SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported) OCTOBER 12, 1999
FRANKLIN SELECT REALTY TRUST
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 1-12709 94-0395938
State or other Commission File Number IRS Employer
jurisdiction of Identification Number
incorporation
2000 ALAMEDA DE LAS PULGAS, SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (650) 312-3000
ITEM 5. OTHER EVENTS.
Franklin Select Realty Trust (the "Company") has signed an agreement
dated as of October 12, 1999 (the "Purchase Agreement") to sell its
remaining real estate interests to Value Enhancement Fund III, LLC, a real
estate fund managed by Lend Lease Real Estate Investments, Inc. The sale
includes all the office and industrial properties owned by the Company,
together with the interests of the Company and its partners in FSRT, L.P.,
its limited partnership subsidiary (the "Partnership"). The Company is the
sole general partner of the Partnership. Lend Lease, located in Atlanta,
Georgia, is a leading real estate advisor to pension funds and other
institutional investors in the United States as ranked by assets under
management.
The aggregate base purchase price is $131,500,000 for the Company's and
the limited partners' interests. Of the total price, the purchase price for
the Company's interests is $119,377,500 in cash, reduced by approximately
$26,500,000 for existing debt to be assumed by the buyer, and the purchase
price for the limited partners' interests is $12,122,500 and is payable in
installments. The transaction is subject to approval by the Company's
shareholders, due diligence-based and other customary pre-closing price
adjustments, closing pro-rations and customary conditions.
The Company had previously announced that a Special Committee of the
Board of Directors, with the assistance of Prudential Securities
Incorporated, its financial advisor, was undertaking a review of the
strategic alternatives available to the Company. In 1998, the Company sold
its three retail properties. The decision to proceed with a transaction with
Lend Lease on behalf of its investment fund was made after lengthy
negotiations.
In connection with the formation of the Partnership, the limited
partners were granted rights (the "Conversion Rights") to convert their
limited partner interests into shares of the Company's Series A Common Stock
or, at the Company's option, the value of Series A shares in cash. The
conversion ratio is currently one Series A share for each limited partner
unit. In connection with the Purchase Agreement, the Company has also signed
a Purchase of Conversion Rights Agreement dated as of October 12, 1999 (the
"Conversion Rights Agreement") with the limited partners pursuant to which
the Company has agreed to purchase the limited partners' Conversion Rights.
The purchase is contingent upon, and is to occur immediately before, the
closing of the sale to Value Enhancement. The purchase price for each
Conversion Right is equal to the amount of the excess, if any, of
distributions per share that the Series A shareholders receive from the sale
of the assets to Value Enhancement and the liquidation of the Company over
the amount per limited partner unit the limited partners receive from Value
Enhancement at the closing.
Each limited partner has the right to convert its partnership interests
into Series A shares effective immediately prior to the closing of the
transaction, but must notify the Company on or before November 19, 1999 of
its election to do so. If any limited partner elects to convert into Series
A shares, the purchase price to be paid by Value Enhancement to Franklin
Select would be increased ratably for each limited partner unit converted
and the price to be paid by Value Enhancement to the remaining limited
partners would be decreased by the same amount.
The above description of the Purchase Agreement and the Conversion
Rights Agreement is qualified in all respects by the text of the Purchase
Agreement and the Conversion Rights Agreement, which are being filed as
Exhibits 2(a) and 2(b) of this Form 8-K, respectively.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
2.(a)Purchase Agreement dated as of October 12, 1999 by and among
Value Enhancement Fund III, LLC, a Georgia limited liability
company, Franklin Select Realty Trust, a California corporation,
FSRT, L.P., a Delaware limited partnership, and the persons listed
on Schedule 1 thereto.
2.(b)Purchase of Conversion Rights Agreement dated as of October
12, 1999 between Franklin Select Realty Trust, a California
corporation, and the Limited Partners listed on Schedule 1 thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned heretofore duly authorized.
Dated: October ___, 1999 FRANKLIN SELECT REALTY TRUST
By:
David P. Goss
President
EXHIBIT INDEX
These Exhibits are numbered according to the Exhibit Table of Item 601
of Regulation S-K:
EXHIBIT NO. DESCRIPTION
2(a) Purchase Agreement dated as of October 12, 1999 by and among
Value Enhancement Fund III, LLC, a Georgia limited liability
company, Franklin Select Realty Trust, a California
corporation, FSRT, L.P., a Delaware limited partnership, and
the persons listed on Schedule 1 thereto.
2(b) Purchase of Conversion Rights Agreement dated as of October
12, 1999 between Franklin Select Realty Trust, a California
corporation, and the Limited Partners listed on Schedule 1
thereto.
Exhibit 2(a)
PURCHASE AGREEMENT
AMONG
FRANKLIN SELECT REALTY TRUST,
FSRT, L.P.,
THE LIMITED PARTNERS LISTED ON SCHEDULE 1
AND
VALUE ENHANCEMENT FUND III, LLC
October 12, 1999
TABLE OF CONTENTS
PAGE
RECITALS..........................................................1
1. AGREEMENT OF PURCHASE AND SALE.................................2
1.1 Interest in Select Properties...........................2
1.2 General Partner's Interest..............................3
1.3 Limited Partners'Interest...............................4
1.4 All or None Transaction................................4
2. PURCHASE PRICE.................................................4
2.1 Select Price............................................4
2.2 Limited Partnership Price...............................4
2.3 Certain Adjustments.....................................5
3. DEPOSIT........................................................5
3.1 Select Deposit..........................................5
3.2 General.................................................5
4. TITLE..........................................................6
4.1 Title Commitments and Surveys...........................6
4.2 Title to Select Properties..............................6
4.3 Title Exceptions Appearing Before the Closing...........6
5. EXISTING LOANS.................................................7
6. DOCUMENTS DELIVERED TO BUYER...................................7
6.1 Property Documents......................................7
6.2 Service Contracts.......................................7
6.3 Physical Condition Reports..............................7
6.4 Leases..................................................8
6.5 Rent Rolls..............................................8
6.6 Financial Information...................................8
6.7 Income and Expense Statements...........................8
6.8 Tax Bills...............................................8
6.9 Insurance Documents.....................................8
6.10 Warranty Agreements....................................8
6.11 Other Documents........................................8
7. DUE DILIGENCE..................................................8
7.1 Completion of Internal Due Diligence and Approval.......8
7.2 Acceptance Of Properties "As Is.........................9
7.3 Breach of Representation and Warranty..................10
8. OPERATION OF PROPERTIES; PARTNERSHIP AGREEMENT................11
8.1 Management and Maintenance of Properties...............11
8.2 Leases.................................................11
8.3 Title..................................................12
8.4 Service Contracts......................................12
8.5 Restrictive Uses.......................................12
8.6 Estoppel Letters.......................................12
8.7 Development of the Data General Project................13
8.8 Modifications to Partnership Agreement.................13
9. INSURANCE; RISK OF LOSS; CONDEMNATION.........................14
9.1 Insurance..............................................14
9.2 Damage or Destruction..................................14
9.3 Eminent Domain.........................................14
9.4 Restoration............................................15
9.5 Exclusive Remedies.....................................15
10. SHAREHOLDER OBLIGATIONS......................................15
10.1 Shareholder Approval..................................15
10.2 Proxy Statement.......................................15
10.3 Failure to Obtain Approvals; Permitted Termination....15
10.4 Subsequently Received Offers..........................16
11. CLOSING......................................................17
11.1 Closing Date..........................................17
11.2 Select's Deliveries...................................17
11.3 Limited Partners'Deliveries...........................19
11.4 Buyer's Deliveries....................................19
11.5 The Partnership's Deliveries..........................20
11.6 Closing Costs.........................................20
11.7 Closing Events........................................21
11.8 Prorations............................................21
11.9 Estimated Closing Accounting..........................24
11.10 Closing Accounting...................................24
11.11 Resolution: Final Accounting.........................24
11.12 Conditions Precedent to Closing......................24
12. LIMITED PARTNER LOANS........................................25
13. REPRESENTATIONS AND WARRANTIES...............................26
13.1 Representations and Warranties of Select as to Itself.26
13.2 Representations and Warranties of Limited Partners....27
13.3 Representations and Warranties Relating to Partnership Properties
27
13.4 Additional Representations and Warranties Regarding the Partnership
and Partnership Properties............................31
13.5 Sellers'Actual Knowledge, Existing Knowledge of Buyer.33
13.6 Breach of Representations and Warranties..............33
13.7 Representations and Warranties of Buyer...............33
13.8 No Representation Respecting Year 2000 Issues.........34
14. INDEMNIFICATION; CLAIMS AGAINST HOLDBACK.....................34
14.1 Indemnification.......................................34
14.2 Cooperation...........................................35
14.3 Claims for Indemnification............................35
14.4 Limitation on Indemnification.........................36
14.5 Survival of Representations, Warranties and Covenants.37
14.6 Disputes..............................................37
14.7 Escrow Fund...........................................37
14.8 Limitation on Obligations.............................38
14.9 Shareholder Litigation................................38
14.10 Specific Performance.................................38
15. DEFAULT AND REMEDIES.........................................38
15.1 Seller's Failure to Close Select Transactions.........38
15.2 Buyer's Failure to Close Select Transactions; Liquidated Damages
38
15.3 Notice of Default; Opportunity to Cure................39
15.4 Select's Continued Existence..........................39
15.5 Limitation on Liability of Limited Paterns............39
15.6 Remedies Available Unless Expressly Restricted........40
15.7 Limited Partners'Rights to Cancel Sale of Units and to Convert
Units
into Shares of Select...................................40
16. DISPUTE RESOLUTION...........................................40
16.1 Disputes..............................................40
16.2 Escrow of Disputed Amounts............................41
16.3 Litigation; Venue.....................................41
16.4 Attorneys'Fees........................................41
16.5 Representative........................................41
17. MISCELLANEOUS................................................41
17.1 Notices...............................................41
17.2 Headings..............................................42
17.3 Covenant of Further Assurances........................42
17.4 Entire Agreement......................................43
17.5 Partial Invalidity....................................43
17.6 No Waiver.............................................43
17.7 Brokers and Finders...................................43
17.8 Time of the Essence...................................43
17.9 Governing Law.........................................43
17.10 Interpretation.......................................43
17.11 Assignment...........................................44
17.12 Counterparts.........................................44
LIST OF SCHEDULES
Schedule 1 Limited Partners
Schedule 1.1 Personal Property
Schedule 2.2 Note Payments
Schedule 4.1 Schedule of Preliminary Title Reports
Schedule 4.2 Title Endorsements
Schedule 5 Existing Loans
Schedule 6.2 Service Contracts
Schedule 6.3 Reports
Schedule 6.5 Rent Rolls
Schedule 6.7 Income and Expense Statements for the Properties
Schedule 8.1 Approved Capital Expenditures
Schedule 8.2.1 Future Leasing Activity Schedule
Schedule 8.7 Development Budget for Data General Project
Schedule 11.2.10 Terminations of Related Party Agreements
Schedule 11.8.5 Buyer Lease Costs
Schedule 13.3.5(a) Commission Agreements
Schedule 13.3.5(b) Unpaid Tenant Inducements
Schedule 13.3.5(c) Disclosure Schedule Regarding Tenant Defaults
Schedule 13.3.13 List of Loan Documents
LIST OF EXHIBITS
Exhibits A-1 - A-5 Select Land Legal Descriptions
Exhibits B-1 - B-4 Partnership Land Legal Descriptions
Exhibit C Form of Note
Exhibit D Form of Letter of Credit
Exhibit E Form of Tenant Estoppel Letter
Exhibit F Form of General Partner's Interest Assignment Agreement
Exhibit G Form of Bill of Sale and Assignment of Leases
Exhibit H Form of Assignment of Plans, Service Contracts, Warranties and
Approvals
Exhibit I Form of Tenant Notice Letter
Exhibit J Form of Partnership Interest Assignment Agreement
Exhibit K Form of Partner Note
Exhibit L Partnership Agreement
Exhibit M Form of Escrow Agreement
TABLE OF DEFINED TERMS
PAGE
Acceptable Estoppel Letter.......................................13
Agreement.........................................................1
Approvals.........................................................3
Approved Capital Expenditures....................................11
Assets...........................................................27
Assignments of Leases............................................17
Assumed Contracts.................................................7
Buyer.............................................................1
Claim............................................................35
Claim Notice.....................................................35
Claim Period.....................................................37
Closing..........................................................17
Closing Accounting...............................................24
Closing Date.....................................................17
Commission Agreements............................................28
Commitments.......................................................6
Contract Date.....................................................1
Covered Party....................................................34
Data General......................................................1
Deposit...........................................................5
Due Diligence Materials...........................................7
Early Closing Cost...............................................17
Emergency Expenditures...........................................11
Escrow Agent.....................................................38
Escrow Agreement.................................................37
Escrow Fund......................................................38
Estimated Closing Accounting.....................................24
Estoppel Letters.................................................12
Exchange Agreement...............................................40
Excluded Claims and Losses.......................................37
Existing Leases...................................................8
Existing Loans....................................................7
Fairway...........................................................1
Final True Up Date...............................................22
Financial Statements.............................................32
Future Leasing Activity Schedule.................................11
General Partner's Interest........................................1
General Partner's Interest Assignment Agreement..................17
General Partner Transaction.......................................3
Grant Deeds......................................................17
Hazardous Materials..............................................30
Holdback Amount...................................................4
Improvements......................................................3
Indemnified Party................................................34
Indemnitor.......................................................34
Indemnity Escrow Fund............................................37
Insolvent........................................................26
Lam Building......................................................1
Land..............................................................2
Lease Costs......................................................23
Lease Files.......................................................8
Leases............................................................3
Letter of Credit..................................................5
Limited Partner Excluded Claims and Losses.......................37
Limited Partner Indemnitor.......................................35
Limited Partner Indemnity Claims.................................35
Limited Partners..................................................1
Limited Partners'Share............................................5
Loan Documents...................................................31
Losses...........................................................34
Major Lease Termination..........................................14
Maximum Indemnification Amount...................................36
Note..............................................................4
Partner Loan.....................................................25
Partner Note.....................................................26
Partnership.......................................................1
Partnership Agreement.............................................1
Partnership Interest Assignment Agreement........................19
Partnership Land..................................................2
Partnership Note..................................................1
Partnership Properties............................................2
Partnership Property..............................................2
Partnership Transaction...........................................4
Permitted Exceptions..............................................6
Permitted Termination............................................16
Personal Property.................................................3
Plans.............................................................3
Post-Contract Exceptions..........................................6
Project..........................................................13
Properties........................................................2
Property..........................................................2
Property Documents................................................7
Property Transaction..............................................2
Purchase Price....................................................4
Purchase Price Adjustment Escrow Fund............................37
Reimbursement Amount.............................................16
Rent Rolls........................................................8
Reports...........................................................7
restraint........................................................24
Rights............................................................3
SEC..............................................................15
Select............................................................1
Select's or the Partnership's or the Sellers'Knowledge...........33
Select's Share....................................................5
Select and Partnership Excluded Claims and Losses................36
Select Land.......................................................1
Select Price......................................................4
Select Properties.................................................1
Select Property...................................................1
Select Transactions...............................................3
Sellers...........................................................1
Service Contracts.................................................7
Shareholder Litigation...........................................27
Shores............................................................1
Superior Proposal................................................16
Surveys...........................................................6
Tenants...........................................................8
Threshold Amount.............................................36, 37
Title Company.....................................................5
Title Policies....................................................6
Trailing Commission Fees.........................................29
Transaction Agreements............................................2
Transactions......................................................4
Units.............................................................2
Units Price.......................................................4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of October
12, 1999 (the "CONTRACT DATE"), by and among VALUE ENHANCEMENT FUND III, LLC,
a Georgia limited liability company ("BUYER"), FRANKLIN SELECT REALTY TRUST,
a California corporation ("SELECT"), FSRT, L.P., a Delaware limited
partnership (the "PARTNERSHIP"), and the persons listed on SCHEDULE 1 hereto
(the "LIMITED PARTNERS"). Select and the Limited Partners are sometimes
collectively referred to in this Agreement as the "SELLERS".
RECITALS
A....Select is the owner of the following real estate projects:
(i) 1800 East Imperial Highway and adjacent land parcel, Brea,
California ("FAIRWAY");
(ii) 4545, 4555 & 4575 Cushing Parkway, Fremont, California;
(iii)45635 & 45875 Northport Loop East, Fremont, California;
(iv) 100 Marine World Parkway, Redwood City, California; and
(v) 1 & 3 Twin Dolphin Drive, Redwood City, California (the
"Shores")
(each individually, a "SELECT PROPERTY" and collectively, the "SELECT
PROPERTIES"). The Select Properties include land located in the California
Counties of Alameda, Orange and San Mateo and are more particularly described
on attached EXHIBITS A-1 through A-5, respectively (the "SELECT LAND").
B....Select is the sole general partner of the Partnership (Select's
interest as the general partner of the Partnership is referred to in this
Agreement as the "GENERAL PARTNER'S INTEREST"). The General Partner's
Interest includes all rights of the general partner in the Partnership
(including Select's right as the payee with respect to a "Revolving
Promissory Note" from the Partnership dated as of December 29, 1997 (the
"PARTNERSHIP NOTE")) and has the rights and obligations set forth in the
Partnership's Agreement of Limited Partnership (the "PARTNERSHIP
Agreement"). The Partnership is the owner of the following real estate
projects:
(i) 46360 Fremont Boulevard, Fremont, California, California;
(ii) 40455 and 40563 Encyclopedia Circle, Fremont California;
(iii)4540 & 4650 Cushing Parkway, Fremont, California (the "LAM
BUILDING"); and
(iv) 1500 Rosecrans Avenue, Manhattan Beach, California ("DATA
GENERAL")
(each individually, a "PARTNERSHIP PROPERTY" and collectively, the
"PARTNERSHIP PROPERTIES"; a Select Property or Partnership Property is
sometimes referred to in this Agreement as a "PROPERTY", and the Select
Properties and the Partnership Properties are sometimes collectively referred
to in this Agreement as the "PROPERTIES"). The Partnership Properties
include land located in the California Counties of Alameda and Los Angeles
and are more particularly described on attached EXHIBITS B-1 through B-4,
respectively (the "PARTNERSHIP LAND", and, collectively with the Select Land,
the "LAND").
C....The Limited Partners are all of the limited partners of the
Partnership.
D....On the terms and subject to the conditions of this Agreement and
the other instruments and agreements contemplated hereby, or entered into
simultaneously herewith (collectively with this Agreement, the "TRANSACTION
AGREEMENTS") (i) Select has agreed to sell to Buyer and Buyer has agreed to
buy from Select at the Closing (as defined below), all of Select's right,
title and interest in the Select Properties, and the General Partner's
Interest, and (ii) the Limited Partners have agreed to sell to Buyer and
Buyer has agreed to buy from each Limited Partner in an installment sale, all
of such Limited Partner's interests in the Partnership (the "UNITS").
NOW, THEREFORE, in consideration for the foregoing Recitals and the
mutual covenants and agreements herein contained, and intending to be legally
bound thereby, Buyer. Select , the Partnership and the Limited Partners agree
as follows:
1....AGREEMENT OF PURCHASE AND SALE.
1.1 INTEREST IN SELECT PROPERTIES. Select agrees to sell to
Buyer, and Buyer agrees to purchase from Select, the Select Properties on the
Closing Date, all on the terms and conditions set forth herein (the "PROPERTY
TRANSACTION") concurrently with, and as a condition to each of the Seller's
and the Buyer's obligations to close, the other Transactions described
herein. The Select Properties include the related Improvements, together
with:
(a) All easements, rights of way, privileges, licenses,
appurtenances and other rights and benefits of Select belonging to or in any
way related to the Select Land.
(b) All Approvals with respect to the Select Land or related
Improvements.
(c) All Plans, Reports (as defined below) and Rights with
respect to the Select Land or the related Improvements (except for certain
causes of action relating to Fairways, as described below).
(d) All Personal Property owned by Select and used in
connection with the ownership or operation of the Select Land or the
Improvements.
(e) The Leases, together with any security deposits for which
landlord is responsible (together with interest thereon, to the extent
accruing for the benefit of any Tenant) and Select's rights under all
guaranties, letters of credit or other instruments that guarantee the
performance of the obligations of the tenants (or any of them) under the
Leases.
(f) All of Select's interest under the Service Contracts (as
defined below).
(g) The following trade names, to the extent of Select's
rights therein: Northport Business Park, The Shores, and Fairway Center.
(h) All other intangible rights and property relating to the
Select Land, the related Improvements or the related Personal Property or the
use, occupancy or operation thereof.
As used in this Agreement, the following terms will have the meanings
ascribed in this Section:
"APPROVALS" means, collectively, all certificate(s) of occupancy with
respect to Improvements, and other building or equipment permits, consents,
authorizations, variances, waivers, licenses, permits, certificates and
approvals from any governmental or quasi-governmental authority with respect
to any Land or its related Improvements.
"IMPROVEMENTS" means all improvements, buildings and fixtures located on
any Land.
"LEASES" means, collectively, the lessor's interest under all Existing
Leases (as defined below) and under any new leases or occupancy agreements
with respect to Improvements entered into prior to the Closing consistent
with the terms and conditions of this Agreement.
"PLANS" means all Select's or the Partnership's, as the case may be,
interest in architectural, mechanical, engineering, as-built and other plans,
specifications, surveys and drawings relating to the Properties, if any.
"PERSONAL PROPERTY" means all furniture, machinery, equipment, supplies
and other personal property owned by Select or the Partnership, as the case
may be, and used in connection with the ownership or operation of Land or
Improvements, and including, without limitation, the personal property listed
on SCHEDULE 1.1.
"RIGHTS" means all transferable or assignable warranties,
representations, guaranties, claims, indemnities, contract rights and
miscellaneous rights relating to the ownership, development, use and
operation of Land and Improvements, if any.
