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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 31, 1996
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
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(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
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2.
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On December 31, 1996, 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 86.0% interest, completed an acquisition of two Class-A suburban office
buildings in Herndon, VA (the "Dulles Properties"). The buildings total
approximately 281,000 square feet and are part of the three million square foot
Dulles Corner Office Park, located at the intersection of Route 28 and the
Dulles Toll Road, adjacent to Dulles International Airport.
The buildings were purchased from Dulles Corner Properties II Limited
Partnership for a purchase price of $40.5 million. The purchase price was paid
through borrowings under the Company's line of credit provided by Bank One,
Texas, N.A. and NationsBank of Texas, N.A.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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Financial Statements and Pro forma Financial Information
As of the date of this report, historical audited financial
information for the two properties is not available. Audited financial
information will be provided for the periods specified under Rule 3-14 of
Regulation S-X within sixty days of this report. Pro forma financial information
for the Company will also be provided at that time.
Exhibits
10.1 - Agreement of Purchase and Sale by and between Dulles Corner
Properties II Limited Partnership ("Seller") and Prentiss Properties Acquisition
Partners, L.P. ("Purchaser") dated December 27, 1996.
99.1 - Buyer's Closing Statement dated December 31, 1996.
2
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EXHIBIT 10.1
CONTRACT
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This Contract (the "Contract") is entered into by and between DULLES
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CORNER PROPERTIES II LIMITED PARTNERSHIP, a Virginia limited partnership
("Seller") and PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P. ("Purchaser").
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RECITALS
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A. Seller owns that certain property commonly known as Park South
(Building 6) and East Court (Building 15) (the "Property") in the Dulles Corner
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Development, all of which is located in Herndon, Fairfax County, Virginia.
B. Seller desires to sell and Purchaser desires to purchase the
Property in accordance with the terms of this Contract.
C. Seller also owns that certain real property known as Parcel 7(a) as
identified on the Conceptual Development Plan dated September 28, 1995 for
Dulles Corner ("Parcel 7(a)").
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FOR AND IN CONSIDERATION of the promises, undertakings, and mutual
covenants of the parties herein set forth, Seller and Purchaser hereby agree to
the following terms and conditions in order to effectuate the foregoing:
ARTICLE I
THE PROPERTY
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Assets Included in the Property. The Property shall include:
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A. That certain property commonly known as the Park South (Building 6)
and East Court (Building 15) located in Herndon, Virginia and described as set
forth on Exhibit A, attached hereto, together with all structures, improvements,
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machinery, fixtures and equipment affixed or attached to the property and all
easements and rights appurtenant to the property (all of the foregoing being
collectively referred to herein as the "Real Property");
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B. All leases, lease amendments, lease guaranties, improvement
agreements, subleases, assignments, licenses, concessions and other agreements
(the "Leases") with all persons ("Tenants") leasing, using or occupying the Real
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Property or any part thereof described in the list of leases (the "List of
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Leases") attached hereto as Exhibit B, together with all security deposits and
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any other deposits held in connection with the Leases (the"Deposits");
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C. All tangible and intangible personal property owned and used in
connection with the Real Property, including, specifically, without limitation,
heating, ventilation and air conditioning systems and equipment, appliances,
furniture, carpeting, draperies and curtains, tools and supplies, and all other
items of personal property and Seller's interest (if any) in the names "Park
South at Dulles Corner" and "East Court at Dulles Corner" (the "Personal
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Property") described in Exhibit C attached hereto;
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D. All contracts, agreements, warranties and guaranties (the
"Contracts") described in Exhibit D attached hereto; and
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E. To the extent transferrable, all building permits, certificates of
occupancy and other certificates, permits, licenses and approvals (the
"Permits") described in Exhibit E attached hereto.
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ARTICLE II
RIGHT OF FIRST REFUSAL
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For a period of eighteen (18) months following the date of closing (the
"Term"), Purchaser shall have the following rights (hereinafter the "Right of
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First Refusal"). If within eighteen (18) months after the date of closing,
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Seller shall receive a bona fide written offer, letter of intent or proposal
executed by Seller and the offering party (each of the foregoing being
hereinafter referred to as an "Offer") for the purchase of Parcel 7(a) (as
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described on Conceptual Development Plan Amendment 86-C-029-4 (Revised) included
in the Proffer Revisions, as hereinafter defined), which Offer Seller desires to
accept, Seller shall give written notice thereof to Purchaser (hereinafter
referred to as the "Offering Notice").
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1. The Offering Notice shall contain the name and address of the
proposed purchaser, an exact copy of the terms and conditions of the
Offer, and an offer to sell the Property to Purchaser upon the same terms
and conditions set forth in the Offer .
2. Purchaser shall have a period of twenty (20) days after receipt of
the Offering Notice (the "Review Period") within which to agree in
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writing to purchase Parcel 7(a) in accordance with the terms of the
Offering Notice , and to deliver to Seller such written agreement, duly
executed by Purchaser. In order to be effective, any written agreement of
Purchaser to purchase Parcel 7(a) shall be accompanied by any earnest
money deposit or other deposit to be made simultaneously or
contemporaneously with the Offer, as provided in the Offer. The closing
on Parcel 7(a) shall occur on the later of thirty (30) days after
Purchaser's acceptance of the Offering Notice or as provided in the
Offer.
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3. If, within the Review Period, Purchaser fails to deliver to Seller
Purchaser's written agreement to purchase Parcel 7(a) in accordance with
paragraph 2, above, Purchaser's rights hereunder shall thereupon be
deemed immediately and irrevocably terminated and of no further force or
effect. The foregoing notwithstanding, if the third-party does not
acquire Parcel 7(a) within the time provided in the Offer and in
accordance with the material terms of the Offer, Purchaser's Right of
First Refusal shall be revived for the remainder of the Term, and Seller
shall not thereafter sell or convey Parcel 7(a) without again offering
the same to Purchaser pursuant to the other terms of this Article II.
4. If, within the Review Period, Purchaser does deliver to Seller
Purchaser's written agreement to purchase Parcel 7(a) in accordance with
such terms and conditions, but thereafter Purchaser defaults and fails to
conclude such purchase, Purchaser's rights hereunder shall be deemed
immediately and irrevocably terminated and of no further force or effect,
and (i) if the Offer does not include any provision for remedies Seller
shall have the right to maintain actions against Purchaser for specific
performance, damages, or both, or (ii) if the Offer does include
provisions for remedies, Seller shall have the right to maintain only
such actions against Purchaser as are provided for in Purchaser's written
agreement to purchase Parcel 7(a).
5. Notwithstanding any contrary provision hereof, this Right of First
Refusal shall neither be effective nor deemed applicable to any of the
following:
a. an offer or transaction involving a transfer of Parcel 7(a) to
one or more partners of Seller or affiliates of said partners;
b. an offer or transaction involving a transfer of Parcel 7(a) to
an entity controlling, controlled by or under common control with
Seller or any of its partners;
c. a conveyance under threat of or pursuant to condemnation by any
governmental authority;
d. a transfer pursuant to any redemption, liquidation or
dissolution agreement or in furtherance of any liquidation or
dissolution of Seller or any redemption of any partnership interest
held by any person or entity in Seller; and
e. a transfer by one or more of the partners of Seller of any
partnership interest in Seller.
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Purchaser shall have no rights with respect to any offer, transaction, sale or
transfer of any of the types described in this paragraph 5. In the event of any
transaction, sale or transfer described in paragraph 5(c), Purchaser's rights
hereunder shall be deemed terminated and shall be of no further force or effect.
In the event of any transaction, sale or transfer described in paragraphs 5(a),
5(b), 5(d), or 5(e), Purchaser's rights hereunder shall not be terminated and
shall continue in full force and effect.
6. If the Offer provides for consideration other than cash, the value
of the non-monetary consideration will be (a) the market value if said
consideration consists of marketable securities, or (b) the value arrived
at by agreement of Purchaser and Seller, or (c) if they do not agree
within the Review Period, the market value shall be determined by
arbitration pursuant to Article XVI.C. hereinafter.
