or is deemed to have waived in
accordance with the provisions of this SECTION 4.1.1, other than
those Title Objections 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.
It is understood and agreed that the Property is being transferred
hereunder free and clear of all liens, claims and encumbrances
except for the Permitted Exceptions.
(d TERMINATION OF THIS AGREEMENT. In the event of
-----------------------------
termination of this Agreement pursuant to this SECTION 4.1.1, the Earnest
Money shall be returned to Buyer and thereafter neither party shall have
any further rights or obligations hereunder.
IV.1.2. INSPECTIONS.
-----------
(a Buyer and Buyer's agents, contractors,
subcontractors or employees, shall have the right to conduct any and all
inspections, investigations, tests and studies (including, without
limitation, investigations with regard to zoning, building codes and other
governmental regulations, architectural inspections,
6
<PAGE>
engineering tests, economic feasibility studies, soils, seismic and
geologic reports and environmental testing) with respect to the Property as
Buyer may elect to make or maintain. During the Contingency Period, Buyer
and its agents and consultants shall have access to: (1) the Property; (2)
the tenants for interviews, which interviews shall be coordinated by
Seller, with Seller or its representative present if Seller so elects; and
(3) the books and records relating to the ownership and operation of the
Property, for the purpose of making such inspections, tests, copies and
verifications as Buyer shall deem reasonably necessary.
(b Prior to any entry onto the Property by Buyer's
agents, contractors, subcontractors or employees, Buyer shall deliver to
Seller a Certificate of Insurance for Buyer's commercial general liability
insurance policy which evidences that Buyer is carrying a commercial
general liability insurance policy with a financially responsible insurance
company (at least A-X in the latest edition of Best's Insurance Guide),
----------------------
covering (i) the activities of Buyer, and Buyer's agents, contractors,
subcontractors and employees on or upon the Property, and (ii) Buyer's
indemnity obligations set forth in this Agreement. Such Certificate shall
evidence that such insurance policy shall have a per occurrence limit
(including umbrella) of at least Five Million and no/100 Dollars
($5,000,000.00) and an aggregate limit (including umbrella) of at least Ten
Million and no/100 Dollars ($10,000,000.00), shall name Seller as an
additional insured, shall be primary and non-contributing with any other
insurance available to Seller, shall be issued on an occurrence basis, and
shall contain a full waiver of subrogation clause. Seller shall be named as
an additional insured under such policy in such Certificate.
(c Within five (5) days after Effective Date, Seller
shall deliver or cause to be delivered to Buyer at its offices in
Sacramento, California, the Due Diligence Documents listed on EXHIBIT "E"
-----------
attached hereto and made a part hereof for all purposes.
IV.1.3. AGREEMENTS. Buyer shall have approved the
----------
Leases, Service Contracts, Personal Property, and all other documents and
materials to be delivered to Buyer by Seller pursuant to the provisions of
SECTION 4.1.2.
IV.1.4. INCOME TAX MATTERS. Buyer shall have received
------------------
satisfactory opinions from its legal counsel as to income tax matters in
connection with the transaction.
IV.1.5. AS-BUILT PLANS AND SPECIFICATIONS. Buyer and its
---------------------------------
architects, engineers and consultants shall have reviewed and approved the "AS-
BUILT" plans and specifications pursuant to which the Property was constructed,
including the confirmation of the net rentable area of the Property.
IV.1.6. PHYSICAL INSPECTION REPORTS. Buyer shall have obtained a
---------------------------
physical inspection report and an environmental report with respect to the Land
(including surrounding areas) and Improvements constituting the Property
prepared in accordance with the specifications submitted by Buyer and prepared
by third-party specialists selected by Buyer,
7
<PAGE>
and Buyer shall then determine in its sole discretion whether it is willing to
purchase the Property in the physical and environmental condition set forth in
said reports.
IV.1.7. FINANCIAL INFORMATION. Buyer shall have (a) verified to
---------------------
its satisfaction the accuracy of the rent roll (the "RENT ROLL") attached hereto
as EXHIBIT "F" and the accuracy of projections and other financial data with
-----------
respect to the Property which have been delivered to Buyer in the offering, (b)
determine that the creditworthiness of the tenants is within the reasonable
financial risk parameters of Buyer, (c) verify that it is willing to accept and
be bound by the actual terms of the Leases, and (d) verify that the Property has
sufficient automobile parking spaces (including, without limitation, handicap
spaces) to comply with the requirements of all governmental authorities and
ordinances and all tenant leases.
IV.1.8. APPROVAL BY BOARD OF DIRECTORS. Buyer shall have, within
------------------------------
ten (10) days following the Effective Date, obtained the approval of the Board
of Directors (the "BOARD") of Prentiss Properties Trust, a real estate
investment trust, which is a partner in Buyer. In the event the Board fails to
approve the transaction contemplated hereby Buyer shall so notify Seller in
which event this Agreement along with the Additional Property Agreements shall
terminate and the Earnest Money shall be returned to Buyer. The failure to
notify Seller of Buyer's election to terminate this Agreement in accordance with
the provisions of this SECTION 4.1.8 within such ten (10) day period shall be
deemed to be an election on the part of Buyer to waive such contingency.
IV.1.9. CONTINGENCY NOTICE.
------------------
(a) Prior to the expiration of the Contingency Period, Buyer
shall deliver to Seller and the Title Company a written notice
("CONTINGENCY NOTICE") of its approval or disapproval of the Property,
which shall be subject to Buyer's sole and absolute discretion. In the
event that Seller does not receive a Contingency Notice approving the
Property by the expiration of the Contingency Period, this Agreement shall
be deemed to have been automatically terminated.
(b) Subject to the provisions of subparagraph (c) below, the
Contingency Notice for the Additional Properties must be consistent with
the Contingency Notice for the Property in respect to Buyer's approval or
disapproval of the Additional Properties. If the Contingency Notice is
inconsistent, this Agreement shall terminate.
(c) Notwithstanding the provisions of subparagraph (b) above,
in the event that (i) the Other Seller terminates the Additional Property
Agreement (the "2525 AGREEMENT") covering the Additional Property located
at 2525 Natomas Park Drive, Sacramento, California, pursuant to SECTION
2.1(c) thereof, or (ii) Buyer terminates the 2525 Agreement for any reason,
the effectiveness of this Agreement or the remaining Additional Property
Agreements shall not be affected. In the event of the termination of the
2525 Agreement pursuant to the foregoing provisions, this Agreement shall
remain in full force and effect, subject to the continued existence of the
remaining Additional Property Agreements.
8
<PAGE>
(d) Additionally, in the event that the Bannon Investors, one
of the Other Sellers under the Additional Property Agreements. which owns
that certain tract of land known as Tract A, terminates its Additional
Property Agreement (the "TRACT A AGREEMENT") in accordance with the
provisions of SECTION 2.1(c) the Tract A Agreement, Buyer, at its option,
may elect (i) to terminate this Agreement and the remaining Additional
Property Agreements, in which event the Earnest Money shall be returned to
Buyer, or (ii) to keep this Agreement as well as the remaining Additional
Property Agreements in full force and effect, in which event the parties
shall consummate the transactions contemplated thereby in accordance with
the respective terms and conditions of this Agreement and the remaining
Additional Property Agreements.
IV.2. APPROVAL BY SELLER'S PARTNERS. As a condition to Seller's
-----------------------------
obligations to consummate the transaction contemplated hereby, Seller shall
have, within ten (10) days following the Effective Date, obtained the approval
of the limited partners and the other general partners (the "PARTNERS") of
Seller. In the event the Partners fail to approve the transaction contemplated
hereby, Seller shall so notify Buyer within such ten (10) day period, in which
event this Agreement along with the Additional Property Agreements shall
terminate and the Earnest Money shall be returned to Buyer. The failure by
Seller to notify Buyer of Seller's election to terminate this Agreement in
accordance with the provisions of this SECTION 4.2, within such ten (10) day
period, shall be deemed to be an election on the part of Seller to waive such
contingency.
IV.3. BUYER'S CLOSING CONDITIONS. The following conditions are for the
--------------------------
benefit of Buyer and are conditions to the Closing, unless expressly waived by
Buyer on or before the Closing Date:
IV.3.1. TENANT ESTOPPEL CERTIFICATES. Seller shall deliver to
----------------------------
Buyer a current estoppel letter substantially in the form attached hereto as
EXHIBIT "G" from tenants of the Property (and other occupants to the extent that
- -----------
Seller has the contractual right to require such letters), in the aggregate
representing at least ninety percent (90%) of the occupied floor area of the
Property. In the event that Seller is unable to obtain an estoppel certificate
from any tenant which has leased less than ten thousand (10,000) square feet,
Seller shall furnish Buyer with a mutually acceptable, qualified estoppel
certificate concerning such Lease executed by Seller. Buyer shall provide Seller
with its desired form of estoppel certificates for each tenant on or before
twenty (20) days following the Effective Date. In addition, all tenants listed
on the Rent Roll or their subtenants occupying in excess of 10,000 square feet
of net rentable area will be in "MATERIAL COMPLIANCE" with the terms and
conditions of their respective leases (except for premises which may not yet be
ready for occupancy as the result of new leases or modified leases). The term
"MATERIAL COMPLIANCE" shall mean that the tenant in question is not more than
thirty (30) days in arrears in the payment of rent due under its lease and/or
the tenant in question has not filed for bankruptcy protection under applicable
law.
9
<PAGE>
IV.3.2. SIMULTANEOUS CLOSING. Subject to the provisions of
--------------------
SECTION 4.1.9, in respect to the termination of the 2525 Agreement and the Tract
A Agreement, the Closing of the transaction contemplated hereby shall be
contingent upon the simultaneous closing of the Additional Properties pursuant
to the terms and conditions of the Additional Property Agreements.
Notwithstanding the foregoing, in the event (a) any of the Additional Property
Agreements are terminated as a result of a Seller default, or in accordance with
ARTICLE IX of the Additional Property Agreements, Buyer shall have the option,
in its sole discretion, to terminate this Agreement and the Earnest Money shall
be returned to Buyer or Buyer may waive the simultaneous closing condition and
consummate the transaction contemplated herein and (b) the Tract A Agreement or
the 2525 Agreement is terminated by Buyer or applicable Other Seller pursuant to
SECTION 2.1(c) thereof, Buyer shall have the right to terminate this Agreement,
in its sole discretion, in which event the Earnest Money shall be returned to
Buyer or Buyer may consummate the transaction contemplated herein without regard
to such termination.
IV.3.3. TITLE INSURANCE. As of the Closing Date, the Title
---------------
Company shall have issued or shall have committed to issue the Title Policy to
Buyer in respect to the Property.
IV.3.4. NO MATERIAL CHANGE. There shall be no material adverse
------------------
change in any of the items approved by Buyer during the Contingency Period,
including, without limitation, the physical condition of the Property and title
to the Property.
IV.3.5. TERMINATION OF AGREEMENTS. On the Closing Date, all
-------------------------
management and leasing agreements with respect to the Property shall be
terminated and Seller shall be solely responsible for any termination fees due
to the present property manager. In addition, Seller shall deliver full releases
from any leasing agents for any and all commissions which may become payable
after the Closing Date with respect to any then existing lease whether currently
earned or payable by virtue of renewal or expansion options.
IV.3.6. DELIVERY OF LEASES/DOCUMENTS. Buyer shall have received
----------------------------
signed originals or copies, certified by Seller as being true and correct of all
leases and contracts, together with all exhibits thereto, and to the extent in
Seller's possession or reasonably obtainable all warranties, licenses, permits
and agreements, together with all exhibits thereto.
IV.4. SELLER'S CLOSING CONDITIONS. The following conditions are for the
---------------------------
benefit of Seller and are conditions to the Closing, unless expressly waived by
Seller on or before the Closing Date:
IV.4.1. SIMULTANEOUS CLOSING. Subject to the provisions of
--------------------
SECTION 4.1.9 hereof, in respect to the termination of the 2525 Agreement and
the Tract A Agreement, the Closing shall be contingent upon the simultaneous
closing of the Additional Properties, pursuant to the terms and conditions of
the Additional Property Agreements.
IV.5. FAILURE OF CONDITION TO CLOSE TO ESCROW. In the event any of the
---------------------------------------
conditions set forth in ARTICLE IV are not timely satisfied or waived by the
appropriate party benefitting
10
<PAGE>
by the conditions in question, for a reason other than the default of Buyer,
this Agreement shall, at the option of the party benefitting by the conditions
in question, terminate, the Earnest Money shall be returned to Buyer and, except
as otherwise provided herein, the parties shall have no further obligations
hereunder.
ARTICLE V.
CLOSING AND ESCROW
------------------
V.1. DEPOSIT WITH THE TITLE COMPANY AND ESCROW INSTRUCTIONS. Upon
------------------------------------------------------
execution of this Agreement, the parties hereto shall deposit one duplicate
original of this Agreement with the Title Company and this instrument shall
serve as the instructions to the Title Company for consummation of the purchase
and sale contemplated hereby. Seller and Buyer agree to execute such additional
and supplementary escrow instructions as may be appropriate to enable the Title
Company to comply with the terms of this Agreement; provided, however, that in
the event of any conflict between the provisions of this Agreement and any
supplementary escrow instructions, the terms of this Agreement shall control.
V.2. CLOSING.
-------
V.2.1. The closing hereunder ("CLOSING") shall be held at the
offices of the Title Company. The execution and exchange of documents shall take
place at the Closing on or before the twentieth (20th) day following the
expiration of the Contingency Period ("CLOSING DATE"). Such date may not be
otherwise extended without the written approval of both Seller and Buyer.
V.2.2. In the event the Closing does not occur on or before the
Closing Date, the Title Company shall, unless it is notified by both parties to
the contrary within ten (10) days after the Closing Date, return to the
depositor thereof all documents which may have been deposited hereunder.
V.2. DELIVERY BY SELLER TO THE TITLE COMPANY. Prior to the Closing Date,
---------------------------------------
Seller shall deliver to the Title Company:
(a The Deed, duly executed and acknowledged by Seller, in
recordable form, and ready for recordation on the Closing Date;
(b A certification duly executed by Seller under penalty of
perjury in the form of, and upon the terms set forth in, the Transferor's
Certification of Non-Foreign Status ("FIRPTA CERTIFICATE"), setting forth
Seller's address and federal tax identification number and certifying that
Seller is a "United States Person" and that Seller is not a "foreign
person" in accordance with and/or for the purpose of the provisions of
Section 7701 and 1445 (as may be amended) of the Internal Revenue Code of
1954, as amended, and any regulations promulgated thereunder. The FIRPTA
Certificate shall be in the form attached hereto as EXHIBIT "H"; and
-----------
11
<PAGE>
(c An Assignment of Rights, Leases and Security Deposits
("ASSIGNMENT OF LEASES"), in the form of EXHIBIT "I" duly executed by
-----------
Seller, by which Seller shall assign to Buyer all of Seller's interest in
the Leases, together with the interest of Seller in security deposits
collected and held by Seller to secure the performance of the duties and
obligations of tenant under the Leases.
V.4. DELIVERY BY SELLER TO BUYER. On or before the Closing Date, Seller
---------------------------
shall deliver to the Title Company, for ultimate delivery to Buyer, the
following:
(a The Bill of Sale duly executed by Seller;
(b The Rent Roll, certified by Seller and current as of the
Closing Date;
(c A schedule of Service Contracts current as of the Closing
Date;
(d Tenant Estoppel Certificates from those tenants specified
pursuant to SECTION 4.2.1, to the extent not previously delivered to Buyer.
(e Originals or copies, certified by Seller as being true and
correct, of all Leases, together with all exhibits thereto;
(f Originals of all Service Contracts and any unexpired
warranties or guaranties received by Seller from any contractors,
subcontractors, suppliers or materialmen in connection with any
construction, repair or alteration of the Improvements or any tenant
improvements;
(g All instruction manuals, procedure manuals, manufacturer's
warranties and similar materials in Seller's possession which relate to the
Property;
(h Notices to tenants under the Leases, in the form of EXHIBIT
-------
"J" attached hereto, duly executed by Seller;
---
(i All keys to the Property;
(j Such resolutions, authorizations, bylaws or other corporate
and/or partnership documents or agreements relating to Seller as shall be
reasonably required by the Title Company in connection with this
transaction; and
(k Any other documents, instruments, data, records,
correspondence or agreements called for hereunder which have not previously
been delivered.
The matters described in subparagraphs (e), (f), (g) and (i) shall be delivered
by making them available at the office of the property manager for the Property.
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<PAGE>
V.5. DELIVERY BY BUYER TO THE TITLE COMPANY. On or before the Closing
--------------------------------------
Date, Buyer shall deliver to the Title Company, for ultimate delivery to Seller:
(a) The Purchase Price described in SECTION 2.1, plus any
additional sums necessary, if any, for Buyer to pay its costs, expenses and
prorations pursuant to this ARTICLE V; and
(b) The Assignment of Leases, duly executed in recordable form by
Buyer.
V.6. OTHER INSTRUMENTS. Seller and Buyer shall each deliver such other
-----------------
instruments as are reasonably required by the Title Company or otherwise
required to close the escrow and consummate the purchase of the Property in
accordance with the terms hereof.
V.6. CLOSE OF ESCROW. Provided that (a) the Title Company has
---------------
received all required documents, instruments and funds, (b) the Title Company
has not received written notice from either Buyer or Seller that any of the
conditions to Closing set forth in ARTICLE IV have not been satisfied or waived,
(c) any of the representations and warranties made by either Buyer or Seller are
untrue either as of the Closing Date and (d) the Title Company is able to
deliver to Buyer the Title Policy described in SECTION 3.1.1 hereof, the Title
Company is authorized and instructed on the Closing Date to:
(a) Record the Deed and the Assignment of Leases with the
Sacramento County Recorder; and
(b) Deliver to Seller the sum described in SECTION 2.1 to Seller,
less Seller's share of prorations and costs of escrow. The Title Company is
instructed to request that the amount of the Documentary Transfer Tax due
be shown on a separate paper and affixed to the Deed by the County Recorder
after the permanent record is made.
V.7. PRORATIONS AND APPORTIONMENTS.
-----------------------------
V.8.1. All revenues and all expenses of the Property shall be
prorated and apportioned as of 12:01 a.m. on the Closing Date, so that Seller
shall bear all expenses with respect to the Property and shall have the benefit
of all income with respect to the Property through and including the period
preceding the Closing Date. Any revenue or expense amount which cannot be
ascertained with certainty as of the Closing Date shall be prorated on the basis
of the parties' reasonable estimates of such amount (other than reimbursements
for operating expenses not billed currently to tenants) and shall be the subject
of a final proration thirty (30) days after the Closing Date or as soon
thereafter as the precise amounts can be ascertained. A statement setting forth
such agreed prorations shall be delivered to the Title Company. The Title
Company shall not be required to calculate any prorations.
13
<PAGE>
V.8.2. Prepaid rents under the Leases shall be credited to Buyer.
Amounts for free rents, concessions, lease takeovers and similar matters not
previously paid or satisfied prior to the Closing Date shall be credited to
Buyer. Rents in arrears will not be prorated, but will be paid to Seller by
Buyer when collected by Buyer, such payment to occur every thirty (30) days
following the Closing Date. Except as expressly provided for in SECTION 5.10
below, the first monies received by Buyer from each tenant after the Closing
Date shall be applied first to current rents and other sums due and thereafter
shall be applied to rent in arrears.
V.8.3. Expenses to be prorated shall include taxes (other than
personal property taxes on Personal Property), payments under any Service
Contracts (provided that any delinquent payments owing to Seller shall be
treated in the same manner as delinquent rents), gas, electricity and other
utility charges, any unfixed meter charges, if any (apportioned on the basis of
the last meter reading), license and permit fees and other expenses customarily
prorated. If possible, in lieu of prorating, utilities and other expenses shall
be contracted for in the name of Buyer as of the Closing Date, with Seller being
responsible directly to the utility provider and others for accrued and unpaid
expenses. No prorations in respect to personal property taxes on Personal
Property based upon Seller's warranty that no personal property taxes have been
assessed against the Personal Property for the previous five (5) years.
V.9. COMPUTATION OF CERTAIN PRORATIONS. Final proration of percentage
---------------------------------
rents and similar apportionable items which are dependent for their calculation
upon the economic performance of the Property (or a portion thereof) over a
specified interval of time shall be accomplished as follows:
(a The parties shall await the expiration of the specified
interval to determine the gross rents, gross receipts and other economic
performance over the entire interval and then prorate the item by
allocating to Seller the product of the rents or other similar
apportionable item for the entire interval multiplied by a fraction, the
numerator of which is the number of days within the specified interval
which occur before the Closing Date and the denominator of which is the
number of days in the specified interval.
(b Operating expenses which are payable (or reimbursable) by any
present or past tenant of the Property or any portion thereof, shall not be
prorated hereunder. Buyer shall send customary statements for reimbursement
of operating expenses and taxes to tenants under the Leases after
consulting with Seller with respect to appropriate amounts due therefore,
and shall remit to Seller, upon receipt, Seller's prorated share thereof,
determined as provided in SECTION 5.9(a) above, to the extent Seller has
previously paid or been charged for the expenses relating to such
reimbursement.
V.10. ARREARAGE. Seller reserves all claims and causes of action against
---------
tenants and others who are in arrears or who shall be obligated to pay monies in
the future which are for the benefit of Seller, and Buyer shall provide its
reasonable cooperation to Seller in pursuing such arrearage. Buyer shall use
reasonable efforts to collect all sums in arrears as of the
14
<PAGE>
closing Date due to Seller, but shall not be required to commence or prosecute
any litigation. Seller may not commence and prosecute litigation against any
tenant for rents in arrears as long as such tenant remains a tenant of the
Property, unless the statute of limitations will expire within the succeeding
sixty (60) day period. To the extent that Buyer receives payments from tenants
for sums due prior to the Closing Date, which can be verified based upon
invoices or other applicable billings, such payments, including rents, shall be
promptly remitted by Buyer to Seller.
V.11. PAYMENT OF ADJUSTMENTS TO PRORATION. Either party owing the other
-----------------------------------
party a sum of money based on adjustments made to prorations after the Closing
Date shall promptly pay that sum to the other party, together with interest
thereon at the rate of ten percent (10%) per annum to the date of payment if
payment is not made within ten (10) days after mutual agreement of the amount
due.
V.12. COSTS AND EXPENSES. Seller shall pay the costs associated with
------------------
the issuance of a California Land Title Association Owner's Policy of Title
Insurance in the full amount of the Purchase Price, the UCC and litigation
searches, documentary stamp taxes, recording fees, transfer taxes, escrow fees
and all costs incurred to repay any liens. Buyer shall pay the incremental
increase in costs relating to ALTA coverage, the costs of all endorsements
thereto and the cost of the Survey. Seller and Buyer shall each pay the fees
and expenses of their respective legal counsel incurred in connection with the
transaction.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
As an inducement to Buyer to enter into this Agreement, Seller hereby
represents and warrants to and agrees with Buyer as follows:
VI.1. AUTHORITY OF SELLER. Seller is a California limited partnership,
-------------------
duly organized and validly existing and in good standing under the laws of the
State of California, and has the authority to own and convey the Property, and
execute this Agreement. All documents executed by Seller which are to be
delivered to Buyer at the Closing are or at the time of Closing will be duly
authorized, executed and delivered by Seller and do not and at the time of
Closing will not violate any provisions of any agreement or judicial order to
which Seller is a party or to which Seller or the Property is subject.
VI.2. CONDITION OF PROPERTY. To Seller's Knowledge, as hereinafter
---------------------
defined, there are no material physical or mechanical defects in the Property,
including, without limitation, the elevators, escalators, plumbing, heating, air
conditioning, ventilating, life safety and electrical systems, and to Seller's
Knowledge, all such items are in good operating condition and repair and are in
compliance with all applicable governmental laws, ordinances, regulations and
requirements, other than compliance with the requirements of the Americans With
Disabilities Act, with respect to which, Seller has commenced compliance in
accordance with the requirements thereof.
15
<PAGE>
VI.3. USE AND OPERATION. To Seller's Knowledge, the use and operation of
-----------------
the Property are in full compliance with applicable building codes, safety and
fire, environmental, zoning and land use laws, and other applicable local, state
and federal laws, ordinances, regulations and requirements, other than
compliance with the requirements of the Americans With Disabilities Act, with
respect to which Seller has commenced compliance in accordance with the
requirements thereof.
VI.4. LAND USE REGULATIONS. To Seller's Knowledge, there are no
--------------------
condemnation, environmental, zoning or other land use regulation proceedings,
either instituted, or planned to be instituted, which could detrimentally affect
the use or operation of the Property of its intended purpose or the value of the
Property, nor has Seller received notice of any special assessment proceedings
affecting the Property.
VI.5. LEASES. To Seller's Knowledge, the copies of the Leases to be made
------
available to Buyer pursuant to SECTION 4.1.2 are true and correct copies of all
Leases affecting the Property and are in full force and effect and there are no
other agreements, written or oral, with respect to the tenancies, except
subleases permitted by the respective Leases. To Seller's Knowledge:
(a) The information set forth in the Rent Roll is true and
complete as of the date such Rent Roll was made available to Buyer and
there are no leases of space in the Improvements and nonmaterial defaults
under any of the Leases which have not been disclosed to Buyer in writing.
(b) No tenant under any of the Leases has prepaid any rent or
other charges for more than the current month, except as disclosed to Buyer
in writing.
(c) No tenant under any of the Leases has any right or option to
purchase the Property or any portion thereof or interest therein, and there
are no outstanding agreements of sale with respect to the Property or any
portion thereof or any interest therein.
(d) Except as provided in the Leases and the Rent Roll, no tenant
under any of the Leases has the right to renew or extend any of the Leases
or has any options or rights of first refusal with respect to leasing of
other space, and no tenant under any of the Leases has the right to free
rent, rebate, allowance, concession, security or other deposit.
VI.6. BROKERAGE COMMISSIONS. Except as set forth in the Rent Roll or
---------------------
otherwise disclosed to Buyer in writing, there are no commissions, finder's fees
or other compensation owing or which may become owing to any broker or any other
person or entity with respect to any Lease or occupancy agreement including,
without limitation, any such compensation with respect to any future renewals,
extensions or expansions thereof.
16
<PAGE>
VI.7. LITIGATION. Except as disclosed to Buyer in writing, there is no
----------
litigation pending or, to Seller's Knowledge, threatened, against Seller or any
basis therefor that arises out of the ownership of the Property or that might
detrimentally affect the use or operation of the Property for its intended
purpose or the value of the Property or adversely affect the ability of Seller
to perform its obligations under this Agreement.
VI.8. USE AND OPERATION OF PROPERTY. To Seller's Knowledge, Seller knows
-----------------------------
of no facts which would prevent Buyer from using and operating the Property
after Closing in the manner in which the Property has been used, leased and
operated prior to the date hereof.
VI.9. OTHER RIGHTS. No other person presently has a right of first
------------
refusal or other right to purchase or finance all or any part of the Property.
In consideration of Buyer's execution and delivery of this Agreement, Seller
agrees that so long as this Agreement has not been terminated or expired, Seller
will not negotiate or otherwise pursue any offers on the Property nor execute
any other letter of intent or contract for the financing, sale or purchase of
the Property.
VI.10. EMPLOYEES. Seller has no employees. There are no employees of
---------
Seller's agent (including the property manager) engaged in the operation or
maintenance of the Property for whom Buyer will be responsible after the Closing
Date unless Buyer agrees to employ such employees after the Closing Date.
VI.11. ENVIRONMENTAL. To Seller's Knowledge, the Property is not in
-------------
violation of any federal, state, local or administrative agency ordinance, law,
rule, regulation, order or requirement relating to environmental conditions or
Hazardous Material ("ENVIRONMENTAL LAWS"). Neither Seller, nor to Seller's
------------------
Knowledge, any third party, has (a) used, manufactured, generated, treated,
stored, disposed of, or released any Hazardous Material on, under or about the
Property or transported any Hazardous Material over the Property in violation of
the Environmental Laws, or (b) installed, used or removed any storage tank on,
from or in connection with the Property except in full compliance with all
Environmental Laws. To Seller's Knowledge, there are no storage tanks or wells
(whether existing or abandoned) located on, under or about the Property. To
Seller's Knowledge, the Property does not consist of any building materials that
contain Hazardous Material. For the purposes hereof, "HAZARDOUS MATERIAL" shall
mean any substance, chemical, waste or other material which is listed, defined
or otherwise identified as "hazardous" or "toxic" under any federal, state,
local or administrative agency ordinance or law.
17
<PAGE>
VI.12. "AS-IS" SALE.
------------
(A) Except as set forth above, Buyer acknowledges that Seller makes no
representation or warranty, either express or implied, with respect to the
Property, its present condition or its fitness or suitability for any particular
purpose. In this respect, Buyer confirms that it is relying solely upon its
investigation of the condition of the Property, its title and all governmental
laws and ordinances which might affect its use and development. With the
exception of matters which Seller has affirmatively represented, actively
concealed or fraudulently represented at the time of sale and with the exception
of the warranties contained in the conveyance documents to be executed and
delivered by Buyer, Buyer hereby releases and forever discharges Seller, its
partners, employees and agents from any and all claims, rights, remedies and
causes of action of any nature or sort, known or unknown, past, present or
future, which Buyer may have arising out of the condition of the Property after
the Closing Date.
(B) Buyer expressly waives the benefits and provisions of Section 1542 of
the Civil Code of the State of California, and any similar law of any state or
territory of the United States or other jurisdiction. Civil Code Section 1542
provides as follow:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
DEBTOR."
Initials of Buyer ____________
VI.13. SELLER'S KNOWLEDGE. The term "TO SELLER'S KNOWLEDGE," or variations
------------------
thereof, means the actual, present knowledge of the individual general partners
of Seller without any duty of inquiry or investigation, other than Seller's
obligation to make inquiry of its managing agent KCS Properties, Inc. in an
effort to determine that the employees of KCS Properties, Inc. responsible for
the day-to-day operation of the Property are not aware of any fact or
circumstance that would make any representation or warranty of Seller untrue in
any material respect.
VI.14. SURVIVAL. The representations and warranties of Seller contained
--------
herein shall survive the Closing Date, but shall terminate one (1) year after
the Closing Date. No liability shall arise thereunder unless suit shall be
filed against Seller as to the specific claim within such one (1) year period.
VI.15. SUBSEQUENT DISCLOSURES. In the event Buyer, prior to the Closing
----------------------
Date, becomes aware, from Seller or otherwise, of any inaccuracy in the
disclosures, information or representations previously provided to Buyer, which
will have a material, adverse effect on Buyer, Buyer may either (i) terminate
this transaction contemplated hereby, receive a refund of the applicable portion
of the Deposit, and to the extent available pursue any rights or claims that
Buyer may have against Seller as a result of any inaccuracy in the disclosures,
information or representations previously provided to Buyer or (ii) proceed with
the Closing, thereby
18
<PAGE>
waiving any rights that Buyer may have against Seller as a result of any
inaccuracy in the disclosures, information or representations previously
provided to Buyer. In no event shall Buyer be entitled to complete the Closing
hereunder and then bring an action against Seller for damages as a result of any
inaccuracy in the disclosures, information or representations previously
provided to Buyer.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
VII.1. AUTHORITY OF BUYER. Buyer is duly organized and validly existing
------------------
under the laws of the State of Delaware and is in good standing and authorized
to do business under the laws of the State of California; this Agreement and all
documents executed by Buyer, which are to be delivered to Seller at the Closing
are or at the time of Closing will be (a) duly authorized, executed, and
delivered by Buyer, (b) be legal, valid, and binding obligations of Buyer, and
(c) not violate any provisions of any agreement or judicial order to which Buyer
is a party or to which it is subject.
VII.2. LITIGATION. There is no litigation pending or, to Buyer's
----------
knowledge, threatened, against Buyer or any basis therefor before any court or
administrative agency which might result in any material adverse change in the
business or financial condition of the Buyer.
ARTICLE VII.
COVENANTS
---------
As matters as to which the Title Company need not be concerned, Seller and
Buyer covenant and agree with one another as follows:
VIII.1. INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify Buyer
-------------------------
and hold Buyer harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Buyer as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach of
covenant made by Seller in this Agreement or any document, certificate, or
exhibit given or delivered to Buyer pursuant to or in connection with this
Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring before
the Closing Date, or in any way related to or arising from any act, conduct,
omission, contract or commitment of Seller (or any of its agents or employees)
at any time or times before the Closing Date.
19
<PAGE>
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.2. INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify Seller
------------------------
and hold Seller harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Seller as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach of
covenant made by Buyer in this Agreement or any document, certificate, or
exhibit given or delivered to Seller pursuant to or in connection with this
Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring
after the Closing Date, or in any way related to or arising from any act,
conduct, omission, contract or commitment of Buyer (or any of its agents or
employees) at any time or times after the Closing Date.
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.3. MAINTENANCE. Seller shall, between the Seller's execution of this
-----------
Agreement and the Closing Date, at Seller's sole cost and expense, maintain the
Property in its present order, condition and repair, reasonable wear and tear
excepted, shall perform all work required to be done by the landlord under the
terms of any lease affecting the Property, and shall make all repairs,
maintenance and replacements of the Improvements and any Personal Property and
otherwise operate the Property in the same manner as before the making of this
Agreement, the same as though Seller were retaining the Property.
VIII.4. LEASES AND OTHER AGREEMENTS. Except as provided below, Seller
---------------------------
covenants and agrees that during the term of this Agreement, Seller or its
agents shall not amend or modify any Lease and shall not enter into any new
Lease, for any portion of the Property, without Buyer's prior written approval.
Seller's request for approval of any such new or modified Lease shall be
accompanied by the estimated cost of any tenant improvements associated
therewith and the amount of the real estate commission to be paid in conjunction
therewith. In the event that Buyer approves any new or modified Lease, upon the
Closing Date, Buyer shall be responsible for the cost of the tenant improvements
and the real estate commissions associated therewith prorated in an amount
proportional to the amount of rent paid thereunder before and after the Closing
Date. Buyer shall pay Seller on the Closing Date for any costs that Seller has
incurred for the tenant improvements and real estate commissions in excess of
its pro-rata share. Upon the Closing Date, all tenant improvement construction
contracts and brokerage agreements on such Leases shall be assigned to and
assumed by Buyer.
20
<PAGE>
VIII.5. RETURN OF INFORMATION. In the event that Buyer does not purchase
---------------------
the Property, Buyer shall promptly return to Seller all information delivered by
Seller to Buyer in conjunction with this transaction.
VIII.6. CONFIDENTIALITY. Except as hereinafter provided, from and after
---------------
the execution of this Agreement, Buyer and Seller shall keep the terms,
conditions and provisions of this Agreement confidential and neither shall make
any public announcements hereof unless the other first approves of same in
writing, nor shall either disclose the terms, conditions and provisions hereof,
or of any data regarding the Property, except to persons who "need to know",
such as their respective officers, directors, employees, attorneys, accountants,
engineers, surveyors, consultants, property managers, financiers, partners,
investors, potential lessees and bankers and such other third parties whose
assistance is required in connection with the consummation of this transaction.
Notwithstanding the foregoing, it is acknowledged that Buyer is an affiliate of,
a real estate investment trust (the "REIT") and the REIT has and will seek to
sell shares to the general public; consequently, Buyer 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 Buyer or Buyer's attorneys to satisfy disclosure and reporting
obligations of Buyer, the REIT, or its affiliates. After Closing, Buyer shall be
free to disclose previously confidential information in its sole, unfettered
discretion.
VIII.7. TAX DEFERRED EXCHANGE. Buyer acknowledges that Seller may desire
---------------------
to structure the sale of the Property as an exchange for like-kind property
under Section 1031 of the Internal Revenue Code of 1986 in order to defer
recognition of income on the disposition of the Property
and/or other properties. Buyer agrees to reasonably cooperate with Seller to
accomplish such exchange and Seller hereby agrees that any and all costs
associated with said exchange shall be borne solely by Seller and shall in no
way be attributable to Buyer. Buyer shall not be requested or required to take
title to other property in conjunction with such exchange.
VIII.8. TESTING SAMPLES. Any testing samples taken from the Property
---------------
during any inspection pursuant to this Agreement shall be divided and shared
with Seller. In the event that any test results or reports contain negative
information concerning the Property, Buyer shall promptly furnish Seller with
written correspondence summarizing the negative
21
<PAGE>
information including the name and address of the consultant who discovered or
learned of such information.
VIII.9. TERMINATION OF AGREEMENT. On the Closing Date, all management and
------------------------
leasing agreements with respect to the Property shall be terminated and Seller
shall be solely responsible for any termination fees due. In addition, Seller
shall deliver full releases from any leasing agents for any and all commissions
which may become payable after the Closing Date with respect to any then
existing lease whether currently earned or payable by virtue of renewal or
expansion options. Seller shall also terminate all Service Contracts which
Buyer fails to elect to assume, such election to be made prior to the expiration
of the Contingency Period.
VIII.10. TRANSFER TAX ON WORKS OF ART. In the event that any transfer
----------------------------
tax is due or payable on the Works of Art pursuant to Section 982 of the
California Civil Code, Seller agrees to pay such tax to the artist in
conjunction with such transfer.
VIII.11. CHANGES BEFORE CLOSING. In the event that any of the
----------------------
representations or warranties by either party contained herein change or become
untrue prior to the Closing Date, such party agrees to notify the other party of
such change or untruthfulness promptly upon learning of such matter.
VIII.12. INDEPENDENT AUDIT. Promptly following the execution of this
-----------------
Agreement, Seller shall provide and shall cause its management company to
provide to Buyer's representatives and independent accounting firm access to
financial and other information relating to the Property in the possession of or
otherwise available to Seller, its affiliates or Seller's management company
which would be sufficient to enable Buyer's representatives and independent
accounting firm to prepare audited financial statements for the year 1996 and
the year to date in conformity with generally accepted accounting principles and
to enable them to prepare such statements, reports or disclosures as Buyer may
deem necessary or advisable. Seller shall also provide and/or shall cause its
management company to provide to Buyer's independent accounting firm 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. Seller shall authorize and shall cause its management company to
authorize any attorneys who have represented Seller or its management company in
material litigation pertaining to or affecting the Property to respond, at
Buyer's expense, to inquiries from Buyer's representatives and independent
accounting firm. If and to the extent Seller's financial statements pertaining
to the Property for any periods during the year 1996 and the year to date have
been audited, promptly after the execution of this Agreement Seller shall
provide Buyer with copies of such audited financial statements and shall
cooperate with Buyer's representatives and independent public accountants to
enable them to contact the auditors who prepared such audited financial
statements and to obtain, at Buyer's expense, a reissuance of such audited
financial statements. To the extent that Seller or its agents incur reasonable
expenses in connection with the performance of such audit, Buyer shall reimburse
Seller and its agents for such reasonable expenses.
22
<PAGE>
ARTICLE IX.
LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION
--------------------------------------------
IX.1. DAMAGE OR DESTRUCTION.
---------------------
IX.1.1. In the event that the Improvements are damaged or destroyed
by fire or other casualty prior to the Closing Date and such damage or
destruction is estimated to cost Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) or less in the aggregate to repair or replace (as verified by an
architect or contractor reasonably selected by Buyer) then the Closing Date
shall occur as scheduled notwithstanding such damage or destruction and Seller
shall pay to Buyer an amount sufficient to restore or repair such damage
(retaining the right to any claim Seller may have against any insurance
carrier).
IX.1.2. In the event that any of the Improvements are damaged or
destroyed by fire or other casualty prior to the Closing Date, and such damage
or destruction is estimated to cost more than Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) in the aggregate to repair or replace (as verified
by an architect or contractor reasonably selected by Buyer), then either Seller
or Buyer shall have the option to (i) terminate this Agreement by written notice
to Seller within fifteen (15) days after the occurrence of the damage or
destruction and the Earnest Money shall be immediately returned to Buyer or (ii)
consummate the transaction contemplated hereby in which event Seller's insurance
proceeds shall be transferred and assigned to Buyer, with Seller remaining
responsible for any deductible.
IX.2. CONDEMNATION. In the event that, prior to the Closing Date, a
------------
governmental entity shall commence any eminent domain proceeding to take any
material portion of the Property, then Buyer shall have the option to elect
either of the following:
(a) Terminate this Agreement by written notice to Seller within
fifteen (15) days of its receiving notice of such action of condemnation
and the Earnest Money shall be immediately returned to Buyer; or
(b) Elect to proceed with the transaction in which case the
Purchase Price shall not be reduced and Buyer shall be entitled to the net
award paid to Seller or Seller's mortgagee for such taking, if any, and
Seller shall assign and transfer to Buyer all right, title and interest in
and to any awards, it being expressly agreed that in such event Seller
shall have no obligation to repair or restore the Property or any portion
thereof.
ARTICLE X.
DEFAULTS
--------
X.1. BUYER'S DEFAULT; SELLER'S REMEDIES. Buyer shall be deemed to be in
----------------------------------
default
23
<PAGE>
if, in respect to the transaction contemplated by this Agreement, at the
Closing, Buyer fails to deliver the Purchase Price or Buyer fails to meet,
comply with, or perform any covenant, agreement or obligation on the part of
Buyer within the time frames and in the manner required in this Agreement, for
any reason other than a default by Seller hereunder or termination of this
Agreement prior to Closing in accordance with the express terms and conditions
hereof. Seller's remedies shall be limited to the remedies set forth in
SECTION 2.4 hereof. Any default by Buyer hereunder shall be deemed a default
under each of the Additional Property Agreements.
X.2. SELLER'S DEFAULTS; BUYER'S REMEDIES.
-----------------------------------
X.2.1. SELLER'S DEFAULTS. Seller shall be deemed to be in default
-----------------
under this Agreement, if in respect to the transaction contemplated by this
Agreement, on or before the Closing, Seller shall have failed to meet, comply
with, or perform any covenant, agreement, or obligation on its part required in
this Agreement, within the time limits and in the manner required in this
Agreement, for any reason other than a default by Buyer hereunder or termination
of this Agreement prior to Closing pursuant to the express terms and conditions
hereof.
X.2.2. BUYER'S REMEDIES. If Seller is deemed to be in default
----------------
hereunder, Buyer may, at Buyer's option, do either one of the following:
(a) Terminate this Agreement by written notice delivered to
Seller on or before ten (10) days following occurrence of such default;
(b) Seek and receive specific performance of Seller's obligations
hereunder to sell the Property for the Purchase Price and on the terms set
forth herein following the expiration of a five (5) day period following
the delivery of a written notice to Seller specifying the default in
question unless specific performance is not an available remedy because
Seller has voluntarily conveyed or encumbered the Property, in which event
Buyer may recover damages from Seller for any losses or costs suffered by
Buyer in connection with Seller's failure to perform its obligations
hereunder following the expiration of a five (5) day period following the
delivery of a written notice to Seller specifying the default in question.
ARTICLE XI.
MISCELLANEOUS
-------------
XI.1. NOTICES. All notices or other communications required or permitted
-------
hereunder shall be in writing, and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or sent
by electronic facsimile and shall be deemed received upon the earlier of (i) if
personally delivered, the date of delivery to the address of the person to
receive such notice, (ii) if mailed, on the date of posting by the United States
Post Office, or (iii) if given by electronic facsimile, when received by the
other party.
24
<PAGE>
If to Seller: 1760 Creekside Oaks Investors
c/o Kelly Broadcasting
3 Television Circle
Sacramento, California 95814
Attention: Scott Nichols
Telephone No.: (916) 446-3333
Facsimile No.: (916) 325-3711
with a copy to: KCS Properties, Inc.
1451 River Park Drive, Suite 230
Sacramento, California 95815
Attention: William P. Krum
Telephone No.: (916) 920-1225
Facsimile No.: (916) 920-1395
with a copy to: Aguer-Pipgrass Associates
1851 Heritage Lane, Suite 128
Sacramento, California 95815
Attention: Thomas C. Aguer
Telephone No.: (916) 649-2777
Facsimile No.: (916) 649-3636
with a copy to: Trainor Robertson
701 University Avenue, Suite 200
Sacramento, California 95825
Attention: Charles W. Trainor, Esquire
Telephone No.: (916) 929-7000
Facsimile No.: (916) 929-7111
If to Buyer: Prentiss Properties Acquisition Partners, L.P.