1.2 GENERAL PARTNER'S INTEREST. Select agrees to sell to Buyer,
and Buyer agrees to purchase from Select, on the Closing Date, all on the
terms and conditions set forth herein, the General Partner's Interest (the
"GENERAL PARTNER TRANSACTION" and, together with the Property Transaction, the
"SELECT TRANSACTIONS") concurrently with, and as a condition to each of the
parties' obligations to close, the other Transactions.
1.3 LIMITED PARTNERS' INTEREST. Each Limited Partner severally
agrees to sell to Buyer, and Buyer agrees to purchase from such Limited
Partner, on the Closing Date, all on the terms and conditions set forth
herein, such Limited Partner's Units (the "PARTNERSHIP TRANSACTION" and,
together with the Select Transactions, the "TRANSACTIONS") concurrently with,
and as a condition to each of the parties' obligations to close, the other
Transactions.
1.4 ALL OR NONE TRANSACTION. Except as expressly set forth in the
letter agreement dated as of the date of this Agreement among Buyer, Select
and the Limited Partners the parties hereto agree and acknowledge that in the
event the Closing takes place as contemplated by this Agreement, the Buyer
shall be required to purchase all of the Select Properties, all of the
General Partner Interests and all of the Units and in no event shall the
Buyer have the right to elect not to purchase any of the Units, any of the
General Partners' Interests or any of the Select Properties or any of the
Partnership Properties.
2....PURCHASE PRICE.
2.1 SELECT PRICE. The purchase price for the Select Properties
and the General Partner's Interest (the "SELECT PRICE") is One Hundred
Nineteen Million, Three Hundred and Seventy-Seven Thousand, Five Hundred
Dollars ($119,377,500), to be paid by Buyer in the form of cash PLUS
assumption of certain debt at the Closing pursuant to Section 5 (EXISTING
LOANS), and subject to certain prorations and adjustments as provided
elsewhere in this Agreement. An amount equal to $2,630,000 will be retained
pursuant to Section 14.7 (ESCROW FUND) (the "HOLDBACK AMOUNT").
2.2 LIMITED PARTNERSHIP PRICE. The aggregate purchase price for
each Limited Partner's Units ("UNITS PRICE", and, collectively with the
Select Price, the "PURCHASE PRICE") is $3,030,625 to be paid by the Buyer in
the form of the delivery to each Limited Partner of a promissory note in
substantially the form of EXHIBIT C, (each, a "NOTE"). Each Note shall be
for the Units Price allocable to the Limited Partner payee (subject to those
adjustments described in Section 2.3 (CERTAIN ADJUSTMENTS) and shall provide
for
(i) interest to accrue thereon at a rate equal to the lower of
(i) the lowest Applicable Federal Rate, determined in accordance with Section
1274(d)(2) of the United States Internal Revenue Code and the regulations
promulgated thereunder, in effect during the three month period ending with
the month in which the Closing occurs or (ii) the lowest Applicable Federal
Rate, determined in accordance with Section 1274(d)(2) of the United States
Internal Revenue Code and the regulations promulgated thereunder, in effect
during the three month period ending with the month in which the Contract
Date occurs;
(ii) quarterly payments of accrued interest in arrears and of
principal in the amounts set forth on SCHEDULE 2.2 until the Note has been
paid in full;
(iii) all accrued but unpaid interest and other charges,
together with the Units Price allocable to such Note, increased by an amount
which would, after giving effect to payments previously made on such Note,
result in a 9.5% internal rate of return on such Units Price through the date
on which the Notes is paid in full (treating the Units Price allocable to
such Note as having been invested on the Closing Date and without giving
effect to $80,000 aggregate ($20,000 per Note) in principal prepayment
resulting from the first quarterly installment payment) to be due and payable
on the first business day after January 2, 2003; and
(iv) all payments to be made without offset or deduction,
other than any offsets for payments due under the Partner Notes.
2.3 CERTAIN ADJUSTMENTS. The Select Price and the Units Price
will be reduced for adjustments, if any, in the Purchase Price as set forth
in Sections 4.3 (TITLE EXCEPTIONS APPEARING BEFORE CLOSING) and 7.3.1
(PURCHASE PRICE ADJUSTMENT). Select's 88.2886% pro rata share of any such
reductions and adjustments and certain other adjustments and costs described
in this Agreement is sometimes referred to in this Agreement as "SELECT'S
SHARE"; the Limited Partners' 11.7114% pro rata share of any such reductions
and adjustments and certain other adjustments and costs described in this
Agreement is sometimes referred to in this Agreement as the "LIMITED
PARTNERS' SHARE". The Select Price will be further (i) reduced by the sum of
the outstanding principal balance and all accrued and unpaid interest and
other charges (other than loan assumption fees and costs and loan prepayment
charges) of the Existing Loans in accordance with Section 5 (EXISTING LOANS),
and (ii) adjusted on account of the prorations and adjustments in accordance
with Section 11.8 (PRORATIONS).
3....DEPOSIT.
3.1 SELECT DEPOSIT. Within three (3) business days of the execution of this
Agreement, Buyer will deposit and will maintain in escrow with Stewart Title
Guaranty Company ("TITLE COMPANY") the sum of One Million Three Hundred
Fifteen Thousand Dollars ($1,315,000) (the "DEPOSIT") in immediately
available funds or deliver such sum directly to Select in the form of an
unconditional and irrevocable sight draft letter of credit substantially in
the form of EXHIBIT D issued by a bank reasonably acceptable to Select in
said amount having an expiration date no earlier than April 6, 2000 (a
"LETTER OF CREDIT") to be held in accordance with the terms of this
Agreement. If the Deposit is not made within three (3) business days of the
execution of this Agreement, this Agreement, and the Transactions
contemplated herein, shall, at the option of Select (acting on behalf of all
of the Sellers) shall be deemed to have been terminated and the parties will
have no further obligations hereunder (including, without limitation, any
obligation to pay any Reimbursement Amount as described in Section 10.3
(FAILURE TO OBTAIN APPROVALS; PERMITTED TERMINATION'S)). With respect to any
cash Deposit, this Agreement will serve as the parties' joint escrow
instructions to the Title Company. Upon closing of the Select Transactions,
any cash Deposit plus interest thereon shall be applied to the Select Price,
and any related Letter of Credit shall be returned to Buyer.
3.2..GENERAL. Any cash Deposit shall be held in an interest bearing
account for the account of Buyer. In the event of a dispute as to Selects'
entitlement to the Deposit, or any part thereof, Buyer and Select agree that
if at any time thereafter the unexpired term of any Letter of Credit is less
than 30 days, Title Company shall give Buyer notice of such pending
expiration and five (5) days after such notice shall draw upon such Letters
of Credit upon Select's demand, and the funds shall be retained in escrow
until such dispute is resolved.
4....TITLE.
4.1..TITLE COMMITMENTS AND SURVEYS. Buyer has been provided with Title
Company's Preliminary Title Reports identified on SCHEDULE 4.1 (the
"COMMITMENTS") to issue its ALTA Owner's Policies of Title Insurance and
certain agreed upon endorsements thereto (the "TITLE POLICIES") for the
Properties, together with a copy of each document referred to in the
Commitments, and Buyer has obtained an ALTA survey of each of the Properties
("SURVEYS"). The Commitments and Surveys and all matters referred to therein
have been reviewed and approved by Buyer.
4.2..TITLE TO SELECT PROPERTIES. At the Closing, (i) Select shall
convey fee title to the Select Properties to Buyer subject only to Permitted
Exceptions, and (ii) the Partnership shall own the Partnership Properties in
fee simple, subject only to the Permitted Exceptions. "PERMITTED EXCEPTIONS"
means, with reference to any Property, those title exceptions shown on the
Commitments or the Surveys for such Property, together with (a) liens for
taxes, assessments and government charges of governmental authorities or
levies not yet due and payable; (b) liens pursuant to the Loan Documents
securing the Existing Loans; (c) rights of tenants, as tenants only, under
the applicable Lease; and (d) Post-Contract Exceptions with respect to which
Buyer is required or elects to close under Section 4.3 (TITLE EXCEPTIONS
APPEARING BEFORE THE CLOSING), PROVIDED that the "Permitted Exceptions" do
not include any liens securing Select's and the Partnership's lines of
credit. Evidence of such title shall be the issuance by the Title Company at
the Closing of its Title Policies insuring that fee title in the Select
Properties is vested in Buyer and that fee title in the Partnership
Properties is vested in the Partnership (or, following the dissolution of the
Partnership, will be vested in Buyer), in each case subject only to the
Permitted Exceptions, with such endorsements as are set forth on SCHEDULE
4.2.
4.3..TITLE EXCEPTIONS APPEARING BEFORE THE CLOSING. In the event that
any title exception other than a Permitted Exception appears of record or on
any updated survey prior to the Closing ("POST-CONTRACT EXCEPTIONS"), Select
(i) shall, if requested by Buyer, cause any such exception resulting from
Select's or the Partnership's acts from and after the Contract Date to be
removed prior to the Closing and (ii) shall exercise good faith, commercially
reasonable efforts (without, however, requiring Select to expend any funds or
incur any obligation or liability with respect thereto) to remove any
Post-Contract Exception prior to the Closing. With respect to any
Post-Contract Exceptions which Select is not obligated pursuant to the
immediately preceding sentence to cure and which have not been cured prior to
the Closing, (i) any monetary lien shall be discharged or bonded against at
the Closing by Select, and (ii) Buyer shall take title to the Select
Properties and shall acquire the General Partner's Interest and the Units
subject to any non-monetary exception but shall receive credit against the
Purchase Price equal to (A) the cost of curing such title exception or
(B) any diminution in value resulting from such title exception, as mutually
agreed or as determined in Section 16 (DISPUTE RESOLUTION), PROVIDED, that if
the exception would cause a diminution in the value of the Properties in
excess of $7,500,000 in the aggregate, either Buyer, or Select on the part of
all of the Sellers, may terminate this Agreement (unless the Buyer elects to
limit the claimed loss or liability to less than $7,500,000, in which event
Select will have no right to terminate this Agreement), Buyer shall receive
back the Deposit, and no party shall have further any obligations under the
Transaction Agreements, except for those obligations which are stated therein
as surviving termination. Notwithstanding the foregoing, Select shall have
no right to terminate this Agreement under this Section 4.3 with respect to a
title exception created by Select or the Partnership. The provisions of this
Section 4.3 shall constitute Buyer's sole and exclusive remedy with respect
to any Post-Contract Exceptions which Select is not obligated to cure and
which are not cured despite Select's good faith, commercially reasonable
efforts, provided, however, that the foregoing shall not limit Buyer's rights
to damages or specific performance under Section 15 (DEFAULT AND REMEDIES)
with respect to any intentional breach or default by Select or the
Partnership.
5. EXISTING LOANS. The Properties are subject to various mortgage liens as
identified on SCHEDULE 5 (collectively, the "EXISTING LOANS"). Buyer shall
either (i) acquire the Select Properties and the General Partner's Interest
and the Units subject to such Existing Loans, subject to the limitations on
recourse set forth in the documents evidencing or securing such loans, in
which case Buyer shall assume such Existing Loans and pay any loan assumption
fees and costs, and Sellers shall be released from any liabilities arising
subsequent to such assumptions; or (ii) the Existing Loans shall be paid at
Closing, and Buyer shall pay any loan prepayment charges. Buyer and Select
shall cooperate in good faith and use their commercially reasonable efforts
to negotiate with the relevant lenders prior to the Closing Date to:
(i) obtain the required lender consents to Buyer's proposed assumptions;
(ii) minimize prepayment and assumption fees and charges; (iii) obtain
favorable terms of assumption for any loans contemplated to be assumed; and
(iv) if requested by Buyer, obtain lender estoppel statements. At the
Closing, Select shall discharge, and shall cause the Partnership to
discharge, any secured credit lines and pay all charges in connection
therewith. Select agrees that it will timely pay all interest, principal,
and other fees, impounds and obligations in respect of and otherwise comply
with Select's and the Partnership's material non-monetary obligations under
the documents evidencing or securing the Existing Loans through the Closing.
6....DOCUMENTS DELIVERED TO BUYER. Select has provided Buyer with
copies of, or access to, each of the following documents and items
(collectively, the "DUE DILIGENCE MATERIALS"), to the extent in Select's or
the Partnership's possession or control:
6.1 PROPERTY DOCUMENTS. Copies of all written Plans and
Approvals, if any ("PROPERTY DOCUMENTS").
6.2 SERVICE CONTRACTS. Copies of all service, maintenance,
management and other contracts and agreements, if any, related to the
operation and management of the Properties (the "SERVICE CONTRACTS").
SCHEDULE 6.2 lists all Service Contracts and identifies those to be assumed
by Buyer. All agreements and contracts so assumed are referred to
collectively as "ASSUMED CONTRACTS."
6.3 PHYSICAL CONDITION REPORTS. Copies of all soils, engineering
structural, seismic, geologic, environmental, and traffic control reports,
inspections, demographic information, studies, tests or analyses relating to
the Properties, if any "REPORTS"); including, without limitation, the Reports
listed on SCHEDULE 6.3, PROVIDED that Select has not disclosed and shall not
be required to disclose any internal economic analyses of the Properties or
their value.
6.4 LEASES. Copies of all existing leases with respect to the
Properties ("TENANTS"), all amendments thereto ("EXISTING LEASES"), and
related Tenant correspondence and files (the "LEASE FILES").
6.5 RENT ROLLS. Rent rolls for the Properties in the format set
forth on SCHEDULE 6.5, current as of September 1, 1999 (the "RENT ROLLS").
6.6 FINANCIAL INFORMATION. That financial information regarding
the Tenants included in the Lease Files (PROVIDED that no representation or
warranty is made as to the truth or accuracy thereof or as to any matter set
forth therein).
6.7 INCOME AND EXPENSE STATEMENTS. Income and expense statements
for the Properties for the prior two years on Select's or the Partnership's
customary forms (including the Financial Statements described in Section
13.4.2 (FINANCIAL STATEMENTS)), as listed on SCHEDULE 6.7, together with the
1999 Property operating budget.
6.8 TAX BILLS. A copy of the property tax bills for the
Properties for the most recent two years.
6.9 INSURANCE DOCUMENTS. Certificates of insurance currently in
effect with respect to each of the Properties, and a description of any
claims in excess of $50,000 made within the last two years and the status of
such claims.
6.10 WARRANTY AGREEMENTS. Copies of current warranty and indemnity
agreements, if any, covering any portion or components of the Properties.
6.11 OTHER DOCUMENTS. Copies of surveys and any unrecorded
agreements affecting title.
7....DUE DILIGENCE.
7.1 COMPLETION OF INTERNAL DUE DILIGENCE AND APPROVAL. Buyer
acknowledges that it has received, reviewed and approved the Due Diligence
Materials, and has been given the opportunity to inspect and investigate the
Properties and Buyer's records relating thereto, including roofs, plumbing,
soils tests, electrical, sprinklers, water, sewers, engineering studies,
heating and air conditioning systems, and structural integrity of the
Improvements (including structural pest control reports), measurement of the
square footage of the Properties (including land and any improvements), legal
status and requirements pertaining to the Properties (including building
codes, zoning, environmental, public health and fire safety laws), hazardous
substance inspections including preparation of an environmental assessments,
suitability of the Properties for Buyer's purposes and all other matters of
significance to Buyer.
7.2 ACCEPTANCE OF PROPERTIES "AS IS". Except for: (i) the
representations and warranties of Sellers and the Partnership expressly
provided herein; (ii) damage, destruction or condemnation as described in
Section 9 (INSURANCE; RISK OF LOSS; CONDEMNATION); and (iii) a Post-Contract
Exception as set forth in Section 4 (TITLE), and subject to the limitations
thereon, Buyer acknowledges and agrees that the Properties and the General
Partner's Interest and the Units are being sold in an "AS IS" condition and
"WITH ALL FAULTS" as of the Closing Date. Except as expressly set forth in
any of the Transaction Agreements, no representations or warranties have been
made or are made and no responsibility has been or is assumed by Sellers or
by any partner, officer, person, firm, agent or representative acting or
purporting to act on behalf of Sellers as to any matters concerning the
Properties, including, without limitation, the condition or repair of the
Properties or the value, expense of operation, or income potential thereof or
as to any other fact or condition which has or might affect the Properties or
the condition, repair, value, expense of operation or income potential of the
Properties or any portion thereof or any environmental matters affecting the
Properties.
Buyer is not relying upon any statement or representation by Sellers
unless such statement or representation is specifically included in any of
the Transaction Agreements or any schedule thereto. Further, to the extent
that Select has provided to Buyer information or reports regarding any
inspection, engineering, environmental or other matters regarding the
condition of the Properties, Select makes no representations or warranties
with respect to the accuracy or completeness, methodology of preparation or
otherwise concerning the contents of such reports except as may be expressly
provided in this Agreement or the other Transaction Agreements. Buyer
acknowledges that Sellers have requested Buyer to inspect fully the
Properties and investigate all matters relevant thereto and to rely solely
upon the results of Buyer's own inspections or other information obtained or
otherwise available to Buyer, rather than any information that may have been
provided by Select to Buyer.
Buyer expressly acknowledges that the Fairway property has substantial
exterior leaks. Select has provided Buyer with certain repair plans and
estimates, but does not warrant or represent the adequacy or accuracy of such
plans and estimates. Buyer fully accepts all risk relating to such repairs,
other than damage, destruction or condemnation occurring after the Contract
Date as described in Section 9 (INSURANCE; RISK OF LOSS; CONDEMNATION).
Select represents, and Buyer further acknowledges, that Select has settled or
retained all causes of action relating to said leaks against the prior owner
and the design professionals, contractors and suppliers who designed and
constructed the Fairway property.
Buyer also expressly acknowledges and accepts the risk (other than
damage, destruction or condemnation occurring after the Contract Date as
described in Section 9 (INSURANCE; RISK OF LOSS; CONDEMNATION)) of the
existence of (i) asbestos-containing materials in the exterior of the Data
General property, and the fact that said property is located upon a former
petroleum tank farm and is being monitored for methane gas generation (ii)
capped oil wells on the Fairway Center and the fact that said property is
located upon a former oil field.
7.3 BREACH OF REPRESENTATION AND WARRANTY.
7.3.1PURCHASE PRICE ADJUSTMENT. If each of (a) and (b) below
apply:
(a) Any of the representations and warranties made by
Sellers or the Partnership in Section 13 (REPRESENTATIONS AND WARRANTIES),
are not true and correct as of the Closing Date (unless any such
representation and warranty is expressly limited to another date, in which
case as of such other date), without reference to any qualifications as to
the Knowledge of a Seller or the Partnership, other than by reason of a
damage, destruction or condemnation as described in Section 9 (INSURANCE;
RISK OF LOSS; CONDEMNATION) or a Post-Contract Exception as set forth in
Section 4 (TITLE); and
(b) Such failure or failures of such representation(s)
and warrantie(s) to be true and correct would result in an aggregate loss or
liability to the Buyer of not less than Four Hundred Thousand Dollars
($400,000), then, at the Buyer's election, the Select Price (to the extent of
Select's Share) and the Units Price (to the extent of the Limited Partners'
Share) shall be reduced by an amount equal to the full amount of such loss or
liability, determined in the manner described in Section 7.3.3 (PROCEDURE).
7.3.2TERMINATION. Either Buyer or Select (on behalf of
Sellers) may elect to terminate the Transactions if each of (a) and (b) below
apply:
(a) Any of the representations and warranties made by
Sellers or the Partnership in Section 13 (REPRESENTATIONS AND WARRANTIES),
are not true and correct as of the Closing Date (unless any such
representation and warranty is expressly limited to another date, in which
case as of such other date), without reference to any qualifications as to
the Knowledge of a Seller or the Partnership other than by reason of damage,
destruction or condemnation as described in Section 9 (INSURANCE; RISK OF
LOSS; CONDEMNATION) or a Post-Contract Exception as set forth in Section 4
(TITLE); and
(b) Such failure or failures of such representation(s)
and warrantie(s) to be true and correct would result in an aggregate loss or
liability to the Buyer equal to at least Seven Million, Five Hundred Thousand
Dollars ($7,500,000) unless the Buyer elects to limit the claimed loss or
liability to less than $7,500,000, and to proceed exclusively under
Subsection 7.3.1 (PURCHASE PRICE ADJUSTMENT), in which event Select will have
no right to terminate this Agreement, PROVIDED, that Select will have no
right to terminate this Agreement in any event under this Section 7.3.2 if,
to Select's or the Partnership's Knowledge at the Contract Date, the
representation and warranty in question was not true and correct or the facts
or circumstances which caused the representation or warranty to become
incorrect resulted from the intentional action or omission of Select or the
Partnership or a breach of a covenant under this Agreement by Select or the
Partnership. The provisions of this Section 7.3 shall constitute the Buyer's
sole and exclusive remedies with respect to representations and warranties
covered herein determined prior to the Closing not to be true and correct,
PROVIDED that the foregoing shall not impact Buyer's rights under Section 15
(DEFAULT AND REMEDIES) with respect to any intentional breach by Select or the
Partnership of the representations and warranties contained herein.
7.3.3PROCEDURE. A party's election to terminate this
Agreement or to invoke the price adjustment procedures set forth in this
Section 7.3 must be invoked by delivery of written notice to the other
parties delivered before the Closing. Any dispute regarding the existence of
a breach of representation or warranty and the amount of any loss or
liability will be resolved as set forth in Section 16 (DISPUTE RESOLUTION).
If the parties are unable to agree on the amount of such adjustment by the
Closing, an amount equal to the loss or liability claimed in good faith by
the Buyer shall be held back and placed in escrow in the same manner as the
Holdback Amount (and in addition to the Holdback Amount) pending resolution
of the dispute.
