<PAGE>
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______ to ______
Commission File No. 1-9321
UNIVERSAL HEALTH
REALTY INCOME TRUST
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
Universal Corporate Center
367 South Gulph Road
King of Prussia, Pennsylvania
(Address of principal executive offices)
23-6858580
(I.R.S. Employer
Identification Number)
19406
(Zip Code)
Registrant's telephone number, including area code: (610) 265-0688
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Securities registered pursuant to Section 12(b) of the Act:
Title of each Class
Shares of beneficial interest,
$.01 par value
Name of exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
------------
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___X___ No ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of voting shares held by non-affiliates as of February
15, 1995: $137,314,188. Number of shares of beneficial interest outstanding
of registrant as of February 15, 1995: 8,947,192.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its 1995 Annual
Meeting of Shareholders, which will be filed with the Securities and Exchange
Commission within 120 days after December 31, 1994 (incorporated by reference
under Part III).
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<PAGE> 1
PART I
Item 1. BUSINESS
General
Universal Health Realty Income Trust, (the "Trust") was organized under the laws
of the State of Maryland as a real estate investment trust on August 6, 1986.
The Trust may invest in income-producing, healthcare related facilities,
including acute care, rehabilitative care, long-term care, psychiatric and
substance abuse recovery facilities, retirement housing facilities, custodial
care, medical care office buildings, and ancillary support facilities associated
with any of the foregoing. The Trust qualifies as a real estate investment trust
within the meaning of the Internal Revenue Code of 1986. Consequently, the Trust
is not taxed under federal income tax laws at the Trust level on the taxable
income which it distributes to its shareholders.
The Trust has investments in fourteen facilities located in nine states. These
investments include: (i) ownership of five acute care, one comprehensive
rehabilitation and two psychiatric hospitals leased to subsidiaries of Universal
Health Services, Inc. ("UHS"); (ii) ownership of one comprehensive
rehabilitation hospital leased to an affiliate of Rehab Systems Company ("Rehab
Systems"), a subsidiary of NovaCare, Inc.; (iii) ownership of one sub-acute care
facility leased to THC-Chicago, Inc. ("THC"), an indirect wholly-owned
subsidiary of Community Psychiatric Centers ("CPC"); (iv) ownership of one
medical office building leased to several tenants including an outpatient
surgery center operated by Medical Care America ("MCA"); (v) a loan made to a
company for the construction and potential purchase of one single tenant and two
multi-tenant medical office buildings; (vi) a mortgage loan made to Crouse
Irving Memorial Properties for the purchase of the real property of the Madison
Irving Medical Center, an ambulatory treatment center and; (vii) a shared
appreciation mortgage on Lake Shore Hospital, (which is fully reserved) which is
currently in default under the terms of its mortgage loan agreement with the
Trust. In addition, the Trust agreed to provide up to $4.1 million of
construction financing, over a seven to nine month period, for construction of a
medical office building which it intends to purchase, subject to certain
contingencies, during the third quarter of 1995. The leases to the subsidiaries
of UHS are guaranteed by UHS and are cross-defaulted with one another. The lease
to the affiliate of Rehab Systems is guaranteed by Rehab Systems, the lease on
the sub-acute care facility to THC is guaranteed by CPC and the lease to the
outpatient surgery center is guaranteed by MCA.
The facilities owned by the Trust had an original aggregate purchase price of
approximately $143 million and contain 1,285 licensed beds. The leases with
respect to such facilities have fixed terms with an average of six years
remaining and provide for renewal options for up to six five-year terms. Minimum
rents are payable based on the initial acquisition costs of the facilities and,
with respect to all facilities other than the one leased to THC, additional
rents are payable based upon a percentage of increased revenues over specific
base period revenues of the respective properties. The lessees have rights of
<PAGE> 2
first refusal to purchase the facilities exercisable during, and in most cases
for 180 days after, the lease terms and also have purchase options exercisable
upon three to six months notice at the end of each lease term at the facilities'
fair market value. The ratio of earnings (exclusive of certain special Medicaid
reimbursements at one of the Trust's facilities located in Texas) before
depreciation, amortization, interest, rent and income taxes to minimum rent plus
additional rent payable to the Trust of the various facilities owned by the
Trust was approximately 3.6, 3.8 and 3.0 for the years ended December 31, 1994,
1993 and 1992, respectively. The ratio of earnings (including $12.4 million in
1994, $13.5 million in 1993 and $29.8 million in 1992 of special Medicaid
reimbursements received by one of the Trust's facilities located in Texas)
before depreciation, amortization, interest, rent and income taxes to minimum
rent plus additional rent payable to the Trust of the various facilities owned
by the Trust was approximately 4.3, 4.5 and 4.6 for the years ended December 31,
1994, 1993 and 1992, respectively.
Lessees are required to maintain all risk, replacement cost and commercial
property insurance policies on the leased properties. The Trust is one of the
named insureds and believes the leased properties are adequately insured.
Relationship to Universal Health Services, Inc.
Leases. As of December 31, 1994, subsidiaries of UHS leased eight of the ten
hospital facilities owned by the Trust with initial terms expiring in 1999
through 2003. Each of the leases contains renewal options of up to six 5-year
periods. These leases accounted for 87% of the total revenue of the Trust for
the five years ended December 31, 1994. For the twelve months ended December 31,
1994, three of the leases with UHS subsidiaries, not including the lease on
Westlake Medical Center (Westlake), were with facilities that did not generate
sufficient earnings before interest, taxes, depreciation, amortization and lease
and rental expense (EBITDAR) to cover the 1994 rent expense payable to the
Trust. These leases, one of which matures in 1999, one in 2000 and one in 2001,
generated rental income to the Trust equal to 7%, 6% and 11%, respectively, of
the Trust's total rental income for the twelve months ended December 31, 1994.
For the twelve months ended December 31, 1994, Westlake, which generated 13% of
the Trust's 1994 total rental income and whose lease matures in 2000, also did
not generate sufficient EBITDAR to cover its 1994 rent expense payable to the
Trust. Subsequent to December 31, 1994, the Trust has accepted substitution
properties in exchange for the real estate assets of Westlake (see discussion
below). Management of the Trust cannot predict whether the remaining three
leases, with subsidiaries of UHS, (which have initial renewal options at the
existing lease rates), or any of the Trust's other leases, will be renewed at
the end of their initial terms. The leases to the subsidiaries of UHS are
guaranteed by UHS and are cross-defaulted with one another.
During the fourth quarter of 1994, UHS signed a letter of intent to purchase an
acute and psychiatric care facility in exchange for cash and two acute care
facilities including the real estate assets of Westlake, a 126 bed hospital of
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<PAGE> 3
which the Trust owns the majority of real estate assets. In exchange for the
real estate assets of Westlake and the termination of the lease, the Trust has
accepted substitution properties valued at approximately $19 million
(approximating the Trust's original purchase price of Westlake) consisting of
additional real estate assets currently owned by UHS but related to three acute
care facilities (McAllen Medical Center, Inland Valley Regional Medical Center
and Wellington Regional Medical Center), currently owned by the Trust and
operated by UHS. These additional real estate assets represent major additions
and expansions made to these facilities since the purchase of the properties
from UHS in 1986. Total annual base rental payments from UHS to the Trust on
substituted properties will be $2.4 million which equals the total base and
bonus rental earned by the Trust on the Westlake facility during 1994 ($2.1
million base and $300,000 bonus). Bonus rental on the substituted properties
will be equal to 1% of the revenues generated by these additional assets. The
guarantee by UHS under the existing leases will continue. The exchange of real
estate assets between the Trust and UHS is expected to occur during the second
quarter of 1995.
Pursuant to the terms of the leases with UHS, the lessees have rights of first
refusal to purchase the respective leased facilities exercisable during, and for
180 days after, the lease terms, and 180-day rights of first refusal at the end
of the lease terms to lease the respective facilities. The leases also grant the
lessees options, exercisable on at least six months notice, to purchase the
respective leased facilities at the end of the lease term or any renewal term at
the facility's then fair market value. The terms of the leases also provide that
in the event UHS discontinues operations at the leased facility for more than
one year, or elects to terminate its lease for prudent business reasons, UHS is
obligated to offer a substitution property. If the Trust does not accept the
substitution property offered, UHS is obligated to purchase the leased facility
back from the Trust at a price equal to the greater of its then fair market
value or the original purchase price paid by the Trust. As noted below,
transactions with UHS must be approved by a majority of Trustees who are
unaffiliated with UHS (the "Independent Trustees"). However, the purchase
options and rights of first refusal granted to the respective lessees to
purchase or lease, after the expiration of the lease term, the respective leased
facilities may, in addition to adversely affecting the Trust's ability to sell
or lease a facility, present a potential conflict of interest between the Trust
and UHS since the price and terms offered by a third party are likely to be
dependent, in part, upon the financial performance of the facility during the
final years of the lease term.
Advisory Agreement. UHS of Delaware, Inc. (the "Advisor"), a wholly-owned
subsidiary of UHS, serves as Advisor to the Trust under an Advisory Agreement
dated December 24, 1986 between the Advisor and the Trust (the "Advisory
Agreement"). Under the Advisory Agreement, the Advisor is obligated to present
an investment program to the Trust, to use its best efforts to obtain
investments suitable for such program (although it is not obligated to present
any particular investment opportunity to the Trust), to provide administrative
services to the Trust and to conduct the Trust's day-to-day affairs. In
performing its services under the Advisory Agreement, the Advisor may utilize
independent professional services, including accounting, legal and other
services, for which the Advisor is reimbursed directly by the Trust. The
Advisory Agreement expires on December 31 of each year, however, it is renewable
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<PAGE> 4
by the Trust, subject to a determination by the Independent Trustees that the
Advisor's performance has been satisfactory and to the termination rights of the
parties. The Advisory Agreement may be terminated for any reason upon sixty days
written notice by the Trust or the Advisor. The Advisory Agreement has been
renewed for 1995. All transactions with UHS must be approved by the Independent
Trustees.
The Advisory Agreement provides that the Advisor is entitled to receive an
annual advisory fee equal to .60% of the average invested real estate assets of
the Trust, as derived from its consolidated balance sheet from time to time. In
addition, the Advisor is entitled to an annual incentive fee equal to 20% of the
amount by which cash available for distribution to shareholders for each year
exceeds 15% of the Trust's equity as shown on its balance sheet, determined in
accordance with generally accepted accounting principles without reduction for
return of capital dividends. No incentive fees were paid during 1994, 1993 and
1992. The advisory fee is payable quarterly, subject to adjustment at year end
based upon audited financial statements of the Trust.
Share Purchase Option. UHS has the option to purchase shares of beneficial
interest in the Trust at their fair market value to maintain a 5% interest in
the Trust. As of December 31, 1994, UHS owned 7.7% of the outstanding shares of
beneficial interest.
Competition
The Trust believes that is one of twelve real estate investment trusts (REITs)
currently investing primarily in income-producing real estate with an emphasis
on healthcare related facilities. The REITs compete with one another in that
each is continually seeking attractive investment opportunities in healthcare
related facilities.
The Trust may also compete with banks and other companies, including UHS, in the
acquisition, leasing and financing of healthcare related facilities.
In most geographical areas in which the Trust's facilities operate, there are
other facilities which provide services comparable to those offered by the
Trust's facilities, some of which are owned by governmental agencies and
supported by tax revenues, and others of which are owned by nonprofit
corporations and may be supported to a large extent by endowments and charitable
contributions. Such support is not available to the Trust's facilities. In
addition, certain hospitals which are located in the areas served by the Trust's
facilities are special service hospitals providing medical, surgical and
psychiatric services that are not available at the Trust's hospitals or other
general hospitals. The competitive position of a hospital is to a large degree
dependent upon the number and quality of staff physicians. Although a physician
may at any time terminate his or her affiliation with a hospital, the Trust's
hospitals seek to retain doctors of varied specializations on its hospital
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<PAGE> 5
staffs and to attract other qualified doctors by improving facilities and
maintaining high ethical and professional standards. The competitive position of
a hospital is also affected by alternative health care delivery systems such as
preferred provider organizations, health maintenance organizations and indemnity
insurance programs. Such systems normally involve a discount from a hospital's
established charges. Outpatient treatment and diagnostic facilities, outpatient
surgical centers, and freestanding ambulatory surgical centers also impact the
healthcare marketplace.
The Trust anticipates investing in additional healthcare related facilities and
leasing the facilities to qualified operators, perhaps including UHS and
subsidiaries of UHS.
Regulation
Private as well as federal and state payment programs, and the impact of other
laws and regulations, could have a significant effect on the utilization of the
Trust's properties and its revenues. A number of legislative initiatives have
been proposed that could result in major changes in the healthcare system,
either nationally or at the state level. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
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<PAGE> 6
Executive Officers of the Registrant
The executive officers of the Trust are as follows:
Name Age Position
---- --- --------
Alan B. Miller 57 Chairman of the Board,
Chief Executive Officer
Kirk E. Gorman 44 President, Chief Financial
Officer, Secretary and Trustee
Charles F. Boyle 35 Vice President and
Controller
Cheryl K. Ramagano 32 Vice President and
Treasurer
Timothy J. Fowler 39 Vice President,
Acquisitions and Development
Mr. Alan B. Miller has been Chairman of the Board and Chief Executive Officer of
the Trust since its inception in 1986. He served as President of the Trust until
March, 1990. Mr. Miller has been Chairman of the Board, President and Chief
Executive Officer of UHS since its inception in 1978. Prior thereto, he was
President, Chairman of the Board and Chief Executive Officer of American
Medicorp, Inc. Mr. Miller also serves as a director of GMIS Inc., Genesis Health
Ventures, Penn Mutual Life Insurance Company and CDI Corp.
Mr. Kirk E. Gorman has been President and Chief Financial Officer of the Trust
since March, 1990 and was elected to the Board of Trustees and Secretary in
December, 1994. Mr. Gorman had previously served as Vice President and Chief
Financial Officer of the Trust since April, 1987. Mr. Gorman was elected Senior
Vice President, Treasurer and Chief Financial Officer of UHS in December, 1992
and served as its Senior Vice President and Treasurer since March, 1989.
Mr. Charles F. Boyle was elected Vice President and Controller of the Trust in
June, 1991. Mr. Boyle was promoted to Assistant Vice President - Accounting of
UHS in December, 1994 and served as its Director of Corporate Accounting since
January, 1989.
Ms. Cheryl K. Ramagano was elected Vice President and Treasurer of the Trust in
September, 1992. Ms. Ramagano was promoted to Assistant Treasurer of UHS in
December, 1994 and served as its Director of Finance since May, 1990.
Mr. Timothy J. Fowler was elected Vice President, Acquisitions and Development
of the Trust upon the commencement of his employment with UHS in October, 1993.
Prior thereto, he served as a Vice President of The Chase Manhattan Bank, N.A.
since 1986.
The Trust has no employees and the Trust's officers are all employees of UHS and
receive no cash compensation from the Trust.
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<PAGE> 7
Item 2. PROPERTIES
The following table shows the Trust's individual investments by the type of
healthcare facility, capacity in terms of beds, and five-year occupancy
levels based on information provided by the lessees or mortgagors.
<TABLE>
<CAPTION>
Number of Average Occupancy (1) Lease Term
available ------------------------ ----------------------------------
Type of beds @ Minimum End of Renewal
Facility Name and Location facility 12/31/1994 1994 1993 1992 1991 1990 rent initial term term (years)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chalmette Hospital Rehabilitation 64 65% 57% 57% 57% 52% $1,261,000 1999 25
Chalmette Medical Center Acute Care 118 66% 68% 69% 69% 70% 879,000 2003 15
Chalmette, Louisiana (2)
Inland Valley Regional Medical Center Acute Care 80 45% 50% 53% 62% 61% 1,427,000 2001 30
Wildomar, California
McAllen Medical Center Acute Care 280 89% 86% 91% 79% 69% 4,047,000 2001 30
McAllen, Texas
Wellington Regional Medical Center Acute Care 120 32% 35% 33% 38% 45% 1,773,000 2001 30
West Palm Beach, Florida
Westlake Medical Center Acute Care 90 31% 26% 32% 39% 46% 2,126,000 2000 20
Westlake Village, California (3)
The BridgeWay Psychiatric 70 61% 57% 54% 63% 65% 683,000 1999 25
North Little Rock, Arkansas
Meridell Achievement Center Psychiatric 114 47% 44% 61% 81% 93% 1,071,000 2000 20
Austin, Texas (4)
Tri-State Regional Rehabilitation Hospital Rehabilitation 80 61% 71% 78% 70% 58% 1,105,000 1999 25
Evansville, Indiana (5)
THC - Chicago Sub-Acute Care 53 38% N/M - - - 1,065,000 2001 25
Chicago, Illinois (6)
Fresno - Herndon Medical Plaza Medical N/A N/A N/A N/A N/A N/A 650,000 1999-2003 Various
Fresno, California (7) Office Building
Crouse Irving Memorial Properties Ambulatory N/A N/A N/A N/A N/A N/A N/A N/A N/A
Syracuse, New York (8) Treatment Cntr.
Professional Center at Kings Crossing Medical N/A N/A N/A N/A N/A N/A N/A N/A N/A
Kingwood, Texas (9) Office Buildings
Lake Shore Hospital Psychiatric N/A N/A N/A N/A N/A N/A N/A N/A N/A
Manchester, New Hampshire (10)
</TABLE>
N/M - not meaningful; N/A - not applicable
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<PAGE> 8
(1) Average occupancy rate is based on the average number of available beds
occupied during the years ended December 31, 1994, 1993, 1992, 1991 and
1990. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for effects of various occupancy levels at the
Trust's properties. Average available beds is the number of beds which are
actually in service at any given time for immediate patient use with the
necessary equipment and staff available for patient care. A hospital may
have appropriate licenses for more beds than are in service for a number of
reasons, including lack of demand, incomplete construction, and
anticipation of future needs.
(2) At the end of 1989, Chalmette General Hospital and DeLaRonde Hospital
consolidated their acute care operations into the DeLaRonde facility. The
DeLaRonde facility now operates under the name Chalmette Medical Center.
The Chalmette facility, now operating as Chalmette Hospital, had been
dedicated to other uses, including rehabilitation programs, but no
assurance can be given as to the effect of the consolidation on the
underlying value of the Chalmette facility. Rental commitments and the
guarantee by UHS under the existing lease continue.
(3) During the fourth quarter of 1994, UHS signed a letter of intent to
purchase an acute and psychiatric care facility in exchange for cash and
two acute care facilities including the real estate assets of Westlake, a
126 bed hospital of which the Trust owns the majority of real estate
assets. In exchange for the real estate assets of Westlake and the
termination of the lease, the Trust has accepted substitution properties
valued at approximately $19 million (the Trust's original purchase price of
Westlake was approximately $19 million) consisting of additional real
estate assets currently owned by UHS but related to three acute care
facilities (McAllen Medical Center, Inland Valley Regional Medical Center
and Wellington Regional Medical Center), currently owned by the Trust and
operated by UHS. These additional real estate assets represent major
additions and expansions made to these facilities since the purchase of the
properties from UHS in 1986. Total annual base rental payments from UHS to
the Trust on substituted properties will be $2.4 million which equals the
total base and bonus rental earned by the Trust on the Westlake facility
during 1994 ($2.1 million base and $300,000 bonus). Bonus rental on the
substituted properties will be equal to 1% of the revenues generated by
these additional assets. The guarantee by UHS under the existing leases
will continue. The exchange of real estate assets between the Trust and UHS
is expected to occur during the second quarter of 1995.
(4) During 1991, the Trust acquired from UHS for approximately $4.1
million, newly constructed patient buildings on the campus of the facility
already owned by the Trust. The buildings are leased back to UHS on
substantially the same terms as the lease already governing the Hospital's
existing assets.
(5) The Trust purchased this Hospital during 1989 for approximately $7.5
million. During 1993, the Trust purchased for approximately $1.1 million,
20 additional beds which were added to the facility. The Trust entered into
an agreement with the operator, an unaffiliated third party, to lease the
facility for an initial fixed term of 10 years, with the operator having
the option to extend the lease for five 5-year renewal terms.
(6) During December of 1993, UHS the former lessee and operator of Belmont
Community Hospital, sold the operations of the facility to THC-Chicago,
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<PAGE> 9
Inc. ("THC"), an indirect wholly-owned subsidiary of Community Psychiatric
Centers ("CPC"). Concurrently, the Trust purchased certain related real
property from UHS for $1 million in cash and a note payable with a carrying
value of $963,000 at December 31, 1994. The note payable has a face value
of $1 million and is due on December 31, 2001. The amount of interest
payable on this note is contingent upon the financial performance of this
leased facility and its estimated fair value at the end of the initial
lease term. The Trust has estimated the total amount payable under the
terms of this note and has discounted the payments to their net present
value using a 6% rate. Included in the Trust's 1994 financial results is
approximately $55,000 of interest expense related to this note. In
connection with this transaction, UHS' lease with the Trust was terminated
and the Trust entered into an eight year lease agreement with THC, which is
guaranteed by CPC, for the real property of this facility, now operating as
THC-Chicago.
(7) In November of 1994, the Trust purchased the Fresno-Herndon Medical
Plaza located in Fresno, California for $6.3 million. The 37,800 square
foot Medical Office Building is leased to seven tenants, including an
outpatient surgery center operated by Medical Care America, under the terms
of leases with expiration dates ranging from November, 1999 to March, 2003.
The Trust has granted the seller the option to repurchase the property in
November, 2001 for $7,250,000.
(8) In December of 1993, the Trust provided a $6.5 million mortgage loan to
Crouse Irving Memorial Hospital, a 612 bed general acute care hospital
located in Syracuse, New York for the purchase of the real property of the
Madison Irving Medical Center, an ambulatory treatment center. The loan has
a fifteen year repayment term.
(9) In December of 1994, the Trust agreed to provide up to $4.1 million of
construction financing for the Professional Center at Kings Crossing, and
intends to purchase, subject to certain contingencies, the property upon
its completion and occupancy. The construction loan accrues interest
monthly at a margin over the one month LIBOR. The Trust expects to disburse
funds related to the construction financing ($1.1 million advanced in
December, 1994) over a seven to nine month period and anticipates
purchasing the property during the third quarter of 1995.
(10) During the first quarter of 1994, the Trust reached a settlement
agreement with Lake Shore Hospital, Inc. and Community Care Systems, Inc.
concerning the default of their obligations under the Trust's mortgage loan
on Lake Shore Hospital. Under the terms of the settlement agreement, the
Trust received $1.5 million in cash payments ($600,000 during the first
quarter of 1994 and $900,000 during the second quarter of 1994) and was
originally scheduled to receive free and clear title to Lake Shore Hospital
by June 30, 1994. Due to delays in removing liens recorded against the real
property of Lake Shore Hospital, Community Care Systems, Inc. has not yet
conveyed free and clear title of Lake Shore Hospital to the Trust. A
foreclosure sale is scheduled to be completed in the second quarter of 1995
which is expected to result in the Trust's receipt of the real property of
Lake Shore Hospital free and clear of all liens. The Trust continues to
market the property in an effort to sell or lease it to a qualified
operator. Of the $1.5 million received during the first six months of 1994,
$450,000 has been reserved for future expenses related to the settlement of
Lake Shore Hospital and the remaining $1,050,000 was included in net income
as recovery of investment losses.
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<PAGE> 10
Item 3. LEGAL PROCEEDINGS
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable. No matter was submitted during the fourth quarter of the fiscal
year ended December 31, 1994 to a vote of security holders.
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<PAGE> 11
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Trust's shares of beneficial interest are listed on the New York Stock
Exchange. The high and low closing sales prices for the Trust shares of
beneficial interest for each quarter in the two years ended December 31, 1994
and 1993 are summarized below:
1994 1993
------------------------ -----------------------
High Price Low Price High Price Low Price
------------------------ -----------------------
First Quarter $ 17 3/4 $ 16 3/8 $ 18 5/8 $ 14 1/2
Second Quarter $ 17 3/4 $ 16 $ 18 1/8 $ 16 1/4
Third Quarter $ 17 7/8 $ 16 3/4 $ 17 3/8 $ 16
Fourth Quarter $ 17 $ 15 7/8 $ 17 3/8 $ 16 1/8
As of February 1, 1995 there were approximately 1,199 shareholders of record of
the Trust's shares of beneficial interest. It is the Trust's intention to
declare quarterly dividends to the holders of its shares of beneficial interest
so as to comply with applicable sections of the Internal Revenue Code governing
real estate investment trusts. Covenants relating to the revolving credit
facility limit the Trust's ability to increase dividends in excess of 95% of
cash available for distribution unless additional distributions are required to
be made as to comply with applicable sections of the Internal Revenue Code and
related regulations governing real estate investment trusts. In each of the past
five years, dividends per share were declared as follows:
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
First Quarter $ .415 $.415 $ .40 $.375 $ .37
Second Quarter .415 .415 .41 .380 .37
Third Quarter .415 .415 .41 .390 .37
Fourth Quarter .420 .415 .41 .395 .37
------ ----- ----- ----- -----
$1.665 $1.66 $1.63 $1.54 $1.48
====== ===== ===== ===== =====
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<PAGE> 12
Item 6. SELECTED FINANCIAL DATA
Financial highlights for the Trust for the years ended December 31, 1994, 1993,
1992, 1991 and 1990 were as follows:
<TABLE>
<CAPTION>
1994 (1) 1993 (1) 1992 (1) 1991 1990
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $18,826,000 $18,263,000 $19,047,000 $19,865,000 $19,435,000
Net Income (Loss) $14,312,000 $12,259,000 ($ 1,782,000) $10,795,000 $ 9,205,000
Cash Available for
Distribution (2) $17,656,000 $15,028,000 $13,829,000 $14,253,000 $12,899,000
Per Share Data:
Net Income (Loss) $1.60 $1.45 ($ 0.25) $ 1.53 $ 1.31
Dividends $ 1.665 $ 1.66 $ 1.63 $ 1.54 $ 1.48
</TABLE>
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(2) Cash available for distribution or reinvestment, which does not represent
cash flows from operations as defined by Generally Accepted Accounting
Principles and should not be considered as an alternative to net income as an
indicator of the Trust's operating performance or to cash flows as a measure of
liquidity, is calculated as follows:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income (Loss) $14,312,000 $12,259,000 ($ 1,782,000) $10,795,000 $ 9,205,000
Depreciation
and amortization 3,282,000 3,140,000 3,144,000 3,165,000 3,152,000
Amortization of interest
rate cap 62,000 -- -- -- --
Provision for investment losses -- -- 12,467,000 350,000 150,000
(Gain) loss on investment
in marketable securities -- -- -- (57,000) 392,000
Gain on disposal of assets -- (371,000) -- -- --
------------------------------------------------------------------------------------
Total $17,656,000 $15,028,000 $13,829,000 $14,253,000 $12,899,000
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
At End of Period 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Assets $128,907,000 $126,657,000 $126,885,000 $136,369,000 $141,227,000
Debt $ 21,283,000 $ 18,947,000 $ 49,600,000 $ 45,845,000 $ 50,940,000
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE> 13
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Trust commenced operations on December 24, 1986. The Trust has investments
in fourteen facilities located in nine states. These investments include: (i)
ownership of five acute care, one comprehensive rehabilitation and two
psychiatric hospitals leased to subsidiaries of Universal Health Services, Inc.
("UHS"); (ii) ownership of one comprehensive rehabilitation hospital leased to
an affiliate of Rehab Systems Company ("Rehab Systems"), a subsidiary of
NovaCare, Inc. (NovaCare, Inc. has agreed to sell the stock of Rehab Systems
Company to HEALTHSOUTH Corp., however, this transaction has not yet been
completed); (iii) ownership of one sub-acute care facility leased to
THC-Chicago, Inc. ("THC"), an indirect wholly-owned subsidiary of Community
Psychiatric Centers ("CPC"); (iv) ownership of one medical office building
leased to several tenants including an outpatient surgery center operated by
Medical Care America ("MCA")' (v) a loan made to a company for the construction
and potential purchase of one single tenant and two multi-tenant medical office
buildings; (vi) a mortgage loan made to Crouse Irving Memorial Properties for
the purchase of the real assets of the Madison Irving Medical Center, an
ambulatory treatment center and; (vii) a shared appreciation mortgage on Lake
Shore Hospital, a psychiatric hospital which is currently in default under the
terms of its mortgage loan agreement with the Trust. The leases to the
subsidiaries of UHS are guaranteed by UHS and are cross-defaulted with one
another. The lease to the affiliate of Rehab Systems is guaranteed by Rehab
Systems and the lease to the outpatient surgery center is guaranteed by MCA. The
terms of the medical office building construction loan are described below.
It is the Trust's intention to declare quarterly dividends to the holders of its
shares of beneficial interest so as to comply with applicable sections of the
Internal Revenue Code governing real estate investment trusts. Covenants
relating to the revolving credit facility limit the Trust's ability to increase
dividends in excess of 95% of cash available for distribution unless additional
distributions are required to be made to comply with applicable sections of the
Internal Revenue Code and related regulations governing real estate investment
trusts. During 1994, dividends of $1.665 per share, or $14,897,000 in the
aggregate, were declared and paid.
Net cash generated by operating activities increased to $18.2 million in 1994
from $14.7 million in 1993 and $13.8 million in 1992. The $3.5 million increase
in net cash provided by operating activities in 1994 as compared to 1993 was due
primarily to the $1.5 million of cash received during 1994 related to the
settlement agreement on Lake Shore Hospital and a $1.4 million decrease in
interest paid due to the reduction in the Trust's average outstanding borrowings
and lower effective interest rates together with the timing of 1992 accrued
interest which was paid in early 1993. The $900,000 increase in cash provided by
operating activities in 1993 as compared to 1992 was due primarily to a $1.4
million reduction in interest paid due to a reduction in the average outstanding
borrowings and the timing of 1992 accrued interest payments as mention above.
During 1994, the $18.2 million of cash flows generated from operations and the
$2.1 million of additional borrowings were used primarily to pay dividends
($14.9 million) and purchase the real property of a medical building held for
lease ($6.3 million).
-13-
<PAGE> 14
During 1993, the Trust generated $14.7 million from operations, $32.6 million
from the issuance of an additional 1.9 million shares of beneficial interest at
$18.25 per share and $3.2 million from the sale of the real estate assets of a
psychiatric facility. These funds were used primarily to repay indebtedness
under the Trust's revolving credit facility ($31.6 million), pay dividends
($14.1 million), invest in a mortgage loan receivable and acquire additional
real estate assets. During 1992, the $13.8 million of cash generated from
operations and $3.8 million of additional net borrowings were used primarily to
pay dividends ($11.5 million) and advance funds pursuant to the terms of a
construction note receivable ($5.0 million).
From 1992 through 1994, the Trust funded $11.8 million ($5.1 million in 1992,
$6.1 million in 1993 and $584,000 in 1994) including interest due on the loan,
under the terms of a $14.1 million construction loan agreement for a medical
office building and expansion of a hospital owned by an unaffiliated major
hospital company. The Trust received principal and interest payments on the loan
totaling $9.0 million in 1993 and $2.8 million in 1994 thereby repaying and
terminating the loan agreement.
During the first quarter of 1994, the Trust reached a settlement agreement with
Lake Shore Hospital, Inc. and Community Care Systems, Inc. concerning the
default of their obligations under the Trust's mortgage loan on Lake Shore
Hospital. Under the terms of the settlement agreement, the Trust received $1.5
million in cash payments ($600,000 during the first quarter of 1994 and $900,000
during the second quarter of 1994) and was originally scheduled to receive free
and clear title to Lake Shore Hospital by June 30, 1994. Due to delays in
removing liens recorded against the real property of Lake Shore Hospital,
Community Care Systems, Inc. has not yet conveyed free and clear title of Lake
Shore Hospital to the Trust. A foreclosure sale is scheduled to be completed in
the second quarter of 1995, which is expected to result in the Trust's receipt
of the real property of Lake Shore Hospital free and clear of all liens. The
Trust continues to market the property in an effort to sell or lease it to a
qualified operator. Of the $1.5 million received during the first six months of
1994, $450,000 has been reserved for future expenses related to the settlement
of Lake Shore Hospital and the remaining $1,050,000 was included in net income
and recorded as recovery of investment losses.
In November of 1994, the Trust purchased the Fresno-Herndon Medical Plaza
located in Fresno, California for $6.3 million. The 37,800 square foot medical
office building is leased to seven tenants, including an outpatient surgery
center operated by Medical Care America, under terms of leases with expiration
dates ranging from November of 1999 to March of 2003. The Trust has granted the
seller the option to repurchase the property in November, 2001 for $7,250,000.
In December of 1994, the Trust agreed to provide up to $4.1 million of
construction financing for the Professional Center at Kings Crossing, and
intends to purchase, subject to certain contingencies, the property upon its
completion and occupancy. The construction loan accrues interest monthly at a
margin over the one month LIBOR. The Trust expects to disburse funds related to
the construction financing ($1.1 million advanced in December, 1994) over a
seven to nine month period and anticipates purchasing the property during the
third quarter of 1995.
During 1994, the Company entered into a new $45 million non-amortizing revolving
credit agreement (the "Agreement") which provides for interest at the Trust's
option, at the certificate of deposit rate plus 3/4%, Eurodollar rate plus 3/4%
or the prime rate. A fee of 3/8% is required on the unused portion of this
-14-
<PAGE> 15
commitment. As of December 31, 1994, the Trust has $25 million of unused
borrowing capacity under its revolving credit facility. The Agreement matures on
February 28, 1997 at which time all amounts then outstanding are required to be
repaid. The Agreement contains a provision whereby the commitments will be
reduced by 50% of the proceeds of any new equity proceeds offering.
The Trust has entered into interest rate swap agreements and an interest rate
cap agreement to reduce the impact of changes in the interest rates on its
floating rate revolving credit notes. The outstanding swap agreements in the
amounts of $5 million each mature in April, 1997 and May, 1999 and effectively
fix the interest rate on $10 million of variable rate debt at 7.6%. The interest
rate cap, for which the Trust paid $622,750, matures in June, 1999 and fixes the
maximum rate on $15 million of variable rate revolving credit notes at 7.75%.
The interest rate cap was purchased in June, 1994 in anticipation of certain
borrowing transactions by the Trust. A portion of the borrowings were made in
1994 and the remaining borrowings are expected to be made in 1995. The Trust is
exposed to credit loss in the event of nonperformance by the counterparties to
the interest rate swap agreements. These counterparties are major financial
institutions and the Trust does not anticipate nonperformance by the
counterparties, which are rated A or better by Moody's Investors Service. At
December 31, 1994, termination of the interest rate swaps would have resulted in
payments to the Trust of $321,074 and termination of the interest rate cap would
have resulted in a payment to the Trust of $733,723.
Covenants related to the revolving credit facility require the maintenance of a
minimum tangible net worth and specified financial ratios, limit the Trust's
ability to incur additional debt, increase dividends in excess of 95% of cash
flow and limit the aggregate amount of mortgage receivables. Management of the
Trust believes that cash generated from operations and other available sources
of capital will be sufficient to fund current operations, repay current
maturities of long-term debt, finance planned expenditures and permit
distributions to shareholders so as to comply with the applicable sections of
the Internal Revenue Code governing real estate investment trusts.
Results of Operations
1994 Compared to 1993
Total revenues increased 3% in 1994 to $18.8 million from $18.3 million in 1993.
The $563,000 increase in net revenue was attributable to (i) a $194,000 increase
in total base rentals resulting from a $1,006,000 increase in base rentals from
non-related parties partially offset by a $812,000 decrease in base rentals from
UHS facilities (see below); (ii) an increase of $307,000 in interest income
consisting of $633,000 of interest earned on the $6.5 million mortgage loan
advanced in December of 1993, partially offset by a $320,000 decrease in the
interest earned under the terms of the construction loan which was fully repaid
during the third quarter of 1994; and (iii) a $62,000 increase in bonus rentals
which are computed as a percentage of each facilities revenue in excess of base
year amounts. The decrease in the base rentals from UHS facilities and
corresponding increase in base rentals from non-related parties is due to the
increase in the invested real estate assets and the lease rate of an acute care
facility which was sold by UHS, the former owner and operator, to THC in
December of 1993. A new eight year lease on this facility commenced in December,
1993. Approximately $124,000 and $130,000 of the Trust's 1994 and 1993 bonus
rentals, respectively, were attributable to special Medicaid reimbursement
programs which relate to an acute care hospital owned by the Trust. The
facility, which participates in the Texas Medical Assistance Program, became
-15-
<PAGE> 16
eligible and received additional reimbursements from the state's
disproportionate share hospital fund since the facility met certain conditions
of participation and served a disproportionately high share of the state's low
income patients. This program is scheduled to terminate in August, 1995 and the
Trust can not predict whether these programs will continue beyond the scheduled
termination date.
For the twelve months ended December 31, 1994, three of the leases with UHS
subsidiaries, not including the lease on Westlake Medical Center (Westlake), and
one with a non-related party, were with facilities that did not generate
sufficient earnings before interest, taxes, depreciation, amortization and lease
and rental expense (EBITDAR) to cover the total 1994 rent expense payable to the
Trust. These leases, one of which matures in 1999, one in 2000 and two in 2001,
generated rental income to the Trust equal to 7%, 6% and 17%, respectively,of
the Trust's total rental income for the twelve months ended December 31, 1994.
For the twelve months ended December 31, 1994, Westlake, which generated 13% of
the Trust's 1994 total rental income and whose lease matures in 2000, also did
not generate sufficient EBITDAR to cover its 1994 rent expense payable to the
Trust. Subsequent to December 31, 1994, the Trust has accepted substitution
properties in exchange for the real assets of Westlake (see Relationship to
Universal Health Services, Inc. in Item 1). Management of the Trust cannot
predict whether the remaining three leases with subsidiaries of UHS (which have
initial renewal options at the existing lease rates), or any of the Trust's
other leases will be renewed at the end of their initial terms. The leases to
the subsidiaries of UHS are guaranteed by UHS and are cross-defaulted with one
another.
The average occupancy rate of a hospital is affected by a number of factors,
including the number of physicians using the hospital, changes in the number of
beds, the composition and size of the population of the community in which the
hospital is located, general and local economic conditions, variations in local
medical and surgical practices and the degree of outpatient use of the hospital
services. Current industry trends in utilization and occupancy have been
significantly affected by changes in reimbursement policies of third party
payers. A continuation of such industry trends could have a material adverse
impact upon the future operating performance of the Trust's facilities. The
Trust's facilities have experienced growth in outpatient utilization over the
past several years. The increase is primarily the result of advances in medical
technologies, which allow more services to be provided on an outpatient basis,
and increased pressure from Medicare, Medicaid, health maintenance organizations
(HMOs), preferred provider organizations (PPOs) and insurers to reduce hospital
stays and provide services, where possible, on a less expensive outpatient
basis. The Trust expects growth in outpatient services to continue, although the
rate of growth may be moderated in the future.
An increased proportion of the Trust's hospitals revenue is derived from fixed
payment services, including Medicare and Medicaid. Management of the Trust's
hospitals expects the Medicare and Medicaid revenues to continue to increase as
a larger portion of the general population qualifies for coverage as a result of
the aging of the population and expansion of state Medicaid programs. The
Medicare program reimburses the Trust's hospitals primarily based on established
rates by a diagnosis related group for acute care hospitals and by a cost based
formula for psychiatric hospitals. In addition to the Medicare and Medicaid
programs, other payers continue to actively negotiate the amounts they will pay
-16-
<PAGE> 17
for services performed. In general, management of the Trust's hospitals expects
the percentage of its business from managed care programs, including HMOs and
PPOs to grow. The consequent growth in managed care networks and the resulting
impact of these networks on the operating results of the Trust's facilities vary
among the markets in which the Trust's facilities operate. The Trust is unable
to predict the rate of growth of the net revenues of its facilities and the
resulting impact on bonus revenues, which are computed as a percentage of each
facility's revenues in excess of base year amounts, because the net revenues of
the Trust's facilities are dependent upon developments in medical technologies
and physician practice patterns, both of which are beyond the control of
management of the facilities.
In addition to the trends described above that continue to have an impact on the
revenues of the Trust's facilities, there are a number of other, more general
factors affecting the Trust's facilities. The healthcare industry faces
increased uncertainty with respect to the level of payer payments because of
national and state efforts to reform healthcare. These efforts include proposals
at all levels of government to contain healthcare costs while making quality,
affordable health services available to more Americans. The Trust is unable to
predict which proposals, if any, will be adopted or the resulting implications
for healthcare providers at this time.
Cash available for distribution or reinvestment, which is the sum of net income
plus depreciation & amortization and amortization of interest rate cap, less
gain on disposal of assets, totalled $17.7 million and $15.0 million for 1994
and 1993,respectively. Cash available for distribution or reinvestment does not
represent cash flows from operations as defined by Generally Accepted Accounting
Principles and should not be considered as an alternative to net income as an
indicator of the Trust's operating performance or to cash flows as a measure of
liquidity.
Included in the financial results for 1994, and recorded as (recovery
of)/provision for investment losses, was ($1.5 million) of cash payments
received related to the Lake Shore Hospital settlement agreement and ($184,000)
of proceeds received during the year related to an investment in marketable
equity securities which was written down to zero in a prior year. Partially
offsetting these amounts was a $450,000 increase in the reserve established for
future expenses related to the settlement of Lake Shore Hospital.
Interest expense decreased $759,000 in 1994 as compared to 1993, due to lower
average outstanding borrowings and lower effective interest rates.
Depreciation and amortization increased $142,000 in 1994 as compared to 1993 due
primarily to $79,000 of accelerated amortization of financing fees related to
the old revolving credit agreement recorded during 1994 and increased
depreciation expense on the $1.9 million of additional real estate assets
purchased by the Trust in December of 1993 related to its sub-acute care
facility in Chicago, Illinois leased to THC.
Included in the financial results for 1993 was a $371,000 gain on the
disposition of a psychiatric facility sold by the Trust during the first quarter
of 1993.
Net income for 1994 was $14.3 million or $1.60 per share compared to $12.3
million or $1.45 per share in 1993.
-17-
<PAGE> 18
1993 Compared to 1992
Total revenues decreased 4% in 1993 to $18.3 million from $19.0 million in 1992.
The decrease in revenues in 1993 as compared to 1992 was partially due to a
$423,000 decrease in base rentals due to the disposition of a psychiatric
facility in the first quarter of 1993 and a reduction in the base rate,
effective March 1993, on a UHS facility which is adjusted every five years to a
4% margin over the then prevailing five-year Treasury rate. Interest income
decreased $348,000 in 1993 as compared to 1992 due to approximately $700,000 of
interest income on the Lake Shore Hospital mortgage covering the period of
January through mid-May 1992 being included in the 1992 revenue. Partially
offsetting this decrease in interest income was a $360,000 increase in the
interest income earned on a construction loan which commenced in the third
quarter of 1992. Approximately $130,000 and $300,000 of the Trust's 1993 and
1992 bonus rentals, respectively, were attributable to special Medicaid
reimbursement programs (see discussion of 1994 Results of Operations).
Interest expense decreased $1.9 million in 1993 as compared to 1992, due
primarily to lower outstanding borrowings. During 1993, the Trust issued an
additional 1,900,000 shares of beneficial interest which generated approximately
$32.6 million of net proceeds. These proceeds were used primarily to repay
indebtedness under the Trust's revolving credit agreement.
Included in the financial results for 1993 was a $371,000 gain on the
disposition of a psychiatric facility sold by the Trust during the first quarter
of 1993. During 1992, the Trust recorded a $12.5 million provision for
investment loss to fully reserve the Lake Shore Hospital mortgage note
receivable.
Net income for 1993 was $12.3 million or $1.45 per share compared to a net loss
for 1992 of ($1.8) million or ($0.25) per share.