3890 West Northwest Highway
Suite 400
Dallas, Texas 75220
Attention: Mark R. Doran
Telephone No.: (214) 654-5703
Facsimile No.: (214) 350-2437
with copies to: Snell, Brannian & Trent
8150 North Central Expressway, Suite 1800
Dallas, Texas 75201
Attention: Lawrence J. Brannian
Telephone No.: (214) 691-2500
Facsimile No.: (214) 691-2501
26
<PAGE>
If to the Title Company: First American Title Insurance Company
3030 LBJ Freeway, Suite 150
Dallas, Texas 75234
Attention: Ms. Jacqueline P. Aul
Telephone No.: (972) 620-7844
Facsimile No.: (972) 241-7112
with copies to: First American Title Insurance Company
1860 Howe Avenue, Suite 100
Sacramento, California 95825
Attention: Ms. Lisa Blazquez
Telephone No.: (916) 920-3100
Facsimile No.: (916) 927-8712
or such other address as either party may from time to time specify in writing
to the other in the manner aforesaid.
XI.2. BROKERS AND FINDERS. In connection with the transaction contemplated
-------------------
by this Agreement, Seller has agreed to pay a brokerage commission to Aguer
Pipgras Associates ("APA") and The CAC Group ("CAC"). Buyer and Seller each
represent and warrant to the other that (other than Seller's employment of APA
and CAC, neither has employed any real estate agent, brokerage or finder in
connection with this transaction. Buyer has not agreed to pay any real estate
commission or finder's fee in connection with this transaction. In the event of
a claim or broker's fee, finder's fee, commission or other similar compensation
in connection herewith other than as set forth above, Buyer, if such claim is
based upon any agreement alleged to have been made by Buyer, hereby agrees to
indemnify and hold Seller harmless against any and all liability, loss, cost,
damage or expense (including reasonable attorneys' fees and costs) which Seller
may sustain or incur by reason of such claim, and Seller, if such claim is based
upon any agreement alleged to have been made by Seller, hereby agrees to
indemnify and hold Buyer harmless against any and all liability, loss, cost,
damage or expense (including reasonable attorneys' fees and costs) which Buyer
may sustain or incur by reason of such claim. The provisions of this SECTION
11.2 shall survive the Closing.
XI.3. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the permitted successors and assigns of the
parties hereto.
XI.4. AMENDMENTS. This Agreement may be amended or modified only by a
----------
written instrument executed by the party asserted to be bound thereby.
XI.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
------------------------------------------
representations and warranties made by each party herein shall survive the
Closing for a period of one (1) year and shall not merge into the Grant Deed and
the recordation thereof in the Official Records of Sacramento County,
California.
XI.6. CONSTRUCTION. Headings at the beginning of each section and
------------
subsection are
27
<PAGE>
solely for the convenience of the parties and are not a part of the Agreement.
Whenever required by the context of this Agreement, the singular shall include
the plural and the masculine shall include the feminine and vice versa. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to paragraphs, sections, subparagraphs and subsections
are to this Agreement.
XI.7. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California. Any actions filed by
either party involving the other party shall be venued in Sacramento County,
California.
XI.8. PRIOR AGREEMENTS. This Agreement (including all Exhibits attached
----------------
hereto) together with the Earnest Money Letter is the final expression of, and
contains the entire agreements between the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented, superseded, canceled or
terminated nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein. The parties do not intend
to confer any benefit hereunder on any person, firm or corporation other than
the parties hereto and lawful assignees.
XI.9. ATTORNEYS' FEES. In the event of the bringing of any action or suit
---------------
by a party hereto against another party hereunder by reason of any breach of any
of the covenants, agreements or provisions on the part of the other party
arising out of this Agreement, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including actual attorneys' fees, accounting and
engineering fees, and any other professional fees resulting therefrom.
XI.10. TIME OF THE ESSENCE. Seller and Buyer hereby acknowledge and agree
-------------------
that time is strictly of the essence with respect to each and every term,
condition, obligation and provision hereof and that failure to timely perform
any of the terms, conditions, obligations or provisions hereof by either party
shall constitute a material breach of and a non-curable (but waivable) default
under this Agreement by the party so failing to perform.
XI.11. RELATIONSHIP OF PARTIES. Nothing contained in this Agreement shall
-----------------------
be deemed or construed by the parties to create the relationship of principal
and agent, a partnership, joint venture or any other association between Buyer
and Seller.
XI.12. WAIVERS. No waiver of any breach of any covenant or provision
-------
herein contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension
of time for performance of any obligation or act shall be deemed an extension of
the time for performance of any other obligation or act except those of the
waiving party, which shall be extended by a period of time equal to the period
of the delay.
28
<PAGE>
XI.13. PARTIAL INVALIDITY. If any term or provision 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 or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
such term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
XI.14. DISCLOSURE. Thomas C. Aguer, one of the general partners of Seller,
----------
hereby discloses that he has an ownership interest in Seller and is a licensed
California real estate broker.
XI.15. CONDITION PRECEDENT/CONCURRENT. This Agreement shall only be valid
------------------------------
if Buyer and Seller simultaneously execute the Additional Property Agreements
and this Agreement. Any default by Buyer under the terms of the Additional
Property Agreements shall give Seller the right to declare a default under this
Agreement.
XI.16. DAYS OF WEEK/TIME. In the event the date on which Buyer or Seller
-----------------
is required to take any action under the terms of this Agreement is not a
business day, the action shall be taken on the next succeeding business day. All
times referenced herein are the times of day in Sacramento, California on the
date in question.
XI.17. EXHIBITS/RECITALS. All exhibits referred to in this Agreement are
-----------------
attached and incorporated by this reference. All of the Recitals set forth
above are true and correct.
XI.18. POSSESSION. Possession of the Property shall be delivered to Buyer
----------
on the Closing Date, subject to the rights of any tenants or subtenants in the
Property.
XI.19. ASSIGNMENT. Buyer shall not assign, transfer or convey its rights
----------
and/or obligations under this Agreement and/or with respect to the Property to
any other party without the prior written consent of Seller, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the foregoing, Buyer
shall have the right to assign its rights under this Agreement to any affiliate
of Buyer.
[SIGNATURES ON FOLLOWING PAGE]
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
PRENTISS PROPERTIES ACQUISITION
PARTNERS, L.P., a Delaware limited
partnership
By: PRENTISS PROPERTIES I, INC.,
a Delaware corporation, its sole
general partner
By: /s/ MARK R. DORAN
---------------------------------
Name: Mark R. Doran
Title: Executive Vice President
SELLER:
1760 CREEKSIDE OAKS INVESTORS,
a California limited partnership
By: /s/ JON S. KELLY
-----------------------------------
Name: Jon S. Kelly
Title: Managing General Partner
The undersigned acknowledges receipt of this Agreement and agrees to act as
the Title Company hereunder.
FIRST AMERICAN TITLE INSURANCE COMPANY
By: /s/ JACQUELINE P. AUL
-----------------------------------
Name: Jacqueline P. Aul
Title:
---------------------------------
30
<PAGE>
EXHIBIT LIST
------------
Exhibit A Legal Description
Exhibit B Additional Properties
Exhibit C Grant Deed
Exhibit D Bill of Sale
Exhibit E Due Diligence Materials
Exhibit F Rent Roll
Exhibit G Tenant Estoppel
Exhibit H Transferor's Certification of Non-Foreign
Status
Exhibit I Assignment of Rights, Leases and Security
Deposits
Exhibit J Notices to Tenant
Exhibit K Works of Art
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
-----------------
The land situated in the State of California, County of Sacramento, City of
Sacramento and is described as follows:
Parcel B of Parcel Map entitled "Lot 6 Plat of Creekside Oaks Book 166, Map 22,"
filed in Book 103 of Parcel Maps, at Page 11, records of Sacramento County.
EXCEPTING THEREFROM all minerals, oil, gas and other hydrocarbon substances
lying below a depth of 500 feet from the surface of said land and real property
whether now known to exist or hereafter discovered, without, however, any right
to use the surface of such land and real property or any other portion thereof
above a depth of 500 feet from the surface of such land and real property for
any purpose whatsoever, as reserved in that certain Deed recorded December 9,
1983 from Sacramento Savings & Loan Association to Christo D. Bardis et al.,
Serial #213662, Official Records of Sacramento County.
<PAGE>
EXHIBIT B
ADDITIONAL PROPERTIES
---------------------
1740 Creekside Oaks Investors 1740 Creekside Oaks Drive, Sacramento, CA
1750 Creekside Oaks Investors 1750 Creekside Oaks Drive, Sacramento, CA
2525 Natomas Investors 2525 Natomas Park Drive, Sacramento, CA
2495 Natomas Investors 2495 Natomas Park Drive, Sacramento, CA
River City Bank 2485 Natomas Park Drive, Sacramento, CA
Bannon Investors Tract A, Natomas Center, Sacramento, CA
Natomas Investors et al Tract D, Natomas Center, Sacramento, CA
<PAGE>
EXHIBIT C
GRANT DEED
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RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MAIL TAX STATEMENTS TO:
GRANT DEED
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FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
_______________, a _______________________ ("GRANTOR"), hereby grants to
____________________, a _______________________ ("GRANTEE"), that certain real
property ("LAND") located in the City of Sacramento, County of Sacramento, State
of California, more particularly described in Exhibit A attached hereto together
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with all right, title and interest of Grantor in and to all buildings and
improvements now located or hereafter constructed on the Land.
Grantor hereby further grants to Grantee all of Grantor's right, title and
interest in and to all easements, privileges and rights appurtenant to the real
property and pertaining or held and enjoyed in connection therewith and all of
Grantor's right, title and interest in and to any land lying in the bed of any
street, alley, road or avenue to the centerline thereof in front of or adjoining
the Land.
IN WITNESS WHEREOF, Grantor has executed this Grant Deed as of
______________, 19__.
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By:
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<PAGE>
SEPARATE STATEMENT OF
DOCUMENTARY TRANSFER TAX
County Recorder
Sacramento County
Sacramento, California
Dear Sir:
In accordance with Revenue and Taxation Code Section 11932, it is required
that this statement of documentary transfer tax due should not be recorded with
the attached Deed, but be affixed to the Deed after recordation and before
return as directed on the Deed.
The Deed names _______________________, a _______________________, as
Grantor and ______________________, a ______________________ as Grantee. The
property being transferred is located in the City of Sacramento, County of
Sacramento, State of California.
The amount of documentary transfer tax due on the attached deed is
___________________ Dollars and _______________ Cents ($________________),
computed on the full value of the property (less the value of any liens and
encumbrances remaining on the property at the time of sale).
Very truly yours,
By
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<PAGE>
EXHIBIT D
BILL OF SALE
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Concurrently with the execution and delivery of this Bill of Sale (the
"Assignment"), 1760 CREEKSIDE OAKS INVESTORS, a California limited partnership
("Assignor"), is conveying to PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership ("Assignee"), by Grant Deed (the "Deed"), that
certain tract of land located in Sacramento County, California, being more
particularly described on Exhibit "A" attached hereto and made a part hereof for
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all purposes, together with the improvements located thereon (collectively the
"Property").
Assignor desires to assign, transfer, and convey to Assignee certain
tangible personal property, together with certain contract rights, guaranties,
licenses, and other specified items of intangible property (but specifically
excluding cash), affixed or attached to the Property, except those owned by
tenants of the Property (such tangible and intangible properties herein below
specified being collectively called the "Assigned Properties").
NOW, THEREFORE, in consideration of the receipt of Ten Dollars ($10.00) and
other good and valuable consideration in hand paid by Assignee to Assignor, the
receipt and sufficiency of which are acknowledged and confessed by Assignor,
Assignor ASSIGNS, TRANSFERS, SETS OVER, and DELIVERS to Assignee, its successors
and assigns, subject to any and all matters of record in Sacramento County,
California, to the extent they affect the Property, all of the Assigned
Properties, including, without limitation of the generality of the foregoing,
the following:
1. All of the personal property owned by Assignor located on or in or
used in connection with the Property, including without limitation the items of
tangible personal property consisting of all furniture, fixtures, equipment,
machinery and other personal property of every kind and nature (excluding cash-
on-hand) located on or used or useful in the operation of the Property including
the works of art listed on Exhibit "B".
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2. All of the right, title and interest of Assignor in any intangible
personal property owned by Assignor and used exclusively in the use and
operation of the Property, and all warranties or guarantees received by Assignor
from any contractors, subcontractors, suppliers or material men in connection
with any construction, repairs or alteration of the Property, licenses,
franchises, permits, tenant lists, advertising materials and other similar
rights relating to the use and operation of the Property.
3. The interest of Assignor under all current design contracts, space
planning contracts, construction contracts, subcontracts and purchase orders,
utility contracts, water and sewer service contracts of any nature, maintenance
contracts, management contracts, mortgage documents, certificates of occupancy,
permits, soils reports, insurance policies, and other contracts or documents of
any nature relating to the Property.
<PAGE>
4. The trade name "Natomas Corporate Center" (the "Trade Name"), on a
non-exclusive basis, and the business and good will of Assignor which were
acquired in connection with the Property.
TO HAVE AND TO HOLD the Assigned Properties unto Assignee, its successors,
and assigns, forever, and Assignor binds itself, its successors, and assigns, to
WARRANT and FOREVER DEFEND, all and singular, title to the Assigned Properties
(with the exception of the Trade Name) unto Assignee, its successors, and
assigns, against every person whomsoever lawfully claiming or to claim the same
or any part thereof, by, through or under Assignor but not otherwise.
Assignor shall not be responsible for the discharge and performance of any
duties or obligations to be performed and/or discharged in connection with the
Assigned Properties after the date hereof. By acceptance of this Assignment,
Assignee accepts and agrees to perform all of the terms, covenants, and
conditions in connection with the Assigned Properties required to be performed
by the owner thereof, from and after the date hereof, but not prior thereto, and
agrees to indemnify, save, and hold harmless Assignor from and against any and
all loss, liability, claims, or causes of action existing in favor of or
asserted by any party arising out of or relating to Assignee's failure to
perform any duties or obligations required by the owner of the Assigned
Properties after the date hereof.
Assignee shall not be responsible for the discharge and performance of any
duties or obligations required to be performed and/or discharged in connection
with the Assigned Properties prior to the date hereof. In such regard Assignor
agrees to indemnify and hold Assignee harmless from and against losses incurred
by Assignee as a result of claims brought against Assignee, as Assignor's
successor in interest to the Assigned Properties, relating to causes of action
arising from any failure by Assignor to perform or discharge its obligation as
the owner of the Assigned Properties prior to the date hereof.
Simultaneously with the execution and delivery of this Assignment, Assignor
has executed and delivered to Assignee the Deed and the specific conveyances
described in the recitals hereof.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment in
multiple counterparts, each of which shall have the same force and effect as an
original, but which shall constitute one and the same instrument, effective this
_______ day of ____________, 1997.
<PAGE>
ASSIGNEE:
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
a Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By: /s/ MARK R. DORAN
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Name: Mark R. Doran
Title: Executive Vice President
ASSIGNOR:
1760 CREEKSIDE OAKS INVESTORS, a California
limited partnership
By:
---------------------------------
Name:
-------------------------------
Title:
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<PAGE>
EXHIBIT "A"
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PROPERTY DESCRIPTION
<PAGE>
EXHIBIT "B"
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WORKS OF ART
<PAGE>
EXHIBIT E
DUE DILIGENCE DOCUMENTS
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1. Form Lease
2. All tenant leases and amendments
3. Leasing Status reports, weekly basis
4. Lease proposals
5. Service and Purchase Contracts
6. Equipment Leases
7. Union Contracts
8. Other Contracts and Agreements
9. Operating Licenses and Permits
10. Lease Commission Agreements and Schedules of Commissions Payable
11. Current Year Operating Budget
12. Operating Statements, past two years and current year, monthly basis
13. Receivables Report, update on monthly basis
14. Rent Roll, update on monthly basis
15. Billing Register, update on monthly basis
16. Escalation Work Papers and Base Year Amount Details
17. Utility Invoices, past two years and current monthly
18. Real Estate Tax Bills, past two years
19. Current Notice of Assessment Valuation
20. Tax Parcel Map
21. Real Estate Tax Consultant Report
22. Tenant Credit Reports (to the extent that they are in the tenant files) to
be reviewed at the Property during the Due Diligence Period
23. Tenant Financial Statements (to the extent that they are in the tenant
files) to be reviewed at the Property during the Due Diligence Period
24. Schedule of Capital and Tenant Improvements
25. Current Schedule of Insurance
26. Pending Insurance Claims
27. List of Personnel & Wages
28. Lease and Tenant Files, to be reviewed at the Property during the Due
Diligence Period
29. Vendor Files, to be reviewed at the Property during the Due Diligence
Period
30. Construction Files, to be reviewed at the Property during the Due Diligence
Period
31. Other Property Files, to be reviewed at the Property during the Due
Diligence Period
32. List of Personal Property
33. Demising/Leasing/Site Plan
34. Plans and Specifications, 2 sets of each
(a) Architectural
(b) Structural
(c) Civil
(d) Mechanical
(e) Landscaping
<PAGE>
(f) Sprinkler
(g) Tenant
35. Certificates of Occupancy, building and tenant
36. Construction Contracts
37. Guaranties & Warranties
38. Existing Reports
(a) Structural and Engineering
(b) Environmental and Asbestos
(c) Soils
(d) Radon
(e) Geotechnical
(f) Ground Water Monitoring
(g) Sprinkler Test
(h) Elevator Consultant
39. Preliminary Title Report issued by Stewart Title Guaranty
40. Underlying Recorded Documents
41. Existing Survey
<PAGE>
EXHIBIT F
RENT ROLL
To be delivered to Buyer and/or Seller within 5 business days
of the Effective Date
<PAGE>
EXHIBIT G
TENANT ESTOPPEL
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To be delivered to Buyer and/or Seller within 5 business days
of the Effective Date
<PAGE>
EXHIBIT H
TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
------------------------------------------------
To inform PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware
limited partnership ("TRANSFEREE"), that withholding of tax under Section 1445
of the Internal Revenue Code of 1986, as amended ("CODE"), will not be required
upon the transfer of certain real property to the Transferee by 1760 CREEKSIDE
OAKS INVESTORS, a California limited partnership ("TRANSFEROR"), the undersigned
hereby certifies the following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Code and the
Income Tax Regulations promulgated thereunder);
2. The Transferor's U.S. employer identification is ________________;
and
3. The transferor's office address is _______________________________.
The Transferor understands that this Certification may be disclosed to the
Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
The Transferor understands that the Transferee is relying on this
Certification in determining whether withholding is required upon said transfer.
The Transferor hereby agrees to indemnify, defend and hold the Transferee
harmless from and against any and all obligations, liabilities, claims, losses,
actions, causes of action, rights, demands, damages, costs and expenses of every
kind, nature or character whatsoever (including, without limitation, actual
attorneys' fees and court costs) incurred by the Transferee as a result of: (i)
the Transferor's failure to pay U.S. federal income tax which the Transferor is
required to pay under applicable U.S. law; or (ii) any false or misleading
statement contained herein.
Under penalty of perjury I declare that I have examined this Certification
and to the best of my knowledge and belief it is true, correct and complete, and
I further declare that I have authority to sign this document on behalf of the
Transferor.
Dated: ________, 1997 1760 CREEKSIDE OAKS INVESTORS, A
CALIFORNIA LIMITED PARTNERSHIP
BY:
--------------------
BY:
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<PAGE>
EXHIBIT I
ASSIGNMENT OF LEASES
--------------------
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
SPACE ABOVE THIS LINE FOR RECORDER'S USE
ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS
THIS ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS is made as of ____,
1997 by ______, a ________________________ ("Assignor"), in favor of ____, a
__________________
A. Assignor is the owner of that certain land ("Land") located in the
City of Sacramento, County of Sacramento, State of California more particularly
described in Schedule 1 hereto, and all rights, privileges and easements
appurtenant to the Land ("Appurtenances"), and all buildings and other
improvements thereon ("Improvements"). The Land, the Appurtenances, and the
Improvements are hereinafter referred to collectively as the "Real Property."
The Real Property is being conveyed to Assignee pursuant to a Grant Deed of even
date herewith, executed by Assignor in favor of Assignee which is being recorded
concurrently herewith.
B. Assignor, as owner of the Real Property, has an interest, as
landlord, in the tenant leases of space in the Improvements ("Leases"), which
are described in Schedule 2 hereto, and an interest in certain security deposits
collected and held by Assignor to secure the performance of the duties and
obligations of tenants under certain of the Leases ("Security Deposits").
C. Assignor desires to assign, transfer and convey to Assignee all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
NOW, THEREFORE, Assignor agrees as follows:
1. Assignor hereby assigns, transfers and conveys to Assignee, all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
<PAGE>
2. Assignor warrants and represents that:
(a) Schedule 2 hereto is a list of all of the leases affecting the Real
Property, other than subleases permitted by the respective leases; Assignor has
not executed or otherwise entered into any other leases, tenancies, occupancy
agreements or other agreements with respect to rights affecting possession of
the Real Property or any portion thereof; and there are no such agreements
executed or otherwise entered into by any third party, and
(b) the Leases are in full force and effect and there is no default on the
part of Assignor as landlord or on the part of any tenant, and there exists no
condition that with the passage of time or the giving of notice or both would
constitute such a default.
(c) Cross-Indemnity.
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(i) By Assignor. Assignor indemnifies and holds harmless Assignee
-----------
from and against any and all loss, damage, liability, cost or expense,
including, without limitation, court costs and reasonable attorneys' fees,
arising out of, by reason of, or in connection with any action, suit, charge,
complaint, proceeding, obligation, undertaking or other similar matter arising
out of or in connection with any transaction, event, act or omission involving
the Leases and Security Deposits which occurred, accrued and/or arose prior to
the date hereof.
(ii) By Assignee. Assignee indemnifies and holds harmless Assignor
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from and against any and all loss, damage, liability, cost or expense,
including, without limitation, court costs and reasonable attorneys' fees,
arising out of, by reason of, or in connection with any action, suit, charge,
complaint, proceeding, obligation, undertaking or other similar matter arising
out of or in connection with any transaction, event, undertaking, act or
omission involving the Leases and Security Deposits which occurs, accrues and
arises from and after the date hereof.
3. The provisions of this Agreement of Rights, Leases and Security
Deposits shall be binding upon and inure to the benefit of Assignor and Assignee
and their respective successors and permitted assigns.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment of
Rights, Leases and Security Deposits as of the date first set forth above.
ASSIGNEE: ASSIGNOR:
BY: BY:
------------------------ -------------------------------
ITS: ITS:
----------------------- ------------------------
DATE: DATE:
---------------------- -----------------------
<PAGE>
EXHIBIT J
NOTICES TO TENANT
-----------------
Premises: ______________________________
Lease dated _______________ between ___________________, a
Landlord, and _____________, a
, Tenant
This is to notify you that the undersigned has sold its fee interest in
the ___________ and in connection therewith has assigned its interest as
landlord under your lease to ____________, a _____________
You are further notified that commencing ____________, 1997, all rental
payments under you Lease shall be paid to _____________, at the address
specified in the first paragraph hereof, unless you are otherwise notified in
writing by __________________. You are ___________________________.
Very truly yours,
CERTIFIED MAIL,
RETURN RECEIPT REQUESTED.
<PAGE>
EXHIBIT K
WORKS OF ART
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To be delivered to Buyer and/or Seller within 5 business days
of the Effective Date
<PAGE>
EXHIBIT 10.4
[COMMENT 1]
AGREEMENT OF PURCHASE AND SALE
AND ESCROW INSTRUCTIONS
(2485 NATOMAS PARK DRIVE)
This Agreement of Purchase and Sale and Escrow Instructions ("AGREEMENT"),
dated for reference purposes as of February 17, 1997, is entered into by and
between RIVER CITY BANK, a state bank ("SELLER"), and PRENTISS PROPERTIES
ACQUISITION PARTNERS, L.P. , a Delaware limited partnership ("BUYER").
RECITALS
A. Seller is the owner of approximately 6.67 acres of land located in
the City of Sacramento, County of Sacramento, State of California ("LAND"), more
particularly described in EXHIBIT "A" hereto and made a part hereof for all
-----------
purposes.
B. The Land has been improved with a six (6) story office building,
containing approximately 142,907 net rentable square feet and related
improvements.
C. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer the "PROPERTY" (as hereinafter defined in SECTION 1.8) on the terms and
conditions set forth herein.
D. In conjunction with its purchase of the Property, Buyer is also
purchasing the real properties located at the addresses ("ADDITIONAL
PROPERTIES") more particularly described in EXHIBIT "B" hereto and made a part
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hereof for all purposes, from the sellers (the "OTHER SELLERS") listed therein
pursuant to certain Agreements of Purchase and Sale and Escrow Instructions of
even date herewith ("ADDITIONAL PROPERTY AGREEMENTS"), the simultaneous purchase
of which shall be a condition concurrent to Buyer's purchase of the Property
hereunder.
NOW, THEREFORE, Seller and Buyer agree as follows:
AGREEMENT
ARTICLE I.
PROPERTY
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Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees
to purchase from Seller, subject to the terms and conditions set forth herein,
the following:
I.1. LAND. The Land;
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I.2. APPURTENANCES. All rights, privileges and easements appurtenant to
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the Land, including, without limitation, all minerals, oil, gas and other
hydrocarbon substances on and
<PAGE>
under the Land (to the extent owned by Seller) as well as all development
rights, air rights, water, water rights and water stock relating to the Land and
any other easements, rights-of-way or appurtenances, used in connection with the
beneficial use and enjoyment of the Land (all of which are collectively referred
to as the "APPURTENANCES");
I.3. IMPROVEMENTS. All buildings improvements and fixtures located on the
------------
Land, including, without limitation, all fixtures, apparatus, equipment and
appliances used in connection with the operation or occupancy thereof, such as
heating and air conditioning systems and facilities used to provide any utility
services, parking services, refrigeration, ventilation, trash disposal,
recreation or other services thereto (all of which are collectively referred to
as the "IMPROVEMENTS");
I.4. PERSONAL PROPERTY. All of the personal property owned by Seller
-----------------
located on or in or used in connection with the Property ("PERSONAL PROPERTY"),
including without limitation the items of tangible personal property consisting
of all furniture, fixtures, equipment, machinery and other personal property of
every kind and nature (excluding cash-on-hand) owned by Seller and located on or
used or useful in the operation of the Property (as opposed to banking
operations), all of which will be assigned pursuant to the Bill of Sale, as
hereinafter defined, which Personal Property includes the works of art listed
on EXHIBITE"K" ("WORKS OF ART") (furniture located in the management office is
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owned by KCS Properties, Inc. shall not be considered Personal Property
hereunder);
I.5. INTANGIBLE PROPERTY. All of the right, title and interest of Seller in
-------------------
any intangible personal property owned by Seller and used exclusively in the use
and operation of the Improvements, and all warranties or guarantees received by
Seller from any contractors, subcontractors, suppliers or materialmen in
connection with any construction, repairs or alteration of the Improvements,
licenses, franchises, permits, tenant lists, advertising materials and other
similar rights relating to the use and operation of the Property (all of which
are collectively referred to as the "INTANGIBLE PROPERTY"), all of which shall
be assigned to Buyer pursuant to the Bill of Sale;
I.6. LEASES. The interest of Seller as landlord under all leases of space
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in the Improvements ("LEASES") in effect on the Closing Date;
I.7. SERVICE CONTRACTS. The interest of Seller under all current design
-----------------
contracts, space planning contracts, construction contracts, subcontracts and
purchase orders, utility contracts, water and sewer service contracts of any
nature, maintenance contracts, management contracts, mortgage documents,
certificates of occupancy, permits, soils reports, insurance policies, and other
contracts or documents of any nature relating to the Property which are to be
assigned to Buyer at the Closing ("SERVICE CONTRACTS"). All such Service
Contracts approved by Buyer shall be transferred and assigned to Buyer by the
Bill of Sale; and
I.8. PROPERTY. All of the items described in SECTIONS 1.1 through 1.7
--------
above are herein collectively referred to as the "PROPERTY." The items described
in SECTIONS 1.1, 1.2 and 1.3 are herein referred to collectively as the "REAL
PROPERTY."
2
<PAGE>
ARTICLE II.
PURCHASE PRICE
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II.1. PURCHASE PRICE. The purchase price for the Property shall be the sum
--------------
of Twenty Million Six Hundred Thousand and No/100ths Dollars ($20,600,000.00)
(the "PURCHASE PRICE"). A portion of the Purchase Price has been allocated to
the purchase of the Works of Art in the manner set forth on EXHIBIT "K" attached
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hereto and made a part hereof for all purposes.
II.2. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by Buyer
-------------------------
in cash by wire transfer on the Closing Date.
II.3. EARNEST MONEY.
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(a) Within two (2) business days following the Effective Date, Buyer shall
deposit, or cause to be deposited with First American Title Insurance Company,
located at 3030 LBJ Freeway, Suite 150, Dallas, Texas 75234; Attn: Jacqueline P.
Aul (the "TITLE COMPANY"), in cash, by certified or bank cashier's check made
payable to the Title Company, or by a confirmed wire transfer of funds, the sum
of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the "EARNEST MONEY")
in accordance with the terms of that certain letter agreement (the "EARNEST
MONEY LETTER") of even date herewith by and between Buyer, the Title Company,
Seller and the Other Sellers. The Earnest Money constitutes escrow deposit under
this Agreement and the Additional Property Agreements. The Earnest Money shall
be held and disbursed in accordance with the terms of the Earnest Money Letter.
(b) The term "EFFECTIVE DATE" shall mean the date upon which this Agreement
and the Additional Property Agreements have been fully executed and delivered by
Seller and Buyer and Seller and the Other Sellers, as the case may be and one
duplicate original of each has been deposited with the Title Company.
II.4. LIQUIDATED DAMAGES. IN THE EVENT THAT THE SALE OF THE PROPERTY AS
------------------
CONTEMPLATED HEREUNDER IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS
AGREEMENT BY BUYER, THROUGH NO FAULT OF SELLER, THE EARNEST MONEY SHALL BE
IMMEDIATELY PAID BY TITLE COMPANY, ON BEHALF OF BUYER, TO SELLER AS LIQUIDATED
DAMAGES PURSUANT TO THE EARNEST MONEY LETTER. THE PARTIES ACKNOWLEDGE THAT
SELLER'S ACTUAL DAMAGES IN THE EVENT OF A DEFAULT BY BUYER WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR SIGNATURES
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES REASONABLE ESTIMATE OF SELLER'S DAMAGES FOR
BUYER'S FAILURE TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
AND THE ADDITIONAL PROPERTY
3
<PAGE>
AGREEMENTS AND AS SELLER'S EXCLUSIVE REMEDY AGAINST BUYER IN THE EVENT OF A
DEFAULT BY BUYER; PROVIDED, HOWEVER, NOTHING CONTAINED HEREIN SHALL PRECLUDE (A)
SELLER FROM PURSUING ANY REMEDIES SET FORTH IN SECTIONS 8.2, 8.5, 8.6, 11.2 AND
11.5 WHICH SURVIVE THE TERMINATION OF THIS AGREEMENT OR (B) THE RECOVERY OF ITS
ATTORNEYS' FEES AND COSTS IN THE PROSECUTION OR DEFENSE OF ANY ACTION BROUGHT
UNDER THIS AGREEMENT, IF SELLER IS ENTITLED TO RECEIVE SAME. THE LIQUIDATED
DAMAGES SET FORTH HEREIN ABOVE ARE DUPLICATIVE OF AND NOT IN ADDITION TO THE
LIQUIDATED DAMAGES SET FORTH IN THE EARNEST MONEY LETTER.
BUYER: SELLER:
---------------- ----------------
ARTICLE III.
TITLE TO PROPERTY
-----------------
III.1. TITLE TO REAL PROPERTY.
----------------------
III.1.1. At the Closing, Seller shall convey to Buyer fee simple
title to the Real Property, by execution and delivery of a Grant Deed ("DEED")
in the form attached hereto as EXHIBIT "C" and made a part hereof for all
purposes. -----------
III.1.2. On the Closing Date, Buyer shall receive from the Title
Company an ALTA Owner's Policy of Title Insurance, in a form to be selected by
Buyer, with liability in the full amount of the Purchase Price, insuring fee
simple title to the Real Property in Buyer, subject only to exceptions approved
by Buyer as provided in SECTION 4.1.1 hereof, together with the following
endorsements: (i) an endorsement deleting all general exceptions and deleting
exclusions from coverage relating to creditor's rights, (ii) 116.1 (survey),
(iii) 100 (modified), (iv) 123.1 (zoning), (v) 116.4 (contiguity), (vi) 103.7
(access), (vii) 100.29 (mineral rights), (viii) 103.1 (easements) (ix) 103.5
(water rights) and (ix) such other endorsements as may be reasonably requested
by Buyer ("TITLE POLICY"). The Title Policy shall provide full coverage against
mechanics and material men's liens arising out of the construction, repair or
alteration of any of the Improvements or any tenant improvements.
III.1.3. The Title Company shall obtain, if requested by Buyer
and at Buyer's cost, reinsurance agreements from such companies as Buyer may
request, which reinsurance agreements shall be in ALTA Facultative Reinsurance
Agreement Form (rev. 1961), and shall include direct access agreements, in such
amounts and in such form as shall otherwise be satisfactory to Buyer.
III.2. TITLE TO PERSONAL PROPERTY. At the Closing, Seller shall transfer
--------------------------
title to the Personal Property pursuant to the Bill of Sale, in the form of Bill
of Sale and Assignment attached as EXHIBIT "D" hereto ("BILL OF SALE") and shall
-----------
further transfer and assign all of Seller's rights in and to any Intangible
Property, pursuant to the Bill of Sale, and shall further
4
<PAGE>
transfer all of Seller's rights, title and interest in and to the Leases
pursuant to the Assignment of Leases (as hereinafter defined). All such title
and rights shall be free of any liens, encumbrances or interests of third
parties whatsoever.
ARTICLE IV.
CONDITIONS TO CLOSING
---------------------
IV.1. BUYER'S DUE DILIGENCE CONDITIONS. For a period beginning on the
--------------------------------
Effective Date and expiring at 5:00 p.m. on the thirtieth (30th) day thereafter
("CONTINGENCY PERIOD") Buyer, Buyer's agents, contractors, subcontractors,
employees and its counsel shall have the right to perform due diligence on the
Property pursuant to the terms of this SECTION 4.1 as follows:
IV.1.1. APPROVAL OF TITLE. Buyer's approval of the following
------------------
matters relating to the title of the Property:
(a TITLE COMMITMENT. Buyer shall obtain (i) a title
-----------------
commitment ("COMMITMENT"), by the terms of which the Title Company agrees
to issue to Buyer, at Closing, the Title Policy in the amount of the
Purchase Price; (ii) a photocopy of all documents ("TITLE DOCUMENTS")
describing or evidencing all title exceptions shown on the Commitment; and
(iii) reports relating to judgment, UCC, and Federal and State tax lien
searches regarding the Seller and the Property (collectively, the
"REPORTS"), to be obtained by Buyer, but to be paid for by Seller at the
Closing.
(b SURVEY. Buyer shall secure an as-built survey
-------
("SURVEY") of the Property, prepared by a registered land surveyor, duly
licensed in the State and certified to the Title Company and to the Buyer
in full ALTA/ASTM form.
(c REVIEW OF SURVEY AND COMMITMENT.
-------------------------------
(i As used herein, the term "TITLE OBJECTION
PERIOD" shall mean a period commencing on the first day following
receipt by Buyer of the Survey, the Commitment, the Reports and
the Title Documents and ending ten (10) days thereafter. All
matters shown on the Survey and exceptions listed in the
Commitment or the Reports which are not objected to by Buyer
within the Title Objection Period, shall be conclusively deemed to
be acceptable to Buyer.
(ii In the event Buyer timely objects to any title
exception or Survey matter ("TITLE OBJECTION"), Seller may, but
shall not be obligated to, cure such Title Objection. Seller shall
notify Buyer, within five (5) days following receipt of the Title
Objection, of its decision as to whether or not it intends to cure
the Title Objection in question. In the event Seller notifies or
its deemed to have notified the Buyer that is unable or unwilling
to cure any Title Objection, Buyer may at its option (a) terminate
this Agreement, or (b) waive the Title Objections in question. The
foregoing election shall be made
5
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by Buyer in writing within ten (10) days following Seller's
notification. If any of the Title 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, Seller shall be obligated to pay and discharge (or bond
against in a manner sufficient to cause the Title Company to
insure over such Title Objections) any such Title Objections.
Bonds and assessments in respect to improvements heretofore made
to the Property which are reflected in the Commitment shall not be
deemed to be a Title Objection.
(iii Seller hereby agrees that it shall not, after
the Effective Date, subject the Property to or permit or suffer to
exist any liens, encumbrances, covenants, conditions,
restrictions, easements or other title matters other than those in
existence on the date hereof or seek any zoning changes or take
any other action which may affect or modify the status of title
without Buyer's prior written consent. Notwithstanding the
foregoing, Buyer shall not be required to accept title to the
Property subject to any matters which may arise subsequent to the
effective date of the Title Commitment, Reports and Survey
examined by Buyer during the period described above.
(iv Notwithstanding anything herein to the
contrary, in any event Buyer's right to terminate this Agreement
pursuant to any provision of this SECTION 4.1.1 shall expire upon
expiration of the Contingency Period.
(v As used in this Agreement, the term "PERMITTED
EXCEPTIONS" shall mean all matters either shown on the Survey or
listed in the Commitment or the Reports to which Buyer does not
raise a Title Objection within the Title Objection Period or,
having objected, waives or is deemed to have waived in accordance
with the provisions of this SECTION 4.1.1, other than those Title
Objections 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. It is
understood and agreed that the Property is being transferred
hereunder free and clear of all liens, claims and encumbrances
except for the Permitted Exceptions.
(d TERMINATION OF THIS AGREEMENT. In the event of
------------------------------
termination of this Agreement pursuant to this SECTION 4.1.1, the Earnest
Money shall be returned to Buyer and thereafter neither party shall have
any further rights or obligations hereunder.
IV.1.2. INSPECTIONS.
-----------
(a Buyer and Buyer's agents, contractors, subcontractors or
employees, shall have the right to conduct any and all inspections,
investigations, tests and studies
6
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(including, without limitation, investigations with regard to zoning,
building codes and other governmental regulations, architectural
inspections, engineering tests, economic feasibility studies, soils,
seismic and geologic reports and environmental testing) with respect to the
Property as Buyer may elect to make or maintain. During the Contingency
Period, Buyer and its agents and consultants shall have access to: (1) the
Property; (2) the tenants for interviews, which interviews shall be
coordinated by Seller, with Seller or its representative present if Seller
so elects; and (3) the books and records relating to the ownership and
operation of the Property, for the purpose of making such inspections,
tests, copies and verifications as Buyer shall deem reasonably necessary.
(b Prior to any entry onto the Property by Buyer's agents,
contractors, subcontractors or employees, Buyer shall deliver to Seller a
Certificate of Insurance for Buyer's commercial general liability insurance
policy which evidences that Buyer is carrying a commercial general
liability insurance policy with a financially responsible insurance company
(at least A-X in the latest edition of Best's Insurance Guide), covering
----------------------
(i) the activities of Buyer, and Buyer's agents, contractors,
subcontractors and employees on or upon the Property, and (ii) Buyer's
indemnity obligations set forth in this Agreement. Such Certificate shall
evidence that such insurance policy shall have a per occurrence limit
(including umbrella) of at least Five Million and no/100 Dollars
($5,000,000.00) and an aggregate limit (including umbrella) of at least Ten
Million and no/100 Dollars ($10,000,000.00), shall name Seller as an
additional insured, shall be primary and non-contributing with any other
insurance available to Seller, shall be issued on an occurrence basis, and
shall contain a full waiver of subrogation clause. Seller shall be named as
an additional insured under such policy in such Certificate.
(c Within five (5) days after Effective Date, Seller shall
deliver or cause to be delivered to Buyer at its offices in Sacramento,
California, the Due Diligence Documents listed on EXHIBIT "E" attached
-----------
hereto and made a part hereof for all purposes.
IV.1.3. AGREEMENTS. Buyer shall have approved the Leases, Service
----------
Contracts, Personal Property, and all other documents and materials to be
delivered to Buyer by Seller pursuant to the provisions of SECTION 4.1.2.
IV.1.4. INCOME TAX MATTERS. Buyer shall have received satisfactory
------------------
opinions from its legal counsel as to income tax matters in connection with the
transaction.
IV.1.5. AS-BUILT PLANS AND SPECIFICATIONS. Buyer and its
---------------------------------
architects, engineers and consultants shall have reviewed and approved the "AS-
BUILT" plans and specifications pursuant to which the Property was constructed,
including the confirmation of the net rentable area of the Property.
IV.1.6. PHYSICAL INSPECTION REPORTS. Buyer shall have obtained a
---------------------------
physical inspection report and an environmental report with respect to the Land
(including surrounding
7
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areas) and Improvements constituting the Property prepared in accordance with
the specifications submitted by Buyer and prepared by third-party specialists
selected by Buyer, and Buyer shall then determine in its sole discretion whether
it is willing to purchase the Property in the physical and environmental
condition set forth in said reports.
IV.1.7. FINANCIAL INFORMATION. Buyer shall have (a) verified to
---------------------
its satisfaction the accuracy of the rent roll (the "RENT ROLL") attached hereto
as EXHIBIT "F" and the accuracy of projections and other financial data with
-----------
respect to the Property which have been delivered to Buyer in the offering, (b)
determine that the creditworthiness of the tenants is within the reasonable
financial risk parameters of Buyer, (c) verify that it is willing to accept and
be bound by the actual terms of the Leases, and (d) verify that the Property has
sufficient automobile parking spaces (including, without limitation, handicap
spaces) to comply with the requirements of all governmental authorities and
ordinances and all tenant leases.
IV.1.8. APPROVAL BY BOARD OF DIRECTORS. Buyer shall have, within
------------------------------
ten (10) days following the Effective Date, obtained the approval of the Board
of Directors (the "BOARD") of Prentiss Properties Trust, a real estate
investment trust, which is a partner in Buyer. In the event the Board fails to
approve the transaction contemplated hereby Buyer shall so notify Seller in
which event this Agreement along with the Additional Property Agreements shall
terminate and the Earnest Money shall be returned to Buyer. The failure to
notify Seller of Buyer's election to terminate this Agreement in accordance with
the provisions of this SECTION 4.1.8 within such ten (10) day period shall be
deemed to be an election on the part of Buyer to waive such contingency.
IV.1.9. CONTINGENCY NOTICE.
------------------
(a) Prior to the expiration of the Contingency Period, Buyer shall
deliver to Seller and the Title Company a written notice ("CONTINGENCY
NOTICE") of its approval or disapproval of the Property, which shall be
subject to Buyer's sole and absolute discretion. In the event that Seller
does not receive a Contingency Notice approving the Property by the
expiration of the Contingency Period, this Agreement shall be deemed to
have been automatically terminated.
(b) Subject to the provisions of subparagraph (c) and (d) below,
the Contingency Notice for the Additional Properties must be consistent
with the Contingency Notice for the Property in respect to Buyer's approval
or disapproval of the Additional Properties. If the Contingency Notice is
inconsistent, this Agreement shall terminate.
(c) Notwithstanding the provisions of subparagraph (b) above, in
the event that (i) the Other Seller terminates the Additional Property
Agreement (the "2525 AGREEMENT") covering the Additional Property located
at 2525 Natomas Park Drive, Sacramento, California, pursuant to SECTION
2.1(C) thereof, or (ii) Buyer terminates the 2525 Agreement for any reason,
the effectiveness of this Agreement or the remaining Additional Property
Agreements shall not be affected. In the event of the termination of
8
<PAGE>
the 2525 Agreement pursuant to the foregoing provisions, this Agreement
shall remain in full force and effect, subject to the continued existence
of the remaining Additional Property Agreements.