8....OPERATION OF PROPERTIES; PARTNERSHIP AGREEMENT.
8.1 MANAGEMENT AND MAINTENANCE OF PROPERTIES. Until the Closing,
Select agrees (and agrees to cause the Partnership) (i) to expend in the
aggregate not less than $130,000 on capital improvements or repairs during
the period between May 1, 1999 and the Closing, PROVIDED that if Select and
the Partnership fail to make all such capital improvements or repairs during
such period, Buyer's sole remedy shall be the credit against the Purchase
Price with respect thereto set forth in Section 11.8.6 (CAPITAL
Expenditures), (ii) not to make any material physical changes to the
Improvements without Buyer's consent, which shall not be unreasonably
withheld, conditioned or delayed, PROVIDED, that those capital improvements
or repairs set forth on SCHEDULE 8.1 have been consented to by Buyer (such
consented to changes, "APPROVED CAPITAL EXPENDITURES"), PROVIDED FURTHER,
that in all events Select may make such emergency capital improvements or
repairs, with a cost not to exceed $10,000 in the aggregate for all such
Emergency Expenditures, as are reasonably deemed necessary by Select to
prevent damage to the Properties, any Improvements or personal property
located thereon or the health and safety of occupants and visitors
("EMERGENCY EXPENDITURES"), PROVIDED, that Select shall provide Buyer with
such prompt and full notice of the Emergency Expenditures as is practical
under the then-existing circumstances; and (iii) to continue to manage and
maintain the Properties in the manner in which they are currently being
managed and maintained.
8.2 LEASES.
8.2.1FUTURE LEASING ACTIVITY SCHEDULE. SCHEDULE 8.2.1 sets
forth a description of all leasing activity, if any, currently the subject of
written negotiation for leasing space at each Property. Said schedule
contains the name of the related Property, the name of the prospective
tenant, the suite number and the net rentable area under discussion (the
"FUTURE LEASING ACTIVITY SCHEDULE"). The consent of Buyer shall not be
required to any leasing activity except as provided in Section 8.2.2 (LEASING
ACTIVITIES).
8.2.2LEASING ACTIVITIES. Until the Closing, Select agrees not
to enter into any new lease for space in the Properties or renew or extend
any such Lease (except pursuant to the exercise by a Tenant of a renewal,
extension or expansion option contained in such Tenant's Lease which, by its
terms, does not require the approval of Select or the Partnership), without
Buyer's prior written approval, which shall not be unreasonably withheld,
conditioned or delayed and shall be deemed given unless objected to in
writing within three (3) business days after the request for such approval is
delivered to Buyer with the material terms of the new Lease, renewal or
extension. Select also agrees not to cancel, terminate, modify or amend any
Existing Lease in any material respect without Buyer's prior written
approval, which shall not be unreasonably withheld, conditioned or delayed
and shall be deemed given unless objected to in writing within three (3)
business days after the request for the applicable action is delivered to
Buyer. Select shall not accept any rent from any Tenant (or any new Tenant
under any new Lease) for more than one month in advance of the payment date.
The default of a Tenant at any of the Properties shall in no event relieve
Buyer of its obligation to consummate the Transactions as provided in this
Agreement except to the extent constituting a Major Lease Termination
pursuant to Section 9 (INSURANCE; RISK OF LOSS; CONDEMNATION), or a Tenant
default existing as of the Contract Date that constitutes a breach of a
representation or warranty set forth herein for which termination is an
available remedy.
8.2.3LEASE COSTS. The costs incurred or actually incurred by
Select or the Partnership in connection with certain leasing activities will
be prorated as provided in Section 11.8.5 (LEASE COSTS).
8.3 TITLE. Except as provided in Section 8.2.2 (LEASING
Activity), Select shall not directly or indirectly sell, assign or create any
right, title or interest whatsoever in or to any of the Properties, or create
or permit to exist thereon any lien, charge or encumbrance other than the
title exceptions currently of record, or enter into any agreement to do any
of the foregoing, without the prior written consent of Buyer, which consent
shall not be unreasonably withheld, conditioned or delayed.
8.4 SERVICE CONTRACTS. Until the Closing, Select agrees not to
enter into any new Service Contract not terminable prior to the Closing or
renew or extend any Service Contract, without Buyer's prior written approval,
which shall not be unreasonably withheld, conditioned or delayed and shall be
deemed given unless objected to in writing within three (3) business days
after the request for such approval is delivered to Buyer with the material
terms of the new Service Contract, renewal or extension. Select also agrees
not to cancel, terminate, modify or amend any Assumed Contract in any
material respect without Buyer's prior written approval, which shall not be
unreasonably withheld, conditioned or delayed and shall be deemed given
unless objected to in writing within three (3) business days after the
request for the applicable action is delivered to Buyer.
8.5 RESTRICTIVE USES. Prior to the Closing Date, Select will not
(and will cause the Partnership not to) initiate, join in, or consent to any
change in the current use of the Properties in any zoning ordinance, private
restrictive covenant, assessment proceedings or other public or private
restrictions limiting or restricting the uses that may be made of the
Properties or any part thereof without the prior written consent of Buyer,
which shall not be unreasonably withheld, conditioned or delayed and shall be
deemed given unless objected to in writing within three (3) business days
after the request for such approval.
8.6 ESTOPPEL LETTERS. Through the Closing Date, Select shall use
its commercially reasonable efforts to attempt to obtain and deliver to Buyer
tenant estoppel letters in substantially the form of EXHIBIT E ("ESTOPPEL
LETTERS") from each of the Tenants. Select shall deliver to Buyer within 30
days after the Contract Date executed Acceptable Estoppel Letters from (i)
not less than seventy-five (75%) by number of Tenants of the Tenants under
Existing Leases leasing 50,000 square feet or more in the Properties and in
all events including Lam Research Corporation with respect to all of its
leased premises and (ii) not less than seventy-five (75%) by number of
Tenants of the Tenants under Existing Leases leasing less than 50,000 square
feet in the Properties. In the event the required number of Acceptable
Estoppel Letters are not timely received, either Buyer, or Select on the part
of all of the Sellers, may terminate this Agreement, Buyer shall receive back
the Deposit, and no party shall have further any obligations under the
Transaction Agreements, except for those obligations which are stated therein
as surviving termination. An "ACCEPTABLE ESTOPPEL LETTER" shall mean an
executed Estoppel Letter substantially conforming in form to EXHIBIT E, the
substance of which is consistent with the related Lease, or with such
material modifications in form or substance as is approved by Buyer, which
approval will not be unreasonably withheld, conditioned, or delayed. Select
and Buyer will jointly prepare the proposed Estoppel Letters prior to
delivery thereof in order to confirm that such Estoppel Letters, when
executed by the appropriate Tenant, will constitute Acceptable Estoppel
Letters. Select will continue to endeavor to obtain Estoppel Letters from
the remaining Tenants in accordance with the first sentence of this Section
8.6 following receipt of such minimum number of Estoppel Letters and shall
promptly deliver any such Estoppel Letters to Buyer.
8.7 DEVELOPMENT OF THE DATA GENERAL PROJECT.
Buyer acknowledges that Select has received approval from the City
of Manhattan Beach, California, for the development of a five-story office
building containing 125,000 rentable square feet of space and a seven-level
parking garage at Data General (the "PROJECT"). Attached as SCHEDULE 8.7 is
Select's proposed budget and development plan for the Project. At the
Closing Buyer will reimburse Select for up to $100,000 of third party
development costs with respect to the Project that are identified as
reimbursable on SCHEDULE 8.7 and incurred with Buyer's prior written approval
(not to be unreasonably withheld, conditioned or delayed) from the Contract
Date through the Closing Date. Buyer acknowledges that maintenance of
existing development rights in respect of the Project may require the
incurrence of additional development costs prior to the Closing. Select
shall incur such additional development costs as Buyer reasonably requests
and for which Buyer reimburses Select (regardless of whether or not the
Closing occurs) on terms reasonably satisfactory to Select. Select may, but
shall have no obligation to, incur any other additional development costs and
Buyer shall have no obligation to reimburse Select for such other additional
development costs. Buyer understands and acknowledges that Buyer's failure
to agree to reimburse Select for such costs and Seller's failure to incur
such costs, could result in the loss or limitation of such rights.
8.8 MODIFICATIONS TO PARTNERSHIP AGREEMENT. Select also agrees not
to cancel, terminate, modify or amend the Partnership Agreement, except as
contemplated by the Transaction Agreements, in any material respect without
Buyer's prior written approval, which shall not be unreasonably withheld,
conditioned or delayed.
9....INSURANCE; RISK OF LOSS; CONDEMNATION.
9.1 INSURANCE. Buyer acknowledges that Select and the Partnership
have provided to Buyer evidence of the property insurance, including
earthquake insurance, currently in effect with respect to the Properties.
Select and the Partnership agree to maintain such insurance (or, with respect
to policies expiring in accordance with their terms prior thereto, such
replacement therefore as is available on a commercially reasonable basis) in
effect through the Closing Date at no cost to the Buyer.
9.2 DAMAGE OR DESTRUCTION. In the event of damage or destruction
to the Properties prior to the Closing, Buyer and Sellers shall Close the
Transactions, and Buyer shall receive all proceeds of Select's insurance
payable by reason of such damage or destruction (excluding rental loss
insurance for the period prior to the Closing), PLUS the amount of any
deductible or uninsured loss, less any amounts expended for approved
restoration in accordance with Section 9.4 (RESTORATION); PROVIDED, HOWEVER,
if any Tenant leasing over 40,000 square feet in the affected Properties, or
20% or more (by number of Tenants) of the remaining Tenants leasing over
10,000 square feet in the affected Properties, either (i) fails or fail to
provide a written statement waiving any and all rights to terminate their
respective Leases as a result of such damage or destruction and stating that
they will stay in possession (in the case of Tenants having a right to
terminate their respective Leases as a result of such damage or destruction)
or (ii) threaten or assert in writing a right to terminate their respective
Leases as a result of such damage or destruction (in the case of any other
Tenant) (collectively, such failure and/or assertion, a "MAJOR LEASE
TERMINATION"), Buyer may terminate this Agreement by delivering a written
termination notice, within forty-five (45) days after the date of such damage
or destruction, in which case the Deposit shall be promptly returned to Buyer
and the parties shall have no further obligations under this Agreement except
as otherwise provided in this Agreement.
9.3 EMINENT DOMAIN. If, prior to the Closing, all or any portion
of any Property is taken by eminent domain, Buyer and Sellers shall Close the
Transactions, with the Buyer acquiring the Properties as affected by such
taking, and any partnership interest in respect thereof, together with all
compensation and damages awarded or the right to receive same (excluding any
award for income loss prior to the Closing), PROVIDED, HOWEVER, that if as a
result of such condemnation a Major Lease Termination occurs, Buyer may
terminate this Agreement by delivering a written termination notice, within
forty-five (45) days after the date of such condemnation, in which case the
Deposit shall be promptly returned to Buyer and the parties shall have no
further obligations under this Agreement except as otherwise provided in this
Agreement. Select agrees to assign to Buyer at the Closing its rights to
such compensation and damages, and will not settle any proceedings relating
to such taking without Buyer's prior written consent. Select shall promptly
notify Buyer of any actual or threatened condemnation affecting any of the
Properties with respect to which Select has received written notice. Buyer
shall have no right to terminate the Partnership Transactions in connection
with any taking by eminent domain occurring on or after the Closing Date.
9.4 RESTORATION. In the event of any damage, destruction or
condemnation, Select or the Partnership, as the case may be, may, with
Buyer's prior written approval, not to be unreasonably withheld, conditioned
or delayed, proceed with the restoration of the affected Properties. Select
or the Partnership, as the case may be, shall submit all budgets, plans,
applications for approvals and related construction and materials contracts
to Buyer for Buyer's prior written approval, which approval shall not be
unreasonably conditioned, withheld or delayed. Notwithstanding anything to
the contrary in Sections 9.2 (DAMAGE OR DESTRUCTION) and 9.3 (EMINENT
Domain), Buyer shall have no right to terminate this Agreement on account of a
Major Lease Termination if Buyer fails to approve any restoration as may be
necessary, in Select's or the Partnership's reasonable business judgment, to
avoid such Major Lease Termination.
9.5 EXCLUSIVE REMEDIES. The provisions of this Section 9 shall
constitute Buyer's sole and exclusive remedies in the event of damage or
destruction to, or condemnation of, the Properties prior to the Closing,
PROVIDED, however, that the foregoing shall not limit Buyer's rights to
damages or specific performance under Section 15 (DEFAULT AND REMEDIES) with
respect to any intentional breach or default by Sellers.
10...SHAREHOLDER OBLIGATIONS.
10.1 SHAREHOLDER APPROVAL. Buyer acknowledges that the Select
Transactions are part of a liquidation of Select and are subject to the
approval of Select's shareholders. Select agrees to make commercially
reasonable efforts to obtain such approval.
10.2 PROXY STATEMENT. In furtherance, and not in limitation of the
foregoing, as soon as practicable (but in no event more than thirty (30) days
following the Contract Date), Select shall finalize and file with the United
States Securities and Exchange Commission (the "SEC") a preliminary proxy
statement in accordance with the applicable rules and regulations promulgated
under the Securities Exchange Act of 1934 and thereafter shall file as soon
as is practicable a definitive proxy statement. The proxy statement shall
include a proposal to approve the Select Transactions. Select shall use
commercially reasonable efforts to respond to any comments of the SEC and to
cause the proxy statement to be mailed to the Select shareholders as promptly
as practicable. Select will promptly notify the Buyer of any comments from
the SEC and of any request by the SEC for amendments or supplements to the
proxy statement or for additional information. The proxy statement shall
comply as to form in all material respects with all applicable requirements
of law. Buyer shall furnish all information concerning Buyer as Seller may
reasonably request in connection with such actions and the preparation of the
proxy statement.
10.3 FAILURE TO OBTAIN APPROVALS; PERMITTED TERMINATION. If,
notwithstanding such efforts, Select is unable to obtain the requisite
approval of the shareholders by February 28, 2000, Select (on behalf of
Sellers) or Buyer shall be entitled to terminate this Agreement by written
notice to the other party. If following the Contract Date, Select receives a
Superior Proposal, then to the extent required by the fiduciary obligations
of the Board of Directors of Select as determined in good faith in
consultation with outside counsel, Select shall be entitled to terminate this
Agreement on behalf of Sellers by written notice to Buyer. A "SUPERIOR
PROPOSAL" means any proposal or offer from any person relating to any direct
or indirect acquisition or purchase of the Properties, shares of Select, or
Units that the Board of Directors of Select determines in its good faith
judgment, after consultation with outside legal counsel and with such
financial and other advisors, if any, as it deems necessary or appropriate,
is reasonably likely to be consummated taking into account all legal,
financial and regulatory aspects of the proposal and the persons on whose
behalf such proposal is made, and which would, if consummated, result in net
proceeds and tax benefits to Select's shareholders and the Limited Partners
in excess of the amount and benefits which the shareholders (treating the
Limited Partners as having fully converted their Units into shares of Select)
would receive in liquidating dividends as a result of the Transactions. A
termination described in this Section 10.3 is sometimes referred to in this
Agreement as a "PERMITTED TERMINATION". In the event of a Permitted
Termination, (a) Select shall reimburse Buyer for; (i) an amount, not
exceeding $250,000 in the aggregate, equal to the sum of (A) Buyer's out of
pocket costs of unaffiliated experts and consultants incurred in connection
with (x) structural and engineering studies with respect to heating, air
conditioning and other building systems, and structural and seismic integrity
of the Improvements (including structural pest control reports), and (y)
environmental assessments, PLUS (B) loan assumption fees and other fees and
expenses (including the legal fees of Lender's outside counsel, if any ) paid
to Lenders in respect of the Existing Loans by Buyer and not returned or
reimbursed; and for (ii) legal fees (not to exceed $25,000) incurred and
claimed within 12 months after September 1, 1999 (in each case subject to
receipt and approval of appropriately detailed invoices) (the amounts to be
reimbursed under this clause (a), the "REIMBURSEMENT AMOUNT"); (b) the
Deposit shall be promptly returned to Buyer; and (c) this Agreement shall
terminate and neither Sellers nor Buyer shall have any further liability
hereunder, except for those obligations which expressly survive the
termination of this Agreement.
10.4 SUBSEQUENTLY RECEIVED OFFERS. If a Permitted Termination
occurs and within 12 months after the Contract Date Select, in one or more
transactions, consummates, or enters into any agreement providing for, any
merger, consolidation, share exchange, business combination or similar
transaction with a third party involving all or substantially all of Select
and/or the Partnership or the Properties or any sale, exchange or transfer
(other than debt financing or refinancing) of all or substantially all of the
Properties, Select shall, in addition to any Reimbursement Amount previously
paid, pay to Buyer a break-up fee of $1,315,000 (appropriately prorated
(based on comparative rentable square feet) for transactions covered by this
sentence that involve substantially all, but less than all, of Select, the
Partnership or the Properties), as, if and when the consummation of such
transaction occurs. Notwithstanding the foregoing, Select will not be
obligated to make the reimbursements described in Section 10.3 or pay the
break-up fee referred to in this Section 10.4 if the Transactions fail to
close as the result of any default under the Transaction Documents on the
part of Buyer. Upon payment of the Reimbursement Amount as described above
and the break-up fee from Select to Buyer as provided in this Section 10.4,
this Agreement shall terminate and neither Sellers nor Buyer shall have any
liability hereunder, except for those obligations which expressly survive the
termination of this Agreement.
11...CLOSING.
11.1 CLOSING DATE. Unless otherwise agreed by Buyer and Select,
the consummation of the Transactions ("CLOSING"; the date on which the
Closing occurs is sometimes referred to in this Agreement as the "CLOSING
Date") shall be held at the offices of the Farella, Braun & Martel LLP, 235
Montgomery Street, San Francisco, California 94104, as soon as is practicable
(but in no event more than twenty (20) business days) after Select notifies
Buyer of receipt of shareholder approval, and in all events by March 31,
2000. Notwithstanding the foregoing, the parties will not be required to
cause the Closing to occur prior to January 4, 2000, unless Buyer agrees to
pay and hold the Limited Partners harmless from the present value (calculated
using a discount rate of 9.5%) of the tax cost incurred by the Limited
Partners by recognizing the Closing of the Transactions in 1999 rather than
2000 (the "EARLY CLOSING COST"). If Buyer wishes the Closing to occur prior
to January 4, 2000 (and PROVIDED that all other conditions to Closing set
forth herein have been satisfied or waived) it shall first give notice of its
intention to the Sellers not less than 20 days prior to its intended Closing
Date. The Limited Partners shall, as promptly as is practical (and in all
events within 10 days of Buyer's notice), inform Buyer of the estimated Early
Closing Cost. If Buyer agrees to the Early Closing Cost (which it may do or
not in its sole discretion), Buyer shall so notify Sellers not less than 5
days before the desired Closing Date and, PROVIDED that all other conditions
to Closing set forth herein have been satisfied or waived, the Closing shall
take place on such desired Closing Date or as soon thereafter as is
practical. If Buyer does not agree to the Early Closing Cost, the Closing
will take place on or after January 4, 2000 in accordance with the first
sentence of this Section 11.1
11.2 SELECT'S DELIVERIES. Select shall deliver the following
documents and items on or before the Closing:
11.2.1GRANT DEEDS. Select shall deposit with the Title
Company in escrow duly executed and acknowledged grant deeds in standard
Title Company form conveying fee title to the Select Land and related
Improvements to Buyer (the "GRANT DEEDS"), with documentary transfer tax
amount declared off-record.
11.2.2GENERAL PARTNER'S INTEREST ASSIGNMENT AGREEMENT. An
assignment agreement with respect to the General Partner's Interest in
substantially the form attached as EXHIBIT F, duly executed by Select (the
"GENERAL PARTNER'S INTEREST ASSIGNMENT AGREEMENT").
11.2.3BILLS OF SALE AND ASSIGNMENTS OF LEASES. Select shall
deliver to Buyer duly executed Bills of Sale and Assignments of Leases in
form attached hereto as EXHIBIT G (the "ASSIGNMENTS OF LEASES").
11.2.4ASSIGNMENTS OF CONTRACTS, ETC. Select shall deliver to
Buyer duly executed assignments, in the form of attached EXHIBIT H, assigning
to Buyer or its nominee all of Select's interest in the Plans, Service
Contracts, Warranties and Approvals, if any.
11.2.5TENANT NOTICE LETTERS. Select shall deliver to Buyer
duly executed Tenant Notice Letters, in the form of attached EXHIBIT I,
notifying each Tenant of the Select Transactions and directing that rent and
other payments thereafter be sent to Buyer or as Buyer directs.
11.2.6FIRPTA AFFIDAVIT. Select shall deposit with the Title
Company in escrow an affidavit by Select establishing that Select is not a
"foreign person" under IRC Section 1445(f)(3), and any similarly required
state forms.
11.2.7TITLE REQUIREMENTS. Select shall deposit with the Title
Company in escrow such other documents as may reasonably be required to
complete the Closing, duly executed by Select, including all affidavits,
certificates and other documents required by the Title Company to issue the
Title Policies in accordance with the Commitments.
11.2.8BRING DOWN CERTIFICATE. Select shall deliver to Buyer a
certificate executed by Select on behalf of itself and the Partnership in
form reasonably acceptable to Buyer stating that (i) those representations
and warranties made by Select and the Partnership in this Agreement are true
and correct as of the Closing (unless another date is specifically referenced
in a representation or warranty), or, if there have been any changes, a
description thereof, (ii) to the best of Select's current, actual knowledge
those representations and warranties made by Buyer in this Agreement are true
and correct as of the Closing (unless another date is specifically referenced
in a representation or warranty), or, if there have been any changes, a
description thereof, in which event Sections 4.3 (TITLE EXCEPTIONS APPEARING
BEFORE THE CLOSING); 7.3 (BREACH OF REPRESENTATION AND WARRANTY);
8.2.2.(LEASING ACTIVITIES)(last sentence); or 9 (INSURANCE; RISK OF LOSS;
CONDEMNATION) shall apply, as appropriate.
