<PAGE>
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): February 5, 1998
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)
<PAGE>
ITEM 2. ACQUISITION OF ASSETS
Prentiss Properties Trust owns a limited partnership interest and
through a wholly-owned subsidiary, Prentiss owns a sole general partnership
interest in Prentiss Properties Acquisition Partners. Prentiss Properties Trust,
as referred to herein, includes the Company, its majority-owned Operating
Partnership and subsidiaries (collectively, the "Company"). On February 5, 1998,
the Company completed the acquisition of 50 suburban office and industrial
buildings (the "Newport National Properties"), and land capable of supporting up
to 72,000 net rentable square feet of development. The buildings total 1,162,000
square feet and are located in Vista, Escondido, San Diego, Carlsbad, Oceanside,
Rancho Bernardo and Irvine, California and Tucson, Arizona.
The Newport National Properties were purchased for an aggregate
purchase price of approximately $90.4 million, including approximately $83.8
million in cash and 237,469 units of limited partnership in the Operating
Partnership ("Units") valued at approximately $6.6 million. The cash portion of
the purchase price was paid primarily with borrowings under the Company's line
of credit.
The Newport National Properties were acquired pursuant to three
purchase agreements entered into between the Operating Partnership (as "Buyer"
or "Purchaser") and various entities, as further described in the exhibits
hereto, that held ownership interests in the Newport National Properties.
The Company determined the purchase price for the Newport National
Properties and the individually insignificant properties listed in Item 5 of
this report on Form 8-K through an evaluation of the following factors: (i)
macro-economic issues that impact the market in which each property is located;
(ii) location and competition in the property's market; (iii) occupancy of and
demand for properties of a similar type in the same market; (iv) the
construction quality and condition of the property; (v) the potential for
increased cash flow after benefiting from the Company's renovations,
refurbishment and upgrades; (vi) existing tenant base; (vii) purchase price
relative to replacement costs; and (viii) the potential to generate revenue
growth at or above levels of economic growth in the property's market. Other
than changes in those factors, the Company, after reasonable inquiry, is not
aware of any material factors relating to the properties that would cause the
historical financial information provided in Item 7 not to be necessarily
indicative of future operating results for the properties.
ITEM 5. OTHER EVENTS
ACQUISITION OF PROPERTIES
On January 30, 1998, the Company completed the acquisition of a single
Class "A" suburban office property (the "Carrara Place Property"). The Carrara
Place Property totals 234,222 square feet and is located in Englewood, Colorado.
The Carrara Place Property was purchased for a purchase price of approximately
$31.5 million which was funded primarily with borrowings under the Company's
line of credit.
On January 13, 1998, the Company completed the acquisition of 6
industrial properties (the "Silicon Valley Properties"). The properties total
382,234 square feet and are located in San Jose and Sunnyvale, California. The
Silicon Valley Properties were purchased for a purchase price of approximately
$27.0 million which was funded primarily with borrowings under Company's line of
credit.
The acquisitions of the Carrara Place Property and Silicon Valley
Properties do not individually constitute acquisitions of a "significant amount
of assets" as defined under Item 2 of Form 8-K or Rule 3-14 of Regulation S-X.
Rather, these acquisitions, constitute a mathematical majority of individually
insignificant 1998 acquisitions, for which audited combined statements of
revenues and certain operating expenses are required under Rule 3-14 of
Regulation S-X. Accordingly, the audited statement of revenues and certain
operating expenses of the Carrara Place Property and the audited combined
statement of revenues and certain operating expenses of the Silicon Valley
Properties are filed herewith.
2
<PAGE>
YEAR-END CONSOLIDATED FINANCIAL RESULTS
The Company reported 1997 annual net income, before extraordinary
items, of $37.8 million, or $1.49 per share, diluted, on revenues of $131.7
million. The Company reported Funds from Operations ("FFO") of $66.0 million.
The Company defines FFO in accordance with the current National Association of
Real Estate Investment Trusts ("NAREIT") definition. The Company's FFO may not
be comparable to FFO reported by other REITs that do not define that term using
the NAREIT definition. Extraordinary items related to the early extinguishment
of higher rate debt contributed a loss of $878,000 or $0.03 per share for the
year. Earnings before interest, taxes, depreciation and amortization (EBITDA),
and before extraordinary items, was $95.6 million.
For the quarter ended December 31, 1997, the Company reported net
income, before extraordinary items, of $11.4 million, or $0.38 per share,
diluted, on revenues of $43.7 million, and FFO of $19.9 million. This compares
to third quarter 1997 net income of $10.1 million, or $0.38 per share diluted,
on revenue of $35.6 million, and FFO of $17.7 million. For the fourth quarter of
1997, extraordinary items contributed a loss of $767,000 or $0.02 per share.
Fourth quarter EBITDA, before extraordinary items, was $30.1 million.
Results for both the quarter and the year were driven by continued
strong performance of the Company's core portfolio, stability in the
contribution of its service business, as well as the impact of approximately
$650 million of acquisitions for the year. Fourth quarter results were impacted
by $245 million of acquisitions, equity financings and debt financings which
reduced the Company's combined cost of debt.
Total revenue on the owned portfolio increased 22.8 percent to $43.7
million for the quarter, up $8.1 million over the prior quarter's $35.6 million.
The Company's total portfolio was 96 percent leased at December 31, 1997. The
office portfolio had nominal lease turnover during the fourth quarter, with
office properties approximately 96 percent leased at December 31, 1997, up
slightly from 95 percent at September 30. During the quarter, average base-line
rents on new and renewed office leases exceeded that on expiring leases by
approximately 17 percent. The industrial portfolio had similar low turnover
during the quarter, and ended with an average occupancy of 95 percent.
Approximately 16 percent of the Company's combined portfolio has lease
expirations in 1998.
At December 31, 1997, total assets at net book value increased $254
million over September 30, to total $1.3 billion (including unconsolidated
joint venture assets). The debt to total market capitalization ratio was 31
percent, based on a market capitalization of $1.6 billion (including
unconsolidated joint venture debt). The market value of equity was $1.1 billion
at the quarter-end stock price of $27.9375 per share, versus $854 million market
value as of September 30, 1997.
At December 31, 1997, the Company had a total $490.0 million of debt
outstanding, including its share of unconsolidated joint venture debt, a
reduction of $12.6 million during the quarter. The $300 million bank line of
credit was unused at December 31, 1997, providing flexibility for acquisitions
and development, and for use in operations.
The Company has capacity remaining under a $550 million shelf
registration filed October 16, 1997, with the Securities and Exchange
Commission, to issue up to $299 million of common or preferred shares.
On December 16, 1997 the Company declared a regular quarterly cash
dividend of 40 cents per share, or $14.8 million, to owners (shares and units)
of record as of December 26, 1997 and paid the dividend on January 17, 1998.
This represents an annualized dividend of $1.60 per share.
3
<PAGE>
SHAREHOLDER RIGHTS PLAN
On February 6, 1998, the Board of Trustees of Prentiss Properties
Trust, a real estate investment trust organized under the laws of Maryland (the
"Company"), approved a Rights Agreement, dated as of and to be effective on
February 6, 1998 (the "Rights Agreement") between the Company and First Chicago
Trust Company of New York, as Rights Agent, having the principal terms
summarized below. In accordance with the Rights Agreement, the Board also
authorized a dividend distribution of one Right for each outstanding common
share of beneficial interest, $.01 par value, (the "Common Shares"), of the
Company to shareholders of record at the close of business on February 17, 1998
(the "Record Date").
Each Right entitles the registered holder to purchase from the Company
one one-thousandth of a share of the Company's Junior Participating Cumulative
Preferred Shares, Series B ("Series B Preferred Shares"). Each one
one-thousandth of a share (a "Unit") of a Series B Preferred Share is structured
to be the equivalent of one Common Share of the Company. Shareholders will
receive one Right per Common Share held of record at the close of business on
the Record Date. The exercise price of the Right will be $85.00 subject to
adjustment (the "Purchase Price").
Rights will also attach to Common Shares issued after the Record Date
but prior to the Distribution Date unless the Board of Trustees determines
otherwise at the time of issuance. The description and terms of the Rights are
set forth in the Rights Agreement.
The Rights will trade with the Common Shares and will be evidenced by
Common Shares certificates, and no separate certificates evidencing the Rights
(the "Rights Certificates") will be distributed initially. The Rights will
separate from the Common Shares and a distribution of the Rights Certificates
will occur (the "Distribution Date") upon the earlier of (i) 10 business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 10% or more of the outstanding Common Shares
(the "Share Acquisition Date"), or (ii) 10 business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially becoming an Acquiring Person. Until the Distribution Date,
(i) the Rights will be evidenced by the Common Shares certificates and will be
transferred with and only with such Common Shares certificates, (ii) any Common
Shares certificates issued will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for Common Shares outstanding will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificates.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on February 17, 2008, unless earlier redeemed or
exchanged by the Company as described below. As soon as practicable after the
Distribution Date, Rights Certificates will be mailed to holders of record of
the Common Shares as of the close of business on the Distribution Date, and
thereafter such separate Rights Certificates alone will represent the Rights.
The Agreement provides that if any person becomes an Acquiring Person,
proper provision shall be made so that each holder of a Right (except as set
forth below) will thereafter have the right to receive, upon exercise and
payment of the Purchase Price, Series B Preferred Shares or, at the option of
the Company, Common Shares (or, in certain circumstances, cash, property or
other securities of the Company) having a value equal to twice the amount of the
Purchase Price.
In the event that, at any time following the Share Acquisition Date,
(i) the Company is acquired in a merger, statutory share exchange, or other
business combination in which the Company is not the surviving person, or (ii)
50% or more of the Company's assets or earning power is sold or transferred,
each holder of a Right (except as set forth below) shall thereafter have the
right to receive, upon exercise and payment of the Purchase Price, Common Shares
of the acquiring company having a value equal to twice the Purchase Price. The
events set forth in this paragraph and in the immediately preceding paragraph
are referred to as the "Triggering Events."
Upon the occurrence of a Triggering Event that entitles Rights holders
to purchase securities or assets of the Company, Rights that are or were owned
by the Acquiring Person, or any affiliate or associate of such
4
<PAGE>
Acquiring Person, on or after such Acquiring Person's Share Acquisition Date
shall be null and void and shall not thereafter be exercised by any person
(including subsequent transferees). Upon the occurrence of a Triggering Event
that entitles Rights holders to purchase Common Shares of a third party, or upon
the authorization of an Exchange, Rights that are or were owned by any Acquiring
Person or any affiliate or associate of any Acquiring Person on or after such
Acquiring Person's Share Acquisition Date shall be null and void and shall not
thereafter be exercised by any person (including subsequent transferees).
The Purchase Price payable, and the number of Series B Preferred
Shares, Common Shares or other securities or property issuable upon exercise of
the Rights are subject to adjustment from time to time to prevent dilution.
At any time after any person becomes an Acquiring Person, the Company
may exchange all or part of the Rights (except as set forth below) for Common
Shares (an "Exchange") at an exchange ratio of one share per Right, as
appropriately adjusted to reflect any share split or similar transaction.
At any time until ten business days following the Share Acquisition
Date or ten business days following the commencement of a tender offer or
exchange offer that would result in a person or group becoming an Acquiring
Person, the Company may redeem the Rights in whole, but not in part, at a price
of $.001 per Right (the "Redemption Price"). Under certain circumstances set
forth in the Rights Agreement, the decision to make an Exchange or to redeem the
Rights shall require the concurrence of a majority of the Continuing Trustees
(as defined below). Additionally, the Company may thereafter but prior to the
occurrence of a Triggering Event redeem the Rights in whole, but not in part, at
the Redemption Price provided that such redemption is incidental to a merger or
other business combination transaction involving the Company that is approved by
a majority of the Continuing Trustees, and does not involve an Acquiring Person,
and is one in which all holders of Common Shares are treated alike. After the
redemption period has expired, the Company's right of redemption may be
reinstated if an Acquiring Person reduces his beneficial ownership to less than
15% of the outstanding Common Shares in a transaction or series of transactions
not involving the Company. Immediately upon the action of the Board ordering
redemption of the Rights, with, where required, the concurrence of the
Continuing Trustees, the Rights will terminate and the only right of the holders
of Rights will be to receive the Redemption Price.
The term "Continuing Trustees" means any member of the Board who was a
member of the Board immediately before the adoption of the Rights Agreement and
any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Trustees, but does not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Series B Preferred Shares (or other consideration) of the
Company or for Common Shares of the acquiring company as set forth above.
Other than certain provisions relating to the principal economic terms
of the Rights, any of the provisions of the Rights Agreement may be amended by
the Board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board (in certain
circumstances, only with the concurrence of the Continuing Trustees) in order to
cure any ambiguity, to make certain other changes that do not adversely affect
the interests of holders of Rights (excluding the interests of any Acquiring
Person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, no amendment to adjust the time period governing redemption
may be made at such time as the Rights are not redeemable.
5
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements for Properties Acquired
Statement of revenues and certain operating expenses of the
Newport National Properties for the year ended December 31, 1996 are presented
as prescribed by Item 2 of Form 8-K and Rule 3-14 of Regulation S-X.
Statement of revenues and certain operating expenses of the
Carrara Place Property for the year ended June 30, 1997 is presented as
prescribed by Rule 3-14 of Regulation S-X.
Combined statement of revenues and certain operating expenses of the
Silicon Valley Properties for the year ended December 31, 1996 are presented as
prescribed by Rule 3-14 of Regulation S-X.
(B) Pro Forma Financial Information
Prentiss Properties Trust Pro Forma Balance Sheet as of December 31,
1997 and Pro Forma Statement of Income for the year ended December 31, 1997.
(C) Exhibits
4.1 Form of Rights Agreement, dated as of February 6, 1998 between
the Company and First Chicago Trust Company of New York, as Rights Agent.
4.2 Form of Rights Certificate, included as Exhibit A to the
Rights Agreement.
10.1 Purchase Agreement entered into by and between Jacob Brouwer
and Jeanette Brouwer (as "Sellers") and Prentiss Properties Acquisition
Partners, L.P. (as "Buyer") in respect to the purchase and sale of the
properties referred to therein as "Carlsbad Pacifica."
10.2 Purchase Agreement entered into by and between JJB Land
Company, LLC, (as "Seller") and Prentiss Properties Acquisition Partners, L.P.
(as "Buyer") in respect to the purchase and sale of the properties referred to
therein as "The Plaza."
10.3 Contribution/Purchase Agreement entered into by and between
the Sellers (therein identified) and Prentiss Properties Acquisition Partners,
L.P. (as "Buyer") in respect to the purchase and sale of the properties referred
to therein as the "Shiley Interests" and "NNC Interests."
10.4 Credit Agreement, dated December 30, 1997, among Prentiss
Properties Acquisition Partners, L.P., as Borrower, each of the lenders that are
a signatory therein, Bank One, Texas, N.A., as Administrative Agent, and
Nationsbank of Texas, N.A., as Syndication Agent.
23.1 Consent of Coopers & Lybrand L.L.P. Independent Accountants
6
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
The following represents certain of the properties acquired by the Company during 1998: PAGE
NUMBER
<S> <C>
SIGNIFICANT ACQUISITION:
The Newport National Properties
Report of Independent Accountants.................................................................. 8
Combined Statement of Revenues and Certain Operating Expenses for the Year Ended
December 31, 1996............................................................................... 9
Notes to Combined Statement of Revenues and Certain Operating Expenses............................. 10
INDIVIDUALLY INSIGNIFICANT ACQUISITIONS:
The Carrara Place Property
Report of Independent Accountants.................................................................. 12
Statement of Revenues and Certain Operating Expenses for the Year Ended
June 30, 1997................................................................................... 13
Notes to Statement of Revenues and Certain Operating Expenses...................................... 14
The Silicon Valley Properties
Report of Independent Accountants.................................................................. 16
Combined Statement of Revenues and Certain Operating Expenses for the Year Ended
December 31, 1996............................................................................... 17
Notes to Combined Statement of Revenues and Certain Operating Expenses............................. 18
PRO FORMA FINANCIAL STATEMENTS:
Prentiss Properties Trust Pro Forma Balance Sheet as of December 31, 1997.......................... 19
Prentiss Properties Trust Pro Forma Statements of Income for the
Year Ended December 31, 1997.................................................................... 20
</TABLE>
7
<PAGE>
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 Newport National Properties (the "Newport
National Properties") for the year ended December 31, 1996. The combined
statement of revenues and certain operating expenses is the responsibility of
the Newport National 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 Newport National Properties'
revenues and expenses and may not be comparable to results from proposed future
operations of the Newport National 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.
February 6, 1998
Dallas, Texas
8
<PAGE>
THE NEWPORT NATIONAL 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 ....................................... $8,869
Other income ........................................ 130
------
8,999
Certain operating expenses:
Real estate taxes ................................... 736
Repairs and maintenance ............................. 746
Property management ................................. 496
Utilities ........................................... 496
Insurance ........................................... 99
------
2,573
Revenues in excess of certain operating expenses $6,426
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
9
<PAGE>
THE NEWPORT NATIONAL 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 Newport
National Properties (the "Newport National Properties" or the "Properties"),
which were acquired by the Company from an unaffiliated third-party for an
aggregate purchase price of $90.4 million (including estimated closing costs).
The Newport National Properties consist of the following properties:
<TABLE>
<CAPTION>
Rentable
Property Type Square Footage Location
- --------- ---- -------------- --------
<S> <C> <C> <C>
The Campus Industrial 157,886 Carlsbad, CA
Carlsbad Pacifica Office 49,080 Carlsbad, CA
Copperwood Center Industrial 125,600 Oceanside, CA
Eastside Newport Center Industrial 138,590 Tucson, AZ
La Terraza Development Parcel - Escondido, CA
Pacific Corporate Center Industrial 68,177 Carlsbad, CA
The Plaza I & II Office 89,034 Carlsbad, CA
Shadowridge Business Center Industrial 91,442 Vista, CA
Shadowridge Plaza Industrial 31,726 Vista, CA
Simpson Business Park Industrial 55,974 Escondido, CA
Sorin Biomedical Industrial 151,032 Irvine, CA
Sycamore Business Center Industrial 116,507 Vista, CA
Via Del Campo Industrial 86,952 Rancho Bernardo, CA
---------
1,162,000
=========
</TABLE>
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.
10
<PAGE>
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.......................................................... $6,626
1998 ......................................................... 5,075
1999 ......................................................... 3,503
2000 ......................................................... 2,565
2001 ......................................................... 1,491
Thereafter ................................................... 1,247
-------
$20,507
=======
</TABLE>
Office space in the Newport National 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
Under terms of various management agreements, the Newport National
Properties paid $372 in management fees during the year ended December 31, 1996
to the Newport National Management Company, an affiliate of the entities owning
the Properties.
The Newport National Properties received base rents in the amount of
$101 during the year ended December 31, 1996 from entities affiliated with the
entities owning the Properties.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Prentiss Properties Trust
We have audited the accompanying statement of revenues and certain
operating expenses of the Carrara Place Property for the year ended June 30,
1997. The statement of revenues and certain operating expenses is the
responsibility of the Carrara Place Property's owners. Our responsibility is to
express an opinion on the 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 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 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 statement of
revenues and certain operating expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying 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 Carrara Place Property's revenues and
expenses and may not be comparable to results from proposed future operations of
the Carrara Place Property.
In our opinion, the 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
June 30, 1997, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Dallas, Texas
February 6, 1998
12
<PAGE>
CARRARA PLACE PROPERTY
STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Revenues:
Rental income ..................................... $3,412
Other income ...................................... 164
------
3,576
Certain operating expenses:
Real estate taxes ................................. 571
Repairs and maintenance ........................... 586
Property management ............................... 206
Utilities ......................................... 313
Insurance ......................................... 39
------
1,715
------
Revenues in excess of certain operating expenses ........... $1,861
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
13
<PAGE>
CARRARA PLACE PROPERTY
NOTES TO STATEMENT OF REVENUES
AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The statement of revenues and certain operating expenses for the year
ended June 30, 1997 relate to the operations of the Carrara Place Property (the
"Property") which was acquired on January 30, 1998 from an unaffiliated third-
party for an aggregate purchase price of $31.5 million (including estimated
closing costs). The Carrara Place Property consists of one Class "A" suburban
office building in Englewood, Colorado totaling approximately 234,222 net
rentable square feet.
The accompanying statement excludes certain expenses such as interest,
depreciation and amortization and other costs not directly related to the future
operations of the Property that may not be comparable to the expenses expected
to be incurred in the proposed future operations of the Property. Management is
not aware of any material factors relating to the Property which would cause the
reported financial information not to be necessarily indicative of future
operating results.
The 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 June 30, 1997 two separate tenants represented
41% and 28%, respectively, of total base rental income.
FUTURE RENTAL REVENUES
The Property 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 June 30, 1997, are approximately
as follows:
<TABLE>
<S> <C> <C>
1998................................................ $3,536
1999 ................................................ 3,516
2000 ................................................ 2,503
2001 ................................................ 2,026
2002 ................................................ 1,943
Thereafter................................................... 4,227
-------
$17,751
=======
</TABLE>
Office space in the Carrara Place Property 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 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.
14
<PAGE>
2. RELATED PARTY TRANSACTIONS
Under terms of the management agreement, the Carrara Place Property
paid $152 in management fees during the year ended June 30, 1997, to an
affiliate of the entities owning the Property.
15
<PAGE>
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 San Jose Industrial Properties
(the "Silicon Valley Properties") for the year ended December 31, 1996. The
combined statement of revenues and certain operating expenses is the
responsibility of the Silicon Valley 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 Silicon Valley
Properties' revenues and expenses and may not be comparable to results from
proposed future operations of the Silicon Valley 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.
October 20, 1997
Dallas, Texas
16
<PAGE>
THE SILICON VALLEY 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 ..................................... $2,562
Other income ...................................... 4
------
2,566
Certain operating expenses:
Real estate taxes ................................. 309
Repairs and maintenance ........................... 86
Property management ............................... 155
Utilities ......................................... 24
Insurance ......................................... 81
------
655
------
Revenues in excess of certain operating expenses ........... $1,911
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
17
<PAGE>
THE SILICON VALLEY 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
San Jose Industrial Properties (the "Silicon Valley Properties"), which were
acquired on January 13, 1998, by the Company from an unaffiliated third-party
for an aggregate purchase price of $27.0 million (including estimated closing
costs). The Silicon Valley Properties consist of six suburban industrial
buildings totaling approximately 382,234 net rentable square feet located in
Sunnyvale and San Jose, California.
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 15% 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......................................... $ 1,861
1998......................................... 1,729
1999......................................... 1,420
2000......................................... 1,204
2001......................................... 1,013
Thereafter................................... 264
-------
$ 7,491
=======
</TABLE>
Office space in the Silicon Valley 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.
18
<PAGE>
PRENTISS PROPERTIES TRUST
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following unaudited pro forma consolidated balance sheet
is presented as if the following transactions had been consummated on December
31, 1997: (i) the acquisition of the Newport National Properties, and (ii) the
acquisition of the Carrara Place Property, the Silicon Valley Properties and an
additional individually insignificant property acquired subsequent to December
31, 1997, (collectively, the "Other Acquisitions"). 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, 1997 and
other unaudited financial results of the Company for the year ended December 31,
1997 included elsewhere in this Form 8-K.
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
(unaudited) ----------------------- PRENTISS
PRENTISS NEWPORT NATIONAL PROPERTIES
PROPERTIES PROPERTIES AND TRUST
TRUST OTHER ACQUISITIONS/(1)/ PRO FORMA
------------- ----------------------- ----------------
<S> <C> <C> <C>
Assets:
Real estate, net.................. $1,134,849 $162,904 $1,297,753
Mortgage note receivable.......... 36,331 36,331
Deferred charges and other
assets, net....................... 24,636 24,636
Receivables, net.................. 10,865 10,865
Cash and cash equivalents......... 7,075 7,075
Escrowed cash and deposits on
real estate....................... 4,524 4,524
Other receivables (affiliates).... 1,928 1,928
Investments in joint venture and
unconsolidated subsidiaries....... 19,638 19,638
------------- ----------------------- ----------------
Total Assets.................. $1,239,846 $162,904 $1,402,750
============= ======================= ================
Liabilities:
Debt on real estate............... $420,030 $156,352 $576,382
Accounts payable and other 35,795 35,795
liabilities..............................
Distributions payable............. 14,782 14,782
------------- ----------------------- ----------------
Total Liabilities........ 470,607 156,352 626,959
------------- ----------------------- ----------------
Minority interest........................ 72,607 4,677 77,284
------------- ----------------------- ----------------
Shareholders' Equity:
Preferred shares.................. 75,000 75,000
Common shares..................... 332 332
Additional paid-in capital........ 628,086 1,875 629,961
Distributions in excess of
accumulated earnings............. (6,786) (6,786)
------------- ----------------------- ----------------
Total Shareholders' Equity.... 696,632 1,875 698,507
------------- ----------------------- ----------------
Total Liabilities and
Shareholders' Equity.......... $1,239,846 $162,904 $1,402,750
============= ======================= ================
</TABLE>
/(1)/ The financial information on the Newport National Properties and Other
Acquisitions is presented as if the transaction occurred on December 31,
1997.
19
<PAGE>
PRENTISS PROPERTIES TRUST
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(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 acquisition of the 1997 Acquired Properties, (ii) the
acquisition of the Newport National Properties, (iii) the acquisition of the
Carrara Place Property, the Silicon Valley Properties and an additional
individually insignificant property acquired subsequent to December 31, 1997
(collectively, the "Other Acquisitions"), and (iv) the Company's follow-on
offerings of common and preferred stock had occurred on January 1, 1997.
This pro forma consolidated statement of income should be read in
conjunction with the pro forma consolidated balance sheet at December 31, 1997
and other unaudited 1997 financial results included elsewhere in this Form 8-K.
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, 1997 nor does it purport to
represent the operations of the Company for future periods.
<TABLE>
<CAPTION>
Pro Forma Adjustments
(unaudited) -------------------------------------------------------------- Prentiss
The Company Newport National Properties
Year Ended 1997 Properties and Other Other Trust
Dec.31, 1997 Acquired Properties(1) Acquisitions(2) Adjustments(3) Pro Forma
------------ ---------------------- -------------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income........ $127,089 $48,341 $ 17,268 $192,698
Mortgage interest.... 1,780 1,969 3,749
Management fees...... 925 925
Development leasing,
sale and other fees. 1,934 1,488 185 3,607
------------ ---------------------- --------------- -------------- ---------
Total revenues....... 131,728 51,798 17,453 200,979
------------ ---------------------- --------------- -------------- ---------
Expenses:
Property operating and
maintenance......... 30,602 15,060 3,474 (2,580) 46,556
Real estate taxes.... 13,742 4,471 1,615 535 20,363
General and
administrative...... 3,141 44 3,185
Personnel costs,
net................. 3,478 180 3,658
Interest expense..... 21,131 19,656 40,787
Amortization of deferred
financing costs.... 824 24 848
Depreciation and
amortization........ 21,600 11,600 33,200
------------ ---------------------- --------------- -------------- ---------
Total expenses...... 94,518 19,531 5,089 29,459 148,597
------------ ---------------------- --------------- -------------- ---------
Equity in income of
joint venture and
unconsolidated
subsidiaries.......... 5,208 307 5,515
------------ ---------------------- --------------- -------------- ---------
Income before gain on
sale and minority
interest.............. 42,418 32,267 12,364 (29,152) 57,897
Gain on sale........... 641 641
Minority interest...... (5,235) (1,168) (6,403)
------------ ---------------------- --------------- -------------- ---------
Net income(4).......... 37,824 32,267 12,364 (30,320) 52,135
Preferred distributions (25) (4,503) (4,528)
------------ ---------------------- --------------- -------------- ---------
Net income applicable
to common
shareholders(4)....... $37,799 $32,267 $12,364 $(34,823) $47,607
============ ====================== =============== ============== =========
Net income per common
share - basic(4)...... $1.52 $1.43
============ =========
Weighted average common
shares outstanding.... 24,930 33,191
============ =========
Net income per common
share - diluted(4).... $1.49 $1.43
============ =========
Weighted average common
shares outstanding.... 25,307 36,384
============ =========
</TABLE>
20
<PAGE>
/(1)/ During 1997, the Company has acquired 51 office and 15 industrial
properties containing approximately 6.8 million square feet for an
approximate purchase price of $650 million (the "1997 Acquired
Properties"). The financial information of the 1997 Acquired Properties
reflects the historical revenues and certain operating expenses of the
properties for the portion of the period prior to acquisition.
/(2)/ The financial information of the Newport National Properties and Other
Acquisitions reflects the historical revenues and certain operating
expenses of the properties for the year ended December 31, 1997.
/(3)/ The Other Adjustments reflect the adjustments that Management considers
necessary to present the revenues and expenses of the Company related
to the ownership and operations of the 1997 Acquired Properties,
Newport National Properties and the Other Acquisitions as if the
acquisitions had occurred on January 1, 1997.
/(4)/ Historical net income attributable to common shareholders also includes
extraordinary charges from write-offs of deferred financing fees, in
the amount of $878. As these amounts are not included in the
determination of net income from continuing operations, these amounts
have been excluded from the computation of pro forma net income.
21
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRENTISS PROPERTIES TRUST
Date: February 10, 1998 By: /s/ THOMAS P. SIMON
--------------------------------
Thomas P. Simon (Vice President)
22
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
4.1 Form of Rights Agreement, dated as of February 6, 1998 between
the Company and First Chicago Trust Company of New York, as
Rights Agent.
4.2 Form of Rights Certificate, included as Exhibit A to the Rights
Agreement.
10.1 Purchase Agreement entered into by and between Jacob Brouwer and
Jeanette Brouwer (as "Sellers") and Prentiss Properties
Acquisition Partners, L.P. (as "Buyer") in respect to the
purchase and sale of the properties referred to therein as
"Carlsbad Pacifica."
10.2 Purchase Agreement entered into by and between JJB Land Company,
LLC, (as "Seller") and Prentiss Properties Acquisition Partners,
L.P. (as "Buyer") in respect to the purchase and sale of the
properties referred to therein as "The Plaza."
10.3 Contribution/Purchase Agreement entered into by and between the
Sellers (therein identified) and Prentiss Properties Acquisition
Partners, L.P. (as "Buyer") in respect to the purchase and sale
of the properties referred to therein as the "Shiley Interests"
and "NNC Interests."
10.4 Credit Agreement, dated December 30, 1997, among Prentiss
Properties Acquisition Partners, L.P., as Borrower, each of the
lenders that are a signatory therein, Bank One, Texas, N.A., as
Administrative Agent, and Nationsbank of Texas, N.A., as
Syndication Agent.
23.1 Consent of Coopers & Lybrand L.L.P. Independent Accountants.
23
<PAGE>
EXHIBIT 4.1
-----------
- -------------------------------------------------------------------------------
PRENTISS PROPERTIES TRUST
AND
FIRST CHICAGO TRUST COMPANY OF NEW YORK
RIGHTS AGENT
---------------
RIGHTS AGREEMENT
DATED AS OF FEBRUARY 6, 1998
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Certain Definitions...................................................................................1
Section 2. Appointment of Rights Agent...........................................................................5
Section 3. Issue of Rights and Rights Certificates...............................................................6
Section 4. Form of Rights Certificates...........................................................................7
Section 5. Countersignature and Registration.....................................................................8
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates..........................................................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights; Restriction on Transfer of
Rights.....................................................................................10
Section 8. Cancellation and Destruction of Rights Certificates..................................................12
Section 9. Reservation and Availability of Series C Preferred Stock.............................................12
Section 10. Series C Preferred Stock Record Date.................................................................13
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights..........................14
Section 12. Certificates of Adjusted Purchase Price or Number of Shares..........................................21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.................................21
Section 14. Fractional Rights and Fractional Shares..............................................................24
Section 15. Rights of Action.....................................................................................25
Section 16. Agreement of Rights Holders..........................................................................25
Section 17. Rights Certificate Holder Not Deemed a Shareholder...................................................26
Section 18. Concerning the Rights Agent..........................................................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent............................................26
Section 20. Duties of Rights Agent...............................................................................27
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 21. Change of Rights Agent...............................................................................29
Section 22. Issuance of New Rights Certificates..................................................................30
Section 23. Redemption and Termination...........................................................................30
Section 24. Exchange ............................................................................................32
Section 25. Notice of Certain Events.............................................................................33
Section 26. Notices .............................................................................................34
Section 27. Supplements and Amendments...........................................................................34
Section 28. Successors...........................................................................................35
Section 29. Determinations and Actions by the Board of Directors, etc............................................35
Section 30. Benefits of this Agreement...........................................................................35
Section 31. Severability.........................................................................................36
Section 32. Governing Law........................................................................................36
Section 33. Counterparts.........................................................................................36
Section 34. Descriptive Headings.................................................................................36
</TABLE>
EXHIBIT A -- Form of Rights Certificate
EXHIBIT B -- Form of Summary of Rights
(ii)
<PAGE>
RIGHTS AGREEMENT
----------------
This Agreement, dated as of February 6, 1998 (the "Agreement"), between
PRENTISS PROPERTIES TRUST, a Maryland real estate investment trust (the
"Company"), and FIRST CHICAGO TRUST COMPANY OF NEW YORK, a _____________
corporation (the "Rights Agent"), provides as follows:
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Board of Trustees of the Company has authorized and
declared a dividend distribution of one Right (as hereinafter defined) for each
outstanding Common Share of the Company to shareholders of record at the Close
of Business (as hereafter defined) on the Record Date (as hereinafter defined)
and has authorized the issuance of one Right (as such number may hereinafter be
adjusted as provided herein) for each Common Share that shall be issued between
the Record Date and the earliest of the Distribution Date, the Redemption Date
or the Expiration Date (as such terms are hereinafter defined) unless the Board
of Trustees provides to the contrary before or at the time of issuance of any
such Common Shares, each Right initially representing the right to purchase one
Unit of Series B Preferred Shares (as hereinafter defined), and being evidenced
by a Rights Certificate in the form attached hereto as Exhibit A, upon the terms
and subject to the conditions hereof (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, alone
or together with all Affiliates and Associates of such Person, shall at any time
be the Beneficial Owner of either or both of (i) 10% or more of the Common
Shares then outstanding or (ii) 10% or more of the Rights then outstanding, but
shall not include: (a) the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan; (b) Security Capital Preferred Growth Incorporated
(SCPG), including its Affiliates and Associates, provided that SCPG and its
Affiliates and Associates shall be an Acquiring Person if and when SCPG and its
Affiliates and Associates shall become the Beneficial Owner of either or both of
(i) 11% or more of the Common Shares then outstanding or (ii) 11% or more of the
Rights then outstanding; or (c) any such Person who has become and is such a
Beneficial Owner solely because (1) of a reduction in the aggregate number of
Common Shares outstanding due to a repurchase of Common Shares by the Company
since the last date on which such Person acquired Beneficial Ownership of any
Common Shares or (2) it acquired such Beneficial Ownership in the good faith
belief that such acquisition would not (A) cause such Beneficial Ownership to
equal or exceed 10% (or, in the case of SCPG and its Affiliates and Associates,
11%) of the Common Shares then outstanding and such Person relied in good faith
in computing the percentage of its Beneficial Ownership on publicly filed
reports or documents of the Company that are inaccurate or out-of-date or (B)
otherwise cause a Distribution Date or the adjustment provided for in Section
11(a) to occur. Notwithstanding
<PAGE>
clause (c)(2) of the preceding sentence, if any Person that is not an Acquiring
Person due to such clause (c)(2) does not reduce its percentage of Beneficial
Ownership of Common Shares to less than 10% (or, in the case of SCPG and its
Affiliates and Associates, 11%) by the Close of Business on the fifth Business
Day after notice from the Company (the date of notice being the first day) that
such Person's Beneficial Ownership of Common Shares so equals or exceeds 10%
(or, in the case of SCPG and its Affiliates and Associates, 11%), such Person
shall, at the end of such five Business Day period, become an Acquiring Person
(and such clause (c)(2) shall no longer apply to such Person). For purposes of
this definition, the determination whether any Person acted in "good faith"
shall be conclusively determined by the Board of Trustees of the Company, acting
by a vote of those trustees of the Company whose approval would be required to
redeem the Rights under Section 23.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(i) that such Person or any of such Person's Affiliates or
Associates is deemed to "beneficially own" within the meaning of Rule 13d-3 of
the General Rules and Regulations under the Exchange Act;
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed to be the
--------
"Beneficial Owner" of, or to "beneficially own," (A) securities tendered
pursuant to a tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange or (B) securities issuable upon exercise of the Rights;
(iii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote, including pursuant to
any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of,
- --------
or to "beneficially own," any security under this subparagraph (iii) as a result
of an agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from a revocable
proxy given in response to a public proxy solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) the beneficial ownership of such security is not
also then reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
2
<PAGE>
(iv) that are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
the proviso to subparagraph (iii) of this paragraph (c)) or disposing of any
voting securities of the Company; provided, however, that notwithstanding any
--------
provision of this Section 1(c), any Person engaged in business as an underwriter
of securities who acquires any securities of the Company through such Person's
participation in good faith in a firm commitment underwriting registered under
the Securities Act of 1933, as amended (the "Act"), shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," such securities until the
expiration of 40 days after the date of acquisition; and provided, further, that
--------
in no case shall an officer or trustee of the Company be deemed (x) the
beneficial owner of any securities beneficially owned by another officer or
trustee of the Company solely by reason of actions undertaken by such persons in
their capacity as officers or trustees of the Company or (y) the beneficial
owner of securities held of record by the trustee of any employee benefit plan
of the Company or any Subsidiary of the Company for the benefit of any employee
of the Company or any Subsidiary of the Company, other than the officer or
trustee, by reason of any influence that such officer or trustee may have over
the voting of the securities held in the plan.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which national banking institutions in the State of Maryland
or State of [JURISDICTION OF RIGHTS AGENT] are authorized or obligated by law or
executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M.,
Dallas, Texas time, on such date; provided, however, that if such date is not a
--------
Business Day it shall mean 5:00 P.M., Dallas, Texas time, on the next succeeding
Business Day.
(f) "Common Shares" shall mean the common shares of beneficial
interest the Company, $.01 par value, except that "Common Shares" when used with
reference to any Person other than the Company, if such Person is a corporation,
shall mean the capital stock of such Person with the greatest voting power, or
the equity securities or other equity interest in such Person having power to
control or direct the management of such Person, or any shares of capital stock
or other equity interests into which the foregoing shall be reclassified or
changed.
(g) "Continuing Trustee" shall mean any member of the Board of
Trustees of the Company, while a member of the Board, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, and (i) who is a
member of the Board on the date of this Agreement or (ii) whose subsequent
nomination for election or election to the Board was recommended or approved by
a majority of the Continuing Trustees serving at the time of such nomination or
election.
3
<PAGE>
(h) "Distribution Date" shall mean the earlier of (i) the close
of business on the tenth business day after the Share Acquisition Date (as
hereinafter defined) or (ii) the close of business on the tenth business day
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act if, upon consummation
thereof, such Person would be an Acquiring Person (irrespective of whether any
shares were actually purchased pursuant to any such offer).
(i) "Equivalent Shares" shall mean Series B Preferred Shares (as
hereinafter defined) and any other class or series of beneficial interest of the
Company that is entitled to participate in dividends and other distributions,
including distributions upon the liquidation, dissolution or winding up of the
Company, on a proportional basis with the Common Shares. In calculating the
number of any class or series of Equivalent Shares for purposes of Section 11
hereof, the number of shares, or fractions of a share, of such class or series
of beneficial interest that is entitled to the same dividend or distribution as
a whole Common Share shall be deemed to be one share.
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and in effect on the date of this Agreement, unless a different
date is otherwise specifically provided herein.
(k) "Exchange Date" shall mean the date on which the Board of
Trustees authorizes the exchange of Rights for Common Shares pursuant to Section
24 hereof.
(l) "Expiration Date" shall mean the earliest of (i) the close of
business on the Final Expiration Date, or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof, or (iii) the Exchange Date.
(m) "Final Expiration Date" shall mean February 23, 2008.
(n) "Person" shall mean any individual, firm, corporation,
partnership or other entity and any particular Person shall include any "group"
acting as described in Section 13(d)(3) of the Exchange Act.
(o) "Purchase Price" shall have the meaning set forth in Section
4(a) hereof, as adjusted in accordance with this Agreement and as in effect from
time to time.
(p) "Record Date" shall mean the Close of Business on February
17, 1998.
4
<PAGE>
(q) "Rights" shall mean the rights to purchase Series B Preferred
Shares (or other securities) as provided in this Agreement.
(r) "Rights Certificate" shall have the meaning set forth in
Section 3(a) hereof.
(s) "Section 11(a)(ii) Event" shall mean any occurrence of the
event described in the first sentence of Section 11(a)(ii) hereof.
(t) "Section 13 Event" shall mean any event described in clause
(w), (x), (y) or (z) of Section 13(a) hereof.
(u) "Series B Preferred Shares" shall mean shares of Series B
Junior Participating Preferred Shares, without par value, of the Company.
(v) "Share Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such.
(w) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which an amount of voting securities sufficient
to elect a majority of the directors, trustees or Persons having similar
authority of such corporation or other entity is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(x) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
(y) "Unit" shall mean one one-thousandth of one Series B
Preferred Share.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be holders of Common Shares) in accordance with the terms and conditions hereof,
and the Rights Agent hereby accepts such appointment. The Company may from time
to time appoint such Co-Rights Agents as it may deem necessary or desirable.
5
<PAGE>
Section 3. Issue of Rights and Rights Certificates.
---------------------------------------
(a) Until the Distribution Date, (x) the Rights shall be evidenced
(subject to the provisions of paragraphs (b) and (c) of this Section 3) by the
certificates for the Common Shares registered in the names of the holders of the
Common Shares (which certificates for Common Shares shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
shall be transferable only in connection with the transfer of the underlying
Common Shares (including a transfer to the Company). Subject to the provisions
of Section 7(e) hereof, as soon as practicable after the Company has notified
the Rights Agent of the occurrence of a Distribution Date, the Rights Agent
shall send by first-class, insured, postage prepaid mail, to each such record
holder of shares of the Common Shares as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit A
hereto (the "Rights Certificates"), evidencing one Right for each Common Share
so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per Common Share has been made pursuant to
Section 11(n) hereof, at the time of distribution of the Rights Certificates,
the Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates evidencing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights shall be
evidenced solely by such Rights Certificates.
(b) A Summary of Rights, in substantially the form attached hereto
as Exhibit B (the "Summary of Rights"), shall be sent by the Company by
first-class, postage prepaid mail, to each record holder of the Common Shares as
of the Record Date, at the address of each such holder shown on the records of
the Company. Until the Distribution Date, the Rights shall be evidenced by such
certificates evidencing the Common Shares, and the registered holders of the
Common Shares shall also be the registered holders of the associated Rights.
Until the earlier of the Distribution Date or the Expiration Date, the transfer
of any certificates evidencing Common Shares in respect of which Rights have
been issued shall also constitute, subject to the provisions of Section 7(e)
hereof, the transfer of the Rights associated with such Common Shares.
(c) Unless the Board of Trustees by resolution adopted at or before
the time of the issuance (including pursuant to the exercise of rights under the
Company's benefit plans) of any Common Shares specifies to the contrary, Rights
shall be issued in respect of all Common Shares that are issued after the Record
Date but prior to the earlier of the Distribution Date or the Expiration Date.
Certificates representing Common Shares outstanding prior to the Record Date
that are issued upon transfer or exchange of such Common Shares, shall also be
deemed to be certificates for Rights, and shall bear substantially the following
legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Prentiss
Properties Trust (the "Company") and First Chicago Trust Company of New
York (the "Rights Agent")
6
<PAGE>
dated as of February 6, 1998 (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which
is on file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced
by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date
of mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights
Agreement, Rights that are owned or that were previously owned by a
Person who is, was or becomes an Acquiring Person or any Affiliate or
Associate of an Acquiring Person may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Shares
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute, subject to the provisions of
Section 7(e) hereof, the transfer of the Rights associated with the Common
Shares represented by such certificates.
In the event that the Company purchases or acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Shares shall be deemed canceled and retired so that the Company
shall not be entitled to exercise any Rights associated with the Common Shares
that are no longer outstanding.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Distribution Date, and on their face shall entitle the holders
thereof to purchase such number of Units of Series B Preferred Shares as shall
be set forth therein at the price set forth therein (such exercise price per
unit, being hereinafter referred to as the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
7
<PAGE>
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that evidences Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Trustees of the Company has
determined is part of a plan, arrangement or understanding which has a primary
purpose to avoid or effects the avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) substantially the
following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a person who was or became an Acquiring Person or
an Affiliate or an Associate of an Acquiring Person. Accordingly, this
Rights Certificate and the Rights represented hereby may become void in
the circumstances specified in Section 7(e) of the Rights Agreement.
The Company shall notify the Rights Agent, and, if such notification is given
orally, the Company shall confirm promptly the same in writing, at such time as
the Company has notice that any Person constitutes an Acquiring Person or an
Affiliate or Associate of an Acquiring Person, and until such notice is received
by the Rights Agent the Rights Agent may conclusively presume for all purposes
that the foregoing legend need be imprinted only on Right Certificates
beneficially owned by Persons that the Company has previously identified to the
Rights Agent as constituting an Acquiring Person or an Affiliate or Associate of
an Acquiring Person and transferees of any such Persons.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chief Executive Officer, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be countersigned manually or by
facsimile by the Rights Agent and shall not be valid for any purpose unless so
countersigned. The Rights Certificates shall be countersigned by an authorized
signatory of the Rights Agent but it shall not be necessary for the same
signatory to countersign all of the Rights Certificates issued hereunder. In
case any officer of the Company who shall have signed any of the Rights
Certificates shall
8
<PAGE>
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- -----------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates (other than Rights
Certificates that have become void pursuant to Section 7(e) hereof or that have
been exchanged pursuant to Section 24 hereof) entitling the registered holder to
purchase a like number of Units of Series B Preferred Shares (or, following a
Triggering Event, Common Shares, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Certificates surrendered then entitle
such holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment from the holder of the Rights of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
9
<PAGE>
(b) Subject to Section 7(c) hereof, upon receipt by the Company and
the Rights Agent of evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Rights Certificate, and, in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights;
--------------------------------------------------------------
Restriction on Transfer of Rights.
- ---------------------------------
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(ii), Section 11(a)(iii),
Section 13, Section 23(a), and Section 24 hereof) in whole or in part at any
time after the Distribution Date upon surrender of the Rights Certificate, with
the form of election to purchase and the certificate on the reverse side thereof
duly executed, to the Rights Agent at the principal office or offices of the
Rights Agent designated for such purpose, together, except as otherwise provided
in Section 11(a)(ii) hereof, with payment of the aggregate Purchase Price with
respect to the total number of Units of Series B Preferred Shares (or Common
Shares or other securities or property, as the case may be) as to which
surrendered Rights are then exercisable, at or prior to the Expiration Date.
(b)The Purchase Price for each Unit of Series B Preferred Shares
pursuant to the exercise of a Right shall initially be $85.00 and shall be
subject to adjustment from time to time as provided in Section 11 hereof and
shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per Unit of Series B Preferred Shares (or Common Shares, other securities
or property, as the case may be) to be purchased as set forth below and an
amount equal to any applicable transfer tax, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly, (i) (A) requisition from any transfer
agent of the Units of Series B Preferred Shares (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of Units of Series B Preferred Shares to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total number
of Units of Series B Preferred Shares issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of Units of Series B Preferred
Shares as are to be purchased (in which case certificates for the Units of
Series B Preferred
10
<PAGE>
Shares represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company will direct the depositary agent to
comply with such request, (ii) requisition from the Company the amount of cash,
if any, to be paid in lieu of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate. The payment
of the Purchase Price (as such amount may be reduced (including to zero)
pursuant to Section 11(a)(iii) hereof) may be made in cash or by certified bank
check or bank draft payable to the order of the Company. In the event that the
Company is obligated to issue other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Trustees
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effects the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or any other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or its Affiliates or
Associates, or any transferee thereof, hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a
11
<PAGE>
registered holder upon the occurrence of any purported exercise as set forth in
this Section 7 unless such registered holder shall have (i) completed and signed
the certificate contained in the form of election to purchase set forth on the
reverse side of the Rights Certificate surrendered for such exercise and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All Rights
---------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Series B Preferred Shares.
---------------------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Series B
Preferred Shares (or, following the occurrence of a Triggering Event, out of its
authorized and unissued Series B Preferred Shares or other securities, as the
case may be), the number of Series B Preferred Shares (or such other securities)
that, except as provided in Section 11(a)(iii) hereof, will be sufficient from
time to time to permit the exercise in full of all outstanding Rights and all
Rights that are at the time issuable, in accordance with the provisions of this
Agreement.
(b) So long as the Series B Preferred Shares (and, following the
occurrence of a Triggering Event, any other securities) issuable and deliverable
upon the exercise of the Rights may be listed on any national securities
exchange, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such issuance to
be listed on such exchange upon official notice of issuance.
(c) The Company shall use its best efforts (i) to file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(ii)
and (iii) hereof, or as soon as is required by law following the Distribution
Date, as the case may be, a registration statement under the Act on an
appropriate form, with respect to the securities purchasable upon exercise of
the Rights, (ii) to cause such registration statement to become effective as
soon as practicable after such filing, and
12
<PAGE>
(iii) to cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the Expiration Date. The Company will also take such action
as may be appropriate under, or to ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety days after the date set forth in clause (i) of the first sentence
of this Section 9(c), the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating, and
notify the Rights Agent, that the exercisability of the Rights has been
temporarily suspended. The Company shall also issue a public announcement at
such time as the suspension is no longer in effect. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction unless the requisite qualification in such jurisdiction
shall have been obtained.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that Series B Preferred Shares (or other
securities, as the case may be) delivered upon exercise of the Rights shall, at
the time of delivery of the certificates for such shares (subject to payment of
the Purchase Price), be duly authorized, validly issued, fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges that
may be payable in respect of the issuance or delivery of the Rights Certificates
and of any certificates for Series B Preferred Shares (or other securities, as
the case may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax that may be payable in respect of any transfer
or delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of Series B Preferred Shares (or other securities, as the
case may be) in respect of a name other than that of, the registered holder of
the Rights Certificates evidencing Rights surrendered for exercise or to issue
or deliver any certificates for a number of Series B Preferred Shares (or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Series B Preferred Shares Record Date. Each person in whose
-------------------------------------
name any certificate for a number of Units of Series B Preferred Shares (or
other securities, as the case may be) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of such
Units of Series B Preferred Shares (or other securities, as the case may be)
represented thereby on, and such certificate shall be dated, the date upon which
the Rights Certificate evidencing such Rights was duly surrendered and payment
of the Purchase Price (and all applicable transfer taxes) was made; provided,
--------
however, that if the date of such surrender and payment is a date upon which the
Series B Preferred Shares (or other securities, as the case may
13
<PAGE>
be) transfer books of the Company are closed, such Person shall be deemed to
have become the record holder of such shares (fractional or otherwise) on, and
such certificate shall be dated, the next succeeding Business Day on which such
transfer books are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Rights Certificate as such shall not be entitled to any rights
of a shareholder of the Company with respect to shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
----------------------------------------------------------
Number of Rights. The Purchase Price, the number and kind of shares covered by
- ----------------
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Series B Preferred Shares
payable in Series B Preferred Shares, (B) subdivide the outstanding Series B
Preferred Shares, (C) combine the outstanding Series B Preferred Shares into a
smaller number of shares, or (D) issue any shares of beneficial interest in a
reclassification of the Series B Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of Series B Preferred
Shares or the number and kind of other shares of beneficial interest, as the
case may be, issuable on such date, shall be proportionately adjusted so that
the holder of any Right exercised after such time shall be entitled to receive,
upon payment of the Purchase Price then in effect, the aggregate number of
Series B Preferred Shares or the number and kind of other shares of beneficial
interest, as the case may be, that, if such Right had been exercised immediately
prior to such date and at a time when the Series B Preferred Shares transfer
books of the Company were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs that would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for
in this Section 11(a)(i) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 23 and Section 24 hereof, in the
event any Person becomes an Acquiring Person, then, proper provision shall be
made by the Company so that each record holder of each Right (except as provided
in Section 7(e) hereof) shall thereafter have the right to receive, upon
exercise thereof for the Purchase Price in accordance with terms of this
Agreement, such number of Units of Series B Preferred Shares (or, in lieu of
Series B Preferred Shares, at the option of the Company and to the extent
available, such number of Common Shares) as shall equal the result obtained by
multiplying the Purchase Price by a fraction, the numerator of which is the
number of Units of Series B Preferred Shares for which a
14
<PAGE>
Right is then exercisable and the denominator of which is 50% of the current
market price of a Common Share (determined pursuant to Section 11(d) hereof) on
the date of the first occurrence of a Section 11(a)(ii) Event (such result being
hereinafter referred to as the "Adjustment Shares").
(iii) To the extent that the number of Series B Preferred
Shares that are authorized by the Company's Amended and Restated Declaration of
Trust but not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a),
and subject to such limitations as are necessary to prevent a default under any
agreement for money borrowed as presently constituted to which the Company is a
party subject to any limitations contained in any applicable law, the Company
shall: (A) determine the excess of (1) the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value"), over (2) the
Purchase Price (such excess being hereinafter referred to as the "Spread"), and
(B) with respect to each Right, make adequate provision to substitute for such
unavailable Adjustment Shares, upon payment of the applicable Purchase Price,
(1) cash, (2) a reduction in the Purchase Price, (3) other equity securities of
the Company, (4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having, together with the Adjustment Shares issued
upon exercise of such Right, an aggregate value equal to the Current Value,
where such aggregate value has been determined by the Board of Trustees of the
Company based upon the advice of a nationally recognized investment banking firm
selected by the Board of Trustees of the Company; PROVIDED, however, if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within 30 days following the first occurrence of a Section
11(a)(ii) Event, then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the Purchase
Price, preferred shares of beneficial interest, par value $.01 per share, of the
Company or Common Shares (to the extent such securities are available) and then,
if necessary, cash, which securities and/or assets in the aggregate are equal to
the Spread. If the Board of Trustees of the Company shall determine in good
faith that it is likely that sufficient additional preferred shares of
beneficial interest, $.01 par value, of the Company or Common Shares could be
authorized for issuance upon exercise in full of the Rights, the 30-day period
set forth above may be extended to the extent necessary, but not more than 90
days following the first occurrence of a Section 11(a)(ii) Event, in order that
the Company may seek shareholder approval for the authorization of such
additional shares (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some action need be
taken pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the Common Shares shall be the current market price (as determined
pursuant to Section 11(d)
15
<PAGE>
hereof) per share of the Common Shares on the date of the first occurrence of a
Section 11(a)(ii) Event.
(b) If at any time after the date of this Agreement the Company
shall fix a record date for the issuance of rights, options or warrants to all
holders of Common Shares or of any class or series of Equivalent Shares
entitling such holders (for a period expiring within 45 calendar days after such
record date) to subscribe for or to purchase Common Shares or Equivalent Shares
(or securities convertible into Common Shares or Equivalent Shares) at a price
per share (or having a conversion price per share, if a security convertible
into Common Shares or Equivalent Shares) less than the current market price of
such Common Shares or Equivalent Shares on such record date, then, in each such
case, each Right outstanding immediately prior to such record date shall
thereafter evidence the right to purchase, for the Purchase Price, that number
of Units of Series B Preferred Shares or Equivalent Shares obtained by
multiplying the number of Units of Series B Preferred Shares issuable upon
exercise of a Right immediately prior to such record date by a fraction, the
numerator of which shall be the total number of Common Shares and Equivalent
Shares (if any) outstanding on such record date plus the number of additional
Common Shares and Equivalent Shares (if any) to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible) and the denominator of which shall be the total number of
Common Shares and Equivalent Shares (if any) outstanding on such record date
plus the number of Common Shares or Equivalent Shares, as the case may be, that
the aggregate offering price of the total number of Common Shares or Equivalent
Shares, as the case may be, so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price. In case such subscription price may be paid in a
consideration, part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Trustees of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Common Shares and Equivalent Shares owned by or
held for the account of the Company or any Subsidiary of the Company shall not
be deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, each Right shall
be adjusted to evidence the right to receive that number of Units of Series B
Preferred Shares that such Right would have entitled the holder to receive, for
the Purchase Price, if such record date had not been fixed.
(c) If at any time after the date of this Agreement the Company
shall fix a record date for the making of a distribution to all holders of
Common Shares or of any class or series of Equivalent Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of cash (other than a
regular quarterly cash dividend of the Company in compliance with any applicable
law), evidences of indebtedness, assets, securities (other than Common Shares or
any Equivalent Shares) or subscription rights, options or warrants (excluding
those referred to in Section 11(b) hereof), then, in each such case, each Right
outstanding immediately prior to such record date shall thereafter evidence the
right to purchase, for the Purchase Price, that number of Units of Series B
Preferred Shares obtained by multiplying the number of Units of Series B
16
<PAGE>
Preferred Shares issuable upon exercise of a Right immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price of a Common Share or an Equivalent Share on the record date and the
denominator of which shall be the current market price of a Common Share or an
Equivalent Share on such record date less the fair market value (as determined
in good faith by the Board of Trustees of the Company, whose determination shall
be described in a statement filed with the Rights Agent) of the portion of the
cash, evidences of indebtedness, assets or securities so to be distributed or of
such subscription rights, options or warrants applicable to a Common Share or an
Equivalent Share, as the case may be. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, each Right shall be adjusted to evidence the right
to receive that number of Units of Series B Preferred Shares that such Right
would have entitled the holder to receive, for the Purchase Price, if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "current market
price" per Common Share on any date shall be deemed to be the average of the
daily closing prices per share of such Common Shares for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the "current market price" per Common Share on any date shall be deemed
to be the average of the daily closing prices per share of such Common Shares
for the ten consecutive Trading Days immediately following such date; provided,
--------
however, that in the event that the current market price per share of the Common
Shares is determined during a period following the announcement by the issuer of
such Common Shares of (A) a dividend or distribution on such Common Shares
payable in shares of such Common Shares or securities convertible into shares of
such Common Shares (other than the Rights), or (B) any subdivision, combination
or reclassification of such Common Shares, and prior to the expiration of the
requisite 30 Trading Day or ten Trading Day period, as set forth above, after
the ex-dividend date for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, then, and in each such case,
the "current market price" shall be properly adjusted to take into account
ex-dividend trading. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Shares are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Shares are listed or admitted to trading or, if the Common
Shares are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices quoted on the Nasdaq Stock Market, as reported by the
National Association of Securities Dealers, Inc. ("Nasdaq") or such other
quotation system then in use, or, if on any such date the Common Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Shares
selected by the Board of Trustees of the Company. If on any such date no market
maker is making a market in the Common Shares, the fair value of such shares on
such date as determined in good faith by the Board of Trustees of the Company
shall be used. The
17
<PAGE>
term "Trading Day" shall mean a day on which the principal national securities
exchange on which the Common Shares are listed or admitted to trading is open
for the transaction of business or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, a Business Day. If the
Common Shares is not publicly held or not so listed or traded, "current market
price" per share shall mean the fair value per share as determined in good faith
by the Board of Trustees of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive for all
purposes.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of the Series B Preferred Shares shall be
determined in the same manner as set forth above for the Common Shares in
Section 11(d)(i) hereof (other than the last sentence thereof). If the current
market price per share of Series B Preferred Shares cannot be determined in the
manner provided above or if the Series B Preferred Shares are not publicly held
or listed or traded in a manner described in clause (i) of this Section 11(d),
the "current market price" per share of the Series B Preferred Shares shall be
conclusively deemed to be an amount equal to 1000 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Shares and Series B Preferred
Shares occurring after the date of this Agreement) multiplied by the current
market price per share of the Common Shares. If neither the Common Shares nor
the Series B Preferred Shares are publicly held or so listed or traded, "current
market price" per share of the Series B Preferred Shares shall mean the fair
value per share as determined in good faith by the Board of Trustees of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. For all purposes of this
Agreement, the "current market price" of one one-thousandth of a share of Series
B Preferred Shares shall be equal to the "current market price" of one share of
Series B Preferred Shares divided by 1000.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the number of Units of Series B Preferred Shares for which a Right is
exercisable or in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least one percent in such number of
shares or in the Purchase Price; provided, however, that any adjustments that by
--------
reason of this Section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth of a Unit of Series B Preferred Shares, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction that mandates such adjustment, or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)
or 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of beneficial interest other than Series B
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right and, if required, the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Series B
Preferred Shares contained in Section
18
<PAGE>
11(a), (b), (c), (e), (g), (h), (i), (k) and (l) hereof, and the provisions of
Sections 7, 9, 10, 13 and 14 hereof with respect to the Series B Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the number or kind of shares purchasable upon exercise of the
Rights or to the Purchase Price hereunder shall evidence the right to purchase,
at the adjusted Purchase Price, the adjusted number of Units of Series B
Preferred Shares or other securities purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its election as
provided below in this Section 11(h), upon each adjustment of the Purchase Price
as a result of the calculations made in Section 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
Units of Series B Preferred Shares obtained by (i) multiplying (x) the number of
Units of Series B Preferred Shares covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment and (ii) dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase Price. On or after the
date of any adjustment of the Purchase Price, in lieu of any adjustment in the
number of Units of Series B Preferred Shares or any other shares of beneficial
interest purchasable upon the exercise of a Right, the Company may elect to
adjust the number of Rights. Each of the Rights outstanding after the adjustment
in the number of Rights shall be exercisable for the number of Units of Series B
Preferred Shares for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten days later than the date of
the public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(h), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
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<PAGE>
(i) Irrespective of any adjustment or change in the Purchase Price
or the number of Units of Series B Preferred Shares or the number and kind of
other securities issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per Unit, the number of Units and the other terms that were
expressed in the initial Rights Certificates issued hereunder.
(j) In any case in which this Section 11 shall require that an
adjustment be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date of the number of Units
of Series B Preferred Shares and other shares of beneficial interest or
securities of the Company, if any, issuable upon such exercise over and above
the number of Units of Preferred Shares and other shares of beneficial interest
or securities of the Company, if any, issuable upon such exercise before giving
effect to such adjustment; provided, however, that the Company shall deliver to
--------
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares (fractional or otherwise) or securities
upon the occurrence of the event requiring such adjustment.
(k) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in its good faith judgment the Board of Trustees of the Company
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Series B Preferred Shares, (ii) issuance wholly for cash of
any Series B Preferred Shares at less than the current market price, (iii)
issuance wholly for cash of Series B Preferred Shares or securities that by
their terms are convertible into or exchangeable for Series B Preferred Shares,
(iv) share dividend or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Company to holders of its Series B
Preferred Shares shall not be taxable to such shareholders.
(l) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(m)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction that complies with Section 11(m) hereof), (iii)
effect a statutory share exchange with any Person (other than a Subsidiary of
the Company in a transaction that complies with Section 11(m) hereof), or (iv)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(m) hereof), if at the time of or immediately after such
consolidation, merger, statutory share exchange or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
that would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights.
20
<PAGE>
(m) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(n) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Record Date and prior to
the Distribution Date (i) declare a dividend on the outstanding Common Shares
payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii)
combine the outstanding Common Shares into a smaller number of shares, the
number of Rights associated with each Common Share then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share immediately
prior to such event by a fraction the numerator of which shall be the total
number of Common Shares outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event.
Section 12. Certificates of Adjusted Purchase Price or Number of Shares.
-----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Series B Preferred Shares or the Common Shares, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate representing
Common Shares) in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power.
- -----
(a) In the event that, following the Share Acquisition Date,
directly or indirectly, (w) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(m) hereof), and the Company shall not
be the continuing or surviving person as a result of such consolidation or
merger, (x) any Person (other than a Subsidiary of the Company in a transaction
that complies with Section 11(m) hereof) shall consolidate with, or merge with
or into, the Company, and the Company shall be the continuing or surviving
person as a result of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding Common Shares shall be
changed into or exchanged for shares of beneficial interest or other securities
of any other Person or cash or any other property, (y) the Company shall be a
party to a statutory share exchange with any other Person (other than a
Subsidiary of the
21
<PAGE>
Company in a transaction that complies with Section 11(m) hereof) after which
the Company is a Subsidiary of any other Person, or (z) the Company shall sell
or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(m) hereof), then, and in
each such case, proper provision shall be made so that: (i) each record holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable and freely tradable Common
Shares of the Principal Party (as hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by (1) multiplying the then current Purchase
Price by the number of Common Shares for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of such shares for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and (2) dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right for all purposes of this Agreement) by 50% of the current market
price (determined pursuant to Section 11(d)(i) hereof) per share of the Common
Shares of such Principal Party on the date of consummation of such Section 13
Event; and (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its common stock) in connection
with the consummation of any such transaction as may be necessary to ensure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its Common Shares thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (w),
(x) or (y) of the first sentence of Section 13(a) hereof, the Person that is the
issuer of any securities into which the Common Shares of the Company are
converted in such merger, consolidation or statutory share exchange, and if no
securities are so issued, the Person that is the other party to such merger,
consolidation or statutory share exchange; and
22
<PAGE>
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Shares of such
- --------
Person is not at such time and has not been continuously over the preceding
twelve-month period registered under Section 12 of the Exchange Act, and such
Person is a direct or indirect Subsidiary of another Person the Common Shares of
which is and has been so registered, "Principal Party" shall refer to such other
Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Shares having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, statutory share exchange, sale or transfer unless the Principal Party
shall have a sufficient number of authorized Common Shares that have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger, statutory share exchange or sale of
assets mentioned in paragraph (a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act
on an appropriate form with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a prospectus at all
times meeting the requirements of the Act) until the Expiration Date and
similarly comply with applicable state securities laws; and
(ii) deliver to record holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or statutory share exchanges or sales or other transfers. In the
event that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights that have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a)
hereof.
23
<PAGE>
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(n) hereof, or to
distribute Rights Certificates that evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price, or, if not so quoted, the average of the high bid and low
asked prices on the Nasdaq Stock Market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Trustees of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Trustees of the Company shall be used.
(b) The Company shall not be required to issue fractions of Series
B Preferred Shares (other than fractions that are integral multiples of one
one-thousandth of a Series B Preferred Share) upon exercise of the Rights or to
distribute certificates that evidence fractional Series B Preferred Shares
(other than in such integral multiples). In lieu of fractional Series B
Preferred Shares that are not in such integral multiples, the Company may pay to
the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one one-thousandth of a Series B Preferred Share. For
purposes of this Section 14(b), the current market value of one one-thousandth
of a Series B Preferred Share shall be one one-thousandth of the current market
price of a Series B Preferred Share (as determined pursuant to Section 11(d)
hereof) for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Right or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
24
<PAGE>
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares in respect of which Rights have been issued); and any registered
holder of any Rights Certificate (or, prior to the Distribution Date, of such
Common Shares), without the consent of the Rights Agent or of the holder of any
other Rights Certificate (or, prior to the Distribution Date, of such Common
Shares), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
---------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificate or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company, subject to the last sentence of Section 7(e) hereof, nor
the Rights Agent shall be required to be affected by any notice to the contrary;
and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental
25
<PAGE>
authority, prohibiting or otherwise restraining performance of such obligation;
PROVIDED, however, the Company must use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No holder,
--------------------------------------------------
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of Units of Series B Preferred Shares or
any other securities of the Company that may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of trustees or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
action, or to receive notice of meetings or other actions affecting shareholders
(except as provided in Section 25 hereof), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, instruction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a
26
<PAGE>
party, or any corporation succeeding to the corporate trust business of the
Rights Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, however, that
--------
such corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, any of the
Rights Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name of the successor Rights Agent; and in all
such cases such Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
----------------------
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, any Vice-Chairman, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
27
<PAGE>
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Series B Preferred Shares
to be issued pursuant to this Agreement or any Rights Certificate or as to
whether any Series B Preferred Shares will, when so issued, be duly authorized,
validly issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman, the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer. At any time the
Rights Agent may apply to the Company for written instructions with respect to
any matter arising in connection with the Rights Agent's duties and obligations
arising under this Agreement. Such application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken or omitted by the Rights Agent with
respect to its duties or obligations under this Agreement and the date on and/or
after which such action shall be taken and the Rights Agent shall not be liable
for any action taken or omitted in accordance with a proposal included in any
such application on or after the date specified therein (which date shall be not
less than one Business Day after the Company receives such application, without
the Company's consent) unless, prior to taking or initiating any such action,
the Rights Agent has
28
<PAGE>
received written instructions in response to such application specifying the
action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
--------
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days notice in writing mailed to the Company, and to each transfer agent
of the Series B Preferred Shares or Common Shares, by registered or certified
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
30 days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Series B Preferred
Shares or Common Shares, by registered or certified mail, and to the holders of
the Rights Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then any registered
29
<PAGE>
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the States of Texas and
Maryland, in good standing, having a principal office in the States Texas and
Maryland, that is authorized under such laws to exercise corporate trust powers
and is subject to supervision or examination by federal or state authority and
that has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
-----------------------------------
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Trustees to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, the Company may, if deemed
necessary or appropriate by the Board of Trustees of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
the issuance or sale of Common Shares following the Distribution Date.