7. Except as regards any transaction included in the provisions of
paragraph 5 above, (i) if the Offer includes property in addition to
Parcel 7(a) that is not within the Dulles Corner development, or if the
Offer includes, in addition to Parcel 7(a), all of Seller's unimproved
land within the Dulles Corner development (or a sufficient portion of
such unimproved land such that the portion remaining with Seller contains
no single parcel with a gross floor area allocation comparable to that
currently allocated for Parcel 7(a)), such other property shall be
excluded from the purchase by Purchaser pursuant to its exercise of
rights hereunder and the purchase price to be paid by Purchaser for
Parcel 7(a) shall be the portion of the entire purchase price that has
been expressly allocated to Parcel 7(a) in the Offer, or, if the Offer
does not contain such an allocation, the purchase price shall be the fair
market value of Parcel 7(a); and (ii) if the Offer includes, in addition
to Parcel 7(a), a portion (but not all) of Seller's unimproved land
within the Dulles Corner development and the portion of such unimproved
land remaining with Seller contains at least one parcel with a gross
floor area allocation comparable to that currently allocated for Parcel
7(a), then Purchaser shall have the option to either (A) designate
another parcel with a gross floor area allocation comparable to Parcel
7(a) from Seller's unimproved land within the Dulles Corner development
not included in the Offer and, upon such designation, such parcel shall
be substituted for Parcel 7(a) for the remaining term of the Right of
First Refusal on the same terms and conditions set forth in this Article
II, Parcel 7(a) shall be released from the terms of the Right of First
Refusal and Seller shall be free to sell Parcel 7(a) in accordance with
the terms of the Offer; or (B) choose not to exercise the Right of First
Refusal in which event the Right of First Refusal shall terminate and be
of no further force and effect; or (C) exercise the Right of First
Refusal and acquire all of the property set forth in the Offer in
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accordance with the terms thereof.
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8. If the Offer includes an exchange of Parcel 7(a) for other real
property or personal property, Seller shall have the right to release its
obligation under this Article II with regard to Parcel 7(a) upon
undertaking in writing to apply the terms of this Article II for the
remaining term of the Right of First Refusal to Parcel 2(a) as identified
on the Conceptual Development Plan dated September 28, 1995 for Dulles
Corner. Upon executing such undertaking, the covenants of this Article II
shall terminate with regard to Parcel 7(a).
9. If the Offer contemplates the provision of Seller financing,
Purchaser shall agree to pay the amount of said financing in cash instead
of utilizing such financing.
10. Neither this Right of First Refusal nor any notice thereof shall be
recorded; if nevertheless recorded by Purchaser, it shall automatically
become null and void and of no force or effect.
11. This Right of First Refusal is personal to Purchaser and may not be
transferred or assigned by Purchaser other than to an assignee of this
Contract permitted hereunder. Any attempted or purported assignment of
this Right of First Refusal by Purchaser shall be null and void and shall
render this Right of First Refusal and Purchaser's rights hereunder null
and void and of no force and effect.
12. The intent of the Right of First Refusal is to allow Purchaser to
match bona fide arms-length offers from third parties made to Seller for
the purchase of all of Seller's right, title and interest in Parcel 7(a)
and Seller agrees that it shall not transfer any interest in Parcel 7(a)
to any party pursuant to Section 5 if such transfer is made in an attempt
to avoid the Right of First Refusal.
ARTICLE III
CONSIDERATION
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Purchaser does herewith deposit the amount of $200,000 with Chicago Title
Insurance Company. Said deposit shall be invested at money market rates. The
deposit and all interest earned thereon shall be referred to herein as the
"Deposit." The Deposit shall be credited against the purchase price at closing
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or otherwise paid to Seller or Purchaser as provided hereunder.
The purchase price shall be $40,500,000 and shall be paid in wire
transfer funds at closing.
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ARTICLE IV
DUE DILIGENCE REVIEW
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Seller has provided or made available to Purchaser at the Property each
of the following (collectively, the "Due Diligence Items"):
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A. An existing as-built ALTA/ACSM Urban Survey of the Property prepared by
a professional land surveyor, which survey will be certified to Purchaser, the
Title Company and Purchaser's lender to a date not more than sixty (60) days
prior to closing and reflecting the following: a metes and bounds legal
description of the Property; all improvements, encroachments, easements and
encumbrances visible or listed on the Title Commitment (identifying each by
recording reference if applicable); the exact number of square feet included
within the land portion of the Property and the dimensions of the surface
perimeter of all improvements; whether the Property (or any portion thereof)
lies within a flood zone or flood prone area; the number of parking spaces
situated on the Property; and a certificate verifying that the Survey was made
on the ground, that the Survey is correct, that there are no improvements,
encroachments, easements, uses or encumbrances except as shown on the survey
plat and that the Property has access to public streets as indicated thereon.
B. A current commitment (the "Title Commitment") for the issuance of an
owner's policy of title insurance to Purchaser from Chicago Title Insurance
Company (the "Title Company"), together with good and legible copies of all
documents constituting exceptions to title as reflected in the Title Commitment
(collectively with the Survey referred to hereinafter as the "Title Documents");
C. Copies of all Leases presently in effect with respect to the Property,
together with any amendments or modifications thereof and other documents such
as lien waivers and non-disturbance and subordination agreements which affect
the rights of the Tenants;
D. A "rent roll" with respect to the Property for the calendar month
immediately preceding the date of this Contract, showing the following with
respect to each Tenant of the Property: the name of the Tenant, the number of
rentable square feet in Tenant's premises as set forth in Tenant's lease, the
current monthly base rental payable by such Tenant, the term of the Lease
including any extension rights, the current amount to be contributed by the
Tenant for operating expenses and other monthly billings, as applicable, and (6)
the amount of Tenant's security deposit, if any;
E. An aging report showing, with respect to each Tenant of the Property,
the date through which such Tenant has paid rent;
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F. A list of all contracts, including service contracts, warranties,
management, maintenance, leasing commission or other agreements affecting the
Property, if any, together with copies of the same. Seller agrees not to enter
into any additional contracts, warranties, or agreements prior to closing which
would be binding on Seller and which cannot be cancelled upon thirty (30) days
written notice without cost, penalty, or obligation unless such service
contracts or other agreements are approved in writing by Purchaser, which
approval shall be in Purchaser's sole and absolute discretion;
G. Copies of all permits, including licenses, permits, applications,
authorizations, certificates of occupancy, governmental approvals and other
entitlements relating to the Property and the operation thereof (if relating to
tenant space, with respect only to current Tenants) in the possession of Seller,
if any;
H. All site plans, leasing plans, as-built plans, drawings, environmental,
mechanical, electrical, structural, soils and similar reports and/or audits and
plans and specifications relative to the Property in the possession of Seller,
if any;
I. True and correct copies of the real estate and personal property tax
statements covering the Property or any part thereof for each of the three (3)
years prior to the current year and, if available, for the current year;
J. True and correct copies of any effective option contracts, construction
contracts, and architectural contracts relating to all or any portion of the
Property;
K. A schedule of all current or pending litigation with respect to the
Property or any part thereof, if any, together with a brief description of each
such proceeding;
L. A schedule of all Personal Property (specifying if any such Personal
Property is leased);
M. A list of any unwritten agreements affecting the Property to which
Seller is a party or of which Seller has knowledge;
N. A schedule of all insurance certificates for current insurance
coverages existing with respect to the Property;
O. A vendor correspondence file available for review at Seller's
management office;
P. Books and records relating to the ownership and operation of the
Property, available for inspection during ordinary business hours at Seller's
management office;
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Q. Operating statements for the Property for calendar years 1993, 1994 and
1995 and calendar year 1996 to date;
R. 1996 operating budget for the Property and report of actual year-to-
date expenses;
S. All owner's association documents; covenants, conditions and
restrictions or architectural design restrictions or approvals relative to the
Property, if any; and
T. All other material information of any kind whatsoever in the possession
of Seller and pertaining to the ownership and operation of the Property.
Seller shall pay the costs associated with providing any of the Due
Diligence Items, but any copies thereof shall be paid for by Purchaser.
Following the date of this Contract, Seller shall provide to Purchaser'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 Purchaser's representatives and independent accounting firm
to prepare audited profit and loss statements for 1993, 1994 and 1995 in
conformity with generally accepted accounting principles and enable them to
prepare such statements, reports, or disclosures as Purchaser may deem necessary
or advisable. Seller shall also provide to Purchaser's independent accounting
firm a signed representation letter in the form of Exhibit M hereof. If, and to
the extent that, Seller's financial statements pertaining to the Property for
any periods during the years 1993, 1994 or 1995 have been audited, promptly
after the execution of this Contract, Seller shall provide Purchaser with copies
of such audited financial statements and shall cooperate with Purchaser's
representatives and independent public accountants to enable them to contact the
auditors who prepared such audited financial statements and to obtain, at
Purchaser's expense, a reissuance of such audited financial statements.
Purchaser shall perform its review of the Due Diligence Items on or before
5:00 p.m. MST December 20, 1996 (which is 30 days following the receipt by
Purchaser of the Due Diligence Items or the date they were made available on the
Property) (the "Due Diligence Period"). On or before expiration of the Due
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Diligence Period, Purchaser shall notify Seller in writing of its approval or
disapproval of the results of its due diligence review. If no written notice is
received by Seller on or before the expiration of the Due Diligence Period, the
Due Diligence Items shall be deemed approved and the parties shall proceed with
closing of the contemplated transaction. If, within the Due Diligence Period,
Purchaser provides Seller with a written notice of disapproval of the Due
Diligence Items, Purchaser's sole and exclusive remedies shall be to terminate
this Contract
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and receive a refund of the Deposit, or waive the objections and close the
transaction as otherwise contemplated herein.
