SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-14162
GLENBOROUGH REALTY TRUST INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland 94-3211970
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 South El Camino Real,
Suite 1100 San Mateo, California
(415) 343-9300 94402-1708
(Address of principal executive offices (Zip Code)
and telephone number)
Securities registered under Section 12(b) of the Act:
Name of Exchange
Title of each class: on which registered:
Common Stock, $.001 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of August 14, 1997, 20,174,692 shares of Common Stock ($.001 par value) were
outstanding.
Page 1 of 199
<PAGE>
INDEX
GLENBOROUGH REALTY TRUST INCORPORATED
Page No.
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements of Glenborough
Realty Trust Incorporated (Unaudited except for
the Consolidated Balance Sheet at December 31, 1996):
Consolidated Balance Sheets at June 30, 1997 and
December 31, 1996 4
Consolidated Statements of Operations for the six months
ended June 30, 1997 and 1996 5
Consolidated Statements of Operations for the three months
ended June 30, 1997 and 1996 6
Consolidated Statements of Stockholders' Equity for the
six months ended June 30, 1997 and 1996 7
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 8-9
Notes to Consolidated Financial Statements 10-18
Consolidated Financial Statements of Glenborough Hotel Group
(Unaudited except for the Consolidated Balance Sheet at
December 31, 1996):
Consolidated Balance Sheets at June 30, 1997 and
December 31, 1996 19
Consolidated Statements of Income for the six months ended
June 30, 1997 and 1996 20
Consolidated Statements of Income for the three months ended
June 30, 1997 and 1996 21
Consolidated Statements of Stockholders' Equity for the six
months ended June 30, 1997 and 1996 22
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 23
Notes to Consolidated Financial Statements 24-26
Page 2 of 199
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations:
Glenborough Realty Trust Incorporated 27-33
Glenborough Hotel Group 34-35
PART II OTHER INFORMATION
Item 1. Legal Proceedings 36-37
Item 2. Changes in Securities 37
Item 4. Submission of Matters to a Vote of Security Holders 37-38
Item 6. Exhibits and Reports on Form 8-K 39
SIGNATURES 40
EXHIBIT INDEX 41
Page 3 of 199
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
June 30, December 31,
1997 1996
(Unaudited) (Audited)
-------------- -------------
<S> <C> <C>
ASSETS
Rental property, net of accumulated depreciation of
$30,450 and $28,784 in 1997 and 1996, respectively $ 315,837 $ 161,945
Investments in Associated Companies and Glenborough
Partners 6,775 7,350
Mortgage loans receivable, net of provision for loss of
$863 in 1996 3,547 9,905
Cash and cash equivalents 3,352 1,355
Other assets 7,659 4,965
------------- -------------
TOTAL ASSETS $ 337,170 $ 185,520
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage loans $ 116,563 $ 54,584
Secured bank line 36,118 21,307
Other liabilities 5,180 3,198
------------- -------------
Total liabilities 157,861 79,089
------------- -------------
Minority interest 15,652 8,831
Stockholders' Equity:
Common stock, 13,194,692 and 9,661,553 shares issued
and outstanding at June 30, 1997, and
December 31, 1996, respectively 13 10
Additional paid-in capital 172,621 105,952
Deferred compensation (304) (399)
Retained earnings (deficit) (8,673)) (7,963)
------------- -------------
Total stockholders' equity 163,657 97,600
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 337,170 $ 185,520
============= =============
See accompanying notes to consolidated financial statements
</TABLE>
Page 4 of 199
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30, 1997 and 1996
(in thousands, except per share amounts)
(Unaudited)
1997 1996
-------------- -------------
<S> <C> <C>
REVENUE
Rental revenue $ 19,691 $ 7,039
Fees and reimbursements from affiliate 367 133
Interest and other income 613 370
Equity in earnings of Associated Companies 603 969
Gain on collection of mortgage loan receivable 652 ---
Net gain on sales of rental properties 570 321
-------------- -------------
Total revenue 22,496 8,832
-------------- -------------
EXPENSES
Property operating expenses 6,045 1,909
General and administrative 1,374 675
Depreciation and amortization 4,044 1,759
Interest expense 3,800 1,421
Consolidation costs --- 6,082
Litigation costs --- 1,155
-------------- -------------
Total expenses 15,263 13,001
-------------- -------------
Income (loss) from operations before minority interest
7,233 (4,169)
Minority interest (629) (243)
-------------- -------------
Net income (loss) $ 6,604 $ (4,412)
============== =============
Primary earnings per share $ 0.55 $ (0.77)
============== =============
Primary weighted average shares outstanding 11,852,810 5,757,995
============== =============
See accompanying notes to consolidated financial statements
</TABLE>
Page 5 of 199
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<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended June 30, 1997 and 1996
(in thousands, except per share amounts)
(Unaudited)
1997 1996
-------------- -------------
<S> <C> <C>
REVENUE
Rental revenue $ 11,784 $ 3,450
Fees and reimbursements from affiliate 180 67
Interest and other income 269 179
Equity in earnings of Associated Companies 458 544
Gain on collection of mortgage loan receivable 498 ---
Net gain on sales of rental properties 570 321
-------------- -------------
Total revenue 13,759 4,561
-------------- -------------
EXPENSES
Property operating expenses 3,663 892
General and administrative 723 394
Depreciation and amortization 2,507 862
Interest expense 2,227 699
-------------- -------------
Total expenses 9,120 2,847
-------------- -------------
Income from operations before minority interest 4,639 1,714
Minority interest (398) (142)
-------------- -------------
Net income $ 4,241 $ 1,572
============== =============
Primary earnings per share $ 0.32 $ 0.27
============== =============
Primary weighted average shares outstanding 13,432,442 5,761,209
============== =============
See accompanying notes to consolidated financial statements
</TABLE>
Page 6 of 199
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<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the six months ended June 30, 1997 and 1996
(in thousands)
(Unaudited)
Common Stock Additional Deferred Retained
Par Paid-in Compen- Earnings
Shares Value Capital sation (Deficit) Total
------------- ------------- -------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 9,662 $ 10 $ 105,952 $ (399) $ (7,963) $ 97,600
Issuance of common stock, net of offering
costs of $4,836 3,500 3 66,036 --- --- 66,039
Issuance of common stock related to
acquisition of E&L Properties 33 --- 633 --- --- 633
Amortization of deferred compensation --- --- --- 95 --- 95
Distributions --- --- --- --- (7,314) (7,314)
Net income --- --- --- --- 6,604 6,604
-----------------------------------------------------------------------------------
Balance at June 30, 1997 13,195 $ 13 $ 172,621 $ (304) $ (8,673) $ 163,657
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
Common Stock Additional Deferred Retained
Par Paid-in Compen- Earnings
Shares Value Capital sation (Deficit) Total
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 5,754 $ 6 $ 55,622 $ --- $ --- $ 55,628
Issuance of stock to directors 15 --- 225 (193) --- 32
Distributions --- --- --- --- (1,726) (1,726)
Net loss --- --- --- --- (4,412) (4,412)
-----------------------------------------------------------------------------------
Balance at June 30, 1996 5,769 $ 6 $ 55,847 $ (193) $ (6,138) $ 49,522
===================================================================================
See accompanying notes to consolidated financial statements
</TABLE>
Page 7 of 199
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<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1997 and 1996
(in thousands)
(Unaudited)
1997 1996
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 6,604 $ (4,412)
Adjustments to reconcile net income (loss)
to net cash provided by (used for) operating
activities:
Depreciation and amortization 4,044 1,759
Amortization of loan fees, included in
interest expense 128 72
Minority interest in income from operations 629 243
Equity in earnings of Associated
Companies (603) (969)
Gain on collection of mortgage loan receivable (652) ---
Net gain on sales of rental properties (570) (321)
Amortization of deferred compensation 95 ---
Consolidation costs --- 6,082
Litigation costs --- 1,155
Changes in certain assets and liabilities, net (1,102) (4,057)
--------------- ---------------
Net cash provided by (used for) operating
activities 8,573 (448)
--------------- ---------------
Cash flows from investing activities:
Proceeds from sales of rental properties 11,889 2,882
Additions to rental property (144,157) (293)
Proceeds from collection of mortgage loan receivable
652 ---
Additions to mortgage loans receivable (2,344) ---
Principal receipts on mortgage loans receivable 8,702 252
Investments in Associated Companies --- (389)
Distributions from Associated Companies and
Glenborough Partners 1,178 655
Deposits on pending acquisitions included
in other assets --- (230)
--------------- ---------------
Net cash used for investing activities (124,080) (2,877)
--------------- ---------------
continued
See accompanying notes to consolidated financial statements
</TABLE>
Page 8 of 199
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<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
For the six months ended June 30, 1997 and 1996
(in thousands)
(Unaudited)
1997 1996
--------------- --------------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from borrowings $ 166,675 $ ---
Repayment of borrowings (107,371) (955)
Payment of investor notes --- (2,483)
Distributions to minority interest holders (525) (162)
Distributions (7,314) (1,726)
Proceeds from issuance of stock, net of offering costs 66,039 ---
--------------- --------------
Net cash provided by (used for) financing
activities 117,504 (5,326)
--------------- --------------
Net increase (decrease) in cash and cash equivalents 1,997 (2,897)
Cash and cash equivalents at beginning of period 1,355 4,587
--------------- --------------
Cash and cash equivalents at end of period $ 3,352 $ 1,690
=============== ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,539 $ 1,349
=============== ==============
Supplemental disclosure of Non-Cash Investing and Financing
Activities:
Acquisition of real estate through assumption of first
trust deed notes payable $ 17,486 $ ---
=============== ==============
Acquisition of real estate through issuance of shares
of common stock and Operating Partnership units $ 7,351 $ ---
=============== ==============
See accompanying notes to consolidated financial statements
</TABLE>
Page 9 of 199
<PAGE>
GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
June 30, 1997
Note 1. ORGANIZATION
Glenborough Realty Trust Incorporated (the "Company") was organized in the State
of Maryland on August 26, 1994. The Company has elected to qualify as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"). The Company completed a Consolidation with certain public
California limited partnerships and other entities (the "Consolidation") engaged
in real estate activities (the "GRT Predecessor Entities") through an exchange
of assets of the GRT Predecessor Entities for 5,753,709 shares of Common Stock
of the Company. The Consolidation occurred on December 31, 1995, and the Company
commenced operations on January 1, 1996.
Subsequent to the Consolidation on December 31, 1995, and through June 30, 1997,
the following Common Stock transactions occurred: (i) 35,000 shares of Common
Stock were issued to officers and directors as stock compensation; (ii)
3,666,000 shares were issued in a public equity offering in October 1996; (iii)
206,844 shares were issued in connection with the acquisition of the TRP and
Carlsberg Properties; (iv) 3,500,000 shares were issued in a public equity
offering in March 1997; (v) 33,198 shares were issued in connection with the
acquisition of the E&L Properties; and (vi) 59 shares were retired, resulting in
total shares of Common Stock issued and outstanding at June 30, 1997, of
13,194,692. In addition, fully converted shares issued and outstanding
(including 996,317 partnership units in the Operating Partnership) totaled
14,191,009 at June 30, 1997.
To maintain the Company's qualification as a REIT, no more than 50% in value of
the outstanding shares of the Company may be owned, directly or indirectly, by
five or fewer individuals (defined to include certain entities), applying
certain constructive ownership rules. To help ensure that the Company will not
fail this test, the Company's Articles of Incorporation provides for certain
restrictions on the transfer of the Common Stock to prevent further
concentration of stock ownership.
The Company, through several subsidiaries, is engaged primarily in the
ownership, operation, management, leasing, acquisition, expansion and
development of various income-producing properties. The Company's major
consolidated subsidiary, in which it holds a 1% general partner interest and a
90.51% limited partner interest at June 30, 1997, is Glenborough Properties,
L.P. (the "Operating Partnership"). As of June 30, 1997, the Operating
Partnership, directly and through various subsidiaries in which it and the
Company own 100% of the ownership interests, controls a total of 64 real estate
projects and 2 mortgage loans receivable.
As of June 30, 1997, the Company also holds 100% of the non-voting preferred
stock of the following two Associated Companies (the "Associated Companies"):
Glenborough Corporation (formerly known as Glenborough Realty Corporation)
("GC") is the general partner of eight partnerships and provides asset and
property management services for these eight partnerships (the "Controlled
Partnerships"). It also provides partnership administration, asset
management, property management and development services under a long term
contract to a group of unaffiliated partnerships which include six public
partnerships sponsored by Rancon Financial Corporation, an unaffiliated
corporation which has significant real estate assets in the Inland Empire
region of Southern California (the "Rancon Partnerships"). The services to
the Rancon Partnerships were previously provided by Glenborough Inland
Realty Corporation ("GIRC"), a California corporation, which merged with GC
effective June 30, 1997. GC also provides property management services for
a limited portfolio of property owned by other unaffiliated third parties.
In the merger between GC and GIRC, the Company received preferred stock of
GC in exchange for its preferred stock of GIRC, on a one-for-one basis.
Following the merger, the Company holds the same preferences with respect
to dividends and liquidation distributions paid by GC as it previously held
with respect to GC and GIRC combined.
Glenborough Hotel Group ("GHG") leases the five Country Suites by Carlson
hotels owned by the Company and operates them for its own account. It also
operates two Country Suites By Carlson hotels owned by the Controlled
Partnerships, and two resort condominium hotels.
Page 10 of 199
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Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements present the consolidated financial
position of the Company as of June 30, 1997, and December 31, 1996, and the
consolidated results of operations and cash flows of the Company for the six and
three months ended June 30, 1997 and 1996. All intercompany transactions,
receivables and payables have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal accruals) necessary to
present fairly the financial position and results of operations of the Company
as of June 30, 1997, and for the period then ended.
Reclassification
Certain 1996 balances have been reclassified to conform with the current year
presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the results of operations during the reporting period. Actual results could
differ from those estimates.
Investments in Real Estate
Investments in real estate are stated at cost unless circumstances indicate that
cost cannot be recovered, in which case, the carrying value of the property is
reduced to estimated fair value. Estimated fair value: (i) is based upon the
Company's plans for the continued operation of each property; (ii) is computed
using estimated sales price, as determined by prevailing market values for
comparable properties and/or the use of capitalization rates multiplied by
annualized rental income based upon the age, construction and use of the
building, and (iii) does not purport, for a specific property, to represent the
current sales price that the Company could obtain from third parties for such
property. The fulfillment of the Company's plans related to each of its
properties is dependent upon, among other things, the presence of economic
conditions which will enable the Company to continue to hold and operate the
properties prior to their eventual sale. Due to uncertainties inherent in the
valuation process and in the economy, it is reasonably possible that the actual
results of operating and disposing of the Company's properties could be
materially different than current expectations.
Depreciation is provided using the straight line method over the useful lives of
the respective assets.
The useful lives are as follows:
Buildings and Improvements 10 to 40 years
Tenant Improvements Term of the related lease
Furniture and Equipment 5 to 7 years
Investments in Associated Companies
The Company's investments in the Associated Companies are accounted for using
the equity method, as discussed further in Note 4.
Investment in Management Contract
Investment in management contract is recorded at cost and amortized on a
straight-line basis over the term of the contract, and is included in other
assets.
Page 11 of 199
<PAGE>
Mortgage Loans Receivable
The Company monitors the recoverability of its loans and notes receivable
through ongoing contact with the borrowers to ensure timely receipt of interest
and principal payments, and where appropriate, obtains financial information
concerning the operation of the properties. Interest on mortgage loans is
recognized as revenue as it accrues during the period the loan is outstanding.
Mortgage loans receivable will be evaluated for impairment if it becomes evident
that the borrower is unable to meet its debt service obligations in a timely
manner and cannot satisfy its payments using sources other than the operations
of the property securing the loan. If it is concluded that such circumstances
exist, then the loan will be considered to be impaired and its recorded amount
will be reduced to the fair value of the collateral securing it. Interest income
will also cease to accrue under such circumstances. Due to uncertainties
inherent in the valuation process, it is reasonably possible that the amount
ultimately realized from the Company's collection on these receivables will be
different than the recorded amounts.
Cash Equivalents
The Company considers short-term investments (including certificates of deposit)
with a maturity of three months or less at the time of investment to be cash
equivalents.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 requires disclosure about
fair value for all financial instruments. Based on the borrowing rates currently
available to the Company, the carrying amount of debt approximates fair value.
Cash and cash equivalents consist of demand deposits, certificates of deposit
and short-term investments with financial institutions. The carrying amount of
cash and cash equivalents as well as the mortgage notes receivable described
above, approximates fair value.
Deferred Financing and Other Fees
Fees paid in connection with the financing and leasing of the Company's
properties are amortized over the term of the related notes payable or leases
and are included in other assets.
Minority Interest
Minority interest represents the 8.49% limited partner interests in the
Operating Partnership not held by the Company.
Revenues
All leases are classified as operating leases. Rental revenue is recognized as
earned over the terms of the leases.
For the six months ended June 30, 1997, no tenants represented 10% or more of
rental revenue of the Company.
Fees and reimbursement revenue consists of property management fees, overhead
administration fees, and transaction fees from the leasing and construction
supervision of real estate.
Revenues are recognized only after the Company is contractually entitled to
receive payment, after the services for which the fee is received have been
provided, and after the ability and timing of payments are reasonably assured
and predictable.
Income Taxes
The Company has made an election to be taxed as a REIT under Sections 856
through 860 of the Code. As a REIT, the Company generally will not be subject to
Federal income tax to the extent that it distributes at least 95% of its REIT
taxable income to its shareholders. REITs are subject to a number of
organizational and operational requirements. If the Company fails to qualify as
a REIT in any taxable year, the Company will be subject to Federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate tax rates. Even if the Company qualifies for taxation as a
REIT, the Company may be subject to certain state and local taxes on its income
and property and to Federal income and excise taxes on its undistributed income.
Page 12 of 199
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Earnings Per Share
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings Per Share."
SFAS No. 128 requires the disclosure of basic earnings per share and modifies
existing guidance for computing fully diluted earnings per share. Under the new
standard, basic earnings per share is computed as earnings divided by weighted
average shares, excluding the dilutive effects of stock options and other
potentially dilutive securities. The effective date of SFAS No. 128 is December
15, 1997, and early adoption is not permitted. The Company intends to adopt SFAS
No. 128 during the quarter and year ended December 31, 1997. Had the provisions
of SFAS No. 128 been applied to the Company's results of operations for the
three and six months ended June 30, 1997 and 1996, the Company's basic earnings
per share would not have been materially different than amounts already
reported.
Reference to 1996 Audited Financial Statements
These unaudited financial statements should be read in conjunction with the
Notes to Consolidated Financial Statements included in the 1996 audited
financial statements.
Note 3. RENTAL PROPERTY
On February 28, 1997, the Company acquired a 163-suite hotel Property (the
"Scottsdale Hotel"), which began operations in January 1996 and is located in
Scottsdale, Arizona. The total acquisition cost, including capitalized costs,
was approximately $12.1 million, which consisted of approximately $4.6 million
of mortgage debt assumed, and the balance in cash. The cash portion was financed
through advances under the Company's Line of Credit (as defined below). The
Scottsdale Hotel is marketed as a Country Inns and Suites by Carlson.
On April 8, 1997, the Company acquired from two limited partnerships and one
limited liability company managed by affiliates of Lennar Partners, a portfolio
of three properties, aggregating approximately 282,000 square feet (the "Lennar
Properties"). The total acquisition cost, including capitalized costs, was
approximately $23.2 million, which was paid in cash from the proceeds of the
Company's March 1997 public offering of Common Stock (the "March 1997
Offering"). The Lennar Properties consist of one office property located in
Virginia and two industrial properties located in Massachusetts.
On April 14, 1997, the Company acquired from a private seller a 227,129 square
foot, 15-story office building located in Bloomington, Minnesota (the "Riverview
Property"). The total acquisition cost, including capitalized costs, was
approximately $20.5 million, of which approximately $16.3 million was paid in
cash from the proceeds of the Company's March 1997 Offering, and the balance was
paid in cash from borrowings under the Company's existing line of credit (the
"Line of Credit").
On April 18, 1997, the Company acquired from seven partnerships and their
general partner, a Southern California syndicator, a portfolio of eleven
properties, aggregating approximately 522,000 square feet, together with
associated management interests (the "E & L Properties"). The total acquisition
cost, including capitalized costs, was approximately $22.2 million, which
consisted of (i) approximately $12.8 million of mortgage debt assumed, (ii)
approximately $6.7 million in the form of 352,197 partnership units in the
Operating Partnership (based on an agreed per unit value of $19.075), (iii)
approximately $633,000 in the form of 33,198 shares of Common Stock of the
Company (based on an agreed per share value of $19.075), and (iv) the balance in
cash. The cash portion was paid from borrowings under the Line of Credit. Of the
$12.8 million of mortgage debt assumed in the acquisition, approximately $8.9
million was paid off on May 1, 1997, through a draw on the Line of Credit. The E
& L Properties consist of one office and ten industrial properties, all located
in Southern California.
On April 29, 1997, the Company acquired from two partnerships formed and managed
by affiliates of CIGNA, a portfolio of six properties, aggregating approximately
616,000 square feet and 224 multi-family units (the "CIGNA Properties"). The
total acquisition cost, including capitalized costs, was approximately $45.4
million, which was paid entirely in cash from the proceeds of a new $40 million
unsecured loan from Wells Fargo Bank (see Note 6)
Page 13 of 199
<PAGE>
and a draw under the Line of Credit. The CIGNA Properties are located in four
states and consist of two office properties, two industrial properties, a
shopping center and a multi-family property.
On June 18, 1997, the Company acquired from Carlsberg Realty, Inc. a portfolio
of three properties, aggregating approximately 245,600 square feet (the "CRI
Properties"). The total acquisition cost, including capitalized costs, was
approximately $14.8 million, which was paid entirely in cash from borrowings
under the Line of Credit. The CRI Properties consist of one office property in
California and two industrial properties in Arizona. The CRI Properties have
been managed by GC since November 1996.
In June 1997, the Company sold from its retail portfolio six Atlanta Auto Care
Center properties and nine of the ten QuikTrip properties for an aggregate sales
price of approximately $12.1 million. These sales generated a net gain of
$570,000. The Company expects to sell its remaining QuikTrip property by August
31, 1997, for a sales price of approximately $1.1 million. The proceeds from the
sale of the QuikTrip properties were used to fund the acquisition of the
Centerstone Property (see Note 10) and the proceeds from the sale of the Auto
Care Center properties will be used to fund future acquisitions of properties.
As of June 30, 1997, approximately $29.3 million of escrow deposits for
acquisitions of properties are included in rental property. The $29.3 million is
comprised of $24.9 million for the acquisition of the Centerstone Property
(discussed below) and $4.4 million for the acquisition of the T. Rowe Price
Properties (discussed below).
Note 4. INVESTMENTS IN ASSOCIATED COMPANIES AND GLENBOROUGH PARTNERS
The Company's investments in the Associated Companies are accounted for using
the equity method as the Company has significant ownership interests through its
100% preferred stock ownership but does not own any voting interests. The
Company records earnings on its investments in the Associated Companies equal to
its cash flow preference, to the extent of earnings, plus its pro rata share of
remaining earnings, based on cash flow allocation percentages. Distributions
received from the Associated Companies are recorded as a reduction of the
Company's investments.
The Company's investment in Glenborough Partners ("GP") is accounted for using
the cost method as the Company holds only a 3.97% limited partner interest.
As of June 30 1997, the Company had the following investments in the Associated
Companies and GP (in thousands):
<TABLE>
<CAPTION>
GC(1) GHG GP Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment at December 31, 1996 $ 5,261 $ 1,504 $ 585 $ 7,350
Distributions (1,111) (55) (12) (1,178)
Equity in earnings (loss) 436 167 --- 603
---------- ---------- ---------- ----------
Investment at June 30, 1997 $ 4,586 $ 1,616 $ 573 $ 6,775
========== ========== ========== ==========
(1) All amounts presented for GC represent combined amounts for GC and GIRC due
to the June 30, 1997 merger, as previously discussed in Note 1.
</TABLE>
Page 14 of 199
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Note 5. MORTGAGE LOANS RECEIVABLE
The Company held a first mortgage loan with a principal balance of $7,563,000
and a carrying value of $6,700,000 at December 31, 1996, secured by an office
and research complex in Eatontown, New Jersey. The loan had an original maturity
date of November 1, 1996 with interest only payable monthly at the fixed rate of
eight percent (8%) per annum. In 1995, due to the uncertainty surrounding the
borrower's ability to payoff the note receivable upon its November 1996
maturity, the Company recorded a $863,000 loss provision on this mortgage loan
receivable to reduce its carrying value to the estimated fair value of the
underlying property. The terms of the note were renegotiated in December 1996
with the maturity date extended to February 1, 1997. The interest rate continued
at 8% per annum. The borrower had the right to payoff the loan at a discount
between January 10 and January 31, 1997. The discounted payoff was i) $6,863,000
in cash and ii) a note for $500,000 payable over a term of twelve years at six
percent (6%) interest amortized over twenty-five years. On January 28, 1997, the
borrower paid off the note at the above discounted terms, resulting in a gain to
the Company of $152,000 ($163,000 net of $11,000 in legal costs) and recognition
of $2,000 of the related $500,000 deferred gain. In June 1997, in connection
with the acquisition of the CRI Properties, the note receivable was assigned to
a third party. Therefore, the remaining balance of the deferred gain of $498,000
has been recognized in the Company's Consolidated Statement of Operations for
the six months ended June 30, 1997.
At June 30, 1997, the Company held a first mortgage loan in the amount of
$509,000 secured by an industrial property in Los Angeles, California. The terms
of the note include interest accruing at eight percent (8%) per annum for the
first twenty-four months (ended June 1996) and at nine percent (9%) per annum
for the next sixty months until the note matures in June 2001. Monthly payments
of principal and interest, computed based on a thirty year amortization
schedule, commenced January 1995 and continue until maturity.
In 1996, the Operating Partnership entered into a Loan Agreement and Option
Agreement (the "Option Agreement") with Carlsberg Properties, LTD. ("the
Borrower"). The loan amount was $3,600,000, of which $2,694,000 was initially
disbursed to the Borrower and $906,000 was held by the Operating Partnership as
leasing and interest reserves. On June 18, 1997, the Loan Agreement was amended
to include an additional advance to the borrower of $250,000 which was applied
in its entirety to the interest reserve, resulting in an amended loan amount of
$3,850,000 and an increase in the interest reserve of $250,000. During the six
months ended June 30, 1997, $344,000 of reserves were disbursed to the borrower
which resulted in an outstanding balance at June 30, 1997, of $3,038,000. The
loan is secured by a 48,000 square foot medical building in Phoenix, Arizona
(the "Grunow Building"), and matures on November 19, 1999, with interest only
payable monthly at the fixed rate of eleven percent (11%) per annum calculated
on the full amount of the loan. The Option Agreement provides the Operating
Partnership the option to purchase the Grunow Building on either the second or
third anniversary of the closing date of November 19, 1996, for the greater of
i) the then outstanding loan balance plus $50,000 or ii) the value of the
Secured Property as defined in the Option Agreement.
Note 6. SECURED AND UNSECURED LIABILITIES
The Company had the following mortgage loans, bank lines, and notes payable
outstanding as of June 30, 1997, and December 31, 1996 (in thousands):
1997 1996
--------- -------
Secured $50,000 line of credit with a bank
with variable interest rates of LIBOR plus
1.75% and prime rate (7.44% and 8.50%,
respectively at June 30, 1997), monthly
interest only payments and a maturity date
of July 14, 1998, with an option to extend
for 10 years. The line is secured by
nineteen properties with an aggregate net
carrying value of $60,389 and $67,118 at
June 30, 1997, and December 31, 1996,
respectively. $ 36,118 $ 21,307
Page 15 of 199
<PAGE>
1997 1996
--------- --------
Secured loan with a bank with variable
interest rates of LIBOR plus 2.375% and
prime rate plus 0.50%, monthly interest only
payments and a maturity date of July 14,
1998. The loan was paid-off in June 1997
upon the sale of the properties securing the
loan. $ --- $ 6,120
Secured loan with an investment bank with a
fixed interest rate of 7.57%, monthly
principal (based upon a 25 year
amortization) and interest payments of $149
and a maturity date of January 1, 2006. The
loan is secured by nine properties with an
aggregate net carrying value of $38,527 and
$39,298 at June 30, 1997 and December 31,
1996, respectively. 19,597 19,744
Secured loans with various lenders, bearing
interest at fixed rates between 7.75% and
9.25%, with monthly principal and interest
payments ranging between $9 and $62 and
maturing at various dates through April 1,
2012. These loans are secured by properties
with an aggregate net carrying value of
$34,476 and $30,441 at June 30, 1997, and
December 31, 1996, respectively. 20,086 17,581
Secured loans with various banks, bearing
interest at variable rates (ranging between
7.32% and 8.18% at June 30, 1997), monthly
principal and interest payments ranging
between $4 and $46 and maturing at various
dates through May 1, 2017. These loans are
secured by properties with an aggregate net
carrying value of $20,857 and $6,975 at June
30, 1997, and December 31, 1996,
respectively. 9,603 3,807
Secured loan with an investment company with
a fixed interest rate of 7.50%, monthly
principal and interest payments of $55 and a
maturity date of March 1, 2021. The loan is
secured by a multifamily property with a net
carrying value of $9,393 and $9,491 at June
30, 1997, and December 31, 1996,
respectively. 7,277 7,332
Unsecured Bridge Loan with a bank with a
fixed interest rate of 7.44%, monthly
interest only payments and a maturity date
of July 31, 1997, with an option to extend
for 90 days. See below for further
discussion. 60,000 ---
----------- ---------
Total $ 152,681 $ 75,891
=========== =========
In April 1997, the Operating Partnership entered into a $40 million unsecured
loan with Wells Fargo Bank to fund the acquisition of the CIGNA Properties (the
"CIGNA Acquisition Financing"). The CIGNA Acquisition Financing had a term of
three months (extendible to six months at the Company's option), interest at a
variable annual rate equal to 175 basis points above 30-day LIBOR, was unsecured
and was guaranteed by the Company. Required payments under the CIGNA Acquisition
Financing were monthly, interest only.
As of June 30, 1997, Wells Fargo had substantially completed underwriting and
due diligence for a $60 million mortgage loan to the Company (the "$60 Million
Mortgage") to be secured by the Lennar Properties, the Riverview Property, the
Centerstone Property (see Note 10) and five of the CIGNA Properties. In the
interim, Wells Fargo funded on June 19, 1997, a $60 million unsecured "bridge"
loan (the "$60 Million Unsecured Bridge Loan"), which was used to (i) repay all
principal and accrued interest under the $40 million CIGNA Acquisition
Financing, and (ii) reduce the outstanding balance under the Line of Credit by
approximately $20 million.
Page 16 of 199
<PAGE>
The required principal payments on the Company's debt for the next five years
and thereafter, as of June 30, 1997, are as follows (in thousands):
Year Ending
December 31,
--------------
1997 $ 60,536
1998 44,673
1999 2,508
2000 3,244
2001 1,299
Thereafter 40,421
----------
Total $ 152,681
==========
Note 7. RELATED PARTY TRANSACTIONS
Fee and reimbursement income earned by the Company from related partnerships
totaled $367,000 and $133,000 for the six months ended June 30, 1997, and 1996,
respectively, and consisted of property management fees and asset management
fees for the six months ended June 30, 1997, and asset management fees for the
six months ended June 30, 1996.
Note 8. STOCK COMPENSATION PLAN
In May 1996, the Company adopted an employee stock incentive plan (the "Plan")
to provide incentives to attract and retain high quality executive officers and
key employees. Certain amendments to the Plan were ratified and approved by the
stockholders of the Company at the Company's 1997 Annual Meeting of
Stockholders. The Plan, as amended, provides for the grant of (i) shares of
Common Stock of the Company, (ii) options, SARs or similar rights with an
exercise or conversion privilege at a fixed or variable price related to the
Common Stock and/or the passage of time, the occurrence of one or more events,
or the satisfaction of performance criteria or other conditions, or (iii) any
other security with the value derived from the value of the Common Stock of the
Company or other securities issued by a related entity. Such awards include,
without limitation, options, SARs, sales or bonuses of restricted stock, DERs,
Performance Units or Preference Shares. The total number of shares of Common
Stock available for grant under the Plan is equal to the greater of 1,140,000
shares or 8% of the number of shares outstanding determined as of the day
immediately following the most recent issuance of shares of Common Stock or
securities convertible into shares of Common Stock; provided that the maximum
aggregate number of shares of Common Stock available for issuance under the Plan
may not be reduced. For purposes of calculating the number of outstanding shares
of Common Stock, all classes of securities of the Company and its related
entities that are convertible presently or in the future by the security holder
into shares of Common Stock or which may presently or in the future be exchanged
for shares of Common Stock pursuant to redemption rights or otherwise, shall be
deemed to be outstanding shares of Common Stock. Notwithstanding the foregoing,
the aggregate number of shares as to which incentive stock options may be
granted under the Plan may not exceed 1,140,000 shares. The Company accounts for
the fair value of the options and bonus grants in accordance with APB Opinion
No. 25. As of June 30, 1997, 35,000 shares of bonus grants have been issued
under the Plan. The fair value of the shares granted have been recorded as
deferred compensation in the accompanying financial statements and will be
charged to earnings ratably over the respective vesting periods which range from
2 to 5 years. As of June 30, 1997, 915,000 options to purchase shares of Common
Stock have been granted. The exercise price of each option granted is equal to
the per-share fair market value of the Common Stock on the date the option is
granted. To date, all options granted have been at higher than the fair market
value of the shares on the grant date, and as such, no compensation expense has
been recognized as accounted for under APB Opinion No. 25. The options vest over
periods between 1 and 6 years, and have a maximum term of 10 years.
Page 17 of 199
<PAGE>
Note 9. DECLARATION OF DIVIDENDS
On April 22, 1997, the Company's Board of Directors declared a dividend for the
first quarter of $0.32 per share or $4,222,301 payable on May 13, 1997, to
stockholders of record at the close of business on May 2, 1997. Such dividend
will be made from the Company's cash reserves at March 31, 1997, combined with
the dividends received from the Associated Companies.
On July 22, 1997, the Company's Board of Directors declared a dividend for the
second quarter of $0.32 per share or $6,455,901 payable on August 12, 1997, to
stockholders of record at the close of business on August 1, 1997. Such dividend
will be made from the Company's cash reserves at June 30, 1997, combined with
the dividends received from the Associated Companies.
