<PAGE> 1
As filed with the Securities and Exchange Commission on December 30, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
AMENDMENT NO. 3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
TRIAD PARK, LLC
(Name of Issuer)
TRIAD PARK, LLC
RICHARD C. BLUM
RICHARD C. BLUM & ASSOCIATES, LP
TPL ACQUISITION, LLC
CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.
WESTMARK REALTY ADVISORS, LLC
(Name of Person(s) Filing Statement)
MEMBERSHIP INTERESTS, NO PAR VALUE
(Title of Class of Securities)
895814 10 1
(CUSIP Number of Class of Securities)
PATRICK J. KERNAN MURRAY A. INDICK
GENERAL COUNSEL MANAGING DIRECTOR, GENERAL COUNSEL
TRIAD PARK, LLC RICHARD C. BLUM & ASSOCIATES, L.P.
3055 TRIAD DRIVE 909 MONTGOMERY STREET, SUITE 400
LIVERMORE, CALIFORNIA 94550-9559 SAN FRANCISCO, CALIFORNIA 94133
(510) 449-0606 (415) 434-1111
(Name, Address and Telephone Number of Person Authorized
to Receive Notice and Communications on Behalf of Person(s) Filing Statement)
Copies to:
EDWARD S. MERRILL
MCCUTCHEN, DOYLE, BROWN & ENERSEN, LLP
THREE EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111-4067
(415) 393-2000
This statement is filed in connection with:
|X| a. The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13d-3(c) under the Securities
Exchange Act of 1934.
[ ] b. The filing of a registration statement under the Securities Act
of 1933.
[ ] c. A Tender Offer
[ ] d. None of the above.
Check the following box if the soliciting materials or information statement
referred to in check box (a) are preliminary copies: |X|
<PAGE> 2
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Transaction Valuation* Amount of Filing Fee
- -----------------------------------------------------------------------------
<S> <C>
$23,358,673 $4,672
- -----------------------------------------------------------------------------
</TABLE>
* For purposes of calculating fee only. This amount assumes the purchase
at a price of $1.32 per share of 17,695,965 outstanding shares of
Company Membership Interests. The amount of the filing fee, calculated
in accordance with Regulation 240.0-11 of the Securities Exchange Act of
1934, equals 1/50th of one percent of the value of the membership
interests purchased.
[X] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED IN RULE
0-11(a)(2) AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS
PREVIOUSLY PAID. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT
NUMBER, OR SCHEDULE AND THE DATE OF ITS FILING.
Amount Previously Paid: $4,672
Acquisition, LLC
Form or Registration No: Schedule 13E-3
Date Filed: October 14, 1997
CROSS REFERENCE SHEET
(PURSUANT TO GENERAL INSTRUCTION F TO SCHEDULE 13E-3)
INTRODUCTION
This Rule 13E-3 Transaction Statement is being filed in
connection with the proposed merger (the "Merger") of TPL Acquisition, LLC, a
Delaware limited liability company (the "Acquisition LLC") and an affiliate of
Richard C. Blum & Associates, LP, a California limited partnership ("RCBA"),
with and into Triad Park, LLC, a Delaware limited liability company (the
"Company"), pursuant to the terms and conditions of an Agreement of Merger dated
September 9, 1997 (the "Merger Agreement") among the Company, RCBA and the
Acquisition LLC, a copy of which is attached hereto as Exhibit (c)(1). Upon
consummation of the Merger, (i) the separate corporate existence of the
Acquisition LLC will cease and the Company will continue as the surviving
company, and (ii) each outstanding membership interest, no par value, of the
Company (the "Shares") will be converted into the right to receive $1.32 in
cash.
The Cross Reference Sheet is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Company's
preliminary proxy statement (the "Proxy Statement"), concurrently being filed
with the Securities and Exchange Commission (the "SEC") in connection with the
proposed Merger, of information required to be included in response to items of
this Statement. A copy of the Proxy Statement is attached hereto as Exhibit
(d)(1). The information in the Proxy Statement, including all exhibits thereto,
is hereby expressly incorporated herein by reference and the responses to each
item are qualified in their entirety by the provisions of the Proxy Statement.
All information in, or incorporated by reference in, the Proxy Statement or this
Statement concerning the Company or its advisors, or
2
<PAGE> 3
actions or events with respect to any of them, was provided by the Company, and
all information in, or incorporated by reference in, the Proxy Statement or this
Statement concerning Richard C. Blum ("Mr. Blum"), RCBA, the Acquisition LLC,
Westmark Realty Advisors, LLC ("Westmark"), CB Commercial Real Estate Services
Group, Inc. ("CBC"), or their affiliates, or actions or events with respect to
them, was provided by RCBA. The Proxy Statement incorporated by reference in
this filing is in preliminary form and is subject to completion or amendment.
Capitalized terms used but not defined in this Statement shall have the
respective meanings given them in the Proxy Statement.
As of September 10, 1997, RCBA owned 1,998,158 Shares,
representing approximately 10.1% of the voting power of the total outstanding
Shares of the Company.
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEM NUMBER AND RESPONSE AND/OR LOCATION IN PROXY
CAPTION STATEMENT
<S> <C>
ITEM 1. ISSUER AND CLASS OF
SECURITY SUBJECT TO THE
TRANSACTION
(a) Front Cover Page and "SUMMARY--The
Company," which information is
incorporated herein by this reference.
(b) "SUMMARY--Record Date; Shareholders
Entitled to Vote; Quorum" and "THE
SPECIAL MEETING--Record Date;
Shareholder Approval," which information
is incorporated herein by this
reference.
(c) "SUMMARY--Market Price and Dividend
Data," which information is incorporated
herein by this reference.
(d) "SUMMARY--Market Price and Dividend
Data," which information is incorporated
herein by this reference.
(e)-(f) "SPECIAL FACTORS--Redemption of Shares,"
which information is incorporated herein
by this reference.
ITEM 2.IDENTITY AND
BACKGROUND This Statement is being jointly filed by
the Company (the issuer of the equity
securities that are the subject of the
Merger), Mr. Blum, RCBA, the Acquisition
LLC, CBC and Westmark.
</TABLE>
3
<PAGE> 4
(a)-(d) "SUMMARY--The Company", "--RCBA," "--The
Acquisition LLC" and "--CBC and
Westmark" and "MANAGEMENT OF THE
COMPANY, RCBA AND THE ACQUISITION LLC,"
which information is incorporated
herein by this reference.
(e), (f) To the best of the undersigneds'
knowledge, none of the persons with
respect to whom information is
provided in response to this Item was
during the last five years (i) convicted
in a criminal proceeding (excluding
traffic violations or similar
misdemeanors) or (ii) party to a civil
proceeding of a judicial or
administrative body of competent
jurisdiction and as a result of such
proceeding was or is subject to a
judgment, decree or final order
enjoining further violations of, or
prohibiting activities subject to,
federal or state securities laws or
finding any violations of such laws.
ITEM 3. PAST CONTACTS,
TRANSACTIONS OR NEGOTIATIONS
(a)(1) "SPECIAL FACTORS--Background of the
Merger-History of Relationship Between
the Company and RCBA" which information
is incorporated herein by this
reference.
(a)(2) "SPECIAL FACTORS--Background of the
Merger-Contacts and Negotiations with
RCBA" which information is incorporated
herein by this reference.
(b) "SPECIAL FACTORS--Background of the
Merger-Discussions with Third Parties"
and "--Contacts and Negotiations Since
Execution of the Merger Agreement,"
which information is incorporated herein
by this reference.
ITEM 4. TERMS OF THE TRANSACTION
(a) Front Cover Page, "SUMMARY--The Merger,"
"THE MERGER AGREEMENT" and "EXHIBIT
A--Agreement of Merger," which
information is incorporated herein by
this reference.
(b) "SPECIAL FACTORS--Purpose and Structure
of the Merger," and "--Interests of
Certain Persons in the Merger," which
information is incorporated herein by
this reference.
4
<PAGE> 5
ITEM 5. PLANS OR PROPOSALS OF THE
ISSUER OR AFFILIATE
(a)-(e) "SPECIAL FACTORS--Plans for the Company
After the Merger" and "MANAGEMENT OF THE
COMPANY, RCBA AND THE ACQUISITION LLC,"
which information is incorporated herein
by this reference.
(f), (g) "SPECIAL FACTORS--Certain Effects of the
Merger," which information is
incorporated herein by this reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS
OR OTHER CONSIDERATION
(a), (b) "SPECIAL FACTORS--Sources and Uses of
Funds," which information is
incorporated herein by this reference.
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES,
REASONS AND EFFECTS
(a)-(c) "SPECIAL FACTORS--Background of the
Merger," "--Purpose and Structure of the
Merger," "--Recommendation of the
Company's Advisory Board,"
"--Perspective of Mr. Blum, RCBA, the
Acquisition LLC, CBC and Westmark on the
Merger" and "--Certain Effects of the
Merger," which information is
incorporated herein by this reference.
(d) "SUMMARY-The Merger," "--Interests of
Certain Persons in the Merger" and
"--Federal Income Tax Consequences,"
"SPECIAL FACTORS--Background of the
Merger," "--Plans for the Company After
the Merger," "--Certain Effects of the
Merger," "--Interests of Certain Persons
in the Merger" and "--Certain Federal
Income Tax Consequences" and "MANAGEMENT
OF THE COMPANY, RCBA AND THE ACQUISITION
LLC," which information is incorporated
herein by this reference.
5
<PAGE> 6
ITEM 8. FAIRNESS OF THE TRANSACTION
(a) "SUMMARY--Special Factors--
Recommendation of the Company's
Advisory Board" and "SPECIAL
FACTORS--Recommendation of the Company's
Advisory Board," which information is
incorporated herein by this reference.
(b) "SUMMARY--Special Factors--
Recommendation of the Company's Advisory
Board" and "--Sedway Report" and
"SPECIAL FACTORS--Background of the
Merger," "--Purpose and Structure of the
Merger," and "--Recommendation of the
Company's Advisory Board," which
information is incorporated herein by
this reference.
(c) "THE SPECIAL MEETING--Record Date;
Shareholder Approval," which information
is incorporated herein by this
reference.
(d)-(e) "SPECIAL FACTORS--Background of the
Merger" and "--Sedway Report," which
information is incorporated
herein by this reference.
(f) "SPECIAL FACTORS--Background of the
Merger," which information is
incorporated herein by this reference.
ITEM 9. REPORTS, OPINIONS,
APPRAISALS AND CERTAIN NEGOTIATIONS
(a)-(c) "SUMMARY--Special Factors--Sedway
Report," "SPECIAL FACTORS--Background of
the Merger" and "--Sedway Report," which
information is incorporated herein by
this reference.
ITEM 10. INTEREST IN SECURITIES OF
THE ISSUER
6
<PAGE> 7
(a) "SUMMARY--Voting of Shares Owned by
RCBA," "THE SPECIAL MEETING--Record
Date; Shareholder Approval," "SPECIAL
FACTORS--Background of the Merger" and
"--Interests of Certain Persons in the
Merger" and "SHARE OWNERSHIP OF
MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS," which information is
incorporated herein by this reference.
(b) "SHARE OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS--Transactions
by Certain Persons in the Shares," which
information is incorporated herein by
this reference.
ITEM 11. CONTRACTS, ARRANGEMENTS "SPECIAL FACTORS--Background of the
OR UNDERSTANDINGS WITH RESPECT TO Merger," "--Interests of Certain Persons
THE ISSUER'S SECURITIES in the Merger," and "--Recommendation
of the Company's Advisory Board,"
which information is incorporated herein
by this reference.
ITEM 12. PRESENT INTENTION AND
RECOMMENDATION OF CERTAIN PERSONS
WITH REGARD TO THE TRANSACTION
(a), (b) "THE SPECIAL MEETING--Record Date;
Shareholder Approval," "SPECIAL FACTORS
--Background of the Merger,"
"--Recommendation of the Company's
Advisory Board" and "--Interests of
Certain Persons in the Merger" and
"SHARE OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS," which
information is incorporated
herein by this reference.
ITEM 13. OTHER PROVISIONS OF THE
TRANSACTION
(a) "SUMMARY--Dissenters' Rights," and
"RIGHTS OF DISSENTING SHAREHOLDERS,"
which information is incorporated herein
by this reference.
(b), (c) Not applicable.
7
<PAGE> 8
ITEM 14. FINANCIAL INFORMATION The relevant financial information is
contained in Exhibit B to the Proxy
Statement and is incorporated herein by
this reference.
ITEM 15. PERSON AND ASSETS
EMPLOYED, RETAINED OR UTILIZED
(a), (b) "THE SPECIAL MEETING--Proxies,"
"SPECIAL FACTORS--Sources and Uses of
Funds" and "THE MERGER
AGREEMENT--Payment for Shares," which
information is incorporated herein by
this reference.
ITEM 16. ADDITIONAL INFORMATION See the text of the Proxy Statement.
ITEM 17. MATERIALS TO BE FILED AS EXHIBIT NUMBER AND DESCRIPTION (EXHIBITS
EXHIBITS MARKED WITH AN ASTERISK (*) ARE FILED
HEREWITH)
(a) Not applicable.
(b) (b)(1) Triad Park Real Estate Asset
Strategy, prepared by Sedway Group,
dated July 22, 1997.*
(c) (c)(1) Agreement of Merger dated as of
September 9, 1997 by and between TPL
Acquisition, LLC, Richard C. Blum &
Associates, LP and the Company, which is
Exhibit A to the Proxy Statement and is
incorporated herein by this reference.
(c)(2) Independent Contractor Services
Agreement, dated February 27, 1997,
between the Company and Larry
McReynolds.
(d) (d)(1) Preliminary copy of Letter to
Stockholders, Notice of Special Meeting,
Proxy Statement and form of Proxy for
the Special Meeting of Shareholders of
the Company to be held on January __,
1998.*
8
<PAGE> 9
(e) Not applicable.
(f) Not applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
December 30, 1997 /s/ MURRAY A. INDICK
----------------------------------
Richard C. Blum
By: Murray A. Indick, Attorney-in-Fact
December 30, 1997 RICHARD C. BLUM & ASSOCIATES, LP
By: RICHARD C. BLUM & ASSOCIATES, INC.,
its sole general partner
By: /s/ MARC T. SCHOLVINCK
-----------------------------
Name: Marc T. Scholvinck
Title: Managing Director & Chief
Financial Officer
December 30, 1997 TPL ACQUISITION, LLC
RICHARD C. BLUM & ASSOCIATES, LP
By: RICHARD C. BLUM & ASSOCIATES, INC.,
its sole general partner
By: /s/ MARC T. SCHOLVINCK
-----------------------------------
Name: Marc T. Scholvinck
Title: Managing Director & Chief
Financial Officer
December 30, 1997 CB COMMERCIAL REAL ESTATE
SERVICES GROUP, INC.
By: /s/ WALTER V. STAFFORD
-----------------------------------
Name: Walter V. Stafford
Title: Senior Executive Vice President
and General Counsel
December 30, 1997 WESTMARK REALTY ADVISORS, LLC
By: /s/ RICHARD C. CLOTFELTER
-----------------------------------
Name: Richard C. Clotfelter
Title: President
December 30, 1997 TRIAD PARK, LLC
By: 3055 Management Corp.,
its Manager
By: /s/ JAMES R. PORTER
-----------------------------------
Name: James R. Porter
Title: Vice President
9
<PAGE> 10
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
(a) Not applicable.
(b) (b)(1) Triad Park Real Estate Asset Strategy, prepared by
Sedway Group, dated July 22, 1997.
(c) (c)(1) Agreement of Merger dated as of September 9, 1997 by
and between TPL Acquisition, LLC, Richard C. Blum &
Associates, LP and the Company, which is Exhibit A to the
Proxy Statement and is incorporated herein by this reference.
(c)(2) Independent Contractor Services Agreement, dated
February 27, 1997, between the Company and Larry McReynolds.
(d) (d)(1) Preliminary copy of Letter to Stockholders, Notice of
Special Meeting, Proxy Statement and form of Proxy for the
Special Meeting of Shareholders of the Company to be held on
January __, 1998.
(e) Not applicable.
(f) Not applicable.
10
<PAGE> 11
EXHIBIT (b)(1)
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
TRIAD PARK REAL
ESTATE ASSET
STRATEGY
PREPARED FOR:
BOARD OF DIRECTORS,
TRIAD PARK, LLC
JULY 22, 1997
<PAGE> 12
[SEDWAY GROUP LETTERHEAD]
July 22, 1997
Board of Directors
Triad Park, LLC
3055 Triad Drive
Livermore, CA 94550
RE: TRIAD PARK REAL ESTATE ASSET STRATEGY
Dear Sirs:
Sedway Group is pleased to present its real estate asset strategy for Triad Park
in Livermore, California. This report has been prepared for the use of the
Board of Directors of Triad Park, LLC, and is a confidential document to be
used for decision-making purposes.
As discussed in more detail in the attached report, Sedway Group recommends that
an orderly disposition of the property be implemented immediately in order to
capture the present strong market conditions and the momentum that Lincoln
Technology Park will generate. The disposition strategy is anticipated to take
about three-and-one-half years and result in proceeds with a net present value
of $25.6 million.
The following report includes an overview section, followed by a discussion of
market issues and recommendations, and concludes with a presentation of the
financial analysis of the disposition strategy. The results of our engagement
are also subject to the assumptions and limiting conditions appended to the end
of this report.
We appreciate this opportunity to assist in this important and challenging
assignment and look forward to discussing our findings with the Board at its
July 28, 1997, meeting.
Sincerely,
/s/ MICHAEL J. CONLON /s/ MARY A. SMITHERAM-SHELDON
- --------------------- -----------------------------
Michael J. Conlon, CRE Mary A. Smitheram-Sheldon
Principal Manager
MJC/MASS:nam
Enclosure
<PAGE> 13
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
OVERVIEW
TRIAD PARK HISTORY
Triad Park, totaling 396 gross acres, was purchased by Triad Systems Corporation
(Triad) in 1984 with the vision of creating an environment similar to Stanford
Business Park. At that time, the belief was that, with a tight real estate
market in Santa Clara County, other firms would follow Triad from the expensive
Silicon Valley to the relatively spacious and inexpensive Livermore.
Despite the 1987 completion of 219,800 square feet for Triad, the sale of a few
parcels of land (Wang NMR in 1987, Vista West/Impact and Boulangerie de France
in 1989), and the construction of the Marriott Residence Inn (Boulangerie de
France resale) and Comfort Inn (out-parcel), the original vision was never
realized due to economic and real estate recessions and competition. In the
early 1990s, Triad obtained approval to change the allowed uses to include
commercial/retail and residential.
Sales activity within Triad Park since 1990 is summarized in Exhibit 1 (exhibits
are included at the end of this report). With the exception of the Costco sale
in 1993, all the sales activity took place in 1996. (Exhibit 1 also includes two
resales of portions of Boulangerie de France=s land for informational purposes.)
Triad sold nearly 30 acres in 1996 in five transactions. For all but the Lincoln
sale, Triad financed 75 percent of the sale price. Of these five sales, three
(totaling 9.39 acres) have proposed uses related to the corporate lodging core
established by the Marriott Residence Inn, Comfort Inn and the new Hampton Inn.
Two sites are slated for a Hilton Garden Inn (with a restaurant) and a Marriott
Courtyard. The third site is planned for one or more restaurants or food-related
commercial. The two other sales (totaling 20.2 acres) are for office/R&D uses.
TRIAD PARK B CURRENT SITUATION
Current uses in Triad Park include the Triad complex, other office/R&D/light
industrial facilities (Wang NMR, Vista West/Impact, plus Lincoln Technology Park
under construction), lodging (Marriott Residence Inn, Comfort Inn, Hampton Inn),
and other commercial (Exxon service station with mini-mart, Wendy=s and
Baskin-Robbins; Harley Davidson Dealership; Costco).
The holdings of Triad Park, LLC include the Triad facility located on 15.06
acres and 293.9 acres of undeveloped land. The Triad facility consists of a
three-building complex totaling 219,800 square feet that has been leased to
Triad for five years commencing February 27, 1997. Although there is a five-year
renewal option, the corporate strategy for Triad is uncertain as to its future
commitment to its Livermore presence due to the recent merger.
Of the 293.9 acres of undeveloped land, 110.8 acres are designated for open
space and 4.5 acres are reserved for a future freeway interchange. Triad Park,
LLC owns about 179 gross acres of development land, or 142 net acres, with the
following breakdown (based on the current planned uses):
TRIAD PARK REAL ESTATE STRATEGY 1 JULY 1997
<PAGE> 14
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
<TABLE>
<CAPTION>
===============================================================================
Use Gross Size Net Size
===============================================================================
<S> <C> <C>
Residential 28.1 acres 24.7 acres
Office/R&D 127.1 acres 93.9 acres
Commercial/Retail 23.4 acres 23.4 acres
- -------------------------------------------------------------------------------
TOTAL 178.6 ACRES 142.0 ACRES
===============================================================================
</TABLE>
Recent potential sales activity within the park has included the following:
- - Lots 1 and 2 (19.4 acres) in escrow to Gibson Speno Company;
- - Discussions with Gibson Speno Company to acquire Lot 3;
- - Discussions with Tom Terrill to acquire a portion of Lot 7 (formerly the
HHH Investments/ Micro Dental option parcel);
- - The first rights agreement with Lincoln Property Company for multiple
parcels, including a Astrike price@ of $4.00 per square foot (net of
bonds) for Lot 9;
- - An offer on Lot 9A at $3.60 per square foot (net of bonds);(1) and
- - A joint venture agreement with Jeffrey Kendall for a retail development
on Lot 16 that included a potential Taco Bell (now expired).
SEDWAY GROUP ENGAGEMENT
Triad Systems Corporation was recently merged with Cooperative Computing, Inc.
into CCI/Triad. As part of the merger, the real estate at Triad Park was spun
off into a separate entity, Triad Park, LLC, and the Board of Directors of this
entity desires to reevaluate the ownership and disposition strategy of its
assets.
Triad Park, LLC retained Sedway Group to provide a strategy to maximize the
value of the real estate assets. As part of this assignment, Sedway Group has
performed the following tasks:
- - Met with Triad Park management and reviewed the current status of the Park;
- - Inspected Triad Park and its environs;
- - Read various documents related to the park, including an appraisal prepared
by Carneghi-Bautovich & Partners, the listing agreement with Grubb & Ellis,
the Gibson Speno Company agreement (portions), the January 1997 Lincoln
Property Company offer, the Lincoln Property Company first rights of
offer clause, the lease and lease amendment pertaining to the Triad
building complex, tax and assessment bond information, etc.
- - Held telephone interviews with members of the Triad Park, LLC Board of
Directors;
- - Held telephone discussions with brokers, developers, and land owners active
in Livermore and the Tri-Valley area;
- - Reviewed market information provided by Grubb & Ellis; and
- ----------
(1) A recent discussion with Grubb & Ellis indicates that the sale price on
this lot has been negotiated up to $3.71 per square foot.
TRIAD PARK REAL ESTATE STRATEGY 2 JULY 1997
<PAGE> 15
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
- - Compiled the information gathered from all sources into a reasonable
disposition program and prepared a cash flow analysis.
MARKET ISSUES
The strategy that maximizes the value of Triad Parks real estate is dependent
upon many market-related issues. The most important of these market issues is
location. Another pertains to the perception of Triad Park. Of course, market
conditions are also very important to the real estate strategy.
LOCATION IN THE CITY OF LIVERMORE
The most important factor influencing Triad Park is its location in Livermore.
To quote one broker, "Livermore is not Pleasanton," or expanded, "Livermore is
not now, nor ever will be, Pleasanton."(2)
Pleasanton is a well-established office and research and development (R&D)
market, with an image as a desirable corporate address. Pleasanton offers an
excellent location at the nexus of I-580 and I-680 and high-quality corporate
park environments. Pleasanton possesses a wide variety of product and currently
has an active speculative market (although many buildings end up becoming
build-to-suits before completion). Companies, especially those that are
image-conscious, are willing to pay a premium to locate or remain in Pleasanton.
In addition, businesses that occupy office and R&D space often view their
employees as their greatest assets. For these firms, real estate occupancy costs
are secondary to their employees and they prefer to locate in an area where they
can attract and retain top talent. Lastly, due to Pleasanton=s established
office and R&D markets, it is a less risky location for owner-users with respect
to their real estate asset exit strategies.
In contrast, Livermore is viewed mainly as a distribution, warehouse, service
center, and light assembly location, capitalizing on its strength of lower land
prices and thus lower occupancy costs (to buy or rent). This occupancy expense
savings is more appealing to space-using businesses such as distributors and
manufacturers (or these divisions of larger firms). As a result, there is
basically no significant multitenant office or R&D product in Livermore, with
such uses considered Apioneering@ by market participants.
Thus, even though Triad Park and Livermore are only a few miles east of the
I-580/I-680 interchange, they possess a vastly different and less desirable
location compared to Pleasanton.
TRIAD PARK PERCEPTION
Although Triad Park is the westernmost business park in Livermore, the park
itself, as it is presently improved, does not convey the image needed in order
to compete with Pleasanton's corporate office and R&D parks. The development
program to date lacks focus, which is evident in the existing and
- ----------
(2) Although Pleasanton is the focus of the Tri-Valley, Dublin and San Ramon
are also important components and competitors in this market area. However,
when comparing Livermore to the rest of the Tri-Valley, the comparison
is often made in reference to Pleasanton.
TRIAD PARK REAL ESTATE STRATEGY 3 JULY 1997
<PAGE> 16
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
proposed mix of uses. This lack of cohesiveness has resulted in "historical
accidents" at the park, such as the conglomeration of corporate lodging
facilities, service station, and Costco, and in a lack of amenities that
indicate a quality corporate environment. More specifically, the issues with
the perception of Triad Park are as follows:
- - The current development in Triad Park is more indicative of a hodgepodge
created to respond to the dire economic conditions of the early 1990s
than of a uniformly planned corporate park.
- - The present pylon sign for Triad Park leads one to believe that it is a
highway rest stop rather than a quality corporate park.
- - There is no entry monument with landscaping to convey to visitors a
sense of arrival at Triad Park (there is no "there" there).
- - The park does not have the amenities needed for a corporate environment.
- - Until the Shea Business Park project moves forward significantly, there
is only one route in and out of the park, which is Airway Boulevard. The
interchange between I-580 and Airway Boulevard requires modernization.
CURRENT MARKET CONDITIONS - RETAIL
The I-580 corridor is already populated by numerous retail centers. The
corridor's demand for retail space is basically saturated, and the market is
generally perceived as being overbuilt. New construction of retail space will
not be speculative but will be driven by the expansion of retail chains.
However, this construction would most logically take place at available
locations near established retail concentrations in the corridor. In some areas
experiencing substantial residential development, a modest amount of
neighborhood-serving retail space may be built. Triad Park does not offer an
appropriate location for either convenience (neighborhood-serving) or comparison
(regional-serving) retail space. For this reason, the proposed Kendall project
on Lot 16 never attracted co-tenants for the Taco Bell.
Triad Park has established itself as a corporate lodging center with three
existing limited service/extended stay hotels, plus two more that were recently
approved. The existing and anticipated lodging space and employee base have
created a modest need for food in the park, which will grow over time as the
park is built-out. However, the sites most logical for food uses are located on
Constitution Way and are controlled by other entities. (There are three
potential food user sites, but we do not expect all three to be developed with
food in the near future.)
CURRENT MARKET CONDITIONS - OFFICE AND R&D
Following Bay Area and Silicon Valley trends, the Tri-Valley office and R&D
markets have improved dramatically in the past two years. According to Grubb &
Ellis in its 1997 market forecast, Tri-Valley Class A office and R&D/flex rents
increased by more than 20 percent in 1996. In addition, Tri-Valley
TRIAD PARK REAL ESTATE STRATEGY 4 JULY 1997
<PAGE> 17
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
R&D/flex land prices increased by 25 percent over 1995 and 1996.3 Net office
absorption in Tri-Valley in 1996 was just over 100,000 square feet; net
industrial space absorption was 29,000 square feet.
Prospects in the Tri-Valley are good through 1997 and 1998. However, with a
significant amount of new construction underway, the potential for continued
dramatic declines in vacancy or increases in rental rates is not as great as was
realized in the past two years (i.e., rents increasing at a decreasing rate).
The market's potential after 1998 is still expected to be healthy, but expected
substantial new construction make this time period less certain.
Pleasanton is the dominant location in the Tri-Valley. Although Pleasanton
presently has a low 3.0 percent office vacancy rate, there is substantial
construction activity and there is still abundant, albeit expensive, vacant land
in Hacienda Business Park and other quality Pleasanton locations. Brittania,
Opus Southwest, Parkway Properties and CM Capital all have office/R&D projects
under construction in Pleasanton. These projects, totaling over 500,000 square
feet (not including the 130,000-square-foot Brittania VI, which is pre-leased to
Pro Business), are predominantly speculative, although it is likely that this
space will be substantially pre-leased before completion.
Dublin and San Ramon similarly have office vacancy rates near 3.0 percent, with
new speculative construction underway in Bishop Ranch totaling over 400,000
square feet.
Livermore has already experienced some benefits related to the tight market in
Pleasanton. The new 115,000-square-foot California State Automobile Association
complex (the first phase of which is completed) on the south side of I-580 is
one example, while the other is the Lincoln Technology Park in Triad Park, which
is currently under construction.
The tight Pleasanton market may result in some users moving to Livermore;
however, it will not cause an exodus of firms. Motivations for companies either
to remain in Pleasanton or move include the following:
- - Some image-conscious tenants are willing to pay a premium for
Pleasanton=s established identity and corporate environment. These firms
are likely to be major name employers.
- - Companies with significant employee assets would likely select
Pleasanton because of its convenient location and greater employee
amenities.
- - On the other hand, some companies may experience sticker shock when
their leases in Pleasanton buildings come up for renewal. The more
price-sensitive and less image-conscious of these firms may consider a
move.
- - In addition, some companies' current and projected growth may result in
space needs that cannot be accommodated in Pleasanton in the required
time frame.
- ----------
(3) Although these statistics are quoted for the Tri-Valley overall, for
office and R&D space, the Tri-Valley basically consists of Pleasanton,
Dublin and San Ramon. As already noted, the main competitor for Livermore
is Pleasanton; however, both Dublin and San Ramon share the same market
strength and desirability as Pleasanton.
TRIAD PARK REAL ESTATE STRATEGY 5 JULY 1997
<PAGE> 18
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
- - Also, back-office (clerical and administrative) components of large
corporations may find that a Livermore location is closer to many of its
employees, who may live in areas such as Livermore, Brentwood, Discovery
Bay, and Tracy.
- - Lastly, in some situations, some companies may grow weary of the
competition for space in Pleasanton and opt to relocate.
Broker consensus is that, if there ever was a time for Livermore and Triad, that
time is now. The current real estate cycle is expected to last about another
three years (more or less, excluding an external shock to the economy or a
dramatic increase in interest rates).(4) However, with significant amounts of
new space under construction and in the planning stages, especially relative to
1996 net absorption, the strongest part of the future market will be in the next
year.
Space is currently tight and expensive in Pleasanton, primarily due to expansion
of Tri-Valley firms. Companies relocating out of the similarly tight (and more
expensive) Silicon Valley and Peninsula markets are creating some additional
demand. However, many of these firms also consider Fremont and nearby
communities when making their relocation decisions. There is a window of
opportunity that must be capitalized on before it closes.(5)
The limited time frame of market opportunity is especially true given the
potential for significant competition by the office and R&D components of the
planned Dublin Ranch and Shea Business Park projects. Shea Business Park has
already started marketing its sites, and Dublin Ranch is expected to start
marketing in the near future. However, both of these projects require major
infrastructure, and any building development will not be possible until after
2000. While both projects represent significant competition to Triad Park,
Dublin Ranch in particular will have a detrimental effect on any unsold land at
Triad Park due to its much superior location (closer to I-580/I-680 and in the
City of Dublin).
RECOMMENDATIONS
Based on its investigations, Sedway Group has prepared a series of
recommendations for Triad Park, LLC regarding the disposition of its real estate
assets, land use issues, park image and environment issues, and marketing
program.
- ----------
(4) Typical real estate cycles last about seven to eight years trough-to-
trough, and one could make the argument that the present Tri-Valley
office and R&D market is about half-way through the present cycle.
(5) It is important to remember that Livermore's nascent office/R&D market
depends on and is secondary to Pleasanton. To the extent Pleasanton has
little space available, Livermore becomes a more viable choice. However,
when vacancies in Pleasanton increase as more space is built than absorbed,
companies will have ample selections and will not be as likely to consider
a move.
TRIAD PARK REAL ESTATE STRATEGY 6 JULY 1997
<PAGE> 19
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
REAL ESTATE ASSET DISPOSITION STRATEGY
Sedway Group recommends an aggressive but orderly real estate asset disposition
program that would likely span about three-and-one-half years. Sedway Group
believes that this strategy would maximize the value of Triad Park, LLC's
holdings. The recommended strategy, with absorption estimates and pricing, is
summarized by Exhibit 2 and is more fully described in this and the following
sections.
We considered a shorter-term disposition, but in our opinion this would be akin
to a fire-sale liquidation that is inappropriate given current strong real
estate market conditions. Such a liquidation is also inappropriate given the
financial capability of Triad Park, LLC to hold the property for a number of
years.
In addition, we considered a longer-term strategy and determined that this would
certainly span the real estate cycle and would likely bring the park=s land in
direct competition with Dublin Ranch and Shea Business Park.
Sedway Group also recommends that the disposition plan be swiftly implemented.
As mentioned above, now is the time to capitalize on very low vacancy levels.
Rents and land/building prices have recently risen so rapidly in Pleasanton that
some tenants may experience sticker shock when their leases come up for renewal.
Less image-conscious and more price-sensitive tenants may give Livermore and
Triad Park serious consideration. Swift implementation of the disposition plan
will also allow Triad Park to build on the momentum expected by the completion
and occupancy of Lincoln Technology Park.
From our perspective, the disposition strategy should contain three key
components B a well-defined site plan and specific land use groupings; a focused
park image repositioning; and an aggressive, sophisticated marketing program
managed by an experienced development team. Each of the three components is
discussed in the following sections.