Notwithstanding anything to the contrary contained herein, Purchaser hereby
agrees that, in the event this Contract is terminated for any reason, then
Purchaser shall promptly and at its sole expense return to Seller all Due
Diligence Items which have been delivered by Seller to Purchaser in connection
with Purchaser's inspection of the Property, along with copies of all reports,
drawings, plans, studies, summaries, surveys, maps and other data prepared by
third-parties (not including attorneys) for Purchaser in its investigation and
inspection of the Property, subject, however to any limitations on Purchaser's
right to make any such materials available to Seller that are imposed in any
agreement with a third party consultant preparing any such reports or materials
("Purchaser's Reports"). Purchaser shall cooperate with Seller at no expense to
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Purchaser in order to obtain a waiver of any such limitation.
Except as to those Due Diligence Items made available pursuant to
paragraphs C, D, E, F, J, K, L, M, P, Q, R, and S of this Article IV ("Seller
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Diligence Items"), notwithstanding any contrary provision of this Contract,
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Purchaser acknowledges that Seller is not representing or warranting that
any of the Due Diligence Items are accurate or complete. Seller warrants and
represents that to the best of its knowledge, the Seller Diligence Items are
accurate and complete. Seller advises Purchaser to independently verify the
facts and conclusions set forth in the Due Diligence Items, Seller warrants that
it is not intentionally concealing information regarding the Property.
ARTICLE V
TITLE INSPECTION PERIOD
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Purchaser shall have until 5:00 p.m. MST on December 20, 1996 in which to
review the Title Documents (the "Title Review Period"). If the Title Documents
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reflect or disclose any defect, exception or other matter affecting the Property
("Title Defects") that is unacceptable to Purchaser, in its sole discretion,
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then prior to the expiration of the Title Review Period, Purchaser shall provide
Seller with written notice of Purchaser's objections. Seller may, at its sole
option, elect to cure or remove the objections made by Purchaser; provided,
however, Seller shall have no obligation to do so. Should Seller elect to
attempt to cure or remove the objections, Seller shall have fifteen (15)
business days from the date of Purchaser's written notice of objections (the
"Cure Period") in which to accomplish the cure. In the event Seller either
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elects not to cure or remove the objections or is unable to accomplish the cure
prior to the expiration of the Cure Period, then Seller shall so notify
Purchaser in writing specifying which objections Seller does not intend to cure,
and then Purchaser shall be entitled, as Purchaser's sole and exclusive
remedies, either to (i) terminate this Contract and obtain a refund of the
Deposit by providing written notice of termination to Seller within ten (10)
days
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from the date on which Purchaser receives Seller's no-cure notice or (ii)
waive the objections and close this transaction as otherwise contemplated
herein. If Purchaser shall fail to notify Seller in writing within the Title
Review Period of any objections to the state of title to the Property, then
Purchaser shall be deemed to have no objections to the state of such title and
any exceptions to title or other conditions or matters which have not been
objected to by Purchaser and which are shown on the Survey or described in the
Title Commitment shall be deemed "Permitted Exceptions." Amendment No. 1 to
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Amended and Restated Declaration of Protected Covenants and Restrictions for
Dulles Corner shall be a Permitted Exception.
ARTICLE VI
INSPECTION
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Purchaser, at its sole expense, shall have the right to conduct a
feasibility, environmental, engineering and physical study of the Property at
any time during the Due Diligence Period. Purchaser and its duly authorized
agents or representatives shall be permitted to enter upon the Property at all
reasonable times during the Due Diligence Period in order to conduct engineering
studies, soil tests and any other inspections and/or tests that Purchaser may
deem necessary or advisable. Purchaser must arrange all inspections of the
Property with Seller at least one day in advance of any such inspection. In the
event that the review and/or inspection conducted pursuant to this Article shows
any fact, matter or condition to exist with respect to the Property that is
unacceptable to Purchaser, in Purchaser's sole discretion, then Purchaser shall
be entitled, as its sole and exclusive remedies, to terminate this Contract and
obtain a refund of the Deposit, or waive the objection and close the transaction
as otherwise contemplated herein. If Purchaser, as a result of its inspection of
the Property, terminates this Contract, it agrees to promptly discharge any
liens that may be imposed against the Property as a result of Purchaser's
investigations and to defend, indemnify and hold Seller harmless from all
claims, suits, losses, costs, expenses (including without limitation court costs
and reasonable attorneys' fees), liabilities, judgments and damages incurred by
Seller as a result of any inspections or tests performed by Purchaser.
ARTICLE VII
REPRESENTATIONS, WARRANTIES, AND COVENANTS
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A. Representations and Warranties of Seller. Seller hereby represents
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and warrants to Purchaser as follows:
1. Seller is a limited partnership duly formed and validly existing
under the laws of the State of Virginia. Seller has full power and
authority to enter into this Contract, to perform this Contract and to
consummate the transactions contemplated hereby. The execution, delivery
and performance
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of this Contract and all documents contemplated hereby by Seller have
been duly and validly authorized by all necessary action on the part of
Seller and all required consents and approvals have been duly obtained
and will not result in a breach of any of the terms or provisions of, or
constitute a default under any indenture, agreement or instrument to
which Seller is a party. This Contract is a legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its
terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
the rights of creditors generally;
2. There are no actions, suits, or proceedings pending or, to the best
of Seller's knowledge, threatened against Seller and affecting any
portion of the Property, at law or in equity, or before or by any
federal, state, municipal, or other governmental court, department,
commission, board, bureau, agency, or instrumentality, domestic or
foreign;
3. To the best of Seller's knowledge, Seller has not received any
notice of any violation of any ordinance, regulation, law, or statute of
any governmental agency pertaining to the Property or any portion
thereof;
4. At closing, there will be no unpaid bills, claims, or liens in
connection with any construction or repair of the Property except for
those that will be paid in the ordinary course of business or which have
been bonded over or the payment of which has otherwise been adequately
provided for to the satisfaction of Purchaser;
5. To the best of Seller's knowledge, (i) the Property has never been
used as a waste "dumpsite" and (ii) there has been no material violation
of any environmental requirements of state, local or federal law
including, but not limited to, the Comprehensive Environmental Response
Compensation and Liability Act of 1980, U.S.C. (S) 9601 et seq.;
6. The Personal Property comprises all of the personal property of
Seller that is used in the operation of the Property in the ordinary
course of business and consistent with Seller's current practice; the
Personal Property does not include certain property located in the
property management office that is owned by the property manager;
7. Seller has not received any notice of condemnation of the Property;
8. The Leases constitute all of the leases, licenses, concessions and
other agreements with all persons leasing, using or occupying the Real
Property or any portion thereof, and all of the Leases are in full force
and effect and have not been amended, except pursuant to amendments
delivered to Purchaser;
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9. To the best of Seller's knowledge, Seller has not received any
notice from any third-party alleging that the building or the
improvements located on the Property are defective in design or
construction, are not in good condition and repair, free of roof leaks,
or that any mechanical systems are not in reasonable working order and
repair, to the extent that they have failed to operate in a commercially
reasonable manner consistent with a modern office building, except for
those matters set forth in Exhibit N hereof; provided, however, the
foregoing representation and warranty shall not include any
representation or warranty as to the aesthetic or other subjective
quality of the design of the Real Property or any system, element or
component thereof.
As used in this Contract, phrases such as "to the actual knowledge of
--------------------------
Seller," "to the best of Seller's knowledge," "Seller's knowledge," "Seller has
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no knowledge that," "to the best knowledge of Seller," "Seller has knowledge"
- ----------------- ------------------------------- --------------------
and "Seller does not have any knowledge of" shall be deemed to refer exclusively
-------------------------------------
to matters within the current, actual (as opposed to constructive) knowledge of
Richard A. Post, Christopher J. Marsico and Stewart A. Loewenstein of U S WEST
Real Estate, Inc., and of Steve Carlson of U S WEST Real Estate, Inc. only with
regard to warranties and representations concerning operating statements, books,
records and financial statements relating to the Property, without having made
any investigation of facts or legal issues and without any duty to do so and
without imputing to the aforementioned persons the knowledge of any employee,
agent, representative or affiliate of Seller or any other person or entity;
provided, however, that Seller has made inquiry of the property manager for the
Property as to the accuracy of Seller's representations and warranties made
hereunder. Seller represents and warrants to Purchaser that the foregoing named
individuals are the individuals principally responsible for managing operation
and ownership of the Property.
All of the foregoing representations and warranties of Seller in this
Article are made by Seller as of the date hereof and shall not survive the
closing, but shall be merged into the documents and instruments of closing
(including Seller's Closing Certificate as described hereinbelow) as of the date
of the closing hereunder.