11.2.9ESTOPPEL LETTERS. To the extent it has not previously
done so, Select shall deliver all Estoppel Letters received by it prior to
the Closing to Buyer.
11.2.10 TERMINATIONS OF RELATED PARTY AGREEMENTS. Select
shall deliver to Buyer duly executed terminations of the advisory and
property management agreements listed on SCHEDULE 11.2.10 and any Service
Contracts that are not Assumed Contracts.
11.2.11 PROOF OF AUTHORITY. Select shall deliver to Buyer
duly executed affidavits and other instruments, including all organizational
documents of Select and the Partnership including Select's articles of
organization and certificates of good standing and existence, the
Partnership's agreement of limited partnership and certificate of limited
partnership, resolutions and evidence of the power and authority of Select
and the Partnership to enter into the Transaction Agreements and perform
their respective obligations thereunder as Buyer reasonably requests.
11.2.12 LEASES AND SERVICE CONTRACTS. All original Leases,
Service Contracts, Plans, Warranties and Approvals (or certified copies of
the same if Select, using commercially reasonable efforts, is unable to
deliver originals), and all files pertaining thereto.
11.2.13 KEYS. Select shall deliver to Buyer all keys an/or
security or access codes with respect to the Properties in Select's
possession or control.
11.2.14 CLOSING STATEMENT. Select shall deliver to the
Title Company, a closing statement reflecting the Estimated Closing
Accounting and mutually approved by Select and Buyer (which approval shall
not be unreasonably withheld, conditioned or delayed by any party thereto),
to enable the Title Company to close escrow.
11.2.15 LEGAL OPINIONS. Select shall deliver to Buyer an
opinion of counsel to Select in form and substance mutually agreed upon by
Buyer and Select, addressing (i) the existence, good standing and
qualification of Select and the Partnership, and (ii) the power and authority
of Select and the Partnership to enter into the Transaction Agreements and
perform their respective obligations thereunder.
11.3 LIMITED PARTNERS' DELIVERIES. Each Limited Partner, as his or
its several obligation, shall deliver the following to Buyer on or before the
Closing Date:
11.3.1PARTNERSHIP INTEREST ASSIGNMENT AGREEMENTS. An
assignment agreement with respect to the Units in substantially the form
attached as EXHIBIT J, duly executed by such Limited Partner (each, a
"PARTNERSHIP INTEREST ASSIGNMENT AGREEMENT").
11.3.2TRANSACTION AGREEMENTS. Any other Transaction
Agreements relating to the Closing to which such Limited Partner is a party;
11.3.3BRING DOWN CERTIFICATE. A certificate executed by such
Limited Partner in form reasonably acceptable to Buyer stating that (i) those
representations and warranties made by such Limited Partner in this Agreement
are true and correct as of the Closing (unless another date is specifically
referenced in a representation or warranty), or, if there have been any
changes, a description thereof (ii) to the best of such Limited Partner's
current, actual knowledge those representations and warranties made by Buyer
in this Agreement are true and correct as of the Closing (unless another date
is specifically referenced in a representation or warranty), or, if there
have been any changes, a description thereof.
11.4 BUYER'S DELIVERIES. Buyer shall deliver the following on or
before the Closing:
11.4.1SELECT PRICE. Buyer shall deposit with the Title
Company in escrow in cash the Select Price, less the principal amount of any
Existing Loans assumed by Buyer and the amount of any cash Deposit.
11.4.2UNITS PURCHASE PRICE. Buyer shall deliver to each of
the Limited Partners his or its Note.
11.4.3CLOSING COSTS. Buyer shall deposit with the Title
Company in escrow Buyer's share of closing costs as described below.
11.4.4TITLE REQUIREMENTS. Buyer shall deposit with the Title
Company in escrow such other documents as may reasonably be required to
complete the Closing, duly executed by Buyer, including all affidavits,
certificates and other documents required by the Title Company to issue the
Title Policies.
11.4.5BRING DOWN CERTIFICATE. Buyer shall deliver to Sellers
a certificate executed by Buyer in form reasonably acceptable to Sellers
stating that (i) those representations and warranties made by Buyer in this
Agreement are true and correct as of the Closing (unless another date is
specifically referenced in a representation or warranty), or, if there have
been any changes, a description thereof (ii) to the best of Buyer's current,
actual knowledge those representations and warranties made by Sellers or the
Partnership in this Agreement are true and correct as of the Closing (unless
another date is specifically referenced in a representation or warranty), or,
if there have been any changes, a description thereof.
11.4.6TRANSACTION AGREEMENTS. Buyer shall deliver to Sellers
any Transaction Agreements to which Buyer is a party, duly executed by Buyer.
11.4.7PROOF OF AUTHORITY. Buyer shall deliver to Sellers
affidavits and other instruments, including all organizational documents of
Buyer, including Buyer's articles of organization and certificates of good
standing and existence, resolutions and evidence of the power and authority
of Buyer to enter into the Transaction Agreements and perform its respective
obligations thereunder as Sellers reasonably request.
11.4.8CLOSING STATEMENT. Buyer shall deliver to the Title
Company, a closing statement reflecting the Estimated Closing Accounting as
mutually approved by Select and Buyer (which approval shall not be
unreasonably withheld, conditioned or delayed by any party thereto), to
enable the Title Company to close escrow.
11.4.9LEGAL OPINIONS. Buyer shall deliver to Sellers an
opinion of counsel to Buyer in form and substance mutually agreed upon by
Sellers and Buyer, addressing (i) the existence, good standing and
qualification of Buyer, and (ii) the power and authority of Buyer to enter
into the Transaction Agreements and perform its obligations thereunder.
11.5 THE PARTNERSHIP'S DELIVERIES. The Partnership shall deliver
to Buyer on or before the Closing, (i) any Transaction Agreements to which
the Partnership is a party, duly executed by the Partnership and (ii) such
certificates and other public filings as are required in connection with the
Transactions.
11.6 CLOSING COSTS. The costs for the Transactions shall be paid
at the Closing as follows:
11.6.1 SELECT COSTS. Select shall pay (i) any brokerage fees
provided for in Section 17.7 (BROKERS AND FINDERS); (ii) one-half of
(A) escrow fees (B) the cost of the Title Policies referred to in Section 4
(TITLE) (C) the costs of any updated Surveys, (D) any transfer taxes,
recording costs or personal property sales taxes incurred in connection with
the Transactions; and (iii) its own attorneys fees.
11.6.2 BUYER COSTS. Buyer shall pay (i) one-half of
(A) escrow fees (B) the cost of the updated Title Policies referred to in
Section 4 (TITLE), (C) the costs of any updated Surveys, (D) any transfer
taxes, recording costs or personal property sales taxes incurred in
connection with the Transactions, (E) any third party costs not otherwise
specifically addressed in this Agreement incurred in connection with the
Closing of the Partnership Transactions; (ii) any brokerage fees provided for
in Section 17.7 (BROKERS AND FINDERS); (iii) the costs of any additional
title endorsements, (iv) loan assumption fees and costs and loan prepayment
charges as set forth in Section 5 (EXISTING LOANS), and (v) its own
attorney's fees.
11.6.3 LIMITED PARTNER COSTS. Limited Partners shall pay
their own attorneys fees and costs and, severally to the extent of their
Units, shall each pay one half of any third party costs not otherwise
specifically addressed in this Agreement incurred in connection with the
Closing of the Partnership Transactions.
11.6.4 OTHER CLOSING COSTS. All other closing costs shall be
shared in accordance with the custom for the county in which each Property is
located.
11.7 CLOSING EVENTS. Sellers and Buyer shall Close the
Transactions when each has received from the other party the items required
to be delivered above. The Title Company shall close the escrow for the
Transaction when it is in a position to issue the Title Policies and has
received from Sellers and Buyer the items required to be delivered to it
above. Title Company shall close escrow by doing the following:
11.7.1 RECORDING. Recording the Grant Deeds in the Official
Records of the appropriate County Recorders.
11.7.2 DELIVERY OF TITLE POLICIES, ETC., Delivering to Buyer
the Title Policies, the originals of all transfer documents deposited by
Select, a closing statement for the escrow, and any refund due Buyer.
11.7.3 SELECT PRICE. Delivering to Select the Select
Price as adjusted pursuant to the mutually approved closing statement, and
copies of all other documents delivered through escrow.
11.7.4 POSSESSION OF SELECT PROPERTIES. Select shall deliver
possession of the Select Properties to Buyer on the Closing Date.
11.8 PRORATIONS. All income and expenses for the Properties will
be prorated as of the Closing on the following basis (for the purposes of
prorations only, "Closing Date" shall mean midnight of the day preceding the
actual Closing); the provisions of this Section shall, to the extent
applicable, survive the Closing through the Final True Up Date:
11.8.1 ALLOCATION TO SELECT. All amounts allocable to the
Sellers under this Section shall be allocated to Select. Once the Units
Price has been determined in accordance with Section 2 (PURCHASE PRICE),
there shall be no prorations applicable to the Partnership Transactions or
other adjustments to the Units Price, other than the Limited Partners' share
of closing costs in accordance with Section 11.6.3 (LIMITED PARTNER COSTS).
11.8.2TAXES AND UTILITIES. All real estate taxes, assessments
and other municipal charges (including betterment assessments) affecting each
Property shall be pro-rated on a per diem basis as of the Closing Date.
Select shall terminate the current utility service to the Properties, and
Buyer will cause utility service in Buyer's name to be implemented, on the
Closing Date and Select shall be responsible for payment of all utility
charges for the period preceding the Closing Date. If any real estate taxes,
charges or assessments have not been finally assessed as of the Closing Date
for the current fiscal year of the taxing authority, then the same shall be
adjusted as of the Closing based upon the most recently issued assessment
therefore using the latest tax rate, and shall be readjusted in the Final
Closing Accounting. The provisions of this Section shall, to the extent
applicable, survive the Closing for a period not to exceed six (6) months
(the last business day of such period, the "FINAL TRUE UP DATE").
11.8.3RENTS AND ADDITIONAL RENTS. All rents and additional
rents (which shall include additional rents on account of taxes, operating
expenses and/or common area management charges) for the month during which
the Closing takes place with respect to Tenants who are not delinquent as of
the last day of the prior month shall be conclusively deemed paid and
collected and shall be pro-rated between Buyer and Select as of and including
the Closing Date.
Delinquent rents and additional rents owed for months prior to the month
during which the Closing takes place shall be and remain the property of
Select, and Buyer shall make commercially reasonable efforts to collect such
delinquent rents and additional rents for the benefit of Select and shall
cooperate with Select in the collection of any such delinquent rents and
additional rents, provided that such collection efforts and such cooperation
with Select shall require no unreimbursed expenditure of funds on Buyer's
part. Any payments received by Select or Buyer from Tenants in any month
following the month of the Closing shall be applied first to then current
rents, and then to delinquent rents, in inverse order of maturity. Subject
to the provisions of the foregoing sentence, if either Select or Buyer
receives before, on or after the Closing, a payment which under the terms of
this Agreement is the property of the other party, the party receiving such
payment shall promptly forward it to the party entitled to receive it.
Select shall not bring any action or claim against or otherwise seek to
affect the possession of any tenant for rent unpaid as of the Closing or for
any other previous monetary defaults under the Leases, other than an action
for monetary damages.
A reconciliation of additional rents for the period prior to the Closing
shall be made as soon after the Closing, as is practical. Select shall be
responsible for reimbursing such Tenants as shall be determined to have made
overpayments of additional rents for the period prior to the Closing, and
Select shall be entitled to receive any payments from such Tenants as shall
be determined to have made underpayments of additional rents for the period
prior to the Closing.
11.8.4CHARGES UNDER SERVICE CONTRACTS. The monetary
obligations of Select or the Partnership with respect to any of the Service
Contracts shall be pro-rated as of the Closing.
11.8.5LEASE COSTS. Select shall be responsible for and timely
pay all leasing commissions, tenant improvement allowances, cost of tenant
improvement work and other out-of-pocket lease inducements (collectively,
"LEASE COSTS") for Leases signed before May 1, 1999, and Buyer will be
responsible for and timely pay, or reimburse Select for, any Lease Costs
incurred with respect to any Leases executed after April 30, 1999 in
accordance with Section 8.2.2 (LEASING ACTIVITY), excluding any such costs
payable to Select or its affiliates exceeding $100,000 in the aggregate.
SCHEDULE 11.8.5 sets out the Lease Costs for which Buyer is responsible under
this Section that have been incurred as of the Contract Date. In addition,
Buyer acknowledges and agrees that it shall pay any and all Trailing
Commission Fees (as defined and described in Section 13.3.5 of this
Agreement) and shall indemnify, protect and hold Select harmless from any
claims made against Select in connection with such Trailing Commission Fees.
11.8.6CAPITAL EXPENDITURES. Approved Capital Expenditures and
Emergency Expenditures incurred from May 1, 1999 through the Closing will be
prorated between Buyer and Select such that Select will be responsible for
the first $130,000 and Buyer will be responsible for all amounts in excess
thereof, provided, that if Select has not incurred after April 30, 1999
costs of Approved Capital Improvements and Emergency Capital Expenditures in
an aggregate amount of not less than $130,000, Select shall credit Buyer with
the difference at the time of the Closing.
11.8.7SECURITY DEPOSITS. Buyer shall receive a credit in an
amount equal to the security deposits (plus interest, if any) landlord is
obligated to hold under the Existing Leases and any new Leases.
11.8.8. PREPAID AMOUNTS. All prepaid interest and other
amounts prepaid by Select or the Partnership in respect of the Existing
Loans, and other similar prepaid amounts subject to proration as of Closing
Date shall be credited to Select.
11.8.9REFUNDABLE DEPOSITS. All refundable deposits shall be
credited to Select.
11.8.10 CASH ON HAND. All cash on hand and balances in bank
accounts with respect to the Partnership shall be credited to Select (other
than escrows for Assumed Loans); Select shall have the right to cause the
Partnership to distribute to its partners any cash on hand immediately prior
to the Closing., and Select will not receive a credit for amounts so
distributed.
11.8.11 INTEREST ON ASSUMED DEBT. The interest due on any
assumed debt shall be pro-rated as of the Closing.
11.9 ESTIMATED CLOSING ACCOUNTING. At least four (4) business days
prior to the proposed Closing Date, Select shall prepare and deliver to the
Buyer a proposed accounting prepared on an accrual basis for income and
expenses ("ESTIMATED CLOSING ACCOUNTING"), that shall estimate in accordance
with Section 11.8 (PRORATIONS) the prorations therein and the other
adjustments to the Select Price described in this Agreement, which Estimated
Closing Accounting shall contain Select's certification to the best of its
knowledge of the credits to which Select is entitled pursuant to Sections
11.8.8, 11.8.9 and 11.8.10 and that the Partnership has no other outstanding
obligations (other than obligations represented by the Partnership Note) not
addressed by the prorations described in this Section 11.
11.10CLOSING ACCOUNTING. Following receipt of the Estimated
Closing Accounting by the Buyer, the Buyer shall review the Estimated Closing
Accounting and shall have the right to approve the same, such approval not to
be unreasonably withheld, conditioned or delayed (such Estimated Closing
Accounting, as so approved, the "CLOSING ACCOUNTING").
11.11RESOLUTION: FINAL ACCOUNTING. In the event the parties are
unable to finally resolve any issue relating to the Estimated Closing
Accounting or the Closing Accounting prior to the Closing Date, the matter
shall be resolved following the Closing in a post-closing audit to be
conducted by PricewaterhouseCoopers. Not later than the Final True-Up Date,
the parties shall cause PricewaterhouseCoopers to conduct an audit of the
Final Closing Accounting and, to the extent it is determined that either
party has retained or received amounts in excess of the amounts to which it
is entitled under this Section 11, such party shall remit such excess to the
other party within thirty (30) days of such determination. The cost of such
audit shall be borne equally by Buyer and Select.
11.12CONDITIONS PRECEDENT TO CLOSING. In addition to any other
express conditions set forth herein, the respective obligations of Buyer and
Sellers to Close the Transactions shall be subject to the satisfaction prior
to the Closing or waiver by the party benefiting thereby of the following
conditions, with the Closing being subject to the simultaneous closing of all
of Transactions:
11.12.1 SELECT SHAREHOLDER APPROVAL. Select shall have
received the requisite approvals of the Select Transactions from its
shareholders.
11.12.2. NO INJUNCTION OR RESTRAINTS. No statute, rule,
decision, regulation, executive order, decree, temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other governmental entity or other legal restraint
or prohibition (each, a "RESTRAINT") preventing the consummation of the
Transactions shall be in effect, PROVIDED, that each of the parties shall
have used all reasonable efforts to prevent the entry of such restraint or
to appeal promptly any such restraint as may be entered.
11.12.3 GOOD TITLE TO UNITS. All of the Limited Partners
shall have delivered good title to the Units, free and clear of any adverse
liens, claims or encumbrances.
11.12.4. PERFORMANCE. Each of the parties shall have
performed or complied with all obligations of such party under the
Transaction Agreements to be performed or complied with by that party on or
before the Closing, PROVIDED, that a failure of compliance or performance
will not give rise to a claim of right to terminate so long as such failure
does not have a material, adverse effect on the Transactions.
11.12.5 TITLE POLICIES. The Title Company shall be ready,
willing and able to issue the Title Policies, subject only to the Permitted
Exceptions and including all endorsements provided for in the Commitments.
11.12.6 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Select set forth in Section 13.1 (REPRESENTATIONS AND
WARRANTIES OF SELECT AS TO ITSELF) (as a condition to Buyer's obligations to
consummate the Closing), the representations and warranties of the Limited
Partners set forth in Section 13.2 (REPRESENTATIONS AND WARRANTIES OF LIMITED
PARTNERS) (as a condition to Buyer's obligations to consummate the Closing,
PROVIDED that a failure of any such representation and warranty to be true
and correct will not give rise to a claim of right to terminate so long as
such failure does not have a material, adverse effect on the Partnership
Transactions) and the representations and warranties of Buyer under Section
13.7 (REPRESENTATIONS AND WARRANTIES OF BUYER) (as a condition to the
Sellers' obligations to consummate the Closing) shall be true and correct in
all material respects as of the Closing Date, subject to Sections 4.3 (TITLE
EXCEPTIONS APPEARING BEFORE THE CLOSING); 7.3 (BREACH OF REPRESENTATION AND
WARRANTY); 8.2.2.(LEASING ACTIVITIES)(last sentence); or 9 (INSURANCE; RISK
OF LOSS; CONDEMNATION), as applicable.
11.12.7. DELIVERIES. Each of Buyer, Sellers and the
Partnership shall have deposited or delivered the items to be deposited or
delivered by it pursuant to Section 11.2 (SELECT'S DELIVERIES), Section 11.3
(LIMITED PARTNERS' DELIVERIES), Section 11.4 (BUYER'S DELIVERIES) or Section
11.5 (THE PARTNERSHIP'S DELIVERIES), as appropriate.
11.12.8. CLOSING DATE. The Closing shall have occurred on or
before March 31,2000.
12...LIMITED PARTNER LOANS.
At, and conditioned on the consummation of Closing, Buyer shall
make available to each of the Limited Partners a loan (each, a "PARTNER
Loan"), which may be drawn on or after the Closing, in an amount not to exceed
$375,000 each, on the following terms and conditions:
(i) cash proceeds of such Partner Loan will be disbursed on or
after Closing, at such Limited Partner's election;
(ii) interest only on the outstanding balance of each Partner Loan
would be payable in arrears on the first day of each calendar quarter and
would accrue at a rate equal to (i) the lowest Applicable Federal Rate,
determined in accordance with Section 1274(d)(2) of the United States
Internal Revenue Code and the regulations promulgated thereunder, in effect
during the three month period ending with the month in which the Contract
Date occurs, or (ii) the lowest Applicable Federal Rate, determined in
accordance with Section 1274(d)(2) of the United States Internal Revenue Code
and the regulations promulgated thereunder, in effect during the three month
period ending with the month in which the Closing occurs;
(iii)the entire principal balance, together with any accrued but
unpaid interest and other charges thereon, will be due and payable on the
first business day after January 2, 2003; and
(iv) each Limited Partner will be severally obligated to repay his
or its allocable share of the Partner Loans, together with all interest and
other charges thereon. Each Limited Partner's obligation in respect of the
Partner Loans will be evidenced by a promissory Note in substantially the
form of EXHIBIT K (each a "PARTNER NOTE").
13...REPRESENTATIONS AND WARRANTIES.
13.1 REPRESENTATIONS AND WARRANTIES OF SELECT AS TO ITSELF. Select
hereby makes the following representations and warranties to Buyer, which
representations and warranties shall survive the Closing and all of which
(i) are material and are being relied upon by Buyer, and (ii) except as
expressly set forth in the attached Disclosure Schedule are complete and
accurate as of the date hereof and subject to the provisions of Sections 4.3
(TITLE EXCEPTIONS APPEARING BEFORE THE CLOSING); 7.3 (BREACH OF REPRESENTATION
AND WARRANTY); or 9 (INSURANCE; RISK OF LOSS; CONDEMNATION), as applicable,
shall be complete and accurate at the date of the Closing:
13.1.1AUTHORIZATION, ENFORCEABILITY, GOOD STANDING. This
Agreement and the other Transaction Agreements executed by Select which are
to be delivered to Buyer at the Closing are, or at the time of the Closing
will be, duly authorized, executed, and delivered by Select, and are, or at
the Closing will be, legal, valid, and binding obligations of Select, and do
not, and at the time of the Closing will not, violate any provision of or
require any notice or consent under any agreement to which Select is a party
or to which it is subject or any law, judgment or order applicable to
Select. The execution, delivery and performance of the Transaction
Agreements by Select does not and will not result in any violation of, or
default under, or require any notice or consent under, any of Select's
organizational documents, any other agreement to which Select is a party or
any law, judgment or order applicable to Select. Select is at the date of
execution of this Agreement, and at the time of the Closing will be, duly
formed, validly existing and, in good standing under the laws of the State of
California. Subject to receipt of shareholder approval as contemplated by
Section 10 (SHAREHOLDER OBLIGATIONS), Select has obtained all necessary
authorizations, approvals and consents to the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
13.1.2NOT A FOREIGN PERSON. Select is not a "foreign person"
within the meaning of IRC Section 1445(f)(d).