Note 10. SUBSEQUENT EVENTS
In July 1997, the Company acquired an office property containing 157,579 square
feet (the "Centerstone Property") located in Irvine, California. The total
acquisition cost, including capitalized costs, was approximately $30.4 million,
which consisted of (i) approximately $5.5 million in the form of 275,000
partnership units in the Operating Partnership (based on an agreed per unit
value of $20.00), and (ii) the balance in cash from a combination of borrowings
under the Line of Credit and the net proceeds of the sale of certain retail
properties (see Note 3).
In July 1997, the Company completed a public offering of 6,980,000 shares of
Common Stock (the "July 1997 Offering"). The 6,980,000 shares were sold at a per
share price of $22.625 for total proceeds of $149,965,300 (net of underwriting
fees of $7,957,200). This additional capital was used to temporarily repay the
$60 Million Unsecured Bridge Loan and the outstanding balance under the
Company's Line of Credit with Wells Fargo. In addition, it is anticipated that
the remaining proceeds will be used to fund the acquisition of the T. Rowe Price
Properties as discussed below. As of June 30, 1997, approximately $48,000 in
other costs had been incurred in connection with the July 1997 Offering.
Note 11. PENDING ACQUISITION
In April 1997, the Company entered into definitive agreements with five limited
partnerships, two general partnerships and one private REIT, each organized by
affiliates of T. Rowe Price, to acquire a portfolio of 27 properties,
aggregating approximately 2,888,000 square feet (the "T. Rowe Price
Properties"). The total acquisition cost, including capitalized costs, is
expected to be approximately $146.8 million, which it is anticipated will be
paid entirely in cash from a combination of the proceeds of the July 1997
Offering and mortgage debt. The T. Rowe Price Properties consist of five office
properties, nineteen industrial properties (including eight office/industrial
complexes) and three retail properties located in 12 states. This acquisition is
subject to a number of contingencies, including approval of the acquisition by
the limited partners, general partners or stockholders of the sellers, as the
case may be, satisfactory completion of title and customary closing conditions.
Accordingly, there can be no assurance that any or all of the T. Rowe Price
Properties will be acquired.
Page 18 of 199
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH HOTEL GROUP
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
June 30, December 31,
1997 1996
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Cash $ 925 $ 461
Accounts receivable 455 247
Investments in management contracts, net 392 430
Rental property and equipment, net of
accumulated depreciation of $120 and $111
in 1997 and 1996, respectively 163 170
Investment in Atlantic Pacific Assurance Company, Limited 755 755
Prepaid expenses 121 156
Other assets 7 36
TOTAL ASSETS $ 2,818 $ 2,255
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accrued lease expense $ 691 $ 285
Mortgage loan 49 61
Other liabilities 427 407
Total liabilities 1,167 753
Stockholders' Equity:
Common stock (1,000 shares authorized,
issued and outstanding) 20 20
Non-voting preferred stock (50 shares
authorized, issued and outstanding) --- ---
Additional paid-in capital 1,568 1,568
Retained earnings 63 (86)
Total stockholders' equity 1,651 1,502
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,818 $ 2,255
See accompanying notes to consolidated financial statements
</TABLE>
Page 19 of 199
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH HOTEL GROUP
CONSOLIDATED STATEMENTS OF INCOME
For the six months ended June 30, 1997 and 1996
(in thousands)
(Unaudited)
1997 1996
REVENUE
<S> <C> <C>
Hotel revenue $ 6,137 $ 3,584
Fees and reimbursements 1,113 1,183
Other revenue --- 239
Total revenue 7,250 5,006
EXPENSES
Leased Hotel Properties:
Room expenses 1,473 992
Lease payments to an affiliate 2,207 1,268
Sales and marketing 619 381
Property general and administrative 578 369
Other operating expenses 675 448
Managed Hotel Properties:
Salaries and benefits 743 837
Other Expenses:
General and administrative 525 466
Depreciation and amortization 49 49
Interest expense 2 3
Total expenses 6,871 4,813
Income from operations before provision
for income taxes 379 193
Provision for income taxes (162) (76)
Net income $ 217 $ 117
See accompanying notes to consolidated financial statements
</TABLE>
Page 20 of 199
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH HOTEL GROUP
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended June 30, 1997 and 1996
(in thousands)
(Unaudited)
1997 1996
REVENUE
<S> <C> <C>
Hotel revenue $ 3,219 $ 1,669
Fees and reimbursements 546 633
Other revenue --- 160
Total revenue 3,765 2,462
EXPENSES
Leased Hotel Properties:
Room expenses 836 416
Lease payments to an affiliate 1,159 585
Sales and marketing 347 196
Property general and administrative 346 206
Other operating expenses 389 258
Managed Hotel Properties:
Salaries and benefits 343 436
Other Expenses:
General and administrative 255 235
Depreciation and amortization 25 24
Interest expense 1 2
Total expenses 3,701 2,358
Income from operations before provision
for income taxes 64 104
Provision for income taxes (26) (36)
Net income $ 38 $ 68
See accompanying notes to consolidated financial statements
</TABLE>
Page 21 of 199
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH HOTEL GROUP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the six months ended June 30, 1997 and 1996
(in thousands, except shares)
(Unaudited)
Addi -
Preferred Stock Common Stock tional Retained
Par Par Paid-in Earnings
Shares Value Shares Value Capital (Deficit) Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE at
December 31, 1996 50 $ --- 1,000 $ 20 $ 1,568 $ (86) $ 1,502
Dividends --- --- --- --- --- (68) (68)
Net income --- --- --- --- --- 217 217
BALANCE at
June 30, 1997 50 $ --- 1,000 $ 20 $ 1,568 $ 63 $ 1,651
</TABLE>
<TABLE>
<CAPTION>
Addi -
Preferred Stock Common Stock tional Retained
Par Par Paid-in Earnings
Shares Value Shares Value Capital (Deficit) Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE at
December 31, 1995 50 $ --- 1,000 $ 20 $ 1,368 $ --- $ 1,388
Additional paid-in capital --- --- --- --- 200 --- 200
Dividends --- --- --- --- --- (50) (50)
Net income --- --- --- --- --- 117 117
BALANCE at
June 30, 1996 50 $ --- 1,000 $ 20 $ 1,568 $ 67 $ 1,655
</TABLE>
Page 22 of 199
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH HOTEL GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1997 and 1996
(in thousands)
(Unaudited)
1997 1996
Cash flows from operating activities:
<S> <C> <C>
Net income $ 217 $ 117
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 49 49
Changes in certain assets and liabilities 280 96
Net cash provided by operating activities 546 262
Cash flows from investing activities:
Additions to equipment (2) (10)
Net cash used for investing activities (2) (10)
Cash flows from financing activities:
Dividends (68) (50)
Capital contributions --- 200
Repayment of borrowings (12) (13)
Net cash provided by (used for) financing activities (80) 137
Net increase in cash 464 389
Cash at beginning of period 461 33
Cash at end of period $ 925 $ 422
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2 $ 3
See accompanying notes to consolidated financial statements
</TABLE>
Page 23 of 199
<PAGE>
GLENBOROUGH HOTEL GROUP
Notes to Consolidated Financial Statements
June 30, 1997
Note 1. ORGANIZATION
Glenborough Hotel Group ("GHG") was organized in the State of Nevada on
September 23, 1991. As of June 30, 1997, GHG operates hotel properties owned by
Glenborough Realty Trust Incorporated ("GLB") under five separate percentage
leases and manages two hotel properties owned by two partnerships whose managing
general partner is Glenborough Corporation. GLB owns 100% of the 50 shares of
non-voting preferred stock of GHG and three individuals, including Terri
Garnick, an executive officer of GLB, each own 33 1/3% of the 1,000 shares of
voting common stock of GHG.
GHG also owns approximately 80% of the common stock of Resort Group, Inc.
("RGI"). RGI manages homeowners associations and rental pools for two beachfront
resort condominium hotel properties and owns six units at one of the properties.
GHG receives 100% of the earnings of RGI and consolidates RGI's operations with
its own.
As of June 30, 1997, GHG also owned 94% of the outstanding common stock of
Atlantic Pacific Holdings, Ltd., the sole owner of 100% of the common stock of
Atlantic Pacific Assurance Company, Limited ("APAC"), a Bermuda corporation
formed to underwrite certain insurable risks of certain of GLB's predecessor
partnerships and related entities. As anticipated, in July 1997, APAC was
liquidated and GHG received a liquidating distribution of approximately
$2,194,000. GHG will recognize a gain of approximately $1,389,000 over its
investment basis and costs of liquidation. GHG had accounted for its investment
in APAC using the cost method due to its anticipated liquidation.
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal accruals) necessary to
present fairly, the financial position and results of operations of GHG as of
June 30, 1997, and for the period then ended.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying financial statements present the
consolidated financial position of GHG and RGI as of June 30, 1997, and December
31, 1996 and the consolidated results of operations and cash flows of GHG and
RGI for the six and three months ended June 30, 1997 and 1996. All intercompany
transactions, receivables and payables have been eliminated in the
consolidation.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the results of operations during the reporting period. Actual
results could differ from those estimates.
Rental Property - Rental properties are stated at cost unless circumstances
indicate that cost cannot be recovered, in which case, the carrying value of the
property is reduced to estimated fair value.
Depreciation is provided using the straight line method over the useful lives of
the respective assets.
Investments in Management Contracts - Investments in management contracts are
recorded at cost and are amortized on a straight-line basis over the term of the
contracts.
Cash Equivalents - GHG considers short-term investments (including certificates
of deposit) with a maturity of three months or less at the time of investment to
be cash equivalents.
Income Taxes - Provision for income taxes is based on financial accounting
income.
Page 24 of 199
<PAGE>
GLENBOROUGH HOTEL GROUP
Notes to Consolidated Financial Statements
June 30, 1997
Note 3. INVESTMENTS IN MANAGEMENT CONTRACTS, NET
Investments in management contracts reflects the unamortized portion of the
management contracts RGI holds with the two beachfront resort condominium hotel
properties for both management of the homeowners associations and the rental
pool programs.
Note 4. RENTAL PROPERTY
Rental property and equipment represents the six condominium hotel units owned
by RGI as well as furniture and fixtures in GHG's corporate offices. The six
units owned by RGI participate in a resort rental program on an "at will" basis,
whereby there is no fixed term of participation. Such participation generated
approximately $11,000 and $9,000 of cash flow after deductions for capital
reserves for the six months ended June 30, 1997 and 1996, respectively.
Note 5. MORTGAGE LOAN
Mortgage loan of $49,000 at June 30, 1997, represents the debt secured by the
six condominium hotel units owned by RGI. Such debt bears interest at 7%,
payable in monthly installments of principal and interest totaling $2,304, and
matures June 30, 1999.
Note 6. THE PERCENTAGE LEASES
GHG is leasing the five hotels owned by GLB for a term of five years pursuant to
individual percentage leases ("Percentage Leases") which provide for rent equal
to the greater of the Base Rent (as defined in the lease) or a specified
percentage of room revenues (the "Percentage Rent"). Each hotel is separately
leased to GHG (the "lessee"). The lessee's ability to make rent payments will,
to a large degree, depend on its ability to generate cash flow from the
operations of the hotels. Each Percentage Lease contains the provisions
described below.
Each Percentage Lease has a non-cancelable term of five years, subject to
earlier termination upon the occurrence of certain contingencies described in
the Percentage Lease. The lessee under the Percentage Lease has one five-year
renewal option at the then current fair market rent.
During the term of each Percentage Lease, the lessee is obligated to pay the
greater of Base Rent or Percentage Rent. Base Rent is required to be paid
monthly in advance. Percentage Rent is calculated by multiplying fixed
percentages by room revenues for each of the five hotels; the applicable
percentage changes when revenue exceeds a specified threshold, and the threshold
may be adjusted annually in accordance with changes in the applicable Consumer
Price Index. Percentage Rent is due quarterly.
The table below sets forth the annual Base Rent and the Percentage Rent formulas
for each of the five hotels.
<TABLE>
<CAPTION>
Hotel Lease Rent Provisions
Percentage Rent
incurred for the six
Initial Annual months ended Annual Percentage
Hotel Base Rent June 30, 1997 Rent Formulas
<S> <C> <C> <C>
Ontario, CA $ 240,000 $ 184,000 24% of the first $1,575,000 of room revenue plus 40%
of room revenue above $1,575,000 and 5% of other revenue
continued
</TABLE>
Page 25 of 199
<PAGE>
GLENBOROUGH HOTEL GROUP
Notes to Consolidated Financial Statements
June 30, 1997
<TABLE>
<CAPTION>
Hotel Lease Rent Provisions - continued
Percentage Rent
incurred for the six
Initial Annual months ended Annual Percentage
Hotel Base Rent June 30, 1997 Rent Formulas
<S> <C> <C> <C>
Arlington, TX $ 360,000 $ 180,000 27% of the first $1,600,000 of room revenue plus
42% of room revenue above $1,600,000 and 5% of other revenue
Tucson, AZ $ 600,000 $ 479,000 40% of the first $1,350,000 of room revenue plus
46% of room revenue above $1,350,000 and 5% of other revenue
San Antonio, TX $ 312,000 $ 1,000 33% of the first $1,200,000 of room revenue plus
40% of room revenue above $1,200,000 and 5% of other revenue
Scottsdale, AZ $ 360,000 $ 487,000 45% of the first $3,200,000 of room revenue plus
60% of room revenue above $3,200,000 and 5% of other revenue
</TABLE>
Other than real estate and personal property taxes, casualty insurance, a fixed
capital improvement allowance and maintenance of underground utilities and
structural elements, which are the responsibility of GLB, the Percentage Leases
require the lessees to pay rent, insurance, salaries, utilities and all other
operating costs incurred in the operation of the Hotels.
Note 7. DECLARATION OF DIVIDENDS
The board of directors of GHG declared and paid the following dividends for the
first and second quarters of 1997:
<TABLE>
<CAPTION>
Preferred Stock Common Stock Total
<S> <C> <C> <C>
April, 1997 $ 38,438 $ 10,312 $ 48,750
July, 1997 38,438 10,312 48,750
Total paid from 1997 earnings $ 76,876 $ 20,624 $ 97,500
</TABLE>
Page 26 of 199
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GLENBOROUGH REALTY TRUST INCORPORATED
Background
Glenborough Realty Trust Incorporated (the "Company") is a self-administered and
self-managed real estate investment trust ("REIT") engaged primarily in the
ownership, operation, management, leasing and acquisition of various types of
income-producing properties. As of June 30, 1997, the Company owned and operated
64 income-producing properties (the "Properties," and each a "Property") and
held two mortgage loans receivable. The Properties are comprised of 30
industrial Properties, 7 retail Properties, 4 multifamily Properties, 6 hotel
Properties and 17 office Properties, located in 19 states. The 64
income-producing Properties include three Properties in which the Company holds
a participating first mortgage interest, not fee title. These three Properties
consist of one retail Property, one industrial Property and one hotel Property
which are each owned by AFP Partners. In accordance with GAAP, the Company
accounts for these properties as though it holds fee title as substantially all
risks and rewards of ownership have been transferred to the Company as a result
of the terms of the mortgages.
The Company was incorporated in the State of Maryland on August 26, 1994. On
December 31, 1995, the Company completed a consolidation (the "Consolidation")
in which Glenborough Corporation, a California corporation ("GC"), and eight
public limited partnerships (the "Partnerships," collectively with GC, the "GRT
Predecessor Entities"), merged with and into the Company. The Company (i) issued
5,753,709 shares (the "Shares") of the $.001 par value Common Stock of the
Company to the Partnerships in exchange for the net assets of the Partnerships;
(ii) merged with Glenborough Corporation, with the Company being the surviving
entity; (iii) acquired an interest in the associated companies that provide
asset and property management services, as well as other services; and (iv)
through a subsidiary operating partnership, Glenborough Properties, L.P. (the
"Operating Partnership"), acquired interests in certain warehouse distribution
facilities from GPA, Ltd., a California limited partnership ("GPA"). A portion
of the Company's operations are conducted through the Operating Partnership, of
which the Company is the sole general partner, and in which the Company holds a
90.51% limited partner interest as of June 30, 1997. The Company operates the
assets acquired in the Consolidation and in subsequent acquisitions and intends
to invest in income-producing property directly and through joint ventures. In
addition, the Associated Companies may acquire general partner interests in
other real estate limited partnerships. The Company elected to qualify as a REIT
under the Internal Revenue Code of 1986, as amended.
The Company seeks to achieve sustainable long-term growth in Funds from
Operations primarily through the following strategies: (i) acquiring portfolios
or individual properties on attractive terms often from public and private
partnerships; (ii) acquiring properties from entities controlled by the
Associated Companies; (iii) improving the performance of Properties in the
Company's portfolio; and (iv) constantly reviewing the Company's current
portfolio for opportunities to redeploy capital from certain existing Properties
into other properties which the Company believes have characteristics more
suited to its overall growth strategy and operating goals.
Consistent with the Company's strategy for growth, the Company acquired 20
properties in the third and fourth quarters of 1996 and, as of August 4, 1997,
had acquired 26 properties during 1997. Such acquired Properties consist of an
aggregate of approximately 3.5 million rentable square feet, 762 multi-family
units and 227 hotel suites and had aggregate acquisition costs, including
capitalized costs, of approximately $262 million. In addition, the Company has
entered into a definitive agreement, subject to a number of contingencies, to
acquire 27 properties in 12 states, aggregating approximately 2.9 million
rentable square feet. There can be no assurance that any or all of these 27
properties will be acquired.
Results of Operations
Comparison of the six months ended June 30, 1997 to the six months ended June
30, 1996.
Rental Revenues. Rental revenues increased $12,652,000, or 180%, to $19,691,000
for the six months ended June 30, 1997, from $7,039,000 for the six months ended
June 30, 1996. The increase included growth in revenues from the office,
industrial, retail, multi-family and hotel Properties of $5,893,000, $2,271,000,
$1,387,000, $2,162,000 and $936,000, respectively. Of this increase, $8,158,000
represents rental revenues generated from the acquisition of 20 properties (the
"1996 Acquisitions") in the third and fourth quarters of 1996, and $4,320,000
represents rental
Page 27 of 199
<PAGE>
revenues generated from the acquisition of 25 properties during the six months
ended June 30, 1997 (the "1997 Acquisitions").
Fees and Reimbursements. Fees and reimbursements revenue consists primarily of
property management fees and asset management fees paid to the Company by a
controlled partnership. This revenue increased $234,000, or 176%, to $367,000
for the six months ended June 30, 1997, from $133,000 for the six months ended
June 30, 1996. The increase primarily consisted of an increase in asset
management fees of $89,000 and property management fees of $144,000. In 1996,
such fees were paid to GC, an associated company, and during the six months
ended June 30, 1997, they were paid to the Company.
Interest and Other Income. Interest and other income consists primarily of
interest on mortgage loans receivable and increased $243,000, or 66%, to
$613,000 for the six months ended June 30, 1997, from $370,000 for the six
months ended June 30, 1996. The increase was primarily due to a $50,000 loan fee
received for the extension of the Hovpark mortgage loan receivable and $198,000
of interest income on the Carlsberg Properties, Ltd. mortgage loan receivable,
both of which were received during the six months ended June 30, 1997. The
Carlsberg Properties, Ltd. mortgage loan receivable originated on November 19,
1996. In 1997, interest and other income also included the net effect of the
reduction in income caused by the payoff of the Hovpark note receivable, as
offset by an increase in income as a result of higher invested cash balances
following the March 1997 Offering (as defined below) and prior to the second
quarter acquisitions.
Equity in Earnings of Associated Companies. Equity in earnings from Associated
Companies decreased $366,000, or 38%, to $603,000 for the six months ended June
30, 1997, from $969,000 for the six months ended June 30, 1996. This decrease
resulted from an increase in salaries, benefits and other operating costs
associated with the growth of the companies and the write-off of GC's
unamortized balance of its investment in a management contract; however, the
increase in these expenses resulted in lower income tax expense. In addition,
the net operating income of GHG increased due to the acquisition of the
Scottsdale Hotel.
Gain on Collection of Mortgage Loan Receivable. The gain on collection of
mortgage loan receivable of $652,000 during the six months ended June 30, 1997,
resulted from the collection of the Hovpark mortgage loan receivable which had a
net carrying value of $6,700,000. The payoff amount totaled $6,863,000, plus a
$500,000 note receivable, which, net of legal costs, resulted in a gain of
$652,000.
Net Gain on Sales of Rental Properties. The net gain on sales of rental
properties of $570,000 during the six months ended June 30, 1997, resulted from
the sale of nine of the ten QuikTrips and six Atlanta Auto Care Centers from the
Company's retail portfolio. The net gain on sales of rental properties of
$321,000 during the six months ended June 30, 1996, resulted from the sale of
the two self-storage facilities from the Company's industrial portfolio.
Property Operating Expenses. Property operating expenses increased $4,136,000,
or 217%, to $6,045,000 for the six months ended June 30, 1997, from $1,909,000
for the six months ended June 30, 1996. Of this increase, $4,201,000 represents
property operating expenses attributable to the 1996 Acquisitions and the 1997
Acquisitions, which was slightly offset by the reduction in expenses resulting
from the June 1996 sale of the All American Self Storage industrial properties.
General and Administrative Expenses. General and administrative expenses
increased $699,000, or 104%, to $1,374,000 for the six months ended June 30,
1997, from $675,000 for the six months ended June 30, 1996. The increase is
primarily due to increased costs resulting from the 1996 Acquisitions and the
1997 Acquisitions.
Depreciation and Amortization. Depreciation and amortization increased
$2,285,000, or 130%, to $4,044,000 for the six months ended June 30, 1997, from
$1,759,000 for the six months ended June 30, 1996. The increase is primarily due
to depreciation and amortization associated with the 1996 Acquisitions and the
1997 Acquisitions.
Interest Expense. Interest expense increased $2,379,000, or 167%, to $3,800,000
for the six months ended June 30, 1997, from $1,421,000 for the six months ended
June 30, 1996. Substantially all of the increase was the result of higher
average borrowings during the six months ended June 30, 1997, as compared to the
six months ended June 30, 1996, due to new debt and the assumption of debt
related to the 1996 Acquisitions and the 1997 Acquisitions.
Page 28 of 199
<PAGE>
Consolidation Costs. Consolidation costs during the six months ended June 30,
1996, consisted of the costs associated with preparing, printing and mailing the
Prospectus/Consent Solicitation Statement and other documents related to the
Consolidation, and all other costs incurred in the forwarding of the
Prospectus/Solicitation Statement to investors.
Litigation Costs. Litigation costs during the six months ended June 30, 1996,
consisted of the legal fees incurred in connection with defending two class
action complaints filed by investors in certain of the Company's predecessor
entities, as well as an accrual for the proposed settlement in one case.
Comparison of the three months ended June 30, 1997 to the three months ended
June 30, 1996.
Rental Revenues. Rental revenues increased $8,334,000, or 242%, to $11,784,000
for the three months ended June 30, 1997, from $3,450,000 for the three months
ended June 30, 1996. The increase included growth in revenues from the office,
industrial, retail, multi-family and hotel Properties of $3,908,000, $1,841,000,
$747,000, $1,226,000 and $610,000, respectively. Of this increase, $4,089,000
represents rental revenues generated from the acquisition of 20 properties (the
"1996 Acquisitions") in the third and fourth quarters of 1996, and $4,083,000
represents rental revenues generated from the acquisition of 25 properties
during the six months ended June 30, 1997 (the "1997 Acquisitions").
Fees and Reimbursements. Fees and reimbursements revenue consists primarily of
property management fees and asset management fees paid to the Company by a
controlled partnership. This revenue increased $113,000, or 169%, to $180,000
for the three months ended June 30, 1997, from $67,000 for the three months
ended June 30, 1996. The increase primarily consisted of an increase in asset
management fees of $44,000 and property management fees of $69,000. In 1996,
such fees were paid to GC, an associated company, and during the three months
ended June 30, 1997, they were paid to the Company.
Interest and Other Income. Interest and other income consists primarily of
interest on mortgage loans receivable and increased $90,000, or 50%, to $269,000
for the three months ended June 30, 1997, from $179,000 for the three months
ended June 30, 1996. The increase was primarily due to $99,000 of interest
income on the Carlsberg Properties, Ltd. mortgage loan receivable which was
received during the three months ended June 30, 1997. The Carlsberg Properties,
Ltd. mortgage loan receivable originated on November 19, 1996. In 1997, interest
and other income also included the net effect of the reduction in income caused
by the payoff of the Hovpark note receivable, as offset by an increase in income
as a result of higher invested cash balances following the March 1997 Offering
(as defined below) and prior to the second quarter acquisitions.
Equity in Earnings of Associated Companies. Equity in earnings from Associated
Companies decreased $86,000, or 16%, to $458,000 for the three months ended June
30, 1997, from $544,000 for the three months ended June 30, 1996. This decrease
resulted from an increase in salaries, benefits and other operating costs
associated with the growth of the companies; however, the increase in these
expenses resulted in lower income tax expense. In addition, the net operating
income of GHG increased due to the acquisition of the Scottsdale Hotel.
Gain on Collection of Mortgage Loan Receivable. The gain on collection of
mortgage loan receivable of $498,000 during the three months ended June 30,
1997, resulted from the collection of the Hovpark mortgage loan receivable. The
payoff amount included a $500,000 note receivable, which was recorded as
deferred income to be recognized as cash was received. Payments received in the
three months ended March 31, 1997, totaled $2,000. The remaining balance of the
note receivable was assigned to a third party in June 1997 which resulted in a
gain of $498,000 during the three months ended June 30, 1997.
Net Gain on Sales of Rental Properties. The net gain on sales of rental
properties of $570,000 during the three months ended June 30, 1997, resulted
from the sale of nine of the ten QuikTrips and six Atlanta Auto Care Centers
from the Company's retail portfolio. The net gain on sales of rental properties
of $321,000 during the three months ended June 30, 1996, resulted from the sale
of the two self-storage facilities from the Company's industrial portfolio.
Property Operating Expenses. Property operating expenses increased $2,771,000,
or 311%, to $3,663,000 for the three months ended June 30, 1997, from $892,000
for the three months ended June 30, 1996. Of this increase, $2,726,000
represents property operating expenses attributable to the 1996 Acquisitions and
the 1997 Acquisitions.
Page 29 of 199
<PAGE>
General and Administrative Expenses. General and administrative expenses
increased $329,000, or 84%, to $723,000 for the three months ended June 30,
1997, from $394,000 for the three months ended June 30, 1996. The increase is
primarily due to increased costs resulting from the 1996 Acquisitions and the
1997 Acquisitions.
Depreciation and Amortization. Depreciation and amortization increased
$1,645,000, or 191%, to $2,507,000 for the three months ended June 30, 1997,
from $862,000 for the three months ended June 30, 1996. The increase is
primarily due to depreciation and amortization associated with the 1996
Acquisitions and the 1997 Acquisitions.
Interest Expense. Interest expense increased $1,528,000, or 219%, to $2,227,000
for the three months ended June 30, 1997, from $699,000 for the three months
ended June 30, 1996. Substantially all of the increase was the result of higher
average borrowings during the three months ended June 30, 1997, as compared to
the three months ended June 30, 1996, due to new debt and the assumption of debt
related to the 1996 Acquisitions and the 1997 Acquisitions.
Liquidity and Capital Resources
For the six months ended June 30, 1997, cash provided by operating activities
increased by $9,021,000 to $8,573,000 as compared to $448,000 used for operating
activities for the same period in 1996. The increase is primarily due to the
one-time payment in 1996 of consolidation costs and litigation costs in the
aggregate amount of $7,237,000. Cash used for investing activities increased by
$121,203,000 to $124,080,000 for the six months ended June 30, 1997, as compared
to $2,877,000 for the same period in 1996. The increase is primarily due to the
1997 Acquisitions. This increase was partially offset by the collection of the
Hovpark mortgage loan receivable. Cash provided by financing activities
increased by $122,830,000 to $117,504,000 for the six months ended June 30,
1997, as compared to $5,326,000 used for financing activities for the same
period in 1996. This increase was primarily due to the net proceeds from the
March 1997 Offering (as defined below) and the proceeds from a $60 million
unsecured "bridge" loan from Wells Fargo Bank (the "$60 Million Unsecured Bridge
Loan).
The Company expects to meet its short-term liquidity requirements generally
through its working capital, its Line of Credit (as defined below) and cash
generated by operations. As of June 30, 1997, the Company had no material
commitments for capital improvements other than certain expansion related
improvements estimated at approximately $1,750,000 at its existing shopping
center in Tampa, Florida. Other planned capital improvements consist of tenant
improvements, expenditures necessary to lease and maintain the Properties and
expenditures for furniture and fixtures and building improvements at the hotel
Properties.
The Company's principal sources of funding for acquisitions, development,
expansion and renovation of properties are a secured Line of Credit (as defined
below), permanent secured debt financing, public equity and privately placed
financing, the issuance of partnership units in the Operating Partnership and
cash flow provided by operations.
Mortgage loans receivable decreased from $9,905,000 at December 31, 1996, to
$3,547,000 at June 30, 1997. This decrease was primarily due to the payoff of
the Hovpark mortgage loan receivable which had a net carrying value of
$6,700,000. This decrease was partially offset by $344,000 of draws made by the
borrower on the leasing and interest reserves related to the Grunow mortgage
loan receivable.
Mortgage loans payable increased from $54,584,000 at December 31, 1996, to
$116,563,000 at June 30, 1997. This increase primarily resulted from the
assumption of a $4,612,000 mortgage loan in connection with the acquisition of
the Scottsdale Hotel in February 1997, the assumption of $3,936,000 of mortgage
loans in connection with the acquisition of the E&L Properties and the funding
of the $60 Million Unsecured Bridge Loan. These increases were partially offset
by the payoff of the $6,120,000 Term Loan which was secured by the QuikTrips and
scheduled principal payments on other mortgage debt.
The Company has a $50,000,000 secured line of credit provided by Wells Fargo
Bank (the "Line of Credit"). Outstanding borrowings under the Line of Credit
increased from $21,307,000 at December 31, 1996, to $36,118,000 at June 30,
1997, due to draws for 1997 Acquisitions. Borrowings under the Line of Credit
currently bear interest at an annual rate of LIBOR plus 1.75%.
Page 30 of 199
<PAGE>
In March 1997, the Company completed a public equity offering of 3,500,000
shares of Common Stock at an offering price of $20.25 per share (the "March 1997
Offering"). The net proceeds from the offering of approximately $66.3 million
were used to fund certain 1997 acquisitions and to repay outstanding
indebtedness.
In July 1997, the Company completed a public equity offering of 6,980,000 shares
of Common Stock at an offering price of $22.625 per share (the "July 1997
Offering"). The net proceeds from the offering of approximately $150 million
were used to repay the $60 Million Unsecured Bridge Loan and the outstanding
balance under the Company's Line of Credit. It is anticipated that the remaining
proceeds will be used to fund future acquisitions of properties.
In January 1997, the Company filed a shelf registration statement (the "January
1997 Shelf Registration Statement") with the Securities and Exchange Commission
to register $250.0 million of equity securities. The January 1997 Shelf
Registration Statement was declared effective by the Securities and Exchange
Commission on February 25, 1997. In May 1997, the Company filed a shelf
registration statement to register an additional $350.0 million of equity
securities of the Company (the "May 1997 Shelf Registration Statement). The May
1997 Shelf Registration Statement was declared effective by the Securities and
Exchange Commission on May 21, 1997. After the completion of the March 1997 and
July 1997 Offerings, the Company has the capacity pursuant to the May 1997 Shelf
Registration Statement to issue up to approximately $371.2 million in equity
securities.
At June 30, 1997, the Company's total indebtedness included fixed-rate debt of
$106,960,000, or 70% of the Company's aggregate indebtedness, and floating-rate
indebtedness of $45,721,000, or 30% of the Company's aggregate indebtedness.
Inflation
Substantially all of the leases at the retail Properties provide for
pass-through to tenants of certain operating costs, including real estate taxes,
common area maintenance expenses, and insurance. Leases at the multi-family
Properties generally provide for an initial term of one month or one year and
allow for rent adjustments at the time of renewal. Leases at the office
Properties typically provide for rent adjustment and pass-through of certain
operating expenses during the term of the lease. All of these provisions permit
the Company to increase rental rates or other charges to tenants in response to
rising prices and therefore, serve to reduce the Company's exposure to the
adverse effects of inflation.
Funds from Operations and Cash Available for Distribution
The Company believes that funds from operations ("FFO") is a measure of cash
flow which, when considered in conjunction with other measures of operating
performance, affects the value of equity REITs such as the Company. FFO means
income (loss) from operations before minority interests and extraordinary items
plus depreciation and amortization, except amortization of deferred financing
costs and loss provisions.
FFO is not necessarily indicative of cash flow available to fund cash needs and
is not the same as cash flow from operations as defined by GAAP, and should not
be considered as an alternative to net income (loss) as an indicator of the
Company's operating performance, or as an alternative to cash flows from
operating, investing and financing activities as a measure of liquidity or
ability to make distributions. Management generally considers FFO to be a useful
financial performance measure of the operating performance of an equity REIT
because, together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the ability of a REIT to incur and service debt and
to fund acquisitions and other capital expenditures. FFO does not represent net
income or cash flows from operations as defined by GAAP and does not necessarily
indicate that cash flows will be sufficient to fund all of the Company's cash
needs including principal amortization, capital improvements and distributions
to stockholders. FFO also does not represent cash flows generated from
operating, investing or financing activities as defined by GAAP. FFO as
disclosed by other REITs may not be comparable to the Company's calculation of
FFO.
Cash available for distribution ("CAD") represents net income (loss) (computed
in accordance with GAAP), excluding extraordinary gains or losses or loss
provisions, plus depreciation and amortization including amortization of
deferred financing costs, less lease commissions and recurring capital
expenditures. CAD should not be considered an alternative to net income as a
measure of the Company's financial performance or to cash flow from
Page 31 of 199
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operating activities (computed in accordance with GAAP) as a measure of the
Company's liquidity, nor is it necessarily indicative of sufficient cash flow to
fund all of the Company's cash needs.
The following table sets forth the Company's calculation of FFO and CAD for the
three months ended March 31 and June 30, 1997 (dollars in thousands):
<TABLE>
<CAPTION>
March 31, June 30, Year to Date
1997 1997 Total
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net income (loss) before minority interest $ 2,594 $ 4,639 $ 7,233
Gain on collection of mortgage loan receivable (154) (498) (652)
Net gain on sales of rental properties --- (570) (570)
Depreciation and amortization 1,537 2,507 4,044
Adjustment to reflect FFO of Associated Companies(1) 623 248 871
---------------- ---------------- ----------------
FFO $ 4,600 $ 6,326 $ 10,926
================ ================ ================
Amortization of deferred financing fees 64 64 128
Capital reserve (110) (220) (330)
Capital expenditures (421) (541) (962)
---------------- ---------------- ----------------
CAD $ 4,133 $ 5,629 $ 9,762
================ ================ ================
================ ================ ================
Distributions per share (2) $ 0.32 $ 0.32 $ 0.64
================ ================ ================
Fully diluted weighted average shares outstanding 10,935,951 14,466,852 12,783,418
================ ================ =================
</TABLE>
(1) Reflects the adjustments to FFO required to reflect the FFO of the
Associated Companies allocable to the Company. The Company's investments
in the Associated Companies are accounted for using the equity method of
accounting.