LAND USE RECOMMENDATIONS
The present Triad Park land use plan includes residential (Lots 1 to 3),
Business Commercial/Light Industrial (Lots 4 to 12), Service Commercial/Retail
(Lots 13 and 16 to 20), and Retail and Office Commercial/Light Industrial (Lots
21 to 25). The discussion below is illustrated by the color-coded land use map
presented as Exhibit 3.
RESIDENTIAL. We recommend that Triad Park, LLC simply follow through the current
agreements, since the majority of the residential component is already under
contract. We recommend that Triad Park, LLC close escrow with Gibson Speno on
Lots 1 and 2, and continue dialogue with respect to Lot 3. Based on discussions
with management and the appraisal, as well as Lot 3's slope restrictions, Sedway
Group believes that it is likely that this lot would be developed with five
large-lot home sites. However, an agreement may be reached with Gibson Speno to
result in the integration of this lot into Lot 2's planned duet home
development. This agreement could change the timing and the sales price of this
lot.
BUSINESS COMMERCIAL/LIGHT INDUSTRIAL. We recommend that Triad Park, LLC
aggregate the business commercial/light industrial land (Lots 4 to 12) into
three components to form a well-defined disposition strategy:
TRIAD PARK REAL ESTATE STRATEGY 7 JULY 1997
<PAGE> 20
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
- - TRIAD CAMPUS AND EXPANSION LAND. This consists of the 15.1 acres
improved with the three leased Triad buildings, plus Lots 4, 5, 6 and 8
(42.1 acres gross, 27.9 acres net, including 1.5 acres shifted from Lot
7). It is important that this asset is sold as soon as reasonably
possible while there is sufficient time remaining on the Triad lease and
a healthy real estate investment market, based on the uncertainty over
the corporate plans for Triad=s Livermore location.
Lots 5 and 8 are natural expansion areas for current and future users of
the campus (with little potential for other development due to their
location and slope restrictions). Lots 4 and 6 could also be used for
expansion or resold individually.
- - MULTITENANT COMPONENT. This consists of Lots 7, 9 and 9A, which are
anticipated to be developed with a variety of multitenant product
serving a range of user sizes. This multitenant component will bring to
the park vitality from multiple businesses with a variety of sizes and
momentum. We recommend the following for these lots.
- Lot 7 (a 3.5-acre portion, the rest of which is allocated to Lot
8) should be sold to Tom Terrill, who is also reportedly
purchasing the former Micro Dental site, for multitenant
office/R&D product aimed at tenants less than 15,000 square feet
(too small for Lincoln Technology Park).
- Lot 9 is expected to represent Phase II of Lincoln Technology
Park (which Lincoln needs to buy in order to preserve its right
of first offer agreement). Triad Park, LLC should work
proactively with Lincoln so that Lincoln Technology Park is fully
leased and to ensure their acquisition of this lot.
- Lot 9A has received an offer at $3.60 per square foot (which has
been reportedly negotiated up to $3.71 per square foot) from a
developer proposing a technology incubator project. This offer
should be accepted and Triad Park, LLC should work proactively
with the developer to make this project happen. If this deal
falls through, Triad Park, LLC should encourage Lincoln Property
Company to acquire this site for their Lincoln Technology Park
project.
- - CORPORATE USER/DEVELOPER. This consists of Lots 10 to 12. Triad Park,
LLC should continue to work with DES to develop functional design
alternatives for the 27.1-acre net area. The anticipated buyer of this
land would be a corporate user or a built-to-suit developer.
SERVICE COMMERCIAL/RETAIL AND RETAIL AND OFFICE COMMERCIAL/LIGHT INDUSTRIAL. The
most challenging portion of Triad Park is the southeast, with Lots 16 to 25. To
be developable, this portion of the park needs a clear direction regarding land
use, substantial infrastructure improvements, and acquisition of two key
out-parcels.
Sedway Group believes that the Aservice commercial/retail@ component on Lots 16
to 20 is ill-conceived. The retail market discussion presented earlier in this
report indicated that the I-580 retail market is saturated and if any retail
development were to occur, it would take place near existing retail
concentrations. Within Triad Park, the most logical site for retail development,
consisting mainly of food services, is located in the Retail/Lodging Center
noted on Exhibit 3. There are three prime sites
TRIAD PARK REAL ESTATE STRATEGY 8 JULY 1997
<PAGE> 21
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
in this area for such food services, all of which are owned by third parties:
New West Petroleum=s 1.954 acres (listed at $10.00 per square foot net of
bonds), Livermore Partners LLC's 1.4 acres (listed at $10.00 per square foot
net of bonds), and D=Ambrosio Brothers' 1.81 acres (listed at $8.50 per square
foot net of bonds, increasing to $10.00 per square foot as of October 1, 1997,
or may be retained and developed by the owner).
The small parcel sizes and high listing prices of lots 16 to 20 appear
unrealistic. Instead, we recommend that this service commercial/retail land be
combined into larger parcels with lower prices commensurate with other
office/R&D land in the park. In fact, these parcels would benefit if combined
with Lots 21 to 23 and potentially Lots 24 and 25. Thus, there could be one or
two corporate campus sites of either 35.9 acres (one campus) or 16.0 and 19.9
acres (two sites). A small premium is applicable for the land=s freeway
visibility.
Furthermore, the out-parcels adjacent to the park on the west side of Colliers
Canyon Road should be incorporated into the park (primarily the Cabrita and Chu
land and potentially the Davina land also). Inclusion of these out-parcels would
Asquare off@ the site and remove incompatible uses that may detract from its
desirability.
There is one small parcel, Lot 13, that possesses the greatest potential for
service commercial/retail use. However, this site will not have access until the
western portion of North Canyons Parkway is developed, which would take place
after Lots 10 to 12 are sold. The eventual type of user for this site is
speculative at this time.
LAND USE SUMMARY. Therefore, Sedway Group recommends that Triad Park, excluding
the Retail/Lodging Center, be segmented into the following components:
- Residential Land (Lots 1 and 2 B 19.4 acres to Gibson Speno; Lot
3 B 5.28 net acres usable to be sold);
- Triad Campus and Expansion Land (219,800 square feet on 15.1
acres and Lots 4, 5, 6 and 8 B 42.1 gross, 27.9 net, acres);
- Multitenant Component (Lincoln Technology Park B 19.2 acres, with
Lot 9 B 13.8 acres to be sold; Terrill B 14.18 acres, with Lot 7
B 3.5 acres to be sold; and incubator Lot 9A, or more Lincoln,
5.6 acres);
- Corporate User/Developer (Lots 10 through 12 B 46.1 gross, 27.1
net, acres);
- Corporate User/Developer (Lots 16 to 25 B 35.9 acres, could be
split into two: 19.9 and 16.0 acres); and
- Future Service Commercial/Retail (Lot 13 B 3.5 acres).
PARK IMAGE AND ENVIRONMENT ISSUES
Triad Park presently does not have a well-defined image or an environment
consistent with a corporate park. Although these considerations are fairly
intangible compared to land, buildings and occupancy costs, they are very
important for corporate users.
SIGNAGE AND ENTRY STATEMENT. Triad Park needs an entry monument with landscaping
to tell visitors that they have arrived. The current pylon sign identifying the
park from I-580 is detrimental to the
TRIAD PARK REAL ESTATE STRATEGY 9 JULY 1997
<PAGE> 22
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
park's image, as it creates the impression of a highway rest stop, not a
corporate park. This pylon sign should be redesigned or removed, if possible,
and replaced with a monument appropriate for a corporate location.(6) Although
an entry monument and landscaping is essential, it does not need to be of the
quality and scale as those in Pleasanton.
The entry to the park is also not of corporate quality, due to the fact that the
first development one sees when entering the park is the Exxon service station.
In addition, there is an out-parcel to the west of the Exxon station site over
which Triad Park, LLC appears to have no real control. The development of this
parcel could potentially create more issues at the entry. We recommend that the
entry be upgraded as development proceeds.
AMENITIES. Triad Park has one very distinct and plentiful amenity: corporate
lodging. However, there is very little in the way of other amenities for the
park's businesses and employees.
Food services are in need at the park. Presently the only food choices are
Wendy's, Baskin-Robbins and Costco's hot dog and pizza stand. A range of food
services, from sit-down restaurants to delis, are needed at the park. The
logical location for these uses is in the Retail/Lodging Center.
Another needed amenity is business services (overnight delivery, copying,
supplies, ATM, etc.). This type of service could be placed in a multitenant
retail building in the Retail/Lodging Center, or in the ground floor of a
multitenant office/R&D building. The provision of these amenities should be
encouraged, even if they located on a third party's parcel.7
Another image consideration that is entwined with the disposition program is
offering a potential large land purchaser naming rights to the park. Such a
carrot may not only secure a significant land sale but also provide a fresh
start for the park.
MARKETING PROGRAM
Sedway Group recommends that the disposition of the park be based on an
aggressive, sophisticated marketing plan including a clear land use strategy; a
coordinated program of presentations to brokers, developers, and a wide range of
investors including REITs for the buildings; and integration of financing and
other key deal points into the offering.
We also recommend that Triad Park, LLC create an experienced development team to
manage the disposition. The team should include, or have immediate access to,
expertise in brokerage, architecture, construction management, off-balance-sheet
financing, and built-to-suit development.
Finally, we recommend that Triad Park, LLC plan to work with multiple
developers, investors and contractors in the park. Given the size of the park
and the need to absorb a very large inventory of
- ----------
(6) There may be a problem with removing this sign, since it is not located
on Triad Park land and portions of the sign are owned by different
entities. However, we recommend addressing this issue.
(7) This recommendation is made with the recognition that amenities require
a population that requires amenities. This chicken-and-egg situation is not
easily resolved.
TRIAD PARK REAL ESTATE STRATEGY 10 JULY 1997
<PAGE> 23
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
undeveloped land, we suggest that perhaps three or four developers be involved
in different elements of the park to maximize the value of the real estate
assets.
FINANCIAL ANALYSIS OF RECOMMENDED DISPOSITION STRATEGY
Exhibits 4 through 7 present the financial analysis of the recommended
disposition strategy. Exhibit 4 presents a brief summary of the results of the
financial analysis for the various components, while Exhibit 5 presents our land
and price conclusions lot by lot (5A) and use by use group (5B), along with a
comparison with the Carneghi-Bautovich appraisal and Grubb & Ellis listing.
Exhibit 5B also presents other cash flow assumptions. Exhibit 6 illustrates the
cash flow by land use group, including the Triad complex. Exhibit 7 is the
summary cash flow projection. Key assumptions are summarized as follows:
- - LAND PRICES. Prices are net of assessment bonds, which are assumed by
the buyer, and are based on the gross acre. The gross acre is used since
purchasers of partially usable sites assume the bonds based on gross
acreage. Prices are based on sales within the park, current escrows and
offers, listing prices, and information presented in the
Carneghi-Bautovich and Partners appraisal.
- - TRIAD CAMPUS. The projected building rental revenue and reimbursements
for taxes and assessments are based on the current lease agreement. The
sales price for the campus is based on the Carneghi-Bautovich and
Partners appraisal and the recent Lincoln Property Company=s verbal
offer (considered slightly low). Active marketing or a competitive bid
process will likely yield a higher price from either Lincoln or another
aggressively growing real estate entity.
- - ABSORPTION. Absorption is based on outstanding escrows, offers, first
rights agreements, and indication of interest. We also assume that
momentum is created by a full commitment to the disposition program,
with appropriate marketing and exposure, as well as the completion and
occupancy of the Lincoln Technology Park. Sale of the Triad Campus and
Expansion Land is timed to reflect interest, as demonstrated by Lincoln
Property Company's recent verbal offer.
- - COMMISSIONS. Commissions are 6.0 percent on the land sale price (net of
bonds) and 2.0 percent on the buildings' sale price. Although the Grubb
& Ellis listing agreement calls for a sliding scale of commissions, we
used 6.0 percent to reflect the potential for other expenses related to
marketing and selling the land.
- - HOLDING COSTS. Holding costs include real estate taxes (tax rate 1.1849
percent), annual payments on assessment bonds, and overhead, including
payments to the park's maintenance association.
- - DEVELOPMENT COSTS. Development costs are reflected by the increase in
payments on assessment bonds. Due to the short-term nature of the financial
analysis, the actual development costs and city recapture has not been
modeled.
- - BUILDING LOAN. The principal and interest on the existing loan are
assumed to be paid per the amortization schedule. We assume that the
land parcels presently encumbered by the loan are
TRIAD PARK REAL ESTATE STRATEGY 11 JULY 1997
<PAGE> 24
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
released, based on plans for such a release agreement, and that the
building complex is the only encumbered portion of the park.
- - DISCOUNT RATE. An annual discount rate of 15.0 percent is assumed for
both the land sell-out and the building equity cash flow analysis.
Employing the discounted cash flow analysis, as summarized in Exhibit 4, the
total present value is calculated at $25.6 million.
TRIAD PARK REAL ESTATE STRATEGY 12 JULY 1997
<PAGE> 25
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
GENERAL ASSUMPTIONS AND LIMITING CONDITIONS
This report is made subject to the following assumptions and limiting
conditions.
1. No responsibility is assumed for legal matters. Title to the property is
assumed to be marketable and to be free and clear of all liens,
encumbrances and special assessments, unless otherwise noted. Unless
otherwise stated, easements are assumed to not adversely impact
development potential of the property.
2. The factual data utilized in this analysis, including land and building
area, have been obtained from sources deemed to be reliable; however, no
responsibility is assumed for their accuracy.
3. Unless otherwise stated in this report, the existence of hazardous
substances, including without limitation asbestos, polychlorinated
biphenyls, petroleum leakage, or agricultural chemicals, which may or
may not be present on the property, or other environmental conditions,
were not called to the attention of nor did the authors become aware of
such during any inspection undertaken on this assignment. The authors
have no knowledge of the existence of such materials on or in the
property unless otherwise stated.
The authors, however, are not qualified to test such substances or
conditions. If the presence of such substances, such as asbestos, urea
formaldehyde foam insulation, or other hazardous substances or
environmental conditions, may affect the value of the property, the
value estimated is predicated on the assumption that there is no such
condition on or in the property or in such proximity thereto that it
would cause a loss in value. No responsibility is assumed for any such
conditions, nor for any expertise or engineering knowledge required to
discover them.
4. Any projections of income, expenses and economic conditions utilized in
this report are not predictions of the future. Rather, they are
estimates of current market expectations of future income and expenses.
No warranty or representation is made that these projections will
materialize.
5. The compensation for this report is in no way contingent upon any value
estimate contained in this report.
6. Neither all nor any part of the contents of this report shall be
conveyed to the public through advertising, public relations, news,
sales or other media, without the written consent and approval of the
author.
7. No engineering study has been made or is implied by this report on the
condition and size of the subject property. It is assumed that there are
no unusual soils conditions that would constrain development, other than
those specifically stated herein.
TRIAD PARK REAL ESTATE STRATEGY 13 JULY 1997
<PAGE> 26
SEDWAY GROUP
REAL ESTATE AND URBAN ECONOMICS
CONFIDENTIAL
8. No testimony is required or implied on the part of the authors in any
court or before any board of appeals or board of supervisors acting in
such capacity, unless arrangements have been made previously.
9. Due to extraneous and yet undeterminable factors that affect sales
price, any estimate of value stated herein for the subject property is
not necessarily the ultimate sales price for the property.
TRIAD PARK REAL ESTATE STRATEGY 14 JULY 1997
<PAGE> 27
EXHIBIT 1
TRIAD PARK, LLC
TRIAD PARK LAND SALES ACTIVITY
1990 TO 1997 (1)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
SITE SIZE SALE SALE PRICE
IDENTIFICATION (ACRES) DATE BUYER NET OF BONDS
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Costco Site 15.22 7/93 Costco $1,720,802
2850 Constitution 1.99 5/96 Brahma Enterprises $ 465,000
W/S Constitution 2.42 5/96 Livermore Partners $ 575,000
E/S Constitution 3.44 8/96 Duffel/Kendall $ 449,540
E/S Constitution 1.81 9/96 D'Ambrosio Brothers $ 320,000
NEC N. Canyons Pkwy 9.18 9/96 HHH Investment $1,389,087
& Independence
NWC N. Canyons Pkwy 11.02 9/96 Lincoln Property $1,636,267
& Independence
E/S Constitution 4.147 12/96 Patel $ 669,735
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
SITE PRICE/SF
IDENTIFICATION NET OF BONDS DEVELOPMENT
- ----------------------------------------------------------
<S> <C> <C>
Costco Site $2.60 Costco Store & offices
2850 Constitution $5.36 Hampton Inn
W/S Constitution $5.45 Harley Davidson (ptn)
Freeway retail (ptn)
E/S Constitution $3.00 Marriott Courtyard
E/S Constitution $4.06 Restaurant(s)
NEC N. Canyons Pkwy $3.47 Office/R&D
& Independence
NWC N. Canyons Pkwy $3.41 Office/R&D
& Independence
E/S Constitution $3.71 Hilton Garden Inn
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
SITE
IDENTIFICATION COMMENTS
- ----------------------------------------------------------------------
<S> <C>
Costco Site
2850 Constitution Resale portion of Boulangerie de France land
W/S Constitution Resale portion of Boulangerie de France land
1.4-ac. portion marketed for resale at
$10.00/SF net of bonds
E/S Constitution Planning Commission approval 7/1/97
E/S Constitution Marketing site for resale at $8.50/SF net of
bonds. Listing price goes up to $10.00/SF as
of 10/1/97. Despite interest, owners are not
accepting offers as they are still considering
developing site with one or more restaurants.
NEC N. Canyons Pkwy Buyer has decided to remain in Dublin and
& Independence has reportedly entered into contract to resell
the site at a price near acquisition cost.
NWC N. Canyons Pkwy Lincoln Technology Park, 145,000 square feet,
& Independence recently commenced construction.
E/S Constitution Planning Commission approval 7/1/97
</TABLE>
NOTES:
(1) Prior to 1990, activity within the park included Wang, NMR (1987), Vista
West and Boulangerie de France (1989)
Sources: Carneghi-Boutovich & Partners; Triad Park LLC; Gateway Commercial;
D'Ambrosio Brothers; brokers; and Sedway Group.
<PAGE> 28
EXHIBIT 2
TRIAD PARK
RECOMMENDED DISPOSITION PROGRAM
PRICING AND ABSORPTION MATRIX
JULY 1997
<TABLE>
<CAPTION>
NET RETAIL SALES PRICE OF GROSS LAND ($/PSF)
GROSS ACRES SOLD
TIME OF SALE
PERCENTAGE 2ND HALF 1ST HALF 2ND HALF 1ST HALF 2ND HALF
LOT NUMBER GROSS ACRE BUILDABLE NET ACRES 1997 1998 1998 1999 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lot 1 13.90 100.0% 13.90 $3.43
Lot 2 5.50 100.0% 5.50 $3.43
Lot 3 8.70 60.7% 5.28
- ----------------------------------------------------------------------------------------------------------------
RESIDENTIAL 28.10 87.8% 24.68 19.40
- ----------------------------------------------------------------------------------------------------------------
Lot 4 5.30 100.0% 5.30 $4.50
Lot 5 22.40 45.2% 10.12 $0.55
Lot 6 4.90 100.0% 4.90 $4.50
Lot 8 9.50 79.8% 7.58 $0.55
- ----------------------------------------------------------------------------------------------------------------
TRIAD CAMPUS/
EXPANSION 42.10 66.3% 27.90 42.10
- ----------------------------------------------------------------------------------------------------------------
Lot 7 3.50 100.0% 3.50 $3.67
Lot 9 13.80 98.3% 13.56 $4.00
Lot 9A (1) 5.60 100.0% 5.60 $3.60
- ----------------------------------------------------------------------------------------------------------------
MULTI-TENANT
COMPONENT 22.90 99.0% 22.66 17.30 5.60
- ----------------------------------------------------------------------------------------------------------------
Lot 10 16.10 58.5% 9.42 $1.00
Lot 11 20.20 48.9% 9.88 $1.00
Lot 12 9.80 79.5% 7.79 $1.00
- ----------------------------------------------------------------------------------------------------------------
CORPORATE USER/
DEVELOPER 46.10 58.8% 27.09 46.10
- ----------------------------------------------------------------------------------------------------------------
Lot 13 3.50 100.0% 3.50
- ----------------------------------------------------------------------------------------------------------------
QUASI COMMERCIAL 3.50 100.0% 3.50
- ----------------------------------------------------------------------------------------------------------------
Lot 14 4.54 100.0% 0.00 $0.00
- ----------------------------------------------------------------------------------------------------------------
ROADS AND
FREEWAY RAMPS 4.54 0.0% 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------
Lot 16 2.60 100.0% 2.60 $4.00
Lot 17 0.80 100.0% 0.80 $4.00
Lot 18 1.30 100.0% 1.30 $4.00
Lot 19 3.00 100.0% 3.00 $4.00
Lot 20 2.80 100.0% 2.80 $4.00
Lot 21 1.00 100.0% 1.00 $4.00
Lot 22 3.60 100.0% 3.60 $4.00
Lot 23 4.80 100.0% 4.80 $4.00
Lot 24 10.50 100.0% 10.50 $4.00
Lot 25 5.50 100.0% 5.50 $4.00
- ----------------------------------------------------------------------------------------------------------------
CORPORATE USER/
DEVELOPER 35.90 100.0% 35.90 35.90
- ----------------------------------------------------------------------------------------------------------------
OPEN SPACE/
AGRICULTURAL 110.80 0.0% 0.00
- ----------------------------------------------------------------------------------------------------------------
OPEN SPACE/
AGRICULTURAL 110.80 0.00
- ----------------------------------------------------------------------------------------------------------------
TOTALS (2) 293.94 48.22% 141.73 36.70 47.70 46.10 0.00 35.90
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NET RETAIL SALES PRICE OF GROSS LAND ($/PSF)
GROSS ACRES SOLD
TIME OF SALE
<TABLE>
<CAPTION>
1ST HALF 2ND HALF
LOT NUMBER 2000 2000 COMMENTS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lot 1 Gibson Speno Escrow
Lot 2 Gibson Speno Escrow
Lot 3 $1.06 Residential Developer
- ------------------------------------------------------------------------------------------
RESIDENTIAL 8.7
- ------------------------------------------------------------------------------------------
Lot 4 Competitive Bid
Lot 5 Competitive Bid
Lot 6 Competitive Bid
Lot 8 Competitive Bid
- ------------------------------------------------------------------------------------------
TRIAD CAMPUS/
EXPANSION
- ------------------------------------------------------------------------------------------
Lot 7 Tom Terrill (or affiliate)
Lot 9 Lincoln Technology Park
Lot 9A (1) Speculative Developer or Lincoln Property
- ------------------------------------------------------------------------------------------
MULTI-TENANT
COMPONENT
- ------------------------------------------------------------------------------------------
Lot 10 Corporate User or Developer
Lot 11 Corporate User or Developer
Lot 12 Corporate User or Developer
- ------------------------------------------------------------------------------------------
CORPORATE USER/
DEVELOPER
- ------------------------------------------------------------------------------------------
Lot 13 $4.00
- ------------------------------------------------------------------------------------------
QUASI COMMERCIAL 3.50
- ------------------------------------------------------------------------------------------
Lot 14 Dedicate to City
- ------------------------------------------------------------------------------------------
ROADS AND
FREEWAY RAMPS
- ------------------------------------------------------------------------------------------
Lot 16 Corporate User or Developer
Lot 17 Corporate User or Developer
Lot 18 Corporate User or Developer
Lot 19 Corporate User or Developer
Lot 20 Corporate User or Developer
Lot 21 Corporate User or Developer
Lot 22 Corporate User or Developer
Lot 23 Corporate User or Developer
Lot 24 Corporate User or Developer
Lot 25 Corporate User or Developer
- ------------------------------------------------------------------------------------------
CORPORATE USER/
DEVELOPER
- ------------------------------------------------------------------------------------------
OPEN SPACE/
AGRICULTURAL $0.03 Trust/Public Agency
- ------------------------------------------------------------------------------------------
OPEN SPACE/
AGRICULTURAL 0.00
- ------------------------------------------------------------------------------------------
TOTALS (2) 8.70 3.50
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NET BUILDING VALUE ($/PSF)
NET ACRES SOLD
TIME OF SALE
PERCENTAGE 2ND HALF 1ST HALF 2ND HALF 1ST HALF 2ND HALF
BUILDING GROSS ACRES BUILDABLE NET ACRES 1997 1998 1998 1999 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TRIAD CORPORATE
CAMPUS 15.06 100.0% 15.06 $100
- ----------------------------------------------------------------------------------------------------------------
15.06
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1ST HALF 2ND HALF
BUILDING 2000 2000 COMMENTS
- ----------------------------------------------------
<S> <C> <C> <C>
TRIAD CORPORATE
CAMPUS
- ----------------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------
</TABLE>
Notes:
(1) The sale price for this parcel has been reportedly negotiated up to $3.71
per square foot.
(2) Net acres does not include open space/agricultural of 110.80 acres and
4.54 acres (Lot 14).
Source: Sedway Group.
<PAGE> 29
EXHIBIT 3
RECOMMENDED LAND USE CATEGORIES
[MAP]
<PAGE> 30
EXHIBIT 4
TRIAD PARK
RECOMMENDED DISPOSITION PROGRAM
NET PRESENT VALUE SUMMARY
JULY 1997
<TABLE>
<CAPTION>
TOTAL LAND FOR SALE BEFORE TRIAD SYSTEMS CORPORATION BUILDING AND
PROJECT OVERHEAD
================================================
<S> <C>
Gross Acres (excluding Lot 14 and
open space/agricultural) 178.60
Net Present Value $13,776,441
Net Present Value/PSF of Land Area $1.77
TRIAD SYSTEMS CORPORATION BUILDING
================================================
Gross Acres 15.06
Building Square Footage 219,818
Net Present Value $12,111,214
Net Present Value/PSF of Bldg. Area $55.10
Net Present Value/PSF of Land Area $18.46
PROJECT OVERHEAD
================================================
Net Present Value ($276,859)
TOTAL NET PRESENT VALUE:
================================================
Net Present Value $25,610,796
Net Present Value (Rounded) $25,600,000
===================
</TABLE>
Source: Sedway Group.
<PAGE> 31
EXHIBIT 5A
TRIAD PARK
RECOMMENDED DISPOSITION PROGRAM
DETAILED SALES PRICE ANALYSIS
JULY 1997
<TABLE>
<CAPTION>
PERCENTAGE
LOT NUMBER GROSS ACRES BUILDABLE NET ACRES
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Lot 1 13.90 100.0% 13.90
Lot 2 5.50 100.0% 5.50
Lot 3 8.70 60.7% 5.28
- ---------------------------------------------------------------------
RESIDENTIAL 28.10 87.8% 24.68
- ---------------------------------------------------------------------
Lot 4 5.30 100.0% 5.30
Lot 5 22.40 45.2% 10.12
Lot 6 4.90 100.0% 4.90
Lot 8 9.50 79.8% 7.58
- ---------------------------------------------------------------------
TRIAD CAMPUS/EXPANSION 42.10 66.3% 27.90
- ---------------------------------------------------------------------
Lot 7 3.50 100.0% 3.50
Lot 9 13.80 98.3% 13.56
Lot 9A 5.60 100.0% 5.60
- ---------------------------------------------------------------------
MULTI-TENANT COMPONENT 22.90 99.0% 22.66
- ---------------------------------------------------------------------
Lot 10 16.10 58.5% 9.42
Lot 11 20.20 48.9% 9.88
Lot 12 9.80 79.5% 7.79
- ---------------------------------------------------------------------
CORPORATE USER/DEVELOPER 46.10 58.8% 27.09
- ---------------------------------------------------------------------
Lot 13 3.50 100.0% 3.50
- ---------------------------------------------------------------------
QUASI COMMERCIAL 3.50 100.0% 3.50
- ---------------------------------------------------------------------
Lot 14 4.54 100.0% 0.00
- ---------------------------------------------------------------------
ROADS AND FREEWAY RAMPS 4.54 100.0% 0.00
- ---------------------------------------------------------------------
Lot 16 2.60 100.0% 2.60
Lot 17 0.80 100.0% 0.80
Lot 18 1.30 100.0% 1.30
Lot 19 3.00 100.0% 3.00
Lot 20 2.80 100.0% 2.80
Lot 21 1.00 100.0% 1.00
Lot 22 3.60 100.0% 3.60
Lot 23 4.80 100.0% 4.80
Lot 24 10.50 100.0% 10.50
Lot 25 5.50 100.0% 5.50
- ---------------------------------------------------------------------
CORPORATE USER/DEVELOPER 35.90 100.0% 35.90
- ---------------------------------------------------------------------
Open Space/Agricultur 110.80 0.0% 0.00
- ---------------------------------------------------------------------
OPEN SPACE/AGRICULTURAL 110.80 0.00
- ---------------------------------------------------------------------
TOTALS (1) 293.94 48.2% 141.73
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
PERCENTAGE
BUILDING GROSS ACRES BUILDABLE NET ACRES
- ---------------------------------------------------------------------
<S> <C> <C> <C>
TRIAD CORPORATE CAMPUS 15.06 100.0% 15.06
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SEDWAY GROUP APPRAISAL GRUBB & ELLIS
- ----------------------------------------------------------------------------------------------
NET SALES PRICE OF NET VALUE OF NET LISTING
GROSS LAND GROSS LAND PRICE OF GROSS
LOT NUMBER ($/PSF) ($/PSF) LAND ($/PSF)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lot 1 $3.43 $2.74 N/Av
Lot 2 $3.43 $5.17 N/Av
Lot 3 $1.06 $1.74 N/Av
- ----------------------------------------------------------------------------------------------
RESIDENTIAL $2.70 $2.91 N/AV
- ----------------------------------------------------------------------------------------------
Lot 4 $4.50 $3.90 $5.00
Lot 5 $0.55 $0.00 $2.00
Lot 6 $4.50 $3.92 $5.00
Lot 8 $0.55 $0.20 $2.00
- ----------------------------------------------------------------------------------------------
TRIAD CAMPUS/EXPANSION $1.51 $1.48 $3.10
- ----------------------------------------------------------------------------------------------
Lot 7 $3.67 $3.02 $4.00
Lot 9 $4.00 $2.77 $4.00
Lot 9A $3.60 $2.77 $4.00
- ----------------------------------------------------------------------------------------------
MULTI-TENANT COMPONENT $3.85 $2.81 $4.00
- ----------------------------------------------------------------------------------------------
Lot 10 $1.00 $0.59 $2.00
Lot 11 $1.00 $0.09 $2.00
Lot 12 $1.00 $1.69 $2.00
- ----------------------------------------------------------------------------------------------
CORPORATE USER/DEVELOPER $1.00 $0.60 $2.00
- ----------------------------------------------------------------------------------------------
Lot 13 $6.00 $4.02 $7.00
- ----------------------------------------------------------------------------------------------
QUASI COMMERCIAL $6.00 $4.02 $7.00
- ----------------------------------------------------------------------------------------------
Lot 14 $0.00 $0.00 $0.00
- ----------------------------------------------------------------------------------------------
ROADS AND FREEWAY RAMPS $0.00 $0.00 $0.00
- ----------------------------------------------------------------------------------------------
Lot 16 $4.00 $4.52 $6.50
Lot 17 $4.00 $4.52 $6.50
Lot 18 $4.00 $4.52 $6.50
Lot 19 $4.00 $4.52 $6.50
Lot 20 $4.00 $4.52 $6.50
Lot 21 $4.00 $4.52 $6.50
Lot 22 $4.00 $4.02 $6.50
Lot 23 $4.00 $3.02 $6.50
Lot 24 $4.00 $3.02 $6.00
Lot 25 $4.00 $3.52 $6.00
- ----------------------------------------------------------------------------------------------
CORPORATE USER/DEVELOPER $4.00 $3.68 $6.28
- ----------------------------------------------------------------------------------------------
Open Space/Agricultur $0.03 $0.03 N/Av
- ----------------------------------------------------------------------------------------------
OPEN SPACE/AGRICULTURAL N/AP N/AP N/AP
- ----------------------------------------------------------------------------------------------
TOTALS (1) $2.45 $2.14 N/AV
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SEDWAY GROUP APPRAISAL GRUBB & ELLIS
- ----------------------------------------------------------------------------------------------
GROSS
BUILDING GROSS SALES PRICE GROSS SALES PRICE SALES PRICE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRIAD CORPORATE CAMPUS $22,000,000 $22,000,000 N/AV
- ----------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Does not include open space/agricultural of 110.80 acres and 4.54 acres
(Lot 14) for land value calculation purposes.
Sources: Carneghi-Boutovich & Partners; Grubb & Ellis; Triad Park, LLC.;
and Sedway Group.
<PAGE> 32
EXHIBIT 5B
TRIAD PARK
RECOMMENDED DISPOSITION PROGRAM
SALES PRICE ANALYSIS BY LAND USE GROUP
JULY 1997
<TABLE>
<CAPTION>
PERCENTAGE
LOT NUMBER GROSS ACRES BUILDABLE NET ACRES
- ---------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------
Residential 28.10 87.8% 24.68
- ---------------------------------------------------------------------
Triad Campus/Expansion 42.10 66.3% 27.90
- ---------------------------------------------------------------------
Multi-Tenant Component 22.90 99.0% 22.66
- ---------------------------------------------------------------------
Corporate User/Developer 46.10 58.8% 27.09
- ---------------------------------------------------------------------
Quasi Commercial 3.50 100.0% 3.50
- ---------------------------------------------------------------------
Roads and Freeway Ramps 4.54 100.0% 0.00
- ---------------------------------------------------------------------
Corporate User/Developer 35.90 100.0% 35.90
- ---------------------------------------------------------------------
Open Space/Agricultural 110.80 0.0% 0.00
- ---------------------------------------------------------------------
TOTALS (1) 293.94 48.2% 141.73
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
PERCENTAGE
BUILDING GROSS ACRES BUILDABLE NET ACRES
- ---------------------------------------------------------------------
<S> <C> <C> <C>
TRIAD CORPORATE CAMPUS 15.06 100.0% 15.06
- ---------------------------------------------------------------------
OTHER ASSUMPTIONS
Annual Discount Rate: Developable Land Sales 15.00%
Annual Discount Rate - Triad Building: 15.00%
Annual Discount Rate - Project Wide Expenditures: 15.00%
Cost of Sales as % of Gross Sales Price: (2)
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SEDWAY GROUP APPRAISAL GRUBB & ELLIS
- ----------------------------------------------------------------------------------------
NET SALES PRICE OF NET VALUE OF NET LISTING
GROSS LAND GROSS LAND PRICE OF GROSS
LOT NUMBER ($/PSF) ($/PSF) LAND ($/PSF)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Residential $2.70 $2.91 N/Av
Triad Campus/Expansion $1.51 $1.48 $3.10
- ----------------------------------------------------------------------------------------
Multi-Tenant Componen $3.85 $2.81 $4.00
- ----------------------------------------------------------------------------------------
Corporate User/Developer $1.00 $0.60 $2.00
- ----------------------------------------------------------------------------------------
Quasi Commercial $6.00 $4.02 $7.00
- ----------------------------------------------------------------------------------------
Roads and Freeway Ramps $0.00 $0.00 $0.00
- ----------------------------------------------------------------------------------------
Corporate User/Developer $4.00 $3.68 $6.28
- ----------------------------------------------------------------------------------------
Open Space/Agricultural N/Ap N/Ap N/Ap
- ----------------------------------------------------------------------------------------
TOTALS (1) $2.45 $2.14 N/AV
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SEDWAY GROUP APPRAISAL GRUBB & ELLIS
- ----------------------------------------------------------------------------------------------
GROSS
BUILDING GROSS SALES PRICE GROSS SALES PRICE SALES PRICE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRIAD CORPORATE CAMPUS $22,000,000 $22,000,000 N/AV
- ----------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Does not include open space/agricultural of 110.80 acres and 4.54 acres
(Lot 14) for land value calculation purposes.