Cash available for distribution or reinvestment, which is the sum of net income
plus depreciation and amortization, plus provision for investment losses, minus
gain on disposal of assets, totaled $15.0 million in 1993 and $13.8 million in
1992, respectively. Cash available for distribution or reinvestment does not
represent cash flows from operations as defined by Generally Accepted Accounting
Principles and should not be considered as an alternative to net income as an
indicator of the Trust's operating performance or to cash flows as a measure of
liquidity.
-18-
<PAGE> 19
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Trust's Balance Sheets and its Statements of Operations, Changes in
Shareholders' Equity and Cash Flows, together with the report of Arthur Andersen
LLP, independent public accountants, are included elsewhere herein. Reference is
made to the "Index to Financial Statements and Schedules."
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-19-
<PAGE> 20
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information to appear under the
caption "Election of Trustees" in the Trust's definitive Proxy Statement to be
filed with the Securities and Exchange Commission within 120 days after December
31, 1994. See also "Executive Officers of the Registrant" appearing in Part I
hereof.
Item 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information under the caption
"Executive Compensation" and "Compensation Pursuant to Plans" in the Trust's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission within 120 days after December 31, 1994.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
There is hereby incorporated by reference the information under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the Trust's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission within 120 days after December 31, 1994.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information under the caption
"Transactions With Management and Others" in the Trust's definitive Proxy
Statement to be filed with the Securities and Exchange Commission within 120
days after December 31, 1994.
-20-
<PAGE> 21
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Financial Statements and Financial Statement Schedules:
1) Report of Independent Public Accountants
2) Financial Statements
Balance Sheets - December 31, 1994 and December 31, 1993.
Statements of Operations - Years Ended December 31, 1994,
1993 and 1992.
Statements of Changes in Shareholders' Equity - Years Ended
December 31, 1994, 1993 and 1992.
Statements of Cash Flows - Years Ended December 31, 1994,
1993 and 1992.
Notes to Financial Statements
(3) Schedules
Schedule II - Valuation and Qualifying Accounts - Years
Ended December 31, 1994, 1993 and 1992.
Schedule III - Real Estate and Accumulated Depreciation -
December 31, 1994.
Notes to Schedule III - December 31, 1994.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last
quarter of the year ended December 31, 1994.
(c) Exhibits:
3.1 Declaration of Trust, dated as of August 1986, previously filed
as Exhibit 3.1 to Amendment No. 3 of the Registration Statement on Form S-11 and
Form S-2 of Universal Health Services, Inc. and the Trust (Registration No.
33-7872), is incorporated herein by reference.
3.2 Amendment to Declaration of Trust, dated as of June 23, 1993,
previously filed as Exhibit 3.2 to the Trust's Annual Report on Form 10-K for
the year ended December 31, 1993, is incorporated herein by reference.
3.3 Amended and restated bylaws, filed as Exhibit 3.2 to the Trust's
Annual Report on Form 10-K for the year ended December 31, 1988, is incorporated
herein by reference.
10.1 Advisory Agreement, dated as of December 24, 1986, between UHS of
Delaware, Inc. and The Trust, previously filed as Exhibit 10.2 to the Trust's
Current Report on Form 8-K dated December 24, 1986, is incorporated herein by
reference.
-21-
<PAGE> 22
10.2 Agreement effective January 1, 1995, to renew Advisory Agreement
dated as of December 24, 1986 between Universal Health Realty Income Trust and
UHS of Delaware, Inc.
10.3 Contract of Acquisition, dated as of August 1986, between the
Trust and certain subsidiaries of Universal Health Services, Inc., previously
filed as Exhibit 10.2 to Amendment No. 3 of the Registration Statement on Form
S-11 and S-2 of Universal Health Services, Inc. and the Trust (Registration No.
33-7872), is incorporated herein by reference.
10.4 Form of Leases, including Form of Master Lease Document Leases,
between certain subsidiaries of Universal Health Services, Inc. and the Trust,
previously filed as Exhibit 10.3 to Amendment No. 3 of the Registration
Statement on Form S-11 and Form S-2 of Universal Health Services, Inc. and the
Trust (Registration No. 33-7872), is incorporated herein by reference.
10.5 Share Option Agreement, dated as of December 24, 1986, between
the Trust and Universal Health Services, Inc., previously filed as Exhibit 10.4
to the Trust's Current Report on Form 8-K dated December 24, 1986, is
incorporated herein by reference.
10.6 Corporate Guaranty of Obligations of Subsidiaries Pursuant to
Leases and Contract of Acquisition, dated December 1986, issued by Universal
Health Services, Inc. in favor of the Trust, previously filed as Exhibit 10.5 to
the Trust's Current Report on Form 8-K dated December 24, 1986, is incorporated
herein by reference.
10.7 Loan Agreement dated August 30, 1988 between the Trust and Lake
Shore Hospital, Inc., previously filed as Exhibit 10.1 to the Trust's quarterly
report on Form 10-Q for the quarter ended September 30, 1988, is incorporated
herein by reference.
10.8 Contract of Acquisition dated August 31, 1988 between the Trust,
Rehab Systems Company, Inc. and Tri-State Regional Rehabilitation Hospital,
Inc., previously filed as Exhibit 10.2 to the Trust's September 30, 1988 Form
10-Q, is incorporated herein by reference.
10.9 Key Employees' Restricted Share Purchase Plan approved by the
Trustees on December 1, 1988 which authorized the issuance of up to 50,000
common shares, previously filed as Exhibit 10.11 to the Trust's Annual Report on
form 10-K for the year ended December 31, 1988, is incorporated herein by
reference.
10.10 Share Compensation Plan for Outside Trustees, previously filed
as Exhibit 10.12 to the Trust's Annual Report on Form 10-K for the year ended
December 31, 1991, is incorporated herein by reference.
10.11 1988 Non-Statutory Stock Option Plan, as amended, previously
filed as Exhibit 10.13 to the Trust's Annual Report on Form 10-K for the year
ended December 31, 1991, is incorporated herein by reference.
-22-
<PAGE> 23
10.12 Loan Agreement and Deed of Trust Note between Concord/Reston
Limited Partnership and Universal Health Realty Income Trust dated August 13,
1992, previously filed as Exhibit 10.16 to the Trust's Annual Report on Form
10-K for the year ended December 31, 1992, is incorporated herein by reference.
10.13 Revolving Credit Agreement dated as of March 7, 1994, by and
among Universal Health Realty Income Trust, CoreStates Bank, N.A., as agent, The
First National Bank of Boston and First Fidelity Bank, National Association,
previously filed as Exhibit 10.13 to the Trust's Annual Report on Form 10-K for
the year ended December 31, 1993, as incorporated herein by reference.
10.14 Lease dated December 22, 1993, between Universal Health Realty
Income Trust and THC-Chicago, Inc. as lessee, previously filed as Exhibit 10.14
to the Trust's Annual Report on Form 10-K for the year ended December 31, 1993,
is incorporated herein by reference.
10.15 Mortgage Modification, Consolidation and Extension Agreement and
Consolidated Note dated December 28, 1993 in the amount of $6,500,000.00 from
Crouse Irving Memorial Properties, Inc. to Universal Health Realty Income Trust,
previously filed as Exhibit 10.15 to the Trust's Annual Report on Form 10-K for
the year ended December 31, 1993, is incorporated herein by reference.
10.16 Agreement for Purchase and Sale and Repurchase Agreement dated
as of November 4, 1994 between Fresno-Herndon Partners, Limited and Universal
Health Realty Income Trust.
10.17 Agreement of Purchase and Sale, and Construction Loan Agreement
dated as of December 20, 1994 between Turner Adreac, L.C. and Universal Health
Realty Income Trust.
27. Financial Data Schedule.
28.1 Dividend Reinvestment Plan for Stockholders, previously filed as
Exhibit 28.1 to the Trust's Form 10-Q for the quarter ended March 31, 1987, is
incorporated herein by reference.
-23-
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 14, 1995
UNIVERSAL HEALTH REALTY INCOME TRUST
(Registrant)
By: /s/ Alan B. Miller
-------------------------------------
Alan B. Miller, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date Signature and Title
---- -------------------
/s/ Alan B. Miller
-------------------------------------
March 14, 1995 Alan B. Miller, Chairman of the Board
and Chief Executive Officer
/s/ Daniel M. Cain
-------------------------------------
March 15, 1995 Daniel M. Cain, Trustee
/s/ Peter Linneman
-------------------------------------
March 15, 1995 Peter Linneman, Trustee
/s/ Myles H. Tanenbaum
-------------------------------------
March 15, 1995 Myles H. Tanenbaum, Trustee
/s/ Michael R. Walker
-------------------------------------
March 15, 1995 Michael R. Walker, Trustee
/s/ Kirk E. Gorman
-------------------------------------
March 14, 1995 Kirk E. Gorman, President, Chief
Financial Officer, Secretary and Trustee
/s/ Charles F. Boyle
-------------------------------------
March 14, 1995 Charles F. Boyle, Vice President and
Controller
/s/ Cheryl K. Ramagano
-------------------------------------
March 14, 1995 Cheryl K. Ramagano, Vice President and
Treasurer
/s/ Timothy J. Fowler
-------------------------------------
March 16, 1995 Timothy J. Fowler, Vice President,
Acquisitions and Development
-24-
<PAGE> 25
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
----
Report of Independent Public Accountants F-2
Balance Sheets - December 31, 1994 and December 31, 1993 F-3
Statements of Operations - Years Ended December 31, 1994,
1993 and 1992 F-4
Statements of Changes in Shareholders' Equity - Years Ended
December 31, 1994, 1993 and 1992 F-5
Statements of Cash Flows - Years Ended December 31, 1994,
1993 and 1992 F-6
Notes to Financial Statements F-7
Schedule II - Valuation and Qualifying Accounts -
Years Ended December 31, 1994, 1993 and 1992 F-16
Schedule III - Real Estate and Accumulated Depreciation -
December 31, 1994 F-17
Notes to Schedule III F-18
F-1
<PAGE> 26
Report of Independent Public Accountants
To The Shareholders and Board of Trustees of
Universal Health Realty Income Trust:
We have audited the accompanying balance sheets of Universal Health Realty
Income Trust (a Maryland real estate investment trust) as of December 31, 1994
and 1993 and the related statements of operations, changes in shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1994. These financial statements and the schedules referred to below are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
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 audits provide 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 Universal Health Realty Income
Trust, as of December 31, 1994 and 1993 and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the Index to
Financial Statements and Schedules on Page F-1 are presented for the purpose of
complying with the Securities and Exchange Commission's Rules and are not a
required part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Philadelphia, Pennsylvania
January 17, 1995
F-2
<PAGE> 27
Universal Health Realty Income Trust
Balance Sheets
<TABLE>
<CAPTION>
December 31,
------------------
Assets: 1994 1993
------- ---- ----
<S> <C> <C>
Real Estate Investments:
Buildings & improvements $119,587,000 $114,321,000
Accumulated depreciation (22,646,000) (19,519,000)
------------ ------------
96,941,000 94,802,000
Land 23,482,000 22,463,000
Mortgage loans receivable, net (Note 7) 6,440,000 6,436,000
Construction loan note receivable, net (Note 7) 1,143,000 2,103,000
Reserve for investment losses (Note 7) (490,000) (77,000)
------------ ------------
Net Real Estate Investments 127,516,000 125,727,000
Other Assets:
Cash 2,000 44,000
Bonus rent receivable from UHS 621,000 769,000
Rent receivable from non-related parties 68,000 --
Construction and mortgage loan interest receivable 3,000 14,000
Deferred charges, net 697,000 103,000
------------ ------------
$128,907,000 $126,657,000
============ ============
Liabilities and Shareholders' Equity:
-------------------------------------
Liabilities:
Bank borrowings $ 20,320,000 $ 18,040,000
Note payable to UHS 963,000 907,000
Accrued interest 117,000 39,000
Accrued expenses & other liabilities 698,000 641,000
Tenant reserves, escrows, deposits and prepaid
rental 364,000 --
Commitments and Contingencies
Shareholders' Equity:
Preferred shares of beneficial interest,
$.01 par value; 5,000,000 shares authorized;
none outstanding............ -- --
Common shares, $.01 par value;
95,000,000 shares authorized; issued
and outstanding: 8,947,192 shares
in 1994 and 1993............... 89,000 89,000
Capital in excess of par value....... 128,643,000 128,643,000
Cumulative net income ............... 70,412,000 56,100,000
Cumulative dividends ................ (92,699,000) (77,802,000)
------------ ------------
Total Shareholders' Equity 106,445,000 107,030,000
------------ ------------
$128,907,000 $126,657,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 28
Universal Health Realty Income Trust
Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues (Note 2):
------------------
Base rental - UHS facilities $13,267,000 $14,079,000 $14,596,000
Base rental - Non-related parties 2,097,000 1,091,000 997,000
Bonus rental 2,629,000 2,567,000 2,580,000
Interest (Note 7) 833,000 526,000 874,000
----------- ----------- -----------
18,826,000 18,263,000 19,047,000
----------- ----------- -----------
Expenses:
---------
Depreciation and amortization 3,282,000 3,140,000 3,144,000
Interest expense 1,146,000 1,905,000 3,838,000
Advisory fees to UHS (Note 2) 909,000 880,000 913,000
Other operating expenses 411,000 450,000 467,000
(Recovery of) provision for investment
losses (Notes 7 & 9) (1,234,000) -- 12,467,000
----------- ----------- -----------
4,514,000 6,375,000 20,829,000
----------- ----------- -----------
Income (loss) before gain on disposal of
assets 14,312,000 11,888,000 (1,782,000)
Gain on disposal of assets -- 371,000 --
----------- ----------- -----------
Net Income (Loss) $14,312,000 $12,259,000 ($1,782,000)
=========== =========== ===========
Net Income (Loss) Per Share $1.60 $1.45 ($0.25)
=========== =========== ===========
Weighted Average Shares Outstanding 8,947,486 8,457,082 7,047,192
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 29
Universal Health Realty Income Trust
Statements of Changes in Shareholders' Equity
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Common Shares
----------------------- Capital in
Number excess of Cumulative Cumulative
of Shares Amount par value net income dividends
--------- ------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
January 1, 1992 7,047,192 $70,000 $96,085,000 $45,623,000 ($52,251,000)
Net Loss -- -- -- (1,782,000) --
Dividends ($1.63/share) -- -- -- -- (11,487,000)
Amortization of
deferred compensation -- -- 7,000 -- --
------------------------------------------------------------------------------------------------------------
January 1, 1993 7,047,192 70,000 96,092,000 43,841,000 (63,738,000)
Net Income -- -- -- 12,259,000 --
Dividends ($1.66/share) -- -- -- -- (14,064,000)
Net proceeds from issuance
of shares of beneficial
interest 1,900,000 19,000 32,551,000 -- --
------------------------------------------------------------------------------------------------------------
January 1, 1994 8,947,192 89,000 128,643,000 56,100,000 (77,802,000)
Net income -- -- -- 14,312,000 --
Dividends ($1.665/share) -- -- -- -- (14,897,000)
------------------------------------------------------------------------------------------------------------
December 31, 1994 8,947,192 $89,000 $128,643,000 $70,412,000 ($92,699,000)
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 30
Universal Health Realty Income Trust
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $14,312,000 $12,259,000 ($1,782,000)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation & amortization 3,282,000 3,140,000 3,144,000
Provision for investment losses 450,000 -- 12,467,000
Amortization of interest rate cap 62,000 -- --
Loss (gain) on disposal of assets 15,000 (371,000) --
Gain on investment in marketable securities (184,000) -- --
Changes in assets and liabilities:
Rent receivable 80,000 (161,000) (118,000)
Accrued expenses and other accrued liabilities 57,000 137,000 11,000
Prepaid rental 92,000 -- --
Construction and mortgage loan interest receivable 11,000 488,000 (113,000)
Accrued interest 78,000 (477,000) 68,000
Reserve for investment losses (37,000) (173,000) --
Deferred charges & other (19,000) (114,000) 119,000
----------- ----------- -----------
Net cash provided by operating activities 18,199,000 14,728,000 13,796,000
----------- ----------- -----------
Cash flows from investing activities:
Sale of real property 40,000 3,218,000 --
Acquisition of real property (6,340,000) (2,062,000) --
Advances under construction note receivable (1,727,000) (6,103,000) (5,016,000)
Repayments under construction note receivable 2,759,000 8,612,000 --
Proceeds from investments in marketable securities 184,000 -- --
Other 272,000 -- --
Advances under mortgage loan receivable -- (6,500,000) --
----------- ----------- -----------
Net cash used in investing activities (4,812,000) (2,835,000) (5,016,000)
----------- ----------- -----------
Cash flows from financing activities:
Additional borrowings, net of financing costs 2,091,000 -- 5,350,000
Repayment of debt -- (31,560,000) (1,595,000)
Purchase of interest rate cap (623,000) -- --
Dividends paid (14,897,000) (14,064,000) (11,487,000)
Proceeds from issuance of shares of beneficial
interest, net -- 32,570,000 --
----------- ----------- -----------
Net cash used in financing activities (13,429,000) (13,054,000) (7,732,000)
----------- ----------- -----------
(Decrease) increase in cash (42,000) (1,161,000) 1,048,000
Cash, beginning of period 44,000 1,205,000 157,000
----------- ----------- -----------
Cash, end of period $2,000 $44,000 $1,205,000
=========== =========== ===========
Supplemental disclosures of cash flow information:
Interest paid $1,012,000 $2,382,000 $3,770,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 31
Universal Health Realty Income Trust
Notes to Financial Statements
December 31, 1994
(1) Summary of Significant Accounting Policies
Universal Health Realty Income Trust (the "Trust") is organized as a Maryland
real estate investment trust. The Trust operates as a real estate investment
trust and owns or holds mortgages and construction loan receivables on acute
care, sub-acute care, and other health care facilities, some of which are leased
to subsidiaries of Universal Health Services, Inc., ("UHS").
Federal Income Taxes
No provision has been made for Federal income tax purposes since the Trust
qualifies as a real estate investment trust under Sections 856 to 860 of the
Internal Revenue Code of 1986, and intends to continue to remain so qualified.
As such, it is required to distribute at least 95 percent of its real estate
investment taxable income to its shareholders.
The Trust is subject to a Federal excise tax computed on a calendar year basis.
The excise tax equals 4% of the excess, if any, of 85% of the Trust's ordinary
income plus 95% of any capital gain income for the calendar year over cash
distributions during the calendar year, as defined. No provision for excise tax
has been reflected in the financial statements as no tax was due.
Earnings and profits, which will determine the taxability of dividends to
shareholders, will differ from net income reported for financial reporting
purposes due to the differences for federal tax purposes in the cost basis of
assets and in the estimated useful lives used to compute depreciation and the
recording of provision for investment losses.
Real Estate Properties
The Trust records acquired real estate at cost and uses the straight-line method
of depreciation for buildings and improvements over estimated useful lives of 25
to 45 years.
Per Share Data
Net income per share is based on the weighted average number of common shares of
beneficial interest outstanding during the year adjusted to give effect to
common share equivalents, consisting of stock options.
Statements of Cash Flows
For purposes of the Statements of Cash Flows, the Trust considers all highly
liquid investment instruments with maturities of three months or less to be cash
equivalents.
F-7
<PAGE> 32
Interest Rate Protection Agreements
In managing interest rate exposure, the Trust at times enters into interest rate
swap agreements and interest rate cap agreements. When interest rates change,
the differential to be paid or received under the Trust's interest rate swap
agreements is accrued as interest expense and is recognized over the life of the
agreements. Premiums paid for purchased interest rate cap agreements are
amortized to interest expense over the terms of the caps. Unamortized premiums
are included in deferred charges in the accompanying balance sheet. Amounts
receivable under the cap agreements is accrued as a reduction of interest
expense.
(2) Related Party Transactions
UHS of Delaware, Inc. (the "Advisor"), a wholly-owned subsidiary of UHS, serves
as Advisor to the Trust under an Advisory Agreement dated December 24, 1986
between the Advisor and the Trust (the "Advisory Agreement"). Under the Advisory
Agreement, the Advisor is obligated to present an investment program to the
Trust, to use its best efforts to obtain investments suitable for such program
(although it is not obligated to present any particular investment opportunity
to the Trust), to provide administrative services to the Trust and to conduct
the Trust's day-to-day affairs. In performing its services under the Advisory
Agreement, the Advisor may utilize independent professional services, including
accounting, legal and other services, for which the Advisor is reimbursed
directly by the Trust. The Advisory Agreement expires on December 31 of each
year, however, it is renewable by the Trust, subject to a determination by the
Independent Trustees that the Advisor's performance has been satisfactory and to
the termination rights of the parties. The Advisory Agreement may be terminated
for any reason upon sixty days written notice by the Trust or the Advisor. The
Advisory Agreement has been renewed for 1995. All transactions with UHS must be
approved by the Independent Trustees.
The Advisory Agreement provides that the Advisor is entitled to receive an
annual advisory fee equal to .60% of the average invested real estate assets of
the Trust, as derived from its consolidated balance sheet from time to time. In
addition, the Advisor is entitled to an annual incentive fee equal to 20% of the
amount by which cash available for distribution to shareholders for each year
exceeds 15% of the Trust's equity as shown on its balance sheet, determined in
accordance with generally accepted accounting principles without reduction for
return of capital dividends. No incentive fees were paid during 1994, 1993 and
1992. The advisory fee is payable quarterly, subject to adjustment at year end
based upon audited financial statements of the Trust.
For the years ended December 31, 1994, 1993 and 1992, 83%, 91% and 89%,
respectively, of the Trust's gross revenues were earned under the terms of the
leases with wholly-owned subsidiaries of UHS. UHS has unconditionally guaranteed
F-8
<PAGE> 33
the obligations of its subsidiariesunder these leases. Revenues received from
UHS and from other non-related parties were as follows:
Year Ended December 31,
---------------------------------------
1994 1993 1992
---- ---- ----
Base rental - UHS facilities $13,267,000 $14,079,000 $14,596,000
Base rental - Non-related parties 2,097,000 1,091,000 997,000
----------- ----------- -----------
Total base rental 15,364,000 15,170,000 15,593,000
----------- ----------- -----------
Bonus rental - UHS facilities 2,414,000 2,474,000 2,450,000
Bonus rental - Non-related parties 215,000 93,000 130,000
----------- ----------- -----------
Total bonus rental 2,629,000 2,567,000 2,580,000
----------- ----------- -----------
Interest - Non-related parties 833,000 526,000 874,000
----------- ----------- -----------
Total revenues $18,826,000 $18,263,000 $19,047,000
=========== =========== ===========
At December 31, 1994, approximately 7.7% of the Trust's outstanding shares of
beneficial interest were held by UHS. The Trust has granted UHS the option to
purchase Trust shares in the future at fair market value to enable UHS to
maintain a 5% interest in the Trust.
Certain officers and directors of the Trust are also officers and/or directors
of UHS.
(3) Acquisitions and Dispositions
1994 - In November of 1994, the Trust purchased the Fresno-Herndon Medical Plaza
located in Fresno, California, for $6.3 million. The 37,800 square foot Medical
office Building is leased to seven tenants, including an outpatient surgery
center operated by Medical Care America, under the terms of leases with
expiration dates ranging from November, 1999 to March, 2003. The Trust has
granted the seller the option to repurchase the property in November, 2001 for
$7,250,000.
In December of 1994, the Trust agreed to provide up to $4.1 million of
construction financing for the Professional Center at Kings Crossing, and
intends to purchase, subject to certain contingencies, the property upon its
completion and occupancy. The construction loan accrues interest monthly at a
margin over the one month LIBOR. The Trust expects to disburse funds related to
the construction financing ($1.1 million advanced in December, 1994) over a
seven to nine month period and anticipates purchasing the property during the
third quarter of 1995.
During the fourth quarter of 1994, UHS signed a letter of intent to purchase an
acute and psychiatric care facility in exchange for cash and two acute care
facilities including the real estate assets of Westlake, a 126 bed hospital of
which the Trust owns the majority of real estate assets. In exchange for the
F-9
<PAGE> 34
real estate assets of Westlake and the termination of the lease, the Trust has
accepted substitution properties valued at approximately $19 million (the
Trust's original purchase price of Westlake was approximately $19 million)
consisting of additional real estate assets currently owned by UHS but related
to three acute care facilities (McAllen Medical Center, Inland Valley Regional
Medical Center and Wellington Regional Medical Center), currently owned by the
Trust and operated by UHS. These additional real estate assets represent major
additions and expansions made to these facilities since the purchase of the
properties from UHS in 1986. Total annual base rental payments from UHS to the
Trust on substituted properties will be $2.4 million which equals the total base
and bonus rental earned by the Trust on the Westlake facility during 1994 ($2.1
million base and $300,000 bonus). Bonus rental on the substituted properties
will be equal to 1% of the revenues generated by these additional assets. The
guarantee by UHS under the existing leases will continue. The exchange of real
estate assets between the Trust and UHS is expected to occur during the second
quarter of 1995.
1993 - The Trust sold the real property of Live Oak Hospital, which had a net
book value of approximately $2.8 million, to UHS for the Trust's original
purchase price of $3.2 million. Operations at this facility were discontinued
during the first quarter of 1992. The base rental payments continued under the
existing lease until the date of sale. The transaction resulted in a $371,000
gain which is included in the Trust's first quarter 1993 financial results.
In December of 1993, UHS, the former lessee and operator of Belmont Community
Hospital, sold the operations of the facility to THC-Chicago, Inc. ("THC"), an
indirect wholly-owned subsidiary of Community Psychiatric Centers. Concurrently,
the Trust purchased certain related real property from UHS for $1 million in
cash and a note payable with a carrying value of $907,000 at December 31, 1993.
The note payable has a face value of $1 million and is due on December 31, 2001.
The amount of interest payable on this note is contingent upon the financial
performance of this leased facility and its estimated fair value at the end of
the initial lease term. The Trust has estimated the total amount payable under
the terms of this note and has discounted the payments to their net present
value using a 6% rate. In connection with this transaction, UHS' lease with the
Trust was terminated and the Trust entered into an eight year lease agreement
with THC for the real property of this facility.
Also during 1993, the Trust purchased for approximately $1.1 million, 20
additional beds which were added to the Tri-State Regional Rehabilitation
Hospital.
(4) Leases
All of the Trust's leases are classified as operating leases with initial terms
ranging from 5 to 15 years with up to six 5-year renewal options. Under the
terms of the leases, the Trust earns fixed monthly base rents and may earn
periodic additional rents (see Note 2). The additional rent payments are
generally computed as a percentage of facility net patient receipts or CPI
increase in excess of a base amount. The base year amount is net patient
receipts for the first full year of the lease.
F-10
<PAGE> 35
Minimum future base rents on noncancelable leases are as follows:
1995 $ 16,082,000
1996 16,112,000
1997 16,142,000
1998 16,166,000
1999 16,182,000
Later Years 24,800,000
------------
Total Minimum Base Rents $105,484,000
============
Under the terms of the hospital leases, the lessees are required to pay all
operating costs of the properties including property insurance and real estate
taxes. Tenants of the Fresno-Herndon Medical Plaza are required to pay their
pro-rata share of the property's operating costs.
(5) Debt
During 1994, the Company entered into a new $45 million non-amortizing revolving
credit agreement (the "Agreement") which provides for interest at the Trust's
option, at the certificate of deposit rate plus 3/4%, Eurodollar rate plus 3/4%
or the prime rate. A fee of 3/8% is required on the unused portion of this
commitment. There are no compensating balance requirements. The Agreement
matures on February 28, 1997 at which time all amounts then outstanding are
required to be repaid. The Agreement contains a provision whereby the
commitments will be reduced by 50% of any new equity proceeds. At December 31,
1994, the Trust had $24,680,000 of unused borrowing capacity.
The average amounts outstanding under the revolving credit agreement during
1994, 1993 and 1992 were $15,218,000, $21,400,000, and $45,237,000,
respectively, with corresponding effective interest rates, including commitment
fees but not including the effect of interest rate swaps of 5.3%, 4.5% and 4.8%.
The maximum amounts outstanding at any month end were $20,320,000, $47,565,000,
and $49,600,000 during 1994, 1993 and 1992, respectively.
Covenants relating to the revolving credit facility require the maintenance of a
minimum tangible net worth and specified financial ratios, limit the Trust's
ability to incur additional debt, limit the aggregate amount of mortgage
receivables and limit the Trust's ability to increase dividends in excess of 95%
of cash available for distribution, unless additional distributions are required
to be made to comply with the applicable section of the Internal Revenue Code
and regulated regulations governing real estate investment trusts.
During 1994, the Trust has entered into two interest rate swap agreements and an
interest rate cap agreement to reduce the impact of changes in the interest
rates on its floating rate revolving credit notes. The outstanding swap
agreements in the amounts of $5 million each mature in April, 1997 and May, 1999
and effectively fix the interest rate on $10 million of floating rate revolving
credit notes at 7.6%. The interest rate cap, for which the Trust paid $622,750,
F-11
<PAGE> 36
(unamortized premium of $560,475 at December 31, 1994) matures in June, 1999 and
fixes the maximum rate on $15 million of variable rate revolving credit notes at
7.75%. The interest rate cap was purchased in June, 1994 in anticipation of
certain borrowing transactions by the Trust. A portion of the borrowings were
made in 1994 and the remaining borrowings are expected to be made in 1995. The
effective rate on the Trust's revolving credit notes including commitment fees
and interest rate swap expense was 6.7%, 8.3% and 8.3% during 1994, 1993 and
1992, respectively. Additional interest expense recorded as a result of the
Trust's hedging activity was $109,427, $410,876 and $1,609,475 in 1994, 1993 and
1992, respectively. The Trust is exposed to credit loss in the event of
nonperformance by the counterparties to the interest rate swap and cap
agreements. These counterparties are major financial institutions and the Trust
does not anticipate nonperformance by the counterparties which are rated A or
better by Moody's Investors Service. Termination of the interest rate swaps
would have resulted in payments to the Trust of $321,074 and termination of the
interest rate cap would have resulted in a payment to the Trust of $733,723. The
fair value of the interest rate swap and cap agreements at December 31, 1994
reflects the estimated amounts that the Trust would receive to terminate the
contracts based on quotes from the counterparties.
(6) Dividends
Dividends of $1.665 per share were declared and paid in 1994, of which $1.528
was ordinary income and $0.137 was a return of capital distribution. Dividends
of $1.66 per share were declared and paid in 1993, of which $0.75 was ordinary
income, $0.81 was a return of capital distribution and $0.10 was capital gain to
the shareholders for income tax purposes. Dividends of $1.63 per share were
declared and paid in 1992, none of which represented a return of capital or
capital gain distribution.
(7) Financing
During the fourth quarter of 1993, the Trust funded $6.5 million for the
purchase of the real assets of the Madison Irving Medical Center, by Crouse
Irving Memorial Properties, located in Syracuse, New York. The loan, which can
be prepaid without penalty at any time after six months from the loan
commencement date, has a fifteen-year repayment term. The Trust has received
prepaid commitment fees related to this mortgage note receivable totaling
$65,000. The unearned portion ($60,000 as of December 31, 1994) is being
recognized as income over the fifteen-year repayment term. The loan accrues
interest monthly at a margin over the one month LIBOR or at a margin over the
five-year Treasury rate. The interest rate is selected at the borrower's option.
Interest on the mortgage loan, including amortization of prepaid commitment
fees, accrued at an average rate of 9.8% during 1994.
In December of 1994, the Trust agreed to provide up to $4.1 million of
construction financing for the Professional Center at Kings Crossing, and
intends to purchase, subject to certain contingencies, the property upon its
completion and occupancy. The construction loan accrues interest monthly at a
F-12
<PAGE> 37
margin over the one month LIBOR. The Trust expects to disburse funds related to
the construction financing ($1.1 million advanced in December, 1994) over a
seven to nine month period and anticipates purchasing the property during the
third quarter of 1995.
From 1992 through 1994, the Trust funded $11.8 million ($5.1 million in 1992,
$6.1 million in 1993 and $584,000 in 1994) including interest due on the loan,
under the terms of a $14.1 million construction loan agreement for a medical
office building and expansion of a hospital owned by an unaffiliated major
hospital company. The Trust received principal and interest payments on the loan
totaling $9.0 million in 1993 and $2.8 million in 1994 thereby repaying and
terminating the loan agreement.
During the first quarter of 1994, the Trust reached a settlement agreement with
Lake Shore Hospital, Inc. and Community Care Systems, Inc. concerning the
default of their obligations under the Trust's mortgage loan on Lake Shore
Hospital. Under the terms of the settlement agreement, the Trust received $1.5
million in cash payments ($600,000 during the first quarter of 1994 and $900,000
during the second quarter of 1994) and was originally scheduled to receive free
and clear title to Lake Shore Hospital by June 30, 1994. Due to delays in
removing liens recorded against the real property of Lake Shore Hospital,
Community Care Systems, Inc. has not yet conveyed free and clear title of Lake
Shore Hospital to the Trust. A foreclosure sale is scheduled to be completed in
the second quarter of 1995, which is expected to result in the Trust's receipt
of the real property of Lake Shore Hospital free and clear of all liens. The
Trust continues to market the property in an effort to sell or lease it to a
qualified operator. Of the $1.5 million received during the first six months of
1994, $450,000 has been reserved for future expenses related to the settlement
of Lake Shore Hospital and the remaining $1,050,000 was included in net income
as recovery of investment losses.
(8) Incentive Plans
During 1988, the Trustees approved a Key Employees' Restricted Share Purchase
Plan. Under the terms of this plan, which expires in 1998, up to 50,000 shares
have been reserved for issuance to key employees. Eligible employees may
purchase shares of the Trust at par value subject to certain restrictions. The
restrictions lapse over four years if the employee remains employed by the
Trust. In 1988, 2,500 shares were issued under this plan. As of December 31,
1992, the restrictions had lapsed on the entire 2,500 shares.
In 1991, the Trustees adopted a share compensation plan for Trustees who are
neither employees nor officers of the Trust ("Outside Trustees"). Pursuant to
the plan, each Outside Trustee may elect to receive, in lieu of all or a portion
of the quarterly cash compensation for services as a Trustee, shares of the
Trust based on the closing price of the shares on the date of issuance. As of
December 31, 1994, no shares have been issued under the terms of this plan.
During 1992, the Trust amended the 1988 Non-Statutory Stock Option Plan to
increase the number of shares reserved under the plan from 50,000 to 200,000. As
of December 31, 1994, options to purchase 115,000 shares of beneficial interest
F-13
<PAGE> 38
were outstanding, of which 105,000 were granted to officers of the Trust during
1992 at an exercise price of $16.875 per share and 10,000 were granted to an
officer of the Trust during 1993 at an exercise price of $16.125. As of December
31, 1994, none of the options had been exercised. As of December 31, 1994, all
of the options were exercisable at an aggregate purchase price of $1,993,125.
(9) Sale of Marketable Securities
During 1994, the Trust received $107,000 related to a class action lawsuit
settlement filed against a real estate investment trust in which the Trust owned
marketable securities. Also during the year, the Trust sold the remainder of its
investment in the marketable securities of the real estate investment trust for
total net proceeds of $77,000. The entire $184,000 generated from the settlement
and sale transactions are included in net income (recovery of provision for
investment losses) since the carrying value of this investment was reduced to
zero in 1990.
F-14
<PAGE> 39
(10) Quarterly Results (Unaudited)
<TABLE>
<CAPTION>
1994
----------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 4,653,000 $ 4,820,000 $ 4,661,000 $ 4,692,000 $18,826,000
Net Income $ 3,632,000 $ 4,199,000 $ 3,232,000 $ 3,249,000 $14,312,000
Earnings Per Share $ 0.41 $ 0.47 $ 0.36 $ 0.36 $ 1.60
</TABLE>
During 1994, the Trust received $1.5 million of cash payments (recorded as
recovery of investment losses) related to the settlement agreement on Lake Shore
Hospital (See Note 7) of which $600,000 was received during the first quarter
and $900,000 was received during the second quarter. Partially offsetting the
net income effect of these cash proceeds was a $450,000 increase in the reserve
established for future expenses related to the settlement of Lake Shore Hospital
(recorded as provision for investment losses) of which $300,000 was recorded in
the first quarter of 1994 and $150,000 was recorded in the second quarter.
<TABLE>
<CAPTION>
1993
--------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 4,558,000 $ 4,580,000 $ 4,535,000 $ 4,590,000 $18,263,000
Net Income $ 2,870,000 $ 2,926,000 $ 3,124,000 $ 3,339,000 $12,259,000
Earnings
Per Share $ 0.41 $ 0.33 $ 0.35 $ 0.37 $ 1.45
</TABLE>
In March and April of 1993, the Trust issued a total of 1,900,000 additional
shares of beneficial interest. This issuance generated approximately $32.6
million of net proceeds which were used primarily to repay indebtedness under
the Trust's revolving credit agreement, resulting in lower interest expense in
the second, third and fourth quarters of 1993.
F-15
<PAGE> 40
Universal Health Realty Income Trust
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged to Balance
beginning costs and at end
Description of period expenses Other of period
----------- --------- -------- ----- ---------
<S> <C> <C> <C> <C>
Reserve for Investment Losses:
Year ended December 31, 1994 $77,000 $450,000 ($37,000)(a) $490,000
======== =========== =========== ========
Year ended December 31, 1993 $250,000 - ($173,000)(a) $77,000
======== =========== =========== ========
Year ended December 31, 1992 $700,000 $12,467,000 ($12,917,000)(b) $250,000
======== =========== =========== ========
</TABLE>
(a) Amounts charged against the reserve.
(b) Reclassified to reserve for Lake Shore Hospital mortgage loan.
F-16
<PAGE> 41
Schedule III
Universal Health Realty Income Trust
Real Estate and Accumulated Depreciation - December 31, 1994
(amounts in thousands)
<TABLE>
<CAPTION>
Initial Cost to
Universal Health Cost capitalized Gross amount at which
Realty Income Trust subsequent acquisition carried at close of period
--------------------- ---------------------- -----------------------------
Building Carrying Building &
Description Land & Improv. Improv. Costs Land Improvements Total
----------- ---- -------- ------- ----- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Chalmette Hospital
Chalmette, Louisiana $1,825 $9,445 - - $1,770 $9,445 $11,215
Chalmette Medical Center
Chalmette, Louisiana 2,000 7,473 - - 2,000 7,473 9,473
Inland Valley Regional Medical Center
Wildomar, California 2,050 10,701 - - 2,050 10,701 12,751
McAllen Medical Center
McAllen, Texas 4,720 31,442 - - 4,720 31,442 36,162
Wellington Regional Medical Center
West Palm Beach, Florida 1,190 14,652 - - 1,190 14,652 15,842
Westlake Medical Center
Westlake Village, California 8,520 10,475 - - 8,520 10,475 18,995
The Bridgeway
North Little Rock, Arkansas 150 5,395 499 - 150 5,894 6,044
Meridell Achievment Center
Austin, Texas 1,350 3,782 4,139 - 1,350 7,921 9,271
Tri-State Rehabilitation Hospital
Evansville, Indiana 500 6,945 1,062 - 500 8,007 8,507
THC - Chicago
Chicago, Illinois 158 6,404 1,907 - 158 8,311 8,469
Fresno - Herndon Medical Plaza
Fresno, California 1,074 5,266 - - 1,074 5,266 6,340
------- -------- ------ ---- ------- -------- --------
TOTALS $23,537 $111,980 $7,607 $ - $23,482 $119,587 $143,069
======= ======== ====== ==== ======= ======== ========
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
Accumulated Date of construction
Depreciation or most recent
as of significant expansion Date Depreciable
Dec. 31, 1994 or renovation Acquired Life
------------- --------------------- -------- -----------
<S> <C> <C> <C> <C>
Chalmette Hospital
Chalmette, Louisiana $ 2,164 1975 1986 35 Years
Chalmette Medical Center
Chalmette, Louisiana 1,485 1981 1988 34 Years
Inland Valley Regional Medical Center
Wildomar, California 1,907 1986 1986 45 Years
McAllen Medical Center
McAllen, Texas 5,604 1985 1986 45 Years
Wellington Regional Medical Center
West Palm Beach, Florida 2,612 1986 1986 45 Years
Westlake Medical Center
Westlake Village, California 2,801 1972 1986 30 Years
The Bridgeway
North Little Rock, Arkansas 1,327 1983 1986 35 Years
Meridell Achievment Center
Austin, Texas 1,576 1991 1986 30 Years
Tri-State Rehabilitation Hospital
Evansville, Indiana 1,007 1993 1989 40 Years
THC - Chicago
Chicago, Illinois 2,153 1993 1986 25 Years
Fresno - Herndon Medical Plaza
Fresno, California 10 1992 1994 45 Years
--------
TOTALS $22,646
========
</TABLE>
F-17
<PAGE> 43
Universal Health Realty Income Trust
Notes to Schedule III
December 31, 1994
(1) Reconciliation of Real Estate Properties
The following table reconciles the Real Estate Properties from January 1, 1992
to December 31, 1994:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Balance at January 1 $136,784,000 $137,033,000 $137,033,000
Acquisitions 6,340,000 2,969,000 --
Dispositions (55,000) (3,218,000) --
------------ ------------ ------------
Balance at December 31 $143,069,000 $136,784,000 $137,033,000
============ ============ ============
</TABLE>
(2) Reconciliation of Accumulated Depreciation
The following table reconciles the Accumulated Depreciation from January 1,
1992 to December 31, 1994:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Balance at January 1 $19,519,000 $16,867,000 $13,815,000
Current year depreciation expense 3,127,000 3,023,000 3,052,000
Dispositions -- (371,000) --
----------- ----------- -----------
Balance at December 31 $22,646,000 $19,519,000 $16,867,000
=========== =========== ===========
</TABLE>
The aggregate cost basis and net book value of the properties for federal
income tax purposes at December 31, 1994 are approximately $127,000,000 and
$106,000,000, respectively.
F-18
<PAGE> 44
INDEX TO EXHIBITS
10.2 Agreement, effective January 1, 1995, to renew Advisory
Agreement dated as of December 24, 1986 between Universal
Health Realty Income Trust and UHS of Delaware, Inc.
10.16 Agreement for Purchase and Sale and Repurchase Agreement,
dated as of November 4, 1994, between Fresno-Herndon Partners,
Limited and Universal Health Realty Income Trust.
10.17 Agreement of Purchase and Sale and Construction Loan Agreement,
dated as of December 20, 1994, between Turner Adreac, L.C. and
Universal Health Realty Income Trust.
27. Financial Data Schedule.
<PAGE>
UNIVERSAL HEALTH REALTY INCOME TRUST Universal Corporate Center
367 South Gulph Road
King of Prussia, Pennsylvania 19406
(215) 265-0688
January 10, 1995
Mr. Alan B. Miller
President
UHS of Delaware, Inc.
367 South Gulph Road
King of Prussia, PA 19406
Dear Alan:
The Board of Trustees of Universal Health Realty Income Trust at their
December 1, 1994, meeting authorized the renewal of the current Advisory
Agreement between the Trust and UHS of Delaware, Inc. ("Agreement") upon the
same terms and conditions.
This letter constitutes the Trust's offer to renew the Agreement until
December 31, 1995, upon the same terms and conditions. Please acknowledge UHS of
Delaware, Inc.'s acceptance of this offer by signing in the space provided below
and returning one copy of this letter to me.
Sincerely yours,
/s/ Kirk E. Gorman
--------------------------
Kirk E. Gorman
President and Secretary
KEG/jds
cc: Warren J. Nimetz, Esquire
Charles Boyle
Agreed to and Accepted:
UHS of Delaware, Inc.