(d) Additionally, in the event that the Bannon Investors, one of
the Other Sellers under the Additional Property Agreements which owns that
certain tract of land known as Tract A, terminates its Additional Property
Agreement (the "TRACT A AGREEMENT") in accordance with the provisions of
SECTION 2.1(C) the Tract A Agreement, Buyer, at its option may elect (i) to
terminate this Agreement and the remaining Additional Property Agreements,
in which event the Earnest Money shall be returned to Buyer, or (ii) to
keep this Agreement as well as the remaining Additional Property Agreements
in full force and effect, in which event the parties shall consummate the
transactions contemplated thereby in accordance with the respective terms
and conditions of this Agreement and the remaining Additional Property
Agreements.
IV.1.10. SELLER'S SPACE LEASE.
--------------------
(a) Seller shall, prior to the expiration of the Contingency
Period, furnish to Buyer satisfactory evidence and documentation that a
lease (the "BANK LEASE"), with Seller as the tenant, will be in place on
the Closing Date providing (a) rental rate in the amount of $1.85 per
square foot of net rentable area per month, (b) a term of fifty-five (55)
months, and (c) a leased premises (the "LEASED PREMISES") constituting
approximately 24,000 square feet of net rentable area on the first and
second floors of the Property. Seller shall have the option to extend the
term of the Bank Lease for five (5) months. The option to extend the term
of the Bank Lease must be exercised within eighteen (18) months following
the Closing Date or such option shall lapse. The form and content of the
Bank Lease shall be approved by Buyer and Seller prior to the expiration of
the Contingency Period.
(b) Buyer shall have no obligation for tenant improvement costs.
No leasing commissions shall due and payable in respect to such lease.
(c) Buyer shall have the right and option (the "RELOCATION
OPTION") to relocate the portion of the Leased Premises situated on the
second floor of the Property in the event a lease (the "XEROX LEASE") with
Xerox Corporation ("XEROX") is entered into in respect to the second floor
of the Property within six (6) months following the Closing Date. The space
to be occupied by Seller on the fourth floor shall be Suite 400 consisting
of approximately 7,769 square feet. In the event that Buyer exercises the
Relocation Option (i) the term of the Bank Lease shall be shortened to
fifty-three (53) months, (ii) the option term shall be seven (7) months in
lieu of five (5) months, (iii) Seller shall be entitled to a tenant
improvement/moving allowance in the amount of $7.50 per square foot of net
rentable area contained in Suite 400, and (iv) the effective date of such
relocation and the delivery of Suite 400 (which shall be delivered in as-is
condition) shall be thirty (30) days following the date Seller receives
notice of the
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exercise of the Relocation Option.
(d) So long as Seller remains in occupancy of the of the entire
first floor of the Property in accordance with the terms of the Bank Lease,
absent a material default in Seller's obligations under the Bank Lease and
subject to existing rights of other tenants in the Property and applicable
laws, Seller shall be entitled to retain its right to exterior signage on
the Property.
IV.2. APPROVAL BY SELLER'S BOARD OF DIRECTORS. Seller shall have, within
---------------------------------------
ten (10) days following the Effective Date, obtained the approval of the Board
of Directors (the "BANK BOARD") of Seller. In the event the Bank Board fails to
approve the transaction contemplated hereby Seller shall so notify Buyer in
which event this Agreement along with the Additional Property Agreements shall
terminate and the Earnest Money shall be returned to Buyer. The failure to
notify Buyer of Seller's election to terminate this Agreement in accordance with
the provisions of this SECTION 4.2 within such ten (10) day period shall be
deemed to be an election on the part of Seller to waive such contingency.
IV.3. BUYER'S CLOSING CONDITIONS. The following conditions are for the
--------------------------
benefit of Buyer and are conditions to the Closing, unless expressly waived by
Buyer on or before the Closing Date:
IV.3.1. TENANT ESTOPPEL CERTIFICATES. Seller shall deliver to Buyer a
----------------------------
current estoppel letter in the substantially the form attached hereto as EXHIBIT
-------
"G" from tenants of the Property (and other occupants to the extent that Seller
- ---
has the contractual right to require such letters), in the aggregate
representing at least ninety percent (90%) of the occupied floor area of the
Property. In the event that Seller is unable to obtain an estoppel certificate
from any tenant which has leased less than ten thousand (10,000) square feet,
Seller shall furnish Buyer with a mutually acceptable, qualified estoppel
certificate concerning such Lease executed by Seller. Buyer shall provide Seller
with its desired form of estoppel certificates for each tenant on or before
twenty (20) days following the Effective Date. In addition, all tenants listed
on the Rent Roll or their subtenants occupying in excess of 10,000 square feet
of net rentable area will be in "material compliance" with the terms and
conditions of their respective leases (except for premises which may not yet be
ready for occupancy as the result of new leases or modified leases). The term
"material compliance" shall mean that the tenant is question is not more than
thirty (30) days in arrears in the payment of rent due under its lease and/or
the tenant in question has not filed for bankruptcy protection under applicable
law.
IV.3.2. SIMULTANEOUS CLOSING. Subject to the provisions of SECTION
--------------------
4.1.9, in respect to the termination of the 2525 Agreement and the Tract A
Agreement, the Closing of the transaction contemplated hereby shall be
contingent upon the simultaneous closing of the Additional Properties pursuant
to the terms and conditions of the Additional Property Agreements.
Notwithstanding the foregoing, in the event (a) any of the Additional Property
Agreements are terminated as a result of a Seller default, or in accordance with
ARTICLE IX of the Additional Property Agreements, Buyer shall have the option,
in its sole discretion, to terminate this Agreement and the Earnest Money shall
be returned to Buyer or Buyer may
10
<PAGE>
waive the simultaneous closing condition and consummate the transaction
contemplated herein and (b) the Tract A Agreement or the 2525 Agreement is
terminated by Buyer or applicable Other Seller pursuant to SECTION 2.1(C)
thereof, Buyer shall have the right to terminate this Agreement, in its sole
discretion, in which event the Earnest Money shall be returned to Buyer or Buyer
may consummate the transaction contemplated herein without regard to such
termination.
IV.3.3. TITLE INSURANCE. As of the Closing Date, the Title Company
---------------
shall have issued or shall have committed to issue the Title Policy to Buyer in
respect to the Property.
IV.3.4. NO MATERIAL CHANGE. There shall be no material adverse change
------------------
in any of the items approved by Buyer during the Contingency Period, including,
without limitation, the physical condition of the Property and title to the
Property.
IV.3.5. TERMINATION OF AGREEMENTS. On the Closing Date, all
-------------------------
management and leasing agreements with respect to the Property shall be
terminated and Seller shall be solely responsible for any termination fees due
to the present property manager. In addition, Seller shall deliver full releases
from any leasing agents for any and all commissions which may become payable
after the Closing Date with respect to any then existing lease whether currently
earned or payable by virtue of renewal or expansion options.
IV.3.6. DELIVERY OF LEASES/DOCUMENTS. Buyer shall have received
----------------------------
signed originals or copies, certified by Seller as being true and correct of all
leases and contracts, together with all exhibits thereto, and to the extent in
Seller's possession or reasonably obtainable all warranties, licenses, permits
and agreements, together with all exhibits thereto.
IV.4. SELLER'S CLOSING CONDITIONS. The following conditions are for the
---------------------------
benefit of Seller and are conditions to the Closing, unless expressly waived by
Seller on or before the Closing Date:
IV.4.1. SIMULTANEOUS CLOSING. Subject to the provisions of SECTION
--------------------
4.1.9 hereof, in respect to the termination of the 2525 Agreement and the Tract
A Agreement, the Closing shall be contingent upon the simultaneous closing of
the Additional Properties, pursuant to the terms and conditions of the
Additional Property Agreements.
IV.5. FAILURE OF CONDITION TO CLOSE TO ESCROW. In the event any of the
---------------------------------------
conditions set forth in ARTICLE IV are not timely satisfied or waived by the
appropriate party benefitting by the conditions in question, for a reason other
than the default of Buyer, this Agreement shall, at the option of the party
benefitting by the conditions in question, terminate, the Earnest Money shall be
returned to Buyer and, except as otherwise provided herein, the parties shall
have no further obligations hereunder.
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ARTICLE V.
CLOSING AND ESCROW
------------------
V.I. DEPOSIT WITH THE TITLE COMPANY AND ESCROW INSTRUCTIONS. Upon execution
------------------------------------------------------
of this Agreement, the parties hereto shall deposit one duplicate original of
this Agreement with the Title Company and this instrument shall serve as the
instructions to the Title Company for consummation of the purchase and sale
contemplated hereby. Seller and Buyer agree to execute such additional and
supplementary escrow instructions as may be appropriate to enable the Title
Company to comply with the terms of this Agreement; provided, however, that in
the event of any conflict between the provisions of this Agreement and any
supplementary escrow instructions, the terms of this Agreement shall control.
V.2. CLOSING.
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V.2.1. The closing hereunder ("CLOSING") shall be held at the offices
of the Title Company. The execution and exchange of documents shall take place
at the Closing on or before the twentieth (20th) day following the expiration of
the Contingency Period ("CLOSING DATE"). Such date may not be otherwise extended
without the written approval of both Seller and Buyer.
V.2.2. In the event the Closing does not occur on or before the Closing
Date, the Title Company shall, unless it is notified by both parties to the
contrary within ten (10) days after the Closing Date, return to the depositor
thereof all documents which may have been deposited hereunder.
V.3. DELIVERY BY SELLER TO THE TITLE COMPANY. Prior to the Closing Date,
---------------------------------------
Seller shall deliver to the Title Company:
(a The Deed, duly executed and acknowledged by Seller, in
recordable form, and ready for recordation on the Closing Date;
(b A certification duly executed by Seller under penalty of
perjury in the form of, and upon the terms set forth in, the Transferor's
Certification of Non-Foreign Status ("FIRPTA CERTIFICATE"), setting forth
Seller's address and federal tax identification number and certifying that
Seller is a "United States Person" and that Seller is not a "foreign
person" in accordance with and/or for the purpose of the provisions of
Section 7701 and 1445 (as may be amended) of the Internal Revenue Code of
1954, as amended, and any regulations promulgated thereunder. The FIRPTA
Certificate shall be in the form attached hereto as EXHIBIT "H"; and
-----------
(c An Assignment of Rights, Leases and Security Deposits
("ASSIGNMENT OF LEASES"), in the form of EXHIBIT "I" duly executed by
-----------
Seller, by which Seller shall assign to Buyer all of Seller's interest in
the Leases, together with the interest of Seller in security deposits
collected and held by Seller to secure the performance of the duties and
obligations of tenant under the Leases.
12
<PAGE>
V.4. DELIVERY BY SELLER TO BUYER. On or before the Closing Date, Seller
---------------------------
shall deliver to the Title Company, for ultimate delivery to Buyer, the
following:
(a The Bill of Sale duly executed by Seller;
(b The Rent Roll, certified by Seller and current as of the
Closing Date;
(c A schedule of Service Contracts current as of the Closing
Date;
(d Tenant Estoppel Certificates from those tenants specified
pursuant to SECTION 4.2.1, to the extent not previously delivered to Buyer.
(e Originals or copies, certified by Seller as being true and
correct, of all Leases, together with all exhibits thereto;
(f Originals of all Service Contracts and any unexpired
warranties or guaranties received by Seller from any contractors,
subcontractors, suppliers or materialmen in connection with any
construction, repair or alteration of the Improvements or any tenant
improvements;
(g All instruction manuals, procedure manuals, manufacturer's
warranties and similar materials in Seller's possession which relate to the
Property;
(h Notices to tenants under the Leases, in the form of
EXHIBIT "J" attached hereto, duly executed by Seller;
-----------
(i All keys to the Property;
(j Such resolutions, authorizations, bylaws or other corporate
and/or partnership documents or agreements relating to Seller as shall be
reasonably required by the Title Company in connection with this
transaction; and
(k Any other documents, instruments, data, records,
correspondence or agreements called for hereunder which have not previously
been delivered.
The matters described in subparagraphs (e), (f), (g) and (i) shall be delivered
by making them available at the office of the property manager for the Property.
V.5. DELIVERY BY BUYER TO THE TITLE COMPANY. On or before the Closing
--------------------------------------
Date, Buyer shall deliver to the Title Company, for ultimate delivery to Seller:
(a) The Purchase Price described in SECTION 2.1, plus any
additional sums necessary, if any, for Buyer to pay its costs, expenses and
prorations pursuant to this ARTICLE V; and
13
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(b) The Assignment of Leases, duly executed in recordable form by
Buyer.
V.6. OTHER INSTRUMENTS. Seller and Buyer shall each deliver such other
-----------------
instruments as are reasonably required by the Title Company or otherwise
required to close the escrow and consummate the purchase of the Property in
accordance with the terms hereof.
V.7. CLOSE OF ESCROW. Provided that (a) the Title Company has received
---------------
all required documents, instruments and funds, (b) the Title Company has not
received written notice from either Buyer or Seller that any of the conditions
to Closing set forth in ARTICLE IV have not been satisfied or waived, (c) any of
the representations and warranties made by either Buyer or Seller are untrue
either as of the Closing Date and (d) the Title Company is able to deliver to
Buyer the Title Policy described in SECTION 3.1.1 hereof, the Title Company is
authorized and instructed on the Closing Date to:
(a Record the Deed and the Assignment of Leases with the
Sacramento County Recorder; and
(b Deliver to Seller the sum described in SECTION 2.1 to Seller,
less Seller's share of prorations and costs of escrow. The Title Company is
instructed to request that the amount of the Documentary Transfer Tax due
be shown on a separate paper and affixed to the Deed by the County Recorder
after the permanent record is made.
V.8. PRORATIONS AND APPORTIONMENTS.
-----------------------------
V.8.1. All revenues and all expenses of the Property shall be
prorated and apportioned as of 12:01 a.m. on the Closing Date, so that Seller
shall bear all expenses with respect to the Property and shall have the benefit
of all income with respect to the Property through and including the period
preceding the Closing Date. Any revenue or expense amount which cannot be
ascertained with certainty as of the Closing Date shall be prorated on the basis
of the parties' reasonable estimates of such amount (other than reimbursements
for operating expenses not billed currently to tenants) and shall be the subject
of a final proration thirty (30) days after the Closing Date or as soon
thereafter as the precise amounts can be ascertained. A statement setting forth
such agreed prorations shall be delivered to the Title Company. The Title
Company shall not be required to calculate any prorations.
V.8.2. Prepaid rents under the Leases shall be credited to Buyer.
Amounts for free rents, concessions, lease takeovers and similar matters not
previously paid or satisfied prior to the Closing Date shall be credited to
Buyer. Rents in arrears will not be prorated, but will be paid to Seller by
Buyer when collected by Buyer, such payment to occur every thirty (30) days
following the Closing Date. Except as expressly provided for in SECTION 5.10
below, the first monies received by Buyer from each tenant after the Closing
Date shall be applied first to current rents and other sums due and thereafter
shall be applied to rent in
14
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arrears.
V.8.3. Expenses to be prorated shall include taxes (other than
personal property taxes on Personal Property), payments under any Service
Contracts (provided that any delinquent payments owing to Seller shall be
treated in the same manner as delinquent rents), gas, electricity and other
utility charges, any unfixed meter charges, if any (apportioned on the basis of
the last meter reading), license and permit fees and other expenses customarily
prorated. If possible, in lieu of prorating, utilities and other expenses shall
be contracted for in the name of Buyer as of the Closing Date, with Seller being
responsible directly to the utility provider and others for accrued and unpaid
expenses. No prorations in respect to personal property taxes on Personal
Property based upon Seller's warranty that no personal property taxes have been
assessed against the Personal Property for the previous five (5) years.
V.9. COMPUTATION OF CERTAIN PRORATIONS. Final proration of percentage
---------------------------------
rents and similar apportionable items which are dependent for their calculation
upon the economic performance of the Property (or a portion thereof) over a
specified interval of time shall be accomplished as follows:
(a The parties shall await the expiration of the specified
interval to determine the gross rents, gross receipts and other economic
performance over the entire interval and then prorate the item by
allocating to Seller the product of the rents or other similar
apportionable item for the entire interval multiplied by a fraction, the
numerator of which is the number of days within the specified interval
which occur before the Closing Date and the denominator of which is the
number of days in the specified interval.
(b) Operating expenses which are payable (or reimbursable) by any
present or past tenant of the Property or any portion thereof, shall not be
prorated hereunder. Buyer shall send customary statements for reimbursement
of operating expenses and taxes to tenants under the Leases after
consulting with Seller with respect to appropriate amounts due therefore,
and shall remit to Seller, upon receipt, Seller's prorated share thereof,
determined as provided in SECTION 5.9(A) above, to the extent Seller has
previously paid or been charged for the expenses relating to such
reimbursement.
V.10. ARREARAGE. Seller reserves all claims and causes of action against
---------
tenants and others who are in arrears or who shall be obligated to pay monies in
the future which are for the benefit of Seller, and Buyer shall provide its
reasonable cooperation to Seller in pursuing such arrearage. Buyer shall use
reasonable efforts to collect all sums in arrears as of the closing Date due to
Seller, but shall not be required to commence or prosecute any litigation.
Seller may not commence and prosecute litigation against any tenant for rents in
arrears as long as such tenant remains a tenant of the Property, unless the
statute of limitations will expire within the succeeding sixty (60) days. To the
extent that Buyer receives payments from tenants for sums due prior to the
Closing Date, which can be verified based upon invoices or other applicable
billings, such payments, including rents, shall be promptly remitted by Buyer
15
<PAGE>
to Seller.
V.11. PAYMENT OF ADJUSTMENTS TO PRORATION. Either party owing the other
-----------------------------------
party a sum of money based on adjustments made to prorations after the Closing
Date shall promptly pay that sum to the other party, together with interest
thereon at the rate of ten percent (10%) per annum to the date of payment if
payment is not made within ten (10) days after mutual agreement of the amount
due.
V.12. COSTS AND EXPENSES. Seller shall pay the costs associated with
------------------
the issuance of a California Land Title Association Owner's Policy of Title
Insurance in the full amount of the Purchase Price, the UCC and litigation
searches, documentary stamp taxes, recording fees, transfer taxes, escrow fees
and all costs incurred to repay any liens. Buyer shall pay the incremental
increase in costs relating to ALTA coverage, the costs of all endorsements
thereto and the cost of the Survey. Seller and Buyer shall each pay the fees
and expenses of their respective legal counsel incurred in connection with the
transaction.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
As an inducement to Buyer to enter into this Agreement, Seller hereby
represents and warrants to and agrees with Buyer as follows:
VI.1. AUTHORITY OF SELLER. Seller is state chartered banking institution,
-------------------
duly organized and validly existing and in good standing under the laws of the
State of California, and has the authority to own and convey the Property, and
execute this Agreement. All documents executed by Seller which are to be
delivered to Buyer at the Closing are or at the time of Closing will be duly
authorized, executed and delivered by Seller and do not and at the time of
Closing will not violate any provisions of any agreement or judicial order to
which Seller is a party or to which Seller or the Property is subject.
VI.2. CONDITION OF PROPERTY. To Seller's Knowledge, as hereinafter
---------------------
defined, there are no material physical or mechanical defects in the Property,
including, without limitation, the elevators, escalators, plumbing, heating, air
conditioning, ventilating, life safety and electrical systems, and to Seller's
Knowledge, all such items are in good operating condition and repair and are in
compliance with all applicable governmental laws, ordinances, regulations and
requirements, other than compliance with the requirements of the Americans With
Disabilities Act, with respect to which, Seller has commenced compliance in
accordance with the requirements thereof.
VI.3. USE AND OPERATION. To Seller's Knowledge, the use and operation of
-----------------
the Property are in full compliance with applicable building codes, safety and
fire, environmental, zoning and land use laws, and other applicable local, state
and federal laws, ordinances, regulations and requirements, other than
compliance with the requirements of the Americans
16
<PAGE>
With Disabilities Act, with respect to which, Seller has commenced compliance in
accordance with the requirements thereof.
VI.4. LAND USE REGULATIONS. To Seller's Knowledge, there are no
--------------------
condemnation, environmental, zoning or other land use regulation proceedings,
either instituted, or planned to be instituted, which could detrimentally affect
the use or operation of the Property of its intended purpose or the value of the
Property, nor has Seller received notice of any special assessment proceedings
affecting the Property.
VI.5. LEASES. To Seller's Knowledge, the copies of the Leases to be made
------
available to Buyer pursuant to SECTION 4.1.2 are true and correct copies of all
Leases affecting the Property and are in full force and effect and there are no
other agreements, written or oral, with respect to the tenancies, except
subleases permitted by the respective Leases. To Seller's Knowledge:
(a) The information set forth in the Rent Roll is true and
complete as of the date such Rent Roll was made available to Buyer and
there are no leases of space in the Improvements and nonmaterial defaults
under any of the Leases which have not been disclosed to Buyer in writing.
(b) No tenant under any of the Leases has prepaid any rent or
other charges for more than the current month, except as disclosed to Buyer
in writing.
(c) No tenant under any of the Leases has any right or option to
purchase the Property or any portion thereof or interest therein, and there
are no outstanding agreements of sale with respect to the Property or any
portion thereof or any interest therein.
(d) Except as provided in the Leases and the Rent Roll, no tenant
under any of the Leases has the right to renew or extend any of the Leases
or has any options or rights of first refusal with respect to leasing of
other space, and no tenant under any of the Leases has the right to free
rent, rebate, allowance, concession, security or other deposit.
VI.6. BROKERAGE COMMISSIONS. Except as set forth in the Rent Roll or
---------------------
otherwise disclosed to Buyer in writing, there are no commissions, finder's fees
or other compensation owing or which may become owing to any broker or any other
person or entity with respect to any Lease or occupancy agreement including,
without limitation, any such compensation with respect to any future renewals,
extensions or expansions thereof.
VI.7. LITIGATION. Except as disclosed to Buyer in writing, there is no
----------
litigation pending or, to Seller's Knowledge, threatened, against Seller or any
basis therefor that arises out of the ownership of the Property or that might
detrimentally affect the use or operation of the Property for its intended
purpose or the value of the Property or adversely affect the ability of Seller
to perform its obligations under this Agreement.
17
<PAGE>
VI.8. USE AND OPERATION OF PROPERTY. To Seller's Knowledge, Seller knows
-----------------------------
of no facts which would prevent Buyer from using and operating the Property
after Closing in the manner in which the Property has been used, leased and
operated prior to the date hereof.
VI.9. OTHER RIGHTS. No other person presently has a right of first refusal
------------
or other right to purchase or finance all or any part of the Property. In
consideration of Buyer's execution and delivery of this Agreement, Seller agrees
that so long as this Agreement has not been terminated or expired, Seller will
not negotiate or otherwise pursue any offers on the Property nor execute any
other letter of intent or contract for the financing, sale or purchase of the
Property.
VI.10. EMPLOYEES. There are no employees of Seller or Seller's agent
---------
(including the property manager) engaged in the operation or maintenance of the
Property for whom Buyer will be responsible after the Closing Date unless Buyer
agrees to employ such employees after the Closing Date.
VI.11. ENVIRONMENTAL. To Seller's Knowledge, the Property is not in
-------------
violation of any federal, state, local or administrative agency ordinance, law,
rule, regulation, order or requirement relating to environmental conditions or
Hazardous Material ("ENVIRONMENTAL LAWS"). Neither Seller, nor to Seller's
------------------
Knowledge, any third party, has (a) used, manufactured, generated, treated,
stored, disposed of, or released any Hazardous Material on, under or about the
Property or transported any Hazardous Material over the Property in violation of
the Environmental Laws, or (b) installed, used or removed any storage tank on,
from or in connection with the Property except in full compliance with all
Environmental Laws. To Seller's Knowledge, there are no storage tanks or wells
(whether existing or abandoned) located on, under or about the Property. To
Seller's Knowledge, the Property does not consist of any building materials that
contain Hazardous Material. For the purposes hereof, "HAZARDOUS MATERIAL" shall
mean any substance, chemical, waste or other material which is listed, defined
or otherwise identified as "hazardous" or "toxic" under any federal, state,
local or administrative agency ordinance or law.
VI.12. "AS-IS" SALE.
------------
(a) Except as set forth above, Buyer acknowledges that Seller
makes no representation or warranty, either express or implied, with
respect to the Property, its present condition or its fitness or
suitability for any particular purpose. In this respect, Buyer confirms
that it is relying solely upon its investigation of the condition of the
Property, its title and all governmental laws and ordinances which might
affect its use and development. With the exception of matters which Seller
has affirmatively represented, actively concealed or fraudulently
represented at the time of sale and with the exception of the warranties
contained in the conveyance documents to be executed and delivered by
Buyer, Buyer hereby releases and forever discharges Seller, its partners,
employees and agents from any and all claims, rights, remedies and causes
of action of any nature or sort, known or unknown, past, present or future,
which Buyer may have arising out of the condition of the Property after the
Closing Date.
(b) Buyer expressly waives the benefits and provisions of Section
1542 of
18
<PAGE>
the Civil Code of the State of California, and any similar law of any state
or territory of the United States or other jurisdiction. Civil Code Section
1542 provides as follow:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
DEBTOR."
Initials of Buyer ______________________
VI.13. SELLER'S KNOWLEDGE. The term "TO SELLER'S KNOWLEDGE," or variations
------------------
thereof, means the actual, present knowledge of the Allen Christenson, Chief
Financial Officer of Seller, without any duty of inquiry or investigation, other
than Seller's obligation to make inquiry of its managing agent KCS Properties,
Inc. in an effort to determine that the employees of KCS Properties, Inc.
responsible for the day-to-day operation of the Property are not aware of any
fact or circumstance that would make any representation or warranty of Seller
untrue in any material respect.
19
<PAGE>
VI.14. SURVIVAL. The representations and warranties of Seller contained
--------
herein shall survive the Closing Date, but shall terminate one (1) year after
the Closing Date. No liability shall arise thereunder unless suit shall be
filed against Seller as to the specific claim within such one (1) year period.
VI.15. SUBSEQUENT DISCLOSURES. In the event Buyer, prior to the Closing
----------------------
Date, becomes aware, from Seller or otherwise, of any inaccuracy in the
disclosures, information or representations previously provided to Buyer, which
will have a material, adverse effect on Buyer, Buyer may either (i) terminate
this transaction contemplated hereby, receive a refund of the applicable portion
of the Deposit, and to the extent available pursue any rights or claims that
Buyer may have against Seller as a result of any inaccuracy in the disclosures,
information or representations previously provided to Buyer or (ii) proceed with
the Closing, thereby waiving any rights that Buyer may have against Seller as a
result of any inaccuracy in the disclosures, information or representations
previously provided to Buyer. In no event shall Buyer be entitled to complete
the Closing hereunder and then bring an action against Seller for damages as a
result of any inaccuracy in the disclosures, information or representations
previously provided to Buyer.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
VII.1. AUTHORITY OF BUYER. Buyer is duly organized and validly existing
------------------
under the laws of the State of Delaware and is in good standing and authorized
to do business under the laws of the State of California; this Agreement and all
documents executed by Buyer, which are to be delivered to Seller at the Closing
are or at the time of Closing will be (a) duly authorized, executed, and
delivered by Buyer, (b) be legal, valid, and binding obligations of Buyer, and
(c) not violate any provisions of any agreement or judicial order to which Buyer
is a party or to which it is subject.
VII.2. LITIGATION. There is no litigation pending or, to Buyer's knowledge,
----------
threatened, against Buyer or any basis therefor before any court or
administrative agency which might result in any material adverse change in the
business or financial condition of the Buyer.
ARTICLE VIII.
COVENANTS
---------
As matters as to which the Title Company need not be concerned, Seller and
Buyer covenant and agree with one another as follows:
VIII.1. INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify Buyer
-------------------------
and hold
20
<PAGE>
Buyer harmless from and against any and all claims, demands, liabilities, liens,
costs, expenses, penalties, damages and losses, including, without limitation,
reasonable attorneys' fees and costs suffered by Buyer as a direct or indirect
result of:
(a) Any misrepresentation or breach of warranty or breach of
covenant made by Seller in this Agreement or any document, certificate, or
exhibit given or delivered to Buyer pursuant to or in connection with this
Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring
before the Closing Date, or in any way related to or arising from any act,
conduct, omission, contract or commitment of Seller (or any of its agents
or employees) at any time or times before the Closing Date.
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.2. INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify Seller
------------------------
and hold Seller harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Seller as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach of
covenant made by Buyer in this Agreement or any document, certificate, or
exhibit given or delivered to Seller pursuant to or in connection with this
Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring
after the Closing Date, or in any way related to or arising from any act,
conduct, omission, contract or commitment of Buyer (or any of its agents or
employees) at any time or times after the Closing Date.
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.3. MAINTENANCE. Seller shall, between the Seller's execution of this
-----------
Agreement and the Closing Date, at Seller's sole cost and expense, maintain the
Property in its present order, condition and repair, reasonable wear and tear
excepted, shall perform all work required to be done by the landlord under the
terms of any lease affecting the Property, and shall make all repairs,
maintenance and replacements of the Improvements and any Personal Property and
otherwise operate the Property in the same manner as before the making of this
Agreement, the same as though Seller were retaining the Property.
VIII.4. LEASES AND OTHER AGREEMENTS. Except as provided below, Seller
---------------------------
covenants and agrees that during the term of this Agreement, Seller or its
agents shall not amend or
21
<PAGE>
modify any Lease and shall not enter into any new Lease, for any portion of the
Property, without Buyer's prior written approval. Seller's request for approval
of any such new or modified Lease shall be accompanied by the estimated cost of
any tenant improvements associated therewith and the amount of the real estate
commission to be paid in conjunction therewith. In the event that Buyer approves
any new or modified Lease, upon the Closing Date, Buyer shall be responsible for
the cost of the tenant improvements and the real estate commissions associated
therewith prorated in an amount proportional to the amount of rent paid
thereunder before and after the Closing Date. Buyer shall pay Seller on the
Closing Date for any costs that Seller has incurred for the tenant improvements
and real estate commissions in excess of its pro-rata share. Upon the Closing
Date, all tenant improvement construction contracts and brokerage agreements on
such Leases shall be assigned to and assumed by Buyer.
VIII.5. RETURN OF INFORMATION. In the event that Buyer does not purchase
---------------------
the Property, Buyer shall promptly return to Seller all information delivered by
Seller to Buyer in conjunction with this transaction.
VIII.6. CONFIDENTIALITY. Except as hereinafter provided, from and after the
---------------
execution of this Agreement, Buyer and Seller shall keep the terms, conditions
and provisions of this Agreement confidential and neither shall make any public
announcements hereof unless the other first approves of same in writing, nor
shall either disclose the terms, conditions and provisions hereof, or of any
data regarding the Property, except to persons who "need to know", such as their
respective officers, directors, employees, attorneys, accountants, engineers,
surveyors, consultants, property managers, financiers, partners, investors,
potential lessees and bankers and such other third parties whose assistance is
required in connection with the consummation of this transaction.
Notwithstanding the foregoing, it is acknowledged that Buyer is an affiliate of,
a real estate investment trust (the "REIT") and the REIT has and will seek to
sell shares to the general public; consequently, Buyer 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 Buyer or Buyer's attorneys to satisfy disclosure and reporting
obligations of Buyer, the REIT, or its affiliates. After Closing, Buyer shall be
free to disclose previously confidential information in its sole, unfettered
discretion.
VIII.7. TAX DEFERRED EXCHANGE. Buyer acknowledges that Seller may desire to
---------------------
structure the sale of the Property as an exchange for like-kind property under
Section 1031 of the Internal Revenue Code of 1986 in order to defer recognition
of income on the disposition of the Property and/or other properties. Buyer
agrees to reasonably cooperate with Seller to accomplish such exchange and
Seller hereby agrees that any and all costs associated with said exchange shall
be borne solely by Seller and shall in no way be attributable to Buyer. Buyer
shall not be requested or required to take title to other property in
conjunction with such exchange.
VIII.8. TESTING SAMPLES. Any testing samples taken from the Property during
---------------
any inspection pursuant to this Agreement shall be divided and shared with
Seller. In the event
22
<PAGE>
that any test results or reports contain negative information concerning the
Property, Buyer shall promptly furnish Seller with written correspondence
summarizing the negative information including the name and address of the
consultant who discovered or learned of such information.
VIII.9. TERMINATION OF AGREEMENT. On the Closing Date, all management and
------------------------
leasing agreements with respect to the Property shall be terminated and Seller
shall be solely responsible for any termination fees due. In addition, Seller
shall deliver full releases from any leasing agents for any and all commissions
which may become payable after the Closing Date with respect to any then
existing lease whether currently earned or payable by virtue of renewal or
expansion options. Seller shall also terminate all Service Contracts which
Buyer fails to elect to assume, such election to be made prior to the expiration
of the Contingency Period.
VIII.10. TRANSFER TAX ON WORKS OF ART. In the event that any transfer tax
----------------------------
is due or payable on the Works of Art pursuant to Section 982 of the California
Civil Code, Seller agrees to pay such tax to the artist in conjunction with such
transfer.
VIII.11. CHANGES BEFORE CLOSING. In the event that any of the
----------------------
representations or warranties by either party contained herein change or become
untrue prior to the Closing Date, such party agrees to notify the other party of
such change or untruthfulness promptly upon learning of such matter.
VIII.12. INDEPENDENT AUDIT. Promptly following the execution of this
-----------------
Agreement, Seller shall provide and shall cause its management company to
provide to Buyer's representatives and independent accounting firm access to
financial and other information relating to the Property in the possession of or
otherwise available to Seller, its affiliates or Seller's management company
which would be sufficient to enable Buyer's representatives and independent
accounting firm to prepare audited financial statements for the year 1996 and
the year to date in conformity with generally accepted accounting principles and
to enable them to prepare such statements, reports or disclosures as Buyer may
deem necessary or advisable. Seller shall also provide and/or shall cause its
management company to provide to Buyer's independent accounting firm 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. Seller shall authorize and shall cause its management company to
authorize any attorneys who have represented Seller or its management company in
material litigation pertaining to or affecting the Property to respond, at
Buyer's expense, to inquiries from Buyer's representatives and independent
accounting firm. If and to the extent Seller's financial statements pertaining
to the Property for any periods during the year 1996 and the year to date have
been audited, promptly after the execution of this Agreement Seller shall
provide Buyer with copies of such audited financial statements and shall
cooperate with Buyer's representatives and independent public accountants to
enable them to contact the auditors who prepared such audited financial
statements and to obtain, at Buyer's expense, a reissuance of such audited
financial statements. To the extent that Seller or its agents incur reasonable
expenses in connection with the performance of such audit, Buyer shall reimburse
Seller and
23
<PAGE>
its agents for such reasonable expenses.
24
<PAGE>
ARTICLE IX.
LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION
--------------------------------------------
IX.1. DAMAGE OR DESTRUCTION.
---------------------
IX.1.1. In the event that the Improvements are damaged or
destroyed by fire or other casualty prior to the Closing Date and such damage or
destruction is estimated to cost Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) or less in the aggregate to repair or replace (as verified by an
architect or contractor reasonably selected by Buyer) then the Closing Date
shall occur as scheduled notwithstanding such damage or destruction and Seller
shall pay to Buyer an amount sufficient to restore or repair such damage
(retaining the right to any claim Seller may have against any insurance
carrier).
IX.1.2. In the event that any of the Improvements are damaged or
destroyed by fire or other casualty prior to the Closing Date, and such damage
or destruction is estimated to cost more than Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) in the aggregate to repair or replace (as verified
by an architect or contractor reasonably selected by Buyer), then either Seller
or Buyer shall have the option to (i) terminate this Agreement by written notice
to Seller within fifteen (15) days after the occurrence of the damage or
destruction and the Earnest Money shall be immediately returned to Buyer or (ii)
consummate the transaction contemplated hereby in which event Seller's insurance
proceeds shall be transferred and assigned to Buyer, with Seller remaining
responsible for any deductible.
IX.2. CONDEMNATION. In the event that, prior to the Closing Date, a
------------
governmental entity shall commence any eminent domain proceeding to take any
material portion of the Property, then Buyer shall have the option to elect
either of the following:
(a) Terminate this Agreement by written notice to Seller within
fifteen (15) days of its receiving notice of such action of condemnation
and the Earnest Money shall be immediately returned to Buyer; or
(b) Elect to proceed with the transaction in which case the
Purchase Price shall not be reduced and Buyer shall be entitled to the net
award paid to Seller or Seller's mortgagee for such taking, if any, and
Seller shall assign and transfer to Buyer all right, title and interest in
and to any awards, it being expressly agreed that in such event Seller
shall have no obligation to repair or restore the Property or any portion
thereof.
ARTICLE X.
DEFAULTS
--------
X.1. BUYER'S DEFAULT; SELLER'S REMEDIES. Buyer shall be deemed to be in
----------------------------------
default if, in respect to the transaction contemplated by this Agreement, at the
Closing, Buyer fails to
25
<PAGE>
deliver the Purchase Price or Buyer fails to meet, comply with, or perform any
covenant, agreement or obligation on the part of Buyer within the time frames
and in the manner required in this Agreement, for any reason other than a
default by Seller hereunder or termination of this Agreement prior to Closing in
accordance with the express terms and conditions hereof. Seller's remedies shall
be limited to the remedies set forth in SECTION 2.4 hereof. Any default by Buyer
hereunder shall be deemed a default under each of the Additional Property
Agreements.
X.2. SELLER'S DEFAULTS; BUYER'S REMEDIES.
-----------------------------------
X.2.1. SELLER'S DEFAULTS. Seller shall be deemed to be in default
-----------------
under this Agreement, if in respect to the transaction contemplated by this
Agreement, on or before the Closing, Seller shall have failed to meet, comply
with, or perform any covenant, agreement, or obligation on its part required in
this Agreement, within the time limits and in the manner required in this
Agreement, for any reason other than a default by Buyer hereunder or termination
of this Agreement prior to Closing pursuant to the express terms and conditions
hereof.
X.2.2. BUYER'S REMEDIES. If Seller is deemed to be in default
----------------
hereunder, Buyer may, at Buyer's option, do either one of the following:
(a) Terminate this Agreement by written notice delivered to Seller
on or before ten (10) days following occurrence of such default;
(b) Seek and receive specific performance of Seller's obligations
hereunder to sell the Property for the Purchase Price and on the terms set
forth herein following the expiration of a five (5) day period following
the delivery of a written notice to Seller specifying the default in
question unless specific performance is not an available remedy because
Seller has voluntarily conveyed or encumbered the Property, in which event
Buyer may recover damages from Seller for any losses or costs suffered by
Buyer in connection with Seller's failure to perform its obligations
hereunder following the expiration of a five (5) day period following the
delivery of a written notice to Seller specifying the default in question.
ARTICLE XI.
MISCELLANEOUS
-------------
XI.1. NOTICES. All notices or other communications required or permitted
-------
hereunder shall be in writing, and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or sent
by electronic facsimile and shall be deemed received upon the earlier of (I) if
personally delivered, the date of delivery to the address of the person to
receive such notice, (ii) if mailed, on the date of posting by the United States
Post Office, or (iii) if given by electronic facsimile, when received by the
other party.
26
<PAGE>
If to Seller: River City Bank
2485 Natomas Park Drive, Suite 100
Sacramento, California 95833
Attention: Allen Christenson
Telephone No.: (916) 920-2265
Facsimile No.: (916) 567-2784
with a copy to: Kelly Broadcasting
3 Television Circle
Sacramento, California 95814
Attention: Scott Nichols
Telephone No.: (916) 446-3333
Facsimile No.: (916) 325-3711
with a copy to: KCS Properties, Inc.
1451 River Park Drive, Suite 230
Sacramento, California 95815
Attention: William P. Krum
Telephone No.: (916) 920-1225
Facsimile No.: (916) 920-1395
with a copy to: Aguer-Pipgras Associates
1851 Heritage Lane, Suite 128
Sacramento, California 95815
Attention: Thomas C. Aguer
Telephone No.: (916) 649-2777
Facsimile No.: (916) 649-3636
with a copy to: Trainor Robertson
701 University Avenue, Suite 200
Sacramento, California 95825
Attention: Charles W. Trainor, Esquire
Telephone No.: (916) 929-7000
Facsimile No.: (916) 929-7111
If to Buyer: Prentiss Properties Acquisition Partners, L.P.
3890 West Northwest Highway
Suite 400
Dallas, Texas 75220
27
<PAGE>
Attention: Mark R. Doran
Telephone No.: (214) 654-5703
Facsimile No.: (214) 350-2437
with copies to: Snell, Brannian & Trent
8150 North Central Expressway, Suite 1800
Dallas, Texas 75201
Attention: Lawrence J. Brannian
Telephone No.: (214) 691-2500
Facsimile No.: (214) 691-2501
If to the Title Company: First American Title Insurance Company
3030 LBJ Freeway, Suite 150
Dallas, Texas 75234
Attention: Ms. Jacqueline P. Aul
Telephone No.: (972) 620-7844
Facsimile No.: (972 241-7112
with copies to: First American Title Insurance Company
1860 Howe Avenue, Suite 100
Sacramento, California 95825
Attention: Ms. Lisa Blazquez
Telephone No.: (916) 920-3100
Facsimile No.: (916) 927-8712
or such other address as either party may from time to time specify in writing
to the other in the manner aforesaid.
XI.2. BROKERS AND FINDERS. In connection with the transaction contemplated
-------------------
by this Agreement, Seller has agreed to pay a brokerage commission to Aguer
Pipgras Associates ("APA") and The CAC Group ("CAC"). Buyer and Seller each
represent and warrant to the other that (other than Seller's employment of APA
and CAC, neither has employed any real estate agent, brokerage or finder in
connection with this transaction. Buyer has not agreed to pay any real estate
commission or finder's fee in connection with this transaction. In the event of
a claim or broker's fee, finder's fee, commission or other similar compensation
in connection herewith other than as set forth above, Buyer, if such claim is
based upon any agreement alleged to have been made by Buyer, hereby agrees to
indemnify and hold Seller harmless against any and all liability, loss, cost,
damage or expense (including reasonable attorneys' fees and costs) which Seller
may sustain or incur by reason of such claim, and Seller, if such claim is based
upon any agreement alleged to have been made by Seller, hereby agrees to
indemnify and hold Buyer harmless against any and all liability, loss, cost,
damage or expense (including reasonable attorneys' fees and costs) which Buyer
may sustain or incur by reason of such claim. The provisions of this SECTION
11.2 shall survive the Closing.
XI.3. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the permitted successors and assigns of the
parties hereto.
28
<PAGE>
XI.4. AMENDMENTS. This Agreement may be amended or modified only by a
----------
written instrument executed by the party asserted to be bound thereby.
XI.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
------------------------------------------
representations and warranties made by each party herein shall survive the
Closing for a period of one (1) year and shall not merge into the Grant Deed and
the recordation thereof in the Official Records of Sacramento County,
California.
XI.6. CONSTRUCTION. Headings at the beginning of each section and
------------
subsection are solely for the convenience of the parties and are not a part of
the Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine and vice
versa. This Agreement shall not be construed as if it had been prepared by one
of the parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to paragraphs, sections, subparagraphs and
subsections are to this Agreement.
XI.7. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California. Any actions filed by
either party involving the other party shall be venued in Sacramento County,
California.
XI.8. PRIOR AGREEMENTS. This Agreement (including all Exhibits attached
----------------
hereto) together with the Earnest Money Letter is the final expression of, and
contains the entire agreements between the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented, superseded, canceled or
terminated nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein. The parties do not intend
to confer any benefit hereunder on any person, firm or corporation other than
the parties hereto and lawful assignees.
XI.9. ATTORNEYS' FEES. In the event of the bringing of any action or suit
---------------
by a party hereto against another party hereunder by reason of any breach of any
of the covenants, agreements or provisions on the part of the other party
arising out of this Agreement, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including actual attorneys' fees, accounting and
engineering fees, and any other professional fees resulting therefrom.
XI.10. TIME OF THE ESSENCE. Seller and Buyer hereby acknowledge and agree
-------------------
that time is strictly of the essence with respect to each and every term,
condition, obligation and provision hereof and that failure to timely perform
any of the terms, conditions, obligations or provisions hereof by either party
shall constitute a material breach of and a non-curable (but waivable) default
under this Agreement by the party so failing to perform.