Section 23. Redemption and Termination.
--------------------------
(a) (i) The Company may, at its option, at any time prior to the
earlier of (A) the close of business on the tenth day following the Share
Acquisition Date, or (B) the Final Expiration Date, redeem all but not less than
all the then outstanding Rights (which shall not include any rights that have
become void pursuant to Section 7(e) hereof) at a redemption price of $.001 per
Right, as it may be appropriately adjusted by the Board of Trustees of the
Company to reflect any share split or combination, share dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the current
market price (as determined pursuant to Section 11(d) hereof) per share of the
Common Shares at the time of redemption) or cash; provided, however, that if the
--------
Board of Trustees of the Company authorizes redemption of the Rights in either
of the circumstances set
30
<PAGE>
forth in clauses (x) and (y) below, then there must be Continuing Trustees in
office and such authorization shall require the concurrence of a majority of
such Continuing Trustees: (x) such authorization occurs on or after the date a
Person becomes an Acquiring Person, or (y) such authorization occurs on or after
the date of a change (resulting from a proxy solicitation) in a majority of the
trustees in office at the commencement of such solicitation if any Person who is
a participant in such solicitation has stated (or, if upon the commencement of
such solicitation, a majority of the Board of Trustees of the Company has
determined in good faith) that such Person (or any of its Affiliates or
Associates) intends to take, or may consider taking, any action that would
result in such Person becoming an Acquiring Person or that would cause the
occurrence of a Triggering Event.
(ii) In addition, if there are Continuing Trustees then in
office, the Board of Trustees may redeem all, but not less than all, of the then
outstanding Rights at the Redemption Price with the concurrence of a majority of
such Continuing Trustees, following the occurrence of a Share Acquisition Date
and following the expiration of the right of redemption hereunder, if either
(A)(1) a Person who is an Acquiring Person shall have transferred or otherwise
disposed of a number of Common Shares in one transaction or a series of
transactions not directly or indirectly involving the Company or any of its
Subsidiaries, such that such Person is thereafter a Beneficial Owner of less
than 10% of the outstanding Common Shares and (2) there are no other Persons,
immediately following the occurrence of the event described in clause (1), who
are Acquiring Persons, or (B) in connection with the type of transaction
specified in Section 13(a) hereof in which all holders of Common Shares are
treated alike and not involving an Acquiring Person or an Affiliate or Associate
of an Acquiring Person or any other Person in which such Acquiring Person,
Affiliate or Associate has any interest, or any other Person acting directly or
indirectly on behalf of or in association with any such Acquiring Person,
Affiliate or Associate.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Triggering Event until
such time as the Company's right of redemption hereunder is not exercisable.
(b) Immediately upon the action of the Board of Trustees of the
Company authorizing the redemption of the Rights pursuant to subsection (a) of
this Section 23 and without any further action and without any notice, the right
to exercise the Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Trustees authorizing the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and to the holders of such Rights by mailing such notice to all such holders at
each holder's last address as it appears upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the transfer
agent for the Common Shares. Any notice that is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption shall state the method by which the payment of
the Redemption Price will be effected.
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<PAGE>
Section 24. Exchange.
--------
(a) The Company may, at its option, by resolution of its Board of
Trustees, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to Section 7(e) hereof) for Common Shares
at an exchange ratio of one Common Share per Right, appropriately adjusted to
reflect any share split, share dividend or similar transaction occurring with
respect to the Common Shares after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"); provided, however, under the
--------
circumstances described in the proviso to Section 23(a)(i) hereof, an Exchange
shall be effective only if there are Continuing Trustees and shall require the
concurrence of a majority of such Continuing Trustees.
(b) Immediately upon the action of the Board of Trustees of the
Company authorizing the exchange of the Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of Rights held by such holder multiplied by the Exchange Ratio. Promptly
after the action of the Board of Trustees authorizing the exchange of the
Rights, the Company shall give notice of such exchange to the Rights Agent and
to the holders of such Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares. Any notice that is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the Common
Shares for Rights will be effected.
(c) In the event that there shall not be sufficient Common Shares
authorized but unissued to permit the exchange in full of such Rights in
accordance with this Section 24, the Company shall take all such action as may
be necessary to authorize additional Common Shares for issuance upon exchange of
the Rights. In the event the Company shall, after good faith effort, be unable
to take all such action as may be necessary to authorize such additional Common
Shares, the Company shall substitute, for each Common Share that would otherwise
be issuable upon exchange of a Right, a number of shares of other equity
securities of the Company or fraction thereof such that the current per share
market price of one share of such other equity securities multiplied by such
number or fraction is equal to the current per share market price of one Common
Share as of the date of issuance of such shares of such other equity securities
or fraction thereof.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates that evidence fractional Common Shares. In
lieu of such fractional Common Shares, there shall be paid to the registered
holders of the Right Certificates with regard
32
<PAGE>
to which such fractional Common Shares would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole Common
Share. For the purposes of this subsection (d), the current market value of a
whole Common Share shall be the closing price of a Common Share (as determined
pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the
Exchange Date.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Series B Preferred Shares or to make any other distribution to the
holders of Series B Preferred Shares (other than a regular quarterly cash
dividend of the Company in compliance with any applicable law, or (ii) to offer
to the holders of Series B Preferred Shares rights or warrants to subscribe for
or to purchase any additional Series B Preferred Shares or other shares of
beneficial interest of any class or any other securities, rights or options, or
(iii) to effect any reclassification of its Series B Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Series B
Preferred Shares), or (iv) to effect any consolidation or merger into or with
any other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(m) hereof), or to effect a statutory share exchange
with any Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(m) hereof), or to effect any sale or other transfer (or
to permit one or more of its Subsidiaries to effect any sale or other transfer),
in one transaction or a series of related transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than a Subsidiary of the Company in one or
more transactions each of which complies with Section 11(m) hereof), or (v) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Series B Preferred Shares, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 20 days prior to the record
date for determining holders of the Series B Preferred Shares for purposes of
such action, and in the case of any such other action, at least 20 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the Series B Preferred Shares whichever shall be the
earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then, in any
such case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of the occurrence of such event, which shall specify
the event and the consequences of the event to holders of Rights under Section
11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Series B
Preferred
33
<PAGE>
Shares shall be deemed thereafter to refer, if appropriate, not only to Series B
Preferred Shares but also to Common Shares or other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to be
-------
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Prentiss Properties Trust
3890 W. Northwest Highway, Suite 4660
Dallas, Texas 75220
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
First Chicago Trust Company of New York
525 Washington Boulevard, Suite 4660
Jersey City, NJ 07310
Attention: George McIntyre
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
Common Shares) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date and
--------------------------
subject to the penultimate sentence of this Section 27, the Company may, and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing Common Shares. From and after the Distribution Date and subject to
the penultimate sentence of this Section 27, the Company and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein that may
be defective or inconsistent with any other provisions herein, (iii) to shorten
or lengthen any time period hereunder (which lengthening or shortening, under
the circumstances described in the proviso to Section 23(a)(i) hereof, shall be
effective only if there are Continuing Trustees and shall require the
concurrence of a majority of such Continuing Trustees), or (iv) to change or
supplement the provisions hereunder in any manner that the Company may deem
necessary or desirable and that shall not adversely affect the
34
<PAGE>
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person); provided, that this
--------
Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company that
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.
No supplement or amendment shall be made that changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of Common Shares for
which a Right is exercisable; provided, however, that at any time prior to the
--------
Distribution Date, the Board of Trustees of the Company may amend this Agreement
to increase the Purchase Price or extend the Final Expiration Date. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
Section 28. Successors. All the covenants and provisions of this Agreement
----------
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Trustees, Etc. For
--------------------------------------------------------
all purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Trustees of the Company (and, where specifically provided for herein,
the Continuing Trustees) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board, or the Company (or, where specifically provided for
herein, the Continuing Trustees), or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board (or, where
specifically provided for herein, by the Continuing Trustees) in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board or
the Continuing Trustees to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any Person other than the Company, the Rights Agent, the
registered holders from time to time of the Rights Certificates (and, prior to
the Distribution Date, registered holders of the Common Shares) any legal or
equitable right, remedy or claim under this Agreement; and this
35
<PAGE>
Agreement shall be for the sole and exclusive benefit of the Company and the
Persons specified above.
Section 31. Severability. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- --------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Trustees of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Trustees.
Section 32. Governing Law. This Agreement, each Right and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Maryland and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
---------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
PRENTISS PROPERTIES TRUST
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By:
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
37
<PAGE>
EXHIBIT A
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER FEBRUARY ___, 2008, OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE COMPANY, AT ITS OPTION, MAY REDEEM THE RIGHTS EVIDENCED BY THIS
CERTIFICATE AT A REDEMPTION PRICE OF $.01 PER RIGHT OR EXCHANGE THE RIGHTS FOR
COMMON SHARES ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON. ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]/(1)/
Rights Certificate
This certifies that ________________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of February 6, 1998 (the "Rights
Agreement"), between Prentiss Properties Trust, a Maryland real estate
investment trust (the "Company"), and First Chicago Trust Company of New York, a
______________ corporation (the "Rights Agent"), to purchase from the Company at
any time prior to 5:00 P.M. (Dallas, Texas time) on February 17, 2008 at the
office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-hundredth of a fully paid, non-assessable
share (a "Unit") of Junior Participating Cumulative Preferred Shares, Series B
(the "Series B Preferred Shares") or other securities of the Company, at a
purchase price of $85.00 per Unit (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. (All capitalized terms not defined herein
shall have the meaning set forth in the Rights Agreement.) The Purchase Price
may be paid in cash or by certified bank check or bank draft payable to the
order of the Company. The number of Rights evidenced by this Rights Certificate
(and the number of shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per share set forth above, are the number
and Purchase Price as of ______ __, based on the Series B Preferred Shares as
constituted at such date.
A-1
<PAGE>
As provided in the Rights Agreement, the Purchase Price and the number
and kind of Series B Preferred Shares or other securities that may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Under certain circumstances specified in Section 7(e) of the Rights Agreement,
Rights that are or were owned by an Acquiring Person or an Affiliate or
Associate of an Acquiring Person may become null and void and no longer
exercisable by any Person (including any subsequent transferee). Copies of the
Rights Agreement are on file at the above-mentioned office of the Rights Agent
and are also available upon written request to the Rights Agent or the Secretary
of the Corporation.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Units of Series B Preferred Shares as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
then entitle such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Company, at its
option, may redeem the Rights evidenced by this Certificate at a redemption
price of $.001 per Right or exchange the Rights for Common Shares.
No fractional Series B Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions that are
integral multiples of one one-hundredth of a share of Series B Preferred
Shares), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Series B Preferred
Shares or of any other securities of the Company that may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of trustees or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to
A-2
<PAGE>
any action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signatures of the proper officers of the Company
and its corporate seal.
Dated as of ,
----------- -- ------
[SEAL]
ATTEST: PRENTISS PROPERTIES TRUST
By:
- -------------------------------- -------------------------------------
Secretary Title:
-----------------------------
Countersigned:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By
--------------------------
Authorized Signature
A-3
<PAGE>
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
- ------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ________________________ hereby sells, assigns and transfers
unto
-------------------------------------------------------------------------
(Please print name and address of transferee)
- ------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: ,
-------------------- ----
----------------------------------------
Signature
Signature Guaranteed:
A-4
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring
Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by
this Rights Certificate from any Person who is, was or subsequently
became an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.
Dated: ,
-------------------- ---- -----------------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
A-5
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: PRENTISS PROPERTIES TRUST:
The undersigned hereby irrevocably elects to exercise ____________
Rights represented by this Rights Certificate to purchase the Series B Preferred
Shares issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person that may be issuable upon the exercise of the
Rights) and requests that certificates for such shares (or other securities) be
issued in the name of and delivered to:
Please insert social security or other identifying number
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
(Please print name and address)
Date: ,
--------------- ----
--------------------------------
Signature
Signature Guaranteed:
A-6
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring
Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did
[ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: ,
----------------------- ---- -----------------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
/(1)/ The bracketed language shall be inserted only if applicable.
A-7
<PAGE>
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE SERIES B PREFERRED SHARES
-------------------------------------------------------
On February 6, 1998, the Board of Trustees of Prentiss Properties
Trust, a real estate investment trust organized under the laws of Maryland (the
"Company"), approved a Rights Agreement, dated as of and to be effective on
February 6, 1998 (the "Rights Agreement") between the Company and First Chicago
Trust Company of New York, as Rights Agent, having the principal terms
summarized below. In accordance with the Rights Agreement, the Board also
authorized a dividend distribution of one Right for each outstanding common
share of beneficial interest, $.01 par value, (the "Common Shares"), of the
Company to shareholders of record at the close of business on February 17, 1998
(the "Record Date").
Each Right entitles the registered holder to purchase from the Company
one one-thousandth of a share of the Company's Junior Participating Cumulative
Preferred Shares, Series B ("Series B Preferred Shares"). Each one
one-thousandth of a share (a "Unit") of a Series B Preferred Share is structured
to be the equivalent of one Common Share of the Company. Shareholders will
receive one Right per Common Share held of record at the close of business on
the Record Date. The exercise price of the Right will be $85.00 subject to
adjustment (the "Purchase Price").
Rights will also attach to Common Shares issued after the Record Date
but prior to the Distribution Date unless the Board of Trustees determines
otherwise at the time of issuance. The description and terms of the Rights are
set forth in the Rights Agreement.
The Rights will trade with the Common Shares and will be evidenced by
Common Shares certificates, and no separate certificates evidencing the Rights
(the "Rights Certificates") will be distributed initially. The Rights will
separate from the Common Shares and a distribution of the Rights Certificates
will occur (the "Distribution Date") upon the earlier of (i) 10 business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 10% or more of the outstanding Common Shares
(the "Share Acquisition Date"), or (ii) 10 business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially becoming an Acquiring Person. Until the Distribution Date,
(i) the Rights will be evidenced by the Common Shares certificates and will be
transferred with and only with such Common Shares certificates, (ii) any Common
Shares certificates issued will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for Common Shares outstanding will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificates.
B-1
<PAGE>
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on February 17, 2008, unless earlier redeemed or
exchanged by the Company as described below. As soon as practicable after the
Distribution Date, Rights Certificates will be mailed to holders of record of
the Common Shares as of the close of business on the Distribution Date, and
thereafter such separate Rights Certificates alone will represent the Rights.
The Agreement provides that if any person becomes an Acquiring Person,
proper provision shall be made so that each holder of a Right (except as set
forth below) will thereafter have the right to receive, upon exercise and
payment of the Purchase Price, Series B Preferred Shares or, at the option of
the Company, Common Shares (or, in certain circumstances, cash, property or
other securities of the Company) having a value equal to twice the amount of the
Purchase Price.
In the event that, at any time following the Share Acquisition Date,
(i) the Company is acquired in a merger, statutory share exchange, or other
business combination in which the Company is not the surviving person, or (ii)
50% or more of the Company's assets or earning power is sold or transferred,
each holder of a Right (except as set forth below) shall thereafter have the
right to receive, upon exercise and payment of the Purchase Price, Common Shares
of the acquiring company having a value equal to twice the Purchase Price. The
events set forth in this paragraph and in the immediately preceding paragraph
are referred to as the "Triggering Events."
Upon the occurrence of a Triggering Event that entitles Rights holders
to purchase securities or assets of the Company, Rights that are or were owned
by the Acquiring Person, or any affiliate or associate of such Acquiring Person,
on or after such Acquiring Person's Share Acquisition Date shall be null and
void and shall not thereafter be exercised by any person (including subsequent
transferees). Upon the occurrence of a Triggering Event that entitles Rights
holders to purchase Common Shares of a third party, or upon the authorization of
an Exchange, Rights that are or were owned by any Acquiring Person or any
affiliate or associate of any Acquiring Person on or after such Acquiring
Person's Share Acquisition Date shall be null and void and shall not thereafter
be exercised by any person (including subsequent transferees).
The Purchase Price payable, and the number of Series B Preferred
Shares, Common Shares or other securities or property issuable upon exercise of
the Rights are subject to adjustment from time to time to prevent dilution.
At any time after any person becomes an Acquiring Person, the Company
may exchange all or part of the Rights (except as set forth below) for Common
Shares (an "Exchange") at an exchange ratio of one share per Right, as
appropriately adjusted to reflect any share split or similar transaction.
B-2
<PAGE>
At any time until ten business days following the Share Acquisition
Date or ten business days following the commencement of a tender offer or
exchange offer that would result in a person or group becoming an Acquiring
Person, the Company may redeem the Rights in whole, but not in part, at a price
of $.001 per Right (the "Redemption Price"). Under certain circumstances set
forth in the Rights Agreement, the decision to make an Exchange or to redeem the
Rights shall require the concurrence of a majority of the Continuing Trustees
(as defined below). Additionally, the Company may thereafter but prior to the
occurrence of a Triggering Event redeem the Rights in whole, but not in part, at
the Redemption Price provided that such redemption is incidental to a merger or
other business combination transaction involving the Company that is approved by
a majority of the Continuing Trustees, and does not involve an Acquiring Person,
and is one in which all holders of Common Shares are treated alike. After the
redemption period has expired, the Company's right of redemption may be
reinstated if an Acquiring Person reduces his beneficial ownership to less than
10% of the outstanding Common Shares in a transaction or series of transactions
not involving the Company. Immediately upon the action of the Board ordering
redemption of the Rights, with, where required, the concurrence of the
Continuing Trustees, the Rights will terminate and the only right of the holders
of Rights will be to receive the Redemption Price.
The term "Continuing Trustees" means any member of the Board who was a
member of the Board immediately before the adoption of the Rights Agreement and
any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Trustees, but does not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Series B Preferred Shares (or other consideration) of the
Company or for Common Shares of the acquiring company as set forth above.
Other than certain provisions relating to the principal economic terms
of the Rights, any of the provisions of the Rights Agreement may be amended by
the Board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board (in certain
circumstances, only with the concurrence of the Continuing Trustees) in order to
cure any ambiguity, to make certain other changes that do not adversely affect
the interests of holders of Rights (excluding the interests of any Acquiring
Person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, no amendment to adjust the time period governing redemption
- --------
may be made at such time as the Rights are not redeemable.
B-3
<PAGE>
EXHIBIT 10.1
PURCHASE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
-----------------------------
TO: Chicago Title Insurance Company Escrow No.:______________________
7616 LBJ Freeway, Suite 300 Escrow Officer: Sharon L. Cooper
Dallas, Texas 75251-1106 Title Order No.:_________________
Attention: Sharon L. Cooper Title Officer:___________________
THIS PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ("Agreement") is
made and entered into as of this 30th day of January, 1998 (the "Effective
Date"), by and between JACOB BROUWER AND JEANETTE BROUWER, Co-trustees of the
Jacob Brouwer and Jeanette Brouwer Declaration of Trust Dated May 11, 1977,
(jointly and severally, "Seller"), and PRENTISS PROPERTIES ACQUISITION PARTNERS,
L.P., a Delaware limited partnership ("Buyer"), with respect to the following
with limited joinders by Prentiss Properties Trust, a Maryland real estate
investment trust ("Company") and Prentiss Properties I, Inc., a Delaware
corporation ("OP General Partner"):
R E C I T A L S :
- - - - - - - -
A. Seller owns that certain real property (the "Land") located in the
City of Carlsbad, County of San Diego, State of California, more particularly
described on Exhibit "A" attached hereto and incorporated herein by this
-----------
reference, together with all buildings located thereon, commonly known as
Carlsbad Pacifica (the "Building").
B. Seller desires to sell and convey to Buyer the following:
1. The "Land", together with the Buildings and all associated
parking garages and areas, and all other improvements located on the Land
(collectively, the "Improvements");
------------
2. All of Seller's interest in all rights, privileges, easements
and appurtenances benefiting the Land and/or the Improvements, including,
without limitation, all mineral and water rights and all easements, rights-
of-way and other appurtenances used or connected with the beneficial use or
enjoyment of the Land and/or the Improvements (the Land, the Improvements
and all such rights, privileges, easements and appurtenances are sometimes
collectively hereinafter referred to as the "Real Property");
-1-
<PAGE>
3. All of Seller's interest, as landlord, in and to all leases,
subleases, licenses and other occupancy agreements affecting any portion of
the Real Property (collectively, the "Leases");
4. All personal property, equipment, supplies and fixtures
(collectively, the "Personal Property") owned by Seller, located at and
used in the operation of the Real Property and described on Exhibit "A-1"
-------------
attached hereto; and
5. All of Seller's interest in any intangible property
appurtenant to the foregoing, including, without limitation, contract
rights, warranties, guaranties, licenses, permits, entitlements, plans
(including, without limitation, plans or permits relating to seismic
retrofitting), governmental approvals and certificates of occupancy which
benefit the Real Property and/or the Personal Property (the "Intangible
Personal Property"). The Real Property, the Personal Property, Seller's
interest as landlord under the Leases, and the Intangible Personal Property
are collectively hereinafter referred to as the "Property."
C. Seller desires to sell the Property to Buyer, and Buyer desires
to purchase the Property from Seller upon the terms and conditions hereinafter
set forth.
A G R E E M E N T :
------------------
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree
that the terms and conditions of this Agreement and the instructions to Chicago
Title Company ("Escrow Holder") with regard to the escrow ("Escrow") created
pursuant hereto are as follows:
1. Purchase and Sale. Seller hereby agrees to sell the Property to
-----------------
Buyer, and Buyer hereby agrees to purchase the Property from Seller, upon the
terms and conditions herein set forth.
2. Purchase Price. Subject to adjustment as provided for in this
--------------
Agreement, the contribution price ("Purchase Price") for the Property shall be
Seven Million Five Hundred Fifty Thousand Dollars ($7,550,000.00).
3. Payment of Purchase Price. The Purchase Price for the Property
-------------------------
shall be payable by Buyer as follows:
(a) Deposit. Two (2) business days after the Effective Date,
-------
Buyer shall deposit with Escrow Holder a sum equal to Forty-Five Thousand
Dollars ($45,000.00) (the "Deposit"). Notwithstanding any other provision
of this Agreement to the contrary, the Deposit shall be nonrefundable to
Buyer in the event this Agreement and the Escrow are canceled unless (i)
Buyer terminates this Agreement pursuant to Paragraph 7(a)(vii),
7(a)(viii), 7(a)(ix) or 16 hereof or (ii) Buyer terminates this
-2-
<PAGE>
Agreement because of a material breach by Seller of its obligations under
this Agreement including, but not limited to, Seller's failure to convey
the Property to Buyer as provided herein, in which event the Deposit and
all accrued interest thereon shall be refunded to Buyer upon the
termination of this Agreement.
(b) Units.
-----
(i) Seller shall receive Four Million Dollars
($4,000,000.00) of the Purchase Price in Units. The number of Units
to be issued shall be based upon each Unit having a value equal to
Twenty-Seven and 59/00 Dollars ($27.59) which was determined as the
average of the closing sales price of the common shares of beneficial
interest of the Company (the "Common Shares") on the New York Stock
Exchange for the ten (10) trading days from January 14, 1998 through
January 28, 1998.
(ii) To the extent that Seller receives a portion of the
Purchase Price in the form of Units, the parties agree that Seller's
receipt of Units as contemplated by this Agreement shall be reported,
for federal income tax purposes, as a contribution by Seller of all or
a portion of the Property, as applicable, to the capital of the
Operating Partnership (as defined in Paragraph 25 hereof) in exchange
for the Units pursuant to Section 721 of the Internal Revenue Code of
1986, as amended.
(c) Closing Funds. On the Close of Escrow, Buyer shall deposit
-------------
or cause to be deposited with Escrow Holder, in Immediately Available
Funds, the balance of the cash portion of the Purchase Price (i.e., the
----
Purchase Price less the amounts and Units provided for in paragraphs (a)
and (b) above and elsewhere in this Agreement) plus or minus Buyer's share
of closing costs, prorations and charges payable pursuant to this
Agreement.
4. Escrow.
------
(a) Opening of Escrow. For purposes of this Agreement, the
-----------------
Escrow shall be deemed opened on the date Escrow Holder shall have received
a fully executed original or originally executed counterparts of this
Agreement from both Buyer and Seller (such date being referred to
hereinafter as the "Opening of Escrow").
(b) Close of Escrow. For purposes of this Agreement, the "Close
---------------
of Escrow" shall be the date that the grant deed, the form of which is
attached hereto as Exhibit "B" (the "Grant Deed"), conveying the Real
-----------
Property to Buyer, are recorded in the Official Records of San Diego County
(the "Official Records"). Unless extended in writing by Buyer and Seller,
the Close of Escrow shall occur on or before February 5, 1998 (the "Closing
Date"). Seller shall deliver possession of the Property to Buyer upon the
Close of Escrow, subject only to the "Approved Condition of Title" (as
defined in Paragraph 5 below).
-3-
<PAGE>
5. Condition of Title. It shall be a condition to the Close of
------------------
Escrow for Buyer's benefit (which Buyer may waive in its sole and absolute
discretion) that title to the Real Property be conveyed to Buyer by Seller by
the Grant Deed subject only to the following approved condition of title
("Approved Condition of Title"):
(a) a lien to secure payment of real estate taxes and
assessments, not delinquent;
(b) the lien of supplemental taxes assessed pursuant to Chapter
3.5 commencing with Section 75 of the California Revenue and Taxation Code
("Code") (but not any delinquent supplement taxes);
(c) matters affecting the Real Property created by or with the
written consent of Buyer; and
(d) exceptions which are disclosed by the Title Report described
in Paragraph 7(a)(i) hereof and which are approved or deemed approved by
Buyer in accordance with such Paragraph 7(a)(i).
Seller covenants that, during the term of the Escrow, it will not
intentionally cause title to the Real Property to differ from the Approved
Condition of Title described in this Paragraph 5, provided that Seller shall
have no obligation to remove any liens or other encumbrances affecting title to
the Property except for liens evidencing monetary encumbrances (other than
nondelinquent real property taxes and assessments which Seller shall cause to be
removed as of the Close of Escrow). Any liens, encumbrances, encroachments,
easements, restrictions, conditions, covenants, rights, rights-of-way or other
matters affecting the Approved Condition of Title which may appear of record or
be revealed after the date of the Title Report described in Paragraph 7(a)(i)
below shall also be subject to Buyer's approval as a condition to the Close of
Escrow for Buyer's benefit.
6. Title Policy. It shall be a condition to the Close of Escrow
------------
for Buyer's benefit (which Buyer may waive in its sole and absolute discretion)
that the "Title Company" (as defined in Paragraph 7(a)(i) hereof) is prepared to
issue its ALTA (Form B 1970) Owner's Extended Policy of Title Insurance ("Title
Policy") in the amount of the Purchase Price, showing title to the Real Property
vested in Buyer (or its assignee), subject only to the Approved Condition of
Title and with such endorsements as are reasonably requested by Buyer. If the
Title Company does not commit to issue a Title Policy for each Property by the
Close of Escrow, Buyer may elect to terminate this Agreement.
7. Conditions to Close of Escrow.
-----------------------------
(a) Conditions to Buyer's Obligations. The Close of Escrow and
---------------------------------
Buyer's obligation to consummate the transaction contemplated by this
Agreement are
-4-
<PAGE>
subject to the satisfaction of the following conditions (or Buyer's written
waiver thereof, it being agreed that Buyer may waive in writing any or all
of such conditions) for Buyer's benefit on or prior to the dates designated
below for the satisfaction of such conditions. Whether or not Buyer
terminates this Agreement and the Escrow due to the nonsatisfaction of any
such conditions, Buyer shall not be entitled to the return of the Deposit
and all interest accrued thereon except in accordance with Paragraph 3(a)
above.
(i) Title. Buyer shall have the right to review and approve
-----
or disapprove, in its reasonable discretion, the legal description of
the Land and any matters of title as disclosed by the following
documents ("Title Documents") to be delivered to Buyer at Seller's
sole cost and expense: a CLTA title commitment issued by Chicago
Title Company (the "Title Company") with respect to the Property (the
"Title Report"), together with legible copies of the underlying
documents relating to the Schedule B exceptions set forth in such
title commitment. Buyer acknowledges that Seller has caused the Title
Company to deliver the Title Documents to Buyer prior to the Effective
Date. Buyer has obtained, at its sole cost and expense, a survey of
each Property. Buyer has had until the Effective Date to give Seller
and Escrow Holder written notice ("Buyer's Title Notice") of Buyer's
disapproval or conditional approval of the legal description or any
matters shown in the Title Documents or the survey. The failure of
Buyer to give Buyer's Title Notice on or before the Effective Date
shall be deemed to constitute Buyer's approval of the legal
description and all of the Title Documents.
If Buyer disapproves or conditionally approves any matters
of title shown in the Title Documents, Seller shall give Buyer written
notice (which shall hereinafter be referred to as "Seller's Title
Notice"), within three (3) days of its receipt of Buyer's Title
Notice, of those matters of title disclosed on the Title Documents
that have not been approved by Buyer pursuant to this Paragraph
7(a)(i) which Seller covenants and agrees to either eliminate from the
Title Policy as exceptions to title to the Property or to ameliorate
to Buyer's satisfaction by the Closing Date as a condition to the
Close of Escrow for Buyer's benefit. If Seller does not elect in
Seller's Title Notice to eliminate or ameliorate any disapproved or
conditionally approved matters as provided above, or if Buyer
disapproves, in Buyer's reasonable discretion, Seller's Title Notice,
then Buyer shall have the right, by a writing delivered to Seller and
Escrow Holder within two (2) days of Buyer's receipt of Seller's Title
Notice, to (A) waive its prior disapproval, in which event said
disapproved matter(s) shall be deemed approved, or (B) terminate this
Agreement and the Escrow created pursuant hereto, in which event the
Deposit shall be immediately delivered to Seller, and this Agreement,
the Escrow and the rights and obligations of the parties hereunder
shall terminate. If Seller fails to timely deliver Seller's Title
Notice, then Seller will be deemed to have elected not to eliminate or
ameliorate to Buyer's satisfaction any disapproved or conditionally
approved matters set forth in Buyer's Title Notice on or before the
Close of Escrow.
-5-
<PAGE>
Notwithstanding anything to the contrary contained in this
Agreement, Buyer hereby disapproves all liens evidencing monetary
encumbrances (other than liens for non-delinquent real property taxes
or assessments), and Seller agrees to cause all such liens to be
eliminated at Seller's sole cost and expense (including all prepayment
penalties and charges) prior to or concurrently with the Close of
Escrow. In the event any additional matters encumber the Property
which are set forth in any amendment or a supplement to the Title
Documents ("Supplemental Title Documents"), Buyer shall give Seller
and Escrow Holder written notice ("Buyer's Supplemental Title Notice")
of Buyer's disapproval or conditional approval of any matters shown on
the Supplemental Title Documents on or before the date which is three
(3) business days after Buyer's receipt of the Supplemental Title
Documents. Seller may elect to eliminate or ameliorate any
disapproved or conditionally approved matters relating to the
Supplemental Title Documents, and Buyer may elect to waive its prior
disapproval of such matters or terminate this Agreement in accordance
with the time periods and provisions set forth herein.
(ii) Review and Approval of Documents and Materials. Seller
----------------------------------------------
has made available to Buyer at the offices of Newport National
Corporation in Carlsbad, California, (A) the documents and materials
respecting the Property set forth on Exhibit "A-2" attached hereto, or
-------------
(B) such other documents in Seller's possession or control which
relate to the Property which Buyer shall reasonably request
(collectively, the "Documents and Materials"). Buyer may make copies
of the Documents and Materials, but Seller shall have no obligation to
provide Buyer with copies. Buyer shall have the right to review and
approve or disapprove, in its sole and absolute discretion, any or all
of the Documents and Materials prior to the Effective Date. The
failure of Buyer to give Seller written notice of its approval of all
of the Documents and Materials on or before the Effective Date shall
be deemed to constitute Buyer's approval thereof.
(iii) Inspections and Studies. Prior to the Effective
-----------------------
Date, Buyer has had the right to approve or disapprove, in Buyer's
sole and absolute discretion, the results of any and all inspections,
investigations, tests and studies, including, without limitation,
investigations with regard to zoning, building codes and other
governmental regulations; architectural inspections; engineering
tests; soils, seismic and geologic reports; inspections of all or any
portion of the Improvements (including, without limitation,
structural, mechanical and electrical systems, roofs, pavement,
landscaping and public utilities); inspections, investigations, tests
and studies with respect to the environmental condition of the
Property; and any other physical inspections and/or investigations as
Buyer may elect to make or obtain. The failure of Buyer to give
Seller written disapproval of said results on or prior to the
Effective Date shall be deemed to constitute Buyer's approval thereof.
-6-
<PAGE>
During the term of this Escrow, Buyer, its agents,
consultants, contractors and subcontractors shall have the right to
enter upon the Real Property (subject to the terms of the Leases) to
conduct environmental tests, inspect the Improvements, monitor and
inspect the construction activities at the Property, if any, and to
conduct or make any and all inspections and tests (including, without
limitation, environmental assessments of the Land, Buildings and
Improvements and structural assessments of the Buildings and
Improvements) as may be necessary or desirable in Buyer's discretion,
provided that such inspections and tests do not materially interfere
with the tenants' use or enjoyment of the Property. Prior to the
exercise of the right of entry, and at all times while Buyer or its
agents are present upon the Real Property, Buyer shall arrange for,
keep and maintain in full force and effect a policy of commercial
general liability insurance with a per occurrence limit of not less
than $1,000,000 and an aggregate single limit of at least $1,000,000.
Buyer hereby indemnifies, agrees to defend, and holds Seller and the
Property harmless from and against any and all costs, losses, damages,
liabilities, liens, claims and expenses arising out of or resulting
from such entry by Buyer or its agents, consultants, contractors and
subcontractors. Buyer agrees to return the Property to substantially
the same condition in which the Property was prior to Buyer's making
any inspection.
(iv) Representations, Warranties and Covenants of Seller.
---------------------------------------------------
Seller shall have duly performed each and every covenant and agreement
to be performed by Seller pursuant to this Agreement as of the Close
of Escrow, and Seller's representations, warranties and covenants set
forth in Paragraph 14(a) hereof shall be true and correct in all
material respects as of the Close of Escrow.
(v) No Material Changes. As of the Close of Escrow, there
-------------------
shall have been no material adverse changes in the physical condition
of the Property from and after the Opening of Escrow.
(vi) Tenant Estoppel Certificates. No later than five (5)
----------------------------
business days prior to the Close of Escrow, Seller shall have obtained
and delivered to Buyer a tenant estoppel certificate disclosing no
material defaults or material deferred maintenance under the Leases
and otherwise consistent with the Rent Roll for each Property
("Estoppel Certificate"), substantially in the form attached hereto as
Exhibit "C", duly executed by seventy-five percent (75%) of all
-----------
tenants occupying a premises which exceeds 2,300 rentable square feet
and whose Lease does not expire prior to July 1, 1998 (as shown on the
Rent Roll) and in all events from tenants occupying no less than fifty
percent (50%) of the rentable square footage of all the Properties.
Each Estoppel Certificate shall be dated not earlier than sixty-five
(65) days prior to the Close of Escrow. Buyer's failure to approve or
disapprove the Estoppel Certificates (or any one of them), as
determined in Buyer's reasonable discretion, prior to the Close of
Escrow shall be deemed to constitute Buyer's disapproval thereof.
Seller shall use its commercially reasonable efforts to obtain the
Estoppel Certificates from the
-7-
<PAGE>
tenants and hereby grants Buyer the right to communicate with any
tenant under the Leases in connection with the Estoppel Certificates.
Such commercially reasonable efforts shall not be construed to require
Seller to threaten or initiate litigation, grant any concession or pay
any consideration.
(vii) Unit Recipient Certifications. No later than one (1)
-----------------------------
business days prior to the Close of Escrow, each Unit Recipient shall
deliver to Buyer a written statement wherein it shall represent,
warrant and covenant as follows:
(A) Unit Recipient is an "accredited investor" within
the meaning of Rule 501(a) promulgated under the Securities Act
of 1933, as amended (the "Securities Act"). Unit Recipient
understands the risks of, and other considerations relating to,
the acquisition of the UnitS. Unit Recipient, by reason of its
business and financial experience, together with the business and
financial experience of those persons, if any, retained by it to
represent or advise it with respect to its investment in the
UnitS, (i) has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions
of this type, that it is capable of evaluating the merits and
risks of an investment in the Operating Partnership and of making
an informed investment decision, (ii) is capable of protecting
its own interests or has engaged representatives or advisors to
assist it in protecting its interests and (iii) is capable of
bearing the economic risk of such investment.
(B) The Units to be issued to each Unit Recipient will
be acquired by each Unit Recipient for its own account for
investment only and not with a view to, or with any intention of,
a distribution or resale thereof, in whole or in part, or the
grant of any participation therein until the UnitS are redeemed
for Common Stock of the Company following the lock-up period
specified in the Registration Rights Agreement in accordance with
the Partnership Agreement. Unit Recipient shall confirm that all
documents, records, and books pertaining to investment in the
Operating Partnership and requested by Unit Recipient have been
made available or delivered to Unit Recipient. Unit Recipient has
had an opportunity to ask questions of and receive answers from
the Operating Partnership, or from a person or persons acting on
the Operating Partnership's behalf, concerning the terms and
conditions of the transaction contemplated by this Agreement and
its acquisition of Units. Unit Recipient has relied upon, and is
making its investment decisions, solely upon such information as
has been provided to Unit Recipient by the Operating Partnership.
Unit Recipient was not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
-8-
<PAGE>
(C) Unit Recipient acknowledges that (i) the Units to
be issued to Unit Recipient have not been registered under the
Securities Act or state securities laws by reason of a specific
exemption or exemptions from registration under the Securities
Act and applicable state securities laws, (ii) the Operating
Partnership's reliance on such exemptions is predicated in part
on the accuracy and completeness of the representations and
warranties of Unit Recipient referred to herein, and in the
Prospective Subscriber Questionnaires delivered to Buyer pursuant
to Paragraph 13(i) hereto, (iii) such Units, therefore, cannot be
resold unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from registration
is available, (iv) there is no public market for such Units, and
(v) the Operating Partnership has no obligation or intention to
register such Units for resale under the Securities Act or any
state securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws. Unit Recipient hereby acknowledges that because of the
restrictions on transfer or assignment of such Units to be issued
hereunder which are set forth in this Agreement and in the
Partnership Agreement, Unit Recipient may have to bear the
economic risk of the investment commitment evidenced by this
Agreement and any Units acquired hereby for an indefinite period
of time, and that, under the terms of the Partnership Agreement
of the Operating Partnership, as it will be in effect on the
Closing Date, Units will not be exchangeable at the request of
the holder thereof for cash or Common Shares of the Company prior
to the first (1st) anniversary of their issuance.
(D) The address of Unit Recipient's residence or
principal place of business, as applicable, shall be set forth,
together with a statement as to whether such Unit Recipient has
any present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which
it present principal place of business or residence, as
applicable, is sited.
(viii) Offering of Units. There shall have been no change
-----------------
in any securities or related law, regulation or interpretation, nor
any change in any Unit Recipient's status as an "accredited investor"
under the Securities Act, that would render consummation of the
conveyance of any portion of the Property for Units as contemplated by
this Agreement a violation of any such laws, regulation or
interpretations thereof. The representations and warranties of each
Unit Recipient contained in this Agreement and in the Prospective
Subscriber Questionnaire shall be true and correct as of the Close of
Escrow.
(ix) Related Property. Concurrently with the execution of
----------------
this Agreement, Buyer and Seller have entered into a separate Purchase
Agreement and Joint Escrow Instructions for certain property commonly
known as the Plaza Buildings (the "Other Agreement"). The Other
Agreement provides for the
-9-
<PAGE>
consummation of the transaction contemplated thereby through an escrow
closing on the Closing Date. Concurrently with the Close of Escrow,
Buyer and Seller shall consummate the close of the escrow conveying
the property identified in the Other Agreement pursuant to the terms
of the Other Agreement.
(b) Conditions to Seller's Obligations. For the benefit of
----------------------------------
Seller, the Close of Escrow shall be conditioned upon all of the following
occurring prior to or concurrently with the Close of Escrow: (i) the
timely performance by Buyer of all of the obligations required by the terms
of this Agreement to be performed by Buyer (or Seller's waiver
thereof, it being agreed that Seller may waive such condition); and (ii)
Buyer's representations and warranties set forth in Paragraph 14(b) hereof
shall be true and correct in all material respects as of the Close of
Escrow and (iii) concurrently with the Close of Escrow, Buyer and Seller
shall consummate the close of the escrow conveying the property identified
in the Other Agreement pursuant to the terms of the Other Agreement.
8. Deposits by Seller. At least one (1) business day prior to the
------------------
Close of Escrow, Seller shall deposit or cause to be deposited with Escrow
Holder for each Property the following documents and instruments (except for the
items listed in subparagraphs (b), (d) and (i), which Seller shall cause to be
delivered to Buyer outside of the Escrow on or before the Close of Escrow):
(a) Grant Deed. The Grant Deed conveying the Real Property to
----------
Buyer, duly executed as appropriate by Seller, acknowledged and in
recordable form in the form attached hereto as Exhibit "B";
-----------
(b) Leases. The original Leases (and originals of all amendments
------
thereto) or correct copies of such documents to the extent originals are
not in Seller's possession;
(c) Tenant Lease Assignment. Tenant Lease Assignment
-----------------------
("Assignment of Leases"), duly executed by Seller, in the form attached
hereto as Exhibit "D", pursuant to which Seller shall assign to Buyer all
-----------
of Seller's right, title and interest in and to the Leases;
(d) Contracts. Any and all original management contracts,
---------
maintenance contracts, service contracts, reciprocal easement agreements,
if any, and any other contracts or agreements affecting or relating to the
leasing, ownership, operation, maintenance, construction or development of
the Property (collectively, the "Contracts") which may remain in effect
following the Close of Escrow and all warranties related thereto, if any,
which Buyer has approved and elected to assume in accordance with Paragraph
7(a) hereof, including, without limitation, any and all operating manuals
for all building systems and components to the extent the same are in
Seller's possession;
(e) Assignment of Contracts and Assumption Agreement. Assignment
------------------------------------------------
of Contracts and Assumption Agreement ("Assignment of Contracts"), duly
executed by
-10-
<PAGE>
Seller, in the form attached hereto as Exhibit "E", pursuant to which
-----------
Seller shall assign to Buyer all of Seller's right, title and interest in,
under and to the Contracts and Buyer has approved and elected to assume any
and all warranties relative thereto;
(f) Bill of Sale. Bill of Sale ("Bill of Sale"), duly executed
------------
by Seller, in the form attached hereto as Exhibit "F", conveying all of
-----------
Seller's right, title and interest in and to the Personal Property;
(g) Tenant Letters. A letter signed by Seller, addressed to the
--------------
tenants advising the tenants of the sale herein to Buyer and directing that
all future rent payments and other charges are to be forwarded to Buyer at
an address to be supplied by Buyer;
(h) Transferor's Certification of Non-Foreign Status. The
------------------------------------------------
Transferor's Certification of Non-Foreign Status in the form attached
hereto as Exhibit "G", duly executed by Seller ("FIRPTA Certificate");
-----------
(i) Permits, Entitlements and the Like. Any and all original
----------------------------------
building and development permits, certificates of occupancy, utility will
serve letters, use permits and other governmental approvals and/or
entitlements relative to the Property, to the extent the same are in
Seller's possession;
(j) General Assignment. General Assignment ("General
------------------
Assignment"), duly executed by Seller, in the form attached herein as
Exhibit "H", conveying all of Seller's right, title and interest in and to
-----------
the Intangible Personal Property; and
(k) UCC. A current certified UCC Report showing no financing
---
statements by Seller as debtor covering the Property. Seller shall deliver
copies of the same to Buyer no less than two (2) days prior to the Close of
Escrow.
(l) Limited Partner Signatures. A limited partner signature page
--------------------------
to the Partnership Agreement ("LP Signature Page") in substantially the
form attached hereto as Exhibit "N" executed by each Unit Recipient.
-----------
(m) Other Instruments. Such other instruments and documents as
-----------------
are described in Paragraph 21(b) herein.
9. Deposits by Buyer. Buyer shall deposit or cause to be deposited
-----------------
with Escrow Holder the funds which are to be applied towards the payment of the
Purchase Price in the amounts and at the times designated in Paragraph 3 above
(as adjusted by the prorations and credits hereinafter provided). In addition,
Buyer shall deposit with Escrow Holder prior to the Close of Escrow the
following documents and instruments for each Property:
(a) Assignment of Lease. Counterpart of the Assignment of
-------------------
Leases, duly executed by Buyer;
-11-
<PAGE>
(b) Assignment of Contracts. Counterpart of the Assignment of
-----------------------
Contracts, duly executed by Buyer;
(c) General Assignment. Counterpart of the General Assignment,
------------------
duly executed by Buyer; and
(d) Other Instruments. Such other instruments and documents as
-----------------
are described in Paragraph 21(b) herein.
10. Costs and Expenses.
------------------
(a) Title. The cost and expense of the CLTA standard portion of
-----
the Title Policy shall be paid by Seller, and Buyer shall pay for the
portion of the Title Policy premium attributable and/or payable for the
ALTA extended coverage portion of the Title Policy and all endorsements
thereto. The escrow fee of Escrow Holder shall be paid equally by Seller
and Buyer. Seller shall pay all documentary transfer taxes payable in
connection with the recordation of the Grant Deed. Buyer and Seller shall
pay, respectively, the Escrow Holder's customary charges to buyers and
sellers for document drafting, recording and miscellaneous charges. If, as
a result of no fault of Buyer or Seller, Escrow fails to close, Buyer and
Seller shall share equally all of Escrow Holder's fees and charges. If
Escrow fails to close due to the Fault of Buyer or Seller, such party at
fault shall pay all of Escrow Holder's fees and charges, if any.
(b) Financing. Seller, at its sole cost and expense, shall pay
---------
for the costs associated with the releases of any deeds of trust,
mortgages and other financing encumbering the Property and any prepayment
premiums in connection with all the indebtedness secured by the same.
11. Prorations. The following prorations between Seller and Buyer
----------
shall be made by Escrow Holder computed as of the Close of Escrow:
(a) Taxes. Real and personal property taxes and assessments on
-----
the Property (including any supplemental taxes resulting from any new
construction in the Property) shall be prorated on the basis that Seller is
responsible for (i) all such taxes for the fiscal year of the applicable
taxing authorities occurring prior to the "Current Tax Period" (as
hereinafter defined) and (ii) that portion of such taxes for the Current
Tax Period determined on the basis of the number of days which have elapsed
from the first day of the Current Tax Period to the Close of Escrow,
inclusive, whether or not the same shall be payable prior to the Close of
Escrow. The phrase "Current Tax Period" refers to the fiscal year of the
applicable taxing authority in which the Close of Escrow occurs. In the
event that as of the Close of Escrow the actual tax bills for the year or
years in question are not available and the amount of taxes to be prorated
as aforesaid cannot be ascertained, then rates and assessed valuation of
the previous year, with known changes, shall be used, and when the actual
amount of taxes and assessments for the year or years in question shall be
determinable, then such taxes and assessments will be reprorated between
the parties to reflect the actual amount of such taxes and assessments.
Seller
-12-
<PAGE>
shall be responsible for, and shall indemnify, protect, defend (with
counsel chosen by Buyer) and hold harmless Buyer and the Real Property from
and against any and all supplemental taxes, to the extent that such taxes
relate to any period occurring prior to the Close of Escrow.
(b) Rentals. Rentals and other payments (including, without
-------
limitation, common area maintenance charges and payments for real property
taxes and insurance premiums) payable by tenants, licensees,
concessionaires and other occupants of the Property or any portion thereof
(collectively, the "Tenants") shall be prorated as of the Close of Escrow.
However, Buyer shall not be obligated to make any payment or give any
credit to Seller on account of, or by reason of, any rental or other
payments which are unpaid as of the Close of Escrow, but shall be required
merely to pay to Seller Seller's share of the same if, as and when received
by Buyer. After the Close of Escrow, all payments received by Buyer from
the Tenants shall be applied as follows: first, to the obligation or
obligations of the Tenants under the Leases accruing during the month in
which the Close of Escrow occurs; second, to any obligation or obligations
of the Tenants under the Leases attributable to any period occurring after
the Close of Escrow through the month in which payment is made and/or with
respect to obligations accruing after the Close of Escrow which are past
due on the date of receipt by Buyer; third, to all of Buyer's costs of
collection incurred with respect to the recovery of any such payments; and
then, to any amounts due Seller from such Tenants under the Leases for
periods prior to the Close of Escrow. Any rental payments received by
Seller following the Close of Escrow shall be paid over to Buyer within
five (5) business days of receipt and shall be applied in the manner
described above. Seller shall have no right whatsoever to initiate any
action against any Tenant for unlawful detainer or other right or action to
dispossess such Tenant of its leased premises with respect to any duties or
obligations of such Tenant under the Leases.
(c) Security Deposits. Buyer shall be credited and Seller shall
-----------------
be charged with any security deposits and advanced rentals in the nature of
security deposits made by the Tenants under the Leases, except to the
extent such amounts have previously been applied to obligations of the
Tenants under the Leases and have been shown as having been so applied on
the Rent Roll for each Property attached hereto as Exhibit "J". Buyer
-----------
shall also be credited and Seller shall be charged for all operating cost
pass-throughs paid by the Tenants and held by Seller in reserve for the
benefit of the Tenants for the repair and/or improvement of the Property.
Seller hereby agrees that it will not during the term of this Escrow or
upon the Close of Escrow apply any security deposits toward any delinquent
rental payments or any other amounts due under any Leases.
(d) Utilities. Gas, water, electricity, heat, fuel, sewer and
---------
other utilities and the operating expenses relating to the Real Property
shall be prorated as of the Close of Escrow to the extent such items are
not directly paid for by the Tenants under the Leases. If the parties are
unable to obtain final meter readings as of the Close of Escrow, such
expenses shall be estimated as of the Close of Escrow on the basis of the
prior operating history of the Real Property.
-13-
<PAGE>
(e) Existing Lease Obligations. Buyer shall be credited and
--------------------------
Seller shall be charged with operating costs (i.e., maintenance charges,
taxes and insurance), including, but not limited to maintenance obligations
under the Leases, tenant improvement costs and allowances, all leasing
commissions for leases entered into prior to the Close of Escrow, and
specifically including the amount of Two Hundred Nine Thousand Two Hundred
Sixty-Six and 00/00 Dollars ($209,266.00) for commissions and tenant
improvement costs arising in connection with the Lease with Paine Weber
(including all commissions relating to any renewal or extension of a Lease
or the leasing of additional space exercised prior to the Close of Escrow)
of the landlord associated with the Leases existing prior to the Close of
Escrow. Seller shall have no obligation to Buyer for expenses relating to
lease renewals or expansions which are exercised by tenants under the
Leases after the Close of Escrow.
(f) Insurance. Buyer acknowledges that Buyer is not assuming any
---------
insurance policies currently maintained by Seller.
Prior to the Close of Escrow, the parties shall agree upon all of the prorations
to be made and submit a statement to Escrow Holder setting forth the same. In
the event that any prorations, apportionments or computations made under this
Paragraph 11 shall require final adjustment (including any such adjustment based
on any post-closing, annual reconciliation of operating expenses performed under
the Leases), then the parties shall make the appropriate adjustments promptly
when accurate information becomes available and either party hereto shall be
entitled to an adjustment to correct the same. The parties agree that they will
estimate the prorations of rents based on rental payments received, and expenses
incurred, prior to the end of business on January 31, 1998, and that an
appropriate adjustment shall be promptly made following the Close of Escrow
based on the rental payments received, and expenses incurred, through the Close
of Escrow. Provided that all such information is available, all such adjustments
shall be made within one hundred and twenty (120) days after the Close of
Escrow. Any corrected adjustment or proration shall be paid in cash to the party
entitled thereto. The provisions of this Paragraph 11 shall survive the Close of
Escrow and the recordation of the Grant Deed.
12. Escrow Disbursements and Other Actions. Upon the Close of Escrow,
--------------------------------------
Escrow Holder shall promptly undertake all of the following in the following
manner:
(a) Prorations. Prorate all matters referenced in Paragraph 11
----------
based upon the statement delivered into Escrow signed by the parties;
(b) Recording. Cause the Grant Deeds and any other documents
---------
which the parties hereto may mutually direct, to be recorded in the
Official Records in the order directed by the parties;
(c) Funds. Disburse from funds deposited by Buyer with Escrow
-----
Holder towards payment of all items (including, without limitation, the net
amount of the cash portion of the Purchase Price) chargeable to the account
of Buyer pursuant hereto in payment of such costs and disburse the balance
of such funds, if any, to Buyer;
-14-
<PAGE>
(d) Documents to Seller. Deliver to Seller counterparts of the
-------------------
Assignment of Lease, the Assignment of Contracts and the General Assignment
executed by Buyer;
(e) Documents to Buyer. Deliver to Buyer originals of the Bill
------------------
of Sale, and the FIRPTA Certificate, and counterparts of the Assignment of
Leases, the Assignment of Contracts and the General Assignment
appropriately executed by Seller, the approved form of letter described in
Paragraph 8(g) above addressed to the Tenants advising such Tenants of this
transaction and any other documents which are to be delivered to Buyer
hereunder;
(f) Title Policy. Direct the Title Company to issue the Title
------------
Policy to Buyer;
(g) Units. Concurrently with the Close of Escrow, Buyer shall
-----
deliver to Seller evidence of the issuance of the Units to Seller in
accordance with Exhibit "M"; and
----------------
(h) Registration Rights Agreements. At or prior to the Close of
------------------------------
Escrow, Buyer, the Company and the Unit Recipients will enter into the
Registration Rights Agreement (defined in Paragraph 25 hereof).
13. Covenants of Seller. Seller hereby covenants with Buyer, as
-------------------
follows:
(a) New Contracts. From the Effective Date through the Close of
-------------
Escrow, Seller shall not, without the prior written consent of Buyer, which
Buyer may withhold in its reasonable discretion, enter into any maintenance
contract, service contract, listing agreement or any other contract
affecting or relating to the Property or any portion thereof which will
survive the Close of Escrow or will otherwise affect the use, operation or
enjoyment of the Property after the Close of Escrow. Buyer's failure to
notify Seller within one (1) business day after receipt of Seller's request
for consent to such a contract whether or not Buyer consents shall be
deemed Buyer's consent.
(b) Insurance. All insurance policies carried by Seller with
---------
respect to the Property and in effect as of the Effective Date shall remain
continuously in full force and effect from the Effective Date through the
day upon which the Close of Escrow occurs;
(c) Amendments. From the Effective Date through the Close of
----------
Escrow, Seller shall not amend, modify, alter or supplement any Lease or
any Contract which is approved by Buyer pursuant to Paragraphs 7(a) or
13(a) hereof, or enter into any new lease or contract or binding proposal
for a new lease or contract, without the prior written consent of Buyer
which may be withheld in Buyer's reasonable discretion. Buyer's failure to
notify Seller within three (3) business days after receipt of Seller's
request for consent to such a contract whether or not Buyer consents shall
be deemed
-15-
<PAGE>
Buyer's consent. Further, Seller shall terminate on or before the Close of
Escrow any Contract which Buyer disapproves in accordance with Paragraph
7(a) hereof.
(d) Operation. From the date of this Agreement until the Close
---------
of Escrow, Seller shall operate, manage, maintain and repair the Property
consistent with Seller's existing business practices and subject to the
terms of Paragraph 11(e), shall satisfy and perform all obligations under
the Leases arising prior to the Close of Escrow.
(e) No New Financing. After the date of this Agreement, Seller
----------------
shall not alienate, lien, encumber or otherwise transfer all or any portion
of or interest in the Property (other than to Buyer at the Close of
Escrow). All Personal Property and Intangible Personal Property shall be
conveyed to Buyer by Seller at the Close of Escrow free from any liens,
encumbrances or security interests of any kind or nature;
(f) Records. For a period of one (1) year following the Close of
-------
Escrow, Seller shall, upon Buyer's request and upon reasonable prior
notice, make all of Seller's non-proprietary records with respect to the
Property, which have not otherwise been turned over to Buyer, available to
Buyer for inspection, copying and audit by Buyer's designated employees,
accountants or consultants; and
(g) Materially Changed Condition. Seller shall, promptly upon
----------------------------
becoming aware of any such occurrence, notify Buyer in writing of any
material change in any condition with respect to the Property or of any
event or circumstance which makes any representation or warranty of Seller
to Buyer under this Agreement untrue or misleading, and of any material
covenant of Seller under this Agreement which Seller will be incapable of
substantial performing (hereinafter, a "Materially Changed Condition"). If
Seller notifies Buyer of any Materially Changed Condition, Buyer shall have
two (2) business days following receipt of written notice from Seller of
such condition to review the events and circumstances giving rise to such
condition. If Buyer disapproves the Materially Changed Condition (as
determined in Buyer's reasonable discretion), Buyer may terminate this
Agreement. If Buyer does not elect to terminate this Agreement and elects
to consummate its acquisition of the Property, it shall be deemed to have
(i) waived any claim regarding the Materially Changed Condition, (ii)
accepted title to and possession of the Property subject to the Materially
Changed Condition and (iii) amended this Agreement to reflect the
Materially Changed Condition.
(h) Accounting Information. The parties acknowledge that Seller
----------------------
has provided 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 and its affiliates from
which Buyer's representatives and independent accounting firm have
prepared, at Buyer's expense, audited financial statements for 1994, 1995
and 1996 in conformity with generally accepted accounting principles and to
enable them to prepare such statements, reports or disclosures as Buyer may
deem necessary or advisable. All such information is being provided to
Buyer without any representation or warranty by Seller except that such
information was used by Seller in the ordinary course
-16-
<PAGE>
of its business. 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 Seller's expense, to inquiries from Buyer's
representatives and independent accounting firm provided that any such
responses do not require an undertaking. If and to the extent Seller's
financial statements pertaining to the Property for any periods during the
years 1994, 1995 or 1996 have been audited, promptly after the execution of
this Agreement, 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.
(i) Prospective Subscriber Questionnaire. Seller, as a Unit
------------------------------------
Recipient, shall deliver to the Operating Partnership, no less than three
(3) business days prior to the Close of Escrow a completed and duly
executed Prospective Subscriber Questionnaire in substantially the form
attached hereto as Exhibit "O", which Questionnaires shall confirm to the
-----------
satisfaction of the Operating Partnership that each Unit Recipient is an
"accredited" investor within the meaning of Rule 501(a) promulgated under
the Securities Act. Seller shall also deliver to the Operating
Partnership, upon the Operating Partnership's reasonable request, such
other information, certificates and materials as the Operating Partnership
may reasonably request in connection with offering the Units without
registration under the Securities Act and the securities laws of applicable
states and other jurisdictions.
(j) Depreciation and Amortization. In connection with the
-----------------------------
issuance of Units to any Unit Recipient, Seller shall deliver to Buyer on
or before the date which is forty-five (45) days after the Close of Escrow,
at Seller's sole cost and expense, prepared as of the date of this
Agreement, depreciation and amortization schedules for the assets
constituting the Property, as kept for tax purposes, showing original
basis, accumulated depreciation or amortization, original useful life of
such assets, remaining useful life of such assets and the date(s) when such
assets were placed in service.
(k) Notifications. From the date of this Agreement until the
-------------
Close of Escrow, and then so long as any Unit Recipient holds any Units,
each such Unit Recipient shall notify the Operating Partnership in writing
promptly upon any change in the identity or number of its partners or of
its indirect partners as identified pursuant to this Agreement, and shall
provide the information called for in Paragraph 13(j) hereof with respect
to any such change. In addition, so long as any Unit Recipient holds any
Units, without the prior written consent of the Operating Partnership, each
Unit Recipient shall not (i) admit additional partners, (ii) permit the
transfer of interests in each Unit Recipient to a look-through entity (as
hereinafter defined) or (iii) permit any transfer of interests in such Unit
Recipients if, as a result of the admissions or transfers described in (i)
through (iii) the number of direct or indirect beneficial owners in such
Unit Recipients would increase. Each Unit Recipient shall use their best
efforts to secure the compliance of any look-through entities that hold
direct or indirect interests of such Unit Recipients with the
-17-
<PAGE>
requirements of this Paragraph as if such requirements applied directly to
such entities. Each Unit Recipient acknowledge that the provisions of this
Paragraph are imposed to aid the Operating Partnership in avoiding taxation
as a corporation for federal income tax purposes, agrees that monetary
damages may be insufficient to remedy the potential harm caused by any
breach of the provisions of this Paragraph, and agree that injunctive
relief, including specific performance or another equitable remedy would be
an appropriate remedy. The provisions of this Paragraph shall survive the
recording of the Grant Deed and the Close of Escrow. For purposes of this
Agreement, a "look-through entity" shall mean a partnership (or other
entity treated as a partnership for federal income tax purposes), S-
corporation or grantor trust.
(l) Partnership Agreement. Seller acknowledges that each Unit
---------------------
Recipient shall be bound by and subject to all terms of the Partnership
Agreement. At or prior to the Closing, Seller shall deliver to the
Operating Partnership a Limited Partner Signature Page in substantially the
form attached hereto as Exhibit "N" executed by each Unit Recipient.
-----------
(m) No Marketing. Upon execution of this Agreement, Seller shall
------------
not market the Property for sale or enter into discussions or negotiations
---
with potential purchasers of the Property unless this Agreement has been
terminated pursuant to its terms.
(n) Additional Cooperation. After the Close of Escrow, Seller
----------------------
shall cooperate with, and promptly respond to reasonable requests from,
Buyer's accountants, including, but not limited to, audit letters
requesting information relating to matters prior to the Close of Escrow,
including, but not limited to, pending or threatened litigation, claims and
assessments; provided, however, information provided by Seller to Buyer's
accountants shall not constitute additional representations and warranties
of Seller.
14. Representations and Warranties.
------------------------------
(a) By Seller. In consideration of Buyer entering into this
---------
Agreement and as an inducement to Buyer to purchase the Property, Seller
makes the following representations and warranties (subject to the matters
disclosed on the Disclosure Statement attached hereto as Exhibit "K"
-----------
("Disclosure Statement")), each of which is material and is being relied
upon by Buyer (and the continued truth and accuracy of which shall
constitute a condition precedent to Buyer's obligations hereunder):
(i) Representations Regarding Seller's Authority.
--------------------------------------------
(A) Seller has the legal power, right and authority to
enter into this Agreement and the instruments referenced herein,
and to consummate the transaction contemplated hereby;
(B) All requisite action (corporate, trust, partnership
or otherwise) has been taken by Seller in connection with the
entering into
-18-
<PAGE>
this Agreement, the instruments referenced herein, and the
consummation of the transaction contemplated hereby. No consent
of any partner, shareholder, trustee, trustor, beneficiary,
creditor, investor, judicial or administrative body, governmental
authority or other party is required or, if required, has been
obtained; and
(C) The individuals executing this Agreement and the
instruments referenced herein on behalf of Seller have the legal
power, right, and actual authority to bind Seller to the terms
and conditions hereof and thereof.
(ii) Threatened Actions. To Seller's actual knowledge,
------------------
there are no pending, and to Seller's actual knowledge no threatened,
actions, suits, arbitrations, claims or proceedings, at law, in equity
or otherwise, that would adversely affect the Property or Seller's
ability to perform its obligations under this Agreement including, but
not limited to, judicial, municipal or administrative proceedings in
eminent domain, collection actions, claims relating to alleged
building code violations or health and safety violations, federal,
state or local agency actions regarding environmental matters, lease
disputes, claims relating to federal environmental protection agency
or zoning violations, or actions relating to personal injuries or
property damages alleged to have occurred at the Real Property or by
reason of the condition or use of or construction on the Real
Property;
(iii) No Contracts. Other than the Leases, the Contracts
------------
and the matters disclosed in the Title Report, there are no leases,
surface or subsurface use agreements, tenancy arrangements, service
contracts, management agreements, or other agreements, instruments or
encumbrances created by Seller, or to Seller's actual knowledge
created by any other person or entity, which will be in force or
effect as of the Close of Escrow that grant to any person whomsoever
or any entity whatsoever any right, title, interest or benefit in or
to all or any part of the Property or any right relating to the
ownership, use, operation, management, maintenance, enjoyment or
repair of all or any part of the Property, and no person or entity has
any rights to acquire any of the foregoing by virtue of the acts of
Seller;
(iv) Compliance with Law. To Seller's actual knowledge,
-------------------
Seller has received no written notice and does not otherwise have
knowledge of any violation of any applicable laws, ordinances, rules,
requirements, regulations and building codes of any governmental
agency, body or subdivision thereof bearing on the Property;
(v) Documents True. To Seller's actual knowledge, all
--------------
documents delivered by Seller or made available to Buyer pursuant to
this
-19-
<PAGE>
Agreement are true, correct and complete copies of the versions
of such documents that are in Seller's possession;
(vi) Hazardous Wastes. Except as set forth on Exhibit "I"
----------------
or as disclosed in the phase I environmental assessments prepared on
behalf of Buyer, to Seller's actual knowledge: (1) the Property or
any portion thereof is not in violation of any Environmental Law (as
hereinafter defined); (2) neither Seller nor any third party has used,
generated, manufactured, stored or disposed of on, under or about the
Property or transported to or from the Property any Hazardous Material
in violation of any Environmental Law; and (3) there is no asbestos
(in any form) or asbestos containing materials in any of the
Improvements. For purposes of this subparagraph, the term "Hazardous
Material" shall mean any substance, chemical, waste product or other
material which is listed, defined, or otherwise identified as
"hazardous" or "toxic" or as a "hazardous material" under any
federal, state, local or administrative agency ordinance or law,
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et
--
seq.; Resource Conservation and Recovery Act, 42 U.S.C. (S)(S) 6901 et
--- --
seq.; Federal Water Pollution Control Act, 33 U.S.C. (S)(S) 1251 et
--- --
seq.; Clean Air Act, 42 U.S.C. (S)(S) 7401 et seq.; Hazardous
--- ------
Materials Transportation Act, 49 U.S.C. (S)(S) 1471 et seq.; Toxic
------
Substances Control Act, 15 U.S.C. (S)(S) 2601 et seq.; Refuse Act, 33
------
U.S.C. (S)(S) 407 et seq.; Emergency Planning and Community
------
Right-To-Know Act, 42 U.S.C. (S)(S) 11001 et seq.; Occupational Safety
------
and Health Act, 29 U.S.C. (S)(S) 65 et seq., to the extent it includes
------
the emission of any Hazardous Material and includes any Hazardous
Material for which hazard communication standards have been
established; California Hazardous Substance Account Act, California
Health & Safety Code (S)(S) 25300 et seq.; California Asbestos
------
Notification Laws, California Health & Safety Code (S)(S) 25915 et
--
seq.; California Hazardous Waste Control Law, California Health &
---
Safety Code (S)(S) 22100 et seq.; California Hazardous Materials
------
Release Response Plans and Inventory Act, California Health & Safety
Code (S)(S) 25500 et seq., California Clean Air Act, California Health
------
& Safety Code (S)(S) 39608 et seq.; California Toxic Pits Cleanup Act,
------
California Health & Safety Code (S)(S) 25208 et seq.; California
------
Pipeline Safety Act, California Government Code (S)(S) 51010 et seq.;
------
California Toxic Air Contaminants Law, California Health & Safe Code
(S)(S) 39650 et seq.; California Porter-Cologne Water Quality Act,
------
California Water Code (S)(S) 13000 et seq.; California Toxic Injection
------
Well Control Act, California Health & Safety Code (S)(S) 25159.10 et
--
seq.; California Underground Storage Tank Act, California Health &
---
Safety Code (S)(S) 25280 et seq.; California Occupational Carcinogens
------
Control Act, California Labor Code (S)(S) 9000 et seq.; or any
------
regulation, order, rule or requirement adopted thereunder; as well as
any formaldehyde, urea, polychlorinated biphenyls, petroleum,
petroleum product or by-product, crude oil, natural gas, natural gas
liquids, liquefied natural gas or synthetic gas usable for fuel or
mixture thereof, radon, asbestos and "source," "special nuclear" and
"by-product" material as defined in the Atomic Energy Act of 1985, 42
U.S.C. (S)(S) 3011 et seq. For purposes of this
------
-20-
<PAGE>
Agreement, the term "Environmental Laws" shall mean the statutes and
ordinances set forth above and any and all other federal, state or
local law, ordinance or regulation relating to industrial hygiene or
to environmental conditions or hazardous conditions.