13.1.3NO INSOLVENCY. Select is not Insolvent (as hereinafter
defined), will not be Insolvent immediately after consummation of the
transactions contemplated hereby, and the consummation of the transactions
contemplated hereby will not render Select Insolvent. "INSOLVENT" means,
with respect to any person, that (i) such person would not be able to pay its
debts as they become due in the usual course of business or (ii) such
person's total assets would be less than the sum total of its liabilities.
13.1.4EFFECT OF TRANSFER. Neither the sale and transfer by
Select, or the acquisition by Buyer (or its assignee) of the General
Partner's Interest and the Select Properties (collectively, for purposes of
this Section 13.1.4, the "ASSETS") will result in or be subject to any law,
rule or regulation pertaining to bulk sales or fraudulent transfers which
might make such sale or transfer or any part thereof ineffective as to
creditors of or claimants against Select or the imposition of any liability
on Buyer (or its assignee) for appraisal rights.
13.1.5NO LITIGATION. Subject to Buyer's acknowledgment that
it has been informed of two existing lawsuits brought by shareholders
relating to prior mergers involving Select (the "SHAREHOLDER LITIGATION"),
there is no litigation or proceeding pending or, to Select's actual
knowledge, threatened, involving Select which might adversely affect Select's
ability to consummate the Select Transactions or which could affect the
legality, validity or enforceability of the Transaction Agreements. Select,
the Select Properties, and Select's General Partner's Interest are not
subject to any order, decree, judgment, or award which could, individually or
in the aggregate, have a material adverse effect on the value of or the use
of the Properties for their present purposes.
13.1.6GENERAL PARTNER'S INTEREST. Select is the sole
beneficial and legal owner of the General Partner's Interest, free from any
lien, claim or encumbrance, with full right, power and authority to sell the
General Partner's Interest in the Select Transactions. Except as otherwise
specified in this Agreement, Select will convey to Buyer good title to the
General Partner's Interest, free and clear of any and all liens, claims,
encumbrances, and security interests, options, pledges and agreements
restricting transferability. Select has not transferred, assigned, sold,
hypothecated, pledged, or encumbered all or any portion of the General
Partner's Interest at any time.
13.2 REPRESENTATIONS AND WARRANTIES OF LIMITED PARTNERS.
Each Limited Partner hereby warrants and represents to Buyer that (i) such
Limited Partner has not previously sold, assigned, transferred, mortgaged,
pledged, encumbered, hypothecated, or otherwise disposed of all or any part
of its Units; (ii) each Limited Partner owns its Units and the title to its
Units are free and clear of all liens, security interests, restrictions,
encumbrances, claims, demands and charges of every kind and character
whatsoever; (iii) each Limited Partner has the full legal right, power,
capacity and authority to convey, assign, transfer and deliver its Units to
the Buyer; (iv) such Limited Partner is not a "foreign person" within the
meaning of IRC Section 1445(f)(d); (v) such Limited Partner is not Insolvent,
will not be Insolvent immediately after the consummation of the Transactions
contemplated hereby, and the consummation of the Transactions contemplated
hereby will not render such Limited Partner Insolvent, and (vi) the
individual executing this Agreement and any other Transaction Agreement on
behalf of the Limited Partners has the full legal right, power and authority
to do so.
13.3 REPRESENTATIONS AND WARRANTIES RELATING TO PARTNERSHIP
PROPERTIES. Select and the Partnership hereby severally make the following
representations and warranties to Buyer, which representations and warranties
shall survive the Closing as set forth in Section 13.1 (REPRESENTATIONS AND
WARRANTIES OF SELECT AS TO ITSELF), and all of which (i) are material and are
being relied upon by Buyer, and (ii) except as expressly set forth in the
attached Disclosure Schedule are complete and accurate as of the date hereof
and subject to the provisions of Sections 4.3 (TITLE EXCEPTIONS APPEARING
BEFORE THE CLOSING); 7.3 (BREACH OF REPRESENTATION AND WARRANTY);
8.2.2.(LEASING ACTIVITIES)(last sentence); or 9 (INSURANCE; RISK OF LOSS;
CONDEMNATION), as applicable, shall be complete and accurate at the date of
the Closing only:
13.3.1NO LITIGATION. There is no litigation or proceeding
pending or, to Select's or the Partnership's Knowledge, threatened, involving
a Property which might adversely affect such Property.
13.3.2NO NOTICE OF VIOLATION OF LAW. Neither Select nor the
Partnership has received any written notice of any claimed violation of any
applicable rule, regulation, ordinance or government directive from any
administrative or governmental authority with respect to a Property, and to
Select's or the Partnership's Knowledge, no such violation exists with
respect to a Property.
13.3.3DUE DILIGENCE MATERIALS. To Select's Knowledge, Select
has provided Buyer with copies of, or access to the Due Diligence Materials
to the extent in Select's or the Partnership's possession or control.
13.3.4OPERATING STATEMENTS AND RENT ROLLS. Each of the
operating statements and the Rent Rolls provided to Buyer is complete and
correct in all material respects as of the dates stated therein. To Select's
or the Partnership's Knowledge, since the latest stated date of such
operating statements and Rent Rolls there has not been any material change in
the information stated therein other than changes which are contemplated or
permitted in the Transaction Agreements.
13.3.5LEASES. On or prior to the Contract Date Select has
made available or delivered to Buyer true and correct and complete copies of
all Existing Leases. Additionally, Select or the Partnership has delivered
to Buyer, on or before the Contract Date, true, correct, and complete copies
of all leasing commission and brokerage agreements currently in effect for
each Property, all of which are listed in SCHEDULE 13.3.5(A) (the "COMMISSION
AGREEMENTS"). SCHEDULE 13.3.5(B) lists (i) all "free rent," rent abatement,
tenant improvement costs, brokers' commissions, leasing fees and recording
fees for which the landlord with respect to any of the Properties is
obligated or subject with respect to the current term under any Existing
Lease and which are unpaid as of the Contract Date (except with respect to
the "Trailing Commission Fees" as hereinafter defined and described), and
(ii) all brokers' commissions and leasing fees which the landlord with
respect to any of the Properties is contractually obligated under the
Existing Leases to pay in the event any related Tenant exercises any
currently unexercised renewal or expansion option. Buyer acknowledges and
agrees that Select has disclosed to Buyer the existence of "trailer" clauses
in each of the Commission Agreements listed on Schedule 13.3.5(a) which
provide, notwithstanding the termination of such Commission Agreement, that
Select or its successor under such Commission Agreement is obligated to pay a
commission to the broker that is a party to such Commission Agreement if,
within one hundred and twenty (120) days of the termination date of the
commission agreement, Select or its successor enters into a lease with a
tenant identified or registered by such broker ("TRAILING COMMISSION FEES").
Buyer acknowledges and agrees that, as set forth in Section 11.8.5 of this
Agreement, it shall pay any such Trailing Commission Fees and shall
indemnify, protect and hold Select harmless from any claims made against
Select in connection with such Trailing Commission Fees.
As of the date hereof, and except as contemplated or permitted
in the Transaction Agreements or as would not, individually or in the
aggregate, have or be expected to have a material adverse effect: (a) no
Existing Lease has been modified, in writing to the extent not included in
the Existing Lease or contained in the Lease Files or otherwise, except as
set forth in SCHEDULE 13.3.5(C) or the Rent Rolls; (b) to Select's or the
Partnership's Knowledge, except as set forth in SCHEDULE 13.3.5(C) or the
Rent Rolls, there has occurred no event of default on the part of the
landlord thereunder which remains uncured, and there exists no event which,
with the giving of notice or the passage of time, or both, would constitute a
default thereof; and (c) no Tenant has any option to purchase any Property or
any portion thereof, except as expressly stated in such Existing Lease.
Select and the Partnership make the following representations
and warranties with respect to Tenants for which Acceptable Estoppel Letters
have not been delivered as of the Closing Date: As of the Closing Date, and
except as contemplated or permitted in the Transaction Agreements, or as set
forth in SCHEDULE 13.3.5(C) or the Rent Rolls, (a) there has occurred no
event of default on the part of such Tenant thereunder which remains uncured,
and there exists no event which, with the giving of notice or the passage of
time, or both, would constitute a default and such Tenant has not asserted
any defense, offset or claim against its obligation to pay rent or perform
its other obligations under its Existing Lease; (b) such Tenant has no right
of first refusal or renewal option which may be exercised by such Tenant, or
option to purchase any Property or any portion thereof, except as expressly
stated in such Existing Lease; (c) each of the Existing Leases is in full
force and effect.
13.3.6HAZARDOUS MATERIALS. To Select's or the Partnership's
Knowledge, except as disclosed in the Reports identified on SCHEDULE 6.3 and
Buyer's own environmental assessments and analysis or as described in
Section 7.2 (ACCEPTANCE OF PROPERTIES "AS-IS") (i) neither Select nor the
Partnership, nor any agent, employee or representative of Select or the
Partnership, nor any predecessor of Select nor the Partnership or occupant of
the Properties, has used, installed, generated, produced, stored or released
on, in, under or about the Properties or transported to or from any of the
Properties or into any ground water (other than lawfully into sanitary sewer
systems established for such purpose) any Hazardous Materials except in the
ordinary course of business and in compliance with all applicable laws,
ordinances, rules, requirements and regulations of any governmental authority
having jurisdiction with respect to the Properties pertaining to the use,
storage, handling or disposal of Hazardous Materials, (ii) no Hazardous
Materials have existed or currently exist in, on or under, or have been
disposed of or release from, any Property, except in compliance with all
applicable laws, ordinances, rules, requirements and regulations of any
governmental authority having jurisdiction with respect to the Properties
pertaining to the use, storage, handling or disposal of Hazardous Materials,
and (iii) no storage tanks have at any time been installed, used or removed
on, at or under the Land, except as described in Section 7.2 (ACCEPTANCE OF
PROPERTIES "AS-IS") and except for above ground tanks located on the Lam and
Northpoint Projects. As used in this Agreement, "HAZARDOUS MATERIALS" means
any radioactive, hazardous or toxic substance, material or waste which is or
becomes regulated by any governmental authorities, including, without
limitation, any materials or substance which is (a) defined as a "hazardous
waste," "extremely hazardous waste," "restricted hazardous waste" or
"hazardous substance" under any laws, ordinances, rules, requirements and
regulations of any governmental authority having jurisdiction with respect to
the Properties, (b) asbestos, and/or (c) petroleum.
13.3.7NO KNOWLEDGE OF UNDISCLOSED DEFECTS. To Select's
Knowledge, there are no, and neither Select nor the Partnership has received
notices from insurers or any other party of, material defects in the
Properties which (i) have not been disclosed to Buyer by the materials
delivered or made available to Buyer or (ii) would not be disclosed by a
reasonable inspection of the Properties and which would, in each case,
materially interfere with Buyer's continued use of the Properties for their
current purposes.
13.3.8CONDEMNATION. Neither Select nor the Partnership has
received written notice or has Knowledge of any pending or contemplated
condemnation, eminent domain or similar proceeding with respect to all or any
portion of each Property, except for the proceedings pending at the Lam
Research Building with respect to the taking of frontage at such Property in
connection with road widening.
13.3.9SERVICE CONTRACTS. There are and will be no
construction management, leasing, service, equipment, supply, maintenance,
repair, improvement or concession agreements entered into by Select or the
Partnership with respect to any Property other than the Service Contracts.
13.3.10 NO VIOLATIONS OF LAW. Neither Select nor the
Partnership has received written notice or has Knowledge of any existing
violations of any federal, state, county or municipal laws, ordinances,
orders, codes, regulations or requirements affecting any Property, except as
disclosed in writing to Buyer by Sellers prior to execution hereof. Any and
all permits required for the construction and operation of the Properties
have been obtained and are in full force and effect as of the date hereof.
Neither Select nor the Partnership has received written notice or has
Knowledge of any current legal challenges or changes officially pending
before applicable governmental authorities to the present zoning
classifications of the Properties.
13.3.11 NO OTHER AGREEMENTS. Neither Select nor the
Partnership has entered into any currently effective agreements to dispose of
all or any part of the Properties except for this Agreement, the Leases and
the documents evidencing or securing the Existing Loans.
13.3.12 NO SPECIAL ASSESSMENTS. Neither Select nor the
Partnership has received written notice or has Knowledge of any pending or
contemplated special assessment proceedings with respect to any of the
Properties other than the proposed "Redwood Shores Community Facilities
District No. 99-1".
13.3.13 LOAN DOCUMENTS. Select represents and warrants that
the schedule attached hereto as SCHEDULE 13.3.13 is a complete and accurate
list of all material documents which evidence, secure or otherwise govern the
Existing Loans ("LOAN DOCUMENTS"). The copies of such Loan Documents
delivered to Buyer prior to execution of this Agreement are true, complete
and accurate copies of such Loan Documents. Such Loan Documents have not
been otherwise supplemented, amended, modified, or extended in any manner
whatsoever. There are no other material documents or instruments which
evidence, secure or otherwise govern such Existing Loans other than as set
forth in such copies of the Loan Documents. Select has not received any
notice of any default or breach under the Loan Documents, and to Select's and
the Partnership's Knowledge, there is no existing or uncured default or
breach under the Loan Documents, there exist no facts or circumstances that,
with the passage of time or the giving of notice, or both, would constitute a
default or breach under the Loan Documents. To Select's and the
Partnership's Knowledge, the current holders of the Existing Loans are the
lenders identified on SCHEDULE 13.3.13. The outstanding principal balance of
each Existing Loan as of June 30, 1999 is set out on SCHEDULE 13.3.13.
Except as set forth on SCHEDULE 13.3.13, there are no real estate tax or
insurance escrows being held by lenders in connection with the Existing Loans
other than the tax escrow maintained in respect of the Hathaway Project,
PROVIDED that the City of Brea holds cash deposits with respect to the
Mello-Roos bond indebtedness for the Fairways project.
13.4 ADDITIONAL REPRESENTATIONS AND WARRANTIES REGARDING THE
PARTNERSHIP AND PARTNERSHIP PROPERTIES. The party or parties specified below
hereby make the following representations and warranties to Buyer, which
representations and warranties shall survive the Closing as set forth in
Section 13.1 (REPRESENTATIONS AND WARRANTIES OF SELECT AS TO ITSELF), and all
of which (i) are material and are being relied upon by Buyer, and (ii) except
as expressly set forth in SCHEDULE 13.3.5(C) are complete and accurate as of
the date hereof and subject to the provisions of subject to the provisions of
Sections 4.3 (TITLE EXCEPTIONS APPEARING BEFORE THE CLOSING); 7.3 (BREACH OF
REPRESENTATION AND WARRANTY); 8.2.2.(LEASING ACTIVITIES)(last sentence); or 9
(INSURANCE; RISK OF LOSS; CONDEMNATION), as applicable shall be complete and
accurate at the date of the Closing only:
13.4.1PARTNERSHIP AGREEMENT. Select and the Limited Partners
represent and warrant that: (i) other than the Exchange Rights Agreement
among the Limited partners, Select and the Partnership dated as of October
30, 1996, the Registration Rights Agreement among Select and the Limited
Partners dated as of October 30, 1996, the Transaction Agreements and the
Purchase of Conversion Rights Agreement of even date among Select and the
Limited Partners, the Partnership Agreement constitutes the entire agreement
between the General Partner and the Limited Partners with respect to the
Partnership and is in full force and effect and no default exists under the
Partnership Agreement on the part of the General Partner or the Limited
Partners; (ii) a true, correct and complete copy of the, Partnership
Agreement (including any and all amendments,) is attached as EXHIBIT L; and
(iii) there are no partners in the Partnership or partnership interests in
the Partnership except the General Partner's Interest and the Limited
Partners' Units.
13.4.2FINANCIAL STATEMENTS. Select has caused to be delivered
to Borrower a true, correct an complete copy of the internally prepared
financial statements for the Partnership for the fiscal year ending
December 31, 1998, prepared in accordance with generally accounting principles
consistently applied (the "FINANCIAL STATEMENTS"). Select represents and
warrants to Buyer that the Financial Statements fairly and accurately
presents the financial condition of the Partnership and that all material
assets and liabilities of the Partnership are disclosed in the Financial
Statements and there has been no material adverse change since the date of
such Financial Statements, other than Tenant defaults, if any, occurring
after the Contract Date. Except as may be otherwise disclosed in the
Financial Statements or as contemplated in the Transaction Agreements:
A. Other than the Existing Leases and the documents
evidencing or securing the Existing Loans, neither the
Partnership nor Select or any of the Limited Partners has
made, executed or entered into any mortgage, deed to
secure debt, deed of trust, security agreement, contract,
contractual or other commitment, agreement, lease or
other undertaking either on its own behalf or on behalf
or on behalf of the Partnership which will be binding
upon the Partnership or Buyer as the general partner
thereof after the Closing Date;
B. There are no subscriptions, warrants, options, conversion
rights, or other agreements of any kind to purchase or
otherwise acquire or sell any interest in the Partnership
(whether existing or additional interests) except as set
forth in the Partnership Agreement;
C. There are no claims against liabilities or indebtedness
of the Partnership or the Limited Partners which are not
insured against and which will be binding upon the
Partnership or Buyer as the general partner thereof after
the Closing Date.
13.4.3OTHER MATTERS. Except for the Partnership Properties,
the Partnership has not owned, managed or operated, and does not own, manage
or operate, any other assets, interests, or business, and the Partnership was
formed, has been operated and will continue to be operated solely in respect
of its ownership of the Partnership Properties.
13.4.4TAXES. All federal, state, municipal and other tax
returns and reports required by law to be filed by the Partnership before the
date hereof have been duly executed and filed, and all taxes, interest and
penalties due have been paid in full. No such returns or reports have been
subject to written request for data by, noticed for audit by, or are under
audit by any taxing authority. The Partnership has been classified as a
partnership for federal income tax purposes and not as an association taxable
as a corporation.
13.4.5NO EMPLOYEES. The Partnership has no, and has never had
any, employees.
13.4.6ADDITIONAL REPRESENTATIONS REGARDING THE PARTNERSHIP
PROPERTIES. Select held interests in the Partnership since its formation on
October 30, 1996, and has continued to hold interests since that date. The
Partnership Properties were completed and in operation on or prior to
October 30, 1996. On and after October 30, 1996, all leasing, management and
operating activities with regard to the Partnership Properties have been
conducted by the Partnership itself or through third party property
management contracted for by the Partnership, and no Tenants have conducted
such activities on their own behalf.
13.5 SELLERS' ACTUAL KNOWLEDGE, EXISTING KNOWLEDGE OF BUYER. For
the purposes of this Section 13, "SELECT'S" or "THE PARTNERSHIP'S" or "THE
SELLERS'" "KNOWLEDGE" shall mean the actual, current knowledge of David Goss,
Mark TenBoer, and David Popelka without duty of inquiry or investigation. To
the extent Buyer has actual knowledge, as of the Contract Date, of any facts
which are inconsistent with Sellers' representations and warranties under
this Agreement, such representations and warranties shall be deemed modified
to reflect such knowledge. For the purposes of this Section, Buyer's
knowledge shall include the Due Diligence Materials and any information
actually received or reviewed by Buyer in connection with the Transaction
from Buyer's employees, representatives or consultants prior to the Contract
Date.
13.6 BREACH OF REPRESENTATIONS AND WARRANTIES. If prior to the
Closing, any party obtains actual knowledge that any of Sellers' or the
Partnership's representations or warranties are untrue, inaccurate or
incorrect in any "material" respect, such party shall give the other written
notice thereof within five (5) business days of obtaining such knowledge
(but, in any event, prior to the Closing).
13.7 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby makes
the following representations and warranties to Sellers, which
representations and warranties shall survive the Closing and the Closing and
all of which (i) are material and are being relied upon by Sellers, and
(ii) are complete and accurate in all respects as of the date hereof and shall
be complete and accurate as of the Closing Date or Closing Date:
13.7.1AUTHORIZATION: ENFORCEABILITY. This Agreement and all
documents executed by Buyer which are to be delivered to Sellers at the
Closing or the Closing are, or at the Closing or the Closing, as the case may
be, will be, legal, valid, and binding obligations of Buyer, and do not, and
at the time of Closing will not, violate any provisions of any agreement to
which Buyer is a party or to which it is subject or any law, judgment or
order applicable to Buyer. The execution, delivery and performance of the
Transaction Agreements by Buyer does not and will not result in any violation
of, or default under, or require any notice or consent under, any of Buyer's
organizational documents, any other agreement to which Buyer is a party or
any law, judgment or order applicable to Buyer. Buyer is at the date of
execution of this Agreement, and at the time of the Closing will be, duly
formed, validly existing and, in good standing under the laws of the State of
Georgia. Buyer has obtained all necessary authorizations, approvals and
consents to the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.
13.7.2NO INSOLVENCY. Buyer is not Insolvent, will not be
Insolvent immediately after consummation of the transactions contemplated
hereby, and the consummation of the transactions contemplated hereby will not
render Buyer Insolvent.