XI.11. RELATIONSHIP OF PARTIES. Nothing contained in this Agreement shall
-----------------------
be deemed or construed by the parties to create the relationship of principal
and agent, a
29
<PAGE>
partnership, joint venture or any other association between Buyer and Seller.
XI.12. WAIVERS. No waiver of any breach of any covenant or provision herein
-------
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed an extension of
the time for performance of any other obligation or act except those of the
waiving party, which shall be extended by a period of time equal to the period
of the delay.
XI.13. PARTIAL INVALIDITY. If any term or provision of this Agreement or
------------------
the application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the
30
<PAGE>
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each such term and provision
of this Agreement shall be valid and be enforced to the fullest extent permitted
by law.
XI.14. CONDITION PRECEDENT/CONCURRENT. This Agreement shall only be valid
------------------------------
if Buyer and Seller simultaneously execute the Additional Property Agreements
and this Agreement. Any default by Buyer under the terms of the Additional
Property Agreements shall give Seller the right to declare a default under this
Agreement.
XI.15. DAYS OF WEEK/TIME. In the event the date on which Buyer or Seller is
-----------------
required to take any action under the terms of this Agreement is not a business
day, the action shall be taken on the next succeeding business day. All times
referenced herein are the times of day in Sacramento, California on the date in
question.
XI.16. EXHIBITS/RECITALS. All exhibits referred to in this Agreement are
-----------------
attached and incorporated by this reference. All of the Recitals set forth
above are true and correct.
XI.17. POSSESSION. Possession of the Property shall be delivered to Buyer
----------
on the Closing Date, subject to the rights of any tenants or subtenants in the
Property.
XI.18. ASSIGNMENT. Buyer shall not assign, transfer or convey its rights
----------
and/or obligations under this Agreement and/or with respect to the Property to
any other party without the prior written consent of Seller, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the foregoing, Buyer
shall have the right to assign its rights under this Agreement to any affiliate
of Buyer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
PRENTISS PROPERTIES ACQUISITION
PARTNERS, L.P., a Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By:
--------------------------------------
Name: Mark R. Doran
Title: Executive Vice President
31
<PAGE>
SELLER:
RIVER CITY BANK, a state banking institution
By:
-------------------------------------------
Name: Henry Royer
Title: President
The undersigned acknowledges receipt of this Agreement and agrees to act as
the Title Company hereunder.
FIRST AMERICAN TILE INSURANCE COMPANY
By:
-------------------------------------------
Name: Jacqueline P. Aul
Title:
----------------------------------------
32
<PAGE>
EXHIBIT LIST
------------
Exhibit A Legal Description
Exhibit B Additional Properties
Exhibit C Grant Deed
Exhibit D Bill of Sale
Exhibit E Due Diligence Materials
Exhibit F Rent Roll
Exhibit G Tenant Estoppel
Exhibit H Transferor's Certification of Non-Foreign
Status
Exhibit I Assignment of Rights, Leases and Security
Deposits
Exhibit J Notices to Tenant
Exhibit K Works of Art
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
-----------------
2485 NATOMAS
The land referred to in this Report is situated in the State of California,
County of Sacramento, City of Sacramento and is described as follows:
Parcel A of Parcel Maps entitled "Parcel 2 76. P.M. 24," filed in Book 105 of
Parcel Maps, at Page 30, records of said County.
EXCEPTING THEREFROM all minerals, oil, gas and other hydrocarbon substances
lying below a depth of 500 feet from the surface of said land, without the right
of surface entry, as contained in the Deed recorded July 24, 1980 in Book
800724, Page 597, Official Records.
<PAGE>
EXHIBIT B
ADDITIONAL PROPERTIES
---------------------
1740 Creekside Oaks Investors 1740 Creekside Oaks Drive, Sacramento, CA
1750 Creekside Oaks Investors 1750 Creekside Oaks Drive, Sacramento, CA
1760 Creekside Oaks Investors 1760 Creekside Oaks Drive, Sacramento, CA
2525 Natomas Investors 2525 Natomas Park Drive, Sacramento, CA
2495 Natomas Investors 2495 Natomas Park Drive, Sacramento, CA
Bannon Investors Tract A, Natomas Center, Sacramento, CA
Natomas Investors et al Tract D, Natomas Center, Sacramento, CA
<PAGE>
EXHIBIT C
GRANT DEED
----------
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MAIL TAX STATEMENTS TO:
GRANT DEED
----------
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
_______________, a _______________________ ("GRANTOR"), hereby grants to
____________________, a _______________________ ("GRANTEE"), that certain real
property ("LAND") located in the City of Sacramento, County of Sacramento, State
of California, more particularly described in Exhibit A attached hereto together
---------
with all right, title and interest of Grantor in and to all buildings and
improvements now located or hereafter constructed on the Land.
Grantor hereby further grants to Grantee all of Grantor's right, title and
interest in and to all easements, privileges and rights appurtenant to the real
property and pertaining or held and enjoyed in connection therewith and all of
Grantor's right, title and interest in and to any land lying in the bed of any
street, alley, road or avenue to the centerline thereof in front of or adjoining
the Land.
IN WITNESS WHEREOF, Grantor has executed this Grant Deed as of
______________, 19__.
----------------------------------------
By:
-------------------------------------
<PAGE>
SEPARATE STATEMENT OF
DOCUMENTARY TRANSFER TAX
County Recorder
Sacramento County
Sacramento, California
Dear Sir:
In accordance with Revenue and Taxation Code Section 11932, it is required
that this statement of documentary transfer tax due should not be recorded with
the attached Deed, but be affixed to the Deed after recordation and before
return as directed on the Deed.
The Deed names _______________________, a _______________________, as
Grantor and ______________________, a ______________________ as Grantee. The
property being transferred is located in the City of Sacramento, County of
Sacramento, State of California.
The amount of documentary transfer tax due on the attached deed is
___________________ Dollars and _______________ Cents ($________________),
computed on the full value of the property (less the value of any liens and
encumbrances remaining on the property at the time of sale).
Very truly yours,
By
-------------------------------------
<PAGE>
EXHIBIT D
BILL OF SALE
------------
Concurrently with the execution and delivery of this Bill of Sale (the
"Assignment"), RIVER CITY BANK, a California corporation ("Assignor"), is
conveying to PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware limited
partnership ("Assignee"), by Grant Deed (the "Deed"), that certain tract of land
located in Sacramento County, California, being more particularly described on
Exhibit "A" attached hereto and made a part hereof for all purposes, together
- -----------
with the improvements located thereon (collectively the "Property").
Assignor desires to assign, transfer, and convey to Assignee certain
tangible personal property, together with certain contract rights, guaranties,
licenses, and other specified items of intangible property (but specifically
excluding cash), affixed or attached to the Property, except those owned by
tenants of the Property (such tangible and intangible properties herein below
specified being collectively called the "Assigned Properties").
NOW, THEREFORE, in consideration of the receipt of Ten Dollars ($10.00) and
other good and valuable consideration in hand paid by Assignee to Assignor, the
receipt and sufficiency of which are acknowledged and confessed by Assignor,
Assignor ASSIGNS, TRANSFERS, SETS OVER, and DELIVERS to Assignee, its successors
and assigns, subject to any and all matters of record in Sacramento County,
California, to the extent they affect the Property, all of the Assigned
Properties, including, without limitation of the generality of the foregoing,
the following:
1. All of the personal property owned by Assignor located on or in or
used in connection with the Property, including without limitation the items of
tangible personal property consisting of all furniture, fixtures, equipment,
machinery and other personal property of every kind and nature (excluding cash-
on-hand) located on or used or useful in the operation of the Property including
the works of art listed on Exhibit "B".
-----------
2. All of the right, title and interest of Assignor in any intangible
personal property owned by Assignor and used exclusively in the use and
operation of the Property, and all warranties or guarantees received by Assignor
from any contractors, subcontractors, suppliers or material men in connection
with any construction, repairs or alteration of the Property, licenses,
franchises, permits, tenant lists, advertising materials and other similar
rights relating to the use and operation of the Property.
3. The interest of Assignor under all current design contracts, space
planning contracts, construction contracts, subcontracts and purchase orders,
utility contracts, water and sewer service contracts of any nature, maintenance
contracts, management contracts, mortgage documents, certificates of occupancy,
permits, soils reports, insurance policies, and other contracts or documents of
any nature relating to the Property.
<PAGE>
4. The trade name "Natomas Corporate Center" (the "Trade Name"), on a
non-exclusive basis, and the business and good will of Assignor which were
acquired in connection with the Property.
TO HAVE AND TO HOLD the Assigned Properties unto Assignee, its successors,
and assigns, forever, and Assignor binds itself, its successors, and assigns, to
WARRANT and FOREVER DEFEND, all and singular, title to the Assigned Properties
(with the exception of the Trade Name) unto Assignee, its successors, and
assigns, against every person whomsoever lawfully claiming or to claim the same
or any part thereof, by, through or under Assignor but not otherwise.
Assignor shall not be responsible for the discharge and performance of any
duties or obligations to be performed and/or discharged in connection with the
Assigned Properties after the date hereof. By acceptance of this Assignment,
Assignee accepts and agrees to perform all of the terms, covenants, and
conditions in connection with the Assigned Properties required to be performed
by the owner thereof, from and after the date hereof, but not prior thereto, and
agrees to indemnify, save, and hold harmless Assignor from and against any and
all loss, liability, claims, or causes of action existing in favor of or
asserted by any party arising out of or relating to Assignee's failure to
perform any duties or obligations required by the owner of the Assigned
Properties after the date hereof.
Assignee shall not be responsible for the discharge and performance of any
duties or obligations required to be performed and/or discharged in connection
with the Assigned Properties prior to the date hereof. In such regard Assignor
agrees to indemnify and hold Assignee harmless from and against losses incurred
by Assignee as a result of claims brought against Assignee, as Assignor's
successor in interest to the Assigned Properties, relating to causes of action
arising from any failure by Assignor to perform or discharge its obligation as
the owner of the Assigned Properties prior to the date hereof.
Simultaneously with the execution and delivery of this Assignment, Assignor
has executed and delivered to Assignee the Deed and the specific conveyances
described in the recitals hereof.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment in
multiple counterparts, each of which shall have the same force and effect as an
original, but which shall constitute one and the same instrument, effective this
day of ____________, 1997.
<PAGE>
ASSIGNEE:
PRENTISS PROPERTIES ACQUISITION
PARTNERS, L.P., a Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By:
--------------------------------------
Name: Mark R. Doran
Title: Executive Vice President
ASSIGNOR:
RIVER CITY BANK, a California corporation
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
<PAGE>
EXHIBIT "A"
-----------
PROPERTY DESCRIPTION
<PAGE>
EXHIBIT "B"
-----------
WORKS OF ART
<PAGE>
EXHIBIT E
DUE DILIGENCE DOCUMENTS
-----------------------
1. Form Lease
2. All tenant leases and amendments
3. Leasing Status reports, weekly basis
4. Lease proposals
5. Service and Purchase Contracts
6. Equipment Leases
7. Union Contracts
8. Other Contracts and Agreements
9. Operating Licenses and Permits
10. Lease Commission Agreements and Schedules of Commissions Payable
11. Current Year Operating Budget
12. Operating Statements, past two years and current year, monthly basis
13. Receivables Report, update on monthly basis
14. Rent Roll, update on monthly basis
15. Billing Register, update on monthly basis
16. Escalation Work Papers and Base Year Amount Details
17. Utility Invoices, past two years and current monthly
18. Real Estate Tax Bills, past two years
19. Current Notice of Assessment Valuation
20. Tax Parcel Map
21. Real Estate Tax Consultant Report
22. Tenant Credit Reports (to the extent that they are in the tenant files) to
be reviewed at the Property during the Due Diligence Period
23. Tenant Financial Statements (to the extent that they are in the tenant
files) to be reviewed at the Property during the Due Diligence Period
24. Schedule of Capital and Tenant Improvements
25. Current Schedule of Insurance
26. Pending Insurance Claims
27. List of Personnel & Wages
28. Lease and Tenant Files, to be reviewed at the Property during the Due
Diligence Period
29. Vendor Files, to be reviewed at the Property during the Due Diligence
Period
30. Construction Files, to be reviewed at the Property during the Due Diligence
Period
31. Other Property Files, to be reviewed at the Property during the Due
Diligence Period
32. List of Personal Property
33. Demising/Leasing/Site Plan
34. Plans and Specifications, 2 sets of each
(a) Architectural
(b) Structural
(c) Civil
(d) Mechanical
(e) Landscaping
<PAGE>
(f) Sprinkler
(g) Tenant
35. Certificates of Occupancy, building and tenant
36. Construction Contracts
37. Guaranties & Warranties
38. Existing Reports
(a) Structural and Engineering
(b) Environmental and Asbestos
(c) Soils
(d) Radon
(e) Geotechnical
(f) Ground Water Monitoring
(g) Sprinkler Test
(h) Elevator Consultant
39. Preliminary Title Report issued by Stewart Title Guaranty
40. Underlying Recorded Documents
41. Existing Survey
<PAGE>
EXHIBIT F
RENT ROLL
---------
To be delivered to Buyer and/or Seller within 5 business days of the
Effective Date
<PAGE>
EXHIBIT G
TENANT ESTOPPEL
---------------
To be delivered to Buyer and/or Seller within 5 business days of the
Effective Date
<PAGE>
EXHIBIT H
TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
------------------------------------------------
To inform PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware
limited partnership ("TRANSFEREE"), that withholding of tax under Section 1445
of the Internal Revenue Code of 1986, as amended ("CODE"), will not be required
upon the transfer of certain real property to the Transferee by RIVER CITY BANK,
a California corporation ("TRANSFEROR"), the undersigned hereby certifies the
following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Code and the
Income Tax Regulations promulgated thereunder);
2. The Transferor's U.S. employer identification is ________________; and
3. The transferor's office address is _______________________________.
The Transferor understands that this Certification may be disclosed to the
Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
The Transferor understands that the Transferee is relying on this
Certification in determining whether withholding is required upon said transfer.
The Transferor hereby agrees to indemnify, defend and hold the Transferee
harmless from and against any and all obligations, liabilities, claims, losses,
actions, causes of action, rights, demands, damages, costs and expenses of every
kind, nature or character whatsoever (including, without limitation, actual
attorneys' fees and court costs) incurred by the Transferee as a result of: (i)
the Transferor's failure to pay U.S. federal income tax which the Transferor is
required to pay under applicable U.S. law; or (ii) any false or misleading
statement contained herein.
Under penalty of perjury I declare that I have examined this Certification
and to the best of my knowledge and belief it is true, correct and complete, and
I further declare that I have authority to sign this document on behalf of the
Transferor.
Dated:_______________, 1997 RIVER CITY BANK
BY:
-------------------------
BY:
-------------------------
<PAGE>
EXHIBIT I
ASSIGNMENT OF LEASES
--------------------
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
SPACE ABOVE THIS LINE FOR RECORDER'S USE
ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS
THIS ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS is made as of
_________________, 1997 by __________________, a _______________________
("Assignor"), in favor of ___________________, a _______________________
("Assignee"), with reference to the following facts:
A. Assignor is the owner of that certain land ("Land") located in the
City of Sacramento, County of Sacramento, State of California more particularly
described in Schedule 1 hereto, and all rights, privileges and easements
appurtenant to the Land ("Appurtenances"), and all buildings and other
improvements thereon ("Improvements"). The Land, the Appurtenances, and the
Improvements are hereinafter referred to collectively as the "Real Property."
The Real Property is being conveyed to Assignee pursuant to a Grant Deed of even
date herewith, executed by Assignor in favor of Assignee which is being recorded
concurrently herewith.
B. Assignor, as owner of the Real Property, has an interest, as
landlord, in the tenant leases of space in the Improvements ("Leases"), which
are described in Schedule 2 hereto, and an interest in certain security deposits
collected and held by Assignor to secure the performance of the duties and
obligations of tenants under certain of the Leases ("Security Deposits").
C. Assignor desires to assign, transfer and convey to Assignee all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
NOW, THEREFORE, Assignor agrees as follows:
1. Assignor hereby assigns, transfers and conveys to Assignee, all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
<PAGE>
2. Assignor warrants and represents that:
(a) Schedule 2 hereto is a list of all of the leases affecting the Real
Property, other than subleases permitted by the respective leases; Assignor has
not executed or otherwise entered into any other leases, tenancies, occupancy
agreements or other agreements with respect to rights affecting possession of
the Real Property or any portion thereof; and there are no such agreements
executed or otherwise entered into by any third party, and
(b) the Leases are in full force and effect and there is no default on the
part of Assignor as landlord or on the part of any tenant, and there exists no
condition that with the passage of time or the giving of notice or both would
constitute such a default.
(c) Cross-Indemnity.
---------------
(i) By Assignor. Assignor indemnifies and holds harmless Assignee
-----------
from and against any and all loss, damage, liability, cost or expense,
including, without limitation, court costs and reasonable attorneys' fees,
arising out of, by reason of, or in connection with any action, suit, charge,
complaint, proceeding, obligation, undertaking or other similar matter arising
out of or in connection with any transaction, event, act or omission involving
the Leases and Security Deposits which occurred, accrued and/or arose prior to
the date hereof.
(ii) By Assignee. Assignee indemnifies and holds harmless Assignor
-----------
from and against any and all loss, damage, liability, cost or expense,
including, without limitation, court costs and reasonable attorneys' fees,
arising out of, by reason of, or in connection with any action, suit, charge,
complaint, proceeding, obligation, undertaking or other similar matter arising
out of or in connection with any transaction, event, undertaking, act or
omission involving the Leases and Security Deposits which occurs, accrues and
arises from and after the date hereof.
3. The provisions of this Agreement of Rights, Leases and Security
Deposits shall be binding upon and inure to the benefit of Assignor and Assignee
and their respective successors and permitted assigns.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment of
Rights, Leases and Security Deposits as of the date first set forth above.
ASSIGNEE: ASSIGNOR:
BY: BY:
- ---------------------- ------------------------
ITS: ITS:
- ---------------------- ------------------------
DATE: DATE:
- ---------------------- ------------------------
<PAGE>
EXHIBIT J
NOTICES TO TENANT
-----------------
Premises:
Lease dated _____________ between _________________________, a _________________
_________________________ Landlord, and ___________________, a _________________
______________________, Tenant
This is to notify you that the undersigned has sold its fee interest in the
_________________ and in connection therewith has assigned its interest as
landlord under your lease to _________________ , _____________________ a
____________________, whose address is _______________________ .
You are further notified that commencing _______________, 1997, all rental
payments under your Lease shall be paid to __________________, at the address
specified in the first paragraph hereof, unless you are otherwise notified in
writing by _________________. You are further notified that all notices to the
Landlord pursuant to your lease should hereafter be sent to _________________
at the address specified in the first paragraph hereof unless you are otherwise
notified in writing by _____________________ .
Very truly yours,
CERTIFIED MAIL,
RETURN RECEIPT REQUESTED.
<PAGE>
EXHIBIT K
WORKS OF ART
------------
To be delivered to Buyer and/or Seller within 5 business days of the
Effective Date
<PAGE>
EXHIBIT 10.5
AGREEMENT OF PURCHASE AND SALE
AND ESCROW INSTRUCTIONS
(2495 NATOMAS PARK DRIVE)
This Agreement of Purchase and Sale and Escrow Instructions ("AGREEMENT"),
dated for reference purposes as of FebruaryE17, 1997, is entered into by and
between 2495 NATOMAS INVESTORS, a California limited partnership ("SELLER"), and
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P. , a Delaware limited partnership
("BUYER").
RECITALS
A. Seller is the owner of approximately 7.65 acres of land located in
the City of Sacramento, County of Sacramento, State of California ("LAND"), more
particularly described in EXHIBIT "A" hereto and made a part hereof for all
-----------
purposes.
B. The Land has been improved with a six (6) story office building,
containing approximately 149,280 net rentable square feet and related
improvements.
C. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer the "PROPERTY" (as hereinafter defined in SECTION 1.8) on the terms and
conditions set forth herein.
D. In conjunction with its purchase of the Property, Buyer is also
purchasing the real properties located at the addresses ("ADDITIONAL
PROPERTIES") more particularly described in EXHIBIT "B" hereto and made a part
-----------
hereof for all purposes, from the sellers (the "OTHER SELLERS") listed therein
pursuant to certain Agreements of Purchase and Sale and Escrow Instructions of
even date herewith ("ADDITIONAL PROPERTY AGREEMENTS"), the simultaneous purchase
of which shall be a condition concurrent to Buyer's purchase of the Property
hereunder.
NOW, THEREFORE, Seller and Buyer agree as follows:
AGREEMENT
ARTICLE .I
PROPERTY
--------
Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees
to purchase from Seller, subject to the terms and conditions set forth herein,
the following:
I.1. LAND. The Land;
----
I.2. APPURTENANCES. All rights, privileges and easements appurtenant to
-------------
the Land, including, without limitation, all minerals, oil, gas and other
hydrocarbon substances on and under the Land (to the extent owned by Seller) as
well as all development rights, air rights,
<PAGE>
water, water rights and water stock relating to the Land and any other
easements, rights-of-way or appurtenances, used in connection with the
beneficial use and enjoyment of the Land (all of which are collectively referred
to as the "APPURTENANCES");
I.3. IMPROVEMENTS. All buildings improvements and fixtures located on the
------------
Land, including, without limitation, all fixtures, apparatus, equipment and
appliances used in connection with the operation or occupancy thereof, such as
heating and air conditioning systems and facilities used to provide any utility
services, parking services, refrigeration, ventilation, trash disposal,
recreation or other services thereto (all of which are collectively referred to
as the "IMPROVEMENTS");
I.4. PERSONAL PROPERTY. All of the personal property owned by Seller
-----------------
located on or in or used in connection with the Property ("PERSONAL PROPERTY"),
including without limitation the items of tangible personal property consisting
of all furniture, fixtures, equipment, machinery and other personal property of
every kind and nature (excluding cash-on-hand) owned by Seller and located on or
used or useful in the operation of the Property, all of which will be assigned
pursuant to the Bill of Sale, as hereinafter defined, which Personal Property
includes the works of art listed on EXHIBIT "K" ("WORKS OF ART");
---------------------------
I.5. INTANGIBLE PROPERTY. All of the right, title and interest of Seller
-------------------
in any intangible personal property owned by Seller and used exclusively in the
use and operation of the Improvements, and all warranties or guarantees received
by Seller from any contractors, subcontractors, suppliers or materialmen in
connection with any construction, repairs or alteration of the Improvements,
licenses, franchises, permits, tenant lists, advertising materials and other
similar rights relating to the use and operation of the Property (all of which
are collectively referred to as the "INTANGIBLE PROPERTY"), all of which shall
be assigned to Buyer pursuant to the Bill of Sale;
I.6. LEASES. The interest of Seller as landlord under all leases of space
------
in the Improvements ("LEASES") in effect on the Closing Date;
I.7. SERVICE CONTRACTS. The interest of Seller under all current design
-----------------
contracts, space planning contracts, construction contracts, subcontracts and
purchase orders, utility contracts, water and sewer service contracts of any
nature, maintenance contracts, management contracts, mortgage documents,
certificates of occupancy, permits, soils reports, insurance policies, and other
contracts or documents of any nature relating to the Property which are to be
assigned to Buyer at the Closing ("SERVICE CONTRACTS"). All such Service
Contracts approved by Buyer shall be transferred and assigned to Buyer by the
Bill of Sale; and
I.8. PROPERTY. All of the items described in SECTIONS 1.1 through 1.7
--------
above are herein collectively referred to as the "PROPERTY." The items described
in SECTIONS 1.1, 1.2 and 1.3 are herein referred to collectively as the "REAL
PROPERTY."
ARTICLE II.
PURCHASE PRICE
--------------
II.1. PURCHASE PRICE. The purchase price for the Property shall
--------------
be the sum of
<PAGE>
Twenty -Two Million Three Hundred Thousand and No/100ths Dollars
($22,300,000.00) (the "PURCHASE PRICE"). A portion of the Purchase Price has
been allocated to the purchase of the Works of Art in the manner set forth on
EXHIBIT "K" attached hereto and made a part hereof for all purposes.
- -----------
II.2. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by Buyer
-------------------------
in cash by wire transfer on the Closing Date.
II.3. EARNEST MONEY.
-------------
(a) Within two (2) business days following the Effective Date, Buyer shall
deposit, or cause to be deposited with First American Title Insurance Company,
located at 3030 LBJ Freeway, Suite 150, Dallas, Texas 75234; Attn: Jacqueline P.
Aul (the "TITLE COMPANY"), in cash, by certified or bank cashier's check made
payable to the Title Company, or by a confirmed wire transfer of funds, the sum
of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the "EARNEST MONEY")
in accordance with the terms of that certain letter agreement (the "EARNEST
MONEY LETTER") of even date herewith by and between Buyer, the Title Company,
Seller and the Other Sellers. The Earnest Money constitutes escrow deposit under
this Agreement and the Additional Property Agreements. The Earnest Money shall
be held and disbursed in accordance with the terms of the Earnest Money Letter.
(b) The term "EFFECTIVE DATE" shall mean the date upon which this Agreement
and the Additional Property Agreements have been fully executed and delivered by
Seller and Buyer and Seller and the Other Sellers, as the case may be and one
duplicate original of each has been deposited with the Title Company.
II.4. LIQUIDATED DAMAGES. IN THE EVENT THAT THE SALE OF THE PROPERTY AS
------------------
CONTEMPLATED HEREUNDER IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS
AGREEMENT BY BUYER, THROUGH NO FAULT OF SELLER, THE EARNEST MONEY SHALL BE
IMMEDIATELY PAID BY TITLE COMPANY, ON BEHALF OF BUYER, TO SELLER AS LIQUIDATED
DAMAGES PURSUANT TO THE EARNEST MONEY LETTER. THE PARTIES ACKNOWLEDGE THAT
SELLER'S ACTUAL DAMAGES IN THE EVENT OF A DEFAULT BY BUYER WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR SIGNATURES
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES REASONABLE ESTIMATE OF SELLER'S DAMAGES FOR
BUYER'S FAILURE TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
AND THE ADDITIONAL PROPERTY AGREEMENTS AND AS SELLER'S EXCLUSIVE REMEDY AGAINST
BUYER IN THE EVENT OF A DEFAULT BY BUYER; PROVIDED, HOWEVER, NOTHING CONTAINED
HEREIN SHALL PRECLUDE (A) SELLER FROM PURSUING ANY REMEDIES SET FORTH IN
SECTIONS 8.2, 8.5, 8.6, 11.2 AND 11.5 WHICH SURVIVE THE TERMINATION OF THIS
AGREEMENT OR (B) THE RECOVERY OF ITS ATTORNEYS' FEES AND COSTS IN THE
PROSECUTION OR DEFENSE OF ANY
3
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ACTION BROUGHT UNDER THIS AGREEMENT, IF SELLER IS ENTITLED TO RECEIVE SAME. THE
LIQUIDATED DAMAGES SET FORTH HEREIN ABOVE ARE DUPLICATIVE OF AND NOT IN ADDITION
TO THE LIQUIDATED DAMAGES SET FORTH IN THE EARNEST MONEY LETTER.
BUYER: SELLER:
----------- ----------
ARTICLE III.
TITLE TO PROPERTY
-----------------
III.1. TITLE TO REAL PROPERTY.
----------------------
III.1.1. At the Closing, Seller shall convey to Buyer fee simple
title to the Real Property, by execution and delivery of a Grant Deed ("DEED")
in the form attached hereto as EXHIBIT "C" and made a part hereof for all
-----------
purposes.
III.1.2. On the Closing Date, Buyer shall receive from the Title
Company an ALTA Owner's Policy of Title Insurance, in a form to be selected by
Buyer, with liability in the full amount of the Purchase Price, insuring fee
simple title to the Real Property in Buyer, subject only to exceptions approved
by Buyer as provided in SECTION 4.1.1 hereof, together with the following
endorsements: (i) an endorsement deleting all general exceptions and deleting
exclusions from coverage relating to creditor's rights, (ii) 116.1 (survey),
(iii) 100 (modified), (iv) 123.1 (zoning), (v) 116.4 (contiguity), (vi) 103.7
(access), (vii) 100.29 (mineral rights), (viii) 103.1 (easements) (ix) 103.5
(water rights) and (ix) such other endorsements as may be reasonably requested
by Buyer ("TITLE POLICY"). The Title Policy shall provide full coverage against
mechanics and material men's liens arising out of the construction, repair or
alteration of any of the Improvements or any tenant improvements.
III.1.3. The Title Company shall obtain, if requested by Buyer
and at Buyer's cost, reinsurance agreements from such companies as Buyer may
request, which reinsurance agreements shall be in ALTA Facultative Reinsurance
Agreement Form (rev. 1961), and shall include direct access agreements, in such
amounts and in such form as shall otherwise be satisfactory to Buyer.
III.2. TITLE TO PERSONAL PROPERTY. At the Closing, Seller shall
--------------------------
transfer title to the Personal Property pursuant to the Bill of Sale, in the
form of Bill of Sale and Assignment attached as EXHIBIT "D" hereto ("BILL OF
-----------
SALE") and shall further transfer and assign all of Seller's rights in and to
any Intangible Property, pursuant to the Bill of Sale, and shall further
transfer all of Seller's rights, title and interest in and to the Leases
pursuant to the Assignment of Leases (as hereinafter defined). All such title
and rights shall be free of any liens, encumbrances or interests of third
parties whatsoever.
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ARTICLE IV.
CONDITIONS TO CLOSING
---------------------
IV.1. BUYER'S DUE DILIGENCE CONDITIONS. For a period beginning on the
--------------------------------
Effective Date and expiring at 5:00 p.m. on the thirtieth (30th) day thereafter
("CONTINGENCY PERIOD") Buyer, Buyer's agents, contractors, subcontractors,
employees and its counsel shall have the right to perform due diligence on the
Property pursuant to the terms of this SECTION 4.1 as follows:
IV.1.1. APPROVAL OF TITLE. Buyer's approval of the following
-----------------
matters relating to the title of the Property:
(a TITLE COMMITMENT. Buyer shall obtain (i) a title
----------------
commitment ("COMMITMENT"), by the terms of which the Title Company
agrees to issue to Buyer, at Closing, the Title Policy in the amount of
the Purchase Price; (ii) a photocopy of all documents ("TITLE
DOCUMENTS") describing or evidencing all title exceptions shown on the
Commitment; and (iii) reports relating to judgment, UCC, and Federal and
State tax lien searches regarding the Seller and the Property
(collectively, the "REPORTS"), to be obtained by Buyer, but to be paid
for by Seller at the Closing.
(b SURVEY. Buyer shall secure an as-built survey ("SURVEY")
------
of the Property, prepared by a registered land surveyor, duly licensed
in the State and certified to the Title Company and to the Buyer in full
ALTA/ASTM form.
(c REVIEW OF SURVEY AND COMMITMENT.
-------------------------------
(i As used herein, the term "TITLE OBJECTION PERIOD"
shall mean a period commencing on the first day following receipt
by Buyer of the Survey, the Commitment, the Reports and the Title
Documents and ending ten (10) days thereafter. All matters shown on
the Survey and exceptions listed in the Commitment or the Reports
which are not objected to by Buyer within the Title Objection
Period, shall be conclusively deemed to be acceptable to Buyer.
(ii In the event Buyer timely objects to any title
exception or Survey matter ("TITLE OBJECTION"), Seller may, but
shall not be obligated to, cure such Title Objection. Seller shall
notify Buyer, within five (5) days following receipt of the Title
Objection, of its decision as to whether or not it intends to cure
the Title Objection in question. In the event Seller notifies or
its deemed to have notified the Buyer that is unable or unwilling
to cure any Title Objection, Buyer may at its option (a) terminate
this Agreement, or (b) waive the Title Objections in question. The
foregoing election shall be made by Buyer in writing within ten
(10) days following Seller's notification. If any
5
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of the Title Objections consist of delinquent taxes, delinquent
assessments, 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, Seller shall be obligated to pay and discharge (or bond
against in a manner sufficient to cause the Title Company to
insure over such Title Objections) any such Title Objections.
Bonds and assessments in respect to improvements heretofore made
to the Property which are reflected in the Commitment shall not be
deemed to be a Title Objection.
(iii Seller hereby agrees that it shall not, after
the Effective Date, subject the Property to or permit or suffer to
exist any liens, encumbrances, covenants, conditions,
restrictions, easements or other title matters other than those in
existence on the date hereof or seek any zoning changes or take
any other action which may affect or modify the status of title
without Buyer's prior written consent. Notwithstanding the
foregoing, Buyer shall not be required to accept title to the
Property subject to any matters which may arise subsequent to the
effective date of the Title Commitment, Reports and Survey
examined by Buyer during the period described above.
(iv Notwithstanding anything herein to the contrary,
in any event Buyer's right to terminate this Agreement pursuant to
any provision of this SECTIONE4.1.1 shall expire upon expiration
of the Contingency Period.
(v As used in this Agreement, the term "PERMITTED
EXCEPTIONS" shall mean all matters either shown on the Survey or
listed in the Commitment or the Reports to which Buyer does not
raise a Title Objection within the Title Objection Period or,
having objected, waives or is deemed to have waived in accordance
with the provisions of this SECTION 4.1.1, other than those Title
Objections 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. It is
understood and agreed that the Property is being transferred
hereunder free and clear of all liens, claims and encumbrances
except for the Permitted Exceptions.
(d TERMINATION OF THIS AGREEMENT. In the event of
-----------------------------
termination of this Agreement pursuant to this SECTION 4.1.1, the Earnest
Money shall be returned to Buyer and thereafter neither party shall have
any further rights or obligations hereunder.
IV.1.2. INSPECTIONS.
-----------
(a Buyer and Buyer's agents, contractors, subcontractors
or employees,shall have the right to conduct any and all inspections,
investigations, tests and studies (including, without limitation,
investigations with regard to zoning,
6
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building codes and other governmental regulations, architectural
inspections, engineering tests, economic feasibility studies, soils,
seismic and geologic reports and environmental testing) with respect to the
Property as Buyer may elect to make or maintain. During the Contingency
Period, Buyer and its agents and consultants shall have access to: (1) the
Property; (2) the tenants for interviews, which interviews shall be
coordinated by Seller, with Seller or its representative present if Seller
so elects; and (3) the books and records relating to the ownership and
operation of the Property, for the purpose of making such inspections,
tests, copies and verifications as Buyer shall deem reasonably necessary.
(b Prior to any entry onto the Property by Buyer's agents,
contractors, subcontractors or employees, Buyer shall deliver to Seller a
Certificate of Insurance for Buyer's commercial general liability insurance
policy which evidences that Buyer is carrying a commercial general
liability insurance policy with a financially responsible insurance company
(at least A-X in the latest edition of Best's Insurance Guide), covering
----------------------
(i) the activities of Buyer, and Buyer's agents, contractors,
subcontractors and employees on or upon the Property, and (ii) Buyer's
indemnity obligations set forth in this Agreement. Such Certificate shall
evidence that such insurance policy shall have a per occurrence limit
(including umbrella) of at least Five Million and no/100 Dollars
($5,000,000.00) and an aggregate limit (including umbrella) of at least Ten
Million and no/100 Dollars ($10,000,000.00), shall name Seller as an
additional insured, shall be primary and non-contributing with any other
insurance available to Seller, shall be issued on an occurrence basis, and
shall contain a full waiver of subrogation clause. Seller shall be named as
an additional insured under such policy in such Certificate.
(c Within five (5) days after Effective Date, Seller shall
deliver or cause to be delivered to Buyer at its offices in Sacramento,
California, the Due Diligence Documents listed on EXHIBIT "E" attached
-----------
hereto and made a part hereof for all purposes.
IV.1.3. AGREEMENTS. Buyer shall have approved the Leases,
----------
Service Contracts, Personal Property, and all other documents and materials to
be delivered to Buyer by Seller pursuant to the provisions of SECTION 4.1.2.
IV.1.4. INCOME TAX MATTERS. Buyer shall have received
------------------
satisfactory opinions from its legal counsel as to income tax matters in
connection with the transaction.
IV.1.5. AS-BUILT PLANS AND SPECIFICATIONS. Buyer and its
---------------------------------
architects, engineers and consultants shall have reviewed and approved the "AS-
BUILT" plans and specifications pursuant to which the Property was constructed,
including the confirmation of the net rentable area of the Property.
IV.1.6. PHYSICAL INSPECTION REPORTS. Buyer shall have
---------------------------
obtained a physical inspection report and an environmental report with respect
to the Land (including surrounding
7
<PAGE>
areas) and Improvements constituting the Property prepared in accordance with
the specifications submitted by Buyer and prepared by third-party specialists
selected by Buyer, and Buyer shall then determine in its sole discretion whether
it is willing to purchase the Property in the physical and environmental
condition set forth in said reports.
IV.1.7. FINANCIAL INFORMATION. Buyer shall have (a)
---------------------
verified to its satisfaction the accuracy of the rent roll (the "RENT ROLL")
attached hereto as EXHIBIT "F" and the accuracy of projections and other
-----------
financial data with respect to the Property which have been delivered to Buyer
in the offering, (b) determine that the creditworthiness of the tenants is
within the reasonable financial risk parameters of Buyer, (c) verify that it is
willing to accept and be bound by the actual terms of the Leases, and (d) verify
that the Property has sufficient automobile parking spaces (including, without
limitation, handicap spaces) to comply with the requirements of all governmental
authorities and ordinances and all tenant leases.
IV.1.8. APPROVAL BY BOARD OF DIRECTORS. Buyer shall have,
------------------------------
within ten (10) days following the Effective Date, obtained the approval of the
Board of Directors (the "Board") of Prentiss Properties Trust, a real estate
investment trust, which is a partner in Buyer. In the event the Board fails to
approve the transaction contemplated hereby Buyer shall so notify Seller in
which event this Agreement along with the Additional Property Agreements shall
terminate and the Earnest Money shall be returned to Buyer. The failure to
notify Seller of Buyer's election to terminate this Agreement in accordance with
the provisions of this SECTION 4.1.8 within such ten (10) day period shall be
deemed to be an election on the part of Buyer to waive such contingency.
IV.1.9. CONTINGENCY NOTICE.
------------------
(a) Prior to the expiration of the Contingency Period, Buyer
shall deliver to Seller and the Title Company a written notice
("CONTINGENCY NOTICE") of its approval or disapproval of the Property,
which shall be subject to Buyer's sole and absolute discretion. In the
event that Seller does not receive a Contingency Notice approving the
Property by the expiration of the Contingency Period, this Agreement shall
be deemed to have been automatically terminated.
(b) Subject to the provisions of subparagraph (c) below,
the Contingency Notice for the Additional Properties must be consistent
with the Contingency Notice for the Property in respect to Buyer's approval
or disapproval of the Additional Properties. If the Contingency Notice is
inconsistent, this Agreement shall terminate.
(c) Notwithstanding the provisions of subparagraph (b) above,
in the event that (i) the Other Seller terminates the Additional Property
Agreement (the "2525 AGREEMENT") covering the Additional Property located
at 2525 Natomas Park Drive, Sacramento, California, pursuant to SECTION
2.1(C) thereof, or (ii) Buyer terminates the 2525 Agreement for any reason,
the effectiveness of this Agreement or the remaining Additional Property
Agreements shall not be affected. In the event of the termination of the
2525 Agreement pursuant to the foregoing provisions, this Agreement shall
remain
8
<PAGE>
in full force and effect, subject to the continued existence of the remaining
Additional Property Agreements.
(d) Additionally, in the event that the Bannon Investors, one of
the Other Sellers under the Additional Property Agreements which owns that
certain tract of land known as Tract A, terminates its Additional Property
Agreement (the "TRACT A AGREEMENT") in accordance with the provisions of
SECTION 2.1(C) the Tract A Agreement, Buyer, at its option may elect (i) to
terminate this Agreement and the remaining Additional Property Agreements,
in which event the Earnest Money shall be returned to Buyer, or (ii)Eto
keep this Agreement as well as the remaining Additional Property Agreements
in full force and effect, in which event the parties shall consummate the
transactions contemplated thereby in accordance with the respect terms and
conditions of this Agreement and the remaining Additional Property
Agreements.
IV.2. APPROVAL BY SELLER'S PARTNERS. As a condition to Seller's
-----------------------------
obligations to consummate the transaction contemplated hereby, Seller shall
have, within ten (10) days following the Effective Date, obtained the approval
of the limited partners and other general partners (the "PARTNERS") of Seller.
In the event the Partners fail to approve the transaction contemplated hereby,
Seller shall so notify Buyer within such ten (10) day period, in which event
this Agreement along with the Additional Property Agreements shall terminate and
the Earnest Money shall be returned to Buyer. The failure by Seller to notify
Buyer of Seller's election to terminate this Agreement in accordance with the
provisions of this SECTION 4.2, within such ten (10) day period, shall be deemed
to be an election on the part of Seller to waive such contingency.
IV.3. BUYER'S CLOSING CONDITIONS. The following conditions are for the
--------------------------
benefit of Buyer and are conditions to the Closing, unless expressly waived by
Buyer on or before the Closing Date:
IV.3.1. TENANT ESTOPPEL CERTIFICATES. Seller shall deliver to
----------------------------
Buyer a current estoppel letter substantially in the form attached hereto as
EXHIBIT "G" from tenants of the Property (and other occupants to the extent
- -----------
that Seller has the contractual right to require such letters), in the aggregate
representing at least ninety percent (90%) of the occupied floor area of the
Property. In the event that Seller is unable to obtain an estoppel certificate
from any tenant which has leased less than ten thousand (10,000) square feet,
Seller shall furnish Buyer with a mutually acceptable, qualified estoppel
certificate concerning such Lease executed by Seller. Buyer shall provide Seller
with its desired form of estoppel certificates for each tenant on or before
twenty (20) days following the Effective Date. In addition, all tenants listed
on the Rent Roll or their subtenants occupying in excess of 10,000 square feet
of net rentable area will be in "material compliance" with the terms and
conditions of their respective leases (except for premises which may not yet be
ready for occupancy as the result of new leases or modified leases). The term
"material compliance" shall mean that the tenant is question is not more than
thirty (30) days in arrears in the payment of rent due under its lease and/or
the tenant in question has not filed for bankruptcy protection under applicable
law. The fact that
9
<PAGE>
Physicians Clinical Laboratories, Inc. is in not in material compliance with its
lease shall not give Buyer any rights to terminate this Agreement.
IV.3.2. SIMULTANEOUS CLOSING. Subject to the provisions of
--------------------
SECTION 4.1.9, in respect to the termination of the 2525 Agreement and the Tract
A Agreement, the Closing of the transaction contemplated hereby shall be
contingent upon the simultaneous closing of the Additional Properties pursuant
to the terms and conditions of the Additional Property Agreements.
Notwithstanding the foregoing, in the event (a) any of the Additional Property
Agreements are terminated as a result of a Seller default, or in accordance with
ARTICLE IX of the Additional Property Agreements, Buyer shall have the option,
in its sole discretion, to terminate this Agreement and the Earnest Money shall
be returned to Buyer or Buyer may waive the simultaneous closing condition and
consummate the transaction contemplated herein and (b) the Tract A Agreement or
the 2525 Agreement is terminated by Buyer or applicable Other Seller pursuant to
SECTION 2.1(C) thereof, Buyer shall have the right to terminate this Agreement,
in its sole discretion, in which event the Earnest Money shall be returned to
Buyer or Buyer may consummate the transaction contemplated herein without regard
to such termination.
IV.3.3. TITLE INSURANCE. As of the Closing Date, the Title
---------------
Company shall have issued or shall have committed to issue the Title Policy to
Buyer in respect to the Property.
IV.3.4. NO MATERIAL CHANGE. There shall be no material
------------------
adverse change in any of the items approved by Buyer during the Contingency
Period, including, without limitation, the physical condition of the Property
and title to the Property.
IV.3.5. TERMINATION OF AGREEMENTS. On the Closing Date,
-------------------------
all management and leasing agreements with respect to the Property shall be
terminated and Seller shall be solely responsible for any termination fees due
to the present property manager. In addition, Seller shall deliver full releases
from any leasing agents for any and all commissions which may become payable
after the Closing Date with respect to any then existing lease whether currently
earned or payable by virtue of renewal or expansion options.