(2) The distributions for the three months ended June 30, 1997, will be paid
on August 12, 1997.
Forward Looking Statements; Factors That May Affect Operating Results
This Report on Form 10-Q contains forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
and Exchange Act of 1934, including statements regarding the Company's
expectations, hopes, intentions, beliefs and strategies regarding the future.
Forward looking statements include statements regarding potential acquisitions,
the anticipated performance of future acquisitions, recently completed
acquisitions and existing properties, including the T. Rowe Price Properties
acquisition, and statements regarding the Company's financing activities. All
forward looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward looking statements. It is important to
note that the Company's actual results could differ materially from those stated
or implied in such forward looking statements.
Factors which may cause the Company's results to differ include the inability to
complete anticipated future acquisitions, defaults or non-renewal of leases,
increased interest rates and operation costs, failure to obtain necessary
outside financing, difficulties in identifying properties to acquire and in
effecting acquisitions, failure to qualify as a real estate investment trust
under the Internal Revenue Code of 1986, environmental uncertainties, risks
related to natural disasters, financial market fluctuations, changes in real
estate and zoning laws, increases in real property tax rates and other factors
discussed under the caption "Forward Looking Statements; Factors That May Affect
Operating Results" in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, and other risk factors set forth
in the Company's other Securities and Exchange Commission filings. In addition,
past performance of the Company's Common Stock is not necessarily indicative of
results that will be obtained in the future from an investment in the Company's
Common Stock. Furthermore, the Company makes distributions to stockholders if,
as and when declared by its Board of Directors, and expects to continue its
policy of paying
Page 32 of 199
<PAGE>
quarterly distributions, however, there can be no assurance that distributions
will continue or be paid at any specific level.
Stockholders or potential stockholders should read the "Risk Factors" section of
the Company's latest annual report on Form 10-K filed with the Securities and
Exchange Commission ("SEC") in conjunction with this quarterly report on Form
10-Q to better understand the factors affecting the Company's results of
operations and the Company's common stock share price. The fact that some of the
risk factors may be the same or similar to the Company's past filings means only
that the risks are present in multiple periods. The Company believes that many
of the risks detailed here and in the Company's other SEC filings are part of
doing business in the real estate industry and will likely be present in all
periods reported. The fact that certain risks are endemic to the industry does
not lessen the significance of the risk.
Page 33 of 199
<PAGE>
GLENBOROUGH HOTEL GROUP
Background
Glenborough Hotel Group ("GHG") was organized in the state of Nevada on
September 23, 1991. As of June 30, 1997, GHG operates hotel properties owned by
the Company under five separate percentage leases and manages two hotel
properties owned by two partnerships whose managing general partner is
Glenborough Corporation. The Company owns 100% of the 50 shares of non-voting
preferred stock of GHG and three individuals, including Terri Garnick, an
executive officer of the Company, each own 33 1/3% of the 1,000 shares of voting
common stock of GHG.
In January 1997, due to the insufficient cash flow of one of the managed hotel
properties in relation to the debt service requirements, the owner of the
property, a California limited partnership owned by an affiliate, stopped making
debt service payments. As a result, in April 1997, the lender foreclosed on the
property, and GHG is no longer managing this hotel.
GHG also owns approximately 80% of the common stock of Resort Group, Inc.
("RGI"). RGI manages homeowners associations and rental pools for two beachfront
resort condominium hotel properties and owns six rental units at one of the
properties. GHG receives 100% of the earnings of RGI and consolidates their
operations with its own.
As of June 30, 1997, GHG also owned 94% of the outstanding common stock of
Atlantic Pacific Holdings, Ltd., the sole owner of 100% of the common stock of
Atlantic Pacific Assurance Company, Limited ("APAC"), a Bermuda corporation
formed to underwrite certain insurable risks of certain of GLB's predecessor
partnerships and related entities. As anticipated, in July 1997, APAC was
liquidated and GHG received a liquidating distribution of approximately
$2,194,000. GHG will recognize a gain of approximately $1,389,000 over its
investment basis and costs of liquidation. GHG had accounted for its investment
in APAC using the cost method due to its anticipated liquidation.
Liquidity and Capital Resources
GHG's primary source of funding is the cash generated by the operations of the
five hotels leased from the Company and fees received for (i) managing two
hotels owned by two partnerships and (ii) managing the homeowners associations
and rental pools for the resort condominium hotel properties as discussed above.
The board of directors of GHG declared and paid the following quarterly
dividends for the three months ended March 31 and June 30, 1997:
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter Year to Date
---------------- ---------------- ----------------
<S> <C> <C> <C>
Preferred dividends to the Company $ 7,500 $ 7,500 $ 15,000
Additional dividends to the Company 30,938 30,938 61,876
---------------- ---------------- ----------------
Total dividends to the Company 38,438 38,438 76,876
Dividends to others 10,312 10,312 20,624
---------------- ---------------- ----------------
Total dividends $ 48,750 $ 48,750 $ 97,500
================ ================ ================
</TABLE>
Results of Operations
Hotel revenue, which represents the revenue earned on the five hotels leased
from the Company, increased $2,553,000, or 71%, to $6,137,000 for the six months
ended June 30, 1997, from $3,584,000 for the six months ended June 30, 1996.
This increase is primarily due to the acquisition of the San Antonio Hotel in
August 1996 and the acquisition of the Scottsdale Hotel in February 1997.
Fee revenue and salary reimbursements of $1,113,000 represents the fees earned
for managing two hotels and two resort condominium hotels. The decrease from the
six months ended June 30, 1996, to the six months ended June 30, 1997, is
primarily due to the change in ownership of one of the managed hotel properties
(see discussion above) which resulted in GHG no longer managing this hotel as of
April 1997.
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<PAGE>
The primary expenses associated with the leased hotels are room expenses, lease
payments, sales and marketing and other operating expenses, including utilities,
maintenance and insurance. All leased hotel expenses increased from the six
months ended June 30, 1996, to the six months ended June 30, 1997, due to the
acquisition of two hotels as discussed above.
The only direct expenses incurred in connection with the management of the two
hotels and two resort condominium hotel properties are salaries and benefits
which decreased $94,000 from the six months ended June 30, 1996, to the six
months ended June 30, 1997. This decrease is primarily due to the change in
ownership of one of the managed hotel properties (see discussion above) which
resulted in GHG no longer managing this hotel as of April 1997.
General and administrative costs represent the overhead costs associated with
administering the business of GHG. Such costs primarily consist of
administrative salaries and benefits, rent, legal fees and accounting fees.
These costs increased $59,000, or 13%, to $525,000 for the six months ended June
30, 1997, from $466,000 for the six months ended June 30, 1996. The increase is
primarily due to higher salaries and benefits related to the growth of GHG.
Page 35 of 199
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Blumberg. On February 21, 1995, a class action complaint was filed in the
Superior Court of the State of California in and for San Mateo County in
connection with the Consolidation. The plaintiff is Anthony E. Blumberg, an
Investor in Equitec B, on behalf of himself and all others (the "Blumberg
Action") similarly situated. The defendants are GC (formerly known as
Glenborough Realty Corporation), Glenborough Realty Corporation ("GRC"), Robert
Batinovich, the Partnerships and the Company.
The complaint alleged breaches by the defendants of their fiduciary duty and
duty of good faith and fair dealing to investors in the Partnerships. The
complaint sought injunctive relief and compensatory damages. The complaint
alleged that the valuation of GC was excessive and was done without appraisal of
GC's business or assets. The complaint further alleged that the interest rate
for the Notes to be issued to investors in lieu of shares of Common Stock, if
they so elected was too low for the risk involved and that the Notes would
likely sell, if at all, at a substantial discount from their face value (as a
matter entirely distinct from the litigation and subsequent settlement, the
Company, as it had the option to, paid in full the amounts due plus interest in
lieu of issuing Notes).
On October 9, 1995 the parties entered into an agreement to settle the action.
The defendants, in entering into the settlement agreement, did not acknowledge
any fault, liability or wrongdoing of any kind and continue to deny all material
allegations asserted in the litigation. Pursuant to the settlement agreement,
the defendants will be released from all claims, known or unknown, that have
been, could have been, or in the future might be asserted, relating to, among
other things, the Consolidation, the acquisition of the Company's shares
pursuant to the Consolidation, any misrepresentation or omission in the
Registration Statement on Form S-4, filed by the Company on September 1, 1994,
as amended, or the prospectus contained therein ("Prospectus/Consent
Solicitation Statement"), or the subject matter of the lawsuit. In return, the
defendants agreed to the following: (a) the inclusion of additional or expanded
disclosure in the Prospectus Consent Solicitation Statement, and (b) the
placement of certain restrictions on the sale of the stock by certain insiders
and the granting of stock options to certain insiders following consummation of
the Consolidation. Plaintiff's counsel indicated that it would request that the
court award it $850,000 in attorneys' fees, costs and expenses. In addition,
plaintiffs' counsel indicated it would request the court for an award of $5,000
payable to Anthony E. Blumberg as the class representative. The defendants
agreed not to oppose such requests.
On October 11, 1995, the court certified the class for purposes of settlement,
and scheduled a hearing to determine whether it should approve the settlement
and class counsel's application for fees. A notice of the proposed settlement
was distributed to the members of the class on November 15, 1995. The notice
specified that, in order to be heard at the hearing, any class member objecting
to the proposed settlement must, by December 15, 1995, file a notice of intent
to appear, and a detailed statement of the grounds for their objection.
Objections were received from a small number of class members. The objections
reiterated the claims in the original Blumberg complaint, and asserted that the
settlement agreement did not adequately compensate the class for releasing those
claims. One of the objections was filed by the same law firm that brought the
BEJ Action described below.
At a hearing on January 17, 1996, the court heard the arguments of the objectors
seeking to overturn the settlement, as well as the arguments of the plaintiffs
and the defendants in defense of the settlement. The court granted all parties a
period of time in which to file additional pleadings. On June 4, 1996, the court
granted approval of the settlement, finding it fundamentally fair, adequate and
reasonable to the respective parties to the settlement. However, the objectors
gave notice of their intent to appeal the June 4 decision, and filed their
opening brief with the court of appeals on November 15, 1996. The Company and
the other defendants filed their answering brief on January 17, 1997.
BEJ Equity Partners. On December 1, 1995, a second class action complaint
relating to the Consolidation was filed in Federal District Court for the
Northern District of California (the "BEJ Action"). The plaintiffs are BEJ
Equity Partners, J/B Investment Partners, Jesse B. Small and Sean O'Reilly as
custodian f/b/o Jordan K. O'Reilly, who as a group held limited partner
interests in the California limited partnerships known as Outlook Properties
Fund IV, Glenborough All Suites Hotels, L.P., Glenborough Pension Investors,
Equitec Income Real Estate Investors-Equity Fund 4, Equitec Income Real Estate
Investors C and Equitec Mortgage Investors Fund IV, on behalf of themselves and
all others similarly situated. The defendants are GRC, GC, the Company, GPA,
Ltd., Robert Batinovich and Andrew Batinovich. The Partnerships are named as
nominal defendants.
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This action alleges the same disclosure violations and breaches of fiduciary
duty as were alleged in the Blumberg Action. The complaint sought injunctive
relief, which was denied at a hearing on December 22, 1995. At that hearing, the
court also deferred all further proceedings in this case until after the
scheduled January 17, 1996 hearing in the Blumberg Action. Following several
stipulated extensions of time for the Company to respond to the complaint, the
Company filed a motion to dismiss the case. The Company has since withdrawn its
motion to dismiss the case, and the court has entered a stipulated order staying
the case pending final resolution of the Blumberg action.
It is management's position that the BEJ Action, and the objections to the
settlement of the Blumberg Action, are without merit, and management intends to
pursue a vigorous defense in both matters. However, given the inherent
uncertainties of litigation, there can be no assurance that the ultimate outcome
in these two legal proceedings will be in the Company's favor.
Item 2. Changes in Securities
(c) Sales of Unregistered Securities
In July 1997, the Company acquired the Centerstone Property for a total
acquisition cost, including capitalized costs, of approximately $30.4 million.
In connection with this acquisition, Glenborough Properties, L.P., a California
limited partnership (the "Operating Partnership"), issued to CT Realty Corp. and
RESCO, the sellers of the Centerstone Property, 275,000 units ("Units") of
partnership interest in Glenborough Properties, L.P. (with an agreed per Unit
value of $20.00, or an aggregate value of $5.5 million) as partial payment for
the Centerstone Property. The balance of the acquisition cost was paid in cash.
The Units are redeemable for cash, or, at the election of the Company, for
shares of Common Stock of the Company on a one-for-one basis. The Units were
issued by the Operating Partnership in reliance on the exemption provided by
Section 4(2) of the Securities Act of 1933, as amended.
In April 1997, the Company acquired the E&L Properties for a total acquisition
cost, including capitalized costs, of approximately $22.2 million. In connection
with this acquisition, the Operating Partnership issued to seven partnerships as
sellers of the E&L Properties, 352,197 Units (with an agreed per Unit value of
$19.075, or an aggregate value of $6,718,158) as partial payment for the E&L
Properties. The Units are redeemable for cash, or, at the election of the
Company, for shares of Common Stock of the Company on a one-for-one basis. In
addition, the Company issued to such seven partnerships 33,198 shares of Common
Stock of the Company (with an agreed per share value of $19.075, or an aggregate
value of $633,252) as partial payment for the E&L Properties. The balance of the
acquisition cost was paid in cash. The Units and the shares of Common Stock were
issued by the Operating Partnership and the Company, respectively, in reliance
on the exemption provided by Section 4(2) of the Securities Act of 1933, as
amended.
Item 4: Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on May 15, 1997. The
Stockholders voted to (i) elect five persons to serve as directors of the
Company until the 1998 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified, (ii) approve amendments to the
Company's 1996 Stock Incentive Plan, and (iii) to ratify the retention of Arthur
Andersen LLP as the Company's independent auditors for the fiscal year ending
December 31, 1997.
The stockholders' votes with respect to the election of directors were as
follows:
FOR WITHHELD
---------- --------
Robert Batinovich 10,066,825 71,200
Andrew Batinovich 10,066,810 71,215
Patrick Foley 10,067,649 70,376
Richard A. Magnuson 10,069,359 68,666
Laura Wallace 10,069,570 68,455
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The stockholders' votes with respect to the approval of amendments to the
Company's 1996 Stock Incentive Plan were as follows:
FOR AGAINST ABSTAIN NON-VOTE
--------- --------- --------- ----------
8,948,640 834,532 124,823 230,030
The stockholders' votes with respect to the ratification of retention of Arthur
Andersen LLP as the Company's independent auditors for the fiscal year ending
December 31, 1997 were as follows:
FOR AGAINST ABSTAIN
---------- --------- ---------
10,053,440 25,890 58,695
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The Exhibit Index attached hereto is hereby incorporated by
reference to this item.
(b) Reports on Form 8-K:
On April 23, 1997, the Company filed a report on Form 8-K with
respect to the acquisition of the Lennar Properties and the
Riverview Property.
On April 24, 1997, the Company filed a report on Form 8-K to
announce the declaration of dividends and funds from operations for
the first quarter of 1997 and to provide certain additional
operation information concerning the Company.
On April 25, 1997, the Company filed a report on Form 8-K to
provide certain additional ownership and operation information
concerning the Company and the properties owned or managed by it as
of March 31, 1997.
On May 2, 1997, the Company filed a report on Form 8-K with respect
to the acquisition of the Ellis & Lane Properties and the CIGNA
Properties.
On May 14, 1997, the Company filed a report on Form 8-K/A,
Amendment No. 1, with respect to the acquisitions of the Lennar
Properties and the Riverview Property.
On May 14, 1997, the Company filed a report on Form 8-K/A,
Amendment No. 1, with respect to the acquisitions of the E&L
Properties and the CIGNA Properties.
On July 15, 1997, the Company filed a report on Form 8-K with
respect to the acquisition of the Centerstone Property.
On July 15, 1997, the Company filed a report on Form 8-K with
respect to the July 1997 Offering.
On July 28, 1997, the Company filed a report on Form 8-K to provide
certain additional ownership and operation information concerning
the Company and the properties owned or managed by it as of June
30, 1997.
On August 8, 1997, the Company filed a report on Form 8-K/A with
respect to the acquisition of the Centerstone Property.
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SIGNATURES
Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GLENBOROUGH REALTY TRUST INCORPORATED
By: Glenborough Realty Trust Incorporated,
Date: August 14, 1997 /s/ Andrew Batinovich
Andrew Batinovich
Director, Executive Vice President,
Chief Operating Officer
and Chief Financial Officer
(Principal Financial Officer)
Date: August 14, 1997 /s/ Terri Garnick
Terri Garnick
Senior Vice President,
Chief Accounting Officer,
Treasurer
(Principal Accounting Officer)
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EXHIBIT INDEX
Exhibit No. Exhibit Title
4.0 Glenborough Realty Trust Incorporated 1996 Stock Incentive
Plan (amended and restated as of March 20, 1997)
10.1 Purchase and Sale Agreement relating to the T. Rowe Price
Realty Income Fund II acquisition
10.2 Purchase Agreement relating to the Centerstone Property
acquisition
10.3 Contribution Agreement relating to the Centerstone
Property acquisition
10.4 Purchase Agreement relating to the CIGNA acquisition
10.5 Unsecured Loan Agreement with Wells Fargo Bank, N.A.
27.1 Financial Data Schedule
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GLENBOROUGH REALTY TRUST INCORPORATED
1996 STOCK INCENTIVE PLAN
(amended and restated as of March 20, 1997)
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants of the Company and its Related Entities and to promote the success
of the Company's and its Related Entities' business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan. All references to the "Committee" in any Award
Agreement shall be deemed to refer to the Administrator.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act. All references to "Affiliates" in any Award Agreement issued prior to the
date of adoption by the Board of this March 20, 1997 amendment and restatement
of the Plan shall be deemed to refer to Parents and Subsidiaries.
(c) "Applicable Laws" means the legal requirements relating to
the administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
(d) "Award" means the grant of an Option, SAR, Dividend
Equivalent Right, Restricted Stock, Performance Unit, Performance Share, or
other right or benefit under the Plan. Award also includes all Options issued in
1996 notwithstanding any recital that the Option is intended to have been issued
outside the terms of the Plan.
(e) "Award Agreement" means the written agreement evidencing the
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Change in Control" means a change in ownership or control of
the Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of
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Rule 13d-3 of the Exchange Act) of securities possessing more than twenty
percent (20%) of the total combined voting power of the Company's outstanding
securities, or
(ii) a change in the composition of the Board over a period
of thirty-six (36) months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who are
Continuing Directors.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means any committee appointed by the Board to
administer the Plan.
(j) "Common Stock" means the common stock of the Company.
(k) "Company" means Glenborough Realty Trust Incorporated, a
Maryland corporation.
(l) "Consultant" means any person who is engaged by the Company
or any Related Entity to render consulting or advisory services as an
independent contractor and is compensated for such services.
(m) "Continuing Directors" means members of the Board who either
(i) have been Board members continuously for a period of at least thirty-six
(36) months or (ii) have been Board members for less than thirty-six (36) months
and were elected or nominated for election as Board members by at least a
majority of the Board members described in clause (i) who were still in office
at the time such election or nomination was approved by the Board.
(n) "Continuous Status as an Employee, Director or Consultant"
means that the provision of services to the Company or a Related Entity in any
capacity of Employee, Director or Consultant, is not interrupted or terminated.
Continuous Status as an Employee, Director or Consultant shall not be considered
interrupted in the case of (i) any approved leave of absence or (ii) transfers
between locations of the Company or among the Company, its Related Entities, or
any successor in any capacity of Employee, Director or Consultant. An approved
leave of absence shall include sick leave, military leave, or any other
authorized personal leave. For purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract.
(o) "Corporate Transaction" means any of the following
stockholder-approved transactions to which the Company is a party:
(i) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose of which is
to change the state in which the Company is incorporated;
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(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company; or
(iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger.
(p) "Covered Employee" means an Employee who is a "covered
employee" under Section 162(m)(3) of the Code.
(q) "Director" means a member of the Board.
(r) "Dividend Equivalent Right" means a right entitling the
Grantee to compensation measured by dividends paid with respect to Common Stock.
(s) "Employee" means any person, including an Officer or
Director, who is an employee of the Company or a Related Entity. The payment of
a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(t) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(u) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) Where there exists a public market for the Common Stock,
the Fair Market Value shall be (A) the closing price for a Share for the last
market trading day prior to the time of the determination (or, if no closing
price was reported on that date, on the last trading date on which a closing
price was reported) on the stock exchange determined by the Administrator to be
the primary market for the Common Stock or the Nasdaq National Market, whichever
is applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on the last
date on which such prices were reported), in each case, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(ii) In the absence of an established market of the type
described in (i), above, for the Common Stock, the Fair Market Value thereof
shall be determined by the Administrator in good faith.
(v) "Grantee" means an Employee, Director or Consultant who
receives an Award under the Plan.
(w) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
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(x) "Non-Employee Director" means a Director who is not an
Officer.
(y) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(z) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(aa) "Option" means a stock option granted pursuant to the Plan.
(bb) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(cc) "Performance - Based Compensation" means compensation
qualifying as "performance-based compensation" under Section 162(m) of the Code.
(dd) "Performance Shares" means Shares or an award denominated in
Shares which may be earned in whole or in part upon attainment of performance
criteria established by the Administrator.
(ee) "Performance Units" means an award which may be earned in
whole or in part upon attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other securities or a
combination of cash, Shares or other securities as established by the
Administrator.
(ff) "Plan" means this 1996 Stock Incentive Plan, as amended and
restated.
(gg) "Related Entity" means any Parent, Subsidiary and any
business, corporation, partnership, limited liability company or other entity in
which the Company, a Parent or a Subsidiary holds an ownership interest,
directly or indirectly, including but not limited to Glenborough Corporation,
Glenborough Hotel Group, Glenborough Inland Realty Corporation, and Glenborough
Properties, L.P.
(hh) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.
(ii) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor thereto.
(jj) "SAR" means a stock appreciation right entitling the Grantee
to Shares or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.
(kk) "Share" means a share of the Common Stock.
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<PAGE>
(ll) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
(mm) "Subsidiary Disposition" means the disposition by the
Company of its equity holdings in any subsidiary corporation effected by a
merger or consolidation involving that subsidiary corporation, the sale of all
or substantially all of the assets of that subsidiary corporation or the
Company's sale or distribution of substantially all of the outstanding capital
stock of such subsidiary corporation.
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 10, below, commencing on
November 15, 1996, the maximum aggregate number of Shares which may be issued
pursuant to Awards shall be the greater of (i) one million one hundred forty
thousand (1,140,000) Shares or (ii) eight percent (8%) of the number of Shares
outstanding determined as of the day immediately following the most recent
issuance of Shares or securities convertible into Shares; provided that the
maximum aggregate number of Shares available for issuance under the Plan shall
not be reduced. For purposes of calculating the number of outstanding Shares,
all classes of securities of the Company and its Related Entities (including
partnership units of Glenborough Properties, L.P.) that are convertible
presently or in the future by the security holder into Shares or which may
presently or in the future be exchanged for Shares pursuant to redemption rights
or otherwise, shall be deemed to be outstanding Shares equal to the number of
Shares into which the securities are convertible or redeemable presently or in
the future. Notwithstanding the foregoing, subject to the provisions of Section
10, below, the maximum aggregate number of Shares available for grant of
Incentive Stock Options shall be one million one hundred forty thousand
(1,140,000) Shares, and such number shall not be subject to adjustment as
described above. The Shares to be issued pursuant to Awards may be authorized,
but unissued, or reacquired Common Stock.
(b) If an Award expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an Award exchange program,
or if any unissued Shares are retained by the Company upon exercise of an Award
in order to satisfy the exercise price for such Award or any withholding taxes
due with respect to such Award, such unissued or retained Shares shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that actually have been issued under the Plan pursuant to an
Award shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if unvested Shares are
forfeited, or repurchased by the Company at their original purchase price, such
Shares shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) Plan Administrator.
(i) Administration with Respect to Directors and Officers.
With respect to grants of Awards to Directors or Employees who are also Officers
or Directors of the Company, the Plan shall be administered by (A) the Board or
(B) a Committee designated by
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<PAGE>
the Board, which Committee shall be constituted in such a manner as to satisfy
the Applicable Laws and to permit such grants and related transactions under the
Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule
16b-3. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. Subject to Rule 16b-3 and
Applicable Laws, the Board may authorize one or more Officers to grant such
Awards and may limit such authority as the Board determines from time to time.
(ii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Awards to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. The Board may authorize one or more
Officers to grant such Awards and may limit such authority as the Board
determines from time to time.
(iii) Administration With Respect to Covered Employees.
Notwithstanding the foregoing, grants of Awards to any Covered Employee intended
to qualify as Performance-Based Compensation shall be made only by a Committee
(or subcommittee of a Committee) which is comprised solely of two or more
Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to Covered
Employees, references to the "Administrator" or to a "Committee" shall be deemed
to be references to such Committee or subcommittee.
(iv) Administration Errors. In the event an Award is granted
in a manner inconsistent with the provisions of this subsection (a), such Award
shall be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to Applicable Laws and
the provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the Board, the
Administrator shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to
whom Awards may be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are
granted hereunder;
(iii) to determine the number of Shares or the amount of
other consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreement for use under the
Plan;
(v) to determine the terms and conditions of any Award
granted hereunder;
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(vi) to amend the terms of any outstanding Award granted
under the Plan, including a reduction in the exercise price (or base amount on
which appreciation is measured) of any Award to reflect a reduction in the Fair
Market Value of the Common Stock since the grant date of the Award, provided
that any amendment that would adversely affect the Grantee's rights under an
outstanding Award shall not be made without the Grantee's written consent;
(vii) to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with the
provisions of the Plan; and
(ix) to take such other action, not inconsistent with the
terms of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.
5. Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.
6. Terms and Conditions of Awards.
(a) Type of Awards. The Administrator is authorized under the
Plan to award any type of arrangement to an Employee, Director or Consultant
that is not inconsistent with the provisions of the Plan and that by its terms
involves or might involve the issuance of (i) Shares, (ii) an Option, a SAR or
similar right with an exercise or conversion privilege at a fixed or variable
price related to the Common Stock and/or the passage of time, the occurrence of
one or more events, or the satisfaction of performance criteria or other
conditions, or (iii) any other security with the value derived from the value of
the Common Stock or other securities issued by a Related Entity. Such awards
include, without limitation, Options, SARs, sales or bonuses of Restricted
Stock, Dividend Equivalent Rights, Performance Units or Performance Shares, and
an Award may consist of one such security or benefit, or two or more of them in
any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the
Award Agreement. In the case of an Option, the Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the
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extent that the aggregate Fair Market Value of Shares subject to Options
designated as Incentive Stock Options which become exercisable for the first
time by a Grantee during any calendar year (under all plans of the Company or
any Parent or Subsidiary) exceeds $100,000, such excess Options, to the extent
of the Shares covered thereby in excess of the foregoing limitation, shall be
treated as Non-Qualified Stock Options. For this purpose, Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the date the
Option with respect to such Shares is granted.
(c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.
(d) Deferral of Award Payment. The Administrator may establish
one or more programs under the Plan to permit selected Grantees the opportunity
to elect to defer receipt of consideration upon exercise of an Award,
satisfaction of performance criteria, or other event that absent the election
would entitle the Grantee to payment or receipt of Shares or other consideration
under an Award. The Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred, and such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any such deferral
program.
(e) Award Exchange Programs. The Administrator may establish one
or more programs under the Plan to permit selected Grantees to exchange an Award
under the Plan for one or more other types of Awards under the Plan on such
terms and conditions as determined by the Administrator from time to time.
(f) Separate Programs. The Administrator may establish one or
more separate programs under the Plan for the purpose of issuing particular
forms of Awards to one or more classes of Grantees on such terms and conditions
as determined by the Administrator from time to time.
(g) Individual Option and SAR Limit. The maximum number of Shares
with respect to which Options and SARs may be granted to any Employee in any
calendar year shall be five hundred thousand (500,000) Shares. The foregoing
limitation shall be adjusted proportionately in connection with any change in
the Company's capitalization pursuant to Section 10, below. To the extent
required by Section 162(m) of the Code or the regulations
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thereunder, in applying the foregoing limitation with respect to an Employee, if
any Option or SAR is canceled, the canceled Option or SAR shall continue to
count against the maximum number of Shares with respect to which Options and
SARs may be granted to the Employee. For this purpose, the repricing of an
Option (or in the case of a SAR, the base amount on which the stock appreciation
is calculated is reduced to reflect a reduction in the Fair Market Value of the
Common Stock) shall be treated as the cancellation of the existing Option or SAR
and the grant of a new Option or SAR.
(h) Early Exercise. The Award may, but need not, include a
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received pursuant to such exercise may be subject
to a repurchase right in favor of the Company or to any other restriction the
Administrator determines to be appropriate.
(i) Term of Award. The term of each Award shall be the term
stated in the Award Agreement, provided, however, that the term of an Incentive
Stock Option shall be no more than ten (10) years from the date of grant
thereof. However, in the case of an Incentive Stock Option granted to a Grantee
who, at the time the Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Award Agreement.
(j) Transferability of Awards. Incentive Stock Options may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's Incentive
Stock Option in the event of the Grantee's death on a beneficiary designation
form provided by the Administrator. Other Awards shall be transferable to the
extent provided in the Award Agreement.
(k) Time of Granting Awards. The date of grant of an Award shall
for all purposes be the date on which the Administrator makes the determination
to grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.
7. Award Exercise or Purchase Price, Consideration, Taxes and Reload
Options.
(a) Exercise or Purchase Price. The exercise or purchase price,
if any, for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option owns stock representing more than ten
percent (10%) of the voting
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power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be not less than one hundred ten percent (110%)
of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(ii) In the case of Awards intended to qualify as
Performance-Based Compensation, the exercise or purchase price, if any, shall be
not less than one hundred percent (100%) of the Fair Market Value per Share on
the date of grant.
(iii) In the case of other Awards, such price as is
determined by the Administrator.
(b) Consideration. Subject to Applicable Laws, the consideration
to be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
issued under the Plan the following:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate;
(iv) surrender of Shares or delivery of a properly executed
form of attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Award) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said Award shall
be exercised (but only to the extent that such exercise of the Award would not
result in an accounting compensation charge with respect to the Shares used to
pay the exercise price unless otherwise determined by the Administrator); (v)
delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require
to effect an exercise of the Award and delivery to the Company of the sale or
loan proceeds required to pay the exercise price; or
(vi) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the
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Administrator for the satisfaction of any foreign, federal, state, or local
income and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares or the disqualifying
disposition of Shares received on exercise of an Incentive Stock Option. Upon
exercise of an Award, the Company shall withhold or collect from Grantee an
amount sufficient to satisfy such tax obligations.
(d) Reload Options. In the event the exercise price or tax
withholding of an Option is satisfied by the Company or the Grantee's employer
withholding Shares otherwise deliverable to the Grantee, the Administrator may
issue the Grantee an additional Option, with terms identical to the Award
Agreement under which the Option was exercised, but at an exercise price as
determined by the Administrator in accordance with the Plan.
8. Exercise of Award.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Award granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator under the
terms of the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment
for the Shares with respect to which the Award is exercised has been received by
the Company. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to
Shares subject to an Award, notwithstanding the exercise of an Option or other
Award. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Award. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in the Award Agreement or Section 10,
below.
(b) Exercise of Award Following Termination of Employment,
Director or Consulting Relationship.
(i) An Award may not be exercised after the termination date
of such Award set forth in the Award Agreement and may be exercised following
the termination of a Grantee's Continuous Status as an Employee, Director or
Consultant only to the extent provided in the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise
an Award following the termination of the Grantee's Continuous Status as an
Employee, Director or Consultant for a specified period, the Award shall
terminate to the extent not exercised on the last day of the specified period or
the last day of the original term of the Award, whichever occurs first.
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(iii) Any Award designated as an Incentive Stock Option to
the extent not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Status as an Employee, Director or Consultant shall convert automatically to a
Non-Qualified Stock Option and thereafter shall be exercisable as such to the
extent exercisable by its terms for the period specified in the Award Agreement.
(c) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Award previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Grantee at the time that such offer is made.
9. Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of such
Shares pursuant thereto shall comply with all Applicable Laws, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, as well as the price per share of Common Stock
covered by each such outstanding Award, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of Common Stock. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Award.
11. Corporate Transactions/Changes in Control/Subsidiary Dispositions.
(a) The Administrator shall have the authority, exercisable
either in advance of any actual or anticipated Corporate Transaction, Change in
Control or Subsidiary Disposition or at the time of an actual Corporate
Transaction, Change in Control or Subsidiary Disposition and exercisable at the
time of the grant of an Award under the Plan or any time while an Award remains
outstanding, to provide for the full automatic vesting and exercisability of one
or more outstanding unvested Awards under the Plan and the release from
restrictions on transfer and
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repurchase or forfeiture rights of such Awards in connection with a Corporate
Transaction, Change in Control or Subsidiary Disposition, on such terms and
conditions as the Administrator may specify. The Administrator also shall have
the authority to condition any such Award vesting and exercisability or release
from such limitations upon the subsequent termination of the Continuous Status
as an Employee or Consultant of the Grantee within a specified period following
the effective date of the Change in Control or Subsidiary Disposition. The
Administrator may provide that any Awards so vested or released from such
limitations in connection with a Change in Control or Subsidiary Disposition,
shall remain fully exercisable until the expiration or sooner termination of the
Award. Effective upon the consummation of a Corporate Transaction, all
outstanding Awards under the Plan shall terminate unless assumed by the
successor company or its Parent.
(b) In the event of a Corporate Transaction, each Award granted
to Non-Employee Directors pursuant to the formula grant provisions of Section 6
of the Plan prior to this March 20, 1997 amendment and restatement of the Plan
which is at the time outstanding under the Plan automatically shall become fully
vested and exercisable and be released from any restrictions on transfer and
repurchase or forfeiture rights, immediately prior to the specified effective
date of such Corporate Transaction, for all of the Shares at the time
represented by such Award. Effective upon the consummation of the Corporate
Transaction, all outstanding Awards under the Plan shall terminate unless
assumed by the successor company or its Parent.