If any of Seller's representations and warranties made hereunder are
found by Purchaser to be incorrect prior to closing to the extent they affect
the Property or its operation in any material respect, Purchaser shall inform
Seller in writing and Purchaser's sole remedy shall be termination of this
Contract on account thereof and refund of the Deposit. If Purchaser elects not
to terminate the Contract, any remedy of Purchaser for breach of such warranties
or representations made prior to the closing shall be deemed to be irrevocably
waived. Notwithstanding anything to the contrary contained in this Article, if
Seller breaches any
Page 12
<PAGE>
representation or warranty made by Seller and if prior to closing Purchaser
notifies Seller that it elects to terminate this Contract on account of such
breach, Seller may by written notice to Purchaser given on or before the closing
agree to and actually cure the breach (but not modify the representation or
warranty) prior to closing, and Purchaser shall thereupon be obligated to close
the transaction and accept such cure as Purchaser's sole remedy for the breach.
Page 13
<PAGE>
At the closing, Seller shall execute and deliver to Purchaser a
certificate ("Seller's Closing Certificate") in the form of Exhibit F attached
---------------------------- ---------
hereto, certifying to Purchaser that all the representations and warranties made
pursuant to this Article are true and correct on and as of the closing date,
with only such exceptions therein as are necessary to reflect facts or
circumstances arising or discovered by Purchaser and disclosed to Seller between
the date of this Contract and the closing date which would make any
representation or warranty materially untrue or incorrect on and as of the
closing date.
Seller shall indemnify and defend Purchaser against and hold Purchaser
harmless from, and shall be responsible for, all claims, demands, liabilities,
losses, damages, costs and expenses, including reasonable attorneys' fees, that
may be suffered or incurred by Purchaser if any representation or warranty made
by Seller in Seller's Closing Certificate is untrue or incorrect in any material
respect when made; provided, however, Purchaser shall not be entitled to a
recovery under this section if any claim is made after the closing as a result
of a breach of the representations and warranties set forth in Seller's Closing
Certificate, unless the aggregate amount of all such recoveries exceeds Fifty
Thousand Dollars ($50,000) in which event Seller shall be liable for payment of
the entire amount of such recoveries; and further provided that Purchaser shall
not be entitled to a recovery under this section as a result of a breach of the
representations and warranties set forth in Seller's Closing Certificate for any
amounts in excess of the amount of the Purchase Price.
The terms of Seller's indemnity set forth above with respect to the
representations and warranties made in Seller's Closing Certificate shall
survive the closing for a period of one year following the closing.
Purchaser acknowledges that it has had, or will have had, as of the
closing, sufficient time to review all materials and information Purchaser deems
necessary, including the information and materials that Seller has furnished to
Purchaser and sufficient time and access to review and investigate the Property.
Notwithstanding any other provision of this Contract, the representations and
warranties of Seller as set forth in Seller's Closing Certificate shall be
deemed modified to the extent that at the time of closing Purchaser has actual
knowledge that the subject representation or warranty is untrue.
To induce Seller to enter into this Contract, Purchaser acknowledges and
agrees that, except as otherwise expressly set forth herein, the Property shall
be conveyed and transferred "AS IS, WHERE IS, AND WITH ALL FAULTS" and Seller
does not warrant or make any representation, express or implied, as to the
merchantability, quantity, quality, condition, suitability or fitness of the
Property for any purpose whatsoever, including, without limitation, its
compliance with applicable building codes and ordinances, zoning laws,
environmental laws including, without limitation, the Clean Air Act, the
Comprehensive Response
Page 14
<PAGE>
Compensation and Liability Act (CERCLA) and the Super Fund Amendments and
Reauthorization Act (SARA), the Americans with Disabilities Act, and any other
federal, state or local statutes, codes or ordinances, and Purchaser
acknowledges that the provisions of this Contract are adequate to enable it to
make its own determination with respect to the suitability of fitness of the
Property.
Except as set forth herein to the contrary and also except to the extent
any of Seller's representations or warranties hereunder are materially untrue or
incorrect, Purchaser, for itself and its successors and assigns, releases Seller
and its agents, employees, partners, officers, directors, contractors,
consultants, agents and representatives from, and waives any and all causes of
action or claims against any of such persons for (1) any and all liability
attributable to any physical condition of or at the Property, including, without
limitation, the presence on, under or about the Property of any materials the
release or storage of which is regulated by law; (2) any and all liability
resulting from the failure of the Property to comply with any applicable laws,
and (3) any liabilities, damages or injury arising from, connected with or
otherwise caused by statements, opinions or information obtained from any of
such persons with respect to the Property.
B. Covenants of Seller. Seller hereby covenants as follows:
-------------------
1. From the date of execution of this Contract through the date of
closing, Seller shall continue to maintain the Property substantially in
its present condition, subject to ordinary wear and tear and the
provisions of Article XI hereof, and shall continue to manage the
Property in the same manner as it is currently being managed; Seller
shall not remove any fixtures, equipment, furnishings or other personal
property from the Property unless replaced with items of equal or greater
quality and quantity, nor shall Seller in any material manner neglect the
Property. Notwithstanding the foregoing, Seller shall be entitled to
terminate the lease of the management/marketing office prior to closing
and to remove the property located therein other than any movable wall
partitions, without obligation to replace the same;
2. At all times from the date hereof through the date of closing,
Seller shall cause to be in force fire and extended coverage insurance
upon the Property for full replacement value thereof, and public
liability insurance with respect to damage or injury to persons or
property occurring on the Property in at least such amounts as are
maintained by Seller on the date hereof;
3. From the date of execution of this Contract through the date of
closing, Seller will not, without Purchaser's prior written consent,
enter into any new lease with respect to the Property. Further, Seller
will not modify any existing Lease covering space in the Property without
first obtaining the
Page 15
<PAGE>
written consent of Purchaser. Purchaser shall have five (5) business days
after Purchaser's receipt of a written proposal from Seller in which to
approve or disapprove of any new lease for which it has a right to
consent. Failure to respond in writing within said time period shall be
deemed to be consent; and
4. From the date of execution of this Contract through the date of
closing, Seller shall not sell, assign, or convey any right, title, or
interest whatsoever in or to the Property, or create or permit to attach
any lien, security interest, easement, encumbrance, charge, or condition
affecting the Property (other than the Permitted Exceptions) without
promptly discharging the same prior to closing.
C. Representations and Warranties of Purchaser. Purchaser hereby
-------------------------------------------
represents and warrants to Seller as follows:
Purchaser is a limited partnership duly organized and validly
existing under the laws of the State of Delaware. Purchaser has full
power and authority to enter into this Contract, to perform this Contract
and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Contract and all documents contemplated
hereby by Purchaser have been duly and validly authorized by all
necessary action on the part of Purchaser and all required consents and
approvals have been duly obtained and will not result in a breach of any
of the terms or provisions of, or constitute a default under any
indenture, agreement or instrument to which Purchaser is a party. This
Contract is a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, subject to
the effect of applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting the rights of
creditors generally.
D. Covenants of Purchaser.
----------------------
Proffer Statement. At closing, Purchaser shall execute a letter in
-----------------
the form of Exhibit L which shall survive closing and which is
incorporated into this Agreement by reference. Seller shall indemnify and
hold Purchaser harmless from and against any claim, loss, cost, or damage
(including without limitation, reasonable attorneys' fees) to the
Property or Purchaser's interest therein arising from (i) Seller's
failure to comply with its obligations under proffer conditions 9, 10 (to
the extent not performed by the Dulles Corner Association Inc. (the
"Association")), 11, 12, 13, 15, 18, 19, 20, 25, 26, 27, 28, 29, 30 and
-----------
32 of the proposed proffer revisions (the "Proffer Revisions") identified
by Fairfax County as PCA 86-C-029-5, PCA 88-C-066 dated October 4, 1996,
a copy of which proposed proffer revisions is attached hereto as Exhibit
-------
P, and (ii) any similar "project
-
Page 16
<PAGE>
development" type obligations contained in the zoning/land use
application for the Dulles Corner Property, Fairfax County, Virginia FDPA
86-C-029-2, CDPA 86-C-029-4 (Revised) (the "Revised Plans") and the
zoning/land use application for the Batman/Dulles Corner Property (PCA
88-C-066 for property located at 15-4((1)-23 and 15-4-(1)-13 (part) -
concurrent with PCA 85-C-008-3). "Project development" type obligations
include obligations like construction of improvements that are intended
to be included in the "Class A Common Areas", as defined in the
Declaration of Protective Covenants and Restrictions for Dulles Corner
(as amended) such as the lake and regional detention pond and landscaping
and other site work around such lake (as distinquished from obligations
relating solely to construction of improvements on a particular parcel of
land in the development such as requirements concerning building
construction and set-backs and landscaping and other site improvements on
such parcel which are not intended to be included in the "Class A Common
Areas" of the development). In the event that the Proffer Revisions
and/or the Revised Plans are not enacted, then the foregoing indemnity
shall apply to the corresponding provisions of the existing proffers and
development plans affecting the Property. This indemnification is not
assignable except to, and only to, future owners of Building 6 and/or
Building 15. Any future revisions to the proffers and/or the development
plans initiated or consented to by Purchaser (and not consented to by
Seller or any subsequent indemnitor under this Section) shall cause this
indemnification to automatically terminate and be of no further force as
to obligations of Seller or any subsequent indemnitor, as applicable,
thereafter arising to the extent that such revisions increase or
otherwise change the obligations of Seller under the existing proffers or
the Proffer Revisions and the Revised Plans, as applicable. In the event
that at any time hereafter Seller shall assign all of its rights as
Applicant under the then existing proffers to a purchaser of all or a
portion of Seller's remaining land in the Dulles Corners development and
such purchaser shall assume all of the obligations of the Applicant under
such proffers and shall assume in writing all of the obligations of
Seller under the foregoing indemnity, then Seller shall be automatically
released from all liability under such indemnity and Purchaser agrees,
promptly upon request from Seller and at no cost to Seller, to execute
any documents as shall be required to evidence such release. It is the
intent of Seller that the obligations of Seller as the Applicant under
proffer condition 24 of the Proffer Revisions concerning implementation
of certain traffic alleviating measures be assumed by the Association.