(2) 6 percent for land, 2 percent for building.
Sources: Carneghi-Boutovich & Partners; Grubb & Ellis; Triad Park, LLC.; and
Sedway Group.
<PAGE> 33
EXHIBIT 6
PAGE 1
TRIAD PARK
DEVELOPMENT PROFORMA: SEMI ANNUAL ANALYSIS
CASH FLOW SUMMARY
RECOMMENDED DISPOSITION PROGRAM
JULY 1997
<TABLE>
<CAPTION>
LAND USE
- ----------------------------------
RESIDENTIAL YEAR 2NDHALF97 1STHALF98 2NDHALF98 1STHALF99 2NDHALF99
---- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Percentage of Total Development 78.61% 0.00% 0.00% 0.00% 0.00%
Gross Acres Sold 19.40 0.00 0.00 0.00 0.00
Land Value Annual Growth Rates 0.00% 3.00% 3.00% 3.00% 3.00%
Land Sale Value $2,900,000 $0 $0 $0 $0
Cost of Land Sales (87,000) 0 0 0 0
Net Land Sales Proceeds 2,813,000 0 0 0 0
Holding Costs (6,895) (6,964) (7,034) (7,104) (7,175)
Land Sales Net of Holding Costs 2,806,105 (6,964) (7,034) (7,104) (7,175)
Miscellaneous Revenues 0 0 0 0 0
Miscellaneous Expenses 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide $2,806,105 ($6,964) ($7,034) ($7,104) ($7,175)
TRIAD CAMPUS EXPANSION YEAR 2NDHALF97 1STHALF98 2NDHALF98 1STHALF99 2NDHALF99
---- --------- --------- --------- --------- ---------
Percentage of Total Development 0.00% 100.00% 0.00% 0.00% 0.00%
Gross Acres Sold 0.00 42.10 0.00 0.00 0.00
Land Value Annual Growth Rates 0.00% 3.00% 3.00% 3.00% 3.00%
Land Sale Value $0 $2,763,664 $0 $0 $0
Cost of Land Sales 0 (165,820) 0 0 0
Net Land Sales Proceeds 0 2,597,844 0 0 0
Holding Costs (137,282) 0 0 0 0
Land Sales Net of Holding Costs (137,282) 2,597,844 0 0 0
Miscellaneous Revenues 0 0 0 0 0
Miscellaneous Expenses 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide ($137,282) $2,597,844 $0 $0 $0
MULTI-TENANT COMPONENT YEAR 2NDHALF97 1STHALF98 2NDHALF98 1STHALF99 2NDHALF99
---- --------- --------- --------- --------- ---------
Percentage of Total Development 75.29% 24.71% 0.00% 0.00% 0.00%
Gross Acres Sold 17.30 5.60 0.00 0.00 0.00
Land Value Annual Growth Rates 0.00% 3.00% 3.00% 3.00% 3.00%
Land Sale Value $2,964,040 $878,170 $0 $0 $0
Cost of Land Sales (173,797) (52,690) 0 0 0
Net Land Sales Proceeds 2,790,243 825,479 0 0 0
Holding Costs (20,600) 0 0 0 0
Land Sales Net of Holding Costs 2,769,643 825,479 0 0 0
Miscellaneous Revenues 0 0 0 0 0
Miscellaneous Expenses 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide $2,769,643 $825,479 $0 $0 $0
Source: Sedway Group.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LAND USE
- ----------------------------------
RESIDENTIAL 1STHALF00 2NDHALF00 1STHALF01 TOTAL
--------- --------- --------- -----
<S> <C> <C> <C> <C>
Percentage of Total Development 0.00% 21.39% 0.00% 100.00%
Gross Acres Sold 0.00 8.70 0.00 28.10
Land Value Annual Growth Rates 3.00% 3.00% 3.00%
Land Sale Value $0 $432,756 $0 $3,332,756
Cost of Land Sales 0 (25,965) 0 (112,965)
Net Land Sales Proceeds 0 406,791 0 3,219,791
Holding Costs (7,247) 0 0 (42,421)
Land Sales Net of Holding Costs (7,247) 406,791 0 3,177,370
Miscellaneous Revenues 0 0 0 0
Miscellaneous Expenses 0 0 0 0
- ---------------------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide ($7,247) $406,791 $0 $3,177,370
TRIAD CAMPUS EXPANSION 1STHALF00 2NDHALF00 1STHALF01 TOTAL
--------- --------- --------- -----
Percentage of Total Development 0.00% 0.00% 0.00% 100.00%
Gross Acres Sold 0.00 0.00 0.00 42.10
Land Value Annual Growth Rates 3.00% 3.00% 3.00%
Land Sale Value $0 $0 $0 $2,763,664
Cost of Land Sales 0 0 0 (165,820)
Net Land Sales Proceeds 0 0 0 2,597,844
Holding Costs 0 0 0 (137,282)
Land Sales Net of Holding Costs 0 0 0 2,460,562
Miscellaneous Revenues 0 0 0 0
Miscellaneous Expenses 0 0 0 0
- ---------------------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide $0 $0 $0 $2,460,562
MULTI-TENANT COMPONENT 1STHALF00 2NDHALF00 1STHALF01 TOTAL
--------- --------- --------- -----
Percentage of Total Development 0.00% 0.00% 0.00% 100.00%
Gross Acres Sold 0.00 0.00 0.00 22.90
Land Value Annual Growth Rates 3.00% 3.00% 3.00%
Land Sale Value $0 $0 $0 $3,842,210
Cost of Land Sales 0 0 0 (226,487)
Net Land Sales Proceeds 0 0 0 3,615,722
Holding Costs 0 0 0 (20,600)
Land Sales Net of Holding Costs 0 0 0 3,595,122
Miscellaneous Revenues 0 0 0 0
Miscellaneous Expenses 0 0 0 0
- ---------------------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide $0 $0 $0 $3,595,122
Source: Sedway Group.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 34
EXHIBIT 6
PAGE 2
TRIAD PARK
DEVELOPMENT PROFORMA: SEMI ANNUAL ANALYSIS
CASH FLOW SUMMARY
RECOMMENDED DISPOSITION PROGRAM
JULY 1997
<TABLE>
<CAPTION>
LAND USE
- -----------------------------------
CORPORATE USER/DEVELOPER YEAR 2NDHALF97 1STHALF98 2NDHALF98
---- --------- --------- ---------
<S> <C> <C> <C> <C>
Percentage of Total Development 0.00% 0.00% 100.00%
Gross Acres Sold 0.00 0.00 46.10
Land Value Annual Growth Rates 3.00% 3.00% 3.00%
Land Sale Value $ 0 $ 0 $ 2,038,238
Cost of Land Sales 0 0 (122,294)
Net Land Sales Proceeds 0 0 1,915,943
Holding Costs (143,517) (175,229) 0
Land Sales Net of Holding Costs (143,517) (175,229) 1,915,943
Miscellaneous Revenues 0 0 0
Miscellaneous Expenses 0 0 0
- -----------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide ($ 143,517) ($175,229) $ 1,915,943
QUASI COMMERCIAL YEAR 2NDHALF97 1STHALF98 2NDHALF98
---- --------- --------- ---------
Percentage of Total Development 0.00% 0.00% 0.00%
Gross Acres Sold 0.00 0.00 0.00
Land Value Annual Growth Rates 0.00% 3.00% 3.00%
Land Sale Value $0 $0 $0
Cost of Land Sales 0 0 0
Net Land Sales Proceeds 0 0 0
Holding Costs (14,778) (17,225) (23,588)
Land Sales Net of Holding Costs (14,778) (17,225) (23,588)
Miscellaneous Revenues 0 0 0
Miscellaneous Expenses 0 0 0
- -----------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide ($14,778) ($17,225) ($23,588)
ROADS AND FREEWAY RAMPS YEAR 2NDHALF97 1STHALF98 2NDHALF98
---- --------- --------- ---------
Percentage of Total Development 100.00% 0.00% 0.00%
Gross Acres Sold 4.54 0.00 0.00
Land Value Annual Growth Rates 0.00% 3.00% 3.00%
Land Sale Value $0 $0 $0
Cost of Land Sales 0 0 0
Net Land Sales Proceeds 0 0 0
Holding Costs 0 0 0
Land Sales Net of Holding Costs 0 0 0
Miscellaneous Revenues 0 0 0
Miscellaneous Expenses 0 0 0
- -----------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide $0 $0 $0
</TABLE>
<TABLE>
<CAPTION>
LAND USE
- -----------------------------------
CORPORATE USER/DEVELOPER 1STHALF99 2NDHALF99 1STHALF00 2NDHALF00 1STHALF01 TOTAL
--------- --------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Percentage of Total Development 0.00% 0.00% 0.00% 0.00% 0.00% 100.00%
Gross Acres Sold 0.00 0.00 0.00 0.00 0.00 46.10
Land Value Annual Growth Rates 3.00% 3.00% 3.00% 3.00% 3.00%
Land Sale Value $ 0 $ 0 $ 0 $ 0 $ 0 $ 2,038,238
Cost of Land Sales 0 0 0 0 0 (122,294)
Net Land Sales Proceeds 0 0 0 0 0 1,915,943
Holding Costs 0 0 0 0 0 (318,746)
Land Sales Net of Holding Costs 0 0 0 0 0 1,597,198
Miscellaneous Revenues 0 0 0 0 0 0
Miscellaneous Expenses 0 0 0 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,597,198
QUASI COMMERCIAL 1STHALF99 2NDHALF99 1STHALF00 2NDHALF00 1STHALF01 TOTAL
--------- --------- --------- --------- --------- -----
Percentage of Total Development 0.00% 0.00% 0.00% 100.00% 0.00% 100.00%
Gross Acres Sold 0.00 0.00 0.00 3.50 0.00 3.50
Land Value Annual Growth Rates 3.00% 3.00% 3.00% 3.00% 3.00%
Land Sale Value $0 $0 $0 $985,456 $0 $985,456
Cost of Land Sales 0 0 0 (59,127) 0 (59,127)
Net Land Sales Proceeds 0 0 0 926,329 0 926,329
Holding Costs (23,644) (23,752) (23,808) 0 0 (126,796)
Land Sales Net of Holding Costs (23,644) (23,752) (23,808) 926,329 0 799,533
Miscellaneous Revenues 0 0 0 0 0 0
Miscellaneous Expenses 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide ($23,644) ($23,752) ($23,808) $926,329 $0 $799,533
ROADS AND FREEWAY RAMPS 1STHALF99 2NDHALF99 1STHALF00 2NDHALF00 1STHALF01 TOTAL
--------- --------- --------- --------- --------- -----
Percentage of Total Development 0.00% 0.00% 0.00% 0.00% 0.00% 100.00%
Gross Acres Sold 0.00 0.00 0.00 0.00 0.00 4.54
Land Value Annual Growth Rates 3.00% 3.00% 3.00% 3.00% 3.00%
Land Sale Value $0 $0 $0 $0 $0 $0
Cost of Land Sales 0 0 0 0 0 0
Net Land Sales Proceeds 0 0 0 0 0 0
Holding Costs 0 0 0 0 0 0
Land Sales Net of Holding Costs 0 0 0 0 0 0
Miscellaneous Revenues 0 0 0 0 0 0
Miscellaneous Expenses 0 0 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Net Cash Flow Before Bldg/Before
Project Wide $0 $0 $0 $0 $0 $0
</TABLE>
Source: Sedway Group.
<PAGE> 35
EXHIBIT 6
PAGE 3
TRIAD PARK
DEVELOPMENT PROFORMA: SEMI ANNUAL ANALYSIS
CASH FLOW SUMMARY
RECOMMENDED DISPOSITION PROGRAM
JULY 1997
<TABLE>
<CAPTION>
LAND USE
CORPORATE USER/DEVELOPER Year 2ndHalf97 1stHalf98 2ndHalf98 1stHalf99 2ndHalf99
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Percentage of Total Development 0.00% 0.00% 0.00% 0.00% 100.00%
Gross Acres Sold 0.00 0.00 0.00 0.00 35.90
Land Value Annual Growth Rates 0.00% 3.00% 3.00% 3.00% 3.00%
Land Sale Value $ 0 $ 0 $ 0 $ 0 $ 6,639,058
Cost of Land Sales 0 0 0 0 (398,343)
Net Land Sales Proceeds 0 0 0 0 6,240,715
Holding Costs (133,056) (157,964) (223,048) (223,426) 0
Land Sales Net of Holding Costs (133,056) (157,964) (223,048) (223,426) 6,240,715
Miscellaneous Revenues 0 0 0 0 0
Miscellaneous Expenses 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Net Cash Flow Before Bldg/
Before Project Wide $ (133,056) $ (157,964) $ (223,048) $ (223,426) $ 6,240,715
</TABLE>
<TABLE>
<CAPTION>
LAND USE
CORPORATE USER/DEVELOPER 1stHalf00 2ndHalf00 1stHalf01 TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Percentage of Total Development 0.00% 0.00% 0.00% 100.00%
Gross Acres Sold 0.00 0.00 0.00 35.90
Land Value Annual Growth Rates 3.00% 3.00% 3.00%
Land Sale Value $ 0 $ 0 $ 0 $ 6,639,058
Cost of Land Sales 0 0 0 (398,343)
Net Land Sales Proceeds 0 0 0 6,240,715
Holding Costs 0 0 0 (737,493)
Land Sales Net of Holding Costs 0 0 0 5,503,221
Miscellaneous Revenues 0 0 0 0
Miscellaneous Expenses 0 0 0 0
----------- ----------- ----------- -----------
Net Cash Flow Before Bldg/
Before Project Wide Expend $ 0 $ 0 $ 0 $ 5,503,221
</TABLE>
<TABLE>
<CAPTION>
OPEN SPACE/AGRICULTURAL Year 2ndHalf97 1stHalf98 2ndHalf98 1stHalf99 2ndHalf99
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Percentage of Total Development 0.00% 0.00% 0.00% 0.00% 0.00%
Gross Acres Sold 0.00 0.00 0.00 0.00 0.00
Land Value Annual Growth Rates 0.00% 3.00% 3.00% 3.00% 3.00%
Land Sale Value $ 0 $ 0 $ 0 $ 0 $ 0
Cost of Land Sales 0 0 0 0 0
Net Land Sales Proceeds 0 0 0 0 0
Holding Costs 0 0 0 0 0
Land Sales Net of Holding Costs 0 0 0 0 0
Miscellaneous Revenues 0 0 0 0 0
Miscellaneous Expenses 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Net Cash Flow Before Bldg/
Before Project Wide Expend $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
<TABLE>
<CAPTION>
OPEN SPACE/AGRICULTURAL 1stHalf00 2ndHalf00 1stHalf01 TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Percentage of Total Development 0.00% 100.00% 0.00% 100.00%
Gross Acres Sold 0.00 110.80 0.00 110.80
Land Value Annual Growth Rates 3.00% 3.00% 3.00%
Land Sale Value $ 0 $ 155,984 $ 0 $ 155,984
Cost of Land Sales 0 (9,359) 0 (9,359)
Net Land Sales Proceeds 0 146,625 0 146,625
Holding Costs 0 0 0 0
Land Sales Net of Holding Costs 0 146,625 0 146,625
Miscellaneous Revenues 0 0 0 0
Miscellaneous Expenses 0 0 0 0
----------- ----------- ----------- -----------
Net Cash Flow Before Bldg/
Before Project Wide Expend $ 0 $ 146,625 $ 0 $ 146,625
</TABLE>
<TABLE>
<CAPTION>
Acres Bldg. SF
----- -------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
TRIAD BUILDING 15.06 219,818 $ 0.48 $ 0.48 $ 0.00 $ 0.00 $ 0.00
REVENUE
Building/Land Sale $ 0 $ 22,000,000 $ 0 $ 0 $ 0
Triad Rental Income 1,252,860 1,252,860 0 0 0
Reimbursement: Assessments 40,270 50,564 0 0 0
Reimbursement: Taxes 124,500 126,990 0 0 0
Total Building Revenue $ 1,417,630 $ 23,430,414 $ 0 $ 0 $ 0
EXPENDITURES
Assessments $ (40,270) $ (50,564) $ 0 $ 0 $ 0
Property Taxes (124,500) (126,990) 0 0 0
Debt Service - Principal (547,819) (8,680,103) 0 0 0
Debt Service - Interest (444,466) (416,854) 0 0 0
Cost of Sales 2.00% 0 (440,000) 0 0 0
Total Building Expenditures $ (1,157,055) $ (9,714,511) $ 0 $ 0 $ 0
TOTAL BUILDING CASH FLOW $ 260,575 $ 13,715,903 $ 0 $ 0 $ 0
NET CASH FLOW: AFTER BLDG/
BEFORE PROJECT WIDE EXPEND $ 5,395,999 $ 16,772,917 $ 1,665,318 $ (251,099) $ 6,212,893
PROJECT WIDE EXPENDITURES
Overhead - Professional Fees (102,759) (78,301) (54,663) (54,663) (21,256)
------------ ------------ ------------ ------------ ------------
TOTAL PROJECT WIDE EXPENDITURES $ (102,759) $ (78,301) $ (54,663) $ (54,663) $ (21,256)
NET CASH FLOW: AFTER BLDG/
AFTER PROJECT WIDE EXPEND $ 5,293,239 $ 16,694,615 $ 1,610,654 $ (305,762) $ 6,191,638
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
TRIAD BUILDING
REVENUE
Building/Land Sale $ 0 $ 0 $ 0 $ 22,000,000
Triad Rental Income 0 0 0 2,505,720
Reimbursement: Assessments 0 0 0 90,834
Reimbursement: Taxes 0 0 0 251,490
Total Building Revenue $ 0 $ 0 $ 0 $ 24,848,044
EXPENDITURES
Assessments $ 0 $ 0 $ 0 $ (90,834)
Property Taxes 0 0 0 (251,490)
Debt Service - Principal 0 0 0 (9,227,922)
Debt Service - Interest 0 0 0 (861,320)
Cost of Sales 0 0 0 (440,000)
Total Building Expenditures $ 0 $ 0 $ 0 $(10,871,566)
TOTAL BUILDING CASH FLOW $ 0 $ 0 $ 0 $ 13,976,478
NET CASH FLOW: AFTER BLDG/BEFORE PROJECT WIDE EXPEND $ (27,919) $ 1,333,120 $ 0 $ 31,101,228
PROJECT WIDE EXPENDITURES
Overhead - Professional Fees (21,256) 0 0 (332,898)
------------ ------------ ------------ ------------
TOTAL PROJECT WIDE EXPENDITURES $ (21,256) $ 0 $ 0 $ (332,898)
NET CASH FLOW: AFTER BLDG/
AFTER PROJECT WIDE EXPEND $ (49,174) $ 1,536,557 $ 56,813 $ 31,028,580
============ ============ ============ ============
</TABLE>
Source: Sedway Group.
<PAGE> 36
EXHIBIT 7
TRIAD PARK
DEVELOPMENT PROFORMA: SEMI ANNUAL ANALYSIS
CASH FLOW SUMMARY
RECOMMENDED DISPOSITION PROGRAM
JULY 1997
<TABLE>
<CAPTION>
LAND USE
TOTAL Year 2ndHalf97 1stHalf98 2ndHalf98 1stHalf99 2ndHalf99
----- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Percentage of Total Development -- -- -- -- --
Gross Acres Sold 41.24 47.70 46.10 0.00 35.90
Land Value Annual Growth Rates -- -- -- -- --
Land Sale Value $ 5,864,040 $ 3,641,834 $ 2,038,238 $ 0 $ 6,639,058
Cost of Land Sales (260,797) (218,510) (122,294) 0 (398,343)
Net Land Sales Proceeds 5,603,243 3,423,324 1,915,943 0 6,240,715
Holding Costs (467,819) (366,310) (250,626) (251,099) (27,822)
Land Sales Net of Holding Costs 5,135,424 3,057,014 1,665,318 (251,099) 6,212,893
Miscellaneous Revenues 0 0 0 0 0
Miscellaneous Expenses 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Net Cash Flow Before Bldg/
Before Project Wide $ 5,135,424 $ 3,057,014 $ 1,665,318 $( 251,099) $ 6,212,893
</TABLE>
<TABLE>
<CAPTION>
1stHalf00 2ndHalf00 1stHalf01 TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Percentage of Total Development -- -- -- --
Gross Acres Sold 0.00 123.00 0.00 293.94
Land Value Annual Growth Rates -- -- -- --
Land Sale Value $ 0 $ 1,574,196 $ 0 $ 19,757,366
Cost of Land Sales 0 (94,452) 0 (1,094,397)
Net Land Sales Proceeds 0 1,479,744 0 18,662,969
Holding Costs (27,919) 0 0 (1,391,595)
Land Sales Net of Holding Costs (27,919) 1,479,744 0 17,271,374
Miscellaneous Revenues 0 0 0 0
Miscellaneous Expenses 0 0 0 0
------------ ------------ ------------ ------------
Net Cash Flow Before Bldg/
Before Project Wide $ (27,919) $ 1,479,744 $ 0 $ 17,271,374
</TABLE>
<TABLE>
<CAPTION>
Acres Bldg. SF
----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
TRIAD BUILDING 15.06 219,818
REVENUE
Building/Land Sale $ 0 $ 22,000,000 $ 0 $ 0 $ 0
Triad Rental Income 1,252,860 1,252,860 0 0 0
Reimbursement: Assessments 40,270 50,564 0 0 0
Reimbursement: Taxes 124,500 126,990 0 0 0
Total Building Revenue $ 1,417,630 $ 23,430,414 $ 0 $ 0 $ 0
EXPENDITURES
Assessments $ (40,270) $ (50,564) $ 0 $ 0 $ 0
Property Taxes (124,500) (126,990) 0 0 0
Debt Service - Principal (547,819) (8,680,103) 0 0 0
Debt Service - Interest (444,466) (416,854) 0 0 0
Cost of Sales 2.00% 0 (440,000) 0 0 0
Total Building Expenditures $ (1,157,055) $ (9,714,511) $ 0 $ 0 $ 0
TOTAL BUILDING CASH FLOW $ 260,575 $ 13,715,903 $ 0 $ 0 $ 0
NET CASH FLOW: AFTER BLDG/
BEFORE PROJECT WIDE EXPEND $ 5,395,999 $ 16,772,917 $ 1,665,318 $ (251,099) $ 6,212,893
PROJECT WIDE EXPENDITURES
Overhead - Professional Fees (102,759) (78,301) (54,663) (54,663) (21,256)
------------ ------------ ------------ ------------ ------------
TOTAL PROJECT WIDE EXPENDITURES $ (102,759) $ (78,301) $ (54,663) $ (54,663) $ (21,256)
NET CASH FLOW: AFTER BLDG/
AFTER PROJECT WIDE EXPEND $ 5,293,239 $ 16,694,615 $ 1,610,654 $ (305,762) $ 6,191,638
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Building/Land Sale $ 0 $ 0 $ 0 $ 22,000,000
Triad Rental Income 0 0 0 2,505,720
Reimbursement: Assessments 0 0 0 90,834
Reimbursement: Taxes 0 0 0 251,490
Total Building Revenue $ 0 $ 0 $ 0 $ 24,848,044
EXPENDITURES
Assessments $ 0 $ 0 $ 0 $ (90,834)
Property Taxes 0 0 0 (251,490)
Debt Service - Principal 0 0 0 (9,227,922)
Debt Service - Interest 0 0 0 (861,320)
Cost of Sales 0 0 0 (440,000)
Total Building Expenditures $ 0 $ 0 $ 0 $(10,871,566)
TOTAL BUILDING CASH FLOW $ 0 $ 0 $ 0 $ 13,976,478
NET CASH FLOW: AFTER BLDG/
BEFORE PROJECT WIDE EXPEND $ (27,919) $ 1,333,120 $ 0 $ 31,101,228
PROJECT WIDE EXPENDITURES
Overhead - Professional Fees (21,256) 0 0 (332,898)
------------ ------------ ------------ ------------
TOTAL PROJECT WIDE EXPENDITURES $ (21,256) $ 0 $ 0 $ (332,898)
NET CASH FLOW: AFTER BLDG/
AFTER PROJECT WIDE EXPEND $ (49,174) $ 1,536,557 $ 56,813 $ 31,028,580
============ ============ ============ ============
</TABLE>
Source: Sedway Group.
<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of The
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TRIAD PARK, LLC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
membership interests, no par value
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
17,695,965 shares
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$1.32 per share purchased ($23,358,673)
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$23,358,673
---------------------------------------------------------------------
(5) Total fee paid:
$4,672
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$4,672
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Schedule 13E-3
---------------------------------------------------------------------
(3) Filing Party:
Joint-Triad Park, LLC, TPL Acquisition, LLC, and Richard C. Blum
& Associates, LP
---------------------------------------------------------------------
(4) Date Filed:
October 14, 1997
---------------------------------------------------------------------
<PAGE> 2
TRIAD PARK, LLC
3055 TRIAD DRIVE
LIVERMORE, CA 94550
DECEMBER , 1997
DEAR SHAREHOLDER:
You are cordially invited to attend a special meeting of shareholders of
Triad Park, LLC (the "Company") to be held at the offices of the Company, 3055
Triad Drive, Livermore, California, on , January , 1998 at 9:00
a.m. local time (the "Special Meeting"). A Notice of the Special Meeting, a
Proxy Statement, related information about the Company and a proxy card are
enclosed. All holders of the Company's outstanding membership interests (the
"Shares") as of December , 1997 are entitled to notice of and to vote at the
Special Meeting.
At the Special Meeting, you will be asked to consider and to vote upon a
proposal to approve an Agreement of Merger, dated September 9, 1997 (the "Merger
Agreement"), by and among the Company, Richard C. Blum & Associates, LP, a
California limited partnership ("RCBA"), and TPL Acquisition, LLC, a Delaware
limited liability company whose sole and managing member is RCBA (the
"Acquisition LLC"), pursuant to which the Acquisition LLC will be merged into
the Company (the "Merger"). If the Merger Agreement is approved and the Merger
becomes effective, each outstanding Share will be converted into the right to
receive $1.32 in cash. Approval of the Merger requires the affirmative vote of
the holders of a majority of the voting power of all outstanding Shares. Details
of the proposed Merger and other important information are set forth in the
accompanying Proxy Statement, which you are urged to read carefully.
YOUR ADVISORY BOARD HAS APPROVED THE MERGER AND RECOMMENDS THAT YOU VOTE
FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. Whether or not you plan to
attend the Special Meeting, please complete, sign and date the accompanying
proxy card and return it in the enclosed postage prepaid envelope. If you attend
the Special Meeting, you may revoke such proxy and vote in person if you wish,
even if you have previously returned your proxy card.
Thank you for your interest and participation.
Sincerely,
James R. Porter
Vice President, 3055 Management Corp.,
Manager of the Company
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE> 3
TRIAD PARK, LLC
3055 TRIAD DRIVE
LIVERMORE, CALIFORNIA 94550
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , JANUARY , 1998
------------------------
To Shareholders of Triad Park, LLC:
The Advisory Board has called a special meeting of the shareholders of
Triad Park, LLC, a Delaware limited liability company (the "Company"), to be
held at the offices of the Company, 3055 Triad Drive, Livermore, California, on
, January , 1998 at 9:00 a.m. local time, including any
adjournments or postponements (the "Special Meeting"), to consider and act upon
the following matters:
1. To consider and vote upon a proposal to approve an Agreement of
Merger, dated September 9, 1997 (the "Merger Agreement"), among the
Company, Richard C. Blum & Associates, LP, a California limited partnership
("RCBA"), and TPL Acquisition, LLC, a Delaware limited liability company
and whose sole and managing member is RCBA (the "Acquisition LLC"),
pursuant to which, among other things, (i) the Acquisition LLC will be
merged into the Company (the "Merger"), and (ii) each outstanding
membership interest of the Company (the "Shares") will be converted into
the right to receive $1.32 in cash (the "Merger Consideration"). A copy of
the Merger Agreement is attached as Exhibit A to the accompanying Proxy
Statement.
2. To consider and vote upon a proposal to adjourn the Special Meeting
to permit further solicitation of proxies in the event there are not
sufficient votes at the time of the Special Meeting to approve and adopt
the Merger Agreement.
3. To transact such other business as may properly come before the
Special Meeting.
Only holders of record of the Shares at the close of business on December
, 1997 are entitled to notice of and to vote at the Special Meeting. RCBA,
which beneficially holds 1,998,158 Shares (representing approximately 10.1% of
the voting power of the Shares) has notified the Company that it intends to vote
its Shares in favor of the Merger.
No appraisal or dissenters' rights are provided for the Company
shareholders under applicable law, nor will the Company or RCBA be voluntarily
providing appraisal rights to the Company shareholders who object to the
transactions contemplated by the Merger Agreement. Therefore, if the Merger is
approved, shareholders who voted against the Merger will be required to accept
the Merger Consideration in exchange for their interests in the Company. See
"RIGHTS OF DISSENTING SHAREHOLDERS."
Your attention is directed to the Proxy Statement and its Exhibits and the
other materials relating to the Company that have been included in this mailing
for more complete information regarding the Merger Agreement and the Company.
THE ADVISORY BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
By Order of the Advisory Board
James R. Porter
Vice President, 3055 Management Corp.,
Manager of the Company
Livermore, California
December , 1997
YOUR VOTE IS IMPORTANT. ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND
THE SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY
NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
<PAGE> 4
TRIAD PARK, LLC
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , JANUARY , 1998
------------------------
This Proxy Statement is being furnished to the shareholders of Triad Park,
LLC, a Delaware limited liability company (the "Company"), in connection with
the solicitation by the Advisory Board of the Company of proxies to be voted at
a special meeting of shareholders of the Company to be held at the offices of
the Company, 3055 Triad Park, Livermore, California, on , January ,
1998 at 9:00 a.m. local time, including any adjournments or postponements (the
"Special Meeting"). At the Special Meeting, the shareholders of the Company will
consider and vote upon a proposal to approve an Agreement of Merger, dated
September 9, 1997 (the "Merger Agreement"), among the Company, Richard C. Blum &
Associates, LP, a California limited partnership ("RCBA"), and TPL Acquisition,
LLC, a Delaware limited liability company whose sole and managing member is RCBA
(the "Acquisition LLC"), pursuant to which, among other things, (i) the
Acquisition LLC will be merged into the Company (the "Merger"), with the result
that the Company will become an affiliate of RCBA, and (ii) each outstanding
membership interest of the Company (the "Shares"), will be converted into the
right to receive $1.32 in cash. See "The Merger Agreement -- Consideration To Be
Received by Shareholders."
This Proxy Statement is accompanied by a copy of the Company's financial
statements for recent years. These materials are specifically incorporated by
reference in this Proxy Statement and are included to aid shareholders in their
consideration of the Merger.
Only holders of record of the Shares at the close of business on December
, 1997 are entitled to notice of and to vote at the Special Meeting. This
Proxy Statement is first being sent to shareholders on or about December ,
1997.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................................................................... 1
Date, Time and Place of Special Meeting............................................. 1
Record Date; Shareholders Entitled to Vote; Quorum.................................. 1
Purpose of the Meeting.............................................................. 1
The Merger.......................................................................... 1
Effective Time of the Merger........................................................ 2
Voting of Shares Owned by RCBA...................................................... 2
Special Factors..................................................................... 2
Payment for Shares.................................................................. 3
Dissenters' Rights.................................................................. 3
Regulatory Approvals................................................................ 3
The Company......................................................................... 3
RCBA................................................................................ 3
The Acquisition LLC................................................................. 3
CBC and Westmark.................................................................... 4
Market Price and Dividend Data...................................................... 4
THE COMPANY........................................................................... 5
History............................................................................. 5
Business of the Company............................................................. 5
Properties of the Company........................................................... 5
THE SPECIAL MEETING................................................................... 8
General............................................................................. 8
Proposal to be Considered at the Special Meeting.................................... 8
Record Date; Shareholder Approval................................................... 8
Proxies............................................................................. 8
SPECIAL FACTORS....................................................................... 9
Background of the Merger............................................................ 9
Contacts and Negotiations Since Execution of the Merger Agreement................... 13
Purpose and Structure of the Merger................................................. 13
Recommendation of the Company's Advisory Board...................................... 14
Sedway Report....................................................................... 16
Perspective of Mr. Blum, RCBA, the Acquisition LLC, CBC and Westmark on the
Merger........................................................................... 17
Plans for the Company After the Merger.............................................. 18
Certain Effects of the Merger....................................................... 18
Relationship Between the Company and RCBA........................................... 18
Interests of Certain Persons in the Merger.......................................... 18
Sources and Uses of Funds........................................................... 19
Certain Federal Income Tax Consequences............................................. 19
Redemptions of Shares............................................................... 21
Regulatory Approvals................................................................ 21
THE MERGER AGREEMENT.................................................................. 22
General............................................................................. 22
Effective Time...................................................................... 22
Consideration To Be Received by Shareholders........................................ 22
Payment for Shares.................................................................. 22
Operations of the Company Prior to the Merger....................................... 23
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Conditions to Consummation of the Merger............................................ 23
Termination......................................................................... 24
Termination Fee..................................................................... 25
Accounting Treatment................................................................ 25
RIGHTS OF DISSENTING SHAREHOLDERS..................................................... 25
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS........................... 26
Share Ownership..................................................................... 26
Transactions by Certain Persons in the Shares....................................... 27
MANAGEMENT OF THE COMPANY, RCBA AND THE ACQUISITION LLC............................... 28
The Company......................................................................... 28
RCBA and Affiliates................................................................. 28
The Acquisition LLC................................................................. 29
Certain Proceedings................................................................. 32
SHAREHOLDER PROPOSALS................................................................. 33
INDEPENDENT PUBLIC ACCOUNTANTS........................................................ 33
INFORMATION INCORPORATED BY REFERENCE................................................. 33
AVAILABLE INFORMATION................................................................. 33
ADDITIONAL INFORMATION................................................................ 33
EXHIBIT A -- Agreement of Merger...................................................... A-1
EXHIBIT B -- Financial Statements..................................................... B-1
EXHIBIT C -- Letter of The Kontrabecki Group, Inc., dated December 16, 1997........... C-1
EXHIBIT D -- Letter of Triad Park, LLC, dated December 18, 1997....................... D-1
EXHIBIT E -- Letter of The Kontrabecki Group, Inc., dated December 26, 1997........... E-1
</TABLE>
ii
<PAGE> 7
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. The following summary is not intended to be complete and
is qualified in its entirety by reference to the more detailed information
contained in this Proxy Statement, in the materials accompanying this Proxy
Statement, in the Exhibits and in the documents incorporated by reference.