(c) In the event of a Change in Control (other than a Change in
Control which also is a Corporate Transaction), each Award granted to
Non-Employee Directors pursuant to the formula grant provisions of Section 6 of
the Plan prior to this March 20, 1997 amendment and restatement of the Plan
which is at the time outstanding under the Plan automatically shall become fully
vested and exercisable and be released from any restrictions on transfer and
repurchase or forfeiture rights, immediately prior to the specified effective
date of such Change in Control, for all of the Shares at the time represented by
such Award. Each such Award shall remain so exercisable until the expiration or
sooner termination of the applicable Award term.
(d) The portion of any Incentive Stock Option accelerated under
this Section 11 in connection with a Corporate Transaction, Change in Control or
Subsidiary Disposition shall remain exercisable as an Incentive Stock Option
under the Code only to the extent the $100,000 dollar limitation of Section
422(d) of the Code is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated excess portion of such Option shall be exercisable as
a Non-Qualified Stock Option.
12. Term of Plan. The Plan shall terminate with respect to the grant of
Incentive Stock Options on April 1, 2006 unless sooner terminated.
13. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the
Plan. To the extent necessary to comply with Applicable Laws, the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
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(b) No Award may be granted during any suspension of the Plan or
after termination of the Plan.
(c) Any amendment, suspension or termination of the Plan shall
not affect Awards already granted, and such Awards shall remain in full force
and effect as if the Plan had not been amended, suspended or terminated, unless
mutually agreed otherwise between the Grantee and the Administrator, which
agreement must be in writing and signed by the Grantee and the Company.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. No Effect on Terms of Employment. The Plan shall not confer upon any
Grantee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
16. Stockholder Approval. The Plan became effective when adopted by the
Board on April 1, 1996, and was approved by the Company's stockholders on May
30, 1996. On March 20, 1997, the Board adopted and approved an amendment and
restatement of the Plan to reflect the amendments promulgated by the Securities
and Exchange Commission to Rule 16b-3 applicable to the Plan, to adjust the
formula for determining the maximum aggregate number of Shares that may be
issued pursuant to Awards by determining the number of Shares outstanding on the
day immediately following the most recent issuance of Shares or securities
convertible into Shares, to increase the aggregate maximum number of Shares that
may be available for the grant of Incentive Stock Options, to permit the grant
of Dividend Equivalent Rights, SARs, Performance Units and Performance Shares,
to address the rules or laws of foreign jurisdictions applicable to Awards
granted to residents therein, to permit Awards to include an early exercise
provision, to increase the maximum number of Shares with respect to which
Options and SARs may be granted to any Employee in any calendar year (such
increase to be effective as of August 2, 1996), and to authorize the
establishment under the Plan of separate programs for the grant of particular
forms of Awards to one or more classes of Grantees, and programs to permit
selected Grantees to elect to defer the receipt of consideration payable under
an Award (collectively, the "Amendments"), subject to stockholder approval of
the Amendments. Awards may be granted in reliance on the per employee maximum
share increase and the formula increase, but no Award issued in reliance on such
increases shall become exercisable unless and until the Amendments shall have
been approved by the Company's stockholders. If such stockholder approval is not
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obtained, then the Awards previously granted in reliance on the Amendments shall
terminate. None of the other Amendments shall be given effect until they shall
have been approved by the Company's stockholders.
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PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
By
And Between
T. ROWE PRICE REALTY INCOME FUND II,
AMERICA'S SALES-COMMISSION-FREE REAL ESTATE LIMITED PARTNERSHIP,
a Delaware Limited Partnership
As Seller
And
GLENBOROUGH REALTY TRUST INCORPORATED,
a Maryland corporation
And
GLENBOROUGH PROPERTIES, L.P.,
a California limited partnership
As Buyer.
Regarding:
1. Atlantic Industrial, Gwinnett Co., Georgia
2. Baseline Business Park, Tempe, Arizona
3. Bonnie Lane, Elk Grove Village, Illinois
4. Business Plaza, Fort Lauderdale, Florida
5. Coronado, Anaheim, California
6. Glenn Avenue, Wheeling, Illinois
7. Oakbrook Corner, Norcross, Georgia
Dated As Of
April 16, 1997
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PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (the
"Agreement") is entered into as of this ____ day of April, 1997, by and between
T. ROWE PRICE REALTY INCOME FUND II, AMERICA'S SALES-COMMISSION-FREE REAL ESTATE
LIMITED PARTNERSHIP, a Delaware limited partnership ("Seller"), and GLENBOROUGH
REALTY TRUST INCORPORATED, a Maryland corporation and GLENBOROUGH PROPERTIES,
L.P., a California limited partnership (collectively, "Buyer").
R E C I T A L S
A. Seller owns those certain parcels of land described in Exhibit A
attached hereto and made a part hereof, each of which is improved with a
building or buildings and certain other improvements as more particularly set
forth in this Agreement.
B. Seller desires to sell, and Buyer desires to buy, the above described
assets upon the terms and subject to the conditions set forth in this Agreement.
A G R E M E N T
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained in this Agreement and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
SECTION 1.
DEFINITIONS
1.1 Defined Terms
"Approved Service Contracts" means the Service Contracts approved by
Buyer pursuant to Section 5.4.
"Assignment and Assumption of Tenant Leases" shall have the meaning set
forth in Section 4.2.1.2.
"Atlantic Property" means the portion of the Real Property described in
Exhibit A as Atlantic Gwinnett Co., Georgia, together with the Personal Property
located thereon and all Tenant Leases with respect thereto.
"Baseline Property" means the portion of the Real Property described in
Exhibit A as Baseline, Tempe, Arizona, together with the Personal Property
located thereon and all Tenant Leases with respect thereto.
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"Bill of Sale" shall have the meaning set forth in Section 4.2.1.4.
"Bonnie Lane Property" means the portion of the Real Property described
in Exhibit A as Bonnie Lane, Elk Grove Village, Illinois, together with the
Personal Property located thereon and all Tenant Leases with respect thereto.
"Broker" shall have the meaning set forth in Section 10.
"Building" means a building and related improvements located on the
Land and all fixtures attached thereto (including but not limited to all HVAC
equipment, elevators, and electrical, plumbing and mechanical systems).
"Business Plaza Property" means the portion of the Real Property
described in Exhibit A as Business Plaza, Fort Lauderdale, Florida, together
with the Personal Property located thereon and all Tenant Leases with respect
thereto.
"Buyer's Counsel" Frank Austin and/or G.Lee Burns, Jr.
"Buyer's Default" shall have the meaning set forth in Section 3.4.
"Closing Agent" shall have the meaning set forth in Section 4.8.5.
"Closing" or "Close of Escrow" shall have the meaning set forth in
Section 4.7.2.
"Closing Date" means the day on which the Closing occurs hereunder.
"Coronado Property" means the portion of the Real Property described in
Exhibit A as Coronado, Anaheim, California, together with the Personal Property
located thereon and all Tenant leases with respect thereto.
"Decision Date" shall have the meaning set forth in Section 7.1.3.
"Deposit" means Two Hundred Eighty-Four Thousand Nine Hundred Eight and
20/100 Dollars ($284,908.20).
"Determination Date" means the date upon which both: (i) the Investor
Consent shall have been obtained and (ii) each of the Financial Due Diligence
Period, the Environmental Due Diligence Period and the Title Due Diligence
Period shall have expired.
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"Disapproved Exceptions" shall have the meaning set forth in Section
7.1.1.
"Environmental Due Diligence Period" means the thirty (30) day period
following the date upon which Buyer has received an ASTM Phase One environmental
report with respect to the Real Property.
"Environmental Reports" shall have the meaning set forth in Section
7.5.1.
"Escrow" means an escrow opened with the Escrow Holder in accordance
with the provisions of this Agreement for the sale of the Properties.
"Escrow Holder" means the Title Company unless Buyer and Seller shall
otherwise mutually agree.
"Escrow Instructions" shall have the meaning set forth in Section 4.1.
"Execution Date" means the date on which both Buyer and Seller shall
have executed this Agreement and delivered a counterpart thereof to the other
party.
"Fairness Opinion" means an opinion of a recognized investment banker,
appraiser or other qualified organization selected by Seller as to the fairness
of the Purchase Price of the Properties as provided for under this Agreement.
"Financial Due Diligence Period" means the period commencing on the
Execution Date and ending on the date which is twenty (20) days thereafter.
"General Assignment and Assumption Agreement" shall have the meaning
set forth in Section 4.2.1.3.
"Glenn Avenue Property" means the portion of the Real Property
described in Exhibit A as Glenn Avenue, Wheeling, Illinois, together with the
Personal Property located thereon and all Tenant Leases with respect thereto.
"GPLP" means Glenborough Properties, L.P., a California limited
partnership.
"Grant Deeds" shall have the meaning set forth in Section 4.2.1.1.
"GRT" means Glenborough Realty Trust Incorporated, a Maryland
corporation.
"Insured Casualty Notice" shall have the meaning set forth in Section
12.1.
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"Intangible Property" means all of Seller's interest in and to all
transferable (i) Licenses and Permits; (ii) development rights, land use rights,
trademark rights, if any (but excluding the name "T. Rowe Price" or any
derivative thereof) and other intangible property, rights, titles, interests,
privileges and appurtenances and related to or used in connection with the
Properties or any of them or their operation; (iii) warranties and guaranties of
architects, engineers, contractors, subcontractors, suppliers or materialmen
involved in the repair, construction, design, reconstruction or operation of the
Properties or any of them; and (iv) Service Contracts.
"Investor Consent" means the consent of the limited partners of Seller
to the transactions contemplated hereby.
"Land" means the land described on Exhibit A annexed hereto and made a
part hereof.
"Licenses and Permits" means all licenses, permits and entitlements of
Seller obtained in connection with the design, construction, rehabilitation or
operation of the Real Property and/or any portion thereof.
"Major Tenant" means a Tenant leasing 10,000 square feet or more under
a Tenant Lease.
"Material Inaccuracies" means aggregate loss to Buyer resulting from
inaccuracies in Seller's representation and warranties set forth in Section 6.2
in excess of Two Hundred Eigthy-Four Thousand Nine Hundred Eight and 20/100
Dollars ($284,908.20).
"Non-Foreign Person Certificate" shall have the meaning set forth in
Section 4.2.1.5.
"Notice Period" shall have the meaning set forth in Section 7.3..
"Oakbrook Corner Property" means the portion of the Real Property
described in Exhibit A as Oakbrook Corner, Norcross, Georgia, together with the
Personal Property located thereon and all Tenant Leases with respect thereto.
"Past-Due Amounts" shall have the meaning set forth in Section 5.2.3.
"Person" means any natural person, partnership, corporation,
association, limited liability company or any other legal entity.
"Personal Property" means collectively the Tangible Personal Property
and Intangible Property.
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"Preliminary Title Report" shall have the meaning set forth in Section
7.1.
"Properties" means collectively the Atlantic Property, the Baseline
Property, the Bonnie Lane Property, the Business Plaza Property, the Coronado
Property, the Glenn Avenue Property and the Oakbrook Corner Property.
"Property" means individually the Atlantic Property, the Baseline
Property, the Bonnie Lane Property, the Business Plaza Property, the Coronado
Property, the Glenn Avenue Property or the Oakbrook Corner Property.
"Proration Time" means midnight (Eastern Daylight Savings Time) on the
day immediately preceding the Closing Date.
"Purchase Offer" shall have the meaning set forth in Section 9.4.
"Purchase Offer Notice" shall have the meaning set forth in Section
9.4.1.
"Purchase Price" means Twenty-Eight Million Four Hundred Ninety
Thousand Eight Hundred Twenty Dollars ($28,490,820.00).
"Real Property" means the Land, the Buildings and all rights, rights of
way, easements, water or littoral rights, all rights to any minerals, oil, gas
and other hydrocarbon substances, development rights and air rights appurtenant
to or used in connection with the Land or any portion thereof and the Buildings
located thereon, and Seller's right, title and interest in and to all streets,
alleys, strips and gores abutting the Land.
"Records and Plans" means all financial records showing income and
expenses of the Buildings for the prior three calendar years and for the current
year to date, Tenant files, certificates of occupancy, records of Building
operations (including utility bills for the prior 12 months), the standard lease
agreement used for the Buildings, all building plans, specifications and
drawings, lists of Personal Property, surveys, tax bills for each Property for
the last three years, copies of the Service Contracts (and correspondence
related thereto) and other documents prepared or used in connection with the
construction, maintenance, repair, management or operation of the Buildings in
each case, to the extent in possession of Seller and/or LaSalle Advisors.
"Released Parties" shall have the meaning set forth in Section 6.3.3.
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"Replacement Buyer" shall have the meaning set forth in Section 9.4.
"Replacement Contract" shall have the meaning set forth in Section
9.4.1.
"Schedule of Leases" means the schedule of Tenant Leases set forth in
Exhibit C annexed hereto and made a part hereof.
"Scheduled Closing Date" means the first day which is a Tuesday and not
a bank holiday and which is at least five (5) days after the last of each of the
following: (i) the expiration of the Title Review Period (subject to any
extension provided for in Section 7 to cure title defects); (ii) the expiration
of the Environmental Due Diligence Period; (iii) the date upon which Seller
receives the Investor Consent; and (iv) the delivery to Seller of a Fairness
Opinion (if requested by Seller in accordance with the provisions of Section
8.4).
"Schedule of Claims" shall have the meaning set forth in Section 6.2.4.
"Seller Default" shall have the meaning set forth in Section 11.1.
"Seller Estoppel Certificate" shall have the meaning set forth in
Section 9.1.1.
"Seller's Counsel" means the law firm of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, acting through Robert J. Ivanhoe and/or Andrew E.
Zobler.
"Service Contracts" means any and all service contracts, landscaping
contracts, equipment leases, maintenance agreements, open purchase orders and
other contracts for the provision of services, materials or supplies to or for
the benefit of the Properties and/or any of them, which are shown on the
Schedule of Service Contracts set forth as Exhibit B annexed hereto and made a
part hereof or which are entered into after the date of this Agreement and are
either approved by Buyer in writing or are terminable by the owner of the
applicable Property without cause and without payment or penalty on no more than
30 days notice.
"Survey" shall have the meaning set forth in Section 7.1.
"Tangible Personal Property" means (i) all Records and Plans (including
a schedule of all equipment of Seller, if any, identified by model and serial
number); and (ii) all depreciable personal property and all other tools,
supplies, artwork,
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furniture, furnishings, machinery, equipment, licensed software and personal
computer based security systems, if any, and other tangible personal property,
in each case, owned or leased by Seller in connection with the ownership,
operation or maintenance of the Properties and/or any of them.
"Tenant" means a tenant leasing space in a Building pursuant to a
Tenant Lease.
"Tenant Estoppel Certificate" shall have the meaning set forth in
Section 9.1.1.
"Tenant Lease" means a lease set forth on the Schedule of Leases.
"Tenant Notification Letter" shall have the meaning set forth in
Section 4.2.1.6.
"Tenant Security Deposits" means all security deposits or other
security of Tenants under the Tenant Leases.
"Termination Option" shall have the meaning set forth in Section 9.4.
"Title Company" means First American Title Insurance Company.
"Title Policies" shall have the meaning set forth in Section 7.2.
"Title Due Diligence Period" means the Title review period unless Buyer
notifies Seller of any Disapproved Exceptions before the expiration of the Title
Review Period, in which case the Title Due Diligence Period shall be extended
until the Decision Date.
"Title Review Period" means the twenty (20) day period following the
date upon which Buyer has received Preliminary Title Reports from the Title
Company with respect to the Real Property, together with a copy of the documents
evidencing or creating the material exceptions to title specified on such
Preliminary Title Reports and an updated Survey with respect to such Real
Property, in each case, in accordance with the applicable provisions of Article
7.
"To Seller's knowledge," means the actual knowledge of Mark B. Ruhe and
Joseph P. Croteau, without any duty to investigate or inquire, and shall not
mean information or material which may be in the possession of Seller generally
or incidentally. No personal liability to Buyer based upon this Agreement,
including but not limited to the warranties and representations contained in
this Agreement, shall be created by this definition or any other provision of
this Agreement.
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"Topping Fee" shall have the meaning set forth in Section 9.4.1.
"Uninsured Casualty Notice" shall have the meaning set forth in Section
12.2.1.
"Uninsured Estimate to Repair" shall have the meaning set forth in
Section 12.2.1.
"Work-in-Progress" shall have the meaning set forth in Section 8.2.2.
SECTION 2.
PURCHASE AND SALE OF PROPERTIES
On the terms and subject to the conditions of this Agreement, Seller
agrees to sell the Properties to Buyer, and Buyer agrees to purchase the
Properties from Seller and to assume all of Seller's obligations arising out of
or relating to the Properties, all as hereinafter provided.
SECTION 3.
PURCHASE PRICE; PAYMENT; BUYER'S DEFAULT; LIQUIDATED DAMAGES
3.1 Purchase Price. The purchase price for the Properties shall be the
Purchase Price. Neither Buyer nor Seller shall be bound by any allocation of the
Purchase Price among the Properties by the other for any purpose unless such
party expressly agrees to be bound thereby.
3.2 Payment. The Purchase Price shall be paid as follows:
3.2.1 Upon the execution hereof, Buyer shall deliver to Escrow Holder,
in cash or other immediately available funds, the Deposit to be held by Escrow
Holder strictly in accordance with the provisions of this Agreement. If the
Close of Escrow shall occur, Seller shall be entitled to receive the Deposit
together with any interest accrued thereon as a credit against the Purchase
Price.
3.2.2 At least one (1) day prior to the Scheduled Closing Date, Buyer
shall deliver to Escrow Holder in cash or other immediately available funds, an
amount equal to (a) the Purchase Price plus (b) such additional amounts as are
required to be paid by Buyer through the Escrow in accordance with the
provisions hereof less an amount equal to (i) the Deposit and (ii) any other
credits to which Buyer is entitled in accordance with the provisions hereof,
including proration credits.
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3.3 Investment of Escrowed Funds. Escrow Holder shall invest and reinvest
any funds deposited by Buyer in the Escrow only in bonds, notes, Treasury bills
or other securities constituting direct obligations of, or fully guaranteed by,
the United States of America (and provided, further, that such direct
obligations or guarantees, as the case may be, are entitled to the full faith
and credit of the United States of America) or such other investments as Buyer
may direct and Seller may approve, until Escrow Holder is required to deliver or
use such funds or any interest earned thereon in accordance with the provisions
of this Agreement.
3.4 Default by Buyer; Liquidated Damages.ed Damages
3.4.1 IF BUYER BREACHES AN OBLIGATION UNDER THIS AGREEMENT AND FAILS TO
CURE SUCH BREACH ON OR BEFORE THE EARLIER OF THE SCHEDULED CLOSING DATE OR THREE
(3) DAYS AFTER RECEIPT OF NOTICE FROM SELLER OR ESCROW HOLDER OF SUCH BREACH
(EXCEPT THAT (i) NO NOTICE SHALL BE NECESSARY OR CURE PERIOD AVAILABLE TO BUYER
FOR A FAILURE OF BUYER TO DEPOSIT THE PURCHASE PRICE WHEN REQUIRED UNDER SECTION
3.2 AND (ii) SUCH THREE (3) DAY PERIOD SHALL BE EXTENDED (BUT NOT BEYOND THE
SCHEDULED CLOSING DATE) IF BUYER IS DILIGENTLY ATTEMPTING TO CURE SUCH DEFAULT)
(A "BUYER DEFAULT"), THEN UPON UNILATERAL WRITTEN NOTICE OF TERMINATION (A
"TERMINATION NOTICE") FROM SELLER TO BUYER AND ESCROW HOLDER, AND
NOTWITHSTANDING ANY CONTRARY DEMAND OR INSTRUCTIONS OF BUYER OR ANY THIRD PARTY,
THE ESCROW AND THIS AGREEMENT SHALL TERMINATE, AND ESCROW HOLDER SHALL
IMMEDIATELY DISBURSE FROM THE ESCROW THE DEPOSIT TOGETHER WITH ALL INTEREST
ACCRUED THEREON TO SELLER AS LIQUIDATED DAMAGES, WHICH SHALL BE SELLER'S SOLE
REMEDY AT LAW OR IN EQUITY FOR THE BUYER DEFAULT.
3.4.2 THE PARTIES ACKNOWLEDGE AND AGREE BY INITIALING THIS SECTION
3.4.2 THAT IF A BUYER DEFAULT OCCURS AND IF, AS A RESULT OF SUCH BUYER DEFAULT,
CLOSE OF ESCROW FAILS TO OCCUR ON OR BEFORE THE SCHEDULED CLOSING DATE, SELLER
WILL INCUR CERTAIN COSTS AND OTHER DAMAGES IN AN AMOUNT THAT WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICAL TO ASCERTAIN; AND THE DEPOSIT BEARS A REASONABLE
RELATIONSHIP TO THE DAMAGES WHICH THE PARTIES ESTIMATE MAY BE SUFFERED BY SELLER
BY REASON OF SUCH FAILURE OF THE CLOSE OF ESCROW SO TO OCCUR AND THAT SELLER'S
RETENTION OF THE DEPOSIT (WITH ALL INTEREST THEREON) IS FAIR AND REASONABLE
COMPENSATION TO SELLER BY REASON OF SUCH FAILURE OF THE CLOSE OF ESCROW TO
OCCUR.
INITIALS: _________________________ _________________________
Seller Buyer
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SECTION 4.
ESCROW; CLOSING; COSTS
4.1 Escrow. The purchase and sale of the Properties shall be consummated
through the Escrow. Immediately upon the execution of this Agreement, the
parties shall deposit a copy of this Agreement with Escrow Holder. This
Agreement, together with any general provisions agreed to in writing by Buyer
and Seller for the benefit of Escrow Holder shall constitute the escrow
instructions for the transfer of the Properties (the "Escrow Instructions"). In
the event of any conflict between this Agreement and such general provisions,
this Agreement shall control unless otherwise expressly agreed in writing by
Buyer, Seller and Escrow Holder. If any requirements relating to the duties or
obligations of Escrow Holder are not acceptable to Escrow Holder, or if Escrow
Holder requires additional instructions, the parties shall make such deletions,
substitutions and additions to the Escrow Instructions as Buyer's Counsel and
Seller's Counsel shall mutually approve and which do not substantially alter
this Agreement or its intent. Written instructions from Seller's Counsel, in the
case of Seller, or from Buyer's Counsel, in the case of Buyer, shall be accepted
by Escrow Holder and shall be binding upon the party whose counsel gave such
instructions to Escrow Holder.
4.2 Seller's Deliveries to Escrow Holder.row Holder
4.2.1 Seller shall deliver to Escrow Holder prior to the Scheduled
Closing Date the following documents duly executed and, where applicable,
acknowledged by Seller, each of which shall be undated and the delivery of each
of which shall be a condition precedent to the Close of Escrow:
4.2.1.1 Grant Deeds. A special warranty deed or limited warranty
deed with respect to each portion of the Real Property in the form necessary to
conform with the laws and practice of the states in which the Real Property is
located (the "Grant Deeds").
4.2.1.2 Assignment and Assumption of Tenant Leases. An Assignment
and Assumption Agreement in the form of Exhibit D annexed hereto and made a part
thereof pursuant to which Seller shall assign the Tenant Leases to Buyer and
Buyer shall assume all of Seller's obligations thereunder modified to the extent
required to conform to the laws and practice of the states in which the Real
Property is located (the "Assignment and Assumption of Tenant Leases").
4.2.1.3 General Assignment. An Assignment and Assumption Agreement
in the form of Exhibit E annexed hereto and made a part thereof pursuant to
which Seller shall assign to
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Buyer all of Seller's right, title and interest in and to all of the Intangible
Property (excluding all Service Contracts other than the Approved Service
Contracts) relating to each of the Buildings and Seller shall assume all
obligations thereunder (the "General Assignment and Assumption Agreement").
4.2.1.4 Bill(s) of Sale. A Bill of Sale in the form of Exhibit F
annexed hereto and made a part hereof conveying to Buyer all of the Tangible
Personal Property located in each of the Buildings (the "Bill of Sale");
4.2.1.5 Non-Foreign Person Certificate. A Non-Foreign Person
Certificate in the form of Exhibit G annexed hereto and made a part hereof (the
"Non-Foreign Person Certificate");
4.2.1.6 Tenant Notification Letters. A letter from Seller to the
Tenants respecting the transfer of each Building to Buyer in the form of Exhibit
H annexed hereto and made a part hereof (the "Tenant Notification Letter"),
which shall be duplicated for purposes of delivery to each Tenant;
4.2.1.7 Transfer Tax Forms. Any statements, such as a transfer or
conveyance tax forms or returns required by applicable state or local law to be
executed by Seller in order to effect the Closing;
4.2.1.8 Certified Rent Roll. A copy of the rent roll for the
Properties certified by Seller and dated as of the Closing Date together with a
delinquency report as of a date no more than five (5) days prior to the Closing
Date;
4.2.1.9 Certified Operating Statement. The most recent operating
statement for the Properties certified by Seller;
4.2.1.10 Estoppel Certificates. Tenant Estoppel Certificates and
Seller Estoppel Certificates to the extent required to be delivered at the
Closing in accordance with Section 9.1.1;
4.2.1.11 Closing Certificate. A certification by Seller with
respect to the representations and warranties set forth in Section 6.2 as of the
Closing Date; and
4.2.1.12 Other. Any other incidental documents, not otherwise
expressly provided for herein, reasonably required by Buyer or the Escrow Holder
to consummate the purchase and sale of the Properties, provided that such
additional documents shall not give rise to any additional cost or liability to
Seller and Seller is given written notice by Buyer or Escrow Holder of the
requirement of such incidental documents within a reasonably sufficient time in
advance of the Scheduled Closing Date.
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4.3 Buyer's Deliveries to Escrow Holder.row Holder
4.3.1 Buyer shall deliver to Escrow Holder prior to the Scheduled
Closing Date the funds as provided below and the following documents duly
executed and where appropriate, acknowledged by Buyer or its designee, as
applicable, each of which shall be undated and the delivery of each of which
shall be a condition precedent to the Close of Escrow;
4.3.1.1 Funds. The funds required by Section 3.2.2 of this
Agreement to close hereunder;
4.3.1.2 The Assignment and Assumption of Tenant Leases.
4.3.1.3 The General Assignment and Assumption Agreement.
4.3.1.4 Transfer Tax Forms. Any statements, such as a transfer or
conveyance tax forms or returns required by applicable state or local law to be
executed by Buyer in order to effect the closing; and
4.3.1.5 Other. Any other incidental documents, not otherwise
expressly provided for herein, reasonably required by Seller or the Escrow
Holder to consummate the purchase and sale of the Properties, provided, that
such additional documents shall not give rise to any additional cost or
liability to Buyer and Buyer is given written notice by Seller or Escrow Holder
of the requirement of such incidental documents within a reasonably sufficient
time in advance of the Scheduled Closing Date.
4.4 Seller's Deliveries to Buyer. After the Close of Escrow, Seller shall
within two (2) business days deliver to Buyer the following documents, to the
extent the same have not already been delivered:
4.4.1 Tenant Leases/Tenant Deposits. The original Tenant Leases (or if
not available, the best available copies), and the originals of tenant deposits
which are evidenced by letters of credit or escrow agreements and if necessary
to enable Buyer to realize or draw upon same, consents of the applicable Tenants
and/or financial institutions or replacement letters of credit or escrow
agreements in favor of Buyer (Seller shall promptly following the Execution Date
provide Buyer written notice of any Tenant Leases with respect to which Seller
does not have an original in its possession);
4.4.2 Service Contracts. The originals, or, if not available, the best
available copies of the Service Contracts.
4.4.3 Licenses and Permits. The originals, or, if not available, the
best available copies of the Licenses and Permits; and
4.4.4 Records and Plans. The originals, or, if
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not available, the best available copies of the Records and Plans.
4.5 Possession. Seller shall deliver the keys and possession to the
Properties to Buyer at the Close of Escrow free and clear of all leases,
tenancies and occupancies, except for the Tenants under the Tenant Leases
(including their assignees, subtenants or licensees) and any rights of occupancy
granted in the Permitted Exceptions (defined in Section 7.1.3) and subject to
the Approved Service Contracts.
4.6 Evidence of Authorization. At the Close of Escrow, each party shall
deliver to the other party evidence in form and content reasonably satisfactory
to the other party and the Title Company that (a) the party is duly organized
and validly existing under the laws of the state of its organization and has the
power and authority to enter into this Agreement, (b) this Agreement and all
documents delivered pursuant hereto have been duly executed and delivered by the
party, and (c) the performance by the party of its obligations under this
Agreement have been duly authorized by all necessary corporate, partnership or
other action.
4.7 Close of Escrow. of Escrow
4.7.1 The Escrow shall close on or before the Scheduled Closing Date.
4.7.2 Provided that Escrow Holder has not received from either party
written notice of the failure of any condition precedent specified in Section 9
to the obligations of such party (or any previous such notice has been
withdrawn), then when the parties have each deposited into the Escrow the
documents and funds required by this Agreement and the Title Company can issue
the Title Policies at the Close of Escrow, Escrow Holder shall perform the
following actions (collectively, "Close of Escrow" or "Closing"):
4.7.2.1 Prepare an Escrow closing statement for the transaction
for approval by Seller and Buyer prior to the Close of Escrow;
4.7.2.2 Insert the Closing Date as the date of any undated
document to be delivered through Escrow;
4.7.2.3 Cause each of the Grant Deeds to be recorded in the
respective land records of the state and county in which the Property which it
is conveying is located;
4.7.2.4 Deliver to Buyer (a) the documents
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deposited into the Escrow for delivery to Buyer at the Close of Escrow, and (b)
any funds deposited by Buyer in excess of the amount required under this
Agreement to be paid by Buyer (including amounts payable by Buyer for Escrow
Holder's fees and expenses);
4.7.2.5 Deliver to Seller (a) all sums to be received by Seller
from Buyer through the Escrow at the Close of Escrow less (i) all amounts to be
paid by Seller for Escrow Holder's fees and expenses and (ii) all amounts paid
by Escrow Holder in satisfaction of liens and encumbrances on the Real Property
pursuant to the written instruction of Seller, and (b) the documents deposited
into the Escrow for delivery to Seller at the Close of Escrow;
4.7.2.6 Cause the Title Policies to be issued by the Title Company
and delivered to Buyer; and
4.7.2.7 Mail the Tenant Notification Letter to the Tenants by
certified mail, return receipt requested.
4.8 Costs of Escrow. Costs of the Escrow shall be allocated as follows:
4.8.1 Buyer and Seller shall each pay one-half (1/2) of the fees of
Escrow Holder.
4.8.2 Seller shall pay for the cost of providing the Surveys required
to be delivered in accordance with the provisions of Section 7.1.
4.8.3 Seller shall pay nineteen thousand dollars ($19,000) toward any
transfer taxes or recording fees payable in connection with the conveyance of
the Properties and/or the recording of the Grand Deeds and Buyer and Seller
shall each pay one-half (1/2) of any such transfer taxes and recording fees in
excess of nineteen thousand dollars ($19,000).
4.8.4 Buyer and Seller shall each pay one-half (1/2) of the cost of
obtaining the basic ALTA coverage under the Title Policies for the Properties
and the cost of any additional coverage and/or endorsements shall be paid by
Buyer.
4.8.5 If the Close of Escrow fails to occur on or before the Scheduled
Closing Date other than as a result of a default hereunder by either party,
including, without limitation, as a result of a failure of a condition precedent
set forth in Section 9, the Escrow fees (including, without limitation, Escrow
cancellation fees) shall be borne equally between Buyer and Seller.
4.8.6 If the Close of Escrow fails to occur as a result of a default
hereunder by either party, the costs incurred
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through Escrow (including, without limitation, Escrow cancellation fees) shall
be borne by the defaulting party.
4.8.7 Pursuant to '6045 of the Internal Revenue and Taxation Code,
Escrow Holder shall be designated the "Closing Agent" hereunder and shall be
solely responsible for complying with the Tax Reform Act of 1986 with regard to
the reporting of all settlement information to the Internal Revenue Service.
4.9 Other Costs. Each party shall pay all of its own legal, accounting and
consulting fees and other costs and expenses incurred in connection with this
Agreement.
4.10 Maintenance of Confidentiality by Escrow Holder. Except as may
otherwise be required by law or by this Agreement, Escrow Holder shall maintain
in strict confidence and not disclose to anyone the existence of the Escrow, the
identity of the parties thereto, the amount of the Purchase Price, the
provisions of this Agreement or any other information concerning the Escrow or
the transactions contemplated hereby, without the prior written consent of Buyer
and Seller.
SECTION 5.
PRORATIONS AND ASSUMPTION OF OBLIGATIONS
5.1 General. All income, receivables, expenses and payables of the Property
hereafter described in this Section 5 shall be apportioned equitably between the
parties as of the Proration Time in accordance with the provisions of this
Section 5 (based upon the number of days in a 365 day year).
5.2 General and Specific Prorations.Prorations
5.2.1 The following items shall be apportioned:
5.2.1.1 Rent, additional rent and other sums and charges payable
under the Tenant Leases, parking fees, parking validation coupons and any other
payments actually received from Tenants;
5.2.1.2 Transferable annual permits, licenses, and/or inspection
fees, if any;
5.2.1.3 Utility charges with respect to the Property (or any of
them) levied against Seller or the Properties (or any of them) and the value of
fuel stored on the Properties (or any of them) at Seller's cost therefor. Seller
shall use its best efforts to cause all utilities furnished to the Properties,
including, but not limited to, electricity, gas, water and sewer, along with any
fuel storage tanks to be read the day prior to the Proration Time.
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5.2.1.4 Payments made for the period in which the Close of Escrow
occurs under the Service Contracts;
5.2.1.5 Permitted administrative charges, if any, on Tenant
Security Deposits.
5.2.2 Real and personal property taxes, assessments and special
district levies shall be prorated for the tax fiscal year in which the Closing
Date occurs on the basis of the then most current available tax bills, Seller
being charged through the day prior to the Closing Date and Buyer with the
Closing Date and thereafter.
5.2.3 Except as hereinafter provided in this Section 5, if at Closing
there are any rents, additional rents, other sums or charges owed by Tenants
past due or other receivables with respect to the Properties or any of them
(collectively, the Past-Due Amounts"), Seller shall receive a credit to Seller's
account in the amount equal to ninety percent (90%) of all such amounts past
due; provided, that the maximum credit to Seller pursuant to this Section 5.2.3
shall not exceed an amount equal to $5000 for Past -Due Amounts with respect to
any one Property. On or before the Closing, Seller shall certify the amount of
the Past-Due Amounts to Buyer. If any rental payments or other Past-Due Amounts
are received by Seller after the Closing, Seller shall promptly remit such
rental or other payments directly to Buyer or its designee. Buyer shall retain
any Past-Due Amounts it collects after the Close of Escrow.