Purchaser agrees to cooperate with Seller in achieving such assumption
and agrees that, even if the Association does not so assume such
obligations, it shall contribute to the costs of performing such
obligations in the amount that would have payable by it as its share of
such costs as a member of the Association. Similarly, Purchaser agrees
that Seller shall not be responsible for any of the costs and expenses of
implementing a Transportation System Management
page 17
<PAGE>
technique that may be allocated to the Property pursuant to the
provisions of Section 4.6 of the Declaration of Protected Covenants and
Restrictions for Dulles Corner; said costs and expenses being the sole
responsibility of the then owner of the Property to the extent that such
responsibility has not been assumed by the Association.
Page 18
<PAGE>
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
The obligations of Purchaser pursuant to this Contract shall, at the
option of Purchaser, be subject to the following conditions precedent:
A. All of the representations, warranties and agreements of Seller set
forth in this Contract shall be true and correct in all material respects as of
the date hereof and as of the date of closing, and Seller shall not have on or
prior to closing, failed to meet, comply with or perform in any material respect
any conditions or agreements on Seller's part as required by the terms of this
Contract.
B. There shall be no change in the matters reflected in the Title
Commitment, and there shall not exist any encumbrance or title defect affecting
the Property not described in the Title Commitment except for the Permitted
Exceptions or matters to be satisfied at closing.
C. There shall be no changes in the matters reflected in the Survey,
and there shall not exist any easement, right-of-way, encroachment, waterway,
pond, flood plain, conflict or protrusion with respect to the Property not shown
on the Survey.
D. Purchaser shall have received executed originals or copies,
certified by Seller as being true and correct, of all Leases and Permits,
including all warranties, licenses and permits in Seller's possession relating
to the Property, all of which shall, at Purchaser's option, be assigned to
Purchaser or its designee at closing.
E. Seller shall have operated the Property from and after the date
hereof in substantially the same manner as prior thereto.
F. Seller shall have delivered to Purchaser an estoppel letter from
each Tenant not affiliated with Purchaser, which letter shall be in form and
substance substantially identical to the estoppel letter attached hereto as
Exhibit J and, in addition, a letter from Seller addressed to each such Tenant
- ---------
informing such Tenant of the change in ownership of the Property. In the event
that any estoppel letter reveals a material default in any lease or does not
confirm that the lease terms are substantially the same as represented in the
rent roll provided to Purchaser, Purchaser shall have the right to terminate
this Contract. For purposes of this subparagraph H, the term "substantially the
-----------------
same" shall mean that there is no material variance in lease terms from those
- ----
set forth in the rent roll delivered by Seller pursuant to Article III hereof.
Notwithstanding the foregoing, if Purchaser has the right to terminate by virtue
of the terms of this section, Seller may provide an indemnification to
Purchaser, which indemnification must be in form and content and from an
indemnitor reasonably satisfactory to Purchaser, for any
Page 19
<PAGE>
amounts that may be lost by virtue of the variance in lease terms, in which case
Purchaser's right to terminate shall be void and of no effect. Purchaser agrees
that US West Real Estate, Inc., a Colorado corporation, is a satisfactory
indemnitor.
G. Seller shall have delivered to Purchaser a current Non-Residential
Use Permit for Building 6 and for Building 15 and a current Non-Residential Use
Permit for the space occupied by each tenant at Building 6 or Building 15, as
applicable.
H. Seller shall have recorded that certain Amendment No. 1 to Amended
and Restated Declaration of Protective Covenants and Restrictions for Dulles
Corner now in escrow at Chicago Title Company.
I. The parties shall have entered into a mutually acceptable agreement
regarding operation of the fitness club incorporating and elaborating on the
items set forth in Exhibit O attached hereto.
---------
If any such condition is not fully satisfied by closing, Purchaser may
terminate this Contract by written notice to Seller whereupon this Contract may
be cancelled, the Deposit shall be paid to Purchaser and, thereafter, neither
Seller nor Purchaser shall have any continuing obligations hereunder.
Notwithstanding anything to the contrary contained in this Article VIII,
if Purchaser notifies Seller that Purchaser elects to terminate this Contract on
account of a failure to satisfy the conditions precedent set forth in this
Article VIII, Seller may, by written notice to Purchaser given on or before the
closing date, agree to satisfy the condition, and Purchaser shall thereupon be
obligated to close the transaction, provided such cure is effectuated prior to
the date of closing.
ARTICLE IX
CLOSING
-------
The closing shall occur on or before December 31, 1996 (the "Closing
-------
Date") at such time as mutually agreed upon by the parties at the offices of
- ----
Akin, Gump, Strauss, Hauer, and Feld, L.L.P., Suite 400, 1333 New Hampshire
Ave., N.W., Washington, D.C. 20036.
ARTICLE X
OBLIGATIONS AT CLOSING
----------------------
At the closing, the following shall occur:
A. Seller shall convey the Property to Purchaser. The conveyance shall
be by special warranty deed duly signed and acknowledged by Seller in the form
attached hereto as Exhibit G. Such deed shall convey title free and clear of all
---------
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<PAGE>
liens, rights of way, easements and other matters affecting title thereto,
except for the Permitted Exceptions.
B. The Title Company shall issue to Purchaser an ALTA owner's form of
title insurance policy covering the Property in the amount of the Purchase Price
(the "Title Policy").
------------
C. Seller shall deliver a special warranty bill of sale and a blanket
assignment in the form set forth on Exhibit H, duly executed and acknowledged by
---------
Seller, transferring the Personal Property to Purchaser.
D. Seller shall deliver an assignment and assumption agreement, in form
set forth on Exhibit I, duly executed and acknowledged by Seller, assigning all
---------
of Seller's interest in and to the Leases, Deposits, Contracts and Permits to
Seller. Seller shall also deliver copies of any Contracts and Permits, original
Leases, and a rent roll with respect to the Property, in the form of the rent
roll to be delivered pursuant to Article III hereinabove, certified to be true
and correct in all material respects.
E. The parties shall deliver such evidence or other documents that may
be reasonably required by the Title Company evidencing the status and capacity
of a party and the authority of the person or persons who are executing the
various documents on behalf of such party in connection with the transactions
described hereunder.
F. Seller shall deliver a non-withholding statement that will satisfy
the requirements of Section 1445 of the Internal Revenue Code so that Purchaser
is not required to collect any amounts for payment to the Internal Revenue
Service.
G. Seller shall deliver to Purchaser all keys to all buildings and
other improvements located on the Property, combinations to any safes thereon,
and security devices therein in Seller's possession.
ARTICLE XI
COSTS AND ADJUSTMENTS
---------------------
At closing, the following items shall be paid or allocated:
A. The County Grantor's Tax shall be paid by Seller. The County
Grantee's Tax shall be paid by Purchaser. Any other sales tax and transfer tax
payable in connection with the conveyance of the Property shall be paid by
Purchaser.
Page 21
<PAGE>
B. Except for those lease commissions set forth on Exhibit K attached
---------
hereto, all lease commissions due and owing or which could become due and owing
with respect to the Property transactions entered into prior to closing shall be
paid by Seller when due and Seller shall indemnify and hold harmless Purchaser
for lease commission claims brought against the Property arising therefrom.
C. Purchaser shall pay all recording costs and documentary fees. The
parties shall share equally any escrow fees in connection with the closing. Each
party will be responsible for the fees and expenses of their respective
attorneys.
D. Seller shall pay for preparation of the survey and the premium of a
basic policy of title insurance issued in accordance with the Title Commitment,
and Purchaser shall pay the premium for any extended coverage or other
endorsements thereto.
E. All rents, income and ordinary operating expenses, ad valorem taxes,
general and special assessments, personal property taxes, and other charges for
or pertaining to the Property, including, but not limited to, common area
expense charges, public utility charges, supplies, maintenance, service charges,
and all other operating charges of the Property shall be prorated as of the date
of closing. Any delinquent rents collected by Purchaser following closing shall
be paid to Seller, but Purchaser shall have no obligation to attempt to collect
such rents and all monies collected by Purchaser will first be applied to any
then current charges or rents. Seller shall have the right to pursue any tenant
for delinquent rent.