IV.3.6. DELIVERY OF LEASES/DOCUMENTS. Buyer shall have
----------------------------
received signed originals or copies, certified by Seller as being true and
correct of all leases and contracts, together with all exhibits thereto, and to
the extent in Seller's possession or reasonably obtainable all warranties,
licenses, permits and agreements, together with all exhibits thereto.
IV.4. SELLER'S CLOSING CONDITIONS. The following conditions are for the
---------------------------
benefit of Seller and are conditions to the Closing, unless expressly waived by
Seller on or before the Closing Date:
IV.4.1. SIMULTANEOUS CLOSING. Subject to the provisions of
--------------------
SECTION 4.1.9 hereof, in respect to the termination of the 2525 Agreement and
the Tract A Agreement, the Closing shall be contingent upon the simultaneous
closing of the Additional Properties, pursuant to the terms and conditions of
the Additional Property Agreements.
10
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IV.5. FAILURE OF CONDITION TO CLOSE TO ESCROW. In the event any of the
---------------------------------------
conditions set forth in ARTICLE IV are not timely satisfied or waived by the
appropriate party benefitting by the conditions in question, for a reason other
than the default of Buyer, this Agreement shall, at the option of the party
benefitting by the conditions in question, terminate, the Earnest Money shall be
returned to Buyer and, except as otherwise provided herein, the parties shall
have no further obligations hereunder.
ARTICLE V.
CLOSING AND ESCROW
------------------
V.1. DEPOSIT WITH THE TITLE COMPANY AND ESCROW INSTRUCTIONS. Upon
------------------------------------------------------
execution of this Agreement, the parties hereto shall deposit one duplicate
original of this Agreement with the Title Company and this instrument shall
serve as the instructions to the Title Company for consummation of the purchase
and sale contemplated hereby. Seller and Buyer agree to execute such additional
and supplementary escrow instructions as may be appropriate to enable the Title
Company to comply with the terms of this Agreement; provided, however, that in
the event of any conflict between the provisions of this Agreement and any
supplementary escrow instructions, the terms of this Agreement shall control.
V.2. CLOSING.
-------
V.2.1. The closing hereunder ("CLOSING") shall be held at the
offices of the Title Company. The execution and exchange of documents shall take
place at the Closing on or before the twentieth (20th) day following the
expiration of the Contingency Period ("CLOSING DATE"). Such date may not be
otherwise extended without the written approval of both Seller and Buyer.
V.2.2. In the event the Closing does not occur on or before
the Closing Date, the Title Company shall, unless it is notified by both parties
to the contrary within ten (10) days after the Closing Date, return to the
depositor thereof all documents which may have been deposited hereunder.
V.3. DELIVERY BY SELLER TO THE TITLE COMPANY. Prior to the Closing
---------------------------------------
Date, Seller shall deliver to the Title Company:
(a The Deed, duly executed and acknowledged by Seller, in
recordable form, and ready for recordation on the Closing Date;
(b A certification duly executed by Seller under penalty of
perjury in the form of, and upon the terms set forth in, the Transferor's
Certification of Non-Foreign Status ("FIRPTA CERTIFICATE"), setting forth
Seller's address and federal tax identification number and certifying that
Seller is a "United States Person" and that Seller is not a "foreign
person" in accordance with and/or for the purpose of the
11
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provisions of Section 7701 and 1445 (as may be amended) of the Internal
Revenue Code of 1954, as amended, and any regulations promulgated
thereunder. The FIRPTA Certificate shall be in the form attached hereto as
EXHIBIT "H"; and
-----------
(c An Assignment of Rights, Leases and Security Deposits
("ASSIGNMENT OF LEASES"), in the form of EXHIBIT "I" duly executed by
-----------
Seller, by
which Seller shall assign to Buyer all of Seller's interest in the Leases,
together with the interest of Seller in security deposits collected and
held by Seller to secure the performance of the duties and obligations of
tenant under the Leases.
V.4. DELIVERY BY SELLER TO BUYER. On or before the Closing Date, Seller
---------------------------
shall deliver to the Title Company, for ultimate delivery to Buyer, the
following:
(a The Bill of Sale duly executed by Seller;
(b The Rent Roll, certified by Seller and current as of the
Closing Date;
(c A schedule of Service Contracts current as of the Closing
Date;
(d Tenant Estoppel Certificates from those tenants specified
pursuant to SECTION 4.2.1, to the extent not previously delivered to Buyer.
(e Originals or copies, certified by Seller as being true and
correct, of all Leases, together with all exhibits thereto;
(f Originals of all Service Contracts and any unexpired
warranties or guaranties received by Seller from any contractors,
subcontractors, suppliers or materialmen in connection with any construction,
repair or alteration of the Improvements or any tenant improvements;
(g All instruction manuals, procedure manuals, manufacturer's
warranties and similar materials in Seller's possession which relate to the
Property;
(h Notices to tenants under the Leases, in the form of
EXHIBIT "J" attached hereto, duly executed by Seller;
- -----------
(i All keys to the Property;
(j Such resolutions, authorizations, bylaws or other corporate
and/or partnership documents or agreements relating to Seller as shall be
reasonably required by the Title Company in connection with this transaction;
and
(k Any other documents, instruments, data, records,
correspondence or agreements called for hereunder which have not previously been
delivered.
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The matters described in subparagraphs (e), (f), (g) and (i) shall be delivered
by making them available at the office of the property manager for the Property.
V.5. DELIVERY BY BUYER TO THE TITLE COMPANY. On or before the Closing
--------------------------------------
Date, Buyer shall deliver to the Title Company, for ultimate delivery to Seller:
(a) The Purchase Price described in SECTION 2.1, plus any
additional sums necessary, if any, for Buyer to pay its costs, expenses and
prorations pursuant to this ARTICLEEV; and
(b) The Assignment of Leases, duly executed in recordable form
by Buyer.
V.6. OTHER INSTRUMENTS. Seller and Buyer shall each deliver such other
-----------------
instruments as are reasonably required by the Title Company or otherwise
required to close the escrow and consummate the purchase of the Property in
accordance with the terms hereof.
V.7. CLOSE OF ESCROW. Provided that (a) the Title Company has
---------------
received all required documents, instruments and funds, (b) the Title Company
has not received written notice from either Buyer or Seller that any of the
conditions to Closing set forth in ARTICLE IV have not been satisfied or waived,
(c) any of the representations and warranties made by either Buyer or Seller are
untrue either as of the Closing Date and (d) the Title Company is able to
deliver to Buyer the Title Policy described in SECTION 3.1.1 hereof, the Title
Company is authorized and instructed on the Closing Date to:
(a) Record the Deed and the Assignment of Leases with the
Sacramento County Recorder; and
(b) Deliver to Seller the sum described in SECTION 2.1 to
Seller, less Seller's share of prorations and costs of escrow. The Title Company
is instructed to request that the amount of the Documentary Transfer Tax due be
shown on a separate paper and affixed to the Deed by the County Recorder after
the permanent record is made.
V.8. PRORATIONS AND APPORTIONMENTS.
-----------------------------
V.8.1. All revenues and all expenses of the Property shall be a
prorated and apportioned as of 12:01 a.m. on the Closing Date, so that Seller
shall bear all expenses with respect to the Property and shall have the benefit
of all income with respect to the Property through and including the period
preceding the Closing Date. Any revenue or expense amount which cannot be
ascertained with certainty as of the Closing Date shall be prorated on the basis
of the parties' reasonable estimates of such amount (other than reimbursements
for operating expenses not billed currently to tenants) and shall be the subject
of a final proration thirty (30) days after the Closing Date or as soon
thereafter as the precise amounts can be ascertained. A statement setting forth
such agreed prorations shall be delivered to the Title Company. The
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Title Company shall not be required to calculate any prorations.
V.8.2. Prepaid rents under the Leases shall be credited to Buyer.
Amounts for free rents, concessions, lease takeovers and similar matters not
previously paid or satisfied prior to the Closing Date shall be credited to
Buyer. Rents in arrears will not be prorated, but will be paid to Seller by
Buyer when collected by Buyer, such payment to occur every thirty (30) days
following the Closing Date. Except as expressly provided for in SECTION 5.10
below, the first monies received by Buyer from each tenant after the Closing
Date shall be applied first to current rents and other sums due and thereafter
shall be applied to rent in arrears.
V.8.3. Expenses to be prorated shall include taxes (other than
personal property taxes on Personal Property), payments under any Service
Contracts (provided that any delinquent payments owing to Seller shall be
treated in the same manner as delinquent rents), gas, electricity and other
utility charges, any unfixed meter charges, if any (apportioned on the basis of
the last meter reading), license and permit fees and other expenses customarily
prorated. If possible, in lieu of prorating, utilities and other expenses shall
be contracted for in the name of Buyer as of the Closing Date, with Seller being
responsible directly to the utility provider and others for accrued and unpaid
expenses. No prorations in respect to personal property taxes on Personal
Property based upon Seller's warranty that no personal property taxes have been
assessed against the Personal Property for the previous five (5) years.
V.9. COMPUTATION OF CERTAIN PRORATIONS. Final proration of percentage
---------------------------------
rents and similar apportionable items which are dependent for their calculation
upon the economic performance of the Property (or a portion thereof) over a
specified interval of time shall be accomplished as follows:
(a The parties shall await the expiration of the specified
interval to determine the gross rents, gross receipts and other economic
performance over the entire interval and then prorate the item by allocating to
Seller the product of the rents or other similar apportionable item for the
entire interval multiplied by a fraction, the numerator of which is the number
of days within the specified interval which occur before the Closing Date and
the denominator of which is the number of days in the specified interval.
(b Operating expenses which are payable (or reimbursable) by
any present or past tenant of the Property or any portion thereof, shall not be
prorated hereunder. Buyer shall send customary statements for reimbursement of
operating expenses and taxes to tenants under the Leases after consulting with
Seller with respect to appropriate amounts due therefore, and shall remit to
Seller, upon receipt, Seller's prorated share thereof, determined as provided in
SECTION 5.9(A) above, to the extent Seller has previously paid or been charged
for the expenses relating to such reimbursement.
V.10. ARREARAGE. Seller reserves all claims and causes of action
---------
against tenants and
14
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others who are in arrears or who shall be obligated to pay monies in the future
which are for the benefit of Seller, and Buyer shall provide its reasonable
cooperation to Seller in pursuing such arrearage. Buyer shall use reasonable
efforts to collect all sums in arrears as of the closing Date due to Seller, but
shall not be required to commence or prosecute any litigation. Seller may not
commence and prosecute litigation against any tenant for rents in arrears as
long as such tenant remains a tenant of the Property, unless the statute of
limitations will expire within the succeeding sixty (60) days. To the extent
that Buyer receives payments from tenants for sums due prior to the Closing
Date, which can be verified based upon invoices or other applicable billings,
such payments, including rents, shall be promptly remitted by Buyer to Seller.
V.11. PAYMENT OF ADJUSTMENTS TO PRORATION. Either party owing the other
-----------------------------------
party a sum of money based on adjustments made to prorations after the Closing
Date shall promptly pay that sum to the other party, together with interest
thereon at the rate of ten percent (10%) per annum to the date of payment if
payment is not made within ten (10) days after mutual agreement of the amount
due.
V.12. COSTS AND EXPENSES. Seller shall pay the costs associated
------------------
with the issuance of a California Land Title Association Owner's Policy of Title
Insurance in the full amount of the Purchase Price, the UCC and litigation
searches, documentary stamp taxes, recording fees, transfer taxes, escrow fees
and all costs incurred to repay any liens. Buyer shall pay the incremental
increase in costs relating to ALTA coverage, the costs of all endorsements
thereto and the cost of the Survey. Seller and Buyer shall each pay the fees and
expenses of their respective legal counsel incurred in connection with the
transaction.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
As an inducement to Buyer to enter into this Agreement, Seller hereby
represents and warrants to and agrees with Buyer as follows:
VI.1. AUTHORITY OF SELLER. Seller is a California limited partnership,
-------------------
duly organized and validly existing and in good standing under the laws of the
State of California, and has the authority to own and convey the Property, and
execute this Agreement. All documents executed by Seller which are to be
delivered to Buyer at the Closing are or at the time of Closing will be duly
authorized, executed and delivered by Seller and do not and at the time of
Closing will not violate any provisions of any agreement or judicial order to
which Seller is a party or to which Seller or the Property is subject.
VI.2. CONDITION OF PROPERTY. To Seller's Knowledge, as hereinafter
---------------------
defined, there are no material physical or mechanical defects in the Property,
including, without limitation, the elevators, escalators, plumbing, heating, air
conditioning, ventilating, life safety and electrical systems, and to Seller's
Knowledge, all such items are in good operating condition and repair and are in
compliance with all applicable governmental laws, ordinances,
15
<PAGE>
regulations and requirements, other than compliance with the requirements of the
Americans With Disabilities Act, with respect to which, Seller has commenced
compliance in accordance with the requirements thereof.
VI.3. USE AND OPERATION. To Seller's Knowledge, the use and operation
-----------------
of the Property are in full compliance with applicable building codes, safety
and fire, environmental, zoning and land use laws, and other applicable local,
state and federal laws, ordinances, regulations and requirements, other than
compliance with the requirements of the Americans With Disabilities Act, with
respect to which, Seller has commenced compliance in accordance with the
requirements thereof.
VI.4. LAND USE REGULATIONS. To Seller's Knowledge, there are no
--------------------
condemnation, environmental, zoning or other land use regulation proceedings,
either instituted, or planned to be instituted, which could detrimentally affect
the use or operation of the Property of its intended purpose or the value of the
Property, nor has Seller received notice of any special assessment proceedings
affecting the Property.
VI.5. LEASES. To Seller's Knowledge, the copies of the Leases to be
------
made available to Buyer pursuant to SECTION 4.1.2 are true and correct copies of
all Leases affecting the Property and are in full force and effect and there are
no other agreements, written or oral, with respect to the tenancies, except
subleases permitted by the respective Leases. To Seller's Knowledge:
(a) The information set forth in the Rent Roll is true and
complete as of the date such Rent Roll was made available to Buyer and
there are no leases of space in the Improvements and nonmaterial defaults
under any of the Leases which have not been disclosed to Buyer in writing.
(b) No tenant under any of the Leases has prepaid any rent or
charges for more than the current month, except as disclosed to Buyer in
writing.
(c) No tenant under any of the Leases has any right or option
to purchase the Property or any portion thereof or interest therein, and
there are no outstanding agreements of sale with respect to the Property or
any portion thereof or any interest therein.
(d) Except as provided in the Leases and the Rent Roll, no
tenant under any of the Leases has the right to renew or extend any of the
Leases or has any options or rights of first refusal with respect to
leasing of other space, and no tenant under any of the Leases has the right
to free rent, rebate, allowance, concession, security or other deposit.
VI.6. BROKERAGE COMMISSIONS. Except as set forth in the Rent Roll or
---------------------
otherwise disclosed to Buyer in writing, there are no commissions, finder's fees
or other compensation owing or which may become owing to any broker or any other
person or entity with respect to any Lease or occupancy agreement including,
without limitation, any such compensation with
16
<PAGE>
respect to any future renewals, extensions or expansions thereof.
VI.7. LITIGATION. Except as disclosed to Buyer in writing, there is no
----------
litigation pending or, to Seller's Knowledge, threatened, against Seller or any
basis therefor that arises out of the ownership of the Property or that might
detrimentally affect the use or operation of the Property for its intended
purpose or the value of the Property or adversely affect the ability of Seller
to perform its obligations under this Agreement.
VI.8. USE AND OPERATION OF PROPERTY. To Seller's Knowledge, Seller
-----------------------------
knows of no facts which would prevent Buyer from using and operating the
Property after Closing in the manner in which the Property has been used, leased
and operated prior to the date hereof.
VI.9. OTHER RIGHTS. No other person presently has a right of first
------------
refusal or other right to purchase or finance all or any part of the Property.
In consideration of Buyer's execution and delivery of this Agreement, Seller
agrees that so long as this Agreement has not been terminated or expired, Seller
will not negotiate or otherwise pursue any offers on the Property nor execute
any other letter of intent or contract for the financing, sale or purchase of
the Property.
VI.10. EMPLOYEES. Seller has no employees. There are no employees of
---------
Seller's agent (including the property manager) engaged in the operation or
maintenance of the Property for whom Buyer will be responsible after the Closing
Date unless Buyer agrees to employ such employees after the Closing Date.
VI.11. ENVIRONMENTAL. To Seller's Knowledge, the Property is not in
-------------
violation of any federal, state, local or administrative agency ordinance, law,
rule, regulation, order or requirement relating to environmental conditions or
Hazardous Material ("ENVIRONMENTAL LAWS"). Neither Seller, nor to Seller's
------------------
Knowledge, any third party, has (a) used, manufactured, generated, treated,
stored, disposed of, or released any Hazardous Material on, under or about the
Property or transported any Hazardous Material over the Property in violation of
the Environmental Laws, or (b) installed, used or removed any storage tank on,
from or in connection with the Property except in full compliance with all
Environmental Laws. To Seller's Knowledge, there are no storage tanks or wells
(whether existing or abandoned) located on, under or about the Property. To
Seller's Knowledge, the Property does not consist of any building materials that
contain Hazardous Material. For the purposes hereof, "HAZARDOUS MATERIAL" shall
mean any substance, chemical, waste or other material which is listed, defined
or otherwise identified as "hazardous" or "toxic" under any federal, state,
local or administrative agency ordinance or law.
VI.12. "AS-IS" SALE.
------------
(a) Except as set forth above, Buyer acknowledges that Seller
makes no representation or warranty, either express or implied, with
respect to the Property, its present condition or its fitness or
suitability for any particular purpose. In this respect, Buyer confirms
that it is relying solely upon its investigation of the condition of the
17
<PAGE>
Property, its title and all governmental laws and ordinances which might
affect its use and development. With the exception of matters which Seller
has affirmatively represented, actively concealed or fraudulently
represented at the time of sale and with the exception of the warranties
contained in the conveyance documents to be executed and delivered by
Buyer, Buyer hereby releases and forever discharges Seller, its partners,
employees and agents from any and all claims, rights, remedies and causes
of action of any nature or sort, known or unknown, past, present or future,
which Buyer may have arising out of the condition of the Property after the
Closing Date.
(b) Buyer expressly waives the benefits and provisions of Section
1542 of the Civil Code of the State of California, and any similar law of
any state or territory of the United States or other jurisdiction. Civil
Code Section 1542 provides as follow:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
DEBTOR."
Initials of Buyer
-----------------------
VI.13. SELLER'S KNOWLEDGE. The term "TO SELLER'S KNOWLEDGE," or
------------------
variations thereof, means the actual, present knowledge of the individual
general partners of Seller, without any duty of inquiry or investigation, other
than the obligation of Seller to make inquiry of its managing agent KCS
Properties, Inc. in an effort to determine that the employees of KCS Properties,
Inc. responsible for the day-to-day operation of the Property are not aware of
any fact or circumstance that would make any representation or warranty of
Seller untrue in any material respect.
VI.14. SURVIVAL. The representations and warranties of Seller contained
--------
herein shall survive the Closing Date, but shall terminate one (1) year after
the Closing Date. No liability shall arise thereunder unless suit shall be
filed against Seller as to the specific claim within such one (1) year period.
VI.15. SUBSEQUENT DISCLOSURES. In the event Buyer, prior to the
----------------------
Closing Date, becomes aware, from Seller or otherwise, of any inaccuracy in the
disclosures, information or representations previously provided to Buyer, which
will have a material, adverse effect on Buyer, Buyer may either (i) terminate
this transaction contemplated hereby, receive a refund of the applicable portion
of the Deposit, and to the extent available pursue any rights or claims that
Buyer may have against Seller as a result of any inaccuracy in the disclosures,
information or representations previously provided to Buyer or (ii) proceed with
the Closing, thereby waiving any rights that Buyer may have against Seller as a
result of any inaccuracy in the disclosures, information or representations
previously provided to Buyer. In no event shall Buyer be entitled to complete
the Closing hereunder and then bring an action against Seller for damages as a
result of any inaccuracy in the disclosures, information or representations
previously provided to Buyer.
18
<PAGE>
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
VII.1. AUTHORITY OF BUYER. Buyer is duly organized and validly existing
------------------
under the laws of the State of Delaware and is in good standing and authorized
to do business under the laws of the State of California; this Agreement and all
documents executed by Buyer, which are to be delivered to Seller at the Closing
are or at the time of Closing will be (a) duly authorized, executed, and
delivered by Buyer, (b) be legal, valid, and binding obligations of Buyer, and
(c) not violate any provisions of any agreement or judicial order to which Buyer
is a party or to which it is subject.
VII.2. LITIGATION. There is no litigation pending or, to Buyer's
----------
knowledge,threatened, against Buyer or any basis therefor before any court or
administrative agency which might result in any material adverse change in the
business or financial condition of the Buyer.
ARTICLE VIII.
COVENANTS
---------
As matters as to which the Title Company need not be concerned, Seller and
Buyer covenant and agree with one another as follows:
VIII.1. INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify
-------------------------
Buyer and hold Buyer harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Buyer as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach
of covenant made by Seller in this Agreement or any document, certificate,
or exhibit given or delivered to Buyer pursuant to or in connection with
this Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring
before the Closing Date, or in any way related to or arising from any act,
conduct, omission, contract or commitment of Seller (or any of its agents
or employees) at any time or times before the Closing Date.
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
19
<PAGE>
VIII.2. INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify
------------------------
Seller and hold Seller harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Seller as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach
of covenant made by Buyer in this Agreement or any document, certificate,
or exhibit given or delivered to Seller pursuant to or in connection with
this Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring
after the Closing Date, or in any way related to or arising from any act,
conduct, omission, contract or commitment of Buyer (or any of its agents or
employees) at any time or times after the Closing Date.
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.3. MAINTENANCE. Seller shall, between the Seller's execution of
-----------
this Agreement and the Closing Date, at Seller's sole cost and expense, maintain
the Property in its present order, condition and repair, reasonable wear and
tear excepted, shall perform all work required to be done by the landlord under
the terms of any lease affecting the Property, and shall make all repairs,
maintenance and replacements of the Improvements and any Personal Property and
otherwise operate the Property in the same manner as before the making of this
Agreement, the same as though Seller were retaining the Property.
VIII.4. LEASES AND OTHER AGREEMENTS. Except as provided below, Seller
---------------------------
covenants and agrees that during the term of this Agreement, Seller or its
agents shall not amend or modify any Lease and shall not enter into any new
Lease, for any portion of the Property, without Buyer's prior written approval.
Seller's request for approval of any such new or modified Lease shall be
accompanied by the estimated cost of any tenant improvements associated
therewith and the amount of the real estate commission to be paid in conjunction
therewith. In the event that Buyer approves any new or modified Lease, upon the
Closing Date, Buyer shall be responsible for the cost of the tenant improvements
and the real estate commissions associated therewith prorated in an amount
proportional to the amount of rent paid thereunder before and after the Closing
Date. Buyer shall pay Seller on the Closing Date for any costs that Seller has
incurred for the tenant improvements and real estate commissions in excess of
its pro-rata share. Upon the Closing Date, all tenant improvement construction
contracts and brokerage agreements on such Leases shall be assigned to and
assumed by Buyer.
VIII.5. RETURN OF INFORMATION. In the event that Buyer does not
---------------------
purchase the Property, Buyer shall promptly return to Seller all information
delivered by Seller to Buyer in conjunction with this transaction.
20
<PAGE>
VIII.6. CONFIDENTIALITY. Except as hereinafter provided, from and
---------------
after the execution of this Agreement, Buyer and Seller shall keep the terms,
conditions and provisions of this Agreement confidential and neither shall make
any public announcements hereof unless the other first approves of same in
writing, nor shall either disclose the terms, conditions and provisions hereof,
or of any data regarding the Property, except to persons who "need to know",
such as their respective officers, directors, employees, attorneys, accountants,
engineers, surveyors, consultants, property managers, financiers, partners,
investors, potential lessees and bankers and such other third parties whose
assistance is required in connection with the consummation of this transaction.
Notwithstanding the foregoing, it is acknowledged that Buyer is an affiliate of,
a real estate investment trust (the "REIT") and the REIT has and will seek to
sell shares to the general public; consequently, Buyer 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 Buyer or Buyer's attorneys to satisfy disclosure and reporting
obligations of Buyer, the REIT, or its affiliates. After Closing, Buyer shall be
free to disclose previously confidential information in its sole, unfettered
discretion.
VIII.7. TAX DEFERRED EXCHANGE. Buyer acknowledges that Seller may
---------------------
desire to structure the sale of the Property as an exchange for like-kind
property under Section 1031 of the Internal Revenue Code of 1986 in order to
defer recognition of income on the disposition of the Property and/or other
properties. Buyer agrees to reasonably cooperate with Seller to accomplish such
exchange and Seller hereby agrees that any and all costs associated with said
exchange shall be borne solely by Seller and shall in no way be attributable to
Buyer. Buyer shall not be requested or required to take title to other property
in conjunction with such exchange.
VIII.8. TESTING SAMPLES. Any testing samples taken from the Property
---------------
during any inspection pursuant to this Agreement shall be divided and shared
with Seller. In the event that any test results or reports contain negative
information concerning the Property, Buyer shall promptly furnish Seller with
written correspondence summarizing the negative information including the name
and address of the consultant who discovered or learned of such information.
VIII.9. TERMINATION OF AGREEMENT. On the Closing Date, all management
------------------------
and leasing agreements with respect to the Property shall be terminated and
Seller shall be solely responsible for any termination fees due. In addition,
Seller shall deliver full releases from any leasing agents for any and all
commissions which may become payable after the Closing Date with respect to any
then existing lease whether currently earned or payable by virtue of
21
<PAGE>
renewal or expansion options. Seller shall also terminate all Service Contracts
which Buyer fails to elect to assume, such election to be made prior to the
expiration of the Contingency Period.
VIII.10. TRANSFER TAX ON WORKS OF ART. In the event that any transfer
----------------------------
tax is due or payable on the Works of Art pursuant to Section 982 of the
California Civil Code, Seller agrees to pay such tax to the artist in
conjunction with such transfer.
VIII.11. CHANGES BEFORE CLOSING. In the event that any of the
----------------------
representations or warranties by either party contained herein change or become
untrue prior to the Closing Date, such party agrees to notify the other party of
such change or untruthfulness promptly upon learning of such matter.
VIII.12. INDEPENDENT AUDIT. Promptly following the execution of this
-----------------
Agreement, Seller shall provide and shall cause its management company to
provide to Buyer's representatives and independent accounting firm access to
financial and other information relating to the Property in the possession of or
otherwise available to Seller, its affiliates or Seller's management company
which would be sufficient to enable Buyer's representatives and independent
accounting firm to prepare audited financial statements for the year 1996 and
the year to date in conformity with generally accepted accounting principles and
to enable them to prepare such statements, reports or disclosures as Buyer may
deem necessary or advisable. Seller shall also provide and/or shall cause its
management company to provide to Buyer's independent accounting firm 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. Seller shall authorize and shall cause its management company to
authorize any attorneys who have represented Seller or its management company in
material litigation pertaining to or affecting the Property to respond, at
Buyer's expense, to inquiries from Buyer's representatives and independent
accounting firm. If and to the extent Seller's financial statements pertaining
to the Property for any periods during the year 1996 and the year to date have
been audited, promptly after the execution of this Agreement Seller shall
provide Buyer with copies of such audited financial statements and shall
cooperate with Buyer's representatives and independent public accountants to
enable them to contact the auditors who prepared such audited financial
statements and to obtain, at Buyer's expense, a reissuance of such audited
financial statements. To the extent that Seller or its agents incur reasonable
expenses in connection with the performance of such audit, Buyer shall reimburse
Seller and its agents for such reasonable expenses.
ARTICLE IX.
LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION
--------------------------------------------
IX.1. DAMAGE OR DESTRUCTION.
---------------------
IX.1.1. In the event that the Improvements are damaged or
destroyed by fire or other casualty prior to the Closing Date and such damage or
destruction is estimated to cost
22
<PAGE>
Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) or less in the
aggregate to repair or replace (as verified by an architect or contractor
reasonably selected by Buyer) then the Closing Date shall occur as scheduled
notwithstanding such damage or destruction and Seller shall pay to Buyer an
amount sufficient to restore or repair such damage (retaining the right to any
claim Seller may have against any insurance carrier).
IX.1.2. In the event that any of the Improvements are damaged
or destroyed by fire or other casualty prior to the Closing Date, and such
damage or destruction is estimated to cost more than Two Hundred Fifty Thousand
and No/100 Dollars ($250,000.00) in the aggregate to repair or replace (as
verified by an architect or contractor reasonably selected by Buyer), then
either Seller or Buyer shall have the option to (i) terminate this Agreement by
written notice to Seller within fifteen (15) days after the occurrence of the
damage or destruction and the Earnest Money shall be immediately returned to
Buyer or (ii) consummate the transaction contemplated hereby in which event
Seller's insurance proceeds shall be transferred and assigned to Buyer, with
Seller remaining responsible for any deductible.
IX.2. CONDEMNATION. In the event that, prior to the Closing Date, a
------------
governmental entity shall commence any eminent domain proceeding to take any
material portion of the Property, then Buyer shall have the option to elect
either of the following:
(a) Terminate this Agreement by written notice to Seller within
fifteen (15) days of its receiving notice of such action of condemnation
and the Earnest Money shall be immediately returned to Buyer; or
(b) Elect to proceed with the transaction in which case the
Purchase Price shall not be reduced and Buyer shall be entitled to the net
award paid to Seller or Seller's mortgagee for such taking, if any, and
Seller shall assign and transfer to Buyer all right, title and interest in
and to any awards, it being expressly agreed that in such event Seller
shall have no obligation to repair or restore the Property or any portion
thereof.
ARTICLE X.
DEFAULTS
--------
X.1. BUYER'S DEFAULT; SELLER'S REMEDIES. Buyer shall be deemed to be in
----------------------------------
default if, in respect to the transaction contemplated by this Agreement, at the
Closing, Buyer fails to deliver the Purchase Price or Buyer fails to meet,
comply with, or perform any covenant, agreement or obligation on the part of
Buyer within the time frames and in the manner required in this Agreement, for
any reason other than a default by Seller hereunder or termination of this
Agreement prior to Closing in accordance with the express terms and conditions
hereof. Seller's remedies shall be limited to the remedies set forth in
SECTIONE2.4 hereof. Any default by Buyer hereunder shall be deemed a default
under each of the Additional
23
<PAGE>
Property Agreements.
X.2. SELLER'S DEFAULTS; BUYER'S REMEDIES.
-----------------------------------
X.2.1. SELLER'S DEFAULTS. Seller shall be deemed to be in
------------------
default under this Agreement, if in respect to the transaction contemplated by
this Agreement, on or before the Closing, Seller shall have failed to meet,
comply with, or perform any covenant, agreement, or obligation on its part
required in this Agreement, within the time limits and in the manner required in
this Agreement, for any reason other than a default by Buyer hereunder or
termination of this Agreement prior to Closing pursuant to the express terms and
conditions hereof.
X.2.2. BUYER'S REMEDIES. If Seller is deemed to be in default
-----------------
hereunder, Buyer may, at Buyer's option, do either one of the following:
(a) Terminate this Agreement by written notice
delivered to Seller on or before ten (10) days following occurrence of such
default;
(b) Seek and receive specific performance of Seller's
obligations hereunder to sell the Property for the Purchase Price and on
the terms set forth herein following the expiration of a five (5) day
period following the delivery of a written notice to Seller specifying the
default in question unless specific performance is not an available remedy
because Seller has voluntarily conveyed or encumbered the Property, in
which event Buyer may recover damages from Seller for any losses or costs
suffered by Buyer in connection with Seller's failure to perform its
obligations hereunder following the expiration of a five (5) day period
following the delivery of a written notice to Seller specifying the default
in question.
ARTICLE XI.
MISCELLANEOUS
-------------
XI.1. NOTICES. All notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be personally delivered or
sent by registered or certified mail, postage prepaid, return receipt requested,
or sent by electronic facsimile and shall be deemed received upon the earlier of
(I) if personally delivered, the date of delivery to the address of the person
to receive such notice, (ii) if mailed, on the date of posting by the United
States Post Office, or (iii) if given by electronic facsimile, when received by
the other party.
If to Seller: 2495 Natomas Investors
c/o Kelly Broadcasting
3 Television Circle
Sacramento, California 95814
Attention: Scott Nichols
Telephone No.: (916) 446-3333
24
<PAGE>
Facsimile No.: (916) 325-3711
with a copy to: KCS Properties, Inc.
1451 River Park Drive, Suite 230
Sacramento, California 95815
Attention: William P. Krum
Telephone No.: (916) 920-1225
Facsimile No.: (916) 920-1395
with a copy to: Aguer-Pipgras Associates
1851 Heritage Lane, Suite 128
Sacramento, California 95815
Attention: Thomas C. Aguer
Telephone No.: (916) 649-2777
Facsimile No.: (916) 649-3636
with a copy to: Trainor Robertson
701 University Avenue, Suite 200
Sacramento, California 95825
Attention: Charles W. Trainor, Esquire
Telephone No.: (916) 929-7000
Facsimile No.: (916) 929-7111
If to Buyer: Prentiss Properties Acquisition Partners, L.P.
3890 West Northwest Highway
Suite 400
Dallas, Texas 75220
Attention: Mark R. Doran
Telephone No.: (214) 654-5703
Facsimile No.: (214) 350-2437
with copies to: Snell, Brannian & Trent
8150 North Central Expressway, Suite 1800
Dallas, Texas 75201
Attention: Lawrence J. Brannian
Telephone No.: (214) 691-2500
Facsimile No.: (214) 691-2501
If to the Title Company: First American Title Insurance Company
3030 LBJ Freeway, Suite 150
Dallas, Texas 75234
Attention: Ms. Jacqueline P. Aul
25
<PAGE>
Telephone No.: (972) 620-7844
Facsimile No.: (972 241-7112
with copies to: First American Title Insurance Company
1860 Howe Avenue, Suite 100
Sacramento, California 95825
Attention: Ms. Lisa Blazquez
Telephone No.: (916) 920-3100
Facsimile No.: (916) 927-8712
or such other address as either party may from time to time specify in writing
to the other in the manner aforesaid.
XI.2. BROKERS AND FINDERS. In connection with the transaction
-------------------
contemplated by this Agreement, Seller has agreed to pay a brokerage commission
to Aguer Pipgras Associates ("APA") and The CAC Group ("CAC"). Buyer and Seller
each represent and warrant to the other that (other than Seller's employment of
APA and CAC, neither has employed any real estate agent, brokerage or finder in
connection with this transaction. Buyer has not agreed to pay any real estate
commission or finder's fee in connection with this transaction. In the event of
a claim or broker's fee, finder's fee, commission or other similar compensation
in connection herewith other than as set forth above, Buyer, if such claim is
based upon any agreement alleged to have been made by Buyer, hereby agrees to
indemnify and hold Seller harmless against any and all liability, loss, cost,
damage or expense (including reasonable attorneys' fees and costs) which Seller
may sustain or incur by reason of such claim, and Seller, if such claim is based
upon any agreement alleged to have been made by Seller, hereby agrees to
indemnify and hold Buyer harmless against any and all liability, loss, cost,
damage or expense (including reasonable attorneys' fees and costs) which Buyer
may sustain or incur by reason of such claim. The provisions of this SECTION
11.2 shall survive the Closing.
XI.3. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the permitted successors and assigns of the
parties hereto.
XI.4. AMENDMENTS. This Agreement may be amended or modified only by a
----------
written instrument executed by the party asserted to be bound thereby.
XI.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
------------------------------------------
representations and warranties made by each party herein shall survive the
Closing for a period of one (1) year and shall not merge into the Grant Deed and
the recordation thereof in the Official Records of Sacramento County,
California.
XI.6. CONSTRUCTION. Headings at the beginning of each section and
------------
subsection are solely for the convenience of the parties and are not a part of
the Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine and vice
versa. This Agreement shall not be construed as if it had been prepared by one
of the parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to paragraphs, sections, subparagraphs and
26
<PAGE>
subsections are to this Agreement.
XI.7. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California. Any actions
filed by either party involving the other party shall be venued in Sacramento
County, California.
XI.8. PRIOR AGREEMENTS. This Agreement (including all Exhibits attached
----------------
hereto) together with the Earnest Money Letter is the final expression of, and
contains the entire agreements between the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented, superseded, canceled or
terminated nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein. The parties do not intend
to confer any benefit hereunder on any person, firm or corporation other than
the parties hereto and lawful assignees.
XI.9. ATTORNEYS' FEES. In the event of the bringing of any action or
---------------
suit by a party hereto against another party hereunder by reason of any breach
of any of the covenants, agreements or provisions on the part of the other party
arising out of this Agreement, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including actual attorneys' fees, accounting and
engineering fees, and any other professional fees resulting therefrom.
XI.10. TIME OF THE ESSENCE. Seller and Buyer hereby acknowledge and
-------------------
agree that time is strictly of the essence with respect to each and every term,
condition, obligation and provision hereof and that failure to timely perform
any of the terms, conditions, obligations or provisions hereof by either party
shall constitute a material breach of and a non-curable (but waivable) default
under this Agreement by the party so failing to perform.
XI.11. RELATIONSHIP OF PARTIES. Nothing contained in this Agreement
-----------------------
shall be deemed or construed by the parties to create the relationship of
principal and agent, a partnership, joint venture or any other association
between Buyer and Seller.
XI.12. WAIVERS. No waiver of any breach of any covenant or provision
-------
herein contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed an extension of
the time for performance of any other obligation or act except those of the
waiving party, which shall be extended by a period of time equal to the period
of the delay.
XI.13. PARTIAL INVALIDITY. If any term or provision of this Agreement
------------------
or the application thereof to any person or circumstance shall, to any extent,
be invalid or
27
<PAGE>
unenforceable, the remainder of this Agreement, or the application of such term
or provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each such term and
provision of this Agreement shall be valid and be enforced to the fullest extent
permitted by law.
XI.14. DISCLOSURE. Thomas C. Aguer, one of the general partners of
----------
Seller, hereby discloses that he has an ownership interest in Seller and is a
licensed California real estate broker.
XI.15. CONDITION PRECEDENT/CONCURRENT. This Agreement shall only be
------------------------------
valid if Buyer and Seller simultaneously execute the Additional Property
Agreements and this Agreement. Any default by Buyer under the terms of the
Additional Property Agreements shall give Seller the right to declare a default
under the terms of this Agreement.
XI.16. DAYS OF WEEK/TIME. In the event the date on which Buyer or
-----------------
Seller is required to take any action under the terms of this Agreement is not a
business day, the action shall be taken on the next succeeding business day. All
times referenced herein are the times of day in Sacramento, California on the
date in question.
XI.17. EXHIBITS/RECITALS. All exhibits referred to in this Agreement
-----------------
are attached and incorporated by this reference. All of the Recitals set forth
above are true and correct.
XI.18. POSSESSION. Possession of the Property shall be delivered to
----------
Buyer on the Closing Date, subject to the rights of any tenants or subtenants in
the Property.
XI.19. ASSIGNMENT. Buyer shall not assign, transfer or convey its
----------
rights and/or obligations under this Agreement and/or with respect to the
Property to any other party without the prior written consent of Seller, which
consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, Buyer shall have the right to assign its rights under this Agreement
to any affiliate of Buyer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
PRENTISS PROPERTIES ACQUISITION
PARTNERS, L.P., a Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By:
-----------------------------------------
Name: Mark R. Doran
Title: Executive Vice President
28
<PAGE>
SELLER:
2495 NATOMAS INVESTORS, a California limited
partnership
By:
-----------------------------------------
Name: Jon S. Kelly
Title: Managing General Partner
The undersigned acknowledges receipt of this Agreement and agrees to act as
the Title Company hereunder.
FIRST AMERICAN TITLE INSURANCE COMPANY
By:
-----------------------------------------
Name: Jacqueline P. Aul
Title:
29
<PAGE>
EXHIBIT LIST
------------
Exhibit A Legal Description
Exhibit B Additional Properties
Exhibit C Grant Deed
Exhibit D Bill of Sale
Exhibit E Due Diligence Materials
Exhibit F Rent Roll
Exhibit G Tenant Estoppel
Exhibit H Transferor's Certification of Non-Foreign
Status
Exhibit I Assignment of Rights, Leases and Security
Deposits
Exhibit J Notices to Tenant
Exhibit K Works of Art
30
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
-----------------
The land situated in the State of California, County of Sacramento, City of
Sacramento and is described as follows:
Parcel B of Parcel Maps entitled "Parcel 2 76. P.M. 24," filed in Book 105 of
Parcel Maps, at Page 30, records of said County.
EXCEPTING THEREFROM all minerals, oil, gas and other hydrocarbon substances
lying below a depth of 500 feet from the surface of said land, without the right
of surface entry, as contained in the Deed recorded July 24, 1980 in Book
800724, Page 597, Official Records.
31
<PAGE>
EXHIBIT B
ADDITIONAL PROPERTIES
---------------------
1740 Creekside Oaks Investors 1740 Creekside Oaks Drive, Sacramento, CA
1750 Creekside Oaks Investors 1750 Creekside Oaks Drive, Sacramento, CA
1760 Creekside Oaks Investors 1760 Creekside Oaks Drive, Sacramento, CA
2525 Natomas Investors 2525 Natomas Park Drive, Sacramento, CA
River City Bank 2485 Natomas Park Drive, Sacramento, CA
Bannon Investors Tract A, Natomas Center, Sacramento, CA
Natomas Investors et al. Tract D, Natomas Center, Sacramento, CA
32
<PAGE>
EXHIBIT C
GRANT DEED
----------
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MAIL TAX STATEMENTS TO:
GRANT DEED
----------
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
_______________, a _______________________ ("GRANTOR"), hereby grants to
____________________, a _______________________ ("GRANTEE"), that certain real
property ("LAND") located in the City of Sacramento, County of Sacramento, State
of California, more particularly described in Exhibit A attached hereto together
---------
with all right, title and interest of Grantor in and to all buildings and
improvements now located or hereafter constructed on the Land.
Grantor hereby further grants to Grantee all of Grantor's right, title and
interest in and to all easements, privileges and rights appurtenant to the real
property and pertaining or held and enjoyed in connection therewith and all of
Grantor's right, title and interest in and to any land lying in the bed of any
street, alley, road or avenue to the centerline thereof in front of or adjoining
the Land.
IN WITNESS WHEREOF, Grantor has executed this Grant Deed as of
______________, 19__.
-----------------------------------------
By:
--------------------------------------
33
<PAGE>
SEPARATE STATEMENT OF
DOCUMENTARY TRANSFER TAX
County Recorder
Sacramento County
Sacramento, California
Dear Sir:
In accordance with Revenue and Taxation Code Section 11932, it is required
that this statement of documentary transfer tax due should not be recorded with
the attached Deed, but be affixed to the Deed after recordation and before
return as directed on the Deed.
The Deed names _______________________, a _______________________, as
Grantor and ______________________, a ______________________ as Grantee. The
property being transferred is located in the City of Sacramento, County of
Sacramento, State of California.
The amount of documentary transfer tax due on the attached deed is
___________________ Dollars and _______________ Cents ($________________),
computed on the full value of the property (less the value of any liens and
encumbrances remaining on the property at the time of sale).
Very truly yours,
By
------------------------------
34
<PAGE>
EXHIBIT D
BILL OF SALE
------------
Concurrently with the execution and delivery of this Bill of Sale (the
"Assignment"), 2495 NATOMAS INVESTORS, a California limited partnership
("Assignor"), is conveying to PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership ("Assignee"), by Grant Deed (the "Deed"), that
certain tract of land located in Sacramento County, California, being more
particularly described on ExhibitE"A" attached hereto and made a part hereof for
-----------
all purposes, together with the improvements located thereon (collectively the
"Property").
Assignor desires to assign, transfer, and convey to Assignee certain
tangible personal property, together with certain contract rights, guaranties,
licenses, and other specified items of intangible property (but specifically
excluding cash), affixed or attached to the Property, except those owned by
tenants of the Property (such tangible and intangible properties herein below
specified being collectively called the "Assigned Properties").