5.2.4 Buyer shall be credited and Seller shall be debited for the
economic value of any "free rent" with respect to any Tenant Leases for the
period following the Closing Date.
5.2.5 Subject to the provisions of Section 8.2.1, Seller shall be
credited and Buyer shall be debited for any amounts paid by or invoiced to
Seller for tenant improvement work, leasing commissions and legal fees, in each
case, with respect to any Tenant Lease entered into after the Execution Date in
accordance with the provisions of this Agreement.
5.2.6 Escalation charges, additional rents, reimbursements, percentage
rent payments or other revenues under the Tenant Leases shall be apportioned as
of the Closing Date between Buyer and Seller based upon the allocation thereof
equally over the period to which they are attributable.
5.2.7 Security Deposits, plus accrued interest, if any, payable thereon
to Tenants, and any other deposit less permitted administrative charges shall be
credited or assigned to Buyer.
5.2.8 There shall be no post-closing adjustments. Any dispute between
Buyer and Seller with respect to any
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prorations hereunder shall be resolved by KPMG/Peat Marwick on or prior to the
Closing Date and any such determination shall be binding upon the parties. The
fees and charges of KPMG/Peat Marwick in connection with resolving any such
dispute shall be paid one-half (2) by Buyer and one-half (2) by Seller.
5.3 Tenant Leases. At the Close of Escrow, pursuant to the Assignment and
Assumption of Tenant Leases, Buyer shall assume all of the obligations of Seller
under the Tenant Leases as of the Proration Time, including, without limitation,
tenant improvement obligations of landlord thereunder.
5.4 Service Contracts and Other Intangible Property. At the Close of
Escrow, Seller shall assign to Buyer, pursuant to the terms of the General
Assignment and Assumption Agreement, all right, title and interest of Seller in
and to the Approved Service Contracts and other Intangible Property, and Buyer
shall assume all of the obligations of Seller under the Approved Service
Contracts arising from and after the Close of Escrow. The term "Approved Service
Contracts" shall mean all Service Contracts that Buyer elects to assume by
written notice to Seller on or prior to the Scheduled Closing Date subject to
the provisions of Section 8.2.2 regarding Service Contracts that Buyer is
obligated to assume as provided therein. Seller shall cancel any Service
Contracts (other than the Approved Service Contracts) on or prior to the Closing
Date. Buyer shall protect, hold harmless, indemnify and defend Seller from any
and all claims, expenses (including, without limitation, reasonable attorneys
fees and costs), liabilities and obligations under the Service Contracts
attributable to the period from and after the Closing Date.
SECTION 6.
REPRESENTATIONS AND WARRANTIES; CONDITION OF PROPERTY
6.1 Of Buyer. As an inducement to Seller to enter into this Agreement,
Buyer hereby represents, warrants and covenants to Seller as follows:
6.1.1 Power and Authority. GRT is a corporation duly organized and
validly existing under the laws of the State of Maryland. GPLP is a limited
partnership duly organized and validly existing under the laws of the State of
California. Buyer has the power and authority to carry on its present business,
to enter into this Agreement and to consummate the transactions herein
contemplated; neither the execution and delivery hereof by Buyer nor the
performance by Buyer of Buyer's obligations hereunder will violate or constitute
an event of default under any material terms or material provisions of any
agreement, document, instrument, judgment, order or decree to which Buyer is a
party or by which Buyer is bound.
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6.1.2 Authorization; Valid Obligation. All proceedings required to be
taken by or on behalf of Buyer to authorize Buyer to make, deliver and carry out
the terms of this Agreement have been or will be duly taken prior to the
Scheduled Closing Date. No consent to the execution, delivery and performance of
this Agreement is required from any partner, board of directors, shareholder,
creditor, investor, judicial or administrative body, governmental authority or
other person, other than any such consent which already has been unconditionally
given. The individuals executing this Agreement and the documents referenced
herein on behalf of Buyer have the legal power, right and actual authority to
bind Buyer to the terms and conditions hereof. This Agreement is a valid and
binding obligation of Buyer enforceable in accordance with its terms, except as
the same may be affected by bankruptcy, insolvency, moratorium or similar laws,
or by legal or equitable principles relating to or limiting the rights of
contracting parties generally.
6.1.3 Confidentiality. Buyer shall hold as confidential all information
concerning Seller or the Properties disclosed in connection with this
transaction and Buyer shall not, prior to the Close of Escrow, release any such
information relating to Seller or the Properties to third parties without
Seller's prior written consent, except pursuant to a court order requiring such
release or as otherwise may be required by law. Buyer shall provide written
notice to Seller prior to the time it makes disclosure of any information with
respect to the transaction contemplated hereby pursuant to any obligation it has
under the law to disclose this Agreement, the transactions contemplated hereby
or otherwise in order to permit Seller to take appropriate legal action to
prohibit or limit such disclosure. Seller hereby gives its consent to Buyer's
disclosure of information relating to the Properties to its lenders and
financial partners to the extent reasonably necessary in order to obtain such
lenders' and/or partners' participation in the contemplated transaction and to
Buyer's disclosure of information relating to the Properties to Buyer's
consultants and contractors, in each instance to the extent reasonably necessary
to verify information given to Buyer by Seller or otherwise to carry out the
purposes of this Agreement, provided, however, that prior to disclosing any
information to such lenders, financial partners, consultants and contractors,
Buyer shall first obtain their written agreement for the benefit of Seller that
they shall hold as confidential all such information.
6.2 Of Seller. As an inducement to Buyer to enter into this Agreement,
Seller, represents, warrants and covenants to Buyer as follows:
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6.2.1 Regarding Seller's Authority.
6.2.1.1 Seller is a limited partnership duly organized and validly
existing under the laws of the State of Delaware. Seller has the power and
authority to enter into this Agreement and, subject to obtaining the Investor
Consent and to the extent deemed necessary or desirable by Seller, the Fairness
Opinion, to sell the Properties on the terms set forth in this Agreement. The
execution and delivery hereof and the performance by Seller of its obligations
hereunder, will not violate or constitute an event of default under any material
terms or material provisions of any agreement, document, instrument, judgment,
order or decree to which Seller is a party or by which Seller is bound.
6.2.1.2 The individuals executing this Agreement and the documents
referenced herein on behalf of Seller have the legal power, right and actual
authority to bind Seller to the terms and conditions hereof. This Agreement is a
valid and binding obligation of Seller, enforceable in accordance with its
terms, except as the same may be affected by bankruptcy, insolvency, moratorium
or similar laws, or by legal or equitable principles relating to or limiting the
rights of contracting parties generally.
6.2.2 Tenant Leases._) There are no leases which will affect any
Property or any portion thereof following the Close of Escrow, except the Tenant
Leases set forth on the Schedule of Leases. To Seller's knowledge, the rent roll
and delinquency report attached as Exhibit I annexed hereto and made a part
hereof is true and correct in all material respects as of the date thereof. To
Seller's knowledge, no outstanding notice of default has been delivered by
Seller or received by Seller with respect to any Tenant Lease except as set
forth in the Schedule of Leases. All of the Tenant Security Deposits are
described on Exhibit I.
6.2.3 Service Contracts. There are no service contracts which will
affect or be obligations of Buyer relating to the Properties or any of them
following the Close of Escrow, other than the Service Contracts.
6.2.4 Claims. To Seller's knowledge, there is no pending litigation,
condemnation or claims threatened in writing (whether or not asserted) with
respect to the Property other than as set forth in Exhibit J annexed hereto and
made a part hereof (the "Schedule of Claims").
6.2.5 Employees. Seller does not employ any persons at any of the
Buildings.
6.2.6 Compliance with Laws. To Seller's knowledge,
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Seller has not received written notice from any party, including, without
limitation, from any municipal, state, federal or other governmental authority,
of violation of any zoning, building, fire, water, use, health, environmental or
other statute, ordinance, code or regulation which has not been heretofore
corrected or disclosed in writing to Buyer.
6.2.7 Hazardous Materials. To Seller's knowledge, except as may be set
forth in the Environmental Reports, (a) the Properties are not being
investigated by any governmental authority and (b) Seller has received no
written notice, in each case, respecting the violation of any federal, state or
local law, ordinance or regulation relating to industrial hygiene or to the
environment.
6.2.8 Brokerage Agreements. To Seller's knowledge, except as expressly
permitted by this Agreement, there are no brokerage, commission or other
agreements related to the Tenant Leases which will be binding upon Buyer.
6.3 Purchase As Is
6.3.1 Prior to the Closing Date, Buyer will be afforded access to the
Records and Plans and to other information readily available to Seller with
respect to the Properties and will have an opportunity to review and analyze the
same. Seller has made no representations or warranties as to the accuracy or
completeness of such information except as expressly set forth herein.
6.3.2 THE PURCHASE PRICE REFLECTS THE FACT THAT THE PROPERTIES ARE
BEING PURCHASED BY BUYER ON AN "AS IS," "WHERE IS" AND "WITH ALL FAULTS" BASIS.
BUYER HEREBY WAIVES AND RELINQUISHES ALL RIGHTS AND PRIVILEGES ARISING OUT OF,
OR WITH RESPECT OR IN RELATION TO, ANY REPRESENTATIONS, WARRANTIES OR COVENANTS,
WHETHER EXPRESS OR IMPLIED, WHICH MAY HAVE BEEN MADE OR GIVEN, OR WHICH MAY BE
DEEMED TO HAVE BEEN MADE OR GIVEN, BY SELLER, EXCEPT FOR THOSE REPRESENTATIONS,
WARRANTIES AND COVENANTS SET FORTH EXPRESSLY IN THIS AGREEMENT. EXCEPT AS
EXPRESSLY PROVIDED IN THIS AGREEMENT, BUYER HEREBY FURTHER ACKNOWLEDGES AND
AGREES THAT WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
ARE EXCLUDED FROM THE TRANSACTION CONTEMPLATED HEREBY, AS ARE ANY WARRANTIES
ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE, AND THAT THE SELLER HAS NOT
WARRANTED, AND DOES NOT HEREBY WARRANT, THAT THE PROPERTIES NOW OR IN THE FUTURE
WILL MEET OR COMPLY WITH THE REQUIREMENTS OF ANY LAW, CODE OR REGULATION OF ANY
APPLICABLE GOVERNMENTAL AUTHORITY OR JURISDICTION. EXCEPT AS EXPRESSLY PROVIDED
IN THIS AGREEMENT, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER
HEREBY ASSUMES ALL RISK AND LIABILITY (AND AGREES THAT SELLER SHALL NOT BE
LIABLE FOR ANY SPECIAL, DIRECT, INDIRECT, CONSEQUENTIAL, OR OTHER DAMAGES)
RESULTING OR ARISING FROM OR RELATING TO THE OWNERSHIP, USE, CONDITION,
LOCATION, MAINTENANCE, REPAIR OR OPERATION OF THE
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PROPERTIES. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, BUYER ACKNOWLEDGES
AND AGREES THAT THE SALE PROVIDED FOR HEREIN IS MADE WITHOUT ANY WARRANTY BY
SELLER AS TO THE NATURE OR QUALITY OF THE PROPERTIES; THE DEVELOPMENT POTENTIAL
OF THE PROPERTIES; THE PRIOR HISTORY OF OR ACTIVITIES ON THE PROPERTIES; THE
QUALITY OF LABOR AND/OR MATERIALS INCLUDED IN ANY OF THE BUILDINGS; THE FITNESS
OF THE PROPERTIES FOR AND/OR THE SOIL CONDITIONS EXISTING AT THE PROPERTIES FOR
ANY PARTICULAR PURPOSE OR DEVELOPMENT POTENTIAL; THE PRESENCE OR SUSPECTED
PRESENCE OF HAZARDOUS WASTE OR SUBSTANCES ON, ABOUT, OR UNDER THE PROPERTIES OR
THE BUILDINGS; OR THE ZONING OR OTHER LEGAL STATUS OF THE PROPERTIES. EXCEPT AS
SPECIFICALLY SET FORTH IN THIS AGREEMENT, NO PERSON ACTING ON BEHALF OF SELLER
IS AUTHORIZED TO MAKE, AND BY THE EXECUTION HEREOF BUYER HEREBY ACKNOWLEDGES
THAT NO PERSON HAS MADE, ANY REPRESENTATION, AGREEMENT, STATEMENT, WARRANTY,
GUARANTY OR PROMISE REGARDING THE PROPERTIES, OR THE TRANSACTION CONTEMPLATED
HEREIN, OR REGARDING THE ZONING, CONSTRUCTION, PHYSICAL CONDITION OR OTHER
STATUS OF THE PROPERTIES, AND NO REPRESENTATION, WARRANTY, AGREEMENT, STATEMENT,
GUARANTY OR PROMISE, IF ANY, MADE BY ANY PERSON ACTING ON BEHALF OF SELLER WHICH
IS NOT CONTAINED HEREIN SHALL BE VALID OR BINDING UPON SELLER. SELLER HAS
OBTAINED THE ENVIRONMENTAL REPORTS FOR BUYER AS AN ACCOMMODATION AND MAKES NO
REPRESENTATION OR WARRANTY WITH RESPECT TO SUCH ENVIRONMENTAL REPORTS
WHATSOEVER, NOR SHALL SELLER HAVE ANY LIABILITY WHATSOEVER TO SELLER WITH
RESPECT TO SUCH ENVIRONMENTAL REPORTS OR THE ADEQUACY THEREOF.
6.3.3 Except for any breach of the representation and warranty set
forth in Section 6.2.7, Buyer waives its right to recover from Seller and its
affiliates, limited partners, general partners and officers, directors,
partners, shareholders, employees, agents, representatives and attorneys of any
of the foregoing (collectively, "Released Parties") any and all damages, losses,
liabilities, costs or expenses whatsoever (including attorneys' fees, court
costs and litigation expenses) and claims therefor, whether direct or indirect,
known or unknown, foreseen or unforeseen, which may arise on account of or in
any way growing out of or connected with the physical or environmental condition
of the Properties (including the improvements thereon) or any law or regulation
applicable thereto, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
including the Superfund Amendments and Reauthorization Act of 1986, (42 U.S.C.
Sections 9601 et seq.), the Resources Conservation and Recovery Act of 1976, (42
U.S.C. Sections 6901 et seq.), the Clean Water Act, (33 U.S.C. Sections 466 et
seq.), the Safe Drinking Water Act, (14 U.S.C. Sections 1401-1450), the
Hazardous Materials Transportation Act, (49 U.S.C. Sections 1801 et seq.), the
Toxic Substance Control Act, (15 U.S.C. Sections 2601-2629), the Georgia
Hazardous Site Response Act (Code 1981, Section 12-8-90 enacted by G.A.L. 1992,
p. 2234 ' 5) and the Florida Resource Recovery and Management Act, Section
403.701, et seq., and the Pollutant Spill Prevention and Control Act, Section
376.011-
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376.17 and 376.19-376.21 Florida Statutes.
6.4 Survival. Buyer and Seller each hereby covenants and agrees with the
other that the representations and warranties of Buyer and Seller (as the case
may be) set forth in Section 6.1.1, Section 6.1.2 and Section 6.2.1 shall
survive the Close of Escrow without limitation as to duration. Unless earlier
terminated as provided in the following sentence, the remaining warranties and
representations of Seller set forth in Section 6.2 shall survive the Close of
Escrow until the earlier of (a) the date which is ninety (90) days following the
Closing Date and (b) October 31, 1997. The representations and warranties of
Seller with respect to a Tenant Lease shall terminate upon receipt by Buyer of a
Tenant Estoppel Certificate in accordance with the provisions of Section 9.1.1
with respect to such Tenant Lease.
6.5 Public Filings. Buyer is deemed to be of notice with respect to any
matter set forth in Seller's public filings with the Securities and Exchange
Commission.
6.6 Radon RADON IS A NATURALLY OCCURRING RADIOACTIVE GAS, THAT, WHEN IT HAS
ACCUMULATED IN A BUILDING IN SUFFICIENT QUANTITIES, MAY PRESENT HEALTH RISKS TO
PERSONS WHO ARE EXPOSED TO IT OVER TIME. LEVELS OF RADON THAT EXCEED FEDERAL AND
STATE GUIDELINES HAVE BEEN FOUND IN BUILDINGS IN FLORIDA. ADDITIONAL INFORMATION
REGARDING RADON AND RADON TESTING MAY BE OBTAINED FROM YOUR COUNTY PUBLIC HEALTH
UNIT. [NOTE: THIS PARAGRAPH IS PROVIDED FOR INFORMATIONAL PURPOSES PURSUANT TO
SECTION 404.056(8), FLORIDA STATUES, (1988).]
SECTION 7.
DUE DILIGENCE; TITLE TO THE REAL PROPERTY: PERMITTED EXCEPTIONS
7.1 Buyer's Review of Title. As soon as reasonably possible after the
Execution Date, Seller shall cause to be delivered to Buyer (i) a current
preliminary title report or commitment for title insurance issued by the Title
Company showing the condition of title to each Property (each, a "Preliminary
Title Report") together with a copy of all documents evidencing or creating the
exceptions to title referenced therein and (ii) a current ALTA survey with
respect to each portion of the Real Property, certified to Buyer and the Title
Company, meeting all state land survey requirements (each a "Survey").
7.1.1 Buyer shall deliver to Seller written notice of Buyer's
disapproval of any of the matters shown on any Preliminary Title Report or
Buyer's disapproval of any of the matters shown on any Survey (those disapproved
title and survey matters as so identified by Buyer during the Title Review
Period are hereafter called the "Disapproved Exceptions"). Buyer's failure to
provide such notice on or before the expiration of the
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Title Review Period shall irrevocably constitute Buyer's approval of the title
matters reflected in the Preliminary Title Reports and the matters shown on the
Surveys.
7.1.2 If Buyer timely notifies Seller of any Disapproved Exceptions
before the expiration of the Title Review Period, Seller shall notify Buyer in
writing within ten (10) days of receipt of the notice of the Disapproved
Exceptions that: (a) Seller will remove such Disapproved Exceptions on or before
Closing; or (b) Seller will not remove any or certain specified Disapproved
Exceptions. Seller shall not be obligated to remove any Disapproved Exceptions
except to the extent provided in Section 7.3 with respect to monetary liens.
Seller's failure to give a notice as to any Disapproved Exceptions strictly in
accordance with the provisions of this Section 7.1.2, shall constitute Seller's
statement that it will not agree to remove such Disapproved Exceptions (other
than a monetary lien which shall be subject to the provisions of Section 7.3).
7.1.3 If Seller does not provide Buyer with written notice of its
agreement to remove any Disapproved Exceptions, Buyer shall have the right to
terminate this Agreement in accordance with the provisions of this Section 7.1.3
by delivery of written notice of termination on or before the date that is ten
(10) days after the receipt by Seller of Buyer's notice with respect to the
Disapproved Exceptions (the "Decision Date"), as Buyer's sole and exclusive
remedy. Buyer's failure to provide such notice of termination on or before the
Decision Date shall constitute Buyer's withdrawal of its disapproval and Buyer's
acceptance of the Disapproved Exceptions. In the case of Buyer's acceptance (or
deemed acceptance) of any Disapproved Exceptions, Seller shall have no
obligation to remove or otherwise address such Disapproved Exceptions. If Buyer
elects to terminate this Agreement pursuant to this Section 7.1.3, Escrow Holder
shall deliver the Deposit to Buyer together with all interest thereon and this
Agreement and the Escrow shall be deemed terminated; provided, however, if such
election by Buyer is made after the expiration of the Financial Due Diligence
Period and the Disapproved Exception with respect to which such termination is
based does not materially reduce the value of the applicable Property, Seller
shall be entitled to receive from Escrow Holder one-half of the Deposit,
together with all interest accrued thereon and one-half of the Deposit together
with interest thereon shall be delivered from Escrow Holder to Buyer. Except for
any (i) Disapproved Exceptions which Seller agrees to remove in accordance with
the preceding provisions of this Section 7.1.3 and (ii) monetary liens which
Seller is obligated to remove pursuant to Section 7.3, the standard pre-printed
exceptions together with the matters shown by the Preliminary Title Report and
Survey shall be deemed "Permitted Exceptions" for all purposes under this
Agreement.
7.2 Title Insurance Policy. Buyer's title to the Real
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Property shall be insured by one or more ALTA extended coverage owner's policies
of title insurance (10-17-70) (collectively, the "Title Policies") issued by the
Title Company, insuring fee title to the Real Property vested in Buyer, subject
only to the Permitted Exceptions together with such customary endorsements as
requested by Buyer (provided, that no such endorsements shall require Seller to
indemnify the Title Company or otherwise expose Seller to liability).
7.3 Monetary Liens. Seller shall be obligated subject to the provisions of
this Section 7.3 to remove any monetary liens upon the Real Property or any
portion thereof of an ascertainable amount identified by Buyer as a Disapproved
Exception in accordance with the foregoing provisions of this Article 7 in the
case of any lien recorded prior to the date of issuance of the applicable
Preliminary Title Report, or identified by Buyer promptly following discovery
thereof in the case of any lien recorded after such date, other than (a) any
lien for taxes or assessments which are not yet due and payable and (b)
mechanics liens with respect to work in progress. If Seller diligently commences
to cure a monetary lien upon notice thereof by Buyer and thereafter diligently
proceeds to perfect such cure, then this Agreement shall continue in full force
and effect and the Closing Date shall be adjusted accordingly until such
monetary lien is removed of record. If Seller is unable to cure such objections
using reasonable efforts, then this Agreement shall terminate upon ten (10) days
notice from Seller to Buyer and Escrow Holder (the "Notice Period"), and Escrow
Holder shall return the Deposit plus all interest earned thereon to Buyer, and
this Agreement and the Escrow will be deemed terminated. Notwithstanding the
foregoing, however, Purchaser may waive any title defect (including any monetary
lien) that Seller is unable or chooses not to cure at any time during the Notice
Period, and upon receipt by Seller of such waiver from Buyer, this Agreement
shall remain in full force and effect with no reduction in the Purchase Price.
7.4 Financial Due Diligence. On or prior to the date hereof, Seller has
made available to Buyer all of its Records and Plans with respect to the
Properties. Buyer shall have the right to terminate this Agreement upon notice
to Seller and Escrow Holder at any time during the Financial Due Diligence
Period. If Seller elects to terminate this Agreement during the Financial Due
Diligence Period by delivery of such notice during the Financial Due Diligence
Period, Escrow Holder shall promptly return the Deposit to Buyer together with
all interest accrued thereon.
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7.5 Environmental Due Diligence Investigation.estigation
7.5.1 Seller at Seller=s sole cost and expense shall provide Buyer with
an ASTM Phase One Environmental Report (collectively, the AEnvironmental
Reports@) with respect to each portion of the Real Property as soon as
practicable after the Execution Date. Buyer shall, during the Environmental Due
Diligence Period, review, analyze and evaluate the Environmental Reports and at
its sole option may upon notice to Seller and Escrow Holder during the
Environmental Due Diligence Period terminate this Agreement.
7.5.2 Subject to the provisions of Section 7.5.3, if Buyer elects to
terminate this Agreement during the Environmental Due Diligence Period by
delivery of such notice during the Environmental Due Diligence Period, Escrow
Holder shall promptly return one-half (1/2) of the Deposit to Buyer together
with all interest accrued thereon and shall disburse one-half (1/2) of the
Deposit to Seller together with all interest accrued thereon.
7.5.3 If Buyer elects to terminate this Agreement during the
Environmental Due Diligence Period on account of an environmental liability at a
Property, then, in such event, if Buyer and Seller agree to continue this
Agreement in full force and effect and to remove the applicable Property from
the Properties to be conveyed hereunder, then, in such event, notwithstanding
the provisions of Section 7.5.2, the entire Deposit shall continue to be held by
the Escrow Holder in accordance with the provisions of this Agreement.
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SECTION 8.
INTERIM ACTIVITIES
8.1 Entry on Properties to Inspect.to Inspect
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8.1.1 Buyer and its agents shall have the right to enter on and inspect
the Properties prior to the Close of Escrow, subject to the rights of tenants
under the Tenant Leases and others claiming through or under Tenants. Nothing
herein shall authorize any subsurface testing or drilling on the Properties by
Buyer or its agents unless specifically approved by Seller in accordance with
the provisions of this Article 8. All inspection fees, appraisal fees,
engineering fees and other expenses of any kind relating to the inspection of
the Properties by Buyer will be solely Buyer's expense except for the
Environmental Reports which shall be paid for by Seller. Any additional
investigation recommended by the Environmental Reports shall be conducted at
Buyer's sole cost and expense in accordance with the provision of this Article
8. Seller hereby reserves the right to have a representative present at the time
of making any such inspection or performing any test. At least two (2) days
prior to Seller's proposed entry on any Property, Buyer shall: (a) notify Seller
of intention to enter a Property to conduct an inspection thereof and the
proposed date and time of such entry (Buyer and its agents may enter only on the
dates and at the times contained in such notices, and Seller shall have the
right (i) to have one or more of its agents or representatives accompany Buyer
and its agents at all times while Buyer or its agents are on any Property and
(ii) to reasonably approve the date and time of entry); (b) provide Seller
copies of any work plans for any physical testing for Seller's prior written
approval, which work plan Seller may modify, limit or disapprove in its
reasonable discretion; and (c) provide Seller with a certificate of insurance
from Buyer's agents inspecting such Property (from an insurance carrier
reasonably acceptable to Seller) evidencing the existence of (i) commercial
general liability insurance, in an amount not less than $1,000,000 combined
limits for any injuries, deaths or property damage sustained as a result of any
one accident or occurrence, (ii) worker's compensation insurance at statutory
limits, and (iii) employer's liability insurance in an amount not less than
$1,000,000 for each accident, disease per employee and disease policy limit. The
commercial general liability insurance shall name Seller as an additional
insured. Any Buyer's agent which conducts environmental inspections of any
Property shall also provide evidence of environmental liability insurance of not
less than $1,000,000. In addition, Buyer and Buyer's agents waive any claims
against Seller (except to the extent caused by the gross negligence, intentional
misconduct or intentional material omission of Seller) for any injury to persons
or damage to property arising out of any inspection or physical testing,
including any damage to the tools and equipment of Buyer and Buyer's agents, all
of which shall be brought on the Properties at the sole risk and responsibility
of Buyer and Buyer's agents. Buyer shall not meet with or contact any Tenant
without Seller's consent and a representative of Seller shall have the right to
be present at any such meetings.
8.1.2 Buyer shall indemnify, protect and hold
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Seller, and its affiliates and limited partners, general partners and officers,
shareholders, partners, directors, employees, agents and contractors of any of
the foregoing harmless from any and all injuries, losses, liens, claims,
judgments, liabilities, costs, expenses or damages (including reasonable
attorneys' fees and court costs) which result from or arise out of any
activities or omissions of Buyer or its representatives in, on or about the
Property at any time prior to the Close of Escrow.
8.1.3 Buyer agrees to keep the Properties free from any liens arising
out of any work performed, materials furnished or obligations incurred by or on
behalf of Buyer or Buyer's Agents with respect to any inspection or physical
testing of the Properties. If any such lien shall at any time be filed, Buyer
shall cause the same to be discharged of record within twenty (20) days after
receiving notice thereof by satisfying the same or, if Buyer in its discretion
and in good faith determines that such lien should be contested, by recording a
bond or having such lien insured over.
8.1.4 Buyer shall, at its sole cost and expense, comply with all
applicable federal, state and local laws, statutes, rules, regulations,
ordinances, or policies in conducting any inspection and physical testing of the
Properties.
8.1.5 Buyer, shall, at its sole cost and expense, clean up and repair
the Properties, in whatever manner necessary, after Buyer's or Buyer's agents,
entry thereon so that the Properties shall be returned to the same condition
that existed prior to Buyer's or Buyer's agents, entry thereon.
8.1.6 Seller shall promptly be provided with a copy of any and all
information, materials and data that Buyer and/or Buyer's agents discover,
obtain or generate in connection with or resulting from its inspection and work
under this Section 8.1.
8.1.7 Buyer's obligations under this Section 8.1 shall survive the
close of Escrow and/or the termination of this Agreement.
8.2 Operation of Properties through the Close of Escrow. During the period
from the Execution Date through the earlier of (i) the Close of Escrow or (ii)
termination of this Agreement pursuant to any provision hereof, no material
obligations of the Tenants or conditions in favor of Seller shall be waived, no
rent (except for security deposits) shall be accepted more than 30 days in
advance, no approval of any assignment or subletting shall be given (except
where Seller's consent is not to be unreasonably withheld or similar criteria
for approval exists), and no other material agreements affecting the Properties
or any of them will be entered into by Seller, without the prior written consent
of Buyer, which consent shall not be unreasonably withheld or delayed.
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8.2.1 No Modifications of Service Contracts, Leases. The Tenant Leases
and the Approved Service Contracts will not be materially modified, terminated
or extended (e.g., a modification, termination or extension having an economic
effect upon the Properties and/or the owner thereof in excess of $50,000),
without the prior written consent of Buyer, which consent will not be
unreasonably withheld, delayed or conditioned. Prior to the expiration of the
Environmental Due Diligence Period and the Title Review Period, Seller may enter
into, renew, extend or modify a lease notwithstanding Buyer's failure to approve
such lease, renewal, extension or modification; provided, that, in the event
Seller elects to enter into any such lease, renewal, extension or modification,
Seller, shall, notwithstanding any provision to the contrary in Section 5, be
charged with all tenant improvement costs of landlord, leasing commissions and
legal costs with respect thereto unless Buyer approves such lease, renewal,
extension or modification. Seller shall provide Buyer with notice of any
proposed lease, renewal, extension or modification which notice shall set forth
all material terms thereof. If Buyer fails to respond to Seller's notice within
three (3) days of receipt thereof, the lease, renewal, extension or modification
described in Seller's notice shall be deemed approved by Buyer for all purposes
under this Agreement.
8.2.2 Work in Progress and Alterations. Exhibit K annexed hereto and
made a part hereof contains a description of the construction work by Seller
which is in progress on the Properties as of the date of this Agreement if any
(the "Work-in-Progress"). Upon the Close of Escrow, all assignable contracts for
the design and construction of the Work-in-Progress will be deemed to be
Approved Service Contracts, which will be assigned to and assumed by Buyer.
Except for the Work-in-Progress, no alterations to the physical condition of the
Land or costing in excess of an aggregate amount of $50,000 will be made without
the prior written consent of Buyer, which consent shall not be unreasonably
withheld or delayed. Seller shall obtain any necessary permits required for the
Work-in-Progress and shall comply with all applicable laws in carrying out the
Work-in-Progress;
8.2.3 Operations and Services. Unless interrupted by fire or other
casualty, or by another cause beyond the control of Seller, the Buildings will
be operated in substantially the manner in which they were operated on the
Execution Date and all services with respect to the Properties that are now
required to be provided will be provided, in order to operate the Buildings.
Seller shall perform all of its material obligations under the Tenant Leases and
the Service Contracts;
8.2.4 Maintenance. All services necessary to maintain and keep the Real
Property and Tangible Personal
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Property (including mechanical equipment of every kind used in the operation
thereof) in substantially the same condition as it is on the Execution Date,
except for reasonable wear and tear, casualty and condemnation, will be
provided;
8.2.5 Insurance Policies. All existing insurance policies (or
replacements thereof) affecting the Properties or any portion thereof will be
kept in full force and effect through the Close of Escrow;
8.2.6 Termination of Management Contract. Seller shall terminate all
property management agreements with respect to each Property effective as of the
Closing Date.
8.3 Investor Consent. Seller shall use all reasonable efforts to obtain the
Investor Consent promptly following the Execution Date.
8.4 Fairness Opinion. Seller shall use all reasonable efforts to obtain a
Fairness Opinion promptly following the Execution Date it if decides that such
opinion is necessary or advisable in connection with the transactions
contemplated hereby.
SECTION 9.
CONDITIONS PRECEDENT TO CLOSING
9.1 Conditions Precedent to Buyer's Obligations. The Close of Escrow and
the obligation of Buyer to purchase the Properties is subject to the
satisfaction, not later than the Scheduled Closing Date, of the following
conditions:
9.1.1 Estoppel Certificates. Buyer shall have received (a) from ninety
percent (90%) or more of the Major Tenants, an estoppel certificate materially
in the form attached as Exhibit L annexed hereto and made a part hereof (the
"Tenant Estoppel Certificate") or, if a form of estoppel is described in or
attached to a Tenant Lease, in such form and (b) from Seller, with respect to
any of the remaining Major Tenants, an estoppel certificate materially in the
form attached as Exhibit M annexed hereto and made a part hereof (the "Seller
Estoppel Certificate").
9.1.2 No Material Changes. There shall have been no casualty or
condemnation for which Buyer has elected to terminate this Agreement pursuant to
Section 12 or 13 of this Agreement;
9.1.3 Seller's Deliveries. Seller shall have delivered the items
described in Section 4.2 and shall be prepared to deliver the items described in
Section 4.4;
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9.1.4 Title Policies. The Title Company shall be unconditionally
prepared (subject only to payment of all necessary title insurance premiums and
other charges) to issue to Buyer the Title Policies;
9.1.5 Representations, Warranties and Covenants of Seller. There shall
not be any Material Inaccuracies in Seller's representations and warranties set
forth in Section 6.2 as of the Close of Escrow;
9.1.6 Seller Performance. Seller shall have performed in all material
respects all of the obligations of Seller under this Agreement, to the extent
required to be performed at or prior to the Close of Escrow;
The conditions set forth in this Section 9.1 are solely for the benefit of
Buyer and may be waived only by Buyer. Buyer shall at all times have the right
to waive any condition. Any such waiver or waivers shall be in writing and shall
be delivered to Seller and Escrow Holder. Neither Seller nor Buyer shall act or
fail to act for the purpose of permitting or causing any condition to fail.
Nothing contained in this Agreement shall require Seller to bring any suit or
other proceeding or, except as otherwise expressly required by this Agreement,
to pay any substantial sum, to satisfy any of said conditions.