F. At closing, Purchaser will receive a credit from Seller of $130,000
as reimbursement of closing costs.
G. Beginning as close to the anticipated closing date as practicable,
Seller shall, in consultation with Purchaser and with Purchaser's reasonable
cooperation, cause to be prepared a statement (the "Preliminary Statement")
---------------------
which shall reflect all of the credits and other adjustments in payment at
closing required under this Article or any other provision of this Contract. As
soon as the parties have agreed upon the Preliminary Statement, they shall
jointly deliver a mutually signed copy thereof to the Title Company.
H. No later than 120 days after closing, Seller shall prepare and
deliver to Purchaser (as to the Seller Property) final closing statements (the
"Final Statements"), which shall correct any estimates and (if necessary) other
----------------
amounts used in the Preliminary Statement, based on facts discovered after
closing. Each party shall be deemed to have agreed to the Final Statements,
except for such items specifically objected to (including the basis for such
objection) in a written notice given to the other party within 15 days after
delivery of the Final Statements. Either party shall have the right upon five
business days prior written notice to the other to audit the books and records
of the Property for the periods
Page 22
<PAGE>
prior to and following closing, and the non-objecting party shall cooperate in
providing all information necessary to do so. The period for objection to the
Final Statements and all periods allowed to settle disputes with regard thereto
shall be extended by the time necessary to obtain the audit. Notwithstanding any
other provision of this Contract, the parties shall adjust the proration
utilized at the closing to reflect any actual items of income or expense. Each
such adjustment shall be made and settled between the parties by the appropriate
payment no later than the later of the Final Settlement Date.
I. If notice of objection to any items on the Final Statements is
proper and timely, and the parties are unable between themselves to resolve each
such objection and agree upon the Final Statements within 30 days after delivery
of the Final Statements, then any party may submit the unresolved items to
Arthur Andersen & Co. ("Andersen"), (or if Andersen is unwilling to handle the
--------
dispute, to such qualified neutral party as Andersen may designate) for a
determination which shall be binding and conclusive upon all parties and shall
become part of the agreed Final Statements. The parties shall pay in equal
shares the fees and other expenses of Andersen (or its designee) for making such
determination.
J. Within ten business days after the Final Statements have been agreed
to or after the last timely objection has been resolved under this section (the
"Final Settlement Date"), the appropriate party shall pay to the other any net
---------------------
amount owing as shown by the adjusted Final Statements. Except for plain
mathematical error or for subsequent tax bills, no further adjustments or
payments shall be required with respect to such credits and other adjustments.
Seller agrees to indemnify and hold Purchaser harmless of and from any
and all liabilities, claims, demands, suits, and judgments, of any kind or
nature, including court costs and reasonable attorneys' fees (except those items
which under the terms of this Contract specifically become the obligation of
Purchaser), brought by third parties and based on events occurring on or before
the date of closing and which are in any way related to the Property, and all
expenses related thereto, including, but not limited to, court costs and
attorneys' fees.
Purchaser agrees to indemnify and hold Seller harmless of and from any
and all liabilities, claims, demands, suits, and judgments, of any kind or
nature, including court costs and reasonable attorneys' fees, brought by third
parties and based on events occurring subsequent to the date of closing and
which arise from Purchaser's ownership and operation of the Property, and all
expenses related thereto, including, but not limited to, court costs and
attorneys' fees.
Page 23
<PAGE>
ARTICLE XII
DAMAGE OR DESTRUCTION PRIOR TO CLOSING
--------------------------------------
In the event that the Property should be damaged by any casualty prior to
closing, then if the cost of repairing such damage, as estimated by an architect
or contractor retained pursuant to the mutual agreement of the parties, is:
A. less than Two Hundred Thousand Dollars ($200,000), the closing shall
proceed as scheduled and any insurance proceeds shall be distributed to
Purchaser, Seller shall pay any deductible under the insurance policy, and
Seller shall assign to Purchaser any rights under the insurance policy; or if
said cost is:
B. greater than Two Hundred Thousand Dollars ($200,000), then either
Seller or Purchaser may elect to terminate this Contract, in which case neither
party shall have any further obligation to the other and the Deposit shall be
returned to Purchaser.
ARTICLE XIII
EMINENT DOMAIN
--------------
If, before the closing, proceedings are commenced for the taking by
exercise of the power of eminent domain of all or a material part of the
Property which, as reasonably determined by Purchaser, would render the Property
unacceptable to Purchaser or unsuitable for Purchaser's intended use, Purchaser
shall have the right, by giving notice to Seller within thirty (30) days after
Seller gives notice of the commencement of such proceedings to Purchaser, to
terminate this Contract, in which event this Contract shall terminate. If,
before the closing, proceedings are commenced for the taking by exercise of the
power of eminent domain of less than such a material part of the Property, or if
Purchaser has the right to terminate this Contract pursuant to the preceding
sentence but Purchaser does not exercise such right, then this Contract shall
remain in full force and effect and, on the closing, the condemnation award (or,
if not theretofore received, the right to receive such portion of the award)
payable on account of the taking shall be transferred in the same manner as
title to the Property is conveyed. Seller shall give notice to Purchaser within
three (3) business days after Seller's receiving notice of the commencement of
any proceedings for the taking by exercise of the power of eminent domain of all
or any part of the Property. Purchaser shall have a period of thirty (30) days
(or such shorter period as Purchaser may elect by giving notice to Seller) after
Seller has given the notice to Purchaser required by this Article to evaluate
the extent of the taking and make the determination as to whether to terminate
this Contract.
Page 24
<PAGE>
ARTICLE XIV
POSSESSION OF PROPERTY
----------------------
Possession of the Property shall be delivered to Purchaser at closing
free and clear of all uses and encroachments, except the Permitted Exceptions
and the Leases.
ARTICLE XV
NOTICES
-------
All notices, demands, or other communications of any type given by any
party hereunder, whether required by this Contract or in any way related to the
transaction contracted for herein, shall be void and of no effect unless given
in accordance with the provisions of this Article. All notices shall be in
writing and delivered to the person to whom the notice is directed, either in
person, by United States Mail, as a registered or certified item, return receipt
requested or by Federal Express. Notices shall be deemed given when received, at
the following addresses:
Seller: Dulles Corner Properties II Limited Partnership
- ------
c/o U S WEST Real Estate, Inc.
6200 S. Quebec Street, Suite 350
Englewood, Colorado 80111
Attn: Vice President
Telephone No.: (303) 793-5661
Facsimile No.: (303) 773-1750
With Required Copy to: Brownstein Hyatt Farber & Strickland, P.C.
- ---------------------
410 17th Street, 22nd Floor
Denver, Colorado 80202
Attn: Edward N. Barad, Esq.
Telephone No.: (303) 534-6335
Facsimile No.: (303) 623-1956
Purchaser: Prentiss Properties Acquisition Partners, L.P.
- ---------
3112 Fairview Park Drive
Falls Church, Virginia 22042
Attn: Robert K. Wiberg
Telephone No.: (703) 560-4700
Facsimile No.: (703) 560-8349
Page 25
<PAGE>
With Required Copy to: Prentiss Properties Acquisition Partners, L.P.
- ---------------------
3890 West Northwest Highway, Suite 400
Dallas, Texas
Attn: Michael V. Prentiss
Telephone No.: (214) 654-0886
Facsimile No.: (214) 350-2409
ARTICLE XVI
REMEDIES
--------
A. Defaults by Seller. If there is any default by Seller under this
------------------
Contract, following notice to Seller and 10 days during which Seller may cure
the default, Purchaser may at its option, (a) declare this Contract terminated
in which case the Deposit shall be returned to Purchaser and each party shall
thereupon be relieved of all further obligations and liabilities, except any
which expressly survive termination, or (b) bring an action against Seller for
specific performance pursuant to the arbitration procedures set forth
hereinbelow. In no event shall Purchaser have the right to sue for damages.
B. Defaults by Purchaser. If there is any default by Purchaser under
---------------------
this Contract, following notice to Purchaser and 10 days during which Purchaser
may cure the default, then Seller may, as its sole remedy, declare this Contract
terminated, in which case the Deposit shall be paid to Seller and each party
shall thereupon be relieved of all further obligations and liabilities, except
any which expressly survive termination.
In the event this Contract is terminated due to the default of Purchaser
hereunder, Purchaser shall deliver to Seller, at no cost to Seller, all right,
title and interest in all plans and specifications regarding any construction
which Purchaser planned to complete on the Property along with Purchaser's
Reports regarding the Property, including, but not limited to inspections,
soils, environmental and economic feasibility plans.