By: /s/ Alan B. Miller
-------------------------
Alan B. Miller, President
<PAGE>
FINAL
AGREEMENT FOR PURCHASE AND SALE
AGREEMENT made as of the ____ day of November, 1994 by and between
FRESNO-HERNDON PARTNERS, LIMITED, a California limited partnership having an
office at 701 North First Street, San Jose, California 95112 ("Seller") and
UNIVERSAL HEALTH REALTY INCOME TRUST having an office at 367 South Gulph Road,
King of Prussia, Pennsylvania 19406 ("Purchaser")
W I T N E S S E T H :
ARTICLE 1
AGREEMENT FOR PURCHASE AND SALE
Seller agrees to sell and cause to be conveyed to Purchaser, and
Purchaser agrees to purchase, the following property (collectively, the
"Project"):
(a) The property located in the City of Fresno, State of California
more particularly described on Exhibit A (the "Land") together with the existing
improvements thereon, consisting of the building and improvements having the
street address of 7055 North Fresno Street, Fresno, California 93720 (together,
the "Property");
(b) The Seller's interest in and to the Tenant Leases (as hereinafter
defined) affecting the Property;
(c) All of Seller's right, title and interest in and to all intangible
property now or hereafter owned or held by Seller in connection with its
ownership of the Property, including but not limited to any leases, contracts,
leasing materials and forms, keys, records and correspondence relating to
tenants, security deposits, prepaid rentals, telephone exchange numbers and the
use of the name "Fresno- Herndon Medical Plaza";
(d) Seller's right, title and interest in and to all easements,
licenses, appurtenances, rights, privileges and hereditaments belonging or
appertaining to the Property, and in and to any land lying in the bed of any
street, road or avenue, in front of or adjoining the Property to the center line
thereof; and
(e) All fixtures and articles of personal property attached or
appurtenant to or used in connection with the Property which are owned by Seller
and located at the Property, free from all liens and encumbrances and, without
limiting the generality of the foregoing, such fixtures and articles of personal
property shall include machinery, computer hardware and software, plumbing,
heating and lighting fixtures, mail boxes, tools, and maintenance equipment or
supplies, if any, owned by Seller and located at the Property.
<PAGE>
ARTICLE 2
PURCHASE PRICE
2.1 The purchase price for the Project is SIX MILLION THREE HUNDRED
THOUSAND DOLLARS ($6,300,000) (the "Purchase Price") plus or minus the
adjustments provided for in this Agreement (the "Closing Payment"), to be paid
to Seller in federal funds in such manner, place and account as Seller may
reasonably request, by notice given to Purchaser at least three (3) business
days prior to the Closing (as hereinafter defined).
ARTICLE 3
PHYSICAL CONDITION OF PROJECT, ETC.
Purchaser has inspected the Property and will continue to inspect the Property
during the hereinafter described Inspection Period to the extent Purchaser deems
necessary in connection with the transaction contemplated by this Agreement.
Purchaser agrees to purchase the Property in its "AS IS" condition on the date
hereof, subject to Seller's representations and warranties as set forth in this
Agreement and ordinary wear and tear between the date hereof and the Closing
Date. Purchaser has not relied upon, and Seller is not liable or bound in any
manner, by any verbal or written statements, representations, real estate
brokers' "set-ups" or information pertaining to the Project furnished by any
real estate broker, agent, employee, servant or other persons unless the same
are expressly set forth in this Agreement.
ARTICLE 4
PERMITTED ENCUMBRANCES TO TITLE
4.1 Seller shall deliver to Purchaser good, marketable and
indefeasible fee simple title to the Property, subject only to the Permitted
Encumbrances (as hereinafter defined).
4.2 Purchaser agrees to accept title to the Property subject to the
following matters (collectively, the "Permitted Encumbrances"):
(a) The leases and tenancies affecting the Property set forth and
described in Exhibit B annexed hereto (the "Tenant Leases");
(b) Liens securing payment of all ad valorem, intangible and
other real and personal property taxes, school taxes, and water and sewer
charges against the Property or the personal property covered by this Agreement
for the tax year in which the Closing Date occurs;
(c) the exceptions listed as numbers 1, 2, 3, 4, 5, 6, 7, 8, 9,
15, 16, 17, 18 and 21 together with portions of 11, 12 and 13 other than
references to assignments of lease in the Preliminary Title Report dated as of
August 9, 1994 (the "Title Commitment") of Chicago Title Insurance Company (the
"Title Company") to issue an owner's policy of title insurance (the "Title
Policy"); and
(d) the exception listed as number 10 on the updated Title
Commitment, dated October 12, 1994, provided that the City of Fresno provides
written confirmation to Purchaser that the covenants and conditions contained in
such instrument have been satisfied;
(e) Such other exceptions to title as shall be approved by
Purchaser.
<PAGE>
4.3 If at the time of the Closing the Property or any part thereof
shall be or shall have been affected by an assessment or assessments which are
or may become payable in annual installments of which the first installment is
then due or has been paid, then for the purpose of this Agreement all the unpaid
annual installments of any such assessment, including those which are to become
due and payable after Closing, shall be prorated between Seller and Purchaser as
of the Closing Date and adjusted accordingly at that time. The terms and
provisions of this Section 4.3 shall survive the Closing.
ARTICLE 5
CONDITION OF TITLE, TITLE INSURANCE
5.1 Seller has delivered to Purchaser the Title Commitment. Purchaser
has given written notice (the "Objection Notice") to Seller of the conditions of
title which Purchaser is not obligated to take the Property subject to pursuant
to the provisions of this Agreement (the "Objections").
5.2 If Seller gives Purchaser notice (the "Response Notice") within
five (5) days of the date hereof, that Seller is unable to convey title to the
Property as required by this Agreement, Purchaser may, as its exclusive remedy,
elect by written notice given to Seller within five (5) days after the Response
Notice is given, either (a) to accept such title as Seller is able to convey
without any reduction or abatement of the Purchase Price, (b) extend the time
for the cure or removal of the objections, provided such extension does not
derogate from Purchaser's rights under clause (d) below, (c) cause the
Objections to be cured at Seller's expense (or by Purchaser curing the
Objections and taking a credit in such amount against the Purchase Price) and
proceed to the Closing or (d) to terminate this Agreement, in which event Seller
shall pay the Cancellation Fee (as hereinafter defined) to Purchaser promptly.
5.3 The existence of liens or encumbrances other than the Permitted
Encumbrances or those which are permitted by this Agreement shall be deemed to
be Permitted Encumbrances if the Title Company will insure Purchaser's title
clear of the matter or will insure against the enforcement of such matter out of
the Property, on the condition that both Purchaser's counsel shall agree to
accept title with such insurance. Any unpaid liens for real estate and personal
property taxes for years prior to the fiscal year in which the Closing Date
occurs and any other matter which Seller is obligated to pay and discharge at
the Closing shall not be deemed objections to title, but the amount thereof
chargeable to Seller, plus interest and penalties thereon, if any, shall be
shown as chargeable to Seller in Purchaser's and Seller's settlement statement
on the Closing Date and paid to the Title Company for the payment of such
matters.
5.4 Seller shall pay any costs for obtaining the Title Commitment and
the portion of the title insurance premium for California Land Title Association
Standard Coverage under the Title Policy. Seller and Purchaser each shall pay
one half of (a) the portion of the title insurance premium for ALTA coverage
under the Title Policy, (b) the cost of the ALTA survey and (c) the escrow fees
of the Title Company. Except as noted herein, Seller shall pay all deed
transfer, documentary stamp tax, intangible and other taxes and other recording
costs and expenses in connection with the Closing.
5.5 Seller shall, at its sole expense except as specified in Section
5.4, deliver or cause to be delivered to Purchaser within five (5) days from and
after the date of execution of this Agreement the following documents, to the
extent they are in Seller's possession:
<PAGE>
(a) All architectural drawings and plans and specifications for
the Improvements including an "As Built" set of plans, if available;
(b) A copy of the paid real estate tax bill for the most recent
period for which real estate taxes have been due and payable;
(c) A recent, accurate ALTA survey (the "Survey") of the Property
prepared by a reputable and established surveyor in the Fresno area;
(d) True and correct copies of all equipment leases, service,
maintenance, union and management contracts, as well as all other documents or
agreements relating to or affecting the Project;
(e) A current rent roll for the Property, listing for each tenant
the name, rent, arrearages, offsets or credits to rent, reimbursement for
expenses, amount of deposits, cleaning fees, preparation charges, advance rent
and prepaid rent, if any, lease commencement dates, lease termination dates,
lease options, option rent, and cost of living clauses;
(f) A schedule of any employees employed by Seller or contractors
retained by Seller in the operation of the Project, setting forth names,
salaries, other compensation, and other pertinent information concerning such
employees or contractors;
(g) Current engineering and asbestos reports with respect to
the Property reasonably satisfactory to Purchaser and Purchaser's counsel;
(h) True and correct copies of any insurance policies covering
the Project;
(i) A schedule and copies of all violations outstanding against
the Property;
(j) A schedule of any litigation which is pending, or for which
notice has been given against the Property as well as any papers received or
sent by Seller in connection with such litigation;
(k) True and correct copies of any uncompleted work letters
relating to the Property;
(l) True and correct copies of operating statements for the
Property for the period commencing with the date of Seller's occupancy through
September 30, 1994 as well as escalation statements for operations, taxes,
electric, utilities and other expenses relating to the Property during the same
period;
(m) True and complete copies of any real estate tax information
available to the Seller relating to the Property as well as a schedule of any
tax reduction proceedings on a historical basis relating to the Property;
(n) A copy of the present 1994 operating budget of the Property
as well as a copy of any projections for future operating budgets relating to
the Property;
(o) True and complete copies of the certificate of occupancy for
the Property as well as a true and complete copy of any other permits relating
to the Project; and
(p) True and complete copies of any notices from any insurance
carriers or mortgagee under any existing mortgage on the Property to make
repairs or improvements to the Property.
<PAGE>
5.6 Purchaser hereby acknowledges that the items set forth in Section
5.5 a, c, d and h have been delivered to Purchaser prior to the date hereof. At
Seller's request, Purchaser shall acknowledge receipt of any of such items
delivered after the date hereof.
ARTICLE 6
CLOSING
6.1 The consummation of the transactions described in this Agreement
(the "Closing") shall occur on November 18, 1994 (the "Closing Date) by escrow
closing through the Title Company at their office in Fresno, California or in
such other manner or in such other place as the parties may agree upon.
Purchaser shall have the right to adjourn the Closing Date for up to seven (7)
days.
6.2 Upon Purchaser's delivery of all required documents and
instruments and its payment of the balance of the Purchase Price and other
amounts required herein, Purchaser and Seller shall prepare and sign a closing
statement reflecting the adjustments and payments made and agreements in
connection therewith (the "Closing Statement"). The Closing Statement and all of
the aforesaid documents executed by Purchaser or Seller, or both, as
appropriate, and be delivered to the Title Company which shall do the following:
(a) Record the deed.
(b) Deliver to Seller and Purchaser or other appropriate party
the documents and payments delivered to it as escrow holder for delivery to such
party; and
(c) Pay all recording, tax and other transfer fees and all filing
fees reflected on the Closing Statement.
6.3 Notwithstanding anything contained in this Agreement to the
contrary, Purchaser and Seller acknowledge that the requirements for the Closing
set forth in this Agreement may be supplemented by written escrow instructions
to the Title Company and a settlement statement executed by both Seller and
Purchaser, whereupon the delivery of any document or other item required to be
delivered hereunder shall be deemed duly delivered if such document or item is
delivered to the Title Company in accordance with such escrow instructions.
ARTICLE 7
DOCUMENTS REQUIRED ON CLOSING DATE
7.1 At or prior to the Closing, Seller shall execute and deliver the
following to Purchaser:
(a) Partnership Grant Deed;
(b) Bill of Sale pursuant to which Seller assigns and conveys to
Purchaser all personal property covered by this Agreement, with any applicable
sales tax to be paid by Seller;
(c) Assignment and Assumption of the Tenant Leases in the
form annexed hereto as Exhibit C;
(d) Assignment and Assumption of Warranties and Service
Contracts, in the form annexed hereto as Exhibit D, pursuant to which Seller
assigns to Purchaser its interest in (i) all service contracts as approved and
designated by Purchaser to remain in effect at the Property and (ii) all
transferable guaranties and warranties relating to the Property;
<PAGE>
(e) A rent roll for the Property (the "Rent Roll") listing each
tenant, the size and location of the space covered by the applicable Tenant
Lease, the date and term (including commencement and termination dates) of the
applicable Tenant Lease, the provisions of renewal options (including term and
rental provisions), if any, of the applicable Tenant Lease, the monthly rent and
other charges payable, lease expiration date and unapplied security deposit
(including the name of the bank, branch address and account in which such
deposit is held) as of a date not more than three (3) days prior to the Closing
Date, certified by Seller and Seller's managing agent;
(f) The originals or certified copies of the Tenant Leases
described in the Rent Roll;
(g) A written notice of the acquisition of the Property by
Purchaser, originally executed by Seller and Purchaser, which Seller shall
transmit to all tenants and to other parties affected by the sale and purchase
of the Property (the "Tenant Notices"). Such Tenant Notices shall be prepared by
Seller in the form of Exhibit E, and shall inform the addressees of the sale and
transfer of the Property to Purchaser and contain appropriate instructions
relating to the payment of future rentals, the giving of future notices, the
naming of Purchaser as an additional insured on each tenant's insurance policies
and other matters reasonably required by Purchaser. The Tenant Notices shall
specify that unapplied security deposits under the tenant leases have been
delivered to Purchaser;
(h) A non-foreign status affidavit for Seller complying with the
requirements of Internal Revenue Code Section 1445(f)(3) and the regulations
promulgated thereunder;
(i) All costs and fees required to be paid by Seller pursuant
to Articles 4 or 8 hereof;
(j) A mechanics' lien and general title affidavit, if required by
the Title Company to issue its policy of title insurance without exception for
mechanics' liens, verifying it to be the fact that, as of the Closing Date,
there are no unpaid bills for work, labor, service or materials furnished to the
real property upon the request or order of Seller which may be made the basis of
a lien, and that Seller is in possession of the Project, subject only to the
rights of tenants in possession under the Tenant Leases;
(k) Estoppel certificates from all tenants under the Tenant
Leases dated no earlier than October 10, 1994, as provided in Article 16 hereof;
(l) The documents in the form of Exhibit F required to evidence
(i) the obligations of Seller to Dr. Bakar and Woodward Park Imaging Center
("WPIC") to install a metal shield to protect Dr. Baker's space from the MRI
equipment in WPIC's space and the electro-magnetic emissions from such equipment
and (ii) the release by Dr. Bakar and WPIC of Purchaser from any claims or
liability relating to such emissions;
(m) The fifth addendum to the Tenant Lease with Vision Care
Center of Central California, Inc. ("VCC") in the form previously accepted by
Purchaser's counsel evidencing the obligations of the landlord under Tenant
Leases with VCC to pay certain amounts to VCC including, without limitation, the
cost of construction or improvement of any space leased or to be leased by VCC;
(n) A lease in the form of Exhibit G (the "Seller Lease") between
Seller, as tenant and Purchaser, as landlord for all vacant space on the third
floor of the Property, which Seller Lease shall be guaranteed by Green Valley
Corporation d/b/a Barry Swenson Builders ("Green Valley");
(o) A repurchase agreement in the form of Exhibit H (the
"Repurchase Agreement") between Seller, as purchaser and Purchaser, as seller
for the Project;
<PAGE>
(p) Reaffirmation of guaranties or restatements of guaranties in
form and substance satisfactory to Purchaser's counsel by all guarantors under
the respective Tenant Leases for VCC and WPIC;
(q) A Reciprocal Easement Agreement in the form of Exhibit
I (the "Reciprocal Easement") between Seller and Purchaser;
(r) A copy of all necessary consents required by the Agreement of
Limited Partnership of Seller dated December 21, 1990 as amended by amendments
dated August 21, 1991 and September 23, 1991, respectively, authorizing the
execution, delivery and performance by Seller of this Agreement and each
document to be executed and delivered by Seller in connection with this
Agreement, and designating one or more partners to execute documents in Seller's
name;
(s) Such other documents and instruments as may be required by
the Title Company in order to consummate the transactions described in this
Agreement and to issue the Title Policy to Purchaser; and
(t) Such documents in the form of Exhibit J (the "Agreement for
Post-Closing Repairs") to evidence the obligations of Seller and Green Valley
pursuant to subsection 15.1(v) hereof.
7.2 At or prior to the Closing, Purchaser shall execute, where
appropriate, and deliver the following to Seller:
(a) The Closing Payment;
(b) The Assignment and Assumption of Tenant Leases;
(c) The Assignment and Assumption of Warranties and Service
Agreements;
(d) The Seller Lease;
(e) The Repurchase Agreement;
(f) The Reciprocal Easement;
(g) The Agreement for Post-Closing Repairs;
(h) The Escrow Agreement (as hereinafter defined); and
(i) Such other documents and instruments as may be required by
the Title Company in order to consummate the transactions described in this
Agreement.
7.3 If at any time after the Closing it becomes apparent that any
necessary closing documents were either not delivered or improperly executed or
that any closing adjustments were improperly calculated, the parties shall act
in good faith and take all such steps including the execution or re-execution of
documents and the payment of monies as may be reasonably necessary to rectify
such errors or miscalculations. The provisions of this Section 7.3 shall survive
the Closing for a period of one (1) year.
<PAGE>
ARTICLE 8
APPORTIONMENTS AND ADJUSTMENTS
8.1 Seller shall be responsible for and shall pay all accrued expenses
with respect to the Project accruing up to 11:59 P.M. on the Closing Date and
shall be entitled to receive and retain all revenue from the Project accruing up
to the Closing Date.
8.2 On the Closing Date, the following adjustments and apportionments
shall be made in cash as follows:
(a) Rents for the month in which the Closing Date occurs (the
"Closing Month") as and when collected. If past due rents are owing by tenants
for any period prior to the Closing Month (the "Rent Arrearages"), then after
request made by Seller subsequent to the Closing Date, Purchaser shall bill all
tenants for such sums, provided however, that Purchaser shall have no liability
or responsibility for the collection of any such Rent Arrearages. Seller shall
be entitled to those funds received by Purchaser from tenants having Rent
Arrearages after the Closing Date, only where such funds are in payment of such
Rent Arrearages and are excess of amounts then owing or otherwise required to be
paid to Purchaser from such tenants. Notwithstanding the foregoing, for any
"pass-through" expenses which are collected from tenants on the basis of
Seller's estimates of such expenses, promptly following the end of the fiscal
period for which such estimated expenses are allocable, Seller and Purchaser
shall determine the actual expenses allocable to such period and shall adjust
for any difference between the estimated expenses and the actual expenses and
the responsible party promptly shall pay the other the amount of any such
difference.
(b) Real estate taxes, ad valorem taxes, school taxes, annual
assessments and personal property, intangible and use taxes, if any;
(c) Charges under service contracts affecting the Project
which Purchaser has agreed to assume on the Closing Date; and
(d) Water and sewer charges on the basis of the period for which
assessed; provided that if a final bill is not available at Closing, a
reasonable estimate will be made based on prior bills and an amount reasonably
estimated to be adequate to pay such charges through the Closing Date shall be
escrowed with the Title Company pending receipt of final bills.
8.3 At the Closing, Purchaser shall receive a credit against the
Purchase Price in the following amounts: (i) in the amount of $5,000
representing a recalculation in the rentable area of the Project, (ii) in the
amount of $120,000 for the landlord's contribution to Seller for the
construction of certain additional space known as Suite 307 pursuant to the
Seller Lease, (iii) in the amount of $8,500 representing the rental on Dr.
Hadden's space known as Suite 305 at a rate of $1.45 per square foot per month
for the period commencing on the Closing Date through 62 days following the
Closing Date, (iv) the amount of $100,000 for any damages, costs, expenses and
lost rents from the potential insolvency or bankruptcy of WPIC or its affiliates
and (v) in the amount of $5,000 to reimburse Purchaser for a portion of
Purchaser's legal fees.
8.4 At the Closing, Purchaser will receive a credit against the
Purchase Price in an amount equal to all unapplied security deposits (and
interest, if any) payable to tenants under Tenant Leases in effect on the
Closing Date, against Purchaser's receipt and indemnification therefor. Seller
hereby acknowledges that Dr. Hadden's security deposit has been applied and
Purchaser shall not receive a credit therefor. Upon making such credit,
Purchaser will be deemed to have received all such security deposits and shall
be fully responsible for the same as if a cash amount equal to such security
deposits were actually delivered to Purchaser. During the period prior to the
Closing, Seller agrees to obtain Purchaser's prior written consent, such consent
not to be unreasonably withheld, before applying any security deposit(s), or
portions thereof, against any tenant default pursuant to the terms of the
defaulting tenant's lease.
<PAGE>
8.5 The provisions of this Article 8 shall survive the closing of
title and the delivery of the deed.
ARTICLE 9
REMEDIES
9.1 If Purchaser defaults in its obligation to purchase the Project
pursuant to this Agreement, then Seller shall have the right, in addition to any
other remedies available to it at law or in equity, to terminate this Agreement
by giving Purchaser written notice thereof and, upon receipt of such notice,
this Agreement shall wholly cease and terminate, no party to this Agreement
shall have any further claim, agreement, or obligation to any other party to
this Agreement, and any lien of Purchaser against the Project shall
automatically cease, terminate and be released.
9.2 If the sale contemplated by this Agreement is not consummated
because of Seller's failure to perform its obligations hereunder, Purchaser
shall be entitled, as its exclusive remedies, to elect either (a) to terminate
this Agreement whereupon Seller shall pay to Purchaser the amount of $63,000
plus the amount of Purchaser's legal fees and expenses (the "Cancellation Fee")
or (b) to enforce specific performance of Seller's obligations under this
Agreement; provided, however, that Seller shall not be required to expend any
money other than the amounts provided in Article 8, or take any action other
than delivery of the items provided in Article 7, in connection with such
specific performance.
<PAGE>
ARTICLE 10
DAMAGE, DESTRUCTION OR CONDEMNATION
10.1 Seller agrees to maintain its present policies of fire insurance
covering the Project in full force and effect from the date of this Agreement
through and including the Closing Date.
10.2 If on or before the Closing Date either (a) all or a Substantial
Part (as hereinafter defined) of the improvements on the Land are damaged or
destroyed by fire or the elements or by any other cause, or (b) any part of the
Property is taken by condemnation or other power of eminent domain, Purchaser
may, by written notice given to Seller within ten (10) days after Purchaser
shall have notice of the occurrence or the taking (but in no event after the
Closing Date), elect to terminate this Agreement (and have any monies paid on
account of the Purchase Price returned to Purchaser).
10.3 If either (a) a Substantial Part of the improvements on the Land
are damaged or destroyed or a part of the Property is taken by condemnation or
other power of eminent domain, but this Agreement is not canceled as provided in
Section 10.2, or (b) on or before the Closing Date, an insubstantial part of the
improvements on the Land are damaged or destroyed, then neither Seller nor
Purchaser shall have the right to terminate this Agreement based upon such
damage, destruction or taking, provided, however, that on the Closing Date:
(i) Seller shall credit the Purchase Price with an amount
equal to any sums of money collected by Seller under its policies of insurance
or renewals thereof insuring against the loss in question (after deducting (1)
any expenses incurred by Seller in collecting such insurance and (2) any amount
that Seller shall have paid, for repairs or restoration of the damage), and
Seller shall assign, transfer and set over to Purchaser all of Seller's right,
title and interest in and to said policies with respect to the Property and any
further sums payable under said policies,
(ii) Seller shall assign, transfer and set over to Purchaser
all of Seller's right, title and interest in and to any awards that may be made
for any taking by condemnation or any other power of eminent domain, and
(iii) Seller shall deliver to Purchaser a sum, reasonably
determined by Purchaser, which when added to then available or estimated
available insurance proceeds shall be reasonably sufficient to fully repair and
restore the damage to the Property provided, however, that no payment shall be
required if such damage is caused by a peril for which insurance could not be
obtained.
10.4 For the purposes of this Article, a substantial part
("Substantial Part") of the Property or the improvements on the Land shall mean
(a) a portion having a value of One Hundred Thousand ($100,000.00) Dollars or
more or (b) a casualty which would require expenditure of One Hundred Thousand
($100,000.00) Dollars or more for repair or restoration, or (c) such portion of
the Property as Purchaser's mortgage lender shall determine to be of a magnitude
that said lender is unwilling to provide its acquisition financing for the
Property on account of such damage.
<PAGE>
ARTICLE 11
BROKER
11.1 Purchaser and Seller mutually represent and warrant to each other
that neither they nor any entity related to them have dealt with any broker,
finder or other person or entity who would be entitled to a commission or other
brokerage fee in connection with the transactions described in this Agreement
other than CB Commercial Real Estate Group, Inc. and Scott Lauritzen Mathias
Associates which entities Seller agrees to pay pursuant to separate agreements.
Purchaser and Seller each agree to indemnify, defend and hold the other harmless
of and from and against any loss, costs, damage or expense (including reasonable
attorneys' fees and court costs) arising out of (i) any inaccuracy in the
representation and warranty contained in the immediately preceding sentence or
(ii) the claims of any broker or finder (or anyone claiming to be a broker or
finder) other than the entities identified in the immediately preceding sentence
regarding any services claimed to have been rendered to the indemnifying party
in connection with the transactions contemplated by this Agreement.
11.2 Notwithstanding any other provision of this Agreement to the
contrary, the provisions of this Article shall survive the closing of title and
the delivery of the deed and any prior termination of this Agreement for any
reason whatsoever.
ARTICLE 12
NOTICES
Any notice given or required to be given pursuant to any provision of
this Agreement shall be in writing and shall either be personally delivered,
sent by facsimile or sent by a reputable commercial courier service guaranteeing
overnight delivery, and shall be deemed to have been given upon receipt if
personally delivered or sent by facsimile, or, upon delivery to such courier,
with delivery charges prepaid, if sent by such a courier, in either case
addressed as follows:
Purchaser: Universal Health Realty Income Trust
367 South Gulph Road
King of Prussia, PA 19406
Attn: Mr. Kirk E. Gorman
with a copy to: Universal Health Realty Income Trust
3525 Piedmont Road, N.E.
7 Piedmont Center; Suite 202
Atlanta, Georgia 30305
Attn: Mr. Timothy J. Fowler
AND
Fulbright Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Warren J. Nimetz, Esq.
Seller: Fresno-Herndon Partners, Limited
701 North First Street
San Jose, California 95112
Attn: Mr. Barry Swenson
with copy to: Fresno-Herndon Partners, Limited
701 North First Street
San Jose, California 95112
Attn: Mr. Jeff Lauritzen
<PAGE>
Either party may, by giving notice to the other in the manner set
forth above, change the address to which notices shall be sent to it, provided
that any such change of address shall be effective three (3) business days after
it is given. If a reputable commercial courier service guaranteeing overnight
delivery shall not service the area to which notice is required to be given,
notice to such area shall be by registered or certified mail, return receipt
requested, and shall be deemed given one day after the same is deposited in an
official U.S. mail depository, with all postage and other charges prepaid,
enclosed in a properly addressed and sealed wrapper. The attorney for each party
to this Agreement may give notices on behalf of his client with the same force
and effect as if such notice was given directly by such party.
ARTICLE 13
PERMITTED ASSIGNMENT
Purchaser may assign its interest under this Agreement without
Seller's consent.
ARTICLE 14
INSPECTION PERIOD
14.1 Purchaser intends to continue its due diligence on the Project
and physical inspection of the Project through and including November 4, 1994
("Inspection Period"). Seller shall assist with such inspection, but shall not
be obligated to incur any cost or expense or to furnish any information other
than at the place where same is maintained in connection therewith other than as
specified in this Agreement. All information received by Purchaser relating to
the Project from Seller or its affiliates shall be used solely for the purpose
of determining the advisability of proceeding with the transaction described in
this Agreement or in connection with Purchaser obtaining mortgage financing for
the acquisition of the Project. Purchaser shall have the right to terminate this
Agreement if Purchaser, in its sole discretion, deems the Project or any aspect
thereof, to be unsatisfactory; provided, however, that Purchaser may only
exercise such right by giving Seller written notice of such termination on or
before the last day of the Inspection Period.
14.2 If Purchaser exercises its right to terminate this Agreement
under this Article 14, this Agreement shall be deemed to be canceled and neither
party have any further claim, agreement, or obligation to the other party.
ARTICLE 15
REPRESENTATIONS AND WARRANTIES
Seller and Purchaser hereby make the following mutual representations
and warranties to each other, which representations and warranties are
materially true and accurate in every respect as of the date hereof and shall be
materially true and accurate as of the Closing Date and shall survive the
delivery of the deed and the closing of title for one (1) year thereafter:
15.1 Of Seller:
(a) Authority. Seller has the full and unrestricted power and capacity
to enter into and carry out the terms of this Agreement and all other agreements
referred to herein. This Agreement constitutes, and all other agreements,
documents and instruments to be executed by Seller pursuant hereto, when
executed and delivered by Seller, will each constitute a valid and binding
obligation of Seller as the case may be, enforceable in accordance with its
terms;
<PAGE>
(b) No Defaults. Neither the execution, delivery or performance of
this Agreement or any other agreement contemplated hereby, the fulfillment of
and compliance with the respective terms and provisions hereof or thereof, nor
the consummation of the transactions contemplated hereby or thereby, will: (i)
conflict with, or result in a breach of, any of the terms, conditions or
provisions of, or constitute any default under, any agreement or instrument to
which Seller is a party or is subject; (ii) violate any restriction to which
Seller is a party or is subject; or (iii) constitute a violation of any
applicable law, statute, regulation, ordinance, rule, judgment, decree, writ or
order;
(c) No Litigation. There are no actions, suits, claims, arbitrations,
proceedings, orders, judgments or investigations pending or, to the knowledge of
Seller, threatened against or affecting Seller or the Project or any of the
Tenant Leases or which question the validity of this Agreement or any action
taken or to be taken under any of the provisions of this Agreement, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality except the
claims threatened by Dr. Bakar and WPIC for WPIC's use of the MRI equipment;
(d) MRI Equipment. Upon the completion of the construction of the
metal shield described in Section 16.1(f), the use and operation of the MRI
equipment by WPIC is in compliance with all applicable laws, regulations and
guidelines except for emissions from the MRI equipment occurring solely within
WPIC's space, and no dispute exists between WPIC and any tenant, other than the
dispute with Dr. Bakar as described in this Agreement;
(e) Assessments. Seller has received no notice and has no
knowledge of any pending improvements, liens or special assessments to be made
against the subject property by any governmental authority;
(f) Condemnation. There is no exercise of eminent domain or
condemnation pending, or to the best of Seller's knowledge threatened, against
or affecting the Property (or any part thereof), nor does Seller know or have
reasonable grounds to know of any basis for any of same;
(g) Tax Reduction Proceedings. There are no pending ad valorem
tax reduction proceedings affecting the Property;
(h) Rents. The schedule attached hereto as Exhibit B and made a part
hereof is a complete and accurate list of all the leases as amended (the "Tenant
Leases") in effect at the Property, the dates thereof and of any amendments
thereto, the names of the tenants thereunder, the rentable area occupied by each
tenant, the expiration dates thereof; the fixed and additional rental currently
payable thereunder, a statement as to rent arrearages, any amounts paid for
parking, storage facilities or other charges not included in rent and the
security (if any) held by Seller for each such tenant. The executed copies of
all the Tenant Leases delivered to Purchaser concurrently with the execution
hereof (and to be assigned at the Closing), are true, complete and correct and
Seller is not in default thereunder, nor is there in existence any condition or
fact which with notice or lapse of time, or both, would constitute a default
thereunder; Seller is in possession of tenant security deposits in the amounts
set forth in the Tenant Leases; no tenants are in default of their Tenant Leases
except for the default claimed against WPIC for the use of the MRI equipment; no
tenant is in arrears in the payment of rents or other charges; no such tenants
shall be entitled to any rebates, rent concessions or free rent or renewal
options, except as provided in the Tenant Leases; no commitments have been made
to any tenant, except to VCC, for repairs or improvements, by Seller, as
landlord, which remain to be completed or paid for in full; the Tenant Leases
<PAGE>
constitute the entire agreement between the landlord and tenant thereunder, and
there are no side letters or other agreements between the Landlord and each of
the tenants; all Tenant Leases are the result of bona fide arm's-length
negotiations with persons who are not affiliates of Seller; no rents due under
any of said Tenant Leases have been assigned, hypothecated or encumbered; no
rents under any Tenant Leases have been prepaid in advance of the then current
month; and there are no fees or commissions payable to any third person or
entity in regard to the subject property or any of said Tenant Leases (including
any commissions payable upon the exercise of any renewal option under the Tenant
Leases); and Seller will not, hereafter and prior to the Closing Date, modify
any Tenant Lease, accept any termination or surrender of any Tenant Lease or
enter into any agreement extending the term of any Tenant Lease, without the
prior written consent of Purchaser;
(i) Zoning. The Property is properly zoned for use as and for medical
offices and an ambulatory surgical facility and no restrictions, easements,
limitations or conditions of any sort whatsoever exist affecting the use of the
Property, other than as specifically set forth in the Title Commitment;
(j) Permits. All permits and licenses necessary for the operation and
occupancy of the Property, including, but not limited to, all building and use
permits, and permits, licenses and other authorization required under any
applicable local, state or federal environmental laws, orders, rules,
regulations or requirements have been obtained on all operations to date and
shall be maintained through the Closing Date and the continued existence use and
occupancy of the Project by Purchaser is not dependent on the granting of any
special permit, exception, approval or variance. No notice, notification,
demand, request for information, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened by any governmental authority with respect to
any alleged failure by Seller to have any permit, license or authorization
required in connection with the use, maintenance and operation of the Property,
or with respect to any generation, treatment, storage, recycling,
transportation, release or disposal of any "hazardous substances" (as
hereinafter defined);
(k) Certificate of Occupancy. Final certificates of occupancy have
been issued for the Property, including all medical offices and ambulatory
surgical facilities (copies of which are annexed hereto as Exhibit K) and have
not been amended, revoked or canceled;
(l) Access. Seller has no knowledge or notice of any fact or
condition existing which would result or could result in the termination or
reduction of the current access from the Property to existing roads or to sewer
or other utility services presently serving the Property;
(m) Utilities. All utilities as shown in the Plans and Specifications
(including, but not limited to, water, sewer, electricity and telephone
facilities) are available at the Project;
(n) No Option to Purchase. No third party has an option to
purchase the Project;
(o) No Bankruptcy. There are no attachments, executions, assignments
for the benefit of creditors or voluntary or involuntary proceedings in
bankruptcy pending, contemplated or, to the knowledge of Seller, threatened
against Seller;
(p) Service, Maintenance Agreements, etc. There are no contracts, oral
or written, with any employees nor any service contract, maintenance contract,
nor any union or other contract or agreement with respect to the Property which
is not listed in Schedule 1 to Exhibit D. All such agreements are in full force
and effect without default. Seller will not enter into any new such agreement or
modify any such agreement prior to the Closing;
<PAGE>
(q) No Lease of Space. Seller will not, hereafter and prior to the
Closing Date, lease any space which is now or may become vacant without the
prior written approval of Purchaser;
(r) Seller to Maintain Premises. Seller will maintain the physical
condition of the Property in the same condition as of the date hereof through
the Closing Date, reasonable wear and tear excepted, will make any ordinary
repairs and continue maintenance of the Property from the date hereof until
Closing, as it would in the normal course of operations;
(s) Insurance Requirements. There are no outstanding requirements by
the holder of any existing note and mortgage on the Property, or any insurance
company, insurance rating board, fire underwriting board or governmental agency
requiring or recommending any repairs or work to be done at the Property or any
equipment to be installed thereon;
(t) Income and Operating Expenses. The schedule attached hereto as
Exhibit L and made a part hereof accurately sets forth the income and expenses
of the Property on an annual basis for the period ended December 31, 1993 and
for the current year through September 30, 1994. There was no tax abatement or
exemption in effect for the Property during said period. There has been no
material adverse change in the operation or income of the Property since that
date, other than as set forth in Exhibit L;
(u) Employees. There are no employees employed by Seller in the
operation and maintenance of the Property;
(v) No Defective Condition. There is no defective condition,
structural or otherwise, in the buildings or other improvements on the Property;
All heating, electrical, plumbing, air conditioning, and other mechanical and
electrical systems are in good condition and working order and are adequate in
quantity and quality for the operation of the Project, and the roof is free from
leaks and in sound structural condition. Seller shall repair or replace
immediately any defective condition or defective system for a period of one (1)
year following the Closing, specifically excluding, however, any such repairs or
replacements that are reimbursable to Purchaser under a Tenant Lease. Seller
shall cause Green Valley to guarantee Seller's obligations under this clause
(v);
(w) No Hazardous Substances. Except as set forth in Exhibit M
attached hereto, to Seller's knowledge (i) the Property has not been used for
the production, storage, deposit or disposal of toxic, dangerous or "hazardous
substances", as such term is defined in the Comprehensive Environmental Response
and Liability Act, 42 U.S.C. Section 9601 et. seq., as amended, or under any
other state or local environmental statutes or regulations issued pursuant
thereto; (ii) No asbestos-containing materials are located on the Property;
(iii) No electrical transformers, florescent light fixtures with ballasts or
other equipment containing PCBs are or were located on the Property; (iv) There
is no activity on the Property which would subject the owner of the Property to
damages or penalties under any federal, state or local law, ordinance, code or
regulation, or under any civil action respecting hazardous substances on the
Property; (v) Seller has at all times operated the Project in compliance with
all applicable limitations, restrictions, conditions, standards, prohibitions,
requirements and obligations of environmental laws and related orders of any
court or other governmental entity; (vi) There are not any existing, pending or,
to the knowledge of Seller, threatened actions, suits, claims, investigations,
inquiries or proceedings by or before any court or any other governmental entity
directed against Seller in connection with the operation of the Project which
pertain or relate to (i) any remedial obligations under any applicable
<PAGE>
environmental law, (ii) violations by Seller of any environmental law, (iii)
personal injury or property damage claims relating to a release of chemicals or
hazardous substances by Seller, or (iv) response, removal, or remedial costs
under the Comprehensive Environmental Response, Compensation, and Liability Act
or any similar state law; (vii) There has been no release of any hazardous
substances on or underlying the real property nor any release or seepage from
any property adjoining the Real Property; (viii) There are no underground
storage tanks for hazardous substances, active or abandoned, with respect to the
Project.
(x) No Violations. There are no outstanding notes or notices of
violations of law or governmental ordinances, orders or requirement issued by
any governmental department, agency, bureau or instrumentality affecting the
Property or any part thereof (collecting "Property Violations") and all Property
Violations affecting the Property as of the Closing Date (as the same may be
adjourned) shall be complied with and removed of record by Seller, at its
expense, at Closing;
(y) Vendors. All vendors, suppliers and other contractors or persons
supplying goods or services to the Property, have been paid in full to date or
will be paid on the Closing Date;
(z) No Landmark. The Property is not a landmark under any applicable
federal, state or local laws, statutes, ordinances, regulations or orders; and
(aa) No Unpaid Bills. As of the Closing Date, there are no unpaid
bills for work, labor, service or materials furnished to the Project upon the
request or order of Seller, which may be made the basis of a lien.
15.2 Of Purchaser:
(a) Authority. Purchaser has the full and unrestricted power and
capacity to enter into and carry out the terms of this Agreement and all other
agreements referred to herein. This Agreement constitutes, and all other
agreements, documents and instruments to be executed by Purchaser pursuant
hereto, when executed and delivered by Purchaser, will each constitute a valid
and binding obligation of Purchaser as the case may be, enforceable in
accordance with its terms;
(b) No Defaults. Neither the execution, delivery or performance of
this Agreement or any other agreement contemplated hereby, the fulfillment of
and compliance with the respective terms and provisions hereof or thereof, nor
the consummation of the transactions contemplated hereby or thereby, will: (i)
conflict with, or result in a breach of, any of the terms, conditions or
provisions of, or constitute any default under, any agreement or instrument to
which Purchaser is a party or is subject; (ii) violate any restriction to which
Purchaser is a party or is subject; or (iii) constitute a violation of any
applicable law, statute, regulation, ordinance, rule, judgment, decree, writ or
order; and
(c) No Litigation. There are no actions, suits, claims, arbitrations,
proceedings, orders, judgments or investigations pending or, to the knowledge of
Purchaser, threatened against or affecting or which question the validity of
this Agreement or any action taken or to be taken under any of the provisions of
this Agreement, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality.
<PAGE>
ARTICLE 16
CONDITIONS PRECEDENT TO CLOSING
16.1 The obligation of Purchaser to purchase the Project pursuant to
the provisions of this Agreement shall be subject to the following conditions
(all or any of which may be waived in writing, in whole or in part, by
Purchaser):
(a) the representations and warranties of Seller in this Agreement
shall be true and correct and the covenants and agreements of Seller contained
herein shall have been complied with as of the date of Closing;
(b) Seller shall deliver the documents described in Articles 5 and 7
of this Agreement;
(c) There shall have been no material changes in the zoning laws
and regulations applicable to the Project;
(d) Seller shall have obtained an estoppel certificate from tenants
occupying the Property's leased space under the Tenant Leases, described on
Exhibit B annexed hereto dated no earlier than October 10, 1994 setting forth
that (i) there are no defaults thereunder by landlord or tenant, (ii) their
respective leases are valid, unmodified and in full force and effect, (iii) that
all rent and additional rent has been paid through the month of Closing and (iv)
such other matters as are set forth in Exhibit B annexed hereto;
(e) Seller shall deliver title to the Property as provided in Article
5 hereof;
(f) Seller shall have commenced and shall be proceeding with due
diligence to construct a metal shield along the length of the wall separating
Dr. Bakar's space from certain portions of WPIC's space containing the examining
room and the control room for the MRI Equipment. Seller shall construct such
wall in accordance with the design by Picker International, Inc. Seller shall
complete such construction on or before January 31, 1995. Seller shall indemnify
and hold Purchaser harmless from all liability, damages, suits, costs and
expenses arising from any claims by Dr. Bakar or WPIC or both relating to the
emissions from the MRI equipment or the construction of the wall. The provisions
of this Section 16.1(f) shall survive the Closing; and
<PAGE>
(g) Seller shall deposit the aggregate amount of $75,000 in escrow
with Purchaser's counsel to be held in accordance with the escrow agreement in
the form of Exhibit N. Such amount represents security for Seller's continuing
post-closing obligations to Purchaser as provided herein and is allocated as
follows: (i) the amount of $25,000 for the satisfactory completion of the metal
shield as described in Section 16.1(f) above, (ii) the amount of $25,000 for
rental payments and construction work on the space currently occupied by Dr.
Hadden and (iii) the amount of $25,000 for the timely completion of the
adjustment of the lot line of the Property such that the lot line runs through
the centerline of the driveway on North Fresno Avenue. Such deposit may be made
by Seller at the Closing from the proceeds of the payment by Purchaser of the
Purchase Price; and
(h) Seller shall have completed, in a manner satisfactory to
Purchaser, the repairs and other work described on Exhibit O attached hereto.
16.2 If Seller shall fail to satisfy any of the conditions set forth
herein or any other covenant or closing obligation of Seller shall not have been
complied with as of the Closing Date, then in such event Purchaser shall have
the right, in addition to any other rights or remedies available to Purchaser
under this Agreement or in equity or at law, to rescind this transaction in
which event Seller shall pay to Purchaser the Cancellation Fee and the parties
shall be relieved and released from any further obligations to each other or
Purchaser may close the transaction in accordance with its terms.
ARTICLE 17
POST-CLOSING OBLIGATIONS
17.1 Purchaser has received a credit against the Purchase Price in the
amount of $8,500 for rent on Dr. Hadden's space. Seller shall pay promptly to
Purchaser on demand any additional amount of rent payable on such space at the
rate specified hereinabove for the period from 63 days following the Closing
Date to the date VCC occupies the space. Seller shall also complete the
alteration of such space prior to February 1, 1995 as required by VCC's Tenant
Lease. Upon (i) Seller's completion of such alterations and (ii) the agreement
of VCC to pay additional rent representing the amortization of the cost of such
alterations, Purchaser shall reimburse Seller in the amount of $23,500.