NOW, THEREFORE, in consideration of the receipt of Ten Dollars ($10.00) and
other good and valuable consideration in hand paid by Assignee to Assignor, the
receipt and sufficiency of which are acknowledged and confessed by Assignor,
Assignor ASSIGNS, TRANSFERS, SETS OVER, and DELIVERS to Assignee, its successors
and assigns, subject to any and all matters of record in Sacramento County,
California, to the extent they affect the Property, all of the Assigned
Properties, including, without limitation of the generality of the foregoing,
the following:
1. All of the personal property owned by Assignor located on or in or
used in connection with the Property, including without limitation the items of
tangible personal property consisting of all furniture, fixtures, equipment,
machinery and other personal property of every kind and nature (excluding cash-
on-hand) located on or used or useful in the operation of the Property including
the works of art listed on Exhibit "B".
-----------
2. All of the right, title and interest of Assignor in any intangible
personal property owned by Assignor and used exclusively in the use and
operation of the Property, and all warranties or guarantees received by Assignor
from any contractors, subcontractors, suppliers or material men in connection
with any construction, repairs or alteration of the Property, licenses,
franchises, permits, tenant lists, advertising materials and other similar
rights relating to the use and operation of the Property.
3. The interest of Assignor under all current design contracts, space
planning contracts, construction contracts, subcontracts and purchase orders,
utility contracts, water and sewer service contracts of any nature, maintenance
contracts, management contracts, mortgage documents, certificates of occupancy,
permits, soils reports, insurance policies, and other contracts or documents of
any nature relating to the Property.
35
<PAGE>
4. The trade name "Natomas Corporate Center" (the "Trade Name"), on a
non-exclusive basis, and the business and good will of Assignor which were
acquired in connection with the Property.
TO HAVE AND TO HOLD the Assigned Properties unto Assignee, its successors,
and assigns, forever, and Assignor binds itself, its successors, and assigns, to
WARRANT and FOREVER DEFEND, all and singular, title to the Assigned Properties
(with the exception of the Trade Name) unto Assignee, its successors, and
assigns, against every person whomsoever lawfully claiming or to claim the same
or any part thereof, by, through or under Assignor but not otherwise.
Assignor shall not be responsible for the discharge and performance of any
duties or obligations to be performed and/or discharged in connection with the
Assigned Properties after the date hereof. By acceptance of this Assignment,
Assignee accepts and agrees to perform all of the terms, covenants, and
conditions in connection with the Assigned Properties required to be performed
by the owner thereof, from and after the date hereof, but not prior thereto, and
agrees to indemnify, save, and hold harmless Assignor from and against any and
all loss, liability, claims, or causes of action existing in favor of or
asserted by any party arising out of or relating to Assignee's failure to
perform any duties or obligations required by the owner of the Assigned
Properties after the date hereof.
Assignee shall not be responsible for the discharge and performance of any
duties or obligations required to be performed and/or discharged in connection
with the Assigned Properties prior to the date hereof. In such regard Assignor
agrees to indemnify and hold Assignee harmless from and against losses incurred
by Assignee as a result of claims brought against Assignee, as Assignor's
successor in interest to the Assigned Properties, relating to causes of action
arising from any failure by Assignor to perform or discharge its obligation as
the owner of the Assigned Properties prior to the date hereof.
Simultaneously with the execution and delivery of this Assignment, Assignor
has executed and delivered to Assignee the Deed and the specific conveyances
described in the recitals hereof.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment in
multiple counterparts, each of which shall have the same force and effect as an
original, but which shall constitute one and the same instrument, effective this
___________day of ____________, 1997.
36
<PAGE>
ASSIGNEE:
PRENTISS PROPERTIES ACQUISITION
PARTNERS, L.P., a Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By:
-----------------------------------------
Name: Mark R. Doran
Title: Executive Vice President
ASSIGNOR:
2495 NATOMAS INVESTORS, a California limited
partnership
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
37
<PAGE>
EXHIBIT "A"
-----------
PROPERTY DESCRIPTION
38
<PAGE>
EXHIBIT "B"
-----------
WORKS OF ART
39
<PAGE>
EXHIBIT E
DUE DILIGENCE DOCUMENTS
-----------------------
1. Form Lease
2. All tenant leases and amendments
3. Leasing Status reports, weekly basis
4. Lease proposals
5. Service and Purchase Contracts
6. Equipment Leases
7. Union Contracts
8. Other Contracts and Agreements
9. Operating Licenses and Permits
10. Lease Commission Agreements and Schedules of Commissions Payable
11. Current Year Operating Budget
12. Operating Statements, past two years and current year, monthly basis
13. Receivables Report, update on monthly basis
14. Rent Roll, update on monthly basis
15. Billing Register, update on monthly basis
16. Escalation Work Papers and Base Year Amount Details
17. Utility Invoices, past two years and current monthly
18. Real Estate Tax Bills, past two years
19. Current Notice of Assessment Valuation
20. Tax Parcel Map
21. Real Estate Tax Consultant Report
22. Tenant Credit Reports (to the extent that they are in the tenant files) to
be reviewed at the Property during the Due Diligence Period
23. Tenant Financial Statements (to the extent that they are in the tenant
files) to be reviewed at the Property during the Due Diligence Period
24. Schedule of Capital and Tenant Improvements
25. Current Schedule of Insurance
26. Pending Insurance Claims
27. List of Personnel & Wages
28. Lease and Tenant Files, to be reviewed at the Property during the Due
Diligence Period
29. Vendor Files, to be reviewed at the Property during the Due Diligence
Period
30. Construction Files, to be reviewed at the Property during the Due Diligence
Period
31. Other Property Files, to be reviewed at the Property during the Due
Diligence Period
32. List of Personal Property
33. Demising/Leasing/Site Plan
34. Plans and Specifications, 2 sets of each
(a) Architectural
(b) Structural
(c) Civil
(d) Mechanical
(e) Landscaping
40
<PAGE>
(f) Sprinkler
(g) Tenant
35. Certificates of Occupancy, building and tenant
36. Construction Contracts
37. Guaranties & Warranties
38. Existing Reports
(a) Structural and Engineering
(b) Environmental and Asbestos
(c) Soils
(d) Radon
(e) Geotechnical
(f) Ground Water Monitoring
(g) Sprinkler Test
(h) Elevator Consultant
39. Preliminary Title Report issued by Stewart Title Guaranty
40. Underlying Recorded Documents
41. Existing Survey
41
<PAGE>
EXHIBIT F
RENT ROLL
---------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date.
42
<PAGE>
EXHIBIT G
TENANT ESTOPPEL
---------------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date.
43
<PAGE>
EXHIBIT H
TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
------------------------------------------------
To inform PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware
limited partnership ("TRANSFEREE"), that withholding of tax under Section 1445
of the Internal Revenue Code of 1986, as amended ("CODE"), will not be required
upon the transfer of certain real property to the Transferee by 2495 NATOMAS
INVESTORS, a California limited partnership ("TRANSFEROR"), the undersigned
hereby certifies the following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Code and the
Income Tax Regulations promulgated thereunder);
2. The Transferor's U.S. employer identification is ________________;
and
3. The transferor's office address is _______________________________.
The Transferor understands that this Certification may be disclosed to the
Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
The Transferor understands that the Transferee is relying on this
Certification in determining whether withholding is required upon said transfer.
The Transferor hereby agrees to indemnify, defend and hold the Transferee
harmless from and against any and all obligations, liabilities, claims, losses,
actions, causes of action, rights, demands, damages, costs and expenses of every
kind, nature or character whatsoever (including, without limitation, actual
attorneys' fees and court costs) incurred by the Transferee as a result of: (i)
the Transferor's failure to pay U.S. federal income tax which the Transferor is
required to pay under applicable U.S. law; or (ii) any false or misleading
statement contained herein.
Under penalty of perjury I declare that I have examined this Certification
and to the best of my knowledge and belief it is true, correct and complete, and
I further declare that I have authority to sign this document on behalf of the
Transferor.
Dated:_________________, 1997 2495 NATOMAS INVESTORS, A
CALIFORNIA LIMITED PARTNERSHIP
BY:
---------------------------
BY:
---------------------------
44
<PAGE>
EXHIBIT I
ASSIGNMENT OF LEASES
--------------------
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
SPACE ABOVE THIS LINE FOR RECORDER'S USE
ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS
THIS ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS is made as of_____,
1997 by_____, a__________("Assignor"), in favor of___, a__________("Assignee"),
with reference to the following facts:
A. Assignor is the owner of that certain land ("Land") located in the
City of Sacramento, County of Sacramento, State of California more particularly
described in Schedule 1 hereto, and all rights, privileges and easements
appurtenant to the Land ("Appurtenances"), and all buildings and other
improvements thereon ("Improvements"). The Land, the Appurtenances, and the
Improvements are hereinafter referred to collectively as the "Real Property."
The Real Property is being conveyed to Assignee pursuant to a Grant Deed of even
date herewith, executed by Assignor in favor of Assignee which is being recorded
concurrently herewith.
B. Assignor, as owner of the Real Property, has an interest, as
landlord, in the tenant leases of space in the Improvements ("Leases"), which
are described in Schedule 2 hereto, and an interest in certain security deposits
collected and held by Assignor to secure the performance of the duties and
obligations of tenants under certain of the Leases ("Security Deposits").
C. Assignor desires to assign, transfer and convey to Assignee all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
NOW, THEREFORE, Assignor agrees as follows:
1. Assignor hereby assigns, transfers and conveys to Assignee, all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
45
<PAGE>
2. Assignor warrants and represents that:
(a) Schedule 2 hereto is a list of all of the leases affecting the Real
Property, other than subleases permitted by the respective leases; Assignor has
not executed or otherwise entered into any other leases, tenancies, occupancy
agreements or other agreements with respect to rights affecting possession of
the Real Property or any portion thereof; and there are no such agreements
executed or otherwise entered into by any third party, and
(b) the Leases are in full force and effect and there is no default on the
part of Assignor as landlord or on the part of any tenant, and there exists no
condition that with the passage of time or the giving of notice or both would
constitute such a default.
(c) Cross-Indemnity.
---------------
(i) By Assignor. Assignor indemnifies and holds harmless Assignee
-----------
from and against any and all loss, damage, liability, cost or expense,
including, without limitation, court costs and reasonable attorneys' fees,
arising out of, by reason of, or in connection with any action, suit, charge,
complaint, proceeding, obligation, undertaking or other similar matter arising
out of or in connection with any transaction, event, act or omission involving
the Leases and Security Deposits which occurred, accrued and/or arose prior to
the date hereof.
(ii) By Assignee. Assignee indemnifies and holds harmless
-----------
Assignor from and against any and all loss, damage, liability, cost or expense,
including, without limitation, court costs and reasonable attorneys' fees,
arising out of, by reason of, or in connection with any action, suit, charge,
complaint, proceeding, obligation, undertaking or other similar matter arising
out of or in connection with any transaction, event, undertaking, act or
omission involving the Leases and Security Deposits which occurs, accrues and
arises from and after the date hereof.
3. The provisions of this Agreement of Rights, Leases and Security
Deposits shall be binding upon and inure to the benefit of Assignor and Assignee
and their respective successors and permitted assigns.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment of
Rights, Leases and Security Deposits as of the date first set forth above.
ASSIGNEE: ASSIGNOR:
BY: BY:
- ----------------------------- -----------------------------
ITS: ITS:
- ----------------------------- -----------------------------
DATE: DATE:
- ----------------------------- -----------------------------
46
<PAGE>
EXHIBIT J
NOTICES TO TENANT
-----------------
Premises:____________________________
Lease dated__________________________between_____________________, a
Landlord, and______________________________________________________, a
, Tenant
This is to notify you that the undersigned has sold its fee interest in
the________and in connection therewith has assigned its interest as landlord
under your lease to ___________, a___________whose address is______________.
You are further notified that commencing_________________, 1997, all rental
payments under your Lease shall be paid to__________________, at the address
specified in the first paragraph hereof, unless you are otherwise notified in
writing by_______________. You are further notified that
all notices to the Landlord pursuant to your lease should hereafter be sent to
_______________________ at the address specified in the first paragraph hereof
unless you are otherwise notified in writing by ______________________________.
Very truly yours,
CERTIFIED MAIL,
RETURN RECEIPT REQUESTED.
47
<PAGE>
EXHIBIT K
WORKS OF ART
------------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date.
48
<PAGE>
EXHIBIT L
DESCRIPTION OF STATE OF CALIFORNIA LEASE TERMS
----------------------------------------------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date.
February 19, 1997 (2:55PM)
49
<PAGE>
EXHIBIT 10.6
AGREEMENT OF PURCHASE AND SALE
AND ESCROW INSTRUCTIONS
(2525 NATOMAS PARK DRIVE)
This Agreement of Purchase and Sale and Escrow Instructions ("AGREEMENT"),
dated for reference purposes as of February 17, 1997, is entered into by and
between 2525 NATOMAS INVESTORS, a California limited partnership ("SELLER"), and
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P. , a Delaware limited partnership
("BUYER").
RECITALS
A. Seller is the owner of approximately 6.14 acres of land located in
the City of Sacramento, County of Sacramento, State of California ("LAND"), more
particularly described in EXHIBIT "A" hereto and made a part hereof for all
-----------
purposes.
B. The Land has been improved with a three (3) story office building,
containing approximately 97,426 of net rentable square feet and related
improvements.
C. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer the "PROPERTY" (as hereinafter defined in SECTION 1.8) on the terms and
conditions set forth herein.
D. In conjunction with its purchase of the Property, Buyer is also
purchasing the real properties located at the addresses ("ADDITIONAL
PROPERTIES") more particularly described in EXHIBIT "B" hereto and made a part
-----------
hereof for all purposes, from the sellers (the "OTHER SELLERS") listed therein
pursuant to certain Agreements of Purchase and Sale and Escrow Instructions of
even date herewith ("ADDITIONAL PROPERTY AGREEMENTS"), the simultaneous purchase
of which shall be a condition concurrent to Buyer's purchase of the Property
hereunder.
NOW, THEREFORE, Seller and Buyer agree as follows:
AGREEMENT
ARTICLE I.
PROPERTY
--------
Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees
to purchase from Seller, subject to the terms and conditions set forth herein,
the following:
I.1. LAND. The Land;
----
I.2. APPURTENANCES. All rights, privileges and easements appurtenant to
-------------
the Land,
<PAGE>
including, without limitation, all minerals, oil, gas and other hydrocarbon
substances on and under the Land (to the extent owned by Seller) as well as all
development rights, air rights, water, water rights and water stock relating to
the Land and any other easements, rights-of-way or appurtenances, used in
connection with the beneficial use and enjoyment of the Land (all of which are
collectively referred to as the "APPURTENANCES");
I.3. IMPROVEMENTS. All buildings improvements and fixtures located on
------------
the Land, including, without limitation, all fixtures, apparatus, equipment and
appliances used in connection with the operation or occupancy thereof, such as
heating and air conditioning systems and facilities used to provide any utility
services, parking services, refrigeration, ventilation, trash disposal,
recreation or other services thereto (all of which are collectively referred to
as the "IMPROVEMENTS");
I.4. PERSONAL PROPERTY. All of the personal property owned by Seller
-----------------
located on or in or used in connection with the Property ("PERSONAL PROPERTY"),
including without limitation the items of tangible personal property consisting
of all furniture, fixtures, equipment, machinery and other personal property of
every kind and nature (excluding cash-on-hand) owned by Seller and located on or
used or useful in the operation of the Property, all of which will be assigned
pursuant to the Bill of Sale, as hereinafter defined; which Personal Property
includes the works of art listed on EXHIBIT "K" ("WORKS OF ART");
-----------
I.5. INTANGIBLE PROPERTY. All of the right, title and interest of Seller
-------------------
in any intangible personal property owned by Seller and used exclusively in the
use and operation of the Improvements, and all warranties or guarantees received
by Seller from any contractors, subcontractors, suppliers or materialmen in
connection with any construction, repairs or alteration of the Improvements,
licenses, franchises, permits, tenant lists, advertising materials and other
similar rights relating to the use and operation of the Property (all of which
are collectively referred to as the "INTANGIBLE PROPERTY"), all of which shall
be assigned to Buyer pursuant to the Bill of Sale;
I.6. LEASES. The interest of Seller as landlord under all leases of
------
space in the Improvements ("LEASES") in effect on the Closing Date;
I.7. SERVICE CONTRACTS. The interest of Seller under all current design
-----------------
contracts, space planning contracts, construction contracts, subcontracts and
purchase orders, utility contracts, water and sewer service contracts of any
nature, maintenance contracts, management contracts, mortgage documents,
certificates of occupancy, permits, soils reports, insurance policies, and other
contracts or documents of any nature relating to the Property which are to be
assigned to Buyer at the Closing ("SERVICE CONTRACTS"). All such Service
Contracts approved by Buyer shall be transferred and assigned to Buyer by the
Bill of Sale; and
I.8. PROPERTY. All of the items described in SECTIONS 1.1 through 1.7
--------
above are herein collectively referred to as the "PROPERTY." The items described
in SECTIONS 1.1, 1.2 and 1.3 are herein referred to collectively as the "REAL
PROPERTY."
2
<PAGE>
ARTICLE II.
PURCHASE PRICE
--------------
II.1. PURCHASE PRICE.
--------------
(a) Subject to the provisions of this SECTION 2.1 hereinafter set forth,
the purchase price for the Property shall be the sum of Ten Million Two Hundred
Thousand and No/100ths Dollars ($10,200,000.00) (the "PURCHASE PRICE"). A
portion of the Purchase Price has been allocated to the purchase of the Works of
Art in the manner set forth on EXHIBIT "K" attached hereto and made a part
-----------
hereof for all purposes.
(b) The Property is currently encumbered by the lien and provisions of that
certain first lien indebtedness and instruments securing same (the "FIRST LIEN
DEBT") held by Ausa Life Insurance Company (the "LIEN HOLDER"). The unpaid
principal balance of the First Lien Debt is approximately $10,125,000.00 (the
"PRINCIPAL BALANCE"). The First Lien Debt is currently in default. The sums
which will be due and payable in respect to the First Lien Debt to the Lien
Holder on the Closing Date plus the Closing Costs, as hereinafter defined, are
expected to exceed the Purchase Price. In such regard, subject Seller's rights
to terminate the transaction contemplated hereby as hereinafter provided, Seller
shall be responsible for the payment of all sums due the Lien Holder plus the
Closing Costs in excess of an amount equal to the Purchase Price plus the NOI.
All net operating income ("NOI") generated from the Property from January 1,
1997 (the First Lien Debt having been current as of December 31, 1996) through
the Closing Date shall be applied to interest and other costs applicable to the
First Lien Debt. The term "NOI" shall mean gross revenues for the period from
January 1, 1997 through the Closing Date less operating expenses for such
period.
(c) In the event the sums payable by Seller in accordance with the
provisions of subparagraph (b) exceed the sum of $200,000.00, Seller shall have
the right to terminate this Agreement, unless Purchaser elects to pay amounts
due the Lien Holder plus Closing Costs in excess of the Purchase Price plus the
$200,000.00 amount plus the NOI. In the event that Seller terminates this
Agreement pursuant to the provisions of this SECTION 2.1, such termination shall
not affect the Additional Property Agreements or give the Other Sellers any
rights to terminate the Additional Property Agreements.
(d) The term "AMOUNTS DUE THE LIEN HOLDER" shall mean and include the
Principal Balance of the First Lien Debt together with all accrued and unpaid
interest thereon, penalties and other interest, costs of collection, including
lender's attorney's fees and receivers fees and other sums due under the loan
documents evidencing the First Lien Debt. The term "CLOSING COSTS" shall mean
transfer taxes, title premiums, escrow charges, miscellaneous charges and
attorneys' fees, which sum shall not exceed the sum of $60,000.00. The terms
"AMOUNTS DUE THE LIEN HOLDER" or "CLOSING COSTS" shall not include Seller's
other costs incurred in connection with the consummation of the transaction
contemplated hereby, such as brokerage commissions.
3
<PAGE>
(e) In the event the amounts due the Lien Holder at Closing, after the
application of NOI to the First Lien Debt, are less than the sum of
$10,200,000.00, the Purchase Price shall be reduced by an amount equal to
difference between the sum of $10,200,000.00 and the sums due the Lien Holder;
provided, however in no event shall the Purchase Price be reduced below the sum
of $10,000,000.00.
II.2. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by
-------------------------
Buyer in cash by wire transfer on the Closing Date.
II.3. EARNEST MONEY.
-------------
(a) Within two (2) business days following the Effective Date, Buyer shall
deposit, or cause to be deposited with First American Title Insurance Company,
located at 3030 LBJ Freeway, Suite 150, Dallas, Texas 75234; Attn: Jacqueline P.
Aul (the "TITLE COMPANY"), in cash, by certified or bank cashier's check made
payable to the Title Company, or by a confirmed wire transfer of funds, the sum
of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the "EARNEST MONEY")
in accordance with the terms of that certain letter agreement (the "EARNEST
MONEY LETTER") of even date herewith by and between Buyer, the Title Company,
Seller and the Other Sellers. The Earnest Money constitutes escrow deposit under
this Agreement and the Additional Property Agreements. The Earnest Money shall
be held and disbursed in accordance with the terms of the Earnest Money Letter.
(b) The term "EFFECTIVE DATE" shall mean the date upon which this Agreement
and the Additional Property Agreements have been fully executed and delivered by
Seller and Buyer and Seller and the Other Sellers, as the case may be and one
duplicate original of each has been deposited with the Title Company.
II.4. LIQUIDATED DAMAGES. IN THE EVENT THAT THE SALE OF THE PROPERTY AS
------------------
CONTEMPLATED HEREUNDER IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS
AGREEMENT BY BUYER, THROUGH NO FAULT OF SELLER, THE EARNEST MONEY SHALL BE
IMMEDIATELY PAID BY TITLE COMPANY, ON BEHALF OF BUYER, TO SELLER AS LIQUIDATED
DAMAGES PURSUANT TO THE EARNEST MONEY LETTER. THE PARTIES ACKNOWLEDGE THAT
SELLER'S ACTUAL DAMAGES IN THE EVENT OF A DEFAULT BY BUYER WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR SIGNATURES
BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES REASONABLE ESTIMATE OF SELLER'S DAMAGES FOR
BUYER'S FAILURE TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
AND THE ADDITIONAL PROPERTY AGREEMENTS AND AS SELLER'S EXCLUSIVE REMEDY AGAINST
BUYER IN THE EVENT OF A DEFAULT BY BUYER; PROVIDED, HOWEVER, NOTHING CONTAINED
HEREIN SHALL PRECLUDE (A) SELLER FROM PURSUING ANY REMEDIES SET FORTH IN
SECTIONS 8.2, 8.5, 8.6, 11.2 and 11.5 WHICH SURVIVE THE TERMINATION OF THIS
AGREEMENT OR (B) THE RECOVERY OF ITS
4
<PAGE>
ATTORNEYS' FEES AND COSTS IN THE PROSECUTION OR DEFENSE OF ANY ACTION BROUGHT
UNDER THIS AGREEMENT, IF SELLER IS ENTITLED TO RECEIVE SAME. THE LIQUIDATED
DAMAGES SET FORTH HEREIN ABOVE ARE DUPLICATIVE OF AND NOT IN ADDITION TO THE
LIQUIDATED DAMAGES SET FORTH IN THE EARNEST MONEY LETTER.
BUYER: _________________ SELLER: ___________________
ARTICLE III.
TITLE TO PROPERTY
-----------------
III.1. TITLE TO REAL PROPERTY.
----------------------
III.1.1. At the Closing, Seller shall convey to Buyer fee simple
title to the Real Property, by execution and delivery of a Grant Deed ("DEED")
in the form attached hereto as EXHIBIT "C" and made a part hereof for all
-----------
purposes.
III.1.2. On the Closing Date, Buyer shall receive from the Title
Company an ALTA Owner's Policy of Title Insurance, in a form to be selected by
Buyer, with liability in the full amount of the Purchase Price, insuring fee
simple title to the Real Property in Buyer, subject only to exceptions approved
by Buyer as provided in SECTION 4.1.1 hereof, together with the following
endorsements: (i) an endorsement deleting all general exceptions and deleting
exclusions from coverage relating to creditor's rights, (ii) 116.1 (survey),
(iii) 100 (modified), (iv) 123.1 (zoning), (v) 116.4 (contiguity), (vi) 103.7
(access), (vii) 100.29 (mineral rights), (viii) 103.1 (easements) (ix) 103.5
(water rights) and (ix) such other endorsements as may be reasonably requested
by Buyer ("TITLE POLICY"). The Title Policy shall provide full coverage against
mechanics and material men's liens arising out of the construction, repair or
alteration of any of the Improvements or any tenant improvements.
III.1.3. The Title Company shall obtain, if requested by Buyer and
at Buyer's cost, reinsurance agreements from such companies as Buyer may
request, which reinsurance agreements shall be in ALTA Facultative Reinsurance
Agreement Form (rev. 1961), and shall include direct access agreements, in such
amounts and in such form as shall otherwise be satisfactory to Buyer.
III.2. TITLE TO PERSONAL PROPERTY. At the Closing, Seller shall transfer
--------------------------
title to the Personal Property pursuant to the Bill of Sale, in the form of Bill
of Sale and Assignment attached as EXHIBIT "D" hereto ("BILL OF SALE") and shall
-----------
further transfer and assign all of Seller's rights in and to any Intangible
Property, pursuant to the Bill of Sale, and shall further transfer all of
Seller's rights, title and interest in and to the Leases pursuant to the
Assignment of Leases (as hereinafter defined). All such title and rights shall
be free of any liens, encumbrances or interests of third parties whatsoever.
5
<PAGE>
ARTICLE IV.
CONDITIONS TO CLOSING
---------------------
IV.1. BUYER'S DUE DILIGENCE CONDITIONS. For a period beginning on the
--------------------------------
Effective Date and expiring at 5:00 p.m. on the thirtieth (30th) day thereafter
("CONTINGENCY PERIOD") Buyer, Buyer's agents, contractors, subcontractors,
employees and its counsel shall have the right to perform due diligence on the
Property pursuant to the terms of this SECTION 4.1 as follows:
IV.1.1. APPROVAL OF TITLE. Buyer's approval of the following
-----------------
matters relating to the title of the Property:
(a TITLE COMMITMENT. Buyer shall obtain (i) a title
----------------
commitment ("COMMITMENT"), by the terms of which the Title Company agrees
to issue to Buyer, at Closing, the Title Policy in the amount of the
Purchase Price; (ii) a photocopy of all documents ("TITLE DOCUMENTS")
describing or evidencing all title exceptions shown on the Commitment; and
(iii) reports relating to judgment, UCC, and Federal and State tax lien
searches regarding the Seller and the Property (collectively, the
"REPORTS"), to be obtained by Buyer, but to be paid for by Seller at the
Closing.
(b SURVEY. Buyer shall secure an as-built survey
------
("SURVEY") of the Property, prepared by a registered land surveyor, duly
licensed in the State and certified to the Title Company and to the Buyer
in full ALTA/ASTM form.
(c REVIEW OF SURVEY AND COMMITMENT.
-------------------------------
(i As used herein, the term "TITLE OBJECTION
PERIOD" shall mean a period commencing on the first day following
receipt by Buyer of the Survey, the Commitment, the Reports and the
Title Documents and ending ten (10) days thereafter. All matters
shown on the Survey and exceptions listed in the Commitment or the
Reports which are not objected to by Buyer within the Title
Objection Period, shall be conclusively deemed to be acceptable to
Buyer.
(ii In the event Buyer timely objects to any title
exception or Survey matter ("TITLE OBJECTION"), Seller may, but
shall not be obligated to, cure such Title Objection. Seller shall
notify Buyer, within five (5) days following receipt of the Title
Objection, of its decision as to whether or not it intends to cure
the Title Objection in question. In the event Seller notifies or is
deemed to have notified the Buyer that is unable or unwilling to
cure any Title Objection, Buyer may at its option (a) terminate this
Agreement, or (b) waive the Title Objections in question. The
foregoing election shall be made by Buyer in writing within ten (10)
days following Seller's notification. If any of the Title Objections
consist of delinquent taxes, delinquent assessments,
6
<PAGE>
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, Seller shall be
obligated to pay and discharge (or bond against in a manner
sufficient to cause the Title Company to insure over such Title
Objections) any such Title Objections. Bonds and assessments in
respect to improvements heretofore made to the Property which are
reflected in the Commitment shall not be deemed to be a Title
Objection.
(iii Seller hereby agrees that it shall not, after
the Effective Date, subject the Property to or permit or suffer to
exist any liens, encumbrances, covenants, conditions, restrictions,
easements or other title matters other than those in existence on
the date hereof or seek any zoning changes or take any other action
which may affect or modify the status of title without Buyer's prior
written consent. Notwithstanding the foregoing, Buyer shall not be
required to accept title to the Property subject to any matters
which may arise subsequent to the effective date of the Title
Commitment, Reports and Survey examined by Buyer during the period
described above.
(iv Notwithstanding anything herein to the contrary,
in any event Buyer's right to terminate this Agreement pursuant to
any provision of this SECTION 4.1.1 shall expire upon expiration of
the Contingency Period.
(v As used in this Agreement, the term "PERMITTED
EXCEPTIONS" shall mean all matters either shown on the Survey or
listed in the Commitment or the Reports to which Buyer does not
raise a Title Objection within the Title Objection Period or, having
objected, waives or is deemed to have waived in accordance with the
provisions of this SECTION 4.1.1, other than those Title Objections
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. It is understood and agreed
that the Property is being transferred hereunder free and clear of
all liens, claims and encumbrances except for the Permitted
Exceptions.
(d TERMINATION OF THIS AGREEMENT. In the event of
-----------------------------
termination of this Agreement pursuant to this SECTION 4.1.1, the Earnest
Money shall be returned to Buyer and thereafter neither party shall have
any further rights or obligations hereunder.
IV.1.2. INSPECTIONS.
-----------
(a Buyer and Buyer's agents, contractors, subcontractors
or employees, shall have the right to conduct any and all inspections,
investigations, tests and studies (including, without limitation,
investigations with regard to zoning, building codes and other governmental
regulations, architectural inspections,
7
<PAGE>
engineering tests, economic feasibility studies, soils, seismic and
geologic reports and environmental testing) with respect to the Property as
Buyer may elect to make or maintain. During the Contingency Period, Buyer
and its agents and consultants shall have access to: (1) the Property; (2)
the tenants for interviews, which interviews shall be coordinated by
Seller, with Seller or its representative present if Seller so elects; and
(3) the books and records relating to the ownership and operation of the
Property, for the purpose of making such inspections, tests, copies and
verifications as Buyer shall deem reasonably necessary.
(b Prior to any entry onto the Property by Buyer's
agents, contractors, subcontractors or employees, Buyer shall deliver to
Seller a Certificate of Insurance for Buyer's commercial general liability
insurance policy which evidences that Buyer is carrying a commercial
general liability insurance policy with a financially responsible insurance
company (at least A-X in the latest edition of Best's Insurance Guide),
----------------------
covering (i) the activities of Buyer, and Buyer's agents, contractors,
subcontractors and employees on or upon the Property, and (ii) Buyer's
indemnity obligations set forth in this Agreement. Such Certificate shall
evidence that such insurance policy shall have a per occurrence limit
(including umbrella) of at least Five Million and no/100 Dollars
($5,000,000.00) and an aggregate limit (including umbrella) of at least Ten
Million and no/100 Dollars ($10,000,000.00), shall name Seller as an
additional insured, shall be primary and non-contributing with any other
insurance available to Seller, shall be issued on an occurrence basis, and
shall contain a full waiver of subrogation clause. Seller shall be named as
an additional insured under such policy in such Certificate.
(c Within five (5) days after Effective Date, Seller
shall deliver or cause to be delivered to Buyer at its offices in
Sacramento, California, the Due Diligence Documents listed on EXHIBIT "E"
-----------
attached hereto and made a part hereof for all purposes.
IV.1.3. AGREEMENTS. Buyer shall have approved the Leases,
----------
Service Contracts, Personal Property, and all other documents and materials to
be delivered to Buyer by Seller pursuant to the provisions of SECTION 4.1.2.
IV.1.4. INCOME TAX MATTERS. Buyer shall have received
------------------
satisfactory opinions from its legal counsel as to income tax matters in
connection with the transaction.
IV.1.5. AS-BUILT PLANS AND SPECIFICATIONS. Buyer and its
---------------------------------
architects, engineers and consultants shall have reviewed and approved the "AS-
BUILT" plans and specifications pursuant to which the Property was constructed,
including the confirmation of the net rentable area of the Property.
IV.1.6. PHYSICAL INSPECTION REPORTS. Buyer shall have obtained
---------------------------
a physical inspection report and an environmental report with respect to the
Land (including surrounding areas) and Improvements constituting the Property
prepared in accordance with the
8
<PAGE>
specifications submitted by Buyer and prepared by third-party specialists
selected by Buyer, and Buyer shall then determine in its sole discretion whether
it is willing to purchase the Property in the physical and environmental
condition set forth in said reports.
IV.1.7. FINANCIAL INFORMATION. Buyer shall have (a) verified to
---------------------
its satisfaction the accuracy of the rent roll (the "RENT ROLL") attached
hereto as EXHIBIT "F" and the accuracy of projections and other financial data
-----------
with respect to the Property which have been delivered to Buyer in the offering,
(b) determine that the creditworthiness of the tenants is within the reasonable
financial risk parameters of Buyer, (c) verify that it is willing to accept and
be bound by the actual terms of the Leases, and (d) verify that the Property has
sufficient automobile parking spaces (including, without limitation, handicap
spaces) to comply with the requirements of all governmental authorities and
ordinances and all tenant leases.
IV.1.8. APPROVAL BY BOARD OF DIRECTORS. Buyer shall have,
------------------------------
within ten (10) days following the Effective Date, obtained the approval of the
Board of Directors (the "Board") of Prentiss Properties Trust, a real estate
investment trust, which is a partner in Buyer. In the event the Board fails to
approve the transaction contemplated hereby Buyer shall so notify Seller in
which event this Agreement along with the Additional Property Agreements shall
terminate and the Earnest Money shall be returned to Buyer. The failure to
notify Seller of Buyer's election to terminate this Agreement in accordance with
the provisions of this SECTION 4.1.8 within such ten (10) day period shall be
deemed to be an election on the part of Buyer to waive such contingency.
IV.1.9. CONTINGENCY NOTICE.
------------------
(a) Prior to the expiration of the Contingency Period, Buyer
shall deliver to Seller and the Title Company a written notice
("CONTINGENCY NOTICE") of its approval or disapproval of the Property,
which shall be subject to Buyer's sole and absolute discretion. In the
event that Seller does not receive a Contingency Notice approving the
Property by the expiration of the Contingency Period, this Agreement shall
be deemed to have been automatically terminated.
(b) Subject to the provisions of subparagraphs (c) below, the
Contingency Notice for the Additional Properties must be consistent with
the Contingency Notice for the Property in respect to Buyer's approval or
disapproval of the Additional Properties. If the Contingency Notices are
inconsistent, this Agreement shall terminate. Buyer or Seller shall have
the right to terminate this Agreement pursuant to SECTION 2.1(c) hereof
without affecting Buyer's rights of purchase the Additional Properties.
(c) In the event that the Bannon Investors, one of the Other
Sellers under the Additional Property Agreements which owns that certain
tract of land known as Tract A, terminates its Additional Property
Agreement (the "TRACT A AGREEMENT") in accordance with the provisions of
SECTION 2.1(c) the Tract A Agreement, Buyer, at its option may elect (i) to
terminate this Agreement and the remaining Additional Property Agreements,
in which event the Earnest Money shall be returned to Buyer, or (ii) to
9
<PAGE>
keep this Agreement, as well as the remaining Additional Property
Agreements, in full force and effect, in which event the parties shall
consummate the transactions contemplated thereby in accordance with the
respective terms and conditions of this Agreement and the remaining
Additional Property Agreements.
IV.2. APPROVAL BY SELLER'S PARTNERS. As a condition to Seller's
-----------------------------
obligations to consummate the transaction contemplated hereby, Seller shall
have, within ten (10) days following the Effective Date, obtained the approval
of the limited partners and other general partners (the "PARTNERS") of Seller.
In the event the Partners fail to approve the transaction contemplated hereby,
Seller shall so notify Buyer within such ten (10) day period, in which event
this Agreement along with the Additional Property Agreements shall terminate and
the Earnest Money shall be returned to Buyer. The failure by Seller to notify
Buyer of Seller's election to terminate this Agreement in accordance with the
provisions of this SECTION 4.2, within such ten (10) day period, shall be deemed
to be an election on the part of Seller to waive such contingency.
IV.3. BUYER'S CLOSING CONDITIONS. The following conditions are for the
--------------------------
benefit of Buyer and are conditions to the Closing, unless expressly waived by
Buyer on or before the Closing Date:
IV.3.1. TENANT ESTOPPEL CERTIFICATES. Seller shall deliver to
----------------------------
Buyer a current estoppel letter substantially in the form attached hereto as
EXHIBIT "G" from all tenants of the Property (and other occupants to the extent
- -----------
that Seller has the contractual right to require such letters), in the aggregate
representing at least ninety percent (90%) of the occupied floor area of the
Property. In the event that Seller is unable to obtain an estoppel certificate
from any tenant which has leased less than ten thousand (10,000) square feet,
Seller shall furnish Buyer with a mutually acceptable, qualified estoppel
certificate concerning such Lease executed by Seller. Buyer shall provide Seller
with its desired form of estoppel certificates for each tenant on or before
twenty (20) days following the Effective Date. In addition, all tenants listed
on the Rent Roll or their subtenants occupying in excess of 10,000 square feet
of net rentable area will be in "material compliance" with the terms and
conditions of their respective leases (except for premises which may not yet be
ready for occupancy as the result of new leases or modified leases). The term
"MATERIAL COMPLIANCE" shall mean that the tenant is question is not more than
thirty (30) days in arrears in the payment of rent due under its lease and/or
the tenant in question has not filed for bankruptcy protection under applicable
law.
IV.3.2. SIMULTANEOUS CLOSING. The Closing shall be contingent
--------------------
upon the simultaneous closing of the Additional Properties, pursuant to the
terms and conditions of the Additional Property Agreements. Notwithstanding the
foregoing, in the event (a) any of the Additional Property Agreements are
terminated as a result of a Seller default, or in accordance with ARTICLE IX of
the Additional Property Agreements, Buyer shall have the option, in its sole
discretion, to terminate this Agreement and the Earnest Money shall be returned
to Buyer or Buyer may waive the simultaneous closing condition and consummate
the transaction contemplated herein and (b) the Tract A Agreement is terminated
by Buyer or Bannon Investors pursuant to SECTION 2.1(c) thereof, Buyer shall
have the right to terminate this
10
<PAGE>
Agreement, in its sole discretion, in which event the Earnest Money shall be
returned to Buyer or Buyer may consummate the transaction contemplated herein
without regard to such termination.
IV.3.3. TITLE INSURANCE. As of the Closing Date, the Title
---------------
Company shall have issued or shall have committed to issue the Title Policy to
Buyer in respect to the Property.
IV.3.4. NO MATERIAL CHANGE. There shall be no material adverse
------------------
change in any of the items approved by Buyer during the Contingency Period,
including, without limitation, the physical condition of the Property and title
to the Property.
IV.3.5. TERMINATION OF AGREEMENTS. On the Closing Date, all
-------------------------
management and leasing agreements with respect to the Property shall be
terminated and Seller shall be solely responsible for any termination fees due
to the present property manager. In addition, Seller shall deliver full releases
from any leasing agents for any and all commissions which may become payable
after the Closing Date with respect to any then existing lease whether currently
earned or payable by virtue of renewal or expansion options.
IV.3.6. DELIVERY OF LEASES/DOCUMENTS. Buyer shall have received
----------------------------
signed originals or copies, certified by Seller as being true and correct of all
leases and contracts, together with all exhibits thereto, and to the extent in
Seller's possession or reasonably obtainable all warranties, licenses, permits
and agreements, together with all exhibits thereto.
IV.4. SELLER'S CLOSING CONDITIONS. The following conditions are for the
---------------------------
benefit of Seller and are conditions to the Closing, unless expressly waived by
Seller on or before the Closing Date:
IV.4.1. SIMULTANEOUS CLOSING. The Closing shall be contingent
--------------------
upon the simultaneous closing of the Additional Properties, pursuant to the
terms and conditions of the Additional Property Agreements, with the exception
of the transaction contemplated by the Tract A Agreement.
IV.5. FAILURE OF CONDITION TO CLOSE TO ESCROW. In the event any of the
---------------------------------------
conditions set forth in ARTICLE IV are not timely satisfied or waived by the
appropriate party benefitting by the conditions in question, for a reason other
than the default of Buyer, this Agreement shall, at the option of the party
benefitting by the conditions in question, terminate, the Earnest Money shall be
returned to Buyer and, except as otherwise provided herein, the parties shall
have no further obligations hereunder.
ARTICLE V.
CLOSING AND ESCROW
------------------
V.1. DEPOSIT WITH THE TITLE COMPANY AND ESCROW INSTRUCTIONS. Upon
------------------------------------------------------
execution of this Agreement, the parties hereto shall deposit one duplicate
original of this Agreement
11
<PAGE>
with the Title Company and this instrument shall serve as the instructions to
the Title Company for consummation of the purchase and sale contemplated hereby.
Seller and Buyer agree to execute such additional and supplementary escrow
instructions as may be appropriate to enable the Title Company to comply with
the terms of this Agreement; provided, however, that in the event of any
conflict between the provisions of this Agreement and any supplementary escrow
instructions, the terms of this Agreement shall control.
V.2. CLOSING.
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V.2.1. The closing hereunder ("CLOSING") shall be held at the
offices of the Title Company. The execution and exchange of documents shall take
place at the Closing on or before the twentieth (20th) day following the
expiration of the Contingency Period ("CLOSING DATE"). Such date may not be
otherwise extended without the written approval of both Seller and Buyer.
V.2.2. In the event the Closing does not occur on or before the
Closing Date, the Title Company shall, unless it is notified by both parties to
the contrary within ten (10) days after the Closing Date, return to the
depositor thereof all documents which may have been deposited hereunder.
V.3. DELIVERY BY SELLER TO THE TITLE COMPANY. Prior to the Closing Date,
---------------------------------------
Seller shall deliver to the Title Company:
(a The Deed, duly executed and acknowledged by Seller, in
recordable form, and ready for recordation on the Closing Date;
(b A certification duly executed by Seller under penalty of
perjury in the form of, and upon the terms set forth in, the Transferor's
Certification of Non-Foreign Status ("FIRPTA CERTIFICATE"), setting forth
Seller's address and federal tax identification number and certifying that
Seller is a "United States Person" and that Seller is not a "foreign person" in
accordance with and/or for the purpose of the provisions of Section 7701 and
1445 (as may be amended) of the Internal Revenue Code of 1954, as amended, and
any regulations promulgated thereunder. The FIRPTA Certificate shall be in the
form attached hereto as EXHIBIT "H";
-----------
(c An Assignment of Rights, Leases and Security Deposits
("ASSIGNMENT OF LEASES"), in the form of EXHIBIT "I" duly executed by Seller, by
-----------
which Seller shall assign to Buyer all of Seller's interest in the Leases,
together with the interest of Seller in security deposits collected and held by
Seller to secure the performance of the duties and obligations of tenant under
the Leases;
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V.4. DELIVERY BY SELLER TO BUYER. On or before the Closing Date, Seller
---------------------------
shall deliver to the Title Company, for ultimate delivery to Buyer, the
following:
(a The Bill of Sale duly executed by Seller;
(b The Rent Roll, certified by Seller and current as of the
Closing Date;
(c A schedule of Service Contracts current as of the Closing
Date;
(d Tenant Estoppel Certificates from those tenants specified
pursuant to SECTION 4.2.1, to the extent not previously delivered to Buyer.