C. ARBITRATION OF DISPUTES. ANY CLAIM, CONTROVERSY OR DISPUTE, WHETHER
-----------------------
SOUNDING IN CONTRACT, STATUTE, TORT, FRAUD, MISREPRESENTATION OR OTHER LEGAL
THEORY, RELATED DIRECTLY OR INDIRECTLY TO THIS CONTRACT, WHENEVER BROUGHT AND
WHETHER BETWEEN THE PARTIES TO THIS CONTRACT OR BETWEEN ONE OF THE PARTIES TO
THIS CONTRACT AND THE EMPLOYEES, AGENTS OR AFFILIATED BUSINESSES OF THE OTHER
PARTY, SHALL BE RESOLVED BY ARBITRATION AS PRESCRIBED IN THIS SECTION. THE
FEDERAL ARBITRATION ACT, 9 U.S.C. (S)(S) 1-15, NOT STATE LAW, SHALL GOVERN THE
ARBITRABILITY OF ALL CLAIMS, AND THE DECISION OF THE ARBITRATOR AS TO
ARBITRABILITY SHALL BE FINAL.
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<PAGE>
A SINGLE ARBITRATOR WHO IS A RETIRED FEDERAL JUDGE SHALL CONDUCT THE
ARBITRATION UNDER THE THEN CURRENT RULES OF THE AMERICAN ARBITRATION ASSOCIATION
(THE "AAA"). THE ARBITRATOR SHALL BE SELECTED BY MUTUAL AGREEMENT OF THE
---
PARTIES, OR IF THEY ARE UNABLE TO REACH AGREEMENT ON THE ARBITRATOR WITHIN
THIRTY (30) DAYS OF WRITTEN NOTICE BY ONE PARTY TO THE OTHER INVOKING THIS
ARBITRATION PROVISION, IN ACCORDANCE WITH AAA PROCEDURES FROM A LIST OF
QUALIFIED PEOPLE MAINTAINED BY THE AAA. THE ARBITRATION SHALL BE CONDUCTED IN
THE METROPOLITAN WASHINGTON, D.C. AREA AND ALL EXPEDITED PROCEDURES PRESCRIBED
BY THE AAA RULES SHALL APPLY.
THERE SHALL BE NO DISCOVERY OTHER THAN THE EXCHANGE OF INFORMATION WHICH
IS PROVIDED TO THE ARBITRATOR BY THE PARTIES. TO THE EXTENT PROVIDED IN THIS
CONTRACT, THE ARBITRATOR SHALL HAVE AUTHORITY ONLY TO GRANT SPECIFIC PERFORMANCE
AND TO ORDER OTHER EQUITABLE RELIEF AND TO AWARD COMPENSATORY DAMAGES, BUT SHALL
NOT HAVE THE AUTHORITY TO AWARD PUNITIVE DAMAGES OR OTHER NONCOMPENSATORY
DAMAGES OR ANY OTHER FORM OF RELIEF. THE ARBITRATOR SHALL AWARD TO THE
PREVAILING PARTY ITS REASONABLE ATTORNEYS' FEES AND COSTS AND OTHER EXPENSES
INCURRED IN THE ARBITRATION, EXCEPT THE PARTIES SHALL SHARE EQUALLY THE FEES AND
EXPENSES OF THE ARBITRATOR. THE ARBITRATOR'S DECISION AND AWARD SHALL BE FINAL
AND BINDING, AND JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED
IN ANY COURT HAVING JURISDICTION THEREOF.
IF ANY PARTY FILES A JUDICIAL OR ADMINISTRATIVE ACTION ASSERTING CLAIMS
SUBJECT TO ARBITRATION AS PRESCRIBED HEREIN, AND ANOTHER PARTY SUCCESSFULLY
STAYS SUCH ACTION OR COMPELS ARBITRATION OF SAID CLAIMS, THE PARTY FILING SAID
ACTION SHALL PAY THE OTHER PARTY'S COSTS AND EXPENSES INCURRED IN SEEKING SUCH
STAY OR COMPELLING ARBITRATION, INCLUDING REASONABLE ATTORNEYS' FEES.
NOTICE: BY INITIALLING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY VIRGINIA LAW AND YOU ARE
GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT
OR JURY TRIAL. BY INITIALLING IN THE SPACE BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY
INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE VIRGINIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO
THIS
Page 27
<PAGE>
ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISIONS
TO NEUTRAL ARBITRATION AS DESCRIBED ABOVE.
________ PURCHASER'S INITIALS _________ SELLER'S INITIALS
ARTICLE XVII
ASSIGNMENT
----------
Except as otherwise expressly allowed elsewhere herein, Purchaser may
assign this Contract only to an affiliate owned or controlled by or under common
control with Purchaser, and to no other person or entity without the consent of
Seller.
ARTICLE XVIII
INTERPRETATION AND APPLICABLE LAW
---------------------------------
This Contract shall be construed and interpreted in accordance with the
laws of the Commonwealth of Virginia. Where required for proper interpretation,
words in the singular shall include the plural; the masculine gender shall
include the neuter and the feminine, and vice versa. The terms "successors and
assigns" shall include the heirs, administrators, executors, successors, and
assigns, as applicable, of any party hereto.
ARTICLE XIX
AMENDMENT
---------
This Contract may not be modified or amended, except by an agreement in
writing signed by the parties. The parties may waive any of the conditions
contained herein or any of the obligations of the other party hereunder, but any
such waiver shall be effective only if in writing and signed by the party
waiving such conditions and obligations.
ARTICLE XX
ATTORNEYS' FEES
---------------
In the event it becomes necessary for either party to file a suit or
arbitration to enforce this Contract or any provisions contained herein, the
prevailing party shall be entitled to recover, in addition to all other remedies
or damages, reasonable attorneys' fees and costs of court incurred in such suit
or arbitration.
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<PAGE>
ARTICLE XXI
DESCRIPTIVE HEADINGS
--------------------
The descriptive headings of the Articles contained in this Contract are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
ARTICLE XXII
ENTIRE AGREEMENT; SURVIVAL
--------------------------
This Contract (and the items to be furnished in accordance herewith)
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings of the parties in connection therewith. No representation,
warranty, covenant, agreement, or condition not expressed in this Contract shall
be binding upon the parties hereto nor shall affect or be effective to
interpret, change, or restrict the provisions of this Contract. The obligations
of the parties hereunder and all other provisions of this Contract shall survive
the closing or earlier termination of this Contract, except as expressly limited
herein.
ARTICLE XXIII
MULTIPLE ORIGINALS ONLY; COUNTERPARTS
-------------------------------------
Numerous copies of this Contract may be executed by the parties hereto.
Each such executed copy shall have the full force and effect of an original
executed instrument. This Contract may be executed in any number of
counterparts, all of which when taken together shall constitute the entire
agreement of the parties.
ARTICLE XXIV
ACCEPTANCE
----------
Time is of the essence of this Contract. The last date of execution of
this Contract by either Seller or Purchaser shall be the date of execution of
this Contract. If the final date of any period falls upon a Saturday, Sunday, or
legal holiday under the laws of the State of Colorado, then in such event the
expiration date of such period shall be extended to the next day which is not a
Saturday, Sunday, or legal holiday under the laws of the State of Colorado.
ARTICLE XXV
REAL ESTATE COMMISSION
----------------------
Seller and Purchaser each represent and warrant to the other that neither
Seller nor Purchaser has contacted or entered into any agreement with any real
estate broker, agent, finder or any other party in connection with this
transaction,
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<PAGE>
and that, neither party has taken any action which would result in any real
estate broker's, finder's or other fees or commissions being due and payable to
any party with respect to the transaction contemplated hereby. Each party hereby
indemnifies and agrees to hold the other party harmless from any loss,
liability, damage, cost, or expense (including reasonable attorneys' fees)
resulting to the other party by reason of a breach of the representation and
warranty made by such party in this Article.
ARTICLE XXVI
CONFIDENTIALITY
---------------
Purchaser agrees that, prior to the closing, all Property Information
received by Purchaser shall be kept confidential as provided in this Article.
Without the prior written consent of Seller, prior to the closing, the Property
Information shall not be disclosed by Purchaser or Purchaser's Representatives,
in any manner whatsoever, in whole or in part, except to Purchaser's
Representatives who need to know the Property Information for the purpose of
evaluating the Property and who are informed by the Purchaser of the
confidential nature of the Property Information; as may be necessary for
Purchaser or Purchaser's Representatives to comply with applicable laws,
including, without limitation, governmental regulatory, disclosure, tax and
reporting requirements; to comply with other requirements and requests of
regulatory and supervisory authorities and self-regulatory organizations having
jurisdiction over Purchaser or Purchaser's Representatives; to comply with
regulatory or judicial processes; or to satisfy reporting procedures and
inquiries of credit rating agencies in accordance with customary practices of
Purchaser or its affiliates; to existing or prospective tenants of the
Property; and as otherwise permitted by this Article.