9.2 Conditions Precedent to Seller's Obligations. The Close of Escrow and
Seller's obligation with respect to the transactions contemplated by this
Agreement are subject to the satisfaction, not later than the Scheduled Closing
Date, of the following conditions:
9.2.1 Funds and Documents. Buyer shall have delivered to Escrow Holder,
prior to the Scheduled Closing Date, for disbursement as directed by Seller, all
cash or other immediately available funds due from Buyer in accordance with
Section 4 of this Agreement and the documents described in Section 4.3;
9.2.2 Representations, Warranties and Covenants of Buyer. Buyer's
representations and warranties set forth in Section 6.1 of this Agreement shall
be true and correct as of the Close of Escrow;
9.2.3 No Material Changes. There shall have been no casualty for which
Seller has elected to terminate this Agreement pursuant to Section 12.2;
9.2.4 Consent of Investors. Seller shall have received the Investor
Consent;
9.2.5 Fairness Opinion. Seller shall have received the Fairness Opinion
if Seller has proceeded to obtain such
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Fairness Opinion in accordance with the provisions of Section 8.4.
9.3 Failure of Condition. Except as otherwise provided in this Agreement,
if the Escrow fails to close on the Scheduled Closing Date for any reason
whatsoever, including, without limitation, a failure of a condition precedent
set forth in this Section 9, either Buyer or Seller, if not then in default
under this Agreement, may terminate the Escrow and this Agreement upon notice to
the other; and, thereupon:
9.3.1 This Agreement and the Escrow shall terminate.
9.3.2 The costs of the Escrow through the Scheduled Closing Date shall
be governed by Section 4.8.3;
9.3.3 All monies paid into the Escrow and all documents deposited in
the Escrow shall be returned to the party paying or depositing the same together
with interest earned thereon; and
9.3.4 Each party shall be released from all obligations under this
Agreement except for the obligations that are expressly stated to survive the
termination of this Agreement.
9.4 Additional Offers. In the event that, prior to the Scheduled Closing
Date, Seller shall receive from an unaffiliated third party (a "Replacement
Buyer") a bona fide offer (any such offer, a "Purchase Offer") for the purchase
of the Properties, Seller shall have the option (the "Termination Option") to
terminate this Agreement in accordance with the provisions of this Section 9.4.
9.4.1 In the event that Seller has received a Purchase Offer which
Seller desires to accept, Seller shall send Buyer a notice (the "Purchase Offer
Notice") informing Buyer that it has received a Purchase Offer and that it is in
good faith negotiating a definitive agreement with the Replacement Buyer (the
"Replacement Contract") regarding the purchase and sale of the Properties. If
Seller and Replacement Buyer shall enter into the Replacement Contract prior to
the Determination Date, this Agreement shall automatically terminate and Escrow
Agent shall promptly deliver to Buyer the Deposit together with all interest
earned thereon. If no Replacement Contract has been entered into prior to the
Determination Date, this Agreement shall continue in full force and effect
without any modification under or pursuant to this Section 9.4. When and if a
closing occurs under a Replacement Contract, Seller shall promptly pay to Buyer
a sum (the "Topping Fee") equal to Six Hundred Thousand Dollars ($600,000.00).
9.4.2 Notwithstanding anything to the contrary
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contained herein, Seller covenants and agrees that it shall not actively seek
out or solicit any Purchase Offer without Buyer's prior written consent,
provided, however, Seller may negotiate in good faith with any Person who
submits an unsolicited Purchase Offer.
9.4.3 The provisions of Section 9.4 shall survive the termination of
the Agreement.
SECTION 10.
BROKER
Buyer and Seller each represent and warrant to the other that it has
not dealt with any broker, finder or other middleman in connection with this
Agreement or the transactions contemplated hereby, except for ROBERT A. STANGER
& CO., INC. ("Broker"), and that no other broker, finder, middleman or other
person has claimed or has the right to claim a commission, finder's fee or other
brokerage fee in connection with this Agreement or the transactions contemplated
hereby. Buyer shall pay any commission due to Broker pursuant to a separate
agreement between Buyer and Broker and shall indemnify, protect, defend and hold
harmless Seller from any claims made by Broker. Each party shall indemnify,
protect, defend and hold the other party harmless from and against any costs,
claims or expenses (including actual attorneys' fees and expenses), arising out
of the breach by the indemnifying party of any of its representations,
warranties or agreements contained in this Section 10. The representations and
obligations under this Section 10 shall survive the Close of Escrow, or, if the
Close of Escrow does not occur, the termination of this Agreement.
SECTION 11.
REMEDIES FOR SELLER'S DEFAULT
11.1 Buyer's Remedies in General.in General
11.1.1 A default by Seller in the performance of its obligations under
this Agreement discovered by Buyer on or before the Close of Escrow shall not
entitle Buyer to terminate this Agreement or refuse to close Escrow, unless (a)
Buyer notified Seller of such default immediately upon its discovery by Buyer,
(b) such default is not cured by Seller on or before the Scheduled Closing Date,
and (c) such uncured default when considered together with any other such
uncured defaults materially and adversely affects the (i) value of any one
Building by an amount equal to or in excess of One Hundred Thousand and xx/100
Dollars ($100,000.00) and/or (ii) value of all of the Buildings by an amount
equal to or in excess of Seven Hundred
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Thousand and xx/100 Dollars ($700,000.00) (a "Seller Default"). If Buyer shall
discover prior to the Close of Escrow any default in any of Seller's obligations
under this Agreement, Buyer shall promptly notify Seller thereof, and Seller
shall have until the Scheduled Closing Date to cure the default. If there shall
be any default by Seller discovered by Buyer prior to the Close of Escrow and
not cured by the Scheduled Closing Date and such default (when combined with any
other such uncured defaults) constitutes a Seller Default, then Buyer may elect
not to close Escrow, in which case Buyer's sole right and remedy shall be (i) to
terminate this Agreement and receive back the Deposit, together with all
interest earned thereon and (ii) a reimbursement from Seller of its reasonable
out of pocket expenses in connection with this Agreement up to One Hundred Five
Thousand and xx/100 Dollars ($105,000.00). If Buyer elects to close Escrow
notwithstanding the existence of any default by Seller, Buyer shall have the
right to specific performance of this Agreement and to an adjustment of the
Purchase Price if such default constitutes a Seller Default. Buyer shall have no
right to any action at law or equity with respect to a Seller default hereunder
(including a Seller Default) except as expressly provided in this Section
11.1.1.
11.1.2 If the Close of Escrow occurs, Buyer shall not have the right to
commence any action in law or in equity for damages or otherwise against Seller
for any default or alleged default of Seller's under this Agreement first
discovered by Buyer after the Close of Escrow, or otherwise recover against
Seller, whether by cross-complaint, counterclaim, offset or otherwise, for such
default or alleged default, unless such default relates to a matter expressly
surviving the Close of Escrow and, in such event such claim must be made prior
to the earlier of (a) October 31, 1997 and (b) ninety (90) days following the
Closing Date.
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SECTION 12.
DAMAGE TO OR DESTRUCTION OF THE PROPERTY
12.1 Insured Casualty.d Casualty
12.1.1 If, prior to the Close of Escrow, all or any portion of the
Buildings or any one of them, is damaged or destroyed, whether by fire or other
insured casualty, Seller shall promptly notify Buyer of such damage or
destruction and of the good-faith estimate of a reputable licensed contractor
selected by Seller and reasonably approved by Buyer of the cost to repair the
damage and Seller's good-faith belief that such casualty is insured (the
"Insured Casualty Notice"). If such estimated cost to repair to Seller for any
Building or Buildings constituting a single Property is in excess of One Hundred
Thousand and xx/100 Dollars ($100,000.00), Buyer may be released from its
obligation to purchase such Property by delivering to Seller written notice of
Buyer's intent to do so within ten (10) days after the date Buyer receives the
Insured Casualty Notice. In such event, (a) this Agreement shall continue in
full force and effect with respect to each other Property and (b) the Purchase
Price shall be reduced by an amount equal to the market value of the damaged
Property one day prior to the date of the casualty under Seller's casualty
insurance policy then in effect.
12.1.2 If the casualty is insured, and (i) the estimated cost of repair
to Seller for any Building or Buildings constituting a single Property is One
Hundred Thousand and xx/100 Dollars ($100,000.00) or less, or (ii) the estimated
cost of repair to Seller exceeds One Hundred Thousand and xx/100 Dollars
($100,000.00) but Buyer elects not to terminate this Agreement in accordance
with this Section 12.1, then the Escrow and this Agreement shall remain in full
force and effect, the Closing shall occur on or before the Scheduled Closing
Date, and Seller shall assign to Buyer, as a condition precedent to the Close of
Escrow, all of Seller's right, title and interest in and to any of the casualty
insurance proceeds or claims therefor with respect to such damage or destruction
(which shall thereafter be repaired or not, at Buyer's option), together with
any and all rental loss insurance of Seller, if any, payable with respect to the
Property for any period after the Proration Time and any and all claims against
other persons for such damage or destruction. Additionally, if the Escrow and
this Agreement remain in full force and effect, Seller shall pay to Buyer, by
way of a reduction in the Purchase Price at Closing, an amount equal to the
deductible under the casualty insurance policy (such deductible amount to be
that determined, prior to Closing, by Seller's estimate).
12.2 Uninsured Casualty.
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12.2.1 If, prior to the Close of Escrow, all or any portion of the
Buildings, or any one of them, are damaged or destroyed by an uninsured casualty
(including, without limitation, a casualty as to which coverage has been
disclaimed by Seller's insurers), Seller shall promptly notify Buyer of such
damage or destruction and of the Seller's reasonable estimate of the cost to
Seller to repair the same of a reputable licensed contractor selected by Seller
and reasonably approved by Buyer (the "Uninsured Estimate to Repair") and
Seller's reasonable belief that such casualty is uninsured (the "Uninsured
Casualty Notice").
12.2.2 If such Uninsured Estimate to Repair is in excess of One Hundred
Thousand and xx/100 Dollars ($100,000.00), either party may elect to remove the
damaged Property from the Properties to be sold hereunder by giving the other
party written notice of its intent to do so within ten (10) days after the date
Buyer receives the Uninsured Casualty Notice, except that Seller shall not have
the right to remove such damaged Property if within such ten (10) day period,
Buyer elects to bear the loss in excess of One Hundred Thousand and xx/100
Dollars ($100,000.00) upon the Close of Escrow and notifies Seller of such
election in writing within such ten (10) day period. If Buyer is released from
its obligations to purchase such damaged Property as provided in this Section
12.2.2, then, in such event, (a) this Agreement shall continue in full force and
effect with respect to each other Property and (b) the Purchase Price shall be
reduced by an amount equal to the market value allocated to the damaged Property
one day prior to the date of the casualty under Seller's casualty insurance
policy then in effect.
12.2.3 If the casualty is uninsured, and (i) the Uninsured Estimate to
Repair is One Hundred Thousand and xx/100 Dollars ($100,000.00) or less, or (ii)
the Uninsured Estimate to Repair is more than One Hundred Thousand and xx/100
Dollars ($100,000.00) and neither party has elected to remove such damaged
Property in accordance with Section 12.2.2, then the Escrow and this Agreement
shall remain in full force and effect, the Closing shall occur on or before the
Scheduled Closing Date, and Buyer shall be entitled to a reduction in the
Purchase Price in an amount equal to the Uninsured Estimate to Repair, less any
amount thereof which Buyer has elected under Section 12.2.2 to bear.
12.2.4 If and to the extent that the Purchase Price is adjusted
pursuant to this Section 12.2 as a result of a disclaimer of coverage by
Seller's insurers, Buyer shall not be entitled to insurance proceeds due under
Seller's policies or to be assigned any claim under or with respect to Seller's
policies, and Seller shall retain all rights thereunder or with respect thereto
and to proceeds therefrom, it being the intent of this Section 12 that there be
no double recovery by or double compensation of Buyer for the casualty.
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SECTION 13.
CONDEMNATION
If, prior to the Close of Escrow, more than ten percent (10%) of any
Building is taken by power of eminent domain and, as a result, the Building can
no longer be operated in substantially the same manner as it was prior to the
taking, or if access to the Building is materially reduced or restricted by
eminent domain (or is the subject of such a pending taking which has not been
consummated), Seller shall immediately notify Buyer of such fact. In such event,
Buyer shall be released from its obligation to purchase the Property where such
Building is located upon written notice to Seller given not later than five (5)
days after receipt of Seller's notice and in such event, (a) this Agreement
shall continue in full force and effect with respect to each other Property and
(b) the Purchase Price shall be reduced by the amount of the Purchase Price
allocated to the Property which is the subject of such condemnation in
accordance with the provisions of Section 3. If Buyer does not so exercise any
option which Buyer may have pursuant to this Section 13 to remove such Property
from the Properties to be sold under this Agreement, or if less than ten percent
(10%) of a Building is taken by or is the subject to eminent domain Proceedings,
and access to the Building is not materially reduced or restricted, then neither
party shall have the right to remove such Property from the Properties to be
sold in accordance with the provisions hereof, but Seller shall assign and turn
over, and Buyer shall be entitled to receive and keep, all awards for the taking
of any of the Real Property by eminent domain which accrue to Seller, and the
parties shall proceed to the Close of Escrow pursuant to the terms hereof,
without modification of the terms of this Agreement and without any reduction in
the Purchase Price.
SECTION 14.
NOTICES
14.1 Addresses. Whenever any notice, demand or request is required or
permitted hereunder, such notice, demand or request shall be made in writing and
shall be sent via facsimile, a nationally recognized overnight courier service
fully prepaid, or deposited in the United States by mail, registered or
certified, return receipt requested, postage prepaid, addressed to the
addressees (and individuals) set forth below:
As to Seller:
T. Rowe Price Realty Income Fund II
c/o T. Rowe Price Real Estate Group
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100 East Pratt Street
Baltimore, Maryland 21202
Facsimile: (410)547-6824
and (410)547-0852
Attn: Mr. Joseph P. Croteau
and Mr. Mark Ruhe
and
Lucy B. Robins, Esq.
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
Facsimile: (410)345-6575
With a copy to Seller's Alternate Addressee:
Greenberg Traurig, Hoffman, Rosen
& Quentel
153 East 53rd Street
New York, NY 10022
Attn: Judith D. Fryer, Esq.
As to Buyer:
Glenborough Realty Trust Incorporated
400 South El Camino Real
San Mateo, CA 94402
Attn: Mr. Stephen Saul
Facsimile: (415)343-7438
With a copy to Buyer's Alternate Addressee:
G. Lee Burns, Jr., Esq.
Glenborough Realty Trust Incorporated
400 South El Camino Real
San Mateo, CA 94402
Facsimile: (415)343-7438
As to Escrow Holder:
First American Title Insurance Company
173 N. First Street
Suite 100
San Jose, CA 95112
Attn: Susan Melton
Facsimile: (408) 451-7836
14.2 Receipt of Notices. Any notice, demand or request that shall be
delivered to Buyer and its Alternate Addressee in the manner aforesaid shall be
deemed sufficiently given to and received by Buyer for all purposes hereunder,
and any notice, demand or request that shall be delivered to Seller and its
Alternate Addresses in the manner aforesaid shall be deemed
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sufficiently given to and received by Seller for all purposes hereunder, (i)
upon receipt of a legible facsimile transmission, (ii) the next business day
following the day such notice, demand or request is delivered by a nationally
recognized overnight courier service fully prepaid, to such party and its
Alternate Addressee, or (iii) if sent via registered or certified mail, at the
time of receipt by such party and its Alternate Addressee.
14.3 Refusal of Delivery. The inability to deliver any notice, demand or
request because the individual to whom it is properly addressed in accordance
with this Section 14 refused delivery thereof or no longer can be located at
that address shall constitute delivery thereof to such individual.
14.4 Change of Address. Each party shall have the right from time to time
to designate by written notice to the other parties hereto such other person or
persons and such other place or places as said party may desire written notices
to be delivered or sent in accordance herewith.
SECTION 15.
GENERAL PROVISIONS
15.1 Amendment. Except as provided in Section 4.1, no provision of this
Agreement or of any documents or instrument entered into, given or made pursuant
to this Agreement may be amended, changed, waived, discharged or terminated
except by an instrument in writing, signed by the party against whom enforcement
of the amendment, change, waiver, discharge or termination is sought.
15.2 Time of Essence. All times provided for in this Agreement for the
performance of any act will be strictly construed, time being of the essence.
15.3 Entire Agreement. This Agreement and other documents delivered at
Closing, set forth the entire agreement and understanding of the parties in
respect of the transactions contemplated by this Agreement, and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof and thereof. No representation, promise, inducement or statement of
intention has been made by Seller or Buyer which is not embodied in this
Agreement, or in the attached Exhibits or the written certificates, schedules or
instruments of assignment or conveyance delivered pursuant to this Agreement,
and neither Buyer nor Seller shall be bound by or liable for any alleged
representations, promise, inducement or statement of intention not therein so
set forth.
15.4 No Waiver. No failure of any party to exercise any power given such
party hereunder or to insist upon strict
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compliance by the other party with its obligations hereunder shall constitute a
waiver of any party's right to demand strict compliance with the terms of this
Agreement.
15.5 Counterparts. This Agreement, any document or instrument entered into,
given or made pursuant to this Agreement or authorized hereby, and any amendment
or supplement thereto may be executed in two or more counterparts, and, when so
executed, will have the same force and effect as though all signatures appeared
on a single document. Any signature page of this Agreement or of such an
amendment, supplement, document or instrument may be detached from any
counterpart without impairing the legal effect of any signatures thereon, and
may be attached to another counterpart identical in form thereto but having
attached to it one or more additional signature pages.
15.6 Costs and Attorneys' Fees. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement or any
document or instrument entered into, given or made pursuant to this Agreement or
authorized hereby or thereby (including, without limitation, the enforcement of
any obligation to indemnify, defend or hold harmless provided for herein or
therein), or because of an alleged dispute, default, or misrepresentation in
connection with any of the provisions of this Agreement or of such document or
instrument, or if Escrow Holder commences any action with respect to the
Escrow(s), the successful or prevailing party shall be entitled to recover
actual attorneys' fees, charges and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
15.7 Payments; Interests. Payment of all amounts required by the terms of
this Agreement shall be made in the United States and in immediately available
funds of the United States of America which, at the time of payment, is accepted
for the payment of all public and private obligations and debts. Unless the
parties otherwise agree, payments shall be made through the Escrow Holder. If
any payment due under this Agreement is not paid when due, it shall thereafter
bear interest at a variable rate equal to the rate announced from time to time
by Citibank, N.A. as its prime or reference rate, plus five percent (5%) per
annum, but in no event more than the maximum rate, if any, allowed by law to be
charged by the party receiving the interest on such type of indebtedness.
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15.8 No Transfers by Buyer; Seller's Right to Transfer. Buyer shall not
have the right to assign any of its rights or obligations under this Agreement.
Buyer may designate another entity or entities to take title separately to each
or any combination of Properties. If Buyer designates another entity or entities
to take title to the Properties (or any Property), it shall not relieve Buyer of
any of its obligations under this Agreement. Any assignment made in violation
hereof shall be null and void.
15.9 Parties in Interest. Subject to Section 15.8, the rights and
obligations of the parties hereto shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, assigns, heirs
and the legal representatives of their respective estates. Nothing in this
Agreement is intended to confer any right or remedy under this Agreement on any
person other than the parties to this Agreement and their respective successors
and permitted assigns, or to relieve or discharge the obligation or liability of
any person to any party to this Agreement or to give any person any right of
subrogation or action over or against any party to this Agreement.
15.10 Applicable Law/Submission to Jurisdiction. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Maryland without giving effect to the conflict-of-law rules and principles of
that state. The Circuit Court of Maryland shall have exclusive jurisdiction with
respect to any dispute hereunder.
15.11 Recording. Each of Seller and Buyer represents, warrants and
covenants that it will not record or cause to be recorded this Agreement or a
memorandum hereof or a lis pendens with respect to the Properties or any
Property in the public records for the States and counties in which any of the
Property is located or in any other jurisdiction. The violation of this Section
15.11 by Buyer shall (a) result in the immediate forfeiture of the Deposit
together with all interest accrued thereon which Escrow Holder shall promptly
disburse to Seller and (b) relieve Seller from any obligations hereunder.
15.12 Incorporation of Recitals and Exhibits. The Recitals and Exhibits
attached to this Agreement are incorporated into and made a part of this
Agreement.
15.13 Construction of Agreement. The language in all parts of this
Agreement shall be in all cases construed simply according to its fair meaning
and not strictly for or against any of the parties hereto. Headings at the
beginning of sections of this Agreement are solely for the convenience of the
parties and are not a part of this Agreement. When required by the context,
whenever the singular number is used in this Agreement, the same shall include
the plural, and the plural shall include
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the singular, the masculine gender shall include the feminine and neuter
genders, and vice versa. As used in this Agreement, the term "Seller" shall
include the respective permitted successors and assigns of Seller, and the term
"Buyer" shall include the permitted successors and assigns of Buyer, if any. All
times, even if designated as Eastern Standard Time refer to the time in New
York, New York.
15.14 Severability. If any term or provision of this Agreement is
determined to be illegal, unconscionable or unenforceable, all of the other
terms, provisions and sections hereof will nevertheless remain effective and be
in force to the fullest extent permitted by law.
15.15 Announcements. Seller and Buyer shall consult with each other with
regard to all press releases and other announcements issued at or prior to the
Close of Escrow concerning the existence of this Agreement or the sale of the
Properties and, except as permitted under Section 6.1.3, neither Seller nor
Buyer shall issue any such press release or other such publicity prior to the
Close of Escrow without the prior consent of the other party. Buyer agrees not
to refer to "T. Rowe Price" or "T. Rowe" in any description of the Properties
acquired pursuant to this Agreement in any future announcements and/or filings
with the Securities and Exchange Commission and/or other sales, investor and/or
offering materials. Buyer may make a one time announcement and a corresponding
disclosure in its required public filings subject to the applicable provisions
of this Agreement that it acquired the Properties from real estate funds
sponsored by T. Rowe Price. The provisions of this Section 15.15 shall survive
the termination of this Agreement.
15.16 Submission of Agreement. The submission of this Agreement to Buyer or
its broker, agent or attorney for review or signature does not constitute an
offer to sell the Properties to Buyer or the granting of an option or other
rights with respect to the Properties to Buyer. No agreement with respect to the
purchase and sale of the Properties shall exist, and this writing shall have no
binding force or effect, until this Agreement shall have been executed and
delivered by Buyer and by Seller and Buyer shall have deposited the Deposit with
Escrow Holder.
15.17 Further Assurances. Buyer and Seller agree to execute such
instructions to the Escrow Holder and such other instruments and take such
further actions either before or after the Close of Escrow as may be reasonably
necessary to carry out the provisions of this Agreement provided that no
material additional cost or liability shall be created thereby.
15.18 Limitations on Liability. In addition to any other limitations on
Seller's obligations to Buyer and Buyer's rights and remedies contained in
Section 11.1 or elsewhere in this Agreement, if the Closing occurs, Seller's
liability to Buyer for
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any inaccuracies in Seller's warranties and representations contained in this
Agreement and breaches of Seller's obligations under Section 8 of this Agreement
or any other agreements of Seller respecting the condition, operation or leasing
of the Properties contained in this Agreement shall be limited as follows:
15.18.1 Seller shall not have any liability to Buyer based upon any
inaccuracy in Seller's warranties and representations or breach of Seller's
obligations resulting in damage to Buyer of less than Two Hundred Eight-Four
Thousand Nine Hundred Eight and 20/100 Dollars ($284,908.20); and
15.18.2 Seller's aggregate liability to Buyer for damages based upon,
arising out of or proximately caused by any inaccuracy in Seller's warranties
and representations or breach of Seller's obligations shall in no event exceed
Two Million Two Hundred Thousand and xx/100 Dollars ($2,200,000.00); provided,
however, that the foregoing limitations shall not apply to any liability of
Seller to Buyer based upon fraud or intentional misrepresentation.
15.19 Access to Records and Plans. Buyer shall allow Seller and its agents
access to the Records and Plans following the Close of Escrow during normal
business hours and upon reasonable prior written notice. Buyer shall permit
Seller and its agents to make duplicate copies of any of the Records and Plans
at Seller's cost.
15.20 Cooperation.ooBuyer and Seller shall cooperate with the other to
carry out the purpose of this Agreement (provided, such cooperation shall not
require either party to expend any sum not otherwise required pursuant to the
other provisions of this Agreement). This Section 15.20 shall survive the Close
of Escrow.
[Balance of Page Intentionally Blank]
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IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
executed as of the day and year first above written.
"Seller"
T. ROWE PRICE REALTY INCOME FUND II,
America's Sales-Commission-Free
Real Estate Limited Partnership, a Delaware
limited partnership
By: T. Rowe Price Realty
Income Fund II Management, Inc.,
a Maryland corporation
its General Partner
By:________________________________
"Buyer"
GLENBOROUGH REALTY TRUST INCORPORATED,
a Maryland corporation
By:________________________________
GLENBOROUGH PROPERTIES, L.P.,
a California limited partnership
By: Glenborough Realty Trust
Incorporated, a Maryland
Corporation, Its General Partner
By:________________________________
ACCEPTED:
"Escrow Holder"
FIRST AMERICAN TITLE INSURANCE COMPANY
By:_______________________________
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PURCHASE AGREEMENT
Centerstone Plaza
THIS PURCHASE AGREEMENT ("Agreement") is dated as of the Effective Date (as
defined in Addendum I hereto) by and among CT Realty Corporation, a California
corporation ("Transferor") and Glenborough Properties, L.P., a California
limited partnership ("GPLP") ("Transferee").
Recitals
A. In June 1995, Transferor and Yale Loop Partners, a limited partnership
("YLP") formed Culver Center Associates II, a joint venture ("CCA II") which
became the owner of the Property (as defined below). Under the CCA II joint
venture agreement ("JV Agreement") Transferor and Yale Loop Partners each owned
a 50% interest in CCA II.
B. As part of the June 1995 transaction Transferor and YLP obtained (i) a
loan from NationsCredit in the face amount of $18,800,000.00 (the "NationsCredit
Loan") and (ii) a loan from Heller Financial in the face amount of $2,900,000.00
(the "Heller Loan"). The NationsCredit Loan and the Heller Loan shall sometimes
hereinafter be collectively referred to as the "Loans".
C. Through a series of distributions in kind of the Property from CCA II,
Transferor and Ronald E. Soderling, Trustee, or his successor in trust U/D/T
dated February 20, 1996, and any amendments thereto (the "Soderling Trust"), now
each own an undivided 50% interest in the Property.
D. Transferee desires to acquire the Property and Transferor desires to
sell its undivided 50% interest in the Property to Transferee, upon the terms
and subject to the conditions set forth in this Agreement. Pursuant to a certain
Contribution Agreement being executed concurrently herewith by Transferee and
the Soderling Trust, the Soderling Trust intends to contribute its undivided 50%
interest in the Property to Transferee in exchange for operating units in
Transferee.
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties, covenants and agreements hereinafter contained, and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged and intending to be legally bound, the parties hereby agree
as follows:
1. Definitions. Terms used in this Agreement shall have the meanings set forth
in Addendum I attached hereto.
2. Agreement to Purchase and Sell. Subject to and upon the terms and conditions
herein set forth and the representations and warranties contained herein,
Transferor agrees to sell the Property to Transferee, and Transferee agrees to
acquire the Property from Transferor.
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3. Consideration. Transferor and Transferee agree that the total Consideration
for the Property shall be Fifteen Million Dollars ($15,000,000).
(a) The Consideration shall comprise the following components:
(i) Earnest Money Deposit. Within two (2) business days of the
Effective Date, Transferee shall deposit the Earnest Money in escrow
with the Title Company. The Earnest Money shall be held in a federally
insured interest-bearing account and interest accruing thereon shall
be for the account of Transferee. The Earnest Money shall be in the
form of cash, certificates of deposit or letters of credit issued by
major national banks. In the event the transaction contemplated hereby
is consummated, the Earnest Money plus interest accrued thereon shall
be credited against Transferee's payment obligations hereunder.
(ii) The Loans. The Loans will be paid off at Closing. If the Closing
occurs on any day during the month of July 1997, (i) all principal and
accrued interest under the Heller Loan, including the Buy-Out Fee (in
the amount of $1,085,000.00) will be paid at the Closing and shall be
paid off from proceeds otherwise payable hereunder to Transferor and
(ii) 50% of all principal and accrued interest under the NationsCredit
Loan shall be paid off from proceeds otherwise payable hereunder to
Transferor. If the Closing occurs at any other time, (i) all principal
and accrued interest under the Heller Loan shall be paid by Transferor
from proceeds otherwise payable hereunder to Transferor but that
portion of the Buy-Out Fee in excess of $1,085,000.00 and any
prepayment or other changes imposed under said loan documents shall be
the additional obligation of Transferee, and (ii) 50% of all principal
and accrued interest under the NationsCredit Loan shall be paid by
Transferor from proceeds otherwise payable hereunder to Transferor,
but 50% of any prepayment or other charges imposed under said loan
documents, shall be the additional obligation of Transferee.
(iii) Cash. Immediately available funds, in an amount equal to the
Consideration, less (i) the amounts paid under Section 3 (a) (ii)
above, (ii) the Earnest Money Deposit, if any and (iii) charges
against Transferor for prorations and closing costs as set forth
elsewhere herein, shall be paid in immediately available funds at
close of escrow.
(iv) Coordination with the Related Transaction. Transferor agrees to
reach agreement with the Soderling Trust so that the consideration to
be received by Transferor hereunder plus the consideration to be
received by the Soderling Trust, as transferor in the Related
Transaction, will be equal to $30,000,000 in the aggregate. Transferee
agrees to execute such modifications to this
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Agreement and to the documents utilized in the Related Transaction
which may be reasonably necessary to adjust the Consideration
hereunder and the Consideration under the Related Agreement to be
equal to $30,000,000 plus any additional amounts under Section
3(a)(ii)in the aggregate. All such adjustments shall be made to the
cash portion of the Consideration.
(b) Withhold if Transferor a Foreign Person. Transferor acknowledges and
agrees that, if Transferor is a foreign person, Transferee may be required
to withhold a portion of the Consideration pursuant to Section 1445 of the
Internal Revenue Code or Sections 18805 and 26131 of the California Revenue
and Taxation Code or similar laws or regulations of other states. Any
amount properly so withheld by Transferee shall be deemed to have been paid
by Transferee as part of the Consideration, and Transferor's obligation to
consummate the transactions contemplated herein shall not be excused,
reduced, terminated or otherwise affected thereby. Transferee does not
intend to withhold any portion of the Consideration if Transferor executes
the FIRPTA Certificate and any equivalent certificates and/or affidavits
required under applicable state law.
(c) Lender Holdback Funds. NationsCredit currently possesses holdback funds
as part of the terms of the NationsCredit Loan (the "Holdback Funds"). The
Holdback Funds shall be paid to the Transferor for the benefit of the
Soderling Trust and itself, and such funds are not a part of the
consideration to be paid hereunder by Transferee.
4. Transferee's Due Diligence. As more fully provided below, Transferor agrees
to assist and cooperate with Transferee in obtaining access to the Property and
certain documents relating thereto for purposes of inspection and due diligence.
(a) Physical Inspection of the Property. Prior to the effective date,
Transferee has had reasonable access to the Property for purposes of
satisfying itself with respect to the condition of the Property. Transferee
has conducted its own independent investigation of the Property and has not
relied on statements or representations of Transferor with respect to the
condition of the Property except as is specifically set forth herein.
(b) Contacts with Tenants. At any time(s) reasonably requested by
Transferee following the Effective Date and prior to Closing, Transferee
may contact and interview the Tenants, provided that such contacts or
interviews shall occur only after reasonable oral or written notice to
Transferor and Transferor may be present during any interview.
(c) Delivery of Documents and Records. Transferor has previously delivered
the Due Diligence Materials to Transferee and Transferee has reviewed those
documents prior to executing this Agreement.
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(d) Rejection of Service Contracts. Prior to the execution of this
Agreement Transferee has advised Transferor in writing of those Service
Contracts which it desires to assume and Transferee shall be deemed to have
rejected all other Service Contracts.
(e) No Assumption of Renewal or Option Commissions. Transferee specifically
disclaims any liability for brokerage commissions that may be payable upon
the renewal or extension of the term of any Lease, whether pursuant to the
exercise of an option or otherwise.
(f) Transferee's Right to Terminate. At any time up to June 30, 1997,
Transferee has the unqualified right to terminate this Agreement and obtain
a refund of any and all amounts paid hereunder to Title Company or to
Transferor, subject to Transferee's obligations to return Due Diligence
Materials to Transferor as provided in the Section entitled "Conditions to
Closing."
5. Conditions to Closing.
(a) Transferee's Conditions Precedent. Transferee's Conditions Precedent as
set forth below are precedent to Transferee's obligation to acquire the
Property. The Transferee's Conditions Precedent are intended solely for the
benefit of Transferee. If any of the Transferee's Conditions Precedent is
not satisfied, Transferee shall have the right in its sole discretion
either to waive the Transferee's Condition Precedent and proceed with the
acquisition or terminate this Agreement by written notice to Transferor and
the Title Company.
(i) Approval of Title. Prior to June 30, 1997, Transferee shall advise
Transferor what exceptions to title, if any, will be accepted by
Transferee. Transferor shall have two (2) business days after receipt
of Transferee's objections to give to Transferee: (A) written notice
that Transferor will remove such objectionable exceptions on or before
the Closing Date; or (B) written notice that Transferor elects not to
cause such exceptions to be removed. Transferor's failure to give
notice to Transferee within the two (2) business day period shall be
deemed to be Transferor's election not to cause such exceptions to be
removed. If Transferor gives Transferee notice or is otherwise deemed
to have elected to proceed under clause (B), Transferee shall have
until the Closing Date to elect to proceed with the transaction or
terminate this Agreement. If Transferee fails to give Transferor
notice of its election on or before the Closing Date and the Closing
does not otherwise occur, Transferee shall be deemed to have elected
to terminate this Agreement. If Transferor gives notice pursuant to
clause (A) and fails to remove any such objectionable exceptions from
title prior to the Closing Date, and Transferee is unwilling to take
title subject thereto, Transferor shall be in default and Transferee
shall have the rights and remedies set forth in the Section entitled
"Non-Consummation of the Transaction."
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(ii) Review of Property, Due Diligence Materials and Disclosures.
[Intentionally Deleted.]
(iii) Leases. Except as may be approved by Transferee, all of the
Leases shall be in full force and effect, without default thereunder
by either tenant or landlord, and no tenant shall be the subject of a
proceeding under any Creditors Rights Laws.
(iv) Representations and Warranties. The representations and
warranties of Transferor contained herein shall be true and correct as
of the Closing Date as though made at and as of the Closing Date, and
Transferor's covenants under this Agreement shall be satisfied as of
the Closing Date (to the extent such covenants are to be satisfied as
of the Closing Date), and Transferee shall have received at the
Closing a Certificate in the form of Exhibit H hereto, dated as of the
Closing Date and executed on behalf of Transferor by executive
officers of Transferor or of the respective general partners of
Transferor, as applicable, certifying as to the fulfillment of the
conditions set forth in this Subsection.