17.2 Seller shall complete, at Seller's cost and expense, on or before
December 20, 1994 an adjustment to the lot line of the Property such that the
lot line runs through the centerline of the driveway connecting the Property to
North Fresno Avenue.
17.3 If Seller fails to satisfy its obligations as set forth under
Sections 16.1(f), 17.1 or 17.2, Purchaser may cause such obligations to be
fulfilled at Seller's cost and expense and Purchaser shall be entitled to
disbursements from the amount deposited by Seller under Section 16.1(g) in the
amounts specified thereunder.
17.4 Provided no monetary default has occurred under the Tenant Lease
of WPIC, on the third anniversary of the date hereof, Purchaser shall pay the
amount of $57,881 to Seller and, on the fifth anniversary of the date hereof,
Purchaser shall pay the amount of $63,814 to Seller. Notwithstanding the
foregoing, if no monetary default has occurred under the Tenant Lease of WPIC
and such Tenant Lease shall have been assumed by a successor tenant having an
Acceptable Financial Status (as hereinafter defined) for a continuous period of
at least four consecutive quarters, Purchaser shall pay to Seller the amount of
$100,000 plus interest at the rate of 5% per annum compounded annually from the
Closing Date up to the date of such payment. Acceptable Financial Status shall
be calculated in accordance with generally accepted accounting principles and
shall mean (i) a ratio of total liabilities to tangible net worth of not more
than 1.5 and (ii) a ratio of earnings before interest and taxes to interest
charges of at least 2.
17.5 The provisions of this Article 17 shall survive the Closing.
<PAGE>
ARTICLE 18
MISCELLANEOUS
18.1 This Agreement is binding upon and shall inure to the benefit of
the parties hereto, their respective heirs, successors, legal representatives
and permitted assigns.
18.2 Wherever under the terms and provisions of this Agreement the
time for performance falls upon a Saturday, Sunday or legal holiday, such time
for performance shall be extended to the second business day thereafter.
18.3 This Agreement may be executed in one or more counterparts, all
of which when taken together shall constitute one and the same agreement, and
shall become effective when one or more counterparts have been executed by each
of the parties hereto and delivered to each of the other parties hereto.
18.4 The captions at the beginning of the several paragraphs, Sections
and Articles are for convenience in locating the context, but are not part of
the context. Unless otherwise specifically set forth in this Agreement to the
contrary, all references to Exhibits contained in this Agreement refer to the
Exhibits which are attached to this Agreement all of which Exhibits are
incorporated in, and made a part of, this Agreement by reference. Unless
otherwise specifically set forth in this Agreement to the contrary, all
references to Articles, Sections, paragraphs and clauses refer to portions of
this Agreement.
18.5 If any term or provision of this Agreement shall be held to be
illegal, invalid, unenforceable or inoperative as a matter of law, the remaining
terms and provisions of this Agreement shall not be affected thereby, but each
such remaining term and provision shall be valid and shall remain in full force
and effect.
18.6 This Agreement and the other writings referred to in, or
delivered pursuant to, this Agreement, embody the entire understanding and
contract between the parties hereto with respect to the Project and supersede
any and all prior agreements and understandings between the parties hereto,
whether written or oral, formal or informal, with respect to the subject matter
of this Agreement. This Agreement has been entered into after full investigation
by each party and its professional advisors, and neither party is relying upon
any statement, representation or warranty made by or on behalf of the other
which is not expressly set forth in this Agreement.
18.7 No extensions, changes, waivers, modifications or amendments to
or of this Agreement, of any kind whatsoever, shall be made or claimed by Seller
or Purchaser, and no notices of any extension, change, waiver, modification or
amendment made or claimed by Seller or Purchaser shall have any force or effect
whatsoever, unless the same is contained in a writing and is fully executed by
the party against whom such matter is asserted.
18.8 This Agreement shall be governed and interpreted in accordance
with the laws of the State of New York (except with respect to the enforcement
of any claims against the Property or in connection with enforcement of
Purchaser's right to seek specific performance of Seller's obligations
hereunder, which rights shall be governed by the Laws of the State of
California).
18.9 Each party hereto shall pay all charges specified to be paid by
them pursuant to the provisions of this Agreement and their own attorney's fees
in connection with the negotiation, drafting and closing of this Agreement.
<PAGE>
18.10 THE DECLARATION OF TRUST ESTABLISHING UNIVERSAL HEALTH REALTY
INCOME TRUST, FILED AUGUST 6, 1986, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO ("DECLARATION"), IS DULY FILED IN THE OFFICE OF THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT
THE NAME "UNIVERSAL HEALTH REALTY INCOME TRUST," REFERS TO THE TRUSTEES UNDER
THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY;
AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE TRUST SHALL
BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF,
OR CLAIM AGAINST, THE TRUST. ALL PERSONS DEALING WITH THE TRUST, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF THE TRUST FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names by their respective duly authorized representatives
on the day and year first above written.
SELLER: FRESNO-HERNDON PARTNERS, LIMITED
By: Green Valley Corporation, its sole general partner
By: _________________________________________
Name:
Title:
PURCHASER: UNIVERSAL HEALTH REALTY INCOME TRUST
By: ______________________________________________
Name:
Title:
<PAGE>
LIST OF EXHIBITS
EXHIBIT
A Description of the Land
B Tenant Leases
C Assignment and Assumption of Tenant Leases (see attached)
D Assignment and Assumption of Warranties and Service Contracts
(see attached)
E Tenant Notice (to be prepared by Seller)
F Documents re Bakar and WPIC Settlement (to be provided by
Seller)
G Seller Lease (to be provided by Seller)
H Repurchase Agreement (to be provided by Purchaser)
I Reciprocal Easement Agreement (to be provided by Seller)
J Agreement for Post-Closing Repairs (to be provided by
Purchaser)
K Certificate of Occupancy (to be provided by Seller)
L Income and Operating Statements for 1993 (to be provided by
Seller)
M Hazardous Substance Disclosure (to be provided by Seller)
N Escrow Agreement (to be provided by Purchaser)
O Repairs (to be provided by Purchaser)
<PAGE>
ASSIGNMENT AND ASSUMPTION OF TENANT LEASES
KNOW THAT FRESNO-HERNDON PARTNERS LIMITED, a California limited partnership
("Assignor"), in consideration of ten dollars and other valuable consideration
paid by UNIVERSAL HEALTH REALTY INCOME TRUST ("Assignee"), hereby assigns unto
Assignee all its right, title and interest as landlord in and to certain leases
of portions of the building know as Fresno-Herndon Medical Plaza, Fresno,
California (collectively, the "Tenant Leases") as more particularly described in
Schedule 1 annexed hereto and made a part hereof.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns, from the
date hereof, for all of the rest of the term mentioned in the Tenant Leases,
subject to the covenants, conditions and provisions therein also mentioned.
AND Assignee hereby assumes performance of all of Assignor's obligations as
landlord under the Tenant Leases from and after the Closing Date and agrees to
indemnify, defend and hold Assignor harmless from and against any legal actions,
damages, losses, costs and expenses (including, without limitation, attorneys'
fees and disbursements) arising out of the Tenant Leases from and after the
Closing Date. Assignor agrees to indemnify, defend and hold Assignee harmless
from and against any legal actions, damages, losses, costs and expenses
(including, without limitation, attorneys' fees and disbursements) arising out
of the Tenant Leases before the Closing Date.
IN WITNESS WHEREOF, Assignor and Assignee have executed this instrument this
____ day of November, 1994.
FRESNO-HERNDON PARTNERS LIMITED
By: ____________________________________
Name:
Title
UNIVERSAL HEALTH REALTY INCOME
TRUST
By: ____________________________________
Name: Timothy J. Fowler
Title: Vice President
<PAGE>
ASSIGNMENT AND ASSUMPTION OF
WARRANTIES AND SERVICE CONTRACTS
KNOW THAT FRESNO-HERNDON PARTNERS LIMITED, a California limited partnership
("Assignor"), in consideration of ten dollars and other valuable consideration
paid by UNIVERSAL HEALTH REALTY INCOME TRUST ("Assignee"), hereby assigns unto
Assignee the warranties and service contracts listed on Schedule 1 annexed
hereto, covering the operation of the building known as Fresno-Herndon Medical
Plaza, Fresno, California (collectively, the "Warranties and Service
Contracts").
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns, from the
date hereof, for all of the rest of the term mentioned in the Warranties and
Service Contracts, subject to the covenants, conditions and provisions therein
also mentioned.
AND Assignee hereby assumes performance of all of Assignor's obligations under
the Warranties and Service Contracts after the Closing Date and agrees to
indemnify, defend and hold Assignor harmless from and against any legal actions,
damages, losses, costs and expenses (including, without limitation, attorneys'
fees and disbursements) arising out of the Warranties and Service Contracts from
and after the Closing Date. Assignor agrees to indemnify, defend and hold
Assignee harmless from and against any legal actions, damages, losses, costs and
expenses (including, without limitation, attorneys' fees and disbursements)
arising out of the Warranties and Service Contracts before the Closing Date.
IN WITNESS WHEREOF, Assignor and Assignee have executed this instrument this
_____ day of November, 1994.
FRESNO-HERNDON PARTNERS LIMITED
By: ___________________________________
Name:
Title:
UNIVERSAL HEALTH REALTY INCOME
TRUST
By: ____________________________________
Name: Timothy J. Fowler
Title: Vice President
<PAGE>
REPURCHASE AGREEMENT
AGREEMENT made as of the ____ day of November, 1994 by and between
FRESNO-HERNDON PARTNERS, LIMITED, a California limited partnership having an
office at 701 North First Street, San Jose, California 95112 ("Purchaser") and
UNIVERSAL HEALTH REALTY INCOME TRUST having an office at 367 South Gulph Road,
King of Prussia, Pennsylvania 19406 ("Seller")
W I T N E S S E T H :
ARTICLE 1
AGREEMENT FOR PURCHASE AND SALE
1.1 Subject to the conditions set forth in this Agreement, Seller is
granting to Purchaser an option commencing on the seventh anniversary of the
date hereof (the "Repurchase Date") and continuing for a period of forty-five
(45) days (the "Expiration Date") to purchase the following property
(collectively, the "Project"):
a) The property located in the City of Fresno, State of California
more particularly described on Exhibit A (the "Land") together with the existing
improvements thereon, consisting of the building and improvements having the
street address of 7055 North Fresno Street, Fresno, California 93720 (together,
the "Property");
(b) The Seller's interest in and to the Tenant Leases (as hereinafter
defined) affecting the Property;
(c) All of Seller's right, title and interest in and to all intangible
property now or hereafter owned or held by Seller in connection with its
ownership of the Property, including but not limited to any leases, contracts,
leasing materials and forms, keys, records and correspondence relating to
tenants, security deposits, prepaid rentals, telephone exchange numbers and the
use of the name "Fresno- Herndon Medical Plaza";
(d) Seller's right, title and interest in and to all easements,
licenses, appurtenances, rights, privileges and hereditaments belonging or
appertaining to the Property, and in and to any land lying in the bed of any
street, road or avenue, in front of or adjoining the Property to the center line
thereof; and
(e) All fixtures and articles of personal property attached or
appurtenant to or used in connection with the Property which are owned by Seller
and located at the Property, free from all liens and encumbrances and, without
limiting the generality of the foregoing, such fixtures and articles of personal
property shall include machinery, computer hardware and software, plumbing,
heating and lighting fixtures, mail boxes, tools, and maintenance equipment or
supplies, if any, owned by Seller and located at the Property.
1.2 Purchaser must exercise the option to purchase by notice to Seller
as provided herein on a date (the "Exercise Date") prior to the Expiration Date.
<PAGE>
ARTICLE 2
PURCHASE PRICE
2.1 The purchase price for the Project is SEVEN MILLION TWO HUNDRED
FIFTY THOUSAND DOLLARS ($7,250,000) (the "Purchase Price") plus or minus the
adjustments provided for in this Agreement (the "Closing Payment"), to be paid
to Seller in federal funds in such manner, place and account as Seller may
reasonably request, by notice given to Purchaser at least three (3) business
days prior to the Closing (as hereinafter defined).
ARTICLE 3
PHYSICAL CONDITION OF PROJECT, ETC.
Purchaser agrees to purchase the Property in its "AS IS" condition on the
Repurchase Date, subject to Seller's representations and warranties as set forth
in this Agreement and ordinary wear and tear between the date hereof and the
Closing Date. Purchaser has not relied upon, and Seller is not liable or bound
in any manner, by any verbal or written statements, representations, real estate
brokers' "set-ups" or information pertaining to the Project furnished by any
real estate broker, agent, employee, servant or other persons unless the same
are expressly set forth in this Agreement.
ARTICLE 4
PERMITTED ENCUMBRANCES TO TITLE
4.1 Seller shall deliver to Purchaser good, marketable and
indefeasible fee simple title to the Property, subject only to the Permitted
Encumbrances (as hereinafter defined).
4.2 Purchaser agrees to accept title to the Property subject to the
following matters (collectively, the "Permitted Encumbrances"):
(a) The leases and tenancies affecting the Property on the
Exercise Date (the "Tenant Leases");
(b) Liens securing payment of all ad valorem, intangible and
other real and personal property taxes, school taxes, and water and sewer
charges against the Property or the personal property covered by this Agreement
for the tax year in which the Closing Date occurs;
(c) the exceptions listed as numbers 1, 2, 3, 4, 5, 6, 7, 8, 9,
15, 16, 17, 18 and 21 together with portions of 11, 12 and 13 other than
references to assignments of lease in the Preliminary Title Report dated as of
August 9, 1994 (the "Title Commitment") of Chicago Title Insurance Company (the
"Title Company") to issue an owner's policy of title insurance (the "Title
Policy");
(d) the exception listed as number 10 on the updated Title
Commitment, dated October 12, 1994;
(e) the Reciprocal Easement dated the date hereof between
Seller and Purchaser for ingress and egress;
(f) the adjustment to the lot line of the respective properties
of Seller and Purchaser such that the lot line runs down the centerline of the
driveway on North Fresno Avenue; and
(g) Such other exceptions to title as shall be approved by
Purchaser.
4.3 If at the time of the Closing the Property or any part thereof
shall be or shall have been affected by an assessment or assessments which are
or may become payable in annual installments of which the first installment is
then due or has been paid, then for the purpose of this Agreement all the unpaid
annual installments of any such assessment, including those which are to become
due and payable after Closing, shall be prorated between Seller and Purchaser as
of the Closing Date and adjusted accordingly at that time. The terms and
provisions of this Section 4.3 shall survive the Closing.
<PAGE>
ARTICLE 5
CONDITION OF TITLE, TITLE INSURANCE
5.1 Within five (5) days of the Exercise Date, Purchaser shall give
written notice (the "Objection Notice") to Seller of the conditions of title
which Purchaser is not obligated to take the Property subject to pursuant to the
provisions of this Agreement (the "Objections").
5.2 If Seller gives Purchaser notice (the "Response Notice") within
five (5) days of the date hereof, that Seller is unable to convey title to the
Property as required by this Agreement, Purchaser may, as its exclusive remedy,
elect by written notice given to Seller within five (5) days after the Response
Notice is given, either (a) to accept such title as Seller is able to convey
without any reduction or abatement of the Purchase Price or (b) to terminate
this Agreement.
5.3 The existence of liens or encumbrances other than the Permitted
Encumbrances or those which are permitted by this Agreement shall be deemed to
be Permitted Encumbrances if the Title Company will insure Purchaser's title
clear of the matter or will insure against the enforcement of such matter out of
the Property, on the condition that both Purchaser's counsel shall agree to
accept title with such insurance. Any unpaid liens for real estate and personal
property taxes for years prior to the fiscal year in which the Closing Date
occurs and any other matter which Seller is obligated to pay and discharge at
the Closing shall not be deemed objections to title, but the amount thereof
chargeable to Seller, plus interest and penalties thereon, if any, shall be
shown as chargeable to Seller in Purchaser's and Seller's settlement statement
on the Closing Date and paid to the Title Company for the payment of such
matters.
5.4 Purchaser shall pay any costs for obtaining the Title Commitment
and the Title Policy. Purchaser shall pay the escrow fees of the Title Company.
Except as noted herein, Purchaser shall pay all deed transfer, documentary stamp
tax, intangible and other taxes and other recording costs and expenses in
connection with the Closing.
5.5 Seller shall, at its sole expense, deliver or cause to be
delivered to Purchaser within five (5) days from and after the Exercise Date of
execution of this Agreement the following documents, to the extent they are in
Seller's possession:
(a) A copy of the paid real estate tax bill for the most recent
period for which real estate taxes have been due and payable;
(b) True and correct copies of all equipment leases, service,
maintenance, union and management contracts, as well as all other documents or
agreements relating to or affecting the Project;
(c) A current rent roll for the Property, listing for each tenant
the name, rent, arrearages, offsets or credits to rent, reimbursement for
expenses, amount of deposits, cleaning fees, preparation charges, advance rent
and prepaid rent, if any, lease commencement dates, lease termination dates,
lease options, option rent, and cost of living clauses;
(d) A schedule of any employees employed by Seller or contractors
retained by Seller in the operation of the Project, setting forth names,
salaries, other compensation, and other pertinent information concerning such
employees or contractors;
<PAGE>
(e) True and correct copies of any insurance policies covering
the Project;
(f) A schedule of any litigation which is pending, or for which
notice has been given against the Property as well as any papers received or
sent by Seller in connection with such litigation; and
(g) True and correct copies of any uncompleted work letters
relating to the Property.
ARTICLE 6
CLOSING
6.1 The consummation of the transactions described in this Agreement
(the "Closing") shall occur on a date mutually agreed upon by Seller and
Purchaser which date shall be no later than the Expiration Date (the "Closing
Date"), by escrow closing through the Title Company at their office in Fresno,
California or in such other manner or in such other place as the parties may
agree upon.
6.2 Upon Purchaser's delivery of all required documents and
instruments and its payment of the balance of the Purchase Price and other
amounts required herein, Purchaser and Seller shall prepare and sign a closing
statement reflecting the adjustments and payments made and agreements in
connection therewith (the "Closing Statement"). The Closing Statement and all of
the aforesaid documents executed by Purchaser or Seller, or both, as
appropriate, and be delivered to the Title Company which shall do the following:
(a) Record the deed.
(b) Deliver to Seller and Purchaser or other appropriate party
the documents and payments delivered to it as escrow holder for delivery to such
party; and
(c) Pay all recording, tax and other transfer fees and all filing
fees reflected on the Closing Statement.
6.3 Notwithstanding anything contained in this Agreement to the
contrary, Purchaser and Seller acknowledge that the requirements for the Closing
set forth in this Agreement may be supplemented by written escrow instructions
to the Title Company and a settlement statement executed by both Seller and
Purchaser, whereupon the delivery of any document or other item required to be
delivered hereunder shall be deemed duly delivered if such document or item is
delivered to the Title Company in accordance with such escrow instructions.
ARTICLE 7
DOCUMENTS REQUIRED ON CLOSING DATE
7.1 At or prior to the Closing, Seller shall execute and deliver the
following to Purchaser:
(a) Grant Deed;
<PAGE>
(b) Bill of Sale pursuant to which Seller assigns and conveys to
Purchaser all personal property covered by this Agreement, with any applicable
sales tax to be paid by Seller;
(c) Assignment and Assumption of the Tenant Leases in the
form annexed hereto as Exhibit B;
(d) Assignment and Assumption of Warranties and Service
Contracts, in the form annexed hereto as Exhibit C, pursuant to which Seller
assigns to Purchaser its interest in (i) all service contracts as approved and
designated by Purchaser to remain in effect at the Property and (ii) all
transferable guaranties and warranties relating to the Property;
(e) A rent roll for the Property (the "Rent Roll") listing each
tenant, the size and location of the space covered by the applicable Tenant
Lease, the date and term (including commencement and termination dates) of the
applicable Tenant Lease, the provisions of renewal options (including term and
rental provisions), if any, of the applicable Tenant Lease, the monthly rent and
other charges payable, lease expiration date and unapplied security deposit
(including the name of the bank, branch address and account in which such
deposit is held) as of a date not more than three (3) days prior to the Closing
Date, certified by Seller and Seller's managing agent;
(f) The originals or certified copies of the Tenant Leases
described in the Rent Roll;
(g) A written notice of the acquisition of the Property by
Purchaser, originally executed by Seller and Purchaser, which Seller shall
transmit to all tenants and to other parties affected by the sale and purchase
of the Property (the "Tenant Notices"). Such Tenant Notices shall be prepared by
Seller and shall inform the addressees of the sale and transfer of the Property
to Purchaser and contain appropriate instructions relating to the payment of
future rentals, the giving of future notices, the naming of Purchaser as an
additional insured on each tenant's insurance policies and other matters
reasonably required by Purchaser. The Tenant Notices shall specify that
unapplied security deposits under the tenant leases have been delivered to
Purchaser;
(h) A non-foreign status affidavit for Seller complying with the
requirements of Internal Revenue Code Section 1445(f)(3) and the regulations
promulgated thereunder;
(i) All costs and fees required to be paid by Seller pursuant
to Articles 4 or 8 hereof;
(j) A mechanics' lien and general title affidavit, if required by
the Title Company to issue its policy of title insurance without exception for
mechanics' liens, verifying it to be the fact that, as of the Closing Date,
there are no unpaid bills for work, labor, service or materials furnished to the
real property upon the request or order of Seller which may be made the basis of
a lien, and that Seller is in possession of the Project, subject only to the
rights of tenants in possession under the Tenant Leases; and
(k) Such other documents and instruments as may be required by
the Title Company in order to consummate the transactions described in this
Agreement and to issue the Title Policy to Purchaser.
7.2 At or prior to the Closing, Purchaser shall execute, where
appropriate, and deliver the following to Seller:
<PAGE>
(a) The Closing Payment;
(b) The Assignment and Assumption of Tenant Leases;
(c) The Assignment and Assumption of Warranties and Service
Agreements; and
(d) Such other documents and instruments as may be required by
the Title Company in order to consummate the transactions described in this
Agreement.
7.3 If at any time after the Closing it becomes apparent that any
necessary closing documents were either not delivered or improperly executed or
that any closing adjustments were improperly calculated, the parties shall act
in good faith and take all such steps including the execution or re-execution of
documents and the payment of monies as may be reasonably necessary to rectify
such errors or miscalculations. The provisions of this Section 7.3 shall survive
the Closing for a period of one (1) year.
ARTICLE 8
APPORTIONMENTS AND ADJUSTMENTS
8.1 Seller shall be responsible for and shall pay all accrued expenses
with respect to the Project accruing up to 11:59 P.M. on the Closing Date and
shall be entitled to receive and retain all revenue from the Project accruing up
to the Closing Date.
8.2 On the Closing Date, the following adjustments and apportionments
shall be made in cash as follows:
(a) Rents for the month in which the Closing Date occurs (the
"Closing Month") as and when collected. If past due rents are owing by tenants
for any period prior to the Closing Month (the "Rent Arrearages"), then after
request made by Seller subsequent to the Closing Date, Purchaser shall bill all
tenants for such sums, provided however, that Purchaser shall have no liability
or responsibility for the collection of any such Rent Arrearages. Seller shall
be entitled to those funds received by Purchaser from tenants having Rent
Arrearages after the Closing Date, only where such funds are in payment of such
Rent Arrearages and are excess of amounts then owing or otherwise required to be
paid to Purchaser from such tenants. Notwithstanding the foregoing, for any
"pass-through" expenses which are collected from tenants on the basis of
Seller's estimates of such expenses, promptly following the end of the fiscal
period for which such estimated expenses are allocable, Seller and Purchaser
shall determine the actual expenses allocable to such period and shall adjust
for any difference between the estimated expenses and the actual expenses and
the responsible party promptly shall pay the other the amount of any such
difference.
(b) Real estate taxes, ad valorem taxes, school taxes, annual
assessments and personal property, intangible and use taxes, if any;
(c) Charges under service contracts affecting the Project
which Purchaser has agreed to assume on the Closing Date; and
(d) Water and sewer charges on the basis of the period for which
assessed; provided that if a final bill is not available at Closing, a
reasonable estimate will be made based on prior bills and an amount reasonably
estimated to be adequate to pay such charges through the Closing Date shall be
escrowed with the Title Company pending receipt of final bills.
<PAGE>
8.3 At the Closing, the Purchase Price shall be increased by (i) the
amount of $10,101 if Vision Care Center of California, Inc. ("VCC") exercises
its option to lease the space known as Suite 307, as set forth in the Tenant
Lease with VCC and the amendments thereto, (ii) an amount equal to the
unamortized cost of any capital improvements or other alterations done to the
Property, including, without limitation, any improvements or alterations done in
any tenant space and (iii) an amount equal to the net present value of payments
which Seller would have received from any tenant following the Closing Date to
reimburse Seller for any tenant improvements financed by Seller.
8.4 At the Closing, Purchaser will receive a credit against the
Purchase Price in an amount equal to all unapplied security deposits (and
interest, if any) payable to tenants under Tenant Leases in effect on the
Closing Date, against Purchaser's receipt and indemnification therefor. Upon
making such credit, Purchaser will be deemed to have received all such security
deposits and shall be fully responsible for the same as if a cash amount equal
to such security deposits were actually delivered to Purchaser. During the
period prior to the Closing, Seller agrees to obtain Purchaser's prior written
consent, such consent not to be unreasonably withheld, before applying any
security deposit(s), or portions thereof, against any tenant default pursuant to
the terms of the defaulting tenant's lease.
8.5 The provisions of this Article 8 shall survive the closing of
title and the delivery of the deed.
ARTICLE 9
REMEDIES
9.1 If Purchaser defaults (i) in its obligation to purchase the
Project pursuant to this Agreement or (ii) in any of its post-closing
obligations under the Agreement of Purchase and Sale for the Project between
Purchaser, as seller and Seller, as purchaser or (iii) in its obligations under
that certain lease dated the date hereof for certain space in the Project known
as Suite 307 between Seller, as landlord and Purchaser, as tenant, then Seller
shall have the right, in addition to any other remedies available to it at law
or in equity, to terminate this Agreement by giving Purchaser written notice
thereof and, upon receipt of such notice, this Agreement shall wholly cease and
terminate, no party to this Agreement shall have any further claim, agreement,
or obligation to any other party to this Agreement, and any lien of Purchaser
against the Project shall automatically cease, terminate and be released.
9.2 If the sale contemplated by this Agreement is not consummated
because of Seller's failure to perform its obligations hereunder, Purchaser
shall be entitled, as its exclusive remedies, to elect either (a) to terminate
this Agreement or (b) to enforce specific performance of Seller's obligations
under this Agreement; provided, however, that Seller shall not be required to
expend any money other than the amounts provided in Article 8, or take any
action other than delivery of the items provided in Article 7, in connection
with such specific performance.
<PAGE>
ARTICLE 10
DAMAGE, DESTRUCTION OR CONDEMNATION
10.1 Seller agrees to maintain its present policies of fire insurance
covering the Project in full force and effect from the date of this Agreement
through and including the Closing Date.
10.2 If on or before the Closing Date either (a) all or a Substantial
Part (as hereinafter defined) of the improvements on the Land are damaged or
destroyed by fire or the elements or by any other cause, or (b) any part of the
Property is taken by condemnation or other power of eminent domain, Seller or
Purchaser may, by written notice given to Seller within ten (10) days after the
parties shall have notice of the occurrence or the taking (but in no event after
the Closing Date), elect to terminate this Agreement.
10.3 If either (a) a Substantial Part of the improvements on the Land
are damaged or destroyed or a part of the Property is taken by condemnation or
other power of eminent domain, but this Agreement is not canceled as provided in
Section 10.2, or (b) on or before the Closing Date, an insubstantial part of the
improvements on the Land are damaged or destroyed, then neither Seller nor
Purchaser shall have the right to terminate this Agreement based upon such
damage, destruction or taking, provided, however, that on the Closing Date:
(i) Seller shall credit the Purchase Price with an amount
equal to any sums of money collected by Seller under its policies of insurance
or renewals thereof insuring against the loss in question (after deducting (1)
any expenses incurred by Seller in collecting such insurance and (2) any amount
that Seller shall have paid, for repairs or restoration of the damage), and
Seller shall assign, transfer and set over to Purchaser all of Seller's right,
title and interest in and to said policies with respect to the Property and any
further sums payable under said policies, and
(ii) Seller shall assign, transfer and set over to Purchaser
all of Seller's right, title and interest in and to any awards that may be made
for any taking by condemnation or any other power of eminent domain.
10.4 For the purposes of this Article, a substantial part
("Substantial Part") of the Property or the improvements on the Land shall mean
(a) a portion having a value of One Hundred Thousand ($100,000.00) Dollars or
more or (b) a casualty which would require expenditure of One Hundred Thousand
($100,000.00) Dollars or more for repair or restoration, or (c) such portion of
the Property as Purchaser's mortgage lender shall determine to be of a magnitude
that said lender is unwilling to provide its acquisition financing for the
Property on account of such damage.
ARTICLE 11
BROKER
11.1 Purchaser and Seller mutually represent and warrant to each other
that neither they nor any entity related to them have dealt with any broker,
finder or other person or entity who would be entitled to a commission or other
brokerage fee in connection with the transactions described in this Agreement.
Purchaser and Seller each agree to indemnify, defend and hold the other harmless
of and from and against any loss, costs, damage or expense (including reasonable
attorneys' fees and court costs) arising out of (i) any inaccuracy in the
representation and warranty contained in the immediately preceding sentence or
(ii) the claims of any broker or finder (or anyone claiming to be a broker or
finder) other than the entities identified in the immediately preceding sentence
regarding any services claimed to have been rendered to the indemnifying party
in connection with the transactions contemplated by this Agreement.
<PAGE>
11.2 Notwithstanding any other provision of this Agreement to the
contrary, the provisions of this Article shall survive the closing of title and
the delivery of the deed and any prior termination of this Agreement for any
reason whatsoever.
ARTICLE 12
NOTICES
Any notice given or required to be given pursuant to any provision of
this Agreement shall be in writing and shall either be personally delivered,
sent by facsimile or sent by a reputable commercial courier service guaranteeing
overnight delivery, and shall be deemed to have been given upon receipt if
personally delivered or sent by facsimile, or, upon delivery to such courier,
with delivery charges prepaid, if sent by such a courier, in either case
addressed as follows:
Seller: Universal Health Realty Income Trust
367 South Gulph Road
King of Prussia, PA 19406
Attn: Mr. Kirk E. Gorman
with a copy to: Universal Health Realty Income Trust
3525 Piedmont Road, N.E.
7 Piedmont Center; Suite 202
Atlanta, Georgia 30305
Attn: Mr. Timothy J. Fowler
AND
Fulbright Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Warren J. Nimetz, Esq.
Purchaser: Fresno-Herndon Partners, Limited
701 North First Street
San Jose, California 95112
Attn: Mr. Barry Swenson
with copy to: Fresno-Herndon Partners, Limited
701 North First Street
San Jose, California 95112
Attn: Mr. Jeff Lauritzen
Either party may, by giving notice to the other in the manner set
forth above, change the address to which notices shall be sent to it, provided
that any such change of address shall be effective three (3) business days after
it is given. If a reputable commercial courier service guaranteeing overnight
delivery shall not service the area to which notice is required to be given,
notice to such area shall be by registered or certified mail, return receipt
requested, and shall be deemed given one day after the same is deposited in an
official U.S. mail depository, with all postage and other charges prepaid,
enclosed in a properly addressed and sealed wrapper. The attorney for each party
to this Agreement may give notices on behalf of his client with the same force
and effect as if such notice was given directly by such party.
<PAGE>
ARTICLE 13
PERMITTED ASSIGNMENT
Purchaser may assign its interest under this Agreement without
Seller's consent.
ARTICLE 14
[INTENTIONALLY DELETED]
ARTICLE 15
REPRESENTATIONS AND WARRANTIES
Seller and Purchaser hereby make the following mutual representations
and warranties to each other, which representations and warranties are
materially true and accurate in every respect as of the date hereof and shall be
materially true and accurate as of the Closing Date and shall survive the
delivery of the deed and the closing of title for one (1) year thereafter:
15.1 Of Seller:
(a) Authority. Seller has the full and unrestricted power and capacity
to enter into and carry out the terms of this Agreement and all other agreements
referred to herein. This Agreement constitutes, and all other agreements,
documents and instruments to be executed by Seller pursuant hereto, when
executed and delivered by Seller, will each constitute a valid and binding
obligation of Seller as the case may be, enforceable in accordance with its
terms;
(b) No Defaults. Neither the execution, delivery or performance of
this Agreement or any other agreement contemplated hereby, the fulfillment of
and compliance with the respective terms and provisions hereof or thereof, nor
the consummation of the transactions contemplated hereby or thereby, will: (i)
conflict with, or result in a breach of, any of the terms, conditions or
provisions of, or constitute any default under, any agreement or instrument to
which Seller is a party or is subject; (ii) violate any restriction to which
Seller is a party or is subject; or (iii) constitute a violation of any
applicable law, statute, regulation, ordinance, rule, judgment, decree, writ or
order; and
(c) No Litigation. There are no actions, suits, claims, arbitrations,
proceedings, orders, judgments or investigations pending or, to the knowledge of
Seller, threatened against or affecting Seller or the Project or which question
the validity of this Agreement or any action taken or to be taken under any of
the provisions of this Agreement, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality.
15.2 Of Purchaser:
(a) Authority. Purchaser has the full and unrestricted power and
capacity to enter into and carry out the terms of this Agreement and all other
agreements referred to herein. This Agreement constitutes, and all other
agreements, documents and instruments to be executed by Purchaser pursuant
hereto, when executed and delivered by Purchaser, will each constitute a valid
and binding obligation of Purchaser as the case may be, enforceable in
accordance with its terms;
<PAGE>
(b) No Defaults. Neither the execution, delivery or performance of
this Agreement or any other agreement contemplated hereby, the fulfillment of
and compliance with the respective terms and provisions hereof or thereof, nor
the consummation of the transactions contemplated hereby or thereby, will: (i)
conflict with, or result in a breach of, any of the terms, conditions or
provisions of, or constitute any default under, any agreement or instrument to
which Purchaser is a party or is subject; (ii) violate any restriction to which
Purchaser is a party or is subject; or (iii) constitute a violation of any
applicable law, statute, regulation, ordinance, rule, judgment, decree, writ or
order; and
(c) No Litigation. There are no actions, suits, claims, arbitrations,
proceedings, orders, judgments or investigations pending or, to the knowledge of
Purchaser, threatened against or affecting or which question the validity of
this Agreement or any action taken or to be taken under any of the provisions of
this Agreement, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality.
ARTICLE 16
CONDITIONS PRECEDENT TO CLOSING
16.1 The obligation of Purchaser to purchase the Project pursuant to
the provisions of this Agreement shall be subject to the following conditions
(all or any of which may be waived in writing, in whole or in part, by
Purchaser):
(a) the representations and warranties of Seller in this Agreement
shall be true and correct and the covenants and agreements of Seller contained
herein shall have been complied with as of the date of Closing;
(b) Seller shall deliver the documents described in Articles 5 and 7
of this Agreement; and
(c) Seller shall deliver title to the Property as provided in Article
5 hereof.
16.2 If Seller shall fail to satisfy any of the conditions set forth
herein or any other covenant or closing obligation of Seller shall not have been
complied with as of the Closing Date, then in such event Purchaser shall have
the right, in addition to any other rights or remedies available to Purchaser
under this Agreement or in equity or at law, to rescind this transaction and the
parties shall be relieved and released from any further obligations to each
other or Purchaser may close the transaction in accordance with its terms.
ARTICLE 17
MISCELLANEOUS
17.1 This Agreement is binding upon and shall inure to the benefit of
the parties hereto, their respective heirs, successors, legal representatives
and permitted assigns.
17.2 Wherever under the terms and provisions of this Agreement the
time for performance falls upon a Saturday, Sunday or legal holiday, such time
for performance shall be extended to the second business day thereafter.
<PAGE>
17.3 This Agreement may be executed in one or more counterparts, all
of which when taken together shall constitute one and the same agreement, and
shall become effective when one or more counterparts have been executed by each
of the parties hereto and delivered to each of the other parties hereto.
17.4 The captions at the beginning of the several paragraphs, Sections
and Articles are for convenience in locating the context, but are not part of
the context. Unless otherwise specifically set forth in this Agreement to the
contrary, all references to Exhibits contained in this Agreement refer to the
Exhibits which are attached to this Agreement all of which Exhibits are
incorporated in, and made a part of, this Agreement by reference. Unless
otherwise specifically set forth in this Agreement to the contrary, all
references to Articles, Sections, paragraphs and clauses refer to portions of
this Agreement.
17.5 If any term or provision of this Agreement shall be held to be
illegal, invalid, unenforceable or inoperative as a matter of law, the remaining
terms and provisions of this Agreement shall not be affected thereby, but each
such remaining term and provision shall be valid and shall remain in full force
and effect.
17.6 This Agreement and the other writings referred to in, or
delivered pursuant to, this Agreement, embody the entire understanding and
contract between the parties hereto with respect to the Project and supersede
any and all prior agreements and understandings between the parties hereto,
whether written or oral, formal or informal, with respect to the subject matter
of this Agreement. This Agreement has been entered into after full investigation
by each party and its professional advisors, and neither party is relying upon
any statement, representation or warranty made by or on behalf of the other
which is not expressly set forth in this Agreement.
17.7 No extensions, changes, waivers, modifications or amendments to
or of this Agreement, of any kind whatsoever, shall be made or claimed by Seller
or Purchaser, and no notices of any extension, change, waiver, modification or
amendment made or claimed by Seller or Purchaser shall have any force or effect
whatsoever, unless the same is contained in a writing and is fully executed by
the party against whom such matter is asserted.
17.8 This Agreement shall be governed and interpreted in accordance
with the laws of the State of New York (except with respect to the enforcement
of any claims against the Property or in connection with enforcement of
Purchaser's right to seek specific performance of Seller's obligations
hereunder, which rights shall be governed by the Laws of the State of
California).
17.9 Each party hereto shall pay all charges specified to be paid by
them pursuant to the provisions of this Agreement and their own attorney's fees
in connection with the negotiation, drafting and closing of this Agreement.
17.10 THE DECLARATION OF TRUST ESTABLISHING UNIVERSAL HEALTH REALTY
INCOME TRUST, FILED AUGUST 6, 1986, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO ("DECLARATION"), IS DULY FILED IN THE OFFICE OF THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT
THE NAME "UNIVERSAL HEALTH REALTY INCOME TRUST," REFERS TO THE TRUSTEES UNDER
THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY;
AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE TRUST SHALL
BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF,
OR CLAIM AGAINST, THE TRUST. ALL PERSONS DEALING WITH THE TRUST, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF THE TRUST FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names by their respective duly authorized representatives
on the day and year first above written.
PURCHASER: FRESNO-HERNDON PARTNERS, LIMITED
By: Green Valley Corporation, its sole general partner
By: _________________________________________
Name:
Title:
SELLER: UNIVERSAL HEALTH REALTY INCOME TRUST
By: ______________________________________________
Name: Timothy J. Fowler
Title: Vice President
LIST OF EXHIBITS
EXHIBIT
A Description of the Land
B Assignment and Assumption of Tenant Leases (see attached)
C Assignment and Assumption of Warranties and Service Contracts
(see attached)
<PAGE>
EXHIBIT C
ASSIGNMENT AND ASSUMPTION OF TENANT LEASES
KNOW THAT UNIVERSAL HEALTH REALTY INCOME TRUST ("Assignor") in consideration of
ten dollars and other valuable consideration paid by FRESNO-HERNDON PARTNERS
LIMITED, a California limited partnership ("Assignee"), hereby assigns unto
Assignee all its right, title and interest as landlord in and to certain leases
of portions of the building know as Fresno-Herndon Medical Plaza, Fresno,
California (collectively, the "Tenant Leases") as more particularly described in
Schedule 1 annexed hereto and made a part hereof.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns, from the
date hereof, for all of the rest of the term mentioned in the Tenant Leases,
subject to the covenants, conditions and provisions therein also mentioned.
AND Assignee hereby assumes performance of all of Assignor's obligations as
landlord under the Tenant Leases from and after the Closing Date and agrees to
indemnify, defend and hold Assignor harmless from and against any legal actions,
damages, losses, costs and expenses (including, without limitation, attorneys'
fees and disbursements) arising out of the Tenant Leases from and after the
Closing Date. Assignor agrees to indemnify, defend and hold Assignee harmless
from and against any legal actions, damages, losses, costs and expenses
(including, without limitation, attorneys' fees and disbursements) arising out
of the Tenant Leases before the Closing Date.
IN WITNESS WHEREOF, Assignor and Assignee have executed this instrument this
____ day of____________, 1994.
FRESNO-HERNDON PARTNERS LIMITED
By:______________________________________
UNIVERSAL HEALTH REALTY INCOME
TRUST
By:______________________________________
[Acknowledgement]
<PAGE>
EXHIBIT D
ASSIGNMENT AND ASSUMPTION OF
WARRANTIES AND SERVICE CONTRACTS
KNOW THAT UNIVERSAL HEALTH REALTY INCOME TRUST ("Assignor") in consideration of
ten dollars and other valuable consideration paid by FRESNO-HERNDON PARTNERS
LIMITED, a California limited partnership ("Assignee"), hereby assigns unto
Assignee the warranties and service contracts listed on Schedule annexed hereto,
covering the operation of the building known as Fresno-Herndon Medical Plaza,
Fresno, California (collectively, the "Warranties and Service Contracts").
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns, from the
date hereof, for all of the rest of the term mentioned in the Warranties and
Service Contracts, subject to the covenants, conditions and provisions therein
also mentioned.
AND Assignee hereby assumes performance of all of Assignor's obligations under
the Warranties and Service Contracts after the Closing Date and agrees to
indemnify, defend and hold Assignor harmless from and against any legal actions,
damages, losses, costs and expenses (including, without limitation, attorneys'
fees and disbursements) arising out of the Warranties and Service Contracts from
and after the Closing Date. Assignor agrees to indemnify, defend and hold
Assignee harmless from and against any legal actions, damages, losses, costs and
expenses (including, without limitation, attorneys' fees and disbursements)
arising out of the Warranties and Service Contracts before the Closing Date.