(vii) Taxes. Seller has no actual knowledge, and Seller
-----
has received no notice to the contrary, of any special assessments or
charges which have been levied against the Property or which will
result from work, activities or improvements done to or for the
benefit of the Property except as may be shown on the Title Report.
Seller has no knowledge, and Seller has received no notice to the
contrary, of any intended public improvements which will result in any
charge being levied against, or in the creation of any lien upon, the
Property or any portion thereof;
(viii) Roofs; Utilities; Building Systems. Except as
----------------------------------
expressly set forth in the reports prepared for Buyer by Building
Analytics which are further identified on Exhibit "K", Seller has no
-----------
actual knowledge that the roofs of the Improvements or any of the
utility facilities or the heating, air conditioning, plumbing or
ventilating systems serving the Property are inadequate or are not in
good operating condition nor that any of the same have been inadequate
or failed to be in good operating condition within the two (2) years
immediately preceding the Opening of Escrow;
(ix) Structural. Except as expressly set forth on the
----------
reports prepared for Buyer by Building Analytics which are further
identified on Exhibit "K", Seller has no actual knowledge of any
-----------
material defects or deficiencies in the integrity or condition of the
structural components of the Real Property;
(x) Leases. The Rent Roll for each Property attached hereto
------
as Exhibit "J" is a copy of the rent roll used by Seller in the
-----------
ordinary course of its business. To Seller's actual knowledge, (1)
each Rent Roll is true, accurate and complete and (2) the copies of
the Leases delivered to Buyer are true, correct and complete copies of
the Leases. The Leases are in full force and effect, without default
by any party and without any right of setoff, except as expressly
provided by the terms of the Leases or as disclosed to Buyer in
writing in an Estoppel Certificate or otherwise. As of the Close of
Escrow, all work to be performed by Seller pursuant to the Leases
shall have been fully or substantially completed, paid for and
accepted by the respective Tenants and all tenant improvement
allowances and similar obligations have been paid in full except as
expressly set forth on Exhibit "U". Except as indicated on Exhibit
----------- -------
"U", to Seller's actual knowledge, no leasing or other commissions or
---
fees are due, or will become due, on an absolute or contingent basis
to any real estate brokers or agents or anyone else in connection with
the Real Property or any portion thereof and no such commissions or
fees will become due during the term of any existing Lease or
-21-
<PAGE>
with respect to any renewal or extension thereof or the leasing of
additional space by any existing Tenant;
(xi) Specific Liabilities. To Seller's actual knowledge, as
--------------------
of the date of this Agreement, there are no payments, assessments,
fees or charges owing, and no outstanding liabilities, obligations or
commitments, in connection with any of the items identified on Exhibit
-------
"Q" attached hereto and incorporated herein by this reference. Seller
---
shall be deemed to have had actual knowledge of any such matter if a
reasonably prudent manager of commercial property would have had
knowledge of such matter regardless of whether Seller actually had
such knowledge.
(xii) Representations and Warranties at Closing. Subject
-----------------------------------------
to Seller's right to deliver its notice to Buyer of a Materially
Changed Condition as set forth in Paragraph 13(g) above, the
representations and warranties of Seller set forth in this Agreement
shall be deemed to be remade and restated by Seller in a certificate
on and as of the Close of Escrow.
As used herein, the term "Seller's actual knowledge" shall mean
the current actual knowledge of Jacob Brouwer, Jeanette Brouwer, Scott
Brusseau, Jeffry Brusseau, and Carolyn Perrigo, without any inquiry. Seller
represents and warrants that Jeffry Brusseau is the representative of
Seller with principal administrative and oversight responsibility for the
Property. The parties agree that (i) Seller's warranties and
representations contained in this Agreement and in any document executed by
Seller pursuant to this Agreement shall survive Buyer's purchase of the
Property only for a period of one (1) year after the Close of Escrow (the
"Limitation Period"), and (ii) Buyer shall provide actual written notice to
Seller of any alleged breach of such warranties or representations and
shall allow Seller thirty (30) days within which to cure such alleged
breach, or, if such alleged breach cannot reasonably be cured within thirty
(30) days, an additional reasonable time period, so long as such cure has
been commenced within such thirty (30) days and diligently pursued. In no
event is Seller obligated to cure any alleged breach. If Seller fails or
elects not to cure such alleged breach after actual written notice and
within such cure period, Buyer's sole and exclusive remedy shall be an
action at law for damages, but in no event lost profits or punitive
damages, which must be commenced, if at all, within the Limitation Period;
provided, however, that if within the Limitation Period Buyer gives Seller
written notice of such alleged breach and Seller commenced to cure and
thereafter terminates such cure effort, Buyer shall have an additional
sixty (60) days from the date that Seller notifies Buyer in writing that
Seller has terminated its cure effort within which to commence such an
action.
(b) By Buyer. In consideration of Seller entering into this
--------
Agreement and as an inducement to Seller to sell the Property, Buyer (and
Company and OP General Partner, by their joinder herein, solely as to the
representations and warranties relating to Company, OP General Partner and
their respective operations) makes the following representations and
warranties, each of which is material and is being relied upon by
-22-
<PAGE>
Seller (and the continued truth and accuracy of which shall constitute a
condition precedent to Seller's obligations hereunder):
(i) Representations Regarding Buyer's Authority.
-------------------------------------------
(A) Buyer has the legal power, right and authority to
enter into this Agreement and the instruments referenced herein,
and to consummate the transaction contemplated hereby;
(B) All requisite action (corporate, trust, partnership
or otherwise) has been taken by Buyer in connection with the
entering into this Agreement, the instruments referenced herein,
and the consummation of the transaction contemplated hereby. No
consent of any partner, shareholder, trustee, trustor,
beneficiary, creditor, investor, judicial or administrative body,
governmental authority or other party is required; and
(C) The individuals executing this Agreement and the
instruments referenced herein on behalf of Buyer and the partners
of Buyer, if any, have the legal power, right, and actual
authority to bind Buyer to the terms and conditions hereof and
thereof.
(ii) AS-IS. Except as expressly set forth in the Agreement,
-----
Buyer is acquiring the Property "AS IS" without any representation or
warranty of Seller, express, implied or statutory, as to the nature or
condition of or title to the Property or its fitness for Buyer's
intended use of same. Except as specifically set forth in this
Agreement, Buyer represents and warrants that it (i) is relying solely
upon its own inspections, investigations and analyses of the Property,
the Title Documents, Documents and Materials, and the Plans and
Reports (collectively, the "Property Documents") in entering into this
Agreement and consummating the transaction set forth herein, and (ii)
is not relying in any way upon any representations, statements,
agreements, warranties, studies, reports, descriptions, guidelines or
other information or material furnished by Seller or its
representatives whether oral or written, express or implied, of any
nature whatsoever regarding any such matters, including, without
limitation, the condition, value, nature, or quality of the Property,
including any constriction on the Property and any materials or
systems incorporated into the Property and seismic conditions or
topography, any income to be derived from the Property, compliance of
the Property or its operation with any law, ordinance, rule,
regulation, or the status of any permits or approvals relating to or
required in connection with the Property, latent defects in the
Property or improvements thereto, safety or building violations or
deficiencies in the Property or improvements thereto, if any, or any
other matter of a similar or dissimilar nature which may be of
relevance to Buyer and relating in any way to the Property or the
market in which it is located. Except as specifically set forth in
this Agreement, Buyer agrees and warrants to Seller that neither
Seller, nor any broker, nor any
-23-
<PAGE>
agent or representative of either of them, has made any representation
to Buyer inconsistent with the foregoing nor as to any Hazardous
Materials Laws, the existence of Hazardous Materials on the Property
or the Property Documents. Except as specifically set forth in this
Agreement, Seller is not making any representation or warranty of any
nature concerning the accuracy or completeness of Seller's files or
concerning the authenticity, source, accuracy or completeness of the
Property Documents. As to certain of the materials made available to
Buyer from Seller's files, including, without limitation, the Property
Documents, Buyer specifically acknowledges that they may have been
prepared by third parties with whom Seller has no privity and Buyer
acknowledges and agrees that except as specifically set forth herein,
no warranty or representation, express or implied, has been made, nor
shall any be deemed to have been made, to Buyer either by Seller or by
any third parties that prepared the materials in question. Buyer
waives any claim of any nature against Seller for any information,
conclusion, projection or other statement of any nature contained in
any of the Property Documents if the same should prove not to be true,
complete or accurate for any reason. Buyer, by its execution of this
Agreement, acknowledges and agrees that a material inducement to
Seller's decision to sell the Property to Buyer at the Purchase Price
provided in this Agreement was Buyer's agreement to conduct its own
feasibility studies and purchase the Property in an "as-is" condition.
Except as relating to any matter or relating to a breach of the
representations and warranties made by Seller, (A) no latent condition
affecting the Property in any way (including, without limitation, the
presence or effects of any Hazardous Materials or any violations of
applicable law on the Property), discovered after the Close of Escrow
(collectively, "Property Conditions"), shall give rise to any rights
of damages, specific performance, rescission or other claims by Buyer
against Seller, and (B) Buyer hereby assumes the risk of any and all
liabilities, claims, demands, suits, judgments, losses, damages,
expenses (including, without limitation, attorneys' fees and costs)
and other obligations arising out of the Property and hereby releases,
waives, discharges, covenants not to sue Seller based solely upon the
same.
(iii) Securities Filings. Each of the Company and the
------------------
Operating Partnership has filed all required documents with the
Securities and Exchange Commission ("SEC") since January 1, 1997
including, without limitation, the Annual Report on Form 10-K for the
year ended December 31, 1996 of the Company and the Operating
Partnership (collectively, the "SEC Documents"). To the knowledge of
the Company and Operating Partnership (defined and limited for
purposes of Paragraphs 14(b)(iii) and (iv) as information contained in
any actual notice received by Company or the Operating Partnership or
information within the actual knowledge of Michael V. Prentiss and
Thomas F. August, Mark Doran and Greg Imhoff (i) as of their
respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act or Exchange Act, as the
case may be, and, at the respective times they were filed, none of the
SEC Documents contained any untrue statement of a material fact or
omitted to state a
-24-
<PAGE>
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, (ii) the consolidated financial statements
(including any notes thereto) of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented in all
material respects the consolidated financial position of the Company
as at the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described
therein), and (iii) except as disclosed in the SEC Documents or as
required by generally accepted accounting principles, the Company has
not, since September 30, 1997, made any material change in the
accounting practices or policies applied in the preparation of
financial statements.
(iv) Absence of Certain Changes or Events. To the knowledge
------------------------------------
of Operating Partnership and Company, except as disclosed in SEC
Documents filed with the SEC prior to the date of this Agreement,
since September 30, 1997, (a) neither the Company nor the Operating
Partnership has sustained any loss or interference with its business
or properties from fire, flood, windstorm, accident or other calamity
(whether or not covered by insurance) that has had a material adverse
effect on the Company or the Operating Partnership, and (b) there has
been no event causing a material adverse effect on the Company or the
Operating Partnership, excluding any changes and effects resulting
from changes in economic, regulatory or political conditions or
changes in conditions generally applicable to the industry in which
the Company or the Operating Partnership is involved. The
representations and warranties of Buyer, the Company and the OP
General Partner set forth in this Agreement and in any document
executed by such parties pursuant to this Agreement shall survive
Buyer's purchase of the Property only for the Limitation Period.
Seller shall provide actual written notice to Buyer of any alleged
breach of such warranties or representations and shall allow Buyer
thirty (30) days within which to cure such alleged breach, or, if such
alleged breach cannot reasonably be cured within thirty (30) days, an
additional reasonable time period, so long as such cure has been
commenced within such thirty (30) days and diligently pursued. In no
event is Buyer obligated to cure any alleged breach. If Buyer fails or
elects not to cure such alleged breach after actual written notice and
within such cure period, Seller's sole and exclusive remedy shall be
an action at law for damages, but in no event lost profits or punitive
damages, which must be commenced, if at all, within the Limitation
Period; provided, however, that if within the Limitation Period Seller
gives Buyer written notice of such alleged breach and Buyer commenced
to cure and thereafter
-25-
<PAGE>
terminates such cure effort, Seller shall have an additional sixty
(60) days from the date that Buyer notifies Seller in writing that
Buyer has terminated its cure effort within which to commence such an
action.
(c) Indemnification.
---------------
(i) Seller's Indemnification. Notwithstanding anything in
------------------------
this Agreement to the contrary, and without limiting either parties'
rights under this Agreement, Seller hereby agrees to indemnify,
defend, protect and hold harmless Buyer and Buyer's Indemnitees (as
defined in Paragraph 13(a)(xv) hereof) from and against any and all
costs, losses, liabilities, damages, lawsuits, deficiencies, claims
and expenses, including without limitation, interest, penalties,
reasonable attorneys' fees and all amounts paid in investigation,
defense or settlement of any of the foregoing (collectively,
"Damages"), incurred in connection with, arising out of, resulting
-------
from or incident to (i) any breach of any covenant or warranty, or the
inaccuracy of any representation, made by Seller in or pursuant to
this Agreement or (ii) any claim by any person or entity initiated
against Buyer arising from the actions or inaction's of Seller prior
to the Close of Escrow.
(ii) Buyer's Indemnification of Seller. Notwithstanding
---------------------------------
anything in this Agreement to the contrary, Buyer shall indemnify,
defend, protect and hold harmless, Seller from and against any and all
Damages incurred in connection with, arising out of, resulting from or
incident to any breach of any covenant or warranty, or the inaccuracy
of any representation, made by Buyer in or pursuant to this Agreement.
(iii) Initiation of Claims. If any party ("Indemnitee")
-------------------- ----------
hereto desires to make a claim against any other party ("Indemnitor")
----------
pursuant to the provisions of this Paragraph 14(c), then Indemnitee
shall notify Indemnitor of the claim, demand, action or right of
action which is the basis of such claim and the provision or
provisions of this Agreement alleged to have been breached or to be
inaccurate, and shall give the Indemnitor a reasonable opportunity to
participate in the defense thereof. Indemnitee shall provide
Indemnitor with all information available to it regarding such claim,
demand, action or right of action (whether or not it involves a third
party).
(iv) Survival of Indemnification Provisions. The
--------------------------------------
indemnification provision set forth in this Paragraph 14(c) shall
survive the Close of Escrow regardless of any investigation made by
any of the parties hereto; provided, however, that the parties'
respective indemnification obligations arising out of any breach of
any covenant or warranty, or the inaccuracy of any representation,
made by a party in or pursuant to this Agreement shall survive only
with respect to claims made against the Indemnitor within the period
that the underlying covenant, warranty or representation survives
pursuant to this Agreement.
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<PAGE>
15. Remedies
--------
(a) LIQUIDATED DAMAGES. SUBJECT TO BUYER'S RIGHT TO HAVE THE
------------------
DEPOSIT RETURNED AS SET FORTH IN PARAGRAPH 3(a) OF THIS AGREEMENT, IF THE
CLOSE OF ESCROW FAILS TO OCCUR FOR ANY REASON OTHER THAN SELLER'S DEFAULT
HEREUNDER, THEN ESCROW HOLDER MAY BE INSTRUCTED BY SELLER TO CANCEL THE
ESCROW AND SELLER SHALL THEREUPON BE RELEASED FROM ITS OBLIGATIONS
HEREUNDER. BUYER AND SELLER AGREE THAT BASED UPON THE CIRCUMSTANCES NOW
EXISTING, KNOWN AND UNKNOWN, IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT
TO ESTABLISH SELLER'S DAMAGE BY REASON OF THE FAILURE OF ESCROW TO CLOSE AS
AFORESAID. ACCORDINGLY, BUYER AND SELLER AGREE THAT IT WOULD BE REASONABLE
AT SUCH TIME TO AWARD SELLER "LIQUIDATED DAMAGES" IN THE AMOUNT OF THE
DEPOSIT AND OWNERSHIP AND POSSESSION OF THE PLANS AND REPORTS PURSUANT TO
PARAGRAPH 24 BELOW.
SELLER AND BUYER ACKNOWLEDGE AND AGREE THAT THE FOREGOING AMOUNT
AND THE PLANS AND REPORTS ARE REASONABLE AS LIQUIDATED DAMAGES AND SHALL BE
SELLER'S SOLE AND EXCLUSIVE REMEDY IN LIEU OF ANY OTHER RELIEF, RIGHT OR
REMEDY, AT LAW OR IN EQUITY, TO WHICH SELLER MIGHT OTHERWISE BE ENTITLED BY
REASON OF THE FAILURE OF ESCROW TO CLOSE UNDER THIS AGREEMENT.
ACCORDINGLY, SUBJECT TO PARAGRAPH 3(a) OF THIS AGREEMENT, IF THE CLOSE OF
ESCROW FAILS TO OCCUR FOR ANY REASON OTHER THAN SELLER'S DEFAULT, SELLER
MAY INSTRUCT THE ESCROW HOLDER TO CANCEL THE ESCROW, WHEREUPON SELLER SHALL
BE RELIEVED FROM ALL LIABILITY HEREUNDER, AND, PROMPTLY FOLLOWING ESCROW
HOLDER'S RECEIPT OF SUCH INSTRUCTION, ESCROW HOLDER SHALL (i) CANCEL THE
ESCROW, AND (ii) DISBURSE TO SELLER THE DEPOSIT. WITHOUT LIMITING THE
FOREGOING PROVISIONS OF THIS PARAGRAPH, SELLER WAIVES ANY AND ALL RIGHTS
WHICH SELLER OTHERWISE WOULD HAVE HAD UNDER CALIFORNIA CIVIL CODE SECTION
3389, OR OTHERWISE, TO SPECIFICALLY ENFORCE THIS AGREEMENT. NOTWITHSTANDING
ANYTHING TO THE CONTRARY SET FORTH HEREIN, IN NO EVENT SHALL BUYER'S
OBLIGATION TO INDEMNIFY SELLER PURSUANT TO PARAGRAPH 7(a)(iii) ABOVE BE
LIMITED IN ANY MANNER. SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ
AND UNDERSTAND THE PROVISIONS OF THIS PARAGRAPH 15 AND BY THEIR INITIALS
IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
Seller's Initials Buyer's Initials
----------------- ----------------
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<PAGE>
(b) Buyer's Remedies. Buyer and Seller hereby agree that, if the
----------------
sale contemplated by this Agreement is not completed as herein provided by
reason of any default of Seller hereunder, then in addition to the return
of the Deposit and the right to retain the Plans and Reports, Buyer shall
be entitled to pursue any remedy available under this Agreement or
available at law or in equity, including, without limitation, the right to
specifically enforce this Agreement.
16. Damage or Condemnation Prior to Closing
---------------------------------------
(a) Material Damage. In the event that prior to the Close of
---------------
Escrow, the Real Property, or a material portion thereof, is destroyed or
materially damaged, Buyer shall have the right, exercisable by giving
written notice to Seller within five (5) days after receipt of written
notice of such damage or destruction, either (i) to terminate this
Agreement, in which event the Deposit and all interest accrued thereon
shall be immediately returned to Buyer, any other money or documents in
Escrow shall be returned to the party depositing the same, and neither
party hereto shall have any further rights or obligations hereunder, or
(ii) to accept the Real Property in its then condition and to proceed with
the consummation of the transaction contemplated by this Agreement with an
abatement or reduction in the Purchase Price equal to the amount of the
deductible for the applicable insurance coverage, and to receive an
assignment of all of Seller's rights to any insurance proceeds payable by
reason of such damage or destruction. If Buyer elects to proceed under
clause (ii) above, Seller shall not compromise, settle or adjust any claims
to such proceeds without Buyer's prior written consent, which consent may
be withheld in Buyer's sole and absolute discretion. For purposes of this
Paragraph 16 destruction or damage of a "material portion" of the Real
Property shall mean that the cost to correct such damage or destruction
(for all of the Real Property) may exceed $642,000, as determined by Buyer
and Seller in their reasonable discretion.
(b) Non-Material Damage. In the event that prior to the Close of
-------------------
Escrow there is any non-material damage to the Real Property, or any part
thereof, Buyer shall accept the Real Property in its then condition with an
abatement or reduction in the Purchase Price equal to the amount of the
deductible for the applicable insurance coverage and proceed with the
transaction contemplated by this Agreement, in which event Buyer shall be
entitled to an assignment of all of Seller's rights to any insurance
proceeds payable by reason of such damage or destruction. Seller shall not
compromise, settle or adjust any claims to such proceeds without Buyer's
prior written consent, which consent may be withheld in Buyer's sole and
absolute discretion.
(c) Material Condemnation. In the event that prior to the Close
---------------------
of Escrow, all or any material portion of the Real Property is subject to a
taking by a public or governmental authority, Buyer shall have the right,
exercisable by giving written notice to Seller within two (2) days after
receiving written notice of such taking, either (i) to terminate this
Agreement, in which event the Deposit and all interest accrued thereon
shall be immediately returned to Buyer, any other money or documents in
Escrow shall be returned to the party depositing the same, and neither
party hereto shall have any further
-28-
<PAGE>
rights or obligations hereunder, or (ii) to accept the Real Property in its
then condition, without a reduction in the Purchase Price, and to receive
an assignment of all of Seller's rights to any condemnation award or
proceeds payable by reason of such taking. If Buyer elects to proceed under
clause (ii) above, Seller shall not compromise, settle or adjust any claims
to such award without Buyer's prior written consent, which consent may be
withheld in Buyer's sole and absolute discretion. For the purposes of this
Paragraph 16, a taking, as set forth herein, shall be deemed to be of a
"material portion" of the Real Property if the value of the affected Real
Property, or the decrease in the value of the remaining Real Property (for
all of the Real Property), is in excess of $642,000 as determined by Buyer
and Seller in their reasonable discretion.
(d) Non-Material Condemnation. In the event that prior to the
-------------------------
Close of Escrow, any non-material portion of the Real Property is subject
to a taking by any public or governmental authority, Buyer shall accept the
Real Property in its then condition and proceed with the consummation of
the transaction contemplated by this Agreement, in which event Buyer shall
be entitled to an assignment of all of Seller's rights to any award or
proceeds payable in connection with such taking. In the event of any such
non-material taking, Seller shall not compromise, settle or adjust any
claims to such award without Buyer's prior written consent, which consent
may be withheld in Buyer's sole and absolute discretion.
17. Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be either (a) personally
delivered, (b) sent by overnight mail for next business day delivery (Federal
Express or the like), (c) sent by registered or certified mail, postage prepaid,
return receipt requested, or (d) sent by fax; and shall be deemed received upon
the earlier of (i) if personally delivered on a business day, the date of
delivery to the address of the person to receive such notice, (ii) if sent by
overnight mail for next business day delivery, the business day following its
deposit in such overnight mail facility, (iii) if mailed, two (2) business days
after the date of posting by the United States post office, or (iv) if given by
fax on a business day, the next business day when sent with confirmation of
receipt. Any notice, request, demand, direction or other communication sent by
fax must be confirmed within forty-eight (48) hours by letter mailed or
delivered in accordance with the foregoing.
To Buyer: Prentiss Properties Acquisition Partners, L.P.
970 West 190th
Street, Suite 550
Torrance, California 90502
Attention: Mr. David C. Robertson
Phone No. (310) 323-8300
Fax No. (310) 327-7714
-29-
<PAGE>
With a copy to: Allen, Matkins, Leck, Gamble & Mallory LLP
18400 Von Karman, Fourth Floor
Irvine, California 92612-1597
Attention: Gary S. McKitterick, Esq.
Phone No. (714) 553-1313
Fax No. (714) 553-8354
To Seller: Jacob and Jeanette Brouwer, Trustees
1508 West Mission Road
Escondido, California 92029
Attention: Arnie Veldcamp
Phone No. (760) 745-0556
Fax No. (760) 740-9557
With a copy to: Newport National Corporation
5050 Avenida Encinas, Suite 350
Carlsbad, California 92008
Attention: Mr. Scott Brusseau
Phone No. (760) 438-4242
Fax No. (760) 438-0046
With a copy to: Luce, Forward, Hamilton & Scripps LLP
600 W. Broadway, 26th Floor
San Diego, California 92101
Attention: Robert D. Buell, Esq.
Phone No. (619) 699-2539
Fax No. (619) 232-8311
To Escrow Holder: Chicago Title Insurance Company
7616 LBJ Freeway, Suite 300
Dallas, Texas 75251-1106
Attention: Debbie Stanley
Phone No. (972) 934-0077
Fax No. (972) 404 -8731
Notice of change of address shall be given by written notice in the manner
detailed in this Paragraph. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to constitute receipt of the notice, demand, request or
communication sent.
18. Brokers. Except for Newport National Corporation ("NNC"), Seller
-------
and Buyer represent to each other that no broker or other agent was involved in
the transaction contemplated by this Agreement. Seller will pay NNC a finders
fee pursuant to a separate agreement. If any other claims for broker's or
finders' fees or commissions for the consummation of this Agreement arise, then
Buyer hereby agrees to indemnify, protect, save harmless and
-30-
<PAGE>
defend Seller from and against such claims if they are based upon any statement,
representation or agreement made by Buyer, and Seller hereby agrees to
indemnify, protect, save harmless and defend Buyer from and against such claims
if they are based upon any statement, representation or agreement made by
Seller.
19. Legal 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 or agreements or any inaccuracies in any of the representations
and warranties on the part of the other party arising out of this Agreement,
then in that event, the prevailing party in such action or dispute, whether by
final judgment or out of court settlement, shall be entitled to have and recover
of and from the other party all costs and expenses of suit, including reasonable
attorneys' fees. Any judgment or order entered in any final judgment shall
contain a specific provision providing for the recovery of all costs and
expenses of suit, including reasonable attorneys' fees (collectively "Costs")
incurred in enforcing, perfecting and executing such judgment. For the purposes
of this paragraph, Costs shall include, without limitation, attorneys' fees,
costs and expenses incurred in (i) post-judgment motions, (ii) contempt
proceeding, (iii) garnishment, levy, and debtor and third party examination,
(iv) discovery, and (v) bankruptcy litigation.
20. Assignment. Seller may assign, transfer or convey its rights or
----------
obligations under this Agreement, provided that its assignee assumes in writing
the obligations of Seller hereunder including the obligation to distribute Units
to Seller. Buyer, without being relieved of liability hereunder and without
obtaining Seller's consent, shall have the right to assign its rights and
obligations hereunder to any affiliate of Buyer.
21. Miscellaneous.
-------------
(a) Survival of Covenants. The covenants, representations and
---------------------
warranties of both Buyer and Seller set forth in this Agreement shall
survive the recordation of the Grant Deed and the Close of Escrow.
(b) Required Actions of Buyer and Seller. Buyer and Seller agree
------------------------------------
to execute such instruments and documents and to diligently undertake such
actions as may be required in order to consummate the purchase and sale
herein contemplated and shall use their commercially reasonable efforts to
accomplish the Close of Escrow in accordance with the provisions hereof.
(c) Computation of Time Periods. If any date or time period
---------------------------
provided for in this Agreement is or ends on a Saturday, Sunday or federal,
state or legal holiday, then such date shall automatically be extended
through the next day which is not a Saturday, Sunday or federal, state or
legal holiday.
(d) Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute but one and the same instrument.
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<PAGE>
(e) Captions. Any captions to, or headings of, the paragraphs or
--------
subparagraphs of this Agreement are solely for the convenience of the
parties hereto, are not a part of this Agreement, and shall not be used for
the interpretation or determination of the validity of this Agreement or
any provision hereof.
(f) No Obligations to Third Parties. Except as otherwise
-------------------------------
expressly provided herein, the execution and delivery of this Agreement
shall not be deemed to confer any rights upon, nor obligate any of the
parties hereto, to any person or entity other than the parties hereto.
(g) Exhibits. The Exhibits attached hereto are hereby
--------
incorporated herein by this reference for all purposes.
(h) Amendment to this Agreement. The terms of this Agreement may
---------------------------
not be modified or amended except by an instrument in writing executed by
each of the parties hereto.
(i) Waiver. The waiver or failure to enforce any provision of
------
this Agreement shall not operate as a waiver of any future breach of any
such provision or any other provision hereof.
(j) Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of California.
(k) Fees and Other Expenses. Except as otherwise provided
-----------------------
herein, each of the parties hereto shall pay its own fees and expenses in
connection with this Agreement.
(l) Entire Agreement. This Agreement supersedes any prior
----------------
agreements, negotiations and communications, oral or written, and contains
the entire agreement between Buyer and Seller as to the subject matter
hereof. No subsequent agreement, representation, or promise made by either
party hereto, or by or to an employee, officer, agent or representative of
either party hereto shall be of any effect unless it is in writing and
executed by the party to be bound thereby.
(m) Successors and Assigns. Subject to the restrictions set
----------------------
forth in Paragraph 20 hereof, this Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the parties
hereto.
(n) Construction. The parties hereto hereby acknowledge and
------------
agree that (i) each party hereto is of equal bargaining strength, (ii) each
such party has actively participated in the drafting, preparation and
negotiation of this Agreement, (iii) each such party has consulted with
such party's own, independent counsel, and such other professional advisors
as such party has deemed appropriate, relative to any and all matters
contemplated under this Agreement, (iv) each such party and such party's
counsel and advisors have reviewed this Agreement, (v) each such party has
agreed to enter into this
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<PAGE>
Agreement following such review and the rendering of such advice, and (vi)
any rule of construction to the effect that ambiguities are to be resolved
against the drafting parties shall not apply in the interpretation of this
Agreement, or any portions hereof, or any amendments hereto.
(o) Joint and Several Liability. Each of the Sellers shall be
---------------------------
jointly and severally liable for the obligations of Seller under this
Agreement.
(p) Confidentiality. Buyer and Seller acknowledge that it is in
---------------
the best interest of Buyer and Seller to maintain the confidentiality of
the terms and provisions of this Agreement and the materials relating
hereto. Except as otherwise provided herein, neither party shall disclose
any of the terms or provisions of this Agreement to any third party other
than such party's contractors, agents, and prospective and actual investors
and lenders of either party, nor shall either party issue any press
releases or make any public statements relating to this Agreement until
after the Close of Escrow except (i) to the extent required by any
applicable statute, law, regulation, governmental authority or court order,
or (ii) in connection with any arbitration or litigation that may arise
between the parties in connection with the transaction contemplated by this
Agreement.
22. Seller's Activities. Seller acknowledges that Buyer has incurred
-------------------
costs and expenses in negotiating and entering into this Agreement. Accordingly,
during the Escrow period Seller shall not conduct negotiations or provide
information regarding the Property or enter into any agreement with respect to
the sale, exchange or transfer of the Property, with any party other than Buyer.
23. Seller's Exchange. At its option, Seller may structure its
-----------------
disposition of the Property as a tax-deferred exchange ("Exchange") pursuant to
Section 1031 of the Internal Revenue Code. If Seller elects to undertake an
Exchange, the following terms shall apply:
(a) Seller, at its option, may assign its rights under this
Agreement to an exchange accommodator ("Accommodator") selected by Seller,
and Seller may add the Accommodator as an additional party to the Escrow;
(b) Buyer agrees to cooperate with Seller in connection with the
Exchange, including the execution of documents (including, but not limited
to, escrow instructions and amendments to escrow instructions) therefor,
but Buyer shall have no obligation to take title to any property in
connection with the Exchange;
(c) Buyer shall in no way be obligated to pay any escrow costs,
brokerage commissions, title charges, survey costs, recording costs or
other charges incurred with respect to Seller's replacement property in the
Exchange;
(d) The Close of Escrow shall not be contingent or otherwise
subject to the consummation of the Exchange;
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<PAGE>
(e) Escrow shall timely close in accordance with the terms of
this Agreement notwithstanding any failure, for any reason, of the
consummation of the Exchange;
(f) Buyer shall have no responsibility or liability on account of
the Exchange to any third party involved in the Exchange;
(g) Buyer shall not be required to make any representations or
warranties nor assume any obligations, nor spend any out-of-pocket sum in
connection with the Exchange;
(h) All representation, warranties, covenants and indemnification
obligations of Seller to Buyer whether set forth in this Agreement or
otherwise existing at law or at equity, shall inure to the benefit of
Buyer, notwithstanding the Exchange;
(i) All representations, warranties, covenants and
indemnification obligations of Buyer to Seller whether set forth in this
Agreement or otherwise existing at law or at equity, shall inure to the
benefit of Seller, notwithstanding the Exchange;
(j) Seller shall indemnify, protect, defend and hold Buyer
harmless from and against any and all causes of action, claims, demands,
liabilities, costs and expenses, including actual attorneys' fees and
costs, incurred by Buyer in connection with any third party claims which
may arise as a result of or in connection with the Exchange.
Buyer makes absolutely no representations or warranties of any kind or nature
(express or implied) that tax-deferred exchange treatment is available to Seller
with respect to the Exchange, or that such a transaction will qualify in any
respect for such treatment, and Buyer shall incur no liability if the Exchange
fails to qualify for the tax-deferred treatment intended by Seller. If Buyer
defaults under the terms of this Agreement, then Buyer will be liable to Seller
for only those damages that would have occurred if Seller had not included the
Property in any such exchange. Specifically excluded from those damages for
which Buyer would be liable, but not by way of limitation, are any consequential
damages Seller would incur because of a loss of tax advantages, tax deferment or
other detrimental tax impacts Buyer's default would cause to Seller. Seller
hereby acknowledges and represents to Buyer that Seller is relying solely and
entirely upon the advice of Seller's own consultants with respect to any and all
aspects of any such exchange. Seller agrees to indemnify, protect, defend (with
counsel chosen by Buyer), and hold Buyer harmless from and against any and all
losses, damages, liabilities, expenses, causes of action, penalties, judgments
and costs including, without limitation, actual attorneys' fees and costs, which
result from the failure of any such exchange to qualify for tax-deferred
treatment. In no event whatsoever shall the obligations of Seller under this
Agreement be contingent upon this transaction being included as part of any such
tax-deferred exchange for Seller.
24. Plans and Reports. If, for any reason whatsoever, Buyer
-----------------
terminates this Agreement, Seller may elect to have Buyer assign to Seller all
of Buyer' rights, title and interests to feasibility studies, including audits
prepared by Coopers & Lybrand, Buyer's financial models, analyses, economic
reports, marketing studies, maps, surveys, environmental reports, civil and
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<PAGE>
soil engineering reports, site plans, plans and specifications relating to the
Improvements on all of the Properties and any and all other plans, reports and
other documents or work relating to any and all of the Properties including but
not limited to, Latitude 33's ALTA surveys of the Property, and the physical
inspection reports and environmental reports prepared by Building Analytics
prepared by or for Buyer, including all land use and other governmental
approvals and applications therefor ("Plans and Reports"), completed to Buyer's
reasonable satisfaction, with all costs and fees relating thereto fully paid
(i.e., at no cost or expense to Seller). Seller agrees that Buyer makes no
warranty to Seller as to the accuracy of such Plans and Reports, and Seller
agrees to indemnify Buyer for all costs, expenses, claims, liabilities, losses,
damages, arising out of or in connection with Seller, its agents or successors
using or relying on the Plans and Reports if Seller elects to have Buyer assign
them to Seller. Buyer agrees to deliver any and all such Plans and Reports, paid
for in full, to Seller within three (3) days after Buyer's receipt of Seller's
written notice regarding Seller's election to have Buyer deliver the same. Buyer
agrees to execute any reasonable assignment documents prepared by Seller within
five (5) days of Seller's request. In addition, Buyer agrees to return any and
all of the Documents and Materials to Seller within five (5) days of
termination.
25. Definitions. For the purposes of this Agreement, the following
-----------
definitions shall apply:
(a) "Company" means Prentiss Properties Trust, a Maryland real
estate investment trust.
(b) "OP General Partner" means Prentiss Properties I, Inc., a
Delaware corporation.
(c) "Operating Partnership" means Prentiss Properties Acquisition
Partners, L.P., a Delaware limited partnership.
(d) "Partnership Agreement" means the Second Amended and Restated
Agreement of Limited Partnership of Prentiss Properties Acquisition
Partners, L.P. as the same may be amended from time to time.
(e) "Unit Recipient" means a Seller or a partner or member of
Seller who will receive Units pursuant to Paragraph 3 hereof.
(f) "Units" means "Seller Units" in the Operating Partnership, as
defined and described in the Operating Partnership's Partnership Agreement.
(g) "Registration Rights Agreement" means the agreement in the
form of Exhibit "P" attached hereto and incorporated herein.
-----------
26. Cross Default. Seller and Buyer each acknowledge and agree that
-------------
each party hereto would not have entered into this Agreement without the other
party also entering into the Other Agreement (as defined in Paragraph 7(a)(ix)
hereof). Notwithstanding anything in this Agreement to the contrary, if either
party is in default under this Agreement (the "Defaulting
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<PAGE>
Party"), the Defaulting Party shall be deemed to be in default under the Other
Agreement. In such event, the non-defaulting party may elect, in its sole
discretion, to treat the Defaulting Party as being in default under the Other
Agreement and shall be entitled to exercise all of its rights and remedies under
the Other Agreement in the event of a default under the Other Agreement.
-36-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
"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/ David C. Robertson
---------------------------------
Name:
----------------------------
Title:
---------------------------
"SELLER" JACOB BROUWER AND JEANETTE
BROUWER, Co-Trustees of the Jacob Brouwer
and Jeanette Brouwer Declaration of Trust
dated May 11, 1977
By: /s/ Jacob Brouwer
---------------------------------------
Jacob Brouwer, Co-Trustee
By: /s/ Jeanette Brouwer
---------------------------------------
Jeanette Brouwer, Co-Trustee
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<PAGE>
JOINDER BY COMPANY AND OP GENERAL PARTNER
-----------------------------------------
The undersigned join in this agreement to evidence their consent to
the provisions hereof and to confirm the representatives, warranties and
certifications contained in this agreement which are expressly stated to be made
by them by their joinder.
PRENTISS PROPERTIES TRUST,
a Maryland Real Estate Investment Trust
By: /s/ David C. Robertson
---------------------------------------
Name:
-------------------------------
Title:
------------------------------
PRENTISS PROPERTIES I INC.,
a Delaware corporation
By: /s/ David C. Robertson
---------------------------------------
Name:
-------------------------------
Title:
------------------------------
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<PAGE>
Acceptance by Escrow Holder:
Chicago Title Insurance Company hereby acknowledges that it has
received a fully executed original or original executed counterparts of the
foregoing Agreement of Purchase and Sale and Joint Escrow Instructions and
agrees to act as Escrow Holder thereunder and to be bound by and strictly
perform the terms thereof as such terms apply to Escrow Holder.
Dated: February 5, 1998 Chicago Title Insurance Company
By: /s/ SHARON L. COOPER
----------------------------------
Its: Authorized Agent
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<PAGE>
EXHIBIT 10.2
PURCHASE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
-----------------------------
TO: Chicago Title Insurance Company Escrow No.:
7616 LBJ Freeway, Suite 300 ----------------------
Dallas, Texas 75251-1106 Escrow Officer: Sharon L. Cooper
Attention: Sharon L. Cooper Title Order No.:
-----------------
Title Officer:
-------------------
THIS PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ("Agreement") is
made and entered into as of this 30th day of January, 1998 (the "Effective
Date"), by and between JJB Land Company, LLC, a Delaware Limited Liability
Company ("Seller"), and PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership ("Buyer"), with respect to the following:
R E C I T A L S :
- - - - - - - -
A. Seller owns that certain real property (the "Land") located in the
City of Carlsbad, County of San Diego, State of California, more particularly
described on Exhibit "A" attached hereto and incorporated herein by this
-----------
reference, together with all buildings located thereon, commonly known as The
Plaza (the "Building").
B. Seller desires to sell and convey to Buyer the following:
1. The "Land", together with the Buildings and all associated
parking garages and areas, and all other improvements located on the Land
(collectively, the "Improvements");
------------
2. All of Seller's interest in all rights, privileges, easements
and appurtenances benefiting the Land and/or the Improvements, including,
without limitation, all mineral and water rights and all easements, rights-
of-way and other appurtenances used or connected with the beneficial use or
enjoyment of the Land and/or the Improvements (the Land, the Improvements
and all such rights, privileges, easements and appurtenances are sometimes
collectively hereinafter referred to as the "Real Property");
3. All of Seller's interest, as landlord, in and to all leases,
subleases, licenses and other occupancy agreements affecting any portion of
the Real Property (collectively, the "Leases");
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4. All personal property, equipment, supplies and fixtures
(collectively, the "Personal Property") owned by Seller, located at and
used in the operation of the Real Property and described on Exhibit "A-1"
-------------
attached hereto; and
5. All of Seller's interest in any intangible property
appurtenant to the foregoing, including, without limitation, contract
rights, warranties, guaranties, licenses, permits, entitlements, plans
(including, without limitation, plans or permits relating to seismic
retrofitting), governmental approvals and certificates of occupancy which
benefit the Real Property and/or the Personal Property (the "Intangible
Personal Property"). The Real Property, the Personal Property, Seller's
interest as landlord under the Leases, and the Intangible Personal Property
are collectively hereinafter referred to as the "Property."
C. Seller desires to sell the Property to Buyer, and Buyer desires to
purchase the Property from Seller upon the terms and conditions hereinafter set
forth.
A G R E E M E N T :
- - - - - - - - -
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree
that the terms and conditions of this Agreement and the instructions to Chicago
Title Company ("Escrow Holder") with regard to the escrow ("Escrow") created
pursuant hereto are as follows:
1. Purchase and Sale. Seller hereby agrees to sell the Property to
-----------------
Buyer, and Buyer hereby agrees to purchase the Property from Seller, upon the
terms and conditions herein set forth.
2. Purchase Price. Subject to adjustment as provided for in this
--------------
Agreement, the contribution price ("Purchase Price") for the Property shall be
Thirteen Million Eight Hundred Fifty Thousand and 00/00 Dollars
($13,850,000.00).
3. Payment of Purchase Price. The Purchase Price for the Property
-------------------------
shall be payable by Buyer as follows:
(a) Deposit. Two (2) business days after the Effective Date,
-------
Buyer shall deposit with Escrow Holder a sum equal to Eighty Thousand and
00/00 Dollars ($80,000.00) (the "Deposit"). Notwithstanding any other
provision of this Agreement to the contrary, the Deposit shall be
nonrefundable to Buyer in the event this Agreement and the Escrow are
canceled unless (i) Buyer terminates this Agreement pursuant to Paragraph
7(a)(vii), or 16 hereof or (ii) Buyer terminates this Agreement because of
a material breach by Seller of its obligations under this Agreement
including, but not limited to, Seller's failure to convey the Property to
Buyer as provided herein, in which event the Deposit and all accrued
interest thereon shall be refunded to Buyer upon the termination of this
Agreement.
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(b) Closing Funds. On the Close of Escrow, Buyer shall deposit
-------------
or cause to be deposited with Escrow Holder, in Immediately Available
Funds, the balance of the Purchase Price (i.e., the Purchase Price less the
----
amounts provided for in paragraph (a) above and elsewhere in this Agreement
plus or minus Buyer's share of closing costs, prorations and charges
payable pursuant to this Agreement.
4. Escrow.
------
(a) Opening of Escrow. For purposes of this Agreement, the
-----------------
Escrow shall be deemed opened on the date Escrow Holder shall have received
a fully executed original or originally executed counterparts of this
Agreement from both Buyer and Seller (such date being referred to
hereinafter as the "Opening of Escrow").
(b) Close of Escrow. For purposes of this Agreement, the "Close
---------------
of Escrow" shall be the date that the grant deed, the form of which is
attached hereto as Exhibit "B" (the "Grant Deed"), conveying the Real
-----------
Property to Buyer, are recorded in the Official Records of San Diego County
(the "Official Records"). Unless extended in writing by Buyer and Seller,
the Close of Escrow shall occur on or before February 5, 1998 (the "Closing
Date"). Seller shall deliver possession of the Property to Buyer upon the
Close of Escrow, subject only to the "Approved Condition of Title" (as
defined in Paragraph 5 below).
5. Condition of Title. It shall be a condition to the Close of
------------------
Escrow for Buyer's benefit (which Buyer may waive in its sole and absolute
discretion) that title to the Real Property be conveyed to Buyer by Seller by
the Grant Deed subject only to the following approved condition of title
("Approved Condition of Title"):
(a) a lien to secure payment of real estate taxes and
assessments, not delinquent;
(b) the lien of supplemental taxes assessed pursuant to Chapter
3.5 commencing with Section 75 of the California Revenue and Taxation Code
("Code") (but not any delinquent supplement taxes);
(c) matters affecting the Real Property created by or with the
written consent of Buyer; and
(d) exceptions which are disclosed by the Title Report described
in Paragraph 7(a)(i) hereof and which are approved or deemed approved by
Buyer in accordance with such Paragraph 7(a)(i).
Seller covenants that, during the term of the Escrow, it will not
intentionally cause title to the Real Property to differ from the Approved
Condition of Title described in this Paragraph 5, provided that Seller shall
have no obligation to remove any liens or other encumbrances affecting title to
the Property except for liens evidencing monetary encumbrances (other than
nondelinquent real property taxes and assessments which Seller shall cause to be
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removed as of the Close of Escrow). Any liens, encumbrances, encroachments,
easements, restrictions, conditions, covenants, rights, rights-of-way or other
matters affecting the Approved Condition of Title which may appear of record or
be revealed after the date of the Title Report described in Paragraph 7(a)(i)
below shall also be subject to Buyer's approval as a condition to the Close of
Escrow for Buyer's benefit.
6. Title Policy. It shall be a condition to the Close of Escrow
------------
for Buyer's benefit (which Buyer may waive in its sole and absolute discretion)
that the "Title Company" (as defined in Paragraph 7(a)(i) hereof) is prepared to
issue its ALTA (Form B 1970) Owner's Extended Policy of Title Insurance ("Title
Policy") in the amount of the Purchase Price, showing title to the Real Property
vested in Buyer (or its assignee), subject only to the Approved Condition of
Title and with such endorsements as are reasonably requested by Buyer. If the
Title Company does not commit to issue a Title Policy for each Property by the
Close of Escrow, Buyer may elect to terminate this Agreement.
7. Conditions to Close of Escrow.
-----------------------------
(a) Conditions to Buyer's Obligations. The Close of Escrow and
---------------------------------
Buyer's obligation to consummate the transaction contemplated by this
Agreement are subject to the satisfaction of the following conditions (or
Buyer's written waiver thereof, it being agreed that Buyer may waive in
writing any or all of such conditions) for Buyer's benefit on or prior to
the dates designated below for the satisfaction of such conditions.
Whether or not Buyer terminates this Agreement and the Escrow due to the
nonsatisfaction of any such conditions, Buyer shall not be entitled to the
return of the Deposit and all interest accrued thereon except in accordance
with Paragraph 3(a) above.
(i) Title. Buyer shall have the right to review and approve
-----
or disapprove, in its reasonable discretion, the legal description of
the Land and any matters of title as disclosed by the following
documents ("Title Documents") to be delivered to Buyer at Seller's
sole cost and expense: a CLTA title commitment issued by Chicago
Title Company (the "Title Company") with respect to the Property (the
"Title Report"), together with legible copies of the underlying
documents relating to the Schedule B exceptions set forth in such
title commitment. Buyer acknowledges that Seller has caused the Title
Company to deliver the Title Documents to Buyer prior to the Effective
Date. Buyer has obtained, at its sole cost and expense, a survey of
each Property. Buyer has had until the Effective Date to give Seller
and Escrow Holder written notice ("Buyer's Title Notice") of Buyer's
disapproval or conditional approval of the legal description or any
matters shown in the Title Documents or the survey. The failure of
Buyer to give Buyer's Title Notice on or before the Effective Date
shall be deemed to constitute Buyer's approval of the legal
description and all of the Title Documents.
If Buyer disapproves or conditionally approves any matters
of title shown in the Title Documents, Seller shall give Buyer written
notice (which shall
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<PAGE>
hereinafter be referred to as "Seller's Title Notice"), within three
(3) days of its receipt of Buyer's Title Notice, of those matters of
title disclosed on the Title Documents that have not been approved by
Buyer pursuant to this Paragraph 7(a)(i) which Seller covenants and
agrees to either eliminate from the Title Policy as exceptions to
title to the Property or to ameliorate to Buyer's satisfaction by the
Closing Date as a condition to the Close of Escrow for Buyer's
benefit. If Seller does not elect in Seller's Title Notice to
eliminate or ameliorate any disapproved or conditionally approved
matters as provided above, or if Buyer disapproves, in Buyer's
reasonable discretion, Seller's Title Notice, then Buyer shall have
the right, by a writing delivered to Seller and Escrow Holder within
two (2) days of Buyer's receipt of Seller's Title Notice, to (A) waive
its prior disapproval, in which event said disapproved matter(s) shall
be deemed approved, or (B) terminate this Agreement and the Escrow
created pursuant hereto, in which event the Deposit shall be
immediately delivered to Seller, and this Agreement, the Escrow and
the rights and obligations of the parties hereunder shall terminate.
If Seller fails to timely deliver Seller's Title Notice, then Seller
will be deemed to have elected not to eliminate or ameliorate to
Buyer's satisfaction any disapproved or conditionally approved matters
set forth in Buyer's Title Notice on or before the Close of Escrow.
Notwithstanding anything to the contrary contained in this
Agreement, Buyer hereby disapproves all liens evidencing monetary
encumbrances (other than liens for non-delinquent real property taxes
or assessments), and Seller agrees to cause all such liens to be
eliminated at Seller's sole cost and expense (including all prepayment
penalties and charges) prior to or concurrently with the Close of
Escrow. In the event any additional matters encumber the Property
which are set forth in any amendment or a supplement to the Title
Documents ("Supplemental Title Documents"), Buyer shall give Seller
and Escrow Holder written notice ("Buyer's Supplemental Title Notice")
of Buyer's disapproval or conditional approval of any matters shown on
the Supplemental Title Documents on or before the date which is three
(3) business days after Buyer's receipt of the Supplemental Title
Documents. Seller may elect to eliminate or ameliorate any disapproved
or conditionally approved matters relating to the Supplemental Title
Documents, and Buyer may elect to waive its prior disapproval of such
matters or terminate this Agreement in accordance with the time
periods and provisions set forth herein.
(ii) Review and Approval of Documents and Materials. Seller
----------------------------------------------
has made available to Buyer at the offices of Newport National
Corporation in Carlsbad, California, (A) the documents and materials
respecting the Property set forth on Exhibit "A-2" attached hereto, or
-------------
(B) such other documents in Seller's possession or control which
relate to the Property which Buyer shall reasonably request
(collectively, the "Documents and Materials"). Buyer may make copies
of the Documents and Materials, but Seller shall have no obligation to
provide Buyer with copies. Buyer shall have the right to review and
approve or disapprove, in its
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<PAGE>
sole and absolute discretion, any or all of the Documents and
Materials prior to the Effective Date. The failure of Buyer to give
Seller written notice of its approval of all of the Documents and
Materials on or before the Effective Date shall be deemed to
constitute Buyer's approval thereof.
(iii) Inspections and Studies. Prior to the Effective
-----------------------
Date, Buyer has had the right to approve or disapprove, in Buyer's
sole and absolute discretion, the results of any and all inspections,
investigations, tests and studies, including, without limitation,
investigations with regard to zoning, building codes and other
governmental regulations; architectural inspections; engineering
tests; soils, seismic and geologic reports; inspections of all or any
portion of the Improvements (including, without limitation,
structural, mechanical and electrical systems, roofs, pavement,
landscaping and public utilities); inspections, investigations, tests
and studies with respect to the environmental condition of the
Property; and any other physical inspections and/or investigations as
Buyer may elect to make or obtain. The failure of Buyer to give Seller
written disapproval of said results on or prior to the Effective Date
shall be deemed to constitute Buyer's approval thereof.
During the term of this Escrow, Buyer, its agents,
consultants, contractors and subcontractors shall have the right to
enter upon the Real Property (subject to the terms of the Leases) to
conduct environmental tests, inspect the Improvements, monitor and
inspect the construction activities at the Property, if any, and to
conduct or make any and all inspections and tests (including, without
limitation, environmental assessments of the Land, Buildings and
Improvements and structural assessments of the Buildings and
Improvements) as may be necessary or desirable in Buyer's discretion,
provided that such inspections and tests do not materially interfere
with the tenants' use or enjoyment of the Property. Prior to the
exercise of the right of entry, and at all times while Buyer or its
agents are present upon the Real Property, Buyer shall arrange for,
keep and maintain in full force and effect a policy of commercial
general liability insurance with a per occurrence limit of not less
than $1,000,000 and an aggregate single limit of at least $1,000,000.
Buyer hereby indemnifies, agrees to defend, and holds Seller and the
Property harmless from and against any and all costs, losses, damages,
liabilities, liens, claims and expenses arising out of or resulting
from such entry by Buyer or its agents, consultants, contractors and
subcontractors. Buyer agrees to return the Property to substantially
the same condition in which the Property was prior to Buyer's making
any inspection.
(iv) Representations, Warranties and Covenants of Seller.
---------------------------------------------------
Seller shall have duly performed each and every covenant and agreement
to be performed by Seller pursuant to this Agreement as of the Close
of Escrow, and Seller's representations, warranties and covenants set
forth in Paragraph 14(a) hereof shall be true and correct in all
material respects as of the Close of Escrow.
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<PAGE>
(v) No Material Changes. As of the Close of Escrow,
-------------------
there
shall have been no material adverse changes in the physical condition
of the Property from and after the Opening of Escrow.
(vi) Tenant Estoppel Certificates. No later than five (5)
----------------------------
business days prior to the Close of Escrow, Seller shall have obtained
and delivered to Buyer a tenant estoppel certificate disclosing no
material defaults or material deferred maintenance under the Leases
and otherwise consistent with the Rent Roll for each Property
("Estoppel Certificate"), substantially in the form attached hereto as
Exhibit "C", duly executed by seventy-five percent (75%) of all
-----------
tenants occupying a premises which exceeds 2,300 rentable square feet
and whose Lease does not expire prior to July 1, 1998 (as shown on the
Rent Roll) and in all events from tenants occupying no less than fifty
percent (50%) of the rentable square footage of all the Properties.
Each Estoppel Certificate shall be dated not earlier than sixty-five
(65) days prior to the Close of Escrow. Buyer's failure to approve or
disapprove the Estoppel Certificates (or any one of them), as
determined in Buyer's reasonable discretion, prior to the Close of
Escrow shall be deemed to constitute Buyer's disapproval thereof.
Seller shall use its commercially reasonable efforts to obtain the
Estoppel Certificates from the tenants and hereby grants Buyer the
right to communicate with any tenant under the Leases in connection
with the Estoppel Certificates. Such commercially reasonable efforts
shall not be construed to require Seller to threaten or initiate
litigation, grant any concession or pay any consideration.
(vii) Related Property. Concurrently with the execution of
----------------
this Agreement, Buyer and Seller have entered into a separate Purchase
Agreement and Joint Escrow Instructions for certain property commonly
known as Carlsbad Pacifica (the "Other Agreement"). The Other
Agreement provides for the consummation of the transaction
contemplated thereby through an escrow closing on the Closing Date.
Concurrently with the Close of Escrow, Buyer and Seller shall
consummate the close of the escrow conveying the property identified
in the Other Agreement pursuant to the terms of the Other Agreement.
(b) Conditions to Seller's Obligations. For the benefit of
----------------------------------
Seller, the Close of Escrow shall be conditioned upon all of the following
occurring prior to or concurrently with the Close of Escrow: (i) the
timely performance by Buyer of all of the obligations required by the terms
of this Agreement to be performed by Buyer (or Seller's waiver thereof, it
being agreed that Seller may waive such condition); and (ii) Buyer's
representations and warranties set forth in Paragraph 14(b) hereof shall be
true and correct in all material respects as of the Close of Escrow and
(iii) concurrently with the Close of Escrow, Buyer and Seller shall
consummate the close of the escrow conveying the property identified in the
Other Agreement pursuant to the terms of the Other Agreement.
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<PAGE>
8. Deposits by Seller. At least one (1) business day prior to the
------------------
Close of Escrow, Seller shall deposit or cause to be deposited with Escrow
Holder for each Property the following documents and instruments (except for the
items listed in subparagraphs (b), (d) and (i), which Seller shall cause to be
delivered to Buyer outside of the Escrow on or before the Close of Escrow):
(a) Grant Deed. The Grant Deed conveying the Real Property to
----------
Buyer, duly executed as appropriate by Seller, acknowledged and in
recordable form in the form attached hereto as Exhibit "B";
-----------
(b) Leases. The original Leases (and originals of all amend-
------
ments thereto) or correct copies of such documents to the extent originals
are not in Seller's possession;
(c) Tenant Lease Assignment. Tenant Lease Assignment
-----------------------
("Assignment of Leases"), duly executed by Seller, in the form attached
hereto as Exhibit "D", pursuant to which Seller shall assign to Buyer all
-----------
of Seller's right, title and interest in and to the Leases;
(d) Contracts. Any and all original management contracts,
---------
maintenance contracts, service contracts, reciprocal easement agreements,
if any, and any other contracts or agreements affecting or relating to the
leasing, ownership, operation, maintenance, construction or development of
the Property (collectively, the "Contracts") which may remain in effect
following the Close of Escrow and all warranties related thereto, if any,
which Buyer has approved and elected to assume in accordance with Paragraph
7(a) hereof, including, without limitation, any and all operating manuals
for all building systems and components to the extent the same are in
Seller's possession;
(e) Assignment of Contracts and Assumption Agreement.
------------------------------------------------
Assignment of Contracts and Assumption Agreement ("Assignment of
Contracts"), duly executed by Seller, in the form attached hereto as
Exhibit "E", pursuant to which Seller shall assign to Buyer all of Seller's
-----------
right, title and interest in, under and to the Contracts and Buyer has
approved and elected to assume any and all warranties relative thereto;
(f) Bill of Sale. Bill of Sale ("Bill of Sale"), duly executed
------------
by Seller, in the form attached hereto as Exhibit "F", conveying all of
-----------
Seller's right, title and interest in and to the Personal Property;
(g) Tenant Letters. A letter signed by Seller, addressed to the
--------------
tenants advising the tenants of the sale herein to Buyer and directing that
all future rent payments and other charges are to be forwarded to Buyer at
an address to be supplied by Buyer;
(h) Transferor's Certification of Non-Foreign Status. The
------------------------------------------------
Transferor's Certification of Non-Foreign Status in the form attached
hereto as Exhibit "G", duly executed by Seller ("FIRPTA Certificate");
-----------
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<PAGE>
(i) Permits, Entitlements and the Like. Any and all original
----------------------------------
building and development permits, certificates of occupancy, utility will
serve letters, use permits and other governmental approvals and/or
entitlements relative to the Property, to the extent the same are in
Seller's possession;
(j) General Assignment. General Assignment ("General
------------------
Assignment"), duly executed by Seller, in the form attached herein as
Exhibit "H", conveying all of Seller's right, title and interest in and to
-----------
the Intangible Personal Property; and
(k) UCC. A current certified UCC Report showing no financing
---
statements by Seller as debtor covering the Property. Seller shall deliver
copies of the same to Buyer no less than two (2) days prior to the Close of
Escrow.
(l) Other Instruments. Such other instruments and documents as
-----------------
are described in Paragraph 21(b) herein.
9. Deposits by Buyer. Buyer shall deposit or cause to be deposited
-----------------
with Escrow Holder the funds which are to be applied towards the payment of the
Purchase Price in the amounts and at the times designated in Paragraph 3 above
(as adjusted by the prorations and credits hereinafter provided). In addition,
Buyer shall deposit with Escrow Holder prior to the Close of Escrow the
following documents and instruments for each Property:
(a) Assignment of Lease. Counterpart of the Assignment of
-------------------
Leases, duly executed by Buyer;
(b) Assignment of Contracts. Counterpart of the Assignment of
-----------------------
Contracts, duly executed by Buyer;
(c) General Assignment. Counterpart of the General Assignment,
------------------
duly executed by Buyer; and
(d) Other Instruments. Such other instruments and documents as
-----------------
are described in Paragraph 21(b) herein.
10. Costs and Expenses.
------------------
(a) Title. The cost and expense of the CLTA standard portion of
-----
the Title Policy shall be paid by Seller, and Buyer shall pay for the
portion of the Title Policy premium attributable and/or payable for the
ALTA extended coverage portion of the Title Policy and all endorsements
thereto. The escrow fee of Escrow Holder shall be paid equally by Seller
and Buyer. Seller shall pay all documentary transfer taxes payable in
connection with the recordation of the Grant Deed. Buyer and Seller shall
pay, respectively, the Escrow Holder's customary charges to buyers and
sellers for document drafting, recording and miscellaneous charges. If, as
a result of no fault of Buyer or Seller, Escrow fails to close, Buyer and
Seller shall share equally all of Escrow Holder's
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<PAGE>
fees and charges. If Escrow fails to close due to the Fault of Buyer or
Seller, such party at fault shall pay all of Escrow Holder's fees and
charges, if any.
(b) Financing. Seller, at its sole cost and expense, shall pay
---------
for the costs associated with the releases of any deeds of trust,
mortgages and other financing encumbering the Property and any prepayment
premiums in connection with all the indebtedness secured by the same.
11. Prorations. The following prorations between Seller and Buyer
----------
shall be made by Escrow Holder computed as of the Close of Escrow:
(a) Taxes. Real and personal property taxes and assessments on
-----
the Property (including any supplemental taxes resulting from any new
construction in the Property) shall be prorated on the basis that Seller is
responsible for (i) all such taxes for the fiscal year of the applicable
taxing authorities occurring prior to the "Current Tax Period" (as
hereinafter defined) and (ii) that portion of such taxes for the Current
Tax Period determined on the basis of the number of days which have elapsed
from the first day of the Current Tax Period to the Close of Escrow,
inclusive, whether or not the same shall be payable prior to the Close of
Escrow. The phrase "Current Tax Period" refers to the fiscal year of the
applicable taxing authority in which the Close of Escrow occurs. In the
event that as of the Close of Escrow the actual tax bills for the year or
years in question are not available and the amount of taxes to be prorated
as aforesaid cannot be ascertained, then rates and assessed valuation of
the previous year, with known changes, shall be used, and when the actual
amount of taxes and assessments for the year or years in question shall be
determinable, then such taxes and assessments will be reprorated between
the parties to reflect the actual amount of such taxes and assessments.
Seller shall be responsible for, and shall indemnify, protect, defend (with
counsel chosen by Buyer) and hold harmless Buyer and the Real Property from
and against any and all supplemental taxes, to the extent that such taxes
relate to any period occurring prior to the Close of Escrow.
(b) Rentals. Rentals and other payments (including, without
-------
limitation, common area maintenance charges and payments for real property
taxes and insurance premiums) payable by tenants, licensees,
concessionaires and other occupants of the Property or any portion thereof
(collectively, the "Tenants") shall be prorated as of the Close of Escrow.
However, Buyer shall not be obligated to make any payment or give any
credit to Seller on account of, or by reason of, any rental or other
payments which are unpaid as of the Close of Escrow, but shall be required
merely to pay to Seller Seller's share of the same if, as and when received
by Buyer. After the Close of Escrow, all payments received by Buyer from
the Tenants shall be applied as follows: first, to the obligation or
obligations of the Tenants under the Leases accruing during the month in
which the Close of Escrow occurs; second, to any obligation or obligations
of the Tenants under the Leases attributable to any period occurring after
the Close of Escrow through the month in which payment is made and/or with
respect to obligations accruing after the Close of Escrow which are past
due on the date of receipt by Buyer; third, to all of
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<PAGE>
Buyer's costs of collection incurred with respect to the recovery of any
such payments; and then, to any amounts due Seller from such Tenants under
the Leases for periods prior to the Close of Escrow. Any rental payments
received by Seller following the Close of Escrow shall be paid over to
Buyer within five (5) business days of receipt and shall be applied in the
manner described above. Seller shall have no right whatsoever to initiate
any action against any Tenant for unlawful detainer or other right or
action to dispossess such Tenant of its leased premises with respect to any
duties or obligations of such Tenant under the Leases.
(c) Security Deposits. Buyer shall be credited and Seller shall
-----------------
be charged with any security deposits and advanced rentals in the nature of
security deposits made by the Tenants under the Leases, except to the
extent such amounts have previously been applied to obligations of the
Tenants under the Leases and have been shown as having been so applied on
the Rent Roll for each Property attached hereto as Exhibit "J". Buyer
-----------
shall also be credited and Seller shall be charged for all operating cost
pass-throughs paid by the Tenants and held by Seller in reserve for the
benefit of the Tenants for the repair and/or improvement of the Property.
Seller hereby agrees that it will not during the term of this Escrow or
upon the Close of Escrow apply any security deposits toward any delinquent
rental payments or any other amounts due under any Leases.
(d) Utilities. Gas, water, electricity, heat, fuel, sewer and
---------
other utilities and the operating expenses relating to the Real Property
shall be prorated as of the Close of Escrow to the extent such items are
not directly paid for by the Tenants under the Leases. If the parties are
unable to obtain final meter readings as of the Close of Escrow, such
expenses shall be estimated as of the Close of Escrow on the basis of the
prior operating history of the Real Property.
(e) Existing Lease Obligations. Buyer shall be credited and
--------------------------
Seller shall be charged with operating costs (i.e., maintenance charges,
taxes and insurance), including, but not limited to maintenance obligations
under the Leases, tenant improvement costs and allowances, all leasing
commissions for leases entered into prior to the Close of Escrow, and
specifically including the amount of Seven Thousand One Hundred Thirteen
and 00/00 Dollars ($7,113.00) for prepaid rent for the months of February
and March, 1998 under the Lease with John Allen (including all commissions
relating to any renewal or extension of a Lease or the leasing of
additional space exercised prior to the Close of Escrow) of the landlord
associated with the Leases existing prior to the Close of Escrow. Seller
shall have no obligation to Buyer for expenses relating to lease renewals
or expansions which are exercised by tenants under the Leases after the
Close of Escrow.
(f) Insurance. Buyer acknowledges that Buyer is not assuming
---------
any insurance policies currently maintained by Seller.
Prior to the Close of Escrow, the parties shall agree upon all of the prorations
to be made and submit a statement to Escrow Holder setting forth the same. In
the event that any prorations,
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<PAGE>
apportionments or computations made under this Paragraph 11 shall require final
adjustment (including any such adjustment based on any post-closing, annual
reconciliation of operating expenses performed under the Leases), then the
parties shall make the appropriate adjustments promptly when accurate
information becomes available and either party hereto shall be entitled to an
adjustment to correct the same. The parties agree that they will estimate the
prorations of rents based on rental payments received, and expenses incurred,
prior to the end of business on January 31, 1998, and that an appropriate
adjustment shall be promptly made following the Close of Escrow based on the
rental payments received, and expenses incurred, through the Close of Escrow.
Provided that all such information is available, all such adjustments shall be
made within one hundred and twenty (120) days after the Close of Escrow. Any
corrected adjustment or proration shall be paid in cash to the party entitled
thereto. The provisions of this Paragraph 11 shall survive the Close of Escrow
and the recordation of the Grant Deed.
12. Escrow Disbursements and Other Actions. Upon the Close of
--------------------------------------
Escrow, Escrow Holder shall promptly undertake all of the following in the
following manner:
(a) Prorations. Prorate all matters referenced in Paragraph 11
----------
based upon the statement delivered into Escrow signed by the parties;
(b) Recording. Cause the Grant Deeds and any other documents
---------
which the parties hereto may mutually direct, to be recorded in the
Official Records in the order directed by the parties;
(c) Funds. Disburse from funds deposited by Buyer with Escrow
-----
Holder towards payment of all items (including, without limitation, the net
amount of the cash portion of the Purchase Price) chargeable to the account
of Buyer pursuant hereto in payment of such costs and disburse the balance
of such funds, if any, to Buyer;
(d) Documents to Seller. Deliver to Seller counterparts of the
-------------------
Assignment of Lease, the Assignment of Contracts and the General Assignment
executed by Buyer;
(e) Documents to Buyer. Deliver to Buyer originals of the Bill
------------------
of Sale, and the FIRPTA Certificate, and counterparts of the Assignment of
Leases, the Assignment of Contracts and the General Assignment
appropriately executed by Seller, the approved form of letter described in
Paragraph 8(g) above addressed to the Tenants advising such Tenants of this
transaction and any other documents which are to be delivered to Buyer
hereunder; and
(f) Title Policy. Direct the Title Company to issue the Title
------------
Policy to Buyer.