(v) Conveyances by Transferor. At the Closing, Transferor shall convey
to Transferee all of its right, title and interest to the Property by
executing and delivering all documents required to be delivered by
Transferor pursuant to the Section entitled "Closing and Escrow."
(vi) Title Policy. Title Company shall be committed to issue the Title
Policy with the Required Endorsements at Closing, showing title to the
Real Property vested in Transferee, subject only to the Permitted
Exceptions. On or before the Closing, Transferor shall cause the Title
Company to deliver to Transferee a certification that, in issuing the
Title Policy, the Title Company has not relied on any representations
or indemnities of Transferor or any of its affiliates (except as
disclosed in such certification).
(vii) No Financing Statements. Transferee shall be satisfied that, as
of the Closing, there is no outstanding financing statement showing
Transferor as debtor filed in accordance with the Uniform Commercial
Code of any applicable jurisdiction with respect to the Property
except for any financing statements approved by Transferee prior to
the Approval Date or relating to the Loan.
(viii) Tenant Estoppel Certificates. Transferor obtaining and
delivering to Transferee the Tenant Estoppel Certificates on or before
7 calendar days prior to the Closing Date.
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(ix) Property Condition. The physical condition of the Real Property
shall be substantially the same on the Closing Date as on the
Effective Date, reasonable wear and tear and loss by casualty
excepted.
(x) Termination of Agreements. On or before the Closing Date,
Transferor shall give written notice of termination of all property
management, leasing brokerage agreements and Service Contracts (except
those specifically assumed by Transferee in writing) affecting the
Property, and such termination shall be without cost or expense to
Transferee.
(b) Closing of Related Transactions. The simultaneous closing of all of the
Related Transactions with the Closing of this transaction is a condition
precedent to both Transferor's and Transferee's obligations under this
Agreement. This condition precedent is for the benefit of both Transferor
and Transferee, and if it is not satisfied, then either party may terminate
this Agreement by written notice to the other party and Title Company, and
the transaction shall not be consummated unless both parties each in their
sole discretion waive this condition precedent and elect to proceed with
the transaction.
(c) Deemed Approval of Conditions. In the event that any party having the
right of cancellation hereunder based on failure of a condition precedent
set forth herein does not inform the other party and Title Company in
writing of its disapproval of any condition precedent prior to the Closing,
such condition precedent shall be deemed to have been satisfied, approved
or waived, effective as of the Closing; provided that a party shall not be
deemed to have waived any claim for breach of any representation or
warranty by the other party unless such party has Actual Knowledge of such
breach prior to Closing.
(d) Return of Materials. Upon termination of this Agreement and the escrow
for failure of a condition precedent, Transferee shall return to Transferor
all materials provided by Transferor to Transferee pursuant to the Section
entitled "Transferee's Due Diligence."
6. Closing and Escrow.
(a) Closing Date. The Closing shall be conducted through, and all items to
be delivered shall be delivered to, the Title Company, on or before the
Closing Date, which may be extended by Transferee for a period of not more
than thirty (30) days by delivery of written notice to Transferor not later
than two (2) business days prior to Closing.
(b) Deposit of Agreement and Escrow Instructions. The parties shall
promptly deposit a fully executed copy of this Agreement with Title Company
and this Agreement shall serve as escrow instructions to Title Company for
consummation of
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the transactions contemplated hereby. The parties agree to execute such
additional escrow instructions as may be appropriate to enable Title
Company to comply with the terms of this Agreement; provided, however, that
in the event of any conflict between the provisions of this Agreement and
any supplementary escrow instructions, the terms of this Agreement shall
control unless a contrary intent is expressly indicated in such
supplementary instructions. Transferor and Transferee hereby designate
Title Company as the Reporting Person for the transaction pursuant to
Section 6045(e) of the Internal Revenue Code and the regulations
promulgated thereunder.
(c) Transferor's Deliveries to Escrow. At or before the Closing, Transferor
shall deliver to Transferee the following, to the extent they have not
already been delivered:
(i) the duly executed and acknowledged Deed;
(ii) a duly executed Assignment of Leases;
(iii) a duly executed Bill of Sale;
(iv) a duly executed Assignment of Contracts;
(v) a FIRPTA affidavit (in the form attached as Exhibit E) pursuant
to Section 1445(b)(2) of the Internal Revenue Code of 1986 (the code
), and on which Transferee is entitled to rely, that Transferor is not
a foreign person within the meaning of Section 1445(f)(3) of the
Internal Revenue Code; and
(vi) a California Form 590 (or equivalent form for another appropriate
state) from Transferee certifying that Transferor has a permanent
place of business in California or such other state is qualified to do
business in California or such other state; and
(vii) any other instruments, records or correspondence called for
hereunder which have not previously been delivered.
(d) Transferor's Deliveries to Transferee.
(i) Deliveries at Closing. At or before the Closing, Transferor shall
deliver to Transferee the following, to the extent they have not
already been delivered:
a) a Closing Certificate in the form attached hereto as Exhibit
H;
b) operating statements for that portion of the current year
ending at the end of the calendar month preceding the month in
which the Closing Date occurs, certified in the manner specified
in Addendum III;
c) a Rent Roll and Delinquency Report both dated as of the first
day of the month in which the Closing Date occurs;
d) duly executed original Tenant Estoppel Certificates;
e)such original resolutions, authorizations, bylaws or other
corporate and/or partnership documents or agreements relating to
Transferor as shall be reasonably required by Transferee and/or
the Title Company;
f) an original signed notice in the form of Exhibit G attached
hereto for each of the Tenants; and
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g) all keys to the Property, which shall be personally delivered
at the Property by a representative of Transferor to a
representative of Transferee.
(ii) Deliveries After Closing. On the first business day following the
Closing, Transferor shall deliver to Transferee the following, to the
extent they have not already been delivered, and such delivery shall
be made in the manner set forth in Addendum IV:
a) originals of the Contracts not previously delivered to
Transferee;
b) originals of the Leases;
c) originals of any and all building permits and certificates of
occupancy for the Real Property that are in the possession or
control of Transferor and/or an affiliate of Transferor;
d) originals of all other matters described in Addendum III; and
e) any other instruments, records or correspondence called for
hereunder which have not previously been delivered.
(e) Transferee's Deliveries to Transferor. At or before the Closing,
Transferee shall deliver or cause to be delivered to escrow the following:
(i) a duly executed Assignment of Leases;
(ii) a duly executed Assignment of Contracts; and
(iii) the Cash.
(f) Deposit of Other Instruments. Transferor and Transferee shall each
deposit such other instruments as are reasonably required by Title Company
or otherwise required to close the escrow and consummate the transactions
described herein in accordance with the terms hereof.
7. Closing Adjustments and Prorations. With respect to each Property, the
following adjustments shall be made, and the following procedures shall be
followed:
(a) Basis of Prorations. All prorations shall be calculated as of 12:01
a.m. on the Closing Date, on the basis of a 365-day year.
(b) Items Not to be Prorated. There shall be no prorations or adjustments
of any kind with respect to:
(i) Insurance premiums;
(ii) Delinquent Rents for full months prior to the month in which the
Closing occurred. Delinquent Rents for full months prior to the month
in which the Closing occurred shall remain the property of Transferor;
however Transferee shall cooperate with Transferor and shall assist
Transferor in efforts to collect; provided further, however, that
Transferee shall have no duty to initiate any legal proceeding or
action against any Tenant on Transferor's behalf
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related to such Delinquent Rents. Transferor may take all appropriate
collection measures (including litigation if deemed by Transferor to
be necessary or desirable), except that Transferor may not seek any
remedy which would interfere with the Tenant's continued occupancy and
full use of its premises under such Tenant's Lease, or Transferee's
rights to receive Rent with respect to any period beginning on the
Closing Date.
(iii) Additional Rents relating to full or partial months prior to the
Closing Date. If Additional Rents relating to full or partial months
prior to the Closing Date are not finally adjusted between Transferor
and any Tenant until after the Closing Date, then any refund to which
any Tenant may be entitled shall be the obligation of Transferor, and
any additional amounts due from the Tenant for such period shall be
the property of Transferor. Transferee shall have no obligation with
respect to any such refund due to any Tenant and no claim to any such
amounts due from any Tenant. In seeking to collect any such amount due
from any Tenant, Transferor may take all appropriate collection
measures (including litigation if deemed by Transferor to be necessary
or desirable), except that, in seeking to collect any such additional
amounts due from any Tenant, Transferor may not seek any remedy which
would interfere with the Tenant's continued occupancy and full use of
its premises under such Tenant's Lease, or Transferee's rights to
receive Rent with respect to any period beginning on the Closing Date.
If Transferor receives any refund of expenses paid prior to the
Closing and relating to a period prior to the Closing, and such
expenses were reimbursed in whole or in part by any Tenant, Transferor
shall refund to each Tenant its share of any such refund.
(c) Closing Adjustments. Prior to Closing, Transferor shall prepare for
review, comment and agreement by Transferee a proration statement for each
Property, substantially in the form attached hereto as Exhibit I, and each
party shall be credited or charged at the Closing, in accordance with the
following:
(i) Rents. Transferor shall account to Transferee for any Rents
actually collected by Transferor for the period in which the Closing
occurs, and Transferee shall be credited for its share.
(ii) Expenses.
a) Prepaid Expenses. To the extent Expenses have been paid prior
to the Closing Date for the period in which the Closing occurs,
Transferor shall account to Transferee for such prepaid Expenses,
and Transferor shall be credited for its pro rata share thereof
for the period after the Closing Date.
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b) Unpaid Expenses. To the extent Expenses relating to the period
in which the Closing occurs are unpaid as of the Closing Date but
are ascertainable (e.g., interest on the Loan), Transferee shall
be credited for Transferor's pro rata share of such Expenses for
the period prior to the Closing date. The amount to be credited
to Transferee hereunder shall include the amount of any future
payments due to any Tenant under such Tenant's Lease as
reimbursement for tenant improvements or otherwise.
c) Property Taxes. For purposes of this Subsection entitled
"Expenses," the Title Company shall pro-rate property taxes based
on the most recent available tax bills.
(iii) Security Deposits. Transferor shall deliver to Transferee all
prepaid rents, security deposits, letters of credit and other
collateral given to Transferor or any of its affiliates or
successors-in-interest under any of the Leases.
(d) Post-Closing Adjustments. After the Closing Date, Transferor and
Transferee shall meet from time to time to discuss adjustments in
accordance with the following.
(i) Non-delinquent Rents. Transferor shall take all reasonable and
customary efforts to bill and collect July Rents for the Property. If
Transferor collects any Rents applicable to the month of July,
Transferor shall promptly endorse such payments over to Transferee,
which shall in turn pay to Transferor its pro rata share of such
Rents, if any.
(ii) Delinquent Rents for month in which the Closing occurred. If
Transferee collects from any Tenant Rents that were delinquent as of
the Closing Date and that relate to the period in which the Closing
occurred, then such Rents shall be applied in the following order of
priority: First, to reimburse Transferee for all reasonable
out-of-pocket third-party collection costs actually incurred by
Transferee in collecting such Rents (including the portion thereof
relating to the period after the Closing Date); second, to satisfy
such Tenant's Rent obligations relating to the period after the
Closing Date; and third, to satisfy such delinquent Rent obligations
relating to the period before the Closing Date. Transferor shall have
no right to pursue the collection of such delinquent Rents.
(iii) Expenses. With respect to any invoice received by Transferee
after the Closing Date for Expenses that relate to the period in which
the Closing occurred, Transferee will either, at Transferee's option,
(A) pay the entire amount of the invoice and either bill Transferor
for Transferor's share, or offset Transferor's share against any
prorated Rents due to Transferor under subsection(i) or (ii) above, or
(B) compute Transferee's pro rata share, write a
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check for that amount in favor of the vendor, and then send the
invoice and check to Transferor, in which case Transferor agrees that
it will pay for its share and forward the invoice and the two payments
to the vendor. If real property taxes and assessments payable for any
period prior to Closing are determined to be more than the amounts
prorated herein (in the case of the current year) or paid by
Transferor (in the case of any prior year), due to a reassessment of
the Real Property or otherwise, Transferor and Transferee shall
promptly adjust the proration of such real property taxes and
assessments after the determination of such amounts and Transferor
shall pay to Transferee any increase in the amount of such real
property taxes and assessment applicable to any period prior to
Closing.
(iv) Survival of Obligations. The obligations of Transferor and
Transferee under the Subsection entitled "Post-Closing Adjustments"
shall survive the Closing.
(e) Allocation of Closing Costs. Closing costs shall be allocated as set
forth below:
(i) Escrow charges: 50% to Transferor and 50% to Transferee.
(ii) Recording fees: 50% to Transferor and 50% to Transferee.
(iii) Title insurance premium: 50% to Transferor and 50% to
Transferee.
(iv) Transfer taxes: 100% to Transferor and 0% to Transferee.
(f) Allocation among Related Transactions. All Closing Adjustments and
prorations chargeable to Transferor in this Agreement and to the transferor
in the Related Transactions shall be aggregated and charged 50% to
Transferor under this Agreement and 50% to the transferor in the Related
Transaction.
(g)Tenant Estoppel Certificates. Transferor shall use all reasonable
efforts to obtain a Tenant Estoppel Certificate from all Tenants, dated no
earlier than thirty (30) days prior to the Closing Date, conforming to the
most recent Rent Roll and Delinquency Report approved by Transferee and
alleging no defaults, offsets, or claims against Transferor. Transferor
shall deliver completed Tenant Estoppel Certificates to Transferee as they
are received by Transferor, and shall use all reasonable efforts to deliver
all Tenant Estoppel Certificates to Transferee not later than 7 calendar
days prior the Closing. It shall be a condition to Transferee's obligation
to close the sell and acquisition of the Property not later than 7 calendar
days prior to the Closing, Transferor delivers to Transferee Tenant
Estoppel Certificates from the Required Tenants and, to the extent
Transferor is unable to obtain Tenant Estoppel Certificates, or any items
required to be therein, from the Non-Required Tenants, Transferor shall
deliver to Transferee and Transferee shall be obligated to accept on the
Closing Date a certification in which Transferor warrants and represents to
Transferee, with respect to such missing Tenant Estoppel Certificates or
any missing items required to be included therein, each such missing item
or Tenant Estoppel Certificate.
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8. Transferor's Representations and Warranties. Transferor hereby represents and
warrants to Transferee the matters set forth on Addendum II, which is
incorporated herein by this reference as though fully set forth herein.
Transferee is entitled to rely on Transferor's representations and warranties
notwithstanding Transferor's inspection and investigation of the Property.
9. Transferee's Representations and Warranties. Transferee hereby represents and
warrants to Transferor as follows:
(a) GPLP is a duly organized and validly existing limited partnership in
good standing under the laws of the State of California. This Agreement and
all documents executed by Transferee which are to be delivered to
Transferor at the Closing are or at the time of Closing will be duly
authorized, executed and delivered by Transferee, and are or at the Closing
will be legal, valid and binding obligations of Transferee, and do not and
at the time of Closing will not violate any provisions of any agreement or
judicial order to which Transferee is subject.
(b) Transferee has made (or will make prior to the Closing Date) an
independent investigation with regard to the Property and Transferee's
intended use thereof, including without limitation, review and/or approval
of matters disclosed by Transferor pursuant to this Agreement.
(c) There is no litigation pending or, to Transferee's knowledge,
threatened, against Transferee or any basis therefor that might materially
and detrimentally affect the ability of Transferee to perform its
obligations under this Agreement. Transferee shall notify Transferor
promptly of any such litigation of which Transferee becomes aware.
(d) All representations and warranties set forth herein shall be true as of
the Effective Date and the Closing Date.
10. Indemnification.
(a) Mutual Indemnification. Each party hereby agrees to indemnify the other
party and defend and hold it harmless from and against any and all claims,
demands, liabilities, costs, expenses, penalties, damages and
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losses, including, without limitation, attorneys fees, resulting from any
misrepresentation or breach of warranty or breach of covenant made by such
party in this Agreement or in any document, certificate, or Exhibit or
Schedule given or delivered to the other pursuant to or in connection with
this Agreement.
(b) Indemnification by Transferor. Transferor agrees to indemnify
Transferee and its partners and defend and hold Transferee and its partners
harmless from and against any and all claims, demands, liabilities, costs,
expenses, penalties, damages and losses, including, without limitation,
attorneys' fees, asserted against, incurred or suffered by Transferee
resulting from or arising out of (i) any personal injury or property damage
occurring in, on or under the Property during the period from June 28, 1995
to the Closing Date, from any cause whatsoever other than as a consequence
of the acts or omissions of Transferee, its agents, employees or
contractors; and (ii) the failure of Transferor to perform any obligation
under the Loan Documents to be performed by the borrower prior to the
Closing Date (other than the obligation to obtain the Lender's Consent for
the transfer of the Property contemplated herein).
(c) Indemnification by Transferee. Transferee agrees to indemnify
Transferor and its partners and defend and hold Transferor and its partners
harmless from any claims, losses, demands, liabilities, costs, expenses,
penalties, damages and losses, including, without limitation, attorneys
fees, asserted against, incurred or suffered by Transferor resulting from
or arising out of (i) any personal injury or property damage first
occurring in, on or under the Property during Transferee's ownership
thereof, from any cause whatsoever other than as a consequence of the acts
or omissions of Transferor, or its agents, employees or contractors, and
(ii) if Transferee does not pay off the Loan on or before the Loan Payoff
Date, the failure of Transferor to perform any obligation under the Loan
Documents to be performed by the borrower after the Closing Date.
(d) Survival of Indemnifications. The indemnification provisions of this
Section shall survive beyond the Closing, or, if the Closing does not occur
pursuant to this Agreement, beyond any termination of this Agreement.
11. Risk of Loss.
(a) Notice of Loss. If, prior to the Closing Date, any portion of the of
the Property suffers a Minor or Major Loss, Transferor shall immediately
notify Transferee of that fact, which notice shall include sufficient
detail to apprise Transferee of the current status of the Property
following such loss.
(b) Minor Loss. Transferee's obligations hereunder shall not be affected by
the occurrence of a Minor Loss, provided that: (i) upon the Closing, there
shall be a credit against the Consideration equal to the amount of any
insurance proceeds or condemnation awards collected by Transferor as a
result of such Minor Loss, plus the amount of any insurance deductible; or
insurance or condemnation proceeds available to Transferor are sufficient
to cover the cost of restoration; and the insurance carrier has admitted
liability for the payment of such costs; and (ii) the Loan is not
accelerated or defaulted by reason of such casualty or condemnation. If the
proceeds or awards have not been collected as of the Closing, then
Transferor's right, title and interest to such proceeds or awards shall be
assigned to Transferee.
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(c) Major Loss. In the event of a Major Loss, Transferee may, at its option
to be exercised by written notice to Transferor within twenty (20) days of
Transferor's notice to Transferee of the occurrence thereof, elect to
either (i) terminate this Agreement, or (ii) consummate the acquisition of
the Property for the full Consideration, subject to the following. If
Transferee elects to proceed with the acquisition of the Property, then the
Closing shall be postponed to the later of the Closing Date or the date
which is five (5) days after Transferee makes such election and, upon the
Closing, Transferee shall be given a credit against the Consideration equal
to the amount of any insurance proceeds or condemnation awards collected by
Transferor as a result of such Major Loss, plus the amount of any insurance
deductible. If the proceeds or awards have not been collected as of the
Closing, then Transferor's right, title and interest to such proceeds or
awards shall be assigned to Transferee, and Transferor will cooperate with
Transferee as reasonably requested by Transferee in the collection of such
proceeds or award. If Transferee fails to give Transferor notice within
such 20-day period, then Transferee will be deemed to have elected to
terminate this Agreement.
12. Transferor's Continued Operation of the Property
(a) General. Except as otherwise contemplated or permitted by this
Agreement or approved by Transferee in writing, from the Effective Date to
the Closing Date, Transferor will operate, maintain, repair and lease the
Property in a prudent manner, in the ordinary course of business, on an
arm's-length basis and consistent with its past practices (and without
limiting the foregoing, Transferor shall, in the ordinary course, negotiate
with prospective tenants and enter into leases of the Property, enforce
leases in all material respects including eviction proceedings against all
Tenants with delinquencies in excess of 30 days, pay all costs and expenses
of the Property, including, without limitation, debt service, real estate
taxes and assessments, maintain insurance and pay and perform obligations
under the Loan Documents) and will not dispose of or encumber any of the
Property, except for dispositions of personal property in the ordinary
course of business. Between the Effective Date and the Closing, Transferor
shall continue to undertake capital improvements with respect to the
Property in the ordinary course of business.
(b) Actions Requiring Transferee's Consent. Notwithstanding the above terms
of this Section, Transferor shall not, without the prior written approval
of Transferee, take any of the following actions:
(i) Leases. Execute or renew any Lease, terminate any Lease; or modify
or waive any material term of any Lease;
(ii) Contracts. Except as otherwise required under this Agreement,
enter into, execute or terminate any operating agreement, reciprocal
easement agreement, management agreement or any lease, contract,
agreement or other commitment of any sort (including any contract for
capital items or
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expenditures), with respect to the Property requiring payments to or
by Transferor in excess of $5,000 per year, or the performance of
services by Transferor the value of which exceeds $5,000 per year.
(c) Cost of Tenant Improvements and Leasing Commissions. In connection with
any new leases or modifications of existing Leases entered into between the
Effective Date and the Closing and approved by Transferee, the cost of
tenant improvement work and leasing commissions (but not legal fees, except
to the extent the same have been approved in advance by Transferee) shall
be prorated between Transferee and Transferor in proportion to the ratio
between the portion of the new lease term prior to the Closing Date and the
portion of the new lease term after the Closing Date. Except as is
otherwise disclosed by Transferor in writing to Transferee as shown on
Schedule II.E.3, Transferor shall be responsible for the cost of tenant
improvement work and leasing commissions for all Leases (and amendments
thereto) entered into prior to the Effective Date (regardless of when the
same are payable), and Transferor's obligations with respect thereto shall
survive the Closing.
13. Cooperation
(a) Before Closing. Transferor and Transferee shall cooperate and do all
acts as may be reasonably required or requested by the other with regard to
the fulfillment of any Condition Precedent or the consummation of the
transactions contemplated hereby including execution of any documents,
applications or permits. Transferor hereby irrevocably authorizes
Transferee and its agents to make all inquiries of any third party,
including any governmental authority, as Transferee may reasonably require
to complete its due diligence.
(b) After Closing. For a period of three years after the Closing,
Transferor will give Transferee timely and complete access to the
historical financial and property records of Transferor relating to its
acquisition, ownership and operation of the Property, and Transferor agrees
that it will not destroy any of the records during any such period of time
without the prior written consent of Transferee. During the first year
after the Closing, Transferor will provide to Transferee on a timely and
complete basis such historical financial information with respect to the
acquisition, ownership and operation of the Property as Transferee may
reasonably request in connection with any reports which Transferee or its
general partner is required to file with the Securities & Exchange
Commission or the New York Stock Exchange.
14. Non-Consummation of the Transaction. If the transaction is not consummated
on or before the Closing Date, the following provisions shall apply:
(a) No Default. If the transaction is not consummated for a reason other
than a default by one of the parties, then (i) Title Company and each party
shall return to the depositor thereof the Earnest Money and all other funds
and items which were
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deposited hereunder; (ii) Transferor and Transferee shall each bear
one-half of any Escrow cancellation charges. Any return of funds or other
items by the Title Company or any party as provided herein shall not
relieve either party of any liability it may have for its wrongful failure
to close.
(b) Default by Transferor. If the transaction is not consummated as a
result of a default by Transferor, then Transferee may either (i) terminate
this Agreement by delivery of notice of termination to Transferor,
whereupon (A) the Earnest Money plus interest accrued thereon shall be
immediately returned to Transferee, and (B) Transferor shall pay to
Transferee any title, escrow, legal and inspection fees incurred by
Transferee and any other expenses incurred by Transferee in connection with
the performance of its review under the Section entitled "Transferee's Due
Diligence" (including, without limitation, environmental and engineering
consultants' fees and expenses), in which case neither party shall have any
further rights or obligations hereunder; or (2) continue this Agreement
pending Transferee's action for specific performance and/or damages.
(c) Default by Transferee. If the Closing does not occur as a result of a
default by Transferee, then (i) Transferee shall pay all escrow
cancellation charges, (ii) Title Company shall deliver the Earnest Money to
Transferor as its full and complete liquidated damages and its sole and
exclusive remedy for Transferee's default. If the transaction is not
consummated because of a default by Transferee, the Earnest Money together
with the interest accrued thereon shall be paid to and retained by
Transferor as liquidated damages. THE PARTIES HAVE AGREED THAT TRANSFEROR'S
ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY TRANSFEREE, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR
INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN
AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF
TRANSFEROR'S DAMAGES AND AS TRANSFEROR'S EXCLUSIVE REMEDY AGAINST
TRANSFEREE, AT LAW OR IN EQUITY, IN THE EVENT OF A DEFAULT UNDER THIS
AGREEMENT ON THE PART OF TRANSFEREE.
INITIALS: Transferor _____ Transferee _____
15. Miscellaneous
(a) Disclosure of Transaction. Prior to the Closing, neither party shall
publicly announce or discuss the execution of this Agreement or the
transaction contemplated hereby except in accordance with the following.
Neither party shall publicly announce or discuss the execution of this
Agreement or the transaction contemplated hereby unless: (i) the
information disseminated by such party is limited to the names of the
Transferor and Transferee; a general description of the Property including
size, type and location; the amount and nature of the Consideration; and
Transferee's anticipated
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yield from the acquisition of the Property; or (ii) the announcing party
has obtained the prior written consent of the other party, which shall not
be unreasonably withheld.
(b) Possession. Possession of the Property shall be delivered to Transferee
upon the Closing.
(c) Notices. Any notice, consent or approval required or permitted to be
given under this Agreement shall be in writing and shall be deemed to have
been given upon (i) hand delivery, (ii) one (1) day after being deposited
with Federal Express, DHL Worldwide Express or another reliable overnight
courier service or transmitted by facsimile telecopy, or (iii) two (2) days
after being deposited in the United States mail, registered or certified
mail, postage prepaid, return receipt required, and addressed as indicated
below, or such other address as either party may from time to time specify
in writing to the other.
If to Transferee: If to Transferor:
Glenborough Realty Trust Incorporated CT Realty
400 South El Camino Real, 11th Floor 4001 MacArthur Boulevard
San Mateo, CA 94402-1708 Suite 100
Attention: Stephen Saul Newport Beach, CA 92660
Attention: Robert Campbell
cc: Larry R. Mathena
with a copy to:
Glenborough Realty Trust Incorporated
400 South El Camino Real, 11th Floor
San Mateo, CA 94402-1708
Attention: G. Lee Burns, Jr.
(d) Brokers and Finders. Transferee has agreed to pay to Provine &
Associates a brokerage fee pursuant to the terms and conditions of a
separate agreement. Except as set forth in the preceding sentence, neither
party has had any contact or dealings regarding the Property, or any
communication in connection with the subject matter of this transaction
through any real estate broker or other person who can claim a right to a
commission or finder's fee in connection with the transfer contemplated
herein. In the event that any broker or finder perfects a claim for a
commission or finder's fee based upon any such contact, dealings or
communication, the party through whom the broker or finder makes its claim
shall be responsible for said commission or fee and shall indemnify and
hold harmless the other party from and against all liabilities, losses,
costs and expenses (including reasonable attorneys' fees) arising in
connection with such claim for a commission or finder's fee. The provisions
of this Subsection shall survive the Closing.
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(e) Joint and Several Liability. If Transferor consists of two (2) or more
parties, each of such parties (and each of their respective general
partners if applicable) shall be liable for Transferor's obligations under
this Agreement, and all documents executed in connection herewith, and the
liability of such parties shall be joint and several.
(f) Successors and Assigns. Subject to the following, this Agreement shall
be binding upon, and inure to the benefit of, the parties and their
respective successors, heirs, administrators and assigns. Transferee shall
have the right, with notice to Transferor (but without the necessity of
Transferor's consent), to assign its right, title and interest in and to
this Agreement to one or more assignees at any time before the Closing
Date; provided, however that such assignee(s) shall assume all obligations
of Transferee, and such assignment and assumption shall not release
Transferee from any obligation hereunder. Transferor shall not have the
right to assign its interest in this Agreement.
(g) Amendments. Except as otherwise provided herein, this Agreement may be
amended or modified only by a written instrument executed by Transferor and
Transferee.
(h) Governing Law. This Agreement has been negotiated and executed in San
Mateo County, California and the substantive laws of the State of
California, without reference to its conflict of laws provisions, will
govern the validity, construction, and enforcement of this Agreement.
(i) Merger of Prior Agreements. This Agreement and the Addenda, Exhibits
and Schedules hereto constitute the entire agreement between the parties
and supersede all prior agreements and understandings between the parties
relating to the subject matter hereof.
(j) Arbitration of Disputes. Any controversy, claim , counterclaim, or
disputes between or among the parties hereto arising out of or relating to
the interpretation, application, breach or enforcement of this Agreement or
any related agreements or instruments ("Subject Documents") ("Dispute"),
shall, at the option of any party, and at that party's expense, be
submitted to mediation, using either the American Arbitration Association
(AAA) or Judicial Arbitration and Mediation Services, Inc. (JAMS). If
mediation is not used, or if it is used and it fails to resolve the Dispute
within 30 days from the date AAA or JAMS is engaged, then the Dispute shall
be determined by neutral binding arbitration in accordance with the
Commercial Arbitration Rules then in effect of either JAMS or AAA (at the
option of the party initiating the arbitration) and Title 9 of the U.S.
Code, notwithstanding any other choice of law provision(s) herein or in the
Subject Documents. Any controversy concerning whether a Dispute is
arbitrable shall be determined by the arbitrator(s). The parties agree that
related arbitration proceedings may be consolidated. The arbitrator shall
prepare written reasons for the award. The parties hereto agree that the
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arbitrator shall be empowered to grant equitable, as well as legal, relief,
including, without limitation, the power to compel specific performance of
this Agreement. The parties further consent that the initiation of
mediation and/or arbitration pursuant to these provisions shall constitute
an action or the equivalent for purposes of determining a party's right to
file a lis pendens in the official records of the jurisdiction where the
Property is/are located. The parties consent that judgment on the award
rendered may be entered in any state court sitting in the state of
California, and that any mediation and/or arbitration shall take place in
Irvine, California.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE
THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE
BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL,
UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING
TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER AUTHORITY OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE
TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION
OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
____________ ____________
Transferor Transferee
(k) Enforcement. If either party fails to perform any of its obligations
under this Agreement or if a dispute arises between the parties concerning
the meaning or interpretation of any provision of this Agreement, then the
defaulting party or the party not prevailing in such dispute shall pay any
and all costs and expenses incurred by the other party on account of such
default and/or in enforcing or establishing its rights hereunder,
including, without limitation, arbitration or court costs and attorneys'
fees and disbursements. Any such attorneys' fees and other expenses
incurred by either party in enforcing a judgment in its favor under this
Agreement shall be recoverable separately from and in addition to any other
amount included in such judgment, and such attorneys' fees obligation is
intended to be severable from the other provisions of this Agreement and to
survive and not be merged into any such judgment.
(l) Time of the Essence. Time is of the essence of this Agreement.
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(m) Severability. If any provision of this Agreement. or the application
thereof to any person, place, or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable or void, the remainder
of this Agreement and such provisions as applied to other persons, places
and circumstances shall remain in full force and effect.
(n) Marketing. Transferor agrees not to market or show the Property to any
other prospective purchasers during the term of this Agreement.
(o) Confidentiality. Transferee and Transferor shall each maintain as
confidential any and all material or information about the other or, in the
case of Transferee and its agents, employees, consultants and contractors,
about the Property, and shall not disclose such information to any third
party, except, in the case of information about the Property and
Transferor, to Transferee's investment bankers, lender or prospective
lenders, insurance and reinsurance firms, attorneys, environmental
assessment and remediation service firms and consultants, as may be
reasonably required for the consummation of the transaction contemplated
hereunder and/or as required by law.
(p) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
(q) Addenda, Exhibits and Schedules. All addenda, exhibits and schedules
referred to herein are, unless otherwise indicated, incorporate herein by
this reference as though set forth herein in full.
(r) Construction. Headings at the beginning of each section and subsection
are solely for the convenience of the parties and are not a part of the
Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine and
vice versa. This Agreement shall not be construed as if it had been
prepared by one of the parties, but rather as if both parties had prepared
the same. In the event the date on which Transferor or Transferee is
required to take any action under the terms of this Agreement is not a
business day, the action shall be taken on the next succeeding business
day.
(s) Property Condition. Except for the Representations and Warranties of
Transferor specifically set forth herein, the Property is being sold and
conveyed by Transferee to Transferor "AS IS, WHERE IS, WITH ALL FAULTS", in
such condition as the same may be on the Closing Date, without any
representations and warranties by the Transferor as to any conditions of
the Property, including, without limitation, surface and subsurface
environmental conditions, whether latent or patent,. Except for the
Representations and Warranties of Transferor specifically set forth herein,
Transferor makes no guarantee, warranty or representation, express or
implied, as to the quality, character, or condition of the Property (or any
part thereof) or the
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fitness of the Property (or any part thereof) for any use or purpose or any
representation as to the nonexistence of any toxic or hazardous waste.
Except for any claim related to a breach of Transferor's express
representations and warranties, Transferee shall have no claim, in law or
in equity, based upon the condition of the Property or the failure of the
Property to meet any standards. In no event shall Transferor be liable for
any incidental, special, exemplary or consequential damages, including,
without limitation, loss of profits or revenue, interference with business
operations, loss of tenants, lenders, investors, buyers, diminution in
value of the Property, or inability to use the Property, due to the
condition of the Property, absent a breach of Transferor's express
Representations and Warranties contained herein. Transferee represents and
warrants to Transferor that upon expiration of the Due Diligence Period,
Transferee will have had ample opportunity to make a proper inspection,
examination and investigation of the Property to familiarize itself with
its condition and that it will do so to its satisfaction. Transferee agrees
that, upon acceptance of the condition of the Property hereunder, and
except for its reliance on the representations and warranties of Transferor
contained herein, it shall purchase and accept title to the Property
including any and all environmental conditions. In the event that any
hazardous substances are discovered on, at or under the Property, except
for any claim for breach of any representation or warranty of Transferee
specifically made herein, Transferee shall not maintain any action or
assert any claim against Transferor, its successors and their respective
members, employees and agents arising out of or relating to any such
hazardous substances, including, without limitation, any for contribution
or the generation, use, handling, treatment, removal, storage,
decontamination, cleanup, transport or disposal thereof. The provisions of
this Section shall survive the Closing or any termination of this
Agreement.