IN WITNESS WHEREOF, Assignor and Assignee have executed this instrument this
_____ day of________________, 1994.
FRESNO-HERNDON PARTNERS LIMITED
By:______________________________________
UNIVERSAL HEALTH REALTY INCOME
TRUST
By:______________________________________
[Acknowledgement]
<PAGE>
----------------------------------------------------------------------------
AGREEMENT OF PURCHASE AND SALE
BETWEEN
TURNER ADREAC, L.C.,
a Texas limited liability company,
d/b/a/ Turner Adreac Development Company
AS SELLER
AND
UNIVERSAL HEALTH REALTY INCOME TRUST,
a Maryland Real Estate Investment Trust
AS PURCHASER
covering and describing
The Professional Center at Kings Crossing
situated in
Harris County, Texas
----------------------------------------------------------------------------
<PAGE>
Table of Contents
Section Page
ARTICLE I PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . 1
1.1 Agreement of Purchase and Sale . . . . . . . . . . . . 1
1.2 Property Defined . . . . . . . . . . . . . . . . . . . 2
1.3 Permitted Exceptions . . . . . . . . . . . . . . . . . 2
1.4 Purchase Price . . . . . . . . . . . . . . . . . . . . 2
1.5 Payment of Purchase Price. . . . . . . . . . . . . . . 3
ARTICLE II TITLE AND SURVEY . . . . . . . . . . . . . . . . . . . 3
2.1 Commitment for Title Insurance . . . . . . . . . . . . 3
2.2 Uniform Commercial Code Searches . . . . . . . . . . . 3
2.3 Survey . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Title Review Period. . . . . . . . . . . . . . . . . . 4
2.5 Owner Policy of Title Insurance. . . . . . . . . . . . 4
ARTICLE III DELIVERY OF MATERIALS AND INSPECTION . . . . . . . . . 4
3.1 Delivery of Materials. . . . . . . . . . . . . . . . . 4
3.2 Entry and Inspection . . . . . . . . . . . . . . . . . 5
3.3 Assumption of Certain Operating Agreements . . . . . . 6
ARTICLE IV ENVIRONMENTAL INSPECTION AND ESTOPPEL CERTIFICATES . . 6
4.1 Environmental Inspection . . . . . . . . . . . . . . . 6
4.2 Estoppel Certificates. . . . . . . . . . . . . . . . . 6
ARTICLE V CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. . . 6
5.1 Conditions Precedent . . . . . . . . . . . . . . . . 6
ARTICLE VI CLOSING. . . . . . . . . . . . . . . . . . . . . . . . 8
6.1 Time and Place . . . . . . . . . . . . . . . . . . . . 8
6.2 Seller's Obligations at Closing. . . . . . . . . . . . 9
6.3 Purchaser's Obligations at Closing . . . . . . . . . . 11
6.4 Prorations . . . . . . . . . . . . . . . . . . . . . . 11
6.5 Closing Costs. . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . 12
7.1 Representations and Warranties of Seller . . . . . . . 12
7.2 Covenants of Seller. . . . . . . . . . . . . . . . . . 14
ARTICLE VIII DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 15
8.1 Default by Purchaser . . . . . . . . . . . . . . . . . 15
8.2 Default by Seller. . . . . . . . . . . . . . . . . . . 16
(i)
<PAGE>
Section Page
ARTICLE IX RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE X COMMISSIONS. . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE XI MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 17
11.1 Assigns. . . . . . . . . . . . . . . . . . . . . . . . 17
11.2 Title Policy or Abstract . . . . . . . . . . . . . . . 17
11.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . 17
11.4 Disbursements. . . . . . . . . . . . . . . . . . . . . 18
11.5 Modification . . . . . . . . . . . . . . . . . . . . . 18
11.6 Reporting Requirements . . . . . . . . . . . . . . . . 18
11.7 Tenant Notification Letters. . . . . . . . . . . . . . 19
11.8 Time of Essence. . . . . . . . . . . . . . . . . . . . 19
11.9 Successors and Assigns . . . . . . . . . . . . . . . . 19
11.10 Exhibits and Schedules . . . . . . . . . . . . . . . . 19
11.11 Entire Agreement . . . . . . . . . . . . . . . . . . . 19
11.12 Further Assurances . . . . . . . . . . . . . . . . . . 19
11.13 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . 20
11.14 Counterparts . . . . . . . . . . . . . . . . . . . . . 20
11.15 Severability . . . . . . . . . . . . . . . . . . . . . 20
11.16 Section Headings . . . . . . . . . . . . . . . . . . . 20
11.17 Binding Effect . . . . . . . . . . . . . . . . . . . . 20
11.18 Choice of Law. . . . . . . . . . . . . . . . . . . . . 20
11.19 Allocation of Purchase Price . . . . . . . . . . . . . 20
11.20 No Third Party Beneficiary . . . . . . . . . . . . . . 21
11.21 Limitation of Liability. . . . . . . . . . . . . . . . 21
11.22 Effective Date of Agreement. . . . . . . . . . . . . . 21
Exhibit Page
EXHIBIT A LEGAL DESCRIPTION OF THE REALTY. . . . . . . . . . . . 23
EXHIBIT B [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . 27
EXHIBIT C GENERAL WARRANTY DEED. . . . . . . . . . . . . . . . 28
EXHIBIT D BLANKET CONVEYANCE, BILL OF SALE AND ASSIGNMENT. . . . 30
EXHIBIT E ASSIGNMENT OF TENANT LEASES. . . . . . . . . . . . . . 34
EXHIBIT F FIRPTA AFFIDAVIT . . . . . . . . . . . . . . . . . . . 38
EXHIBIT G NOTICE OF PURCHASE AND LEASE ASSIGNMENT TO TENANTS . . 40
EXHIBIT H ESTOPPEL CERTIFICATE . . . . . . . . . . . . . . . . . 42
EXHIBIT I PERMITTED ENCUMBRANCES . . . . . . . . . . . . . . . . 47
(ii)
<PAGE>
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement") is made to be
effective as of the date described in Section 11.22 hereof (the "Effective
Date"), by and between Turner Adreac, L.C., a Texas limited liability company,
d/b/a Turner Adreac Development Company ("Seller"), and Universal Health Realty
Income Trust, a Maryland Real Estate Investment Trust ("Purchaser").
W I T N E S S E T H:
ARTICLE I
PURCHASE AND SALE
1.1 Agreement of Purchase and Sale. Subject to the terms and conditions
set forth herein and for the consideration stated herein, Seller agrees to sell
to Purchaser and Purchaser agrees to purchase from Seller the following:
(a) All those two (2) certain tracts or parcels of land situated in
Harris County, Texas, containing 1.69 acres and 1.72 acres, respectively,
each as more particularly described on Exhibit A attached hereto and made a
part hereof for all purposes, together with any and all improvements situated
thereon, commonly known as "The Professional Center at Kings Crossing," and
situated at the corner of Lake Houston Parkway and Towns Bend Drive,
Kingwood, Texas, together with all rights, tenements, hereditaments,
easements, appendages, privileges and appurtenances pertaining thereto,
including all wastewater discharge capacity allocated or reserved thereto,
all development rights with respect thereto and any right, title and interest
of Seller in and to the adjacent streets, alleys, rights-of-way and any
adjacent strips or gores of real estate (collectively the "Realty");
(b) A nonexclusive easement (the "Easement") encumbering that certain
tract or parcel of land situated in Harris County, Texas, more particularly
described as Tract 3 on Exhibit A attached hereto and made a part hereof for
all purposes (the "Easement Tract"), granting the owner of all or any part of
the Realty the right of ingress, egress and access to the Realty and
prohibiting Seller or Seller's successors and assigns from taking any action
on or with regard to the Easement Tract that would have a material, adverse
effect on the rights granted to the owner of all or any part of the Realty
pursuant to the Easement;
(c) All of the interest of the "Lessor" or "Landlord" under all tenant
leases covering the Realty (collectively the "Leases"), and any security
deposits or prepaid rent received or held by Seller in connection therewith;
(d) All tangible personal property owned by Seller and situated upon and
used in connection with the complete and comfortable ownership, use,
enjoyment, occupancy or operation of the Realty, including, without
limitation, all raw materials, work and materials in process, stock in trade,
inventory and equipment, if any (collectively the "Personalty");
(e) All right, title and interest in and to any trade name or assumed
name presently or formerly used by Seller in connection with the ownership,
use, enjoyment, occupancy or operation of the Realty, including, without
limitation, the name "The Professional Center at Kings Crossing" (the
"Name");
<PAGE>
(f) All assignable warranties, guaranties, indemnities and claims issued
to Seller in connection with the Realty and the Personalty (collectively the
"Warranties"); and
(g) All assignable contracts and agreements relating to the upkeep,
repair, maintenance or operation of the Realty and the Personalty
(collectively the "Operating Agreements") which Purchaser elects to assume
pursuant to Section 3.3 hereof.
1.2 Property Defined. The property and interests described in
Sections 1.1(a) through 1.1(g) above are hereinafter sometimes referred to
collectively as the "Property."
1.3 Permitted Exceptions. The Property shall be conveyed subject
to the following matters (collectively the "Permitted Exceptions"):
(a) those matters deemed to Permitted Exceptions pursuant to
Section 2.4 hereof;
(b) building restrictions and zoning regulations heretofore or hereafter
adopted by any municipal or other public authority relating to the Property,
which in the aggregate do not have a material adverse effect on Purchaser's
use or enjoyment of the Property;
(c) taxes for the year of Closing (as such term is defined in Section
6.1 hereof) (if such taxes are not yet due and payable) and subsequent years,
which taxes shall be prorated at Closing;
(d) the Leases; and
(e) the matters set forth on Exhibit I.
1.4 Purchase Price. Seller is to sell and Purchaser is to purchase the
Property for a total purchase price (the "Purchase Price") equal to the Total
Annual Base Rental (as such term is hereinafter defined) divided by 12.096% (the
"Cap Rate"), plus accrued interest (not including default interest) on the
development loan through September 1, 1995. By way of example, if the Total
Annual Basic Rental for the first year of each lease equaled $474,603.53, while
accrued interest equaled $122,473.71, the Purchase Price would be $4,046,114.00.
As used in this Section 1.4, the term "Total Annual Base Rental" means the total
sum of all the Annual Base Rental plus Additional Rental for Above Standard
Improvements in the first year following completion as set forth in all of the
Leases (including the Master Leases (hereinafter defined)) (hereinafter defined)
that have been approved by Purchaser as of the date of Closing (hereinafter
defined). The Total Annual Base Rental for the Leases as of the date hereof is
set forth on Schedule 1, attached hereto and made a part hereof for all
purposes.
1.5 Payment of Purchase Price. The Purchase Price shall be payable by
Purchaser to Seller in cash or readily available funds at Closing; provided,
however, that for purposes of this Section 1.5, a credit against the
Construction Loan Indebtedness (as such term is defined in Section 5.1(a)
hereof) shall be deemed the equivalent of cash.
<PAGE>
ARTICLE II
TITLE AND SURVEY
2.1 Commitment for Title Insurance. Seller and Purchaser hereby instruct
Stewart Title Company, Fort Bend Division, 1250 Shoreline Drive, Suite 100,
Sugar Land, Texas 77478, Attention: David Draper (the "Title Company") to
deliver to Purchaser, Seller and the Surveyor (as such term is defined in
Section 2.3 hereof), at least forty-five (45) days prior to Closing, a
Commitment for Title Insurance (the "Title Commitment") covering the Realty,
showing all matters affecting title to the Realty and binding the Title Company
to issue to Purchaser at Closing an Owner Policy of Title Insurance (the
"Owner's Policy"), the Owner's Policy to be issued by an underwriter acceptable
to Purchaser, on the standard form of policy prescribed by the Texas State Board
of Insurance and in the full amount of the Purchase Price. Seller and Purchaser
further instruct the Title Company to deliver to Seller, Purchaser and the
Surveyor legible copies of all instruments referred to on Schedules B or C of
the Title Commitment. Seller and Purchaser hereby direct the Title Company to
delete the "survey exception" contained in the Title Commitment except for
"shortages in area" and Seller and Purchaser shall each pay one-half of the fees
charged by the Title Company in connection with such deletion.
2.2 Uniform Commercial Code Searches. Seller shall, at least thirty
(30) days prior to Closing, and at Seller's sole cost and expense, obtain and
deliver to Purchaser (a) a Uniform Commercial Code Search performed on Seller
and any assumed name Seller uses or has used in connection with the upkeep,
repair, maintenance or operation of the Property, certified by the County Clerk
of Harris County, Texas, and (b) a Uniform Commercial Code Search performed on
Seller and any assumed name Seller uses or has used in connection with the
upkeep, repair, maintenance or operation of the Property, certified by the
Secretary of State of Texas (together, the "UCC Searches").
2.3 Survey. Seller shall, at least thirty (30) days prior to Closing,
and at Seller's sole cost and expense, cause a current Texas Society of
Professional Surveyors Category 1A, Condition II survey (the "Survey") to be
performed and completed on the Realty by a Registered Professional Land Surveyor
licensed by the State of Texas (the "Surveyor") and reasonably acceptable to
Purchaser and the Title Company. A copy of the Survey shall be delivered to
Seller, Purchaser and the Title Company. Unless otherwise agreed by Seller and
Purchaser, the metes and bounds description contained in the Survey shall be the
legal description contained in the documents employed to convey the Property
from Seller to Purchaser. The Survey shall contain a certification from the
Surveyor satisfactory, in form and content, to Purchaser.
2.4 Title Review Period. Purchaser shall have twenty (20) days (the
"Title Review Period") after the receipt of the Title Commitment, legible copies
of all instruments referred to in Schedules B or C of the Title Commitment, the
UCC Searches and the Survey to notify Seller, in writing, of such objections as
Purchaser may have to anything contained in the Title Commitment, the UCC
Searches or the Survey. Any item contained in the Title Commitment, the UCC
Searches or the Survey to which Purchaser does not object during the Title
Review Period shall be deemed a Permitted Exception. In the event Purchaser
shall notify Seller of an objection to anything contained in the Title
Commitment, the UCC Searches or the Survey prior to the expiration of the Title
Review Period, Seller shall cure or remove such objection and deliver to
Purchaser a revised Title Commitment, UCC Search or Survey evidencing such cure
or removal; provided, however, that Purchaser shall be deemed to have objected
to and Seller shall cure or remove all liens of any kind against the Property,
including, without limitation, (a) mortgage liens, (b) tax liens, (c) abstracts
of judgment, (d) environmental liens, and (e) materialmen's and mechanic's
liens.
<PAGE>
2.5 Owner Policy of Title Insurance. At Closing, the Title Company shall
furnish to Purchaser, at Seller's sole cost and expense, the Owner's Policy,
which shall be in the customary form prescribed by the Texas State Board of
Insurance. The Owner's Policy may contain as exceptions the standard printed
exceptions and the Permitted Exceptions; provided, however, (a) the standard
exception for restrictions shall read "None of Record" (except for restrictions
that are Permitted Exceptions), (b) the exception for rights of parties in
possession shall be limited to the rights of tenants under the Leases, (c) the
standard exception for taxes shall be limited to the year in which the Closing
occurs (if such taxes are not yet due and payable), and (d) the "survey
exception" shall be deleted except for "shortages in area" and Seller shall pay
all fees charged by the Title Company in connection with such deletion.
ARTICLE III
DELIVERY OF MATERIALS AND INSPECTION
3.1 Delivery of Materials. Within twenty (20) days from the Effective
Date, Seller, at its sole cost and expense, shall deliver to Purchaser the
following:
(a) a rent roll for the Property for the period ending on the last day
of the last full calendar month which will be certified as true and correct
by Seller;
(b) copies of all Leases, including all amendments or addendums
thereto;
(c) copies of all Operating Agreements and any amendments
and letter agreements relating thereto;
(d) statements of property taxes and assessed values with
respect to the Property for 1994 and for 1995, if in Seller's possession or
control;
(e) as-built plans and specifications for the Property;
(f) copies of all Certificates of Occupancy or inspection reports in
Seller's possession or control relating to the Property issued by any
municipal or other governmental authority;
(g) current operating statements;
(h) a list and description of the Personalty;
(i) copies of any inspection reports relating to the Property in
Seller's possession or control including, without limitation, any
environmental inspection reports;
(j) copies of any inspection reports, correspondence or other
documentation concerning the compliance of the Property with applicable
rules, regulations, ordinances and laws of governmental authorities having
jurisdiction, including, without limitation, any inspection reports,
correspondence or documentation concerning the Property's compliance or
noncompliance, as the case may be, with any applicable Life Safety
Requirements; and
(k) such additional information relating to the Property in the
possession or control of Seller as Purchaser may reasonably request.
In addition, Seller shall update the information provided to Purchaser pursuant
to this Section 3.1 contemporaneously with any and all draw requests made by
Seller pursuant to the Security Documents (as such term is defined in Section
5.1(a) hereof). Seller represents or warrants that all materials, data and
information to be delivered by Seller to Purchaser in connection with the
transaction contemplated hereby will be complete, true and accurate in all
material respects.
<PAGE>
3.2 Entry and Inspection. Purchaser and Purchaser's agents, employees,
contractors and consultants shall have the right from and after the Effective
Date, to enter onto the Property, to make a physical inspection of the Property
and to examine all books and records maintained by Seller relating to the
Property at such place or places as such books and records may be located in
Harris County, Texas. All inspections shall occur at reasonable times agreed
upon by Seller and Purchaser and shall be conducted so as not to unreasonably
interfere with use of the Property by Seller or its tenants.
3.3 Assumption of Certain Operating Agreements. At least ten (10) days
prior to Closing Purchaser shall notify Seller in writing of those Operating
Agreements which Purchaser elects, in its sole and absolute discretion, to
assume (collectively the "Assumed Operating Agreements"); provided, however,
that Purchaser shall have no obligation to assume any Operating Agreements.
Seller shall cause all other Operating Agreements to be terminated and released
prior to Closing.
ARTICLE IV
ENVIRONMENTAL INSPECTION AND ESTOPPEL CERTIFICATES
4.1 Environmental Inspection. Prior to the execution of this Agreement,
Seller has delivered to Purchaser a Phase I environmental audit on the Property
(the "Environmental Audit"), stating and setting forth that the Property is free
from contamination by Hazardous Materials (as such term is defined in Section
7.1(g) hereof) and in full and complete compliance with all applicable law
relating to Hazardous Materials. At Closing, Seller shall, at Seller's sole cost
and expense, deliver to Purchaser an updated Environmental Audit, updated to no
earlier than three (3) days prior to Closing, confirming that the matters set
forth in the Environmental Audit are true and correct as of such date.
4.2 Estoppel Certificates. At or prior to Closing, Seller shall, at
Seller's sole cost and expense, deliver to Purchaser estoppel certificates
(collectively the "Estoppel Certificates") in form and content satisfactory to
Purchaser from all tenants currently occupying or scheduled to occupy part of
the Property (collectively the "Tenants") setting forth such information as may
be reasonably required by Purchaser.
ARTICLE V
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
5.1 It shall be an express condition precedent to Purchaser's
obligations to this Agreement that prior to Closing:
(a) Seller shall have complied in full with all of its obligations under
that certain Promissory Note dated December _____, 1994 (the "Note")
evidencing a construction loan (the "Construction Loan Indebtedness") from
Purchaser to Seller to finance the construction of the Property, and all of
Seller's obligations pursuant to the other documents and instruments
evidencing and securing the Construction Loan Indebtedness, including,
without limitation, (i) that certain Construction Loan Agreement dated
December , 1994 (the "Construction Loan Agreement"), (ii) that certain Deed
of Trust, Security Agreement and Fixture Filing dated December , 1994, (iii)
that certain Assignment of Leases and Rents dated December , 1994, and (iv)
those certain Construction Loan Guarantys dated December , 1994 (collectively
the "Security Documents");
(b) Seller shall have fully and timely performed all of its obligations
under this Agreement, including, without limitation, the obligations set
forth in Sections 4.1, 4.2 and 6.2 hereof;
<PAGE>
(c) Seller's representations and warranties set forth in Section
7.1 hereof shall be true and correct in all respects;
(d) Seller shall have fully and timely complied with all of its
covenants and obligations set forth in Section 7.2 hereof;
(e) Seller shall have delivered to Purchaser true and correct copies of
all insurance policies relating to the Property, in form, content and amount
satisfactory to Purchaser;
(f) Seller shall have paid any and all penalties and other sums due and
payable pursuant to the Leases as a result of any action or inaction on the
part of Seller, including, without limitation, the failure to complete the
Improvements (as such term is defined in the Construction Loan Agreement) by
the dates specified in the Leases;
(g) The Independant Supervising Architect (as defined in the
Construction Loan Agreement) shall have reasonably determined that the
construction of the Property has been completed in compliance with the terms
and provisions of the Note and the Security Documents and in full compliance
with applicable law;
(h) All leasable space in the Property shall be subject to valid,
binding and enforceable leases with Tenants acceptable to Purchaser;
provided, however, that if no more than twenty percent (20%) of the leasable
space in the Property (the "Unleased Area") is not leased as required by this
Section 5.1(h), Seller shall be deemed to have complied with this condition
if Seller master leases the Unleased Area pursuant to a master lease or
several master leases in form and content acceptable to Purchaser and
containing rental rates and other terms and provisions acceptable to
Purchaser (collectively, the "Master Leases") and provides Purchaser with an
irrevocable, multiple draw, unconditional letter of credit, in form and
content satisfactory to Purchaser, in the amount of one (1) year's rent under
the Master Leases and securing Seller's obligations under the Master Leases.
Seller agrees to provide a replacement Letter of Credit annually no less than
fourteen (14) calendar days prior to the expiration of the then current
letter of credit, and the Letter of Credit shall provide that Seller's
failure to provide such a replacement Letter of Credit shall entitle
Purchaser to draw upon the Letter of Credit;
(i) Seller shall have delivered to Purchaser a sum of money equal to the
rental rebate set forth in that certain Lease Agreement, Suite 103, between
Seller, as landlord, and Lester J. Kocinski, D.P.M and Tommy W. Der, D.P.M.,
as Tenant, dated September 8, 1994 (the "Rebate");
(j) Seller shall have performed all of its obligations under the Leases
and no default on the part of any party thereto shall exist and there shall
be no event or occurrence which, upon the giving of notice or the passage of
time or both, would constitute an event of default thereunder;
(k) Seller shall have obtained, delivered and assigned to Purchaser all
guarantees from the developer and all contractors, subcontractors, suppliers,
engineers, architects and others covering, among other things, the structural
soundness and integrity of all improvements located on the Realty;
(l) All requirements contained in the Construction Loan Agreement
regarding the structural condition, zoning classification and physical
condition of the Property shall have been met; and
(m) Seller shall have delivered to Purchaser a written Management
Agreement in form and content acceptable to Purchaser (the "Management
Agreement"), pursuant to which Seller, Charles Turner and Michael Van,
collectively, shall agree to manage the Property for a term of ten (10) years
for a management fee of no more than four percent (4%) of the gross lease
stream, (i) containing a lease commission structure consistent with that
contained in agreements similar to the Management Agreement then existing in
connection with projects similar to the Property and otherwise satisfactory
to Purchaser, (ii) containing representations, warranties and covenants
regarding such partys' competency as real property managers, and (iii)
providing that the same may be cancelled at any time by Purchaser upon thirty
(30) days' written notice.
<PAGE>
ARTICLE VI
CLOSING
6.1 Time and Place. Subject to the provisions of Article IX hereof, the
closing of the transaction contemplated hereby (the "Closing") shall take place
at the offices of the Title Company at 10:00 a.m., Houston, Texas time, on the
thirtieth (30th) day following Final Completion (as such term is defined in the
Security Documents) (or the nearest business day thereafter in the event such
thirtieth (30th) day is on a Saturday, Sunday or legal holiday in Houston,
Harris County, Texas) or on such other date and at such time as may be agreed
upon in writing by Seller and Purchaser. Notwithstanding anything to the
contrary contained in this Section 6.1, Purchaser shall have the right, at
Purchaser's sole discretion, to extend the date of Closing up to fifteen (15)
days by providing written notice to such effect to Seller.
6.2 Seller's Obligations at Closing. At Closing, Seller shall:
(a) comply or provide evidence, in form and content satisfactory to
Purchaser, of Seller's compliance with all of the conditions set forth in
Section 5.1 hereof;
(b) deliver to Purchaser a General Warranty Deed (the "Deed") in the
form of Exhibit C attached hereto and made a part hereof for all purposes,
executed and acknowledged by Seller and in recordable form, conveying the
Realty to Purchaser free and clear of all encumbrances except the Permitted
Exceptions;
(c) join with Purchaser in the execution and acknowledgment of a
Blanket Conveyance, Bill of Sale and Assignment (the "Bill of Sale") in the form
of Exhibit D attached hereto and made a part hereof for all purposes, conveying
the Personalty, the Name, the Warranties and the Assumed Operating Agreements to
Purchaser free and clear of all encumbrances except the Permitted Exceptions;
(d) join with Purchaser in the execution and acknowledgment of an
Assignment of Tenant Leases (the "Assignment") in the form of Exhibit E
attached hereto and made a part hereof for all purposes, conveying the Leases
to Purchaser free and clear of all encumbrances except Permitted Exceptions;
(e) deliver to Purchaser the Management Agreement;
(f) join with Purchaser in the execution and acknowledgement
of any notice required by Section 50.301 of the Texas Water Code;
(g) join with Purchaser in the execution and acknowledgement
of any notice required by City of Houston Ordinance No. 89-1312;
(h) deliver to Purchaser a FIRPTA Affidavit (the "FIRPTA Affidavit") in
the form of Exhibit F attached hereto and made a part hereof for all
purposes, duly executed by Seller, stating that Seller is not a "foreign
person" as defined in the federal Foreign Investment in Real Property Tax Act
of 1980 and the 1984 Tax Reform Act, and in the event Seller is unable or
unwilling to deliver the FIRPTA Affidavit, in lieu thereof the funds payable
to Seller shall be adjusted in such a manner as to comply with the
withholding provisions of such statutes;
(i) deliver to Purchaser a Certificate, executed and sworn to by
Seller, confirming that as of Closing, (i) all of the conditions set forth in
Section 5.1 hereof have been performed by Seller, (ii) all of the
representations and warranties set forth in Section 7.1 hereof are true and
correct, (iii) all covenants set forth in Section 7.2 hereof have been
satisfied, (iv) all conditions to Seller and Purchaser's obligations hereunder
have occurred or been satisfied, and (v) no material adverse changes have
occurred with respect to all or any part of the Property;
<PAGE>
(j) deliver to Purchaser updated UCC Searches, updated to a date no
more than three (3) days prior to the date of Closing, showing no liens or other
encumbrances other than any liens or encumbrances that are Permitted Exceptions;
(k) deliver to Purchaser a certificate of an officer of Seller in form
reasonably satisfactory to Purchaser, stating that Seller has complied in
full with all of its obligations under the Note and the Security Documents;
(l) deliver to Purchaser the Environmental Audit;
(m) deliver to Purchaser possession and occupancy of the
Property, subject to the Permitted Exceptions;
(n) join with Purchaser in the execution of a letter to each tenant
under the Leases (collectively the "Tenant Letters") in the form of Exhibit G
attached hereto and made a part hereof for all purposes, the Tenant Letters
to be prepared by Seller and delivered for execution by Purchaser at Closing;
(o) deliver to Purchaser the originals of all Leases and all
Assumed Operating Agreements;
(p) deliver to Purchaser tax certificates furnished by the taxing
authorities having jurisdiction over the Property indicating that all taxes
on the Property have been paid through 1994;
(q) deliver to Purchaser such evidence as Purchaser and/or the Title
Company may reasonably require as to the authority of the person or persons
executing documents on behalf of Seller;
(r) deliver to Purchaser all keys to the Property;
(s) deliver to Purchaser a certified rent roll dated as of the end of
the last full calendar month immediately preceding the date of Closing;
(t) deliver to Purchaser the Estoppel Certificates; and
(u) if an Assumed Name has been filed by Seller in connection with the
ownership, use, enjoyment, occupancy or operation of the Property, deliver to
Purchaser an executed withdrawal thereof.
6.3 Purchaser's Obligations at Closing. At Closing, Purchaser shall:
(a) pay to Seller the Purchase Price in cash or readily available funds,
it being agreed that the Earnest Money shall be delivered to Seller at
Closing and applied towards payment of such amount;
(b) join with Seller in execution of the instruments described in
Sections 6.2(c), 6.2(d), 6.2(f), 6.2(g) and 6.2(n) hereof;
(c) deliver to Seller such evidence as Seller and/or the Title Company
may reasonably require as to the authority of the person or persons executing
documents on behalf of Purchaser; and
<PAGE>
6.4 Prorations.
(a) The following shall be apportioned with respect to the Property:
(i) rents payable under the Leases;
(ii) real estate taxes for the year of Closing, as of the date
of Closing, any apportionment of real estate taxes to
be made with respect to a tax year for which either the
tax rate or assessed valuation or both have not yet
been fixed, to be upon the basis of the tax rate and/or
assessed valuation last fixed; provided that Seller and
Purchaser agree that to the extent the actual taxes for
the current year differ from the amount so apportioned
at Closing, Seller and Purchaser will make all necessary
adjustments by appropriate payments between
themselves following Closing. The provisions of this
Section 6.4(a)(iii) shall survive Closing;
(iii) current expenses under the Assumed Operating
Agreements; and
(iv) gas, electricity and other utility charges.
(b) In making such apportionments, Purchaser shall be entitled to rents
and other income earned and due from the Property with respect to the period
up to and including the date of Closing, and Purchaser shall be responsible
for taxes and other expenses accrued or incurred with respect to the period
following the date of Closing. All such apportionments shall be subject to
post-Closing adjustments as necessary to reflect later relevant information
not available at Closing and to correct any errors made at Closing with
respect to such apportionments and the party receiving more than it was
entitled to hereunder shall reimburse the other party hereto in the amount of
such overpayment within thirty (30) days after written demand therefor.
Notwithstanding the foregoing, such apportionments shall be deemed final and
not subject to further post-Closing adjustments if no such adjustments have
been requested after a period of ninety (90) days from such time as all
necessary information is available to make a complete and accurate
determination of such apportionments. All other matters with respect to
apportionments shall be governed by the Closing Memorandum. The provisions of
this Section 6.4(b) shall survive Closing.
(c) At Closing, Seller shall credit to the account of Purchaser against
the cash portion of the Purchase Price any security deposits or prepaid rent
received by Seller pursuant to any leases executed by Seller or Seller's
predecessors in interest, as lessor, which will continue in effect after
Closing, and Seller shall keep all such security deposits and prepaid rents.
6.5 Closing Costs. Seller shall pay (a) the fees of any counsel
representing Seller in connection with the transaction contemplated hereby, (b)
the fees of any counsel representing Purchaser in connection with the
transaction contemplated hereby, not to exceed $15,000.00, (c) the premium for
the Owner's Policy (specifically including the additional premium chargeable for
deletion of the "survey exception"), (d) the cost of the Survey, (e) the cost of
the Environmental Audit, (f) the fees for recording the Deed, the Bill of Sale
and any other instruments used to convey the Property to Purchaser, and (g) any
escrow fees charged by the Title Company in connection with the transaction
contemplated hereby.
<PAGE>
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Representations and Warranties of Seller. Seller hereby
represents and warrants to Purchaser that:
(a) Seller is a limited liability company, validly existing and in good
standing under the laws of the State of Texas. Seller has complete and
unrestricted power and authority to enter into this Agreement and all other
agreements to be executed and delivered by Seller pursuant to the terms and
provisions hereof, to perform its obligations hereunder and thereunder, and
to consummate the transaction contemplated hereby;
(b) This Agreement has been duly executed and delivered by Seller. All
other agreements contemplated hereby to be executed and delivered by Seller
will be, prior to Closing, duly authorized, executed and ready in all
respects to be delivered by Seller. This Agreement and all other agreements
contemplated hereby constitute legal, valid and binding obligations of Seller
enforceable in accordance with their respective terms;
(c) The execution, delivery and performance of this Agreement and any
other agreement contemplated hereby and the consummation of the transaction
contemplated hereby or thereby do not, with or without the passage of time
and/or giving of notice, (i) conflict with, constitute a breach, violation or
termination of any provision of any contract or other agreement to which
Seller is a party or to which all or any part of the Property is bound, (ii)
result in an acceleration or increase of any amounts due from Seller to any
person or entity, (iii) conflict with or violate the Articles of
Incorporation or Bylaws of Seller, (iv) result in the creation or imposition
of any lien on all or any part of the Property, or (v) violate any law,
statute, ordinance, regulation, judgment, writ, injunction, rule, decree,
order or any other restriction of any kind or character applicable to Seller
or all or any part of the Property;
(d) Seller now has and shall have at Closing good and indefeasible title
to the Property in fee simple absolute, free and clear of all liens (other
than the Security Documents) and no party has any material rights in, or to
acquire, all or any part of the Property;
(e) There are no actions, suits, claims, assessments, or proceedings
pending or, to the best of Seller's knowledge, threatened that could
materially adversely affect the ownership, operation, or maintenance of the
Property or Seller's ability to perform hereunder;
(f) Seller has no information of and to the best of Seller's knowledge,
after reasonable inquiry, there is not (i) any change contemplated in any
applicable law, statute, ordinance, rule, regulation, order, or determination
of any governmental authority or any board of fire underwriters (or other
body exercising similar functions), (ii) any law, ordinance, regulation,
administrative ruling, restrictive covenant or deed restriction affecting the
Property, including without limitation, any applicable zoning ordinances,
building codes, flood disaster laws, wetlands regulation, health law or
environmental law, (iii) any judicial or administrative action, (iv) any
action by adjacent landowners, (v) any administrative action, (vi) any
natural or artificial conditions on or about the Property, or (vii) any
significant adverse fact or condition relating to the Property or its use,
that would prevent, limit, impede, or render more costly the ownership,
operation or maintenance of the Property;
<PAGE>
(g) No Hazardous Materials have been incorporated, used,
generated, manufactured, stored, or disposed of in, on, under, or about
the Property or transferred to or from the Property and there are no
claims, litigation, administrative or other proceedings, whether actual or
threatened, or judgments or orders, relating to the use, generation,
manufacture, storage or disposal of any Hazardous Materials on, under or
about the Property. As used in this Agreement, the term "Hazardous
Materials" shall mean any flammables, explosives, radioactive materials,
hazardous waste, toxic substances or related materials, including, without
limitation, substances defined as "hazardous substances", "hazardous
materials" or "toxic substances" in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Sec. 9601, et. seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
Sec. 1801, et. seq.; and the Resources Conservation and Recovery Act, 42
U.S.C. Sec. 6901, et seq.;
(h) Any and all underground storage tanks previously removed from the
Property were removed in accordance with all applicable laws, ordinances,
regulations and administrative rulings and no underground storage tanks are
presently situated on the Property;
(i) The Property includes all sewer or wastewater capacity rights and
development rights which were originally obtained with the Property by
Seller, and no such sewer or wastewater capacity rights or development rights
have previously been conveyed or transferred to any third party by Seller;
(j) Seller is not in default under the Leases;
(k) Seller has not entered into any Leases or other agreements allowing
any party to occupy all or any part of the Property on any basis such that
the rental to be paid by the tenant or lessee thereunder would be based, in
whole or in part, on either (i) the income or profits derived by the business
activities of the tenant or lessee, or (ii) any other formula such that any
portion of the rental would fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the Code, or any similar successor
provision thereof; and
(l) The materials, data and information provided by Seller to Purchaser
pursuant to Section 3.1 hereof are true, accurate and complete in all
material respects.
The representations and warranties contained in this Section 7.1 shall be deemed
to be restated at Closing and shall survive Closing.
7.2 Covenants of Seller. Seller hereby covenants with Purchaser, which
covenants shall survive Closing, as follows:
(a) subsequent to the Effective Date, Seller will not, without the
prior written approval of Purchaser, enter into any employment agreement,
management agreement, lease or other agreement affecting the Property; provided,
however, that Purchaser will not unreasonably withhold consent to any lease to
any financially capable tenant containing terms at least as favorable to
landlord as those contained in the Master Leases;
(b) subsequent to the Effective Date, Seller will (i) maintain and
operate the Property in a good and businesslike manner and the same manner as
Seller has heretofore maintained and operated the same, (ii) not commit or
permit to be committed any waste to the Property, (iii) continue all Assumed
Operating Agreements and all insurance policies concerning the ownership,
operation, or maintenance of the Property in full force and effect and
neither cancel, amend, nor renew any of the same without Purchaser's prior
written consent, and (iv) not remove any item of the Personalty from the
Property unless it is replaced with an item of at least equal value that is
properly suited for its intended purpose;
<PAGE>
(c) Prior to Closing, Seller shall, at its sole cost and expense, remove
and/or remediate to Purchaser's reasonable satisfaction all Hazardous
Materials which have been disclosed by the Environmental Audit to be situated
in, on, under, or about the Property;
(d) Prior to Closing, Seller shall terminate all Operating Agreements
other than the Assumed Operating Agreements and pay all leasing commissions
and other accrued obligations arising out of the upkeep, repair, maintenance
or operation of the Property;
(e) Prior to Closing, Seller shall, at its sole cost and expense, comply
with any and all applicable subdivision regulations and similar ordinances
necessary to allow for the conveyance of the Property from Seller to
Purchaser;
(f) Seller shall not lease the Property on any basis such that the
rental to be paid by the tenant or lessee thereunder would be based, in whole
or in part, on either (i) the income or profits derived by the business
activities of the tenant or lessee, or (ii) any other formula such that any
portion of the rental would fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated in connection therewith
(the "Code"), or any similar successor provision thereof; and
(g) Seller shall notify Purchaser immediately after the same occurs of
any material change concerning the Property, these representations and
warranties contained in Section 7.1 hereof, or any other information
heretofore or hereafter furnished to Purchaser concerning the Property.
ARTICLE VIII
DEFAULT
8.1 Default by Purchaser. In the event that Purchaser should fail to
consummate this Agreement for any reason, except Seller's default or the
termination of this Agreement by either Seller or Purchaser as expressly
provided for herein, Seller shall be entitled, as its sole and exclusive remedy,
to either (a) enforce specific performance of this Agreement, or (b) terminate
this Agreement, in which event neither party shall have any further rights,
duties or obligations hereunder; provided, however, that no termination or other
action by Purchaser pursuant to this Section 8.1 shall have any effect on the
rights, remedies and obligations of Seller or Purchaser under the Note and the
Security Documents.
8.2 Default by Seller. In the event that Seller should fail to
consummate this Agreement for any reason, except Purchaser's default or the
termination of this Agreement by either Seller or Purchaser as expressly
provided for herein, Purchaser shall be entitled, as its sole and exclusive
remedies, either (a) to enforce specific performance of this Agreement, or (b)
to terminate this Agreement, in which event neither party shall have any
further rights, duties or obligations hereunder; provided, however, that no
termination or other action by Seller pursuant to this Section 8.1 shall have
any effect on the rights, remedies and obligations of Seller or Purchaser under
the Note and the Security Documents.
<PAGE>
ARTICLE IX
RISK OF LOSS
9.1 In the event of any damage or destruction to the Property subsequent
to the Effective Date and prior to the date of Closing, the estimated time of
repair of which is in excess of sixty (60) calendar days, Purchaser, at its
option, may either terminate this Agreement (provided, however, that no
termination by Purchaser pursuant to this Section 9.1 shall have any effect on
the rights, remedies and obligations of Seller or Purchaser under the Note and
the Security Documents) or Purchaser may elect to consummate the transaction
contemplated hereby, in which event Seller and Purchaser shall agree in writing
to extend the date of Closing as necessary to allow Seller to repair the
Property to new condition. Purchaser agrees to deliver to Seller any insurance
proceeds it may have received in connection with such damage or destruction
(subject in all respects to the terms and provisions, and Purchaser's rights
under, the Note and the Security Documents), to the extent necessary to restore
the Property, and Seller shall promptly restore the property to its new
condition. In the event of any damage or destruction to the Property subsequent
to the Effective Date and prior to the date of Closing, the estimated time of
repair of which is less than sixty (60) calendar days, Purchaser shall have no
right to terminate this Agreement as a result thereof, and Seller shall have up
to an additional sixty (60) calendar days in which to restore the Property to
new condition. Purchaser agrees to deliver to Seller any insurance proceeds it
may have received in connection with such damage or destruction (subject in all
respects to the terms and provisions, and Purchaser's rights under, the Note and
the Security Documents), to the extent necessary to restore the Property, and
Seller shall promptly restore the property to its new condition.
ARTICLE X
COMMISSIONS
10.1 Each party represents to the other that there has been no broker,
finder, real estate agent or similar agent engaged in connection with the sale
of the Property from Seller to Purchaser other than Larry Marks of Harry M.
Green Interests, Inc. ("Broker"). Each party agrees that should any claim be
made for brokerage commissions or finder's fees by any broker, finder or agent
other than Broker, by, through or on account of any acts of the indemnifying
party or its agents, employees or representatives, the indemnifying party will
hold the other party free and harmless from and against any and all loss,
liability, cost, damage and expense (including attorneys' fees, accountants'
fees and court costs) in connection therewith. The commission payable to Broker
is set forth in a separate written agreement. The provisions of this Section
10.1 shall survive Closing.
ARTICLE XI
MISCELLANEOUS
11.1 Assigns. Purchaser may assign or transfer its rights and obligations
under this Agreement at any time to (a) any financially capable party to whom
Purchaser assigns its interest under the Note and the Security Documents, and/or
(b) any wholly owned, related, controlled or affiliated entity or party, without
the consent of Seller, and this Agreement shall inure to the benefit of and be
binding on the parties hereto and their respective heirs, legal representatives,
successors, and assigns. Except as set forth above, Purchaser may not assign or
transfer its rights or obligations under this Agreement without the prior
written consent of Seller, which consent shall not be unreasonably withheld. If
Purchaser assigns its rights and obligations under this Agreement as permitted
above, Purchaser shall be automatically fully released from all of its
obligations and liabilities hereunder. In such event, Seller agrees to and shall
immediately upon request by Purchaser execute a written instrument in a form
satisfactory to Purchaser evidencing and confirming such full release.
<PAGE>
11.2 Title Policy or Abstract. The Texas Real Estate License Act requires
written notice to Purchaser that it should have an attorney examine an abstract
of title to the property being purchased or obtain a title insurance policy.
Notice to that effect is, therefore, hereby given to Purchaser.
11.3 Notices. All notices or other communications required or permitted
to be given pursuant to the provisions of this Agreement shall be in writing and
shall be considered a properly given if mailed by first class United States
mail, postage prepaid, registered or certified with return receipt requested, or
by delivering same in person to the intended addressee, or by prepaid telegram,
telex or telecopy. Notice so mailed shall be effective upon its deposit in the
custody of the U.S. Postal Service. Notice given in any other manner shall be
effective only if and when received by the addressee. For purposes of notice,
the addresses of the parties shall be as follows:
(a) if to Purchaser:
Universal Health Realty Income Trust
367 South Gulph Road
King of Prussia, Pennsylvania 19406
Attention: Cheryl K. Ramagano
with a copy to:
Universal Health Realty Income Trust
3525 Piedmont Road, N.E.
7 Piedmont Center, Suite 202
Atlanta, Georgia 30305
Attention: Timothy J. Fowler
and with a copy to:
Jonathan K. Newsome
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
(b) if to Seller:
Turner Adreac, L.C.
407 Julie Rivers, Suite 102
Sugar Land, Texas 77478
Attention: Michael Van
with a copy to:
Dwight Donaldson
820 Gessner, Suite 1340
Houston, Texas 77024-4259
Either party shall have the right to change its address for notice hereunder to
any other location within the continental United States by the giving of thirty
(30) days notice to the other party in the manner set forth herein.
11.4 Disbursements. All disbursements of every kind made in connection
with the transaction contemplated hereby shall be made at Closing by the Title
Company and all such disbursements and their respective recipients shall be
clearly set forth on the applicable settlement statement.
11.5 Modification. This Agreement cannot under any circumstance be
modified orally, and no agreement shall be effective to waive, change, modify or
discharge this Agreement in whole or in part unless such agreement is in writing
and is signed by both Seller and Purchaser.
<PAGE>
11.6 Reporting Requirements. The Title Company hereby agrees to serve as
the real estate reporting person as that term is defined in Section 6045(e) of
the Internal Revenue Code of 1986, as amended. This Agreement shall constitute a
designation agreement, the name and address of the transferor and transferee of
the transaction contemplated hereby appear in Section 11.3 hereof and Seller,
Purchaser and the Title Company each agrees to obtain a copy of this Agreement
for a period of four (4) years following the end of the calendar year in which
Closing occurs. The provisions of this Section 11.6 shall survive Closing.
11.7 Tenant Notification Letters. Seller and Purchaser shall deliver to
each and every tenant under the Leases a signed statement prepared by Seller
acknowledging Purchaser's receipt and responsibility for each tenant's security
deposit (to the extent delivered or credited by Seller to Purchaser at Closing),
if any, all in compliance with and pursuant to the applicable provisions of
Texas law, including, without limitation, Section 92.105(b) of the Texas
Property Code. The provisions of this Section 11.7 shall survive Closing.