13. Covenants of Seller. Seller hereby covenants with Buyer, as
-------------------
follows:
(a) New Contracts. From the Effective Date through the Close of
-------------
Escrow, Seller shall not, without the prior written consent of Buyer, which
Buyer may
-12-
<PAGE>
withhold in its reasonable discretion, enter into any maintenance contract,
service contract, listing agreement or any other contract affecting or
relating to the Property or any portion thereof which will survive the
Close of Escrow or will otherwise affect the use, operation or enjoyment of
the Property after the Close of Escrow. Buyer's failure to notify Seller
within one (1) business day after receipt of Seller's request for consent
to such a contract whether or not Buyer consents shall be deemed Buyer's
consent.
(b) Insurance. All insurance policies carried by Seller with
---------
respect to the Property and in effect as of the Effective Date shall remain
continuously in full force and effect from the Effective Date through the
day upon which the Close of Escrow occurs;
(c) Amendments. From the Effective Date through the Close of
----------
Escrow, Seller shall not amend, modify, alter or supplement any Lease or
any Contract which is approved by Buyer pursuant to Paragraphs 7(a) or
13(a) hereof, or enter into any new lease or contract or binding proposal
for a new lease or contract, without the prior written consent of Buyer
which may be withheld in Buyer's reasonable discretion. Buyer's failure to
notify Seller within three (3) business days after receipt of Seller's
request for consent to such a contract whether or not Buyer consents shall
be deemed Buyer's consent. Further, Seller shall terminate on or before
the Close of Escrow any Contract which Buyer disapproves in accordance with
Paragraph 7(a) hereof.
(d) Operation. From the date of this Agreement until the Close
---------
of Escrow, Seller shall operate, manage, maintain and repair the Property
consistent with Seller's existing business practices and subject to the
terms of Paragraph 11(e), shall satisfy and perform all obligations under
the Leases arising prior to the Close of Escrow.
(e) No New Financing. After the date of this Agreement, Seller
----------------
shall not alienate, lien, encumber or otherwise transfer all or any portion
of or interest in the Property (other than to Buyer at the Close of
Escrow). All Personal Property and Intangible Personal Property shall be
conveyed to Buyer by Seller at the Close of Escrow free from any liens,
encumbrances or security interests of any kind or nature;
(f) Records. For a period of one (1) year following the Close
-------
of Escrow, Seller shall, upon Buyer's request and upon reasonable prior
notice, make all of Seller's non-proprietary records with respect to the
Property, which have not otherwise been turned over to Buyer, available to
Buyer for inspection, copying and audit by Buyer's designated employees,
accountants or consultants; and
(g) Materially Changed Condition. Seller shall, promptly upon
----------------------------
becoming aware of any such occurrence, notify Buyer in writing of any
material change in any condition with respect to the Property or of any
event or circumstance which makes any representation or warranty of Seller
to Buyer under this Agreement untrue or misleading, and of any material
covenant of Seller under this Agreement which Seller will be incapable of
substantial performing (hereinafter, a "Materially Changed
-13-
<PAGE>
Condition"). If Seller notifies Buyer of any Materially Changed Condition,
Buyer shall have two (2) business days following receipt of written notice
from Seller of such condition to review the events and circumstances giving
rise to such condition. If Buyer disapproves the Materially Changed
Condition (as determined in Buyer's reasonable discretion), Buyer may
terminate this Agreement. If Buyer does not elect to terminate this
Agreement and elects to consummate its acquisition of the Property, it
shall be deemed to have (i) waived any claim regarding the Materially
Changed Condition, (ii) accepted title to and possession of the Property
subject to the Materially Changed Condition and (iii) amended this
Agreement to reflect the Materially Changed Condition.
(h) Accounting Information. The parties acknowledge that Seller
----------------------
has provided 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 and its affiliates from
which Buyer's representatives and independent accounting firm have
prepared, at Buyer's expense, audited financial statements for 1994, 1995
and 1996 in conformity with generally accepted accounting principles and to
enable them to prepare such statements, reports or disclosures as Buyer may
deem necessary or advisable. All such information is being provided to
Buyer without any representation or warranty by Seller except that such
information was used by Seller in the ordinary course of its business.
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
Seller's expense, to inquiries from Buyer's representatives and independent
accounting firm provided that any such responses do not require an
undertaking. If and to the extent Seller's financial statements pertaining
to the Property for any periods during the years 1994, 1995 or 1996 have
been audited, promptly after the execution of this Agreement, 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.
(i) Depreciation and Amortization. Seller shall deliver to
-----------------------------
Buyer on or before the date which is forty-five (45) days after the Close
of Escrow, at Seller's sole cost and expense, prepared as of the date of
this Agreement, depreciation and amortization schedules for the assets
constituting the Property, as kept for tax purposes, showing original
basis, accumulated depreciation or amortization, original useful life of
such assets, remaining useful life of such assets and the date(s) when such
assets were placed in service.
(j) No Marketing. Upon execution of this Agreement, Seller
------------
shall not market the Property for sale or enter into discussions or
---
negotiations with potential purchasers of the Property unless this
Agreement has been terminated pursuant to its terms.
-14-
<PAGE>
(k) Additional Cooperation. After the Close of Escrow, Seller
----------------------
shall cooperate with, and promptly respond to reasonable requests from,
Buyer's accountants, including, but not limited to, audit letters
requesting information relating to matters prior to the Close of Escrow,
including, but not limited to, pending or threatened litigation, claims and
assessments; provided, however information provided by Seller to Buyer's
accountants shall not constitute additional representations and warranties
of Seller.
14. Representations and Warranties.
------------------------------
(a) By Seller. In consideration of Buyer entering into this
---------
Agreement and as an inducement to Buyer to purchase the Property, Seller
makes the following representations and warranties (subject to the matters
disclosed on the Disclosure Statement attached hereto as Exhibit "K"
-----------
("Disclosure Statement")), each of which is material and is being relied
upon by Buyer (and the continued truth and accuracy of which shall
constitute a condition precedent to Buyer's obligations hereunder):
(i) Representations Regarding Seller's Authority.
--------------------------------------------
(A) Seller has the legal power, right and authority
to enter into this Agreement and the instruments referenced
herein, and to consummate the transaction contemplated hereby;
(B) All requisite action (corporate, trust,
partnership or otherwise) has been taken by Seller in connection
with the entering into this Agreement, the instruments referenced
herein, and the consummation of the transaction contemplated
hereby. No consent of any partner, shareholder, trustee, trustor,
beneficiary, creditor, investor, judicial or administrative body,
governmental authority or other party is required or, if
required, has been obtained; and
(C) The individuals executing this Agreement and the
instruments referenced herein on behalf of Seller have the legal
power, right, and actual authority to bind Seller to the terms
and conditions hereof and thereof.
(ii) Threatened Actions. To Seller's actual knowledge,
------------------
there are no pending, and to Seller's actual knowledge no threatened,
actions, suits, arbitrations, claims or proceedings, at law, in equity
or otherwise, that would adversely affect the Property or Seller's
ability to perform its obligations under this Agreement including, but
not limited to, judicial, municipal or administrative proceedings in
eminent domain, collection actions, claims relating to alleged
building code violations or health and safety violations, federal,
state or local agency actions regarding environmental matters, lease
disputes, claims relating to federal environmental protection agency
or zoning violations, or actions relating to personal injuries or
property damages alleged to have occurred at the Real
-15-
<PAGE>
Property or by reason of the condition or use of or construction on
the Real Property;
(iii) No Contracts. Other than the Leases, the Contracts
------------
and the matters disclosed in the Title Report, there are no leases,
surface or subsurface use agreements, tenancy arrangements, service
contracts, management agreements, or other agreements, instruments or
encumbrances created by Seller, or to Seller's actual knowledge
created by any other person or entity, which will be in force or
effect as of the Close of Escrow that grant to any person whomsoever
or any entity whatsoever any right, title, interest or benefit in or
to all or any part of the Property or any right relating to the
ownership, use, operation, management, maintenance, enjoyment or
repair of all or any part of the Property, and no person or entity has
any rights to acquire any of the foregoing by virtue of the acts of
Seller;
(iv) Compliance with Law. To Seller's actual knowledge,
-------------------
Seller has received no written notice and does not otherwise have
knowledge of any violation of any applicable laws, ordinances, rules,
requirements, regulations and building codes of any governmental
agency, body or subdivision thereof bearing on the Property;
(v) Documents True. To Seller's actual knowledge, all
--------------
documents delivered by Seller or made available to Buyer pursuant to
this Agreement are true, correct and complete copies of the versions
of such documents that are in Seller's possession;
(vi) Hazardous Wastes. Except as set forth on Exhibit "I"
----------------
or as disclosed in the phase I environmental assessments prepared on
behalf of Buyer, to Seller's actual knowledge: (1) the Property or
any portion thereof is not in violation of any Environmental Law (as
hereinafter defined); (2) neither Seller nor any third party has used,
generated, manufactured, stored or disposed of on, under or about the
Property or transported to or from the Property any Hazardous Material
in violation of any Environmental Law; and (3) there is no asbestos
(in any form) or asbestos containing materials in any of the
Improvements. For purposes of this subparagraph, the term "Hazardous
Material" shall mean any substance, chemical, waste product or other
material which is listed, defined, or otherwise identified as
"hazardous" or "toxic" or as a "hazardous material" under any federal,
state, local or administrative agency ordinance or law, including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq.;
-- ---
Resource Conservation and Recovery Act, 42 U.S.C. (S)(S) 6901 et seq.;
-- ---
Federal Water Pollution Control Act, 33 U.S.C. (S)(S) 1251 et seq.;
-- ---
Clean Air Act, 42 U.S.C. (S)(S) 7401 et seq.; Hazardous Materials
-- ---
Transportation Act, 49 U.S.C. (S)(S) 1471 et seq.; Toxic Substances
-- ---
Control Act, 15 U.S.C. (S)(S) 2601 et seq.; Refuse Act, 33 U.S.C.
-- ---
(S)(S) 407 et seq.; Emergency Planning and Community Right-To-Know
-- ---
Act, 42 U.S.C. (S)(S) 11001
-16-
<PAGE>
et seq.; Occupational Safety and Health Act, 29 U.S.C. (S)(S) 65 et
-- --- --
seq., to the extent it includes the emission of any Hazardous Material
---
and includes any Hazardous Material for which hazard communication
standards have been established; California Hazardous Substance
Account Act, California Health & Safety Code (S)(S) 25300 et seq.;
-- ---
California Asbestos Notification Laws, California Health & Safety Code
(S)(S) 25915 et seq.; California Hazardous Waste Control Law,
-- ---
California Health & Safety Code (S)(S) 22100 et seq.; California
-- ---
Hazardous Materials Release Response Plans and Inventory Act,
California Health & Safety Code (S)(S) 25500 et seq., California Clean
-- ---
Air Act, California Health & Safety Code (S)(S) 39608 et seq.;
-- ---
California Toxic Pits Cleanup Act, California Health & Safety Code
(S)(S) 25208 et seq.; California Pipeline Safety Act, California
-- ---
Government Code (S)(S) 51010 et seq.; California Toxic Air
-- ---
Contaminants Law, California Health & Safe Code (S)(S) 39650 et seq.;
-- ---
California Porter-Cologne Water Quality Act, California Water Code
(S)(S) 13000 et seq.; California Toxic Injection Well Control Act,
-- ---
California Health & Safety Code (S)(S) 25159.10 et seq.; California
-- ---
Underground Storage Tank Act, California Health & Safety Code (S)(S)
25280 et seq.; California Occupational Carcinogens Control Act,
-- ---
California Labor Code (S)(S) 9000 et seq.; or any regulation, order,
-- ---
rule or requirement adopted thereunder; as well as any formaldehyde,
urea, polychlorinated biphenyls, petroleum, petroleum product or by-
product, crude oil, natural gas, natural gas liquids, liquefied
natural gas or synthetic gas usable for fuel or mixture thereof,
radon, asbestos and "source," "special nuclear" and "by-product"
material as defined in the Atomic Energy Act of 1985, 42 U.S.C. (S)(S)
3011 et seq. For purposes of this Agreement, the term "Environmental
-- ---
Laws" shall mean the statutes and ordinances set forth above and any
and all other federal, state or local law, ordinance or regulation
relating to industrial hygiene or to environmental conditions or
hazardous conditions.
(vii) Taxes. Seller has no actual knowledge, and Seller
-----
has received no notice to the contrary, of any special assessments or
charges which have been levied against the Property or which will
result from work, activities or improvements done to or for the
benefit of the Property except as may be shown on the Title Report.
Seller has no knowledge, and Seller has received no notice to the
contrary, of any intended public improvements which will result in any
charge being levied against, or in the creation of any lien upon, the
Property or any portion thereof;
(viii) Roofs; Utilities; Building Systems. Except as
----------------------------------
expressly set forth in the reports prepared for Buyer by Building
Analytics which are further identified on Exhibit "K", Seller has no
------------
actual knowledge that the roofs of the Improvements or any of the
utility facilities or the heating, air conditioning, plumbing or
ventilating systems serving the Property are inadequate or are not in
good operating condition nor that any of the same have been inadequate
or failed to be in good operating condition within the two (2) years
immediately preceding the Opening of Escrow;
-17-
<PAGE>
(ix) Structural. Except as expressly set forth on the
----------
reports prepared for Buyer by Building Analytics which are further
identified on Exhibit "K", Seller has no actual knowledge of any
------------
material defects or deficiencies in the integrity or condition of the
structural components of the Real Property;
(x) Leases. The Rent Roll for each Property attached
------
hereto as Exhibit "J" is a copy of the rent roll used by Seller in the
-----------
ordinary course of its business. To Seller's actual knowledge, (1)
each Rent Roll is true, accurate and complete and (2) the copies of
the Leases delivered to Buyer are true, correct and complete copies of
the Leases. The Leases are in full force and effect, without default
by any party and without any right of setoff, except as expressly
provided by the terms of the Leases or as disclosed to Buyer in
writing in an Estoppel Certificate or otherwise. As of the Close of
Escrow, all work to be performed by Seller pursuant to the Leases
shall have been fully or substantially completed, paid for and
accepted by the respective Tenants and all tenant improvement
allowances and similar obligations have been paid in full except as
expressly set forth on Exhibit "U". Except as indicated on Exhibit
----------- -------
"U", to Seller's actual knowledge, no leasing or other commissions or
---
fees are due, or will become due, on an absolute or contingent basis
to any real estate brokers or agents or anyone else in connection with
the Real Property or any portion thereof and no such commissions or
fees will become due during the term of any existing Lease or with
respect to any renewal or extension thereof or the leasing of
additional space by any existing Tenant;
(xi) Specific Liabilities. To Seller's actual knowledge,
--------------------
as of the date of this Agreement, there are no payments, assessments,
fees or charges owing, and no outstanding liabilities, obligations or
commitments, in connection with any of the items identified on Exhibit
-------
"Q" attached hereto and incorporated herein by this reference. Seller
---
shall be deemed to have had actual knowledge of any such matter if a
reasonably prudent manager of commercial property would have had
knowledge of such matter regardless of whether Seller actually had
such knowledge.
(xii) Representations and Warranties at Closing. Subject
-----------------------------------------
to Seller's right to deliver its notice to Buyer of a Materially
Changed Condition as set forth in Paragraph 13(g) above, the
representations and warranties of Seller set forth in this Agreement
shall be deemed to be remade and restated by Seller in a certificate
on and as of the Close of Escrow.
As used herein, the term "Seller's actual knowledge" shall mean
the current actual knowledge of Jacob Brouwer, Jeanette Brouwer, Scott
Brusseau, Jeffry Brusseau, and Carolyn Perrigo, without any inquiry.
Seller represents and warrants that Jeffry Brusseau is the representative
of Seller with principal administrative and oversight responsibility for
the Property. The parties agree that (i) Seller's warranties and
representations contained in this Agreement and in any document executed by
Seller
-18-
<PAGE>
pursuant to this Agreement shall survive Buyer's purchase of the Property
only for a period of one (1) year after the Close of Escrow (the
"Limitation Period"), and (ii) Buyer shall provide actual written notice to
Seller of any alleged breach of such warranties or representations and
shall allow Seller thirty (30) days within which to cure such alleged
breach, or, if such alleged breach cannot reasonably be cured within thirty
(30) days, an additional reasonable time period, so long as such cure has
been commenced within such thirty (30) days and diligently pursued. In no
event is Seller obligated to cure any alleged breach. If Seller fails or
elects not to cure such alleged breach after actual written notice and
within such cure period, Buyer's sole and exclusive remedy shall be an
action at law for damages, but in no event lost profits or punitive
damages, which must be commenced, if at all, within the Limitation Period;
provided, however, that if within the Limitation Period Buyer gives Seller
written notice of such alleged breach and Seller commenced to cure and
thereafter terminates such cure effort, Buyer shall have an additional
sixty (60) days from the date that Seller notifies Buyer in writing that
Seller has terminated its cure effort within which to commence such an
action.
(b) By Buyer. In consideration of Seller entering into this
--------
Agreement and as an inducement to Seller to sell the Property, Buyer makes
the following representations and warranties, each of which is material and
is being relied upon by Seller (and the continued truth and accuracy of
which shall constitute a condition precedent to Seller's obligations
hereunder):
(i) Representations Regarding Buyer's Authority.
-------------------------------------------
(A) Buyer has the legal power, right and authority
to enter into this Agreement and the instruments referenced
herein, and to consummate the transaction contemplated hereby;
(B) All requisite action (corporate, trust,
partnership or otherwise) has been taken by Buyer in connection
with the entering into this Agreement, the instruments referenced
herein, and the consummation of the transaction contemplated
hereby. No consent of any partner, shareholder, trustee, trustor,
beneficiary, creditor, investor, judicial or administrative body,
governmental authority or other party is required; and
(C) The individuals executing this Agreement and the
instruments referenced herein on behalf of Buyer and the partners
of Buyer, if any, have the legal power, right, and actual
authority to bind Buyer to the terms and conditions hereof and
thereof.
(ii) AS-IS. Except as expressly set forth in the
-----
Agreement, Buyer is acquiring the Property "AS IS" without any
representation or warranty of Seller, express, implied or statutory,
as to the nature or condition of or title to the Property or its
fitness for Buyer's intended use of same. Except as specifically set
forth in this Agreement, Buyer represents and warrants that it (i) is
relying solely
-19-
<PAGE>
upon its own inspections, investigations and analyses of the Property,
the Title Documents, Documents and Materials, and the Plans and
Reports (collectively, the "Property Documents") in entering into this
Agreement and consummating the transaction set forth herein, and (ii)
is not relying in any way upon any representations, statements,
agreements, warranties, studies, reports, descriptions, guidelines or
other information or material furnished by Seller or its
representatives whether oral or written, express or implied, of any
nature whatsoever regarding any such matters, including, without
limitation, the condition, value, nature, or quality of the Property,
including any constriction on the Property and any materials or
systems incorporated into the Property and seismic conditions or
topography, any income to be derived from the Property, compliance of
the Property or its operation with any law, ordinance, rule,
regulation, or the status of any permits or approvals relating to or
required in connection with the Property, latent defects in the
Property or improvements thereto, safety or building violations or
deficiencies in the Property or improvements thereto, if any, or any
other matter of a similar or dissimilar nature which may be of
relevance to Buyer and relating in any way to the Property or the
market in which it is located. Except as specifically set forth in
this Agreement, Buyer agrees and warrants to Seller that neither
Seller, nor any broker, nor any agent or representative of either of
them, has made any representation to Buyer inconsistent with the
foregoing nor as to any Hazardous Materials Laws, the existence of
Hazardous Materials on the Property or the Property Documents. Except
as specifically set forth in this Agreement, Seller is not making any
representation or warranty of any nature concerning the accuracy or
completeness of Seller's files or concerning the authenticity, source,
accuracy or completeness of the Property Documents. As to certain of
the materials made available to Buyer from Seller's files, including,
without limitation, the Property Documents, Buyer specifically
acknowledges that they may have been prepared by third parties with
whom Seller has no privity and Buyer acknowledges and agrees that
except as specifically set forth herein, no warranty or
representation, express or implied, has been made, nor shall any be
deemed to have been made, to Buyer either by Seller or by any third
parties that prepared the materials in question. Buyer waives any
claim of any nature against Seller for any information, conclusion,
projection or other statement of any nature contained in any of the
Property Documents if the same should prove not to be true, complete
or accurate for any reason. Buyer, by its execution of this
Agreement, acknowledges and agrees that a material inducement to
Seller's decision to sell the Property to Buyer at the Purchase Price
provided in this Agreement was Buyer's agreement to conduct its own
feasibility studies and purchase the Property in an "as-is" condition.
Except as relating to any matter or relating to a breach of the
representations and warranties made by Seller, (A) no latent condition
affecting the Property in any way (including, without limitation, the
presence or effects of any Hazardous Materials or any violations of
applicable law on the Property), discovered after the Close of Escrow
(collectively, "Property Conditions"), shall give rise to any rights
of damages, specific performance, rescission or other claims by Buyer
against Seller, and
-20-
<PAGE>
(B) Buyer hereby assumes the risk of any and all liabilities, claims,
demands, suits, judgments, losses, damages, expenses (including,
without limitation, attorneys' fees and costs) and other obligations
arising out of the Property and hereby releases, waives, discharges,
covenants not to sue Seller based solely upon the same.
(c) Indemnification.
---------------
(i) Seller's Indemnification. Notwithstanding anything
------------------------
in this Agreement to the contrary, and without limiting either
parties' rights under this Agreement, Seller hereby agrees to
indemnify, defend, protect and hold harmless Buyer and Buyer's
Indemnitees (as defined in Paragraph 13(a)(xv) hereof) from and
against any and all costs, losses, liabilities, damages, lawsuits,
deficiencies, claims and expenses, including without limitation,
interest, penalties, reasonable attorneys' fees and all amounts paid
in investigation, defense or settlement of any of the foregoing
(collectively, "Damages"), incurred in connection with, arising out
-------
of, resulting from or incident to (i) any breach of any covenant or
warranty, or the inaccuracy of any representation, made by Seller in
or pursuant to this Agreement or (ii) any claim by any person or
entity initiated against Buyer arising from the actions or inaction's
of Seller prior to the Close of Escrow.
(ii) Buyer's Indemnification of Seller. Notwithstanding
---------------------------------
anything in this Agreement to the contrary, Buyer shall indemnify,
defend, protect and hold harmless, Seller from and against any and all
Damages incurred in connection with, arising out of, resulting from or
incident to any breach of any covenant or warranty, or the inaccuracy
of any representation, made by Buyer in or pursuant to this Agreement.
(iii) Initiation of Claims. If any party ("Indemnitee")
-------------------- ----------
hereto desires to make a claim against any other party ("Indemnitor")
----------
pursuant to the provisions of this Paragraph 14(c), then Indemnitee
shall notify Indemnitor of the claim, demand, action or right of
action which is the basis of such claim and the provision or
provisions of this Agreement alleged to have been breached or to be
inaccurate, and shall give the Indemnitor a reasonable opportunity to
participate in the defense thereof. Indemnitee shall provide
Indemnitor with all information available to it regarding such claim,
demand, action or right of action (whether or not it involves a third
party).
(iv) Survival of Indemnification Provisions. The
--------------------------------------
indemnification provision set forth in this Paragraph 14(c) shall
survive the Close of Escrow regardless of any investigation made by
any of the parties hereto; provided, however, that the parties'
respective indemnification obligations arising out of any breach of
any covenant or warranty, or the inaccuracy of any representation,
made by a party in or pursuant to this Agreement shall survive only
with respect to claims made against the Indemnitor within the period
that the
-21-
<PAGE>
underlying covenant, warranty or representation survives pursuant to
this Agreement.
15. Remedies
--------
(a) LIQUIDATED DAMAGES. SUBJECT TO BUYER'S RIGHT TO HAVE THE
------------------
DEPOSIT RETURNED AS SET FORTH IN PARAGRAPH 3(a) OF THIS AGREEMENT, IF THE
CLOSE OF ESCROW FAILS TO OCCUR FOR ANY REASON OTHER THAN SELLER'S DEFAULT
HEREUNDER, THEN ESCROW HOLDER MAY BE INSTRUCTED BY SELLER TO CANCEL THE
ESCROW AND SELLER SHALL THEREUPON BE RELEASED FROM ITS OBLIGATIONS
HEREUNDER. BUYER AND SELLER AGREE THAT BASED UPON THE CIRCUMSTANCES NOW
EXISTING, KNOWN AND UNKNOWN, IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT
TO ESTABLISH SELLER'S DAMAGE BY REASON OF THE FAILURE OF ESCROW TO CLOSE AS
AFORESAID. ACCORDINGLY, BUYER AND SELLER AGREE THAT IT WOULD BE REASONABLE
AT SUCH TIME TO AWARD SELLER "LIQUIDATED DAMAGES" IN THE AMOUNT OF THE
DEPOSIT AND OWNERSHIP AND POSSESSION OF THE PLANS AND REPORTS PURSUANT TO
PARAGRAPH 24 BELOW.
SELLER AND BUYER ACKNOWLEDGE AND AGREE THAT THE FOREGOING AMOUNT
AND THE PLANS AND REPORTS ARE REASONABLE AS LIQUIDATED DAMAGES AND SHALL BE
SELLER'S SOLE AND EXCLUSIVE REMEDY IN LIEU OF ANY OTHER RELIEF, RIGHT OR
REMEDY, AT LAW OR IN EQUITY, TO WHICH SELLER MIGHT OTHERWISE BE ENTITLED BY
REASON OF THE FAILURE OF ESCROW TO CLOSE UNDER THIS AGREEMENT.
ACCORDINGLY, SUBJECT TO PARAGRAPH 3(a) OF THIS AGREEMENT, IF THE CLOSE OF
ESCROW FAILS TO OCCUR FOR ANY REASON OTHER THAN SELLER'S DEFAULT, SELLER
MAY INSTRUCT THE ESCROW HOLDER TO CANCEL THE ESCROW, WHEREUPON SELLER SHALL
BE RELIEVED FROM ALL LIABILITY HEREUNDER, AND, PROMPTLY FOLLOWING ESCROW
HOLDER'S RECEIPT OF SUCH INSTRUCTION, ESCROW HOLDER SHALL (i) CANCEL THE
ESCROW, AND (ii) DISBURSE TO SELLER THE DEPOSIT. WITHOUT LIMITING THE
FOREGOING PROVISIONS OF THIS PARAGRAPH, SELLER WAIVES ANY AND ALL RIGHTS
WHICH SELLER OTHERWISE WOULD HAVE HAD UNDER CALIFORNIA CIVIL CODE SECTION
3389, OR OTHERWISE, TO SPECIFICALLY ENFORCE THIS AGREEMENT. NOTWITHSTANDING
ANYTHING TO THE CONTRARY SET FORTH HEREIN, IN NO EVENT SHALL BUYER'S
OBLIGATION TO INDEMNIFY SELLER PURSUANT TO PARAGRAPH 7(a)(iii) ABOVE BE
LIMITED IN ANY MANNER. SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND
UNDERSTAND THE PROVISIONS OF THIS PARAGRAPH 15 AND BY THEIR INITIALS
IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
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Seller's Initials Buyer's Initials
----------------- ----------------
(b) Buyer's Remedies. Buyer and Seller hereby agree that, if
----------------
the sale contemplated by this Agreement is not completed as herein provided
by reason of any default of Seller hereunder, then in addition to the
return of the Deposit and the right to retain the Plans and Reports, Buyer
shall be entitled to pursue any remedy available under this Agreement or
available at law or in equity, including, without limitation, the right to
specifically enforce this Agreement.
16. Damage or Condemnation Prior to Closing
---------------------------------------
(a) Material Damage. In the event that prior to the Close of
---------------
Escrow, the Real Property, or a material portion thereof, is destroyed or
materially damaged, Buyer shall have the right, exercisable by giving
written notice to Seller within five (5) days after receipt of written
notice of such damage or destruction, either (i) to terminate this
Agreement, in which event the Deposit and all interest accrued thereon
shall be immediately returned to Buyer, any other money or documents in
Escrow shall be returned to the party depositing the same, and neither
party hereto shall have any further rights or obligations hereunder, or
(ii) to accept the Real Property in its then condition and to proceed with
the consummation of the transaction contemplated by this Agreement with an
abatement or reduction in the Purchase Price equal to the amount of the
deductible for the applicable insurance coverage, and to receive an
assignment of all of Seller's rights to any insurance proceeds payable by
reason of such damage or destruction. If Buyer elects to proceed under
clause (ii) above, Seller shall not compromise, settle or adjust any claims
to such proceeds without Buyer's prior written consent, which consent may
be withheld in Buyer's sole and absolute discretion. For purposes of this
Paragraph 16 destruction or damage of a "material portion" of the Real
Property shall mean that the cost to correct such damage or destruction
(for all of the Real Property) may exceed One Million One Hundred Ninety
Thousand and 00/00 Dollars ($1.190,000.00), as determined by Buyer and
Seller in their reasonable discretion.
(b) Non-Material Damage. In the event that prior to the Close
-------------------
of Escrow there is any non-material damage to the Real Property, or any
part thereof, Buyer shall accept the Real Property in its then condition
with an abatement or reduction in the Purchase Price equal to the amount of
the deductible for the applicable insurance coverage and proceed with the
transaction contemplated by this Agreement, in which event Buyer shall be
entitled to an assignment of all of Seller's rights to any insurance
proceeds payable by reason of such damage or destruction. Seller shall not
compromise, settle or adjust any claims to such proceeds without Buyer's
prior written consent, which consent may be withheld in Buyer's sole and
absolute discretion.
(c) Material Condemnation. In the event that prior to the Close
---------------------
of Escrow, all or any material portion of the Real Property is subject to a
taking by a public
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<PAGE>
or governmental authority, Buyer shall have the right, exercisable by
giving written notice to Seller within two (2) days after receiving written
notice of such taking, either (i) to terminate this Agreement, in which
event the Deposit and all interest accrued thereon shall be immediately
returned to Buyer, any other money or documents in Escrow shall be returned
to the party depositing the same, and neither party hereto shall have any
further rights or obligations hereunder, or (ii) to accept the Real
Property in its then condition, without a reduction in the Purchase Price,
and to receive an assignment of all of Seller's rights to any condemnation
award or proceeds payable by reason of such taking. If Buyer elects to
proceed under clause (ii) above, Seller shall not compromise, settle or
adjust any claims to such award without Buyer's prior written consent,
which consent may be withheld in Buyer's sole and absolute discretion. For
the purposes of this Paragraph 16, a taking, as set forth herein, shall be
deemed to be of a "material portion" of the Real Property if the value of
the affected Real Property, or the decrease in the value of the remaining
Real Property (for all of the Real Property), is in excess of One Million
One Hundred Ninety Thousand and 00/00 Dollars ($1.190,000.00) as determined
by Buyer and Seller in their reasonable discretion.
(d) Non-Material Condemnation. In the event that prior to the
-------------------------
Close of Escrow, any non-material portion of the Real Property is subject
to a taking by any public or governmental authority, Buyer shall accept the
Real Property in its then condition and proceed with the consummation of
the transaction contemplated by this Agreement, in which event Buyer shall
be entitled to an assignment of all of Seller's rights to any award or
proceeds payable in connection with such taking. In the event of any such
non-material taking, Seller shall not compromise, settle or adjust any
claims to such award without Buyer's prior written consent, which consent
may be withheld in Buyer's sole and absolute discretion.
17. Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be either (a) personally
delivered, (b) sent by overnight mail for next business day delivery (Federal
Express or the like), (c) sent by registered or certified mail, postage prepaid,
return receipt requested, or (d) sent by fax; and shall be deemed received upon
the earlier of (i) if personally delivered on a business day, the date of
delivery to the address of the person to receive such notice, (ii) if sent by
overnight mail for next business day delivery, the business day following its
deposit in such overnight mail facility, (iii) if mailed, two (2) business days
after the date of posting by the United States post office, or (iv) if given by
fax on a business day, the next business day when sent with confirmation of
receipt. Any notice, request, demand, direction or other communication sent by
fax must be confirmed within forty-eight (48) hours by letter mailed or
delivered in accordance with the foregoing.
To Buyer: Prentiss Properties Acquisition Partners, L.P.
970 West 190th Street, Suite 550
Torrance, California 90502
Attention: Mr. David C. Robertson
Phone No. (310) 323-8300
Fax No. (310) 327-7714
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<PAGE>
With a copy to: Allen, Matkins, Leck, Gamble & Mallory LLP
18400 Von Karman, Fourth Floor
Irvine, California 92612-1597
Attention: Gary S. McKitterick, Esq.
Phone No. (714) 553-1313
Fax No. (714) 553-8354
To Seller: Jacob and Jeanette Brouwer, Trustees
1508 West Mission Road
Escondido, California 92029
Attention: Arnie Veldcamp
Phone No. (760) 745-0556
Fax No. (760) 740-9557
With a copy to: Newport National Corporation
5050 Avenida Encinas, Suite 350
Carlsbad, California 92008
Attention: Mr. Scott Brusseau
Phone No. (760) 438-4242
Fax No. (760) 438-0046
With a copy to: Luce, Forward, Hamilton & Scripps LLP
600 W. Broadway, 26th Floor
San Diego, California 92101
Attention: Robert D. Buell, Esq.
Phone No. (619) 699-2539
Fax No. (619) 232-8311
To Escrow Holder: Chicago Title Insurance Company
7616 LBJ Freeway, Suite 300
Dallas, Texas 75251-1106
Attention: Debbie Stanley
Phone No. (972) 934-0077
Fax No. (972) 404-8731
Notice of change of address shall be given by written notice in the manner
detailed in this Paragraph. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to constitute receipt of the notice, demand, request or
communication sent.
18. Brokers. Except for Newport National Corporation ("NNC"), Seller
-------
and Buyer represent to each other that no broker or other agent was involved in
the transaction contemplated by this Agreement. Seller will pay NNC a finders
fee pursuant to a separate agreement. If any other claims for broker's or
finders' fees or commissions for the consummation of this Agreement arise, then
Buyer hereby agrees to indemnify, protect, save harmless and
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<PAGE>
defend Seller from and against such claims if they are based upon any statement,
representation or agreement made by Buyer, and Seller hereby agrees to
indemnify, protect, save harmless and defend Buyer from and against such claims
if they are based upon any statement, representation or agreement made by
Seller.
19. Legal 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 or agreements or any inaccuracies in any of the representations
and warranties on the part of the other party arising out of this Agreement,
then in that event, the prevailing party in such action or dispute, whether by
final judgment or out of court settlement, shall be entitled to have and recover
of and from the other party all costs and expenses of suit, including reasonable
attorneys' fees. Any judgment or order entered in any final judgment shall
contain a specific provision providing for the recovery of all costs and
expenses of suit, including reasonable attorneys' fees (collectively "Costs")
incurred in enforcing, perfecting and executing such judgment. For the purposes
of this paragraph, Costs shall include, without limitation, attorneys' fees,
costs and expenses incurred in (i) post-judgment motions, (ii) contempt
proceeding, (iii) garnishment, levy, and debtor and third party examination,
(iv) discovery, and (v) bankruptcy litigation.
20. Assignment. Seller may assign, transfer or convey its rights or
----------
obligations under this Agreement, provided that its assignee assumes in writing
the obligations of Seller hereunder including the obligation to distribute to
Seller. Buyer, without being relieved of liability hereunder and without
obtaining Seller's consent, shall have the right to assign its rights and
obligations hereunder to any affiliate of Buyer.
21. Miscellaneous.
-------------
(a) Survival of Covenants. The covenants, representations and
---------------------
warranties of both Buyer and Seller set forth in this Agreement shall
survive the recordation of the Grant Deed and the Close of Escrow.
(b) Required Actions of Buyer and Seller. Buyer and Seller
------------------------------------
agree to execute such instruments and documents and to diligently undertake
such actions as may be required in order to consummate the purchase and
sale herein contemplated and shall use their commercially reasonable
efforts to accomplish the Close of Escrow in accordance with the provisions
hereof.
(c) Computation of Time Periods. If any date or time period
---------------------------
provided for in this Agreement is or ends on a Saturday, Sunday or federal,
state or legal holiday, then such date shall automatically be extended
through the next day which is not a Saturday, Sunday or federal, state or
legal holiday.
(d) Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute but one and the same instrument.
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<PAGE>
(e) Captions. Any captions to, or headings of, the paragraphs
--------
or subparagraphs of this Agreement are solely for the convenience of the
parties hereto, are not a part of this Agreement, and shall not be used for
the interpretation or determination of the validity of this Agreement or
any provision hereof.
(f) No Obligations to Third Parties. Except as otherwise
-------------------------------
expressly provided herein, the execution and delivery of this Agreement
shall not be deemed to confer any rights upon, nor obligate any of the
parties hereto, to any person or entity other than the parties hereto.
(g) Exhibits. The Exhibits attached hereto are hereby
--------
incorporated herein by this reference for all purposes.
(h) Amendment to this Agreement. The terms of this Agreement
---------------------------
may not be modified or amended except by an instrument in writing executed
by each of the parties hereto.
(i) Waiver. The waiver or failure to enforce any provision of
------
this Agreement shall not operate as a waiver of any future breach of any
such provision or any other provision hereof.
(j) Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of California.
(k) Fees and Other Expenses. Except as otherwise provided
-----------------------
herein, each of the parties hereto shall pay its own fees and expenses in
connection with this Agreement.
(l) Entire Agreement. This Agreement supersedes any prior
----------------
agreements, negotiations and communications, oral or written, and contains
the entire agreement between Buyer and Seller as to the subject matter
hereof. No subsequent agreement, representation, or promise made by either
party hereto, or by or to an employee, officer, agent or representative of
either party hereto shall be of any effect unless it is in writing and
executed by the party to be bound thereby.
(m) Successors and Assigns. Subject to the restrictions set
----------------------
forth in Paragraph 20 hereof, this Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the parties
hereto.
(n) Construction. The parties hereto hereby acknowledge and
------------
agree that (i) each party hereto is of equal bargaining strength, (ii) each
such party has actively participated in the drafting, preparation and
negotiation of this Agreement, (iii) each such party has consulted with
such party's own, independent counsel, and such other professional advisors
as such party has deemed appropriate, relative to any and all matters
contemplated under this Agreement, (iv) each such party and such party's
counsel and advisors have reviewed this Agreement, (v) each such party has
agreed to enter into this
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<PAGE>
Agreement following such review and the rendering of such advice, and (vi)
any rule of construction to the effect that ambiguities are to be resolved
against the drafting parties shall not apply in the interpretation of this
Agreement, or any portions hereof, or any amendments hereto.
(o) Joint and Several Liability. Each of the Sellers shall be
---------------------------
jointly and severally liable for the obligations of Seller under this
Agreement.
(p) Confidentiality. Buyer and Seller acknowledge that it is in
---------------
the best interest of Buyer and Seller to maintain the confidentiality of
the terms and provisions of this Agreement and the materials relating
hereto. Except as otherwise provided herein, neither party shall disclose
any of the terms or provisions of this Agreement to any third party other
than such party's contractors, agents, and prospective and actual investors
and lenders of either party, nor shall either party issue any press
releases or make any public statements relating to this Agreement until
after the Close of Escrow except (i) to the extent required by any
applicable statute, law, regulation, governmental authority or court order,
or (ii) in connection with any arbitration or litigation that may arise
between the parties in connection with the transaction contemplated by this
Agreement.
22. Seller's Activities. Seller acknowledges that Buyer has incurred
-------------------
costs and expenses in negotiating and entering into this Agreement. Accordingly,
during the Escrow period Seller shall not conduct negotiations or provide
information regarding the Property or enter into any agreement with respect to
the sale, exchange or transfer of the Property, with any party other than Buyer.
23. Seller's Exchange. At its option, Seller may structure its
-----------------
disposition of the Property as a tax-deferred exchange ("Exchange") pursuant to
Section 1031 of the Internal Revenue Code. If Seller elects to undertake an
Exchange, the following terms shall apply:
(a) Seller, at its option, may assign its rights under this
Agreement to an exchange accommodator ("Accommodator") selected by Seller,
and Seller may add the Accommodator as an additional party to the Escrow;
(b) Buyer agrees to cooperate with Seller in connection with the
Exchange, including the execution of documents (including, but not limited
to, escrow instructions and amendments to escrow instructions) therefor,
but Buyer shall have no obligation to take title to any property in
connection with the Exchange;
(c) Buyer shall in no way be obligated to pay any escrow costs,
brokerage commissions, title charges, survey costs, recording costs or
other charges incurred with respect to Seller's replacement property in the
Exchange;
(d) The Close of Escrow shall not be contingent or otherwise
subject to the consummation of the Exchange;
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<PAGE>
(e) Escrow shall timely close in accordance with the terms of
this Agreement notwithstanding any failure, for any reason, of the
consummation of the Exchange;
(f) Buyer shall have no responsibility or liability on account
of the Exchange to any third party involved in the Exchange;
(g) Buyer shall not be required to make any representations or
warranties nor assume any obligations, nor spend any out-of-pocket sum in
connection with the Exchange;
(h) All representation, warranties, covenants and
indemnification obligations of Seller to Buyer whether set forth in this
Agreement or otherwise existing at law or at equity, shall inure to the
benefit of Buyer, notwithstanding the Exchange;
(i) All representations, warranties, covenants and
indemnification obligations of Buyer to Seller whether set forth in this
Agreement or otherwise existing at law or at equity, shall inure to the
benefit of Seller, notwithstanding the Exchange;
(j) Seller shall indemnify, protect, defend and hold Buyer
harmless from and against any and all causes of action, claims, demands,
liabilities, costs and expenses, including actual attorneys' fees and
costs, incurred by Buyer in connection with any third party claims which
may arise as a result of or in connection with the Exchange.
Buyer makes absolutely no representations or warranties of any kind or nature
(express or implied) that tax-deferred exchange treatment is available to Seller
with respect to the Exchange, or that such a transaction will qualify in any
respect for such treatment, and Buyer shall incur no liability if the Exchange
fails to qualify for the tax-deferred treatment intended by Seller. If Buyer
defaults under the terms of this Agreement, then Buyer will be liable to Seller
for only those damages that would have occurred if Seller had not included the
Property in any such exchange. Specifically excluded from those damages for
which Buyer would be liable, but not by way of limitation, are any consequential
damages Seller would incur because of a loss of tax advantages, tax deferment or
other detrimental tax impacts Buyer's default would cause to Seller. Seller
hereby acknowledges and represents to Buyer that Seller is relying solely and
entirely upon the advice of Seller's own consultants with respect to any and all
aspects of any such exchange. Seller agrees to indemnify, protect, defend (with
counsel chosen by Buyer), and hold Buyer harmless from and against any and all
losses, damages, liabilities, expenses, causes of action, penalties, judgments
and costs including, without limitation, actual attorneys' fees and costs, which
result from the failure of any such exchange to qualify for tax-deferred
treatment. In no event whatsoever shall the obligations of Seller under this
Agreement be contingent upon this transaction being included as part of any such
tax-deferred exchange for Seller.
24. Plans and Reports. If, for any reason whatsoever, Buyer
-----------------
terminates this Agreement, Seller may elect to have Buyer assign to Seller all
of Buyer' rights, title and interests to feasibility studies, including audits
prepared by Coopers & Lybrand, Buyer's financial models, analyses, economic
reports, marketing studies, maps, surveys, environmental reports, civil and
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<PAGE>
soil engineering reports, site plans, plans and specifications relating to the
Improvements on all of the Properties and any and all other plans, reports and
other documents or work relating to any and all of the Properties including but
not limited to, Latitude 33's ALTA surveys of the Property, and the physical
inspection reports and environmental reports prepared by Building Analytics
prepared by or for Buyer, including all land use and other governmental
approvals and applications therefor ("Plans and Reports"), completed to Buyer's
reasonable satisfaction, with all costs and fees relating thereto fully paid
(i.e., at no cost or expense to Seller). Seller agrees that Buyer makes no
warranty to Seller as to the accuracy of such Plans and Reports, and Seller
agrees to indemnify Buyer for all costs, expenses, claims, liabilities, losses,
damages, arising out of or in connection with Seller, its agents or successors
using or relying on the Plans and Reports if Seller elects to have Buyer assign
them to Seller. Buyer agrees to deliver any and all such Plans and Reports, paid
for in full, to Seller within three (3) days after Buyer's receipt of Seller's
written notice regarding Seller's election to have Buyer deliver the same. Buyer
agrees to execute any reasonable assignment documents prepared by Seller within
five (5) days of Seller's request. In addition, Buyer agrees to return any and
all of the Documents and Materials to Seller within five (5) days of
termination.
25. Cross Default. Seller and Buyer each acknowledge and agree that
-------------
each party hereto would not have entered into this Agreement without the other
party also entering into the Other Agreement (as defined in Paragraph 7(a)(vii)
hereof). Notwithstanding anything in this Agreement to the contrary, if either
party is in default under this Agreement (the "Defaulting Party"), the
Defaulting Party shall be deemed to be in default under the Other Agreement. In
such event, the non-defaulting party may elect, in its sole discretion, to treat
the Defaulting Party as being in default under the Other Agreement and shall be
entitled to exercise all of its rights and remedies under the Other Agreement in
the event of a default under the Other Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
"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/ DAVID C. ROBERTSON
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
"SELLER" JJB Land Company, LLC, a Delaware Limited
Liability Company
By: /s/ JACOB BROUWER
------------------------------------------
Jacob Brouwer
Its:
----------------------------------------
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<PAGE>
Acceptance by Escrow Holder:
Chicago Title Insurance Company hereby acknowledges that it has
received a fully executed original or original executed counterparts of the
foregoing Agreement of Purchase and Sale and Joint Escrow Instructions and
agrees to act as Escrow Holder thereunder and to be bound by and strictly
perform the terms thereof as such terms apply to Escrow Holder.
Dated: February 5, 1998 Chicago Title Insurance Company
By: /s/ SHARON L. COOPER
---------------------------------------
Its: Authorized Agent
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<PAGE>
EXHIBIT 10.3
CONTRIBUTION/PURCHASE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
-----------------------------
TO: Chicago Title Insurance Company Escrow No.:______________________
7616 LBJ Freeway, Suite 300 Escrow Officer: Sharon L. Cooper
Dallas, Texas 75251-1106 Title Order No.:_________________
Attention: Sharon L. Cooper Title Officer:___________________
THIS CONTRIBUTION/PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS
("Agreement") is made and entered into as of this 30th day of January, 1998 (the
"Effective Date"), by and between the Sellers (hereinafter identified), and
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware limited partnership
("Buyer"), with respect to the following with limited joinders by Prentiss
Properties Trust, a Maryland real estate investment trust ("Company") and
Prentiss Properties I, Inc., a Delaware corporation ("OP General Partner"):
R E C I T A L S :
- - - - - - - -
A. The term "Sellers" or "Seller" used throughout this Agreement
means the following persons:
1. Donald P. Shiley and Darlene Vicki Shiley, as Co-Trustees of
the D-D Shiley Trust established March 15, 1984 by Donald P. Shiley and
Darlene Vicki Shiley, Trustors (the "D-D-Shiley Trust"), doing business as
Shadowridge Plaza, which owns that certain land located in the City of
Vista, County of San Diego, State of California, more particularly
described as "Property No. 1" on Exhibit "A" attached hereto and
-----------
incorporated herein by this reference, together with all buildings located
thereon commonly known as Shadowridge Plaza ("Building No. 1").
2. Donald Pearce Shiley, as Trustee of the Shiley Family Trust
(Trust B) dated July 14, 1972 (the "Shiley Family Trust"), Trustee, who
owns that certain land located in the City of Irvine, County of Orange,
State of California, more particularly described as "Property No. 2" on
Exhibit "A", together with all buildings located thereon commonly known as
-----------
Sorin BioMedical Buildings ("Building No. 2").
3. With respect to Shadowridge Business Center, a California
limited partnership, ("Shadowridge"), the D-D-Shiley Trust as to a 15%
general partner interest, F.M. (Bruce) Brusseau, Trustee of the F.M.
(Bruce) Brusseau Trust established September 17, 1985 ("Bruce") as to a
16.25% general partner interest, Newport National Corporation, a California
corporation ("NNC") as to a 2.5% general partner interest, Jeffry Brusseau
("Jeff") as to a 3.125% general partner interest, Scott Brusseau ("Scott")
<PAGE>
as to a 3.125% general partner interest, and Donald Pearce Shiley, as
Trustee of Shiley Family Trust as to a 60% limited partner interest.
4. With respect to Simpson Way Associates, a California limited
partnership, Bruce as to a 50% general partner interest, the Shiley Family
Trust as to a 33.333% limited partner interest, and Elliott Investment
Company, L.P., a California limited partnership ("Elliott") as to a 16.667%
limited partner interest.
5. With respect to Sycamore Investments, a California general
partnership, the Shiley Family Trust as to an 80% general partner interest,
the D-D-Shiley Trust as to a 10% general partner interest, and Bruce as to
a 10% general partner interest.
6. With respect to Copperwood Leasing Company, a California
limited partnership, the D-D-Shiley Trust as to a 10% general partner
interest, Bruce as to a 24% general partner interest, NNC as to a 1%
general partner interest, the D-D-Shiley Trust as to a 27.5% limited
partner interest, and the Shiley Family Trust as to a 37.5% limited partner
interest.
7. With respect to Palomar Venture, a California limited
partnership, Bruce as to a 4% general partner interest, NNC as to a 16%
general partner interest, the D-D-Shiley Trust as to a 10% general partner
interest, D. Kent Dahlke ("Dahlke") as to a 5% general partner interest,
and the Shiley Family Trust as to a 65% limited partner interest.
8. With respect to Rancho Bernardo Associates, a California
general partnership, NNC as to a 37.5% general partner interest, the D-D-
Shiley Trust as to a 50% general partner interest, Jeff as to a 6.25%
general partner interest, and Scott as to a 6.25% general partner interest.
9. With respect to Eastside Associates, a California limited
partnership, Bruce as to an 8.5% general partner interest, NNC as to a 23%
general partner interest, Jeff as to a 4.25% general partner interest,
Scott as to a 4.25% general partner interest, the D-D-Shiley Trust as to a
20% general partner interest, and the Shiley Family Trust as to a 40%
limited partner interest.
10. With respect to The Campus, LLC, a California limited
liability company, Bruce as to a 3.85% membership interest, NNC as to a
22.4% membership interest, the D-D-Shiley Trust as to a 65% membership
interest, Jeff as to a 4.2% membership interest, and Scott as to a 4.55%
membership interest.
11. As to La Terraza Associates, a California general
partnership, NNC as to a 40% general partner interest, and the Shiley
Family Trust as to a 60% general partner interest.
Each of the persons, trusts and other entities identified above in
Paragraphs 1 through 11 are referred to herein from time to time collectively as
"Seller." The entities identified above in Paragraphs 3 through 11 are referred
to herein from time to time collectively
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<PAGE>
as "Partnerships". The term "Seller" as used herein may from time to time mean
one owner with respect to the property that it owns. The Sellers identified as
D-D-Shiley Trust and the Shiley Family Trust in Paragraphs 1 and 2 above are
referred to collectively from time to time herein as the "Shiley Entities". The
Sellers identified in Paragraphs 3 through 11 as Bruce, Jeff, Scott, Dahlke,
Elliott and NNC are referred to collectively from time to time herein as the
"NNC Entities". The land identified herein as Properties No. 1 and 2 inclusive
are referred to collectively in this Agreement from time to time as the "Shiley
Land." The improvements identified as Buildings No. 1 and 2 inclusive are
referred to collectively in this Agreement from time to time as the "Shiley
Buildings." The Land owned by the Partnerships identified in Paragraphs 3
through 11, and described on Exhibit "A" attached hereto and incorporated
-----------
herein, is referred to collectively in this Agreement from time to time as the
"Partnership Land". The Improvements owned by the Partnerships identified in
Paragraphs 3 through 11 are referred to collectively in this Agreement from time
to time as the "Partnership Buildings".
B. The Shiley Entities desire to sell and convey to Buyer for cash
the following (collectively, the "Shiley Interests"):
1. The "Shiley Land", together with the Shiley Buildings and all
associated parking garages and areas, and all other improvements located on
the Shiley Land (collectively, the "Shiley Improvements");
2. All of the Shiley Entities' interest in all rights,
privileges, easements and appurtenances benefiting the Shiley Land and/or
the Shiley Improvements, including, without limitation, all mineral and
water rights and all easements, rights-of-way and other appurtenances used
or connected with the beneficial use or enjoyment of the Shiley Land and/or
the Shiley Improvements (the Shiley Land, the Shiley Improvements and all
such rights, privileges, easements and appurtenances are sometimes
collectively hereinafter referred to as the "Shiley Real Property");
3. All of the Shiley Entities' interest, as landlord, in and to
all leases, subleases, licenses and other occupancy agreements affecting
any portion of the Shiley Real Property (collectively, the "Shiley
Leases");
4. All personal property, equipment, supplies and fixtures
(collectively, the "Shiley Personal Property") owned by the Shiley
Entities, located at and used in the operation of the Shiley Real Property
and described on Exhibit "A-1" attached hereto; and
-------------
5. All of the Shiley Entities' interest in any intangible
property appurtenant to the foregoing, including, without limitation,
contract rights, warranties, guaranties, licenses, permits, entitlements,
plans (including, without limitation, plans or permits relating to seismic
retrofitting), governmental approvals and certificates of occupancy which
benefit the Shiley Real Property and/or the Shiley Personal Property (the
"Shiley Intangible Personal Property"). The Shiley Real Property, the
Shiley Personal Property, the Shiley Entities' interest as landlord under
the Shiley Leases, and
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<PAGE>
the Shiley Intangible Personal Property are collectively hereinafter
referred to as the "Shiley Property."
6. All of the Shiley Entities' rights, title and interest in and
to the Partnerships (the "Shiley Partnership Interests").
C. The NNC Entities desire to contribute all of their right, title
and interests in and to the Partnerships (collectively the "NNC Interests") to
Buyer in exchange for cash or Units, and Buyer desires to acquire the NNC
Interests in the Partnerships from the NNC Entities upon the terms and
conditions hereinafter set forth.
D. Upon completion of the acquisition of the Shiley Entities interests
in the Partnerships, and the NNC Entities interests in the Partnerships, Buyer
will own all of the outstanding Partnership interests and it is anticipated that
the Partnerships will concurrently therewith dissolve pursuant to state law. In
order to reflect the transfer of fee title from the Partnerships to Buyer upon
the dissolution of the Partnerships, the Partnerships shall deliver a grant deed
to Buyer conveying the Partnership Real Property (hereinafter defined) to Buyer.
Upon the dissolution of the Partnerships, the Buyer will receive the following:
1. The Partnership Land, together with the Partnership Buildings
and all associated parking garages and areas, and all other improvements
located on the Partnership Land (collectively, the "Partnership
Improvements");
2. All of the Partnerships' interest in all rights, privileges,
easements and appurtenances benefiting the Partnership Land and/or the
Improvements, including, without limitation, all mineral and water rights
and all easements, rights-of-way and other appurtenances used or connected
with the beneficial use or enjoyment of the Partnership Land and/or the
Partnership Improvements (the Partnership Land, the Partnership
Improvements and all such rights, privileges, easements and appurtenances
are sometimes collectively hereinafter referred to as the "Partnership Real
Property");
3. All of the Partnerships' interest, as landlord, in and to all
leases, subleases, licenses and other occupancy agreements affecting any
portion of the Partnership Real Property (collectively, the "Partnership
Leases");
4. All personal property, equipment, supplies and fixtures
(collectively, the "Partnership Personal Property") owned by the
Partnerships, located at and used in the operation of the Partnership Real
Property and described on Exhibit "A-1" attached hereto; and
-------------
5. All of the Partnerships' interest in any intangible property
appurtenant to the foregoing, including, without limitation, contract
rights, warranties, guaranties, licenses, permits, entitlements, plans
(including, without limitation, plans or permits relating to seismic
retrofitting), governmental approvals and certificates of occupancy which
benefit the Partnership Real Property and/or the Partnership Personal
Property (the "Partnership Intangible Personal Property"). The Partnership
Real Property,
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<PAGE>
the Partnership Personal Property, the Partnerships' interest as landlord
under the Partnership Leases, and the Partnership Intangible Personal
Property are collectively hereinafter referred to as the "Partnership
Property."
E. The Shiley Improvements and the Partnership Improvements are
collectively referred to as the "Improvements"; the Shiley Land and the
Partnership Land are collectively referred to as the "Land". The Partnership
Buildings and the Shiley Buildings are collectively referred to as the
"Buildings". The Shiley Real Property and the Partnership Real Property are
collectively referred to as the "Real Property". The Partnership Leases and the
Shiley Leases are collectively referred to as the "Leases". The Partnership
Personal Property and the Shiley Personal Property are collectively referred to
as the "Personal Property". The Shiley Intangible Personal Property and the
Partnership Intangible Personal Property are collectively referred to as the
"Intangible Personal Property". The Real Property, the Personal Property, the
Seller's Interests as Landlord under the Leases and the Intangible Personal
Property are collectively referred to herein as the "Property".
A G R E E M E N T :
- - - - - - - - -
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree
that the terms and conditions of this Agreement and the instructions to Chicago
Title Company ("Escrow Holder") with regard to the escrow ("Escrow") created
pursuant hereto are as follows:
1. Purchase and Sale of Shiley Interests and Contribution of NNC
-------------------------------------------------------------
Interests. The Shiley Entities hereby agree to sell the Shiley Interests to
- ---------
Buyer, and Buyer hereby agrees to purchase the Shiley Interests from the Shiley
Entities, upon the terms and conditions herein set forth. The NNC Entities
hereby agree to contribute the NNC Interests to Buyer and Buyer agrees to
acquire the NNC Interests for Units (as defined in Paragraph 24 hereof) and cash
from the Buyer upon the terms and conditions herein set forth.
2. Purchase Price.
--------------
(a) General. Subject to adjustment as provided for in this
-------
Agreement, the contribution price ("Purchase Price") (i) for all of the
Property (other than Property No. 2) and the Partnerships (other than the
Property No. 7 Partnership Interests) shall be Fifty-Two Million Five
Hundred Thousand and 00/00 Dollars ($52,500,000.00) (ii) for Property No. 2
is Nine Million One Hundred and Twenty-Five Thousand and 00/00 Dollars
($9,125,000.00) and (iii) for the Property No. 7 Partnership Interests is
Six Million Three Hundred Seventy-Five Thousand and 00/00 dollars
($6,375,000).
(b) Adjustments. Buyer acknowledges that the Property owned by
-----------
Palomar Venture ("Property No. 7") (commonly known as 5399 and 5999 Avenida
Encinas, Carlsbad, California), is subject to a right of purchase by a
third party ("Third Party") pursuant to a right of first refusal. No later
than five (5) business days prior to the
-5-
<PAGE>
Close of Escrow, Seller shall notify Buyer, in writing, whether Property
No. 7 is no longer subject to the right of first refusal and is intended to
be conveyed to Buyer upon the Close of Escrow.
(i) If Seller notifies Buyer in writing that Property No. 7
is intended to be conveyed to Buyer as of the Close of Escrow, Seller
shall be required to provide to Buyer, together with such written
notice, documents evidencing that the Third Party's right of first
refusal relating to Property No. 7 has fully terminated, including,
but not limited to, a written termination waiver and release, executed
by the Third Party in a form acceptable to Buyer in its sole and
absolute discretion, waiving and releasing all such purchase rights
(collectively, the "Waiver Evidence"). If Buyer provides Seller with
written notice that it is satisfied with the Waiver Evidence, then the
Shiley Partnership Interest and the NNC Interest relating to Property
No. 7 will be sold or contributed respectively, to Buyer upon the
Close of Escrow, and the Purchase Price shall include the Six Million
Three Hundred Seventy-Five Thousand and 00/100 Dollars ($6,375,000.00)
allocated to the Property No. 7 Partnership Interests. If Buyer is
not satisfied with the Waiver Evidence in its sole discretion, then
Buyer may at its sole option elect, prior to the Close of Escrow to
exclude the Shiley Partnership Interest and the NNC Interest relating
to Property No. 7 from the Close of Escrow, and the Close of Escrow
for only Property No. 7 shall be delayed as provided for below.
(ii) If Seller notifies Buyer that Property No. 7 will not
be conveyed to Buyer as of the Close of Escrow, or if Buyer does not
approve of the Waiver Evidence and elects to exclude the Property No.
7 in its sole discretion from the Close of Escrow, then in either
case, the Close of Escrow shall occur on all of the Property other
than Property No. 7, and Buyer shall have the rights and Seller shall
have the obligations set forth in subparagraph (iii) below.
(iii) In the event Property No. 7 is excluded from the
Close of Escrow pursuant to Section (i) or (ii) above, and Seller
subsequently delivers the Waiver Evidence together with an updated
Estoppel Certificate from Third Party for its lease affecting Property
No. 7 (both of which shall be satisfactory to Buyer in its sole and
absolute discretion) to Buyer on or before sixty (60) days after the
Close of Escrow for the other Property, then the Close of Escrow for
Property No. 7 shall occur ten (10) business days after Buyer's
approval of the Waiver Evidence provided that all conditions for
Buyer's benefit to the conveyance of such Property No. 7 are satisfied
including, but not limited to, Paragraphs 7(a)(i), 7(a)(iv), 7(a)(v),
7(a)(vii), and 7(a)(viii) of the Agreement. However, in the event
Buyer does not receive the Waiver Evidence in a form satisfactory to
Buyer in its sole discretion on or before sixty (60) days after the
Close of Escrow for the other Properties, then Buyer shall not have
any further obligations under this Agreement in connection with
Property No. 7.
-6-
<PAGE>
3. Payment of Purchase Price. The Purchase Price for the Property shall
-------------------------
be payable by Buyer as follows:
(a) Deposit. Two (2) business days after the Effective Date,
-------
Buyer shall deposit with Escrow Holder the sum of Two Hundred Fifty
Thousand and 00/00 Dollars ($250,000.00) (the "Deposit"). The Deposit
shall be nonrefundable to Buyer in the event this Agreement and the Escrow
are canceled unless (i) Buyer terminates this Agreement pursuant to
Paragraphs 7(a)(vii), 7(a)(viii) or 16 hereof or (ii) Buyer terminates this
Agreement because of a material breach by Seller of its obligations under
this Agreement including, but not limited to, Seller's failure to convey
the Property to Buyer as provided herein, and in which events the Deposit
and all accrued interest thereon shall be refunded to Buyer upon the
termination of this Agreement.
(b) Units.
-----
(i) An allocable portion of the Purchase Price for each
Partnership shall be paid to Seller by issuing Units or cash to the
NNC Entities based upon the portion of the Purchase Price for each
Partnership that is allocable to the interests of all of the partners
or members of the NNC Entities as set forth on Exhibit "L". The
-----------
number of Units to be issued shall be set forth on Exhibit "M",
------------
attached hereto and incorporated herein, which shall provide and does
provide for Seller receiving a 5% premium (in addition to and not as a
reduction of the balance of the Purchase Price) (i.e., the Units
----
issued shall have the value of one hundred five percent (105%) of the
amount of cash otherwise payable), with each Unit having a value equal
to Twenty-Seven and 59/00 Dollars ($27.59) which was determined as
being the average of the closing sales price of the common shares of
beneficial interest of the Company (the "Common Shares") on the New
York Stock Exchange for the 10 trading days from January 14, 1998
through January 28, 1998.
(ii) The portion of the Purchase Price allocable to the
Partnership interests of the Shiley Entities and the Shiley Property,
as set forth on Exhibit "L", shall be paid in cash.
-----------
(iii) To the extent that Seller receives all or a portion
of the Purchase Price in the form of Units, the parties agree that
Seller's receipt of Units as contemplated by this Agreement shall be
reported, for federal income tax purposes, as a contribution by Seller
of all or a portion of the Property, as applicable, to the capital of
the Operating Partnership (as defined in Paragraph 24 hereof) in
exchange for the Units pursuant to Section 721 of the Internal Revenue
Code of 1986, as amended.
(c) Closing Funds. On the Close of Escrow, Buyer shall deposit
-------------
or cause to be deposited with Escrow Holder, in Immediately Available
Funds, the balance of the cash portion of the Purchase Price (i.e., the
----
Purchase Price less then amounts provided for in paragraphs (a) and (b)
above and elsewhere in this Agreement) plus or
-7-
<PAGE>
minus Buyer's share of closing costs, prorations and charges payable
pursuant to this Agreement.
4. Escrow.
------
(a) Opening of Escrow. For purposes of this Agreement, the
-----------------
Escrow shall be deemed opened on the date Escrow Holder shall have received
a fully executed original or originally executed counterparts of this
Agreement from both Buyer and Seller (such date being referred to
hereinafter as the "Opening of Escrow").
(b) Close of Escrow. For purposes of this Agreement, subject to
---------------
the terms of Paragraph 2(b) and Paragraph 4(c) of this Agreement, the
"Close of Escrow" shall be the date that all of the grant deeds, the forms
of which are attached hereto as Exhibit "B" (collectively, the "Grant
-----------
Deeds"), conveying the Real Property, other than Property No. 2, to Buyer
(including the Grant Deeds from the Partnerships to Buyer), are recorded in
the Official Records of the county in which each respective parcel of Land
is located (the "Official Records"). Subject to the terms of Paragraph
2(b) of this Agreement, if all the Grant Deeds are not recorded on the same
day, then the Close of Escrow shall be on the day that the last Grand Deed
is so recorded. Unless extended in writing by Buyer and the Sellers, the
Close of Escrow shall occur on or before February 5, 1998 (the "Closing
Date"). The Sellers shall deliver possession of the Property to Buyer upon
the Close of Escrow, subject only to the "Approved Condition of Title" (as
defined in Paragraph 5 below).
(c) Close of Escrow for Property No. 2. For purposes of this
----------------------------------
Agreement, the "Close of Escrow" for Property No. 2 shall be the date that
the Grant Deed, the form of which is attached hereto as Exhibit "B",
-----------
conveying Property No. 2 to Buyer, is recorded in the Official Records in
the County in which Property No. 2 is located. Unless extended in writing
by Buyer and Sellers, the Close of Escrow for Property No. 2 shall occur on
the date which is sixty (60) days after the Close of Escrow for the other
Properties (the "Property No. 2 Closing Date"). The Seller shall deliver
possession of Property No. 2 to Buyer upon the Close of Escrow for Property
No. 2, subject only to the Approved Condition of Title.
(d) Other. All references in this Agreement to "Close of Escrow"
-----
shall include the Close of Escrow for each respective Property to the
extent that the same occur after the Close of Escrow for the other
Properties, whether or not expressly stated (for example, each of the
conditions set forth in Paragraph 7 of this Agreement, which are to be
satisfied as of the Close of Escrow, shall be satisfied as of the
respective Close of Escrow for each property including Property No. 2 and
Property No. 7).
5. Condition of Title. It shall be a condition to the Close of Escrow for
------------------
Buyer's benefit (which Buyer may waive in its sole and absolute discretion) that
title to the Real Property be conveyed to Buyer by the Shiley Entities and the
Partnerships by the Grant Deed subject only to the following approved condition
of title ("Approved Condition of Title"):
-8-
<PAGE>
(a) a lien to secure payment of real estate taxes and
assessments, not delinquent;
(b) the lien of supplemental taxes assessed pursuant to Chapter
3.5 commencing with Section 75 of the California Revenue and Taxation Code
("Code") (but not any delinquent supplemental taxes);
(c) matters affecting the Real Property created by or with the
written consent of Buyer; and
(d) exceptions which are disclosed by the Title Report described
in Paragraph 7(a)(i) hereof and which are approved or deemed approved by
Buyer in accordance with such Paragraph 7(a)(i).
The Sellers covenant that, during the term of the Escrow, they will
not intentionally cause title to the Real Property to differ from the Approved
Condition of Title described in this Paragraph 5, provided that the Sellers
shall have no obligation to remove any liens or other encumbrances affecting
title to the Property except for liens evidencing monetary encumbrances (other
than nondelinquent real property taxes and assessments) which the Sellers shall
cause to be removed as of the Close of Escrow. Any liens, encumbrances,
encroachments, easements, restrictions, conditions, covenants, rights, rights-
of-way or other matters affecting the Approved Condition of Title which may
appear of record or be revealed after the date of the Title Report described in
Paragraph 7(a)(i) below shall also be subject to Buyer's approval as a condition
to the Close of Escrow for Buyer's benefit.