Shareholders are urged to review the entire Proxy Statement and accompanying
materials carefully.
DATE, TIME AND PLACE OF SPECIAL MEETING
A Special Meeting of Shareholders of Triad Park, LLC will be held on ,
January , 1998 at 9:00 a.m. local time at the offices of the Company, 3055
Triad Drive, Livermore, California.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE; QUORUM
Only holders of record of the Company's membership interests (the "Shares")
at the close of business on December , 1997 (the "Record Date") are entitled
to notice of and to vote at the Special Meeting. On that date, there were
approximately 19,708,123 Shares outstanding, held of record by approximately
1,358 shareholders. Each holder of Shares is entitled to one vote per Share on
the matters to be voted upon at the Special Meeting. See "THE SPECIAL
MEETING -- Record Date; Shareholder Approval." The presence, in person or by
proxy, at the Special Meeting of the holders of a majority of the voting power
of the outstanding Shares is necessary to constitute a quorum at the Special
Meeting.
PURPOSE OF THE MEETING
At the Special Meeting, shareholders will consider and vote upon a proposal
to approve the Merger Agreement, a copy of which is attached as Exhibit A to
this Proxy Statement. See "THE SPECIAL MEETING -- Proposal To Be Considered at
the Special Meeting." The Merger Agreement provides for the merger of the
Acquisition LLC into the Company.
THE MERGER
Pursuant to the Merger Agreement, the Acquisition LLC will merge into the
Company, with the result that the Company, as the surviving company (the
"Surviving Company"), will become an affiliate of RCBA. All of the Company's
liabilities, including contingent, environmental, tax and any other liabilities,
will become liabilities of the Surviving Company by operation of law. There are
no contractual arrangements which would cause the shareholders to have
post-closing exposure to these liabilities. See "THE MERGER
AGREEMENT -- General." Each outstanding Share will be converted into the right
to receive from the Acquisition LLC or RCBA $1.32 in cash, without interest (the
"Merger Consideration"). See "THE MERGER AGREEMENT -- Consideration To Be
Received by Shareholders." After the Merger, RCBA will own all of the
outstanding membership interests of the Surviving Company. The Shares will no
longer be traded on the open market and the registration of the Shares under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), will be
terminated. See "SPECIAL FACTORS -- Certain Effects of the Merger."
Approval of the Merger requires the affirmative vote of the holders of a
majority of the voting power of all outstanding Shares. See "THE SPECIAL
MEETING -- Record Date; Shareholder Approval."
The Merger is subject to various closing conditions and the absence of any
event that would have a material adverse effect on the assets, properties,
liabilities, obligations, financial condition, results of operations or business
of the Company. See "THE MERGER AGREEMENT -- Conditions to Consummation of the
Merger."
The Merger Agreement may, under specified circumstances, be terminated and
the Merger abandoned at any time prior to the filing of a Certificate of Merger
with the Delaware Secretary of State, notwithstanding approval of the Merger
Agreement by the shareholders of the Company. The Merger Agreement requires the
Company to pay the Acquisition LLC a termination fee of $1.3 million if the
Merger is not consummated and if (i) the Merger Agreement shall not have been
submitted for approval and adoption by the Company
1
<PAGE> 8
shareholders at a shareholder meeting prior to January 31, 1998 (unless the
meeting is held later solely due to delays in obtaining approval of this proxy
statement by the Securities and Exchange Commission (the "Commission")), (ii)
the Advisory Board of the Company recommends to the Company's shareholders a
third party proposal regarding a merger, consolidation, sale of assets, sale of
securities or similar transaction (an "Acquisition Proposal"), or (iii) the
Company enters into an agreement with a third party regarding an Acquisition
Proposal. See "THE MERGER AGREEMENT -- Termination" and "-- Termination Fee."
EFFECTIVE TIME OF THE MERGER
Unless otherwise agreed by the parties to the Merger Agreement or otherwise
provided by law, the Merger will become effective upon the acceptance for
recording of the Certificate of Merger by the Delaware Secretary of State (the
"Effective Time"). Subject to approval of the Merger at the Special Meeting and
the satisfaction or waiver of the terms and conditions in the Merger Agreement,
the Effective Time is expected to occur as soon as practicable after the Special
Meeting. See "THE MERGER AGREEMENT -- Effective Time."
VOTING OF SHARES OWNED BY RCBA
The General Partner of RCBA, which beneficially holds 1,998,158 Shares
(representing approximately 10.1% of the outstanding Shares), has approved the
Merger and has notified the Company that it intends to vote its Shares in favor
of the Merger. Because RCBA is entitled to vote substantially less than 50.0% of
the voting power of the outstanding Shares, approval of the Merger is not
assured as a result of the voting power held by RCBA. See "THE SPECIAL
MEETING -- Record Date; Shareholder Approval."
SPECIAL FACTORS
In determining whether to vote in favor of the Merger, shareholders of the
Company should consider the following special factors, as well as the other
factors discussed elsewhere in this Proxy Statement under the caption "SPECIAL
FACTORS":
PURPOSE AND STRUCTURE OF THE MERGER. The purpose of the Merger is to effect
the sale of the Company to RCBA in a transaction that will provide the Company
shareholders cash for their Shares at a price that the Advisory Board of the
Company believes to be fair. The Advisory Board believes the Merger is the most
effective means of achieving the purpose of liquidating the shareholders'
investment in a reasonable time at a reasonable price. See "SPECIAL
FACTORS -- Purpose and Structure of the Merger."
RECOMMENDATION OF THE COMPANY'S ADVISORY BOARD. The Advisory Board of the
Company has determined that the Merger is fair from a financial point of view to
and in the best interests of the Company's shareholders (other than RCBA). The
Advisory Board has approved the Merger Agreement and recommends that the
Company's shareholders vote in favor of the proposal to approve and adopt the
Merger Agreement. See "SPECIAL FACTORS--Recommendation of the Company's Advisory
Board."
NO FAIRNESS OPINION. The Company has not received an opinion from an
independent financial advisor regarding the fairness of the consideration to be
received by shareholders of the Company. See "SPECIAL FACTORS -- Recommendation
of the Company's Advisory Board."
SEDWAY REPORT. On July 22, 1997, Sedway Group, a real estate and urban
economics firm ("Sedway Group") delivered a written report to the Company's
Advisory Board recommending a disposition strategy for maximization of the
Company's real estate assets. Sedway Group's report forecasted proceeds of $25.6
million if its disposition strategy was followed. See "SPECIAL FACTORS -- Sedway
Report."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. In considering the
recommendation of the Advisory Board of the Company with respect to the Merger
Agreement and the transactions contemplated thereby, shareholders should be
aware that certain officers and Advisory Board members of the Company have
interests in connection with the consummation of the Merger that may conflict
with the interests of the Company's shareholders. See "SPECIAL
FACTORS -- Interests of Certain Persons in the Merger."
2
<PAGE> 9
FEDERAL INCOME TAX CONSEQUENCES. For federal income tax purposes, the
Merger will be treated as a taxable sale or exchange of Shares for cash by each
holder of the Shares. The amount of gain or loss to be recognized by each
shareholder will be measured by the difference between the amount of cash
received by such shareholder in connection with the Merger plus such
shareholder's share of the Company's liabilities less such shareholder's tax
basis in the Shares at the Effective Time. See "SPECIAL FACTORS -- Certain
Federal Income Tax Consequences."
PAYMENT FOR SHARES
As promptly as possible after the Effective Time, instructions will be
furnished to holders of Shares regarding procedures to be followed to surrender
their certificates and receive payment for their Shares. See "THE MERGER
AGREEMENT -- Payment for Shares."
DISSENTERS' RIGHTS
No appraisal or dissenters' rights are provided for the Company
shareholders under the Delaware limited liability company act or under the
Company's limited liability company agreement, nor will the Company or RCBA be
voluntarily providing appraisal rights to the Company shareholders who object to
the transactions contemplated by the Merger Agreement. Therefore, if the Merger
is approved, shareholders who voted against the Merger will be required to
accept the Merger Consideration in exchange for their interests in the Company.
See "RIGHTS OF DISSENTING SHAREHOLDERS."
REGULATORY APPROVALS
Although no particular regulatory approval is required in connection with
the proposed Merger, state Attorneys General and private parties may bring legal
actions under the federal or state antitrust laws under certain circumstances.
See "SPECIAL FACTORS -- Regulatory Approvals."
THE COMPANY
The Company was formed on February 10, 1997. The Company's manager is 3055
Management Corp., a California corporation ("Management Corp."). The Company's
primary assets consist of three buildings and improvements (comprising 220,000
square feet) situated on approximately 15 acres of land in Triad Park,
Livermore, California (the "Headquarters") and 303 acres of undeveloped land
located in Triad Park (the "Land", the Land and the Headquarters, collectively
the "Property"). The Company was formed to liquidate its investment in the
Property. In the absence of any liquidation, the Company's principal business
has been to own, operate, improve and maintain the Property.
The principal executive office of the Company is located at 3055 Triad
Drive, Livermore, California 94550, and the Company's telephone number is (510)
449-0606.
RCBA
RCBA is a California limited partnership whose principal business is acting
as general partner for investment partnerships and providing investment advisory
and financial consulting services. RCBA is a registered investment adviser with
the Commission. The sole general partner of RCBA is Richard C. Blum &
Associates, Inc., a California corporation ("RCBA Inc."). RCBA Inc. is in turn
controlled, for purposes of the federal securities laws, by Richard C. Blum
("Mr. Blum"), the Chairman and a substantial shareholder of RCBA Inc.
The principal executive office of RCBA is located at 909 Montgomery Street,
Suite 400, San Francisco, California 94133, and its telephone number is (415)
434-1111.
THE ACQUISITION LLC
The Acquisition LLC is a Delaware limited liability company. Although no
definitive plans have been made, it is expected that the Acquisition LLC will be
jointly controlled by RCBA and Westmark Realty
3
<PAGE> 10
Advisors L.L.C. ("Westmark"), an indirect wholly-owned subsidiary of CB
Commercial Real Estate Services Group, Inc. ("CBC").
The principal executive office of the Acquisition LLC is located at 909
Montgomery Street, Suite 400, San Francisco, California 94133, and its telephone
number is (415) 434-1111.
CBC AND WESTMARK
CBC is a publicly traded Delaware corporation whose principal business is
providing vertically integrated commercial real estate services through its
subsidiaries, including commercial property sales and leasing, property
management, corporate advisory services and facilities management, mortgage
banking, realty advisory and investment management, capital markets, appraisal
services, financial analysis, market research and human resources. The principal
executive office of CBC is located at 533 South Fremont Avenue, Los Angeles,
California 90071.
Westmark is a Delaware limited liability company whose principal business
is providing comprehensive, integrated real estate advisory services to the
pension fund industry. Westmark is a registered investment adviser with the
Commission. The principal executive office of Westmark is located at 865 South
Figueroa Street, Los Angeles, California 90017.
CBC was not involved in the negotiation of the Merger or the Merger
Agreement. Westmark representatives participated in due diligence and
negotiation of the Merger and the Merger Agreement. It is expected that the
Acquisition LLC will be jointly controlled by RCBA and Westmark. Neither CBC or
Westmark had any prior connection or association with the Company. Mr. Blum is a
member of the board of directors of CBC.
MARKET PRICE AND DIVIDEND DATA
The Shares are publicly traded, although the Shares are not registered for
trading on any exchange. The Company is aware that bid and ask prices have been
quoted over the Internet under the symbol "TDPK." The following table sets forth
the range of high and low bid quotations per Share as quoted on the OTC Bulletin
Board. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
<TABLE>
<CAPTION>
BID QUOTATIONS
---------------
HIGH LOW
----- -----
<S> <C> <C>
1997
Third Quarter (July 31 through September 30)............... $1.26 $0.75
Fourth Quarter (through December 29)....................... $1.30 $1.25
</TABLE>
On August 13, 1997, the last full day of trading prior to the filing of the
RCBA Schedule 13D (as defined herein) which disclosed RCBA's interest in
acquiring the Company, such reported high and low bid quotations per Share was
$0.75 in both cases. On December , 1997, the last full day of trading prior to
the printing of this Proxy Statement, the reported high and low bid quotations
per Share were $ and $ , respectively. SHAREHOLDERS ARE URGED
TO OBTAIN A CURRENT MARKET QUOTATION FOR THEIR SHARES.
The Company has never paid a cash distribution on the Shares and does not
anticipate paying any such distribution in the foreseeable future.
4
<PAGE> 11
THE COMPANY
HISTORY
Prior to the Company's formation, the real estate assets now owned by the
Company were owned by Triad Systems Corporation, a Delaware corporation
("Triad") and its wholly-owned subsidiary, 3055 Triad Dr. Corp., a California
corporation ("3055 Triad Dr. Corp."). 3055 Triad Dr. Corp. was the owner of the
Headquarters as well as a certain portion of the Land, and Triad was the owner
of the remainder of the Land.
On October 23, 1996, Cooperative Computing, Inc., a Texas corporation
("CCI"), through a wholly owned subsidiary, commenced a tender offer (the
"Offer") to purchase all of the outstanding shares of common stock of Triad. The
Offer contemplated that, among other things, certain real property assets of
Triad and 3055 Triad Dr. Corp. would be spun off to the shareholders of Triad in
a dividend to be declared prior to the consummation of the Offer. The dividend
was declared on February 26, 1997.
The Company was organized under the laws of the State of Delaware as a
limited liability company on February 10, 1997 as a spin-off of Triad. At the
time of the formation of the Company, 3055 Triad Dr. Corp., the owner of the
Headquarters, was merged with and into Triad, with Triad being the surviving
corporation. On February 27, 1997, the Offer was consummated, CCI merged with
Triad, and Triad became known as Cooperative Computing, Inc., a Delaware
corporation, aka CCI/Triad ("CCI/Triad").
BUSINESS OF THE COMPANY
The Company's Shares are owned 99% by the former shareholders of Triad and
1% by Management Corp. The Management Corp. is the exclusive operator of the
Company's business except that certain actions require the approval of its
Advisory Board (the "Advisory Board"). The Advisory Board was responsible for
considering, reviewing and analyzing the Merger Agreement and the other
competing offers. The members of the Company's Advisory Board are Stanley F.
Marquis, James R. Porter, William W. Stevens and Martin W. Inderbitzen.
Information regarding each member may be found under the caption "MANAGEMENT OF
THE COMPANY, RCBA AND THE ACQUISITION LLC -- The Company."
The Company's main objective is to liquidate its investment in the
Property. In the meantime, the Company will own, operate, improve and maintain
the Property. The Company may enter into joint ventures with third parties for
the purpose of disposing of the Property if the Advisory Board determines that
such arrangements are appropriate to the purposes of the Company.
There can be no assurance that the Company will be successful in its
efforts to dispose of the Property or that the Company will realize a profit
from its activities. The Company will be subject to all of the market forces
which impact the ownership and operation of real property, including market
supply and demand, interest rates, local, regional and national economic
conditions, local land use policies and restrictions, construction costs,
competition from other sellers and landlords, and the effects of inflation. The
Company is unable to predict the amount of time it will take to completely
dispose of the Property and wind up the Company.
PROPERTIES OF THE COMPANY
Pursuant to that certain Real Estate Distribution Agreement dated as of
February 26, 1997 between Triad, 3055 Triad Dr. Corp., Management Corp. and the
Company (the "Distribution Agreement"), Triad contributed to the Company certain
of its real estate assets located in Livermore, California, consisting primarily
of the Headquarters, subject to the existing first deed of trust, and the Land,
subject to existing assessment bonds, and the right to certain refunds for
infrastructure expenditures from the City of Livermore (the "Contribution").
In conjunction with the Contribution, the Company agreed in the
Distribution Agreement to indemnify CCI/Triad against any claims relating to
"Environmental Costs and Liabilities" associated with the Land or the
Headquarters prior to the Contribution. These "Environmental Costs and
Liabilities" include all costs, liabilities, losses, claims and expenses arising
from or under any "environmental law." The term "environmen-
5
<PAGE> 12
tal law" is defined to include any applicable law regulating or prohibiting
releases into any part of the natural environment, or pertaining to the
protection of natural resources, the environment and public and employee health
and safety including, among other law, the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA), the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act (RCRA), the Clean Water Act, the
Clean Air Act, the Toxic Substances Control Act, and the Occupational Safety and
Health Act, and any applicable state or local statutes.
Subject to certain limitations, the Company also agreed in the Distribution
Agreement to indemnify CCI/Triad against certain taxes arising from, or relating
to, among other things, any sale of the Property after October 17, 1996, the
Company, the formation of the Company, the transfer by Triad or any affiliate of
Triad of the Property to the Company, the assumption or refinancing of any
liabilities with respect to the Property and the sale, exchange or distribution
of interests in the Company by CCI/Triad.
As of September 30, 1997, the Property consisted of approximately 303 acres
of unimproved land and the 220,000 (approximate) square feet of office contained
in three separate buildings situated on 15 acres of land occupied by CCI/Triad.
The Property is located on the north side of Interstate 580 in the City of
Livermore, California. The City of Livermore is located approximately 40 miles
southeast of San Francisco.
All of the buildings are of concrete tilt-up construction and were built in
1987. Building G is a two story office building containing approximately 70,986
square feet. Building K is a 74,064 square foot single story research and
development building and Building F is a single story industrial flex building
of 74,768 square feet. The office build-out in Buildings K and F is 90 percent
and 40 percent, respectively. The Company's management believes that the
Headquarters is adequately insured. There are 689 parking spaces associated with
the Headquarters. The parking area is landscaped and the areas between the
buildings are improved as open courtyards, fenced with iron gates for controlled
access. Although the buildings were primarily designed for owner-occupancy, they
were also designed to be flexible to allow multi-tenant occupancy.
The 303 acres of vacant land is divided into land use categories of
residential, industrial/office flex, retail and open space. The residential
portion consists of three lots comprising approximately 28.1 useable acres. The
industrial/office flex portion is divided into eight lots and contains
approximately 114.6 acres. The retail/commercial portion is divided into ten
lots and contains approximately 35.9 useable acres. The total useable area for
these lots is approximately 141 acres. In addition, there are two lots, one of
approximately 112 acres designated for open space or agricultural use and one
lot of 4.54 acres dedicated for transportation improvements. Finally,
approximately 7.8 acres are to be developed as public roadways. Approximately
half the required offsite improvements are in place, funded through a
combination of assessment bonds and community facility bonds. The construction
of the remaining offsite improvements are expected to be funded through
additional community facility bonds, as further described below in the final
paragraph of this section. Several of the vacant land sites are in escrow and
most of the remaining sites are subject to a first right of refusal contract.
Two residential lots, comprising 19.4 acres, are in escrow to be sold to a
single purchaser for a total price of $2,900,000 plus current assessments and up
to approximately $1,500,000 of future assessments on these lots and an adjacent
lot. This transaction is subject to the satisfaction of several material
conditions, and the closing is not assured.
One 19.3 acre lot is subject to a seven day right of first offer held by
Lincoln Property Co., starting at $3.99 per square foot and increasing 5% per
year, plus assessments. In addition, Lincoln Property Co. has the right of first
offer on 8 lots plus the above mentioned lot. Finally, a previous purchaser of a
lot holds a three year option, commencing September 1996, on 3.4 to 6 acres of
land adjacent to the lot it owns. The option price is $3.60 per square foot plus
assessments for two years, increasing to $5.50 for the third year.
Since September 30, 1997 the Company has concluded a sale to Marina Square
Partners, a partnership sponsored by the unaffiliated developer Reynolds &
Brown, of a five acre parcel of the property planned for industrial/office flex
development for approximately $781,000 plus the buyer's agreement to pay
approximately $43,000 towards the cost of developing a roadway to the property.
This equates to a price per square foot of approximately $3.78. In addition, the
Company has entered into a contract with Lincoln Property
6
<PAGE> 13
Company to sell Lincoln a 5.56 acre parcel of the property planned for
industrial/office flex for $889,000 plus a contribution to roadway construction
of approximately $72,000. This transaction is scheduled to close on December 9,
1997 and equates to a price per square foot of $3.97.
The Property is partially improved with infrastructure improvements,
including curbs, gutters, storm drains and typical utilities. A community
facilities bond issue was completed on March 24, 1997, the proceeds of which
funded the reimbursement to the Company of $1,485,000 for completed
infrastructure, created a $600,000 security fund for future infrastructure
obligations, and will fund $3,700,000 for in-progress infrastructure
improvements. In addition, there are $7,000,000 of new bonds which are planned
to be sold in the future to fund the remaining improvements required for
completion of Triad Park. The current cost estimates for the required
improvements indicate that the community facilities bond funding limits should
be adequate to cover the expenses of the remaining items of improvement.
However, design and engineering is not complete and there is a significant
possibility that the actual cost of the improvements may be greater than
estimated and may exceed the bond funding limit. Any shortfall in the bond
funding will be borne by the Company or by purchasers of lots, which may have an
adverse impact on the value of the Land. The remaining required improvements are
scheduled to be completed by 2000.
7
<PAGE> 14
THE SPECIAL MEETING
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Advisory Board of the Company for a Special Meeting of
Shareholders to be held on January , 1998 at 9:00 a.m. local time at the
offices of the Company, 3055 Triad Drive, Livermore, California, and as may be
adjourned to a later date. Shares represented by properly executed proxies
received by the Company will be voted at the Special Meeting in accordance with
the terms of the proxies, unless the proxies are revoked. See "-- Proxies"
below.
PROPOSALS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the shareholders of the Company will consider and
vote upon a proposal to approve and adopt the Merger Agreement. Pursuant to the
Merger Agreement, the Acquisition LLC will merge with and into the Company, the
separate corporate existence of the Acquisition LLC will cease, and the Company
will be the Surviving Company. At the Effective Time, each outstanding Share
will be converted into the right to receive $1.32 in cash. A copy of the Merger
Agreement is attached as Exhibit A to this Proxy Statement.
In addition to approval of the Merger Agreement and the Merger,
shareholders of the Company will consider and vote upon a proposal to adjourn
the Special Meeting to permit further solicitation of proxies in the event there
are not sufficient votes at the time of the Special Meeting to approve and adopt
the Merger Agreement. It is not anticipated that any other matters will be
brought before the Special Meeting. However, if other matters should come before
the Special Meeting, it is intended that the holders of Proxies will vote upon
them in their discretion, unless that authority is withheld in the Proxy.
RECORD DATE; SHAREHOLDER APPROVAL
Only holders of record of the Shares at the close of business on December
, 1997 are entitled to notice of and to vote at the Special Meeting. On that
date, there were 19,708,123 Shares outstanding, which were held of record by
approximately 1,358 shareholders. Each Share entitles its holder to one vote
concerning all matters properly coming before the Special Meeting. A majority of
the voting power of the Shares entitled to vote, represented in person or by
proxy, will constitute a quorum. Abstentions and broker non-votes (i.e. Shares
held by brokers in street name, voting on certain matters due to discretionary
authority or instructions from the beneficial owner but not voting on other
matters due to lack of authority to vote on those matters without instructions
from the beneficial owner) are counted for the purpose of establishing a quorum
and will have the same effect as a vote against the approval of the Merger. The
Merger must be approved by the holders of at least a majority of the voting
power of all outstanding Shares. RCBA, which beneficially owns 1,998,158 Shares
(representing approximately 10.1% of the voting power of the Shares), has
notified the Company that it intends to vote its Shares in favor of the Merger.
Because RCBA is entitled to vote substantially less than 50.0% of the voting
power of all outstanding Shares, approval of the Merger is not assured as a
result of the voting power held by RCBA.
Although they have not specifically agreed to do so, the Company believes
that each of the Advisory Board members and executive officers of the Company
will vote the Shares with respect to which he has voting power in favor of the
Merger. Such Shares represent less than 8% of the Shares entitled to vote at the
Special Meeting. See "SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS."
PROXIES
Any Company shareholder entitled to vote at the Special Meeting may vote
either in person or by duly authorized proxy. All Shares represented by properly
executed proxies received prior to or at the Special Meeting and not revoked
will be voted in accordance with the instructions indicated in the proxies. IF
NO INSTRUCTIONS ARE INDICATED, THE PROXIES WILL BE VOTED FOR THE PROPOSAL TO
APPROVE AND ADOPT THE MERGER AGREEMENT, FOR THE PROPOSAL TO ADJOURN
8
<PAGE> 15
THE SPECIAL MEETING TO PERMIT FURTHER SOLICITATION OF PROXIES IN THE EVENT THERE
ARE NOT SUFFICIENT VOTES AT THE TIME OF THE SPECIAL MEETING TO APPROVE AND ADOPT
THE MERGER AGREEMENT AND, IN THE DISCRETION OF THE PERSONS NAMED IN THE PROXY,
ON SUCH OTHER MATTERS AS MAY PROPERLY BE PRESENTED AT THE SPECIAL MEETING.
A shareholder may revoke his or her proxy at any time prior to its use by
delivering to the President of the Company a signed notice of revocation or a
later dated and signed proxy or by attending the Special Meeting and voting in
person. Attendance at the Special Meeting will not in itself constitute the
revocation of a proxy.
Expenses in connection with the solicitation of proxies will be paid by
RCBA or the Acquisition LLC. Upon request, RCBA or the Acquisition LLC will
reimburse brokers, dealers and banks, or their nominees, for reasonable expenses
incurred in forwarding copies of the proxy material to the beneficial owners of
the Shares which such persons hold of record. Solicitation of proxies will be
made principally by mail. Proxies may also be solicited in person, or by
telephone or telegraph, by officers and regular employees of the Company.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
HISTORY OF RELATIONSHIP BETWEEN THE COMPANY AND RCBA. The Company was
formed in 1997 as a spin-off of Triad. RCBA's President and Chairman, Richard C.
Blum ("Mr. Blum"), was a director of Triad from August 3, 1992 until February
26, 1997, when Triad was acquired by CCI as part of CCI's successful tender
offer for all outstanding shares of Triad common stock.
When Management Corp. was formed in February, 1997, all of the outstanding
stock was issued in equal amounts to Mr. Blum, William W. Stevens ("Mr.
Stevens") and James R. Porter ("Mr. Porter"), three former directors of Triad.
Mr. Blum was also a vice president and director of Management Corp. On August 8,
1997, Mr. Blum resigned from the Board of Directors and also resigned as vice
president of Management Corp. On September 5, 1997, Mr. Blum assigned his shares
in Management Corp. over to Mr. Stevens and Mr. Porter. Mr. Blum was never a
member of the Advisory Board.
REAL ESTATE LISTING AGENT. On June 1, 1997, the Company engaged the real
estate firm of Grubb & Ellis, the same real estate firm that had been previously
engaged by Triad to represent it in certain real estate matters, to act as its
exclusive listing agent in connection with the potential sale of the Property.
From time to time, representatives of Grubb & Ellis have had discussions with
senior management of the Company and the Company's Advisory Board concerning the
Company's potential strategic alternatives with respect to the sale of the
Property. Such discussions have been general in nature and did not result in any
formal actions by the Company's Advisory Board.
DISCUSSIONS WITH THIRD PARTIES. In addition to the negotiations with RCBA
discussed below, the Company has had discussions with several other parties as
described below.
CONTACTS AND NEGOTIATIONS WITH EVEREST FINANCIAL. On August 28, 1997,
Everest Financial, Inc. ("Everest"), in a letter to the Company, set forth the
terms and conditions upon which it would be willing to acquire the Company. In
the letter, Everest indicated that it was willing to undertake a tender offer
for all of the Company's outstanding Shares at a price of $0.91 per Share (an
aggregate purcase price of less than $18,000,000), subject to due diligence and
other contingencies.
CONTACTS AND NEGOTIATIONS WITH T.V.O.B. GENERAL PARTNERSHIP. On August 25,
1997, Jeffrey S. Kendall ("Mr. Kendall"), General Partner of T.V.O.B. General
Partnership ("TVOB"), met with Stanley F. Marquis, a member of the Company's
Advisory Board ("Mr. Marquis"), in a meeting initiated by Mr. Kendall, to
discuss the general terms of a proposal whereby TVOB would acquire all of the
Company's outstanding Shares. On August 26, 1997, TVOB, in a letter to the
Company, indicated it would be willing to acquire the Company for a total price
of $25,500,000.
9
<PAGE> 16
On August 29, 1997, Larry D. McReynolds, President of the Company ("Mr.
McReynolds") and Mr. Marquis met with Mr. Kendall and Joseph A. Duffel ("Mr.
Duffel"), General Partner of TVOB. The parties discussed general due diligence
issues and certain contingent liabilities of the Company. Mr. Marquis informed
the TVOB representatives that their offer was lower than another offer
previously received by the Company. In the course of the meeting, TVOB increased
its offer for the Company to $26,500,000.
On the morning of September 5, 1997, Mr. Kendall telephoned Mr. Marquis and
verbally indicated that TVOB would be increasing its offer price to $27,000,000.
On the afternoon of September 5, 1997, Mr. Duffel, in a letter delivered via
facsimile to Mr. Marquis, changed TVOB's offer price to $26,900,000. In
addition, Mr. Duffel proposed an alternative transaction structure in which the
Company would join TVOB in a joint venture regarding the development of the
Property. This proposal called for the Company to receive $1 million in cash at
closing, with a $25.9 million wrap around mortgage on all of the Property. The
Company would receive 10% imputed interest on $25.9 million, TVOB would
liquidate the Property over three years, and all profits would be split evenly
between TVOB and the Company.
During all of the discussions with TVOB, TVOB never indicated whether it
was willing to assume all of the contingent liabilities of the Company.
On September 10, 1997, Mr. Marquis telephoned Mr. Duffel to inform him of
the Advisory Board's decision to approve the Merger Agreement.
CONTACTS AND NEGOTIATIONS WITH LINCOLN PROPERTY COMPANY. On September 5,
1997, Lincoln Property Company ("Lincoln"), in a letter to Mr. Marquis delivered
via facsimile, indicated that it would be willing to purchase the assets of the
Company for an aggregate purchase price of $30,000,000. The letter indicated
that Lincoln would assume the bond assessments, but was silent as to the
assumption of the Company's liabilities. Mr. Marquis telephoned Steven N. Dunn,
Vice President of Lincoln ("Mr. Dunn"), to clarify Lincoln's position with
respect to the Company's liabilities. Mr. Dunn told Mr. Marquis that the Lincoln
offer contemplated that Lincoln would not assume any of the Company's
liabilities, contingent or otherwise. In light of this clarification by Mr.
Dunn, Mr. Marquis calculated that the aggregate value of Lincoln's offer to the
Company's shareholders, after paying off the existing mortgage and before any
real estate or transactions costs, was approximately $21,000,000.
CONTACTS AND NEGOTIATIONS WITH GRIGGS RESOURCE GROUP. On September 8, 1997,
shortly before a special meeting of the Advisory Board, Griggs Resource Group,
on behalf of PeopleSoft, Inc., sent a letter to the Company that indicated
PeopleSoft was willing to purchase all of the Company's remaining assets for an
aggregate purchase price of $36,000,000, subject to (a) changes being made in
the Company's lease with CCI/Triad (over which the Company had no control) and
(b) a due diligence period of up to 60 days after the execution of a definitive
agreement. Under the terms of this offer, PeopleSoft would not be assuming the
existing mortgage. Thus, after deducting the existing mortgage and applicable
commissions, the net realizable value of the PeopleSoft offer was approximately
$26,000,000. However, PeopleSoft did not contemplate the assumption of the
Company's contingent liabilities. The letter also indicated that PeopleSoft
would be willing to consider a merger or tender offer structure.
On September 10, 1997, Mr. Marquis telephoned Brian Griggs ("Mr. Griggs")
of Griggs Resource Group to inform him of the Board's decision to approve the
Merger Agreement.
On September 12, 1997, Mr. Griggs, in a letter to Mr. Marquis, reiterated
PeopleSoft's interest in acquiring the Company in an all-cash merger
transaction. Subsequent to that date, Mr. Griggs has had several conversations
with members of the Company's management regarding certain liabilities of the
Company.
On October 2, 1997, Mr. Marquis and McReynolds met with Mr. Griggs and
Deborah J. Oxendine, Director of Real Estate and Administrative Services for
PeopleSoft ("Ms. Oxendine"), in a meeting initiated by Mr. Griggs, to discuss
the terms of PeopleSoft's offer. During the meeting, Ms. Oxendine reiterated
PeopleSoft's interest in acquiring the Company and inquired as to what type of
offer would be necessary to merit the Advisory Board's consideration. Mr.