11.8 Time of Essence. Seller and Purchaser agree that time is of
the essence with regard to this Agreement.
11.9 Successors and Assigns. The terms and provisions of this Agreement
are to apply to and bind the successors and assigns of the parties hereto.
11.10 Exhibits and Schedules. The following schedules or exhibits
attached hereto (collectively the "Exhibits") shall be deemed to be an integral
part of this Agreement:
(a) Exhibit A--legal description of the Realty;
(b) Exhibit B--[intentionally omitted]
(c) Exhibit C--form of Deed;
(d) Exhibit D--form of Bill of Sale;
(e) Exhibit E--form of Assignment;
(f) Exhibit F--form of FIRPTA Affidavit;
(g) Exhibit G--form of tenant letters;
(h) Exhibit H--form of Estoppel Certificate; and
(i) Exhibit I--permitted encumbrances.
11.11 Entire Agreement. This Agreement, including the Exhibits, contains
the entire agreement between Seller and Purchaser pertaining to the transaction
contemplated hereby and fully supersedes all prior agreements and understandings
between Seller and Purchaser pertaining to such transaction.
11.12 Further Assurances. Both Seller and Purchaser agree that it will
without further consideration execute and deliver such other documents and take
such other action, whether prior or subsequent to Closing, as may be reasonably
requested by the other party to consummate more effectively the transaction
contemplated hereby. The provisions of this Section 11.12 shall survive Closing.
11.13 Attorneys' Fees. In the event of any controversy, claim or dispute
between Seller and Purchaser affecting or relating to the subject matter or
performance of the rights, duties and obligations under this Agreement, the
prevailing party shall be entitled to recover from the nonprevailing party all
of the prevailing party's reasonable expenses, including, without limitation,
attorneys' fees, accountants' fees and court costs.
<PAGE>
11.14 Counterparts. This Agreement may be executed in multiple
counterparts, and all such executed counterparts shall constitute the same
agreement. It shall be necessary to account for only one (1) such counterpart in
proving the existence, validity or content of this Agreement.
11.15 Severability. If any provision hereof is determined by a court of
competent jurisdiction to be invalid or unenforceable, the remainder of this
Agreement shall nonetheless remain in full force and effect.
11.16 Section Headings. Section headings contained herein are for
convenience only and shall not be considered in interpreting or construing this
Agreement.
11.17 Binding Effect. This Agreement shall not be binding upon any
party hereto unless and until both Seller and Purchaser have executed this
Agreement.
11.18 Choice of Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Texas, without regard to the
conflicts of laws principles thereof.
11.19 Allocation of Purchase Price. Seller and Purchaser hereby agree
that, for federal income tax reporting purposes, the Purchase Price shall be
allocated, in accordance with Treasury Regulation 1.1060-1T, as follows:
Class I Assets (cash, demand
deposits in banks, etc.)............ $0
Class II Assets (certificates
of deposit, U.S. government
securities, readily marketable
stock, etc.)........................ $0
Class III Assets (furniture and
fixtures, land, buildings,
equipment, etc.).................... Purchase Price
Class IV Assets (Goodwill and
going concern value)................ $0
Total Purchase Price................ Purchase Price
Seller and Purchaser agree to work and cooperate with each other to coordinate
their completion of Form 8594, Asset Acquisition Statement (the "Form") under
Section 1060, promulgated by the Internal Revenue Service by regulations under
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any successor form so that the amounts allocated as set forth on the Form will
be consistent. The provisions of this Section 11.19 shall survive Closing.
11.20 No Third Party Beneficiary. The provisions hereof and of the
documents to be executed and delivered at Closing are and will be for the
benefit of Seller and Purchaser only and are not for the benefit of any third
party, and accordingly, no third party shall have the right to enforce the
provisions hereof or of the documents to be executed and delivered at Closing.
<PAGE>
11.21 Limitation of Liability. This Agreement is made on behalf of
Purchaser by a Trustee of Purchaser, not individually, but solely in his, her or
its capacity in such office as authorized by the Trustees of Purchaser pursuant
to Purchaser's Declaration of Trust, and the obligations set forth in this
Agreement are not binding upon, nor shall resort be had to, the private property
of any of the Trustees, shareholders, officers, employees or agents of Purchaser
personally, shall bind only Purchaser's property. The provision contained in the
foregoing sentence is not intended to, and shall not, limit any right that
Seller might otherwise have to obtain injunctive relief against Purchaser or
Purchaser's successors in interest, or any action not involving the personal
liability of the Trustees, shareholders, officers, employees or agents, original
or successor, of Purchaser.
11.22 Effective Date of Agreement. This Agreement has been executed on
the dates set forth below, but shall be deemed effective date for all purposes
as of December 20th, 1994 (the "Effective Date").
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the Effective Date.
SELLER:
Executed by Seller this TURNER ADREAC, L.C., a Texas limited
19th day of December, 1994 liability company, d/b/a Turner Adreac
Development Company
By /s/ Charles H. Turner
-------------------------------
Name: Charles H. Turner
Title: President
PURCHASER:
Executed by Purchaser this UNIVERSAL HEALTH REALTY INCOME
day of December, 1994. TRUST, a Maryland Real Estate
Investment Trust
By /s/ Cheryl K. Ramagano
------------------------------
Name: Cheryl K. Ramagano
Title: Vice President
<PAGE>
Exhibit A
Tract 1
Being a tract or parcel of land containing 1.699 acres (73,987 sq. ft.), more or
less, situated in the John W. Asbury Survey, Abstract 91 in Harris County,
Texas, being out of Restricted Reserve "A", Block 1 of Kingwood Town Center,
Section Two as recorded under Film Code 357060 of the Harris County Map Records
and being all of the same land described in the deed to Turner Adreac, L. C. as
recorded under Harris County Clerk's File Number P635826; said 1.699 acres
being more particularly described by metes and bounds as follows:
BEGINNING at a 5/8-inch iron rod found for the southerly cutback corner at the
intersection of the southwesterly right-of-way line of Lake Houston Parkway
(width varies) with the northwesterly right-of-way line of Bens Town Drive (60
feet wide);
THENCE South 55o30'50" West along said northwesterly right-of-way line of Bens
Town Drive, a distance of 177.05 feet to a 5/8-inch iron rod found for the most
southerly corner of said Turner Adreac, L. C. tract,
THENCE North 33o34'17" West along the southwesterly line of said Turner Adreac,
L. C. tract, a distance of 344.81 feet to a 5/8-inch iron rod with cap found in
the line common to said Reserve "A" and Restricted Reserve "B", Block 2 of
Kingwood Town Center Section One as recorded under Film Code 345143 of the
Harris County Map Records;
THENCE North 60o12'39" East along said common line, a distance of 237.49 feet to
a 5/8-inch iron rod with cap found for the east corner common to said Reserves
"A" and "B", being in said southwesterly right-of-way line of Lake Houston
Parkway and being in a curve to the right,
THENCE 227.36 feet southeasterly along said southwesterly right-of-way line of
Lake Houston Parkway and along the arc of said curve to the right (Central Angle
=06o30'48"; Radius = 2000.00 feet; Chord = South 27o33'32" East, 227.24 feet)
to a 5/8-inch iron rod with cap found for a point of reverse curvature to the
left;
THENCE 79.58 feet continuing along said southwesterly right-of-way line and
along the arc of said curve to the left (Central Angle = 01o31'12"; Radius =
3000.00 feet; Chord = South 25o03'44" East, 79.58 feet) to a 5/8-inch iron rod
with cap found for a point of reverse curvature to the right;
THENCE 35.49 feet continuing along said southwesterly right-of-way line and
along the arc of said curve to the right (Central Angle = 81o20'09"; Radius =
25.00 feet; Chord = South 14o50'45" West, 32.58 feet) to the POINT OF BEGINNING
and containing 1.699 acres (73,987 sq. ft.), more or less.
R.S. McClendon Co.
Ph: (713)240-9099
Job No. 48-9402 SEAL
December, 1994
<PAGE>
Tract 2
Being a tract containing 1.727 acres (75,211 square feet) of land situated in
the John W. Asbury Survey, A-91 of Harris County, Texas and being out of
Restricted Reserve "B" of Kingwood Town Center Section Two, a subdivision of
record under Film Code Number 357060 of the Harris County Map Records
(H.C.M.R.). Said 1.727 acre tract being more particularly described as follows,
with all bearings referenced to the Texas Coordinate System, South Central Zone:
BEGINNING at a 3/4-inch iron rod found for the most easterly northeast corner of
said Reserve "B" and being a point in a southwesterly right-of-way line of
Lake Houston Parkway (varying width) per plat recorded under Film Code Number
350032 of said H.C.M.R.;
THENCE, 202.84 feet, along said southwesterly right-of-way line and along the
arc of a non-tangent curve to the left (Central Angle = 03o52'26"; Radius =
3,000.00 feet; Chord Bearing and Distance = South 29o51'41" East, 202.80 feet)
to a 5/8-inch iron rod with plastic cap stamped "SURVCON INC." set for corner;
THENCE, South 55o30'50" West, a distance of 313.87 feet to a 5/8-inch iron rod
with plastic cap stamped "SURVCON INC." set for corner and being in a
northeasterly right-of-way line of Bens Branch Drive (60.00 feet wide) per said
Kingwood Town Center Section Two;
THENCE, North 37o34'31" West, along said northeasterly right-of-way line, a
distance of 203.95 feet to a 3/4-inch iron rod found for the beginning of a
tangent curve to the right and being the intersection with a southerly
right-of-way line of Bens Town Drive (60.00 feet wide) per said Kingwood Town
Center Section Two;
THENCE, easterly along said southerly right-of-way line the following courses:
40.62 feet, along the arc of said curve to the right (Central Angle =
93o05'21"; Radius = 25.00 feet; Chord Bearing and Distance = North
08o58'09" East, 36.30 feet) to a 3/4-inch iron rod found for a point
of tangency;
North 55o30'50" East, a distance of 291.41 feet to a 3/4-inch iron rod
found for the beginning of a tangent curve to the right;
42.13 feet, along the arc of said curve to the right (Central Angle =
96o33'43"; Radius = 25.00 feet; Chord Bearing and Distance = South
76o12'l9" East, 37.32 feet) to the POINT OF BEGINNING and containing a
computed area of 1.727 acres (75,211 square feet) of land.
Compiled by:
SURVCON INC.
Houston, Texas
Job No. 5728-03 SEAL
March 1994
D-61
<PAGE>
Tract 3
An easement over and across that certain tract or parcel of real property
situated in Harris County, Texas, as more particularly described as
follows:
Being a tract or parcel of land containing 6,421 square feet (0.1474 acre), more
of less, situated in the John W. Asbury Survey, Abstract No. 91 in Harris
County, Texas, being 4,521 square feet out of Restricted Reserve "B", Block 2 of
Kingwood Town Center, Section One as recorded under Film Code 354143 of the
Harris County Map Records and 1,900 square feet out of Restricted Reserve "A" of
Kingwood Town Center, Section Two as recorded under Film Code 357060 of the
Harris County Map Records; said 6,421 square feet being more particularly
described by metes and bounds as follows:
COMMENCING at a 5/8-inch iron rod with aluminum cap found for the east corner
common to said Reserves "A" and "B", being in the southwesterly right-of-way
line of Lake Houston Parkway (width varies) aad being in a curve to the right;
thence as follows:
Southeasterly 5.00 feet along said southwesterly right-of-way line and the arc
of said curve to the right (Central Angle = 00o08'36"; Radius = 2000.00 feet;
Chord = South 30o44'39" East, 5.00 feet) to the POINT OF BEGINNING.
THENCE, 25.00 feet continuing southeasterly along said southwesterly
right-of-way line and the arc of said curve to the right (Central Angle =
00o42'58", Radius = 2000.00 feet; Chord = South 30o18'52" East, 25.00 feet) to a
point for corner,
THENCE South 60o12'39" West departing said southwesterly right-of-way line, a
distance of 71.00 feet to a point in a curve to the left;
THENCE northwesterly along tho arc of said curve to the left, at 30.00 feet
pass the line common to said Reserves "A" and "B", for a total arc distance of
51.38 feet (Central Angle = 01o31'34"; Radius = 1929.00 feet; Chord = North
30o43'58" West, 51.38 feet) to a point of reverse curvature to the right;
THENCE 113.29 feet along the arc of said curve to the right (Central Angle =
01o3'22"; Radius = 6146.00 feet; Chord = North 30o57'39" West, 113.28 feet) to
a point for corner;
THENCE North 59o27'02" East, a distance of 71.00 feet to a point for corner in
said southwesterly right-of-way line of Lake Houston Parkway and being in a
curve to the left;
<PAGE>
THENCE southeasterly 25.00 feet along said southwesterly right-of-way line and
the arc of said curve to the left (Central Angle = 00o14'09", Radius = 6075.00
feet: Chord = South 301o32'58" East, 25.00 feet) to a point for corner, beimg
87.12 feet along the arc of said curve from) a 5/8-inch iron rod with
aluminum cap found for a point of reverse curvature to the right;
THENCE South 59o27'02" West departing said southwesterly right-of-way line, a
distance of 46.00 feet to a point in a curve to the left;
THENCE southeasterly 87.87 feet along the are of said curve to the left
(Central Angle = 00o49'21"; Radius = 6121.00 feet; Chord = South 3lo04'40" East,
87.87 feet) to a point of reverse curvature to the right;
THENCE 27.12 feet along the arc of said curve to the right (Central Angle =
00o47'43"; Radias = 1954.00 feet; Chord = South 31o05'53" East, 27.12 feet) to a
point for corner,
THENCE North 60o12'39" East, a distance of 46.01 feet to the POINT OF BEGINNING
and containing 6,421 square feet (0.1474 acre) of land, more or less.
R. S. McCLENDON CO.
Ph: (713)240-9099
Job No. 48-9402 SEAL
December, 1994
<PAGE>
EXHIBIT B
[INTENTIONALLY OMITTED]
<PAGE>
EXHIBIT C
GENERAL WARRANTY DEED
THE STATE OF TEXAS Section
Section KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF HARRIS Section
THAT ________________________________, a ______________("Grantor"), for
and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other
good and valuable consideration to it in hand paid by ________________________,
a _____________("Grantee"), whose mailing address is ___________________________
__, the receipt and sufficiency of which consideration are hereby acknowledged,
and upon and subject to the exceptions, encumbrances, terms and provisions
hereinafter set forth and described, has GRANTED, BARGAINED, SOLD and CONVEYED,
and by these presents does hereby GRANT, BARGAIN, SELL and CONVEY, unto Grantee
that certain tract or parcel of real property situated in Harris County, Texas,
described on Exhibit A attached hereto and made a part hereof for all purposes,
together with all and singular the rights, benefits, privileges, easements,
tenements, hereditaments and appurtenances thereon or in anywise appertaining
thereto, and together with all improvements situated thereon, all sewer and
wastewater discharge capacity allocated or reserved thereto, all development
rights with respect thereto and any right, title and interest of Grantor in and
to adjacent streets, alleys, rights-of-way and any adjacent strips or gores of
real estate (such land, rights, benefits, privileges, easements, tenements,
hereditaments, appurtenances, improvements and interests being hereinafter
referred to collectively as the "Property").
This conveyance is expressly made subject and subordinate to those
encumbrances and exceptions (collectively the "Permitted Exceptions") set forth
on Exhibit B attached hereto and made a part hereof for all purposes, but only
to the extent that the same affect or relate to the Property.
TO HAVE AND TO HOLD the Property, subject to the Permitted Exceptions,
as aforesaid, unto Grantee, its successors and assigns, forever; and Grantor
does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER
DEFEND all and singular the Property unto Grantee, its successors and assigns,
against every person whomsoever lawfully claiming or to claim the same, or any
part thereof.
By acceptance of this General Warranty Deed, Grantor warrants payment of
all property taxes on the Property through and including the year 19 . By
acceptance of this General Warranty Deed, Grantee assumes payment of all
property taxes on the Property for the year 19 , which have been prorated, and
subsequent years.
<PAGE>
IN WITNESS WHEREOF, this General Warranty Deed has been executed by
Grantor on the date of the acknowledgement set forth below, to be effective for
all purposes as of the __ day of _________, 19___.
---------------------------,
a
-------------------------
By
-------------------------
Name:
--------------------
Title:
-------------------
THE STATE OF _________________ Section
Section
COUNTY OF ____________________ Section
This instrument was acknowledged before me on the ____ day of
_________________, 19___, by ____________________________,
of _________________________________, a ________________________________
_______________________, on behalf of said _______________.
--------------------------------
Notary Public in and for the
State of
-----------------------
--------------------------------
Printed or Typed Name of Notary
My Commission Expires:
--------------------------------
<PAGE>
EXHIBIT D
BLANKET CONVEYANCE, BILL OF SALE AND ASSIGNMENT
THE STATE OF TEXAS Section
Section KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF HARRIS Section
Concurrently with the execution and delivery of this Blanket Conveyance,
Bill of Sale and Assignment (this "Bill of Sale"), _____________________________
, a ________________("Assignor"), is conveying to ______________________________
_____________________, a _______________________________________________________
_______ ("Assignee"), whose mailing address is ____________________________,
by General Warranty Deed (the "Deed"), that certain tract or parcel of real
property situated in Harris County, Texas, being more particularly described on
Exhibit A attached hereto and made a part hereof for all purposes, together
with the improvements situated thereon (collectively the "Property").
It is the desire of Assignor hereby to assign, transfer, and convey to
Assignee all fixtures, fittings, appliances, apparatus, equipment, machinery,
warranties, guaranties, indemnities, claims and other items of tangible and
intangible personal property owned by Assignor and affixed or attached to, or
placed or situated upon, or used in connection with the use, occupancy, or
operation of the Property (all of such properties and assets are hereinafter
referred to collectively as the "Assigned Properties").
NOW, THEREFORE, in consideration of the receipt of Ten and No/100
Dollars ($10.00) and other good and valuable consideration in hand paid by
Assignee to Assignor, the receipt and sufficiency of which are hereby
acknowledged and confessed by Assignor, Assignor does hereby ASSIGN, TRANSFER,
SET OVER, and DELIVER to Assignee, its successors and assigns, all of the
Assigned Properties, including, without limitation, the following:
1. Any and all tangible personal property owned by Assignor and
situated upon and used in connection with the complete and comfortable use,
enjoyment, occupancy or operation of the Property, including, without
limitation, all raw materials, work and materials in process, stock in
trade, inventory and equipment, if any.
2. The rights and interests of Assignor in and to, and existing under
and by virtue of, the contracts (collectively the "Contracts") described on
the schedule attached hereto as Exhibit B and made a part hereof for all
purposes to which Assignor is now a party and which relate to the ownership,
use, enjoyment, occupancy or operation of the Property.
3. All assignable warranties, bonds, guaranties (express or implied),
indemnities and claims issued in connection with or arising out of (a) the
purchase and repair of all fixtures, equipment, and personal property owned
by Assignor and attached to and located in or used in connection with the
Property, including, but not limited to (i) all electrical, heating, air
conditioning, plumbing, and lighting fixtures and equipment, and (ii) all
carpeting, furniture, and window draperies, or (b) the construction of any
of the improvements constituting a portion of the Property.
4. All right, title and interest in and to any trade name or assumed
name presently or formerly used by Assignor in connection with the
ownership, use, enjoyment, occupancy or operation of the Property,
including, without limitation, the name "The Professional Center at Kings
Crossing".
<PAGE>
TO HAVE AND TO HOLD the Assigned Properties unto Assignee, its successors
and assigns, forever, and Assignor does hereby bind itself and its successors to
WARRANT AND FOREVER DEFEND, all and singular, title to the Assigned Properties
unto Assignee, its successors and assigns, against every person whomsoever
lawfully claiming or to claim the same, or any part thereof.
Assignor represents and warrants that (1) there are no contracts, agreements
or warranties that relate to the Property other than those listed on Exhibit B,
(2) the Contracts have not been amended or modified except as set forth on
Exhibit B, (3) Assignor is the owner of the Contracts and has all necessary
authority to assign the Contracts to Assignee, (4) there has been no default
thereunder, or any event which, with the passage of time or giving the notice,
or both, would constitute a default thereunder, and (5) all consents necessary
to the assignment of the Contracts have been obtained.
Assignor hereby agrees to perform, execute, and/or deliver or cause to be
performed, executed, and/or delivered any and all such further acts and
assurances as Assignee may reasonably require to perfect Assignee's interest in
the Assigned Properties.
It is specifically agreed that Assignee shall not be responsible for the
discharge and performance of any duties or obligations required to be performed
and/or discharged in connection with the Assigned Properties prior to the
effective date hereof. In such regard, Assignor agrees to indemnify, save and
hold harmless Assignee from and against any and all loss, liability, cost or
expense (including, without limitation, attorneys' fees, accountants' fees,
consultants' fees, court costs and interest) resulting from any claims or causes
of action existing in favor of or asserted by any party arising out of or
relating to Assignor's failure to perform any duties or obligations of the owner
of the Assigned Properties prior to the effective date hereof.
Nothing herein contained shall be deemed to limit or restrict the
properties, assets and rights conveyed, assigned or transferred to or acquired
by Assignee pursuant to the Deed or other instruments of conveyance executed in
connection therewith.
EXECUTED on the dates of the acknowledgements set forth below, to be
effective for all purposes as of the day of , 19 .
ASSIGNOR:
--------------------------------,
a-------------------------------
By
------------------------------
Name: ------------------------
Title:------------------------
ASSIGNEE:
--------------------------------,
a-------------------------------
By
------------------------------
Name: ------------------------
Title:------------------------
<PAGE>
THE STATE OF __________ Section
Section
COUNTY OF _____________ Section
This instrument was acknowledged before me on the ____ day of _________
_____, 19___, by __________________________, ___________________________ of
_______________________________, a __________________________________________
__, on behalf of said _______________.
Notary Public in and for the
State of
Printed or Typed Name of Notary
My Commission Expires:
THE STATE OF ___________ Section
Section
COUNTY OF ______________ Section
This instrument was acknowledged before me on the ____ day of __________
________, 19___, by ____________________________, ________________________ of
___________________________, a ____________, on behalf of said ______________.
--------------------------------
Notary Public in and for the
State of
------------------------
--------------------------------
Printed or Typed Name of Notary
My Commission Expires:
--------------------------------
<PAGE>
EXHIBIT E
ASSIGNMENT OF TENANT LEASES
THE STATE OF TEXAS Section
Section KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF HARRIS Section
THAT THIS ASSIGNMENT OF TENANT LEASES is made from ___________________
__________, a ________________ ("Assignor"), to ___________________________, a
_____________("Assignee"), whose mailing address is __________________________.
W I T N E S S E T H:
WHEREAS, Assignor is the lessor under each of the leases demising space
in the improvements located on the tract of land more particularly described on
Exhibit A attached hereto and made a part hereof for all purposes (the
"Property"), said leases (collectively the "Leases") being more particularly
described on the schedule attached hereto as Exhibit B and made a part hereof
for all purposes;
WHEREAS, the Property is being conveyed from Assignor to Assignee by
General Warranty Deed of even date herewith (the "Deed"); and
WHEREAS, Assignor desires to transfer and assign to Assignee all of the
interest of the "Lessor" or "Landlord" under the Leases.
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration to Assignor in hand
paid by Assignee, the receipt and sufficiency of which are hereby acknowledged,
Assignor does hereby SELL, ASSIGN, CONVEY, TRANSFER, SET-OVER and DELIVER unto
Assignee all of the interest of the "Lessor" or "Landlord" under the Leases.
TO HAVE AND TO HOLD all and singular the Leases unto Assignee, its
successors and assigns, and Assignor does hereby bind itself and its successors
to WARRANT AND FOREVER defend all and singular the Leases unto Assignee, its
successors and assigns, against every person whomsoever lawfully claiming or
attempting to claim the same, or any part thereof.
Assignor represents and warrants that (1) there are no leases demising
space in the improvements located on the Property other than those described on
Exhibit A, (2) the Leases have not been amended or modified except as set forth
on Exhibit A, (3) the Leases are in full force and effect, (4) there has been no
default thereunder, or any event which, with the passage of time or giving of
notice, or both, would constitute a default thereunder, and (5) all consents
necessary to the assignment of the Leases have been obtained.
It is specifically agreed that Assignee shall not be responsible for the
discharge and performance of duties or obligations required to be performed
and/or discharged in connection with the Leases prior to the effective date
hereof. In such regard, Assignor agrees to indemnify, save and hold harmless
Assignee from and against any and all loss, liability, cost or expense
(including, without limitation, attorneys' fees, accountants' fees, consultants'
fees, court costs and interest) resulting from any claims or causes of action
existing in favor of or asserted by any party arising out of or relating to
Assignor's failure to perform any duties or obligations of the "Lessor" or
"Landlord" under the Leases prior to the effective date hereof.
<PAGE>
It is specifically agreed that Assignor shall not be responsible for the
discharge and performance of duties or obligations required to be performed
and/or discharged in connection with the Leases subsequent to the effective date
hereof. In such regard, Assignee agrees to indemnify, save and hold harmless
Assignor from and against any and all loss, liability, cost or expense
(including, without limitation, attorneys' fees, accountants' fees, consultants'
fees, court costs and interest) resulting from any claims or causes of action
existing in favor of or asserted by any party arising out of or relating to
Assignee's failure to perform any duties or obligations of the "Lessor" or
"Landlord" under the Leases on or after the effective date hereof.
EXECUTED on the dates of the acknowledgements set forth below, to be
effective for all purposes as of the day of , 19 .
ASSIGNOR:
-------------------------,
a------------------------
By
-----------------------
Name: -----------------
Title:-----------------
ASSIGNEE:
-------------------------,
a -----------------------
By
-----------------------
Name: -----------------
Title:-----------------
THE STATE OF _________ Section
Section
COUNTY OF _________ Section
This instrument was acknowledged before me on the ____ day of ________,
19___, by ______________________________, ________________________ of ________,
a ________________________, on behalf of said ________________.
------------------------------
Notary Public in and for the
State of
----------------------
------------------------------
Printed or Typed Name of Notary
My Commission Expires:
-------------------------------
<PAGE>
THE STATE OF ________ Section
Section
COUNTY OF ________ Section
This instrument was acknowledged before me on the ____ day of _________,
19___, by ________________________________, ________________________________ of
______________________________, a ___________________________________________
________________________, on behalf of said ______________.
-------------------------------
Notary Public in and for the
State of
-----------------------
-------------------------------
Printed or Typed Name of Notary
My Commission Expires:
-------------------------------
<PAGE>
EXHIBIT F
FIRPTA AFFIDAVIT
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
Section 1445 of the Internal Revenue Code provides that a
transferee of a U.S. real property interest must withhold tax if the transferor
is a foreign person. To inform ____________________________________, a ________
______________ ("Transferee"), whose mailing address is
_______________________________________________________, that withholding of
tax is not required upon the disposition of a U.S. real property interest by
______________, a ____________ ("Transferor"), the undersigned hereby certifies
as follows:
1. Transferor is not a foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);
2. Transferor's U.S. employer identification number is: ______________;
3. Transferor's office address is ______________________________________.
Transferor understands that this certification may be disclosed to the
Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct,
and complete, and I further declare that I have authority to sign this document.
EXECUTED effective as of the _____ day of _____________, 19___.
---------------------------------,
a
--------------------------------
By
-------------------------------
Name:
-------------------------
Title:
-------------------------
SWORN TO AND SUBSCRIBED BEFORE ME this ____ day of _______________, 19___.
---------------------------
Notary Public in and for
the State of
---------------
--------------------------------
Printed or Typed Name of Notary
My Commission Expires:
--------------------------------
<PAGE>
EXHIBIT G
Notice of Purchase and Lease Assignment to Tenants
_____________________, 19 ___
[Name and Address of Tenant]
Re: Sale of
----------------------------
Gentlemen:
Please be advised that ____________________, a ________________________
("Purchaser"), has purchased the captioned property, in which you occupy space
as a tenant pursuant to a lease dated ____________________________, 19 _________
(the "Lease"), from _______________________, a ____________________ ("Seller"),
the previous owner thereof. In connection with such purchase, Seller has
assigned its interest as landlord in the Lease to Purchaser and has transferred
your security deposit in the amount of $______________ (the "Security Deposit")
to Purchaser. Purchaser specifically acknowledges the receipt of and
responsibility for the Security Deposit, the intent of Purchaser and Seller
being to relieve Seller of any liability for the return of the Security Deposit.
Our records show the following offsets and claims against the Security
Deposit:
--------------------
--------------------
--------------------
--------------------
All rental and other payments that become due on or
subsequent to the date hereof should be payable to __________________________,
a ___________, and should be addressed as follows:
---------------------
---------------------
---------------------
---------------------
<PAGE>
In addition, all notices from you to the landlord concerning any matter
relating to your tenancy should be sent to
at the address set forth above.
Very truly yours,
----------------------------,
a --------------------------
By
--------------------------
Name:
---------------------
Title:
--------------------
"Seller"
---------------------------,
a -------------------------
By
--------------------------
Name:
---------------------
Title:
--------------------
"Purchaser"
<PAGE>
EXHIBIT H
FORM OF ESTOPPEL CERTIFICATE
SUBORDINATION, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT
THE STATE OF TEXAS Section
Section
COUNTY OF _________ Section
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT
AGREEMENT (this "Agreement") is entered into by and between ___________________
____________________________________________, a _______________________________
("Lienholder"), and ___________________________________________________________
____________________________________, a ___________________________ ("Tenant"),
effective as of the date set forth below.
W I T N E S S E T H:
WHEREAS, Lienholder is the holder and owner of that certain promissory
note executed by _________________________________, a ___________________
("Landlord"), in the original principal amount of _____________________, dated
as of _______________ (the "Note"), which Note is secured by a Deed of Trust and
Security Agreement of even date therewith to ______________________, Trustee,
filed in the office of the County Clerk of _________ County, __________ (said
Deed of Trust and Security Agreement being herein referred to as the "Deed of
Trust"), which Deed of Trust covers certain
property and improvements in ___________ County,____________, more particularly
described on Exhibit A, attached hereto and made a part hereof for all purposes,
and in said Deed of Trust (the "Mortgaged Property"); and
WHEREAS, Landlord has executed a lease agreement dated as of
____________________ (the "Lease Contract"), with Tenant covering a portion of
the improvements on the Mortgaged Property (the "Leased Premises"); and
WHEREAS, Lienholder and Tenant desire that the aforesaid Lease Contract
remain in effect notwithstanding any foreclosure or other proceedings for
enforcement of said Deed of Trust or foreclosure of any other lien securing said
Promissory Note and held by Lienholder on all or any portion of the Mortgaged
Property;
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS:
THAT, for and in consideration of the premises, Ten Dollars ($10.00) and
other good and valuable consideration each to the other paid, the parties hereto
agree as follows:
1. Non-Disturbance.
A. Lienholder agrees, for the benefit of Landlord, Tenant and
Lienholder, that, notwithstanding any foreclosure by Lienholder under the
aforesaid Deed of Trust or foreclosure by Lienholder under any other lien,
assignment of leases, assignment of rents or other instrument securing the Note
now owned and held by Lienholder and covering all or any portion of the
Mortgaged Property or any conveyance in lieu of foreclosure, and notwithstanding
any exercise by Lienholder of any prior rights of Lienholder with respect to the
Mortgaged Property, Tenant's right of possession of the Leased Premises shall
not be disturbed or affected by Lienholder so long as no default by Tenant
exists under the terms of said Lease Contract (after notice and an opportunity
to cure, if any, as provided in said Lease Contract) as would enable Landlord to
terminate said Lease Contract or would cause termination of said Lease Contract
or would entitle the Landlord to dispossess the Tenant under said Lease
Contract.
<PAGE>
B. Except as herein expressly provided to the contrary and subject
to the further terms and provisions hereof, in the event of foreclosure under
said Deed of Trust or any other lien or instrument in favor of Lienholder or
exercise of any other prior rights of Lienholder with respect to the Mortgaged
Property, Lienholder shall be deemed to have assumed and agreed to perform the
duties of Landlord under such Lease Contract during such period, if any, as
Lienholder is collecting or entitled to collect rent from Tenant thereunder,
except that the person acquiring the interests of the Lienholder and Landlord,
or of either of them, as a result of any such action or proceeding, shall not be
(a) liable for any act or omission of Landlord or any other prior landlord; or
(b) subject to any offsets or defenses which Tenant might have against Landlord
or any other prior landlord; or (c) bound by any rent or additional rent which
Tenant might have paid for more than one month in advance of the due dates under
the terms of the Lease Contract; or (d) liable for any security deposit which
Tenant might have paid pursuant to the Lease Contract unless such security
deposit has been paid over to Lienholder; or (e) bound by any amendment or
modification of the Lease Contract made without Lienholder's prior written
consent; or (f) bound by any provisions requiring Landlord to construct
improvements on or to the Mortgaged Property or any part thereof.
2. Subordination. Tenant agrees that, as of the date hereof, the
Lease Contract is hereby subordinated to and shall be and remain subject and
subordinate to the Deed of Trust and any extensions, renewals or modifications
thereof, subject to the further provisions of this Agreement.
3. Attornment. Tenant further agrees with Lienholder that a foreclosure
or other action or proceeding under said Deed of Trust or conveyance in lieu of
foreclosure shall not terminate the Lease Contract and the Tenant shall not be
relieved of the Tenant's obligations thereunder, unless the Lienholder or any
purchaser at foreclosure under the Deed of Trust or otherwise, or any other
proceedings for enforcement of said Deed of Trust, elects to terminate the Lease
Contract pursuant to any right to do so under Section 1, above, or as may be
otherwise provided in the Lease. So long as the Lease Contract remains in effect
as above provided, the Lienholder in possession or any purchaser or purchasers
at any sale under the Deed of Trust shall have all rights of the Landlord under
the Lease Contract (including, without limitation, any extensions or renewals
thereof that may be effected in accordance with any option therefor in the Lease
Contract) and the Tenant shall be deemed to have attorned to such Lienholder or
such purchaser or purchasers (including, without limitation, the Lienholder if
it be the purchaser), and for the duration of possession by Lienholder or such
other Purchaser, then, subject to the limitations on liability set forth in the
Lease Contract, the Tenant shall have the same rights against such Lienholder in
possession or such other purchaser or purchasers as it has against the Landlord
under the Lease Contract, except as otherwise provided in this Agreement. The
attornment of Tenant provided for in the immediately preceding sentence hereof
is to be effective and self-operative without the execution of any further
instruments upon Lienholder or a purchaser or purchasers succeeding to the
interest of Landlord under the Lease Contract, but Tenant agrees to execute and
acknowledge such documents as such Lienholder or a purchaser or purchasers
succeeding to the interest of Landlord under the Lease Contract or of Lienholder
under the Lease Contract may reasonably request to evidence Tenant's attornment
hereunder.
4. Confirmation of Terms. As of the date hereof, the Lease Contract
consists solely of the lease agreement between Landlord and Tenant dated ______
______ and any amendments thereto, if any, specifically listed on that certain
Lease Summary attached hereto as Exhibit B and made a part hereof for all
purposes (the "Lease Summary"), and there are no other agreements between
Landlord and Tenant relating to the Lease Contract or the Premises. Tenant
confirms and agrees that the Lease Summary completely and correctly summarizes
all of the basic terms of the Lease Contract, and, to the extent of any conflict
between the terms of the Lease Contract and the Lease Summary, the Lease
Contract, at Lienholder's election, may be deemed to have been amended to
conform to the Lease Summary.
<PAGE>
5. Lienholder's Liability. Neither __________________, nor any other
party that may, from time to time, be included as "Lienholder" hereunder, shall
have any liability or responsibility under or pursuant to the terms of this
Agreement after such time as such party ceases to own an interest in the
Mortgaged Property and, at no time shall Lienholder's liability hereunder or
under the Lease Contract exceed Lienholder's interest in the Mortgaged Property.
6. Successors and Assigns. The provisions hereof shall inure to
the benefit of and be binding upon the undersigned parties and their
respective successors and assigns.
<PAGE>
EXECUTED in multiple counterparts, each of which shall have the force
and effect of an original, on the dates of the acknowledgments set forth below,
to be effective, however, as of the ________ day of ______________, 199_.
-------------------------,
a ____________________
By
-------------------------
Name:
----------------------
Title:
---------------------
"Lienholder"
-------------------------,
a ____________________
By
-------------------------
Name:
----------------------
Title:
---------------------
"Tenant"
<PAGE>
THE STATE OF ________ Section
Section
COUNTY OF ___________ Section
This instrument was acknowledged before me on _____________, 199_, by
_________________________, ___________________ of ___________________, a
_______________, on behalf of said ________________.
(SEAL)
-------------------------------
Notary Public in and for
the State of
-------------------
-------------------------------
(Printed Name of Notary Public)
My commission expires:
-------------------------------
THE STATE OF ____________ Section
Section
COUNTY OF ________________ Section
This instrument was acknowledged before me on __________, 199_, by
_________________________, ________________________ of ______________________, a
________________, on behalf of said ______________.
(SEAL)
-------------------------------
Notary Public in and for
the State of
-------------------
-------------------------------
(Printed Name of Notary Public)
My commission expires:
-------------------------------
<PAGE>
EXHIBIT I
Tract I PERMITTED ENCUMBRANCES
-------
Restrictive Covenants as set out under Film Code No. 357060 of the Map Records
of Harris County, Texas and those recorded under Clerk's File No. H-679437 as
amended by instruments recorded under Clerk's File Nos. H-876904, annexed by
P-512539, and N-474681, annexed by instrument recorded under Clerk's File No.
P-512540, and those in the Deed recorded under Clerk's File No. P-635826 of the
Real Property Records of Harris County, Texas.
An easement 10 feet wide, northeasterly of and adjacent to the southwesterly
line of the 30 feet wide building line along the northeasterly property line,
for the use of public utilities as reflected by the recorded plat, and an aerial
easement 10 feet wide beginning at a plane 16 feet above the ground level and
extending upwards located on both sides of and adjoining the dedicated utility
easement, as granted to Houston Lighting Power Company by instrument recorded
under Clerk's File No. R-029502 of the Real Property Records of Harris County,
Texas.
An easement 10 feet wide southeasterly of and adjacent to the northwesterly
property line, beginning at the most northerly corner and extending in a
southwesterly direction 30 feet
along said line, for the use of public utilities as reflected by the recorded
plat, and an aerial easement 10 feet wide beginning at a plane 16 feet above the
ground level and extending upwards located southeast of and adjoining the
dedicated utility easement, as granted to Houston Lighting Power Company by
instrument recorded under Clerk's File No. R-029502 of the Real Property Records
of Harris County, Texas.
A 10 foot wide utility easement adjacent to and within all of the property's
external boundaries along with a 15 foot aerial easement adjacent to the north
property line for the purpose of general utilities, as reserved in the
instrument recorded under Clerk's File No. P-635826 of the Real Property Records
of Harris County, Texas.
An easement 5 feet wide and being the southeasterly one-half of a 10 foot wide
easement centered on the northwest property line, along with an unobstructed
aerial easement 10 feet wide beginning at a plane 16 feet above the ground and
extending upwards, located southeasterly of and adjoining said 5 feet wide
easement, as granted to Houston Lighting & Power Company by instrument recorded
under Clerk's File No. P-660108 of the Real Property Records of Harris County,
Texas.
A guy easement 3 feet wide and 40 feet in length located 25 feet Southwest of
the northeast corner of subject property and extending in a Southeasterly
direction, as granted to Houston Lighting & Power Company by instrument recorded
under Clerk's File No. P-660108 of the Real Property Records of Harris County,
Texas.
An easement for drainage purposes extending a distance of 15 feet on each side
of the centerline of all natural drainage courses, as reflected by the recorded
plat.
<PAGE>
1/2 of all the oil, gas and other minerals, the royalties, bonuses, rentals and
all other rights in connection with same are excepted herefrom as the same are
set forth in instrument recorded in Volume 7036, Page 323 of the Deed Records of
Harris County, Texas. (as to all oil, gas, sulphur and other minerals found at
depths of more than 1,000 feet below the surface and as to all oil, gas, sulphur
and hydrocarbons in addition to oil and gas found at depths of less than 1,000
feet below the surface of the land) Leasing rights waived therein. Surface use
limited by Agreement therein and as recorded under Clerk's File No. E-010659 of
the Real Property Records of Harris County, Texas.
The remainder of all the oil, gas and other minerals, the royalties, bonuses,
rentals and all other rights in connection with same are excepted herefrom as
the same are set forth in instrument recorded under Clerk's File No. P-635826 of
the Real Property Records of Harris County, Texas. Surface rights were waived
therein.
Subject to the restrictions and regulations imposed by Ordinances of the City of
Houston, recorded in Volume 5448, Page 421 of the Deed Records of Harris County,
Texas, as amended under Clerk's File No. J-040968 of the Real Property Records
of Harris County, Texas, regarding the Houston Intercontinental Airport.
Building Set Back Line 50 feet wide for buildings and parking along Lake Houston
Parkway, as set forth in instrument recorded under Clerk's File No. H-679437 of
the Real Property Records of Harris County, Texas.
Building Set Back Line 10 feet in width along the southeasterly property line as
reflected by the recorded plat.
Building Set Back Line 30 feet in width along the northeasterly property line as
reflected by the recorded plat.
Annual Maintenance Charge and Special Assessments for Capital Improvement
payable to Kings Crossing Community Association reserved in instrument recorded
under Clerk's File No. H-679437 as amended by instrument recorded under Clerk's
File No. H-876904 and annexed by instrument recorded under Clerk's File No.
P-512539 of the Real Property Records of Harris County, Texas. This lien having
been subordinated therein to all first mortgage liens only.
Annual Maintenance Charge and Special Assessments for Capital Improvements
payable to Kings Crossing Trail Association reserved in instrument recorded
under Clerk's File No. N-467646, annexed by P-512540 of the Real Property
Records of Harris County, Texas. This lien having been subordinated therein to
all first mortgage liens only.
<PAGE>
Tract 2
Restrictive Covenants as set out in Film Code No. 357060 of the Map Records and
those recorded under Clerk's File No. H-679437 as amended by instrument recorded
under Clark's File No. H-876904 and as annexed by instrument recorded under
Clerk's File No. P-745162 and those recorded under Clerk's File No. N-467646 as
annexed by instrument recorded under Clerk's File No. P-745163 of the Real
Property Records of Harris County, Texas.
A storm sewer easement 10" feet wide in the most westerly corner of subject
property as reflected by the recorded plat.
A sanitary sewer easement 10 feet wide along the southeast portion of the
southwest property line, as reflected by the recorded plat.
An easement 10 feet wide centered along a line 25 feet southwest of and parallel
to the northeast property line for the use of public utilities as reflected by
the recorded plat.
An unobstructed aerial easement 10 feet wide, located on both sides of and
adjoining the aforementioned 10 foot easement, from a plane 16 feet above the
ground upward, granted to Houston Lighting & Power Company by instrument
recorded under Clerk's File No. R-029501 of the Real Property Records of Harris
County, Texas.
A proposed aerial easement 11.5 feet wide located southwest of, adjacent to and
adjoining the aforementioned 10 loot wide easement as reflected by the survey
plat by Arthur W. Girts, Jr., RPLS No. 4741 dated April 29, 1994.
Subject to any easements, rights-of-way, roadways, encroachments, etc., which a
survey or physical inspection of the premises might disclose.
An easement for drainage purposes extending a distance of 15 feet on each side
of the centerline of all natural drainage courses, as reflected by the recorded
plat.
1/2 of all the oil, gas and other minerals, the royalties, bonuses, rentals
and all other rights in connection with same are excepted herefrom as the same
are set forth in instrument recorded in Volume 7036, Page 323 of the Deed
Records of Harris County, Texas (as to all oil, gas, sulphur and other minerals
found at depths of more than 1,000 feet below the surface and as to all oil,
gas, sulphur and hydrocarbons in addition to oil and gas found at depths of less
than 1,000 feet below the surface of the land) Leasing rights waived therein.