6. Title Policy. It shall be a condition to the Close of Escrow for
------------
Buyer's benefit (which Buyer may waive in its sole and absolute discretion) that
the "Title Company" (as defined in Paragraph 7(a)(i) hereof) is prepared to
issue its ALTA (Form B 1970) Owner's Extended Policy of Title Insurance ("Title
Policy") in the amount of the Purchase Price, showing title to the Real Property
vested in Buyer (or its assignee provided that any assignment shall not affect
the issuing of Units provided for in this Agreement), subject only to the
Approved Condition of Title and with such endorsements as are reasonably
requested by Buyer. If the Title Company does not commit to issue a Title
Policy for each Property by the Close of Escrow, Buyer may elect to terminate
this Agreement.
7. Conditions to Close of Escrow.
-----------------------------
(a) Conditions to Buyer's Obligations. The Close of Escrow and
---------------------------------
Buyer's obligation to consummate the transaction contemplated by this
Agreement are subject to the satisfaction of the following conditions (or
Buyer's written waiver thereof, it being agreed that Buyer may waive in
writing any or all of such conditions) for Buyer's benefit on or prior to
the dates designated below for the satisfaction of such conditions.
Whether or not Buyer terminates this Agreement and the Escrow due to the
nonsatisfaction of any such conditions, Buyer shall not be entitled to the
return of the Deposit and all interest accrued thereon except in accordance
with the provisions of Paragraph 3(a) above.
-9-
<PAGE>
(i) Title. Buyer shall have the right to review and approve
-----
or disapprove, in its reasonable discretion, the legal description of
the Land and any matters of title as disclosed by the following
documents ("Title Documents") to be delivered to Buyer at the Seller's
sole cost and expense: a CLTA title commitment issued by Chicago
Title Company (the "Title Company") with respect to each Property (the
"Title Report"), together with legible copies of the underlying
documents relating to the Schedule B exceptions set forth in such
title commitment. Buyer acknowledges that Seller has caused the Title
Company to deliver the Title Documents to Buyer. Buyer has obtained,
at its sole cost and expense, a survey of each Property. Buyer has
had until the Effective Date to give the Sellers and Escrow Holder
written notice ("Buyer's Title Notice") of Buyer's disapproval or
conditional approval of the legal description or any matters shown in
the Title Documents or the survey. The failure of Buyer to give
Buyer's Title Notice on or before the Effective Date shall be deemed
to constitute Buyer's approval of the legal description and all of the
Title Documents.
If Buyer disapproves or conditionally approves any matters
of title shown in the Title Documents, the Sellers shall give Buyer
written notice (which shall hereinafter be referred to as "Seller's
Title Notice"), within three (3) days of its receipt of Buyer's Title
Notice, of those matters of title disclosed on the Title Documents
that have not been approved by Buyer pursuant to this Paragraph
7(a)(i) which of the Sellers covenants and agrees to either eliminate
from the Title Policy as exceptions to title to the Property or to
ameliorate to Buyer's satisfaction by the Closing Date as a condition
to the Close of Escrow for Buyer's benefit. If the Sellers do not
elect in Seller's Title Notice to eliminate or ameliorate any
disapproved or conditionally approved matters as provided above, or if
Buyer disapproves, in Buyer's sole discretion, Seller's Title Notice,
then Buyer shall have the right, by a writing delivered to the Sellers
and Escrow Holder within two (2) days of Buyer's receipt of Seller's
Title Notice, to (A) waive its prior disapproval, in which event said
disapproved matter(s) shall be deemed approved, or (B) terminate this
Agreement and the Escrow created pursuant hereto, in which event the
Deposit shall be immediately delivered to Seller, and this Agreement,
the Escrow and the rights and obligations of the parties hereunder
shall terminate. If the Sellers fail to timely deliver Seller's Title
Notice, then the Sellers will be deemed to have elected not to
eliminate or ameliorate to Buyer's satisfaction any disapproved or
conditionally approved matters set forth in Buyer's Title Notice on or
before the Close of Escrow.
Notwithstanding anything to the contrary contained in this
Agreement, Buyer hereby disapproves all liens evidencing monetary
encumbrances (other than liens for non-delinquent real property taxes or
assessments), and the Sellers agree to cause all such liens to be
eliminated at the Sellers' sole cost and expense (including all prepayment
penalties and charges) prior to or concurrently with the Close of Escrow.
In the event any additional matters encumber the Property which are set
forth in any amendment or a supplement to the Title Documents
("Supplemental Title Documents"), Buyer shall give the Sellers and Escrow
Holder written notice ("Buyer's Supplemental Title Notice") of
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<PAGE>
Buyer's disapproval or conditional approval of any matters shown on the
Supplemental Title Documents on or before the date which is three (3)
business days after Buyer's receipt of the Supplemental Title Documents.
The Sellers may elect to eliminate or ameliorate any disapproved or
conditionally approved matters relating to the Supplemental Title
Documents, and Buyer may elect to waive its prior disapproval of such
matters or terminate this Agreement in accordance with the time periods and
provisions set forth herein.
The parties acknowledge that the property located in Tucson,
Arizona owned by Eastside Associates is subject to a right of way easement
dated March 25, 1987 granted by Eastside Associates in favor of Tucson Gas
and Electric (the "Utility Company"), recorded April 1, 1987 in the
official records of Pima County, Arizona at Docket 8004, Page 868
(the "Easement"). Seller has discovered that the utility lines of the
Utility Company are not within the Easement, but are located in another
portion of the subject property. Notwithstanding anything in this
Agreement to the contrary, as an obligation which survives the Close of
Escrow, Seller, at its sole cost and expense, shall be responsible for
causing the Easement to be abandoned by the Utility Company in its present
location in a manner acceptable to Buyer in its reasonable discretion.
Such abandonment shall occur on or before ninety (90) days after the Close
of Escrow. Buyer agrees to cooperate with Seller in the granting of a new
easement, without any cost or expense to Buyer. In order to secure
Seller's performance of its obligation under this subparagraph to have the
Easement abandoned and a new easement recorded within ninety (90) days
after the Close of Escrow, the parties agree that Escrow Holder shall
retain as of the Close of Escrow, Twenty-Five Thousand Dollars ($25,000.00)
of the Purchase Price which shall be released in accordance with
instructions approved by Buyer, which instructions shall authorize the
disbursement of the $25,000.00 to Seller only in the event the abandonment
of the Easement is fully completed and a new easement, in a form reasonably
acceptable to Buyer, is recorded in a location approved by Buyer in its
reasonable discretion on or before ninety (90) days after the Close of
Escrow. Such escrow instructions shall also provide that if such matters
are not completed within such ninety (90) day period, the $25,000.00 shall
immediately be returned to Buyer without the need of further instructions.
(ii) Review and Approval of Documents and Materials. Seller
----------------------------------------------
has made available to Buyer at the offices of Newport National
Corporation in Carlsbad, California, (A) the documents, materials and
contracts respecting the Property set forth on Exhibit "A-2" attached
------- -----
hereto, or (B) such other documents in Seller's possession or control
which relate to the Property which Buyer shall reasonably request
(collectively, the "Documents and Materials"). Buyer may make copies
of the Documents and Materials, but Seller shall have no obligation to
provide Buyer with copies. Subject to the terms of Paragraph 25
hereof, Buyer shall have the right to review and approve or
disapprove, in its sole and absolute discretion, any or all of the
Documents and Materials for all of the Properties prior to the
Effective Date. The failure of Buyer to give Seller written notice of
its approval of all of the Documents and Materials on or before the
Effective Date shall be deemed to constitute Buyer's approval thereof.
-11-
<PAGE>
(iii) Inspections and Studies. Prior to the Effective
-----------------------
Date, Buyer has had the right to approve or disapprove, in Buyer's
sole and absolute discretion, the results of any and all inspections,
investigations, tests and studies, including, without limitation,
investigations with regard to zoning, building codes and other
governmental regulations; architectural inspections; engineering
tests; soils, seismic and geologic reports; inspections of all or any
portion of the Improvements (including, without limitation,
structural, mechanical and electrical systems, roofs, pavement,
landscaping and public utilities); inspections, investigations, tests
and studies with respect to the environmental condition of the
Property; and any other physical inspections and/or investigations as
Buyer may elect to make or obtain. Subject to the terms of Paragraph
25 hereof, the failure of Buyer to give Seller written disapproval of
said results on or prior to the Effective Date shall be deemed to
constitute Buyer's approval thereof.
During the term of this Escrow, Buyer, its agents, consultants,
contractors and subcontractors shall have the right to enter upon the Real
Property (subject to the terms of the Leases) to conduct environmental
tests, inspect the Improvements, monitor and inspect the construction
activities at the Property, if any, and to conduct or make any and all
inspections and tests (including, without limitation, environmental
assessments of the Land, Buildings and Improvements and structural
assessments of the Buildings and Improvements) as may be necessary or
desirable in Buyer's discretion, provided that such inspections and tests
do not materially interfere with the tenants' use or enjoyment of the
Property. Prior to the exercise of the right of entry, and at all times
while Buyer or its agents are present upon the Real Property, Buyer shall
arrange for, keep and maintain in full force and effect a policy of
commercial general liability insurance with a per occurrence limit of not
less than $1,000,000 and an aggregate single limit of at least $1,000,000.
Buyer hereby indemnifies, agrees to defend, and holds Seller and the
Property harmless from and against any and all costs, losses, damages,
liabilities, liens, claims and expenses arising out of or resulting from
such entry by Buyer or its agents, consultants, contractors and
subcontractors. Buyer agrees to return the Property to substantially the
same condition in which the Property was prior to Buyer's making any
inspection.
(iv) Representations, Warranties and Covenants of Seller.
---------------------------------------------------
Seller shall have duly performed each and every covenant and agreement
to be performed by Seller pursuant to this Agreement as of the Close
of Escrow, and Seller's representations, warranties and covenants set
forth in Paragraph 14(a) hereof shall be true and correct in all
material respects as of the Close of Escrow.
(v) No Material Changes. As of the Close of Escrow, there
-------------------
shall have been no material adverse changes in the physical condition
of the Property from and after the Opening of Escrow.
(vi) Tenant Estoppel Certificates. No later than five (5)
----------------------------
business days prior to the Close of Escrow, Seller shall have obtained
and delivered to Buyer a tenant estoppel certificate disclosing no
material defaults or
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<PAGE>
material deferred maintenance under the Leases and otherwise
consistent with the Rent Roll for each Property ("Estoppel
Certificate"), substantially in the form attached hereto as Exhibit
-------
"C", duly executed by seventy-five percent (75%) of all tenants
---
occupying a premises which exceeds 2,300 rentable square feet (as
shown on the Rent Roll) and in all events from tenants occupying no
less than fifty percent (50%) of the rentable square footage of all
the Properties. Each Estoppel Certificate shall be dated not earlier
than sixty-five (65) days prior to Close of Escrow. Buyer's failure to
approve or disapprove the Estoppel Certificates (or any one of them),
as determined in Buyer's reasonable discretion, prior to the Close of
Escrow shall be deemed to constitute Buyer's approval thereof. Seller
shall use its commercially reasonable efforts to obtain the Estoppel
Certificates from the tenants and hereby grants Buyer the right to
communicate with any tenant under the Leases in connection with the
Estoppel Certificates. Such commercially reasonable efforts shall not
be construed to require Seller to threaten or initiate litigation,
grant any concession or pay any consideration.
(vii) Unit Recipient Certifications. No later than one (1)
-----------------------------
business day prior to the Close of Escrow, each Unit Recipient shall
deliver to Buyer a written statement wherein it shall represent,
warrant and covenant as follows:
(A) Unit Recipient is an "accredited investor" within
the meaning of Rule 501(a) promulgated under the Securities Act
of 1933, as amended (the "Securities Act"). Unit Recipient
understands the risks of, and other considerations relating to,
the acquisition of the Units. Unit Recipient, by reason of its
business and financial experience, together with the business and
financial experience of those persons, if any, retained by it to
represent or advise it with respect to its investment in the
Units, (i) has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions
of this type, that it is capable of evaluating the merits and
risks of an investment in the Operating Partnership and of making
an informed investment decision, (ii) is capable of protecting
its own interests or has engaged representatives or advisors to
assist it in protecting its interests and (iii) is capable of
bearing the economic risk of such investment.
(B) The Units to be issued to each Unit Recipient will
be acquired by each Unit Recipient for its own account for
investment only and not with a view to, or with any intention of,
a distribution or resale thereof, in whole or in part, or the
grant of any participation therein until the Units are redeemed
for Common Stock of the Company following the lock-up period
specified in the Registration Rights Agreement in accordance with
the Partnership Agreement. Unit Recipient shall confirm that all
documents, records, and books pertaining to investment in the
Operating Partnership and requested by Unit Recipient have been
made available or delivered to Unit Recipient. Unit Recipient
has had an
-13-
<PAGE>
opportunity to ask questions of and receive answers from the
Operating Partnership, or from a person or persons acting on the
Operating Partnership's behalf, concerning the terms and
conditions of the transaction contemplated by this Agreement and
its acquisition of Units. Unit Recipient has relied upon, and is
making its investment decisions, solely upon such information as
has been provided to Unit Recipient by the Operating Partnership.
Unit Recipient was not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
(C) Unit Recipient acknowledges that (i) the Units to
be issued to Unit Recipient have not been registered under the
Securities Act or state securities laws by reason of a specific
exemption or exemptions from registration under the Securities
Act and applicable state securities laws, (ii) the Operating
Partnership's reliance on such exemptions is predicated in part
on the accuracy and completeness of the representations and
warranties of Unit Recipient referred to herein, and in the
Prospective Subscriber Questionnaires delivered to Buyer pursuant
to Paragraph 13(a)(ix) hereto, (iii) such Units, therefore,
cannot be resold unless registered under the Securities Act and
applicable state securities laws, or unless an exemption from
registration is available, (iv) there is no public market for
such Units, and (v) the Operating Partnership has no obligation
or intention to register such Units for resale under the
Securities Act or any state securities laws or to take any action
that would make available any exemption from the registration
requirements of such laws. Unit Recipient hereby acknowledges
that because of the restrictions on transfer or assignment of
such Units to be issued hereunder which are set forth in this
Agreement and in the Partnership Agreement, Unit Recipient may
have to bear the economic risk of the investment commitment
evidenced by this Agreement and any Units acquired hereby for an
indefinite period of time, and that, under the terms of the
Partnership Agreement of the Operating Partnership, as it will be
in effect on the Closing Date, Units will not be exchangeable at
the request of the holder thereof for cash or Common Shares of
the Company prior to the first (1st) anniversary of their
issuance.
(D) The address of Unit Recipient's residence or
principal place of business, as applicable, shall be set forth,
together with a statement as to whether such Unit Recipient has
any present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which
it present principal place of business or residence, as
applicable, is sited.
(viii) Offering of Units. There shall have been no change
-----------------
in any securities or related law, regulation or interpretation, nor
any change in any Unit Recipient's status as an "accredited investor"
under the Securities Act, that would render consummation of the
conveyance of any portion of the Property for Units as contemplated by
this Agreement a violation of any such laws, regulation or
-14-
<PAGE>
interpretations thereof. The representations and warranties of each
Unit Recipient contained in this Agreement and in the Prospective
Subscriber Questionnaire shall be true and correct as of the Close of
Escrow.
(b) Conditions to Seller's Obligations. For the benefit of
----------------------------------
Seller, the Close of Escrow shall be conditioned upon both of the following
occurring prior to or concurrently with the Close of Escrow: (i) the
timely performance by Buyer of all of the obligations required by the terms
of this Agreement to be performed by Buyer (or Seller's waiver thereof, it
being agreed that Seller may waive such condition); and (ii) Buyer's
representations and warranties set forth in Paragraph 14(b) hereof shall be
true and correct in all material respects as of the Close of Escrow.
8. Deposits by Seller. At least one (1) business day prior to the Close
------------------
of Escrow for the respective Properties, Seller shall deposit or cause to be
deposited with Escrow Holder for each Property the following documents and
instruments (except for the items listed in subparagraphs (b), (d) and (i),
which Seller shall cause to be delivered to Buyer outside of the Escrow on or
before the Close of Escrow):
(a) Grant Deed. The Grant Deed conveying the Shiley Real
----------
Property to Buyer, duly executed as appropriate by the Shiley Entities,
acknowledged and in recordable form in the form attached hereto as
Exhibit "B";
------- ---
(b) Leases. The original Leases (and originals of all amendments
------
thereto) or correct copies of such documents to the extent originals are
not in Seller's possession;
(c) Tenant Lease Assignment. Tenant Lease Assignment
-----------------------
("Assignment of Leases"), duly executed by the Shiley Entities, in the form
attached hereto as Exhibit "D", pursuant to which the Shiley Entities shall
-----------
assign to Buyer all of the Shiley Entities' right, title and interest in
and to the Shiley Leases;
(d) Contracts. Any and all original management contracts,
---------
maintenance contracts, service contracts, reciprocal easement agreements,
if any, and any other contracts or agreements affecting or relating to the
leasing, ownership, operation, maintenance, construction or development of
the Property (collectively, the "Contracts") which may remain in effect
following the Close of Escrow and all warranties related thereto, if any,
which Buyer has approved and elected to assume in accordance with Paragraph
7(a) hereof, including, without limitation, any and all operating manuals
for all building systems and components to the extent the same are in
Seller's possession;
(e) Assignment of Contracts and Assumption Agreement. Assignment
------------------------------------------------
of Contracts and Assumption Agreement ("Assignment of Contracts"), duly
executed by the Shiley Entities, in the form attached hereto as
Exhibit "E", pursuant to which the Shiley Entities shall assign to Buyer
-----------
all of Shiley Entities' right, title and interest in, under and to the
Contracts relating to the Shiley Properties, and Buyer has approved and
elected to assume any and all warranties relative thereto;
-15-
<PAGE>
(f) Bill of Sale. Bill of Sale ("Bill of Sale"), duly executed
------------
by the Shiley Entities, in the form attached hereto as Exhibit "F",
-----------
conveying all of the Shiley Entities' right, title and interest in and to
the Shiley Personal Property;
(g) Tenant Letters. A letter signed by Seller, addressed to the
--------------
tenants advising the tenants of the sale herein to Buyer and directing that
all future rent payments and other charges are to be forwarded to Buyer at
an address to be supplied by Buyer;
(h) Transferor's Certification of Non-Foreign Status. The
------------------------------------------------
Transferor's Certification of Non-Foreign Status in the form attached
hereto as Exhibit "G", duly executed by Seller ("FIRPTA Certificate");
-----------
(i) Permits, Entitlements and the Like. Any and all original
----------------------------------
building and development permits, certificates of occupancy, utility will
serve letters, use permits and other governmental approvals and/or
entitlements relative to the Property, to the extent the same are in
Seller's possession;
(j) General Assignment. General Assignment ("General
------------------
Assignment"), duly executed by the Shiley Entities, in the form attached
herein as Exhibit "H", conveying all of the Shiley Entities' right, title
-----------
and interest in and to the Shiley Intangible Personal Property; and
(k) UCC. A current certified UCC Report showing no financing
---
statements by Seller or Partnerships as debtor covering the Property
(Seller shall deliver copies of the same to Buyer no less than two (2) days
prior to the Close of Escrow).
(l) Limited Partner Signatures. A limited partner signature page
--------------------------
to the Partnership Agreement ("LP Signature Page") in substantially the
form attached hereto as Exhibit "N" executed by each Unit Recipient.
-----------
(m) Assignment of Partnership Interests. A Bill of Sale and
-----------------------------------
Assignment of Partnership or Limited Liability Company Interests
("Assignment of Interests") in the form attached hereto as Exhibit "Q",
-----------
duly executed by Seller.
(n) Partner's Guarantees. Partner's Guarantee, in the form
--------------------
attached hereto as "Exhibit "R" executed by the NNC Entities.
------------
(o) Evidence of Good Standing. Certificates of good standing (or
-------------------------
certificates of existence for each general partnership) issued by the
California Secretary of State, dated within thirty (30) days of the Close
of Escrow, for each of the Partnerships.
(p) Partnership Amendments. Documents necessary to convey, or
----------------------
reflect the conveyance of, the Shiley Partnership Interests and the NNC
Interests (as defined in Recital "C" of this Agreement), including, but not
limited to, a Form LP-2 for the limited partnerships, a Statement of
Amendment for the general partnerships, duly executed by the appropriate
parties, for each of the Partnerships (collectively, the "Partnership
Amendments").
-16-
<PAGE>
(q) Other Instruments. Such other instruments and documents as
-----------------
are described in Paragraph 21(b) herein.
(r) Opinion. If Dahlke is a Unit Recipient, an opinion of
-------
counsel for Dahlke in a form acceptable to Buyer and Buyer's counsel that
the offering and sale of Units to Unit Recipients is exempt from or
otherwise complies with all applicable state securities laws and
regulations including, but not limited to, applicable "roll-up" rules.
9. Deposits by Buyer. Buyer shall deposit or cause to be deposited with
-----------------
Escrow Holder the funds which are to be applied towards the payment of the
Purchase Price in the amounts and at the times designated in Paragraph 3 above
(as adjusted by the prorations and credits hereinafter provided). In addition,
Buyer shall deposit with Escrow Holder prior to the Close of Escrow the
following documents and instruments for each Property:
(a) Assignment of Lease. Counterpart of the Assignment of
-------------------
Leases, duly executed by Buyer;
(b) Assignment of Contracts. Counterpart of the Assignment of
-----------------------
Contracts, duly executed by Buyer;
(c) General Assignment. Counterpart of the General Assignment,
------------------
duly executed by Buyer; and
(d) Other Instruments. Such other instruments and documents as
-----------------
are described in Paragraph 21(b) herein.
(e) Dissolution of Partnerships. Documents reflecting the
---------------------------
dissolution of each of the Partnerships to be filed with the State of
California, or recorded in the Official Records, as appropriate.
(f) Partnership Grant Deeds. Grant Deeds from the Partnerships
-----------------------
to Buyer (collectively, the "Partnership Deeds").
10. Costs and Expenses.
------------------
(a) Title. The cost and expense of the CLTA standard portion of
-----
the Title Policy for all of the Properties shall be paid by the Sellers,
and Buyer shall pay for the portion of the Title Policy premium
attributable and/or payable for the ALTA extended coverage portion of the
Title Policy and all endorsements thereto. The escrow fee of Escrow Holder
shall be paid equally by the Sellers and Buyer. The Sellers shall pay all
transfer taxes payable in connection with the recordation of the Grant Deed
from the Shiley Entities to Buyer and from each of the Partnerships to
Buyer and arising in connection with the transfer of the NNC Interests and
--------------------------------------------------------------------
the Shiley Partnership Interests to Buyer. Buyer and the Sellers shall
-----------------------------------------
pay, respectively, the Escrow Holder's customary charges to buyers and
sellers for document drafting, recording and miscellaneous charges. If, as
a result of no fault of Buyer or the Sellers, Escrow fails to close, Buyer
and the Sellers shall share equally all of Escrow Holder's fees and
charges.
-17-
<PAGE>
If Escrow fails to close due to the Fault of Buyer or Sellers, such party
at fault shall pay all of Escrow Holder's fees and charges, if any.
(b) Financing. The Sellers, at its sole cost and expense, shall
---------
pay for the costs associated with the releases of any deeds of trust,
mortgages and other financing encumbering the Property and any prepayment
premiums in connection with all the indebtedness secured by the same.
(c) Other. Seller shall pay for, and reimburse Buyer if paid by
-----
Buyer, all fees and expenses paid to the State of California or state
securities administrators in connection with perfecting any exemption from
applicable state securities laws and regulations.
(d) Partnerships. Seller shall pay for the cost of filing,
------------
recording, publishing notice and all other costs, expenses and fees
incurred in connection with the filing of the Partnership Amendments and
the dissolution of the Partnerships.
11. Prorations. The following prorations between Seller and Buyer shall
----------
be made by Escrow Holder computed as of the Close of Escrow:
(a) Taxes. Real and personal property taxes and assessments on
-----
the Property (including any supplemental taxes resulting from any new
construction in the Property) shall be prorated on the basis that Seller is
responsible for (i) all such taxes for the fiscal year of the applicable
taxing authorities occurring prior to the "Current Tax Period" (as
hereinafter defined) and (ii) that portion of such taxes for the Current
Tax Period determined on the basis of the number of days which have elapsed
from the first day of the Current Tax Period to the Close of Escrow,
inclusive, whether or not the same shall be payable prior to the Close of
Escrow. The phrase "Current Tax Period" refers to the fiscal year of the
applicable taxing authority in which the Close of Escrow occurs. In the
event that as of the Close of Escrow the actual tax bills for the year or
years in question are not available and the amount of taxes to be prorated
as aforesaid cannot be ascertained, then rates and assessed valuation of
the previous year, with known changes, shall be used, and when the actual
amount of taxes and assessments for the year or years in question shall be
determinable, then such taxes and assessments will be reprorated between
the parties to reflect the actual amount of such taxes and assessments.
Seller shall be responsible for, and shall indemnify, protect, defend (with
counsel chosen by Buyer) and hold harmless Buyer, the Partnerships and the
Real Property from and against any and all supplemental taxes, to the
extent that such taxes relate to any period occurring prior to the Close of
Escrow.
(b) Rentals. Rentals and other payments (including, without
-------
limitation, common area maintenance charges and payments for real property
taxes and insurance premiums) payable by tenants, licensees,
concessionaires and other occupants of the Property or any portion thereof
(collectively, the "Tenants") shall be prorated as of the Close of Escrow.
However, Buyer shall not be obligated to make any payment or give any
credit to Seller on account of, or by reason of, any rental or other
payments which are
-18-
<PAGE>
unpaid as of the Close of Escrow, but shall be required merely to pay to
Seller, Seller's share of the same if, as and when received by Buyer. After
the Close of Escrow, all payments received by Buyer from the Tenants shall
be applied as follows: first, to the obligation or obligations of the
Tenants under the Leases accruing during the month in which the Close of
Escrow occurs; second, to any obligation or obligations of the Tenants
under the Leases attributable to any period occurring after the Close of
Escrow through the month in which payment is made and/or with respect to
obligations accruing after the Close of Escrow which are past due on the
date of receipt by Buyer; third, to all of Buyer's costs of collection
incurred with respect to the recovery of any such payments; and then, to
any amounts due Seller from such Tenants under the Leases for periods prior
to the Close of Escrow. Any rental payments received by Seller following
the Close of Escrow shall be paid over to Buyer within five (5) business
days of receipt and shall be applied in the manner described above. Seller
shall have no right whatsoever to initiate any action against any Tenant
for unlawful detainer or other right or action to dispossess such Tenant of
its leased premises with respect to any duties or obligations of such
Tenant under the Leases. Prior to closing Seller will distribute any funds
held in bank accounts to its respective partners and members in accordance
with their respective interests and will provide for the assumption by
Seller of all short term liabilities of the Partnerships.
(c) Security Deposits. Buyer shall be credited and Seller shall
-----------------
be charged with any security deposits and advanced rentals in the nature of
security deposits made by the Tenants under the Leases, except to the
extent such amounts have previously been applied to obligations of the
Tenants under the Leases and have been shown as having been so applied on
the Rent Roll for each Property attached hereto as Exhibit "J". Buyer
------- ---
shall also be credited and Seller shall be charged for all operating cost
pass-throughs paid by the Tenants and held by Seller in reserve for the
benefit of the Tenants for the repair and/or improvement of the Property.
Seller hereby agrees that it will not during the term of this Escrow or
upon the Close of Escrow apply any security deposits toward any delinquent
rental payments or any other amounts due under any Leases.
(d) Utilities. Gas, water, electricity, heat, fuel, sewer and
---------
other utilities and the operating expenses relating to the Real Property
shall be prorated as of the Close of Escrow to the extent such items are
not directly paid for by the Tenants under the Leases. If the parties are
unable to obtain final meter readings as of the date which is three (3)
business days prior to the Close of Escrow, such expenses shall be
estimated as of the Close of Escrow on the basis of the prior operating
history of the Real Property.
(e) Existing Lease Obligations. Subject to the treatment of
--------------------------
Special Lease Costs provided for below, Buyer shall be credited and Seller
shall be charged with operating costs (i.e., maintenance charges, taxes and
insurance), including, but not limited to maintenance obligations under the
Leases, tenant improvement costs and allowances, all leasing commissions
for leases entered into prior to the Close of Escrow (including all
commissions relating to any renewal or extension of a Lease or the leasing
of additional space exercised prior to the Close of Escrow) of the landlord
associated with the Leases existing prior to the Close of Escrow. Seller
shall have no obligation to Buyer for
-19-
<PAGE>
expenses relating to lease renewals or expansions which are exercised by
tenants under the Leases after the Close of Escrow. Buyer shall be charged
and Seller credited for capital expenditures (repairs and replacements),
tenant improvement costs and leasing commissions (collectively, "Special
Lease Costs") relating to Leases and allocable to the period of time after
November 17, 1997, and prior to the Close of Escrow, to the extent actually
paid by Seller, as shown on Exhibit "U" attached; provided, however, the
------- ---
maximum amount of Special Lease Costs charged to Buyer shall not exceed
Twenty Thousand Six Hundred One and 26/100 Dollars ($20,601.26). Seller
shall be responsible for all other Special Lease Costs.
(f) Insurance. Buyer acknowledges that Buyer is not assuming any
---------
insurance policies currently maintained by Seller.
(g) Sales Tax and Other Tax Liability. Seller shall pay all
---------------------------------
federal, state, local and other taxes, duties, imposts, levies, fees and
other governmental exactions arising out of the transfer of the Shiley
Partnership Interests or the NNC Interests to Buyer; provided, however,
this subparagraph (g) shall not require Seller to pay any income tax
obligations of Buyer.
Prior to the Close of Escrow, the parties shall agree upon all of the
prorations to be made and submit a statement to Escrow Holder setting forth the
same. In the event that any prorations, apportionments or computations made
under this Paragraph 11 shall require final adjustment (including any such
adjustment based on any post-closing, annual reconciliation of operating
expenses performed under the Leases), then the parties shall make the
appropriate adjustments promptly when accurate information becomes available and
either party hereto shall be entitled to an adjustment to correct the same. The
parties agree that they will estimate the proration of rents based on rental
payments received, and expenses incurred, prior to the end of business on
January 31, 1998, and that an appropriate adjustment shall be promptly made
following the Close of Escrow based on the rental payments received, and
expenses incurred, through the Close of Escrow. Provided that all such
information is available, all such adjustments shall be made within one hundred
and twenty (120) days after the Close of Escrow. Any corrected adjustment or
proration shall be paid in cash to the party entitled thereto. The provisions
of this Paragraph 11 shall survive the Close of Escrow and the recordation of
the Grant Deeds.
12. Escrow Disbursements and Other Actions. Upon the Close of Escrow,
--------------------------------------
Escrow Holder shall promptly undertake all of the following in the following
manner:
(a) Prorations. Prorate all matters referenced in Paragraph 11
----------
based upon the statement delivered into Escrow signed by the parties;
(b) Recording. Cause the Grant Deeds and the Partnership Grant
---------
Deeds and any other documents which the parties hereto may mutually direct,
to be recorded in the Official Records in the order directed by the
parties;
-20-
<PAGE>
(c) Partnership Filings. File the Partnership Amendments and
-------------------
dissolution documents with the State of California or in the Official
Records, as appropriate, and otherwise satisfy any requirements relating to
the transfer of the Partnership Interests and the dissolution of the
Partnerships;
(d) Funds. Disburse from funds deposited by Buyer with Escrow
-----
Holder towards payment of all items (including, without limitation, the net
amount of the cash portion of the Purchase Price) chargeable to the account
of Buyer pursuant hereto in payment of such costs and disburse the balance
of such funds, if any, to Buyer;
(e) Documents to Seller. Deliver to Seller counterparts of the
-------------------
Assignment of Lease, the Assignment of Contracts and the General Assignment
executed by Buyer;
(f) Documents to Buyer. Deliver to Buyer originals of the Bill
------------------
of Sale, and the FIRPTA Certificate, and counterparts of the Assignment of
Leases, Assignment of Interests, Partner's Guaranties, the Assignment of
Contracts and the General Assignment appropriately executed by Seller, the
approved form of letter described in Paragraph 8(g) above addressed to the
Tenants advising such Tenants of this transaction and any other documents
which are to be delivered to Buyer hereunder;
(g) Title Policy. Direct the Title Company to issue the Title
------------
Policy to Buyer;
(h) Units. Concurrently with the Close of Escrow, Buyer shall
-----
deliver to the NNC Entities evidence of the issuance of the Units to the
NNC Entities in accordance with Exhibit "M"; and
----------------
(i) Registration Rights Agreements. At or prior to the Close of
------------------------------
Escrow, Buyer, the Company and the Unit Recipients will enter into the
Registration Rights Agreement (defined in Paragraph 24 hereof).
13. Covenants.
---------
(a) Seller. Seller hereby covenants with Buyer, as follows:
------
(i) New Contracts. From the Effective Date through the
-------------
Close of Escrow, Seller shall not and the Partnerships shall not,
without the prior written consent of Buyer, which Buyer may withhold
in its reasonable discretion, enter into any maintenance contract,
service contract, listing agreement or any other contract affecting or
relating to the Property or any portion thereof which will survive the
Close of Escrow or will otherwise affect the use, operation or
enjoyment of the Property after the Close of Escrow. Buyer's failure
to notify Seller within one (1) business day after receipt of Seller's
request for consent to such a contract whether or not Buyer consents
shall be deemed Buyer's consent.
-21-
<PAGE>
(ii) Insurance. All insurance policies carried by Seller
---------
and the Partnerships with respect to the Property and in effect as of
the Effective Date shall remain continuously in full force and effect
from the Effective Date through the day upon which the Close of Escrow
occurs;
(iii) Amendments. From the Effective Date through the
----------
Close of Escrow, Seller and the Partnerships shall not amend, modify,
alter or supplement any Lease or any Contract which is approved by
Buyer pursuant to Paragraphs 7(a) or 13(a) hereof, or enter into any
new lease or contract or binding proposal for a new lease or contract,
without the prior written consent of Buyer which may be withheld in
Buyer's reasonable discretion. Buyer's failure to notify Seller
within three (3) business days after receipt of Seller's request for
consent to such a contract whether or not Buyer consents shall be
deemed Buyer's consent. Further, Seller shall terminate on or before
the Close of Escrow any Contract which Buyer disapproves in accordance
with Paragraph 7(a) hereof.
(iv) Operation. From the date of this Agreement until the
---------
Close of Escrow, Seller and the Partnerships shall operate, manage,
maintain and repair the Property consistent with Seller's and the
Partnership's existing business practices and subject to the terms of
Paragraph 11(e), shall satisfy and perform all obligations under the
Leases arising prior to the Close of Escrow. If Buyer approves, in
writing, any lease not listed on Exhibit "U", the amount of the
-----------
Special Lease Costs provided for in Paragraph 11(e) hereof shall be
increased by the amount of any additional Special Lease Costs
expressly set forth in Buyer's approval.
(v) No New Financing. After the date of this Agreement,
----------------
Seller and the Partnerships shall not alienate, lien, encumber or
otherwise transfer all or any portion of or interest in the Property
(other than to Buyer at the Close of Escrow). All Shiley Personal
Property and Shiley Intangible Personal Property shall be conveyed to
Buyer by Seller at the Close of Escrow free from any liens,
encumbrances or security interests of any kind or nature, and all
Partnership Personal Property and Partnership Intangible Property
shall be free from any liens, encumbrances or security interests of
any kind or nature as of the Close of Escrow;
(vi) Records. For a period of one (1) year following the
-------
Close of Escrow, Seller shall, upon Buyer's request and upon
reasonable prior notice, make all of Seller's non-proprietary records
with respect to the Property, which have not otherwise been turned
over to Buyer, available to Buyer for inspection, copying and audit by
Buyer's designated employees, accountants or consultants;
(vii) Materially Changed Condition. Seller shall, promptly
----------------------------
upon becoming aware of any such occurrence, notify Buyer in writing of
any material change in any condition with respect to the Property or
of any event or circumstance which makes any representation or
warranty of Seller to Buyer under
-22-
<PAGE>
this Agreement untrue or misleading, and of any material covenant of
Seller under this Agreement which Seller will be incapable of
substantially performing (hereinafter, a "Materially Changed
Condition"). If Seller notifies Buyer of any Materially Changed
Condition, Buyer shall have two (2) business days following receipt of
written notice from Seller of such condition to review the events and
circumstances giving rise to such condition. If Buyer disapproves the
Materially Changed Condition (as determined in Buyer's reasonable
discretion), Buyer may terminate this Agreement. If Buyer does not
elect to terminate this Agreement and elects to consummate its
acquisition of the Property, it shall be deemed to have (i) waived any
claim regarding the Materially Changed Condition, (ii) accepted title
to and possession of the Property subject to the Materially Changed
Condition and (iii) amended this Agreement to reflect the Materially
Changed Condition.
(viii) Accounting Information. The parties acknowledge
----------------------
that Seller has provided 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 and
its affiliates from which Buyer's representatives and independent
accounting firm have prepared, at Buyer's expense, audited financial
statements for 1994, 1995 and 1996 in conformity with generally
accepted accounting principles and to enable them to prepare such
statements, reports or disclosures as Buyer may deem necessary or
advisable. All such information is being provided to Buyer without
any representation or warranty by Seller except that such information
was used by Seller in the ordinary course of its business. 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 Seller's expense, to inquiries from Buyer's
representatives and independent accounting firm provided that any such
responses do not require an undertaking. If and to the extent Seller's
financial statements pertaining to the Property for any periods during
the years 1994, 1995 or 1996 have been audited, promptly after the
execution of this Agreement, 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. After the Close of Escrow, Seller shall
cooperate with, and promptly respond to reasonable requests from,
Buyer's accountants, including, but not limited to, audit letters
requesting information relating to matters prior to the Close of
Escrow, including, but not limited to, pending or threatened
litigation, claims and assessments; provided, however, information
provided by Seller to Buyer's accountants shall not constitute
additional representations and warranties of Seller.
(ix) Prospective Subscriber Questionnaire. Attached hereto
------------------------------------
as Exhibit "M" is a definitive list of all Unit Recipients to receive
-----------
Units at the Close of Escrow. Seller and each other Unit Recipient
shall deliver to the Operating
-23-
<PAGE>
Partnership within no less than three (3) business days prior to the
Close of Escrow a completed and duly executed Prospective Subscriber
Questionnaire in substantially the form attached hereto as Exhibit
-------
"O", which Questionnaires shall confirm to the satisfaction of the
---
Operating Partnership that each Unit Recipient is an "accredited"
investor within the meaning of Rule 501(a) promulgated under the
Securities Act. Each Unit Recipient who is not an accredited investor,
including, but not limited to Dahlke, shall also deliver to the
Operating Partnership a supplement to such Questionnaire which shall
confirm to the satisfaction of the Operating Partnership such Unit
Recipient's investment sophistication in the form attached hereto as a
part of Exhibit "O". Seller and each Unit Recipient shall also deliver
-----------
to the Operating Partnership, upon the Operating Partnership's
reasonable request, such other information, certificates and materials
as the Operating Partnership may reasonably request in connection with
offering the Units without registration under the Securities Act and
the securities laws of applicable states and other jurisdictions.
(x) Depreciation and Amortization. In connection with the
-----------------------------
issuance of Units to any Unit Recipient, Seller shall deliver to
Buyer on or before the date which is forty-five (45) days after the
Close of Escrow at Seller's sole cost and expense, prepared as of the
date of this Agreement, depreciation and amortization schedules for
the assets constituting the Partnership Property, as kept for tax
purposes, showing original basis, accumulated depreciation or
amortization, original useful life of such assets, remaining useful
life of such assets and the date(s) when such assets were placed in
service.
(xi) Notifications. From the date of this Agreement until
-------------
the Close of Escrow, and then so long as any Unit Recipient holds any
Units, each such Unit Recipient shall notify the Operating Partnership
in writing promptly upon any change in the identity or number of its
partners or of its indirect partners as identified pursuant to this
Agreement, and shall provide the information called for in Paragraph
13(a)(ix) hereof with respect to any such change. In addition, so
long as any Unit Recipient holds any Units, without the prior written
consent of the Operating Partnership, each Unit Recipient shall not
(i) admit additional partners, (ii) permit the transfer of interests
in each Unit Recipient to a look-through entity (as hereinafter
defined) or (iii) permit any transfer of interests in such Unit
Recipients if, as a result of the admissions or transfers described in
(i) through (iii) the number of direct or indirect beneficial owners
in such Unit Recipients would increase. Each Unit Recipient shall use
their best efforts to secure the compliance of any look-through
entities that hold direct or indirect interests of such Unit
Recipients with the requirements of this Paragraph as if such
requirements applied directly to such entities. Each Unit Recipient
acknowledges that the provisions of this Paragraph are imposed to aid
the Operating Partnership in avoiding taxation as a corporation for
federal income tax purposes, agrees that monetary damages may be
insufficient to remedy the potential harm caused by any breach of the
provisions of this Paragraph, and agrees that injunctive relief,
including specific performance or another equitable
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<PAGE>
remedy would be an appropriate remedy. The provisions of this
Paragraph shall survive the recording of the Grant Deed and the Close
of Escrow. For purposes of this Agreement, a "look-through entity"
shall mean a partnership (or other entity treated as a partnership for
federal income tax purposes), S-corporation or grantor trust.
(xii) Partnership Agreement. Seller acknowledges that each
---------------------
Unit Recipient shall be bound by and subject to all terms of the
Partnership Agreement. At or prior to the Closing, Seller shall
------
deliver to the Operating Partnership a Limited Partner Signature Page
in substantially the form attached hereto as Exhibit "N" executed by
-----------
each Unit Recipient.
(xiii) No Marketing. Upon execution of this Agreement,
------------
Seller shall not market the Property for sale or enter into
discussions or negotiations with potential purchasers of the Property
unless this Agreement has been terminated pursuant to its terms.
(xiv) Basement Guarantee. The NNC Entities shall guarantee
------------------
certain indebtedness secured by the Operating Partnership Property.
The NNC Entities shall execute Partner's Guarantees ("Guarantees"), in
substantially the same form as attached hereto as Exhibit "R,"
------------
guaranteeing for the benefit of the applicable lenders the repayment
of certain indebtedness of Buyer in the amount shown on Exhibit "T".
-----------
Buyer agrees that it will not provide, nor grant its consent to any
other limited partners of Buyer requesting to provide, additional
guarantees for the portion of the indebtedness which is the subject of
the Guarantees. In addition, Buyer shall maintain indebtedness in a
minimum amount sufficient to allow the NNC Entities to guaranty
indebtedness which is no less than the aggregate amount of the
Guarantees.
(xv) Property No. 2 Hazardous Materials. Buyer and Seller
----------------------------------
acknowledge that Property No. 2 may contain certain Hazardous
Materials (as defined in Paragraph 14(a)(vi) hereof). If Buyer
acquires Property No. 2, the Shiley Entities shall indemnify, protect,
defend (by counsel acceptable to Buyer) and hold harmless Buyer and
its partners, directors, officers, employees, members, shareholders,
lenders, tenants, agents, contractors and each of their respective
successors, assigns and assignees (individually and collectively,
"Buyer's Indemnitees") from and against any and all claims, judgments,
causes of action, damages, penalties, fines, taxes, costs,
liabilities, losses and expenses (including, without limitation,
reasonable attorneys' fees and court costs) arising at any time
before, on or after the Close of Escrow as a result (directly or
indirectly) of or arising from or in connection with, or caused in
whole or in part, directly or indirectly, by (a) Seller and/or any of
Seller's employees or agents breach of any Environmental Law (defined
in Paragraph 14(a)(vi) hereof); or (b) the presence of Hazardous
Materials on, in, under or about Property No. 2 as of the date of the
Close of Escrow. However, nothing in this subparagraph 13(a)(xv) shall
create any liability for Seller for any consequential damages or
claims based on any
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<PAGE>
diminution in value of Property No. 2 because of the existence of
Hazardous Materials. This indemnity shall include the cost of any
required or necessary investigation, repair, response, removal,
remediation, cleanup or detoxification, and the preparation and
implementation of any closure, monitoring or other required plans,
only to the extent such actions are required by applicable laws,
rules, regulations or orders and all sums paid in settlement of
claims, litigation, arbitration and administrative proceeding costs,
and expert, consultant and laboratory fees. The Shiley Entities'
obligations pursuant to the foregoing indemnity shall survive the
Close of Escrow and the recording of the Grant Deed.
(b) Post Closing Restrictions. Buyer and the NNC Entities agree
--------------------------
to the terms and conditions set forth on Exhibit "S", attached hereto and
-----------
incorporated herein by this reference.:
14. Representations and Warranties.
------------------------------
(a) By Seller. In consideration of Buyer entering into this
---------
Agreement and as an inducement to Buyer to purchase the Property, Seller
makes the following representations and warranties (subject to the matters
disclosed on the Disclosure Statement attached hereto as Exhibit "K"
-----------
("Disclosure Statement")), each of which is material and is being relied
upon by Buyer (and the continued truth and accuracy of which shall
constitute a condition precedent to Buyer's obligations hereunder);
provided, however, the Shiley Entities are not making and shall not be
liable for any inaccuracies in the representations or warranties set forth
in subparagraphs 14(a)(ii) through 14(a)(x) hereof. The Shiley Entities
shall be deemed to be making the representations and warranties set forth
in subparagraphs 14(a)(i), 14(a)(xi) 14(a)(xiv), 14(a)(xv), 14(a)(xvi),
14(a)(xvii) and 14(a)(xix) as they relate to the Shiley Partnership
Interests, and the NNC Entities shall be deemed to be making the
representations and warranties set forth in subparagraphs 14(a)(xi) through
14(a)(xx) as they relate to the NNC Interests.
(i) Representations Regarding Seller's Authority and
------------------------------------------------
Partnership's Good Standing.
---------------------------
(A) Each of the Sellers has the legal power, right and
authority to enter into this Agreement and the instruments
referenced herein, and to consummate the transaction contemplated
hereby;
(B) All requisite action (corporate, trust, partnership
or otherwise) has been taken by each of the Sellers in connection
with the entering into this Agreement, the instruments referenced
herein, and the consummation of the transaction contemplated
hereby. No consent of any partner, shareholder, trustee,
trustor, beneficiary, creditor, investor, judicial or
administrative body, governmental authority or other party is
required or, if required, has been obtained; and
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<PAGE>
(C) The individuals executing this Agreement and the
instruments referenced herein on behalf of each of the Sellers
and the members of each Seller have the legal power, right, and
actual authority to bind Seller to the terms and conditions
hereof and thereof.
(D) Each Partnership is a general partnership, limited
partnership, or limited liability company duly organized, validly
existing, and in good standing under the laws of the State of
California, with full power and authority to conduct its business
as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its
obligations. Each Partnership is duly qualified to do business
as a foreign general partnership, limited partnership or limited
liability company and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use
of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(ii) Threatened Actions. To Seller's actual knowledge,
------------------
there are no pending, and to Seller's actual knowledge no threatened,
actions, suits, arbitrations, claims or proceedings, at law, in equity
or otherwise, that would adversely affect, any of the Sellers, the
Partnerships, the Property or Seller's ability to perform its
obligations under this Agreement including, but not limited to,
judicial, municipal or administrative proceedings in eminent domain,
collection actions, claims relating to alleged building code
violations or health and safety violations, federal, state or local
agency actions regarding environmental matters, lease disputes, claims
relating to federal environmental protection agency or zoning
violations, or actions relating to personal injuries or property
damages alleged to have occurred at the Real Property or by reason of
the condition or use of or construction on the Real Property. Without
limiting the preceding terms of this Paragraph 14(a)(ii), the NNC
Entities hereby represent and warrant that, to the actual knowledge of
the NNC Entities, as of the date of this Agreement there are no
payments, assessments, fees or charges owing, and no outstanding
liabilities, obligations or commitments, in connection with any of the
items identified on Exhibit "W" attached hereto and incorporated
-----------
herein. The NNC Entities shall be deemed to have had actual knowledge
of any such matter if a reasonably prudent manager of commercial
property would have had knowledge of such matter regardless of whether
the NNC Entities actually had such knowledge.
(iii) No Contracts. Other than the Leases, the Contracts
------------
and the matters disclosed in the Title Report, there are no leases,
surface or subsurface use agreements, tenancy arrangements, service
contracts, management agreements, or other agreements, instruments or
encumbrances created by Seller, by any Partnership, or to Seller's
actual knowledge created by any other person or entity, which will be
in force or effect as of the Close of Escrow that grant to any person
whomsoever or any entity whatsoever any right, title, interest or
benefit in or to all or any part of the Property or any right relating
to the ownership, use, operation,
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<PAGE>
management, maintenance, enjoyment or repair of all or any part of the
Property, and no person or entity has any rights to acquire any of the
foregoing by virtue of the acts of Sellers or the Partnerships;
(iv) Compliance with Law. To Seller's actual knowledge, (A)
-------------------
neither Seller nor the Partnerships have received any written notice
and does not otherwise have knowledge of any violation of any
applicable laws, ordinances, rules, requirements, regulations and
building codes of any governmental agency, body or subdivision thereof
bearing on the Property; and (B) none of the Sellers or Partnerships
has violated or failed to comply in any material respect with any
statute, law, ordinance, regulation, rule, decree or order of any
foreign, federal, state or local government or any other governmental
department or agency, or any judgment, decree or order of any court.
(v) Documents True. To Seller's actual knowledge, all
--------------
documents delivered by Seller or made available to Buyer pursuant to
this Agreement are true, correct and complete copies of the versions
of such documents that are in Seller's possession;
(vi) Hazardous Wastes. Except as set forth on Exhibit "I"
---------------- -----------
or as disclosed in the phase I and phase II environmental assessments
prepared on behalf of Buyer, to Seller's actual knowledge: (1) the
Property or any portion thereof is not in violation of any
Environmental Law (as hereinafter defined); (2) neither Seller, any
Partnership nor any third party has used, generated, manufactured,
stored or disposed of on, under or about the Property or transported
to or from the Property any Hazardous Material in violation of any
Environmental Law; and (3) there is no asbestos (in any form) or
asbestos containing materials in any of the Improvements. For purposes
of this subparagraph, the term "Hazardous Material" shall mean any
substance, chemical, waste product or other material which is listed,
defined, or otherwise identified as "hazardous" or "toxic" or as a
"hazardous material" under any federal, state, local or administrative
agency ordinance or law, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. (S)(S) 9601 et seq.; Resource Conservation and Recovery Act,
-- ---
42 U.S.C. (S)(S) 6901 et seq.; Federal Water Pollution Control Act, 33
-- ---
U.S.C. (S)(S) 1251 et seq.; Clean Air Act, 42 U.S.C. (S)(S) 7401 et
-- --- --
seq.; Hazardous Materials Transportation Act, 49 U.S.C. (S)(S) 1471 et
--- --
seq.; Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601 et seq.;
--- -- ---
Refuse Act, 33 U.S.C. (S)(S) 407 et seq.; Emergency Planning and
-- ---
Community Right-To-Know Act, 42 U.S.C. (S)(S) 11001 et seq.;
-- ---
Occupational Safety and Health Act, 29 U.S.C. (S)(S) 65 et seq., to
-- ---
the extent it includes the emission of any Hazardous Material and
includes any Hazardous Material for which hazard communication
standards have been established; California Hazardous Substance
Account Act, California Health & Safety Code (S)(S) 25300 et seq.;
-- ---
California Asbestos Notification Laws, California Health & Safety Code
(S)(S) 25915 et seq.; California Hazardous Waste Control Law,
-- ---
California Health & Safety Code (S)(S) 22100 et seq.; California
-- ---
Hazardous Materials Release Response Plans and Inventory Act,
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<PAGE>
California Health & Safety Code (S)(S) 25500 et seq., California Clean
-- ---
Air Act, California Health & Safety Code (S)(S) 39608 et seq.;
-- ---
California Toxic Pits Cleanup Act, California Health & Safety Code
(S)(S) 25208 et seq.; California Pipeline Safety Act, California
-- ---
Government Code (S)(S) 51010 et seq.; California Toxic Air
-- ---
Contaminants Law, California Health & Safe Code (S)(S) 39650 et seq.;
-- ---
California Porter-Cologne Water Quality Act, California Water Code
(S)(S) 13000 et seq.; California Toxic Injection Well Control Act,
-- ---
California Health & Safety Code (S)(S) 25159.10 et seq.; California
-- ---
Underground Storage Tank Act, California Health & Safety Code (S)(S)
25280 et seq.; California Occupational Carcinogens Control Act,
-- ---
California Labor Code (S)(S) 9000 et seq.; or any regulation, order,
-- ---
rule or requirement adopted thereunder; as well as any formaldehyde,
urea, polychlorinated biphenyls, petroleum, petroleum product or by-
product, crude oil, natural gas, natural gas liquids, liquefied
natural gas or synthetic gas usable for fuel or mixture thereof,
radon, asbestos and "source," "special nuclear" and "by-product"
material as defined in the Atomic Energy Act of 1985, 42 U.S.C. (S)(S)
3011 et seq. For purposes of this Agreement, the term "Environmental
-- ---
Laws" shall mean the statutes and ordinances set forth above and any
and all other federal, state or local law, ordinance or regulation
relating to industrial hygiene or to environmental conditions or
hazardous conditions.
(vii) Taxes. Seller has no actual knowledge, and Seller
-----
and the Partnerships have received no notice to the contrary, of any
special assessments or charges which have been levied against the
Property or which will result from work, activities or improvements
done to or for the benefit of the Property except as may be shown on
the Title Report. Seller has no actual knowledge, and Seller and the
Partnerships have received no notice to the contrary, of any intended
public improvements which will result in any charge being levied
against, or in the creation of any lien upon, the Property or any
portion thereof;
(viii) Roofs; Utilities; Building Systems. Except as
----------------------------------
expressly set forth in the reports prepared for Buyer by Building
Analytics which are further identified on Exhibit "K", Seller has no
-----------
actual knowledge that the roofs of the Improvements or any of the
utility facilities or the heating, air conditioning, plumbing or
ventilating systems serving the Property are inadequate or are not in
good operating condition nor that any of the same have been inadequate
or failed to be in good operating condition within the two (2) years
immediately preceding the Opening of Escrow;
(ix) Structural. Except as expressly set forth in the
----------
reports prepared for Buyer by Building Analytics which are further
identified on Exhibit "K", to Seller's actual knowledge, there are no
-----------
material defects or deficiencies in the integrity or condition of the
structural components of the Real Property;
(x) Leases. The Rent Roll for each Property attached hereto
------
as Exhibit "J" is a copy of the rent roll used by Seller and the
-----------
applicable Partnership
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<PAGE>
in the ordinary course of its business. To Seller's actual knowledge,
(1) each Rent Roll is true, accurate and complete and (2) the copies
of the Leases delivered to Buyer are true, correct and complete copies
of the Leases. The Leases are in full force and effect, without
default by any party and without any right of setoff, except as
expressly provided by the terms of the Leases or as disclosed to Buyer
in writing in an Estoppel Certificate or otherwise. As of the Close of
Escrow, all work to be performed by Seller and/or the applicable
Partnership pursuant to the Leases shall have been fully or
substantially completed, paid for and accepted by the respective
Tenants and all tenant improvement allowances and similar obligations
have been paid in full except as expressly set forth on Exhibit "U".
-----------
Except as indicated on Exhibit "U", to Seller's actual knowledge, no
-----------
leasing or other commissions or fees are due, or will become due, on
an absolute or contingent basis to any real estate brokers or agents
or anyone else in connection with the Real Property or any portion
thereof and no such commissions or fees will become due during the
term of any existing Lease or with respect to any renewal or extension
thereof or the leasing of additional space by any existing Tenant;
(xi) No Undisclosed Liabilities. The Shiley Entities hereby
--------------------------
represent and warrant and the NNC Entities represent and warrant that
the Shiley Partnership Interests and the NNC Interests, respectively,
are not subject to, or affected by any liabilities, obligations or
commitments of any nature (whether accrued, absolute, contingent or
otherwise and whether matured or unmatured) except for (1) liabilities
or obligations reflected in the Leases and; (2) liabilities or
obligations identified on Exhibit "K".
-----------
(xii) Taxes. The NNC Entities, but not the Shiley
-----
Entities, hereby represent and warrant that the Partnerships have
filed or caused to be filed on a timely basis, since inception, all
Tax Returns (as hereinafter defined) that are or were required to be
filed by it or with respect to it or its businesses, either separately
or as a member of a group, pursuant to all applicable federal, state,
local or other administrative order, constitution, law, ordinance,
regulation or statue (collectively, "Legal Requirements"). The
Partners have paid, or made provision for the payment of, all taxes
that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by the Partnerships.
The information contained in such Tax Returns is true and correct in
all material respects. Sellers shall be responsible, at Seller's sole
cost and expense, for filing or causing to be filed all Tax Returns
for the Partnerships for periods beginning prior to the Closing Date,
including but not limited to all returns required for the calendar
year 1998 prior to, or in connection with, the dissolution of the
Partnerships and for all other costs and expenses of the Partnerships
for calendar year 1998, including but not limited to franchise taxes.
For the purposes of this Agreement, a Tax Return means any return
(including any information return), report statement, schedule,
notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any governmental
body in connection with the determination, assessment,
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<PAGE>
collection, or payment of any tax or in connection with the
administration, implementation, or enforcement of or compliance with
any Legal Requirement relating to any tax.
(xiii) Tax Allocations: Code Section 704(c). In
-------------------------------------
accordance with Section 704(c) of the Internal Revenue Code of 1986,
as amended ("Code") and the Regulations thereunder, income, gain,
loss, and deduction with respect to any Partnership Property
contributed to the capital of the Operating Partnership shall, solely
for tax purposes, be allocated among the partners of each Partnership
so as to take account of any variation between the adjusted basis of
such Partnership Property to the Operating Partnership for federal
income tax purposes and its allocable share of the Purchase Price
following dissolution of the applicable Partnership. Allocations
pursuant to this Paragraph 14(a)(xiii) are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way be
taken into account in computing, any Partner's capital account or
share of profits, losses, other items, or distributions pursuant to
any provision of this Agreement. The allocations provided for in this
Paragraph 14(a)(xiii) shall be made pursuant to the traditional method
as set forth in the applicable Treasury regulations promulgated under
Section 704(c) of the Code.
(xiv) Ownership of Shiley Partnership Interests and the NNC
-----------------------------------------------------
Interests. The Shiley Entities and the NNC Entities each hereby
---------
represent and warrant as to their respective interests: (i) that each
of them is respectively, the record and beneficial owner of the Shiley
Partnership Interests and the NNC Interests, (ii) that each of them
has good and marketable title to the respective Shiley Partnership
Interests and the NNC Interests, and (iii) that each of them has the
absolute right, power and authority to sell, transfer and deliver
their respective Shiley Partnership Interests and the NNC Interests to
Buyer, free and clear of all liens and encumbrances; (iv) that there
are no options, warrants, rights of first refusal, puts, calls,
commitments or other claims of ownership of any nature or any
character whatsoever relating to the Shiley Partnership Interests and
the NNC Interests, except for certain rights of first refusal
contained within the partnership agreements of certain Partnerships
all of which have been waived by the respective holder thereof and
which shall have no force or effect as of the Close of Escrow; and (v)
that no notice to, declaration, filing or registration with, or
authorization, consent or approval of, or permit from, any domestic or
foreign governmental or regulatory body or authority, or any other
person or entity, is necessary in connection with the execution and
delivery of this Agreement by Seller and the respective partners or
members and the consummation by Seller and the respective partners or
members of the transactions contemplated by this Agreement.
(xv) No Conflict or Violation. The Shiley Entities and the
------------------------
NNC Entities, each as to their respective interests, represent and
warrant that neither the execution and delivery of this Agreement by
Seller, nor the consummation by Seller of the transactions
contemplated hereby, nor compliance by Seller with any
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<PAGE>
of the provisions hereof will (i) violate, conflict with, or result in
a breach of any provisions of, or constitute a material default (or an
event which, with notice or lapse of time or both, would constitute a
material default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any
encumbrance upon the Shiley Partnership Interests or the NNC Interests
under, any of the terms, conditions or provisions of any agreement to
which Seller or the Partnerships are a party except for certain
indebtedness that will be repaid by Seller upon the Close of Escrow or
(ii) violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Seller, or the Shiley
Partnership Interests, the NNC Interests or any of the Properties.
(xvi) Status of Seller and Unit Recipients. None of the
------------------------------------
Sellers is a "foreign person" as defined in Section 1445 of the
Internal Revenue Code of 1986, as amended. Each of the Unit
Recipients is a resident of the State of California.
(xvii) Single Purpose Entities. Each Partnership is a
-----------------------
single purpose entity formed solely for the purpose of owning and
operating the Property owned by it and owns no other assets other than
the Property identified in this Agreement.
(xviii) Partnership Agreements and Financial Statements.
-----------------------------------------------
The NNC Entities have delivered to Buyer true, accurate and complete
copies of all of the organizational documents of each Partnership
which are identified in Exhibit "K" attached hereto. To Seller's
-----------
actual knowledge, the financial information of each Partnership
delivered to Buyer fairly and accurately present in all material
respects the assets, liabilities and financial position of each
Partnership as of the date thereof.
(xix) Ownership Interests. The ownership interests of the
-------------------
various Sellers set forth in Recital "A" to this Agreement are
accurate in all respects, and each of the Partnerships is the sole
holder of fee simple title to the respective Real Property identified
on Exhibit "A" as being owned by such Partnership.
-----------
(xx) Employees. The Partnerships have no employees and have
---------
never had any employees.
(xxi) Representations and Warranties at Closing. Subject
-----------------------------------------
to Seller's right to deliver its notice to Buyer of a Materially
Changed Condition as set forth in Paragraph 13(a)(vii) above, the
representations and warranties of Seller set forth in this Agreement
shall be deemed to be remade and restated by Seller in a certificate
on and as of the Close of Escrow.
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<PAGE>
As used herein, the term "Seller's actual knowledge" shall mean
the current actual knowledge of Scott Brusseau, Jeffry Brusseau, and
Carolyn Perrigo, without any inquiry. Seller represents and warrants that
Jeffry Brusseau is the representative of Seller with principal
administrative and oversight responsibility for the Property and the
Partnerships. The parties agree that (i) Seller's warranties and
representations contained in Paragraphs 14(a)(ii) through 14(a)(x) of this
Agreement shall survive Buyer's purchase of the Property only for a period
of one (1) year) after each respective Close of Escrow (the "Limitation
Period"), and (ii) Buyer shall provide actual written notice to Seller of
any alleged breach of such warranties or representations and shall allow
Seller thirty (30) days within which to cure such alleged breach, or, if
such alleged breach cannot reasonably be cured within thirty (30) days, an
additional reasonable time period, so long as such cure has been commenced
within such thirty (30) days and diligently pursued. In no event is Seller
obligated to cure any alleged breach. If Seller fails or elects not to
cure such alleged breach after actual written notice and within such cure
period, Buyer's sole and exclusive remedy shall be an action at law for
damages, but in no event lost profits or punitive damages, which must be
commenced, if at all, within the Limitation Period; provided, however, that
if within the Limitation Period Buyer gives Seller written notice of such
alleged breach and Seller commenced to cure and thereafter terminates such
cure effort, Buyer shall have an additional sixty (60) days from the date
that Seller notifies Buyer in writing that Seller has terminated its cure
effort within which to commence such an action.
Seller's representations and warranties set forth in Paragraph
14(a)(i) and 14(a)(xi) through 14(a)(xx) shall survive the Close of Escrow
and the recording of the Grant Deed without limitation to the extent that
Buyer incurs or is subject to any Damages (as hereinafter defined) because
Buyer acquired the Shiley Partnership Interests or the NNC Interests which
would not have been incurred had Buyer directly acquired title to the Real
Property
(b) By Buyer. In consideration of Seller entering into this
--------
Agreement and as an inducement to Seller to sell the Property, and the
interests in the Partnerships, Buyer (and Company and OP General Partner,
by their joinder herein, solely as to the representations and warranties
relating to Company, OP General Partner and their respective operations)
makes the following representations and warranties, each of which is
material and is being relied upon by Seller (and the continued truth and
accuracy of which shall constitute a condition precedent to Seller's
obligations hereunder):
(i) Representations Regarding Buyer's Authority.
-------------------------------------------
(A) Buyer has the legal power, right and authority to
enter into this Agreement and the instruments referenced herein,
and to consummate the transaction contemplated hereby;
(B) All requisite action (corporate, trust, partnership
or otherwise) has been taken by Buyer in connection with the
entering into this Agreement, the instruments referenced herein,
and the consummation
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<PAGE>
of the transaction contemplated hereby. No consent of any
partner, shareholder, trustee, trustor, beneficiary, creditor,
investor, judicial or administrative body, governmental authority
or other party is required; and
(C) The individuals executing this Agreement and the
instruments referenced herein on behalf of Buyer and the partners
of Buyer, if any, have the legal power, right, and actual
authority to bind Buyer to the terms and conditions hereof and
thereof.
(ii) AS-IS. Except as expressly set forth in the Agreement,
-----
Buyer is acquiring the Property "AS IS" without any representation or
warranty of Seller, express, implied or statutory, as to the nature or
condition of or title to the Property or its fitness for Buyer's
intended use of same. Except as specifically set forth in this
Agreement, Buyer represents and warrants that it (i) is relying solely
upon its own inspections, investigations and analyses of the Property,
the Title Documents, Documents and Materials, and the Plans and
Reports (collectively, the "Property Documents") in entering into this
Agreement and consummating the transaction set forth herein, and (ii)
is not relying in any way upon any representations, statements,
agreements, warranties, studies, reports, descriptions, guidelines or
other information or material furnished by Seller or its
representatives whether oral or written, express or implied, of any
nature whatsoever regarding any such matters, including, without
limitation, the condition, value, nature, or quality of the Property,
including any constriction on the Property and any materials or
systems incorporated into the Property and seismic conditions or
topography, any income to be derived from the Property, compliance of
the Property or its operation with any law, ordinance, rule,
regulation, or the status of any permits or approvals relating to or
required in connection with the Property, latent defects in the
Property or improvements thereto, safety or building violations or
deficiencies in the Property or improvements thereto, if any, or any
other matter of a similar or dissimilar nature which may be of
relevance to Buyer and relating in any way to the Property or the
market in which it is located. Except as specifically set forth in
this Agreement, Buyer agrees and warrants to Seller that neither
Seller, nor any broker, nor any agent or representative of either of
them, has made any representation to Buyer inconsistent with the
foregoing nor as to any Hazardous Materials Laws, the existence of
Hazardous Materials on the Property or the Property Documents. Except
as specifically set forth in this Agreement, Seller is not making any
representation or warranty of any nature concerning the accuracy or
completeness of Seller's files or concerning the authenticity, source,
accuracy or completeness of the Property Documents. As to certain of
the materials made available to Buyer from Seller's files, including,
without limitation, the Property Documents, Buyer specifically
acknowledges that they may have been prepared by third parties with
whom Seller has no privity and Buyer acknowledges and agrees that
except as specifically set forth herein, no warranty or
representation, express or implied, has been made, nor shall any be
deemed to have been made, to Buyer either by Seller or by any third
parties that prepared the materials in question. Buyer waives any
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<PAGE>
claim of any nature against Seller for any information, conclusion,
projection or other statement of any nature contained in any of the
Property Documents if the same should prove not to be true, complete
or accurate for any reason. Buyer, by its execution of this Agreement,
acknowledges and agrees that a material inducement to Seller's
decision to sell the Property to Buyer at the Purchase Price provided
in this Agreement was Buyer's agreement to conduct its own feasibility
studies and purchase the Property in an "as-is" condition. Except as
relating to any matter covered by the terms of Paragraph 13(a)(xv)
hereof or relating to a breach of the representations and warranties
made by Seller, (A) no latent condition affecting the Property in any
way (including, without limitation, the presence or effects of any
Hazardous Materials or any violations of applicable law on the
Property), discovered after the Close of Escrow (collectively,
"Property Conditions"), shall give rise to any rights of damages,
specific performance, rescission or other claims by Buyer against
Seller, and (B) Buyer hereby assumes the risk of any and all
liabilities, claims, demands, suits, judgments, losses, damages,
expenses (including, without limitation, attorneys' fees and costs)
and other obligations arising out of the Property and hereby releases,
waives, discharges, covenants not to sue Seller based solely upon the
same.