Marquis informed Ms. Oxendine and Mr. Griggs that any offer at this point would
have to be higher than the sum of RCBA's offer plus the $1.3 million termination
fee that
10
<PAGE> 17
the Company would be required to pay to RCBA in the event that the Advisory
Board approved an alternative offer.
On October 6, 1997, Mr. McReynolds telephoned Mr. Griggs. During the
conversation, Mr. Griggs informed Mr. McReynolds that PeopleSoft had entered
into an exclusive negotiations agreement with Alameda County and the City of
Dublin with the intent of purchasing property in the City of Dublin
(approximately four miles west of Triad Park). Mr. Griggs indicated that
PeopleSoft would not be continuing further discussions with the Company at this
time.
CONTACTS AND NEGOTIATIONS WITH RCBA. On August 8, 1997, in a letter from
Mr. Blum to Mr. Porter, a member of the Company's Advisory Board, RCBA advised
the Company that it was working on an offer to purchase all of the assets or
membership interests of the Company, and that it expected to submit a more
detailed offer to the Company within a week.
On August 11, 1997, RCBA, in a letter from Mr. Blum to Mr. Porter,
submitted a written proposal to the Company which indicated the material terms
and conditions upon which RCBA would be willing to proceed in an acquisition of
all of the assets or stock of the Company. In this letter, RCBA indicated it
would be willing to purchase all of the outstanding Shares at a price of $1.20
per Share, inclusive of the debt on the Property.
On August 12, 1997, the Company, in a letter from Mr. Porter to Mr. Blum,
informed RCBA that the proposed terms were inadequate but that the Company would
be interested in continuing discussions regarding a potential acquisition. In
the letter, Mr. Porter pointed out that any transaction would have to
contemplate RCBA assuming all of the Company's liabilities and, because of Mr.
Blum's prior association with the Company as a member of the Board of Directors
of Management Corp. (but not as a member of the Advisory Board), would have to
include a mechanism whereby the Company could consider other offers that may be
more favorable to the Company's shareholders.
In its Schedule 13D filed with the Commission on August 14, 1997 (the "RCBA
Schedule 13D"), RCBA confirmed the above contacts between RCBA and the Company
and indicated that it was considering a response to the Company's letter of
August 12, 1997.
On August 15, 1997, the Advisory Board held a telephonic board meeting at
which all Advisory Board members were present. The Advisory Board reviewed
RCBA's proposal of August 11, and generally discussed the manner in which the
Company should proceed in negotiating the proposed transaction.
Later that same day, RCBA, in a letter from Mr. Blum to Mr. Porter
delivered via facsimile, increased its offer price to $1.30 per Share. RCBA
indicated that its offer was contingent upon completion of customary due
diligence, including an engineering study of the Company's properties and
environmental review.
On August 18, 1997, the Advisory Board held a telephonic board meeting at
which all Advisory Board members were present to consider RCBA's latest offer.
Mr. Porter was instructed to further negotiate with RCBA in an attempt to obtain
a price above $1.30 per Share.
On August 18, 1997, Mr. Porter telephoned Mr. Blum to further negotiate the
price at which RCBA was willing to purchase the Shares. In the course of the
conversation, Mr. Blum agreed to a price of $1.32 per Share, the equivalent of a
net purchase price of $26,014,722 since RCBA agreed to assume all of the
Company's actual and contingent liabilities subject to negotiation of definitive
documentation and other standard conditions.
On August 25, 1997, Murray A. Indick, Managing Director and General Counsel
of RCBA ("Mr. Indick") delivered to McCutchen, Doyle, Brown & Enersen, LLP, the
Company's outside legal counsel ("McCutchen"), a draft merger agreement which
contemplated a transaction whereby the Acquisition LLC would acquire the
outstanding Shares for $1.32 per Share in cash.
On August 29, 1997, Mr. Indick, Robert Zerbst, Managing Director of
Westmark ("Mr. Zerbst"), Rick Mariano, an employee of RCBA ("Mr. Mariano"), Mr.
McReynolds, Mr. Marquis, Patrick J. Kernan, legal counsel to the Company ("Mr.
Kernan") and representatives of McCutchen met in McCutchen's offices in
11
<PAGE> 18
San Francisco, California to discuss the draft merger agreement. The parties
discussed the structure of the proposed transaction and certain provisions
contained in the draft merger agreement. Mr. Marquis disclosed that the Company
had received two other proposals regarding the Property and suggested that
perhaps a tender offer would be the best structure for the proposed transaction.
Mr. Indick indicated that RCBA was committed to proceeding with the transaction
under a cash-out merger format. The parties also discussed certain provisions of
the lease under which CCI/Triad leases the Headquarters from the Company. During
these discussions pertaining to the CCI/Triad lease, Mr. McReynolds and Mr.
Kernan, both of whom are employees of CCI/Triad, excused themselves from the
meeting. Mr. Indick also submitted comments to the draft merger agreement.
On September 5, 1997 Mr. Indick, Mr. Zerbst, Mr. Mariano, Mr. McReynolds,
Mr. Marquis, Mr. Kernan and representatives of McCutchen again met in
McCutchen's offices. Mr. Marquis disclosed that the Company was expecting to
receive additional offers for the Property. The parties then negotiated specific
provisions contained in the draft merger agreement, including those related to a
termination fee and payment of the Company's transaction expenses. At the end of
the meeting, the parties had agreed on all provisions in the draft merger
agreement.
On September 8, 1997, at a meeting of the Company's Advisory Board that
included all members in attendance (Messrs. Porter, Stevens, Marquis and Martin
W. Inderbitzen), and was also attended by Mr. Kernan, Mr. McReynolds and
representatives of McCutchen, the parties discussed recent events, including a
review of all proposals received by the Company to date. The Advisory Board
considered the validity of each offer and the reputations of each potential
acquiror, and also considered asking RCBA for a reduced termination fee in
exchange for approving the draft merger agreement.
The Advisory Board rejected Everest's offer because the offering price was
far less than that offered by RCBA. The Advisory Board rejected both offers from
TVOB because neither offer considered assuming all of the Company's contingent
liabilities and because neither offer called for the entire purchase price to be
paid up front at the time of the transaction's closing. In addition, the
Advisory Board members expressed concerns about the ability of TVOB to fund the
potential transaction. The Advisory Board also noted that TVOB had undertaken no
due diligence.
The Advisory Board rejected the offer from Lincoln because it was not in
definitive form and because it did not contemplate assumption of the Company's
current liabilities. In addition, the Lincoln offer was in the form of an asset
sale and therefore did not contemplate assumption of the Company's contingent
liabilities. As a result of not assuming any of the Company's liabilities, the
Advisory Board concluded that the value of the Lincoln offer was significantly
less than the proposal from RCBA.
The Advisory Board rejected the offer from Griggs Resource Group because it
was in preliminary form and was first submitted only minutes before the meeting.
Additionally, the Advisory Board concluded that this offer did not appear to
equal or exceed the value of the RCBA proposal since PeopleSoft would not be
assuming the existing mortgage or the Company's contingent liabilties.
Furthermore, any acquisition would be delayed for up to 60 days while PeopleSoft
conducted due diligence.
In rejecting these offers, the Advisory Board noted that any of the
offerors could submit a more competitive offer at any time.
The Advisory Board ultimately authorized Mr. Marquis and Mr. Edward S.
Merrill ("Mr. Merrill") of McCutchen to contact Mr. Indick and propose that RCBA
drop its request for an environmental due diligence contingency in exchange for
which the Advisory Board would approve the draft merger agreement. The members
of the Advisory Board concluded that a transaction in this form with RCBA
offered significantly more value than the proposals from the other potential
acquirors and consequently did not pursue negotiations with the other parties at
that time. Mr. Marquis and Mr. Merrill telephoned Mr. Indick and advised him of
the Advisory Board's proposal.
Later in the evening on September 8, 1997, Mr. Indick telephoned Mr.
Marquis and Mr. Merrill to inform them that RCBA had accepted the Advisory
Board's proposal. Representatives of McCutchen and
12
<PAGE> 19
Mr. Indick then negotiated the remainder of the minor terms of the definitive
Merger Agreement, and the Merger Agreement was executed on September 9, 1997.
CONTACTS AND NEGOTIATIONS SINCE EXECUTION OF THE MERGER AGREEMENT
On November 7, 1997, after the Company had entered into the Merger
Agreement, the Company received a preliminary proposal from The Kontrabecki
Group ("TKG") dated November 6, 1997 at a price of $28.5 million which, after
payment of the termination fee to RCBA, would result in a per Share price to the
shareholders of $1.38, or $0.06 per Share in excess of the price in the Merger
Agreement. Because this proposal could lead to a Superior Proposal which would
allow termination of the Merger Agreement, the Company entered into a
confidentiality agreement with TKG on November 25, 1997 and provided TKG
detailed due diligence information regarding the Company and its properties.
On December 16, 1997 the Company received a revised proposal letter from
TKG with substantially different conditions, a copy of which is attached as
Exhibit C to this Proxy Statement. This revised proposal was accompanied by a
draft definitive merger agreement under separate cover. On December 18, 1997,
the Company delivered a response letter to TKG, a copy of which is attached as
Exhibit D to this Proxy Statement. This revised proposal remained subject to a
condition precedent based upon further satisfactory due diligence and one based
upon the continued availability of financing which TKG orally claimed to be
available. The revised proposal contained an additional condition that the
proposal would cease to be effective if the termination fee in the Merger
Agreement were triggered.
On December 29, 1997 the Company received another letter from TKG dated
December 26, a copy of which is attached as Exhibit E to this Proxy Statement
and which stated it was intended to clarify the December 16, 1997 letter. The
December 26 letter expressed an expectation of the finalization of all due
diligence and financing arrangements prior to any meeting of the shareholders.
It also stated that if the Merger Agreement were terminated without incurring a
termination fee, the financing and due diligence conditions would be
automatically waived and TKG would be contractually bound, subject to an
affirmative vote of the shareholders, to acquire the Company by merger under the
terms of their offer. The TKG proposal continues the condition that it will
cease to be effective if a termination fee to RCBA is triggered. This condition
continues to prevent the TKG proposal from being a Superior Proposal which would
give rise to the right to terminate the Merger Agreement with RCBA. Therefore,
the Company remains contractually obligated to proceed with the special meeting
of the Company's shareholders to approve the Merger Agreement.
At this time, the Advisory Board and Management Corp. continue to recommend
that the Company's shareholders approve the Merger and Merger Agreement. If the
shareholders voted down the Merger and the Merger Agreement, but TKG did not
have financing arranged, the Advisory Board is concerned that TKG may not be
able to close and may not be able to fully respond in damages if sued by the
Company. If the Advisory Board were to recommend that the shareholders vote
against the Merger or if the Advisory Board were to change its recommendation in
a manner adverse to RCBA, RCBA would be able to terminate the Merger Agreement
under a provision which triggers the termination fee, which in turn would
violate one of the conditions in the TKG proposal and TKG would be released from
any obligation to acquire the Company under the terms of its offer.
In addition to the contact with the TKG, the Company received a request for
information from Manchester Securities Corp. ("Manchester") on November 28,
1997. The Company has provided a form of confidentiality agreement to
Manchester, but has not yet received an executed version from Manchester.
Manchester holds 9.7% of the Company's outstanding Shares.
PURPOSE AND STRUCTURE OF THE MERGER
The primary benefit of the Merger to the Company's shareholders is the
opportunity to sell all of their Shares at a price which represents a
substantial premium over trading prices in effect immediately prior to the
filing of the RCBA Schedule 13D, which disclosed RCBA's interest in acquiring
the Company. The structure of the transaction as a cash merger provides a cash
payment at a premium price to all holders of outstanding Shares and ensures the
acquisition by the Acquisition LLC of all the outstanding Shares of the Company.
13
<PAGE> 20
The primary reason for the Company entering into the Merger Agreement is
the Advisory Board's belief that the Merger is the most effective means of
achieving the purpose of liquidating the shareholders' investment in a
reasonable time at a reasonable price. The Advisory Board also believes that
since RCBA is willing to assume the contingent liabilities of the Company, the
Merger is the most advantageous transaction for the Company's shareholders, as
opposed to an asset sale. The Company is obligated to indemnify CCI/Triad for
certain taxes arising from, among other things, any transfer of the Property to
the Company (see "THE COMPANY -- Properties of the Company"). Due to this
indemnification obligation, the Company ordinarily would not be able to make
final distributions to shareholders until after CCI/Triad's audit was complete,
a process that could last up to three years, not including extensions. Instead,
RCBA is prepared
14
<PAGE> 21
to assume all liabilities, contingent or otherwise, of the Company in
conjunction with the Merger. As a result, the Company's shareholders will
receive their proceeds shortly after the consummation of the Merger without any
requirement to hold back contingency reserves.
In addition, the Company is currently obligated to undertake approximately
an additional $7,000,000 in improvements on the Property. The City of Livermore
has indicated that it is willing to reimburse the Company for improvements
undertaken and paid for by the Company by means of bond financings.
Historically, the City of Livermore has fulfilled such reimbursement commitments
to Triad. However, if the City of Livermore is unsuccessful in completing a bond
offering, the Company would not receive any reimbursement for such improvements.
Further, there is a significant chance the cost of the improvements undertaken
by the Company will exceed the amount of the bond financings and the Company
would be responsible for paying any such cost overruns. Again, RCBA is prepared
to assume this potential liability of the Company in conjunction with the
Merger, so the Company's shareholders will receive their full proceeds shortly
after the consummation of the Merger.
The Advisory Board also believes it significant that by entering into the
Merger at this time the Company avoids ongoing operating expenses such as taxes
(which are currently in excess of $1 million annually) and the costs of ongoing
reporting requirements, including those related to securities filings made with
the Commission.
The Advisory Board believes that the Merger is the best available
opportunity to maximize shareholder value at the present time. The $1.32 per
share price to be received by the shareholders represents a premium of
approximately 54% over the reported average closing price of the Shares for all
trades reported during the period prior to the filing of the RCBA Schedule 13D.
RCBA's purpose and reasons for engaging in the transaction contemplated by
the Merger Agreement is to obtain ownership of the Company, thereby becoming
entitled to the benefits of ownership including management and investment
discretion with regard to the future of the real estate assets of the Company.
This includes execution of a business plan that combines strategic undeveloped
lots dispositions and developments of other lots for the Company's own account
or for third parties, depending on market conditions. RCBA will receive the
benefits, if any, of its decisions and will also bear the risk of loss.
RECOMMENDATION OF THE COMPANY'S ADVISORY BOARD
On September 8, 1997, the Company's Advisory Board, by unanimous vote, at a
special board meeting held on that date, determined that the transactions
contemplated by the Merger are fair from a financial point of view to and in the
best interests of the shareholders of the Company other than (i) affiliates of
the Company and (ii) RCBA and its affiliates (the "Unaffiliated Shareholders"),
approved the Merger Agreement and resolved to recommend that the Company's
shareholders approve the Merger Agreement.
In determining to approve and adopt the Merger Agreement, and in
determining the fairness of the terms of the Merger to the Unaffiliated
Shareholders, the Advisory Board considered the following factors, each of
which, in the view of the Advisory Board, supported the determination to
recommend the Merger:
(i) because the Company's limited purpose is to sell a finite amount
of real estate over a limited period of time, the going concern value of
the Company is difficult to assess. The Company's main objective is to
liquidate its investment in the Property and it will not remain a viable
entity if forced to rely on its sole source of income, the lease with
CCI/Triad. To assess its value in this limited operations mode, the Company
consulted a real estate advisor regarding a rapid, but realistic, sales
program for the Property. The sales program was projected to produce total
revenues of approximately $31 million over a four year period. The net
present value of these amounts using a 15% discount rate was $25.6 million,
or $1.30 per Share. Further, if the Property were sold for these amounts
under the disposition plan, the Company would retain material contingent
liabilities. Therefore the results from operations in a manner consistent
with the Company purpose would result in shareholder value less than the
$1.32 per Share offered by RCBA;
14
<PAGE> 22
(ii) the net book value of the Company (based upon the financial
statements contained in its Form 10-QSB for the quarter ended September 30,
1997), which on a per Share basis is calculated at $1.22 per Share, less
than the $1.32 per Share being offered by RCBA;
(iii) the liquidation value of the Company (based upon the appraisal
report prepared by Carneghi-Bautovich & Partners, Inc., dated November 18,
1996, as amended on February 18, 1997), which on a per Share basis is
calculated at $0.72 per Share, less than the $1.32 per Share being offered
by RCBA;
(iv) the fact that, as discussed below in "-- Redemption of Shares,"
when the Company redeemed Shares from Mr. Porter and Mr. Stevens, the
redemption price was $0.72 per Share, and that the $1.32 per Share being
offered by RCBA constitutes a significant premium over the redemption
price;
(v) the historical market prices of the Company's Shares, particularly
the fact that the Merger will enable the shareholders of the Company to
realize a significant premium over the prices at which the Shares traded
prior to the filing of the RCBA Schedule 13D;
(vi) the conclusion contained in the Sedway Report that following a
three-and-one-half year disposition strategy could result in proceeds with
a net present value of $25.6 million and the fact that the Merger would
result in proceeds of over $26 million (inclusive of Shares beneficially
held by RCBA);
(vii) the terms and conditions of the Merger Agreement, including the
provision negotiated by the Company which allowed the Company to consider
and respond to unsolicited offers after the date of the Merger Agreement;
the fact that the Company may terminate the Merger Agreement in certain
circumstances; the circumstances under which the termination fee is
payable; and the relatively few substantive closing conditions;
(viii) the fact that, as discussed above in "-- Purpose and Structure
of the Merger," RCBA is willing to assume all contingent liabilities of the
Company, including those related to tax matters and construction of
improvements on the Property and those relating to the potential obligation
to indemnify CCI/Triad against any claims relating to environmental costs
and liabilities associated with the Land or the Headquarters prior to the
Contribution (as discussed above in "THE COMPANY -- Properties of the
Company");
(ix) RCBA's positive reputation in the financial industry for its
ability to fund and close transactions in which it has been involved; and
(x) the fact that the offer from RCBA, when considered on a net basis,
was higher than the firm offers received from the other potential acquirors
and that none of the other firm offers considered the assumption of the
Company's liabilities, contingent or otherwise.
When undertaking the above analysis, the Advisory Board did not consider
the current market prices of the Shares because (i) there is no organized
trading market for the Shares and there have been few reported trades of the
Shares since the Company's Form 10-SB Information Statement was declared
effective in June 1997 and (ii) since the RCBA Schedule 13D (which disclosed
RCBA's interest in acquiring the Company) was filed nearly a month before the
Merger was announced, the current market prices for the Shares have been nearly
as high as the $1.32 per share being offered by RCBA.
In considering the fairness of the Merger to Unaffiliated Shareholders, the
Advisory Board gave primary consideration to factors (i) through (viii) above.
It also gave consideration to factors (ix) and (x) in determining whether to
approve the Merger. The Company's Advisory Board did not find it practicable to,
and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its conclusions.
Management Corp., with the advice and consent of the Advisory Board,
determined that the transactions contemplated by the Merger are fair from a
financial point of view to and in the best interests of all shareholders
including the Unaffiliated Shareholders and recommends that the Company
shareholders approve the Merger Agreement. In determining to approve and adopt
the Merger Agreement, and in
15
<PAGE> 23
determining the fairness of the terms of the Merger to the Unaffiliated
Shareholders, Management Corp. adopted the analysis undertaken by the Advisory
Board in the preceding paragraphs.
The Advisory Board and Management Corp. also believe that the Merger is
procedurally fair to the Unaffiliated Shareholders. Although the proposed
transaction is not expressly conditioned upon approval by a majority vote of the
Unaffiliated Shareholders it is conditioned upon the vote of the shareholders,
approximately 90% of whom are not affiliated with Mr. Blum, RCBA, the
Acquisition LLC, CBC or Westmark. The Advisory Board and Management Corp.
believe it is procedurally fair to the Unaffiliated Shareholders because the
Company's Advisory Board unanimously recommended the transaction. The entire
Advisory Board believes itself to be independent from Mr. Blum, RCBA, the
Acquisition LLC, CBC and Westmark. Mr. Stevens and Mr. Porter's only
relationship with Mr. Blum is having served on the Triad Board of Directors with
Mr. Blum and a short period in which he was a shareholder and board member of
Management Corp. Mr. Marquis' only relationship with Mr. Blum was as an officer
of Triad and of Management Corp. Martin W. Inderbitzen has no relationship with
Mr. Blum. The Merger Agreement was structured to allow the Advisory Board to
consider other proposals and to cancel the transaction with RCBA and the
Acquisition LLC upon payment of a 5% fee in the event a more favorable proposal
were to be received.
The executive officers of the Company have made no recommendation with
respect to the Merger.
The Company has not received an opinion from an independent financial
advisor regarding the fairness of the consideration to be received by the
Unaffiliated Shareholders in the Merger. It has compared the financial results
of the Merger with those projected as feasible from the continued operation of
the Company by an independent real estate and urban economics advisor (see
"Sedway Report" below).
If the Merger is not approved by the Company's shareholders and the Merger
does not occur, the Company will continue its current operations as an
independent company. However, for the reasons discussed above, it is possible
that the Company would seek a business combination with another company.
SEDWAY REPORT
Shortly after its formation, the Company began considering various methods
in order to effectuate an orderly disposition of the Property. Accordingly, on
May 22, 1997, the Company's Advisory Board authorized Martin W. Inderbitzen, a
member of the Advisory Board, and Mr. McReynolds to engage Sedway Group or a
comparable firm for the purpose of preparing a report exploring various
disposition strategies. On July 22, 1997, Sedway Group delivered its written
report to the Company's Advisory Board (the "Sedway Report").
The Sedway Report does not relate to the Merger Consideration or the
fairness of the Merger Consideration, or the fairness of the Merger to the
Company, RCBA or shareholders who are not affiliates. However, the Sedway Report
does relate to the value of the Company's real estate assets in a liquidation
situation, and as such, was given strong consideration by the Company's Advisory
Board during its decision making process. A copy of the Sedway Report, which
sets forth the assumptions made and matters considered in, and limits on the
review undertaken, is available for inspection and copying at the principal
executive offices of the Company during regular business hours by any interested
shareholder or such shareholder's representative who has been so designated in
writing.
In preparing its report, Sedway Group met with Company management and
reviewed the current status of Triad Park, inspected Triad Park and its
environs, read various documents related to Triad Park, including the listing
agreement with Grubb & Ellis and the lease pertaining to the Triad Park building
complex, held telephone interviews with members of the Company's Advisory Board,
held telephone discussions with brokers, developers, and land owners active in
the Livermore area and reviewed market information provided by Grubb & Ellis.
Sedway Group was asked to provide a strategy to maximize the value of the
Company's real estate assets.
The Sedway Report contains a history of Triad Park and a summary of the
current situation at Triad Park. The Sedway Report also contains a market
overview, including current market conditions for retail, office and R&D
properties. The Sedway Report recommends an "aggressive but orderly real estate
disposition program" including certain improvements to the Triad Park area and a
multi-faceted marketing program.
16
<PAGE> 24
According to the Sedway Report, the proposed strategy should "result in proceeds
with a net present value of $25.6 million." The Sedway Report also includes a
presentation of the financial analysis of the disposition strategy and
assumptions and limiting conditions.
GENERAL. Although the Company believes all material analyses performed by
and conclusions of Sedway Group are disclosed in the summary set forth above,
the summary does not purport to be a complete description of the analyses
performed by Sedway Group. The preparation of a report similar to the Sedway
Report involves various determinations and assumptions and therefore is not
readily susceptible to summary description. Accordingly, Sedway Group believes
that its report must be considered as a whole and that selected portions of its
report and the factors considered by it, without considering all analyses and
factors, could create an incomplete view of the evaluation process underlying
its report. In preparing its report, Sedway Report made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of the Company.
Sedway Group is a nationally recognized full-service real estate and urban
economics consulting firm engaged, among other things, in market research and
analysis, real estate strategy and asset management (including acquisition and
disposition strategies), financial analysis and valuation services. Sedway Group
has substantial experience in major land uses (residential, retail, office,
industrial, hotel and mixed use) and in specialized areas such as entertainment
retail, public/private transactions and economic revitalization.
It was the opinion of the Advisory Board that Sedway Group was very
familiar and experienced with economic analysis in the Tri-Valley region of
Northern California. At the time that the Advisory Board was seeking a firm to
undertake the analysis, Sedway Group was conducting similar analyses in the City
of Livermore and in the Tri-Valley area. Members of the Advisory Board were also
personally familiar with Sedway Group, and all agreed that Sedway Group had a
positive business reputation in the community. All of these factors were
considered by the Advisory Board when it chose Sedway Group to prepare the
economic report.
The Company has paid Sedway Group approximately $15,000 for preparing the
Sedway Report. No portion of the fee payable to Sedway Group is contingent upon
consummation of the Merger or similar type of transaction.
PERSPECTIVE OF MR. BLUM, RCBA, THE ACQUISITION LLC, CBC AND WESTMARK ON THE
MERGER
Although RCBA and the Acquisition LLC may be considered "affiliates" of the
Company under Rule 13e-3(a)(1) of the Securities Exchange Act of 1934, the
Company and RCBA believe that the determination of the Merger Consideration
resulted from extensive arm's-length negotiation between the Company and RCBA
and their respective representatives. See "-- Background of the Merger." The
Company sought offers from a number of potential buyers, and made public Company
information available to all parties. The Company had negotiations with four
other potential buyers and in the end the RCBA offer was considered superior to
all others. The four other potential buyers, along with any new party, are free
at any time to submit an offer that is superior to the RCBA offer.
At the conclusion of the negotiation process, RCBA offered to acquire the
Company for a price of $1.32 per Share. In determining such price, RCBA analyzed
the real estate market in Northern California generally, and the development of
the Company owned sites in particular, taking into account current market
conditions.
Mr. Blum, RCBA, the Acquisition LLC, CBC and Westmark have considered the
analysis of and the factors examined by the Advisory Board (described above in
"SPECIAL FACTORS -- Recommendation of the Company's Advisory Board") and believe
that these analyses and factors, in particular factors (i) through (viii) of
that section, provide a reasonable basis for them to believe, as they do, that
the Merger is fair to the Unaffiliated Shareholders and they hereby adopt the
Advisory Board's analysis as to fairness. This belief should not, however, be
construed as a recommendation by them to the Company's shareholders to approve
the Merger Agreement.
17
<PAGE> 25
PLANS FOR THE COMPANY AFTER THE MERGER
Effective upon consummation of the Merger, the manager of the Acquisition
LLC will be the initial manager of the Surviving Company. The Surviving Company
will not have an Advisory Board.
Following the Merger, RCBA and its affiliates may cause the Company to sell
some, but in any event no more than fifty percent, of the assets of the Company
to an unaffiliated third party (such as a real estate development company).
Except as otherwise indicated in this Proxy Statement, neither Mr. Blum, RCBA,
the Acquisition LLC, CBC or Westmark has any other present plans or proposals
which relate to or would result in an extraordinary corporate transaction, such
as a merger, reorganization or liquidation, involving the Company or any of its
subsidiaries or any material change in the Company's capitalization or any other
material changes in the Company's corporate structure or business or the
composition of the Company's management.
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, the entire equity interest of the Company will
be owned by RCBA, and the current shareholders will have no continuing interest
in the Company. Therefore, following the Merger, the shareholders of the Company
other than RCBA will no longer benefit from any increases in the value of the
Company and will no longer bear the risk of any decreases in the value of the
Company. Following the Merger, RCBA and its affiliates will own 100% of the
Company and will have complete control over the management and conduct of the
Company's business, all income generated by the Company and any future increase
in the Company's value. Similarly, RCBA will also bear the risk of any losses
incurred in the operation of the Company and any decrease in the value of the
Company.
The Shares are currently registered as a class of securities under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
not listed on a national securities exchange or quoted on the Nasdaq National
Market and there are fewer than 300 record holders of the Shares. Termination of
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its shareholders and to
the Commission and would make certain provisions of the Exchange Act, such as
the short-swing trading provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with shareholders' meetings pursuant
to Section 14(a), and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions, no longer applicable to the Company. It
is the present intention of RCBA to cause the Company to make an application for
the termination of the registration of the Shares under the Exchange Act as soon
as practicable after the Effective Time of the Merger.
RELATIONSHIP BETWEEN THE COMPANY AND RCBA
NO INTERCOMPANY BUSINESS RELATIONSHIP. Not including the Merger Agreement,
the transactions contemplated thereby, or as otherwise disclosed in this Proxy
Statement, there have been no business relationships between the Company and
either RCBA, Mr. Blum, the Acquisition LLC, CBC or Westmark.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Advisory Board of the Company with
respect to the Merger Agreement and the transactions contemplated thereby,
shareholders should be aware that certain members of the Advisory Board and
management of the Company have certain interests in the Merger in addition to
the interests of shareholders of the Company generally. In connection with the
Advisory Board's determination that the Merger is fair to the Company's
shareholders (excluding RCBA and its affiliates), the Advisory Board carefully
considered conflict of interest issues relating to the matters described below.
INDEPENDENT CONTRACTOR SERVICES AGREEMENT. Larry D. McReynolds, President
of the Company, has an Independent Contractor Services Agreement with the
Company, under which he is currently paid an annual base salary of approximately
$108,000, of which the Company is responsible for 50%. Mr. McReynold's
independent contractor agreement provides for bonus compensation in the event of
certain "changes in
18
<PAGE> 26
control" of the Company, including a merger involving the Company. Upon
consummation of the Merger, Mr. McReynolds is entitled to receive a bonus of
less than 1% of the net value paid to the Company's shareholders, which is
estimated to be approximately $200,000.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Merger Agreement provides
that, for a period of not less than six years following the Effective Time, the
Surviving Company will maintain in effect all rights of indemnification of the
officers, directors or employees of the Company provided in its limited
liability company agreement or bylaws. RCBA has also agreed to allow the
Company, with the Acquisition LLC's prior consent (such consent is not required
if the cost does not exceed $110,000), to purchase additional policies of
directors' and officers' liability insurance of at least the same coverage as
currently maintained by the Company, such policies to be pre-paid and in effect
for a period of six years from the Effective Time.
SOURCES AND USES OF FUNDS
MERGER CONSIDERATION, FEES AND EXPENSES. RCBA estimates that the total
consideration payable to shareholders other than RCBA and its affiliates upon
consummation of the Merger will be approximately $23,359,000. The estimated fees
and expenses incurred or to be incurred by RCBA in connection with the Merger
are legal fees and expenses of $75,000 and miscellaneous fees of $25,000. RCBA
expects to use working capital funds to make such payments and pay such fees and
expenses.
The estimated fees and expenses incurred or to be incurred by the Company
in connection with the Merger, which will be paid by RCBA or the Acquisition
LLC, are approximately as follows.
<TABLE>
<S> <C>
Legal fees and expenses................................... $ 100,000
Printing and mailing fees................................. 10,000
Commission filing fee..................................... 4,672
Disbursing Agent fees..................................... 7,000
Miscellaneous fees........................................ 5,000
Total Fees and Expenses................................... $ 126,672
</TABLE>
Certain of the Company's officers will receive certain payments if the
Merger is consummated. See "-- Interest of Certain Persons in the Merger."
SOLICITATION FEES AND EXPENSES. Neither RCBA nor the Company will pay any
fees or commissions to any broker or dealer or any other person for soliciting
Company shareholders with respect to the Merger. Brokers, dealers, commercial
banks and trust companies will, upon request, be reimbursed by RCBA or the
Acquisition LLC for reasonable and necessary costs and expenses incurred by them
in forwarding materials to their customers.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Under currently existing provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), the Treasury Regulations promulgated thereunder,
applicable judicial decisions and administrative rulings, all of which are
subject to change, the federal income tax consequences described below are
expected to arise in connection with the Merger. Due to the complexity of the
Code, the following discussion is limited to the material federal income tax
aspects of the Merger for a Company shareholder who is a citizen or resident of
the United States. The general tax principles discussed below are subject to
retroactive changes that may result from subsequent amendments to the Code. The
following discussion does not address potential foreign, state, local and other
tax consequences, nor does it address taxpayers subject to special treatment
under the federal income tax laws, such as insurance companies, tax-exempt
organizations, regulated investment companies, S corporations and taxpayers
subject to the alternative minimum tax. Neither the Company nor RCBA has
requested either the Internal Revenue Service or counsel to rule or issue an
opinion on the federal income tax consequences of the Merger. ALL SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, FOREIGN,
STATE AND LOCAL TAX CONSEQUENCES OF THE DISPOSITION OF THEIR SHARES IN THE
MERGER.
19
<PAGE> 27
Merger as Sale of Shares
Although the transaction will be cast in the form of the merger of the
Company with Acquisition LLC, for federal income tax purposes it is anticipated
that the Merger will be treated as a taxable sale of Shares by each holder of
Shares. Accordingly, each holder of Shares will recognize gain or loss by reason
of the consummation of the Merger.
Measure of Gain or Loss
A shareholder's gain or loss in the Merger will be equal to the difference
between the consideration received in the Merger and the shareholder's adjusted
basis in the shareholder's Shares. The consideration received will be equal to
the sum of the cash received plus the shareholder's allocable share of the
Company's liabilities.
A shareholder's initial basis in the Shares will be the cost of the Shares
plus the shareholder's allocable share of the Company's liabilities. For shares
received in the distribution from Triad, the shareholder's "cost" of the Shares
will be the fair market value of the Shares at the time of the distribution. The
basis of the Shares will be increased by the shareholder's share of Company
income and by any increases in the shareholder's share of Company liabilities.
The basis will be reduced (but not below zero) by distributions from the
Company, by the shareholder's share of Company losses, by decreases in the
shareholder's share of Company liabilities and by the shareholder's share of
expenditures of the Company that are neither deductible in computing taxable
income nor required to be capitalized.
It will not be possible to determine the precise amount of gain or loss on
the sale of the Shares until after the Effective Time, because the calculation
of gain or loss requires a determination of the Company's liabilities as of the
Effective Time and the shareholder's share of the Company's income, gain, loss
and deduction for the taxable year in which the Merger occurs. Following the
Effective Time, the Company's books will be closed and the shareholders will
receive the information they require to determine the adjusted basis of their
Shares and the consideration received in the Merger.
Character of Gain or Loss
The Shares represent interests in the Company, which is taxed as a
partnership for federal income tax purposes. Generally, gain or loss on the sale
of a partnership interest is capital gain or loss under Section 741 of the Code.