Surface use limited by Agreement therein and as recorded under Clerk's File No.
E-010659 of the Real Property Records of Harris County, Texas.
Subject to the restrictions and regulations imposed by Ordinances of the City of
Houston, recorded in Volume 5448, Page 421 of the Deed Records of Harris County,
Texas, as amended under Clerk's File No. J-040968 of the Real Property Records
of Harris County, Texas, regarding the Houston Intercontinental Airport.
<PAGE>
Building Set Back Line 10 feet in width along the northwest and southwest
property lines as reflected by the recorded plat.
Building Set Back Line 30 feet in width along the northeast property line as
reflected by the recorded plat.
Building Set Back Lines as reflected in instrument recorded under Clerk's File
No. H-679437 and as annexed by instrument recorded under Clerk's File No.
P-745162 of the Real Property Records of Harris County, Texas and as reflected
by the survey plat by Arthur W. Girts, Jr., RPLS No. 4741 dated April 29, 1994.
Annual Maintenance Charge and Special Assessments for Capital Improvements
payable to Kings Crossing Community Association reserved under Clark's File No.
H-679437 as amended by instrument recorded under Clerk's File No. H-876904 and
as annexed by instrument recorded under Clerk's File No. P-745162 of the Real
Property Records of Harris County, Texas. This lien having been subordinated
therein to all first mortgage liens only.
Annual Maintenance Charge and Special Assessments for Capital Improvements
payable to Kings Crossing Trail Association reserved under Clerk's File No.
N-467646 as annexed by instrument recorded under Clerk's File No. P-745163 of
the Real Property Records of Harris County, Texas. This lien having been
subordinated therein to all first mortgage lipnm only.
<PAGE>
CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT (this "Agreement") is entered into as of
the 20th day of December, 1994, by and between Universal Health Realty Income
Trust, a Maryland Real Estate Investment Trust ("Lender"), and Turner Adreac,
L.C., a Texas limited liability company, d/b/a Turner Adreac Development Company
("Borrower").
WITNESSETH:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall have
the meanings indicated:
Agreement of Purchase and Sale: The Agreement of Purchase and Sale of even
date herewith between Borrower, as Seller, and Lender, as Purchaser, covering
and describing the Mortgaged Property.
Architect: Yeatts Architects, Inc.
Architect's Contract: An Agreement between Borrower and the Architect
providing for the provision by Architect of architectural and related services
in connection with the construction of the Improvements and requiring the
Architect to carry professional liability insurance in an amount not less than
$500,000.00.
Assignment of Leases and Rents: The Assignment of Leases and Rents of even
date herewith between Borrower, as Assignor, and Lender, as Assignee, covering
and describing the Leases.
Code: The Internal Revenue Code of 1986, as amended, together with the
rules and regulations promulgated in connection therewith.
Commitment: The agreement between Borrower and Lender dated December 8,
1994, and providing for the execution and delivery of the Security Documents.
Completion Date: The date that the Improvements are constructed to
Completion, but in no event later than July 18, 1995; except, however, that in
the event of casualty or force majeure the Completion Date may be extended as
late as September 15, 1995.
Completion Deposit: An amount (if any) calculated by Lender to equal the
difference between (a) the amount which Lender from time to time determines to
be necessary to pay all costs to be incurred in connection with the completion
of the development of the Mortgaged Property and the construction, marketing,
ownership, management, maintenance, operation, sale or leasing of the
Improvements in accordance with this Agreement; to pay all sums which may accrue
under the Security Documents prior to repayment of the Indebtedness, including,
without limitation, the generality of the foregoing, interest on the
Indebtedness; and to enable Borrower to perform and satisfy all of the covenants
of Borrower contained in the Security Documents, and (b) the funds then
unadvanced by Lender to Borrower on the Note.
Construction Contracts: Any and all contracts and agreements, written or
oral, between Borrower and the General Contractor, between Borrower and any
other original contractor, between any of the foregoing and any subcontractor
and between any of the foregoing and any other person or entity relating in any
way to the construction of the Improvements, including, without limitation, the
performing of labor or the furnishing of standard or specially fabricated
materials in connection therewith. The Construction Contracts shall require the
General Contractor to carry professional liability insurance in an amount not
less than $5,000,000.00 and the structural engineers to carry professional
liability insurance in an amount not less than $1,000,000.00.
<PAGE>
Contracts: The Construction Contracts and the Architect's Contract.
Deed of Trust: The Deed of Trust, Security Agreement and Fixture Filing of
even date herewith executed by Borrower conveying the Mortgaged Property to
Jonathan K. Newsome, Trustee for Lender to secure the repayment of the
Indebtedness and performance of the Obligations and all amendments thereto.
Disposition: Shall have the meaning ascribed thereto in Section 7.9
hereof.
Environmental Law: All Legal Requirements relating to the generation,
storage, use, handling, treatment, transportation, disposal, release or emission
of Hazardous Materials including, without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Superfund Amendments and Reauthorization Act, as
amended, the Safe Drinking Water Act, as amended, the Hazardous Materials
Transportation Act, as amended, and the Resources Conservation and Recovery Act,
as amended.
Environmental Report: That certain Phase I environmental audit of the
Mortgaged Property prepared by Compass Professional Services, Inc. for Borrower
and dated October 28, 1994, together with an update thereof performed subsequent
to Substantial Completion, but no earlier than three (3) calendar days prior to
the closing of the sale of the Mortgaged Property to Lender.
Event of Default: Any happening or occurrence described in Article 7
hereof.
Final Completion: When all of the following have occurred: (a) Substantial
Completion, (b) the Improvements have been completed in accordance with the
Plans, the Security Documents and all applicable Legal Requirements, (c)
Borrower has delivered to Lender Certificates of Occupancy (or their equivalent)
from all appropriate Governmental Authorities having jurisdiction over the
Mortgaged Property, (d) Lender has received an endorsement from the Title
Company deleting any exception in the Title Insurance relating to completion of
the Improvements and other exceptions specified by Lender which may be deleted
pursuant to applicable title insurance regulations, (e) Lender has received a
Texas Society of Professional Surveyors Category 1A, Condition II Survey
satisfactory in form and content to Lender, (f) Lender has received the
Environmental Report, (g) Lender has received a certificate executed by the
Independent Supervising Architect stating that the Independant Supervising
Architect has determined, that the construction of the improvements to the
Mortgaged Property has been completed in accordance with the Plans, (h) Lender
has received final "as-built" plans and specifications for the Improvements
showing all changes to the Plans from the original Plans, other than any changes
in the tenant improvements reasonably determined by the Independant Supervising
Architect to be non-substantial, which non-substantial changes shall be marked
on the "as-built" plans and specifications (i) all "punch list" items have been
resolved to Lender's satisfaction, (j) all sums due in connection with the
construction of the Improvements have been paid in full, and (k) Lender has
received an Affidavit and Full Release of Liens in recordable form from the
General Contractor and, upon Lender's request, either (1) a Full Release of
Liens or (2) a bond satisfactory to Lender and the Title Company complying with
the provisions of Chapter 53 of the Texas Property Code, with respect to any
other contractors or subcontractors who have performed work on, or furnished
materials for, the Improvements.
General Contractor: Quest Construction Company, or any other general
contractor engaged by Borrower and approved in writing by Lender to construct
the Improvements or any part thereof.
Governmental Authority: Any and all courts, boards, agencies, commissions,
offices or authorities of any nature whatsoever for any governmental unit
(federal, state, county, district, municipal, city or otherwise) whether now or
hereafter in existence.
<PAGE>
Guarantor (individually and/or collectively, as the context may require):
Quest Construction Company, Jemtex Inc., Charles H. Turner, Michael Van, and
Eric Van.
Guaranty (individually and/or collectively, as the context may require):
That or those instruments of guaranty, if any, now or hereafter in effect, from
Guarantor in favor of Lender guaranteeing the repayment of all or any part of
the Indebtedness and/or the satisfaction of, or continued compliance with, the
Obligations.
Hazardous Materials: Any flammables, explosives, radioactive materials,
asbestos, petroleum products, or other hazardous waste, including, without
limitation, substances defined as "hazardous substances", "hazardous materials",
or "toxic substances" under any Legal Requirements, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Hazardous Materials Transportation Act, and The Resources
Conservation and Recovery Act, all as amended.
Improvements: The improvements described in the Plans, being generally
described as the improvements to be completed on a combined 3.428 acre site in
the Kings Crossing section of Kingwood, Texas, on the corner of Lake Houston
Parkway and Towns Bend Drive, which improvements shall be constructed in
compliance with the Plans, the Security Documents, and all applicable Legal
Requirements, as reasonably determined by the Independant Supervising Architect.
Indebtedness: The principal of, interest on and all other amounts, payments
and premiums due under or secured by the Note, the Deed of Trust, the Guaranty
and any and all other documents now or hereafter executed by Borrower, Guarantor
or any other person or party in connection with the loan evidenced by the Note.
Independent Supervising Architect: The architect, engineer, agent,
consultant or other inspector selected and retained by Lender to supervise
construction of and inspect the Improvements on behalf of Lender.
Land: The real estate or interest therein described on Exhibit A attached
hereto and made a part hereof for all purposes, all fixtures and improvements
situated thereon and all rights, titles and interests appurtenant thereto.
Leases: Any and all written leases, subleases, licenses, concessions or
other agreements that grant a possessory interest in and to, or the right to
use, all or any part of the Mortgaged Property, together with all security and
other deposits made in connection therewith, and all other agreements, such as
engineer's contracts, utility contracts, maintenance agreements and service
contracts, which in any way relate to the design, use, occupancy, operation,
maintenance, enjoyment or ownership of the Mortgaged Property, save and except
any and all leases, subleases or other forms of conveyance or contracts pursuant
to which Borrower is granted a possessory interest in the Land.
Legal Requirements: (a) Any and all present and future judicial decisions,
statutes, rulings, rules, regulations, permits, certificates or ordinances of
any Governmental Authority in any way applicable to Borrower, any Guarantor or
the Mortgaged Property, including, without limitation, the ownership, use,
construction, occupancy, possession, operation, maintenance, alteration, repair
or reconstruction thereof, (b) any and all covenants, conditions and
restrictions contained in any deed or other form of conveyance or in any other
instrument of any nature that relate in any way or are applicable to the
Mortgaged Property or the ownership, use, construction, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction thereof, (c)
Borrower's or any Guarantor's presently or subsequently effective bylaws and
articles of incorporation or partnership, limited partnership, joint venture,
trust or other form of business association agreement, (d) any and all Leases,
(e) any and all terms, provisions and conditions of any Commitment which are to
be performed or observed by Borrower, and (f) any and all leases, other than
those described in (iv) above, and (vii) other contracts (written or oral) of
any nature that relate in any way to the Mortgaged Property and to which
Borrower or any Guarantor may be bound, including, without limitation, any
lease, sublease or other form of conveyance or contract pursuant to which
Borrower is granted a possessory interest in the Land.
<PAGE>
Letter of Credit: An unconditional, multiple-draw, irrevocable letter of
credit from an institution acceptable to Lender, in form and content
satisfactory to Lender, in the amount of one (1) year's rent under the Master
Leases having a term of one (1) year. Borrower agrees to provide a replacement
Letter of Credit annually no less than fourteen (14) calendar days prior to the
expiration of the then current letter of credit, and the Letter of Credit shall
provide that Borrower's failure to provide such a replacement Letter of Credit
shall entitle Lender to draw upon the Letter of Credit.
Master Leases: One or more Lease Agreements of even date herewith pursuant
to which Borrower leases all leasable space in the Improvements which has not
been leased to tenants pursuant to written Leases acceptable in all respects to
Lender.
Mortgaged Property: The Land, Improvements and Leases, all other property
(real, personal or mixed) which is conveyed by the Deed of Trust or in which a
security interest is therein created and all other property (real, personal or
mixed) on which a lien or security interest is placed or granted to secure the
repayment of the Indebtedness or the performance and discharge of the
Obligations.
Note: The Promissory Note of even date herewith, executed by Borrower,
payable to the order of Lender, in the amount of Four Million One Hundred
Twenty-Five Thousand and No/100 Dollars ($4,125,000.00) and any and all
modifications, renewals, rearrangements, reinstatements, enlargements or
extensions thereof or of any promissory note or notes given therefor.
Obligations: Any and all of the covenants, conditions, warranties,
representations and other obligations (other than to repay the Indebtedness)
made or undertaken by Borrower, Guarantor or any other person or party to Lender
or others as set forth in the Security Documents and in any deed, lease,
sublease or other form of conveyance or contract pursuant to which Borrower is
granted a possessory interest in the Land.
Plans: Any and all contracts and agreements, written or oral, between
Architect and Borrower, together with the final plans, specifications, shop
drawings and other technical descriptions prepared for the construction of the
Improvements, and all amendments and modifications thereof.
Security Documents: This Agreement, the Commitment, the Note, the Deed of
Trust, the Assignment of Leases and Rents, the Guaranty and any and all other
documents now or hereafter executed by Borrower, Guarantor or any other person
or party to evidence or secure the payment of the Indebtedness or the
performance and discharge of the Obligations.
Substantial Completion: When Lender has received a certificate of
substantial completion signed by Borrower, the Architect, the Independent
Supervising Architect and the General Contractor, in form and content
satifactory to Lender, stating that the Improvements have been substantially
completed in accordance with the Plans and the Security Documents.
Title Company: The issuer of the Title Insurance.
Title Insurance: A mortgagee title policy binder on interim construction
loan or, in cases where the Lender so specifies, a mortgagee policy of title
insurance, all in form and substance satisfactory to Lender and containing no
exceptions (printed or otherwise) which are unacceptable to Lender, issued by a
title company (or, If Lender so requires, by several title companies on a
co-insured or reinsured basis) acceptable to Lender in the face amount of the
Note and insuring that Lender has a first and prior lien on the Land and
Improvements, subject only to the Permitted Encumbrances described in the Deed
of Trust.
<PAGE>
ARTICLE 2
BORROWER'S REPRESENTATIONS AND WARRANTIES
Borrower hereby unconditionally represents and warrants unto Lender as follows:
2.1 Information. Any and all information, reports, papers and other data
(including, without limitation, any and all balance sheets, statements of income
or loss, reconciliation of surplus and financial data of any other kind)
heretofore furnished, or to be furnished, Lender by or on behalf of Borrower
are, or when delivered will be, true and correct in all material respects; all
financial data has been, or when delivered will have been, prepared in
accordance with generally accepted accounting principles consistently applied
and fully and accurately present, or will present, the financial condition of
the subjects thereof as of the dates thereof; and, with respect to the financial
data heretofore furnished, no materially adverse change has occurred in the
financial condition reflected therein since the dates thereof.
2.2 Litigation. Except as may be otherwise set forth on any exhibit attached
hereto, there are no actions, suits or proceedings of a material nature pending
or, to the knowledge of Borrower, threatened against or affecting Borrower, any
Guarantor or the Mortgaged Property, or involving the validity or enforceability
of the Deed of Trust or the priority of the liens and security interests created
therein; and no event has occurred (including, without limitation, Borrower's
and Guarantor's execution of the respective Security Documents and Borrower's
consummation of the loan represented thereby) which will violate, be in conflict
with, result in the breach of or constitute (with due notice or lapse of time,
or both) a default under any Legal Requirement or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever on the
Mortgaged Property other than the liens and security interests created by or
expressly permitted under the Security Documents.
2.3 Compliance with Legal Requirements. Borrower has (or prior to commencement
of construction of the Improvements will have) (a) received all requisite
building permits and approvals of the Plans, (b) filed and/or recorded all
requisite plats and other instruments, and (c) complied with all Legal
Requirements required to be met prior to commencement of construction of the
Improvements.
2.4 Streets, Easements, Utilities and Other Services. All streets, easements,
utilities and related services necessary for the construction of the
Improvements and the operation thereof for their intended purpose are (or within
thirty (30) days after commencement of construction of the Improvements, will
be) available to the boundaries of the Land, including, without limitation,
potable water, storm and sanitary sewer, gas, electric and telephone facilities
and garbage removal.
2.5 Contract and Commencement of Construction. Neither Borrower, any Guarantor
nor anyone else on Borrower's behalf has (a) commenced construction of the
Improvements, (b) purchased, contracted for or otherwise brought upon the Land
any materials, specially fabricated or otherwise, to be incorporated into the
Improvements, (c) entered into any Construction Contracts, or (d) made any oral
or written contract or arrangement of any kind the performance of which by the
other party thereto would or could give rise to a lien or claim on the Mortgaged
Property, or any portion thereof.
2.6 Validity of Security Documents. All action on Borrower's part requisite for
the due authorization, creation, issuance, execution and delivery of the
Security Documents has been duly and effectively taken, and each such document
constitutes a legal and binding obligation of, and is valid and enforceable
against, Borrower and the Mortgaged Property (as the case may be) in accordance
with the terms thereof.
<PAGE>
2.7 Commitment. All of the representations, warranties, agreements and
obligations made or undertaken by Borrower in the Commitment are true and
correct in all material respects and (to the maximum extent that the same were
to be complied with) have been complied with as of the date hereof.
2.8 Environmental Matters; Hazardous Substances. The Mortgaged Property has not
been the site of any activity that would violate any past or present Legal
Request, including, without limitation, any Environmental Law. Specifically,
without limitation, (a) no solid waste, as that term is defined in the Texas
Solid Waste Act, and no petroleum or petroleum products have been handled on the
Mortgaged Property such that they may have leaked or spilled on to the Mortgaged
Property or contaminated the Mortgaged Property, (b) there is no on-site
contamination resulting from activities on the Mortgaged Property or adjacent
tracts, (c) the Mortgaged Property contains no Hazardous Materials, and (d)
there are no underground storage tanks located in, on or under the Mortgaged
Property.
ARTICLE 3
BORROWER'S COVENANTS
Borrower hereby unconditionally covenants with Lender as follows:
3.1 Construction of Improvements. The construction of the Improvements will be
commenced by Borrower forthwith, will be prosecuted by Borrower with diligence
and continuity to Final Completion, will be constructed in strict compliance
with all Legal Requirements, and will be completed by Borrower in a good and
workmanlike manner in substantial accordance with the Plans and the other
provisions of this Agreement, on or before the Completion Date and free and
clear from all liens, or claims for liens, other than the liens and security
interests created by the Security Documents. Borrower agrees that (a)
construction of the Improvements shall not be commenced unless and until
Borrower has furnished the Plans to Lender and afforded Lender the opportunity
to accept them (which acceptance shall be evidenced, if at all, by the initials
of an authorized representative of Lender thereon), (b) when the Plans have been
furnished to Lender, no changes of a material nature will be made to them by, or
be permitted to be made to them by, Borrower, Guarantor, Architect or any other
person or entity without the prior written approval therefor of all requisite
Governmental Authorities, prior compliance with all requisite Legal Requirements
and prior acceptance by the Lender, (c) in instances where Lender does accept
the Plans (or any change therein), such acceptance shall be deemed to be
strictly limited to an acknowledgement of Lender's consent to the Improvements
being constructed in accordance therewith and shall not, in any way, be deemed
to imply any warranty, representation or approval by Lender that such
Improvements, if so constructed, will be structurally sound, will comply with
all Legal Requirements, will be fit for any particular purpose or will have a
market value of any particular magnitude, and (d) within twenty (20) days after
construction of the Improvements has commenced Borrower and General Contractor
shall execute and file an Affidavit of Commencement in accordance with Section
53.124(c) of the Texas Property Code and provide a copy thereof to Lender.
<PAGE>
3.2 Affirmative Covenants. At all times during construction of the Improvements,
Borrower will (a) permit Lender, the Independent Supervising Architect and their
representatives, to enter upon the Land and into the Improvements, to inspect
the same and all materials to be used in the construction of the Improvements
and to examine the Plans, (b) comply strictly with all Legal Requirements, (c)
deliver to Lender, or its representatives, immediately upon demand, counterparts
and/or conditional assignments of any and all Construction Contracts, bills of
sale, statements, conveyances, receipted vouchers or agreements of any nature
under which Borrower claims title to any materials or supplies used or to be
used in the construction of the Improvements, (d) either cause each Construction
Contract to contain a provision specifically subordinating any lien right
against the Mortgaged Property to the liens and security interests created by
the Security Documents or cause the other party thereto to execute any and all
instruments, acceptable in form and substance to Lender, to accomplish the same,
(e) if requested by Lender, furnish to Lender, immediately after the pouring of
each concrete slab, street and curbstone within the Land, the completion of each
foundation of a structure forming part of the Improvements and the completion of
the Improvements, a survey certified to by a licensed engineer acceptable to
Lender showing all of same and that the location thereof is entirely within the
property lines of the Land and does not encroach upon, breach or violate any
building line, easement or similar restriction, (f) use all advances made to it
by Lender for, and only for, payment of the costs itemized in Section 6.2 hereof
and under no circumstances use, directly or indirectly, any portion of such
advances for any other purpose, (g) obtain and maintain (and cause the Architect
and the General Contractor and, if requested by Lender, any other contractors or
subcontractors who perform work on, or furnish materials for, the Improvements
to maintain) in full force and effect, an owner's and contractor's liability
insurance policy or policies (including worker's compensation insurance) and a
hazard insurance policy or policies in builder's all risk form with loss payable
endorsements acceptable to Lender insuring the Improvements and all materials
and supplies purchased with advances hereunder against all risks and losses, all
such insurance policies to be issued by companies, in amounts and on terms
approved by Lender (with such amounts to be reasonably satisfactory to Lender),
(h) upon demand of Lender or the Independent Supervising Architect, furnish
Lender with a current list of original contractors, subcontractors, materialmen,
vendors, artisans and laborers performing work on the Improvements, (i) upon
demand of Lender or the Independent Supervising Architect, correct any
structural defect in the Improvements or any material departure from the Plans
not accepted by Lender, it being understood and agreed that the advance of any
loan proceeds shall not constitute a waiver of Lender's right to require
compliance with this Section 3.2 with respect to any such defects or departures,
and (j) pay when due any and all penalties and other sums payable under the
Leases as a result of any action or nonaction taken by or on behalf of Borrower,
including, without limitation, Borrower's failure to complete the Improvements
by the date or dates specified in the Leases. Within five (5) days after Final
Completion, Borrower and General Contractor shall execute and file an Affidavit
of Completion in accordance with Section 53.106 of the Texas Property Code and
provide a copy thereof to Lender.
<PAGE>
3.3 Negative Covenants. At no time shall Borrower (a) use, maintain, operate or
occupy, or allow the use, maintenance, operation or occupancy of, any part of
the Mortgaged Property for any purpose which violates any Legal Requirement or
in any manner which may be dangerous unless safeguarded as required by law or
which may constitute a public or private nuisance or which may make void,
voidable or cancelable or increase the premium of any insurance then in force
with respect thereto, (b) create or place, permit to be created or placed or,
through any act or failure to act, acquiesce in the creation or placing of, or
allow to remain, any mortgage, lien (statutory, constitutional or contractual),
pledge, security interest, encumbrance or charge or conditional sale or other
title retention agreement on the Mortgaged Property (or any part thereof) other
than those created by or expressly permitted under the Security Documents,
regardless of whether same is expressly subordinate to the liens and security
interests created in the Security Documents, or (c) lease, directly or
indirectly, all or any part of the Mortgaged Property on any basis such that the
rental to be paid by the tenant or lessee thereunder would be based, in whole or
in part, on either (i) the income or profits derived by the business activities
of the tenant or lessee, or (ii) any other formula such that any portion of the
rental would fail to qualify as "rents from real property" within the meaning of
Section 856(b) of the Code, or any similar or successor provision thereof. If
any such mortgage, lien, pledge, security interest, encumbrance or charge is
asserted against the Mortgaged Property (or any part thereof), Borrower shall
promptly, at its own cost and expense, (a) pay the underlying claim in full or
take any other action necessary to cause same to be released or bonded to the
satisfaction of Lender and the Title Company in accordance with the provisions
of Chapter 53 of the Texas Property Code, and (b) within five (5) days from the
date such mortgage, lien, pledge, security interest, encumbrance or charge is
asserted, give Lender notice thereof. The notice shall specify who is asserting
such mortgage, lien, pledge, security interest, encumbrance or charge and shall
detail the origin and nature of the underlying claim giving rise to the asserted
mortgage, lien, pledge, security interest, encumbrance or charge.
3.4 Completion Deposit. If, in the judgment of Lender, it appears at any time or
from time to time that the unadvanced loan proceeds will be insufficient to (a)
pay all costs to be incurred in connection with the completion of the
development of the Mortgaged Property and the construction, marketing,
ownership, management, maintenance, operation, sale or leasing of the
Improvements in accordance with this Agreement, (b) pay all sums which may
accrue under the Security Documents prior to repayment of the Indebtedness,
including, without limitation, interest on the Indebtedness, and (c) enable
Borrower to perform and satisfy all of the covenants of Borrower contained in
the Security Documents, Borrower shall immediately deposit, or shall make
arrangements satisfactory to Lender to deposit with Lender, the Completion
Deposit. The Completion Deposit may be retained by Lender in a non-interest
bearing account, need not be segregated from any of Lender's other funds and may
be disbursed in accordance with the provisions of the Security Documents by
Lender before making any further advances on the Note.
ARTICLE 4
INSPECTION
4.1 Inspection. Lender, through its officers, agents or employees, shall have
the right at all reasonable times:
(a) To enter upon the Mortgaged Property and inspect the construction to
determine that it is in conformity with the Plans and all the requirements
hereof; and
<PAGE>
(b) To examine, copy and make extracts of, the books, records, accounting
data and other documents of Borrower that relate in any way to the Mortgaged
Property, including without limiting the generality of the foregoing all
permits, licenses, consents and approvals of all Governmental Authorities having
jurisdiction over Borrower or the Mortgaged Property and all the relevant books
and records of contractors and subcontractors supplying goods and/or services in
connection with the construction of the Improvements. All such books, records
and documents shall be made available to Lender promptly upon written demand
therefor; and, at the request of Lender, Borrower shall furnish Lender with
convenient facilities for the foregoing purpose. All contracts made or amended
by Borrower or its contractors and subcontractors after the date hereof relating
to construction of the Improvements shall require agreement to the foregoing
inspection rights, except where such rights have been waived by Lender in
writing.
4.2 No Duty to Inspect. It is expressly understood and agreed that Lender shall
have no duty to supervise or to inspect the construction of the Improvements or
any books and records, and that any such inspection shall be for the sole
purpose of determining whether or not the Obligations of Borrower are being
properly discharged and of preserving Lender's rights hereunder. If Lender, or
the Independent Supervising Architect acting on behalf of Lender, should inspect
the construction of the Improvements or any books and records, Lender and the
Independent Supervising Architect shall have no liability or obligation to
Borrower or any third party arising out of such inspection. Inspection not
followed by notice of default shall not constitute a waiver of any default then
existing; nor shall it constitute an acknowledgement or representation by Lender
and the Independent Supervising Architect that there has been or will be
compliance with the Plans and all Legal Requirements or that the construction is
free from defective materials or workmanship or a waiver of Lender's right
thereafter to insist that the Improvements be constructed in accordance with the
Plans and Legal Requirements. Lender's failure to inspect the construction of
the Improvements or any part thereof or any books and records shall not
constitute a waiver of any of Lender's rights hereunder. Neither Borrower nor
any third party shall be entitled to rely upon any such inspection or review.
Lender and the Independent Supervising Architect owe no duty of care to Borrower
or any third person to protect against, or inform Borrower or any third person
of the existence of negligent, faulty, inadequate or defective design or
construction of the Improvements.
4.3 Borrower's Responsibilities. Borrower shall be solely responsible for all
aspects of Borrower's business and conduct in connection with the Mortgaged
Property, including, without limitation:
(a) the quality and suitability of the Plans;
(b) supervision of construction of the Improvements;
(c) the qualifications, financial condition and performance of all
architects, engineers, contractors, subcontractors and material
suppliers, consultants, and property managers;
(d) conformance of construction of the Improvements to the Plans, to all
Legal Requirements and to the requirements of this Agreement;
(e) the quality and suitability of all materials and workmanship; and
(f) the accuracy of all requests for the disbursement of loan proceeds and
the proper application of disbursed loan process.
<PAGE>
4.4 Inspections. In furtherance of Lender's rights hereunder, Lender may, at its
option, require an inspection of the Mortgaged Property by the Independent
Supervising Architect (a) prior to each advance, (b) at least once each month
during the course of construction even though no advance is to be made for that
month, (c) upon Substantial Completion of construction of the Improvements, (d)
upon Final Completion of construction of the Improvements and (e) at least
annually thereafter. Furthermore, if Lender determines in connection with any
such inspection that extra services will be required of the Independent
Supervising Architect as a result of noncompliance with the Plans or any Legal
Requirement, as a result of deviations from acceptable construction practices,
or as a result of Borrower's failure to satisfy the requirements of any
Commitment or any other agreement, then Borrower shall pay, in addition to the
fees for such inspections, the cost of all such extra services.
ARTICLE 5
ADDITIONAL SECURITY
5.1 Security Documents. As additional security for payment of the Indebtedness,
Borrower agrees to and shall execute and deliver to Lender the Security
Documents, which shall be in form and content satisfactory to Lender.
5.2 Contracts. As additional security for the payment of the Indebtedness,
Borrower hereby transfers and assigns to Lender all of Borrower's rights, title
and interests, but not its obligations, in, under and to the Construction
Contracts and the Architect's Contract (collectively, the "Contracts") upon the
following terms and conditions:
(a) Borrower represents and warrants that each copy of any of the Contracts
furnished to Lender is a true and complete copy thereof and that Borrower's
interest therein is not subject to any claim, setoff or encumbrance.
(b) Neither this assignment nor any action by Lender shall constitute an
assumption by Lender of any obligations under the Contracts; and Borrower shall
continue to be liable for all obligations of Borrower thereunder, Borrower
hereby agreeing to perform all of its obligations under the Contracts. Borrower
agrees to indemnify and hold Lender harmless against and from any loss, cost,
liability or expense (including, without limitation, attorneys' fees,
acountants' fees, consultants' fees, court costs and interest) incurred by
Lender and resulting from any failure of Borrower to so perform.
(c) Lender shall have the right at any time (but shall have no obligation)
to take, in its name or in the name of Borrower, such action as Lender may at
any time determine to be necessary or advisable to cure any default under the
Contracts or to protect the rights of Borrower or Lender thereunder. Lender
shall incur no liability if any action so taken by it or in its behalf shall
prove to be inadequate or invalid, and Borrower agrees to hold Lender free and
harmless from any loss, cost, liability or expense (including, without
limitation, attorneys' fees, accountants' fees, consultants' fees, court costs
and interest) incurred in connection with any such action.
(d) Borrower hereby irrevocably constitutes and appoints Lender as
Borrower's attorney-in-fact, in Borrower's name or in Lender's name, to enforce
all rights of Borrower under the Contracts; provided, however, that Lender shall
have no obligation to enforce such rights.
(e) Prior to an Event of Default, Borrower shall have the right to exercise
its rights as owner under the Contracts; provided, however, that Borrower shall
not cancel or amend the Contracts or do, or suffer to be done, any act which
would impair the security constituted by this assignment without the prior
written consent of Lender.
<PAGE>
(f) This assignment shall inure to the benefit of Lender, its successors
and assigns, including, without limitation, any purchaser upon foreclosure of
the Mortgaged Property or any grantee under a deed in lieu of foreclosure, any
receiver in possession of the Mortgaged Property and any corporation formed by
or on behalf of Lender which assumes Lender's rights and obligations under this
Agreement.
(g) The Contracts are complete and adequate for the construction of the
Improvements, and there have been no modifications thereof except as described
in such schedule. The Contracts shall not be modified without the prior written
consent of Lender, except for nonstructural changes which do not change the cost
of construction by more than $10,000.00 per change, not to exceed $50,000.00 in
the aggregate.
5.3 Plans. As additional security for the payment of the Indebtedness, Borrower
hereby transfers and assigns to Lender all of Borrower's rights, title and
interest in and to the Plans, and hereby represents and warrants to and agrees
with Lender as follows:
(a) The original counterparts of the Plans furnished to Lender are true
and complete.
(b) The schedule of the Plans delivered to Lender is a complete and
accurate description of the Plans.
(c) The Plans are complete and adequate for the construction of the
Improvements, and there have been no modifications thereof except as described
in such schedule. The Plans shall not be modified without the prior written
consent of Lender, except for nonstructural changes which do not change the cost
of construction by more than $10,000.00 per change, not to exceed $50,000.00 in
the aggregate.
(d) Lender may use the Plans for any purpose relating to the Improvements,
including, without limitation, inspections of construction and the completion of
the Improvements.
(e) Lender's acceptance of this assignment shall not constitute approval of
the Plans by Lender. Lender has no liability or obligation whatsoever in
connection with the Plans and no responsibility for the adequacy thereof or for
the construction of the Improvements contemplated by the Plans.
(f) This assignment shall inure to the benefit of Lender, its successors
and assigns, including, without limitation, any purchaser upon foreclosure of
the Mortgaged Property or any grantee under a deed in lieu of foreclosure, any
receiver in possession of the Mortgaged Property and any corporation formed by
or on behalf of Lender which assumes Lender's rights and obligations under this
Agreement.
ARTICLE 6
LENDER'S COMMITMENT
6.1 Loan. Subject to the terms, provisions and conditions of this Agreement,
Lender will make and Borrower will accept, in installments, a loan in the
aggregate amount of the principal sum of the Note, it being understood that
interest as called for in the Note shall be calculated only on sums actually
advanced and only from the dates of such advances.
<PAGE>
6.2 Advances. (a) Advances shall be made to Borrower on the principal amount of
the Note at the times and otherwise in accordance with the Disbursement Schedule
attached hereto as Exhibit B and made a part hereof for all purposes. Advances
shall be made in amounts no smaller than $100,000.00, and any request for
advance in an amount of less than $100,000.00 shall be held until additional
advances have been requested in an amount sufficient to total at least
$100,000.00. The advances on the Note shall be disbursed, at Lender's option,
(i) by Lender's check or checks (which checks may, at Lender's discretion, be
issued to Borrower or jointly to Borrower and any other person or entity
entitled to receive such sums) drawn upon Lender's disbursement account and
delivered to Borrower, (ii) by depositing the amount of the disbursement to
Borrower's account in a bank approved by Lender, (iii) by direct or joint check
payment to any or all persons entitled to payment for work performed on or
materials delivered to or services performed in connection with the construction
of the Improvements or the loan evidenced by the Note, or (iv) by any other
method the Lender shall from time to time elect. Notwithstanding the
Disbursement Schedule, the advance as to which Borrower shall be entitled at any
one time shall not exceed the cost of the materials, supplies and equipment
purchased for the Improvements and stored on the Land in a manner acceptable to
Lender, plus the cost of all materials, supplies, equipment and labor actually
incorporated into the Improvements, plus any other costs and fees which have
been approved for payment by Lender and which are then due or will become due
within thirty (30) days thereafter minus the sum of all prior advances. Under no
circumstances shall any portion of any advance be used for any purpose other
than the payment of those costs and fees approved by Lender as legitimately
relating to the purchase price for the Land, the cost of constructing the
Improvements and the payment of the Indebtedness. Except as may be provided
otherwise in the Disbursement Schedule, for each advance made to Borrower
hereunder Lender shall retain a sum equal to ten percent (10%) thereof (or a
greater percentage, if permitted or required by any Legal Requirement) so that,
until a period of thirty (30) days after Final Completion of the Improvements
(or such longer period if permitted or required by any Legal Requirement or if,
during such longer period, a lien or claim could lawfully be filed against the
Mortgaged Property by anyone performing work or services, or furnishing
materials or goods, during the construction of the Improvements) Lender shall
have in its possession a fund equal to ten percent (10%) of the total cost of
the Improvements. Notwithstanding anything to the contrary contained in or
inferable from any other provisions hereof or in any other Security Documents,
if the Title Insurance is initially a binder, Lender shall have the right, at
any time, to cause the binder to be converted into a policy at Borrower's cost
and to use any undisbursed proceeds on the Note, any portion of the Completion
Deposit and, to the extent not prohibited by law, any other sum then in Lender's
possession as payment for the cost thereof. So long as Borrower is not in
default under any of the Security Documents, a developer's fee in the amount of
$268,000.00 payable to Borrower in connection with the construction of the
Improvements may be included in Borrower's requests for advances at the
following times and in the following amounts:
(i) Closing . . . . . . . . . . . . . . . . . . . . . $88,440.00
(ii) Spread equally over
the seven (7) month
construction period . . . . . . . . . . . . . . . $88,440.00
(iii) Within thirty (30)
days after Final
Completion. . . . . . . . . . . . . . . . . . . . $91,120.00
<PAGE>
(b) Upon Borrower's written request made to Lender (a "Disbursement
Request") and compliance by Borrower with all of the conditions set forth
herein, Lender will disburse on a monthly basis construction funds to Borrower
in accordance with the progress of the construction and the value of the
Improvements as determined by Lender and the Independent Supervising Architect,
with funding amounts as set forth herein. Each Disbursement Request must be
submitted to Lender not later than the 5th day of each month, or, if such 5th
day is a Saturday, Sunday or legal holiday, on the next business day, or Lender
will be unable to issue its monthly loan disbursement on the 20th day of the
same month, or if such 20th day is a Saturday, Sunday or legal holiday, on the
next business day. Each such monthly loan disbursement shall be made in the form
of two (2) checks, one check payable to Borrower for "soft" costs, and one check
payable to both Borrower and the General Contractor for "hard" costs. Lender
shall withhold from all loan disbursements amounts for interest payable to
Lender, real property taxes and insurance, and shall pay such amounts on
Borrower's behalf. Following the occurrence of an Event of Default, Lender may,
in its sole discretion, and at Borrower's sole cost and expense, disburse funds
through the Title Company or directly to the General Contractor, any
subcontractor, materialmen or laborers. The making of any such disbursement
shall not be deemed a waiver of Lender's rights hereunder with respect to any
further disbursement, nor shall it be construed to be a waiver of any of the
conditions precedent to Lender's obligations to make further advances.
6.3 First Advance. Lender shall not be obligated to make the first advance to
Borrower unless and until:
(a) Lender has received true, legible and correct copies of the following:
(i) the Plans and the final draft of the Contracts in the forms
approved by Lender;
(ii) a certificate from the Architect and, if Lender elects, the
Independent Supervising Architect stating that the Plans have been approved
by him or them and that the Construction Contracts are acceptable to him or
them and satisfactorily provide for the construction of the Improvements;
(iii) all authorizations and permits which are then procurable and
required by any Legal Requirement for the construction and proposed use of
the Improvements;
(iv) an original current survey of the Land containing the
certification of the surveyor in form and substance satisfactory to Lender
and showing the perimeter of the Land by courses and distances, all
easements and rights-of-way, the boundary lines of the streets abutting the
Land and the width thereof, any encroachments and the extent thereof in
feet and inches, the relation of the proposed Improvements by distances to
the perimeter of the Land and the proposed building lines, all acceptable
to the Title Company to modify the "area, boundaries and encroachments"
exception of the Title Insurance to the maximum extent permitted by law;
(v) the policies of insurance required by the Security Documents
accompanied by evidence of the payment of the premium therefor;
(vi) duplicate original copies of all Leases, in form and content
satisfactory to Lender, together with the Master Leases and the Letter of
Credit;
(vii) evidence satisfactory to Lender that the Leases have been
amended to ensure that there will be no adverse effect, including, without
limitation, the termination or cancellation of any Leases, due to missed
deadlines during the period of time necessary to construct the
Improvements;
<PAGE>
(viii) a soils investigation report from a soils engineer
satisfactory to Lender;
(ix) evidence satisfactory to Lender that the Land is not located
within the 100 year flood plain or identified as a special flood hazard
area as defined by any Legal Requirement;
(x) a complete project budget in form and substance satisfactory to
Lender;
(xi) an ad valorem tax service contract covering the Mortgaged
Property acceptable to Lender;
(xii) an opinion of counsel for Borrower satisfactory to Lender;
(xiii) a copy of the form of tenant lease satisfactory to Lender to
be used by Borrower in connection with the Leases;
(xiv) the Environmental Report; and
(xv) any other documents and information as Lender may reasonably
require;
(b) The Agreement of Purchase and Sale and the Security Documents have been
duly authorized, executed and recorded or filed in accordance with applicable
Legal Requirements and original counterparts thereof delivered to Lender, all
prior to the commencement of construction of the Improvements, the placing of
any materials or supplies on the Land, the execution or recording of any
Construction Contracts (written or oral) for any of the same or the performance
of any other act which could give rise to a lien claim equal or superior to the
liens and security interests created by the Security Documents;
(c) The Title Company has issued the Title Insurance;
(d) Borrower, Architect and, if Lender requests, the Independent
Supervising Architect have executed, or caused to be executed, and delivered to
Lender the Disbursement Request Form attached hereto a Exhibit C and made a part
hereof for all purposes or in such other form acceptable to Lender certifying in
acceptable detail the expenditures made or expenses incurred by Borrower of the
type described in Section 6.2 hereof, with such supporting data as Lender may
require, and that the amount requested represents sums actually spent or
indebtedness actually incurred; and
(e) Borrower pays to Lender, or any other person or party entitled thereto,
all fees and costs then due and payable in connection with this Agreement and
the subject hereof.
6.4 Subsequent Advances. Lender shall not be obligated to make any subsequent
advance to Borrower unless and until:
(a) Borrower shall have delivered to Lender a duplicate original of the
Architect's Contract and the Construction Contracts in the forms approved by
Lender.
(b) Borrower, Architect and, if Lender requests, the Independent
Supervising Architect shall have executed, or caused to be executed, and
delivered to Lender a Disbursement Request Form a described in Section 6.3(d)
hereof and the data referred to therein.
<PAGE>
(c) Lender shall have received (i) an endorsement (if permitted or required
by virtue of the form thereof) to the Title Insurance increasing the coverage
thereof to the full amount of the sum advanced and reflecting no changes in the
status of title or the Title Insurance since the previous advance, or, if such
endorsement cannot be obtained, an abstractor's certificate or other evidence
satisfactory to Lender from the Title Company reflecting that there have been no
such changes in the status of title or the Title Insurance, (ii) certification
from the Architect and, if Lender elects, the Independent Supervising Architect
that, in their opinion, the construction of the Improvements theretofore
performed has been in strict accordance with the Plans, (iii) the survey called
for in Section 3.2(vi) hereof and as may be required by the Title Company to
issue the endorsement or other evidence referred to in Section 6.4(c)(i) hereof,
(iv) at the request of Lender, lien waivers or releases (in recordable form) or
bonds satisfactory to Lender and the Title Company issued in accordance with the
provisions of Chapter 53 of the Texas Property Code from all contractors,
subcontractors, laborers and materialmen employed or furnishing materials in
connection with the construction of the Improvements, (v) all amendments,
modifications and revisions satisfactory to Lender in the form of tenant lease,
(vi) at the request of Lender, a written certification signed by Borrower as to
all Leases and the names of the tenants and rents payable thereunder, together
with copies of all such Leases, and (vii) such other certifications or evidence
of cost and completion as Lender may request.
(d) Borrower shall have satisfied, if then applicable, the provisions of
Section 3.4 hereof.
6.5 Any Advance. Notwithstanding anything to the contrary contained in or
inferable from any of the above, Lender shall not be required to make any
advance hereunder if, at the time of the requested advance, any of the following
exists:
(a) Any Event of Default exists hereunder or under any other Security
Document or under the Agreement of Purchase and Sale.
(b) The requested advance, plus the sum of the previous advances (including
retained amounts deemed to have been advanced pursuant to Section 6.2 hereof) or
other sums disbursed by Lender under the Security Documents, exceed the face
amount of the Note.