(iii) Securities Filings. Each of the Company and the
------------------
Operating Partnership has filed all required documents with the
Securities and Exchange Commission ("SEC") since January 1, 1997
including, without limitation, the Annual Report on Form 10-K for the
year ended December 31, 1996 of the Company and the Operating
Partnership (collectively, the "SEC Documents"). To the knowledge of
the Company and Operating Partnership (defined and limited for
purposes of Paragraphs 14(b)(iii) and (iv) as information contained in
any actual notice received by Company or the Operating Partnership or
information within the actual knowledge of Michael V. Prentiss, Thomas
F. August, Mark Doran and Greg Imhoff, (i) as of their respective
dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act or Exchange Act, as the case may
be, and, at the respective times they were filed, none of the SEC
Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, (ii) the consolidated financial
statements (including any notes thereto) of the Company included in
the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except, in
the case of the unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except
as may be indicated therein or in the notes thereto) and fairly
presented in all material respects the consolidated financial position
of the Company as at the respective dates thereof and the consolidated
results of their operations and their consolidated cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal year-end audit
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adjustments and to any other adjustments described therein), and (iii)
except as disclosed in the SEC Documents or as required by generally
accepted accounting principles, the Company has not, since September
30, 1997, made any material change in the accounting practices or
policies applied in the preparation of financial statements.
(iv) Absence of Certain Changes or Events. To the knowledge
------------------------------------
of Operating Partnership and Company, except as disclosed in SEC
Documents filed with the SEC prior to the date of this Agreement,
since September 30, 1997, (a) neither the Company nor the Operating
Partnership has sustained any loss or interference with its business
or properties from fire, flood, windstorm, accident or other calamity
(whether or not covered by insurance) that has had a material adverse
effect on the Company or the Operating Partnership, and (b) there has
been no event causing a material adverse effect on the Company or the
Operating Partnership, excluding any changes and effects resulting
from changes in economic, regulatory or political conditions or
changes in conditions generally applicable to the industry in which
the Company or the Operating Partnership is involved. The
representations and warranties of Buyer, the Company and the OP
General Partner set forth in this Agreement and in any document
executed by such parties pursuant to this Agreement shall survive
Buyer's purchase of the Property only for the Limitation Period.
Seller shall provide actual written notice to Buyer of any alleged
breach of such warranties or representations and shall allow Buyer
thirty (30) days within which to cure such alleged breach, or, if such
alleged breach cannot reasonably be cured within thirty (30) days, an
additional reasonable time period, so long as such cure has been
commenced within such thirty (30) days and diligently pursued. In no
event is Buyer obligated to cure any alleged breach. If Buyer fails
or elects not to cure such alleged breach after actual written notice
and within such cure period, Seller's sole and exclusive remedy shall
be an action at law for damages, but in no event lost profits or
punitive damages, which must be commenced, if at all, within the
Limitation Period; provided, however, that if within the Limitation
Period Seller gives Buyer written notice of such alleged breach and
Buyer commenced to cure and thereafter terminates such cure effort,
Seller shall have an additional sixty (60) days from the date that
Buyer notifies Seller in writing that Buyer has terminated its cure
effort within which to commence such an action.
(c) Indemnification.
---------------
(i) Seller's Indemnification. Notwithstanding anything in
------------------------
this Agreement to the contrary and without limiting either parties'
rights under this Agreement, the NNC Entities and the Shiley Entities
respectively hereby agree to indemnify, defend, protect and hold
harmless Buyer and Buyer's Indemnitees (as defined in Paragraph
13(a)(xv) hereof) from and against any and all costs, losses,
liabilities, damages, lawsuits, deficiencies, claims and expenses,
including without limitation, interest, penalties, reasonable
attorneys' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing (collectively,
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<PAGE>
"Damages"), incurred in connection with, arising out of, resulting
-------
from or incident to (i) any breach of any covenant or warranty, or the
inaccuracy of any representation, made by the NNC Entities or the
Shiley Entities respectively in or pursuant to this Agreement as to
their respective representations, covenants or warranties, or (ii) any
claim by any person or entity initiated against Buyer arising from the
actions or inaction's of Seller, or any Partnership, prior to the
Close of Escrow.
(ii) Buyer's Indemnification of Seller. Notwithstanding
---------------------------------
anything in this Agreement to the contrary, Buyer shall indemnify,
defend, protect and hold harmless, each Seller and the directors,
officers, employees, members, shareholders and agents of NNC from and
against any and all Damages incurred in connection with, arising out
of, resulting from or incident to any breach of any covenant or
warranty, or the inaccuracy of any representation, made by Buyer in or
pursuant to this Agreement.
(iii) Initiation of Claims. If any party ("Indemnitee")
-------------------- ----------
hereto desires to make a claim against any other party ("Indemnitor")
----------
pursuant to the provisions of this Paragraph 14(c), then Indemnitee
shall notify Indemnitor of the claim, demand, action or right of
action which is the basis of such claim and the provision or
provisions of this Agreement alleged
to have been breached or to be inaccurate, and shall give the
Indemnitor a reasonable opportunity to participate in the defense
thereof. Indemnitee shall provide Indemnitor with all information
available to it regarding such claim, demand, action or right of
action (whether or not it involves a third party).
(iv) Survival of Indemnification Provisions. The
--------------------------------------
indemnification provision set forth in this Paragraph 14(c) shall
survive the Close of Escrow regardless of any investigation made by
any of the parties hereto; provided, however, that the parties'
respective indemnification obligations arising out of any breach of
any covenant or warranty, or the inaccuracy of any representation,
made by a party in or pursuant to this Agreement shall survive only
with respect to claims made against the Indemnitor within the period
that the underlying covenant, warranty or representation survives
pursuant to this Agreement.
15. Remedies.
--------
(a) LIQUIDATED DAMAGES. SUBJECT TO BUYER'S RIGHT TO HAVE THE
------------------
DEPOSIT RETURNED AS SET FORTH IN PARAGRAPH 3(a) OF THIS AGREEMENT, IF THE
CLOSE OF ESCROW FAILS TO OCCUR FOR ANY REASON OTHER THAN SELLER'S DEFAULT
HEREUNDER, THEN ESCROW HOLDER MAY BE INSTRUCTED BY SELLER TO CANCEL THE
ESCROW AND SELLER SHALL THEREUPON BE RELEASED FROM ITS OBLIGATIONS
HEREUNDER. BUYER AND SELLER AGREE THAT BASED UPON THE CIRCUMSTANCES NOW
EXISTING, KNOWN AND UNKNOWN, IT WOULD BE
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<PAGE>
IMPRACTICAL OR EXTREMELY DIFFICULT TO ESTABLISH SELLER'S DAMAGE BY REASON
OF THE FAILURE OF ESCROW TO CLOSE AS AFORESAID. ACCORDINGLY, BUYER AND
SELLER AGREE THAT IT WOULD BE REASONABLE AT SUCH TIME TO AWARD SELLER
"LIQUIDATED DAMAGES" IN THE AMOUNT OF THE DEPOSIT AND OWNERSHIP AND
POSSESSION OF THE PLANS AND REPORTS PURSUANT TO PARAGRAPH 24 BELOW.
SELLER AND BUYER ACKNOWLEDGE AND AGREE THAT THE FOREGOING AMOUNT
AND THE PLANS AND REPORTS ARE REASONABLE AS LIQUIDATED DAMAGES AND SHALL BE
SELLER'S SOLE AND EXCLUSIVE REMEDY IN LIEU OF ANY OTHER RELIEF, RIGHT OR
REMEDY, AT LAW OR IN EQUITY, TO WHICH SELLER MIGHT OTHERWISE BE ENTITLED BY
REASON OF THE FAILURE OF ESCROW TO CLOSE UNDER THIS AGREEMENT.
ACCORDINGLY, SUBJECT TO PARAGRAPH 3(a) OF THIS AGREEMENT, IF THE CLOSE OF
ESCROW FAILS TO OCCUR FOR ANY REASON OTHER THAN SELLER'S DEFAULT, SELLER
MAY INSTRUCT THE ESCROW HOLDER TO CANCEL THE ESCROW, WHEREUPON SELLER SHALL
BE RELIEVED FROM ALL LIABILITY HEREUNDER, AND, PROMPTLY FOLLOWING ESCROW
HOLDER'S RECEIPT OF SUCH INSTRUCTION, ESCROW HOLDER SHALL (i) CANCEL THE
ESCROW, AND (ii) DISBURSE TO SELLER THE DEPOSIT. WITHOUT LIMITING THE
FOREGOING PROVISIONS OF THIS PARAGRAPH, SELLER WAIVES ANY AND ALL RIGHTS
WHICH SELLER OTHERWISE WOULD HAVE HAD UNDER CALIFORNIA CIVIL CODE SECTION
3389, OR OTHERWISE, TO SPECIFICALLY ENFORCE THIS AGREEMENT. NOTWITHSTANDING
ANYTHING TO THE CONTRARY SET FORTH HEREIN, IN NO EVENT SHALL BUYER'S
OBLIGATION TO INDEMNIFY SELLER PURSUANT TO PARAGRAPH 7(a)(iii) ABOVE BE
LIMITED IN ANY MANNER. SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND
UNDERSTAND THE PROVISIONS OF THIS PARAGRAPH 15 AND BY THEIR INITIALS
IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
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<PAGE>
-------------------------------- ------------------------------
Seller's Initials Buyer's Initials
--------------------------------
Seller's Initials
--------------------------------
Seller's Initials
--------------------------------
Seller's Initials
--------------------------------
Seller's Initials
--------------------------------
Seller's Initials
--------------------------------
Seller's Initials
--------------------------------
Seller's Initials
--------------------------------
Seller's Initials
--------------------------------
Seller's Initials
--------------------------------
Seller's Initials
(b) Buyer's Remedies. Buyer and Seller hereby agree that, if the
----------------
sale contemplated by this Agreement is not completed as herein provided by
reason of any default of Seller hereunder, then in addition to the return
of the Deposit and the right to retain the Plans and Reports, Buyer shall
be entitled to pursue any remedy available under this Agreement or
available at law or in equity, including, without limitation, the right to
specifically enforce this Agreement.
16. Damage or Condemnation Prior to Closing.
---------------------------------------
(a) Material Damage. In the event that prior to the Close of
---------------
Escrow, the Real Property, or a material portion thereof, is destroyed or
materially damaged, Buyer shall have the right, exercisable by giving
written notice to Seller within five (5) days after receipt of written
notice of such damage or destruction, either (i) to terminate
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<PAGE>
this Agreement, in which event the Deposit and all interest accrued thereon
shall be immediately returned to Buyer, any other money or documents in
Escrow shall be returned to the party depositing the same, and neither
party hereto shall have any further rights or obligations hereunder, or
(ii) to accept the Real Property or the Partnerships interests in their
then condition and to proceed with the consummation of the transaction
contemplated by this Agreement with an abatement or reduction in the
Purchase Price equal to the amount of the deductible for the applicable
insurance coverage, and to receive an assignment of all of Seller's rights
to any insurance proceeds payable by reason of such damage or destruction.
If Buyer elects to proceed under clause (ii) above, Seller shall not
compromise, settle or adjust any claims to such proceeds without Buyer's
prior written consent, which consent may be withheld in Buyer's sole and
absolute discretion. For purposes of this Paragraph 16 destruction or
damage of a "material portion" of the Real Property shall mean that the
cost to correct such damage or destruction (for all of the Real Property)
may exceed $2,169,000, as determined by Buyer and Seller in their
reasonable discretion.
(b) Non-Material Damage. In the event that prior to the Close of
-------------------
Escrow there is any non-material damage to the Real Property, or any part
thereof, Buyer shall accept the Real Property or the Partnership interests
in its their condition with an abatement or reduction in the Purchase Price
equal to the amount of the deductible for the applicable insurance coverage
and proceed with the transaction contemplated by this Agreement, in which
event Buyer shall be entitled to an assignment of all of Seller's rights to
any insurance proceeds payable by reason of such damage or destruction.
Seller shall not compromise, settle or adjust any claims to such proceeds
without Buyer's prior written consent, which consent may be withheld in
Buyer's sole and absolute discretion.
(c) Material Condemnation. In the event that prior to the Close
---------------------
of Escrow, all or any material portion of the Real Property is subject to a
taking by a public or governmental authority, Buyer shall have the right,
exercisable by giving written notice to Seller within two (2) days after
receiving written notice of such taking, either (i) to terminate this
Agreement, in which event the Deposit and all interest accrued thereon
shall be immediately returned to Buyer, any other money or documents in
Escrow shall be returned to the party depositing the same, and neither
party hereto shall have any further rights or obligations hereunder, or
(ii) to accept the Real Property or the Partnership Interests in their
then condition, without a reduction in the Purchase Price, and to receive
an assignment of all of Seller's rights to any condemnation award or
proceeds payable by reason of such taking. If Buyer elects to proceed
under clause (ii) above, Seller shall not compromise, settle or adjust any
claims to such award without Buyer's prior written consent, which consent
may be withheld in Buyer's sole and absolute discretion. For the purposes
of this Paragraph 16, a taking, as set forth herein, shall be deemed to be
of a "material portion" of the Real Property if the value of the affected
Real Property, or the decrease in the value of the remaining Real Property
(for all of the Real Property), is in excess of $2,169,000 as determined by
Buyer and Seller in their reasonable discretion.
(d) Non-Material Condemnation. In the event that prior to the
-------------------------
Close of Escrow, any non-material portion of the Real Property is subject
to a taking by any
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<PAGE>
public or governmental authority, Buyer shall accept the Real Property in
its then condition and proceed with the consummation of the transaction
contemplated by this Agreement, in which event Buyer shall be entitled to
an assignment of all of Seller's rights to any award or proceeds payable in
connection with such taking. In the event of any such non-material taking,
Seller shall not compromise, settle or adjust any claims to such award
without Buyer's prior written consent, which consent may be withheld in
Buyer's sole and absolute discretion.
17. Notices. All notices or other communications required or permitted
-------
hereunder shall be in writing, and shall be either (a) personally delivered, (b)
sent by overnight mail for next business day delivery (Federal Express or the
like), (c) sent by registered or certified mail, postage prepaid, return receipt
requested, or (d) sent by fax; and shall be deemed received upon the earlier of
(i) if personally delivered on a business day, the date of delivery to the
address of the person to receive such notice, (ii) if sent by overnight mail for
next business day delivery, the business day following its deposit in such
overnight mail facility, (iii) if mailed, two (2) business days after the date
of posting by the United States post office, or (iv) if given by fax on a
business day, the next business day when sent with confirmation of receipt. Any
notice, request, demand, direction or other communication sent by fax must be
confirmed within forty-eight (48) hours by letter mailed or delivered in
accordance with the foregoing.
To Buyer: Prentiss Properties Acquisition Partners, L.P.
970 West 190th
Street, Suite 550
Torrance, California 90502
Attention: Mr. David C. Robertson
Phone No. (310) 323-8300
Fax No. (310) 327-7714
With a copy to: Allen, Matkins, Leck, Gamble & Mallory LLP
18400 Von Karman, Fourth Floor
Irvine, California 92612-1597
Attention: Gary S. McKitterick, Esq.
Phone No. (714) 553-1313
Fax No. (714) 553-8354
To Seller: c/o Newport National Corporation
5050 Avenida Encinas, Suite 350
Carlsbad, California 92008
Attention: Mr. Scott Brusseau
Phone No. (760) 438-4242
Fax No. (760) 438-0046
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<PAGE>
With a copy to: Luce, Forward, Hamilton & Scripps LLP
600 W. Broadway, 26th Floor
San Diego, California 92101
Attention: Robert D. Buell, Esq.
Phone No. (619) 699-2539
Fax No. (619) 232-8311
To Seller: Donald P. Shiley
P.O. Box 207
Pauma Valley, California 92016
Fax No. (760) 742-1413
With a copy to: Stradling, Yocca, Carlson and Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Bruce C. Stuart, Esq.
Phone No. (714) 725-4000
Fax No. (714) 725-4100
With a copy to: Mr. Kenneth Unruh
6397 La Jolla Scenic Drive South
La Jolla, California 92037
Phone No. (619) 454-5100
Fax No. (619) 454-8401
To Escrow Holder: Chicago Title Insurance Company
7616 LBJ Freeway, Suite 300
Dallas, Texas 75251-1106
Attention: Debbie Stanley
Phone No. (972) 934-0077
Fax No. (972) 404-8731
Notice of change of address shall be given by written notice in the manner
detailed in this Paragraph. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to constitute receipt of the notice, demand, request or
communication sent.
18. Brokers. Seller and Buyer represent to each other that no broker or
-------
other agent was involved in the transaction contemplated by this Agreement;
provided, however, if any broker commission, finder's fee or other payment is
due in connection with Property No. 2, to NNC the Shiley Entities shall be
responsible for the same. If any other claims for broker's or finders' fees or
commissions for the consummation of this Agreement arise, then Buyer hereby
agrees to indemnify, protect, save harmless and defend Seller from and against
such claims if they are based upon any statement, representation or agreement
made by Buyer, and Seller hereby agrees to indemnify, protect, save harmless and
defend Buyer from and against such claims if they are based upon any statement,
representation or agreement made by Seller.
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<PAGE>
19. Legal 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 or agreements or any inaccuracies in any of the representations
and warranties on the part of the other party arising out of this Agreement,
then in that event, the prevailing party in such action or dispute, whether by
final judgment or out of court settlement, shall be entitled to have and recover
of and from the other party all costs and expenses of suit, including reasonable
attorneys' fees. Any judgment or order entered in any final judgment shall
contain a specific provision providing for the recovery of all costs and
expenses of suit, including reasonable attorneys' fees (collectively "Costs")
incurred in enforcing, perfecting and executing such judgment. For the purposes
of this paragraph, Costs shall include, without limitation, reasonable
attorneys' fees, costs and expenses incurred in (i) post-judgment motions, (ii)
contempt proceeding, (iii) garnishment, levy, and debtor and third party
examination, (iv) discovery, and (v) bankruptcy litigation.
20. Assignment. Seller may assign, transfer or convey its rights or
----------
obligations under this Agreement, provided that its assignee assumes in writing
the obligations of Seller hereunder including, the obligation to distribute
Units to each Unit Recipient. Buyer, without being relieved of liability
hereunder and without obtaining Seller's consent, shall have the right to assign
its rights and obligations hereunder to any affiliate of Buyer. In addition,
Buyer, without being relieved of liability hereunder, and without obtaining
Seller's consent, shall have the right to assign its rights and obligations
hereunder in connection with Property No. 1 and Property No. 2 to any non-
affiliate of Buyer.
21. Miscellaneous.
-------------
(a) Survival of Covenants. The covenants, representations and
---------------------
warranties of both Buyer and Seller set forth in this Agreement shall
survive the recordation of the Grant Deed and the Close of Escrow.
(b) Required Actions of Buyer and Seller. Buyer and Seller agree
------------------------------------
to execute such instruments and documents and to diligently undertake such
actions as may be required in order to consummate the purchase and sale
herein contemplated and shall use their commercially reasonable efforts to
accomplish the Close of Escrow in accordance with the provisions hereof.
(c) Computation of Time Periods. If any date or time period
---------------------------
provided for in this Agreement is or ends on a Saturday, Sunday or federal,
state or legal holiday, then such date shall automatically be extended
through the next day which is not a Saturday, Sunday or federal, state or
legal holiday.
(d) Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute but one and the same instrument.
(e) Captions. Any captions to, or headings of, the paragraphs or
--------
subparagraphs of this Agreement are solely for the convenience of the
parties hereto, are
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<PAGE>
not a part of this Agreement, and shall not be used for the interpretation
or determination of the validity of this Agreement or any provision hereof.
(f) No Obligations to Third Parties. Except as otherwise
-------------------------------
expressly provided herein, the execution and delivery of this Agreement
shall not be deemed to confer any rights upon, nor obligate any of the
parties hereto, to any person or entity other than the parties hereto.
(g) Exhibits. The Exhibits attached hereto are hereby
--------
incorporated herein by this reference for all purposes.
(h) Amendment to this Agreement. The terms of this Agreement may
---------------------------
not be modified or amended except by an instrument in writing executed by
each of the parties hereto.
(i) Waiver. The waiver or failure to enforce any provision of
------
this Agreement shall not operate as a waiver of any future breach of any
such provision or any other provision hereof.
(j) Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of California.
(k) Fees and Other Expenses. Except as otherwise provided
-----------------------
herein, each of the parties hereto shall pay its own fees and expenses in
connection with this Agreement.
(l) Entire Agreement. This Agreement supersedes any prior
----------------
agreements, negotiations and communications, oral or written, and contains
the entire agreement between Buyer and Seller as to the subject matter
hereof. No subsequent agreement, representation, or promise made by either
party hereto, or by or to an employee, officer, agent or representative of
either party hereto shall be of any effect unless it is in writing and
executed by the party to be bound thereby.
(m) Successors and Assigns. Subject to the restrictions set
----------------------
forth in Paragraph 20 hereof, this Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the parties
hereto.
(n) Construction. The parties hereto hereby acknowledge and
------------
agree that (i) each party hereto is of equal bargaining strength, (ii) each
such party has actively participated in the drafting, preparation and
negotiation of this Agreement, (iii) each such party has consulted with
such party's own, independent counsel, and such other professional advisors
as such party has deemed appropriate, relative to any and all matters
contemplated under this Agreement, (iv) each such party and such party's
counsel and advisors have reviewed this Agreement, (v) each such party has
agreed to enter into this Agreement following such review and the rendering
of such advice, and (vi) any rule of construction to the effect that
ambiguities are to be resolved against the drafting parties
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<PAGE>
shall not apply in the interpretation of this Agreement, or any portions
hereof, or any amendments hereto.
(o) Joint and Several Liability. Each of the Sellers shall be
---------------------------
jointly and severally liable for the obligations of Sellers under this
Agreement. However, the Shiley Entities shall have no liability (i) under
Paragraphs 14(a)(ii) through 14(a)(x), 14(a)(xii), (except for the
affirmative obligation to file Tax Returns set forth in Paragraph
14(a)(xii)) 14(a)(xiii) or 14(a)(xviii) hereof or (ii) for the
representations and warranties made solely by the NNC Entities.
(p) Confidentiality. Buyer and Seller acknowledge that it is in
---------------
the best interest of Buyer and Seller to maintain the confidentiality of
the terms and provisions of this Agreement and the materials relating
hereto. Except as otherwise provided herein, neither party shall disclose
any of the terms or provisions of this Agreement to any third party other
than such party's contractors, agents, and prospective and actual investors
and lenders of either party, nor shall either party issue any press
releases or make any public statements relating to this Agreement until
after the Close of Escrow except (i) to the extent required by any
applicable statute, law, regulation, governmental authority or court order,
or (ii) in connection with any arbitration or litigation that may arise
between the parties in connection with the transaction contemplated by this
Agreement.
22. Seller's Activities. Seller acknowledges that Buyer has incurred
-------------------
costs and expenses in negotiating and entering into this Agreement.
Accordingly, during the Escrow period Seller shall not conduct negotiations or
provide information regarding the Property or enter into any agreement with
respect to the sale, exchange or transfer of the Property, with any party other
than Buyer.
23. Plans and Reports. If, for any reason whatsoever, Buyer terminates
-----------------
this Agreement, Seller may elect to have Buyer assign to Seller all of Buyer'
rights, title and interests to feasibility studies, including audits prepared by
Coopers & Lybrand, Buyer's financial models, analyses, economic reports,
marketing studies, maps, surveys, environmental reports, civil and soil
engineering reports, site plans, plans and specifications relating to the
Improvements on all of the Properties and any and all other plans, reports and
other documents or work relating to any and all of the Properties including but
not limited to, Latitude 33's ALTA surveys of the Property, and the physical
inspection reports and environmental reports prepared by Building Analytics
prepared by or for Buyer, including all land use and other governmental
approvals and applications therefor ("Plans and Reports"), completed to Buyer's
reasonable satisfaction, with all costs and fees relating thereto fully paid
(i.e., at no cost or expense to Seller). Seller agrees that Buyer makes no
warranty to Seller as to the accuracy of such Plans and Reports, and Seller
agrees to indemnify Buyer for all costs, expenses, claims, liabilities, losses,
damages, arising out of or in connection with Seller, its agents or successors
using or relying on the Plans and Reports if Seller elects to have Buyer assign
them to Seller. Buyer agrees to deliver any and all such Plans and Reports,
paid for in full, to Seller within three (3) days after Buyer's receipt of
Seller's written notice regarding Seller's election to have Buyer deliver the
same. Buyer agrees to execute any reasonable assignment documents prepared by
Seller within five (5) days of Seller's request.
-45-
<PAGE>
In addition, Buyer agrees to return any and all of the Documents and Materials
to Seller within five (5) days of termination.
24. Definitions. For the purposes of this Agreement, the following
-----------
definitions shall apply:
(a) "Company" means Prentiss Properties Trust, a Maryland real
estate investment trust.
(b) "OP General Partner" means Prentiss Properties I, Inc., a
Delaware corporation.
(c) "Operating Partnership" means Prentiss Properties Acquisition
Partners, L.P., a Delaware limited partnership.
(d) "Partnership Agreement" means the Second Amended and Restated
Agreement of Limited Partnership of Prentiss Properties Acquisition
Partners, L.P. as the same may be amended from time to time.
(e) "Unit Recipient" means a Seller or a partner or member of
Seller who will receive Units pursuant to Paragraph 3 hereof.
(f) "Units" means "Seller Units" in the Operating Partnership, as
defined and described in the Operating Partnership's Partnership Agreement.
(g) "Registration Rights Agreement" means the agreement in the
form of Exhibit "P" attached hereto and incorporated herein.
-----------
25. Extension for Property No. 2. Buyer and Seller acknowledge that
----------------------------
Property No. 2 may be affected by certain Hazardous Materials (as defined in
Paragraph 14(a)(vi) hereof), and notwithstanding anything in this Agreement to
the contrary, provided that the Close of Escrow occurs for the other Properties
(not including Property No. 7) , Buyer shall have until 5:00 pm on the date
which is sixty (60) days after the Close of Escrow for the other Properties (not
including Property No. 7) to approve or disapprove, in Buyer's sole and absolute
discretion, the environmental condition of Property No. 2, including, but not
limited to, the results of any investigations, tests, or studies relating to any
Hazardous Materials affecting Property No. 2. If Buyer approves of Property No.
2 pursuant to this Paragraph 25, the Close of Escrow for Property No. 2 shall
occur as provided for in Paragraph 4(c) hereof. If Buyer disapproves of Property
No. 2 pursuant to this Paragraph 25, this Agreement shall be deemed to be
terminated as it relates to Property No. 2, and neither Buyer nor Seller shall
have any further rights or obligations under this Agreement in connection with
Property No. 2.
-46-
<PAGE>
26. Lease Indemnities.
-----------------
(a) Sellers hereby agree to indemnify, protect, defend (with
counsel chosen by Buyer) and hold harmless Buyer from and against any and
all liability, loss, cost, damage or expense (including, without
limitation, reasonable attorneys' fees) which Buyer may incur under the
Leases and contracts affecting Property No. 3 through Property No. 11,
inclusive from any and all claims and demands whatsoever which may be
asserted against Buyer by reason of any alleged obligation or undertaking
on its part to perform or discharge any of the terms, covenants or
agreements contained therein, to the extent such claims or demands are
attributable to the period prior to the Close of Escrow.
(b) Buyer hereby agrees to indemnify, protect, defend (with
counsel chosen by Sellers) and hold Sellers harmless from and against any
and all liability, loss, damage or expense (including, without limitation,
reasonable attorneys' fees) which Sellers may incur under the Leases and
contracts affecting Property No. 3 through Property No. 11, inclusive from
any and all claims whatsoever which may be asserted against Sellers by
reason of any alleged obligation or undertaking on its part to perform or
discharge any of the terms, covenants or agreements contained therein, to
the extent such claims or demands are attributable to the period after the
Close of Escrow.
-47-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
"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/ DAVID C. ROBERTSON
--------------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
"SELLER" 1. SHADOWRIDGE PLAZA
DONALD P. SHILEY and DARLENE VICKI
SHILEY, Co-Trustees of the D-D Shiley Trust
established March 15, 1984 by Donald P. Shiley
and Darlene Vicki Shiley, Trustors, doing
business as Shadowridge Plaza
By: /s/ DONALD P. SHILEY
--------------------------------------------
Donald P. Shiley, Co-Trustee
By: /s/ DARLENE VICKI SHILEY
--------------------------------------------
Darlene Vicki Shiley, Co-Trustee
-48-
<PAGE>
2. SORIN BIOMEDICAL
/s/ DONALD PEARCE SHILEY
---------------------------------------------
Donald Pearce Shiley, Trustee of the Shiley
Family Trust (Trust B) dated July 14, 1972,
Trustee
3. SHADOWRIDGE BUSINESS CENTER
SHADOWRIDGE BUSINESS CENTER, a
California Limited Partnership
By: Newport National Corporation, a California
Corporation, General Partner
By: /s/ SCOTT R. BRUSSEAU
----------------------------------------
Scott R. Brusseau, President
By: /s/ JEFFRY A. BRUSSEAU
----------------------------------------
Jeffry A. Brusseau, Secretary
By: /s/ F.M. BRUSSEAU
----------------------------------------------
F.M. Brusseau, Trustee of the F.M. (Bruce)
Brusseau Trust, established September 17, 1985,
General Partner
By: /s/ SCOTT R. BRUSSEAU
----------------------------------------------
Scott R. Brusseau, General Partner
By: /s/ JEFFRY A. BRUSSEAU
----------------------------------------------
Jeffry A. Brusseau, General Partner
By: /s/ DONALD P. SHILEY
----------------------------------------------
Donald P. Shiley, Co-Trustee of the D-D Shiley
Trust, established March 15, 1984, by Donald P.
Shiley and Darlene Vicki Shiley, Trustors,
General Partner
-49-
<PAGE>
By: /s/ DARLENE VICKI SHILEY
--------------------------------------------
Darlene Vicki Shiley, Co-Trustee of the D-D
Shiley Trust, established March 15, 1984, by
Donald P. Shiley and Darlene Vicki Shiley,
Trustors, General Partner
By: /s/ DONALD PEARCE SHILEY
---------------------------------------------
Donald Pearce Shiley, Trustee of the Shiley
Family Trust (Trust B) dated July 14, 1972,
Limited Partner
-50-
<PAGE>
4. SIMPSON BUSINESS PARK
SIMPSON WAY ASSOCIATES, a
California Limited Partnership
By: /s/ F.M. BRUSSEAU
----------------------------------------------
F.M. Brusseau, Trustee of the F.M. (Bruce)
Brusseau Trust, established September 17, 1985,
General Partner
By: /s/ DONALD PEARCE SHILEY
----------------------------------------------
Donald Pearce Shiley, Trustee of the Shiley
Family Trust (Trust B) dated July 14, 1972,
Limited Partner
ELLIOTT INVESTMENT COMPANY, a
California limited partnership
By: /s/ ROBERT A. ELLIOTT
----------------------------------------------
Robert A. Elliott
General Partner
CONSENT: /s/ D. KENT DAHLKE
------------------------------------------
D. Kent Dahlke
-51-
<PAGE>
5. SYCAMORE BUSINESS CENTER
SYCAMORE INVESTMENTS, a
California General Partnership
By: /s/ F.M. BRUSSEAU
----------------------------------------------
F.M. Brusseau, Trustee of the F.M. (Bruce)
Brusseau Trust, established September 17, 1985,
Partner
By: /s/ DONALD P. SHILEY
----------------------------------------------
Donald P. Shiley, Co-Trustee of the D-D Shiley
Trust, established March 15, 1984, by Donald P.
Shiley and Darlene Vicki Shiley, Trustors,
Partner
By: /s/ DARLENE VICKI SHILEY
---------------------------------------------
Darlene Vicki Shiley, Co-Trustee of the D-D
Shiley Trust, established March 15, 1984, by
Donald P. Shiley and Darlene Vicki Shiley,
Trustors, Partner
By: /s/ DONALD PEARCE SHILEY
---------------------------------------------
Donald Pearce Shiley, Trustee of the Shiley
Family Trust (Trust B) dated July 14, 1972,
Partner
-52-
<PAGE>
6. COPPERWOOD CENTER
COPPERWOOD LEASING CO., a
California Limited Partnership
By: Newport National Corporation, a
California Corporation, General Partner
By: /s/ SCOTT R. BRUSSEAU
----------------------------------------
Scott R. Brusseau, President
By: /s/ JEFFRY A. BRUSSEAU
----------------------------------------
Jeffry A. Brusseau, Secretary
By: /s/ F.M. BRUSSEAU
----------------------------------------------
F.M. Brusseau, Trustee of the F.M. (Bruce)
Brusseau Trust, established September 17, 1985,
General Partner
By: /s/ DONALD P. SHILEY
----------------------------------------------
Donald P. Shiley, Co-Trustee of the D-D Shiley
Trust, established March 15, 1984, by Donald P.
Shiley and Darlene Vicki Shiley, Trustors,
General Partner
By: /s/ DARLENE VICKI SHILEY
----------------------------------------------
Darlene Vicki Shiley, Co-Trustee of the D-D
Shiley Trust, established March 15, 1984, by
Donald P. Shiley and Darlene Vicki Shiley,
Trustors, General Partner
By: /s/ DONALD P. SHILEY
-----------------------------------------------
Donald P. Shiley, Co-Trustee of the D-D Shiley
Trust, established March 15, 1984, by Donald P.
Shiley and Darlene Vicki Shiley, Trustors,
Limited Partner
By: /s/ DARLENE VICKI SHILEY
----------------------------------------------
Darlene Vicki Shiley, Co-Trustee of the D-D
Shiley Trust, established March 15, 1984, by
Donald P. Shiley and Darlene Vicki Shiley,
Trustors, Limited Partner
-53-
<PAGE>
By: /s/ DONALD PEARCE SHILEY
-------------------------------------------
Donald Pearce Shiley, Trustee of the Shiley
Family Trust (Trust B) dated July 14, 1972,
Limited Partner
CONSENT: /s/ D. KENT DAHLKE
--------------------------------------
D. Kent Dahlke
-54-
<PAGE>
7. PACIFIC CORPORATE CENTER
PALOMAR VENTURE, a
California Limited Partnership
By: Newport National Corporation, a
California Corporation, General Partner
By: /s/ SCOTT R. BRUSSEAU
----------------------------------------
Scott R. Brusseau, President
By: /s/ JEFFRY A. BRUSSEAU
----------------------------------------
Jeffry A. Brusseau, Secretary
By: /s/ F.M. BRUSSEAU
----------------------------------------------
F.M. Brusseau, Trustee of the F.M. (Bruce)
Brusseau Trust, established September 17, 1985,
General Partner
By: /s/ DONALD P. SHILEY
----------------------------------------------
Donald P. Shiley, Co-Trustee of the D-D Shiley
Trust, established March 15, 1984, by Donald P.
Shiley and Darlene Vicki Shiley, Trustors,
General Partner
By: /s/ DARLENE VICKI SHILEY
----------------------------------------------
Darlene Vicki Shiley, Co-Trustee of the D-D
Shiley Trust, established March 15, 1984, by
Donald P. Shiley and Darlene Vicki Shiley,
Trustors, General Partner
By: /s/ DONALD PEARCE SHILEY
----------------------------------------------
Donald Pearce Shiley, Trustee of the Shiley
Family Trust (Trust B) dated July 14, 1972,
Limited Partner
-55-
<PAGE>
8. VIA DEL CAMPO COURT
RANCHO BERNARDO ASSOCIATES,
a California General Partnership
By: Newport National Corporation, a California
Corporation, General Partner
By: /s/ SCOTT R. BRUSSEAU
----------------------------------------
Scott R. Brusseau, President
By: /s/ JEFFRY A. BRUSSEAU
----------------------------------------
Jeffry A. Brusseau, Secretary
By: /s/ SCOTT R. BRUSSEAU
----------------------------------------------
Scott R. Brusseau, General Partner
By: /s/ JEFFRY A. BRUSSEAU
----------------------------------------------
Jeffry A. Brusseau, General Partner
By: /s/ DONALD P. SHILEY
----------------------------------------------
Donald P. Shiley, Co-Trustee of the D-D Shiley
Trust, established March 15, 1984, by Donald P.
Shiley and Darlene Vicki Shiley, Trustors,
General Partner
By: /s/ DARLENE VICKI SHILEY
----------------------------------------------
Shiley Trust, established March 15, 1984, by
Donald P. Shiley and Darlene Vicki Shiley,
Trustors, Partner
-56-
<PAGE>
9. EASTSIDE NEWPORT CENTER
EASTSIDE ASSOCIATES, a
California Limited Partnership
By: Newport National Corporation, a California
Corporation, General Partner
By: /s/ SCOTT R. BRUSSEAU
-----------------------------------------
Scott R. Brusseau, President
By: /s/ JEFFRY A. BRUSSEAU
-----------------------------------------
Jeffry A. Brusseau, Secretary
By: /s/ DONALD P. SHILEY
----------------------------------------------
Donald P. Shiley, Co-Trustee of the D-D Shiley
Trust, established March 15, 1984, by Donald P.
Shiley and Darlene Vicki Shiley, Trustors,
General Partner
By: /s/ DARLENE VICKI SHILEY
-----------------------------------------------
Darlene Vicki Shiley, Co-Trustee of the D-D
Shiley Trust, established March 15, 1984, by
Donald P. Shiley and Darlene Vicki Shiley,
Trustors, General Partner
By: /s/ F.M. BRUSSEAU
-----------------------------------------------
F.M. Brusseau, Trustee of the F.M. (Bruce)
Brusseau Trust, established September 17, 1985,
General Partner
By: /s/ SCOTT R. BRUSSEAU
-----------------------------------------------
Scott R. Brusseau, General Partner
By: /s/ JEFFRY A. BRUSSEAU
-----------------------------------------------
Jeffry A. Brusseau, General Partner
By: /s/ DONALD PEARCE SHILEY
-----------------------------------------------
Donald Pearce Shiley, Trustee of the Shiley
Family Trust (Trust B) dated July 14, 1972,
Limited Partner
-57-
<PAGE>
10. THE CAMPUS
THE CAMPUS, LLC., a
California Limited Liability Company
By: Newport National Corporation,
a California corporation,
Member Manager
By: /s/ SCOTT R. BRUSSEAU
----------------------------------------
Scott R. Brusseau, President
By: /s/ JEFFRY A. BRUSSEAU
----------------------------------------
Jeffry A. Brusseau, Secretary
By: /s/ SCOTT R. BRUSSEAU
----------------------------------------------
Scott R. Brusseau, Member
By: /s/ JEFFRY A. BRUSSEAU
----------------------------------------------
Jeffry A. Brusseau, Member
By: /s/ F.M. BRUSSEAU
----------------------------------------------
F.M. Brusseau, Trustee of the F.M. (Bruce)
Brusseau Trust, established September 17, 1985,
Member
By: /s/ DONALD P. SHILEY
----------------------------------------------
Donald P. Shiley, Co-Trustee of the D-D Shiley
Trust, established March 15, 1984, by Donald P.
Shiley and Darlene Vicki Shiley, Trustors,
Member
By: /s/ DARLENE VICKI SHILEY
----------------------------------------------
Darlene Vicki Shiley, Co-Trustee of the D-D
Shiley Trust, established March 15, 1984, by
Donald Pearce Shiley and Darlene Vicki Shiley,
Trustors, Member
-58-
<PAGE>
11. LA TERRAZA DEVELOPMENT SITE
LA TERRAZA, a California General Partnership
By: Newport National Corporation, a California
Corporation, General Partner
By: /s/ SCOTT R. BRUSSEAU
---------------------------------------
Scott R. Brusseau, President
By: /s/ JEFFRY A. BRUSSEAU
---------------------------------------
Jeffry A. Brusseau, Secretary
By: /s/ DONALD PEARCE SHILEY
---------------------------------------
Donald Pearce Shiley, Trustee of the
Shiley Family Trust (Trust B) dated
July 14, 1972, General Partner
-59-
<PAGE>
JOINDER BY COMPANY AND OP GENERAL PARTNER
-----------------------------------------
The undersigned join in this agreement to evidence their consent to
the provisions hereof and to confirm the representations, warranties and
certifications contained in this agreement which are expressly stated to be made
by them by their joinder.
PRENTISS PROPERTIES TRUST, a
Maryland Real Estate Investment Trust
By: /s/ DAVID C. ROBERTSON
------------------------------------
Name:
-------------------------------
Title:
-------------------------------
PRENTISS PROPERTIES I, INC., a Delaware
Corporation
By: /s/ DAVID C. ROBERTSON
------------------------------------
Name:
-------------------------------
Title:
-------------------------------
-60-
<PAGE>
Acceptance by Escrow Holder:
_______________________________ hereby acknowledges that it has
received a fully executed original or original executed counterparts of the
foregoing Agreement of Purchase and Sale and Joint Escrow Instructions and
agrees to act as Escrow Holder thereunder and to be bound by and strictly
perform the terms thereof as such terms apply to Escrow Holder.
Dated: February 5, 1998 _______________________________________
By: /s/ Sharon L. Cooper
-------------------------------------
Its: Authorized Agent
-61-
<PAGE>
EXHIBIT 10.4
CREDIT AGREEMENT
among
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
as Borrower
BANK ONE, TEXAS, N.A.,
as Administrative Agent
NATIONSBANK OF TEXAS, N.A.,
as Syndication Agent
and
THE LENDERS NAMED HEREIN,
as Lenders
$300,000,000
AS OF
DECEMBER 30, 1997
COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY,
CRESTAR BANK,
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH,
and
SOCIETE GENERALE, SOUTHWEST AGENCY,
as Co-Agents
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS AND TERMS...............................................1
1.1 Definitions.......................................................1
1.2 Time References..................................................15
1.3 Other References.................................................15
1.4 Accounting Principles............................................15
SECTION 2 COMMITMENT.........................................................15
2.1 Revolving Facility...............................................15
2.2 Borrowing Procedure..............................................16
2.3 Termination......................................................16
SECTION 3 TERMS OF PAYMENT...................................................16
3.1 Notes and Payments...............................................16
3.2 Interest and Principal Payments..................................17
(a) Interest Payments..........................................17
(b) Principal Payments.........................................17
(c) Voluntary Prepayment.......................................17
3.3 Interest Options.................................................17
3.4 Quotation of Rates...............................................17
3.5 Default Rate.....................................................17
3.6 Interest Recapture...............................................17
3.7 Interest Calculations............................................18
3.8 Maximum Rate.....................................................18
3.9 Interest Periods.................................................18
3.10 Conversions......................................................19
3.11 Order of Application.............................................19
3.12 Sharing of Payments, Etc.........................................19
3.13 Booking Borrowings...............................................19
3.14 Basis Unavailable or Inadequate for the Eurodollar Rate..........20
3.15 Additional Costs.................................................20
3.16 Change in Governmental Requirement...............................21
3.17 Funding Loss.....................................................21
3.18 Foreign Lenders..................................................22
3.19 Fees.............................................................22
(a) Treatment of Fees..........................................22
(b) Agent Fees.................................................22
(c) Commitment Fees............................................22
3.20 Option to Replace Lenders........................................23
SECTION 4 UNENCUMBERED PROPERTIES; GUARANTIES................................23
4.1 Unencumbered Properties..........................................23
4.2 Negative Pledge Agreements.......................................24
4.3 Guaranties.......................................................24
SECTION 5 CONDITIONS PRECEDENT...............................................25
5.1 Conditions to Initial Borrowing..................................25
5.2 Conditions to all Borrowings.....................................26
CREDIT AGREEMENT (ii)
<PAGE>
5.3 Conditions.......................................................26
SECTION 6 REPRESENTATIONS AND WARRANTIES.....................................27
6.1 Purpose of Credit Facility.......................................27
6.2 Existence, Good Standing, Authority and Compliance...............27
6.3 Affiliates.......................................................27
6.4 Authorization and Contravention..................................27
6.5 Binding Effect...................................................27
6.6 Financial Statements; Fiscal Year................................28
6.7 Litigation.......................................................28
6.8 Taxes............................................................28
6.9 Environmental Matters............................................28
6.10 Employee Plans...................................................29
6.11 Properties; Liens................................................29
6.12 Locations........................................................29
6.13 Government Regulations...........................................29
6.14 Transactions with Affiliates.....................................29
6.15 Insurance........................................................29
6.16 Labor Matters....................................................29
6.17 Solvency.........................................................29
6.18 Full Disclosure..................................................29
6.19 Exemption from ERISA; Plan Assets................................30
SECTION 7 AFFIRMATIVE COVENANTS..............................................30
7.1 Items to be Furnished............................................30
7.2 Use of Proceeds..................................................31
7.3 Books and Records................................................31
7.4 Inspections......................................................31
7.5 Taxes............................................................31
7.6 Payment of Obligations...........................................31
7.7 Expenses.........................................................32
7.8 Maintenance of Existence, Assets, and Business...................32
7.9 Insurance........................................................32
7.10 Preservation and Protection of Rights............................32
7.11 Environmental Laws...............................................32
7.12 INDEMNIFICATION..................................................32
7.13 REIT Status......................................................33
7.14 ERISA Exemptions.................................................33
7.15 Listed Company...................................................33
SECTION 8 NEGATIVE COVENANTS.................................................34
8.1 Payment of Obligations...........................................34
8.2 Employee Plans...................................................34
8.3 Transactions with Affiliates.....................................34
8.4 Compliance with Governmental Requirements and Documents..........34
8.5 Loans, Advances, and Investments.................................34
8.6 Dividends and Distributions......................................35
8.7 Sale of Assets...................................................35
8.8 Mergers and Dissolutions.........................................35
8.9 Assignment.......................................................35
8.10 Fiscal Year and Accounting Methods...............................35
8.11 New Businesses...................................................35
CREDIT AGREEMENT (iii)
<PAGE>
8.12 Government Regulations...........................................35
8.13 Subsidiary Guarantors............................................35
8.14 Amendment of Constituent Documents...............................35
SECTION 9 FINANCIAL COVENANTS................................................36
9.1 Minimum Tangible Net Worth.......................................36
9.2 Total Indebtedness to Total Assets...............................36
9.3 Maximum Secured Debt.............................................36
9.4 Debt.............................................................36
9.5 Interest and Debt Service Coverage Ratios........................36
SECTION 10 DEFAULT...........................................................37
10.1 Payment of Obligation............................................37
10.2 Covenants........................................................37
10.3 Debtor Relief....................................................37
10.4 Judgments and Attachments........................................38
10.5 Government Action................................................38
10.6 Misrepresentation................................................38
10.7 Default Under Other Agreements...................................38
10.8 Validity and Enforceability of Loan Documents....................38
10.9 Management Changes...............................................38
10.10 Change in Control................................................39
10.11 Plan Assets......................................................39
SECTION 11 RIGHTS AND REMEDIES...............................................39
11.1 Remedies Upon Default............................................39
11.2 Waivers..........................................................39
11.3 Performance by Administrative Agent..............................39
11.4 Not in Control...................................................39
11.5 Course of Dealing................................................40
11.6 Cumulative Rights................................................40
11.7 Application of Proceeds..........................................40
11.8 Certain Proceedings..............................................40
SECTION 12 AGENTS AND LENDERS................................................40
12.1 Agents...........................................................40
12.2 Expenses.........................................................42
12.3 Proportionate Absorption of Losses...............................42
12.4 Delegation of Duties; Reliance...................................42
12.5 Limitation of Agents' Liability..................................43
12.6 Default..........................................................44
12.7 Limitation of Liability..........................................44
12.8 Relationship of Lenders..........................................44
12.9 Benefits of Agreement............................................44
12.10 Approval of Lenders..............................................44
SECTION 13 MISCELLANEOUS.....................................................45
13.1 Headings.........................................................45
13.2 Nonbusiness Days; Time...........................................45
13.3 Communications...................................................45
13.4 Form and Number of Documents.....................................45
13.5 Survival.........................................................45
CREDIT AGREEMENT (iv)
<PAGE>
13.6 Governing Law....................................................45
13.7 Invalid Provisions...............................................45
13.8 Venue; Service of Process; Jury Trial............................46
13.9 Amendments, Consents, Conflicts, and Waivers.....................46
13.10 Multiple Counterparts............................................47
13.11 Successors and Assigns; Participations...........................47
13.12 Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances....................................................49
13.13 Entirety.........................................................49
CREDIT AGREEMENT (v)
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1 Parties, Addresses, Commitments, and Wiring Information
Schedule 4.1 Initial Unencumbered Properties
Schedule 6.2 Jurisdictions of Incorporation, Chief Executive Office, and
Jurisdictions
Schedule 6.7 Litigation
Schedule 6.9 Environmental Matters
Schedule 6.14 Affiliates Transactions
Schedule 9.4 Existing Recourse Debt
Exhibit A Borrowing Request
Exhibit B Compliance Certificate
Exhibit C-1 Form of PPT Guaranty
Exhibit C-2 Form of Subsidiary Guaranty
Exhibit D Form of Revolving Credit Note
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Counsel Opinion
CREDIT AGREEMENT (vi)
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of December 30, 1997, among PRENTISS
PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware limited partnership
("BORROWER"), each of the lenders that are a signatory hereto or that becomes a
signatory hereto as provided in SECTION 13.11(c) (individually, together with
its successors and assigns, a "LENDER" and collectively, the "LENDERS"), BANK
ONE, TEXAS, N.A., a national banking association, as Administrative Agent (in
such capacity, together with its successors and assigns, the "ADMINISTRATIVE
AGENT"), and NATIONSBANK OF TEXAS, N.A., as Syndication Agent (in such capacity,
together with its successors and assigns, "SYNDICATION AGENT").
R E C I T A L S:
- - - - - - - -
1. Borrower has requested that Lenders extend to Borrower a
revolving credit facility not to exceed the principal amount of $300,000,000.
2. Lenders are willing to extend the requested credit on the terms
and subject to the conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1
DEFINITIONS AND TERMS
1.1 DEFINITIONS. Unless otherwise indicated, as used in the Loan
Documents:
"ADJUSTED AGGREGATE EBITDA" means, for any period, (a) Aggregate
EBITDA, minus (b) the EBITDA Adjustments for all Properties.
"ADJUSTED PROPERTY EBITDA" means, for any Property, the product of (a)
the difference between (i) the EBITDA of such Property, minus (ii) the EBITDA
Adjustments for such Property, in each case for the three (3) month period
ending on the last day of the fiscal quarter immediately preceding such
determination date, times (b) four (4). For Properties owned for less than three
(3) months as of the date of determination, EBITDA of all such Properties shall
be equal to the lesser of (I) the product of (x) the Approved Costs of such
Properties, times (y) eight percent (8%), and (II) Borrower's most-recent asset
manager's forecasts for the EBITDA of such Properties for the first (1st)
calendar quarter following acquisition thereof; provided that if Administrative
Agent shall reasonably determine that such amount is not an appropriate
computation of EBITDA of any such Property, then EBITDA for all such Properties
shall be based upon the most recent three (3) month period available.
"ADMINISTRATIVE AGENT" is defined in the preamble.
"AFFILIATE" of a Person means any other individual or entity who
directly or indirectly controls, or is controlled by, or is under common control
with, that Person. For purposes of this definition "control," "controlled by,"
and "under common control with" mean possession, directly or indirectly, of
power to direct (or cause the direction of) management or policies (whether
through ownership of voting securities or other ownership interests, by
contract, or otherwise).
"AGENTS" means Administrative Agent and Syndication Agent, and "AGENT"
means any one of the Agents.
CREDIT AGREEMENT
<PAGE>
"AGGREGATE EBITDA" means, for the Companies for any period, (a) EBITDA
of the Companies, minus (b) the Companies' Share of recognized net income of
Unconsolidated Affiliates, plus (c) the Companies' Share of EBITDA of
Unconsolidated Affiliates, to the extent a Company is entitled to such amounts
under the Constituent Documents of the applicable Unconsolidated Affiliate.
"AGREEMENT" means this Credit Agreement, as modified, amended,
supplemented, or restated from time to time.
"APPLICABLE MARGIN" means, as of any date of determination, the
interest margin over the Eurodollar Rate that corresponds to the Moody's Rating
and the S & P Rating set forth below on such date of determination:
<TABLE>
<CAPTION>
===========================================================================
Applicable
LEVEL Moody's Rating S & P Rating Margin
===========================================================================
<C> <S> <C> <C>
1 Less than Baa3 or Less than BBB- or 1.375%
Not Rated Not Rated
---------------------------------------------------------------------------
2 Baa3 BBB- 1.15%
---------------------------------------------------------------------------
3 Baa2 BBB 1.00%
---------------------------------------------------------------------------
4 Baa1 or better BBB+ or better .85%
===========================================================================
</TABLE>
For purposes of the foregoing: (a) if only one of the Moody's Rating or the S &
P Rating shall be in effect, then Borrower may substitute such rating with the
corresponding rating of Duff & Phelps Credit Rating Co., Fitch Investors
Service, L.P., or another rating agency reasonably acceptable to Agents,
provided that if no such other rating is available, then the Applicable Margin
will be determined by reference to LEVEL 1; (b) if the Moody's Rating and the S
& P Rating shall fall within different LEVELS (but not more than one (1) LEVEL
apart), then the Applicable Margin shall be determined by reference to the
numerically lower LEVEL (e.g., if the S & P Rating is in LEVEL 1 and the Moody's
Rating is in LEVEL 2, then the Applicable Margin shall be determined by
reference to LEVEL 1); provided that if the higher of the Moody's Rating or the
S & P Rating is supported by the corresponding rating of Duff & Phelps Credit
Rating Co., Fitch Investors Service, L.P., or another rating agency reasonably
acceptable to Agents, then the numerically higher CATEGORY shall apply; and (c)
if the Moody's Rating and the S & P Rating shall fall within different LEVELS
(and by more than one (1) LEVEL), then the Applicable Margin shall be determined
by reference to the LEVEL that is one (1) LEVEL higher than the numerically
lower LEVEL (e.g., if the S & P Rating is in LEVEL 1 and the Moody's Rating is
in LEVEL 4, then the Applicable Margin shall be determined by reference to LEVEL
2). Each change in the Applicable Margin shall be effective commencing on the
fifth (5th) Business Day following the earlier to occur of (i) Administrative
Agent's receipt of notice from Borrower, as required in SECTION 7.1(h), of a
change in the Moody's Rating or the S & P Rating, and (ii) Administrative
Agent's actual knowledge of a change in the Moody's Rating or the S & P Rating.
"APPROVED COSTS" means, for any Property, the sum of the acquisition,
construction, and other capitalized costs of such Property (or the stock,
partnership interests, or other ownership interests in the Company that owns
such Property), whether in the form of cash, property, liabilities assumed, or
other consideration.
"ASSUMED INTEREST EXPENSE" means, as of any date, the product of (a)
the aggregate amount of all Unsecured Debt of the Companies as of such date,
times (b) the weighted average interest rate per annum on all such Unsecured
Debt as of such date.
CREDIT AGREEMENT 2
<PAGE>
"BASE RATE" means, for any day, the greater of (a) the sum of the
Federal Funds Rate plus one-half of one percent (0.5%), and (b) the annual
interest rate most recently announced by Administrative Agent as its prime rate
(or, if the Person then acting as Administrative Agent under this Agreement is
not a bank organized under the Governmental Requirements of the United States or
any State, then the rate announced by Bank One, Texas, National Association, or
any successor thereof, as its prime rate) in effect at its principal office,
automatically fluctuating upward and downward with and as specified in each
announcement without special notice to Borrower or any other Person (which prime
rate may not necessarily represent the lowest or best rate actually charged to a
customer).
"BASE RATE BORROWING" means a Borrowing bearing interest at the Base
Rate.
"BORROWING" means (without duplication) any amount disbursed by (a)
Lenders to or on behalf of Borrower under the Loan Documents, or (b) any Lender
in accordance with, and to satisfy the obligations of Borrower under, any Loan
Document.
"BORROWING DATE" means for any Borrowing (a) the date for which funds
are requested by Borrower, or (b) the date any Borrowing is converted hereunder
to another Type of Borrowing.
"BORROWING REQUEST" means a request substantially in the form of
EXHIBIT A.
"BUSINESS DAY" means (a) for all purposes, any day other than Saturday,
Sunday, and any other day that commercial banks are authorized by any
Governmental Requirement to be closed in Texas or New York, and (b) for purposes
of any Eurodollar Borrowing, a day that satisfies the requirements of CLAUSE (a)
and is a day when commercial banks are open for domestic or international
business in London.
"CAPITAL EXPENDITURES" means any expenditures by a Person for an asset
that will be used in years subsequent to the year in which the expenditure is
made or which is properly classified in the relevant financial statements of
such Person in accordance with GAAP as a capital asset.
"CAPITAL LEASE" means, for any Person, any capital lease or sublease
that has been (or under GAAP should be) capitalized on a balance sheet of such
Person.
"CASH EQUIVALENTS" means (a) investments and direct obligations of the
United States of America or any agency thereof, or obligations fully guaranteed
by the United States of America or any agency thereof, provided that such
obligations mature within one (1) year of the date of acquisition thereof, (b)
commercial paper rated "A-1" or higher according to S & P or "P-1" or better
according to Moody's and maturing not more than one hundred and eighty (180)
days from the date of acquisition thereof, (c) time deposits with, and
certificates of deposit and bankers' acceptances issued by, any Agent or any
United States bank having capital surplus and undivided profits aggregating at
least $1,000,000,000, and (d) mutual funds whose investments are limited to the
foregoing.
"CHANGE IN CONTROL" means, with respect to Borrower, the transfer of
beneficial ownership of the outstanding partnership interests of Borrower such
that PPT owns, directly or indirectly, less than fifty-one percent (51%) of the
outstanding partnership interests of Borrower.
"CLOSING DATE" means the date this Agreement is fully executed and
delivered.
"CO-AGENTS" means Commerzbank Aktiengesellschaft, Atlanta Agency,
Crestar Bank, Dresdner Bank AG, New York Branch and Grand Cayman Branch, and
Societe Generale, Southwest Agency.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
CREDIT AGREEMENT 3
<PAGE>
"COMMITMENT" means, for a Lender, the amount (which is subject to
reduction and cancellation as provided in this Agreement) stated beside such
Lender's name on SCHEDULE 1 as most recently amended under this Agreement, as
the same may be reduced pursuant to SECTION 2.3 or terminated pursuant to
SECTION 11.1, and as the same may be increased or decreased from time to time by
further assignment pursuant to SECTION 13.11.
"COMMITMENT PERCENTAGE" means, for any Lender, the proportion (stated
as a percentage) that its Commitment bears to the Total Commitment.
"COMPANIES" means, without duplication, (a) PPT, (b) Borrower, and (c)
each of their respective Consolidated Affiliates, and "COMPANY" means any one of
the Companies.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT B and signed by a Responsible Officer of Borrower and PPT.
"CONSOLIDATED AFFILIATE" means, in respect of any Person, any other
Person in whom such Person holds an equity or ownership interest and whose
financial results would be consolidated under GAAP with the financial results of
such Person on the consolidated financial statements of such Person.
"CONSTITUENT DOCUMENTS" means, with respect to any Person, its articles
or certificate of incorporation, bylaws, partnership agreements, organizational
documents, limited liability company agreements, trust agreement, or such other
document as may govern such Person's formation, organization, and management.
"CREDIT PARTIES" means Agents, Co-Agents, and Lenders, and "CREDIT
PARTY" means any one of the Credit Parties.
"CURRENT FINANCIALS" means, at any time, the consolidated Financial
Statements of the Companies most recently delivered to Administrative Agent
under SECTION 7.1(a) or 7.1(b), as the case may be.
"CUSTOMARY RECOURSE EXCEPTIONS" means with respect to any Non-Recourse
Debt, exclusions from the exculpation provisions with respect to such
Non-Recourse Debt for fraud, misapplication of cash, environmental claims,
breach of representations or warranties, failure to pay taxes and insurance, and
other circumstances customarily excluded by institutional lenders from
exculpation provisions and/or included in separate indemnification agreements in
non-recourse financings of real estate.
"DEBT SERVICE" means, for the Companies on a consolidated basis for any
period, the sum of all regularly scheduled principal payments (but excluding any
regularly scheduled principal payments on any Indebtedness which pays such
Indebtedness in full, but only to the extent that the amount of such final
payment is greater than the scheduled principal payment immediately preceding
such final payment) and all Interest Expense that are paid or payable during
such period in respect of all Liabilities of the Companies.
"DEBTOR RELIEF LAWS" means Title 11 of the United States Code and all
other applicable state or federal liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar Governmental Requirements affecting creditors' Rights in
effect from time to time.
"DEFAULT" is defined in SECTION 10.
"DEFAULTING LENDER" means, as of any date, any Lender that has
defaulted on any of its obligations under this Agreement, which default has not
been cured or waived as of such date.
CREDIT AGREEMENT 4
<PAGE>
"DEFAULT RATE" means an annual rate of interest equal from day-to-day
to the lesser of (a) the then-existing Base Rate plus four (4%), and (b) the
Maximum Rate.
"DISTRIBUTION" means, with respect to any shares of any capital stock
or other equity securities or other ownership interests issued by a Person, (a)
the retirement, redemption, purchase or other acquisition for value of such
securities or interests by such Person, (b) the declaration or payment of any
dividend on or with respect to such securities or interests by such Person, (c)
any loan or advance by that Person to, or other investment by that Person in,
the holder of any of such securities or interests, and (d) any other payment by
that Person with respect to such securities or interests.
"EBITDA" means, for any Person or any Property for any period, the sum
of (a) Net Income, plus (b) depreciation and amortization expense, plus (c)
Interest Expense, plus (d) income taxes deducted from Net Income in accordance
with GAAP, plus (e) extraordinary losses (and any unusual losses arising in or
outside the ordinary course of business of such Person not included in
extraordinary losses) determined in accordance with GAAP that have been
reflected in the determination of Net Income, minus (f) extraordinary gains (and
any unusual gains arising in or outside the ordinary course of business of such
Person not included in extraordinary gains) determined in accordance with GAAP
that have been reflected in the determination of Net Income, minus (g) earnings
of Consolidated Affiliates for such period distributed to minority interests.
"EBITDA ADJUSTMENTS" means, for any Property for any period,
appropriate accruals for items such as taxes, insurance, or other expenses
determined by Borrower (subject to the reasonable approval of Administrative
Agent), a management fee equal to the greater of actual fees paid or two percent
(2%) of rents, and a reserve of at least $1 per square foot per year for office
Properties and $0.25 per square foot for industrial Properties, all as
determined in accordance with accounting principles reasonably acceptable to
Administrative Agent, consistently applied.
"EBITDA VALUE" means, for any Property as of any determination date,
(a) Adjusted Property EBITDA for such Property, divided by (b) nine and
one-quarter of one percent (9.25%).
"ELIGIBLE ASSIGNEE" means any of the following entities: (a) a
commercial bank organized under the laws of the United States, or any state
thereof; (b) a commercial bank organized under the laws of any other country
which is a member of the Organization for Economic Cooperation and Development,
or a political subdivision of any such country, provided that such bank is
acting through a branch or agency located in the United States, in the country
in which it is organized, or in another country which is also a member of the
Organization for Economic Cooperation and Development; (c) the central bank of
any country which is a member of the Organization for Economic Cooperation and
Development; and (d) any other Person approved by Agents and, so long as no
Default or Potential Default exists, Borrower.
"EMPLOYEE PLAN" means an employee pension benefit plan covered by Title
IV of ERISA and established or maintained by any Company.
"ENVIRONMENTAL LAW" means any and all Governmental Requirements
pertaining to health or the environment in effect in any and all jurisdictions
in which any Company is conducting or at any time has conducted business, or
where any property of any Company is located, including, without limitation, the
Oil Pollution Act of 1990, as amended, ("OPA"), the Clean Air Act, as amended,
the Comprehensive Environmental, Response, Compensation, and Liability Act of
1980, as amended, ("CERCLA"), the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976, as amended, ("RCRA"), the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, and other environmental
conservation or protection Governmental Requirements. The term "oil" has the
meaning specified in OPA,
CREDIT AGREEMENT 5
<PAGE>
the terms "hazardous substance" and "release" (or "threatened release") have the
meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or
"disposed") have the meanings specified in RCRA; provided, however, that (i) in
the event either OPA, CERCLA or RCRA is amended so as to broaden the meaning of
any term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment, and (ii) to the extent the Governmental
Requirements of the state in which any property of any Company is located
establish a meaning for "oil," "hazardous substance," "release," "solid waste"
or "disposal" which is broader than that specified in either OPA, CERCLA or
RCRA, such broader meaning shall apply.
"EQUITY ISSUANCE" means the issuance or sale by any Company of any
capital stock (common or preferred), partnership, profits, capital, or member
interests, or options, warrants, or other right to subscribe for or otherwise
acquire shares of capital stock or partnership, profits, capital, or member
interests, of such Company, other than the issuance by Borrower of partnership
interests in Borrower to sellers of properties or non-cash assets as a partial
payment of the purchase price of such assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"EURODOLLAR RATE" means, for any Eurodollar Borrowing for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first
(1st) day of such Interest Period for a term comparable to such Interest Period.
If for any reason such rate is not available, then the term "Eurodollar Rate"
shall mean, for any Eurodollar Borrowing for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first (1st) day of such Interest Period for a term comparable
to such Interest Period; provided, however, if more than one rate is specified
on Reuters Screen LIBO Page, then the applicable rate shall be the arithmetic
mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of
1%).
"EURODOLLAR BORROWING" means a Borrowing bearing interest at the sum of
the Eurodollar Rate plus the Applicable Margin.
"FEDERAL FUNDS RATE" means, on any day, the annual rate (rounded
upwards, if necessary, to the nearest 0.01%) determined by Administrative Agent
(which determination is conclusive and binding, absent manifest error) to be
equal to the weighted average of the rates on overnight federal funds
transactions with member banks of the Federal Reserve System arranged by federal
funds brokers as published by the Federal Reserve Bank of New York on the next
successive Business Day; provided, however, that (a) if such determination date
is not a Business Day, then the Federal Funds Rate for such day shall be the
rate for such transactions on the next preceding Business Day as published on
the next successive Business Day, or (b) if those rates are not published for
any Business Day, then the Federal Funds Rate shall be the average of the
quotations at approximately 10:00 a.m. on such Business Day received by
Administrative Agent from three (3) federal funds brokers of recognized standing
selected by Administrative Agent in its sole discretion.
"FINANCIAL STATEMENTS" of a Person means balance sheets, and statements
of earnings, shareholders' equity, and cash flow prepared (a) according to GAAP,
(b) except as stated in SECTION 1.4, in comparative form to prior year-end
figures or corresponding periods of the preceding fiscal year, as applicable,
and (c) on a consolidated basis if that Person had any Consolidated Affiliates
during the applicable period.
"FIXED CHARGES" means, for the Companies on a consolidated basis for
any period, the sum of (a) Debt Service during such period, and (b) all
Distributions paid or payable during such period in respect of any preferred
stock of the Companies.
CREDIT AGREEMENT 6
<PAGE>
"FUNDING LOSS" means, without duplication, any loss, expense, or costs
incurred by any Lender (including any loss, expense or cost incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such
Lender to make or maintain any portion of any Borrowing as a Eurodollar
Borrowing) when (a) Borrower fails or refuses (for any reason other than any
Lender's failure to comply with this Agreement) to take any Borrowing that it
has requested under this Agreement, or (b) Borrower prepays or pays any
Borrowing or converts any Borrowing to a Borrowing of another Type, in each
case, before the last day of the applicable Interest Period.
"FUNDS FROM OPERATIONS" means, for any Person for any period, Net
Income before such Person's Share of the Net Income or loss of any
Unconsolidated Affiliate, plus any and all cash distributions received by such
Person representing such Person's Share of the Net Income of any Unconsolidated
Affiliate, plus depreciation and amortization (exclusive of amortization of
financing costs), all as determined in accordance with GAAP; provided that there
shall not be included in such calculation (a) any proceeds of any insurance
policy other than rental or business interruption insurance received by such
Person, (b) any gain or loss which is classified as "extraordinary" in
accordance with GAAP, or (c) any capital gains and taxes on capital gains.
"GAAP" means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board that are applicable on the date of this
Agreement, subject to changes permitted by SECTION 1.4.
"GOVERNMENTAL AUTHORITY" means any (a) local, state, or federal
judicial, executive, or legislative instrumentality, (b) private arbitration
board or panel acting through binding arbitration or mediation, or (c) central
bank.
"GOVERNMENTAL REQUIREMENT" means all applicable statutes, laws,
treaties, ordinances, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, and interpretations of any Governmental Authority.
"GUARANTIES" means the PPT Guaranty and the Subsidiary Guaranty, and
"GUARANTY" means any one of the Guaranties.
"GUARANTORS" means PPT and Subsidiary Guarantors, and "GUARANTOR" means
any one of the Guarantors.
"HAZARDOUS SUBSTANCE" means any substance (a) the presence of which
requires removal, remediation, or investigation under any Environmental Law, or
(b) that is defined or classified as a hazardous waste, hazardous material,
pollutant, contaminant, or toxic or hazardous substance under any Environmental
Law.