An exception to this general rule is provided in Section 751 of the Code, which
treats as ordinary income or ordinary loss any gain or loss on unrealized
receivables or inventory items (including real property held for sale to
customers).
A substantial portion of the Property is land held by the Company for sale
to customers and any gain or loss attributable to such land will be ordinary
income or loss to the shareholders in the Merger. Although the precise amount
cannot be calculated until after the Effective Time, it is estimated that each
shareholder who received Shares from Triad in the distribution will recognize
approximately $0.7156 ordinary gain per Share in the Merger. The balance of
gain, if any, will be capital gain.
If a shareholder who is an individual (and any individual who is a partner
in a partnership that is a shareholder) has held the Shares for more than 12
months but less than 18 months as of the Effective Time, any capital gain will
be long term capital gain and will be subject to federal tax at not more than a
28% tax rate. If the Shares have been held for more than 18 months as of the
Effective Time, any capital gain will be subject to federal tax at not more than
a 20% tax rate. However, it is not anticipated that any of the Shares will have
been held for 18 months as of the Effective Time and it is possible that none of
the Shares will have been held for more than 12 months at the Effective Time.
Any capital gain on Shares held for 12 months or less will be short term capital
gain and will be subject to tax at the rates applicable to ordinary income.
Company Income or Loss Prior to the Merger
Each shareholder will receive an allocation of the shareholder's share of
the Company's income or loss for the periods prior to the Merger. Shareholders
should review the discussion in the Company's Information
20
<PAGE> 28
Statement mailed to shareholders on or about August 21, 1997 under "Tax
Considerations" for a summary of the federal income tax consequences of the
Company's operations. If the Company has taxable income during the periods prior
to the Merger, it is not anticipated that the Company will make any
distributions to shareholders and shareholders may be required to pay federal
income taxes on Company income.
Reporting and Withholding
Cash payments made pursuant to the Merger will be reported to the extent
required by the Code to shareholders of the Company and the Internal Revenue
Service. The payments will ordinarily not be subject to withholding of federal
income tax. However, backup withholding of such tax at a rate of 31% may apply
to certain shareholders by reason of the events specified in Section 3406 of the
Code and related Treasury Regulations, which include failure of a shareholder to
supply the Company or its agent with the shareholder's taxpayer identification
number. Accordingly, each Company shareholder will be asked to provide the
shareholder's correct taxpayer identification number on a Substitute Form W-9
which is to be included in the letter of transmittal to be sent to shareholders
relating to their Shares. Withholding may also apply to Company shareholders who
are otherwise exempt from such withholding, such as a foreign person, if that
person fails to properly document its status as an exempt recipient.
REDEMPTIONS OF SHARES
In August, 1997, as part of the consummation of a transaction completed as
a part of the formation of the Company, the Management Corp. paid its promissory
note due the Company in full, Messrs. Porter and Stevens paid their respective
promissory notes due the Management Corp. in full, and the Company redeemed
99,536 Shares from each of Mr. Porter and Mr. Stevens at a price of $0.72 per
Share. The net effect of the transaction was to reduce the outstanding Shares of
the Company to 19,708,123, the same as the number of Triad Systems Corporation
shares which existed immediately prior to formation of the Company and to reduce
the number of Shares beneficially owned by Mr. Stevens and Mr. Porter to the
same number of Shares they owned in Triad Systems Corporation immediately prior
to formation of the Company.
REGULATORY APPROVALS
Although no particular regulatory approval is required in connection with
the proposed Merger, state Attorneys General and private parties may bring legal
actions under the federal or state antitrust laws under certain circumstances.
There can be no assurance that a challenge to the proposed Merger on antitrust
grounds will not be made or of the result if such a challenge is made.
21
<PAGE> 29
THE MERGER AGREEMENT
The information in this summary is qualified in its entirety by reference
to the full text of the Merger Agreement, a copy of which is attached as Exhibit
A to this Proxy Statement.
GENERAL
The Company, the Acquisition LLC and RCBA entered into the Merger Agreement
effective September 9, 1997. If the shareholders of the Company approve the
Merger Agreement, the Acquisition LLC will be merged with and into the Company,
with the result that the separate corporate existence of the Acquisition LLC
will then cease. The Company will be the Surviving Company and will be an
affiliate of RCBA. All of the Company's liabilities, including contingent,
environmental, tax and any other liabilities, will become liabilities of the
Surviving Company by operation of law. There are no contractual arrangements
which would cause the shareholders to have post-closing exposure to these
liabilities. At the Effective Time, the Shares will be converted automatically
into the right to receive cash, as described below. See "-- Consideration to be
Received by Shareholders." The Shares will no longer be listed or traded in any
public market, and the registration of the Shares under the Exchange Act will be
terminated.
EFFECTIVE TIME
If the Merger Agreement is adopted by the majority vote of the Company's
shareholders, the Merger will be consummated and become effective upon the
acceptance for record of the Certificate of Merger by the Delaware Secretary of
State on a date as soon as practicable after conditions to the Merger are
satisfied (or waived to the extent permitted), or such other date agreed on by
the parties. It is currently contemplated that the Effective Time will occur on
or about January 31, 1998. There can be no assurance that all conditions to the
Merger will be satisfied. See "-- Conditions to Consummation of the Merger."
CONSIDERATION TO BE RECEIVED BY SHAREHOLDERS
In connection with the Merger, each Share outstanding immediately prior to
the Effective Time will be converted into the right to receive $1.32 in cash,
without interest (the cash consideration per share to be paid to the Company's
shareholders in the Merger being sometimes referred to herein as the "Merger
Consideration")."
PAYMENT FOR SHARES
Payment for Shares. First Trust of California, National Association (the
"Disbursing Agent") will act as the paying agent for payment of the Merger
Consideration to the holders of the Shares. Instructions with regard to the
surrender of certificates formerly representing Shares, together with the letter
of transmittal to be used for that purpose, will be mailed to shareholders as
soon as practicable after the Effective Time. As soon as practicable following
receipt from the shareholder of a duly executed letter of transmittal, together
with certificates formerly representing Shares and any other items specified by
the letter of transmittal, the Disbursing Agent will pay the Merger
Consideration to the shareholder, by check or draft.
After the Effective Time, the holder of a certificate formerly representing
Shares will cease to have any rights as a shareholder of the Company, and the
holder's sole right will be to receive the Merger Consideration with respect to
the Shares. If payment is to be made to a person other than the person in whose
name the surrendered certificate is registered, it will be a condition of
payment that the certificates so surrendered be properly endorsed or otherwise
in proper form for transfer and that the person requesting the payment shall pay
any transfer or other taxes required by reason of the payment or establish to
the satisfaction of the Surviving Company that the taxes have been paid or are
not applicable. No transfer of Shares outstanding immediately prior to the
Effective Time will be made on the stock transfer books of the Surviving Company
after the Effective Time.
To the extent permitted by law, the appointment of the Disbursing Agent may
be terminated at any time by RCBA upon notice to the Disbursing Agent, or by the
Disbursing Agent upon 30 days notice to RCBA.
22
<PAGE> 30
Any portion of the Merger Consideration remaining undistributed one year after
the Effective Time will be returned to the Surviving Company, and any holders of
unsurrendered Share certificates may surrender them to the Surviving Company and
(subject to abandoned property, escheat or similar laws) receive the Merger
Consideration to which they are entitled.
SHAREHOLDERS OF THE COMPANY SHOULD NOT FORWARD THEIR SHARE CERTIFICATES TO
THE DISBURSING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND SHOULD NOT RETURN
THEIR SHARE CERTIFICATES WITH THE ENCLOSED PROXY.
No Interest on Payment Amounts. In no event will holders of Shares be
entitled to receive payment of any interest on the Merger Consideration.
OPERATIONS OF THE COMPANY PRIOR TO THE MERGER
The Company has agreed that, prior to the Effective Time, the business of
the Company will be conducted in accordance with certain restrictions set forth
in the Merger Agreement. Among other things, the Company has agreed that, except
as the Company and the Acquisition LLC may otherwise agree, the Company will
operate only in the ordinary course of business, and the Company will not do any
of the following: (a) take any action which would or could reasonably be
expected to jeopardize any of its material contracts or its good standing with
any applicable governmental agency with jurisdiction over the Company, or (b)
declare, set aside or pay any dividend or other distribution in respect of its
membership interests, whether in securities, cash, or other property, redeem,
repurchase or otherwise acquire any of its outstanding Shares, or issue any
membership interests or any right to acquire or convert into membership
interests.
In addition, the Company has agreed that until the earlier of the
termination of the Merger Agreement or the Effective Time, neither the Company
nor any of its employees or representatives will take any action to solicit,
initiate or encourage the submission of any Acquisition Proposal (as defined
below) or enter into any agreement for or relating to any Acquisition Proposal
(an "Acquisition Agreement"). Notwithstanding the foregoing, at any time prior
to obtaining the approval of the Company shareholders to the Merger, the Company
may, in response to an unsolicited written request for information made by a
third party to the Company, provide information to or have discussions or
negotiations with the third party if the Advisory Board of the Company, after
having considered the advice of outside counsel, has determined in good faith
that it is the fiduciary duty under applicable law of such Advisory Board
members to do so.
An Acquisition Proposal is defined in the Merger Agreement as a proposal
for any (i) merger, consolidation or similar transaction involving the Company,
(ii) sale, lease or other disposition directly or indirectly by merger,
consolidation, share exchange or otherwise of either (a) assets of the Company
representing 75% or more of the consolidated assets of the Company in one
transaction, or (b) all or substantially all of the undeveloped Property on one
transaction (but not including solicitation of sales of individual parcels of
the undeveloped Property), (iii) issuance, or other acquisition or disposition
of (including by way of merger, consolidation, share exchange or any similar
transaction) securities (or options, rights or warrants to purchase, or
securities convertible into, such securities) representing 20% or more of the
voting power of the Company, or (iv) transaction in which any person or group of
persons would acquire beneficial ownership or the right to acquire beneficial
ownership, or any group shall have been formed which beneficially owns or would
own or would have the right to acquire beneficial ownership of 20% or more of
the outstanding Shares, other than transactions contemplated by the Merger
Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger will occur only if the Merger Agreement is approved and adopted
by majority vote of the holders of the Shares. Consummation of the Merger also
is subject to the satisfaction of the following conditions specified in the
Merger Agreement, unless the conditions are waived (to the extent waiver is
permitted by law). The failure of any of these conditions to be satisfied, if
not waived, would prevent consummation of the Merger.
23
<PAGE> 31
The obligations of the Acquisition LLC to consummate the Merger are subject
to satisfaction of the following conditions: (i) the Merger shall have been
approved by a majority vote of the shareholders of the Company, (ii) no
temporary restraining order, preliminary or permanent injunction or other order
of any court or other judicial or administrative body of competent jurisdiction
(each, an "Injunction") which prohibits or prevents the consummation of the
Merger shall have been issued and remain in effect, (iii) the Company shall have
performed in all material respects its agreements contained in the Merger
Agreement required to be performed on or prior to the Effective Time, (iv) each
of the representations and warranties of the Company contained in the Merger
Agreement shall be true in all material respects when made on and as of the
Effective Time, and (v) the Company shall have obtained all consents, appeals,
releases or authorizations from, and shall have made all filings and
registrations to or with, any person necessary to be obtained or made in order
to consummate the transactions contemplated by the Merger Agreement.
The obligations of Company to consummate the Merger are subject to
satisfaction of the following conditions: (i) the Merger shall have been
approved by a majority vote of the shareholders of the Company, (ii) no
Injunction which prohibits or prevents the consummation of the Merger shall have
been issued and remain in effect, (iii) the Acquisition LLC shall have performed
in all material respects its agreements contained in the Merger Agreement
required to be performed on or prior to the Effective Time, (iv) each of the
representations and warranties of the Acquisition LLC contained in the Merger
Agreement shall be true in all material respects when made on and as of the
Effective Time, and (v) the Merger Consideration shall have been deposited with
the Disbursing Agent with irrevocable instructions to exchange the Shares for
the Merger Consideration in accordance with the terms of the Merger Agreement
immediately upon notification by the Company and the Acquisition LLC of the
Effective Time.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the filing of Certificate of Merger with the Delaware Secretary of
State whether before or after action by the Company's shareholders and without
further approval by the Company's shareholders under any of the following
circumstances: (i) by mutual consent of the Board of Directors of the
Acquisition and the Company's Advisory Board; (ii) by either the Acquisition LLC
or the Company, if the Merger shall have not been consummated on or before
January 31, 1998; provided that this particular right to terminate shall not be
available to any party whose failure to perform in any material respect any
covenant under the Merger Agreement has been the cause of or resulted in whole
or in part in the failure of the Merger to be consummated before January 31,
1998; (iii) by either the Acquisition LLC or the Company, if there shall be any
Injunction or other order by any court which is final and nonappealable
preventing the consummation of the Merger; (iv) by either the Acquisition LLC or
the Company if the Company shareholders do not approve the Merger Agreement and
the transactions contemplated thereby; or (v) by the Acquisition LLC if the
Merger Agreement and the transactions contemplated thereby shall not have been
submitted for approval by the Company's shareholders by January 31, 1998.
In addition, the Merger Agreement may be terminated by (a) the Acquisition
LLC, if the Advisory Board withdraws, modifies in a manner adverse to the
Acquisition LLC, or refrains from making its recommendation concerning the
Merger, or the Advisory Board shall have recommended to the Company shareholders
any Acquisition Proposal or the Company shall have entered into an Acquisition
Agreement, or, other than in connection with the Company's delivery of a
Superior Proposal Notice (as defined below), the Advisory Board shall have
resolved to do any of the foregoing, and (b) by the Company, if by a good faith
vote, with the advice of outside legal counsel, in order to avoid breaching its
fiduciary duties to Company shareholders under applicable law, (1) the Advisory
Board has delivered to the Acquisition LLC a Superior Proposal Notice, (2) the
Company has paid the Termination Fee (as defined below), and (3) five business
days have passed since the Acquisition LLC received the Superior Proposal
Notice. A "Superior Proposal Notice" is written notice advising the Acquisition
LLC that the Advisory Board has received a Superior Proposal (as defined below)
which the Advisory Board has authorized and intends to effect, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making the Superior Proposal. A "Superior Proposal" is a definitive
unconditioned agreement with a third party, with all due
24
<PAGE> 32
diligence investigations completed, to acquire, directly or indirectly, more
than 50% of the membership interests of the Company, assets of the Company
representing 75% or more of the real estate assets of the Company in one
transaction (but not solicitation of sales of individual parcels of the
Property) or all or substantially all of the undeveloped Property in one
transaction (but not solicitation of sales of individual parcels of the
undeveloped Property), and otherwise on terms which the Advisory Board
determines in its good faith judgment to be more favorable from a financial
point of view to the Company shareholders than the Merger Agreement, the Merger
and the transactions contemplated thereby and for which financing, to the extent
required, is then committed.
TERMINATION FEE
The Merger Agreement requires the Company to pay the Acquisition LLC a
termination fee of $1.3 million (the "Termination Fee") if the Board of
Directors of the Company takes the action described in clause (b) above under
the caption "-- Termination," (but only if the Company executes the agreement
contemplating the Superior Proposal within three business days after the receipt
by the Acquisition LLC of the Superior Proposal Notice) or the Merger Agreement
is terminated by the Acquisition LLC for any of the reasons set forth in clauses
(v) or (a) above under such caption.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting
under which the total consideration paid in the Merger will be allocated among
the Surviving Company's consolidated assets and liabilities based on the fair
values of the assets acquired and liabilities assumed.
RIGHTS OF DISSENTING SHAREHOLDERS
No appraisal rights are provided for the Company shareholders under the
Delaware limited liability company act or under the Company's limited liability
company agreement. Neither the Company, Mr. Blum, RCBA or the Acquisition LLC
will be voluntarily providing appraisal rights to the Company shareholders who
object to the transactions contemplated by the Merger Agreement. Neither the
Company nor RCBA is aware of any appraisal rights available to objecting
shareholders under applicable law.
25
<PAGE> 33
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
SHARE OWNERSHIP
The following table sets forth certain information, as of June 30, 1997,
with respect to the beneficial ownership of Shares by (i) all persons known by
the Company to beneficially own more than 5% of the outstanding Shares, (ii)
each Advisory Board member of the Company, (iii) each executive officer of the
Company, and (iv) all executive officers and directors of the Company as a
group. For purposes of this table, beneficial ownership of securities is defined
in accordance with the rules of the Commission and means generally the power to
vote or dispose of securities, regardless of any economic interest therein.
Except as otherwise indicated, the shareholders listed in the table have sole
voting and investment power with respect to the Shares indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP
BENEFICIAL OWNER OF SHARES PERCENT OF CLASS(1)
- -------------------------------------------------------- -------------------- -------------------
<S> <C> <C>
Richard C. Blum......................................... 2,012,158(2) 10.2%
909 Montgomery Street, Suite 400
San Francisco, CA 94133
Manchester Securities Corp.............................. 1,914,760(3) 9.7%
712 Fifth Avenue
New York, NY 10019
Farallon Capital Management, L.L.C...................... 1,569,900(4) 8.0%
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
Pioneering Management Corporation....................... 1,237,950 6.3%
60 State Street
Boston, MA 02109
Gabelli Funds, Inc...................................... 1,031,200(5) 5.2%
One Corporate Center
Rye, New York 10580-1434
James R. Porter......................................... 828,664 4.2%
3055 Triad Drive
Livermore, CA 94550
William W. Stevens...................................... 324,154(6) 1.6%
3055 Triad Drive
Livermore, CA 94550
3055 Management Corp.................................... 199,072(7) 1.0%
3055 Triad Drive
Livermore, CA 94550
Stanley F. Marquis...................................... 136,824 0.7%
3055 Triad Drive
Livermore, CA 94550
Larry D. McReynolds..................................... 19,317 0.1%
3055 Triad Drive
Livermore, CA 94550
Martin W. Inderbitzen................................... 0 0%
3055 Triad Drive
Livermore, CA 94550
All Executive Officers and Advisory Board Members as a
Group................................................. 1,508,031 7.7%
</TABLE>
- ---------------
(1) Except as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all Shares shown
as beneficially owned by them, subject to community property laws, where
applicable.
(2) Richard C. Blum ("Mr. Blum") is a controlling person and Chairman of Richard
C. Blum & Associates Inc. ("Inc."), which is the general partner of Richard
C. Blum & Associates LP ("LP"). These Shares
26
<PAGE> 34
are directly owned by three limited partnerships for which LP is the general
partner (BK Capital Partners II, 111,111 Shares; BK Capital Partners III,
500,000 Shares; and BK Capital Partners IV, 1,387,047 Shares). Mr. Blum
disclaims beneficial ownership of these securities except to the extent of
his pecuniary interest thereof.
(3) Manchester Securities Corp. is wholly-owned by Elliott Associates, L.P.
("Elliott"). Paul E. Singer ("Singer") and Braxton Associates, L.P., a New
Jersey limited partnership, which is controlled by Singer, are the general
partners of Elliott.
(4) Includes 1,363,200 Shares held by Farallon Capital Partners, L.P. ("FCP")
and 206,700 Shares held by Tinicum Partners, L.P. ("Tinicum"). Farallon
Partners, L.L.C. ("FPLLC") is the General Partner of FCP and Tinicum. Thomas
F. Steyer is the senior managing member of FPLLC.
(5) Includes 205,000 Shares held by GAMCO Investors, Inc., 169,900 Shares held
by Gabelli Performance Partnership L.P. and 656,300 Shares held by Gabelli
Associates Fund. Mario J. Gabelli is the Chairman, Chief Executive Officer
and Chief Investment Officer of Gabelli Funds, Inc.
(6) Includes 324,154 Shares held as tenant-in-common with Virda J. Stevens.
(7) In addition to the totals shown in the above table, Messrs. Porter and
Stevens are deemed to be the beneficial owners of 199,072 Shares by virtue
of their respective 50% equity ownership in 3055 Management Corp.
TRANSACTIONS BY CERTAIN PERSONS IN THE SHARES
No transactions in the Company's Shares were effected by any Advisory Board
member or executive officer of the Company during the 60 day period preceding
the date of this Proxy Statement.
27
<PAGE> 35
MANAGEMENT OF THE COMPANY, RCBA
AND THE ACQUISITION LLC
Certain information concerning the directors and executive officers of the
Company, RCBA, RCBA, Inc. the Acquisition LLC, Westmark and CBC is set forth
below. Unless otherwise indicated, each such person is a citizen of the United
States and the address of each such person is that of the Company, RCBA, the
Acquisition LLC or CBC, as the case may be. Such addresses are set forth under
the caption "SUMMARY -- The Company," "-- RCBA" and "-- The Acquisition LLC" and
below under "-- CBC."
THE COMPANY
The names, ages, principal occupations and employment history for the past
five years of the members of the Advisory Board and executive officers of the
Company, and the Board of Directors and executive officers of the Management
Corp. are set forth below.
James R. Porter, 61, has been a member of the Company's Advisory Board
since the Company's inception in February, 1997, and has been a director and
Vice President of the Management Corp. since its inception in February, 1997. He
is Chairman of the Board of CCI/Triad. He was President and Chief Executive
Officer of Triad from September, 1985 until its merger with Cooperative
Computing, Inc. in February, 1997. He is also a director of Silicon Valley Bank,
Brock International, Inc. and Cellular Technical Services, Inc.
William W. Stevens, 65, has been a member of the Company's Advisory Board
since the Company's inception in February, 1997, and has been a director and
Chairman of the Management Corp. since its inception in February, 1997. He was
Chairman of the Board of Triad from 1972 until its merger with Cooperative
Computing, Inc. in February, 1997. He is the founder of Triad and was its
President and Chief Executive Officer from its inception until September, 1985.
Stanley F. Marquis, 54, has been a member of the Company's Advisory Board
since the Company's inception in February, 1997. He was President of Triad
Systems Financial Corporation from August, 1983 until June 30, 1997. Mr. Marquis
was also Treasurer of Triad from September, 1987 until June 30, 1997, and was
its Vice President, Finance from December, 1994 until March, 1997.
Martin W. Inderbitzen, 45, has been a member of the Company's Advisory
Board since March, 1997. He has been a member of the State Bar of California
since 1976, maintaining a private general civil law practice since that time.
His practice has emphasized land use entitlement and zoning work almost
exclusively for the past ten years.
Larry D. McReynolds, 52, has been the President of the Company since its
inception in February, 1997. He joined Triad in September, 1984 as its Manager,
Facilities and became Manager, Real Estate and Facilities in June, 1992. In
July, 1994 he also assumed responsibility for Triad's Office Services. He is
currently employed in similar capacities for CCI/Triad.
RCBA AND AFFILIATES
RCBA. The names, principal occupations and employment history for the past
five years of the directors and executive officers of RCBA are set forth below.
Richard C. Blum, 62, has been President and Chairman of RCBA since 1994 and
has been President and Chairman of RCBA Inc. since 1985.
Nils Colin Lind, 41, has been Managing Director of RCBA since 1994 and has
been Managing Director of RCBA Inc. since 1987. Mr. Lind is a Norwegian citizen.
Jeffrey W. Ubben, 36, has been Managing Director of Investments of RCBA
since April, 1995. Prior to that, he was a portfolio manager for Fidelity
Management and Research Company from March, 1991 until March, 1995.
28
<PAGE> 36
William C. Johnston, 44, has been Managing Director of Investments of RCBA
since August, 1997. Prior to that, he was a Managing Director of APAC Holdings
Ltd., a direct investment firm in Hong Kong, from 1991 until July, 1997.
John C. Walker, 36, has been a Managing Director of RCBA since April, 1997.
Prior to that, he held various positions with Pexco Holdings, Inc. from October,
1992 until March, 1997.
Murray A. Indick, 38, has been Managing Director and General Counsel of
RCBA since April, 1997. He was a partner with the law firm of Dechert Price &
Rhoads from December, 1996 until March, 1997. He was with the law firm of
Wilmer, Cutler & Pickering from November, 1985 to March, 1992 and from
September, 1993 until November, 1996, and was Deputy General Counsel of First
American Bankshares from April, 1992 until August, 1993.
George F. Hamel, Jr., 40, has been Managing Director of Marketing of RCBA
since April, 1996. He was Vice President of Private Capital Management, Inc.
from March, 1992, until March, 1996.
Marc T. Scholvinck, 40, has been Managing Director and Chief Financial
Officer of RCBA since March, 1996. He was Vice President and Controller of RCBA
from November, 1995 until March, 1996, and was Director of Finance and
Controller of RCBA Inc. from January, 1994 until November, 1995, positions he
also held with RCBA Inc. from August, 1991 until March, 1993. He was a
self-employed financial consultant from March, 1993 until December, 1993 and
served as Financial Director of Leopard Rock Hotel (Pty) Ltd. during that
period.
Thomas L. Kempner, 70, has been a Director of RCBA, Inc. since May, 1985.
He has been Chairman of Loeb Partners Corp. since December, 1979.
RCBA, INC. The names and, unless already set forth under "-- RCBA" above,
the principal occupations and employment history for the past five years of the
directors and executive officers of RCBA, Inc. are set forth below.
Richard C. Blum, President, Chairman and Director.
Nils Colin Lind, Managing Director and Director.
Jeffrey W. Ubben, Managing Director of Investments.
Murray A. Indick, Managing Director, General Counsel and Secretary.
George F. Hamel, Jr., Managing Director of Marketing.
Marc T. Scholvinck, Managing Director and Chief Financial Officer.
Thomas L. Kempner, Director.
Mr. Blum is the majority shareholder of RCBA, Inc.
THE ACQUISITION LLC. RCBA is the Managing Member of the Acquisition LLC.
All information regarding the directors and executive officers of RCBA may be
found above under the heading "-- RCBA.".
WESTMARK. The names, principal occupations and employment history for the
past five years of the directors and executive officers of Westmark are set
forth below. The principal executive address of Westmark is 865 South Figueroa
Street, Los Angeles, California 90017.
Richard C. Clotfelter, 59, was elected Chairman and President of Westmark,
an indirect wholly-owned subsidiary of CBC, in 1995, and has been a Director of
CBC since 1993. Mr. Clotfelter joined CBC in 1993 as President -- Capital
Markets, Asset Valuation and Management Activities. From April 1977 through
1992, he was President of Prescott, Inc., a real estate development and
management company. Mr. Clotfelter is on the Board of Directors of The Commerce
Bancorporation. Mr. Clotfelter is also a member of the Urban Land Institute,
serving on its Urban Development/Mixed Used Council.
James J. Didion, 57, has been a Director of Westmark since 1995. He has
served as Chairman and Chief Executive Officer of CBC since January 1987 and a
Director since CBC's incorporation. Previously, he served
29
<PAGE> 37
as President of CBC following a career of almost 24 years in sales and
management positions in the commercial brokerage operations of CBC. Mr. Didion
is a member and current trustee of the Urban Land Institute. He is also a member
of the National Realty Committee and was Chairman of the National Realty
Committee from 1993 through June 1996. Mr. Didion serves on the University of
California at Berkeley's Advisory Board for the Haas School of Business.
Walter V. Stafford, 56, has served as a Director of Westmark since 1995. He
has served as Senior Executive Vice President and General Counsel of CBC since
1995. Mr. Stafford was a partner at the law firm of Pillsbury Madison & Sutro
LLP from 1973 to 1982 and from 1988 to 1995. From 1982 to 1988 he was Senior
Vice President and General Counsel at Diasonics, Inc., a medical device
manufacturer, and from 1982 to 1994 he was a director of that company.
Laurie E. Romanak, 38, Treasurer, oversees all accounting, finance,
information systems, valuation and administrative operations for Westmark. Ms.
Romanak assumed responsibility for Westmark's financial and administrative
operations in November 1995. She joined Westmark in 1986 as Controller,
responsible for all aspects of the accounting and finance functions. In 1992,
she became Director of Finance & Administration and assumed the additional
responsibilities of client reporting and client relations for the commingled
fund investors. Before joining Westmark, Mr. Romanak spent four years with the
public accounting firm of KPMG Peat Marwick, concentrating in the real estate
industry.
CBC. The names, and, unless already set forth under "-- Westmark" above,
the principal occupations and employment history for the past five years of the
directors and executive officers of CBC are set forth below. The principal
executive address of CBC is 533 South Fremont Avenue, Los Angeles, California
90071.
James L. Didion, Chairman, Chief Executive Officer and Director.
Gary J. Beban, 50, has been the President of CBC since May 1995 and a
Director since 1989. He joined CBS's Los Angeles office in 1970 as an industrial
and investment properties specialist and thereafter served in several management
positions in Chicago. Mr. Beban has also served as the President of CB
Commercial Brokerage Services from 1987 to 1997, at which time he became
President of CB Commercial Corporate Services. He is a member of the Industrial
Development Research Council and the National Realty Committee. Mr. Beban serves
on the Board of Directors of The First American Financial Corporation and its
wholly-owned subsidiary, First American Title Insurance, Inc.
John C. Haeckel, 38, joined CBC as Chief Financial Officer and Senior
Executive Vice President on April 1, 1997. Since 1996, Mr. Haeckel has been
President of Perdix Group, L.L.C., a management consulting firm that he founded.
From 1993 to 1995, he was Chief Financial Officer and from 1994 to 1995 he was
Executive Vice President of Broadway Stores, Inc. From 1987 to 1994 he was a
General Partner and from 1984 to 1986 he was an Associate with Chilmark
Partners, a merchant banking firm.
George J. Kallis, 54, has been CBC's Senior Executive Vice
President -- Brokerage Western U.S. since 1992 and a Director of CBC since 1995.
Prior to that time, he served as Executive Vice President from 1991 to 1992 and
as Senior Vice President and Regional Manager -- Brokerage from 1988 to 1991.
Mr. Kallis joined CBC in 1977. Mr. Kallis is a member of the International
Council of Shopping Centers and the Urban Land Institute and is on the Board of
Directors of the Los Angeles County Economic Development Council.
Ronald J. Platisha, 50, has been CBC's Executive Vice President and
Principal Accounting Officer since 1992. Mr. Platisha was promoted to Senior
Vice President in 1991, after serving as First Vice President and Controller
from 1982 to 1991. Mr. Platisha joined CBC in 1976.
Walter V. Stafford, Senior Executive Vice President and General Counsel.
Richard C. Clotfelter, Director.
Lawrence J. Melody, 59, has served as a Director since August 1996. He is
also President of L.J. Melody & Company which he founded in February 1978 and an
indirect wholly-owned subsidiary of CBC. He is a member of the International
Council of Shopping Centers, the Urban Land Institute (a member of the
Multifamily Council), the Pension Real Estate Association, the National
Association of Industrial and Office
30
<PAGE> 38
Parks, the National Multi Housing Council, as well as other professional
organizations. He is a member of the Board of Trustees of the Mortgage Bankers
Association of America and past President and Director of the Texas Mortgage
Bankers Association, who awarded him their Distinguished Service Award in 1995.
Stanton D. Anderson, 56, has been a Director of CBC since 1989. In 1995, he
became counsel to the law firm of McDermott, Will & Emery. Prior to 1995, Mr.
Anderson was a founding partner in the law firm of Anderson, Hibey & Blair. He
is also a founder of Global USA, Inc., an international consulting company,
where he serves as Chairman and President. He served as Deputy Director of the
Republican Convention in 1980, 1984 and 1988, as counsel to the Reagan-Bush
Campaign in 1980 and as a Director of the 1980 Presidential Transition. Mr.
Anderson serves on the Board of Directors of International Management &
Development Group, Ltd.
Richard C. Blum has been a Director of CBC since 1993.
Daniel A. D'Aniello, 50, has been a Director of CBC since 1989. He has
served as Managing Director of The Carlyle Group, a merchant banking firm since
May 1987. From August 1986 through April 1987, Mr. D'Aniello was Vice
President -- Finance and Development of Marriott Inflite Services, Inc., a
subsidiary of Marriott Corp. Mr. D'Aniello is Chairman of the Board of Directors
of GTS Duratek, Inc.
Hiroaki Hoshino, 55, has been a Director of CBC since 1992. Previously, he
served as Senior Vice President, Treasurer and Chief Financial Officer of Kajima
International, Inc. from April 1987 to March 1990 and as Senior Vice President
and Chief Financial Officer of that company from April 1990 to March 1991. From
April 1991 to March 1993, he served as Executive Vice President and Chief
Financial Officer of Kajima International, Inc. Since April 1991, he has served
as the Chief Financial Officer and since April 1993 he has been Executive Vice
President and Chief Financial Officer of Kajima U.S.A., Inc. From September 1992
to April 1996, he was Executive Vice President, Chief Financial Officer and
Director of Kajima Capital of America, Inc. Since April 1996 he has been
President, Chief Executive Officer, Chief Financial Officer and Director of
Kajima Capital of America, Inc.
Takayuki Kohri, 45, has been a Director of CBC since 1989. Previously, he
was Assistant Manager of Sumitomo Real Estate Sales in Japan from 1984 to August
1988. From August 1988 to July 1993, he was an Executive Vice President of
Sumitomo Real Estate Sales L.A., Inc. Since July 1993, he has been Deputy
Manager of Sumitomo Real Estate Sales Japan, a real estate sales and development
firm.
Paul C. Leach, 52, has been a Director of CBC since August 1996. Since its
founding in 1991, Mr. Leach has served as president of Paul Leach & Company, a
private investment banking firm in San Francisco which specializes in
international and domestic acquisitions and investments. He is also Managing
Director of The Lone Cypress Company, the owner of Pebble Beach Company. From
1988 through 1991, Mr. Leach was a senior manager and partner in the
international merger and acquisition group at Deloitte & Touche. Prior to 1988,
he held several positions in San Francisco, including serving as a partner with
both Osterweis Capital Management and Centennial Petroleum Company and manager
of corporate development for Natomas Company. From 1975 through 1977, Mr. Leach
served as associate director of the Domestic Council Staff at the White House
during the Ford Administration.
Frederic V. Malek, 60, has been a Director of CBC since 1989. He has served
as Chairman of Thayer Capital Partners, a merchant banking firm he founded since
1993. He was President of Marriott Hotels and Resorts from 1981 through 1988 and
was Executive Vice President of Marriott Corp. from 1978 through 1988. He was
Senior Advisor to The Carlyle Group, a merchant banking firm, from November 1988
through December 1991. From September 1989 through June 1990, he was President
of Northwest Airlines and from June 1990 until December 1991 he served as Vice
Chairman of Northwest Airlines. From December 1991 through November 1992, Mr.