(c) In the judgment of the Lender, the Improvements will not be completed
in substantial accordance with the Plans and the other provisions of this
Agreement on or before the Completion Date, regardless of the cause of such
failure so to complete.
(d) In the judgment of Lender, the sum of the unadvanced loan proceeds plus
other sums being held by Lender in escrow for Borrower are insufficient to
complete the Improvements in substantial accordance with the Plans and this
Agreement, unless and until the provisions of Section 3.4 hereof are satisfied.
(e) The Mortgaged Property (or any part thereof) is demolished or
substantially destroyed or condemnation or similar type proceedings are
commenced with reference thereto, and either such damage cannot be repaired
within sixty (60) calendar days or any continuing construction is being
performed using insurance or condemnation proceeds.
(f) Any change in the status of title to the Land or the Improvements has
occurred subsequent to the date hereof without Lender's prior written consent.
(g) Borrower is unable to satisfy all of the conditions set forth in
Sections 6.2, 6.3 or 6.4 hereof.
(h) Any event has occurred which has given or could give rise to a lien
claim of equal or superior rank to the liens and security interests intended to
be created by the Security Documents.
(i) An order or decree in any court of competent jurisdiction exists
enjoining the construction of the Improvements or enjoining or prohibiting
Borrower or Lender or either of them from performing their respective
obligations under this Agreement.
<PAGE>
(j) Any material deviation exists in the construction of the Improvements
from the Plans without the prior written approval of Lender; or it appears to
Lender or the Independent Supervising Architect that there are material defects
in the workmanship or materials.
(k) Any encroachment exists which has occurred without the approval of
Lender.
(l) Construction has ceased prior to Final Completion of the Improvements
for a continuous period of ten (10) days or more for causes other than those
beyond the control of Borrower or consented to in writing by Lender.
6.6 Third Party Beneficiaries. All conditions precedent to Lender's obligation
to make advances hereunder are imposed solely and exclusively for Lender's
benefit. No person or entity other than Lender shall have any standing to
require satisfaction of such conditions or be entitled to assume that Lender
will refuse to make advances absent strict compliance therewith, and any or all
of such conditions may be freely waived (in whole or in part) by Lender at any
time or times.
6.7 Non-advanced Tenant Buildout Funds. If, upon the Final Completion of the
Improvements, Borrower has not leased and built out any portion of the Mortgaged
Property because the same has not been leased, Lender shall place in escrow for
Borrower each month an amount equal to the interest at a rate of five percent
(5%) per annum on the portion of the Note then remaining unadvanced with respect
to tenant buildout of such unleased space. Upon completion of any tenant
buildout work, Lender shall deliver to Borrower the portion of the funds
escrowed hereunder attributable to the funds advanced in connection with such
buildout.
ARTICLE 7
EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default hereunder:
7.1 Conditions to Advances. If, at any time, Borrower is unable to satisfy any
condition or cure any circumstance specified in Article 6 hereof, including,
without limitation, the occurrence of any circumstance described in Section 6.5
hereof, the satisfaction or curing of which being precedent to its right to
receive an advance hereunder, and such inability continues for a period in
excess of thirty (30) days.
7.2 Voluntary Bankruptcy. If Borrower or any Guarantor or, if Borrower or any
Guarantor is a partnership, joint venture, trust or other type of business
association, if any of the parties comprising Borrower or any Guarantor, shall
(a) voluntarily be adjudicated a bankrupt or insolvent, (b) file any petition or
commence any case or proceeding under any provision or chapter of the Federal
Bankruptcy Code or any other federal or state law relating to its insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, (c) make a general
assignment for the bent of its creditors, (d) have an order for relief entered
under the Federal Bankruptcy Code with respect to it, (e) convene a meeting of
its creditors, or any class thereof, for the purpose of effecting a moratorium
upon or extension or composition of its debts, (f) fail to pay its debts as they
mature, (g) admit in writing that it is generally not able to pay its debts as
they mature or generally not pay its debts as they mature, or (h) become
insolvent.
<PAGE>
7.3 Involuntary Bankruptcy. If (a) a petition is filed or any case or proceeding
described in Section 7.2 hereof is commenced against Borrower or any Guarantor
or, if Borrower or any Guarantor is a partnership, joint venture, trust or other
type of business association, against any of the parties comprising Borrower or
any Guarantor, or against the assets of any such persons or entities, unless
such petition and the case or proceeding initiated thereby is dismissed within
thirty (30) days from the date of the filing, (b) an answer is filed by Borrower
or any Guarantor or, if Borrower or any Guarantor is a partnership, joint
venture, trust or other type of business association, by any of the parties
comprising Borrower or any Guarantor, admitting the allegations of any such
petition, or (c) a court of competent jurisdiction enters an order, judgment or
decree appointing, without the consent of Borrower or any Guarantor, or, if
Borrower or any Guarantor is a partnership, joint venture, trust or other type
of business association, of any of the parties comprising Borrower or any
Guarantor, a custodian, trustee, agent or receiver for it, or for all or any
part of its property, or authorizing the taking possession by a custodian,
trustee, agent or receiver of it, or all or any part of its property unless such
appointment is vacated or dismissed or such possession is terminated within
thirty (30) days from the date of such appointment or commencement of such
possession, but not later than five (5) days before the proposed sale of any
assets of Borrower or any Guarantor, or, if Borrower or any Guarantor is a
partnership, joint venture, trust or other business association, of any of the
parties comprising Borrower or any Guarantor, by such custodian, trustee, agent
or receiver, other than in the ordinary course of the business of Borrower or
any Guarantor.
7.4 Payment of Indebtedness. If Borrower shall fail, refuse or neglect to pay,
in full, any installment or portion of the Indebtedness as and when the same
shall become due and payable, whether at the due date thereof stipulated in the
Security Documents, or at a date fixed for prepayment or otherwise, and such
failure, refusal or neglect continues for a period of ten (10) days thereafter;
provided, however, that if such installment or portion of the Indebtedness
becomes due and payable as a result of Lender's accelerating the maturity of the
Indebtedness in accordance with the Security Documents, the ten (10) day grace
period for payment set forth in this Section 7.4 shall not apply to the
accelerated due date.
7.5 Performance of Obligations. If Borrower shall fail, refuse or neglect to
perform and discharge fully and timely any of the Obligations as and when called
for and such failure, refusal or neglect shall either be incurable or, if
curable, shall remain uncured for a period of fifteen (15) days after the
earlier to occur of (a) the date Lender gives written notice thereof to Borrower
or (b) the date upon which Borrower had actual knowledge of the Obligation to be
performed; provided, however, that if such default is curable but requires work
to be performed, acts to be done or conditions to be remedied which, by their
nature, cannot be performed, done or remedied, as the case may be, within such
fifteen (15) day period, no Event of Default shall be deemed to have occurred if
Borrower commences same within such fifteen (15) day period and thereafter
diligently and continuously prosecutes the same to Final Completion within
forty-five (45) days after such notice or date of actual knowledge.
7.6 False Representations. If any representation, statement or warranty made by
Borrower, Guarantor or others in, under or pursuant to the Commitment, any of
the Security Documents or any affidavit or other instrument executed in
connection with the Security Documents shall be false or misleading in any
material respect as of the date hereof or shall become so at any time prior to
the repayment in full of the Indebtedness.
<PAGE>
7.7 Dissolution and Change or Encumbrance of Ownership. If Borrower or any
Guarantor or, if Borrower or any Guarantor is a partnership, joint venture,
trust or other type of business association, if any of the parties comprising
Borrower or any Guarantor, shall dissolve, terminate or liquidate, or merge with
or be consolidated into any other entity, or shall hypothecate, pledge, mortgage
or otherwise encumber all or any part of the beneficial ownership interest in
Borrower or any Guarantor (if Borrower or any Guarantor is a corporation,
partnership, joint venture, trust or other type of business association or legal
entity) or shall attempt to do any of the same.
7.8 No Further Encumbrances. If Borrower, without the prior written consent of
Lender, creates, places or permits to be created or placed, or through any act
or failure to act, acquiesces in the placing of, or allows to remain, any
mortgage, pledge, lien (statutory, constitutional or contractual), security
interest, encumbrance or charge, or conditional sale or other title retention
agreement, regardless of whether same is expressly subordinate to the liens of
the Security Documents, with respect to the Mortgaged Property, other than the
Permitted Encumbrances described in the Deed of Trust.
7.9 Disposition of Mortgaged Property and Beneficial Interest in Borrower. If
Borrower sells, leases, exchanges, assigns, conveys, transfers or otherwise
disposes of (herein collectively called "Disposition") all or any part of the
Mortgaged Property (or any interest therein), or all or any part of the
beneficial ownership interest in Borrower (if Borrower is a corporation,
partnership, joint venture, trust or other type of business association or legal
entity), without the prior written consent of Lender. It is expressly agreed
that in connection with determining whether to grant or withhold such consent,
Lender may (but is not obligated to), among other things, (a) consider the
creditworthiness of the party to whom such Disposition will be made and its
management ability with respect to the Mortgaged Property, (b) consider whether
or not the security for repayment of the Indebtedness and the performance of the
Obligations, or Lender's ability to enforce its rights, remedies and recourses
with respect to such security, will be impaired in any way by the proposed
Disposition, (c) require as a condition to granting such consent, an increase in
the rate of interest payable under the Note or any other change in the terms and
provisions of the Note and other Security Documents, (d) require that Lender be
reimbursed for all costs and expenses incurred by Lender in investigating the
creditworthiness and management ability of the party to whom such Disposition
will be made and in determining whether Lender's security will be impaired by
the proposed Disposition, (e) require the payment to Lender of a transfer fee to
cover the cost of documenting the Disposition in its records, (f) require the
payment of its reasonable attorneys' fees in connection with such Disposition,
(g) require the express assumption of payment of the Indebtedness and
performance of the Obligations by the party to whom such Disposition will be
made (with or without the release of Borrower from liability for such
Indebtedness and Obligations), (h) require the execution of assumption
agreements, modification agreements, supplemental security documents and
financing statements satisfactory in form and substance to Lender, (i) require
endorsements (to the extent available under applicable law) to any existing
Title Insurance insuring Lender's liens and security interests covering the
Mortgaged Property, and (j) require additional security for the payment of the
Indebtedness and performance of the Obligations.
7.10 Destruction of Improvements. If the Mortgaged Property is demolished,
destroyed or substantially damaged so that (in Lender's judgment) it cannot be
restored or rebuilt with available funds (including any insurance proceeds or
other cash resources available to Borrower) to the condition existing
immediately prior to such demolition, destruction or damage within sixty (60)
calendar days.
<PAGE>
7.11 Change in Financial Condition. If Lender reasonably determines that the
likelihood of payment of the Indebtedness or performance of the Obligations
secured by the Deed of Trust is threatened by reason of a material adverse
change in the financial condition or credit standing of Borrower or any
Guarantor or, if Borrower or any Guarantor is a partnership, joint venture,
trust or other type of business association, of any of the parties comprising
Borrower or any Guarantor, or if the estate held by Borrower in the Land is a
leasehold estate, of the ground lessor.
7.12 Foreclosure of Other Liens. If the holder of any lien or security interest
on the Mortgaged Property (without hereby implying Lender's consent to the
existence, placing, creating or permitting of any such lien or security
interest) institutes foreclosure or other proceedings for the enforcement of its
remedies thereunder.
7.13 Agreement of Purchase and Sale. If Borrower defaults under the Agreement
of Purchase and Sale.
ARTICLE 8
REMEDIES
8.1 Rights, Remedies and Recourses. Upon the happening of any Event of Default,
Lender shall have, in addition to any and all other rights, remedies and
recourses available to it under any of the Security Documents or otherwise
available at law or in equity, including, without limitation, the right to
declare immediately due and payable the unpaid advanced principal and unpaid
accrued interest on the Note and to foreclose any and all liens and security
interests securing the repayment of same, the right (a) to take exclusive
possession of the Mortgaged Property, (b) to use any funds of Borrower,
including, without limitation, the Completion Deposit (if any) and any sums
which may remain unadvanced hereunder, to complete the Improvements, (c) to make
such changes in and revisions to the Plans a Lender may deem desirable, (d) to
prosecute and defend all actions or proceedings relating to the construction of
the Improvements, (e) to pay, settle or compromise all existing bills and claims
which are or may be liens against the Mortgaged Property, or may be necessary or
desirable for the completion of the Improvements or the clearance of title, (f)
to execute in Borrower's name all applications, certificates and other
instruments which may be required by any Construction Contracts, (g) to do any
and every act with respect to the construction of the Improvements which
Borrower may do in its own behalf, and (h) to employ such contractors,
subcontractors, agents, attorneys, architects, accountants, watchmen and
inspectors as Lender may deem desirable to accomplish any of the above purposes.
For these purposes, Borrower hereby constitutes and appoints Lender its true and
lawful attorney-in-fact with full power of substitution to take any and all of
the above described action, which power of attorney shall be deemed to be
coupled with an interest and shall be irrevocable. All sums expended by Lender
for any of the above purposes shall be deemed to be advances hereunder and shall
be secured by the Security Documents.
8.2 Cessation of Lender's Obligations. Upon the happening of any Event of
Default hereunder or under any other Security Document, all obligations (if any)
of Lender hereunder, including, without limitation, any obligation to advance
funds hereunder, shall immediately cease and terminate.
8.3 Acceleration. Notwithstanding anything to the contrary herein contained or
inferable from any provision of this Agreement, upon the happening of an Event
of Default as set forth in Sections 7.2, 7.3 or 7.12 hereof, the unpaid
principal and unpaid accrued interest on the Note shall immediately become due
and payable in full, without the necessity of any further action on the part of
Lender, and Borrower expressly waives any requirement of notice of intent to
accelerate, or of notice of such acceleration of, the maturity of the
Indebtedness.
<PAGE>
8.4 Lender's Default Under Purchase Agreement. Borrower and Lender have entered
into a Purchase Agreement dated of even date herewith (the "Purchase
Agreement"), pursuant to which Lender has agreed to purchase the Mortgaged
Property from Borrower following Final Completion. In the event that Lender
refuses to consumate the purchase of the Mortgaged Property and Borrower has
achieved Final Completion of the Improvements and is not otherwise in default
hereunder or under the Purchase Agreement the Indebtedness shall not come due
until March 20, 1996.
ARTICLE 9
GENERAL TERMS AND PROVISIONS
9.1 Performance at Borrower's Expense. Subject to the provisions of Section 9.5
hereof, Borrower shall (a) pay all legal fees incurred by Lender in connection
with the preparation of this Agreement and any and all other Security Documents
contemplated hereby (including any amendments hereto or thereto or consents,
releases or waivers hereunder or thereunder), (b) pay all out-of-pocket expenses
of Lender in connection with the administration of this Agreement and the other
Security Documents, (c) reimburse Lender, promptly upon demand, for all amounts
expended, advanced or incurred by Lender to satisfy any obligation of Borrower
under this Agreement or any other Security Documents, which amounts shall
include all court costs, attorneys' fees (including, without limitation, for
trial, appeal or other proceedings), fees of auditors and accountants, and
investigation expenses reasonably incurred by Lender in connection with any such
matter, and (d) pay any and all other costs and expenses required to satisfy any
provision of this Agreement, including, without limitation, documentary taxes
and recording, brokerage, attorneys', surveyors', accountants', consultants',
engineers', architects' and inspectors' fees (except to the extent the same is
Lender's responsibility pursuant to this Agreement) and Title Insurance
premiums. Except to the extent that certain of these costs and expenses are
included within the definition of "Indebtedness", the payment by Borrower of any
of these costs and expenses shall not be credited, in any way or to any extent,
against any portion of the Indebtedness.
9.2 Approval of Lender and Further Assurances. All instruments and policies of
insurance to be executed and/or delivered to Lender, and all proceedings to be
taken in connection with this Agreement and the loan provided for herein, and
all persons or parties responsible in any way for the construction of the
Improvements or any obligation to be performed hereunder or under the other
Security Documents, shall be subject to the acceptance of Lender as to form,
substance, coverage and identity. Immediately upon request of Lender, Borrower
will execute, acknowledge and deliver to Lender such further instruments and do
such further acts a Lender may deem necessary to carry out more effectively the
purpose of this Agreement or to subject to the liens and security interests of
the Security Documents any property intended by the terms thereof to be covered
thereby, including, without limitation, any renewals, additions, substitutions,
replacements, betterments or appurtenances to the Mortgaged Property.
9.3 No Waiver. Any failure by Lender to insist, or any election by Lender not to
insist, upon Borrower's or any Guarantor's strict performance of any of the
terms, provisions or conditions of the Security Documents shall not be deemed to
be a waiver of same or of any other term, provision or condition thereof; and
Lender shall have the right at any time thereafter to insist upon strict
performance by Borrower of any and all of same. In specific, no advance by
Lender of any loan proceeds hereunder absent Borrower's strict compliance with
Article 6 hereof shall in any way preclude Lender from thereafter declaring such
failure to comply to be an Event of Default hereunder.
9.4 Modification. This Agreement shall not be amended, waived, discharged or
terminated orally but only by an instrument executed by the party against which
enforcement of the amendment, waiver, discharge or termination is sought.
<PAGE>
9.5 Applicable Law. This Agreement has been executed under, and shall be
construed and enforced in accordance with, the laws of the State of Texas from
time to time in effect except to the extent preempted by United States federal
law. This Agreement and all of the Security Documents are intended to be
performed in accordance with, and only to the extent permitted by, all
applicable Legal Requirements. If the Note recites that the real property
subject to the Security Documents is "residential real property" and the
Indebtedness is secured by a first lien on residential real property within the
meaning of Part A, Title V of the Depository Institutions Deregulation and
Monetary Control Act of 1980 (the "Act"), as amended, and the regulations
promulgated thereunder, then, the following provisions of this Section 9.5 shall
be inapplicable. However, if, for any reason, the provisions of Part A, Title V
of the Act shall be found not to exempt any and all interest and other charges
payable in connection with the Indebtedness from any limitation otherwise
applicable, then the following provisions shall apply. It is expressly
stipulated and agreed to be the intent of Borrower and Lender at all times to
comply with the applicable Texas law governing the maximum rate or amount of
interest payable on the Indebtedness (or applicable United States federal law to
the extent that it permits Lender to contract for, charge, take, reserve or
receive a greater amount of interest than under Texas law). If the applicable
law is ever judicially interpreted so as to render usurious any amount called
for under the Security Documents or contracted for, charged, taken, reserved or
received with respect to the Indebtedness, or if the acceleration of the
maturity of the Indebtedness or if any prepayment by Borrower results in
Borrower having paid any interest in excess of that permitted by applicable law,
then it is Borrower's and Lender's express intent that all excess amounts
theretofore collected by Lender be credited on the principal balance of the Note
(or, if the Note has been or would thereby be paid in full, refunded to
Borrower), and the provisions of Security Documents immediately be deemed
reformed and the amounts thereafter collectible thereunder reduced, without the
necessity of the execution of any new documents, so as to comply with the
applicable law, but so a to permit the recovery of the fullest amount otherwise
called for hereunder and thereunder. All sums paid or agreed to be paid to
Lender for the use, forbearance or detention of the Indebtedness shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Indebtedness until payment in full so that the
rate or amount of interest on account of such Indebtedness does not exceed the
usury ceiling from time to time in effect and applicable to the Indebtedness for
so long as the Indebtedness is outstanding. To the extent that Lender is relying
on Article 5069-1.04, as amended, of the Revised Civil Statutes of Texas to
determine the maximum rate (the "Maximum Rate") payable on the Indebtedness,
Lender will utilize the indicated (weekly) rate ceiling from time to time in
effect as provided in Article 5069-1.04, as amended. To the extent United States
federal law permits Lender to contract for, charge or receive a greater amount
of interest, Lender will rely on United States federal law instead of Article
5069-1.04, as amended, for the purpose of determining the Maximum Rate.
Additionally, to the extent permitted by applicable law now or hereafter in
effect, Lender may, at its option and from time to time, implement any other
method of computing the Maximum Rate under such Article 5069-1.04, a amended, or
under other applicable law by giving notice, if required, to Borrower as
provided by applicable law now or hereafter in effect. In no event shall the
provisions of Article 5069, ch. 15 of the Revised Civil Statutes of Texas (which
regulates certain revolving credit loan accounts and revolving triparty
accounts) apply to the loan evidenced hereby. Notwithstanding anything to the
contrary contained herein or in any of the other Security Documents, it is not
Lender's intention to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.
9.6 Severability. If any provision hereof or of any of the other Security
Documents or the application thereof to any person or circumstance shall, for
any reason and to any extent, be invalid or unenforceable, neither the
application of such provision to any other person or circumstance nor the
remainder of the instrument in which such provision is contained shall be
affected thereby, but rather shall be enforced to the greatest extent permitted
by law.
<PAGE>
9.7 Rights. Remedies and Recourses Cumulative. All rights, remedies and
recourses afforded Lender in the Security Documents or otherwise available at
law or in equity, including specifically, but without limitation, those granted
by the Uniform Commercial Code in effect in the State of Texas (a) shall be
deemed cumulative and concurrent, (b) may be pursued separately, successively or
concurrently against Borrower, any Guarantor or anyone else obligated under any
or all of the Security Documents, or against the Mortgaged Property, or against
any one or more of them, at the sole discretion of Lender, (c) may be exercised
as often as the occasion therefor shall arise, it being understood by Borrower
that the exercise, failure to exercise or election not to exercise any of the
same shall in no event be construed as a waiver of same or of any other right,
remedy or recourse available to Lender, and (d) are intended to be, and shall
be, nonexclusive.
9.8 Successors and Assigns. Subject to the provisions of Section 7.9 hereof,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors, legal representatives and
assigns.
9.9 Notices. All notices or other communications required or permitted to be
given pursuant to the provisions of this Agreement shall be in writing and shall
be considered a properly given if mailed by first class United States mail,
postage prepaid, registered or certified with return receipt requested, or by
delivering same in person to the intended addressee, or by prepaid telegram,
telex or telecopy. Notice so mailed shall be effective upon its deposit in the
custody of the U.S. Postal Service. Notice given in any other manner shall be
effective only if and when received by the addressee. For purposes of notice,
the addresses of the parties shall be as follows:
(a) if to Lender:
Universal Health Realty Income Trust
367 South Gulph Road
King of Prussia, Pennsylvania 19406
Attention: Cheryl K. Ramagano
with a copy to:
Universal Health Realty Income Trust
3525 Piedmont Road, N.E.
7 Piedmont Center, Suite 202
Atlanta, Georgia 30305
Attention: Timothy J. Fowler
and with a copy to:
Jonathan K. Newsome
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
(b) if to Borrower:
Turner-Adreac Development Corporation
407 Julie Rivers, Suite 102
Sugar Land, Texas 77478
Attention: Michael Van
with a copy to:
Dwight Donaldson
820 Gessner, Suite 1340
Houston, Texas 77024-4259
<PAGE>
Either party shall have the right to change its address for notice hereunder to
any other location within the continental United States by the giving of thirty
(30) days notice to the other party in the manner set forth herein.
9.10 Participations. Lender may, at any time, sell, transfer, assign or grant
participations in any loan or in any loan documents that Borrower or the
partners or joint venturers of Borrower have entered into, executed, or granted
in favor of Lender; and Lender may forward to each participant and prospective
participant all documents and information relating to any such loan, whether
furnished by Borrower or otherwise, a Lender determines necessary or desirable.
9.11 Lender's Right to Perform the Obligations. If Borrower shall fail, refuse
or neglect to make any payment or perform any act required by the Security
Documents within the time periods required thereby, then Lender at any time
thereafter, without notice to or demand upon Borrower and without waiving or
releasing any other right, remedy or recourse Lender may have because of same,
may make such payment or perform such act for the account of and at the expense
of Borrower, and shall have the right to enter the Land and Improvements for
such purpose and to take all action with respect to the Mortgaged Property a it
may deem desirable. If Lender shall elect to pay any statement, invoice or tax
bill, Lender may do so in reliance on any bill, statement or assessment procured
from the appropriate Governmental Authority or company without inquiring into
the accuracy or validity thereof. Similarly, in making any payments to protect
the security intended to be created by the Security Documents, Lender shall not
be bound to inquire into the validity of any apparent or threatened adverse
title, lien, encumbrance, claim or charge before making an advance for the
purpose of preventing or removing the same. Borrower shall indemnify Lender for
all losses, expenses, damages, claims and causes of action, including reasonable
attorneys' fees, incurred or accruing by reason of any acts performed by Lender
pursuant to the provisions of this Section 9.11 or by reason of any other
provision in the Security Documents. All sums paid by Lender pursuant to this
Section 9.11, and all sums expended by Lender to which it shall be entitled to
be indemnified, together with interest thereon at the Default Rate (as such term
is defined in the Note) from the date of such payment or expenditure until paid,
shall constitute advances on and additions to the Indebtedness, shall be secured
by the Security Documents and shall be paid by Borrower to Lender upon demand.
This indemnification shall survive the payment of all amounts payable pursuant
to and secured by, the Security Documents. Payment by Lender shall not be a
condition precedent to the obligations of Borrower under this indemnity.
9.12 Headings. The Article, Paragraph and Subparagraph entitlements hereof are
inserted for convenience of reference only and shall in no way alter, modify or
define, or be used in construing, the text of such Articles, Paragraphs or
Subparagraphs.
9.13 Supplement to Deed of Trust. The provisions of this Agreement are not
intended to supersede the provisions of the Deed of Trust but shall be construed
as supplemental thereto. In the event of any inconsistency between the
provisions hereof and the Deed of Trust, this Agreement shall be controlling.
This Agreement shall remain in effect until the Indebtedness has been paid in
full.
9.14 Limitation of Liability. This Agreement is made on behalf of Lender by a
Trustee of Lender, not individually, but solely in his, her or its capacity in
such office as authorized by the Trustees of Lender pursuant to Lender's
Declaration of Trust, and the obligations set forth in this Agreement are not
binding upon, nor shall resort be had to, the private property of any of the
Trustees, shareholders, officers, employees or agents of Lender personally,
shall bind only Lender's property. The provision contained in the foregoing
sentence is not intended to, and shall not, limit any right that Borrower might
otherwise have to obtain injunctive relief against Lender or Lender's successors
in interest, or any action not involving the personal liability of the Trustees,
shareholders, officers, employees or agents, original or successor, of Lender.
9.15 No Other Agreements. THIS AGREEMENT, TOGETHER WITH THE OTHER
SECURITY DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE>
EXECUTED as of the date first above written.
LENDER:
UNIVERSAL HEALTH REALTY INCOME
TRUST, a Maryland Real Estate Investment Trust
By: /s/ Cheryl K. Ramagano
---------------------------
Name: Cheryl K. Ramagano
Title: Vice President
BORROWER:
TURNER ADREAC, L.C., a Texas limited liability
company, d/b/a Turner Adreac
Development Company
By: /s/ Charles H. Turner
----------------------------
Name: Charles H. Turner
Title: President
<PAGE>
THE STATE OF PENNSYLVANIA Section
Section
COUNTY OF MONTGOMERY Section
This instrument was acknowledged before me on the 3rd day of January, 1995,
by Cheryl K. Ramagano, Vice President of UNIVERSAL HEALTH REALTY INCOME TRUST,
a Maryland Real Estate Investment Trust, on behalf of said trust.
(SEAL)
/s/ Joan D. Staudenmayer
------------------------------
Notary Public in and for
the State of Pennsylvania
/s/ Joan D. Staudenmayer
------------------------------
(Printed Name of Notary)
My commission expires: March 1, 1997
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on the 19th day of December,
1994, by Charles H. Turner, President of TURNER ADREAC, L.C., a Texas limited
liability company, d/b/a Turner Adreac Development Company, on behalf of
said company.
(SEAL)
/s/ Carolyn Torres
-------------------------
Notary Public in and for
the State of Texas
/s/ Carolyn Torres
-------------------------
(Printed Name of Notary)
My commission expires: November 18, 1995
<PAGE>
Exhibit A
Tract I
Being a tract or parcel of land containing 1.699 acres (73,987 sq. ft.), more or
less, situated in the John W. Asbury Survey, Abstract 91 in Harris County,
Texas, being out of Restricted Reserve "A", Block I of Kingwood Town Center,
Section Two as recorded under Film Code 357060 of the Harris County Map Records
and being all of the same land described in the deed to Turner Adreac, L. C. as
recorded under Harris County Clerk's File Number P635826, said 1.699 acres being
more particularly described by metes and bounds as follows:
BEGINNING at a 5/8-inch iron rod found for the southerly cutback corner at the
intersection of the southwesterly right-of-way line of Lake Houston Parkway
(width varies) with the northwesterly right-of-way line of Bens Town Drive (60
feet wide),
THENCE South 55o30'50" West along said northwesterly right-of-way line of Bens
Town Drive, a distance of 177.05 feet to a 5/8-inch iron rod found for the most
southerly comer of said Turner Adreac, L. C. tract;
THENCE North 33o34'17" West along the southwesterly line of said Turner Adreac,
L. C. tract, a distance of 344.81 feet to a 5/8-inch iron rod with cap found in
the line common to said Reserve "A" and Restricted Reserve "B", Block 2 of
Kingwood Town Center Section One as recorded under Film Code 345143 of the
Harris County Map Records;
THENCE North 60o12'39" East along said common line, a distance of 237.49 feet to
a 5/8-inch iron rod with cap found for the east corner common to said Reserves
"A" and "B", being in said southwesterly right-of-way line of Lake Houston
Parkway and being in a curve to the right;
THENCE 227.36 feet southeasterly along said southwesterly right-of-way line of
Lake Houston Parkway and along the arc of said curve to the right (Central Angle
= 06o3O'48"; Radius = 2000.00 feet; Chord = South 27o33'32" East, 227.24 feet)
to a 5/8-inch iron rod with cap found for a point of reverse curvature to the
left;
THENCE 79.58 feet continuing along said southwesterly right-of-way line and
along the arc of said curve to the left (Central Angle = 01o31'12"; Radius =
3000.00 feet; Chord = South 25o03'44" East, 79.58 feet) to a 5/8-inch iron rod
with cap found for a point of reverse curvature to the right;
THENCE 35.49 feet continuing along said southwesterly right-of-way line and
along the arc of said curve to the right (Central Angle = 81o20'09"; Radius =
25.00 feet; Chord = South 14o50'45" West, 32.58 feet) to the POINT OF BEGINNING
and containing 1.699 acres (73,987 sq. ft.), more or less.
R. S. McClendon Co.
Ph: (713)240-9099
Job No. 48-9402 SEAL
December, 1994
<PAGE>
Tract 2
Being a tract containing 1.727 acres (75,211 square feet) of land situated in
the John W. Asbury Survey, A-91 of Harris County, Texas and being out of
Restricted Reserve "B" of Kingwood Town Center Section Two, a subdivision of
record under Film Code Number 357060 of the Harris county Map Records
(H.C.M.R.). Said 1.727 acre tract being more particularly described as follows,
with all bearings referenced to the Texas Coordinate System, South Central Zone:
BEGINNING at a 3/4-inch iron rod found for the most easterly northeast corner of
said Reserve "B" and being a point in a southwesterly right-of-way line of Lake
Houston Parkway (varying width) per plat recorded under Film Code Number 350032
of said H.C.M.R.;
THENCE, 202.84 feet, along said southwesterly right-of-way line and along the
arc of a non-tangent curve to the left (Central Angle = 03o52'26"; Radius =
3,000.00 feet; Chord Bearing and Distance = South 29o51'41" East, 202.80 feet)
to a 5/8-inch iron rod with plastic cap stamped "SURVCON INC." set for corner;
THENCE, South 55o30'50" West, a distance of 313.87 feet to a 5/8-inch iron rod
with plastic cap stamped "SURVCON INC." set for corner and being in a
northeasterly right-of-way line of Bens Branch Drive (60.00 feet wide) per said
Kingwood Town Center Section Two;
THENCE, North 37o34'31" West, along said northeasterly right-of-way line, a
distance of 203.95 feet to a 3/4-inch iron found for the beginning of a tangent
curve to the right and being the intersection with a southerly right-of-way line
of Bens Town Drive (60.00 feet wide) per said Kingwood Town Center Section Two;
THENCE, easterly along said southerly right-of-way line the following courses:
40.62 feet, along the arc of said curve to the right (Central Angle =
93o05'21"; Radius = 25.00 feet; Chord Bearing and Distance = North 08o58'09"
East, 36.30 feet) to a 3/4-inch iron rod found for a point of tangency;
North 55o30'50" East, a distance of 291.41 feet to a 3/4-inch iron rod found
for the beginning of a tangent curve to the right;
42.13 feet, along the arc of said curve to the right (central Angle =
96o33'43"; Radius = 25.00 feet; Chord Bearing and Distance = South 76o12'19"
East, 37.32 feet) to the POINT OF BEGINNING and containing a computed area of
1.727 acres (75,211 square feet) of land.
Compiled by:
SURVCON INC.
Houston, Texas SEAL
Job No. 5728-03
March 1994
D-61
<PAGE>
Tract 3
An easement over and across that certain tract or parcel of real property
situated in Harris County, Texas, as more particularly described as follows:
Being a tract or parcel of land containing 6,421 square feet (0.1474 acre), more
or less, situated in the John W. Asbury Survey, Abstract No. 91 in Harris
County, Texas, being 4,521 square feet out of Restricted Reserve "B", Block 2 of
Kingwood Town Center, Section One as recorded under Film Code 354143 of the
Harris County Map Records and 1,900 square feet out of Restricted Reserve "A" of
Kingwood Town Center, Section Two as recorded under Film Code 357060 of the
Harris County Map Records; said 6,421 square feet being more particularly
described by metes and bounds as follows:
COMMEnClNG at a 5/8-inch iron rod with aluminum cap found for the east corner
common to said Reserves "A" and "B", being in the southwesterly right-of-way
line of Lake Houston Parkway (width varies) and being in a curve to the right;
thence as follows;
Southeasterly 5.00 feet along said southwesterly right-of-way line and the arc
of said curve to the right (Central Angle = 00o08'36"; Radius = 2000.00 feet;
Chord = South 30o44'39" East, 5.00 feet) to the POINT OF BEGINNING,
THENCE 25.00 feet continuing southeasterly along said southwesterly right-of-way
line and the arc of said curve to the right (Center Angle = 00o42'58", Radius =
2000.00 feet; Chord = South 30o18'52" East, 25,00 feet) to a point for corner;
THENCE South 60o12'39" West departing said southwesterly right-of-way line, a
distance of 71.00 feet to a point in a curve to the left;
THENCE northwesterly along the arc of said curve to the left, at 30.00 feet pass
the line common to said Reserves "A" and "B", for a total arc distance of 51.38
feet (Central Angle = 01o31'34"; Radius = 1929.00 feet; Chord = North 30o43'58"
West, 51-38 feet) to a point of reverse curature to the right;
THENCE 113.29 feet along the arc of said curve to the right (Central Angle =
01o03'22": Radius = 6146.00 feet; Chord = North 30o57'39" West, 113.28 feet) to
a point for corner;
THENCE North 59o27'02" East, a distance of 71.00 feet to a point for corner in
said southwesterly right-of-way line of Lake Houston Parkway and being in a
curve to the left;
<PAGE>
THENCE southeasterly 25.00 feet along said southwesterly right-of-way line and
the arc of said curve to the left (Central Angle = 00o14'09", Radius = 6075,00
feet: Chord = South 30o32'59" East, 25,00 feet) to a point for corner, being
87.12 feet along the arc of said curve from a 5/8-inch iron rod with
aluminum cap found for a point of reverse curvature to the right;
THENCE South 59o27'02" West departing said southwesterly right-of-way line, a
distance of 46.00 feet to a point in a curve to the left;
THENCE southeasterly 87.87 feet along the are of said curve to the left (Central
Angle 00o49'21"; Radius = 6121.00 feet, Chord = South 31o04'40" East, 87.87
feet) to a point of reverse curvature to the right;
THENCE 27.12 feet along the arc of said curve to the right (Central Angle =
00o47'43": Radius = 1954.00 feet; Chord = South 31o05'53" East, 27.12 feet) to
a point for comer,
THENCE North 60o12'39" East, a distance of 46.01 feet to the POINT OF BEGINNING
and containing 6,421 square feet (0.1474 acre) of land, more or less.
R. S. McCLENDON CO.
Ph: (713)240-9099
Job No. 49-9402
December, 1994
<PAGE>
|-------------------------------------------------|
| PROFESSIONAL CENTER & KELSEY SEYBOLD |
|-------------------------------------------------|
|-------------------------------------------------|
| Schedule 2 - Project Budget & Funding Schedule |
|-------------------------------------------------|
Occupancy @ 100.00%
<TABLE>
<CAPTION>
CLOSING Feb-95 Mar-95 Apr-95
-------------------------------------------
<S> <C> <C> <C> <C>
Land 877,885
Shell Construction 267,000 267,000 267,000
Standard Tenant Buildout
Above Standard Buildout
Landscaping
Architectural & Engineering
Fees 71,675 13,909 13,909 13,909
Taxes, Insurance & Closing 24,500 4,439
Enviros/Appraisals/Surveys 7,000 0 4,000 0
Construction Interest
Capital Cost 0
Marketing & Commissions 94,235
Legal & Accounting 0
Project Management 18,995 18,995 18,995 18,995
Developers Fee 83,440 14,740 14,740 14,740
---------------------------------------------
Total Project Budget 1,182,730 314,644 318,644 319,083
=============================================
SOURCE OF FUNDS
CONSTRUCTION FINANCING 1,182,730 314,644 318,644 319,083
CAPITAL REQUIRED 0 0 0 0
----------------------------------------------
TOTAL SOURCE OF FUNDS 1,182,730 314,644 318,644 319,083
LOAN BALANCE 1,182,730 1,497,374 1,816,018 2,135,101
</TABLE>
<TABLE>
<CAPTION>
May-95 Jun-95 Jul-95 Aug-95 Sep-95 TOTAL
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Land 877,885
Shell Construction 267,000 133,500 133,500 1,335,000
Standard Tenant Buildout 214,081 214,081 214,081 214,081 856,324
Above Standard Buildout 6,194 6,194 6,194 6,194 24,776
Landscaping 51,227 5,692 56,919
Architectural & Engineering
Fees 13,909 127,311
Taxes, Insurance & Closing 7,063 36,002
Enviros/Appraisals/Surveys 0 4,000 2,000 0 17,000
Construction Interest 0
Capital Cost 0
Marketing & Commissions 23,559 23,559 50,253 191,606
Legal & Accounting 0
Project Management 18,995 18,995 18,995 0 132,965
Developers Fee 14,740 14,740 14,740 91,120 268,000
-----------------------------------------------------------------
Total Project Budget 534,919 466,296 418,761 368,711 0 3,923,788
=================================================================
SOURCE OF FUNDS
CONSTRUCTION FINANCING 534,919 466,296 418,761 368,711 0 3,923,788
CAPITAL REQUIRED 0 0 0 0 0 0
-----------------------------------------------------------------
TOTAL SOURCE OF FUNDS 534,919 466,296 418,761 368,711 0 3,923,788
LOAN BALANCE 2,670,020 3,136,316 3,555,077 3,923,788 3,923,788
</TABLE>
<PAGE>
EXHIBIT C
DISBURSEMENT REQUEST
FORM
Universal Health Realty Income Trust
367 South Gulph Road
King of Prussia, Pennsylvania 19406
Attention: Cheryl K. Ramagano/Timothy J. Fowler
RE: Request for Advance to Pay Costs Under Construction
Loan Agreement (the "Loan Agreement") dated as of
December 20, 1994, between Turner Adreac, L.C.
("Borrower") and the Lender
Ladies/Gentlemen:
The Borrower hereby requests in advance under the Loan Agreement to pay
costs heretofore incurred in connection with construction of the Improvements
as contemplated therein, in the amount of $________. All terms used herein
shall have the same meanings ascribed to them in the Loan Agreement, except as
otherwise provided herein.
The costs to be paid from the proceeds of such advance are for the items
listed on the continuation page(s) attached. To the extent that the advance will
be used to pay Contractor(s), an Application and Certificate for Payment for
each Contractor to be paid is also attached.
The status of costs for the Improvements is as follows:
(a) Origiual projected costs $3,923,787
(b) Additions to date hereof $0
(c) Deductions to date hereof $0
(d) Current projection of costs $3,923,787
(e) Total certified to date, including
amount of this certificate $_________
(f) Unpaid balance of projected costs
(amount yet to be certified) $_________
<PAGE>
The status of available funds under the Loan Agreement is as follows:
(g) Total amount of Construction Loan $3,923,787
(h) Less: Total costs certified to
date, including amount of this
certificate (from line [e) above) $_________
(i) Balance to be advanced pursuant
to Loan Agreement $_________
The borrower hereby represents and warrants as follows:
(a) The amount above requested has actually been incurred in connection with
the construction of the Improvements and no previous advances have been made
under the Loan Agreement to pay any of the costs for which the Borrower hereby
requests this advance.
(b) The representations and warranties set forth in Loan Agreement are true
and correct in all material respects as of the date this Request for Advance is
submitted to the Lender.
(c) Except as may be set forth on Schedule 1 to this Request for Advance,
all equipment, supplies and materials acquired or furnished in connection with
the construction of the Improvements which are not affixed to or incorporated
into the Improvements are stored on the Premises.
(d) No Event of Default has occurred under the Loan Agreement which has not
been waived by the Lender or cured to the satisfaction of the Lender.
(e) No Default has occurred under the Loan Agreement which, with notice or
lapse of time or both, would constitute an Event of Default under the Loan
Agreement, except such Defaults as have been waived by the Lender or cured to
the satisfaction of the Lender.
With respect to the items described on Schedule 1 to this Request for
Advance, the following is attached to this Request for Advance:
<PAGE>
(a) With respect to items stored in a bonded warehouse, an original
warehouse receipt covering such items; and
(b) With respect to items not stored in a bonded warehouse, a written
certificate signed by the Borrower certifying as to the location of all such
items. Such items shall be insured by companies, on forms and in amounts,
satisfactory to Lender. Each such location must be acceptable to the Lender and
such items must be stored under adequate safeguards acceptable to the Lender to
minimize the possibility of loss, theft, damage or commingling of other
property.
Very truly yours,
TURNER ADREAC, L.C.
a Texas limited liability company
By:_____________________________
Charles H. Turner
President
<PAGE>
PROFESSIONAL CENTER & KELSEY SEYBOLD
DATE: Docember 19, 1994
DRAW NO:______
<TABLE>
<CAPTION>
CURRENT
TOTAL Previous This Total To
ITEM BUDGET Application Application Date
------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Land 877,885 0
Shell Construction 1,335,000 0
Standard Tenant Buildout 856,325 0
Above Standard Buildout 24,775 0
Landscaping 56,919 0
Architectural & Engineering 127,310 0
Taxes, Insurance & Closing 36,002 0
Enviros/Appraisals/Surveys 17,000 0
Capital Cost 0 0
Marketing & Commissions 191,606 0
Legal & Accounting 0 0
Project Management 132,966 0
Developers Fee 268,000 0
--------- --- -------- -------
TOTAL 3,923,787 0 -------- -------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 13,275
<ALLOWANCES> 5,490
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 143,069
<DEPRECIATION> 22,646
<TOTAL-ASSETS> 128,907
<CURRENT-LIABILITIES> 0
<BONDS> 21,283
<COMMON> 89
0
0
<OTHER-SE> 106,356
<TOTAL-LIABILITY-AND-EQUITY> 128,907
<SALES> 0
<TOTAL-REVENUES> 18,826
<CGS> 0
<TOTAL-COSTS> 1,320
<OTHER-EXPENSES> 2,048
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,146
<INCOME-PRETAX> 14,312
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,312
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.60
</TABLE>