(e Originals or copies, certified by Seller as being true and
correct, of all Leases, together with all exhibits thereto;
(f Originals of all Service Contracts and any unexpired
warranties or guaranties received by Seller from any contractors,
subcontractors, suppliers or materialmen in connection with any construction,
repair or alteration of the Improvements or any tenant improvements;
(g All instruction manuals, procedure manuals, manufacturer's
warranties and similar materials in Seller's possession which relate to the
Property;
(h Notices to tenants under the Leases, in the form of EXHIBIT
-------
"J" attached hereto, duly executed by Seller;
- ---
(i All keys to the Property;
(j Such resolutions, authorizations, bylaws or other corporate
and/or partnership documents or agreements relating to Seller as shall be
reasonably required by the Title Company in connection with this transaction;
and
(k Any other documents, instruments, data, records,
correspondence or agreements called for hereunder which have not previously been
delivered.
The matters described in subparagraphs (e), (f), (g) and (i) shall be delivered
by making them available at the office of the property manager for the Property.
V.5. DELIVERY BY BUYER TO THE TITLE COMPANY. On or before the Closing
--------------------------------------
Date, Buyer shall deliver to the Title Company, for ultimate delivery to Seller:
(a) The Purchase Price described in SECTION 2.1, plus any
additional sums necessary, if any, for Buyer to pay its costs, expenses and
prorations pursuant to this ARTICLE V; and
(b) The Assignment of Leases, duly executed in recordable form by
Buyer.
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V.6. OTHER INSTRUMENTS. Seller and Buyer shall each deliver such other
-----------------
instruments as are reasonably required by the Title Company or otherwise
required to close the escrow and consummate the purchase of the Property in
accordance with the terms hereof.
V.7. CLOSE OF ESCROW. Provided that (a) the Title Company has
---------------
received all required documents, instruments and funds, (b) the Title Company
has not received written notice from either Buyer or Seller that any of the
conditions to Closing set forth in ARTICLE IV have not been satisfied or waived,
(c) any of the representations and warranties made by either Buyer or Seller are
untrue either as of the Closing Date and (d) the Title Company is able to
deliver to Buyer the Title Policy described in SECTION 3.1.1 hereof, the Title
Company is authorized and instructed on the Closing Date to:
(a Record the Deed and the Assignment of Leases with the
Sacramento County Recorder; and
(b Deliver to Seller the sum described in SECTION 2.1 to Seller,
less Seller's share of prorations and costs of escrow. The Title Company is
instructed to request that the amount of the Documentary Transfer Tax due be
shown on a separate paper and affixed to the Deed by the County Recorder after
the permanent record is made.
V.8. PRORATIONS AND APPORTIONMENTS.
-----------------------------
V.8.1. All revenues and all expenses of the Property shall be
prorated and apportioned as of 12:01 a.m. on the Closing Date, so that Seller
shall bear all expenses with respect to the Property and shall have the benefit
of all income with respect to the Property through and including the period
preceding the Closing Date. Any revenue or expense amount which cannot be
ascertained with certainty as of the Closing Date shall be prorated on the basis
of the parties' reasonable estimates of such amount (other than reimbursements
for operating expenses not billed currently to tenants) and shall be the subject
of a final proration thirty (30) days after the Closing Date or as soon
thereafter as the precise amounts can be ascertained. A statement setting forth
such agreed prorations shall be delivered to the Title Company. The Title
Company shall not be required to calculate any prorations.
V.8.2. Prepaid rents under the Leases shall be credited to Buyer.
Amounts for free rents, concessions, lease takeovers and similar matters not
previously paid or satisfied prior to the Closing Date shall be credited to
Buyer. Rents in arrears will not be prorated, but will be paid to Seller by
Buyer when collected by Buyer, such payment to occur every thirty (30) days
following the Closing Date. Except as expressly provided for in SECTION 5.10
below, the first monies received by Buyer from each tenant after the Closing
Date shall be applied first to current rents and other sums due and thereafter
shall be applied to rent in arrears.
V.8.3. Expenses to be prorated shall include taxes (other than
personal property taxes on Personal Property), payments under any Service
Contracts (provided that
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any delinquent payments owing to Seller shall be treated in the same manner as
delinquent rents), gas, electricity and other utility charges, any unfixed meter
charges, if any (apportioned on the basis of the last meter reading), license
and permit fees and other expenses customarily prorated. If possible, in lieu of
prorating, utilities and other expenses shall be contracted for in the name of
Buyer as of the Closing Date, with Seller being responsible directly to the
utility provider and others for accrued and unpaid expenses. No prorations in
respect to personal property taxes on Personal Property based upon Seller's
warranty that no personal property taxes have been assessed against the Personal
Property for the previous five (5) years.
V.9. COMPUTATION OF CERTAIN PRORATIONS. Final proration of percentage
---------------------------------
rents and similar apportionable items which are dependent for their calculation
upon the economic performance of the Property (or a portion thereof) over a
specified interval of time shall be accomplished as follows:
(a The parties shall await the expiration of the specified
interval to determine the gross rents, gross receipts and other economic
performance over the entire interval and then prorate the item by allocating to
Seller the product of the rents or other similar apportionable item for the
entire interval multiplied by a fraction, the numerator of which is the number
of days within the specified interval which occur before the Closing Date and
the denominator of which is the number of days in the specified interval.
(b Operating expenses which are payable (or reimbursable) by any
present or past tenant of the Property or any portion thereof, shall not be
prorated hereunder. Buyer shall send customary statements for reimbursement of
operating expenses and taxes to tenants under the Leases after consulting with
Seller with respect to appropriate amounts due therefore, and shall remit to
Seller, upon receipt, Seller's prorated share thereof, determined as provided in
SECTION 5.9(a) above, to the extent Seller has previously paid or been charged
for the expenses relating to such reimbursement.
V.10. ARREARAGE. Seller reserves all claims and causes of action against
---------
tenants and others who are in arrears or who shall be obligated to pay monies in
the future which are for the benefit of Seller, and Buyer shall provide its
reasonable cooperation to Seller in pursuing such arrearage. Buyer shall use
reasonable efforts to collect all sums in arrears as of the closing Date due to
Seller, but shall not be required to commence or prosecute any litigation.
Seller may not commence and prosecute litigation against any tenant for rents in
arrears as long as such tenant remains a tenant of the Property, unless the
statute of limitations will expire within the succeeding sixty (60) day period.
To the extent that Buyer receives payments from tenants for sums due prior to
the Closing Date, which can be verified based upon invoices or other applicable
billings, such payments, including rents, shall be promptly remitted by Buyer to
Seller.
V.11. PAYMENT OF ADJUSTMENTS TO PRORATION. Either party owing the other
-----------------------------------
party a sum of money based on adjustments made to prorations after the Closing
Date shall promptly pay that sum to the other party, together with interest
thereon at the rate of ten percent (10%) per annum to the date of payment if
payment is not made within ten (10) days after mutual agreement of the amount
due.
15
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V.12. COSTS AND EXPENSES. Seller shall pay the costs associated with
------------------
the issuance of a California Land Title Association Owner's Policy of Title
Insurance in the full amount of the Purchase Price, the UCC and litigation
searches, documentary stamp taxes, recording fees, transfer taxes, escrow fees
and all costs incurred to repay any liens. Buyer shall pay the incremental
increase in costs relating to ALTA coverage, the costs of all endorsements
thereto and the cost of the Survey. Seller and Buyer shall each pay the fees
and expenses of their respective legal counsel incurred in connection with the
transaction.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
As an inducement to Buyer to enter into this Agreement, Seller hereby
represents and warrants to and agrees with Buyer as follows:
VI.1. AUTHORITY OF SELLER. Seller is a California limited partnership,
-------------------
duly organized and validly existing and in good standing under the laws of the
State of California, and has the authority to own and convey the Property, and
execute this Agreement. All documents executed by Seller which are to be
delivered to Buyer at the Closing are or at the time of Closing will be duly
authorized, executed and delivered by Seller and do not and at the time of
Closing will not violate any provisions of any agreement or judicial order to
which Seller is a party or to which Seller or the Property is subject.
VI.2. CONDITION OF PROPERTY. To Seller's Knowledge, as hereinafter
---------------------
defined, there are no material physical or mechanical defects in the Property,
including, without limitation, the elevators, escalators, plumbing, heating, air
conditioning, ventilating, life safety and electrical systems, and to Seller's
Knowledge, all such items are in good operating condition and repair and are in
compliance with all applicable governmental laws, ordinances, regulations and
requirements, other than compliance with the requirements of the Americans With
Disabilities Act, with respect to which, Seller has commenced compliance in
accordance with the requirements thereof.
VI.3. USE AND OPERATION. To Seller's Knowledge, the use and operation of
-----------------
the Property are in full compliance with applicable building codes, safety and
fire, environmental, zoning and land use laws, and other applicable local, state
and federal laws, ordinances, regulations and requirements, other than
compliance with the requirements of the Americans With Disabilities Act, with
respect to which Seller has commenced compliance in accordance with the
requirements thereof.
VI.4. LAND USE REGULATIONS. To Seller's Knowledge, there are no
--------------------
condemnation, environmental, zoning or other land use regulation proceedings,
either instituted, or planned to be instituted, which could detrimentally affect
the use or operation of the Property of its
16
<PAGE>
intended purpose or the value of the Property, nor has Seller received notice of
any special assessment proceedings affecting the Property.
VI.5. LEASES. To Seller's Knowledge, the copies of the Leases to be made
------
available to Buyer pursuant to SECTION 4.1.2 are true and correct copies of all
Leases affecting the Property and are in full force and effect and there are no
other agreements, written or oral, with respect to the tenancies, except
subleases permitted by the respective Leases. To Seller's Knowledge:
(a) The information set forth in the Rent Roll is true and
complete as of the date such Rent Roll was made available to Buyer and there are
no leases of space in the Improvements and nonmaterial defaults under any of the
Leases which have not been disclosed to Buyer in writing.
(b) No tenant under any of the Leases has prepaid any rent or
other charges for more than the current month, except as disclosed to Buyer in
writing.
(c) No tenant under any of the Leases has any right or option to
purchase the Property or any portion thereof or interest therein, and there are
no outstanding agreements of sale with respect to the Property or any portion
thereof or any interest therein.
(d) Except as provided in the Leases and the Rent Roll, no tenant
under any of the Leases has the right to renew or extend any of the Leases or
has any options or rights of first refusal with respect to leasing of other
space, and no tenant under any of the Leases has the right to free rent, rebate,
allowance, concession, security or other deposit.
VI.6. BROKERAGE COMMISSIONS. Except as set forth in the Rent Roll or
---------------------
otherwise disclosed to Buyer in writing, there are no commissions, finder's fees
or other compensation owing or which may become owing to any broker or any other
person or entity with respect to any Lease or occupancy agreement including,
without limitation, any such compensation with respect to any future renewals,
extensions or expansions thereof.
VI.7. LITIGATION. Except as disclosed to Buyer in writing, there is no
----------
litigation pending or, to Seller's Knowledge, threatened, against Seller or any
basis therefor that arises out of the ownership of the Property or that might
detrimentally affect the use or operation of the Property for its intended
purpose or the value of the Property or adversely affect the ability of Seller
to perform its obligations under this Agreement, other than pending litigation
with the First Lien Holder in connection with its foreclosure proceedings.
VI.8. USE AND OPERATION OF PROPERTY. To Seller's Knowledge, Seller knows
-----------------------------
of no facts which would prevent Buyer from using and operating the Property
after Closing in the manner in which the Property has been used, leased and
operated prior to the date hereof.
VI.9. OTHER RIGHTS. No other person presently has a right of first
------------
refusal or other right to purchase or finance all or any part of the Property.
In consideration of Buyer's execution and delivery of this Agreement, Seller
agrees that so long as this Agreement has not
17
<PAGE>
been terminated or expired, Seller will not negotiate or otherwise pursue any
offers on the Property nor execute any other letter of intent or contract for
the financing, sale or purchase of the Property.
VI.10. EMPLOYEES. Seller has no employees. There are no employees of
---------
Seller's agent (including the property manager) engaged in the operation or
maintenance of the Property for whom Buyer will be responsible after the Closing
Date unless Buyer agrees to employ such employees after the Closing Date.
VI.11. ENVIRONMENTAL. To Seller's Knowledge, the Property is not in
-------------
violation of any federal, state, local or administrative agency ordinance, law,
rule, regulation, order or requirement relating to environmental conditions or
Hazardous Material ("ENVIRONMENTAL LAWS"). Neither Seller, nor to Seller's
------------------
Knowledge, any third party, has (a) used, manufactured, generated, treated,
stored, disposed of, or released any Hazardous Material on, under or about the
Property or transported any Hazardous Material over the Property in violation of
the Environmental Laws, or (b) installed, used or removed any storage tank on,
from or in connection with the Property except in full compliance with all
Environmental Laws. To Seller's Knowledge, there are no storage tanks or wells
(whether existing or abandoned) located on, under or about the Property. To
Seller's Knowledge, the Property does not consist of any building materials that
contain Hazardous Material. For the purposes hereof, "HAZARDOUS MATERIAL" shall
mean any substance, chemical, waste or other material which is listed, defined
or otherwise identified as "hazardous" or "toxic" under any federal, state,
local or administrative agency ordinance or law.
VI.12. "AS-IS" SALE.
------------
(a) Except as set forth above, Buyer acknowledges that Seller makes no
representation or warranty, either express or implied, with respect to the
Property, its present condition or its fitness or suitability for any particular
purpose. In this respect, Buyer confirms that it is relying solely upon its
investigation of the condition of the Property, its title and all governmental
laws and ordinances which might affect its use and development. With the
exception of matters which Seller has affirmatively represented, actively
concealed or fraudulently represented at the time of sale and with the exception
of the warranties contained in the conveyance documents to be executed and
delivered by Buyer, Buyer hereby releases and forever discharges Seller, its
partners, employees and agents from any and all claims, rights, remedies and
causes of action of any nature or sort, known or unknown, past, present or
future, which Buyer may have arising out of the condition of the Property after
the Closing Date.
(b) Buyer expressly waives the benefits and provisions of Section 1542
of the Civil Code of the State of California, and any similar law of any state
or territory of the United States or other jurisdiction. Civil Code Section 1542
provides as follow:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
18
<PAGE>
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH DEBTOR."
Initials of Buyer ___________________
VI.13. SELLER'S KNOWLEDGE. The term "TO SELLER'S KNOWLEDGE," or variations
------------------
thereof, means the actual, present knowledge of the individual general partners
of Seller, without any duty of inquiry or investigation, other than Seller's
obligation to make inquiry of its managing agent KCS Properties, Inc. in an
effort to determine that the employees of KCS Properties, Inc. responsible for
the day-to-day operation of the Property are not aware of any fact or
circumstance that would make any representation or warranty of Seller untrue in
any material respect.
VI.14. SURVIVAL. The representations and warranties of Seller contained
--------
herein shall survive the Closing Date, but shall terminate one (1) year after
the Closing Date. No liability shall arise thereunder unless suit shall be
filed against Seller as to the specific claim within such one (1) year period.
VI.15. SUBSEQUENT DISCLOSURES. In the event Buyer, prior to the Closing
----------------------
Date, becomes aware, from Seller or otherwise, of any inaccuracy in the
disclosures, information or representations previously provided to Buyer, which
will have a material, adverse effect on Buyer, Buyer may either (i) terminate
this transaction contemplated hereby, receive a refund of the applicable portion
of the Deposit, and to the extent available pursue any rights or claims that
Buyer may have against Seller as a result of any inaccuracy in the disclosures,
information or representations previously provided to Buyer or (ii) proceed with
the Closing, thereby waiving any rights that Buyer may have against Seller as a
result of any inaccuracy in the disclosures, information or representations
previously provided to Buyer. In no event shall Buyer be entitled to complete
the Closing hereunder and then bring an action against Seller for damages as a
result of any inaccuracy in the disclosures, information or representations
previously provided to Buyer.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
VII.1. AUTHORITY OF BUYER. Buyer is duly organized and validly existing
------------------
under the laws of the State of Delaware and is in good standing and authorized
to do business under the laws of the State of California; this Agreement and all
documents executed by Buyer, which are to be delivered to Seller at the Closing
are or at the time of Closing will be (a) duly authorized, executed, and
delivered by Buyer, (b) be legal, valid, and binding obligations of Buyer, and
(c) not violate any provisions of any agreement or judicial order to which Buyer
is a party or to which it is subject.
19
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VII.2. LITIGATION. There is no litigation pending or, to Buyer's
----------
knowledge, threatened, against Buyer or any basis therefor before any court or
administrative agency which might result in any material adverse change in the
business or financial condition of the Buyer.
ARTICLE VIII.
COVENANTS
---------
As matters as to which the Title Company need not be concerned, Seller and
Buyer covenant and agree with one another as follows:
VIII.1. INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify Buyer
-------------------------
and hold Buyer harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Buyer as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach of
covenant made by Seller in this Agreement or any document, certificate, or
exhibit given or delivered to Buyer pursuant to or in connection with this
Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring before
the Closing Date, or in any way related to or arising from any act, conduct,
omission, contract or commitment of Seller (or any of its agents or employees)
at any time or times before the Closing Date.
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.2. INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify Seller
------------------------
and hold Seller harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
without limitation, reasonable attorneys' fees and costs suffered by Seller as a
direct or indirect result of:
(a) Any misrepresentation or breach of warranty or breach of
covenant made by Buyer in this Agreement or any document, certificate, or
exhibit given or delivered to Seller pursuant to or in connection with this
Agreement; and
(b) Any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how
arising, and in any way related to the Property and arising or occurring after
the Closing Date, or in any way related to or arising from any act, conduct,
omission, contract or commitment of Buyer (or any of its agents or employees) at
any time or times after the Closing Date.
20
<PAGE>
The provisions of this Section shall survive the execution and delivery of this
Agreement, the delivery of the Deed and transfer of title.
VIII.3. MAINTENANCE. Seller shall, between the Seller's execution of this
-----------
Agreement and the Closing Date, at Seller's sole cost and expense, maintain the
Property in its present order, condition and repair, reasonable wear and tear
excepted, shall perform all work required to be done by the landlord under the
terms of any lease affecting the Property, and shall make all repairs,
maintenance and replacements of the Improvements and any Personal Property and
otherwise operate the Property in the same manner as before the making of this
Agreement, the same as though Seller were retaining the Property.
VIII.4. LEASES AND OTHER AGREEMENTS.
---------------------------
(a) Except as provided below, Seller covenants and agrees that during
the term of this Agreement, Seller or its agents shall not amend or modify any
Lease and shall not enter into any new Lease, for any portion of the Property,
without Buyer's prior written approval. Seller's request for approval of any
such new or modified Lease shall be accompanied by the estimated cost of any
tenant improvements associated therewith and the amount of the real estate
commission to be paid in conjunction therewith. In the event that Buyer approves
any new or modified Lease, upon the Closing Date, Buyer shall be responsible for
the cost of the tenant improvements and the real estate commissions associated
therewith prorated in an amount proportional to the amount of rent paid
thereunder before and after the Closing Date. Buyer shall pay Seller on the
Closing Date for any costs that Seller has incurred for the tenant improvements
and real estate commissions in excess of its pro-rata share. Upon the Closing
Date, all tenant improvement construction contracts and brokerage agreements on
such Leases shall be assigned to and assumed by Buyer.
(b) Notwithstanding the provisions of subparagraph (a) above, Buyer
approves the terms and conditions of a lease proposal to the State of California
set forth on EXHIBIT "L" attached hereto and made a part hereof for all
purposes and Buyer shall accept a lease or leases with the State of California
in the event it agrees to enter into a lease or leases in accordance with such
terms, subject to the approval of the form of lease by Buyer, which approval
shall not be unreasonably withheld.
VIII.5. RETURN OF INFORMATION. In the event that Buyer does not purchase
---------------------
the Property, Buyer shall promptly return to Seller all information delivered by
Seller to Buyer in conjunction with this transaction.
VIII.6. CONFIDENTIALITY. Except as hereinafter provided, from and after
---------------
the execution of this Agreement, Buyer and Seller shall keep the terms,
conditions and provisions of this Agreement confidential and neither shall make
any public announcements hereof unless the other first approves of same in
writing, nor shall either disclose the terms, conditions and provisions hereof,
or of any data regarding the Property, except to persons who "need to know",
such as their respective officers, directors, employees, attorneys, accountants,
engineers, surveyors, consultants, property managers, financiers, partners,
investors, potential
21
<PAGE>
lessees and bankers and such other third parties whose assistance is required in
connection with the consummation of this transaction. Notwithstanding the
foregoing, it is acknowledged that Buyer is an affiliate of, a real estate
investment trust (the "REIT") and the REIT has and will seek to sell shares to
the general public; consequently, Buyer 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
Buyer or Buyer's attorneys to satisfy disclosure and reporting obligations of
Buyer, the REIT, or its affiliates. After Closing, Buyer shall be free to
disclose previously confidential information in its sole, unfettered discretion.
VIII.7. TAX DEFERRED EXCHANGE. Buyer acknowledges that Seller may desire
---------------------
to structure the sale of the Property as an exchange for like-kind property
under Section 1031 of the Internal Revenue Code of 1986 in order to defer
recognition of income on the disposition of the Property and/or other
properties. Buyer agrees to reasonably cooperate with Seller to accomplish such
exchange and Seller hereby agrees that any and all costs associated with said
exchange shall be borne solely by Seller and shall in no way be attributable to
Buyer. Buyer shall not be requested or required to take title to other property
in conjunction with such exchange.
VIII.8. TESTING SAMPLES. Any testing samples taken from the Property
---------------
during any inspection pursuant to this Agreement shall be divided and shared
with Seller. In the event that any test results or reports contain negative
information concerning the Property, Buyer shall promptly furnish Seller with
written correspondence summarizing the negative information including the name
and address of the consultant who discovered or learned of such information.
VIII.9. TERMINATION OF AGREEMENT. On the Closing Date, all management and
------------------------
leasing agreements with respect to the Property shall be terminated and Seller
shall be solely responsible for any termination fees due. In addition, Seller
shall deliver full releases from any leasing agents for any and all commissions
which may become payable after the Closing Date with respect to any then
existing lease whether currently earned or payable by virtue of renewal or
expansion options. Seller shall also terminate all Service Contracts which
Buyer fails to elect to assume, such election to be made prior to the expiration
of the Contingency Period.
VIII.10. TRANSFER TAX ON WORKS OF ART. In the event that any transfer
----------------------------
tax is due or payable on the Works of Art pursuant to Section 982 of the
California Civil Code, Seller agrees to pay such tax to the artist in
conjunction with such transfer.
VIII.11. CHANGES BEFORE CLOSING. In the event that any of the
----------------------
representations or warranties by either party contained herein change or become
untrue prior to the Closing Date, such party agrees to notify the other party of
such change or untruthfulness promptly upon learning of such matter.
VIII.12. INDEPENDENT AUDIT. Promptly following the execution of this
-----------------
Agreement, Seller shall provide and shall cause its management company to
provide to Buyer's
22
<PAGE>
representatives and independent accounting firm access to financial and other
information relating to the Property in the possession of or otherwise available
to Seller, its affiliates or Seller's management company which would be
sufficient to enable Buyer's representatives and independent accounting firm to
prepare audited financial statements for the year 1996 and the year to date in
conformity with generally accepted accounting principles and to enable them to
prepare such statements, reports or disclosures as Buyer may deem necessary or
advisable. Seller shall also provide and/or shall cause its management company
to provide to Buyer's independent accounting firm 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. Seller shall
authorize and shall cause its management company to authorize any attorneys who
have represented Seller or its management company in material litigation
pertaining to or affecting the Property to respond, at Buyer's expense, to
inquiries from Buyer's representatives and independent accounting firm. If and
to the extent Seller's financial statements pertaining to the Property for any
periods during the year 1996 and the year to date have been audited, promptly
after the execution of this Agreement Seller shall provide Buyer with copies of
such audited financial statements and shall cooperate with Buyer's
representatives and independent public accountants to enable them to contact the
auditors who prepared such audited financial statements and to obtain, at
Buyer's expense, a reissuance of such audited financial statements. To the
extent that Seller or its agents incur reasonable expenses in connection with
the performance of such audit, Buyer shall reimburse Seller and its agents for
such reasonable expenses.
ARTICLE IX.
LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION
--------------------------------------------
IX.1. DAMAGE OR DESTRUCTION.
---------------------
IX.1.1. In the event that the Improvements are damaged or destroyed
by fire or other casualty prior to the Closing Date and such damage or
destruction is estimated to cost Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) or less in the aggregate to repair or replace (as verified by an
architect or contractor reasonably selected by Buyer) then the Closing Date
shall occur as scheduled notwithstanding such damage or destruction and Seller
shall pay to Buyer an amount sufficient to restore or repair such damage
(retaining the right to any claim Seller may have against any insurance
carrier).
IX.1.2. In the event that any of the Improvements are damaged or
destroyed by fire or other casualty prior to the Closing Date, and such damage
or destruction is estimated to cost more than Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) in the aggregate to repair or replace (as verified
by an architect or contractor reasonably selected by
23
<PAGE>
Buyer), then either Seller or Buyer shall have the option to (i) terminate this
Agreement by written notice to Seller within fifteen (15) days after the
occurrence of the damage or destruction and the Earnest Money shall be
immediately returned to Buyer or (ii) consummate the transaction contemplated
hereby in which event Seller's insurance proceeds shall be transferred and
assigned to Buyer, with Seller remaining responsible for any deductible.
IX.2. CONDEMNATION. In the event that, prior to the Closing Date, a
------------
governmental entity shall commence any eminent domain proceeding to take any
material portion of the Property, then Buyer shall have the option to elect
either of the following:
(a) Terminate this Agreement by written notice to Seller within
fifteen (15) days of its receiving notice of such action of condemnation and the
Earnest Money shall be immediately returned to Buyer; or
(b) Elect to proceed with the transaction in which case the
Purchase Price shall not be reduced and Buyer shall be entitled to the net award
paid to Seller or Seller's mortgagee for such taking, if any, and Seller shall
assign and transfer to Buyer all right, title and interest in and to any awards,
it being expressly agreed that in such event Seller shall have no obligation to
repair or restore the Property or any portion thereof.
ARTICLE X.
DEFAULTS
--------
X.1. BUYER'S DEFAULT; SELLER'S REMEDIES. Buyer shall be deemed to be in
----------------------------------
default if, in respect to the transaction contemplated by this Agreement, at the
Closing, Buyer fails to deliver the Purchase Price or Buyer fails to meet,
comply with, or perform any covenant, agreement or obligation on the part of
Buyer within the time frames and in the manner required in this Agreement, for
any reason other than a default by Seller hereunder or termination of this
Agreement prior to Closing in accordance with the express terms and conditions
hereof. Seller's remedies shall be limited to the remedies set forth in
SECTION 2.4 hereof. Any default by Buyer hereunder shall be deemed a default
under each of the Additional Property Agreements.
X.2. SELLER'S DEFAULTS; BUYER'S REMEDIES.
-----------------------------------
X.2.1. SELLER'S DEFAULTS. Seller shall be deemed to be in
------------------
default under this Agreement, if in respect to the transaction contemplated by
this Agreement, on or before the Closing, Seller shall have failed to meet,
comply with, or perform any covenant, agreement, or obligation on its part
required in this Agreement, within the time limits and in the manner required in
this Agreement, for any reason other than a default by Buyer hereunder or
termination of this Agreement prior to Closing pursuant to the express terms and
conditions hereof.
24
<PAGE>
X.2.2. BUYER'S REMEDIES. If Seller is deemed to be in default
-----------------
hereunder, Buyer may, at Buyer's option, do either one of the following:
(a) Terminate this Agreement by written notice delivered
to Seller on or before ten (10) days following occurrence of such default;
(b) Seek and receive specific performance of Seller's
obligations hereunder to sell the Property for the Purchase Price and on
the terms set forth herein following the expiration of a five (5) day
period following the delivery of a written notice to Seller specifying the
default in question unless specific performance is not an available remedy
because Seller has voluntarily conveyed or encumbered the Property, in
which event Buyer may recover damages from Seller for any losses or costs
suffered by Buyer in connection with Seller's failure to perform its
obligations hereunder following the expiration of a five (5) day period
following the delivery of a written notice to Seller specifying the default
in question.
ARTICLE XI.
MISCELLANEOUS
-------------
XI.1. NOTICES. All notices or other communications required or permitted
-------
hereunder shall be in writing, and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or sent
by electronic facsimile and shall be deemed received upon the earlier of (i) if
personally delivered, the date of delivery to the address of the person to
receive such notice, (ii) if mailed, on the date of posting by the United States
Post Office, or (iii) if given by electronic facsimile, when received by the
other party.
If to Seller: 2525 Natomas Investors
c/o Kelly Broadcasting
3 Television Circle
Sacramento, California 95814
Attention: Scott Nichols
Telephone No.: (916) 446-3333
Facsimile No.: (916) 325-3711
with a copy to: KCS Properties, Inc.
1451 River Park Drive, Suite 230
Sacramento, California 95815
Attention: William P. Krum
Telephone No.: (916) 920-1225
Facsimile No.: (916) 920-1395
25
<PAGE>
with a copy to: Aguer-Pipgras Associates
1851 Heritage Lane, Suite 128
Sacramento, California 95815
Attention: Thomas C. Aguer
Telephone No.: (916) 649-2777
Facsimile No.: (916) 649-3636
with a copy to: Trainor Robertson
701 University Avenue, Suite 200
Sacramento, California 95825
Attention: Charles W. Trainor, Esquire
Telephone No.: (916) 929-7000
Facsimile No.: (916) 929-7111
If to Buyer: Prentiss Properties Acquisition Partners, L.P.
3890 West Northwest Highway
Suite 400
Dallas, Texas 75220
Attention: Mark R. Doran
Telephone No.: (214) 654-5703
Facsimile No.: (214) 350-2437
with copies to: Snell, Brannian & Trent
8150 North Central Expressway, Suite 1800
Dallas, Texas 75201
Attention: Lawrence J. Brannian
Telephone No.: (214) 691-2500
Facsimile No.: (214) 691-2501
If to the Title Company: First American Title Insurance Company
3030 LBJ Freeway, Suite 150
Dallas, Texas 75234
Attention: Ms. Jacqueline P. Aul
Telephone No.: (972) 620-7844
Facsimile No.: (972 241-7112
with copies to: First American Title Insurance Company
1860 Howe Avenue, Suite 100
Sacramento, California 95825
Attention: Ms. Lisa Blazquez
Telephone No.: (916) 920-3100
Facsimile No.: (916) 927-8712
or such other address as either party may from time to time specify in writing
to the other in the manner aforesaid.
26
<PAGE>
XI.2. BROKERS AND FINDERS. Buyer and Seller each represent and warrant to
-------------------
the other that neither has employed any real estate agent, brokerage or finder
in connection with this transaction. In the event of a claim or broker's fee,
finder's fee, commission or other similar compensation in connection herewith,
Buyer, if such claim is based upon any agreement alleged to have been made by
Buyer, hereby agrees to indemnify and hold Seller harmless against any and all
liability, loss, cost, damage or expense (including reasonable attorneys' fees
and costs) which Seller may sustain or incur by reason of such claim, and
Seller, if such claim is based upon any agreement alleged to have been made by
Seller, hereby agrees to indemnify and hold Buyer harmless against any and all
liability, loss, cost, damage or expense (including reasonable attorneys' fees
and costs) which Buyer may sustain or incur by reason of such claim. The
provisions of this SECTION 11.2 shall survive the Closing.
XI.3. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the permitted successors and assigns of the
parties hereto.
XI.4. AMENDMENTS. This Agreement may be amended or modified only by a
----------
written instrument executed by the party asserted to be bound thereby.
XI.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
------------------------------------------
representations and warranties made by each party herein shall survive the
Closing for a period of one (1) year and shall not merge into the Grant Deed and
the recordation thereof in the Official Records of Sacramento County,
California.
XI.6. CONSTRUCTION. Headings at the beginning of each section and
------------
subsection are solely for the convenience of the parties and are not a part of
the Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine and vice
versa. This Agreement shall not be construed as if it had been prepared by one
of the parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to paragraphs, sections, subparagraphs and
subsections are to this Agreement.
XI.7. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California. Any actions filed by
either party involving the other party shall be venued in Sacramento County,
California.
XI.8. PRIOR AGREEMENTS. This Agreement (including all Exhibits attached
----------------
hereto) together with the Earnest Money Letter is the final expression of, and
contains the entire agreements between the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto.
This Agreement may not be modified, changed, supplemented, superseded, canceled
or terminated nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein. The parties do not intend
to confer any benefit hereunder on any person, firm or corporation other than
the parties hereto and lawful assignees.
27
<PAGE>
XI.9. ATTORNEYS' FEES. In the event of the bringing of any action or suit
---------------
by a party hereto against another party hereunder by reason of any breach of any
of the covenants, agreements or provisions on the part of the other party
arising out of this Agreement, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including actual attorneys' fees, accounting and
engineering fees, and any other professional fees resulting therefrom.
XI.10. TIME OF THE ESSENCE. Seller and Buyer hereby acknowledge and agree
-------------------
that time is strictly of the essence with respect to each and every term,
condition, obligation and provision hereof and that failure to timely perform
any of the terms, conditions, obligations or provisions hereof by either party
shall constitute a material breach of and a non-curable (but waivable) default
under this Agreement by the party so failing to perform.
XI.11. RELATIONSHIP OF PARTIES. Nothing contained in this Agreement shall
-----------------------
be deemed or construed by the parties to create the relationship of principal
and agent, a partnership, joint venture or any other association between Buyer
and Seller.
XI.12. WAIVERS. No waiver of any breach of any covenant or provision herein
-------
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension
of time for performance of any obligation or act shall be deemed an extension of
the time for performance of any other obligation or act except those of the
waiving party, which shall be extended by a period of time equal to the period
of the delay.
XI.13. PARTIAL INVALIDITY. If any term or provision 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 or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
such term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
XI.14. CONDITION PRECEDENT/CONCURRENT. This Agreement shall only be valid
------------------------------
if Buyer and Seller simultaneously execute the Additional Property Agreements
and this Agreement. Any default by Buyer under the terms of the Additional
Property Agreements shall give Seller the right to declare a default under this
Agreement.
XI.15. DAYS OF WEEK/TIME. In the event the date on which Buyer or Seller is
-----------------
required to take any action under the terms of this Agreement is not a business
day, the action shall be taken on the next succeeding business day. All times
referenced herein are the times of day in Sacramento, California on the date in
question.
XI.16. EXHIBITS/RECITALS. All exhibits referred to in this Agreement are
-----------------
attached and incorporated by this reference. All of the Recitals set forth
above are true and correct.
XI.17. POSSESSION. Possession of the Property shall be delivered to Buyer
----------
on the Closing Date, subject to the rights of any tenants or subtenants in the
Property.
28
<PAGE>
XI.18. ASSIGNMENT. Buyer shall not assign, transfer or convey its rights
----------
and/or obligations under this Agreement and/or with respect to the Property to
any other party without the prior written consent of Seller, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the foregoing, Buyer
shall have the right to assign its rights under this Agreement to any affiliate
of Buyer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
a Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By: /s/ MARK R. DORAN
----------------------------------------
Name: Mark R. Doran
Title: Executive Vice President
SELLER:
2525 NATOMAS INVESTORS, a California limited
partnership
By: /s/ JON S. KELLY
---------------------------------------------
Name: Jon S. Kelly
Title: Managing General Partner
29
<PAGE>
The undersigned acknowledges receipt of this Agreement and agrees to act as
the Title Company hereunder.
FIRST AMERICAN TITLE INSURANCE COMPANY
By: /s/ JACQUELINE P. AUL
-----------------------------------
Name: Jacqueline P. Aul
Title:
--------------------------------
30
<PAGE>
EXHIBIT LIST
------------
Exhibit A Legal Description
Exhibit B Additional Properties
Exhibit C Grant Deed
Exhibit D Bill of Sale
Exhibit E Due Diligence Materials
Exhibit F Rent Roll
Exhibit G Tenant Estoppel
Exhibit H Transferor's Certification of Non-Foreign Status
Exhibit I Assignment of Rights, Leases and Security Deposits
Exhibit J Notices to Tenant
Exhibit K Works of Art
Exhibit L Description of State of California Lease Terms
31
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
-----------------
The land is situated in the State of California, County of Sacramento, City of
Sacramento and is described as follows:
Parcel No. 3, as shown on that certain Parcel Map entitled "Portion of Lot 116,
Natomas East Side Subdivision, 17-B.M.-34 and portion of Tract 3 and 4, 2-R.S.-
48," recorded in BookE76 of Parcel Maps, Page 24, records of said County.
EXCEPTING THEREFROM all minerals, oil, gas and other hydrocarbon substances
lying below a depth of 500 feet from the surface of said land, without the right
of surface entry, as contained in the Deed recorded July 24, 1980 in Book 800724
of Official Records, at Page 597.
32
<PAGE>
EXHIBIT B
ADDITIONAL PROPERTIES
---------------------
1740 Creekside Oaks Investors 1740 Creekside Oaks Drive, Sacramento, CA
1750 Creekside Oaks Investors 1750 Creekside Oaks Drive, Sacramento, CA
1760 Creekside Oaks Investors 1760 Creekside Oaks Drive, Sacramento, CA
2495 Natomas Investors 2495 Natomas Park Drive, Sacramento, CA
River City Bank 2485 Natomas Park Drive, Sacramento, CA
Bannon Investors Tract A, Natomas Center, Sacramento, CA
Natomas Investors et al Tract D, Natomas Center, Sacramento, CA
33
<PAGE>
EXHIBIT C
GRANT DEED
----------
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MAIL TAX STATEMENTS TO:
GRANT DEED
----------
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
_______________, a _______________________ ("GRANTOR"), hereby grants to
____________________, a _______________________ ("GRANTEE"), that certain real
property ("LAND") located in the City of Sacramento, County of Sacramento, State
of California, more particularly described in Exhibit A attached hereto together
---------
with all right, title and interest of Grantor in and to all buildings and
improvements now located or hereafter constructed on the Land.
Grantor hereby further grants to Grantee all of Grantor's right, title and
interest in and to all easements, privileges and rights appurtenant to the real
property and pertaining or held and enjoyed in connection therewith and all of
Grantor's right, title and interest in and to any land lying in the bed of any
street, alley, road or avenue to the centerline thereof in front of or adjoining
the Land.
IN WITNESS WHEREOF, Grantor has executed this Grant Deed as of
______________, 19__.
--------------------------------
By:
-----------------------------
34
<PAGE>
SEPARATE STATEMENT OF
DOCUMENTARY TRANSFER TAX
County Recorder
Sacramento County
Sacramento, California
Dear Sir:
In accordance with Revenue and Taxation Code Section 11932, it is required
that this statement of documentary transfer tax due should not be recorded with
the attached Deed, but be affixed to the Deed after recordation and before
return as directed on the Deed.
The Deed names _______________________, a _______________________, as
Grantor and ______________________, a ______________________ as Grantee. The
property being transferred is located in the City of Sacramento, County of
Sacramento, State of California.
The amount of documentary transfer tax due on the attached deed is
___________________ Dollars and _______________ Cents ($________________),
computed on the full value of the property (less the value of any liens and
encumbrances remaining on the property at the time of sale).
Very truly yours,
By
-----------------------------------------
35
<PAGE>
EXHIBIT D
BILL OF SALE
------------
Concurrently with the execution and delivery of this Bill of Sale (the
"Assignment"), 2525 NATOMAS INVESTORS, a California limited partnership
("Assignor"), is conveying to PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership ("Assignee"), by Grant Deed (the "Deed"), that
certain tract of land located in Sacramento County, California, being more
particularly described on Exhibit "A" attached hereto and made a part hereof for
-----------
all purposes, together with the improvements located thereon (collectively the
"Property").
Assignor desires to assign, transfer, and convey to Assignee certain
tangible personal property, together with certain contract rights, guaranties,
licenses, and other specified items of intangible property (but specifically
excluding cash), affixed or attached to the Property, except those owned by
tenants of the Property (such tangible and intangible properties herein below
specified being collectively called the "Assigned Properties").
NOW, THEREFORE, in consideration of the receipt of Ten Dollars ($10.00) and
other good and valuable consideration in hand paid by Assignee to Assignor, the
receipt and sufficiency of which are acknowledged and confessed by Assignor,
Assignor ASSIGNS, TRANSFERS, SETS OVER, and DELIVERS to Assignee, its successors
and assigns, subject to any and all matters of record in Sacramento County,
California, to the extent they affect the Property, all of the Assigned
Properties, including, without limitation of the generality of the foregoing,
the following:
1. All of the personal property owned by Assignor located on or in or
used in connection with the Property, including without limitation the items of
tangible personal property consisting of all furniture, fixtures, equipment,
machinery and other personal property of every kind and nature (excluding cash-
on-hand) located on or used or useful in the operation of the Property including
the works of art listed on Exhibit "B".
-----------
2. All of the right, title and interest of Assignor in any intangible
personal property owned by Assignor and used exclusively in the use and
operation of the Property, and all warranties or guarantees received by Assignor
from any contractors, subcontractors, suppliers or material men in connection
with any construction, repairs or alteration of the Property, licenses,
franchises, permits, tenant lists, advertising materials and other similar
rights relating to the use and operation of the Property.
3. The interest of Assignor under all current design contracts, space
planning contracts, construction contracts, subcontracts and purchase orders,
utility contracts, water and sewer service contracts of any nature, maintenance
contracts, management contracts, mortgage documents, certificates of occupancy,
permits, soils reports, insurance policies, and other contracts or documents of
any nature relating to the Property.
36
<PAGE>
4. The trade name "Natomas Corporate Center" (the "Trade Name"), on a
non-exclusive basis, and the business and good will of Assignor which were
acquired in connection with the Property.
TO HAVE AND TO HOLD the Assigned Properties unto Assignee, its successors,
and assigns, forever, and Assignor binds itself, its successors, and assigns, to
WARRANT and FOREVER DEFEND, all and singular, title to the Assigned Properties
(with the exception of the Trade Name) unto Assignee, its successors, and
assigns, against every person whomsoever lawfully claiming or to claim the same
or any part thereof, by, through or under Assignor but not otherwise.
Assignor shall not be responsible for the discharge and performance of any
duties or obligations to be performed and/or discharged in connection with the
Assigned Properties after the date hereof. By acceptance of this Assignment,
Assignee accepts and agrees to perform all of the terms, covenants, and
conditions in connection with the Assigned Properties required to be performed
by the owner thereof, from and after the date hereof, but not prior thereto, and
agrees to indemnify, save, and hold harmless Assignor from and against any and
all loss, liability, claims, or causes of action existing in favor of or
asserted by any party arising out of or relating to Assignee's failure to
perform any duties or obligations required by the owner of the Assigned
Properties after the date hereof.
Assignee shall not be responsible for the discharge and performance of any
duties or obligations required to be performed and/or discharged in connection
with the Assigned Properties prior to the date hereof. In such regard Assignor
agrees to indemnify and hold Assignee harmless from and against losses incurred
by Assignee as a result of claims brought against Assignee, as Assignor's
successor in interest to the Assigned Properties, relating to causes of action
arising from any failure by Assignor to perform or discharge its obligation as
the owner of the Assigned Properties prior to the date hereof.
Simultaneously with the execution and delivery of this Assignment, Assignor
has executed and delivered to Assignee the Deed and the specific conveyances
described in the recitals hereof.