Malek served as Campaign Manager for the 1992 Bush/Quayle presidential campaign.
He also serves on the Board of Directors of American Management Systems, Inc.;
Automatic Data Processing Corp.; Choice Hotels International, Inc.; FPL Group
Inc.; Manor Care, Inc.; National Education Corp.; Northwest Airlines
Corporation; and Paine Webber Funds.
Peter V. Ueberroth, 59, has been a Director of CBC since 1989. Since 1989,
he has been an investor and Managing Director of Contrarian Group, Inc., a
business management company. From 1984 through 1989, he
31
<PAGE> 39
was the Commissioner of Major League Baseball in the United States. Mr.
Ueberroth is a member of the Board of Directors of The Coca Cola Company;
Ambassadors International, Inc.; Doubletree Hotels Corp.; and Transamerica
Corporation.
Gary L. Wilson, 57, has been a Director of CBC since 1989. Since 1991, he
has been Co-Chairman of Northwest Airlines, Inc., Northwest Airlines Corporation
and NWA, Inc. From 1985 until January 1990, Mr. Wilson was an Executive Vice
President and Chief Financial Officer and Director for The Walt Disney Company
and remains a Director of The Walt Disney Company. Mr. Wilson also serves on the
Board of Directors of On Command Corporation and Veritas Holdings GmbH. From
1974 until 1985, he was Executive Vice President and Chief Financial Officer of
Marriott Corporation.
Ray Elizabeth Uttenhove, 49, has been a Director of CBC since August 1997.
Since August 1995 she has been First Vice President of Retail Tenant Services of
CBC. Ms. Uttenhove joined CBC in March, 1981. She has been named to CBC's
Colbert Coldwell Circle (representing the top three percent of CBC's sales
force) for 1995 and 1996. In 1995 she was awarded the William H. McCarthy Award,
the highest honor awarded producing professionals within CBC.
Donald M. Koll, 64, has been a Director of CBC since August 1997. He served
as Chairman of the Board and as a director of Koll Management Services, an
indirect wholly-owned subsidiary of CBC, from June 1988 to August 1997, and also
served as the Chief Executive Officer of Koll Management Services from June 1988
to May 1991. Mr. Koll founded The Koll Company in 1962 and has served as
Chairman of the Board and Chief Executive Officer of The Koll Company since that
time. Since June 1992, Mr. Koll has been a member of the Board of Directors and
has served as an executive officer of Koll Real Estate Group, Inc., which filed
for Chapter 11 bankruptcy protection on July 14, 1997 with a reorganization plan
preapproved by its bondholders. Mr. Koll is also a member of the Board of
Directors of Koll Real Estate Group, Inc., a real estate services company, The
Irvine Company and Fidelity National Financial, Inc., a title company.
Raymond E. Wirta, 53, has been a Director of CBC since August 1997. Mr.
Wirta joined CBC in August 1997 as the President of CB Commercial Financial
Services. Prior to that he served as Chief Executive Officer of Koll Management
Services from May 1991 to August 1997. He served as a director of Koll
Management Services from June 1988 to August 1997. Prior to that time, Mr. Wirta
held various management positions with Koll Management Services from 1981 to
August 1997. Mr. Wirta is a member of the Board of Directors and served as an
executive officer from June 1992 to November 1996 of Koll Real Estate Group,
Inc., which filed for Chapter 11 bankruptcy protection on July 14, 1997 with a
reorganization plan preapproved by its bondholders. Mr. Wirta is a Certified
Property Manager.
Bradford M. Freeman, 55, has been a Director of CBC since August 1997. Mr.
Freeman is a founding partner of FS&Co., which was founded in 1983. Mr. Freeman
is also a member of the Board of Directors of RDO Equipment Company, an
agricultural and industrial equipment distributor.
Ricardo Koenigsberger, 31, has been a Director of CBC since August 1997. He
has been a partner of Apollo Real Estate Advisors II, L.P. since 1996, and has
been associated since 1995 with Apollo Real Estate Advisors, L.P., which,
together with affiliates, acts as managing general partner of the Apollo Real
Estate Investment Funds, private real estate investment funds which invest in
direct and indirect real property interests, including real estate related
public and private debt and equity securities. From prior to 1992 Mr.
Koenigsberger has been associated with Apollo Advisors, L.P., which acts as
managing general partner of Apollo Investment Fund, L.P. and AIF II, L.P.,
private securities investment funds. Mr. Koenigsberger is a director of
Meadowbrook Golf, Inc., Atlantic Gulf Communities Corporation and Western
Pacific Housing, Inc.
CERTAIN PROCEEDINGS
During the past five years, neither the Company, RCBA, RCBA, Inc., the
Acquisition LLC, Westmark, CBC nor any of the individuals named above with
respect to those entities has been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors), or been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding been or become
32
<PAGE> 40
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
of finding any violation with respect to such laws.
SHAREHOLDER PROPOSALS
In the event the Merger is not consummated for any reason, proposals of
shareholders intended to be presented at the 1998 annual meeting of shareholders
must be received by the Company at its principal executive offices not later
than February 1, 1998 for inclusion in the Company's proxy statement and form of
proxy relating to that meeting. Shareholders should mail any proposals by
certified mail return receipt requested.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of the Company as of September 30, 1997, contained
in Exhibit B and incorporated by reference in this Proxy Statement, have been
audited by Coopers & Lybrand LLP, independent public accountants.
A representative of Coopers & Lybrand LLP will be at the Special Meeting to
answer questions by shareholders and will have the opportunity to make a
statement if so desired.
INFORMATION INCORPORATED BY REFERENCE
The Company's Information Statement on Form 10-SB dated June 20, 1997,
Quarterly Report on Form 10-QSB, as amended, for the quarters ended June 30,
1997 and September 30, 1997 and its Current Reports on Form 8-K dated September
10, 1997, September 15, 1997 and December 9, 1997 as filed by the Company with
the Commission (Commission File No. 0-22343), are incorporated by reference into
this Proxy Statement.
All documents filed by the Company pursuant to sections 13(a), 13(c), 14 or
15(d) or the Exchange Act after the date of this Proxy Statement and prior to
the date of the Special Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Copies
of the documents (without exhibits) incorporated by reference in this Proxy
Statement are available without charge upon written or oral request from Larry
D. McReynolds, President, Triad Park, LLC, 3055 Triad Drive, Livermore,
California 94550 (telephone (510)449-0606).
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information can be inspected and copies made at the public reference facilities
of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
and the Commission's regional offices at Seven World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can also be obtained from
the Public Reference Section of the Commission at its Washington, D.C. address
at prescribed rates. The Commission also maintains a Web site address,
http://www.sec.gov.
ADDITIONAL INFORMATION
This Proxy Statement contains information disclosed pursuant to Rule 13e-3
under the Exchange Act, which governs so-called "going private" transactions by
certain issuers and their affiliates. At the time the Company and RCBA entered
into the Merger Agreement, RCBA owned 1,998,158 Shares which represents
approximately 10.1% of the voting power of the Company's Shares. This Proxy
Statement does not contain all of the information set forth in the Rule 13e-3
Transaction Statement ("Schedule 13E-3") parts of which are omitted in
accordance with the regulations of the Commission. The Schedule 13E-3, and any
amendments
33
<PAGE> 41
thereto, including exhibits filed as part thereof, will be available for
inspection and copying at the offices of the Commission as set forth above.
By Order of the Advisory Board
James R. Porter
Vice President, 3055 Management Corp.,
Manager of the Company
Livermore, California
December , 1997
34
<PAGE> 42
EXHIBIT B
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Management's discussion and analysis of financial condition and
results of operations B-2
Balance sheets as of September 30, 1995 and 1996
and December 31, 1996 B-4
Statements of operations of the years ended September 30, 1995
and 1996 and the three months ended December 31, 1995 and 1996 B-5
Statements of members' equity for the years ended September 30,
1995 and 1996, and the three months ended December 31, 1996 B-6
Statements of cash flows for the years ended September 30, 1995
and 1996 and the three months ended December 31, 1995 and 1996 B-7
Notes to financial statements B-8
Report of independent accountants B-16
Pro forma statements of operations B-18
</TABLE>
Condensed balance sheets as of September 30, 1997 (unaudited) and
December 31, 1996 B-20
Condensed statements of operations for the three and nine month
periods ended September 30, 1997 and 1996 (unaudited) B-21
Condensed statements of cash flows for the nine month periods ended
September 30, 1997 and 1996 (unaudited) B-22
Notes to condensed financial statements B-23
B-1
<PAGE> 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following Management's Discussion and Analysis is based upon and should be
read in conjunction with the Company's financial statements and notes thereto
included elsewhere in this Information Statement.
RESULTS OF OPERATIONS
Revenues generated from the leasing of the facilities located at 3055 Triad
Drive were $2.5 million in the years ended September 30, 1995 and 1996. These
revenues are pursuant to a lease agreement in effect through 2001. Revenues
from land sales were $3.8 million during the year ended September 30, 1996.
Revenues from land sales were $640,000 for the three months ended December 31,
1996 with no sales during the comparable period in the prior year. There were
no land sales during the year ended September 30, 1995. Gross margin was $3.5
million in the year ended September 30, 1996, an 84% increase over the gross
margin of $1.9 million in the year ended September 30, 1995. This increase was
directly attributed to the land sales during 1996. Gross margin for the three
months ended December 31, 1995 was $491,000 compared to $678,000 for the three
months ended December 31, 1996. The increase was directly attributed to land
sales.
Net income was $521,000 for the year ended September 30, 1996 compared with a
net loss of $548,000 for the year ended September 30, 1995. The increase is due
principally to the absence of any land sales in 1995. Likewise, the increase
from a loss of $130,000 for the three months ended December 31, 1995 to a loss
of $8,000 for the three months ended December 31, 1996 was due to the absence of
land sales in the earlier period.
Revenues for the three months ended September 30, 1997 were $.6 million compared
to $4.4 million in the same quarter of the prior year when there were land sales
totaling $3.8 million. There have been no land sales to date in 1997 compared to
the $3.8 million recognized in the nine months ended September 30, 1996. Rental
revenues from the leasing of the facilities located at 3055 Triad Drive were $.6
million for the quarters ended September 30, 1997 and 1996. These revenues are
generated under a lease agreement in effect through February 2002. See
"Management's Discussion and Analysis-Liquidity and Capital Resources." Gross
margin was $.5 million for the quarter ended September 30, 1997 compared to $2.1
million for the same quarter in fiscal 1996. The gross margin for the nine month
period ended September 30, 1997 was $1.5 million compared to $3.0 million for
the same period of 1996. The gross margin differences for the three and nine
month periods are directly attributed to land sales which occurred in 1996.
For the three and nine month periods ended September 30, 1997, there were net
losses of $.2 million and $.4 million respectively compared to net income of $.9
million and $.7 million for the same periods of 1996. The difference is
principally due to the absence of any land sales in the current year. The net
loss per share was one cent for the three months ended September 30, 1997
compared to net income per share of five cents for the same period in the prior
year.
LAND SALES
As of December 31, 1996, the Company had approximately 302.6 acres of unimproved
land remaining to be sold. Approximately 35.9 acres are zoned for
retail/commercial use, 28.1 acres for residential use, and 114.3 acres for
retail/light industrial/office use. The remaining acres are zoned for open
space/agricultural and transportation purposes. The Company sold four parcels
totaling 25.5 acres during the year ended September 30, 1996 for $3.8 million
and one parcel of 4.1 acres for $640,000 during the three months ended December
31, 1996. There were no land sales during the year ended September 30, 1995 or
the three months ended December 31, 1995. Likewise, the Company had no land
sales during the three or nine month periods ended September 30, 1997.
GROSS MARGIN
Land sale gross margins were 41% for the quarter and the year ended September
30, 1996 and 29% for the three months ended December 31, 1996. Gross margins on
rental income were approximately the same for all periods as the properties are
subject to a triple net lease whereby substantially all operating expenses are
paid by the tenant.
COSTS AND EXPENSES
Land-related sales expenses include broker commissions, escrow fees, etc., and
totaled $369,000 for the nine months and year ended September 30, 1996 and
$64,000 for the three months ended December 31, 1996.
B-2
<PAGE> 44
General and administrative expenses consist of property taxes and other general
management and operational costs including costs necessary to maintain the
appearance of the land in a marketable condition and personnel and overhead
expenses requires for the development, management and marketing of the
properties. These expenses were $623,000 for the year ended September 30, 1995
and $723,000 for the year ended September 30, 1996 with the increase attributed
to incremental management efforts associated with the land sales for the year
ended September 30, 1996. Operating expenses were similar for the quarters
ending December 31, 1995 and 1996.
General and administrative expenses were $0.2 million for the quarter ended
September 30, 1997, and were approximately equal to those expenses for the same
quarter in the prior year. Operating expenses were $628,000 for the nine month
period ended September 30, 1997 compared to $561,000 for the same period the
prior year.
Interest expense consists of mortgage interest on the buildings and the bonded
indebtedness incurred in connection with the development improvements and
community services. Interest expense was approximately $1.9 million for the
years ended September 30, 1995 and 1996, decreasing slightly due to normal debt
maturation. Likewise, interest expense for the quarters ending December 31,
1995 and 1996 was relatively unchanged at $472,000 and $449,000, respectively.
Interest expense was approximately the same for the quarter ended September 30,
1997 compared to the same quarter in the prior year. Year to date interest
expense was also relatively unchanged at $1.3 million compared to $1.4 million
for the nine months ended September 30, 1997 and 1996, respectively. The
reduction is due to normal debt maturation, as well as reduced debt in 1997 due
to land sales in the six months ended December 31, 1996, offset by interest
expense related to the bond issuance in March 1997. See "Management's Discussion
and Analysis-Liquidity and Capital Resources."
FUTURE OPERATING RESULTS
Future operating results are dependent upon the Company's ability to dispose of
its real estate assets. Risks that affect real estate sales include, but are not
limited to, the relative illiquidity of real estate investments, the ability to
obtain entitlements from governmental agencies, changing tax assessments,
compliance with environmental requirements, and general risks such as changes in
interest rates and changes in local market conditions which affect real estate
values. The future operating results may also be affected by the Company's
relationship with Triad. These risks include, but are not limited to, the
indemnification agreement between the Company and Triad, potential conflicts of
interest within the management and representation of the Company and Triad, and
reliance upon Triad lease payments for the Company's financial performance.
On September 9, 1997, the Company entered into an Agreement of Merger with TPL
Acquisition, LLC and Richard C. Blum Associates, LP, a California limited
partnership ("RCBA"), subject to approval of the Members, in which TPL
Acquisition, LLC will acquire all outstanding shares of the Company from the
Members for $1.32 per share. Following such acquisition, TPL Acquisition, LLC,
which is affiliated with RCBA, will merge into Triad Park, LLC and will become
liable for all obligations of Triad Park, LLC. A copy of the Agreement of Merger
was included as Exhibit 2.1 to the Company's Form 8-K (Amendment No. 1) filed
with the Securities and Exchange Commission on September 15, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ability to continue funding its current business will depend upon
the timing and volume of land sales, without taking the merger of the Company
and TPL Acquisition into account. Receipts from rental of its buildings under
the existing lease agreements are expected to be sufficient to fund mortgage
obligations for the foreseeable future. Currently, there is a lease agreement
for the Company's buildings in effect through February 2002 with an option to
renew for an additional term of five years. All expenses related to the
buildings are paid by the tenant as required by the "triple net lease". The
Company's ability to repay the remaining assessment district debt and operating
expenses are dependent in part on making future land sales. To the extent
additional working capital is required, management expects that it will have
sufficient borrowing capacity to finance any needs which may arise in the
ordinary course of business.
On March 24, 1997, the City of Livermore completed the sale of Mello-Roos bonds
which raised a total of $9,070,000 in new funds, of which approximately
$6,944,000 encumbers property owned by the Company. The proceeds were designated
to refinance $2,255,000 of prior bonded indebtedness, to fund the reimbursement
to the Company of approximately $2,045,000 of previously completed improvements,
to provide funds of approximately $3,700,000 to complete improvements required
by various agreements with the City of Livermore and others, to pay financing
expenses of $610,000 and to create a reserve fund of approximately $673,000. Of
the indebtedness, approximately $5,218,000 is an additional encumbrance to the
property owned by the Company and $1,726,000 refinances existing debt. In the
quarter ended June 30, 1997, the Company received approximately $1,485,000 from
the City of Livermore as reimbursement for previously completed projects
totaling $2,085,000, net of a surety deposit of $600,000.
In addition, the Company is obligated to undertake an estimated additional
$7,000,000 in improvements to its land in connection with its approved
development plan. The City of Livermore is expected to issue bonds to reimburse
the Company for such improvements. Improvements are funded as projects are
completed. The current estimates for the required improvements indicate that
bonded funding limits are expected to be adequate to cover the remaining items
of improvement. However, the actual costs of the improvements may be greater
than estimated and may exceed the bond funding limit. Any shortfall in the bond
funding will be borne by the Company or by purchasers of lots, which may have an
adverse effect on the value of the land.
B-3
<PAGE> 45
TRIAD PARK, LLC
(a Delaware limited liability company)
BALANCE SHEETS
(in thousands)
_______
<TABLE>
<CAPTION>
September 30,
---------------------- December 31,
ASSETS 1995 1996 1996
-------- -------- ------------
<S> <C> <C> <C>
Land $ 25,250 $ 22,850 $ 27,876
Property, plant and equipment 18,703 18,171 12,362
Assessments receivable 1,859 2,073 2,091
-------- -------- --------
Total assets $ 45,812 $ 43,094 $ 42,329
======== ======== ========
LIABILITIES AND MEMBERS' EQUITY
Debt $ 21,715 $ 19,464 $ 18,840
-------- -------- --------
Total liabilities 21,715 19,464 18,840
-------- -------- --------
Commitments and contingencies (Note 9).
Members' equity 24,097 23,630 23,489
-------- -------- --------
Liabilities and member's equity $ 45,812 $ 43,094 $ 42,329
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-4
<PAGE> 46
TRIAD PARK, LLC
(a Delaware limited liability company)
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
________
<TABLE>
<CAPTION>
Year Ended Three Months Ended
September 30, December 31,
------------------- -------------------
1995 1996 1995 1996
------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 2,506 $ 2,506 $ 627 $ 627
Land sales - 3,795 - 640
------- ------- ------- -------
Total revenues 2,506 6,301 627 1,267
Depreciation of rental property 558 547 136 137
Cost of land sold - 2,231 - 452
------- ------- ------- -------
Gross margin 1,948 3,523 491 678
------- ------- ------- -------
Costs and expenses:
Sales expenses - 369 - 64
General and administrative 623 723 162 174
------- ------- ------- -------
Total costs and expenses 623 1,092 162 238
------- ------- ------- -------
Operating income 1,325 2,431 329 440
Interest expense 1,929 1,857 472 449
------- ------- ------- -------
Income (loss) before provision for
(benefit from) income taxes (604) 574 (143) (9)
Provision for (benefit from) income taxes (56) 53 (13) (1)
------- ------- ------ -------
Net income (loss) $ (548) $ 521 $ (130) $ (8)
======= ======= ======= =======
Net income (loss) per share $ (0.03) $ 0.03 $ (0.01) $ -
======= ======= ======= =======
Shares used in per share calculation 19,708 19,708 19,708 19,708
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-5
<PAGE> 47
TRIAD PARK, LLC
(a Delaware limited liability company)
STATEMENTS OF MEMBERS' EQUITY
for the years ended September 30, 1995 and 1996
and the three months ended December 31, 1996
(in thousands)
_______
<TABLE>
<CAPTION>
Undistributed Total
Unallocated Earnings Members'
Capital (Losses) Equity
-------- -------- --------
<S> <C> <C> <C>
Balance, October 1, 1994 $ 27,741 $ (4,674) $ 23,067
Contributions 1,578 1,578
Net loss - (548) (548)
-------- -------- --------
Balance, September 30, 1995 29,319 (5,222) 24,097
Distributions (988) (988)
Net income 521 521
-------- -------- --------
Balance, September 30, 1996 28,331 (4,701) 23,630
Distributions (133) (133)
Net loss - (8) (8)
-------- -------- --------
Balance, December 31, 1996 $ 28,198 $ (4,709) $ 23,489
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-6
<PAGE> 48
TRIAD PARK, LLC
(a Delaware limited liability company)
STATEMENTS OF CASH FLOWS
(in thousands)
_______
<TABLE>
<CAPTION>
Year Ended Three Months Ended
September 30, December 31,
------------------- -------------------
1995 1996 1995 1996
------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (548) $ 521 $ (130) $ (8)
Gain from sale of land - (1,194) - (124)
Depreciation 558 547 136 137
Amortization 20 20 5 6
------- ------- ------- -------
Net cash provided by (used in) operating
activities 30 (106) 11 (11)
------- ------- ------- -------
Cash flows from investing activities:
Land sales - 3,523 - 576
Investment in property, plant and equipment (36) (15) (3) -
Acquisition of land - (972) - -
Land improvements (187) (146) (38) (30)
Assessment district improvements (292) (214) (80) (18)
------- ------- ------- -------
Net cash provided by (used in) investing
activities (515) 2,176 (121) 528
------- ------- ------- -------
Cash flows from financing activities:
Repayment of debt (1,093) (1,082) (443) (406)
Members contribution (distribution) 1,578 (988) 553 (133)
------- ------- ------- -------
Net cash provided by (used in) financing
activities 485 (2,070) 110 (539)
------- ------- ------- -------
Net increase (decrease) in cash - - - -
Cash, beginning of period - - - -
------- ------- ------- -------
Cash, end of period $ - $ - $ - $ -
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 1,929 $ 1,857 $ 472 $ 449
======= ======= ======= =======
Income taxes $ - $ 53 $ - $ 5
======= ======= ======= =======
NONCASH INVESTING AND FINANCIAL ACTIVITY:
Land reclassified from property, plant and equipment
to land for resale $ 5,672
=======
Assessment district improvements and related debt
transferred upon sale $ 1,348 $ 224
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-7
<PAGE> 49
TRIAD PARK, LLC
(a Delaware limited liability company)
NOTES TO FINANCIAL STATEMENTS
_______
1. Description of Business and Basis of Presentation:
Triad Park, LLC (the Company) is a Delaware limited liability company
organized to effect the spin-off of certain real estate assets and related
liabilities of Cooperative Computing, Inc., a Delaware Corporation,
formerly known as Triad Systems Corporation (Triad). On October 17, 1996
Triad signed a definitive merger agreement with Cooperative Computing,
Inc. (CCI), a Texas corporation, and its affiliate, CCI Acquisition Corp.
(CAC), a Delaware corporation, under which CCI, through CAC, would
acquire Triad. Pursuant to the terms of the merger agreement, CCI,
through CAC, commenced a cash tender offer for all outstanding shares of
Triad at a price of $9.25 per share on October 23, 1996. As a condition
precedent to completion of the merger, Triad arranged for the spin-off of
certain real estate assets and related liabilities (the Predecessor
Business) to Triad stockholders.
On February 27, 1997, immediately prior to completion of the tender offer,
Triad contributed such assets and related liabilities to the Company. Under
the terms of the Real Estate Distribution Agreement (the Agreement), all
indebtedness of Triad or any of its subsidiaries secured, in whole or in
part, by any of the contributed assets have been assumed by the Company.
Stockholders of Triad received one Triad Park LLC membership interest for
each share of Triad common stock held as of February 26, 1997, the
Distribution Record Date.
The Company's operations include the ownership and management of the
spun-off real estate assets, all of which are located in Livermore,
California, for their orderly liquidation and distribution of related net
proceeds to the holders of membership interests ("Members"). The
Company's shares are owned 99% by the former shareholders of Triad and 1%
by Management Corp ("the Manager"). The Manager is responsible for
management and control of the business of the Company, subject to certain
required approvals of the Advisory Board. The Members may elect or vote to
remove members of the Advisory Board.
The Company will be dissolved upon the earlier of a majority vote to
dissolve the Company or upon the sale or other disposition of all or
substantially all of the assets and properties of the Company and
distribution of the proceeds to the members. The financial statements
presented herein include the financial position, results of operations and
cash flows of the Predecessor Business as if the Company had existed as a
corporation separate from Triad for all periods presented on a historical
basis and may not be indicative of actual results of operations and
financial position of the Company as an independent stand-alone entity.
The statements of operations reflect certain expense items incurred by
Triad which are allocated to the Company on a basis which management
believes represents a reasonable allocation of such costs. These
allocations consist primarily of corporate expenses such as management and
accounting services. Expenses related to the normal recurring management
activities of the Company have been allocated based on an estimate of Triad
personnel time dedicated to the operations and management of the Company.
Continued
B-8
<PAGE> 50
TRIAD PARK, LLC
(a Delaware limited liability company)
NOTES TO FINANCIAL STATEMENTS, Continued
_______
2. Summary of Significant Accounting Policies:
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses
during the reported periods. Actual results could differ from those
estimates.
LAND:
Land held for resale includes developed lots, land underdeveloped
and raw land. Land held for resale is carried at the lower of cost
or market. The cost of development of building lots includes the land,
the related costs of development (planning, survey, engineering and other)
and interest costs during development, all of which are capitalized. The
carrying costs of property held for resale, interest expense, property
taxes and other are expensed. Common costs are allocated based on square
footage and relative market value.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of
the related assets. Leasehold improvements are amortized using the
straight-line method over their estimated useful lives or the lease term,
whichever is less. As property, plant and equipment are disposed of, the
asset related cost and related accumulated depreciation or amortization
are removed from the accounts, and the resulting gains or losses are
reflected in operations.
DEBT ISSUANCE COSTS:
The unamortized costs associated with the issuance of debt are recorded
with the associated liability. Amortization is computed according to the
interest method for debt issuance costs and is included in interest
expense. Upon retirement of remaining principal balances, the associated
unamortized costs are reflected in operations.
Continued
B-9
<PAGE> 51
TRIAD PARK, LLC
(a Delaware limited liability company)
NOTES TO FINANCIAL STATEMENTS, Continued
_______
2. Summary of Significant Accounting Policies, continued:
REVENUE RECOGNITION:
Profits on sale of developed lots, developed land and raw land are
recognized in accordance with standards established for the real estate
industry which generally provide for deferral of all or part of the profit
on a sale if the buyer does not meet certain down payment requirements or
certain other tests of the buyer's financial commitment to the purchase,
or the Company is required to perform significant obligations subsequent
to the sale.
Cost of sales include an allocated pro rata portion of acquisition and
development costs along with sales commissions, closing costs and other
costs specifically related to the sale.
INCOME TAXES:
The Company does not provide for income taxes as all income and losses are
allocated to the members for inclusion in their respective tax returns
except for the state of California for which the Company has elected to be
treated as a taxable entity. The tax basis of the Company's net assets is
estimated at December 31, 1996 to be approximately $14 million which is
determined based on appraised value under a bulk sale assumption. As a
result, gains on future sales as reported for tax purposes may be
substantially higher than those reported for financial statement purposes.
UNAUDITED INTERIM PERIOD ENDED DECEMBER 31, 1995:
The unaudited financial statements for the three months ended December 31,
1995 have been prepared on the same basis as the audited financial
statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations in
accordance with generally accepted accounting principles. Results for
interim periods are not necessarily indicative of results for the entire
year.
FISCAL YEAR:
As a limited liability corporation, the Company is treated as a partnership
for federal income tax purposes and is therefore required to use a calendar
based fiscal year end whereas Triad had a fiscal year based on the twelve
months ending on September 30 of each year. Accordingly, the accompanying
financial statements include audited financial statements for the
three-month transition period ending December 31, 1996. Unaudited financial
statements are presented for the three-month period ended December 31, 1995
for comparative purposes only.
NET INCOME (LOSS) PER SHARE:
The number of shares used to compute earnings per share assumes that
shares issued in connection with the spin-off were outstanding for all
periods presented.
Continued
B-10
<PAGE> 52
TRIAD PARK, LLC
(a Delaware limited liability company)
NOTES TO FINANCIAL STATEMENTS, Continued
_______
3. Related Party Agreement:
The Company's developed commercial property, consisting of three buildings
and improvements on approximately 15 acres, is occupied by Triad under a
lease agreement that provides for annual rent of $2,505,720 payable monthly
in advance through February 1999 and prevailing market rate thereafter,
providing that annual rental shall not fall below rate in effect at the
date of renegotiation nor exceed 120% of such rental rate. Payments under
the lease are on a "net lease" basis, free of any impositions and with out
abatement, deduction or set-off. The tenant is required to pay all
impositions (e.g. taxes, assessments, water and sewer charges, excises,
levies, etc.) in addition to the annual rent.
Certain officers of the Company are also officers or employees of Triad.
The stock of Management Corp. is owned by three of Triad's current or
former directors. In February 1997, in connection with the Company's
capitalization, a promissory note of $142,000 was received from Management
Corp. for purchase of 1% of the membership interests.
4. Property, Plant and Equipment:
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30,
---------------------- December 31,
1995 1996 1996
-------- -------- ------------
<S> <C> <C> <C>
Building and leasehold improvements $ 16,302 $ 16,317 $ 16,317
Less accumulated depreciation (4,248) (4,795) (4,932)
-------- -------- --------
12,054 11,522 11,385
Land 6,649 6,649 977
-------- -------- --------
Total property, plant and equipment $ 18,703 $ 18,171 $ 12,362
======== ======== ========
</TABLE>
The above facilities and land are all subject to a lease agreement with
Triad for use as their headquarters (see Note 3).
During December 1996, certain land previously intended for use by Triad in
their operations was reclassified as land for resale in connection with the
merger and spin-off (see Note 5).
Continued
B-11
<PAGE> 53
TRIAD PARK, LLC
(a Delaware limited liability company)
NOTES TO FINANCIAL STATEMENTS, Continued
_______
5. Land:
Land consists of property in Livermore, California, classified by planned
use as follows (dollars in thousands):
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1996
-------------------- --------------------
Use Classification Acreage Cost Acreage Cost
------------------ ------- -------- ------- --------
<S> <C> <C> <C> <C>
Residential 28.1 $ 4,015 28.1 $ 4,029
Retail/commercial 40.0 5,430 35.9 4,797
Retail/industrial/office 68.2 12,285 114.3 17,925
Open space/agricultural 112.0 -- 112.0 --
Transportation 12.3 1,120 12.3 1,125
----- -------- ----- -------
260.6 $ 22,850 302.6 $27,876
===== ======== ===== =======
</TABLE>
During the three months ended December 31, 1996, approximately 34 acres of
land previously held for future use by Triad was reclassified to land. As
a result, costs of approximately $5.7 million which include debt financed
amounts of approximately $2.2 million were reclassified from property,
plant and equipment to land.
6. Debt:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
September 30,
------------------------ December 31,
1995 1996 1996
-------- -------- ------------
<S> <C> <C> <C>
Mortgage loan payable, bearing interest at 9.9%,
and maturing through 2003 $ 10,946 $ 10,004 $ 9,749
Assessment district improvement bonds, bearing
interest rates ranging from 4.75% to 7.25%, and
maturing through 2014 10,932 9,606 9,228
Unamortized debt issuance costs (163) (146) (137)
-------- -------- --------
Total debt $ 21,715 $ 19,464 $ 18,840
======== ======== ========
</TABLE>
The interest rate on the mortgage financing for the Livermore headquarters
facility may be adjusted at the option of the lender in 1998 and could
impact the interest rate from 1999 to its maturity in 2003. Borrowings
are collateralized by the land and buildings and are payable in monthly
installments.
A portion of the Company's land for resale and the parcel retained for its
facilities are part of assessment districts and are subject to bonded
indebtedness incurred in connection with the development of improvements
and community services. Semiannual principal and interest payments on the
bonds are required as long as the parcels are owned by the Company. As
the Company sells land, the corresponding obligation will be assumed by
the new owners.
On March 24, 1997, the City of Livermore entered into a Bond Indenture and
issued an additional $9,070,000 in new funds from the sale of community
facility bonds. The Company currently owns 76.56% of the property related
to this Issuance. The Company's portion of the bond issuance is designated
for approximately $5,218,000 of additional debt and $1,726,000 for
refinancing of existing debt. The Company has recorded the net additional
debt as a liability. Approximately $1,878,000 of this debt obligation is
attributable to the Company's portion of previously completed improvements
which have been included in the costs of property plant and equipment and
land as appropriate. Approximately $3,340,000, representing funds set aside
by the City of Livermore for reimbursement to the Company for future
improvements, are recorded as property development commitments.
Continued
B-12
<PAGE> 54
TRIAD PARK, LLC
(a Delaware limited liability company)
NOTES TO FINANCIAL STATEMENTS, Continued
_______
7. Members Equity:
Members have the right to vote on certain matters of the Company including
the election and removal of Advisory Board members, merger with or into
another business entity and dissolution of the Company.
All the issued and outstanding membership interests are fully paid and
nonassessable. Holders of membership interests do not have preemptive or
conversion rights, nor rights to redemption or sinking fund provisions by
the Company. In the event of any liquidation, dissolution or winding up
of the Company, the holders of the membership interests are entitled to
share ratably in proportion to their ownership as of the date of
distribution in any assets remaining after payment of all debts and
liabilities.
Continued
B-13
<PAGE> 55
TRIAD PARK, LLC
(a Delaware limited liability company)
NOTES TO FINANCIAL STATEMENTS, Continued
_______
8. Significant Customers:
The Company had land sales to four customers during the year ended
September 30, 1996 and one customer during the three months ended December 31,
1996.
There were no land sales in 1995.
9. Contingencies:
Under the terms of the Distribution Agreement (see Note 1), all costs and
expenses solely attributed to the transactions related to the spin-off and
related dividend to Triad shareholders will be paid by the Company when
such amounts are due. The Company will indemnify and hold Triad and its
subsidiaries harmless from and against loss, cost, damage or expense
arising out of or related to any failure of the Company to discharge the
obligations specified in the Agreement. The Company will indemnify and
hold Triad and its subsidiaries harmless from and against any taxes
attributed to, arising out of or relating to the Company, its formation,
the transfer of contributed assets, the assumption or refinancing of
liabilities with respect to the contributed assets, the sale, exchange,
distribution, dividend or other disposition of interests of the Company by
Triad or its subsidiaries.