13.7.3NO LITIGATION. There is no litigation or proceeding
pending or, to Buyer's actual knowledge, threatened, involving Buyer which
might adversely affect Buyer's ability to consummate the Transactions or
which could affect the legality, validity or enforceability of the
Transaction Agreements
13.8 NO REPRESENTATION RESPECTING YEAR 2000 ISSUES. Buyer
acknowledges that it has reviewed Select's discussion of "Year 2000" issues
as disclosed in the Annual Report of Select (Form 10K) for the fiscal year
ended December 31, 1998 filed on March 4, 1999 (including the disclosure that
Select has determined that certain of its own systems are not currently year
2000 compliant). Buyer acknowledges that neither Select nor the Limited
Partners nor the Partnership has made any representations or warranties to
Buyer respecting Year 2000 compliance.
14...INDEMNIFICATION; CLAIMS AGAINST HOLDBACK.
...........14.1. INDEMNIFICATION.
14.1.1 INDEMNITY BY SELECT AND THE PARTNERSHIP. Subject to
the limitations on remedies and amounts provided in this Section 14, Select
and the Partnership (each individually, an "INDEMNITOR") shall indemnify,
save and hold harmless Buyer and its directors, officers, employees, agents,
representatives and affiliates (each of which is a "INDEMNIFIED PARTY"), from
and against any and all costs, losses (including, without limitation,
diminution in value), liabilities, obligations, damages, lawsuits,
deficiencies, claims, demands, and expenses (whether or not arising out of
third-party claims), including interest, penalties, lost profits and other
losses, attorneys' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing, incurred in connection with, arising out
of, resulting from or incident to (a) the inaccuracy of any representation
made by, or the failure to comply with any agreement or obligation of Select
or the Partnership set forth in the Transaction Agreements, (b) any document
filed or to be filed by or on behalf of Select or any direct or indirect
shareholder, partner, member or affiliate of Select (the "COVERED PARTY")
with any Governmental Authority or any other document prepared or distributed
by or on behalf of any Covered Party in connection with the transactions
contemplated hereby, including any document distributed in connection with
the solicitation of consents to the consummation by Select or the Partnership
of the transactions contemplated by this Agreement (PROVIDED, HOWEVER, that
the foregoing shall not apply to information provided by the Buyer in writing
to the Covered Party specifically for inclusion or incorporation by reference
in any such document) (the foregoing costs and losses are referred to herein
as "LOSSES").
14.1.2 INDEMNITY BY LIMITED PARTNERS. Subject to the
Limitations on remedies and amounts provided in this Agreement, including but
not limited to the limitations on remedies and amounts set forth in Section
14 (included but not limited to Section 14.4 (LIMITATION ON
Indemnification)), the Limited Partners shall each severally and not jointly
indemnify, save and hold harmless the "Indemnified Party" as defined in the
preceding paragraph from and against any and all costs, losses (including,
without limitation diminution in value), liabilities, obligations, damages,
lawsuits, deficiencies, claims, demands and expenses (whether or not arising
out of third party claims) including interest, penalties, loss profits and
other losses, reasonable attorneys' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (herein
collectively, "LIMITED PARTNER INDEMNITY CLAIMS") if, and only if, such
Limited Partner Indemnity Claims arise solely as a result of and solely as a
direct consequence of (i) an intentional breach by any such Limited Partner
of their representations set forth in Section 13.2 (REPRESENTATIONS AND
WARRANTIES OF LIMITED PARTNERS), or (ii) an intentional failure of any such
Limited Partner to perform its obligations to deliver documentation at the
Closing in accordance with Section 11.3 (LIMITED PARTNERS' DELIVERIES). To
the extent the Limited Partners have any indemnification responsibilities as
set forth in this Section 14.1.2, they may be referred to herein as a
"LIMITED PARTNER INDEMNITOR."
14.2 COOPERATION. Each Indemnified Party shall cooperate in all
reasonable respects with each Indemnitor and its representatives (including
without limitation its attorneys) in the investigation, trial and defense of
any lawsuit or action and any appeal arising therefrom; PROVIDED, HOWEVER,
that the Indemnified Party may, at its own cost, participate in negotiations,
arbitrations and the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with
each other in any notifications to insurers.
14.3 CLAIMS FOR INDEMNIFICATION. If a claim for Losses (a "CLAIM")
is to be made by a Indemnified Party against the Indemnitor or the Limited
Partner Indemnitor, as the case may be, the party claiming such
indemnification shall give written notice (a "CLAIM NOTICE") to the
Indemnitor as soon as practicable after the party entitled to indemnification
becomes aware of any fact, condition or event which may give rise to Losses
for which indemnification may be sought under this Section 14. Such Claim
Notice shall specify the amount of the Claim asserted, if actually known to
the Indemnified Party and method of computation thereof, and shall contain a
reference to the provisions of this Agreement in respect of which such Claim
arises. If any lawsuit or enforcement action is filed by a third party
against any Indemnified Party, written notice thereof shall be given to the
Indemnitor as promptly as practicable (and in any event within 15 calendar
days after the service of the citation or summons). The failure of any
Indemnified Party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the Indemnitor
demonstrates actual damage caused by such failure. After such notice, if the
Indemnitor acknowledges in writing to the Indemnified Party its obligation to
indemnify the Indemnified Party hereunder against any Losses that may result
from such lawsuit or enforcement action, then the Indemnitor shall be
entitled, if it so elects at its own cost, risk and expense, (i) to take
control of the defense and investigation of such lawsuit or action, (ii) to
employ and engage attorneys of its own choice, subject to the reasonable
approval of the Indemnified Party, to handle and defend the same unless
(A) the named parties to such action or proceeding (including any impleaded
parties) include both the Indemnitor and the Indemnified Party and (B) the
Indemnified Party has been advised in writing by counsel that there exists or
is reasonably likely to exist a conflict of interest that would make it
inappropriate for the same counsel to represent both the Indemnified Party
and the Indemnitor, in which event the Indemnified Party shall be entitled,
at the Indemnitor's cost, risk and expense, to separate counsel of its own
choosing, subject to the reasonable approval of Indemnitor, and (iii) to
compromise or settle such Claim, which compromise or settlement shall be made
only with the written consent of the Indemnified Party, such consent not to
be unreasonably withheld (PROVIDED it shall not be unreasonable for an
Indemnified Party to withhold consent to any settlement the terms of which do
not fully release such Indemnified Party). If the Indemnitor fails to assume
the defense of such Claim within 15 calendar days after receipt of the Claim
Notice, the Indemnified Party against which such Claim has been asserted will
(upon delivering notice to such effect to the Indemnitor) have the right to
undertake, at the Indemnitor's cost and expense, the defense, compromise or
settlement of such claim on behalf of and for the account and risk of the
Indemnitor; provided, however, that such Claim shall not be compromised or
settled without the written consent of the Indemnitor, which consent shall
not be unreasonably withheld. In the event the Indemnified Party assumes the
defense of the Claim, the Indemnified Party will keep the Indemnitor
reasonably informed of the progress of any such defense, compromise or
settlement. The Indemnitor shall be liable for any settlement of any action
effected pursuant to and in accordance with this Section 14 and for any final
judgment (subject to any right of appeal), and the Indemnitor agrees to
indemnify and hold harmless an indemnified party from and against any Losses
by reason of such settlement or judgment.
14.4 LIMITATION ON INDEMNIFICATION. No Indemnified Party will make
a claim under Section 14.1.1 (INDEMNITY BY SELECT OR THE PARTNERSHIP) or
under 14.1.2 (INDEMNITY BY LIMITED PARTNERS) unless the total of all claims
by all Indemnified Parties thereunder and theretofore exceeds, in the
aggregate, $1,315,000 (the "THRESHOLD AMOUNT"). The Threshold Amount is a
deductible amount, and the indemnification obligation of the Indemnitor or
the Limited Partner Indemnitors, as the case may be, will not include the
Threshold Amount, but will include all other Losses subject to
indemnification. Notwithstanding the foregoing, none of the Sellers shall be
liable for Losses above the Threshold Amount, except to the extent of any
cash remaining in the Indemnity Escrow Fund (the "MAXIMUM INDEMNIFICATION
AMOUNT"). Notwithstanding the foregoing, Claims and Losses relating to
Select and the Partnership concerning the following matters or circumstances
(the "SELECT AND PARTNERSHIP EXCLUDED CLAIMS AND LOSSES") will not be limited
to the deductible Threshold Amount or apply to reduce the Maximum
Indemnification Amount as the case may be: (A) an intentional
misrepresentation; (B) a failure of a party to comply with any obligation of
such party set forth in the Transaction Agreements to be performed after the
Closing and (C) a breach of the representation and indemnity in Section 17.7
(BROKERS AND FINDERS) relating to brokerage commissions, (D) Select and the
Partnership indemnification obligations with respect to the Shareholder
Litigation under Section 14.9 (SHAREHOLDER LITIGATION), or (E) a failure of
Select or the Partnership to pay costs or expenses required to be paid by
such party under the Transaction Agreements, including closing adjustments.
Payments made to an Indemnified Party hereunder shall be limited to the
amount of Losses that remain after deducting therefrom any insurance proceeds
and any indemnity, contribution or other payment actually received by the
Indemnified Party from any person (other than Indemnitor) with respect
thereto.
No indemnified party will make any claim under Section 14.1.2
(INDEMNITY BY LIMITED PARTNERS) unless the total of all claims by all
Indemnified Parties against all of the parties comprising Sellers thereunder
and theretofore exceeds, in the aggregate, $1,315,000.000 (the "THRESHOLD
AMOUNT"). The Threshold Amount is a deductible amount and the
indemnification obligation of the Limited Partner Indemnitors will not
include the Threshold Amount but will include all other losses subject to the
Limited Partner Indemnification. Notwithstanding the foregoing, none of the
Limited Partners shall be liable for Losses above the Threshold Amount,
except to the extent of any cash remaining in the Indemnity Escrow Fund (the
Maximum Indemnification Amount). Notwithstanding the foregoing, Claims and
Losses relating solely to the following matters or circumstances and which
arise solely as a result of the following matters or circumstances (the
"LIMITED PARTNER EXCLUDED CLAIMS AND LOSSES") will not be limited to the
deductible Threshold Amount or applied to reduce the Maximum Indemnification
Amount as the case may be: (A) an intentional breach of any Limited Partner
Representation set forth in Section 13.2 (REPRESENTATIONS AND WARRANTIES OF
LIMITED PARTNERS) or (B) an intentional failure of any Limited Partner to
deliver documentation at the Closing in accordance with Section 11.3 (LIMITED
PARTNERS' DELIVERIES). Payments made to an Indemnified Party hereunder shall
be limited to the amount of Losses that remain after deducting therefrom any
insurance proceeds and any indemnity, contribution or other payment from any
Person (other than the Limited Partner Indemnitor) with respect thereto.
As used herein the term "Select and Partnership Excluded Claims and
Losses" and the "Limited Partner Excluded Claims and Losses" shall be
collectively referred to as the "EXCLUDED CLAIMS AND LOSSES."
14.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
Claims for the breach of any representation, warranty or covenant under this
Agreement, other than Excluded Claims and Losses, must be brought, if at all,
by the filing of a Claim Notice on or before the nine month anniversary of
the Closing Date (the "CLAIM PERIOD"). All Claims for the breach of any
Limited Partner representation or warranty including any claims related to
any Excluded Claims and Losses must be brought, if at all, by the filing of a
claim notice on or before the nine-month anniversary of the Closing Date.
14.6 DISPUTES. Except as otherwise provided elsewhere in this
Agreement, any and all disagreement among the parties regarding
interpretation of, or obligations under, this Agreement or liability or the
amount or payment of damages or other monetary amounts payable pursuant to
this Agreement (including any disagreement relating to a claim for
indemnification made under Section 14.1 (INDEMNITY BY SELLERS)) will be
resolved in accordance with the provisions of Section 16 (DISPUTE RESOLUTION).
14.7 ESCROW FUND. At the Closing, Select and Buyer shall forthwith
enter into an escrow agreement in the form of EXHIBIT M to carry out the
terms of this Agreement (the "ESCROW AGREEMENT"). At Closing, in accordance
with the Escrow Agreement, Select shall (i) to deposit into an escrow account
cash, in an aggregate amount equal to the Holdback Amount, (the "INDEMNITY
ESCROW FUND"), (ii) pursuant to Section 7.3.3 (PROCEDURE), deposit into an
escrow account the holdback amount described therein (the "PURCHASE PRICE
<PAGE>
ADJUSTMENT ESCROW FUND"). The Indemnity Escrow Fund, and the Purchase Price
Adjustment Escrow Funds are collectively referred to herein as the "ESCROW
FUND"). Only the Indemnity Escrow Fund shall be available to satisfy Claims
for Losses, except Excluded Claims and Losses. An escrow agent reasonably
acceptable to the parties ("ESCROW AGENT") shall hold and dispose of the
Escrow Fund in accordance with the terms of this Agreement and the Escrow
Agreement. The parties to this Agreement understand and agree to the terms
of the Escrow Agreement, which when duly executed shall be incorporated as
part of this Agreement.
14.8 LIMITATION ON OBLIGATIONS. Except as set forth in Section
14.4 (LIMITATION ON INDEMNIFICATION), the Buyer's sole recourse for Losses
for which Sellers are liable shall be to recover against the Indemnity Escrow
Fund as set forth in this Section 14 and the Escrow Agreement, and the
Sellers shall not be liable for Losses, in the aggregate in excess of an
amount which, as of any date, is greater than an amount equal to the Maximum
Indemnification Amount.
14.9 SHAREHOLDER LITIGATION. Notwithstanding any other provision
of this Section 14, Select shall indemnify, save and hold harmless the
Indemnified Parties from and against any and all costs, losses, liabilities,
obligations, damages, lawsuits, deficiencies, claims, demands and expenses
including without limitations, attorney's fees and all amount paid in
investigation, defense or settlement of any of the foregoing, incurred in
connection with, arising out of or resulting from the Shareholder Litigation,
The provisions of this Section 14.9 shall survive termination of this
Agreement or closing of the transactions contemplated hereby.
14.10SPECIFIC PERFORMANCE. Nothing in this Section 14 will be
construed to limit any remedy of specific performance otherwise available to
Buyer under applicable law.
15...DEFAULT AND REMEDIES
15.1 SELLERS' FAILURE TO CLOSE TRANSACTIONS. If the Transactions
are not consummated on account of one or both of the Seller's default
hereunder, then Title Company shall refund the Deposit to Buyer, on demand,
without prejudice to any other rights or remedies of Buyer hereunder, or at
law or in equity, and, without limitation, Buyer shall have the right to
enforce this agreement by specific performance and other equitable remedies.
15.2 BUYER'S FAILURE TO CLOSE TRANSACTIONS; LIQUIDATED DAMAGES. IF
THE TRANSACTIONS ARE NOT CONSUMMATED BECAUSE BUYER DEFAULTS IN ITS
OBLIGATIONS TO SELLERS UNDER THIS AGREEMENT (SUBJECT TO SATISFACTION OF THE
CONDITIONS THERETO NOT WITHIN BUYER'S CONTROL), TITLE COMPANY SHALL (AFTER
GIVING BUYER FIVE (5) DAYS PRIOR NOTICE THEREOF) PAY THE CASH DEPOSIT AND ANY
INTEREST EARNED THEREON TO SELECT AND SELECT SHALL BE ENTITLED TO DRAW ON ANY
LETTER OF CREDIT, AND SELECT SHALL BE ENTITLED TO THE FULL AMOUNT OF THE
DEPOSIT, TOGETHER WITH ALL INTEREST THEREON, AS LIQUIDATED DAMAGES AND AS
SELLER'S SOLE AND EXCLUSIVE REMEDY. THE PARTIES AGREE THAT SELLERS' DAMAGES,
IN THE EVENT OF SUCH A DEFAULT BY BUYER, WOULD BE EXTREMELY DIFFICULT OR
IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS BELOW, THE
PARTIES ACKNOWLEDGE THAT THE DEPOSIT HAS BEEN AGREED UPON, AFTER NEGOTIATION,
AS THE PARTIES' REASONABLE ESTIMATE OF SELLERS' DAMAGES.
SELECT: BUYER:
LP: ..... LP: ..... LP: ..... LP: .....
------------ ------------ ------------ -------
15.3 NOTICE OF DEFAULT; OPPORTUNITY TO CURE. Neither Sellers nor
Buyer shall be deemed to be in default hereunder until and unless such party
has been given written notice of its failure to comply with the terms hereof
and thereafter does not cure such failure within ten (10) days after receipt
of such notice.
15.4 SELECT'S CONTINUED EXISTENCE. Select agrees that,
notwithstanding the fact that the Transaction are being done in connection
with a dissolution of Select, Select shall remain in existence for at least
nine months after Closing, with liquid assets in an amount at least equal to
Two Million, Six Hundred and Thirty Thousand Dollars ($2,630,000). The
provisions of this Section shall survive the Closing and shall not be merged
therein.
15.5 LIMITATION ON LIABILITY OF LIMITED PARTNERS. Notwithstanding
any other provision of this Agreement or any of the other Transaction
Agreements to the contrary, the Limited Partners shall not have any personal
or other liability hereunder to Buyer or any other party unless such
liability arises solely as a direct result of a breach by any of the Limited
Partners, severally, of any of their representations and warranties set forth
in Section 13.2 (REPRESENTATIONS AND WARRANTIES OF LIMITED PARTNERS) or
solely as a result of and as a direct consequence of the breech or any of the
Limited Partners' obligations under Section 11.3 (LIMITED PARTNERS'
Deliveries). Each Limited Partner's liability shall only be with respect to
such individual Limited Partner, respectively, and in no event shall any of
the Limited Partner's liabilities be joint and several in any respect
whatsoever. In addition to the limitations in liabilities set forth in this
Section 15.5, the liability of each of the Limited Partners shall also be
limited by all of the other provisions in this agreement which limit
liability including but not limited to the provisions set forth in Section
14.4 (LIMITATION ON INDEMNIFICATION)). In furtherance, but not in
limitation, of the foregoing, Buyer agrees that it shall not make any claim
against any Limited Partner, bring any action against any Limited Partner,
name or join any Limited Partner in any action or seek to obtain or execute
upon any judgment against the assets of any Limited Partner for any matter
for which such Limited Partner has no personal or other liability in
accordance with the provisions set forth in this Section 15.5.
Additionally, all representations and warranties of the Limited
Partners and any and all other liabilities of the Limited Partners of every
kind and nature whatsoever shall fully and finally terminate on that day
which is nine months following the Closing except to the extent such
representations, warranties and liabilities have expired prior to such date
based on the other provisions of this Agreement or otherwise.
In addition to the other limitations set forth in this Section
15.5, Buyer hereby agrees that in the event the Closing fails to take place
for any reason, Buyer shall not make any claim against any Limited Partner,
bring any action against any Limited Partner, name or join any Limited
Partner in any action of any kind whatsoever unless the failure to close is
solely a result of any such Limited Partner's breach of a Limited Partner
representation in accordance with Section 13.2 (REPRESENTATIONS AND
WARRANTIES OF LIMITED PARTNERS) or solely as a result of the failure of any
Limited Partner to deliver documentation to the closing in accordance with
Section 11.3 (LIMITED PARTNERS' DELIVERIES).
15.6 REMEDIES AVAILABLE UNLESS EXPRESSLY RESTRICTED. Except as
expressly restricted by Sections 4.3 (TITLE EXCEPTIONS APPEARING BEFORE THE
CLOSING); 7.3 (BREACH OF REPRESENTATION AND WARRANTY); 8.2.2.(LEASING
ACTIVITIES) (last sentence); 9 (INSURANCE; RISK OF LOSS; CONDEMNATION); 14
(INDEMNIFICATION; CLAIMS AGAINST HOLDBACK); or this Section 15, the parties
hereto shall have access to all remedies available in the Transaction
Agreements, at law or in equity, including, without limitation, the right to
enforce this agreement by specific performance and other equitable remedies.
15.7 LIMITED PARTNERS' RIGHTS TO CANCEL SALE OF UNITS AND TO
CONVERT UNITS INTO SHARES OF SELECT. Notwithstanding anything in this
Agreement or any of the other Transaction Agreements to the contrary, Buyer
hereby acknowledges that the Limited Partners have specifically negotiated
for the right to elect to avoid selling their Units to Buyer as contemplated
by this Agreement and to instead convert their Units into shares of Select as
contemplated in the Exchange Rights Agreement between Select and the Limited
Partners dated as of October 30, 1996 (the "EXCHANGE AGREEMENT"). In the
event the Limited Partners elect to convert their Units into shares in
Select, the Limited Partners wishing to do so shall provide written notice to
Select and to the Buyer of such election prior to November 19, 1999 at 5:00
p.m. Pacific Standard Time. Such conversion shall be on the following terms:
(i) a Limited Partner may convert all, but not less than all of its Units;
(ii) Any notice of conversion, once delivered, shall be irrevocable; and
(iii) for each Limited Partner who so converts, (A) the Select Price shall be
increased by $3,030,625 and the aggregate Unit Price will be decreased by the
same amount, (B) the Select's Share shall be increased by 2.92785%, and (C)
the Limited Partners' Share shall be decreased by 2.92785%. In the event any
of the Limited Partners elect to convert their respective Units into shares
of Select, and provide timely notice pursuant to the second preceding
sentence, Select shall be responsible for causing such Units to be converted
into shares in Select immediately prior to Closing. Alternatively, if all of
the Limited Partners elect to so convert their Units into shares in Select,
Select shall have the right to simply cause the Partnership to sell the
Partnership Properties to the Buyer at Closing in the same manner as this
Agreement contemplates that the Select Properties shall be conveyed to the
Buyer at Closing. Notwithstanding anything in this Agreement to the
contrary, in the event any of the Limited Partners elect to have their Units
converted into shares in Select as contemplated by this Section 15.7, all of
the obligations of the Limited Partners set forth in this Agreement shall be
automatically and retroactively void, terminated and of no further force or
effect whatsoever; provided, however, that the any such Limited Partner
electing to so convert their Units into shares in Select shall do all things
reasonably necessary to cooperate with Select and the Partnership in causing
the Partnership Properties to be conveyed to the Buyer at Closing so long as
such cooperation is at no cost to the Limited Partners and does not cause the
Limited Partners to incur any liability of any kind whatsoever. The
provisions of this Section 15.7 shall amend and supersede any contrary
provisions of the Partnership Agreement or the Exchange Agreement.