Except as provided otherwise in this Article, Purchaser and Seller, for
the benefit of each other, hereby agree that prior to the closing and for a
period of six (6) months after the closing if pertaining to the sale
contemplated herein, neither of them will release or cause or permit to be
released to the public any press notices relating to the terms, conditions or
substance of this Contract or the transactions contemplated herein, without
first obtaining the consent of the other party hereto (which shall not be
unreasonably withheld; provided, however, that no consent from the other party
shall be required for any press notices that are released at least two weeks
after the closing if such press releases contain only factual information (e.g.,
date of sale; property description; and the names of purchaser and seller) and
do not express any opinions (e.g., that the sale price was above or below market
value). With respect to any press notice for which the consent of the other
party is required, the requesting party shall deliver a copy of the proposed
press notice to the other party. The party receiving the proposed press notice
shall have one business day following the day on which such party received the
proposed press notice within which to deliver to the requesting party written
notice of disapproval of the proposed press notice. If the receiving party
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<PAGE>
fails to timely deliver such written disapproval to the requesting party, the
press notice shall be deemed approved. For purposes of this Section only, the
copy of the proposed press notice and any notice of disapproval can be delivered
to the other party by telecopier (with telephonic confirmation of receipt) to
the telecopier number set forth in Article XV. Additionally, each party
acknowledges that the other party and its affiliates may be compelled by
considerations of legal obligation to issue a public press release announcing
that it has entered into this Contract and stating the material terms hereof.
The announcing party agrees to send a copy of such press release directly to the
other not later than the time when the announcing party issues such press
release to the public; and each party consents to the dissemination of any such
press release and to all such additional statements and disclosures reasonably
made in responding to inquiries arising as a result of any such press release.
Purchaser shall indemnify and hold Seller and its affiliates harmless,
and Seller shall indemnify and hold Purchaser and the affiliates of Purchaser
harmless, from and against any and all actual direct claims, demands, causes of
action, losses, damages, liabilities, costs and expenses (including, without
limitation, attorneys' fees and disbursements) suffered or incurred by the other
party and proximately caused by a breach by Purchaser or Purchaser's
Representatives or Seller, as the case may be, of the provisions of this
Article. The foregoing and any other provision of this Contract to the contrary
notwithstanding, (a) if Purchaser defaults under the terms of this Article and
Purchaser fails to purchase the Property, Purchaser's liability to Seller shall
be limited to the Deposit; provided, however, if Purchaser defaults under the
terms of this Article and Purchaser purchases (or has purchased) the Property,
Purchaser's liability to Seller under this Article shall be limited to $200,000;
and (b) if Seller defaults under the terms of this Article, Seller's liability
to Purchaser under this Article shall be limited to $200,000.
As used in this Contract, the term "Property Information" shall mean
--------------------
all information and documents in any way relating to the Property, the operation
thereof or the sale thereof (including, without limitation, leases, contracts,
licenses and any environmental reports) furnished to, or otherwise made
available for review by, Purchaser or its directors, officers, employees,
affiliates, partners, brokers, agents or other representatives, including,
without limitation, attorneys, accountants, contractors, consultants, engineers
and financial advisors (collectively, "Purchaser's Representatives"), under or
---------------------------
in connection with this Contract by Seller or any affiliate of Seller, or their
agents or representatives, including, without limitation, their contractors,
engineers, attorneys, accountants, consultants, brokers or advisors, and all
analyses, compilations, data, studies, reports or other information or documents
prepared or obtained by Purchaser or Purchaser's Representatives to the extent
such information or documents contain or are based on the information or
documents described in the preceding clause (1), or otherwise reflecting their
review or investigation of the Property undertaken
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<PAGE>
with Seller's required approval; but notwithstanding the foregoing, the term
"Property Information" shall not be deemed to include any information or
--------------------
document which is or becomes generally available to the public other than as a
result of a disclosure by Purchaser or Purchaser's Representatives in violation
of this Contract, is in the possession of Purchaser or Purchaser's
Representatives prior to its disclosure to Purchaser by Seller or any affiliates
of Seller or their agents or representatives, becomes available to Purchaser
from a source other than Seller or any affiliates of Seller or their agents or
representatives, or is developed by Purchaser or Purchaser's Representatives
without reliance upon and independently of otherwise confidential Property
Information.
In addition to any other remedies available to Seller and Purchaser,
Seller and Purchaser shall each have the right to seek equitable relief,
including, without limitation, injunctive relief or specific performance,
against the other party or their representatives, in order to enforce the
provisions of this Article.
The provisions of this Article shall survive the termination of this
Contract for one year.
ARTICLE XXVII
OTHER COVENANTS
---------------
A. Following closing, Seller shall have the right to enter Building 6
in order to show clients a view of the Dulles Corner development from the
platform on the roof which is accessed from the penthouse, via the eighth floor
of Building 6; provided that (i) the tenant of the space adjacent to the
platform area has not made it a secure area not open to the public; (ii) Seller
shall have no right to assign the right set forth herein; (iii) Seller shall
hold harmless and indemnify Purchaser from any claim, loss, cost or damage
(including without limitation, reasonable attorneys' fees) that Seller or its
guests cause in entering Building 6; (iv) Seller has given Purchaser reasonable
advance notice of Seller's desire to use the platform; (v) Seller uses the
platform only during normal business hours; (vi) if Purchaser so elects, a
representative of Purchaser accompanies Seller while Seller uses the platform;
(vii) Purchaser shall have no obligation to maintain or replace the platform;
and (viii) Seller's right to use the platform shall expire upon the earlier of
Purchaser's sale of Building 6 or the second anniversary of the Closing Date.
B. At closing, Seller will appoint Purchaser to one position on the
Architectural Review Committee for the Association and Purchaser shall be
entitled to retain such position for so long as there exists a Declarant under
the Declaration of Protective Covenants and Restrictions for Dulles Corner, as
amended. Purchaser shall abstain from voting on all matters regarding
development of land owned by Purchaser during its term on the Architectural
Review Committee.
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<PAGE>
C. At closing, Seller shall appoint Purchaser to one position on the
Board of Directors of the Association and Purchaser shall be entitled to retain
such position for so long as there exists a Declarant under the Declaration of
Protective Covenants and Restrictions for Dulles Corner, as amended.
D. At closing, Purchaser shall deposit into escrow with the Title
Company the sum of $10,000 to be held by the Title Company pending deposit by
Purchaser of the amount required by the Commonwealth of Virginia as security for
deposits made by members of the fitness center which is a part of the Property.
Purchaser shall effect such deposit within thirty (30) days after the closing.
Page 33
<PAGE>
EXECUTED as of the _____ day of December, 1996.
SELLER:
------
DULLES CORNER PROPERTIES II LIMITED PARTNERSHIP, a
Virginia limited partnership
By: DULLES CORNER ASSOCIATES LIMITED PARTNERSHIP, a
Virginia limited partnership, its sole general
partner
By: EQUITY DULLES CORNER VENTURE, a
Colorado general partnership, its general
partner
By: U S WEST REAL ESTATE, INC., a Colorado
corporation, formerly known as BetaWest
Properties, Inc., its managing partner
By: ____________________________
Christopher J. Marsico
Vice President
PURCHASER:
---------
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
By: PRENTISS PROPERTIES I, INC.
By: _______________________________________
Robert K. Wiberg
Senior Vice President
Page 34
<PAGE>
EXHIBIT 99.1
BUYER'S CLOSING STATEMENT
BUYER: PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.
SELLER: DULLES CORNER PROPERTIES II LIMITED PARTNERSHIP
CLOSING DATE: December 31, 1996
CTIC CASE NO. 95810088-A
PROPERTY: Parcel 6-A, Dulles Corner and Parcel 15-A,
Dulles Corner, Fairfax County, Virginia
<TABLE>
<CAPTION>
CHARGES CREDITS
<S> <C> <C>
PURCHASE PRICE 40,500,000.00
Recording Deed
State Tax 60,750.00
County Tax 20,250.00
Clerk's Fee 25.00
Credit given for Refurbishing 177,512.00
Grumann
Noell 670.79
Credit given for due
diligence reimbursement 130,000.00
Credit for Security Deposits
held by Seller 5,095.00
Escrow for Health Club 10,000.00
Credit for Rent Proration 16,687.31
Chicago Title Insurance Company
Search & Commitment Fees 500.00
Comprehensive Endorsement 6,075.00
Settlement Fee 250.00 1/2
Charge for 1996 real estate taxes
paid by Seller on Parcel 6A--1 day 535.53
@ 535.53
Route 28--1 day @ 87.00 87.00
Parcel 15-A--1 day @ 249.15 249.15
Route #28--1 day @ 41.12 41.12
SUBTOTALS 40,598,762.80 329,956,10
FUNDS DUE FROM BUYER 40,268,797.70
TOTALS 40,598,762.80 40,598,762.80
</TABLE>
The undersigned hereby authorizes Chicago Title Insurance Company to receive
funds and disburse them in accordance with the above, subject to the General
Conditions of Escrow attached.
<PAGE>
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.
By: Prentiss Properties I, Inc.
BY: /s/ Robert Wiberg
-------------------------------------
NAME: Robert Wiberg
Title: Sr. Vice President