To support its ability to fund the indemnity commitment to Triad, the
Company has agreed to maintain net assets with a minimum market value of
$2,350,000 based upon the most recent appraised value of the Company's
then existing real property assets until 60 days after the expiration of
all statutes of limitation related to the collection of taxes related to
the transactions contemplated by the Agreement (estimated to be
approximately four years). Triad may cause the real property to be
appraised at any time and the Company must pay one half of the expense if
the most current calculation of net worth is less than $4,000,000.
Compliance with these requirements may limit the Company's ability to
make distributions to members.
Continued
B-14
<PAGE> 56
TRIAD PARK, LLC
(a Delaware limited liability company)
NOTES TO FINANCIAL STATEMENTS, Continued
_______
The Company is obligated to undertake an estimated additional $7,000,000
in improvements to its land held for resale in connection with its
approved development plan. The City of Livermore has indicated that it is
willing to reimburse the Company for such improvements by means of a bond
financing. Historically, the City of Livermore has been able to
successfully sell its bond offerings and the current estimates for
required improvements indicate that bonded funding limits will be adequate
to cover the remaining items of improvement. However, the actual costs of
the improvements may be greater than estimated and may exceed the bond
funding limit. Alternatively, if the City of Livermore is unsuccessful
in completing a bond offering, it is possible the Company would not
receive any reimbursement for such improvements. Any shortfall in the
bond funding will be borne by the Company or by purchasers of lots, which
may have an adverse effect on the value of the land.
10. Subsequent Event (unaudited):
On September 9, 1997, the Company entered into an Agreement of Merger with
TPL Acquisition, LLC and Richard C. Blum Associates, LP, a California
limited partnership ("RCBA"), subject to approval of the Members, in
which TPL Acquisition, LLC will acquire all outstanding shares of the
Company from the Members for $1.32 per share. Following such acquisition,
TPL Acquisition, LLC, which is affiliated with RCBA, will merge into Triad
Park, LLC and will become liable for all obligations of Triad Park, LLC.
B-15
<PAGE> 57
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of
Triad Park, LLC:
We have audited the accompanying balance sheet of the Predecessor Business (See
Note 1) of Triad Park, LLC (a Delaware limited liability company) as of
September 30, 1995 and 1996 and December 31, 1996, and the related statements of
operations, changes in members' equity and cash flows for the years ended
September 30, 1995 and 1996 and for the three months ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Predecessor Business of
Triad Park, LLC (a Delaware limited liability company) as of September 30, 1995
and 1996 and December 31, 1996 and the results of its operations and cash flows
for the years ended September 30, 1995 and 1996 and the three months ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand LLP
San Jose, California
March 14, 1997, except
for the matters discussed
in Note 6 for which
the date is
March 24, 1997
B-16
<PAGE> 58
TRIAD PARK, LLC
(a Delaware limited liability company)
INTRODUCTION TO UNAUDITED PRO FORMA
CONDENSED STATEMENTS OF OPERATIONS
_______
The following unaudited pro forma condensed statements of operations give
effect to the spin-off of Triad Park, LLC by Triad Systems Corporation as if it
had occurred at the beginning of each period presented. The pro forma
information is based on the estimates and assumptions set forth below and in
the note to such statements.
This pro forma information has been prepared utilizing the historical financial
statements of the Predecessor Business of Triad Park, LLC. This information
should be read in conjunction with the historical financial statements and
notes thereto. The pro forma financial data have been included as required by
the rules and regulations of the Securities and Exchange Commission and are
provided for comparative purposes only. The pro forma financial data does not
purport to be indicative of the results which actually would have been obtained
if the spin-off had been effected on the dates indicated or of those results
which may be obtained in the future.
B-17
<PAGE> 59
TRIAD PARK, LLC
(a Delaware limited liability company)
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
_______
<TABLE>
<CAPTION>
Three Months Ended
Year Ended September 30, 1996 December 31, 1996
----------------------------------- -----------------------------------
Historical Adjustments Pro Forma Historical Adjustments Pro Forma
---------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $ 2,506 $ 2,506 $ 627 $ 627
Land sales 3,795 3,795 640 640
-------- -------- -------- ------- ------- --------
Total revenues 6,301 6,301 1,267 1,267
Depreciation of rental property 547 547 137 137
Cost of land sold 2,231 2,231 452 452
-------- -------- -------- ------- ------- --------
Gross margin 3,523 3,523 678 678
-------- -------- -------- ------- ------- --------
Costs and expenses:
Marketing 369 369 64 64
General and administrative 723 723 174 174
-------- -------- -------- ------- ------- --------
Total costs and expenses 1,092 1,092 238 238
-------- -------- -------- ------- ------- --------
Operating income 2,431 2,431 440 440
Interest expense (a) (1,857) $ (2,594) (4,451) (449) $ (635) (1,084)
-------- -------- -------- ------- ------- --------
Income (loss) before
provision for (benefit
from) income taxes 574 (2,594) (2,020) (9) (635) (644)
Provision for (benefit from) income taxes 53 (241) (188) (1) (59) (60)
-------- -------- -------- ------- ------- --------
Net income (loss) $ 521 $ (2,353) $ (1,832) $ (8) $ (576) $ (584)
======== ======== ======== ======= ======= ========
Pro forma net income (loss) per share $ (0.09) $ (0.03)
======== ========
Pro forma shares used in per share
calculation (b) 19,708 19,708
======== ========
</TABLE>
See accompanying note.
B-18
<PAGE> 60
TRIAD PARK, LLC
(a Delaware limited liability company)
UNAUDITED NOTE TO PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
_______
1 Pro Forma Statements of Operations:
Prior to February 26, 1997, Triad Park, LLC ("the Company") was a
wholly-owned subsidiary of Triad Systems Corporation (Triad).
During February 1997 Triad transferred certain real estate assets and
related liabilities to the Company as a condition precedent to Triad's
merger with Cooperative Computing, Inc.
Effective February 26, 1996, Triad spun-off the Company as a dividend to
the shareholders. All membership interests in the Company will be
distributed to Triad shareholders on a pro rata basis on the Distribution
Date, as defined in the Real Estate Distribution Agreement. The
accompanying pro forma condensed statements of operations give effect to
the spin-off as if it had occurred at the beginning of the period
presented. The pro forma information is based on the estimates and
assumptions set forth below.
This pro forma information has been prepared utilizing the historical
financial statements of the Predecessor Business of the Company. This
information should be read in conjunction with the historical financial
statements and notes thereto and is included as required by the rules and
regulations of the Securities and Exchange Commission and is provided for
comparative purpose only. The pro forma financial data do not purport to
be indicative of the results which actually would have been obtained if
the acquisition had been effected on the date indicated or of those
results which may be obtained in the future.
Pro forma adjustments consist of the following:
(a) To record interest expense which would have been incurred by
the Company for working capital needs funded by intercompany
contributions at an estimated annual rate of 9%.
(b) The number of shares used to compute pro forma earnings per
share assumes that shares issuable in connection with the
spinoff were outstanding as of the beginning of the first
period presented.
B-19
<PAGE> 61
TRIAD PARK, LLC
CONDENSED BALANCE SHEETS
(Amounts shown in thousands except share data)
<TABLE>
<CAPTION>
DECEMBER 31, SEPT 30,
1996 1997
------------ -------
(Unaudited)
<S> <C> <C>
ASSETS
Cash $ -- $ 1,111
Land 27,876 29,620
Property, plant and equipment 12,362 12,202
Assessments receivable 2,091 1,164
Property development commitments -- 3,340
Prepaid expenses and other assets -- 396
------- -------
Total assets $42,329 $47,833
======= =======
LIABILITIES
Debt $18,840 $23,130
Other liabilities -- 733
------- -------
Total liabilities 18,840 23,863
Commitments and contingencies
MEMBERS' EQUITY
Members' shares; no par value; -- --
19,708,123 shares outstanding at September 30, 1997
Members' equity 23,489 23,970
------- -------
Total liabilities and members' equity $42,329 $47,833
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-20
<PAGE> 62
TRIAD PARK, LLC
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts shown in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 626 $ 626 $ 1,879 $ 1,880
Land sales 3,795 - 3,795 -
-------- -------- -------- --------
Total revenues 4,421 626 5,674 1,880
Depreciation of rental property 139 137 411 420
Cost of land sold 2,231 - 2,231 -
-------- -------- -------- --------
Gross Margin 2,051 489 3,032 1,460
-------- -------- -------- --------
COSTS AND EXPENSES:
Sales expenses 369 - 369 -
General and administrative 237 235 561 628
-------- -------- -------- --------
Total costs and expenses 606 235 930 628
-------- -------- -------- --------
Operating income 1,445 254 2,102 832
Interest expense 449 450 1,385 1,278
-------- -------- -------- --------
Income (loss) before provision for 996 (196) 717 (446)
(benefit from) income taxes
Provision for (benefit from) income taxes 91 (18) 66 (36)
-------- -------- -------- --------
NET INCOME (LOSS) $ 905 $ (178) $ 651 $ (410)
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE $ 0.05 $ (0.01) $ 0.03 $ (0.02)
======== ======== ======== ========
SHARES USED IN PER SHARE CALCULATION (A) 19,708 19,708 19,708 19,708
======== ======== ======== ========
</TABLE>
(a) The number of shares used to compute earnings per share assumes that shares
issued in connection with the spin-off were outstanding for all periods
presented.
The accompanying notes are an integral part of these financial statements.
B-21
<PAGE> 63
TRIAD PARK, LLC
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts shown in thousands)
<TABLE>
<CAPTION>
NINE MONTH PERIODS
ENDED SEPTEMBER 30,
1996 1997
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 651 $ (410)
Gain from sale of land (1,195) -
Depreciation and amortization 425 465
Provision for doubtful accounts - 65
Changes in assets and liabilities:
Increase in prepaid expenses and other assets - (425)
Increase in other liabilities - 733
------- -------
Net cash provided by (used in) operating activities (119) 428
------- -------
CASHFLOWS FROM INVESTING ACTIVITIES:
Land sales 3,523 -
Investment in property, plant and equipment (12) (113)
Acquisition of land (972) -
Land improvements (108) (14)
Assessment district improvements (130) (623)
------- -------
Net cash provided by (used in) investing activities 2,301 (750)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (638) (943)
Reimbursement for property improvements 1,485
Members' contribution (distribution) net of note receivable (1,544) 891
------- -------
Net cash provided by (used in) financing activities (2,182) 1,433
------- -------
Net increase in cash - 1,111
Cash, beginning of period - -
Cash, end of period $ - $ 1,111
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 1,385 $ 1,040
======= =======
Income taxes $ 53 $ 5
======= =======
NONCASH INVESTING AND FINANCIAL
ACTIVITY:
Bond issuance resulting in increased assessment
district improvements and related debt $ - $ 5,218
======= =======
Assessment district improvements and related debt
transferred upon sale $ 1,189 $ -
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements
B-22
<PAGE> 64
TRIAD PARK, LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:
Triad Park, LLC (the Company) is a Delaware limited liability company
organized to effect the spin-off of certain real estate assets and related
liabilities of Cooperative Computing, Inc., a Delaware corporation, formerly
known as Triad Systems Corporation (Triad). On October 17, 1996 Triad signed a
definitive merger agreement with Cooperative Computing, Inc. (CCI), a Texas
corporation, and its affiliate, CCI Acquisition Corp. (CAC), a Delaware
corporation, under which CCI, through CAC, would acquire Triad. Pursuant to the
terms of the merger agreement, CCI through CAC commenced a cash tender offer for
all outstanding shares of Triad at a price of $9.25 per share on October 23,
1996. As a condition precedent to completion of the merger, Triad arranged for
the spin-off of certain real estate assets and related liabilities (such assets
and liabilities hereinafter referred to as the Predecessor Business) to Triad
stockholders.
On February 26, 1997, Triad contributed such assets and related
liabilities to the Company. Under the terms of the Real Estate Distribution
Agreement (the Agreement), all indebtedness of Triad or any of its subsidiaries
secured, in whole or in part, by any of the contributed assets have been assumed
by the Company. Stockholders of Triad were entitled to receive one share of
Triad Park, LLC, membership interest for each share of Triad common stock held
as of February 26, 1997, the Distribution Record Date. Such shareholders
(Members) are entitled to share in the income, gains, losses, deductions,
credit, or similar items of, and to receive distributions from, the Company, the
right to vote on certain specified matters, and the right to information
concerning the business and affairs of the Company.
The Company's operations include the ownership and management of the
spun-off real estate assets, all of which are located in Livermore, California,
for their orderly liquidation and distribution of related net proceeds to the
holders of membership interests. The manager of the Company, 3055 Management
Corp., (the Manager), is responsible for management and control of the business
of the Company, subject to certain required approvals of the Advisory Board. The
members may elect or vote to remove members of the Advisory Board but otherwise
will not directly or indirectly participate in the management or operation of
the Company or have actual or apparent authority to act for or bind the Company.
The Company will be dissolved upon the earlier of a majority vote to
dissolve the Company or upon the sale or other disposition of all or
substantially all of the assets and properties of the Company and distribution
of the proceeds to the members. On September 9, 1997, the Company entered into
an Agreement of Merger with TPL Acquisition, LLC and Richard C. Blum &
Associates, LP (RCBA), subject to approval of the Members. TPL Acquisition, LLC
will acquire all outstanding shares of the Company from the Members for $1.32
per share. Following such acquisition, TPL Acquisition, LLC, which is affiliated
with RCBA, will merge into Triad Park, LLC and will become liable for all
obligations of Triad Park, LLC. A copy of the Agreement of Merger was included
as Exhibit 2.1 to the Company's Form 8-K (Amendment No. 1) filed with the
Securities and Exchange Commission on September 15, 1997.
The financial statements for periods prior to the Distribution
B-23
<PAGE> 65
Record Date which are presented herein include the financial position, results
of operations and cash flows of the Predecessor Business as if the Company had
existed as a corporation separate from Triad for all periods presented on a
historical basis and may not be indicative of actual results of operations and
financial position of the Company as an independent stand-alone entity. The
statements of operations for those periods reflect certain expense items
incurred by Triad which are allocated to the Company on a basis which management
believes represents a reasonable allocation of such costs. These allocations
consist primarily of corporate expenses such as management and accounting
services. Expenses related to the normal recurring management activities of the
Company have been allocated based on an estimate of Triad personnel time
dedicated to the operations and management of the Company.
2. In the opinion of management, the unaudited interim financial statements as
of September 30, 1997 and for the periods ended September 30, 1997 and 1996
include all adjustments, consisting only of those of a normal recurring nature,
necessary for fair presentation. The results of operations for the three and
nine month periods ended September 30, 1997 are not necessarily indicative of
the results to be expected for the full year. The accompanying financial
statements should be read in conjunction with the audited financial statements
and notes thereto presented elsewhere in this proxy statement. The balance
sheet as of December 31, 1996 has been derived from the audited financial
statements as of and for the three months ended December 31, 1996, and
includes all information and footnotes required by generally accepted accounting
principles for interim financial statements.
3. Property, plant and equipment at December 31, 1996 and September 30, 1997
include accumulated depreciation of $4,932,000 and $5,353,000 respectively.
4. Land consists of property in Livermore, California, classified by planned use
as follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31,1996 September 30,1997
Use Classification Acreage/Cost Acreage/Cost
------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Residential 28.1 $ 4,029 28.1 $ 4,284
Retail/commercial 35.9 4,797 35.9 5,123
Retail/industrial/office 114.3 17,925 114.3 18,976
Open space/agricultural 112.0 - 112.0 -
Transportation 12.3 1,125 12.3 1,237
----- ------- ----- -------
302.6 $27,876 302.6 $29,620
===== ======= ===== =======
</TABLE>
B-24
<PAGE> 66
5. On March 24, 1997, the city of Livermore entered into a Bond Indenture and
issued an additional $9,070,000 in funds from the sale of community facility
bonds for new debt financing as well as for refinancing existing debt. The
Company currently owns 76.56% of the property related to this issuance. The
Company's portion of the bond issuance is for approximately $5,218,000 of
additional debt and $1,726,000 for refinancing of existing debt. The Company has
recorded the net additional debt as a liability and the improvements as assets.
Of these assets, $3,340,000 are recorded as property development commitments and
represent funds set aside by the City of Livermore for reimbursement to the
Company for future improvements.
6. Recent Accounting Pronouncements. In February 1997, the Financial Accounting
Standards board issued Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share", which specifies the computation, presentation and
disclosure requirements for earnings per share. SFAS 128 supersedes Accounting
Principles Board Opinion No. 15 and is effective for financial statements issued
for periods ending after December 15, 1997. SFAS 128 requires restatement of all
prior period earnings per share data presented after the effective date. SFAS
128 will not have a material impact on the Company's financial position, results
of operations or cashflows.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income." This statement establishes requirements for disclosure of comprehensive
income and becomes effective for the Company for fiscal years beginning after
December 15, 1997, with reclassification of earlier financial statements for
comparative purposes. Comprehensive income generally represents all changes in
stockholders' equity except those resulting from investments or contributions by
stockholders. The Company is evaluating alternative formats for presenting this
information, but does not expect this pronouncement to materially impact the
Company's results of operations.
In June 1997, The Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about
Segments of an Enterprise and Related Information." This statement establishes
standards for disclosure about operating segments in annual financial statements
and selected information in interim financial reports. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. This statement supersedes Statement of Financial Accounting
Standards No. 14, Financial Reporting for Segments of a Business Enterprise. The
new standard becomes effective for fiscal years beginning after December 15,
1997, and requires that comparative information from earlier years be
B-25
<PAGE> 67
restated to conform to the requirements of this standard. The Company is
evaluating the requirements of SFAS 131 and the effects, if any, on the
Company's current reporting and disclosures.
B-26
<PAGE> 68
EXHIBIT C
December 16, 1997
Mr. Stanley F. Marquis
Triad Park, LLC
3055 Triad Drive
Livermore, California 94550
Re: Acquisition of Triad Park, LLC
Dear Stan:
Based on our preliminary due diligence, The Kontrabecki Group, Inc. ("TKG")
is pleased to present the following refinements to its previous proposal to
acquire Triad Park, LLC ("Triad Park"). As set forth more fully below, TKG is
prepared to acquire Triad Park for a total consideration of $28.5
million -- $2.5 million more than the competing offer that has previously been
made for Triad Park. Other terms will be at least as favorable to Triad Park as
the terms set forth in the Agreement of Merger by and between TPL Acquisition,
LLC, Richard C. Blum & Associates, LP ("Blum"), and Triad Park dated as of
September 9, 1997 (the "Blum Agreement"). This offer represents a substantial
premium over the price contemplated by the Blum Agreement (the "Blum Offer").
TERMINATION FEES
TKG's offer assumes (and is conditioned upon) the absence of any material
adverse change in Triad Park's assets or financial position since September 1,
1997, no sale or other disposition of any part of the real property owned or
leased by Triad Park, and no change in (or waiver by Triad Park of) the January
31, 1998 "drop dead" date set forth in Section 9.1(b) of the Blum Agreement or
any other rights or obligations of Triad Park under the Blum Agreement. In this
regard, TKG is only willing to offer $28.5 million if Triad Park does not pay
(and does not incur any obligation to pay) the $1.3 million termination fee (the
"Blum Fee") contemplated by the Blum Agreement. The Blum Fee represents 5% of
the value of the Blum offer. This is a significant impediment to TKG's efforts
to provide superior value to Triad Park Share Holders and diverts value to one
Triad Park Share Holder that could otherwise be paid to all Triad Park Share
Holders. It is also a far higher percentage of the transaction than the courts
of Delaware have ever approved in an insider transaction. As a Share Holder of
Triad Park, we believe that this amount is excessive and is preclusive of
alternative offers. Other Triad Park Share Holders have communicated similar
objections to you.
Our review of the Blum Agreement indicates that the Share Holders of Triad
Park can obtain the superior value provided by our offer without Triad Park
incurring or paying a $1.3 million termination fee to Blum. If Triad Park Share
Holders vote down the Blum Agreement, or if the Blum Agreement is not
consummated on or before January 31, 1998, and Triad has performed its covenants
under the Blum Agreement in all material respects, Triad Park is free to
terminate the Blum Agreement without incurring or paying the Blum Fee. We have
structured our offer to achieve this end.
To this end, TKG is prepared to enter into a merger agreement with Triad
Park, in substantially the same form as the Blum Agreement (but with a higher
price to Share Holders and a substantially lower termination fee to TKG(1)),
immediately following (but only following) the termination of the Blum Agreement
pursuant to Section 9.1(b) thereof (or pursuant to Section 9.1(a) or 9.1(d)
thereof under circumstances not resulting in the payment or incurrence of a
termination fee pursuant to Section 9.2 thereof). A copy of our proposed form of
merger agreement (the "TKG Merger Agreement") is being sent to you under
separate cover by TKG's
- ---------------
(1)The small number of other differences between our merger agreement and
the Blum Agreement are necessary to reflect TKG's position as an outsider versus
Blum's position as an insider.
<PAGE> 69
attorneys, Gray Cary Ware & Freidenrich. After entering into a merger agreement,
TKG would be prepared to proceed expeditiously to complete the transaction.
TKG'S COMMITMENT TO THE TRANSACTION
TKG is a commercial real estate investment and development company with a
record of success. Founded in 1983, TKG and its predecessors have created over
1,500,000 square feet of commercial property. The company specializes in the
acquisition, development, and management of office, research and development,
light manufacturing, and warehouse buildings. TKG enjoys a solid track record in
site identification, project development, construction management, leasing, and
property management. Clients include many well-known public traded corporations,
including Varian Associates, Maxell, SDL, KLA Instruments, Robert Half
International, Bristol-Myers Squibb, Michelin, Whirlpool, Anixter, and Newark
Electronics.
TKG has since its inception enjoyed the capital backing of Wells Fargo
Bank, one of the most respected financial institutions in the industry and the
second largest real estate development lender in the United States. Venture
relationships have also been established with Heitman Financial, Mitsubishi
Corporation, Advent International, Copernicus Capital Management, Japan
International Development Organization, the European Bank for Reconstruction and
Development, and major life insurance companies in the United States and Canada.
In addition, Lehman Brothers is providing financing for a number of TKG
transactions.
TKG began doing business as TKG International in 1995 to reflect the growth
of its business activities in Central Europe. Outside the United States, TKG is
midway through the development of the first Western-style planned industrial
park in Central Europe. The park is located in Poland near Warsaw's Okecie
International Airport. Development is underway and construction of 300,000
square feet is completed in a 600,000 square foot masterplanned industrial park
to furnish multi-national firms with offices, warehousing and manufacturing
facilities. Additionally, in January 1998, TKG will be announcing a second
industrial park project in Warsaw with over 700,000 square feet to be developed
over the next two years. The financing for this project has already been
arranged.
To provide Triad Park Share Holders with further assurance that TKG will
deliver the superior value described in this letter, I am pleased to inform you
that TKG has received a written offer of financing from Lehman Brothers to
provide funding in the full amount of our offer, subject only to the
satisfactory completion of due diligence, completion of documentation, and other
standard conditions which we expect to be satisfied in the near future.
To provide Triad Park Share Holders with additional comfort that TKG will
deliver on its offer of superior value if Triad Park Share Holders vote against
the Blum Agreement, the offer set forth in this letter will become irrevocable
if and when (i) a meeting of Triad Park Share Holders is held and Triad Park
Share Holders reject the Blum Agreement, or (ii) the Blum Agreement is
terminated pursuant to Section 9.1(a), (b) or (d) without triggering a
termination fee under the Blum Agreement.(2) In addition, TKG is prepared to
place a substantial sum into escrow upon such rejection or termination and
execution of the TKG Merger Agreement by Triad Park. TKG would also be prepared
to waive the "bringdown" condition set forth in Section 8.3(a) if (and when) TKG
is substituted as the manager of Triad Park, and the undersigned is appointed to
the Advisory Board of Triad Park.
DUE DILIGENCE
TKG's offer is subject to satisfactory completion of due diligence, the
continued availability of funding, and delivery by Triad Park of a
particularized schedule of exceptions to the representations and warranties in
the TKG Merger Agreement, in mutual satisfactory form. Although due diligence
has not yet been completed, we expect that it can be completed in the near
future, assuming timely receipt of information. Since Triad
- ---------------
(2)If, however, a termination fee is triggered or paid to Blum, or if the
January 31, 1998 "drop dead" date set forth in Section 9.1(b) of the Blum
Agreement is extended or waived by Triad Park, this letter and TKG's offer shall
automatically be withdrawn and revoked and would be void.
<PAGE> 70
Park is a public company, TKG has formulated its offer (and has arranged for
funding) on the assumption that all material information concerning Triad Park
has already been publicly disclosed in Triad Park's SEC reports. We expect and
trust that our (and Lehman's) due diligence review of Triad Park's non-public
information will confirm that assumption. We therefore do not believe that due
diligence should be a significant uncertainty.
DISCLOSURE TO TRIAD PARK SHARE HOLDERS
In view of the relevance of our offer to the decision to be made by Triad
Park's Share Holders with respect to the Blum Agreement, the potential impact of
our offer on the market for Triad Park shares, and the obligations imposed by
applicable corporate and securities laws, TKG understands and expects that Triad
Park will need (and in any event would want) to make prompt public disclosure of
this letter and the terms of our offer to Triad Park Share Holders. We believe
that such disclosure is within the scope of the second sentence of paragraph 3
of our Confidentiality Agreement (concerning disclosure "required by applicable
securities laws"), and that no consent is required for such disclosure. However,
to avoid uncertainty, this letter will serve as our consent to such disclosure.
Finally, our offer presupposes that Triad Park's "poison pill" rights plan
will not apply to (and will not be triggered by) this offer or the agreement or
transactions contemplated by this letter, that this letter and the transactions
contemplated hereby will not be subject (or cause Triad Park to be subject) to
any state anti-takeover law; and that Triad Park will timely take all action
that may be required to ensure that this is the case.
We hope that the Share Holders of Triad Park are as enthusiastic about our
offer as we are. If you would like to discuss any aspect of our proposal, we
would be happy to meet with you and other representatives of Triad Park. We
trust that you and the other members of the Advisory Board and management of
Triad Park will offer an opportunity for the Share Holders of Triad Park to
consider TKG's proposal, and to compare the TKG and Blum proposals side by side,
when a proxy statement is mailed to Triad Park Share Holders seeking their
approval of the Blum Agreement. We are confident that the Share Holders of Triad
Park will see that TKG is offering superior value.
Yours very truly,
/s/ J.T. KONTRABECKI
John Kontrabecki
President
The Kontrabecki Group, Inc.
<PAGE> 71
EXHIBIT D
December 18, 1997
VIA FACSIMILE
Mr. John Kontrabecki
President
The Kontrabecki Group, Inc.
2755 Campus Drive, Suite 100
San Mateo, CA 94403
TKG INTERNATIONAL LETTER OF DECEMBER 16, 1997
Dear John:
We have received your letter of December 16, 1997. I must admit that we
were somewhat disappointed in its contents. Please consider this response
subject to the terms of our Confidentiality Agreement.
First of all, your letter treats the Merger Agreement with Acquisition and
Richard C. Blum & Associates, LP ("Blum") as an offer of some kind. It is of
course a binding agreement which Triad Park, LLC is obligated to and intends to
honor.
Due to the intricacy of your letter, we are confident that you understand
that it does not constitute a Superior Proposal as defined under the terms of
the Merger Agreement and therefore the Company must proceed with the Proxy
Statement and the Shareholder meeting unless a Superior Proposal is received.
We were surprised that 45 days into a original 30-day due diligence period,
you still feel the need for a condition precedent based upon due diligence. Nor
did we see any proposed time frame for the elimination of this condition.
More significant was your condition of the "continued availability of
financing." Although you speak of Lehman Brothers as providing financing and
refer to a letter with conditions from them, we note the letter was not
included. You had earlier advised us that your financing was in place. This most
recent letter seems a step back. Our financial due diligence on your company
indicates it is incapable of concluding any transaction without financing. It
will be difficult to take any proposal from you seriously until you have
financing.
Lastly your condition that your "offer" isn't really an offer unless Blum
goes away without a being paid a termination fee appears specifically designed
to prevent your proposal from becoming binding or from becoming a Superior
Proposal.
Less significantly, you indicate that there should be no sales of property.
For your information, the Company has recently concluded a sale of two parcels
and a copy of our press release is included. As a confidential matter, the
Company is exploring the sale or lease of a 40,000 square foot parcel to an
existing adjacent owner in Triad Park.
We note several differences in your proposed merger agreement and the
existing Merger Agreement, some of which are acceptable and some of which are
not. To aid our review, we request that we either be provided another draft
marked from the Merger Agreement or a disk of your draft so that we may prepare
our own.
We would like the opportunity to meet with you and your counsel at your
earliest opportunity to see if there is any way in which your proposal may be
converted into a Superior Proposal.
Yours very truly,
/s/ STANLEY F. MARQUIS
Stanley F. Marquis
<PAGE> 72
EXHIBIT E
[letterhead of TKG INTERNATIONAL]
December 26, 1997
Mr. Stanley F. Marquis
Triad Park, LLC
3055 Triad Drive
Livermore, California 94550
Re: Acquisition of Triad Park, LLC
Dear Stan:
Based on our meeting earlier this week, The Kontrabecki Group, Inc.
("TKG") is prepared to offer the following assurances and clarifications to its
offer to acquire Triad Park, LLC ("Triad Park") dated December 16, 1997 (the
"December 16 Offer Letter"). Capitalized terms used without definition have
the same meanings given to them in our December 16 Offer Letter.
(1) TKG expects to complete due diligence and finalize all
financing required under the December 16 Offer Letter well in advance of the
planned meeting of Triad Park Share Holders in January 1998 and their vote on
the Blum Agreement. If, however, TKG has not already waived and eliminated the
due diligence and financing conditions set forth in its December 16 Offer
Letter, those conditions will automatically be waived and eliminated when (i) a
meeting of Triad Park Share Holders is held and Triad Park Share Holders reject
the Blum Agreement, or (ii) the Blum Agreement is terminated pursuant to
Section 9.1(a), (b) or (d) of the Blum Agreement without triggering a
termination fee under the Blum Agreement. This means that Triad Park Share
Holders can vote down the Blum Agreement and be assured that TKG's December 16
Offer Letter will then be irrevocable and will have no financing or due
diligence contingency.
(2) The sales and leases of property by Triad Park disclosed in
your December 18, 1997 letter and discussed in our meeting on Monday, December
22 (the "Dispositions") do not alter TKG's enthusiastic interest in acquiring
Triad Park and will not require any alteration in the terms of our December 16,
1997 Offer Letter -- provided that Triad Park's disclosures concerning these
Dispositions has been accurate and complete in all material respects and Triad
Park retains the net proceeds of the Dispositions. We make no commitment
concerning possible further dispositions in the future, which may or may not be
acceptable to TKG.
<PAGE> 73
Except as expressly set forth in paragraphs (1) and (2), all other
terms and conditions set forth in TKG's December 16 Offer Letter remain
unchanged. We reiterate our commitment to complete the transaction as
expeditiously as possible following rejection of the Blum Agreement by Triad
Park Share Holders or termination of the Blum Agreement under circumstances not
resulting in the payment or incurrence of the termination fee. Barring
unforeseen circumstances, we believe the Share Holders of Triad Park could
receive the proceeds from our superior offer as early as March 31, 1998.
As we indicated in our meeting on December 22, we are confident that
Triad Park Share Holders will recognize the superior value offered in this
letter and our December 16 Offer Letter. We again encourage (and authorize)
you to promptly furnish copies of this letter and our December 16 Offer Letter
to the Share Holders of Triad Park, so that they may have a full opportunity to
compare TKG's offer with the Blum Offer for themselves.
Yours very truly,
The Kontrabecki Group, Inc.
By /s/ J.T. KONTRABECKI
-------------------------
John Kontrabecki
cc: Doc Merrill, Esq.
2
<PAGE> 74
TRIAD PARK, LLC
3055 TRIAD DRIVE
LIVERMORE, CALIFORNIA 94550
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS JANUARY , 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE ADVISORY BOARD
The undersigned appoints Larry D. McReynolds and Stanley F. Marquis, and
each of them, with power to act without the other and with all the right of
substitution in each, the proxies of the undersigned to vote all shares of Triad
Park, LLC (the "Company") held by the undersigned on December , 1997, at the
Special Meeting of Shareholders of the Company, to be held on January , 1998
at 9:00 a.m. local time at the offices of the Company, 3055 Triad Drive,
Livermore, California 94550, and all adjournments thereof, with all powers the
undersigned would possess if present in person. All previous proxies given with
respect to the meeting are revoked.
Receipt of Notice of Special Meeting of Shareholders and Proxy Statement is
acknowledged by your execution of this proxy. Complete, sign, date, and return
this proxy in the addressed envelope -- no postage required. Please mail
promptly to save further solicitation expenses.
<TABLE>
<S> <C> <C> <C>
1. Approval of Merger Agreement, dated [ ] FOR THE MERGER [ ] AGAINST THE MERGER [ ] ABSTAIN
September 9, 1997, by and between TPL
Acquisition, LLC, Richard C. Blum &
Associates, LP and Triad Park, LLC
</TABLE>
(continued, and to be dated and signed, on other side)
<PAGE> 75
2.To adjourn the meeting to permit further solicitation of proxies in the event
there are not sufficient votes to approve and adopt the Merger Agreement.
[ ] APPROVED [ ] WITHHELD
3.To vote with discretionary authority upon such other matters as may come
before the meeting. (Discretionary authority will be only exercised with
respect to votes in favor or abstentions.)
[ ] APPROVED [ ] WITHHELD
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS PROVIDED BY THE
UNDERSIGNED SHAREHOLDER, THIS PROXY WILL BE VOTED "FOR" ITEM 1 LISTED HEREIN,
UPON ALL OTHER MATTERS, THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST
INTERESTS OF THE COMPANY.
SIGNATURE(S)
-----------------------------------
-----------------------------------
Dated: , 1997
INSTRUCTION: When shares are held
by joint tenants, all joint tenants
should sign. When signing as
attorney, executor, administrator,
trustee, custodian, or guardian,
please give full title as such. If
shares are held by a corporation,
this proxy should be signed in full
corporate name by its president or
other authorized officer. If a
partnership holds the shares
subject to this proxy, an
authorized person should sign in
the name of such partnership.