16...DISPUTE RESOLUTION.
16.1 DISPUTES. In the event that any dispute cannot be settled by
good faith negotiation, the parties shall first attempt to resolve such
dispute by non-binding mediation in San Francisco, California under the rules
of the American Arbitration Association. If the dispute is still not
settled, any claims for Purchase Price adjustments under Section 7.3 (BREACH
OF REPRESENTATION AND WARRANTY) of this Agreement shall be settled by final
and binding arbitration in San Francisco, California in accordance with the
then current Commercial Arbitration Rules of the American Arbitration
Association, and judgment on the arbitration award may be rendered by any
court having jurisdiction thereof. Unless otherwise agreed by the parties,
the arbitrator shall be an attorney with at least 20 years experience in the
buying and selling of industrial and office properties in California, with no
prior relationship to either party. The parties shall first attempt to
mutually agree on an arbitrator, and if they fail to do so the arbitrator
shall be appointed in accordance with the rules of the American Arbitration
Association. Any discovery shall be as authorized by the arbitrator. The
arbitrator shall be obligated to follow the law and this Agreement in
rendering the award. Each party shall bear its own attorneys fees in such
arbitration.
16.2 ESCROW OF DISPUTED AMOUNTS. Any disputes as to amounts owed
by Select to Buyer under this Agreement unresolved at the time of Closing
shall not delay the Closing, but the parties shall withhold in escrow with
the Title Company any disputed amount until resolved as provided in the
preceding Section.
16.3 LITIGATION; VENUE. Any disputes arising out of this Agreement
which cannot be resolved as provided in Section 16.1 (DISPUTES) shall be
litigated solely in the Superior Court for the City and County of San Mateo.
16.4 ATTORNEYS' FEES. In the event of any litigation between the
parties respecting this Agreement or in connection with the Properties, the
prevailing party shall, except as otherwise provided herein, be entitled, in
addition to all expenses, costs or damages awarded by a court of competent
jurisdiction, to reasonable attorneys' fees, whether or not such controversy
was litigated or prosecuted to judgment.
16.5 REPRESENTATIVE. In connection with any dispute arising prior
to the Closing, and any Claims under Section 14.3 (CLAIMS FOR
Indemnification), Select will have the sole authority to resolve such matters
on behalf of Sellers and Buyer may rely fully on the acts of Select as the
acts of Sellers in connection therewith.
17...MISCELLANEOUS.
17.1 NOTICES. Unless otherwise provided herein, all notices and
any other communications permitted or required under this Agreement must be
in writing and will be effective (i) immediately upon delivery in person, or
(ii) upon delivery by a commercial courier or delivery service for overnight
delivery, or (iii) upon receipt by the sender of confirmation that notice
sent by facsimile transmission has been received by the recipient of the
facsimile. All notices must be properly addressed (including facsimile
transmission numbers) and delivered to the parties at the addresses set forth
below, or at such other addresses as either party may subsequently designate
by written notice given in the manner provided in this Section:
Select: Franklin Select Realty Trust
P. O. Box 7777
San Mateo, CA 94403
Facsimile No.: (650) 312-5830
Attn: David P. Goss
with a copy to:Farella, Braun & Martel LLP
235 Montgomery Street, 19th Floor
San Francisco, CA 94104
Facsimile No.: (415) 954-4480
Attn: Jeffrey Newman, Esq.
Buyer: Value Enhancement Fund III, LLC
c/o Lend Lease Real Estate Investments, Inc.
3424 Peachtree Road, N.E., Suite 800
Atlanta, GA 30326
Attn:James P. Ryan
and Mark E. Bratt
Facsimile No.: J Ryan 404-848-8925
M Bratt 404-848-8912
with a copy to:King & Spalding
191 Peachtree Street, N.E.
Atlanta, GA 30303
Attn: William B. Fryer, Esq.
Facsimile No.: (404) 572-5148
If to the Limited
Partners: Barry C.L. Fernald
3880 South Bascom Ave. Suite 210
San Jose, CA 95124
with a copy to:Eugene Miller
Miller Starr & Regalia
1331 North California Boulevard, 5th Floor
Walnut Creek, CA 94596
17.2 HEADINGS. The headings used herein are for purposes of
convenience only and should not be used in construing the provisions hereof.
17.3 COVENANT OF FURTHER ASSURANCES. The parties hereby agree to
execute such other documents and perform such other acts as may be necessary
or desirable to carry out the purposes of this Agreement.
17.4 ENTIRE AGREEMENT. This document represents the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements. This Agreement may only be modified
by a written instrument signed by all of the parties.
17.5 PARTIAL INVALIDITY. If any term, covenant or condition of
this Agreement or its application to any person or circumstances shall be
held to be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provisions to other persons or circumstances
shall not be affected, provided that the affected party is still able to
realize the material benefits of this Agreement.
17.6 NO WAIVER. No consent or waiver by either party to or of any
breach of any representation, covenant or warranty shall be construed as a
consent to or waiver of any other breach of the same or any other
representation, covenant, or warranty. No consent or waiver shall be
effective unless in writing, executed by the waiving or consenting party.
17.7 BROKERS AND FINDERS. Neither party has had any contact or
dealings regarding the Properties, through any licensed investment advisor,
investment banker, real estate broker or other persons who can claim a right
to a commission or finder's fee in connection with this transaction, except
for Prudential Securities Incorporated, representing Select. Each party
shall be responsible for paying its own such advisors or brokers. Each party
shall hold the other harmless and indemnify and defend such other party, its
successors and assigns, agents, employees, officers, trustees and members and
the Properties from and against any and all obligations, liabilities, claims,
demands, liens, encumbrances and losses (including reasonable attorneys' fees
actually incurred), arising out of or relating to any commission or fee
claims by any person (other than Prudential Securities Incorporated) whose
claim is alleged to arise through the actions or inactions of such party.
Select shall hold harmless, indemnify and defend Buyer, its successors and
assigns, agents, employees, officers, trustees and members and the Properties
from and against any and all obligations, liabilities, claims, demands,
liens, encumbrances and losses (including reasonable attorneys' fees actually
incurred), arising out of or relating to any commission or fee claims by
Prudential Securities Incorporated. In the event that any other party claims
a such a commission or fee in this transaction, the party through whom the
party makes his claim shall be responsible for said commission or fee and
shall indemnify the other against all costs and expenses (including
reasonable attorneys' fees) incurred in defending against the same. The
provisions of this Section 17.7 shall survive termination of this Agreement
or closing of the transactions contemplated hereby.
17.8 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
17.9 GOVERNING LAW. This Agreement is entered into and shall be
governed by and construed in accordance with the laws of the State of
California.
17.10INTERPRETATION. All parties have been represented by counsel
in the preparation and negotiation of this Agreement, and this Agreement
shall be construed according to the fair meaning of its language. The rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be employed in interpreting this Agreement. Whenever
the term "days" is used in this Agreement, it shall mean calendar days unless
specifically provided otherwise. Whenever the term "including" is used in
this Agreement, it shall mean "including, but not limited to," the items
thereafter enumerated.
17.11ASSIGNMENT. Neither Buyer nor Select shall assign its rights
or delegate its obligations hereunder without the prior written consent of
the other party, provided that Buyer may assign its right hereunder to an
affiliate of Lend Lease Real Estate Investments, Inc. upon 3 business days
notice, provided that no such assignment shall relieve Buyer of any
obligation hereunder. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
successors and assigns. In connection with any approved assignment, the
assignee shall assume the assignor's obligations hereunder, but assignor
shall nevertheless remain liable therefor.
17.12COUNTERPARTS . This Agreement may be signed in any number of
counterparts with the same effect as if the signatures to each counterpart
were upon a single instrument, and is intended to be binding when all parties
have delivered their signatures to the other parties. Signatures may be
delivered by facsimile transmission. All counterparts shall be deemed an
original of this Agreement.
[Remainder of this page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
SELECT:
FRANKLIN SELECT REALTY TRUST,
a California corporation
By: /S/ MARK A.TENBOER
Name:MARK A. TENBOER
Its: VICE PRESIDENT FINANCE
By:
Name:
Its:
PARTNERSHIP:
FSRT, L.P.,
a California limited partnership
By: Franklin Select Realty Trust,
a California corporation,
its General Partner
By: /S/ MARK A. TENBOER
Name:MARK A. TENBOER
Its: VICE PRESIDENT FINANCE
By:
Name:
Its:
NOTE: ALL PARTIES MUST ALSO INITIAL THE AGREEMENT IN SECTION 15.
[THIS IS A SIGNATURE PAGE TO AND SHALL BE ATTACHED TO AND BECOME A PART OF A
MASTER COUNTERPART OF THAT CERTAIN PURCHASE AGREEMENT AMONG VALUE ENHANCEMENT
FUND III, LLC, FRANKLIN SELECT REALTY TRUST, FSRT, L.P., AND THE LIMITED
PARTNERS OF FSRT, L.P. DATED OCTOBER 12, 1999.]
LIMITED PARTNERS:
/S/ BARRY C.L. FERNALD
Barry C.L. Fernald, individually
/S/ GARY FILIZETTI
Gary Filizetti, individually
/S/ LARRY D. RUSSEL
Larry D. Russel, individually
/S/ CHARLES GERALD ENGLES
Charles Gerald Engles, individually
NOTE: ALL PARTIES MUST ALSO INITIAL THE AGREEMENT IN SECTION 15.
[THIS IS A SIGNATURE PAGE TO AND SHALL BE ATTACHED TO AND BECOME A PART OF A
MASTER COUNTERPART OF THAT CERTAIN PURCHASE AGREEMENT AMONG VALUE ENHANCEMENT
FUND III, LLC, FRANKLIN SELECT REALTY TRUST, FSRT, L.P., AND THE LIMITED
PARTNERS OF FSRT, L.P. DATED OCTOBER 12, 1999.]
LIMITED PARTNERS:
Barry C.L. Fernald and Toby Lynn Fernald, or their
successors, Trustees under Revocable Trust Agreement
dated September 3, 1980, as amended, FBO Barry C.L.
Fernald and Toby Lynn Fernald
/S/ BARRY C.L. FERNALD
Barry C.L. Fernald, Trustee
/S/ TOBY LYNN FERNALD
Toby Lynn Fernald, Trustee
Gary J. Filizetti, Trustee under Revocable Trust
Agreement dated November 3, 1988, as amended, FBO
Gary J. Filizetti
/S/ GARY J. FILIZETTI
Gary J. Filizetti, Trustee
Larry D. Russel and Janet M. Russel, Trustees or the
Trustee's Successors, under the Larry D. Russel and
Janet M. Russel Living Trust dated February 15,
1978, as amended
/S/ LARRY D. RUSSEL
Larry D. Russel, Trustee
/S/ JANET M. RUSSEL
Janet M. Russel, Trustee
Charles Gerald Engles and Jane Beth Engles, or their
successor(s), Trustees under Revocable Trust
Agreement dated September 20, 1984, as amended, FBO
Charles Gerald Engles and Jane Beth Engles
/S/ CHARLES GERALD ENGLES
Charles Gerald Engles, Trustee
/S/ JANE BETH ENGLES
Jane Beth Engles, Trustee
NOTE: ALL PARTIES MUST ALSO INITIAL THE AGREEMENT IN SECTION 15.
[THIS IS A SIGNATURE PAGE TO AND SHALL BE ATTACHED TO AND BECOME A PART OF A
MASTER COUNTERPART OF THAT CERTAIN PURCHASE AGREEMENT AMONG VALUE ENHANCEMENT
FUND III, LLC, FRANKLIN SELECT REALTY TRUST, FSRT, L.P., AND THE LIMITED
PARTNERS OF FSRT, L.P. DATED OCTOBER 12, 1999.]
BUYER:
VALUE ENHANCEMENT FUND III, LLC,
a Georgia limited liability company
By: Lend Lease Real Estate Investments, Inc.,
its Manager
By: /S/ CHRIS MCELDOWNEY
Its: SENIOR VICE PRESIDENT
NOTE: ALL PARTIES MUST ALSO INITIAL THE AGREEMENT IN SECTION 15.
[THIS IS A SIGNATURE PAGE TO AND SHALL BE ATTACHED TO AND BECOME A PART OF A
MASTER COUNTERPART OF THAT CERTAIN PURCHASE AGREEMENT AMONG VALUE ENHANCEMENT
FUND III, LLC, FRANKLIN SELECT REALTY TRUST, FSRT, L.P., AND THE LIMITED
PARTNERS OF FSRT, L.P. DATED OCTOBER 12, 1999.]
Exhibit 2(b)
PURCHASE OF
CONVERSION RIGHTS
AGREEMENT
BETWEEN
FRANKLIN SELECT REALTY TRUST,
AND
THE LIMITED PARTNERS LISTED ON SCHEDULE 1
October 12, 1999
PURCHASE OF CONVERSION RIGHTS AGREEMENT FRANKLIN SELECT REALTY TRUST - THE
LIMITED PARTNERS
TABLE OF CONTENTS
PAGE
RECITALS..........................................................1
1. DEFINED TERMS..................................................2
2. PURCHASE OF CONVERSION RIGHTS..................................2
3. PURCHASE PRICE.................................................3
3.1. Amount and Payment of Conversion Purchase Price............3
3.2 Conversion Purchase Price Contingent.......................3
3.3 Reports....................................................3
3.4 Authority of Select.........................................3
4. CONDITIONS PRECEDENT...........................................4
5. CLOSING OF PURCHASE OF CONVERSION RIGHTS.......................5
5.1 Closing.....................................................5
5.2 Delivery of Assignment of the Conversion Rights............5
5.3 Fees and Costs..............................................5
6. REPRESENTATIONS AND WARRANTIES.................................5
7. INDEMNITIES....................................................5
7.1 Indemnity by Limited Partners...............................5
7.2 Indemnification and Defense by Select.......................6
7.3 Cooperation................................................7
7.4 Claims for Indemnification.................................7
8. MISCELLANEOUS..................................................8
8.1 Notices.....................................................8
8.2 Headings....................................................8
8.3 Covenant of Further Assurances..............................8
8.4 Entire Agreement............................................9
8.5 Partial Invalidity..........................................9
8.6 No Waiver...................................................9
8.7 Time of the Essence.........................................9
8.8 Governing Law...............................................9
8.9 Interpretation..............................................9
8.10 Assignment.................................................9
8.11 Attorneys'Fees.............................................9
8.12 Counterparts..............................................10
8.13 Undertaking by Individuals................................10
LIST OF SCHEDULES
Schedule 1.Limited Partners
PURCHASE OF CONVERSION RIGHTS AGREEMENT FRANKLIN SELECT REALTY TRUST - THE
LIMITED PARTNERS p. 6
PURCHASE OF CONVERSION RIGHTS AGREEMENT
THIS PURCHASE OF CONVERSION RIGHTS AGREEMENT (this "AGREEMENT") is
entered into as of October 12, 1999 (the "CONTRACT DATE"), by and between
FRANKLIN SELECT REALTY TRUST, a California corporation ("SELECT") and the
persons listed on SCHEDULE 1 hereto (the "LIMITED PARTNERS").
RECITALS
A. Select is the sole general partner of FSRT, L.P., a Delaware
limited partnership (the "PARTNERSHIP"), and the Limited Partners are all of
the limited partners of the Partnership.
B. On October 30, 1996, Select, the Partnership, and the Limited
Partners entered into that certain Exchange Rights Agreement, dated as of
October 30, 1996 ("EXCHANGE RIGHTS AGREEMENT"). Concurrently therewith,
Select and the Limited Partners entered into that certain Registration Rights
Agreement, of even date therewith ("REGISTRATION RIGHTS AGREEMENT").
Pursuant and subject to the terms and conditions of the Exchange Rights
Agreement, the Limited Partners have the separate and independent right to
exchange limited partnership units in the Partnership ("UNITS") for Series A
Shares of common stock in Select ("SHARES"), on a one for one basis, subject
to adjustments for capital changes in Select occurring after the date of the
Exchange Rights Agreement (such as stock splits and recapitalizations).
Pursuant and subject to the terms and conditions of the Registration Rights
Agreement, the Limited Partners are entitled to certain registration rights
for Units that are converted into Shares. (Such conversion and registration
rights of the Limited Partners, as more fully provided in the Exchange Rights
Agreement and the Registration Rights Agreement, are hereinafter collectively
referred to as the "CONVERSION RIGHTS").
C. Concurrently with the execution and delivery of this Agreement,
Select, the Limited Partners and the Partnership have entered into a
Purchase Agreement (the "PURCHASE AGREEMENT") with Value Enhancement Fund
III, LLC, a Georgia limited liability company ("BUYER"), pursuant to which
Buyer will acquire, among other things, all of Select's interest as General
Partner of the Partnership (the "GENERAL PARTNER'S INTEREST"). Buyer has
also agreed to purchase the Units on the terms and conditions set forth in
the Purchase Agreement. Buyer has informed Select and the Limited Partners
that Buyer is not willing to purchase the General Partner's Interest so long
as the Limited Partners maintain such Conversion Rights and is unwilling to
give value to the Limited Partners for such Conversion Rights. Moreover,
Select is unwilling to enter into an agreement to sell certain assets,
including the General Partner's Interest, to the Buyer unless the Conversion
Rights are first either reacquired by Select and thereby terminated by the
Partnership, or exercised by the Limited Partners prior to Closing.
D. Select and the Limited Partners agree that the Conversion Rights
constitute property with substantial value, but that such value is difficult
or impracticable to determine. In order to induce Buyer to acquire the
General Partner's Interest on the terms and conditions of the Purchase
Agreement and to induce the Limited Partners to sell their Units to Buyer
without the Conversion Rights, and to induce Select to enter into the
Purchase Agreement, Select and the Limited Partners have agreed that (except
as set forth in Recital F, below), on the terms and subject to the conditions
of this Agreement, and immediately prior to the closing of the transactions
set forth in the Purchase Agreement, (i) the Limited Partners will sell to
Select, and Select will purchase from the Limited Partners, the Conversion
Rights for a contingent purchase price to be determined and paid at the times
and in the manner set forth in this Agreement, and (ii) Select and the
Limited Partners are willing to agree to certain other undertakings in
connection with such transaction, the Purchase Agreement, and the Transaction
Agreements (as defined in the Purchase Agreement).
E. Select and the Limited Partners intend that without regard for the
manner in which the purchase of the Units has occurred, once Select has
purchased the Conversion Rights from the Limited Partners, the consideration
received by the Limited Partners in excess of the $7.46 per Unit price (as
adjusted) will be the same as if they had converted their Units to Class A
common stock in Select ("SHARES").
F. The Limited partners, at their option, may elect to convert their
Units to Shares as of the Closing, pursuant to the terms of the Purchase
Agreement. If such conversion occurs, the Limited Partners so converting
shall be treated as holders of Shares of Select for all purposes, and Select
shall indemnify the Limited Partners from certain claims as specified below.
NOW, THEREFORE, in consideration for the foregoing Recitals and the
mutual covenants and agreements herein contained, and intending to be legally
bound thereby, Select and the Limited Partners agree as follows:
1. DEFINED TERMS. Any capitalized term used but not otherwise defined
herein shall have the meaning set forth for such term in the Purchase
Agreement
2. PURCHASE OF CONVERSION RIGHTS. Except as provided below, the
Limited Partners hereby severally agree to sell to Select, and Select agrees
to purchase from each of the Limited Partners, immediately prior to the
Closing of the Transactions contemplated by the Purchase Agreement, all
right, title, and interest of the Limited Partners in and to the Conversion
Rights regarding all 1,625,000 Unit Conversion Rights held by all of the
Limited Partners collectively, all on the terms and conditions set forth in
this Agreement and subject to the consummation of the contemporaneous
Transactions contemplated by the Purchase Agreement and the other Transaction
Documents. Pursuant to the Exchange Rights Agreement, as modified by the
Purchase Agreement, each Limited Partner may convert his Units to Shares
immediately prior to closing by giving notice on or before November 19, 1999,
to Select and Buyer. In the event a Limited Partner does so convert, such
Limited Partner shall no longer be a Limited Partner for purposes of, nor a
party to, this Agreement, and the number of Unit Conversion Rights subject to
this Agreement shall be reduced by 406250. Notwithstanding the foregoing,
however, Sections 5.3, 7.2, 7.3 and 7.4 (with regard to Select's
indemnification obligations) shall continue in full force and effect with
respect to all of the Limited Partners.
3. PURCHASE PRICE.
3.1. AMOUNT AND PAYMENT OF CONVERSION PURCHASE PRICE. The
contingent purchase price per Unit for the Conversion Rights ("CONVERSION
PURCHASE PRICE") shall be an amount per Unit equal to the amount of
distributions, if any, paid per share to the holders of Class A common stock
of Select from and after the Closing Date in excess of $7.46 per share,
including any liquidating distributions made by Select or a liquidating trust
established by Select to wind up its affairs; PROVIDED, HOWEVER, that the
$7.46 per share amount shall be adjusted downward to the extent that the
price per Unit received by the Limited Partners in their sale to the Buyer is
reduced in accordance with the terms of Section 2.3 (CERTAIN ADJUSTMENTS) of
the Purchase Agreement. The Conversion Purchase Price shall be paid in
installments, without interest, at the same time as, and in no event later
than within ten (10) business days after, the corresponding distribution to
the Select Class A common shareholders. It is the intention of the parties
that the Conversion Purchase Price per Unit be an amount equal to what each
Limited Partner would have received had the Limited Partner converted his
Units to Shares prior to the Closing minus the amount of $7.46 per share, as
adjusted. Select and the Limited Partners agree that such amount, although
contingent, is a reasonable approximation of the value of the Conversion
Rights.