"INDEBTEDNESS" means, for any Person, all Liabilities of such Person,
excluding accounts payable and accrued expenses in each case incurred in the
ordinary course of business and the payment of which is not past-due (unless
payment is being contested in good faith by appropriate proceedings diligently
conducted and for which reserves in accordance with GAAP or otherwise reasonably
acceptable to Administrative Agent have been provided).
"INTEREST EXPENSE" means, for any Person for any period, all of such
Person's paid, accrued, or amortized interest expense (net of any amounts
received by such Person in respect of any Interest Rate Agreements, but
including any amounts paid or amortized during such period in respect of any
Interest Rate Agreements) on such Person's Indebtedness (whether direct,
indirect, or contingent, and including interest on all convertible
Indebtedness), other than interest capitalized on the balance sheet of such
Person in accordance with GAAP.
CREDIT AGREEMENT 7
<PAGE>
"INTEREST PERIOD" has the meaning set forth in SECTION 3.9.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, or other similar
agreement or arrangement designed to protect any Company against fluctuations in
interest rates.
"INVESTMENT GRADE RATING" means that (a) if both the Moody's Rating and
the S & P Rating are in effect, then both (i) the Moody's Rating equals Baa3 or
better, and (ii) the S & P Rating equals BBB- or better, or (b) if only one of
the Moody's Rating or the S & P Rating shall be in effect, then (i) either the
Moody's Rating equals Baa3 or better or the S & P Rating equals BBB- or better,
and (ii) such rating is supported by the corresponding rating of Duff & Phelps
Credit Rating Co., Fitch Investors Service, L.P., or another rating agency
reasonably acceptable to Agents.
"LENDERS" is defined in the preamble.
"LIABILITIES" means (without duplication), for any Person, (a) any
indebtedness, liabilities, or obligations required by GAAP to be classified upon
such Person's balance sheet as liabilities, (b) any liabilities secured (or for
which the holder of the Liability has an existing Right, contingent or
otherwise, to be so secured) by any Lien existing on property owned or acquired
by that Person, (c) any obligations that have been (or under GAAP should be)
capitalized for financial reporting purposes, including all Capital Leases, (d)
any guaranties, endorsements, and other contingent obligations with respect to
the principal of the Liabilities or obligations of others, and (e) such Person's
Share of any Liabilities of Unconsolidated Affiliates (other than of Broadmoor
Austin Associates), and "LIABILITY" means any of the Liabilities.
"LIEN" means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind and any other
substantially similar arrangement for a creditor's claim to be satisfied from
assets or proceeds prior to the claims of other creditors or the owners.
"LITIGATION" means any action by or before any Governmental Authority.
"LOAN DOCUMENTS" means (a) this Agreement, certificates, and reports
delivered under this Agreement, and exhibits and schedules to this Agreement,
(b) the Notes, (c) the Guaranties, (d) any Interest Rate Agreements with any
Lender specifically relating to the Obligation, (e) all other agreements,
documents, and instruments executed by Obligors in favor of any of the Credit
Parties (or any Agent on behalf of the Credit Parties) ever delivered in
connection with or under this Agreement, and (f) all renewals, extensions, and
restatements of, and amendments and supplements to, any of the foregoing.
"MAJORITY LENDERS" means, as of any date, any combination of Lenders
(other than Defaulting Lenders) who collectively hold fifty-one percent (51%) or
more of the Total Commitments (excluding the Commitments of Defaulting Lenders),
or if the Total Commitments shall have been terminated, then of the Total
Principal Debt (other than the Principal Debt of Defaulting Lenders).
"MATERIAL ADVERSE EVENT" means any circumstance or event that,
individually or collectively with other circumstances or events, reasonably is
expected to result in any (a) material impairment of the ability of the Obligors
(including Borrower and PPT), taken as a whole, Borrower, or PPT to perform any
of their respective payment or other obligations under any Loan Document, (b)
material impairment of the ability of any Credit Party to enforce (i) any of the
obligations of any Obligor under this Agreement or the other Loan Documents, or
(ii) any of their respective Rights under the Loan Documents, or (c) material
and adverse effect on the financial condition of the Companies (including
Borrower and PPT), taken as a whole, Borrower, or PPT.
CREDIT AGREEMENT 8
<PAGE>
"MAXIMUM AMOUNT" and "MAXIMUM RATE" respectively mean, for an Agent or
a Lender, the maximum non-usurious amount and the maximum non-usurious rate of
interest that, under applicable Governmental Requirement, such Agent or Lender
is permitted to contract for, charge, take, reserve, or receive on the
Obligation.
"MOODY'S" means Moody's Investors Service, Inc., or, if Moody's no
longer publishes ratings, another ratings agency acceptable to Agents.
"MOODY'S RATING" means the most recently-announced rating from time to
time of Moody's assigned to any class of long-term senior, unsecured debt
securities issued by PPT, as to which no letter of credit, guaranty, or third
party credit support is in place, regardless of whether all or any part of such
Liability has been issued at the time such rating was issued.
"MULTI-EMPLOYER PLAN" means a multi-employer plan as defined in
Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code to which
Borrower or any of its Consolidated Affiliates (or any Person that, for purposes
of Title IV of ERISA, is a member of Borrower's controlled group or is under
common control with Borrower within the meaning of Section 414 of the Code) is
making, or has made, or is accruing, or has accrued, an obligation to make
contributions.
"NET INCOME" means, for any Person or any Property for any period, the
net earnings (or loss) after taxes of such Person or such Property, as the case
may be, determined in accordance with GAAP.
"NET PROCEEDS" means, with respect to any Equity Issuance by any
Company, the amount of cash received by such Company in connection with such
transaction after deducting therefrom the aggregate, without duplication, of the
following amounts to the extent properly attributable to such transaction: (a)
brokerage commissions, attorneys' fees, finder's fees, financial advisory fees,
accounting fees, underwriting fees, investment banking fees, and other similar
commissions and fees (and expenses and disbursements of any of the foregoing),
in each case, to the extent paid or payable by such Company; (b) printing and
related expenses and filing, recording, or registration fees or charges or
similar fees or charges paid by such Company; and (c) taxes paid or payable by
such Company to any Governmental Authority as a result of such transaction.
"NON-INCREMENTAL CAPITAL EXPENDITURES" means, for the Companies on a
consolidated basis for the twelve (12) month period ending on the date of
determination, that portion of Capital Expenditures deducted from Funds from
Operations for the purpose of calculating "Funds Available for Distribution" as
publicly reported to the shareholders of PPT. "NON-INCREMENTAL CAPITAL
EXPENDITURES" shall include all Capital Expenditures required to sustain or
replace existing lease income. "NON-INCREMENTAL CAPITAL EXPENDITURES" for any
period shall not include the following:
(a) The costs of new construction of Properties;
(b) The costs of leasing first generation space in Properties;
(c) The costs of the initial leasing of space in Properties
that was vacant at the time of acquisition of such Properties;
(d) Capital improvements (exclusive of tenant finish) that
were budgeted as part of an acquisition of Properties and anticipated
to be spent in the first twelve (12) months following acquisition of
such Properties;
(e) The costs of leasing space in Properties which has been
vacant for twelve (12) months; and
CREDIT AGREEMENT 9
<PAGE>
(f) Capital improvements (exclusive of tenant finish) to
existing Properties that are made to generate incremental revenues and
that are approved by Administrative Agent.
"NON-RECOURSE DEBT" means, for any Person, any Indebtedness of such
Person in which the holder of such Indebtedness may not look to such Person
personally for repayment, other than to the extent of any security therefor or
pursuant to Customary Recourse Exceptions.
"NOTES" means one of the promissory notes substantially in the form of
EXHIBIT D, and "NOTE" means any one of the Notes.
"OBLIGATION" means all present and future indebtedness and obligations,
and all renewals, increases, and extensions thereof, or any part thereof, now or
hereafter owed to any Credit Party by Borrower under any Loan Document, together
with all interest accruing thereon, fees, costs and expenses (including all
reasonable attorneys' fees and expenses incurred in the enforcement or
collection thereof) payable under the Loan Documents or in connection with the
protection of Rights under the Loan Documents.
"OBLIGORS" means Borrower and Guarantors, and "OBLIGOR" means any one
of the Obligors.
"OCCUPANCY RATE" means, for any Property, the percentage of the
rentable area of such Property leased pursuant to bona fide tenant leases,
licenses, or other agreements requiring current rent or other similar payments.
"PARTICIPANT" is defined in SECTION 13.11(b).
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereof, established under ERISA.
"PERMITTED DISTRIBUTIONS" means, for (a) Borrower for any fiscal year
of Borrower, an amount not to exceed ninety-five percent (95%) of Borrower's
Funds from Operations for such fiscal year, and (b) PPT for any fiscal year of
PPT, an amount not to exceed ninety-five percent (95%) of PPT's Funds from
Operations for such fiscal year.
"PERMITTED LIENS" means:
(a) Liens granted to Administrative Agent, for the ratable benefit of
the Credit Parties, to secure the Obligation;
(b) pledges or deposits made to secure payment of worker's compensation
(or to participate in any fund in connection with worker's compensation
insurance), unemployment insurance, pensions, or social security programs;
(c) encumbrances consisting of zoning restrictions, easements, or other
restrictions on the use of real property, provided that such items do not
materially impair the use of such property for the purposes intended and none of
which is violated in any material respect by existing or proposed structures or
land use;
(d) Liens imposed by mandatory provisions of any Governmental
Requirement such as for materialmen's, mechanic's, warehousemen's, and other
like Liens arising in the ordinary course of business, securing payment of any
Liability whose payment is not yet due or that is being contested in good faith
by appropriate proceedings diligently conducted, and for which reserves in
accordance with GAAP or other security (and otherwise reasonably acceptable to
Administrative Agent) have been provided;
CREDIT AGREEMENT 10
<PAGE>
(e) Liens for taxes, assessments, and governmental charges or
assessments that are not yet due and payable or that are being contested in good
faith by appropriate proceedings diligently conducted, and for which reserves in
accordance with GAAP or other security (and otherwise reasonably acceptable to
Administrative Agent) have been provided; and
(f) Liens securing assessments or charges payable to a property owner
association or similar entity, which assessments are not yet due and payable or
that are being contested in good faith by appropriate proceedings diligently
conducted, and for which reserves in accordance with GAAP or other security (and
otherwise reasonably acceptable to Administrative Agent) have been provided.
"PERMITTED RECOURSE DEBT" means (a) Recourse Debt existing from time to
time under the credit facilities described on SCHEDULE 9.4, (b) unsecured bonds
having a maturity date at least one (1) year after the Termination Date, and (c)
Recourse Debt incurred for the purpose of constructing improvements on an
individual Property exceeding $25,000,000.
"PERSON means any individual, entity, or Governmental Authority.
"POTENTIAL DEFAULT" means the occurrence of any event or the existence
of any circumstance that could, upon notice or lapse of time or both, become a
Default.
"PPT" means Prentiss Properties Trust, a Maryland real estate
investment trust.
"PPT GUARANTY" means the Unconditional Guaranty of Payment dated of
even date herewith, executed by PPT in favor of the Credit Parties, and
substantially in the form of EXHIBIT C-1.
"PRINCIPAL DEBT" means, for a Lender and at any time, the unpaid
principal balance of all outstanding Borrowings from such Lender hereunder.
"PROPERTIES" means all real estate properties owned by any Company or
any Unconsolidated Affiliate, and "PROPERTY" means any one of the Properties.
"PRO RATA" and "PRO RATA SHARE" means, when determined for any Lender,
the proportion (stated as a percentage) that such Lender's Commitment bears to
the Total Commitment, or, if the Total Commitments shall have been terminated,
then the proportion (stated as a percentage) that the sum of the Principal Debt
owed to such Lender bears to the Total Principal Debt owed to all Lenders.
"PURCHASER" is defined in SECTION 13.11(c).
"RECOURSE DEBT" means, for any Person, Indebtedness of such Person that
is not Non-Recourse Debt. To the extent that any Person has partial recourse
obligations with respect to any Indebtedness, then only that portion of such
Indebtedness that is not Non-Recourse Debt shall be considered to be Recourse
Debt (e.g., if any such Person is personally liable for only $25,000,000 of
Indebtedness equal to $100,000,000, then only $25,000,000 of such Indebtedness
shall be Recourse Debt).
"REIT" means a "real estate investment trust" for purposes of the Code.
"REPRESENTATIVES" means representatives, officers, directors,
employees, attorneys, and agents.
"REQUIRED LENDERS" means, as of any date, any combination of Lenders
(other than Defaulting Lenders) who collectively hold sixty-six and two-thirds
percent (66-2/3%) or more of the Total Commitments (excluding the Commitments of
Defaulting Lenders), or if the Total Commitments shall have been terminated,
then of the Total Principal Debt (other than the Principal Debt of Defaulting
Lenders).
CREDIT AGREEMENT 11
<PAGE>
"RESERVE REQUIREMENT" means, with respect to any Eurodollar Borrowing
for the relevant Interest Period, the actual aggregate reserve requirements
(including all basic, supplemental, emergency, special, marginal, and other
reserves required by applicable Governmental Requirement) applicable to a member
bank of the Federal Reserve System for eurocurrency fundings or liabilities.
"RESPONSIBLE OFFICER" means, for any Person, any chairman, president,
chief executive officer, chief financial officer, controller, secretary,
executive vice president, or senior vice president of such Person.
"RIGHTS" means rights, remedies, powers, privileges, and benefits.
"SECURED DEBT" means, for any Person, Indebtedness of such Person
secured by Liens (other than Permitted Liens) in any of such Person's Properties
or other assets.
"SHARE" means, for any Person, such Person's share of the assets,
liabilities, revenues, income, losses, or expenses of an Unconsolidated
Affiliate based upon such Person's percentage ownership of such Unconsolidated
Affiliate.
"SOLVENT" means, as to a Person, that (a) the aggregate fair market
value of its assets exceeds its Liabilities, (b) such Person is able to pay and
is paying its Liabilities as they mature, and (c) it does not have unreasonably
small capital to conduct its businesses.
"S & P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., a New York corporation, or if S & P no longer publishes ratings,
then another ratings agency acceptable to Agents.
"S & P RATING" means the most recently-announced rating from time to
time of S & P assigned to any class of long-term senior, unsecured debt
securities issued by PPT, as to which no letter of credit, guaranty, or third
party credit support is in place, regardless of whether all or any part of such
Liability has been issued at the time such rating was issued.
"SUBSIDIARY GUARANTORS" means, as of any date, all Consolidated
Affiliates of Borrower owning one or more Unencumbered Properties, and
"SUBSIDIARY GUARANTOR" means any one of the Subsidiary Guarantors.
"SUBSIDIARY GUARANTY" means the Unconditional Guaranty of Payment dated
of even date herewith, executed by each of the Subsidiary Guarantors in favor of
the Credit Parties, and substantially in the form of EXHIBIT C-2.
"SYNDICATION AGENT" is defined in the preamble.
"TANGIBLE NET WORTH" means, as of any date, (a) Total Assets, minus (b)
all Liabilities of the Companies, on a consolidated basis, as of such date.
"TAXES" means, for any Person, taxes, assessments, or other
governmental charges or levies imposed upon it, its income, or any of its
properties, franchises, or assets.
"TERMINATION DATE" means the earlier of (a) December 30, 2000, and (b)
the effective date that Lenders' commitments to lend hereunder are otherwise
canceled or terminated in accordance with this Agreement.
"TOTAL ASSETS" means, as of any determination date, the sum of the
following (without duplication):
CREDIT AGREEMENT 12
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(a) the EBITDA Value of each Property owned by a Company for, or in
which construction was completed and a certificate of occupancy was issued, more
than twelve (12) months as of such determination date; plus
(b) so long as Walnut Glen Tower is owned by a Company, $50,000,000 in
respect of such Property until the earlier of (i) such time that Dr. Pepper
Bottling Company is no longer a tenant in occupancy in such Property and
American International Group, Inc. has occupied such Property for one (1)
calendar quarter, and (ii) September 30, 1999, and thereafter, the EBITDA Value
of such Property; plus
(c) either (i) $37,500,000 if a Company holds the World Savings Note on
such determination date, or (ii) $37,500,000 if a Company owns title to the
World Savings Property and a Company acquired the World Savings Note less than
twelve (12) months prior to such determination date, or (iii) the EBITDA Value
of the World Savings Property if a Company owns title to the World Savings
Property and a Company acquired the World Savings Note more than twelve (12)
months prior to such determination date; plus
(d) the Approved Costs of each Property constructed by a Company until
the earlier of (i) twelve (12) months following the completion of construction
and the issuance of a certificate of occupancy with respect to such Property,
and (ii) the date that such Property has achieved an Occupancy Rate of at least
eighty-five percent (85%) for three (3) consecutive months, and thereafter, the
EBITDA Value of such Property; plus
(e) the Approved Costs of each other Property owned by a Company for
less than twelve (12) months as of such determination date; plus
(f) the lesser of (i) $40,000,000, and (ii) the product of (A) seven
(7), and (B) EBITDA for the four (4) fiscal quarters ending on such
determination date in respect of management contracts between a Company and a
third party (other than another Company); plus
(g) the sum of (without duplication) Borrower's Share of (i) the
Approved Costs of each Property owned by an Unconsolidated Affiliate for less
than twelve (12) months as of such determination date, (ii) the Approved Costs
of each Property constructed by an Unconsolidated Affiliate until the earlier of
(A) twelve (12) months following the completion of construction and the issuance
of a certificate of occupancy with respect to such Property, and (B) the date
that such Property has achieved an Occupancy Rate of at least eighty-five
percent (85%) for three (3) consecutive months, and (iii) the EBITDA Value of
each other Property (other than Broadmoor Austin Associates) owned by an
Unconsolidated Affiliate as of such determination date; plus
(h) the Companies' cash and Cash Equivalents, in each case that are not
subject to any Lien.
If any Company that owns any Total Assets described above has any minority
interests, then Total Assets shall be adjusted to reflect the minority
interests' share of such Total Assets.
"TOTAL COMMITMENT" means, at any time, the sum of the Commitments of
all Lenders.
"TOTAL PRINCIPAL DEBT" means, at any time, the sum of the Principal
Debt of all Lenders.
"TYPE" means any type of Borrowing determined with respect to the
applicable interest option.
"UNCONSOLIDATED AFFILIATE" means any Person in whom Borrower or PPT
holds a voting equity or ownership interest and whose financial results would
not be consolidated under GAAP with the financial results of Borrower or PPT on
the consolidated financial statements of Borrower or PPT.
CREDIT AGREEMENT 13
<PAGE>
"UNENCUMBERED PROPERTIES" means, as of any date, all Properties in
which any Company owns fee simple title or leasehold interests, in each case
free and clear of any Liens (other than Permitted Liens), and "UNENCUMBERED
PROPERTY" means any one of the Unencumbered Properties. The Unencumbered
Properties may include the World Savings Property so long as Borrower or a
Subsidiary Guarantor holds the World Savings Note or owns title to the World
Savings Property, in each case free and clear of any Liens (other than Permitted
Liens). Unencumbered Properties include Properties owned by Subsidiary
Guarantors that have executed guaranties permitted by the last sentence of
SECTION 8.13.
"UNENCUMBERED PROPERTY REPORT" means a report in substantially the form
of SCHEDULE 4.1 certified by a Responsible Officer of Borrower, setting forth in
reasonable detail the total square footage, Occupancy Rate, Approved Costs,
EBITDA, EBITDA Adjustments, and Adjusted Property EBITDA for the Unencumbered
Properties (individually and in the aggregate).
"UNSECURED DEBT" means, for any Person, Indebtedness of such Person
that is not Secured Debt.
"UNUSED COMMITMENT" means, as of any date, (a) the Total Commitment
minus (b) the Total Principal Debt.
"WORLD SAVINGS NOTE" means that certain Promissory Note dated October
31, 1986, executed by PC Oakland Associates, Ltd. and payable to the order of
Prentiss Properties WSC, L.L.C. in the original principal amount of $40,000,000.
"WORLD SAVINGS PROPERTY" means the real and personal property securing
the World Savings Note.
1.2 TIME REFERENCES. Unless otherwise specified in the Loan
Documents (a) time references are to time in Dallas, Texas, and (b) in
calculating a period from one date to another, the word "from" means "from and
including" and the word "to" or "until" means "to but excluding."
1.3 OTHER REFERENCES. Unless otherwise specified in the Loan
Documents (a) where appropriate, the singular includes the plural and vice
versa, and words of any gender include each other gender, (b) headings and
caption references may not be construed in interpreting provisions, (c) monetary
references are to currency of the United States of America, (d) section,
paragraph, annex, schedule, exhibit, and similar references are to the
particular Loan Document in which they are used, (e) references to "telecopy,"
"facsimile," "fax," or similar terms are to facsimile or telecopy transmissions,
(f) references to "including" mean including without limiting the generality of
any description preceding that word, (g) the rule of construction that
references to general items that follow references to specific items are limited
to the same type or character of those specific items is not applicable in the
Loan Documents, (h) references to any Person include that Person's heirs,
personal representatives, successors, trustees, receivers, and permitted
assigns, (i) references to any Governmental Requirement include every amendment
or supplement to it, rule and regulation adopted under it, and successor or
replacement for it, and (j) references to any Loan Document or other document
include every renewal and extension of it, amendment and supplement to it, and
replacement or substitution for it.
1.4 ACCOUNTING PRINCIPLES. Under the Loan Documents, unless
otherwise stated, (a) GAAP determines all accounting and financial terms and
compliance with financial covenants, (b) GAAP in effect on the date of this
Agreement determines compliance with financial covenants, (c) otherwise, all
accounting principles applied in a current period must be comparable in all
material respects to those applied during the preceding comparable period, and
(d) all accounting and financial terms and compliance with financial covenants
must be for the Companies, on a consolidated basis, as applicable. If there is a
change in GAAP after the date hereof, then each Compliance Certificate shall
include calculations setting forth the adjustments from the relevant financial
items as shown in the Current Financials, based on the then-current GAAP, to the
corresponding financial items based on GAAP as used in the Current Financials
delivered to Administrative
CREDIT AGREEMENT 14
<PAGE>
Agent and Lenders on or prior to the date hereof, so as to demonstrate how such
financial covenant compliance was derived from the Current Financials.
SECTION 2
COMMITMENT
2.1 REVOLVING FACILITY. Subject to the provisions in the Loan
Documents, each Lender severally and not jointly agrees to lend to Borrower one
or more Borrowings hereunder which Borrower may borrow, repay, and reborrow
under this Agreement, subject to the following conditions:
(a) each Borrowing requested by Borrower hereunder must occur on a
Business Day and no later than the Business Day immediately preceding the
Termination Date;
(b) each Borrowing requested by Borrower must be in an amount not
less than $1,000,000 or a greater integral multiple of $100,000 or, if less, the
Unused Commitment;
(c) the Total Principal Debt may not exceed the Total Commitment;
and
(d) no Lender's Principal Debt may exceed such Lender's Commitment.
2.2 BORROWING PROCEDURE. The following procedures apply to
Borrowings:
(a) Borrower may request a Borrowing by submitting to Administrative
Agent a Borrowing Request. The Borrowing Request must be received by
Administrative Agent no later than 11:00 a.m. on (i) the third (3rd) Business
Day preceding the Borrowing Date for any Eurodollar Borrowing, or (ii) the
Business Day preceding the Borrowing Date for any Base Rate Borrowing.
Administrative Agent shall promptly notify each Lender of its receipt of any
Borrowing Request and its contents. A Borrowing Request is irrevocable and
binding on Borrower.
(b) By 11:00 a.m. on the applicable Borrowing Date, each Lender
shall remit its Pro Rata Share of each requested Borrowing by wire transfer to
Administrative Agent pursuant to Administrative Agent's wire transfer
instructions on SCHEDULE 1 (or as otherwise directed by Administrative Agent) in
funds that are available for immediate use by Administrative Agent. Subject to
receipt of such funds, Administrative Agent shall make such funds available to
Borrower in Dallas, Texas at 12:00 noon on such Borrowing Date (unless it has
actual knowledge that any applicable condition precedent has not been satisfied
by Borrower).
(c) Absent contrary written notice from a Lender, Administrative
Agent may assume that each Lender has made its Pro Rata Share of the requested
Borrowing available to Administrative Agent on the applicable Borrowing Date,
and Administrative Agent may, in reliance upon such assumption (but is not
required to), make available to Borrower a corresponding amount. If a Lender
fails to make its Pro Rata Share of any requested Borrowing available to
Administrative Agent on the applicable Borrowing Date, then Administrative Agent
may recover the applicable amount on demand (i) from such Lender, together with
interest at the Federal Funds Rate for the period commencing on the date the
amount was made available to Borrower by Administrative Agent and ending on (but
excluding) the date Administrative Agent recovers the amount from such Lender,
or (ii) if such Lender fails to pay its amount upon Administrative Agent's
demand, then from Borrower, together with interest at an annual interest rate
equal to the rate applicable to the requested Borrowing for the period
commencing on the Borrowing Date and ending on (but excluding) the date
Administrative Agent recovers the amount from Borrower. No Lender is responsible
for the failure of any other Lender to make its Pro Rata Share of any Borrowing.
CREDIT AGREEMENT 15
<PAGE>
2.3 TERMINATION. Without premium or penalty, and upon giving at
least three (3) Business Days prior written and irrevocable notice to
Administrative Agent, Borrower may terminate all or part of the unused portion
of the Total Commitment. Each partial termination must be in an amount of not
less than $1,000,000 or a greater integral multiple thereof, and shall be Pro
Rata among all Lenders. Once terminated, the Total Commitment may not be
increased or reinstated.
SECTION 3
TERMS OF PAYMENT
3.1 NOTES AND PAYMENTS.
(a) The Principal Debt shall be evidenced by the Notes, which Notes
shall be payable to Lenders in the aggregate stated principal amount of the
Total Commitment.
(b) Borrower must make each payment and prepayment on the
Obligation, without offset, counterclaim, or deduction, to Administrative
Agent's principal office in Dallas, Texas, in funds that will be available for
immediate use by Administrative Agent by 12:00 noon on the day due. Payments
received after such time shall be deemed received on the next Business Day.
Administrative Agent shall pay to each Lender any payment to which such Lender
is entitled on the same day Administrative Agent receives the funds from
Borrower if Administrative Agent receives the payment or prepayment before 12:00
noon, and otherwise before 12:00 noon on the following Business Day. If and to
the extent that Administrative Agent does not make payments to Lenders when due,
then Administrative Agent shall be obligated to pay to Lenders such unpaid
amounts together with interest at the Federal Funds Rate from the due date until
(but not including) the payment date.
3.2 INTEREST AND PRINCIPAL PAYMENTS.
(a) INTEREST PAYMENTS. Accrued interest on each Borrowing is due and
payable on the first (1st) day of each calendar month during the term of this
Agreement, commencing on January 1, 1998, and on the Termination Date.
(b) PRINCIPAL PAYMENTS. The Total Principal Debt is due and payable
on the Termination Date.
(c) VOLUNTARY PREPAYMENT. Borrower may voluntarily repay or prepay
all or any part of the Total Principal Debt at any time without premium or
penalty, subject to the following conditions:
(i) Administrative Agent must receive Borrower's written
payment notice by 11:00 a.m. on (A) the Business Day preceding the date
of payment of a Eurodollar Borrowing, and (B) the Business Day
preceding the date of payment of a Base Rate Borrowing, which shall
specify the payment date and the Type and amount of the Borrowing(s) to
be paid, and which shall constitute an irrevocable and binding
obligation of Borrower to make a repayment or prepayment on the
designated date;
(ii) each partial repayment or prepayment must be in a
minimum amount of at least $1,000,000 or a greater integral multiple of
$100,000, or, if less, the Total Principal Debt; and
(iii) Borrower shall pay any related Funding Loss upon demand.
3.3 INTEREST OPTIONS. Except as specifically otherwise provided,
Borrowings shall bear interest at an annual rate equal to the lesser of (a) the
Base Rate, or the Eurodollar Rate plus the Applicable Margin (in each case as
designated or deemed designated by Borrower and, in the case of Eurodollar
Borrowings, for
CREDIT AGREEMENT 16
<PAGE>
the Interest Period designated by Borrower), and (b) the Maximum Rate. Each
change in the Base Rate and Maximum Rate is effective, without notice to
Borrower or any other Person, upon the effective date of change.
3.4 QUOTATION OF RATES. A Representative of Borrower may call
Administrative Agent before delivering a Borrowing Request to receive an
indication of the interest rates then in effect, but the indicated rates do not
bind Administrative Agent or Lenders or affect the interest rate that is
actually in effect when Borrower delivers its Borrowing Request or on the
Borrowing Date.
3.5 DEFAULT RATE. If permitted by applicable law, all past-due
Principal Debt and past-due interest accruing on any of the foregoing, bears
interest from the date due (stated or by acceleration) at the Default Rate until
paid, regardless of whether payment is made before or after entry of a judgment.
3.6 INTEREST RECAPTURE. If the designated interest rate applicable
to any Borrowing exceeds the Maximum Rate, then the interest rate on that
Borrowing is limited to the Maximum Rate, provided that any subsequent
reductions in the designated rate shall not reduce the interest rate thereon
below the Maximum Rate until the total amount of accrued interest equals the
amount of interest that would have accrued if that designated rate had always
been in effect. If at maturity (stated or by acceleration), or at final payment
of the Notes, the total interest paid or accrued is less than the interest that
would have accrued if the designated rates had always been in effect, then, at
that time and to the extent permitted by applicable law, Borrower shall pay an
amount equal to the difference between (a) the lesser of the amount of interest
that would have accrued if the designated rates had always been in effect and
the amount of interest that would have accrued if the Maximum Rate had always
been in effect, and (b) the amount of interest actually paid or accrued on the
Notes.
3.7 INTEREST CALCULATIONS.
(a Interest shall be calculated on the basis of actual number of
days elapsed (including the first day but excluding the last day) but computed
as if each calendar year consisted of (i) 365 or 366 days, as the case may be,
for Base Rate Borrowings, and (ii) 360 days for all other Borrowings (unless the
calculation would result in an interest rate greater than the Maximum Rate, in
which event interest shall be calculated on the basis of a year of 365 or 366
days, as the case may be). All interest rate determinations and calculations by
Administrative Agent are conclusive and binding absent manifest error.
(b The provisions of this Agreement relating to calculation of the
Base Rate and the Eurodollar Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid under this
Agreement that are based upon those rates. Each Lender may fund and maintain its
funding of all or any part of each Borrowing as it selects.
3.8 MAXIMUM RATE. Regardless of any provision contained in any Loan
Document or any document related thereto, it is the intent of the parties to
this Agreement that no Credit Party may contract for, charge, take, reserve,
receive or apply, as interest on all or any part of the Obligation any amount in
excess of the Maximum Rate or the Maximum Amount or receive any unearned
interest in violation of any applicable law, and, if any Credit Party ever does
so, then any excess shall be treated as a partial repayment or prepayment of
principal and any remaining excess shall be refunded to Borrower. In determining
if the interest paid or payable exceeds the Maximum Rate, Borrower, and the
Credit Parties shall, to the maximum extent permitted under applicable law, (a)
treat all Borrowings as but a single extension of credit (and Lenders and
Borrower agree that is the case and that provision in this Agreement for
multiple Borrowings is for convenience only), (b) characterize any non-principal
payment as an expense, fee or premium rather than as interest, (c) exclude
voluntary repayments or prepayments and their effects, and (d) amortize,
prorate, allocate and spread the total amount of interest throughout the entire
contemplated term of the Obligation. If, however, the Obligation is paid in full
before the end of its full contemplated term, and if the interest received for
its actual period of existence exceeds the Maximum Amount, then Lenders shall
refund any excess (and Lenders may not, to the extent permitted by applicable
law, be subject to any penalties provided by any Governmental
CREDIT AGREEMENT 17
<PAGE>
Requirements for contracting for, charging, taking, reserving or receiving
interest in excess of the Maximum Amount). If the Governmental Requirements of
the State of Texas are applicable for purposes of determining the "Maximum Rate"
or the "Maximum Amount," then those terms mean the "weekly ceiling" from time to
time in effect under Article 5069-1D, Title 79, Revised Civil Statutes of Texas,
as amended. Borrower agrees that Chapter 346 of the Texas Finance Code, as
amended (which regulates certain revolving credit loan accounts and revolving
tri-party accounts), does not apply to the Obligation.
3.9 INTEREST PERIODS. When Borrower requests any Eurodollar
Borrowing, Borrower may elect the applicable interest period (each an "INTEREST
PERIOD"), which may be, at Borrower's option, one (1), two (2), three (3) or six
(6) months, subject to the following conditions: (a) the initial Interest Period
for a Eurodollar Borrowing commences on the applicable Borrowing Date or
conversion date, and each subsequent Interest Period applicable to any Borrowing
commences on the day when the next preceding applicable Interest Period expires;
(b) if any Interest Period for a Eurodollar Borrowing begins on a day for which
there exists no numerically corresponding Business Day in the calendar month at
the end of the Interest Period ("ENDING CALENDAR MONTH"), then the Interest
Period ends on the next succeeding Business Day of the Ending Calendar Month,
unless there is no succeeding Business Day in the Ending Calendar Month in which
case the Interest Period ends on the next preceding Business Day of the Ending
Calendar Month; (c) no Interest Period for any portion of Principal Debt may
extend beyond the scheduled repayment date for that portion of Principal Debt;
and (d) there may not be in effect at any one time more than five (5) Interest
Periods.
3.10 CONVERSIONS. Borrower may (a) on the last day of the applicable
Interest Period (or at any other time, subject to payment of any Funding Loss)
convert all or part of a Eurodollar Borrowing to a Base Rate Borrowing, (b) at
any time convert all or part of a Base Rate Borrowing to a Eurodollar Borrowing,
and (c) on the last day of an Interest Period, elect a new Interest Period for a
Eurodollar Borrowing. Any such conversion is subject to the dollar limits and
denominations of SECTION 2.1 and may be accomplished by delivering a Borrowing
Request to Administrative Agent no later than 11:00 a.m. (i) on the third (3rd)
Business Day before (A) the conversion date for conversion to a Eurodollar
Borrowing, and (B) the last day of the Interest Period, for the election of a
new Interest Period, and (ii) one (1) Business Day before the last day of the
Interest Period for conversion to a Base Rate Borrowing. Absent Borrower's
notice of conversion or election of a new Interest Period, a Eurodollar
Borrowing shall be converted to a Base Rate Borrowing when the applicable
Interest Period expires.
3.11 ORDER OF APPLICATION.
(a) NO DEFAULT. If no Default exists, then except as otherwise
specifically provided in the Loan Documents, any payment shall be applied to the
Obligation in the order and manner as Borrower directs.
(b) DEFAULT. If a Default exists, any payment (including proceeds
from the exercise of any Rights) shall be applied in the following order: (i) to
all fees and expenses for which any Credit Party have not been paid or
reimbursed in accordance with the Loan Documents (and if such payment is less
than all unpaid or unreimbursed fees and expenses, then the payment shall be
paid against unpaid and unreimbursed fees and expenses in the order of
incurrence or due date); (ii) to accrued interest on the Principal Debt; and
(iii) to the remaining Obligation in the order and manner as the Required
Lenders deem appropriate.
(c) PRO RATA. Each payment or prepayment shall be distributed to
each Lender in accordance with its Pro Rata Share of such payment or prepayment.
3.12 SHARING OF PAYMENTS, ETC. If any Lender obtains any amount
(whether voluntary, involuntary or otherwise) that exceeds the part of that
payment that such Lender is then entitled to receive under the Loan Documents,
then such Lender shall purchase from the other Lenders participations that will
cause the purchasing Lender to share the excess amount ratably with each other
Lender. If all or any portion of any excess amount is subsequently recovered
from the purchasing Lender, then the purchase shall be
CREDIT AGREEMENT 18
<PAGE>
rescinded and the purchase price restored to the extent of the recovery.
Borrower agrees that any Lender purchasing a participation from another Lender
under this SECTION may, to the fullest extent permitted by applicable law,
exercise all of its Rights of payment with respect to that participation as
fully as if such Lender were the direct creditor of Borrower in the amount of
that participation.
3.13 BOOKING BORROWINGS. To the extent permitted by applicable law,
any Lender may make, carry or transfer its Borrowings at, to, or for the account
of any of its branch offices or the office of any of its Affiliates. However, no
Affiliate is entitled to receive any greater payment under SECTION 3.15 than the
transferor Lender would have been entitled to receive with respect to those
Borrowings, and a transfer may not be made if, as a direct result of it, SECTION
3.15 or 3.16 would apply to any of the Obligation. If any of the conditions of
SECTIONS 3.15 or 3.16 ever apply to a Lender, then such Lender shall, to the
extent possible, carry or transfer its Borrowings at, to, or for the account of
any of its branch offices or the office or branch of any of its Affiliates so
long as the transfer is consistent with the other provisions of this SECTION,
does not create any burden or adverse circumstance for such Lender that would
not otherwise exist, and eliminates or ameliorates the conditions of SECTIONS
3.15 or 3.16 as applicable.
3.14 BASIS UNAVAILABLE OR INADEQUATE FOR THE EURODOLLAR RATE.
(a) DETERMINATION BY ADMINISTRATIVE AGENT. If Administrative Agent
determines that, for any Eurodollar Borrowing, the basis for determining the
applicable rate is not available, then Administrative Agent shall promptly
notify Borrower and Lenders of that determination (which is conclusive and
binding on Borrower absent manifest error), and all Borrowings shall bear
interest at the Base Rate. Until Administrative Agent notifies Borrower that
such circumstances no longer exist, Lenders' commitments under this Agreement to
make, or to convert to, Eurodollar Borrowings shall be suspended.
(b) DETERMINATION BY A LENDER. If any Lender determines that, for
any Eurodollar Borrowing and for other similar loans made by such Lender to
similar borrowers, the resulting rate does not accurately reflect the cost to
such Lender of making or converting Borrowings at that rate for the applicable
Interest Period, then such Lender shall promptly notify Administrative Agent and
Borrower, and all Borrowings of such Lender shall bear interest at the Base
Rate. Until Administrative Agent notifies Borrower that such circumstances no
longer exist, such Lender's commitment under this Agreement to make, or to
convert to, Eurodollar Borrowings shall be suspended.
3.15 ADDITIONAL COSTS.
(a) EUROCURRENCY RESERVES. If, after the date hereof, any Lender
shall be required under any Reserve Requirement to maintain reserves with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities, then (i) such Lender (through Administrative Agent) shall, within
sixty (60) days after the end of any Interest Period with respect to any
Eurodollar Borrowing during which Lender was so required to maintain reserves,
deliver to Borrower a certificate stating (A) that such Lender was required to
maintain reserves and as a result such Lender incurred additional costs in
connection with making Eurodollar Borrowings and (B) in reasonable detail, such
Lender's computations of the amount of additional interest payable by Borrower,
pursuant to the provisions below, and (ii) Borrower shall, promptly upon receipt
of any such certificate, pay to Administrative Agent, for the account to such
Lender, additional interest on the unpaid principal amount of each Eurodollar
Borrowing of such Lender made to it outstanding during the Interest Period with
respect to which the above-referenced certificate was delivered to
Administrative Agent, at a rate per annum equal to the difference obtained by
subtracting (x) the Eurodollar Rate for such Interest Period from (y) the rate
obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus
the Reserve Requirement of such Lender for such Interest Period. The amount of
interest payable by Borrower to any Lender as stated in any certificate
delivered to Administrative Agent pursuant to the provisions of this SECTION
3.15(a) shall be conclusive and binding for all purposes, absent manifest error.
The provisions of this SECTION 3.15(a) shall survive the termination of this
Agreement.
CREDIT AGREEMENT 19
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(b) RESERVES. With respect to any Eurodollar Borrowing, if (i) any
change in present Governmental Requirement, any change in the interpretation or
application of any present Governmental Requirement, or any future Governmental
Requirement imposes, modifies, or deems applicable (or if compliance by any
Lender with any such requirement of any Governmental Authority results in) any
such requirement that any reserves (including any marginal, emergency,
supplemental or special reserves) be maintained, and (ii) those reserves reduce
any sums receivable by such Lender under this Agreement or increase the costs
incurred by such Lender in advancing or maintaining any portion of any
Eurodollar Borrowing, then (unless the effect is already reflected in the rate
of interest then applicable under this Agreement) such Lender (through
Administrative Agent) shall deliver to Borrower a certificate setting forth in
reasonable detail the calculation of the amount necessary to compensate it for
its reduction or increase (which certificate is conclusive and binding absent
manifest error), and Borrower shall promptly pay that amount to such Lender upon
demand.
(c) CAPITAL ADEQUACY. With respect to any Borrowing and for similar
loans to similar borrowers, if any change in present Governmental Requirement or
any future Governmental Requirement regarding capital adequacy or compliance by
Administrative Agent or any Lender with any request, directive or requirement
now existing or hereafter imposed by any Governmental Authority regarding
capital adequacy, or any change in its written policies or in the risk category
of this transaction, reduces the rate of return on its capital as a consequence
of its obligations under this Agreement to a level below that which it otherwise
could have achieved (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by it to be material (and it may, in
determining the amount, use reasonable assumptions and allocations of costs and
expenses and use any reasonable averaging or attribution method), then (unless
the effect is already reflected in the rate of interest then applicable under
this Agreement) Administrative Agent or such Lender (through Administrative
Agent) shall notify Borrower and deliver to Borrower a certificate setting forth
in reasonable detail the calculation of the amount necessary to compensate it
(which certificate is conclusive and binding absent manifest error), and
Borrower shall promptly pay that amount to Administrative Agent or such Lender
upon demand.
(d) TAXES. Any Taxes payable by Administrative Agent or any Lender
or ruled (by a Governmental Authority) payable by Administrative Agent or any
Lender in respect of this Agreement or any other Loan Document shall, if
permitted by Governmental Requirement, be paid by Borrower, together with
interest and penalties, if any (except for Taxes imposed on or measured by the
overall net income of Administrative Agent or such Lender). Administrative Agent
or such Lender (through Administrative Agent) shall notify Borrower and deliver
to Borrower a certificate setting forth in reasonable detail the calculation of
the amount of payable Taxes, which certificate is conclusive and binding (absent
manifest error), and Borrower shall promptly pay that amount to Administrative
Agent for its account or the account of such Lender, as the case may be. If
Administrative Agent or such Lender subsequently receives a refund of the Taxes
paid to it by Borrower, then the recipient shall promptly pay the refund to
Borrower.
(e) SURVIVAL. The provisions of this SECTION 3.15 shall survive the
satisfaction and payment of the Obligation and termination of this Agreement.
3.16 CHANGE IN GOVERNMENTAL REQUIREMENT. If any Governmental
Requirement makes it unlawful for any Lender to make or maintain Eurodollar
Borrowings, then such Lender shall promptly notify Borrower and Administrative
Agent, and (a) as to undisbursed funds, that requested Borrowing shall be made
as a Base Rate Borrowing, and (b), as to any outstanding Borrowing, (i) if
maintaining the Borrowing until the last day of the applicable Interest Period
is unlawful, the Borrowing shall be converted to a Base Rate Borrowing as of the
date of notice, and Borrower shall pay any related Funding Loss, or (ii) if not
prohibited by all Governmental Requirements, the Borrowing shall be converted to
a Base Rate Borrowing as of the last day of the applicable Interest Period, or
(iii) if any conversion will not resolve the unlawfulness, Borrower shall
promptly prepay the Borrowing, without penalty, together with any related
Funding Loss.
CREDIT AGREEMENT 20
<PAGE>
3.17 FUNDING LOSS. BORROWER AGREES TO INDEMNIFY EACH LENDER AGAINST,
AND PAY TO IT UPON DEMAND, ANY FUNDING LOSS OF SUCH LENDER. When any Lender
demands that Borrower pay any Funding Loss, such Lender shall deliver to
Borrower and Administrative Agent a certificate setting forth in reasonable
detail the basis for imposing Funding Loss and the calculation of the amount,
which calculation is conclusive and binding absent manifest error. The
provisions of this SECTION 3.17 shall survive the satisfaction and payment of
the Obligation and termination of this Agreement.
3.18 FOREIGN LENDERS. Each Lender that is organized under the
Governmental Requirements of any jurisdiction other than the United States of
America or any State thereof (a) represents to Administrative Agent and Borrower
that (i) no Taxes are required to be withheld by Administrative Agent or
Borrower with respect to any payments to be made to it in respect of the
Obligation, and (ii) it has furnished to Administrative Agent and Borrower two
(2) duly completed copies of U.S. Internal Revenue Service Form 4224, Form 1001,
Form W-8, or any other tax form acceptable to Administrative Agent (wherein it
claims entitlement to complete exemption from U.S. federal withholding tax on
all interest payments under the Loan Documents), and (b) covenants to (i)
provide Administrative Agent and Borrower a new tax form upon the expiration or
obsolescence of any previously delivered form according to Governmental
Requirement, duly executed and completed by it, and (ii) comply from time to
time with all Governmental Requirements with regard to the withholding tax
exemption. If any of the foregoing is not true or the applicable forms are not
provided and such party is obligated by law to withhold, then Borrower or
Administrative Agent (without duplication) may deduct and withhold from interest
payments under the Loan Documents United States federal income tax at the full
rate applicable under the Code.
3.19 FEES.
(a) TREATMENT OF FEES. The fees described in this SECTION 3.19 (i) are
not compensation for the use, detention, or forbearance of money, (ii) are in
addition to, and not in lieu of, interest and expenses otherwise described in
this Agreement, (iii) are payable in accordance with SECTION 3.1(b), (iv) are
non-refundable, (v) to the fullest extent permitted by applicable law, bear
interest, if not paid when due, at the Default Rate, and (vi) are calculated on
the basis of actual number of days (including the first day but excluding the
last day) elapsed, but computed as if each calendar year consisted of 360 days,
unless computation would result in an interest rate in excess of the Maximum
Rate in which event the computation is made on the basis of a year of 365 or 366
days, as the case may be. The fees described in this SECTION 3.19 are in all
events subject to the provisions of SECTION 3.8.
(b) AGENT FEES. Borrower shall pay to each Agent, solely for their own
accounts, the fees described in the letter agreement(s) between Borrower and
Agents dated the same date as this Agreement, as such letter agreement(s) may be
modified or amended from time to time.
(c) COMMITMENT FEES.
(i) Borrower shall pay to Administrative Agent, for the account
of Lenders, the commitment fees described in the letter agreement(s)
between Borrower and Agents.
(ii) Within five (5) days after Administrative Agent sends
Borrower notice of the amount thereof, Borrower agrees to pay to
Administrative Agent, for the ratable account of Lenders, an unused fee
equal to the sum of the amounts obtained by multiplying the daily
Unused Commitment set forth below times the applicable percentage set
forth opposite such portion below:
CREDIT AGREEMENT
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=======================================================================
UNUSED COMMITMENTS APPLICABLE PERCENTAGE PER ANNUM
=======================================================================
$0 through $150,000,000 0.15%
-----------------------------------------------------------------------
Greater than $150,000,000 0.20%
=======================================================================
Such commitment fee shall be due and payable quarterly in arrears for
each fiscal quarter ending on March, June, September, and December
during the term hereof, commencing with the quarter ending on March 31,
1998, based upon the Unused Commitment for each day during the quarter
ending on such date. Solely for purposes of this SECTION 3.19(c)(ii),
"ratable" means, for any calculation period, with respect to any
Lender, the proportion that (A) the daily unused Commitment of such
Lender during the period bears to (B) the aggregate amount of the daily
unused Total Commitment during the period.
3.20 OPTION TO REPLACE LENDERS. If any Lender shall make demand for
payment or reimbursement pursuant to SECTION 3.14(b) or SECTIONS 3.15(a), (b),
(c), or (d) or notifies Borrower of the occurrence of the circumstances
described in SECTION 3.16, then, provided that (a) no Default has occurred and
is continuing, and (b) the circumstances resulting in such demand for payment or
reimbursement are not applicable to all Lenders, Borrower may terminate the
Commitment of such Lender, in whole but not in part, by either (i) (A) giving
such Lender and Administrative Agent not less than five (5) Business Days'
written notice thereof, which notice shall be irrevocable and effective only
upon receipt thereof by such Lender and Administrative Agent and shall specify
the date of such termination, and (B) paying such Lender (and there shall become
due and payable) on such date the outstanding Principal Debt of all Borrowings
made by such Lender, all interest thereon, and any other Obligation owed to such
Lender (including any amounts payable under SECTION 3.17), if any, or (ii)
pursuant to the provisions of SECTION 13.11, proposing the introduction of a
replacement Lender satisfactory to Administrative Agent, or obtaining the
agreement of one or more existing Lenders, to assume the entire amount of the
Commitment of the Lender whose Commitment is being terminated, on the effective
date of such termination. Upon the satisfaction of all the foregoing conditions,
such Lender that is being terminated shall cease to be a "Lender" for purposes
of this Agreement, provided that Borrower shall continue to be obligated to such
Lender under SECTION 7.12 with respect to Indemnified Liabilities (as defined in
SECTION 7.12) arising prior to such termination.
SECTION 4
UNENCUMBERED PROPERTIES; GUARANTIES
4.1 UNENCUMBERED PROPERTIES. Borrower shall not permit, as of any
date, the ratio of the Companies' Unsecured Debt to the Unencumbered Property
Value of all Unencumbered Properties to exceed 0.50 to 1.0. For purposes of the
foregoing, "UNENCUMBERED PROPERTY VALUE" means, as of any determination date,
the sum of (without duplication):
(a) the EBITDA Value of each Unencumbered Property owned by Borrower
or a Subsidiary Guarantor for, or in which construction was completed and a
certificate of occupancy was issued, more than twelve (12) months as of such
determination date; plus
(b) if the Walnut Glen Tower is owned by a Subsidiary Guarantor and is
an Unencumbered Property, then $50,000,000 until the earlier of (i) such time
that Dr. Pepper Bottling Company is no longer a tenant in occupancy in such
Property and American International Group, Inc. has occupied such Property for
one (1) calendar quarter or (ii) September 30, 1999, and thereafter, the EBITDA
Value of such Property; plus
(c) if Borrower or a Subsidiary Guarantor holds the World Savings Note
or the World Savings Property, and the World Savings Property is an Unencumbered
Property, then either (i) $37,500,000 if Borrower or a Subsidiary Guarantor
holds the World Savings Note on such determination date, or (ii) $37,500,000 if
Borrower or a Subsidiary Guarantor owns title to the World Savings Property and
acquired
CREDIT AGREEMENT
22
<PAGE>
the World Savings Note less than twelve (12) months prior to such determination
date, or (iii) the EBITDA Value of the World Savings Property if Borrower or a
Subsidiary Guarantor owns title to the World Savings Property and acquired the
World Savings Note more than twelve (12) months prior to such determination
date; plus
(d) the Approved Costs of each Unencumbered Property owned by Borrower
or a Subsidiary Guarantor for less than twelve (12) months as of such
determination date and that has an Occupancy Rate of at least eighty-five
percent (85%); plus
(e) the lesser of (i) the sum of (A) the Approved Costs of each
Unencumbered Property being actively constructed by Borrower or a Subsidiary
Guarantor on a diligent basis until the earlier of (I) twelve (12) months
following the completion of construction and the issuance of a certificate of
occupancy with respect to such Unencumbered Property, and (II) the date that
such Unencumbered Property has achieved an Occupancy Rate of at least eighty-
five percent (85%) for three (3) consecutive months, and (B) the aggregate
Approved Costs of each Unencumbered Property owned by Borrower or a Subsidiary
Guarantor for, or in which construction work was completed and a certificate of
occupancy was issued, less than twelve (12) months as of such date and that has
an Occupancy Rate of less than eighty-five percent (85%), and (ii) the lesser of
(A) $90,000,000, and (B) fifteen percent (15%) of Unencumbered Property Value.
To the extent that the Unencumbered Property Value with respect to any
Unencumbered Property described in SUBSECTIONS (d) and (e) above is no longer
determined with respect to such SUBSECTIONS, the Unencumbered Property Value
with respect to such Unencumbered Property shall be determined according to
SUBSECTION (a) above. If any Company that owns any Unencumbered Property
described above has any minority interests, then Unencumbered Property Value
shall be adjusted to reflect the minority interests' share of such Unencumbered
Property. As of the Closing Date, the Unencumbered Properties consist of the
Unencumbered Properties listed on SCHEDULE 4.1.
4.2 NEGATIVE PLEDGE AGREEMENTS. Borrower shall not, and shall not
permit any Subsidiary Guarantor to, enter into or permit to exist any
arrangement or agreement that directly or indirectly prohibits Borrower or any
Subsidiary Guarantor from creating or incurring any Lien (other than Permitted
Liens) on any Unencumbered Property, except for the Loan Documents.
4.3 GUARANTIES.
(a) PPT GUARANTY. Pursuant to the PPT Guaranty, PPT shall
unconditionally guarantee in favor of the Credit Parties the full payment and
performance of the Obligation.
(b) SUBSIDIARY GUARANTY. Pursuant to the Subsidiary Guaranty or an
addendum thereto in the form attached to the Subsidiary Guaranty, each
Subsidiary Guarantor shall unconditionally guarantee in favor of the Credit
Parties the full payment and performance of the Obligation.
(c) RELEASE OF SUBSIDIARY GUARANTORS. If, as of any date, any Property
owned by a Subsidiary Guarantor is no longer an Unencumbered Property, then
Administrative Agent shall, upon the written request of Borrower, release such
Subsidiary Guarantor from the Subsidiary Guaranty pursuant to a release of
guaranty in the form attached to the Subsidiary Guaranty, unless a Default
exists or would result from such release.
CREDIT AGREEMENT
23
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SECTION 5
CONDITIONS PRECEDENT
5.1 CONDITIONS TO INITIAL BORROWING. The obligations of Lenders to make
the initial Borrowing is subject to satisfaction of the following conditions
precedent on or before the Closing Date:
(a) BORROWER DOCUMENTS. Borrower shall deliver or cause to be delivered
to Administrative Agent the following, each, unless otherwise noted, dated as of
the Closing Date:
(i) Certified copies of its Certificate of Limited Partnership,
together with a good standing certificate from the Secretary of State
of the State of Delaware and each other state in which an Unencumbered
Property owned by Borrower is located (to the extent that qualification
is required by applicable law) and, to the extent generally available,
a certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing
authority of each of such states, each dated a recent date prior to the
Closing Date;
(ii) An Officer's Certificate of Borrower certifying (A) its
Constituent Documents, (B) resolutions of its Board of Directors
approving and authorizing the execution, delivery, and performance of
this Agreement and the other Loan Documents, certified as of the
Closing Date as being in full force and effect without modification or
amendment, and (C) signatures and incumbency of its officers executing
this Agreement and the other Loan Documents;
(iii) Executed originals of this Agreement, the Notes, and the
other Loan Documents; and
(iv) Such other documents as Administrative Agent may
reasonably request.
(b) GUARANTOR DOCUMENTS. Borrower shall deliver or cause to be
delivered to Administrative Agent the following with respect to each Guarantor,
each, unless otherwise noted, dated as of the Closing Date:
(i) Certified copies of each Guarantor's Constituent Documents,
together with a good standing certificate from each Guarantor's
jurisdiction of incorporation or formation and each other state in
which an Unencumbered Property owned by each Guarantor is located (to
the extent that qualification is required by applicable law), and, to
the extent generally available, a certificate or other evidence of good
standing as to payment of any applicable franchise or similar taxes
from the appropriate taxing authority of each of such states, each
dated a recent date prior to the Closing Date;
(ii) Officer's Certificate of each Guarantor certifying (A) its
Constituent Documents, (B) resolutions of its Board of Directors
approving and authorizing the execution, delivery, and performance of
the Loan Documents to which it is a party, certified as of the Closing
Date as being in full force and effect without modification or
amendment, and (C) signatures and incumbency of its officers executing
the Loan Documents to which it is a party;
(iii) Executed originals of the Loan Documents to which it is
a party; and
(iv) Such other documents as Administrative Agent may
reasonably request.
(c) OPINIONS OF COUNSEL FOR BORROWER AND GUARANTORS. The Credit Parties
and their respective counsel shall have received originally executed copies of a
favorable written opinion of counsel for the Obligors, in form and substance
reasonably satisfactory to Agents and their counsel, dated as of the
CREDIT AGREEMENT
24
<PAGE>
Closing Date, and setting forth substantially the matters in the opinions
designated in EXHIBIT F and as to such other matters as Agents, acting on behalf
of the Credit Parties, may reasonably request.
(d) FEES. Borrower shall have paid to Administrative Agent, for
distribution (as appropriate) to the Credit Parties, the fees payable on the
Closing Date referred to in SECTION 3.19.
(e) UNENCUMBERED PROPERTY REPORT. Borrower shall have delivered an
Unencumbered Property Report dated as of the Closing Date.
(f) COMPLETION OF PROCEEDINGS. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto not previously found acceptable by
Administrative Agent, acting on behalf of Lenders, and its counsel shall be
satisfactory in form and substance to Administrative Agent and such counsel, and
Administrative Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Administrative Agent may
reasonably request.
(g) TERMINATION OF CREDIT FACILITY. Borrower shall have terminated the
commitments of the lenders under that certain Credit Agreement dated as of
October 17, 1996, executed by and among Borrower, Administrative Agent, as
Administrative Agent, Syndication Agent, as Documentation Agent, and the Lenders
named therein and Borrower shall have paid to such lenders the Obligation (as
defined in such Credit Agreement) outstanding thereunder.
5.2 CONDITIONS TO ALL BORROWINGS. The obligations of Lenders to make
all Borrowings (including the initial Borrowing) are subject to the following
conditions precedent:
(a) NOTICE OF BORROWING. Administrative Agent shall have received, in
accordance with the provisions of SECTION 2.2, an originally executed Borrowing
Request signed by a Responsible Officer of Borrower.
(b) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. The
representations and warranties in Loan Documents are true, correct, and complete
in all material respects (unless they speak to a specific date or are based on
facts which have changed by transactions expressly contemplated or permitted by
this Agreement).
(c) NO DEFAULT. No Potential Default, Default, or Material Adverse
Event exits or would be caused by the making of such Borrowing.
(d) NO INJUNCTION OR RESTRAINING ORDER. No order, judgment, or decree
of any Governmental Authority shall purport to enjoin or restrain any Lender
from making the Borrowing to be made by it.
(e) NO VIOLATION. The making of the Borrowing shall not violate any
Governmental Requirement, including, without limitation, Regulation G,
Regulation T, Regulation U, or Regulation X of the Board of Governors of the
Federal Reserve System.
5.3 CONDITIONS. GENERALLY. Each condition precedent in this Agreement
is material to the transactions contemplated by this Agreement, and time is of
the essence with respect to each condition precedent. Lenders may fund any
Borrowing without all conditions being satisfied, but, to the extent permitted
by Governmental Requirements, such funding shall not be deemed to be a waiver of
the requirement that each condition precedent be satisfied as a prerequisite for
any subsequent funding or issuance, unless Lenders specifically waive each item
in writing.
CREDIT AGREEMENT
25
<PAGE>
SECTION 6
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to the Credit Parties as follows:
6.1 PURPOSE OF CREDIT FACILITY. Borrower shall use proceeds of the
Borrowings hereunder to pay Indebtedness, acquire, subject to SECTION 8.5,
office and industrial Properties, raw land, properties under construction,
partnership interests, interests in other Persons, investments in mortgages and
loans, and other acquisitions or investments permitted hereunder, and for
construction costs and working capital purposes of the Companies. Borrower is
not engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended. No part of the proceeds of any Borrowing shall be
used, directly or indirectly, for a purpose that violates any Governmental
Requirement, including the provisions of Regulation U.
6.2 EXISTENCE, GOOD STANDING, AUTHORITY AND COMPLIANCE. Each Company is
duly formed, validly existing and in good standing under the Governmental
Requirements of the jurisdiction in which it is incorporated or formed as
identified on SCHEDULE 6.2 (as supplemented from time to time). Each Company (a)
is duly qualified to transact business and is in good standing as a foreign
trust, corporation, partnership, limited liability company, or other entity in
each jurisdiction where the nature and extent of its business and properties
require due qualification and good standing, which jurisdictions are identified
on SCHEDULE 6.2 (as supplemented from time to time to reflect changes as a
result of transactions permitted by the Loan Documents), except where the
failure to so qualify could not result in a Material Adverse Event, (b)
possesses all requisite authority, permits and power to conduct its business as
is now being, or is contemplated by this Agreement to be, conducted, and (c) is
in compliance with all applicable Governmental Requirements.
6.3 AFFILIATES. Borrower has no Consolidated Affiliates or
Unconsolidated Affiliates except as disclosed on SCHEDULE 6.2 (as supplemented
from time to time to reflect changes as a result of transactions permitted by
the Loan Documents).
6.4 AUTHORIZATION AND CONTRAVENTION. The execution and delivery by each
Company of each Loan Document or related document to which it is a party, and
the performance by it of its obligations thereunder, (a) are within its trust,
corporate, limited liability company, or partnership power, (b) have been duly
authorized by all necessary trust, corporate, limited liability company, or
partnership action of such Person, (c) require no action by or filing with any
Governmental Authority, (d) do not violate any provision of its Constituent
Documents, (e) do not violate any provision of any Governmental Requirement or
order of any Governmental Authority applicable to it, (f) do not violate any
material agreements to which it is a party, or (g) do not result in the creation
or imposition of any Lien on any asset of any Company, other than pursuant to
the Loan Documents.
6.5 BINDING EFFECT. Upon execution and delivery by all parties thereto,
each Loan Document to which it is a party shall constitute a legal and binding
obligation of each Company, enforceable against such Company in accordance with
its terms, subject to applicable Debtor Relief Laws and general principles of
equity.
6.6 FINANCIAL STATEMENTS; FISCAL YEAR. The Current Financials were
prepared in accordance with GAAP and present fairly, in all material respects,
the consolidated financial condition, results of operations, and cash flows of
the Companies as of, and for the portion of the fiscal year ending on the date
or dates thereof (subject only to normal audit adjustments). All material
liabilities of the Companies as of the date or dates of the Current Financials
are reflected therein or in the notes thereto. Except for transactions directly
related to, or specifically contemplated by, the Loan Documents or disclosed in
the Current Financials, no subsequent material adverse changes have occurred in
the consolidated financial condition of the
CREDIT AGREEMENT
26
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Companies from that shown in the Current Financials. The fiscal year of each
Company ends on December 31.
6.7 LITIGATION. Except as disclosed on SCHEDULE 6.7, no Company is
subject to, or aware of the threat of, any Litigation that is reasonably likely
to be determined adversely to such Company or the Companies, taken as a whole
or, if so adversely determined, is a Material Adverse Event. No outstanding and
unpaid final and non-appealable judgments against any Company exist which could
result in a Material Adverse Event.
6.8 TAXES.
(a) All Tax returns of each Company required to be filed have been
filed (or extensions have been granted) before delinquency, and all Taxes
imposed upon each Company that are due and payable have been paid before
delinquency or are being contested in good faith by appropriate proceedings
diligently conducted and for which reserves in accordance with GAAP or otherwise
reasonably acceptable to Administrative Agent have been provided.
(b) As of the date hereof, no United States federal income tax returns
of the "affiliated group" (as defined in the Code) of which any Company is a
member have been examined and closed. The members of such affiliated group have
filed all United States Federal income tax returns and all other material tax
returns which are required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment received by or any of
them (except for taxes being contested in good faith by appropriate proceedings
diligently conducted and for which reserves in accordance with GAAP or otherwise
acceptable to Administrative Agent have been provided). The charges, accruals,
and reserves on the books of the Companies in respect of taxes or other
governmental charges are, in the opinion of the Companies, adequate.
(c) PPT qualifies as a REIT.
6.9 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 6.9, and
except where the breach of any of the following representations could not result
in a Material Adverse Event, (a) no environmental condition or circumstance
exists that materially and adversely affects any Company's properties or
operations, (b) no Company has received any report of any Company's violation of
any Environmental Law that has not been remedied, (c) no Company knows that any
Company is under any obligation to remedy any violation of any Environmental
Law, or (d) to the best of Borrower's knowledge, no facility of any Company is
or has been used for storage, treatment, or disposal of any Hazardous Substance,
except for (i) the storage and use of cleaning and maintenance materials, used
and stored in commercially reasonable quantities and in compliance with
applicable Environmental Laws, and (ii) light manufacturing and distribution
activities of tenants, in compliance with applicable Environmental Laws,
provided that such tenants are not primarily engaged in the treatment,
processing, recycling, or disposal of any Hazardous Substance, or for any other
use that would give rise to the release of any Hazardous Substance on such
facility. Each Company has taken prudent steps to determine that its properties
and operations do not violate any Environmental Law.
6.10 EMPLOYEE PLANS. Except where occurrence or existence could not
reasonably be expected to result in a Material Adverse Event, (a) no Employee
Plan has incurred an "accumulated funding deficiency" (as defined in Section 302
of ERISA or Section 412 of the Code), (b) no Company has incurred liability
under ERISA to the PBGC in connection with any Employee Plan (other than
required insurance premiums, all of which have been paid), (c) no Company has
withdrawn in whole or in part from participation in a Multi-employer Plan, (d)
no Company has engaged in any "prohibited transaction" (as defined in Section
406 of ERISA or Section 4975 of the Code), and (e) no "reportable event" (as
defined in Section 4043 of ERISA) has occurred, excluding events for which the
notice requirement is waived under applicable PBGC regulations.
CREDIT AGREEMENT
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6.11 PROPERTIES; LIENS. Each Company has good title to all of its
property reflected on the Current Financials (except for property that is
obsolete or that has been disposed in the ordinary course of business or, after
the date of this Agreement, as otherwise permitted by SECTION 8.7 or SECTION
8.8). Except for Permitted Liens, no Lien exists on any Unencumbered Property,
and the execution, delivery, performance, or observance of the Loan Documents
shall not require or result in the creation of any Lien on any Unencumbered
Property.
6.12 LOCATIONS. Each Company's chief executive office is located at the
address set forth on SCHEDULE 6.2 (as supplemented from time to time). Each
Company's books and records are located at its chief executive office.
6.13 GOVERNMENT REGULATIONS. No Company is subject to regulation under
the Investment Company Act of 1940, as amended, or the Public Utility Holding
Company Act of 1935, as amended.
6.14 TRANSACTIONS WITH AFFILIATES. Except as disclosed on SCHEDULE 6.14
(as supplemented from time to time if the disclosures are approved by
Administrative Agent), no Company is a party to a material transaction with any
of its Affiliates, other than transactions in the ordinary course of business
and upon fair and reasonable terms not materially less favorable than it could
obtain or could become entitled to in an arm's-length transaction with a Person
that was not its Affiliate.
6.15 INSURANCE. Each Company maintains with financially sound,
responsible, and reputable insurance companies or associations (or, as to
workers' compensation or similar insurance, with an insurance fund or by self-
insurance authorized by the jurisdictions in which it operates) insurance
concerning its properties and businesses against casualties and contingencies
and of types and in amounts (and with co-insurance and deductibles) as is
customary in the case of similar businesses.
6.16 LABOR MATTERS. No actual or, to Borrower's knowledge, threatened
strikes, labor disputes, slow downs, walkouts, or other concerted interruptions
of operations by the employees of any Company that could reasonably be expected
to result in a Material Adverse Event exist. All payments due from any Company
for employee health and welfare insurance have been paid or accrued as a
liability on its books, other than any non-payment that are not, individually or
collectively, a Material Adverse Event.
6.17 SOLVENCY. On each Borrowing Date, each Company is, and after
giving effect to the requested Borrowing will be, Solvent.
6.18 FULL DISCLOSURE. Each material fact or condition relating to the
financial condition or business of the Companies which could reasonably be
expected to result in a Material Adverse Event has been disclosed to
Administrative Agent. All information previously furnished, furnished on the
date of this Agreement, and furnished in the future, by any Company to
Administrative Agent in connection with the Loan Documents (a) was, is, and will
be, true and accurate in all material respects or based on good faith estimates
on the date the information is stated or certified, and (b) did not, does not,
and will not, fail to state any material fact the existence of which or the
omission of which could be or result in a Material Adverse Event
6.19 EXEMPTION FROM ERISA; PLAN ASSETS. PPT is a "real estate operating
company" within the meaning of 29 C.F.R. (S) 2510.3-101(e) (or anY successor
regulation) and the assets of the Companies would not be deemed "plan assets" as
defined in 29 C.F.R. (S) 2510.3-101(a)(1) (or any successor regulation) of any
Employee Plan or Multi-employer Plan.