37
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment in
multiple counterparts, each of which shall have the same force and effect as an
original, but which shall constitute one and the same instrument, effective this
________ day of ____________, 1997.
ASSIGNEE:
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
a Delaware limited partnership
By: PRENTISS PROPERTIES I, INC., a Delaware
corporation, its sole general partner
By: /s/ MARK R. DORAN
----------------------------------------
Name: Mark R. Doran
Title: Executive Vice President
ASSIGNOR:
2525 NATOMAS INVESTORS, a California limited
partnership
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
38
<PAGE>
EXHIBIT "A"
-----------
PROPERTY DESCRIPTION
39
<PAGE>
EXHIBIT "B"
-----------
WORKS OF ART
40
<PAGE>
EXHIBIT E
DUE DILIGENCE DOCUMENTS
-----------------------
1. Form Lease
2. All tenant leases and amendments
3. Leasing Status reports, weekly basis
4. Lease proposals
5. Service and Purchase Contracts
6. Equipment Leases
7. Union Contracts
8. Other Contracts and Agreements
9. Operating Licenses and Permits
10. Lease Commission Agreements and Schedules of Commissions Payable
11. Current Year Operating Budget
12. Operating Statements, past two years and current year, monthly basis
13. Receivables Report, update on monthly basis
14. Rent Roll, update on monthly basis
15. Billing Register, update on monthly basis
16. Escalation Work Papers and Base Year Amount Details
17. Utility Invoices, past two years and current monthly
18. Real Estate Tax Bills, past two years
19. Current Notice of Assessment Valuation
20. Tax Parcel Map
21. Real Estate Tax Consultant Report
22. Tenant Credit Reports (to the extent that they are in the tenant files) to
be reviewed at the Property during the Due Diligence Period
23. Tenant Financial Statements (to the extent that they are in the tenant
files) to be reviewed at the Property during the Due Diligence Period
24. Schedule of Capital and Tenant Improvements
25. Current Schedule of Insurance
26. Pending Insurance Claims
27. List of Personnel & Wages
28. Lease and Tenant Files, to be reviewed at the Property during the Due
Diligence Period
29. Vendor Files, to be reviewed at the Property during the Due Diligence
Period
30. Construction Files, to be reviewed at the Property during the Due Diligence
Period
31. Other Property Files, to be reviewed at the Property during the Due
Diligence Period
32. List of Personal Property
33. Demising/Leasing/Site Plan
34. Plans and Specifications, 2 sets of each
(a) Architectural
(b) Structural
(c) Civil
(d) Mechanical
(e) Landscaping
41
<PAGE>
(f) Sprinkler
(g) Tenant
35. Certificates of Occupancy, building and tenant
36. Construction Contracts
37. Guaranties & Warranties
38. Existing Reports
(a) Structural and Engineering
(b) Environmental and Asbestos
(c) Soils
(d) Radon
(e) Geotechnical
(f) Ground Water Monitoring
(g) Sprinkler Test
(h) Elevator Consultant
39. Preliminary Title Report issued by Stewart Title Guaranty
40. Underlying Recorded Documents
41. Existing Survey
42
<PAGE>
EXHIBIT F
RENT ROLL
---------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date
43
<PAGE>
EXHIBIT G
TENANT ESTOPPEL
---------------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date
44
<PAGE>
EXHIBIT H
TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
------------------------------------------------
To inform PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware
limited partnership ("TRANSFEREE"), that withholding of tax under Section 1445
of the Internal Revenue Code of 1986, as amended ("CODE"), will not be required
upon the transfer of certain real property to the Transferee by 2525 NATOMAS
INVESTORS, a California limited partnership ("TRANSFEROR"), the undersigned
hereby certifies the following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Code and the
Income Tax Regulations promulgated thereunder);
2. The Transferor's U.S. employer identification is ________________;
and
3. The transferor's office address is _______________________________.
The Transferor understands that this Certification may be disclosed to the
Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
The Transferor understands that the Transferee is relying on this
Certification in determining whether withholding is required upon said transfer.
The Transferor hereby agrees to indemnify, defend and hold the Transferee
harmless from and against any and all obligations, liabilities, claims, losses,
actions, causes of action, rights, demands, damages, costs and expenses of every
kind, nature or character whatsoever (including, without limitation, actual
attorneys' fees and court costs) incurred by the Transferee as a result of: (i)
the Transferor's failure to pay U.S. federal income tax which the Transferor is
required to pay under applicable U.S. law; or (ii) any false or misleading
statement contained herein.
Under penalty of perjury I declare that I have examined this Certification
and to the best of my knowledge and belief it is true, correct and complete, and
I further declare that I have authority to sign this document on behalf of the
Transferor.
Dated: ________, 1997 2525 NATOMAS INVESTORS, A
CALIFORNIA LIMITED PARTNERSHIP
BY:
---------------------------------------
BY:
---------------------------------------
45
<PAGE>
EXHIBIT I
ASSIGNMENT OF LEASES
--------------------
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
SPACE ABOVE THIS LINE FOR RECORDER'S USE
ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS
THIS ASSIGNMENT OF RIGHTS, LEASES AND SECURITY DEPOSITS is made as of
____________________, 1997 by _______________, a _________________ ("Assignor"),
in favor of __________________, a ________________________ ("Assignee"),
with reference to the following facts:
A. Assignor is the owner of that certain land ("Land") located in the
City of Sacramento, County of Sacramento, State of California more particularly
described in Schedule 1 hereto, and all rights, privileges and easements
appurtenant to the Land ("Appurtenances"), and all buildings and other
improvements thereon ("Improvements"). The Land, the Appurtenances, and the
Improvements are hereinafter referred to collectively as the "Real Property."
The Real Property is being conveyed to Assignee pursuant to a Grant Deed of even
date herewith, executed by Assignor in favor of Assignee which is being recorded
concurrently herewith.
B. Assignor, as owner of the Real Property, has an interest, as
landlord, in the tenant leases of space in the Improvements ("Leases"), which
are described in Schedule 2 hereto, and an interest in certain security deposits
collected and held by Assignor to secure the performance of the duties and
obligations of tenants under certain of the Leases ("Security Deposits").
C. Assignor desires to assign, transfer and convey to Assignee all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
NOW, THEREFORE, Assignor agrees as follows:
1. Assignor hereby assigns, transfers and conveys to Assignee, all of
Assignor's right, title and interest in and to the Leases and the Security
Deposits.
46
<PAGE>
2. Assignor warrants and represents that:
(a) Schedule 2 hereto is a list of all of the leases affecting the Real
Property, other than subleases permitted by the respective leases; Assignor has
not executed or otherwise entered into any other leases, tenancies, occupancy
agreements or other agreements with respect to rights affecting possession of
the Real Property or any portion thereof; and there are no such agreements
executed or otherwise entered into by any third party, and
(b) the Leases are in full force and effect and there is no default on the
part of Assignor as landlord or on the part of any tenant, and there exists no
condition that with the passage of time or the giving of notice or both would
constitute such a default.
(c) Cross-Indemnity.
---------------
(i) By Assignor. Assignor indemnifies and holds harmless Assignee
-----------
from and against any and all loss, damage, liability, cost or expense,
including, without limitation, court costs and reasonable attorneys' fees,
arising out of, by reason of, or in connection with any action, suit, charge,
complaint, proceeding, obligation, undertaking or other similar matter arising
out of or in connection with any transaction, event, act or omission involving
the Leases and Security Deposits which occurred, accrued and/or arose prior to
the date hereof.
(ii) By Assignee. Assignee indemnifies and holds harmless Assignor
-----------
from and against any and all loss, damage, liability, cost or expense,
including, without limitation, court costs and reasonable attorneys' fees,
arising out of, by reason of, or in connection with any action, suit, charge,
complaint, proceeding, obligation, undertaking or other similar matter arising
out of or in connection with any transaction, event, undertaking, act or
omission involving the Leases and Security Deposits which occurs, accrues and
arises from and after the date hereof.
3. The provisions of this Agreement of Rights, Leases and Security
Deposits shall be binding upon and inure to the benefit of Assignor and Assignee
and their respective successors and permitted assigns.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment of
Rights, Leases and Security Deposits as of the date first set forth above.
ASSIGNEE: ASSIGNOR:
BY: BY:
- ----------------------------------- --------------------------------------
ITS: ITS:
- ----------------------------------- --------------------------------------
DATE: DATE:
- ----------------------------------- --------------------------------------
47
<PAGE>
EXHIBIT J
NOTICES TO TENANT
-----------------
Premises: ________________________________
Lease dated ________________ between ___________________, a
Landlord, and _____________, a
____________________________, Tenant
This is to notify you that the undersigned has sold its fee interest in the
__________ and in connection therewith has assigned its interest as landlord
under your lease to ________________________, a ____________________, whose
address is ______________________________.
You are further notified that commencing ___________________________, 1997,
all rental payments under your Lease shall be paid to _________________________,
at the address specified in the first paragraph hereof, unless you are otherwise
notified in writing by __________________________. You are further notified that
all notices to the Landlord pursuant to your lease should hereafter be sent to
______________________ at the address specified in the first paragraph hereof
unless you are otherwise notified in writing by _______________________________.
Very truly yours,
CERTIFIED MAIL,
RETURN RECEIPT REQUESTED.
48
<PAGE>
EXHIBIT K
WORKS OF ART
------------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date
49
<PAGE>
EXHIBIT L
DESCRIPTION OF TERMS OF STATE OF CALIFORNIA LEASE
-------------------------------------------------
To be delivered to Buyer and/or Seller within 5 business days of the Effective
Date
50
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Report on Form 8-K of
Prentiss Properties Trust dated April 2, 1997 of our report dated March 12, 1997
on our audit of the Combined Statement of Revenues and Certain Operating
Expenses of the Natomas Properties for the year ended December 31, 1996,
appearing in the registration statement on Form S-11 (File No. 333-23989) of
Prentiss Properties Trust filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933.
Coopers & Lybrand L.L.P.
Dallas, Texas
June 11, 1997
<PAGE>
EXHIBIT 99.1
PRENTISS PROPERTIES TRUST
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following unaudited pro forma consolidated balance sheet is presented as
if the following transactions had been consummated on December 31, 1996: (i)
the acquisition of the 1997 Acquired Properties (ii) the acquisition of the
Pending Acquisitions (iii) the closing of the Mortgage Loan and (iv) the
completion of the Offering. This pro forma consolidated balance sheet should
be read in conjunction with the pro forma consolidated statement of income of
the Company for the year ended December 31, 1996 and the historical
consolidated and combined financial statements and notes thereto of the
Company and the Predecessor Company included elsewhere in this Prospectus.
The pro forma consolidated balance sheet is not necessarily indicative of
what the actual financial position would have been had the Company completed
the transactions described above, nor does it purport to represent the future
financial position of the Company.
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------------------------------- PRENTISS
PRENTISS 1997 PROPERTIES
PROPERTIES ACQUIRED PENDING OTHER TRUST
TRUST PROPERTIES ACQUISITIONS OFFERING ADJUSTMENTS PRO FORMA
---------- ---------- ------------ -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Real estate, net....... $482,528 $16,104 (A) $243,335 (A) $ 5,276 (A) $747,243
Mortgage note
receivable............ 16,510 (A) 16,510
Deferred charges and
other assets, net..... 11,747 1,658 (B) 13,405
Receivables, net....... 5,356 5,356
Cash and cash
equivalents........... 7,226 (704)(C) (247,845)(C) $135,850 (C) 111,995 (C) 6,522
Escrowed cash.......... 867 867
Other receivables
(affiliates).......... 1,346 1,346
Investments in joint
venture and
unconsolidated
subsidiaries.......... 21,956 21,956
-------- ------- -------- -------- -------- --------
Total Assets.......... $531,026 $15,400 $ 12,000 $135,850 $118,929 $813,205
======== ======= ======== ======== ======== ========
Liabilities:
Debt on real estate.... $128,800 $15,400 (D) $ 12,000 (D) $119,071 (D) $275,271
Accounts payable and
other liabilities..... 15,868 15,868
Distributions payable.. 7,309 7,309
-------- ------- -------- -------- -------- --------
Total Liabilities..... 151,977 15,400 12,000 119,071 298,448
-------- ------- -------- -------- -------- --------
Minority interest....... 53,828 4,400 (F) 58,228
-------- ------- -------- -------- -------- --------
Shareholders' Equity:
Common shares.......... 203 $ 60 (E) 263
Additional paid-in
capital............... 326,309 131,390 (F) 457,699
Distributions in excess
of accumulated
earnings.............. (1,291) (142)(B) (1,433)
-------- ------- -------- -------- -------- --------
Total Shareholders'
Equity............... 325,221 131,450 (142) 456,529
-------- ------- -------- -------- -------- --------
Total Liabilities and
Shareholders'
Equity............... $531,026 $15,400 $ 12,000 $135,850 118,929 $813,205
======== ======= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this pro forma consolidated
balance sheet.
F-2
<PAGE>
PRENTISS PROPERTIES TRUST
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
PRO FORMA ADJUSTMENTS
(A) Represents the purchase prices (including estimated closing costs) of
properties acquired by the Company subsequent to December 31, 1996 (the "1997
Acquired Properties") and the properties that the Company intends to acquire
concurrent with the Offering (the "Pending Acquisitions") as follows:
<TABLE>
<CAPTION>
1997 ACQUIRED PROPERTIES PURCHASE PRICE
------------------------ --------------
<S> <C>
4401 Fair Lakes Court..................................... $ 6,256
5211 South 3rd Street..................................... 9,848
---------
$ 16,104
=========
<CAPTION>
PENDING ACQUISITIONS
--------------------
<S> <C>
Properties:
Natomas Corporate Center.................................. $ 78,156
Corporetum Office Campus.................................. 51,229
Seven Mile Crossing....................................... 22,148
Crescent Centre(1)........................................ 25,146
Pacific Gateway Office Center............................. 24,486
16801 South Exchange...................................... 11,684
Baltimore Industrials(2).................................. 10,039
Six Flags Distribution Center............................. 8,865
Bridgestone Distribution Center........................... 4,470
Day Creek Industrial Park................................. 7,112
---------
243,335
Mortgage Note:
The Colonnade II.......................................... 16,510
---------
Total Pending Acquisitions................................ $ 259,845
=========
<CAPTION>
CONSTRUCTION IN PROGRESS
------------------------
<S> <C>
Federal Express(3)........................................ $ 5,276
=========
(1) The purchase price of Crescent Centre will be comprised of a
payment of cash of $13,146 and assumption of debt of $12,000.
(2) The Baltimore Industrials include 8779 Greenwood Place and the
Route 100 Building.
(3) From January 1, 1997 to March 31, 1997, the Company incurred
indebtedness to fund construction in progress for the development
of an industrial building for Federal Express.
(B) Represents $1.8 million of financing costs incurred in connection with
$180.1 million of mortgage debt borrowed from an affiliate of Lehman Brothers
Inc., offset by $142 of unamortized deferred financing costs written-off as a
result of the repayment of the related mortgage indebtedness. As discussed in
Note (D), a portion of the proceeds of the debt will be utilized to pay-off
the borrowings under the Company's line of credit and other mortgage
indebtedness. The remaining proceeds will be utilized to fund property
acquisitions. The financing costs will be amortized over the 10 year term of
the mortgage debt.
(C) Represents the cash transactions as follows:
Working capital used to acquire the 1997 Acquired Proper-
ties..................................................... $ (704)
Cash to be used to acquire the Pending Acquisitions....... (247,845)
Net cash proceeds of the Offering described in Note (F)... 135,850
Net increase in cash from the borrowings described in Note
(D)...................................................... 113,795
Financing costs incurred in connection with the borrowings
described in Note (B).................................... (1,800)
---------
$ (704)
=========
</TABLE>
F-3
<PAGE>
PRENTISS PROPERTIES TRUST
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(D) Represents the debt transactions as follows:
<TABLE>
<S> <C>
Increase in borrowing under the line of credit to fund the
acquisition of the 1997 Acquired Properties.................. $ 15,400
Debt assumed in connection with the acquisition of the Pending
Acquisitions................................................. 12,000
Proceeds from borrowings on the Federal Express construction
loan......................................................... 5,276
Proceeds from borrowings from an affiliate of Lehman Brothers
Inc. ........................................................ 180,100
Repayment of borrowings on the line of credit................. (26,305)
Repayment of other borrowings from an affiliate of Lehman
Brothers Inc. ............................................... (40,000)
--------
Net increase in debt on real estate........................... $146,471
========
</TABLE>
Following such debt transactions, debt outstanding is comprised of the
following:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT RATE
--------- --------
<S> <C> <C>
Mortgage debt with an affiliate of Lehman
Brothers Inc.(1)................................ $180,100 7.57%
Line of Credit................................... 61,895 7.25%(/2/)
Mortgage debt on Crescent Centre................. 12,000 7.95%
Mortgage debt on Walnut Glen..................... 10,000 7.50%
Mortgage debt on FHP Building.................... 6,000 7.30%
Construction loan for Federal Express............ 5,276 7.35%(/3/)
--------
$275,271
========
</TABLE>
(1) The Company entered into a loan agreement with an affiliate of
Lehman Brothers Inc., whereby the Company had the ability to borrow
up to the maximum of $180.1 million by March 26, 1997. In an effort
to maximize the amount available for future acquisitions, the
Company exercised the option to maximize the borrowings under the
loan agreement.
(2) The Line of Credit has a variable interest rate of (LIBOR + 1.75%.
LIBOR was 5.5% at December 31, 1996.
(3) This loan has a variable interest rate of LIBOR + 1.85%. LIBOR was
5.5% at December 31, 1996.
(E) Represents the issuance of 6 million ($.01 par value per share) common
shares in the Offering.
(F) Represents the net proceeds obtained from the issuance of 6 million
common shares in the Offering as follows:
<TABLE>
<S> <C>
Gross proceeds from the Offering................................. $144,000
Underwriters' discount........................................... (7,200)
Other offering expenses.......................................... (950)
--------
Net cash proceeds................................................ 135,850
Allocation to minority interest(/1/)............................. (4,400)
Par value of common shares as described in Note (E).............. (60)
--------
$131,390
========
</TABLE>
(1) Represents the minority interest holders' 11.1% interest in the
Operating Partnership subsequent to the Offering.
F-4
<PAGE>
PRENTISS PROPERTIES TRUST
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following unaudited pro forma consolidated statement of income is
presented as if (i) the consummation of the IPO, the Offering and related
Formation Transactions, (ii) the closing of the Mortgage Loan, (iii) the
acquisition of the Acquired Properties, and (iv) the acquisition of the
Pending Acquisitions had occurred on January 1, 1996.
This pro forma consolidated statement of income should be read in
conjunction with the pro forma consolidated balance sheet of the Company and
the historical consolidated and combined financial statements and notes
thereto of the Company and the Predecessor Company included elsewhere in the
Prospectus.
The pro forma consolidated statement of income is not necessarily indicative
of what actual results would have been had the previously described
transactions actually occurred as of January 1, 1996 nor does it purport to
represent the operations of the Company for future periods.
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS PRO FORMA ADJUSTMENTS
COMPANY PREDECESSOR ----------------------- ------------------------
HISTORICAL COMPANY FORMATION PRENTISS
OCT. 22, 1996 JAN. 1, 1996 TRANSACTIONS PROPERTIES
THROUGH THROUGH ACQUIRED AND OTHER PENDING OTHER TRUST
DEC. 31, 1996 OCT. 21, 1996 PROPERTIES ADJUSTMENTS SUBTOTAL ACQUISITIONS ADJUSTMENTS PRO FORMA
------------- ------------- ---------- ------------ -------- ------------ ----------- ----------
(A) (B) (C) (D)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income......... $13,485 $27,086 $18,379 $ 24,599 $83,549 $33,763 $117,312
Mortgage interest..... 1,269 1,269
Management fees....... 192 7,903 (7,127) 968 968
Development, leasing,
sale and other fees.. 110 9,607 242 (8,451) 1,508 789 2,297
------- ------- ------- -------- ------- ------- -------- --------
Total revenues........ 13,787 44,596 18,621 9,021 86,025 35,821 121,846
------- ------- ------- -------- ------- ------- -------- --------
Expenses:
Property operating and
maintenance.......... 3,618 7,550 4,351 6,294 21,813 9,284 $ (761) 30,336
Real estate taxes..... 1,162 3,085 2,512 1,432 8,191 3,259 11,450
General and
administrative....... 547 5,304 (3,390) 2,461 52 2,513
Personnel costs, net.. 505 11,991 (10,427) 2,069 215 2,284
Interest expense...... 759 4,549 6,015 11,323 8,940 20,263
Amortization of
deferred financing
costs................ 87 1,402 (1,019) 470 63 533
Depreciation and
amortization......... 2,696 5,993 8,181 16,870 5,407 22,277
------- ------- ------- -------- ------- ------- -------- --------
Total expenses........ 9,374 39,874 6,863 7,086 63,197 12,543 13,916 89,656
------- ------- ------- -------- ------- ------- -------- --------
Equity in joint venture
and unconsolidated
subsidiaries.......... 1,427 18 3,291 4,736 1,190 5,926
------- ------- ------- -------- ------- ------- -------- --------
Income before minority
interest and gain on
sale of property...... 5,840 4,740 11,758 5,226 27,564 23,278 (12,726) 38,116
Minority interest...... (844) (3,098) (3,942) (384) (4,326)
------- ------- ------- -------- ------- ------- -------- --------
Income before gain on
sale of property...... 4,996 4,740 11,758 2,128 23,622 23,278 (13,110) 33,790
Gain on sale of
property.............. 378 (378)
------- ------- ------- -------- ------- ------- -------- --------
Net income............. $ 4,996 $ 5,118 $11,758 $ 1,750 $23,622 $23,278 $(13,110) $ 33,790
======= ======= ======= ======== ======= ======= ======== ========
Net income per common
share................. $ 0.25 $ 1.16 $ 1.29
======= ======= ========
Weighted average number
of common shares
outstanding........... 20,002 20,280 26,280
======= ======= ========
</TABLE>
The accompanying notes are an integral part of this pro forma consolidated
statement of income.
F-5
<PAGE>
PRENTISS PROPERTIES TRUST
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA ADJUSTMENTS
(A) Represents the 1996 historical revenues in excess of certain operating
expenses of the properties acquired by the Company subsequent to the IPO for
the period prior to acquisition by the Company. Eight properties, five office
and three industrial were acquired subsequent to the IPO from October 22, 1996
through December 31, 1996 (the "1996 Acquired Properties"). Two properties,
one office and one industrial property, were acquired by the Company
subsequent to December 31, 1996 (the "1997 Acquired Properties"). The 1996
Acquired Properties include 1717 Deerfield Road and O'Hare Plaza II
(collectively, the "Chicago Office Properties"); FHP Building; 2411 Dulles
Corner Park and 2455 Horsepen Road (collectively, the "Dulles Properties");
155 Alexandra Way and Wood Dale 1 & 2 (collectively, the "Chicago Industrial
Properties"). The 1997 Acquired Properties include 4401 Fair Lakes Court and
5211 South 3rd Street.
The expenses excluded from the operations of the Acquired Properties are
interest and depreciation and amortization.
<TABLE>
<CAPTION>
1996 ACQUIRED PROPERTIES 1997 ACQUIRED PROPERTIES
--------------------------------------------- --------------------------------
CHICAGO CHICAGO 4401 TOTAL
OFFICE FHP DULLES INDUSTRIAL FAIR LAKES 5211 SOUTH ACQUIRED
PROPERTIES(1) DENVER PROPERTIES(2) PROPERTIES COURT 3RD STREET PROPERTIES
------------- ------ ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income........... $6,796 $2,920 $5,947 $1,104 $862 $750 $18,379
Other income............ 143 61 14 24 242
------ ------ ------ ------ ---- ---- -------
Total revenues......... 6,939 2,981 5,961 1,128 862 750 18,621
------ ------ ------ ------ ---- ---- -------
Property operating and
maintenance............ 1,236 928 1,628 184 331 44 4,351
Real estate taxes....... 1,578 218 336 175 58 147 2,512
------ ------ ------ ------ ---- ---- -------
Total expenses......... 2,814 1,146 1,964 359 389 191 6,863
------ ------ ------ ------ ---- ---- -------
Revenues in excess of
certain operating
expenses............... $4,125 $1,835 $3,997 $ 769 $473 $559 $11,758
====== ====== ====== ====== ==== ==== =======
</TABLE>
(1) The acquisition of the Chicago Office Properties occurred on December 11,
1996 through December 13, 1996. The operations presented above reflect the
1996 revenues in excess of certain operating expenses for the period prior
to acquisition. The Combined Statement of Revenues and Certain Operating
Expenses for the Chicago Office Properties included elsewhere in this
prospectus include the historical revenues in excess of certain operating
expenses for the entire year ended December 31, 1996.
(2) The acquisition of the Dulles Properties occurred on December 31, 1996.
The Combined Statement of Revenues and Certain Operating Expenses for the
Dulles Properties are included elsewhere in this prospectus.
(B) Represents pro forma adjustments made to reflect the ownership by the
Company of all properties acquired concurrent with the IPO and certain other
Formation Transactions as if these transactions occurred on January 1, 1996.
The column totals reflect the net adjustments presented on the Company's Pro
Forma Consolidated Statement of Income for the year ended December 31, 1996.
The following table should be read in conjunction with the notes that follow.
F-6
<PAGE>
PRENTISS PROPERTIES TRUST
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMORT
PROPERTY REAL PER- OF
PRO FORMA RENTAL MGMT OTHER OPERATING ESTATE GEN & SONNEL INTEREST DEF FIN DEPR & INVEST MINORITY
ADJUSTMENT INCOME FEES FEES & MAINT. TAXES ADMIN COSTS EXPENSE COSTS AMORT INCOME INTEREST
---------- ------- ------- ------- --------- ------ ------- -------- -------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(1) Acquisition
of properties
concurrent with
IPO............ $24,599 $ 131 $7,241 $1,432
(2) Assignment of
contracts........ $(6,529) (7,549) $(2,597) $ (8,628)
(3) Equity
investment
income........... $2,934
(4) Management of
REIT
properties..... (598) (598)
(5) Acquisition
and management
of REIT
properties..... (349)
(6) Other fees
and recoveries... (1,033)
(7) Advisory
fees............. (717)
(8) Prop mgmt g&a
and salaries... (121) (1,622)
(9) Special
compensation..... (177)
(10) Mortgage
interest......... $6,015
(11) Amortization
of deferred
financing
costs.......... $(1,019)
(12) Depreciation
expense.......... $8,181
(13) Consolidation
of Austex........ 45 357
(14) Minority
ownership
interest......... $(3,098)
(15) Gain on sale
of property......
------- ------- ------- ------ ------ ------- -------- ------ ------- ------ ------ -------
Total........... $24,599 $(7,127) $(8,451) $6,294 $1,432 $(3,390) $(10,427) $6,015 $(1,019) $8,181 $3,291 $(3,098)
======= ======= ======= ====== ====== ======= ======== ====== ======= ====== ====== =======
<CAPTION>
PRO FORMA GAIN
ADJUSTMENT ON SALE
---------- -------
<S> <C>
(1) Acquisition
of properties
concurrent with
IPO............
(2) Assignment of
contracts........
(3) Equity
investment
income...........
(4) Management of
REIT
properties.....
(5) Acquisition
and management
of REIT
properties.....
(6) Other fees
and recoveries...
(7) Advisory
fees.............
(8) Prop mgmt g&a
and salaries...
(9) Special
compensation.....
(10) Mortgage
interest.........
(11) Amortization
of deferred
financing
costs..........
(12) Depreciation
expense..........
(13) Consolidation
of Austex........
(14) Minority
ownership
interest.........
(15) Gain on sale
of property...... $(378)
-------
Total........... $(378)
=======
</TABLE>
(1) Concurrent with the IPO, the Company acquired certain properties
including Park West C2, the Los Angeles Industrial Properties, One
Northwestern Plaza, Cottonwood, 9050 Junction, Westloop Business Park, Park
West E1, Park West E2, 3141 Fairview Park and the Plaza on Bachman Creek. The
historical results of operations of each property are presented below for the
period in 1996 which the property was not included in the results of
operations of the Predecessor Company. With respect to the 3141 Fairview Park
Drive and the Plaza on Bachman Creek properties, the information below
includes the results of operations for the period January 1, 1996 through
February 22, 1996 and January 1, 1996 through August 18, 1996, respectively,
which reflects the period prior to the acquisition of the property by the
Predecessor Company.
<TABLE>
<CAPTION>
LOS ONE
PARK ANGELES NORTH- WESTLOOP 3141 PLAZA ON
WEST INDUSTRIAL WESTERN COTTON- 9050 BUSINESS PARK PARK FAIRVIEW BACHMAN
C2 PROPERTIES PLAZA WOOD JUNCTION PARK WEST E1 WEST E2 PARK CREEK TOTAL
------ ---------- ------- ------- -------- -------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental income......... $6,954 $4,744 $4,158 $1,833 $383 $494 $2,387 $2,215 $489 $942 $24,599
Other income.......... 68 46 7 1 2 2 2 3 131
------ ------ ------ ------ ---- ---- ------ ------ ---- ---- -------
Total Revenue......... 7,022 4,790 4,165 1,834 383 494 2,389 2,217 491 945 24,730
Expenses:
Property operating and
maintenance.......... 1,666 1,179 1,173 699 40 110 880 939 216 339 7,241
Real estate taxes..... 525 141 370 219 60 1 33 83 1,432
------ ------ ------ ------ ---- ---- ------ ------ ---- ---- -------
Total expenses........ 2,191 1,320 1,543 918 40 170 880 940 249 422 8,673
------ ------ ------ ------ ---- ---- ------ ------ ---- ---- -------
Revenue in excess of
certain operating
expenses.............. $4,831 $3,470 $2,622 $ 916 $343 $324 $1,509 $1,277 $242 $523 $16,057
====== ====== ====== ====== ==== ==== ====== ====== ==== ==== =======
</TABLE>
F-7
<PAGE>
PRENTISS PROPERTIES TRUST
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(2) In connection with the Formation Transactions, certain third-party
management contracts were assigned to the Manager. As a result of the
assignment, current operating income, expenses and overhead attributable to
the contracts will be reflected in the operations of the Manager as detailed
below:
<TABLE>
<S> <C>
Management fees................................................... $ 6,529
Other fees and recoveries......................................... 7,549
General and administrative........................................ (2,597)
Personnel cost, net............................................... (8,628)
-------
Manager contract income........................................... $ 2,853
=======
</TABLE>
In addition to the above, the Manager will benefit from a reduction in
occupancy cost of approximately $235, resulting in net income to the Manager
of $3,088.
(3) Represents the equity interest of $2,934 on the $3,088 net income of the
Manager as the Operating Partnership owns a 95% economic interest in the
Manager.
(4) Represents the intercompany elimination of management fee revenues and
expenses (property operating and maintenance) of $598 as a result of the in-
house management of the Company's properties.
(5) Represents a reduction in property management fee expense (property
operating and maintenance) of $349 previously paid to a third party.
Subsequent to the acquisition of these properties, the properties are managed
by the Company.
(6) Represents a reduction of $1,033 in recovery revenues, received from
property owners, as a result of certain tax and legal services performed in
the operations of the Predecessor Company that are not now performed by the
Company.
(7) Represents the decrease of $717 in fees formerly paid by the Predecessor
Company to an affiliate for acquisition and advisory services performed.
(8) Reflects a decrease of $121 and $1,622 in general and administration
expense and personnel costs, net, respectively. The decrease in general and
administration expenses results from an adjustment to reflect the estimated
additional costs of operating as a public company ($850), net of a reduction
in costs primarily attributable to certain services performed historically
that are not now being performed by the Company ($971). The decrease in
personnel costs, net, results from a reduction in base salary being earned by
the Prentiss Principals subsequent to the IPO ($800) as well as a reduction in
salary expense resulting from the staffing changes made concurrent with the
Company's formation ($822).
(9) Reflects the decrease of $177 in compensation paid to the Prentiss
Principals. As a privately held company, PPL distributed a portion of
quarterly cash flow in the form of compensation to the Prentiss Principals.
This compensation is not paid by the Company.
F-8
<PAGE>
PRENTISS PROPERTIES TRUST
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(10) Pro forma interest expense prior to the Offering and the acquisition of
the Pending Acquisitions is computed as follows (Interest expense related to
the Federal Express construction loan is not included as this interest will be
capitalized as a cost of the project.):
<TABLE>
<CAPTION>
ANNUAL
PRINCIPAL INTEREST INTEREST
AMOUNT RATE EXPENSE
--------- -------- --------
<S> <C> <C> <C>
Mortgage debt with an affiliate of Lehman
Brothers Inc............................... $96,100 7.57% $ 7,275
Mortgage debt with an affiliate of Lehman
Brothers Inc............................... 40,000 7.15%(1) 2,860
Mortgage debt on Walnut Glen Tower.......... 10,000 7.50% 750
Mortgage debt on FHP Building............... 6,000 7.30% 438
-------
Pro forma annual interest expense......... 11,323
Interest expense included in historical
columns.................................. 5,308
-------
Pro forma interest expense adjustment..... $ 6,015
=======
</TABLE>
(1) This loan has a variable interest rate of LIBOR + 1.65%. LIBOR was 5.50%
at December 31, 1996.
(11) Represents the net decrease of $1,019 in amortization of deferred
financing costs as a result of an increase in amortization of deferred
financing resulting from financing fees incurred on the Line of Credit ($270)
and other borrowings ($103) less a reduction in amortization of deferred
financing costs resulting from costs written-off concurrent with the IPO
($1,392).
(12) Represents the net increase in depreciation and amortization expense as
a result of the acquisition of properties concurrent with the IPO.
Depreciation on newly acquired buildings is provided under the straight-line
method over an estimated useful life of 40 years for office buildings and 30
years for industrial buildings.
(13) Represents the net investment income and general and administration
expenses of $357 and $45, respectively, as a result of the consolidation of
Austex.
(14) Represents net income attributable to the minority investors interest
in the Operating Partnership, before the Offering. The Company, through its
wholly owned subsidiary, is the sole general partner and currently owns
approximately 86.0% of the Operating Partnership before the Offering. The
minority investors own in the aggregate approximately 14.0% of the Operating
Partnership before the Offering. Also includes an immaterial minority interest
in other partnerships.
(15) Represents a gain on sale of a parcel of land totaling $378, completed
by the Predecessor Company prior to the formation of the Company.
(C) Represents the 1996 historical revenues in excess of certain operating
expenses of the properties to be acquired concurrent with the Offering. The
Pending Acquisitions include the Natomas Corporate Center ("the Natomas
Properties"); the Corporetum Office Campus; Seven Mile Crossing; Crescent
Centre; Pacific Gateway Office Center; 16801 South Exchange; Route 100
Building and 8779 Greenwood (collectively, the "Baltimore Industrials"); The
Colonnade II; Six Flags Distribution Center (the "Six Flags Distribution");
and Bridgestone Distribution Center (the "Bridgestone Distribution"). The
Company is purchasing a note, collateralized by the Colonnade II building, and
intends to foreclose on the property during 1997, thus mortgage interest is
included rather than the historical revenues in excess of certain operating
expenses. Also included in the Pending Acquisitions are the Day Creek
Properties, two industrial properties containing 228,382 square feet. The
F-9
<PAGE>
PRENTISS PROPERTIES TRUST
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
properties were under construction during 1996 and therefore, there were no
1996 historical operations. The Pro Forma Consolidated Statement of Income for
the year ended December 31, 1996 does not include any earnings from these
properties.
The expenses excluded from the operations of the Acquired Properties are
interest and depreciation and amortization.
<TABLE>
<CAPTION>
PACIFIC
SEVEN GATEWAY 16801 SIX
NATOMAS CORPORETUM MILE CRESCENT OFFICE SOUTH BALTIMORE COLONNADE FLAGS BRIDGESTONE
PROPERTIES(1) PROPERTIES(2) CROSSING(2) CENTRE(2) CENTER EXCHANGE INDUSTRIALS II DIST. DIST.
------------- ------------- ----------- --------- ------- -------- ----------- --------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental income.... $11,037 $6,710 $4,406 $3,547 $3,594 $1,766 $1,068 $915 $720
Mortgage
interest........ $1,269
Other income..... 128 431 6 12 189 11 1 11
------- ------ ------ ------ ------ ------ ------ ------ ---- ----
Total Revenue... 11,165 7,141 4,412 3,559 3,783 1,777 1,069 1,269 926 720
------- ------ ------ ------ ------ ------ ------ ------ ---- ----
Expenses:
Property
operating and
maintenance..... 2,974 1,784 1,426 1,283 1,271 164 119 138 125
Real estate
taxes........... 993 675 377 304 115 692 103
------- ------ ------ ------ ------ ------ ------ ------ ---- ----
Total expenses.. 3,967 2,459 1,803 1,587 1,386 856 222 138 125
------- ------ ------ ------ ------ ------ ------ ------ ---- ----
Revenue in excess
of certain
operating
expenses........ $ 7,198 $4,682 $2,609 $1,972 $2,397 $ 921 $ 847 $1,269 $788 $595
======= ====== ====== ====== ====== ====== ====== ====== ==== ====
<CAPTION>
TOTAL
-------
<S> <C>
Revenue:
Rental income.... $33,763
Mortgage
interest........ 1,269
Other income..... 789
-------
Total Revenue... 35,821
-------
Expenses:
Property
operating and
maintenance..... 9,284
Real estate
taxes........... 3,259
-------
Total expenses.. 12,543
-------
Revenue in excess
of certain
operating
expenses........ $23,278
=======
</TABLE>
(1) The Combined Statement of Revenues and Certain Operating Expenses for the
Natomas Properties are included elsewhere in this prospectus.
(2) The Corporetum Properties, Seven Mile Crossing, and Crescent Centre
comprise the Combined Statement of Revenues and Certain Operating Expenses
of the Selected 1997 Pending Acquisitions included elsewhere in this
prospectus.
(D) Represents other adjustments to the Pending Acquisitions as follows:
(1) Represents a reduction in property management fee (property operating
and maintenance) of $997, offset by an estimated increase of $236 in other
property management expenses to be incurred by the Company. The decrease in
property management fee results from elimination of the management fees paid
to third-party managers. Subsequent to acquisition, the properties will be
managed by the Company.
(2) The increase of $52 and $215 in general and administrative and personnel
costs, net, represents an estimated increase in staffing and related costs
related to the properties to be acquired.
F-10
<PAGE>
PRENTISS PROPERTIES TRUST
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(3) Pro forma interest expense following the Offering is computed as follows
(Interest expense related to the Federal Express construction loan is not
included as this interest will be capitalized as a cost of the project.):
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT RATE INTEREST
--------- -------- --------
<S> <C> <C> <C>
Mortgage debt with an affiliate of Lehman Brothers
Inc.............................................. $180,100 7.57% $13,634
Line of Credit.................................... 61,895 7.25% 4,487
Mortgage debt on Crescent Centre.................. 12,000 7.95% 954
Mortgage debt on Walnut Glen Tower................ 10,000 7.50% 750
Mortgage debt on FHP Building..................... 6,000 7.30% 438
-------
Pro forma annual interest expense............... 20,263
Interest expense included in previous columns... 11,323
-------
Pro forma interest expense adjustment........... $ 8,940
=======
</TABLE>
(4) Represents an increase of $180 in annual amortization of deferred
financing costs resulting from an estimated $1.8 million of costs incurred in
connection with the new mortgage obtained from an affiliate of Lehman Brothers
Inc., offset by a reduction of $117 in annual amortization of deferred
financing costs that were written-off as a result of the repayment of certain
outstanding indebtedness with proceeds of the Offering and indebtedness.
(5) Reflects the net increase in depreciation and amortization expense of
$5,407 as a result of the acquisition of the properties. Depreciation on
buildings is provided under the straight-line method of over an estimated
useful life of 40 years for office buildings, and 30 years for industrial
buildings. The estimated purchase price of the Pending Acquisition properties
(including estimated closing costs) is as follows:
<TABLE>
<CAPTION>
TOTAL
ALLOC. TO PURCHASE
PROPERTY TYPE LAND BUILDINGS PRICE
-------- ---------- ------- --------- --------
<S> <C> <C> <C> <C>
Natomas Corporate Center................. Office $14,273 $ 63,883 $ 78,156
Corporetum Office Campus................. Office 7,684 43,545 51,229
Seven Mile Crossing...................... Office 3,322 18,826 22,148
Crescent Centre.......................... Office 3,772 21,374 25,146
Pacific Gateway Office Center............ Office 3,673 20,813 24,486
16801 South Exchange..................... Industrial 1,753 9,931 11,684
Baltimore Industrials.................... Industrial 1,506 8,533 10,039
Six Flags Distribution................... Industrial 1,330 7,535 8,865
Bridgestone Distribution................. Industrial 671 3,799 4,470
Day Creek Industrial Park................ Industrial 1,067 6,045 7,112
------- -------- --------
$39,051 $204,284 $243,335
======= ======== ========
</TABLE>
(6) Reflects the increase in equity in earnings from the Operating
Partnerships 95% economic interest in the Manager, resulting from the
capitalization of certain acquisition costs.
(7) Reflects the adjustment to minority interest to reflect the minority
investors interest in the Operating Partnership of approximately 11.1%
following the Offering. Also includes an immaterial minority interest in other
partnerships.
F-11
<PAGE>
EXHIBIT 99.2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of Prentiss Properties Trust
We have audited the accompanying combined statement of revenues and certain
operating expenses of the Natomas Properties (the "Natomas Properties") for
the year ended December 31, 1996. The combined statement of revenues and
certain operating expenses is the responsibility of the Natomas Properties'
owners. Our responsibility is to express an opinion on the combined statement
of revenues and certain operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined statement of revenues
and certain operating expenses is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the combined statement of revenues and certain operating
expenses. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the combined statement of revenues and certain operating
expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying combined statement of revenues and certain operating
expenses was prepared for the purpose of complying with rules and regulations
of the Securities and Exchange Commission, as described in Note 1, and is not
intended to be a complete presentation of the Natomas Properties' revenues and
expenses and may not be comparable to results from proposed future operations
of the Natomas Properties.
In our opinion, the combined statement of revenues and certain operating
expenses referred to above presents fairly, in all material respects, the
revenues and certain operating expenses described in Note 1 for the year ended
December 31, 1996, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
March 12, 1997
Dallas, Texas
F-32
<PAGE>
THE NATOMAS PROPERTIES
COMBINED STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Revenues:
Rental income........................................................ $11,037
Other income......................................................... 128
-------
11,165
Certain operating expenses:
Real estate taxes.................................................... 993
Repairs and maintenance.............................................. 1,115
Property management.................................................. 638
Utilities............................................................ 1,040
Insurance............................................................ 181
-------
3,967
-------
Revenues in excess of certain operating expenses....................... $ 7,198
=======
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-33
<PAGE>
THE NATOMAS PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION:
The combined statement of revenues and certain operating expenses for the
year ended December 31, 1996 relate to the operations of the Natomas
Properties (the "Natomas Properties"), which are currently under contract to
be acquired by Prentiss Properties Trust from an unaffiliated third-party for
an aggregate purchase price of $78.2 million (including estimated closing
costs and $3 million for adjacent land). The Natomas Properties consist of six
Class "A" suburban office buildings in Sacramento, California. The Natomas
Properties consist of office buildings totaling approximately 564,606 net
rentable square feet.
The accompanying combined statement excludes certain expenses such as
interest, depreciation and amortization and other costs not directly related
to the future operations of these properties that may not be comparable to the
expenses expected to be incurred in the proposed future operations of these
properties. Management is not aware of any material factors relating to these
properties which would cause the reported financial information not to be
necessarily indicative of future operating results.
The combined statement of revenues and certain operating expenses have been
prepared on the accrual basis of accounting.
Revenue and Expense Recognition
Rental income is recorded when due from tenants. The effects of scheduled
rent increases and rental concessions, if any, are recognized on a straight-
line basis over the term of the tenant's lease.
During the year ended December 31, 1996, rents attributable to one tenant
represented 24% of total base rental income.
Future Rental Revenues
The properties are leased to tenants under net operating leases. Minimum
lease payments receivable, excluding tenant reimbursement of expenses, under
noncancellable operating leases in effect as of December 31, 1996, are
approximately as follows:
<TABLE>
<S> <C>
1997............................................................. $ 9,740
1998............................................................. 9,201
1999............................................................. 8,755
2000............................................................. 7,309
2001............................................................. 4,638
Thereafter....................................................... 2,405
-------
$42,048
=======
</TABLE>
Office space in the Natomas Properties is generally leased to tenants under
lease terms which provide for tenants to pay for increases in operating
expenses in excess of specified amounts.
Use of Estimates
The preparation of the combined statement of revenues and certain operating
expenses requires management to make estimates and assumptions that affect the
reported amounts, revenues and certain operating expenses during the reporting
period. Actual results could differ from those estimates.
2. RELATED PARTY TRANSACTIONS:
Certain of the owners hold an interest in the management company of the
Properties. Fees incurred under this management agreement were $379,802 for
the year ended December 31, 1996.
F-34