3.2 CONVERSION PURCHASE PRICE CONTINGENT. The Limited Partners
acknowledge and agree that the Conversion Purchase Price is contingent and
will be effected by, among other things, (i) the Holdback Amount (as defined
in the Purchase Agreement) remaining after all Claims with respect thereto
have been resolved, (ii) all costs of defending and resolving pending
shareholder litigation involving Select and the Partnership, including the
cost of obtaining and maintaining any insurance with respect thereto, (iii)
all costs relating to the indemnification by select of the Limited Partners
as provided therein, (iv) all costs of resolving any residual claims with
respect to the Transactions, (v) closing costs and expenses payable by Select
under the Purchase Agreement, (vi) prorations under Section 11.8 (PRORATIONS)
of the Purchase Agreement, (vii) the cash flow and sales proceeds, if any,
generated by any assets of Select that are not sold to the Buyer at the
Closing, and (viii) all costs of attending to post-Closing matters under the
Purchase Agreement and of winding up the affairs of Select, and in each case
including, without limitation attorney's fees and costs and escrow and
similar fees and costs.
3.3 REPORTS. Concurrently with the distribution of any
installment of the Conversion Purchase Price, if Select elects at such time
to deliver to the shareholders of Select a report that sets out in reasonable
detail the calculation of amounts available for distribution and the basis
therefor, Select shall also deliver to each Limited Partner a copy of any
such report.
3.4 AUTHORITY OF SELECT. Other than such matters relating to
breaches of their obligations or representations and warranties under the
Transaction Agreements for which the Limited Partners are liable under the
terms thereof Select shall have the sole and exclusive obligation and
authority to determine, settle, approve, give consents to or take any other
action affecting the matters described in the last sentence of Section 3.2
(CONVERSION PURCHASE PRICE CONTINGENT) (collectively, the "COVERED ACTS"), and
all parties to the Transaction Agreements may rely fully on such acts.
Notwithstanding anything to the contrary in the immediately preceding
sentence, Select shall not agree to any Purchase Price Adjustment under the
Purchase Agreement (other than as results from the withdrawal of Data General
pursuant to the Letter Agreement (as defined below)) that would exceed,
cumulatively and in the aggregate $7,500,000, without the approval of Barry
C. L. Fernald, or such other Limited Partner as a majority in interest of the
Limited Partners may from time to time appoint. Costs incurred in connection
with such Covered Acts shall be paid out of funds retained by Select for such
purpose (including, without limitation, any Holdback Amount or any Escrow
Fund) and the Limited Partners shall have no liability for such costs, other
than any resulting diminution of the Conversion Purchase Price. Subject to
Select's indemnification obligation under Section 7.2 hereof, neither Select
or its officers, directors, managers, agents, shareholders or employees shall
be liable to any Limited Partner for any Covered Acts, except for their own
negligence or willful misconduct. Without limiting the foregoing, Select (i)
may consult with legal counsel, independent public accountants and other
experts and consultants selected by it and shall not be liable for any action
taken or omitted to be taken in good faith by them with the advise of such
counsel, accountants or experts, (ii) shall incur no liability by acting on
any notice (including notice by telephone) consent, certificate or other
writing or communication believed by them to be genuine and signed or
authorized by a proper party or parties (iii) may give such consideration as
in the exercise of its reasonable business judgment it deems appropriate, to
the interest of all of its shareholders and other interested parties, and not
just the interests of the Limited Partners.
Notwithstanding that the Buyer and other third parties may fully and
unconditionally rely on the foregoing authority of Select without any further
documentation from the Limited Partners, Select for the benefit of each of
the Limited Partners agrees that it will not exercise its rights under this
Section with regard to any matter in which the result to any of the Limited
Partners is not proportionally the same for the Limited Partner as it is for
the Class A common shareholders of Select without the consent of Barry C.L.
Fernald or such other of the Limited Partners as a majority in interest of
the Limited Partners may from time to time appoint.
4. CONDITIONS PRECEDENT.
The obligations of the parties under this Agreement are subject to
the following conditions precedent, each of which may be waived in writing by
the party benefited thereby:
(a) consummation of the Transactions pursuant to the Purchase
Agreement (such consummation being subject to, among other conditions, the
approval of Select's shareholders) (PROVIDED that such consummation is not a
condition precedent to the parties' indemnification obligations herein);
(b) as a condition to Select's obligation to purchase the
Conversion Rights as provided herein, the Limited Partners shall have
delivered good title thereto; and
(c) as a condition to Select's obligation to acquire any
Limited Partner's Conversion Rights, Select shall concurrently acquire the
Conversion Rights of each of the other Limited Partners.
5. CLOSING OF PURCHASE OF CONVERSION RIGHTS.
5.1 CLOSING. The purchase by Select of the Conversion Rights
pursuant to this Agreement or the conversion of the Units into Shares shall
occur immediately prior to the Closing of the Transactions contemplated by
the Purchase Agreement.
5.2 DELIVERY OF ASSIGNMENT OF THE CONVERSION RIGHTS. Each of the
Limited Partners shall evidence the sale of the Conversion Rights under this
Agreement by the execution and delivery to Select on the Closing Date of an
Assignment of Conversion Rights in substantially the form of EXHIBIT A (each,
an "ASSIGNMENT"). Execution and delivery of the Assignment is for the
benefit of Select only, and, at Select's option and without relieving any
Limited Partner of his obligation to execute and deliver an Assignment on the
Closing Date (PROVIDED that the Closing under the Purchase Agreement has
occurred and the other conditions for the Limited Partners' benefit set forth
in Section 4 (CONDITIONS PRECEDENT ) have been satisfied) the purchase and
sale of each Limited Partner's Conversion Rights shall be deemed to have been
consummated and perfected immediately prior to such Closing, without further
action or delivery on the part of any party.
5.3 FEES AND COSTS. Select shall reimburse the Limited Partners
within 15 days after demand and the receipt of appropriately detailed
invoices therefore, all reasonable attorneys' and accountants' fees and costs
reasonably incurred after June 30, 1999 by the Limited Partners in connection
with the evaluation, negotiation and documentation of the sale of their
Conversion Rights pursuant to this Agreement and their Units pursuant to the
Purchase Agreement, together with any third party closing costs incurred by
the Limited Partners in connection with the closing of these.
6. REPRESENTATIONS AND WARRANTIES.
Each Limited Partner is the sole beneficial and legal owner of the
such Limited Partner's 406,250 Unit Conversion Rights, free from any lien,
claim or encumbrance, with full right, power and authority to sell these
Conversion Rights. Each Limited Partner will convey all of its right, title
and interest in and to all of his Conversion Rights to Select free and clear
of any and all liens, claims, encumbrances, and security interests, options,
pledges and agreements restricting transferability and such Limited Partner
has not transferred, assigned, sold, hypothecated, pledged, or encumbered all
or any portion of these Conversion Rights at any time. the undertakings of
each Limited Partner under this Section are several and not joint.
7. INDEMNITIES.
7.1 INDEMNITY BY LIMITED PARTNERS. The Limited Partners,
severally and not jointly, shall indemnify, save and hold harmless Select and
its directors, officers, employees, agents, representatives shareholders and
affiliates (each of which is a "INDEMNIFIED PARTY"), from and against any and
all costs, losses (including, without limitation, diminution in value),
liabilities, obligations, damages, lawsuits, deficiencies, claims, demands,
and expenses (whether or not arising out of third-party claims), including
interest, penalties, lost profits and other losses, attorneys' fees and all
amounts paid in investigation, defense or settlement of any of the foregoing,
incurred in connection with, arising out of, resulting from or incident to
(a) the inaccuracy of any representation made by the Limited Partner in
Section 6 (REPRESENTATIONS AND WARRANTIES) of this Agreement, to the extent
the same constitute an intentional misrepresentation, or the failure of the
Limited Partner to deliver good title to his or its Unit Conversion Rights,
and (b) the inaccuracy of any representation made by the Limited Partner in
Section 13.2 (REPRESENTATIONS AND WARRANTIES OF LIMITED PARTNERS) of the
Purchase Agreement, to the extent the same constitute "Limited Partner
Excluded Claims or Losses" under the Purchase Agreement (the foregoing costs
and losses are referred to herein as "SELECT LOSSES"). The foregoing
indemnity does not extend to Losses of any kind suffered or incurred by
Select because the Select Transactions fail to close because of any act of a
Limited Partner.
7.2 INDEMNIFICATION AND DEFENSE BY SELECT. Select shall indemnify,
save and hold harmless each Limited Partner, and such partner's agents,
representatives, heirs, successors and assigns (each of which is a
"INDEMNIFIED PARTY"), from and against any and all costs, losses (including,
without limitation, diminution in value), liabilities, obligations, damages,
lawsuits, deficiencies, claims, demands, and expenses (whether or not arising
out of third-party claims), including interest, penalties, lost profits and
other losses, reasonable attorneys' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing, incurred in
connection with, arising out of, resulting from or incident to the
Transactions and the sale of assets pursuant to the Purchase Agreement or in
any other Transaction Agreement, except to the extent such liabilities,
obligations, damages, lawsuits, deficiencies, claims, demands and expenses
arise from (a) the inaccuracy of any representation made by the Limited
Partner in Section 6 (REPRESENTATIONS AND WARRANTIES) of this Agreement to
the extent the same shall constitute an intentional misrepresentation or the
failure of the Limited Partner to deliver good title to the Unit Conversion
Rights, and (b) the inaccuracy of any representation made by the Limited
Partner in Section 13.2 (REPRESENTATIONS AND WARRANTIES OF THE LIMITED
PARTNERS) of the Purchase Agreement to the extent the same constitute
"Limited Partner Excluded Claims and Losses" under the Purchase Agreement (the
foregoing non-excluded costs and losses are referred to herein as the
"LIMITED PARTNER LOSSES"). In addition, Select shall pay in advance of the
final disposition of the matter, upon presentation of appropriately detailed
invoices therefor reasonable legal fees, or shall provide the Limited
Partners with legal representation, in connection with defending any matter
described in the immediately preceding sentence, regardless of whether the
matters at issue are ultimately determined to constitute Limited Partner
Excluded Claims and Losses or result from an Indemnified Party's intentional
misrepresentation or breach of his or its obligations under this Agreement,
upon receipt of an undertaking, reasonably satisfactory in form and substance
to Select, by such Indemnified Party to repay such amounts if it is
ultimately determined that the Indemnified Party is not entitled to
indemnification under the first sentence of this Section 7.2.
7.3 COOPERATION. Each Indemnified Party shall cooperate in all
reasonable respects with each party from which it is seeking indemnification
hereunder (an "INDEMNITOR") and its representatives (including without
limitation its attorneys) in the investigation, trial and defense of any
lawsuit or action and any appeal arising therefrom; PROVIDED, HOWEVER, that
the Indemnified Party may, at its own cost, participate in negotiations,
arbitrations and the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with
each other in any notifications to insurers.
7.4 CLAIMS FOR INDEMNIFICATION. If a claim (a "CLAIM") either for
Select Losses or Limited Partner Losses (together, "LOSSES")is to be made by
a Indemnified Party against the Indemnitor, the party claiming such
indemnification shall give written notice (a "CLAIM NOTICE") to the
Indemnitor as soon as practicable after the party entitled to indemnification
becomes aware of any fact, condition or event which may give rise to Losses
for which indemnification may be sought under this Section 7. Such Claim
Notice shall specify the amount of the Claim asserted, if actually known to
the Indemnified Party and method of computation thereof, and shall specify
the basis for such Claim. If any lawsuit or enforcement action is filed by a
third party against any Indemnified Party, written notice thereof shall be
given to the Indemnitor as promptly as practicable (and in any event within
15 calendar days after the service of the citation or summons). The failure
of any Indemnified Party to give timely notice hereunder shall not affect
rights to indemnification hereunder, except to the extent that the Indemnitor
demonstrates actual damage caused by such failure. After such notice, if the
Indemnitor acknowledges in writing to the Indemnified Party its obligation to
indemnify the Indemnified Party hereunder against any Losses that may result
from such lawsuit or enforcement action, then the Indemnitor shall be
entitled, if it so elects at its own cost, risk and expense, (i) to take
control of the defense and investigation of such lawsuit or action, (ii) to
employ and engage attorneys of its own choice, subject to the reasonable
approval of the Indemnified Party, to handle and defend the same unless
(A) the named parties to such action or proceeding (including any impleaded
parties) include both the Indemnitor and the Indemnified Party and (B) the
Indemnified Party has been advised in writing by counsel that there exists or
is reasonably likely to exist a conflict of interest that would make it
inappropriate for the same counsel to represent both the Indemnified Party
and the Indemnitor, in which event the Indemnified Party shall be entitled,
at the Indemnitor's cost, risk and expense, to separate counsel of its own
choosing, subject to the reasonable approval of Indemnitor, and (iii) to
compromise or settle such Claim, which compromise or settlement shall be made
only with the written consent of the Indemnified Party, such consent not to
be unreasonably withheld (PROVIDED it shall not be unreasonable for an
Indemnified Party to withhold consent to any settlement the terms of which do
not fully release such Indemnified Party). If the Indemnitor fails to assume
the defense of such Claim within 15 calendar days after receipt of the Claim
Notice, the Indemnified Party against which such Claim has been asserted will
(upon delivering notice to such effect to the Indemnitor) have the right to
undertake, at the Indemnitor's cost and expense, the defense, compromise or
settlement of such claim on behalf of and for the account and risk of the
Indemnitor; provided, however, that such Claim shall not be compromised or
settled without the written consent of the Indemnitor, which consent shall
not be unreasonably withheld. In the event the Indemnified Party assumes the
defense of the Claim, the Indemnified Party will keep the Indemnitor
reasonably informed of the progress of any such defense, compromise or
settlement. The Indemnitor shall be liable for any settlement of any action
effected pursuant to and in accordance with this Section 7 and for any final
judgment (subject to any right of appeal), and the Indemnitor agrees to
indemnify and hold harmless an indemnified party from and against any Losses
by reason of such settlement or judgment.
8. MISCELLANEOUS.
8.1 NOTICES. Unless otherwise provided herein, all notices and
any other communications permitted or required under this Agreement must be
in writing and will be effective (i) immediately upon delivery in person, or
(ii) upon delivery by a commercial courier or delivery service for overnight
delivery, or (iii) upon receipt by the sender of confirmation that notice
sent by facsimile transmission has been received by the recipient of the
facsimile. All notices must be properly addressed (including facsimile
transmission numbers) and delivered to the parties at the addresses set forth
below, or at such other addresses as either party may subsequently designate
by written notice given in the manner provided in this Section:
Select: Franklin Select Realty Trust
P. O. Box 7777
San Mateo, CA 94403
Facsimile No.: (650) 312-5830
Attn: David P. Goss
with a copy to:Farella, Braun & Martel LLP
235 Montgomery Street, 19th Floor
San Francisco, CA 94104
Facsimile No.: (415) 954-4480
Attn: Matthew J. Lewis, Esq.
Limited Partners: Barry C.L. Fernald
3880 South Bascom Ave., Suite 210
San Jose, CA 95124
with a copy to:Eugene Miller
Miller Starr & Regalia
1331 N. California Blvd.
5th Floor
Walnut Creek, CA 94596
8.2 HEADINGS. The headings used herein are for purposes of
convenience only and should not be used in construing the provisions hereof.
8.3 COVENANT OF FURTHER ASSURANCES. The parties hereby agree to
execute such other documents and perform such other acts as may be necessary
or desirable to carry out the purposes of this Agreement.
8.4 ENTIRE AGREEMENT. This document, together with the
Transaction Agreements, represents the entire agreement between the parties
with respect to the subject matter hereof and supersedes all other prior
agreements. This Agreement may only be modified by a written instrument
signed by all parties.
8.5 PARTIAL INVALIDITY. If any term, covenant or condition of
this Agreement or its application to any person or circumstances shall be
held to be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provisions to other persons or circumstances
shall not be affected, provided that the affected party is still able to
realize the material benefits of this Agreement.
8.6 NO WAIVER. No consent or waiver by either party to or of any
breach of any representation, covenant or warranty shall be construed as a
consent to or waiver of any other breach of the same or any other
representation, covenant, or warranty. No consent or waiver shall be
effective unless in writing, executed by the waiving or consenting party.
8.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
8.8 GOVERNING LAW. This Agreement is entered into and shall be
governed by and construed in accordance with the laws of the State of
California.
8.9 INTERPRETATION. All parties have been represented by counsel
in the preparation and negotiation of this Agreement, and this Agreement
shall be construed according to the fair meaning of its language. The rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be employed in interpreting this Agreement. Whenever
the term "days" is used in this Agreement, it shall mean calendar days unless
specifically provided otherwise. Whenever the term "including" is used in
this Agreement, it shall mean "including, but not limited to," the items
thereafter enumerated.
8.10 ASSIGNMENT. Select may assign its rights and delegate its
duties under this Agreement to a liquidating trust established in connection
with the dissolution and liquidation of Select. The Limited Partners may
assign their rights to receive the Conversion Purchase Price (subject to the
terms and conditions of this Agreement) to any person, but no attempted
assignment or delegation of a Limited Partner's rights and duties hereunder
will relieve such Limited Partner from any obligation hereunder. Except as
otherwise provided in this Section, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and assigns.
8.11 ATTORNEYS' FEES. In the event of any litigation between the
parties respecting this Agreement, the prevailing party shall, except as
otherwise provided herein, be entitled, in addition to all expenses, costs or
damages awarded by a court of competent jurisdiction, to reasonable
attorneys' fees, whether or not such controversy was litigated or prosecuted
to judgment.
8.12 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures to each counterpart
were upon a single instrument, and is intended to be binding when all parties
have delivered their signatures to the other parties. Signatures may be
delivered by facsimile transmission. All counterparts shall be deemed an
original of this Agreement.
8.13 UNDERTAKING BY INDIVIDUALS. Each of Messrs. Fernald,
Filizetti, Engles and Russel are the "Limited Partners" of record on the
records of the Partnership, but have informed Select that they have
transferred their interests in the Partnership to the estate planning trusts
set forth on SCHEDULE 1 effective as of February 28, 1997. Notwithstanding
any contrary provision of this Agreement or the Purchase Agreement, Select
has agreed to recognize and to cause the Partnership to recognize the
transferee trusts as the Limited Partners on the condition that, and by their
signatures hereon each of Messrs. Fernald, Filizetti, Engles and Russel agree
that (i) each of Messrs. Fernald, Filizetti, Engles and Russel has
transferred all of their respective right, title and interest in the Units to
their respective estate planning trusts and have no further interest in such
Units (ii) each of Messrs. Fernald, Filizetti, Engles and Russel will cause
their respective transferee Limited Partner to perform or pay its obligations
and liabilities hereunder (subject to the limitations on personal liability
set forth herein).
[Remainder of this page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
SELECT:
FRANKLIN SELECT REALTY TRUST,
a California corporation
By: /S/ MARK A. TENBOER
Name: MARK A. TENBOER
Its: VICE PRESIDENT FINANCE
By:
Name:
Its:
LIMITED PARTNERS:
/S/ BARRY C.L. FERNALD
Barry C.L. Fernald, individually
/S/ GARY FILIZETTI
Gary Filizetti, individually
/S/ LARRY D. RUSSEL
Larry D. Russel, individually
/S/ CHARLES GERALD ENGLES
Charles Gerald Engles, individually
LIMITED PARTNERS:
Barry C.L. Fernald and Toby Lynn Fernald, or their
successors, Trustees under Revocable Trust Agreement
dated September 3, 1980, as amended, FBO Barry C.L.
Fernald and Toby Lynn Fernald
/S/ BARRY C.L. FERNALD
Barry C.L. Fernald, Trustee
/S/ TOBY LYNN FERNALD
Toby Lynn Fernald, Trustee
Gary J. Filizetti, Trustee under Revocable Trust
Agreement dated November 3, 1988, as amended, FBO
Gary J. Filizetti
/S/ GARY J. FILIZETTI
Gary J. Filizetti, Trustee
Larry D. Russel and Janet M. Russel, Trustees or the
Trustee's Successors, under the Larry D. Russel and
Janet M. Russel Living Trust dated February 15,
1978, as amended
/S/ LARRY D. RUSSEL
Larry D. Russel, Trustee
/S/ JANET M. RUSSEL
Janet M. Russel, Trustee
Charles Gerald Engles and Jane Beth Engles, or their
successor(s), Trustees under Revocable Trust
Agreement dated September 20, 1984, as amended, FBO
Charles Gerald Engles and Jane Beth Engles
/S/ CHARLES GERALD ENGLES
Charles Gerald Engles, Trustee
/S/ JANE BETH ENGLES
Jane Beth Engles, Trustee
SCHEDULE 1
LIMITED PARTNERS
Barry C.L. Fernald and Toby Lynn 406,250 Units
Fernald, or their successors,
Trustees under Revocable Trust
Agreement dated September 3, 1980,
as amended, FBO Barry C.L. Fernald
and Toby Lynn Fernald
Gary J. Filizetti, Trustee under 406,250 Units
Revocable Trust Agreement dated
November 3, 1988, as amended, FBO
Gary J. Filizetti
Larry D. Russel and Janet M. 406,250 Units
Russel, Trustees or the Trustee's
Successors, under the Larry D.
Russel and Janet M. Russel Living
Trust dated February 15, 1978, as
amended
Charles Gerald Engles and Jane 406,250 Units
Beth Engles, or their
successor(s), Trustees under
Revocable Trust Agreement dated
September 20, 1984, as amended,
FBO Charles Gerald Engles and Jane
Beth Engles