CREDIT AGREEMENT
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SECTION 7
AFFIRMATIVE COVENANTS
So long as Lenders are committed to fund any Borrowings under this
Agreement and until the Obligation is paid in full, Borrower covenants and
agrees as follows:
7.1 ITEMS TO BE FURNISHED. Borrower shall cause the following to be
furnished to Administrative Agent (with sufficient copies for each Lender):
(a) ANNUAL FINANCIAL STATEMENTS. Promptly after preparation, and no
later than ninety (90) days after the last day of each fiscal year of PPT,
Financial Statements of PPT showing the consolidated financial condition and
results of operations of PPT as of, and for the year ended on, that last day,
accompanied by: (A) the unqualified opinion of the firm of an accounting firm of
nationally-recognized independent certified public accountants, based on an
audit using generally accepted auditing standards, that the Financial Statements
of PPT were prepared in accordance with GAAP and present fairly, in all material
respects, the consolidated financial condition and results of operations of PPT;
and (B) a Compliance Certificate.
(b) PERIODIC FINANCIAL STATEMENTS. Promptly after preparation, and no
later than forty-five (45) days after the last day of each fiscal quarter
(except the last) of PPT: (i) Financial Statements of PPT showing the
consolidated financial condition and results of operations of PPT for the fiscal
quarter and for the period from the beginning of the current fiscal year to the
last day of the fiscal quarter; and (ii) a Compliance Certificate.
(c) OTHER REPORTS.
(i) Promptly after receipt, a copy of each interim or special
audit report and management letter issued by independent accountants
with respect to Borrower and PPT or their financial records.
(ii) Promptly upon its becoming available, each press release and
each regular or periodic report and any registration statement or
prospectus in respect thereof filed by Borrower or PPT with, or
received by Borrower or PPT in connection therewith from, any
securities exchange or the Securities and Exchange Commission, or any
successor agency thereof, including, without limitation, each Form 10-
K, 10-Q, and S-8 filed with the Securities and Exchange Commission.
(iii) Promptly after the mailing or delivery thereof, copies of all
material reports or other information from Borrower or PPT to its
shareholders or partners (other than reports or other information
delivered only to Responsible Officers or other employees of Borrower
or PPT).
(d) UNENCUMBERED PROPERTY REPORT. Promptly after the preparation, and
no later than forty-five (45) days after the last day of each fiscal quarter of
Borrower, an Unencumbered Property Report and certifying compliance with SECTION
4.1.
(e) UNENCUMBERED PROPERTY INFORMATION. Promptly upon reasonable request
by Administrative Agent, information concerning the Unencumbered Properties,
including, without limitation, rent rolls, operating statements, Capital
Expenditure budgets, copies of leases, copies of tenant financial statements,
agings of rent payments, copies of existing environmental assessments, and
copies of existing property inspection reports.
(f) NOTICES. Notice, promptly after a Responsible Officer of Borrower
knows of (i) the existence and status of any Litigation that, if determined
adversely to any Company, could reasonably be expected to result in a Material
Adverse Event, (ii) any change in any material fact or circumstance represented
or warranted by any Company in any Loan Document which could be or result in a
Material Adverse Event, (iii) the receipt by any Company of notice of any
violation or alleged violation of ERISA or any Environmental Law (which
individually or collectively with other violations or allegations could
reasonably be expected to
CREDIT AGREEMENT
29
<PAGE>
result in a Material Adverse Event), or (iv) a Default or Potential Default,
specifying the nature thereof and what action Borrower has taken, is taking, or
proposes to take.
(g) CHANGE IN CONTROL. Promptly upon any Change in Control, notice of
such event together with a description of the transaction giving rise thereto.
(h) RATINGS. Promptly upon the receipt of notice thereof, and in any
event within five (5) Business Days after any change in the Moody's Rating or
the S & P Rating, notice of such change.
(i) OTHER INFORMATION. Promptly upon reasonable request by
Administrative Agent, information (not otherwise required to be furnished under
the Loan Documents) respecting the business affairs, assets, and liabilities of
the Companies and opinions, certifications, and documents in addition to those
mentioned in this Agreement.
7.2 USE OF PROCEEDS. Borrower shall use the proceeds of Borrowings only
for the purposes represented in this Agreement.
7.3 BOOKS AND RECORDS. Borrower shall, and shall cause each Company to,
maintain books, records, and accounts necessary to prepare financial statements
in accordance with GAAP.
7.4 INSPECTIONS. Upon reasonable notice and during normal business
hours, Borrower shall, and shall cause each Company to, allow Administrative
Agent (or its Representatives) to inspect any of their respective properties
(subject to the inspection rights in any tenant leases), to review reports,
files, and other records and to make and take away copies, and to discuss in the
presence of Borrower or such other Company any of its affairs, conditions and
finances with its other creditors, directors, officers, employees, or
representatives from time to time, during reasonable business hours.
7.5 TAXES. Borrower shall, and shall cause each Company to, promptly
pay prior to delinquency any and all Taxes, other than Taxes that are being
contested in good faith by lawful proceedings diligently conducted, against
which reserves or other provisions required by GAAP have been made, and in
respect of which levy and execution of any Lien have been and continue to be
stayed.
7.6 PAYMENT OF OBLIGATIONS. Borrower shall, and shall cause each
Company to, promptly pay (or renew and extend) all of their respective
obligations as they become due (unless any such obligations are being contested
in good faith by appropriate proceedings and against which reserves or other
provisions required by GAAP have been made, except where the failure to so pay
(or renew or extend) could not result in a Material Adverse Event).
7.7 EXPENSES. Borrower shall promptly pay following demand (a) all
costs, fees, and expenses paid or incurred by Agents in connection with the
arrangement, syndication, and negotiation of the loan evidenced by this
Agreement and the other Loan Documents and the negotiation, preparation,
delivery, and execution of the Loan Documents and any related amendment, waiver,
or consent (including in each case the reasonable fees and expenses of any
Agent's counsel), and (b) all costs, fees, and expenses of Agents and, after a
Default, Lenders incurred by any Agent or, after a Default, any Lender in
connection with the enforcement of the obligations of any Obligor arising under
the Loan Documents or the exercise of any Rights arising under the Loan
Documents (including reasonable attorneys' fees, expenses, and costs paid or
incurred in connection with any workout or restructure and any action taken in
connection with any Debtor Relief Laws), all of which shall be a part of the
Obligation and shall bear interest, if not paid upon demand, at the Default Rate
until repaid.
7.8 MAINTENANCE OF EXISTENCE, ASSETS, AND BUSINESS. Each Company shall
(a) maintain its trust, partnership, limited liability company, or corporate
existence in good standing in its state of
CREDIT AGREEMENT
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organization, and (b) except where not a Material Adverse Event (i) maintain its
authority to transact business in good standing in all other states, (ii)
maintain all licenses, permits, franchises, and Governmental Requirements
necessary for its business, and (iii) keep all of its material assets that are
useful in and necessary to its business in good working order and condition
(ordinary wear and tear excepted) and make all necessary repairs and
replacements.
7.9 INSURANCE. Borrower shall, and shall cause each Company to,
maintain with financially sound, responsible, and reputable insurance companies
or associations (or, as to workers' compensation or similar insurance, with an
insurance fund or by self-insurance authorized by the jurisdictions in which it
operates) insurance reasonably acceptable to Administrative Agent concerning its
properties and businesses against casualties and contingencies and of types and
in amounts (and with co-insurance and deductibles) as is customary in the case
of similar businesses. At Administrative Agent's request, Borrower shall, and
shall cause each Company to, deliver to Administrative Agent evidence of
insurance for each policy of insurance and evidence of payment of all premiums.
7.10 PRESERVATION AND PROTECTION OF RIGHTS. Borrower shall, and shall
cause each other Obligor to, perform the acts and duly authorize, execute,
acknowledge, deliver, file, and record any additional writings as any Agent may
reasonably deem necessary or appropriate to preserve and protect the Rights of
the Credit Parties under any Loan Document.
7.11 ENVIRONMENTAL LAWS. Borrower shall, and shall cause each Company
to, (a) operate and manage its businesses and otherwise conduct its affairs in
compliance with all Environmental Laws, except to the extent noncompliance could
not reasonably be expected to result in a Material Adverse Event, (b) promptly
deliver to Administrative Agent a copy of any written notice received from any
Governmental Authority alleging that any Company is not in compliance with any
Environmental Law, where such notice or non-compliance could result in a
Material Adverse Event, and (c) promptly deliver to Administrative Agent a copy
of any written notice received from any Governmental Authority alleging that any
Company has any potential environmental Liability that could result in a
Material Adverse Event.
7.12 INDEMNIFICATION.
(a) AS USED IN THIS SECTION: (i) "INDEMNITOR" MEANS THE OBLIGORS; (ii)
"INDEMNITEE" MEANS EACH AGENT, EACH LENDER, EACH PRESENT AND FUTURE AFFILIATE OF
----------
EACH AGENT OR ANY LENDER, EACH PRESENT AND FUTURE REPRESENTATIVE OF EACH AGENT,
EACH LENDER, OR ANY OF SUCH AFFILIATES, AND EACH PRESENT AND FUTURE SUCCESSOR
AND ASSIGN OF EACH AGENT, EACH LENDER, OR ANY OF SUCH AFFILIATES OR
REPRESENTATIVES; AND (iii) "INDEMNIFIED LIABILITIES" MEANS ALL PRESENT AND
-----------------------
FUTURE, KNOWN AND UNKNOWN, FIXED AND CONTINGENT, ADMINISTRATIVE, INVESTIGATIVE,
JUDICIAL, AND OTHER CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, INVESTIGATIONS,
SUITS, PROCEEDINGS, AMOUNTS PAID IN SETTLEMENT, DAMAGES, JUDGMENTS, PENALTIES,
COURT COSTS, LIABILITIES, AND OBLIGATIONS -- AND ALL PRESENT AND FUTURE COSTS,
EXPENSES, AND DISBURSEMENTS (INCLUDING, WITHOUT LIMITATION, ALL REASONABLE
ATTORNEYS' FEES AND EXPENSES WHETHER OR NOT SUIT OR OTHER PROCEEDING EXISTS OR
ANY INDEMNITEE IS PARTY TO ANY SUIT OR OTHER PROCEEDING) IN ANY WAY RELATED TO
ANY OF THE FOREGOING -- THAT MAY AT ANY TIME BE IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST ANY INDEMNITEE AND IN ANY WAY RELATING TO OR ARISING OUT OF ANY
(A) LOAN DOCUMENT, TRANSACTION CONTEMPLATED BY ANY LOAN DOCUMENT, OR ANY
PROPERTY, (B) ENVIRONMENTAL LIABILITY IN ANY WAY RELATED TO ANY COMPANY, ANY
PROPERTY, OR ANY ACT, OMISSION, STATUS, OWNERSHIP, OR OTHER RELATIONSHIP,
CONDITION, OR CIRCUMSTANCE CONTEMPLATED BY, CREATED UNDER, OR ARISING PURSUANT
TO OR IN CONNECTION WITH ANY LOAN DOCUMENT, OR (C) INDEMNITEE'S SOLE OR
--------------------
CONCURRENT ORDINARY NEGLIGENCE.
- ------------------------------
CREDIT AGREEMENT
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(b) EACH INDEMNITOR SHALL JOINTLY AND SEVERALLY INDEMNIFY EACH
INDEMNITEE FROM AND AGAINST, PROTECT AND DEFEND EACH INDEMNITEE FROM AND
AGAINST, HOLD EACH INDEMNITEE HARMLESS FROM AND AGAINST, AND ON DEMAND PAY OR
REIMBURSE EACH INDEMNITEE FOR, ALL INDEMNIFIED LIABILITIES.
(c) THE FOREGOING PROVISIONS (i) ARE NOT LIMITED IN AMOUNT EXCEEDS THE
OBLIGATION, (ii) INCLUDE, WITHOUT LIMITATION, REASONABLE FEES AND EXPENSES OF
ATTORNEYS AND OTHER COSTS AND EXPENSES OF LITIGATION OR PREPARING FOR LITIGATION
AND DAMAGES OR INJURY TO PERSONS, PROPERTY, OR NATURAL RESOURCES ARISING UNDER
ANY STATUTORY OR COMMON LAW, PUNITIVE DAMAGES, FINES, AND OTHER PENALTIES, AND
(iii) ARE NOT AFFECTED BY THE SOURCE OR ORIGIN OF ANY HAZARDOUS SUBSTANCE, AND
(iv) ARE NOT AFFECTED BY ANY INDEMNITEE'S INVESTIGATION, ACTUAL OR CONSTRUCTIVE
KNOWLEDGE, COURSE OF DEALING, OR WAIVER.
(d) No Indemnitee is entitled to be indemnified under the Loan
Documents for its or its Representatives' own fraud, gross negligence, or
willful misconduct.
(e) THE PROVISIONS OF AND INDEMNIFICATION AND OTHER UNDERTAKINGS UNDER
THIS SECTION SURVIVE THE SATISFACTION OF THE OBLIGATION AND THE TERMINATION OF
THE LOAN DOCUMENTS.
7.13 REIT STATUS. At all times, PPT (including its organization and
method of operations and those of its Consolidated Affiliates) shall qualify as
a REIT.
7.14 ERISA EXEMPTIONS. PPT shall qualify as a "real estate operating
company" under the 29 C.F.R. (S) 2510.3-101(e) (or any successor regulation) or
other appropriate exemption such that its assets shall not be deemed "plan
assets" as defined in 29 C.F.R. (S) 2510.3-101(a)(1) (or any successor
regulation) of any Employee Plan or Multi-employer Plan.
7.15 LISTED COMPANY. The common shares of beneficial interest of PPT
shall at all times be listed for trading and be traded on either the New York
Stock Exchange or American Stock Exchange.
SECTION 8
NEGATIVE COVENANTS
So long as Lenders are committed to fund any Borrowings under this
Agreement and until the Obligation is paid in full, Borrower covenants and
agrees as follows:
8.1 PAYMENT OF OBLIGATIONS. Borrower shall not, and shall not permit
any Company to, voluntarily prepay principal of, or interest on, any Liabilities
other than the Obligation, if a Default exists.
8.2 EMPLOYEE PLANS. Except where a Material Adverse Event would not
result, Borrower shall not, and shall not permit any Company to, permit any of
the events or circumstances described in SECTION 6.10 to exist or occur.
8.3 TRANSACTIONS WITH AFFILIATES. Except as disclosed on SCHEDULE 6.14
(as supplemented from time to time to reflect changes as a result of
transactions permitted by this Agreement or approved by the Required Lenders),
Borrower shall not, and shall not permit any Company to, enter into any material
transaction with any of its Affiliates, other than transactions in the ordinary
course of business and upon fair and reasonable terms not materially less
favorable than it could obtain or could become entitled to in an arm's-length
transaction with a Person that was not its Affiliate.
CREDIT AGREEMENT
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8.4 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS AND DOCUMENTS. Borrower
shall not, and shall not permit any Company to, (a) violate the provisions of
any Governmental Requirements applicable to it or of any material agreement to
which it is a party if that violation alone, or when aggregated with all other
violations, could reasonably be expected to result in Material Adverse Event,
(b) violate the provisions of its Constituent Documents where such violation
could result in a Material Adverse Event, or (c) repeal, replace, or amend any
provision of its Constituent Documents if that action could reasonably be
expected to result in a Material Adverse Event.
8.5 LOANS, ADVANCES, AND INVESTMENTS. Without the prior written consent
of the Required Lenders, no Company shall have or make any investments in:
(a) Properties consisting of raw land exceeding in the aggregate five
percent (5%) of Total Assets;
(b) Properties under construction having actual and budgeted costs
exceeding in the aggregate twenty percent (20%) of Total Assets (including the
total budgeted project costs for all Properties under construction); provided
that the Companies may not have Properties under construction that are less than
fifty percent (50%) pre-leased having actual and budgeted costs exceeding in the
aggregate fifteen percent (15%) of Total Assets (including the total budgeted
project costs for all Properties under construction);
(c) Except for Borrower's investment in Broadmoor Austin Associates,
partnerships, joint ventures, and similar entities that are not Consolidated
Affiliates accounted for on an equity basis (determined in accordance with GAAP)
exceeding in the aggregate twelve and one-half percent (12.5%) of Total Assets;
(d) Loans, mortgages, advances, and extensions of credit to Persons
exceeding in the aggregate ten percent (10%) of Total Assets;
(e) The stock of any Persons that are not Consolidated Affiliates
exceeding in the aggregate five percent (5%) of Total Assets; or
(f) The investments described in (A) through (E) above exceeding in the
aggregate thirty percent (30%) of Total Assets.
8.6 DIVIDENDS AND DISTRIBUTIONS. Borrower shall not, and shall not
permit any Company to, declare, make or pay any Distribution other than (a)
Permitted Distributions, and (b) Distributions declared, made or paid by (i)
Borrower or PPT wholly in the form of its capital stock or partnership
interests, (ii) any Company (other than Borrower) to Borrower or to PPT.
Borrower shall not, and shall not permit any Company to, enter into or permit to
exist any arrangement or agreement (other than this Agreement) that prohibits it
from paying distributions to its shareholders, partners, or members.
8.7 SALE OF ASSETS. Neither Borrower nor PPT shall sell, assign, lease,
transfer, or otherwise dispose of all or substantially all of its assets.
8.8 MERGERS AND DISSOLUTIONS. Borrower shall not, and shall not permit
any Obligor to, merge or consolidate with any other Person or liquidate, wind
up, or dissolve (or suffer any liquidation or dissolution); provided, however,
that the foregoing shall not operate to prevent mergers or consolidations of any
Company into Borrower or another Company (if such transaction does not reduce
the net worth of the Companies determined in accordance with GAAP).
8.9 ASSIGNMENT. Borrower shall not, and shall not permit any Company
to, assign or transfer any of its Rights, duties, or obligations under any of
the Loan Documents.
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8.10 FISCAL YEAR AND ACCOUNTING METHODS. Without the prior written
consent of Administrative Agent, Borrower shall not, and shall not permit any
Company to, change its fiscal year or its method of accounting (other than
immaterial changes in methods or as required by GAAP).
8.11 NEW BUSINESSES. Borrower shall not, and shall not permit any
Company to, engage in any type of business except the types of businesses in
which they are presently engaged and any other reasonably related business.
8.12 GOVERNMENT REGULATIONS. Borrower shall not, and shall not permit
any Company to, conduct its business in a way that it becomes regulated under
the Investment Company Act of 1940, as amended, or the Public Utility Holding
Company Act of 1935, as amended.
8.13 SUBSIDIARY GUARANTORS. No Subsidiary Guarantor shall: (a) create,
incur, assume, guarantee, or suffer to exist any Liabilities, other than (i) the
Obligation, (ii) trade payables created in the ordinary course of business,
(iii) endorsements of negotiable instruments in the ordinary course of business,
(iv) contingent Liabilities covered by reserves or insurance, and (v) equipment
leases incurred in the ordinary course of business; or (b) create, incur, or
suffer or permit to be created or incur or exist any Lien upon any of its
Assets, except Permitted Liens. Notwithstanding the foregoing, any Subsidiary
Guarantor may guarantee any Unsecured Debt of Borrower or PPT, which guarantee
shall be pari passu with the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty.
8.14 AMENDMENT OF CONSTITUENT DOCUMENTS. Borrower shall not permit any
amendment of any Company's Constituent Documents, if any, which would materially
and adversely affect Agents or Lenders or their respective Rights under the Loan
Documents.
8.15 INTEREST RATE AGREEMENTS. Borrower shall not permit the Companies'
Indebtedness that is not either subject to a fixed interest rate or hedged
pursuant to an Interest Rate Agreement acceptable to Administrative Agent
("VARIABLE RATE DEBT") to exceed twenty-five percent (25%) of Total Assets as of
such date; provided that the Companies' Variable Rate Debt may exceed
twenty-five percent (25%) of Total Assets for a period of time not to exceed
ninety (90) days if Borrower is diligently seeking Interest Rate Agreements with
respect to such Indebtedness or is in the process of incurring fixed rate
Indebtedness or an Equity Issuance in order to comply with the requirements of
this SECTION 8.15.
SECTION 9
FINANCIAL COVENANTS
So long as Lenders are committed to fund Borrowings under this
Agreement and until the Obligation is paid and performed in full, Borrower
covenants and agrees with Administrative Agent and Lenders that Borrower shall
not directly or indirectly permit:
9.1 MINIMUM TANGIBLE NET WORTH. As of any date, the Tangible Net Worth
to be less than the sum of (a) $718,000,000, and (b) eighty percent (80%) of the
amount of Net Proceeds of any Equity Issuances subsequent to the date hereof.
9.2 TOTAL INDEBTEDNESS TO TOTAL ASSETS. As of any date, the ratio of
(a) all Indebtedness of the Companies, on a consolidated basis, to (b) Total
Assets to exceed 0.55 to 1.0.
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9.3 MAXIMUM SECURED DEBT. As of any date during the following periods,
the ratio of (a) Secured Debt of the Companies, on a consolidated basis, to (b)
Total Assets to exceed the ratio set forth opposite such period below:
------------------------------------------------------
PERIOD Maximum Ratio
======================================================
Closing Date through the 0.45 to 1.0
Change Date
------------------------------------------------------
Change Date and thereafter 0.40 to 1.0
------------------------------------------------------
For purposes of this SECTION 9.3, the term "CHANGE DATE" means the earlier to
occur of (a) December 31, 1998, and (b) the date in which Borrower achieves a
Investment Grade Rating; provided that the Change Date may be a later date as
shall be agreed to by the Majority Lenders.
9.4 RECOURSE DEBT. As of any date prior to the Change Date, Recourse
Debt of the Companies, on a consolidated basis, (other than Permitted Recourse
Debt) to exceed $350,000,000. For purposes of this SECTION 9.4, the term "CHANGE
DATE" means the date in which Borrower achieves an Investment Grade Rating;
provided that the Change Date may be an earlier date as shall be agreed to by
the Majority Lenders.
9.5 INTEREST AND DEBT SERVICE COVERAGE RATIOS.
(a) As of any date, the ratio of (i) Aggregate EBITDA, to (ii) Interest
Expense of the Companies, on a consolidated basis, in each case for the twelve
(12) month period ending on the date of determination, to be less than 2.0 to
1.0. For purposes of the foregoing, Aggregate EBITDA and Interest Expense shall
include each Company's (as the case may be, but without duplication) Share of
Aggregate EBITDA and Interest Expense of their respective Unconsolidated
Affiliates.
(b) As of any date, the ratio of (i) Adjusted Property EBITDA for the
Unencumbered Properties owned by Borrower or a Subsidiary Guarantor as of such
date, to (ii) Assumed Interest Expense, on a consolidated basis, to be less than
2.0 to 1.0.
(c) As of any date, the ratio of (i) (A) Aggregate EBITDA, minus (B)
Non-Incremental Capital Expenditures, to (ii) Debt Service, in each case for the
twelve (12) month period ending on the date of determination, to be less than
1.75 to 1.0. For purposes of the foregoing, Aggregate EBITDA, Non-Incremental
Capital Expenditures, and Debt Service shall include each Company's (as the case
may be, but without duplication) Share of Aggregate EBITDA, Capital
Expenditures, and Debt Service of their respective Unconsolidated Affiliates.
(d) As of any date, the ratio of (i) Adjusted Property EBITDA for the
Unencumbered Properties owned by a Company as of the date of determination that
have an Occupancy Rate of at least eighty-five percent (85%), to (ii) the
outstanding Unsecured Debt of the Companies as of such date, to be less than
0.13 to 1.0.
(e) As of any date, the ratio of (i) Adjusted Aggregate EBITDA, to (ii)
Fixed Charges, in each case for the twelve (12) month period ending on the date
of determination, to be less than 1.25 to 1.0.
SECTION 10
DEFAULT
The term "DEFAULT" means the occurrence of any one or more of the
following events:
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10.1 PAYMENT OF OBLIGATION. The failure of Borrower or PPT to pay any
principal of or any interest on the Obligation when it becomes due and payable
under the Loan Documents, and (a) for the first (1st) and second (2nd) such
failures, if any, occurring during any calendar year, such failure shall
continue for three (3) days after written notice thereof from Administrative
Agent to Borrower, and (b) for any other such failures, if any, such failure
shall continue for five (5) days after such payment became due and payable.
10.2 COVENANTS. The failure of Borrower (and, if applicable, any
Company) to punctually and properly perform, observe, and comply with:
(a) any covenant or agreement contained in SECTION 7.1; or
(b) any other covenant or agreement contained in any Loan Document
(other than the covenants to pay the principal of and interest on the Obligation
and the covenants in (A) preceding), and such failure shall continue for (i)
thirty (30) days after the earlier to occur of the date (A) Borrower knows of,
or (B) Borrower receives notice from Administrative Agent of, such failure, or
(ii) seventy-five (75) days after such earlier date if such failure is not
capable of being cured within thirty (30) days and Borrower is diligently
pursuing cure thereof.
10.3 DEBTOR RELIEF. Any Company (a) is not Solvent, (b) fails to pay
its Liabilities generally as they become due, (c) voluntarily seeks, consents
to, or acquiesces in the benefit of any Debtor Relief Law, or (d) becomes a
party to or is made the subject of any proceeding provided for by any Debtor
Relief Law, other than as a creditor or claimant, that could suspend or
otherwise adversely affect the Rights of any Credit Party granted in the Loan
Documents (unless, if the proceeding is involuntary, the applicable petition is
dismissed within sixty (60) days after its filing).
10.4 JUDGMENTS AND ATTACHMENTS. Any Company fails, within sixty (60)
days after entry, to pay, bond, or otherwise discharge any judgment or order for
the payment of money in excess of $1,000,000 (individually or collectively) or
any warrant of attachment, sequestration, or similar proceeding against such
Company's assets having a value (individually or collectively) of $1,000,000
unless such judgment, order for payment, warrant of attachment, sequestration,
or similar proceeding is (a) stayed on appeal, (b) diligently contested in good
faith by appropriate proceedings and adequate reserves have been set aside on
its books in accordance with GAAP, or (c) covered by insurance acceptable to
Administrative Agent.
10.5 GOVERNMENT ACTION.
(a) A final non-appealable order is issued by any Governmental
Authority (including the United States Justice Department) requiring any Company
to divest all or a substantial portion of its assets under any antitrust,
restraint of trade, unfair competition, industry regulation, or similar
Governmental Requirements, or
(b) any Governmental Authority seizes or otherwise appropriates, or
takes custody or control of, all or any substantial portion of the assets of any
Company, other than through condemnation proceeding.
10.6 MISREPRESENTATION. Any material representation or warranty made by
any Company contained in any Loan Document at any time proves to have been
incorrect in any material respect when made and such misrepresentation shall
continue for thirty (30) days after the earlier to occur of the date (a)
Borrower knows of, or (b) Borrower receives notice from Administrative Agent of,
such misrepresentation.
10.7 DEFAULT UNDER OTHER AGREEMENTS.
(a) Any Company shall fail to make any payment in respect of any
Recourse Debt in excess of $5,000,000 when due or within any applicable grace
period or otherwise granted by the lender thereof; or
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(b) A default shall occur in respect of credit agreement, note,
mortgage, indenture, or other agreement or document evidencing, securing, or
otherwise relating to any Recourse Debt in excess of $5,000,000 (other than a
failure to make any payment when due in respect of any such Recourse Debt) and
such default shall continue for more than the period of grace, if any, specified
therein or otherwise granted by the lender thereof; or
(c) The acceleration of the maturity of any Non-Recourse Debt in
excess of $25,000,000 of any Company.
10.8 VALIDITY AND ENFORCEABILITY OF LOAN DOCUMENTS. Except in
accordance with its terms or as otherwise expressly permitted by this Agreement,
any Loan Document at any time after its execution and delivery ceases to be in
full force and effect in any material respect or is declared by a Governmental
Authority to be null and void or its validity or enforceability is contested by
any Company, or any Company denies that it has any further liability or
obligations under any Loan Document to which it is a party.
10.9 MANAGEMENT CHANGES. During any period of twelve (12) consecutive
calendar months, individuals who were directors or trustees of PPT on the first
day of such period shall cease to constitute a majority of the board of
directors of PPT; provided, however, that the directors or trustees of PPT may
include new or replacement directors or trustees that (a) are an officer or
employee of an Affiliate, (b) are required in order (as a practical matter) for
the majority of the board of directors or trustees of PPT to be independent
directors or trustees, or (c) are independent directors or trustees that are
replacing another independent director or trustee whose term has expired or who
has voluntarily resigned.
10.10 CHANGE IN CONTROL. A Change in Control shall occur.
10.11 PLAN ASSETS. The assets of the Companies at any time constitute
assets, within the meaning of ERISA, the Code, and the respective regulations
promulgated thereunder, of any Employee Plan or Multi-employer Plan.
SECTION 11
RIGHTS AND REMEDEMIES
11.1 REMEDIES UPON DEFAULT.
(a) DEBTOR RELIEF. If a Default (i) occurs under SECTION 10.3(c) or
(ii) occurs and is continuing under SECTION 10.3(a), (b) OR (d), the commitment
to extend credit under this Agreement automatically terminates, the entire
unpaid balance of the Obligation automatically becomes due and payable without
any action of any kind whatsoever.
(b) OTHER DEFAULTS. If a Default occurs and is continuing, subject to
the terms of SECTION 13.9(b), then Administrative Agent, upon the request of the
Required Lenders, may do any one or more of the following: (i) if the maturity
of the Obligation has not already been accelerated under SECTION 11.1(A), then
declare the entire unpaid balance of all or any part of the Obligation
immediately due and payable, whereupon it is due and payable; (ii) terminate the
commitments of Lenders to extend credit under this Agreement; (iii) reduce any
claim to judgment; and (iv) exercise any and all other legal or equitable Rights
afforded by the Loan Documents, the Governmental Requirements of the State of
Texas, or any other applicable jurisdiction.
11.2 WAIVERS. To the extent permitted by applicable law, each Company
waives presentment and demand for payment, protest, notice of intention to
accelerate, notice of acceleration, and notice of protest and
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nonpayment, and agrees that its liability with respect to all or any part of the
Obligation is not affected by any renewal or extension in the time of payment of
all or any part of the Obligation, by any indulgence, or by any release or
change in any security for the payment of all or any part of the Obligation.
11.3 PERFORMANCE BY ADMINISTRATIVE AGENT. If any covenant, duty, or
agreement of Borrower is not performed in accordance with the terms of the Loan
Documents, Administrative Agent may, while a Default exists, at its option,
perform, or attempt to perform that covenant, duty, or agreement on behalf of
Borrower (and any amount expended by Administrative Agent in its performance or
attempted performance is payable by Borrower to Administrative Agent on demand,
becomes part of the Obligation, and bears interest at the Default Rate from the
date of Administrative Agent's expenditure until paid). However, neither
Administrative Agent nor any Lender assumes or shall have, except by its express
written consent, any liability or responsibility for the performance of any
covenant, duty, or agreement of Borrower.
11.4 NOT IN CONTROL. None of the covenants or other provisions
contained in any Loan Document shall, or shall be deemed to, give Agents or
Lenders the Right to exercise control over the assets (including real property),
affairs, or management of any Company.
11.5 COURSE OF DEALING. The acceptance by Agents or any Lender of any
partial payment on the Obligation shall not be deemed to be a waiver of any
Default then existing. No waiver by any Credit Party of any Default shall be
deemed to be a waiver of any other then-existing or subsequent Default. No delay
or omission by any Credit Party in exercising any Right under the Loan Documents
will impair that Right or be construed as a waiver thereof or any acquiescence
therein, nor will any single or partial exercise of any Right preclude other or
further exercise thereof or the exercise of any other Right under the Loan
Documents or otherwise.
11.6 CUMULATIVE RIGHTS. All Rights available to the Credit Parties
under the Loan Documents are cumulative of and in addition to all other Rights
granted to the Credit Parties at law or in equity, whether or not the Obligation
is due and payable and whether or not Agents or Lenders have instituted any suit
for collection, foreclosure, or other action in connection with the Loan
Documents.
11.7 APPLICATION OF PROCEEDS. Any and all proceeds ever received by
any Credit Party from the exercise of any Rights pertaining to the Obligation
shall be applied to the Obligation according to SECTION 3.11.
11.8 CERTAIN PROCEEDINGS. Borrow shall promptly execute and deliver, or
cause the execution and delivery of, all applications, certificates,
instruments, and all other documents and papers any Agent reasonably requests in
connection with the obtaining of any consent, approval, registration,
qualification, permit, license, or authorization of any Governmental Authority
or other Person necessary or appropriate for the effective exercise of any
Rights under the Loan Documents. Because Borrower agrees that Agents' and
Lenders' remedies at law for failure of Borrower to comply with the provisions
of this paragraph would be inadequate and that failure would not be adequately
compensable in damages, Borrower agrees that the covenants of this SECTION 11.8
may be specifically enforced.
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SECTION 12
AGENTS AND LENDERS
12.1 AGENTS.
(a) APPOINTMENT. Each Lender appoints Administrative Agent (including,
without limitation, each successor Agent in accordance with this SECTION 12) as
its nominee and agent to act in its name and on its behalf (and Administrative
Agent and each such successor accepts that appointment): (i) to act as its
nominee and on its behalf in and under all Loan Documents; (ii) to arrange the
means whereby its funds are to be made available to Borrower under the Loan
Documents; (iii) to take any action that it properly requests under the Loan
Documents (subject to the concurrence of other Lenders as may be required under
the Loan Documents); (iv) to receive all documents and items to be furnished to
it under the Loan Documents; (v) to be the secured party, mortgagee,
beneficiary, recipient, and similar party in respect of any collateral, for the
benefit of Lenders; (vi) to promptly distribute to it all Financial Statements,
Unencumbered Property Reports, notices received hereunder, and other items
specifically required to be delivered to it hereunder, and, upon request, such
other material information, requests, documents, and items received under the
Loan Documents; (vii) to promptly distribute to it its ratable part of each
payment or prepayment (whether voluntary, as proceeds of collateral upon or
after foreclosure, as proceeds of insurance thereon, or otherwise) in accordance
with the terms of the Loan Documents; and (viii) to deliver to the appropriate
Persons requests, demands, approvals, and consents received from it. However,
Administrative Agent may not be required to take any action that exposes it to
personal liability or that is contrary to any Loan Document or applicable
Governmental Requirement.
(b) SUCCESSOR. Administrative Agent may assign all of its Rights and
obligations as Administrative Agent under the Loan Documents to any of its
Affiliates, which Affiliate shall then be the successor Administrative Agent
under the Loan Documents. Administrative Agent may also voluntarily resign by
giving thirty (30) days' prior written notice to Borrower and Lenders, and shall
resign upon the request of the Required Lenders for cause (i.e., Administrative
Agent is continuing to fail to perform its responsibilities as Administrative
Agent under the Loan Documents). If the initial or any successor Administrative
Agent ever ceases to be a party to this Agreement or if the initial or any
successor Administrative Agent ever resigns (whether voluntarily or at the
request of the Required Lenders), then the Required Lenders shall (which, if no
Default or Potential Default exists, is subject to Borrower's approval that may
not be unreasonably withheld) appoint the successor Administrative Agent from
among Lenders (other than the resigning Administrative Agent). If the Required
Lenders fail to appoint a successor Administrative Agent within thirty (30) days
after the resigning Administrative Agent has given notice of resignation or the
Required Lenders have removed the resigning Administrative Agent, then the
resigning Administrative Agent may, on behalf of Lenders, appoint a successor
Administrative Agent (which, if no Default or Potential Default exists, is
subject to Borrower's approval that may not be unreasonably withheld), which
must be a commercial bank having a combined capital and surplus of at least
$1,000,000,000 (as shown on its most recently published statement of condition)
and whose debt obligations (or whose parent's debt obligations) are rated not
less than Baa1 by Moody's or BBB+ by S & P. Upon its acceptance of appointment
as successor Administrative Agent, the successor Administrative Agent succeeds
to and becomes vested with all of the Rights of the prior Administrative Agent,
and the prior Administrative Agent is discharged from its duties and obligations
of Administrative Agent under the Loan Documents, and each Lender shall execute
the documents that any Lender, the resigning or removed Administrative Agent, or
the successor Administrative Agent reasonably request to reflect the change.
After any Administrative Agent's resignation or removal as Administrative Agent
under the Loan Documents, the provisions of this Section inure to its benefit as
to any actions taken or not taken by it while it was Administrative Agent under
the Loan Documents. If Borrower fails to respond to any written request for any
consent required in this Section 12.1(b) within ten (10) days after the date
that Borrower receives such request, then Borrower shall be deemed to have given
its consent to such request.
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(c) RIGHTS AS LENDER. Each Agent, in its capacity as a Lender, has the
same Rights under the Loan Documents as any other Lender and may exercise those
Rights as if it were not acting as an Agent. The term "Lender," unless the
context otherwise indicates, includes Agents. Administrative Agent's resignation
or removal does not impair or otherwise affect any Rights that it has or may
have in its capacity as an individual Lender. Each Lender and Borrower agree
that Agents are not a fiduciary for Lenders or for Borrower but are simply
acting in the capacities described in this Agreement to alleviate administrative
burdens for Borrower and Lenders, that Agents have no duties or responsibilities
to Lenders or Borrower except those expressly set forth in the Loan Documents,
and that each Agent in its capacity as a Lender has the same Rights as any other
Lender.
(d) OTHER ACTIVITIES. Any Credit Party may now or in the future be
engaged in one or more loan, letter of credit, leasing, or other financing
transactions with Borrower or another Company, act as trustee or depositary for
Borrower or another Company, or otherwise be engaged in other transactions with
Borrower (collectively, the "OTHER ACTIVITIES") not the subject of the Loan
Documents. Without limiting the Rights of Lenders specifically set forth in the
Loan Documents, no Credit Party is responsible to account to the other Credit
Parties for those other activities, and no Credit Party shall have any interest
in any other Credit Party's activities, any present or future guaranties by or
for the account of Borrower that are not contemplated by or included in the Loan
Documents, any present or future offset exercised by any Credit Party in respect
of those other activities, any present or future property taken as security for
any of those other activities, or any property now or hereafter in any Credit
Party's possession or control that may be or become security for the obligations
of Borrower arising under the Loan Documents by reason of the general
description of indebtedness secured or of property contained in any other
agreements, documents, or instruments related to any of those other activities
(but, if any payments in respect of those guaranties or that property or the
proceeds thereof is applied by any Credit Party to reduce the Obligation, then
each Lender is entitled to share ratably in the application as provided in the
Loan Documents).
(e) SYNDICATION AGENT. Syndication Agent, in such capacity, shall have
no rights, duties, or obligations hereunder, except as specifically provided in
this Agreement. Syndication Agent (a) may voluntarily resign by notice to
Administrative Agent, Lenders, and Borrower, and (b) shall resign upon the
request of the Required Lenders for cause. Upon the resignation of Syndication
Agent, the Required Lenders may elect to designate a successor Syndication Agent
(which, if no Default or Potential Default exists, is subject to Borrower's
approval that may not be unreasonably withheld), which must be a Lender who is a
commercial bank having a combined capital and surplus of at least $1,000,000,000
(as shown on its most recently published statement of condition) and whose debt
obligations (or whose parent's debt obligations) are rated not less than Baa1 by
Moody's or BBB+ by S & P.
(f) CO-AGENTS. Co-Agents, in such capacity, shall have no rights,
duties, or obligations hereunder.
12.2 EXPENSES. Should Administrative Agent commence any proceeding or
in any way seek to enforce its Rights under the Loan Documents, irrespective of
whether as a result thereof Administrative Agent shall acquire title to any
collateral, either through foreclosure, deed in lieu of foreclosure, or
otherwise, each Lender, upon demand therefor from time to time, shall contribute
its share (based on its Pro Rata Share) of the reasonable costs and/or expenses
of any such enforcement or acquisition, including, but not limited to, fees of
receivers or trustees, court costs, title company charges, filing and recording
fees, appraisers' fees and fees and expenses of attorneys to the extent not
otherwise reimbursed by Borrower. Without limiting the generality of the
foregoing, each Lender shall contribute its share (based on its Pro Rata Share)
of all reasonable costs and expenses incurred by Administrative Agent (including
reasonable attorneys' fees and expenses) if Administrative Agent employs counsel
for advice or other representation (whether or not any suit has been or shall be
filed) with respect to any collateral or any part thereof, or any of the Loan
Documents, or the attempt to enforce any Lien in any of the collateral, or to
enforce any rights of Administrative Agent or any of Borrower's or any other
Company's obligations under any of the Loan Documents, but not with respect
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to any dispute between Administrative Agent and any other Lender(s). Any loss of
principal and interest resulting from any Default shall be shared by Lenders in
accordance with their respective Pro Rata Share. It is understood and agreed
that if Administrative Agent determines that it is necessary to engage counsel
for Lenders from and after the occurrence of a Potential Default or Default,
then said counsel shall be selected by Administrative Agent and written notice
of the same shall be delivered to Lenders.
12.3 PROPORTIONATE ABSORPTION OF LOSSES. Except as otherwise provided
in the Loan Documents, nothing in the Loan Documents gives any Lender any
advantage over any other Lender insofar as the Obligation is concerned or
relieves any Lender from ratably absorbing any losses sustained with respect to
the Obligation (except to the extent unilateral actions or inactions by any
Lender result in Borrower or any other Obligor on the Obligation having any
credit, allowance, setoff, defense, or counterclaim solely with respect to all
or any part of that Lender's Pro Rata Share of the Obligation).
12.4 DELEGATION OF DUTIES; RELIANCE. Lenders may perform any of their
duties or exercise any of their Rights under the Loan Documents by or through
Administrative Agent, and Lenders and Administrative Agent may perform any of
their duties or exercise any of their Rights under the Loan Documents by or
through their respective Representatives. Administrative Agent, Lenders, and
their respective Representatives (a) are entitled to rely upon (and shall be
protected in relying upon) any written or oral statement believed by it or them
to be genuine and correct and to have been signed or made by the proper Person
and, with respect to legal matters, upon opinion of counsel selected by
Administrative Agent or that Lender (but nothing in this CLAUSE (A) permits
Administrative Agent to rely on (i) oral statements if a writing is required by
this Agreement or (ii) any other writing if a specific writing is required by
this Agreement), (b) are entitled to deem and treat each Lender as the owner and
holder of its portion of the Obligation for all purposes until written notice of
the assignment or transfer is given to and received by Administrative Agent (and
any request, authorization, consent, or approval of any Lender is conclusive and
binding on each subsequent holder, assignee, or transferee of or Participant in
that Lender's portion of the Obligation until that notice is given and
received), (c) are not deemed to have notice of the occurrence of a Default
unless a Responsible Officer of Administrative Agent, who handles matters
associated with the Loan Documents and transactions thereunder, has actual
knowledge or Administrative Agent has been notified by a Lender or Borrower, and
(d) are entitled to consult with legal counsel (including counsel for Borrower),
independent accountants, and other experts selected by Administrative Agent and
are not liable for any action taken or not taken in good faith by it in
accordance with the advice of counsel, accountants, or experts.
12.5 LIMITATION OF AGENTS' LIABILITY.
(a) EXCULPATION. No Agent nor any of their Affiliates or
Representatives will be liable for any action taken or omitted to be taken by it
or them under the Loan Documents in good faith and believed by it or them to be
within the discretion or power conferred upon it or them by the Loan Documents
or be responsible for the consequences of any error of judgment (except for
fraud, gross negligence, or willful misconduct), and no Agent nor any of its
Affiliates or Representatives has a fiduciary relationship with any Lender by
virtue of the Loan Documents (but nothing in this Agreement negates the
obligation of Administrative Agent to account for funds received by it for the
account of any Lender).
(b) INDEMNITY. Unless indemnified to its satisfaction against loss,
cost, liability, and expense, no Agent may be compelled to do any act under the
Loan Documents or to take any action toward the execution or enforcement of the
powers thereby created or to prosecute or defend any suit in respect of the Loan
Documents. If an Agent requests instructions from Lenders, or the Required
Lenders, as the case may be, with respect to any act or action in connection
with any Loan Document, then such Agent is entitled to refrain (without
incurring any liability to any Person by so refraining) from that act or action
unless and until it has received instructions. In no event, however, may any
Agent or any of its Representatives be required to take any action that it or
they determine could incur for it or them criminal or onerous civil liability.
Without limiting the generality of the foregoing, no Lender has any right of
action against any Agent as a
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result of such Agent's acting or refraining from acting under this Agreement in
accordance with instructions of the Required Lenders.
(c) RELIANCE. No Agent is responsible to any Lender or any
Participant for, and each Lender represents and warrants that it has not relied
upon any Agent in respect of, (i) the creditworthiness of Borrower or PPT and
the risks involved to that Lender, (ii) the effectiveness, enforceability,
genuineness, validity, or the due execution of any Loan Document (except by such
Agent), (iii) any representation, warranty, document, certificate, report, or
statement made therein (except by such Agent) or furnished thereunder or in
connection therewith, (iv) the adequacy of any collateral now or hereafter
securing the Obligation or the existence, priority, or perfection of any Lien
now or hereafter granted or purported to be granted on any collateral under any
Loan Document, or (v) observation of or compliance with any of the terms,
covenants, or conditions of any Loan Document on the part of any Company. EACH
LENDER AGREES TO INDEMNIFY EACH AGENT AND ITS REPRESENTATIVES AND HOLD THEM
HARMLESS FROM AND AGAINST (BUT LIMITED TO SUCH LENDER'S PRO RATA SHARE OF) ANY
AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, REASONABLE EXPENSES, AND REASONABLE DISBURSEMENTS OF
ANY KIND OR NATURE WHATSOEVER THAT MAY BE IMPOSED ON, ASSERTED AGAINST, OR
INCURRED BY THEM IN ANY WAY RELATING TO OR ARISING OUT OF THE LOAN DOCUMENTS OR
ANY ACTION TAKEN OR OMITTED BY THEM UNDER THE LOAN DOCUMENTS IF SUCH AGENT AND
ITS REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH AMOUNTS BY ANY COMPANY. ALTHOUGH
EACH AGENT AND ITS REPRESENTATIVES HAVE THE RIGHT TO BE INDEMNIFIED UNDER THIS
AGREEMENT FOR ITS OR THEIR OWN ORDINARY NEGLIGENCE, EACH AGENT AND ITS
REPRESENTATIVES DO NOT HAVE THE RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR
ITS OR THEIR OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT.
12.6 DEFAULT. While a Default exists, Lenders agree to promptly confer
in order that the Required Lenders or Lenders, as the case may be, may agree
upon a course of action for the enforcement of the Rights of Lenders.
Administrative Agent is entitled to act or refrain from taking any action
(without incurring any liability to any Person for so acting or refraining)
unless and until it has received instructions from the Required Lenders. In
actions with respect to any Company's property, Administrative Agent is acting
for the ratable benefit of each Lender.
12.7 LIMITATION OF LIABILITY. No Lender or any Participant will incur
any liability to any other Lender or Participant except for acts or omissions in
bad faith, and neither Administrative Agent nor any Lender or Participant will
incur any liability to any other Person for any act or omission of any other
Lender or any Participant.
12.8 RELATIONSHIP OF LENDERS. The Loan Documents do not create a
partnership or joint venture among the Credit Parties.
12.9 BENEFITS OF AGREEMENT. None of the provisions of this SECTION
inure to the benefit of any Company or any other Person except the Credit
Parties. Therefore, no Company nor any other Person is responsible or liable
for, entitled to rely upon, or entitled to raise as a defense -- in any manner
whatsoever -- the failure of any Credit Party to comply with these provisions.
12.10 APPROVAL OF LENDERS.
(a) All communications from Administrative Agent to Lenders
requesting Lenders' determination, consent, approval, or disapproval (i) shall
be given in the form of a written notice to each Lender, (ii) shall be
accompanied by a description of the matter or thing as to which such
determination, approval, consent, or disapproval is requested, or shall advise
each Lender where such matter or thing may be inspected, or shall otherwise
describe the matter or issue to be resolved, (iii) shall include, if reasonably
requested by a Lender and to the extent not previously provided to such Lender,
written materials and a
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summary of all oral information provided to Administrative Agent by Borrower in
respect of the matter or issue to be resolved, and (iv) shall include
Administrative Agent's recommended course of action or determination in respect
thereof. Each Lender shall reply promptly, but in any event (x) within thirty
(30) days (or such lesser period as may be required under the Loan Documents for
Administrative Agent to respond) for those matters requiring the consent by all
Lenders, and (y) within fifteen (15) Business Days (or such lesser period as may
be required under the Loan Documents for Administrative Agent to respond) for
those matters requiring the consent by the Majority Lenders or the Required
Lenders, in each instance, after receipt of the request therefore by
Administrative Agent (in either event, the "LENDER REPLY PERIOD").
(b) Unless a Lender shall give written notice to Administrative Agent
that it objects to the recommendation or determination of Administrative Agent
within the Lender Reply Period, such Lender shall be deemed to have approved of
or consented to such recommendation or determination.
SECTION 13
MISCELLANEOUS
13.1 HEADINGS. The headings, captions and arrangements used in any of
the Loan Documents are, unless specified otherwise, for convenience only and
shall not be deemed to limit, amplify, or modify the terms of the Loan
Documents, nor affect the meaning thereof.
13.2 NONBUSINESS DAYS; TIME. Any payment or action that is due under
any Loan Document on a non-Business Day may be delayed until the next-succeeding
Business Day (but interest shall continue to accrue on any applicable payment
until payment is in fact made) unless the payment concerns a Eurodollar
Borrowing, in which case if the next-succeeding Business Day is in the next
calendar month, then such payment shall be made on the next-preceding Business
Day.
13.3 COMMUNICATIONS. Unless otherwise specifically provided, whenever
any Loan Document requires or permits any consent, approval, notice, request,
demand, or other communication from one party to another, communication must be
in writing (which may be by telex or telecopy) to be effective and shall be
deemed to have been given (a) if by telex, when transmitted to the appropriate
telex number and the appropriate answerback is received, (b) if by telecopy,
when transmitted to the appropriate telecopy number (and all communications sent
by telecopy must be confirmed promptly thereafter by telephone; but any
requirement in this parenthetical shall not affect the date when the telecopy
shall be deemed to have been delivered), (c) if by mail, on the fifth (5th)
Business Day after it is enclosed in an envelope and properly addressed,
stamped, sealed, certified mail, return receipt requested, and deposited in the
appropriate official postal service, or (d) if by any other means, when actually
delivered. Until changed by notice pursuant to this Agreement, the address (and
telecopy number) for each party to a Loan Document is set forth on SCHEDULE 1.
13.4 FORM AND NUMBER OF DOCUMENTS. The form, substance, and number of
counterparts of each writing to be furnished under this Agreement must be
satisfactory to Agents and their counsel.
13.5 SURVIVAL. All covenants, agreements, undertakings,
representations, and warranties made in any of the Loan Documents survive all
closings under the Loan Documents and, except as otherwise indicated, are not
affected by any investigation made by any party.
13.6 GOVERNING LAW. Except as expressly provided in a Loan Document,
the Governmental Requirements (other than conflict-of-laws provisions) of the
State of Texas and of the United States of America govern the Rights and duties
of the parties to the Loan Documents and the validity, construction,
enforcement, and interpretation of the Loan Documents.
CREDIT AGREEMENT
43
<PAGE>
13.7 INVALID PROVISIONS. Any provision in any Loan Document held to be
illegal, invalid, or unenforceable is fully severable; the appropriate Loan
Document shall be construed and enforced as if that provision had never been
included; and the remaining provisions shall remain in full force and effect and
shall not be affected by the severed provision. Agents, Lenders, and Borrower
agree to negotiate, in good faith, the terms of a replacement provision as
similar to the severed provision as may be possible and be legal, valid and
enforceable. However, if the provision held to be illegal, invalid, or
unenforceable is a material part of this Agreement, such invalid, illegal, or
unenforceable provision shall be, to the extent permitted by applicable law,
replaced by a clause or provision judicially construed and interpreted to be as
similar in substance and content to the original terms of such illegal, invalid,
or unenforceable clause or provision as the context thereof would reasonably
allow, so that such clause or provision would thereafter be legal, valid, and
enforceable.
13.8 VENUE; SERVICE OF PROCESS; JURY TRIAL. EACH PARTY TO ANY LOAN
DOCUMENT, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS (AND IN THE CASE
OF BORROWER, FOR EACH OF ITS CONSOLIDATED AFFILIATES), (a) IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF
TEXAS, (b) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS AND THE
OBLIGATION BROUGHT IN DISTRICT COURTS OF DALLAS COUNTY, TEXAS, OR IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, (c)
IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY OF THE
AFOREMENTIONED COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (d) IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THOSE COURTS IN ANY LITIGATION
BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
POSTAGE PREPAID, BY HAND-DELIVERY, OR BY DELIVERY BY A NATIONALLY RECOGNIZED
COURIER SERVICE, AND SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY OF THE LEGAL
PROCESS AT ITS ADDRESS SET FORTH IN THIS AGREEMENT, (e) IRREVOCABLY AGREES THAT
ANY LEGAL PROCEEDING AGAINST ANY PARTY TO ANY LOAN DOCUMENT ARISING OUT OF OR IN
CONNECTION WITH THE LOAN DOCUMENTS OR THE OBLIGATION MAY BE BROUGHT IN ONE OF
THE AFOREMENTIONED COURTS, AND (f) IRREVOCABLY WAIVES TO THE FULLEST EXTENT
PERMITTED BY LAW, ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY LOAN DOCUMENT. The scope of each of the
foregoing waivers is intended to be all-encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of this
transaction, including contract claims, tort claims, breach of duty claims, and
all other common law and statutory claims. Borrower (for itself and on behalf of
each of its Consolidated Affiliates) acknowledges that these waivers are a
material inducement to Administrative Agent's and each Lender's agreement to
enter into a business relationship, that Administrative Agent and each Lender
has already relied on these waivers in entering into this Agreement, and that
Administrative Agent and each Lender will continue to rely on each of these
waivers in related future dealings. Borrower (for itself and on behalf of each
of its Consolidated Affiliates) further warrants and represents that it has
reviewed these waivers with its legal counsel, and that it knowingly and
voluntarily agrees to each waiver following consultation with legal counsel. THE
WAIVERS IN THIS SECTION 13.8 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS, OR REPLACEMENTS TO OR OF THIS OR ANY OTHER
LOAN DOCUMENT. In the event of Litigation, this Agreement may be filed as a
written consent to a trial by the court.
CREDIT AGREEMENT 44
<PAGE>
13.9 AMENDMENTS, CONSENTS, CONFLICTS, AND WAIVERS.
(a) REQUIRED LENDERS. Unless otherwise specifically provided, the
provisions of this Agreement may be amended, modified, or waived, only by an
instrument in writing executed by Borrower and the Required Lenders and
supplemented only by documents delivered or to be delivered in accordance with
the express terms of this Agreement.
(b) ALL LENDERS. Except as specifically otherwise provided in this
SECTION 13.9, any amendment to or consent or waiver under this Agreement or any
Loan Document that purports to accomplish any of the following must be by an
instrument in writing executed by Borrower and executed (or approved, as the
case may be) by each Lender (other than any Defaulting Lender): (i) extends the
scheduled Termination Date; (ii) extends the due date or decreases the amount of
any scheduled payment or amortization of the Obligation beyond the date
specified in the Loan Documents; (iii) decreases any rate or amount of interest,
fees, principal, or other sums payable to Agents or Lenders under this Agreement
(except such reductions as are contemplated by this Agreement); (iv) changes the
definition of "Adjusted Property EBITDA," "Approved Costs," "Commitment,"
"EBITDA Adjustments," "EBITDA Value," "Majority Lenders," "Occupancy Rate,"
"Required Lenders," "Pro Rata Share," "Total Commitment," or "Unencumbered
Property;" (v) increases any one or more Lenders' Commitment; (vi) waives
compliance with, amends, or fully or partially releases the PPT Guaranty; (vii)
permits Borrower to assign any of its rights hereunder; (viii) amends SECTION
4.1; or (ix) changes this SECTION 13.9(B) or any other matter specifically
requiring the consent of all Lenders under this Agreement.
(c) AGENTS. No amendment, modification, consent, or waiver which
modifies the rights, duties, or obligations of any Agent shall be effective
without the consent of such Agent.
(d) CONFLICTS. Any conflict or ambiguity between the terms and
provisions of this Agreement and terms and provisions in any other Loan Document
is controlled by the terms and provisions of this Agreement.
(e) COURSE OF DEALING. No course of dealing or any failure or delay
by any Credit Party or any of its Representatives with respect to exercising any
Right of any Credit Party under this Agreement operates as a waiver thereof. A
waiver must be in writing and signed by the Required Lenders or Lenders, as
appropriate, to be effective, and a waiver will be effective only in the
specific instance and for the specific purpose for which it is given.
13.10 MULTIPLE COUNTERPARTS. Any Loan Document may be executed in a
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but, in
making proof of thereof, it shall not be necessary to produce or account for
more than one counterpart. Each Lender need not execute the same counterpart of
this Agreement so long as identical counterparts are executed by Borrower, each
Lender, and each Agent. This Agreement shall become effective when counterparts
of this Agreement have been executed and delivered to Administrative Agent by
each Lender, each Agent, and Borrower, or, in the case only of Lenders, when
Administrative Agent has received telecopied, telexed, or other evidence
satisfactory to it that each Lender has executed and is delivering to
Administrative Agent a counterpart of this Agreement.
13.11 SUCCESSORS AND ASSIGNS; PARTICIPATIONS.
(a) Each Loan Document binds and inures to the benefit of the parties
thereto, any intended beneficiary thereof, and each of their respective
successors and permitted assigns. No Lender may transfer, pledge, assign, sell
any participation in, or otherwise encumber its portion of the Obligation,
except as permitted by this SECTION 13.11.
CREDIT AGREEMENT 45
<PAGE>
(b) Subject to the provisions of this SECTION and in accordance with
applicable law, any Lender having a Commitment equal to or greater than
$10,000,000, or if the Total Commitments have been terminated, then Notes having
outstanding Principal Debt equal to or greater than $10,000,000, may, in the
ordinary course of its commercial banking business, at any time sell to one (1)
or more Eligible Assignees (each a "PARTICIPANT") participating interests in its
portion of the Obligation; provided that (i) each such participation is not less
than $10,000,000, and (ii) after giving effect to such participation, the Lender
granting such participation shall retain a Commitment of at least $10,000,000,
or if the Total Commitments have been terminated, then Notes having outstanding
principal debt of at least $10,000,000. The selling Lender shall remain a
"Lender" under this Agreement (and the Participant shall not constitute a
"Lender" under this Agreement) and its obligations under this Agreement shall
remain unchanged. The selling Lender shall remain solely responsible for the
performance of its obligations under the Loan Documents and shall remain the
holder of its share of the Principal Debt for all purposes under this Agreement.
Borrower and Administrative Agent shall continue to deal solely and directly
with the selling Lender in connection with such Lender's Rights and obligations
under the Loan Documents. Participants have no Rights under the Loan Documents,
other than certain voting Rights as provided below. Subject to the following,
each Lender may obtain (on behalf of its Participants) the benefits of SECTION 3
with respect to all participations in its part of the Obligation outstanding
from time to time so long as Borrower is not obligated to pay any amount in
excess of the amount that would be due to such Lender under SECTION 3 calculated
as though no participations have been made. No Lender may sell any participating
interest under which the Participant has any Rights to approve any amendment,
modification, or waiver of any Loan Document, except to the extent the
amendment, modification, or waiver extends the due date for payment of any
principal, interest, or fees due under the Loan Documents, reduces the interest
rate or the amount of principal or fees applicable to the Obligation (except
reductions contemplated by this Agreement), or releases any guaranty or
collateral, if any, for the Obligation. However, if a Participant is entitled to
the benefits of SECTION 3 or a Lender grants Rights to its Participants to
approve amendments to or waivers of the Loan Documents respecting the matters
described in the previous sentence, then such Lender must include a voting
mechanism in the relevant participation agreement whereby a majority of its
portion of the Obligation (whether held by it or participated) shall control the
vote for all of such Lender's portion of the Obligation. Except in the case of
the sale of a participating interest to another Lender, the relevant
participation agreement shall prohibit the Participant from transferring,
pledging, assigning, selling participations in, or otherwise encumbering its
portion of the Obligation.
(c) Subject to the provisions of this section, any Lender having a
Commitment equal to or greater than $15,000,000, or if the Total Commitments
have been terminated, then Notes having outstanding Principal Debt equal to or
greater than $15,000,000, may at any time, in the ordinary course of its
commercial banking business, (i) without the consent of Borrower or Agents,
assign all or any part of its Rights and obligations under the Loan Documents to
any of its Affiliates (each a "PURCHASER"), and (ii) upon the prior written
consent of Agents, and so long as no Default or Potential Default exists,
Borrower, such consents not to be unreasonably withheld, assign to any Eligible
Assignee (each of which is also a "PURCHASER") a proportionate part (not less
than $15,000,000 and an integral multiple of $1,000,000) of all or any part of
its Rights and obligations under the Loan Documents; provided that unless the
Lender granting such assignment is assigning all of its Commitments and Notes
hereunder, after giving effect to such assignment, the Lender granting such
assignment shall retain a Commitment of at least $15,000,000 (or if the Total
Commitments have been terminated, then Notes having outstanding Principal Debt
of at least $15,000,000). Notwithstanding the foregoing, each Agent shall, at
all times prior to its resignation or replacement as an Agent hereunder, retain
a minimum Commitment of $25,000,000, or if the Total Commitments have been
terminated, then Notes having outstanding Principal Debt of at least
$25,000,000. In each case, the Purchaser shall assume those Rights and
obligations under an assignment agreement substantially in the form of EXHIBIT
E. Upon (i) delivery of an executed copy of the assignment agreement to Borrower
and Administrative Agent and (ii) payment of a fee of $3,000 from the transferor
to Administrative Agent, from and after the assignment's effective date (which
shall be after the date of delivery), the Purchaser shall for all purposes be a
Lender party to this Agreement and shall have all the Rights and obligations of
a Lender under this Agreement to the same extent as if it were an original party
to this Agreement with commitments as set forth in the assignment
CREDIT AGREEMENT 46
<PAGE>
agreement, and the transferor Lender shall be released from its obligations
under this Agreement to a corresponding extent, and, except as provided in the
following sentence, no further consent or action by Borrower, Lenders or
Administrative Agent shall be required. Upon the consummation of any transfer to
a Purchaser under this SECTION 13.11(C), the then-existing SCHEDULE 1 shall
automatically be deemed to reflect the name, address, and Commitment of such
Purchaser, Administrative Agent shall deliver to Borrower and Lenders an amended
SCHEDULE 1 reflecting those changes, Borrower shall execute and deliver to each
of the transferor Lender and the Purchaser a Note in the face amount of its
respective Commitment following transfer, and, upon receipt of its new Note, the
transferor Lender shall return to Borrower the Note previously delivered to it
under this Agreement. A Purchaser is subject to all the provisions in this
SECTION as if it were a Lender signatory to this Agreement as of the date of
this Agreement.
(d) Any Lender may at any time, without the consent of Borrower or
Administrative Agent, assign all or any part of its Rights under the Loan
Documents to a Federal Reserve Bank without releasing the transferor Lender from
its obligations thereunder.
(e) Until January 31, 1998, each Agent shall identify and solicit
prospective Purchasers or Participants to be assignees of or participants in the
Rights and obligations of each Agent under this Agreement (in such capacity,
"SYNDICATING LENDERS") in an amount of up to $240,000,000. During such period,
the Syndicating Lenders shall (i) not solicit or enter into any such assignment
or participation except as provided in this SECTION 13.11(e), and (ii) refer
each prospective Purchaser or Participant that expresses an interest in
purchasing or acquiring any such assignment or participation to the other
Syndicating Lender. Each Syndicating Lender, upon identifying any prospective
Purchaser or Participant desiring to be an assignee of or participant in any
portion of the Rights and obligations of the Syndicating Lenders under this
Agreement, shall deliver written notice to the other Syndicating Lender of the
terms of such transaction ("PROPOSED SYNDICATION TRANSACTION"). Each Syndicating
Lender shall have the right to participate in such Proposed Syndication
Transaction on the terms set forth in such notice by so notifying the other
Syndicating Lender within five (5) days of receiving such notice. The assignment
or participation effected by such Proposed Syndication Transaction shall be
allotted equally to each participating Syndicating Lender. Notwithstanding
anything contained to the contrary in SECTION 13.11(c), the aggregate
assignments to a Purchaser by the Syndicating Lenders shall be in an aggregate
amount of not less than $15,000,000 or a greater integral multiple of
$1,000,000.
(f) No Lender may assign or participate all or any portion of its
Rights or obligations under this Agreement to any Company or any Affiliate of
any Company.
(g) Borrower acknowledges that the Syndicating Lenders may use their
Affiliates (other than a real estate development or management company) (and in
the case of Syndication Agent, may use NationsBanc Montgomery Securities, Inc.)
to assist in the syndication of their Rights and obligations under this
Agreement. Borrower acknowledges and consents that the Syndicating Lenders may
share information relating to Borrower, PPT, and the other Companies or the
transactions contemplated hereby with their respective Affiliates (other than a
real estate development or management company), and that such Affiliates may
likewise share information relating to Borrower, PPT, and the other Companies or
such transactions with the Syndicating Lenders.
13.12 DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. Borrower's obligations under the Loan Documents remain in full
force and effect until the Total Commitment is terminated and the Obligation is
paid in full (except for provisions under the Loan Documents which by their
terms expressly survive payment of the Obligation and termination of the Loan
Documents). If at any time any payment of the principal of or interest on any
Note or any other amount payable by Borrower or any other obligor on the
Obligation under any Loan Document is rescinded or must be restored or returned
upon the insolvency, bankruptcy, or reorganization of Borrower or otherwise,
then the obligations of Borrower
CREDIT AGREEMENT 47
<PAGE>
under the Loan Documents with respect to that payment shall be reinstated as
though the payment had been due but not made at that time.
13.13 ENTIRETY. THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS
(EACH AS AMENDED IN WRITING FROM TIME TO TIME) EXECUTED BY BORROWER AND/OR ANY
CREDIT PARTY REPRESENT THE FINAL AGREEMENT AMONG BORROWER AND THE CREDIT PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDEN CE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS BY THE PAR TIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.
[Remainder of Page Intentionally Left Blank;
Signature Page Follows.]
CREDIT AGREEMENT 48
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
EXECUTED as of the day and year first mentioned.
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.
a Delaware limited partnership,
as Borrower
By: PRENTISS PROPERTIES I, INC.,
General Partner
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
CREDIT AGREEMENT 49
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
BANK ONE, TEXAS, N.A.,
as Administrative Agent and a Lender
By:
----------------------------------------
Roderick Washington
Vice President
CREDIT AGREEMENT 50
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
CREDIT AGREEMENT BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
NATIONSBANK OF TEXAS, N.A.,
as Syndication Agent and a Lender
By:
----------------------------------------
Rick C. Bower
Vice President
CREDIT AGREEMENT 51
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA
AGENCY, as a Co-Agent and a Lender
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CREDIT AGREEMENT 52
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
CRESTAR BANK,
as a Co-Agent and a Lender
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CREDIT AGREEMENT 53
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH,
as a Co-Agent and a Lender
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CREDIT AGREEMENT 54
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
SOCIETE GENERALE, SOUTHWEST AGENCY,
as a Co-Agent and a Lender
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CREDIT AGREEMENT 55
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
COMERICA BANK,
as a Lender
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CREDIT AGREEMENT 56
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CREDIT AGREEMENT 57
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
AMSOUTH BANK,
as a Lender
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CREDIT AGREEMENT 58
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK
AKTIENGESELLSCAFT, as a Lender
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CREDIT AGREEMENT 59
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
UNION BANK OF SWITZERLAND, NEW YORK BRANCH,
as a Lender
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CREDIT AGREEMENT 60
<PAGE>
SIGNATURE PAGE TO CREDIT AGREEMENT
BETWEEN PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
BANK ONE, TEXAS, N.A., AS ADMINISTRATIVE AGENT,
NATIONSBANK OF TEXAS, N.A., AS SYNDICATION AGENT,
AND THE LENDERS DEFINED THEREIN
MELLON BANK, N.A.,
as a Lender
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
CREDIT AGREEMENT 61
<PAGE>
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Prentiss Properties Trust on Form S-3 (File No. 333-38079) and
Form S-8 (File No. 333-20329) of our reports dated (i) October 20, 1997 on our
audit of the combined statement of revenues and certain operating expenses of
the Silicon Valley Properties, (ii) February 6, 1998 on our audits of the
combined statement of revenues and certain operating expenses of the Newport
National Properties, and the statement of revenues and certain operating
expenses of the Carrara Place Property, all of which reports are included in
this Current Report on Form 8-K.
Dallas, Texas
February 10, 1998