(t) Tax Free Exchange. As an accommodation to Transferee, Transferor agrees
to cooperate with Transferee to accomplish an I.R.C. Section 1031 like kind
tax deferred exchange, provided that the following terms and conditions are
met; (i) Transferee shall give Transferor notice of any desired exchange
not later than two (2) days prior to the Closing Date; (ii) Transferor
shall in no way be liable for any additional costs, fees and/or expenses
relating to the exchange; (iii) in no way shall the Closing be contingent
or otherwise subject to the consummation of the exchange, and the Closing
shall timely occur despite any failure, for what ever reason, of the
parties to the exchange to effect the same; and (iv) Transferor shall not
be required to make any representations or warranties nor assume or incur
any obligations or personal liability whatsoever in connection with the
exchange transaction.
The 1031 Exchange Transaction in question will involve funds held by
exchange facilitators for the benefit of Glenborough Fund III, Limited
Partnership ("Fund III"). Transferor agrees to convey a proportionate share
of the equitable and beneficial ownership of the Property to Fund III, and
Transferee and Fund III direct that legal title be transferred directly to
Glenborough Fund V, Limited Partnership, a Delaware limited partnership.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
Transferor
CT Realty Corporation,
a California corporation
By ____________________________
its ____________________________
Date: June _______, 1997
Transferee
Glenborough Properties, L.P.
a California limited partnership
By Glenborough Realty Trust Incorporated
a Maryland corporation
its General Partner
By __________________________________
Date: June _______, 1997
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Summary Description of Addenda, Exhibits and Schedules
Not Attached to
Purchase Agreement between
CT Realty Corporation
And
Glenborough Properties, L.P.
Addenda
I Definitions.
II Transferor's Representations and Warranties.
III Due Diligence Materials to be Delivered by Transferor to Transferee.
IV Description of Method of Delivery of Certain Documents by Transferor
After Closing.
Exhibits
A Form of Deed.
B Form of Assignment and Assumption of Leases.
C Form of Warranty Bill of Sale.
D Form of Assignment and Assumption of Service Contracts,
Warranties and Guaranties, and Other Intangible Property.
E Certificate of Transferor Other Than an Individual (FIRPTA Affidavit).
F Form of Tenant Estoppel Certificate.
G Form of Notice to Tenants regarding Transfer.
H Form of Closing Certificate of Transferor.
I Form of Closing Proration Statement.
Schedules
1. Description of Land.
2. Permitted Title Exceptions at Closing.
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3. List of Title Policy Endorsements required by Transferee.
4. Listing of Personal Property transferred to Transferee.
5. Listing of Existing Contracts regarding Property Operation.
6. Description of Other Interests being transferred to Transferee.
7. Listing of Environmental Reports delivered to Transferee.
8. Rent Roll.
9. Tenant Delinquency Report.
10. Description of Existing Secured Loans encumbering the Property.
11. Related Transactions that were a condition to closing.
II.C.1. Transferor's Listing of Property Defects.
II.C.2. Transferor's Listing of Violations of Laws and Regulations concerning
property operation.
II.C.3. Transferor's Description of Regulatory or Condemnation Proceedings.
II.D.3. Transferor's Description of Lease Exceptions and Tenant Defaults.
II.D.7. Transferor's Description of Pending Brokerage Fees Due to Third
Parties.
II.E.2. Transferor's Description of Litigation involving the Property.
II.E.3. Transferor's Description of Tenant Improvements Costs and
Leasing Commissions that remain the Transferor's Responsibility.
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CONTRIBUTION AGREEMENT
Centerstone Plaza
THIS CONTRIBUTION AGREEMENT ("Agreement") is dated as of the Effective Date
(as defined in Addendum I) by and among Ronald E. Soderling, Trustee, or his
succesor in trust U/D/T dated February 20, 1996, and any amendments thereto
("Transferor") and Glenborough Properties, L.P., a California limited
partnership ("GPLP") ("Transferee").
Recitals
A. In June 1995, Transferor and CT Realty Corporation, a California
corporation ("CT") formed Culver Center Associates II, a joint venture ("CCA
II") which became the owner of the Property (as defined below). Under the CCA II
joint venture agreement ("JV Agreement") Transferor and CT each owned a 50%
interest in CCA II.
B. As part of the June 1995 transaction Transferor and CT obtained (i) a
loan from NationsCredit in the unpaid principal amount of $18,800,000.00 (the
"NationsCredit Loan") and (ii) a loan from Heller Financial in the face amount
of $2,900,000.00 (the "Heller Loan"). The NationsCredit Loan and the Heller Loan
shall sometimes hereinafter be collectively referred to as the "Loans".
C. Glenborough Realty Trust Incorporated, a Maryland corporation ("GLB") is
general partner of GPLP, and GLB's stock is publicly traded on the New York
Stock Exchange.
D. Through distributions in kind of the Property from CCA II, Transferor
and CT, each own an undivided 50% interest in the Property.
E. Transferee desires to acquire the Property and Transferor desires to
contribute its undivided 50% interest in the Property to Transferee in exchange
for operating units in Transferee, upon the terms and subject to the conditions
set forth in this Agreement. Pursuant to a certain Purchase Agreement, CT
desires concurrently herewith to sell its undivided 50% interest in the Property
to Transferee in exchange for certain cash consideration.
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties, covenants and agreements hereinafter contained, and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged and intending to be legally bound, the parties hereby agree
as follows:
1. Definitions. Terms used in this Agreement shall have the meanings set forth
in Addendum I attached hereto.
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2. Agreement to Acquire and Contribute. Subject to and upon the terms and
conditions herein set forth and the representations and warranties contained
herein, Transferor agrees to contribute the Property to Transferee, and
Transferee agrees to acquire the Property from Transferor.
3. Consideration. Transferor and Transferee agree that the total Consideration
for the Property shall be Fifteen Million Dollars ($15,000,000).
(a) The Consideration shall comprise the following components:
(i) OP Units. 275,000 OP Units, as defined and subject to the other
terms and conditions of Addendum V which is incorporated herein by
this reference as though set forth in full. Said 275,000 OP Units
shall be deemed to have a value of $5,500,000 to apply against the
Consideration.
(ii) The Loans. At the Closing Transferee shall pay off an undivided
50% portion of the Loan payable to NationsCredit secured by the
Property in the approximate unpaid principal amount of approximately
$18,450,000 (50% of which is approximately $9,225,000). Under the
Related Transaction, concurrently with the Closing hereunder,
Transferee shall pay off the other undivided 50% portion of the Loan
payable to NationsCredit and 100% of the Heller Loan. Transferor shall
not be charged with or responsible to pay for any prepayment penalty
with respect to the NationsCredit Loan. Transferor represents and
warrants that there will be no prepayment penalty if the Loan is
repaid during July, 1997.
(iii) Cash. The balance of the Consideration shall be paid in cash at
the Closing. All charges and credits for prorations and other charges
in connection with this transaction shall be charged against or
credited to the cash portion of the Consideration.
(iv) Coordination with the Related Transaction. Transferor agrees to
reach agreement with CT Realty Corporation (Transferor in the Related
Transaction) so that the consideration to be received by Transferor
hereunder plus the consideration to be received by CT Realty
Corporation, as Transferor in the Related Transaction, will be equal
to $30,000,000 in the aggregate. Transferee agrees to execute such
modifications to this Agreement and to the documents utilized in the
Related Transaction which may be reasonably necessary to adjust the
Consideration hereunder and the Consideration under the Related
Agreement to be equal to $30,000,000 in the aggregate. All such
adjustments shall be made to the cash portion of the Consideration."
(b) Withhold if Transferor a Foreign Person. Transferor acknowledges and
agrees that, if Transferor is a foreign person, Transferee may be required
to withhold a
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portion of the Consideration pursuant to Section 1445 of the Internal
Revenue Code or Sections 18805 and 26131 of the California Revenue and
Taxation Code or similar laws or regulations of other states. Any amount
properly so withheld by Transferee shall be deemed to have been paid by
Transferee as part of the Consideration, and Transferor's obligation to
consummate the transactions contemplated herein shall not be excused,
reduced, terminated or otherwise affected thereby. Transferee does not
intend to withhold any portion of the Consideration if Transferor executes
the FIRPTA Certificate and any equivalent certificates and/or affidavits
required under applicable state law.
(c) Lender Holdback Funds. NationsCredit currently possesses holdback funds
as part of the terms of the NationsCredit Loan (the "Holdback Funds"). The
Holdback Funds shall be paid to the transferor under the Related
Transaction for the benefit of the Transferor and itself, and such funds
are not a part of the consideration to be paid hereunder by Transferee.
4. Transferee's Due Diligence. As more fully provided below, Transferor agrees
to assist and cooperate with Transferee in obtaining access to the Property and
certain documents relating thereto for purposes of inspection and due diligence.
(a) Physical Inspection of the Property. Prior to the effective date,
Transferee has had reasonable access to the Property for purposes of
satisfying itself with respect to the representations, warranties and
covenants of Transferor contained herein and with respect to the condition
of the Property. Transferee has conducted its own independent investigation
of the Property and has not relied on statements or representations of
Transferor with respect to the condition of the Property except as is
specifically set forth herein.
(b) Contacts with Tenants. At any time(s) reasonably requested by
Transferee following the Effective Date and prior to Closing, Transferee
may contact and interview the Tenants, provided that such contacts or
interviews shall occur only after reasonable oral or written notice to
Transferor and Transferor may be present during any interview.
(c) Delivery of Documents and Records. Transferor has previously delivered
the Due Diligence Materials to Transferee and Transferee has reviewed those
documents prior to executing this Agreement.
(d) Rejection of Service Contracts. Prior to the execution of this
Agreement, Transferee has advised Transferor in writing of those Service
Contracts which it desires to assume and Transferee shall be deemed to have
rejected all other Service Contracts.
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(e) No Assumption of Renewal or Option Commissions. Transferee specifically
disclaims any liability for brokerage commissions that may be payable upon
the renewal or extension of the term of any Lease, whether pursuant to the
exercise of an option or otherwise.
(f) Transferee's Right to Terminate. At any time up to June 30, 1997,
Transferee has the unqualified right to terminate this Agreement and obtain
a refund of any and all amounts paid hereunder to Title Company or to
Transferor, subject to Transferee's obligations to return Due Diligence
Materials to Transferor as provided in the Section entitled "Conditions to
Closing."
5. Conditions to Closing.
(a) Transferee's Conditions Precedent. Transferee's Conditions Precedent as
set forth below are precedent to Transferee's obligation to acquire the
Property. The Transferee's Conditions Precedent are intended solely for the
benefit of Transferee. If any of the Transferee's Conditions Precedent is
not satisfied, Transferee shall have the right in its sole discretion
either to waive the Transferee's Condition Precedent and proceed with the
acquisition or terminate this Agreement by written notice to Transferor and
the Title Company.
(i) Approval of Title. Prior to June 30, 1997, Transferee shall advise
Transferor what exceptions to title, if any, will be accepted by
Transferee. Transferor shall have two (2) business days after receipt
of Transferee's objections to give to Transferee: (A) written notice
that Transferor will remove such objectionable exceptions on or before
the Closing Date; or (B) written notice that Transferor elects not to
cause such exceptions to be removed. Transferor's failure to give
notice to Transferee within the two (2) business day period shall be
deemed to be Transferor's election not to cause such exceptions to be
removed. If Transferor gives Transferee notice or is otherwise deemed
to have elected to proceed under clause (B), Transferee shall have
until the Closing Date to elect to proceed with the transaction or
terminate this Agreement. If Transferee fails to give Transferor
notice of its election on or before the Closing Date and the Closing
does not otherwise occur, Transferee shall be deemed to have elected
to terminate this Agreement. If Transferor gives notice pursuant to
clause (A) and fails to remove any such objectionable exceptions from
title prior to the Closing Date, and Transferee is unwilling to take
title subject thereto, Transferor shall be in default and Transferee
shall have the rights and remedies set forth in the Section entitled
"Non-Consummation of the Transaction."
(ii) Review of Property, Due Diligence Materials and Disclosures.
{Intentionally deleted.]
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(iii) Leases. Except as may be approved by Transferee, all of the
Leases shall be in full force and effect, without default thereunder
by either tenant or landlord, and no tenant shall be the subject of a
proceeding under any Creditors Rights Laws.
(iv) Representations and Warranties. The representations and
warranties of Transferor contained herein shall be true and correct as
of the Closing Date as though made at and as of the Closing Date, and
Transferor's covenants under this Agreement shall be satisfied as of
the Closing Date (to the extent such covenants are to be satisfied as
of the Closing Date), and Transferee shall have received at the
Closing a Certificate in the form of Exhibit H hereto, dated as of the
Closing Date and executed on behalf of Transferor by executive
officers of Transferor or of the respective general partners of
Transferor, as applicable, certifying as to the fulfillment of the
conditions set forth in this Subsection.
(v) Conveyances by Transferor. At the Closing, Transferor shall convey
to Transferee all of its right, title and interest to the Property by
executing and delivering all documents required to be delivered by
Transferor pursuant to the Section entitled "Closing and Escrow."
(vi) Title Policy. Title Company shall be committed to issue the Title
Policy with the Required Endorsements at Closing, showing title to the
Real Property vested in Transferee, subject only to the Permitted
Exceptions. On or before the Closing, Transferor shall cause the Title
Company to deliver to Transferee a certification that, in issuing the
Title Policy, the Title Company has not relied on any representations
or indemnities of Transferor or any of its affiliates (except as
disclosed in such certification).
(vii) No Financing Statements. Transferee shall be satisfied that, as
of the Closing, there is no outstanding financing statement showing
Transferor as debtor filed in accordance with the Uniform Commercial
Code of any applicable jurisdiction with respect to the Property
except for any financing statements approved by Transferee prior to
the Approval Date or relating to the Loan.
(viii) Tenant Estoppel Certificates. Transferor obtaining and
delivering to Transferee the Tenant Estoppel Certificates.
(ix) Property Condition. The physical condition of the Real Property
shall be substantially the same on the Closing Date as on the
Effective Date, reasonable wear and tear and loss by casualty
excepted.
(x) Termination of Agreements. On or before the Closing Date,
Transferor shall give written notice of termination of all property
management, leasing brokerage agreements and Service Contracts (except
those specifically
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assumed by Transferee in writing) affecting the Property, and such
termination shall be without cost or expense to Transferee.
(b) Closing of Related Transaction. The simultaneous closing of all of the
Related Transactions with the Closing of this transaction is a condition
precedent to both Transferor's and Transferee's obligations under this
Agreement. This condition precedent is for the benefit of both Transferor
and Transferee, and if it is not satisfied, then either party may terminate
this Agreement by written notice to the other party and Title Company, and
the transaction shall not be consummated unless both parties each in their
sole discretion waive this condition precedent and elect to proceed with
the transaction.
(c) Deemed Approval of Conditions. In the event that any party having the
right of cancellation hereunder based on failure of a condition precedent
set forth herein does not inform the other party and Title Company in
writing of its disapproval of any condition precedent prior to the Closing,
such condition precedent shall be deemed to have been satisfied, approved
or waived, effective as of the Closing; provided that a party shall not be
deemed to have waived any claim for breach of any representation or
warranty by the other party unless such party has Actual Knowledge of such
breach prior to Closing.
(d) Return of Materials. Upon termination of this Agreement and the escrow
for failure of a condition precedent, Transferee shall return to Transferor
all materials provided by Transferor to Transferee pursuant to the Section
entitled "Transferee's Due Diligence."
6. Closing and Escrow.
(a) Closing Date. The Closing shall be conducted through, and all items to
be delivered shall be delivered to, the Title Company, on or before the
Closing Date, which may be extended by Transferee for a period of not more
than thirty (30) days by delivery of written notice to Transferor not later
than one (1) day prior to the Closing Date.
(b) Deposit of Agreement and Escrow Instructions. The parties shall
promptly deposit a fully executed copy of this Agreement with Title Company
and this Agreement shall serve as escrow instructions to Title Company for
consummation of the transactions contemplated hereby. The parties agree to
execute such additional escrow instructions as may be appropriate to enable
Title Company to comply with the terms of this Agreement; provided,
however, that in the event of any conflict between the provisions of this
Agreement and any supplementary escrow instructions, the terms of this
Agreement shall control unless a contrary intent is expressly indicated in
such supplementary instructions. Transferor and Transferee hereby designate
Title
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Company as the Reporting Person for the transaction pursuant to Section
6045(e) of the Internal Revenue Code and the regulations promulgated
thereunder.
(c) Transferor's Deliveries to Escrow. At or before the Closing, Transferor
shall deliver to Transferee the following, to the extent they have not
already been delivered:
(i) the duly executed and acknowledged Deed;
(ii) a duly executed Assignment of Leases;
(iii) a duly executed Bill of Sale;
(iv) a duly executed Assignment of Contracts;
(v) a Lease for Suite 210 at the Property, executed by Resco
Properties, a California general partnership, in the form attached
hereto as Exhibit J (the "Suite 210 Lease";
(vi) a FIRPTA affidavit (in the form attached as Exhibit E) pursuant
to Section 1445(b)(2) of the Internal Revenue Code of 1986 (the code
), and on which Transferee is entitled to rely, that Transferor is not
a foreign person within the meaning of Section 1445(f)(3) of the
Internal Revenue Code; and
(vii) a California Form 590 from Transferor certifying that Transferor
has a permanent place of business in California or is qualified to do
business in California; and
(viii) any other instruments, records or correspondence called for
hereunder which have not previously been delivered.
(d) Transferor's Deliveries to Transferee.
(i) Deliveries at Closing. At or before the Closing, Transferor shall
deliver to Transferee the following, to the extent they have not
already been delivered:
a) a Closing Certificate in the form attached hereto as Exhibit
H;
b) operating statements for that portion of the current year
ending at the end of the calendar month preceding the month in
which the Closing Date occurs, certified in the manner specified
in Addendum III;
c) a Rent Roll and Delinquency Report both dated as of the first
day of the month in which the Closing Date occurs;
d) duly executed original Tenant Estoppel Certificates;
e) such original resolutions, authorizations, bylaws or other
corporate and/or partnership documents or agreements relating to
Transferor as shall be reasonably required by Transferee and/or
the Title Company;
f) an original signed notice in the form of Exhibit G attached
hereto for each of the Tenants; and
g) all keys to the Property, which shall be personally delivered
at the Property by a representative of Transferor to a
representative of Transferee.
(ii) Deliveries After Closing. On the first business day following the
Closing, Transferor shall deliver to Transferee the following, to the
extent they
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have not already been delivered, and such delivery shall be made in
the manner set forth in Addendum IV:
a) originals of the Contracts not previously delivered to
Transferee;
b) originals of the Leases;
c) originals of any and all building permits and certificates of
occupancy for the Real Property that are in the possession or
control of Transferor and/or an affiliate of Transferor;
d) originals of all other matters described in Addendum III; and
e) any other instruments, records or correspondence called for
hereunder which have not previously been delivered.
(e) Transferee's Deliveries to Transferor. At or before the Closing,
Transferee shall deliver or cause to be delivered to escrow the following:
(i) a duly executed Assignment of Leases;
(ii) a duly executed Assignment of Service Contracts;
(iii) a duly executed counterpart of the Suite 210 Lease;and
(iv) the Cash.
(f) Deposit of Other Instruments. Transferor and Transferee shall each
deposit such other instruments as are reasonably required by Title Company
or otherwise required to close the escrow and consummate the transactions
described herein in accordance with the terms hereof.
7. Closing Adjustments and Prorations. With respect to each Property, the
following adjustments shall be made, and the following procedures shall be
followed:
(a) Basis of Prorations. All prorations shall be calculated as of 12:01
a.m. on the Closing Date, on the basis of a 365-day year.
(b) Items Not to be Prorated. There shall be no prorations or adjustments
of any kind with respect to:
(i) Insurance premiums;
(ii) Delinquent Rents for full months prior to the month in which the
Closing occurred. Delinquent Rents for full months prior to the month
in which the Closing occurred shall remain the property of Transferor;
however Transferee shall cooperate with Transferor and shall assist
Transferor in efforts to collect; provided further, however, that
Transferee shall have no duty to initiate any legal proceeding or
action against any Tenant on Transferor's behalf related to such
Delinquent Rents. Transferor may take all appropriate collection
measures (including litigation if deemed by Transferor to be necessary
or desirable), except that Transferor may not seek any remedy which
would interfere with the Tenant's continued occupancy and full use of
its premises
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under such Tenant's Lease, or Transferee's rights to receive Rent with
respect to any period beginning on the Closing Date.
(iii) Additional Rents relating to full or partial months prior to the
Closing Date. If Additional Rents relating to full or partial months
prior to the Closing Date are not finally adjusted between Transferor
and any Tenant until after the Closing Date, then any refund to which
any Tenant may be entitled shall be the obligation of Transferor, and
any additional amounts due from the Tenant for such period shall be
the property of Transferor. Transferee shall have no obligation with
respect to any such refund due to any Tenant and no claim to any such
amounts due from any Tenant. In seeking to collect any such amount due
from any Tenant, Transferor may take all appropriate collection
measures (including litigation if deemed by Transferor to be necessary
or desirable), except that, in seeking to collect any such additional
amounts due from any Tenant, Transferor may not seek any remedy which
would interfere with the Tenant's continued occupancy and full use of
its premises under such Tenant's Lease, or Transferee's rights to
receive Rent with respect to any period beginning on the Closing Date.
If Transferor receives any refund of expenses paid prior to the
Closing and relating to a period prior to the Closing, and such
expenses were reimbursed in whole or in part by any Tenant, Transferor
shall refund to each Tenant its share of any such refund.
(c) Closing Adjustments. Prior to Closing, Transferor shall prepare for
review, comment and agreement by Transferee a proration statement for each
Property, substantially in the form attached hereto as Exhibit I, and each
party shall be credited or charged at the Closing, in accordance with the
following:
(i) Rents. Transferor shall account to Transferee for any Rents
actually collected by Transferor for the period in which the Closing
occurs, and Transferee shall be credited for its share.
(ii) Expenses.
a) Prepaid Expenses. To the extent Expenses have been paid prior
to the Closing Date for the period in which the Closing occurs,
Transferor shall account to Transferee for such prepaid Expenses,
and Transferor shall be credited for its pro rata share thereof
for the period after the Closing Date.
b) Unpaid Expenses. To the extent Expenses relating to the period
in which the Closing occurs are unpaid as of the Closing Date but
are ascertainable (e.g., interest on the Loan), Transferee shall
be credited for Transferor's pro rata share of such Expenses for
the period prior to the Closing date.
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c) Property Taxes. For purposes of this Subsection entitled
"Expenses," the Title Company shall pro-rate property taxes based
on the most recent available tax bills.
(iii) Security Deposits. Transferor shall deliver to Transferee all
prepaid rents, security deposits, letters of credit and other
collateral given to Transferor or any of its affiliates or
successors-in-interest under any of the Leases.
(d) Post-Closing Adjustments. After the Closing Date, Transferor and
Transferee shall meet from time to time to discuss adjustments in
accordance with the following.
(i) Non-delinquent Rents. Transferor shalll take all reasonable and
customary efforts to bill and collect July Rents for the Property. If
Transferor collects ay Rents applicable to the month of July,
Transferor shall promptly endorse such payments over to Transferee,
which shall in turn pay to Transferor its pro rata share of such
Rents, if any.
(ii) Delinquent Rents for month in which the Closing occurred. If
Transferee collects from any Tenant Rents that were delinquent as of
the Closing Date and that relate to the period in which the Closing
occurred, then such Rents shall be applied in the following order of
priority: First, to reimburse Transferee for all reasonable
out-of-pocket third-party collection costs actually incurred by
Transferee in collecting such Rents (including the portion thereof
relating to the period after the Closing Date); second, to satisfy
such Tenant's Rent obligations relating to the period after the
Closing Date; and third, to satisfy such delinquent Rent obligations
relating to the period before the Closing Date. Transferor shall have
no right to pursue the collection of such delinquent Rents.
(iii) Expenses. With respect to any invoice received by Transferee
after the Closing Date for Expenses that relate to the period in which
the Closing occurred, Transferee will either, at Transferee's option,
(A) pay the entire amount of the invoice and either bill Transferor
for Transferor's share, or offset Transferor's share against any
prorated Rents due to Transferor under subsection(i) or (ii) above, or
(B) compute Transferee's pro rata share, write a check for that amount
in favor of the vendor, and then send the invoice and check to
Transferor, in which case Transferor agrees that it will pay for its
share and forward the invoice and the two payments to the vendor. If
real property taxes and assessments payable for any period prior to
Closing are determined to be more than the amounts prorated herein (in
the case of the current year) or paid by Transferor (in the case of
any prior year), due to a reassessment of the Real Property or
otherwise, Transferor and Transferee shall promptly adjust the
proration of such real property taxes and assessments after
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the determination of such amounts and Transferor shall pay to
Transferee any increase in the amount of such real property taxes and
assessment applicable to any period prior to Closing.
(iv) Survival of Obligations. The obligations of Transferor and
Transferee under the Subsection entitled "Post-Closing Adjustments"
shall survive the Closing.
(e) Allocation of Closing Costs. Closing costs shall be allocated as set
forth below:
(i) Escrow charges: 50% to Transferor and 50% to Transferee.
(ii) Recording fees: 50% to Transferor and 50% to Transferee.
(iii) Title insurance premium: 50% to Transferor and 50% to
Transferee.
(iv) Transfer taxes: 100% to Transferor and 0% to Transferee.
(f) Allocation among Related Transactions. All Closing Adjustments and
prorations chargeable to Transferor in this Agreement and to the transferor
in the Related Transactions shall be aggregated and charged 50% to
Transferor under this Agreement and 50% to the transferor in the Related
Transaction.
8. Tenant Estoppel Certificates. Transferor shall use all reasonable efforts to
obtain a Tenant Estoppel Certificate from all Tenants, dated no earlier than
thirty (30) days prior to the Closing Date, conforming to the most recent Rent
Roll and Delinquency Report approved by Transferee and alleging no defaults,
offsets, or claims against Transferor. Transferor shall deliver completed Tenant
Estoppel Certificates to Transferee as they are received by Transferor, and
shall use all reasonable efforts to deliver all Tenant Estoppel Certificates to
Transferee prior the Closing. It shall be a condition to Transferee's obligation
to close the contribution and acquisition of the Property that on or before the
Closing:
(a) Transferor delivers to Transferee Tenant Estoppel Certificates from the
Required Tenants, and, to the extent Transferor is unable to obtain Tenant
Estoppel Certificates, or any items required to be therein, from the
Non-Required Tenants, Transferor shall deliver to Transferee and Transferee
shall be obligated to accept on the Closing Date a certification in which
Transferor warrants and represents to Transferee, with respect to such
missing Tenant Estoppel Certificates or any missing items required to be
included therein, each such missing item or Tenant Estoppel Certificate.
9. Transferor's Representations and Warranties. Transferor hereby represents and
warrants to Transferee the matters set forth on Addendum II, which is
incorporated herein by this reference as though fully set forth herein.
Transferee is entitled to rely on Transferor's representations and warranties
notwithstanding Transferor's inspection and investigation of the Property.
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10. Transferee's Representations and Warranties. Transferee hereby represents
and warrants to Transferor as follows:
(a) GPLP is a duly organized and validly existing limited partnership in
good standing under the laws of the State of California, and GLB is a duly
organized and validly existing corporation under the laws of the State of
Maryland. This Agreement and all documents executed by Transferee which are
to be delivered to Transferor at the Closing are or at the time of Closing
will be duly authorized, executed and delivered by Transferee, and are or
at the Closing will be legal, valid and binding obligations of Transferee,
and do not and at the time of Closing will not violate any provisions of
any agreement or judicial order to which Transferee is subject.
(b) Transferee has made (or will make prior to the Closing Date) an
independent investigation with regard to the Property and Transferee's
intended use thereof, including without limitation, review and/or approval
of matters disclosed by Transferor pursuant to this Agreement.
(c) There is no litigation pending or, to Transferee's knowledge,
threatened, against Transferee or any basis therefor that might materially
and detrimentally affect the ability of Transferee to perform its
obligations under this Agreement. Transferee shall notify Transferor
promptly of any such litigation of which Transferee becomes aware.
(d) All representations and warranties set forth herein shall be true as of
the Effective Date and the Closing Date.
(e) The 1996 Annual Report of GLB, the Prospectus Supplement of GLB dated
March 17, 1997 and the Form 10-K Annual Report for 1996 of GLB as
previously delivered to Transferor are true and correct in all material
respects and do not omit any material information about GLB or Transferee.
(f) The Second Amended and Restated Agreement of Limited Partnership of
Glenborough Properties, LP dated as of October 17, 1996 (the "GPLP
Agreement") previously delivered to Transferor is a true and correct copy
of such agreement and sets forth all of the rights, preferences and
privileges of Transferor as a holder of OP Units except as such rights,
preferences and privileges of Transferor as a holder of OP Units are
modified by this Agreement.
(g) True and correct copies of the provisions of the Articles of
Incorporation of GLB to which reference is made in Section 8.6C of the GPLP
Agreement have been previously delivered to Transferor."
11. Indemnification.
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(a) Mutual Indemnification. Each party hereby agrees to indemnify the other
party and defend and hold it harmless from and against any and all claims,
demands, liabilities, costs, expenses, penalties, damages and losses,
including, without limitation, attorneys fees, resulting from any
misrepresentation or breach of warranty or breach of covenant made by such
party in this Agreement or in any document, certificate, or Exhibit or
Schedule given or delivered to the other pursuant to or in connection with
this Agreement.
(b) Indemnification by Transferor. Transferor agrees to indemnify
Transferee and its partners and defend and hold Transferee and its partners
harmless from and against any and all claims, demands, liabilities, costs,
expenses, penalties, damages and losses, including, without limitation,
attorneys' fees, asserted against, incurred or suffered by Transferee
resulting from or arising out of (i) any personal injury or property damage
occurring in, on or under the Property during the period from June 18, 1995
to the date of Closing, from any cause whatsoever other than as a
consequence of the acts or omissions of Transferee, its agents, employees
or contractors; and (ii) the failure of Transferor to perform any
obligation under the Loan Documents to be performed by the borrower prior
to the Closing Date (other than the obligation to obtain the Lender's
Consent for the of the Property contemplated herein).
(c) Indemnification by Transferee. Transferee agrees to indemnify
Transferor and its partners and defend and hold Transferor and its partners
harmless from any claims, losses, demands, liabilities, costs, expenses,
penalties, damages and losses, including, without limitation, attorneys
fees, asserted against, incurred or suffered by Transferor resulting from
or arising out of (i) any personal injury or property damage first
occurring in, on or under the Property during Transferee's ownership
thereof, from any cause whatsoever other than as a consequence of the acts
or omissions of Transferor, or its agents, employees or contractors, and
(ii) if Transferee does not pay off the Loan on or before the Loan Payoff
Date, the failure of Transferor to perform any obligation under the Loan
Documents to be performed by the borrower after the Closing Date.
(d) Survival of Indemnifications. The indemnification provisions of this
Section shall survive beyond the Closing, or, if the Closing does not occur
pursuant to this Agreement, beyond any termination of this Agreement.
12. Risk of Loss.
(a) Notice of Loss. If, prior to the Closing Date, any portion of the of
the Property suffers a Minor or Major Loss, Transferor shall immediately
notify Transferee of that fact, which notice shall include sufficient
detail to apprise Transferee of the current status of the Property
following such loss.
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(b) Minor Loss. Transferee's obligations hereunder shall not be affected by
the occurrence of a Minor Loss, provided that: (i) upon the Closing, there
shall be a credit against the Consideration equal to the amount of any
insurance proceeds or condemnation awards collected by Transferor as a
result of such Minor Loss, plus the amount of any insurance deductible; or
insurance or condemnation proceeds available to Transferor are sufficient
to cover the cost of restoration; and the insurance carrier has admitted
liability for the payment of such costs; and (ii) the Loan is not
accelerated or defaulted by reason of such casualty or condemnation. If the
proceeds or awards have not been collected as of the Closing, then
Transferor's right, title and interest to such proceeds or awards shall be
assigned to Transferee.
(c) Major Loss. In the event of a Major Loss, Transferee may, at its option
to be exercised by written notice to Transferor within twenty (20) days of
Transferor's notice to Transferee of the occurrence thereof, elect to
either (i) terminate this Agreement, or (ii) consummate the acquisition of
the Property for the full Consideration, subject to the following. If
Transferee elects to proceed with the acquisition of the Property, then the
Closing shall be postponed to the later of the Closing Date or the date
which is five (5) days after Transferee makes such election and, upon the
Closing, Transferee shall be given a credit against the Consideration equal
to the amount of any insurance proceeds or condemnation awards collected by
Transferor as a result of such Major Loss, plus the amount of any insurance
deductible. If the proceeds or awards have not been collected as of the
Closing, then Transferor's right, title and interest to such proceeds or
awards shall be assigned to Transferee, and Transferor will cooperate with
Transferee as reasonably requested by Transferee in the collection of such
proceeds or award. If Transferee fails to give Transferor notice within
such 20-day period, then Transferee will be deemed to have elected to
terminate this Agreement.
13. Transferor's Continued Operation of the Property
(a) General. Except as otherwise contemplated or permitted by this
Agreement or approved by Transferee in writing, from the Effective Date to
the Closing Date, Transferor will operate, maintain, repair and lease the
Property in a prudent manner, in the ordinary course of business, on an
arm's-length basis and consistent with its past practices (and without
limiting the foregoing, Transferor shall, in the ordinary course, negotiate
with prospective tenants and enter into leases of the Property, enforce
leases in all material respects including eviction proceedings against all
Tenants with delinquencies in excess of 30 days, pay all costs and expenses
of the Property, including, without limitation, debt service, real estate
taxes and assessments, maintain insurance and pay and perform obligations
under the Loan Documents) and will not dispose of or encumber any of the
Property, except for dispositions of personal property in the ordinary
course of business. Between the Effective Date and the Closing, Transferor
shall continue to undertake capital improvements with respect to the
Property in the ordinary course of business.
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(b) Actions Requiring Transferee's Consent. Notwithstanding the above terms
of this Section, Transferor shall not, without the prior written approval
of Transferee, take any of the following actions:
(i) Leases. Execute or renew any Lease, terminate any Lease, or modify
or waive any material term of any Lease;
(ii) Contracts. Except as otherwise required under this Agreement,
enter into, execute or terminate any operating agreement, reciprocal
easement agreement, management agreement or any lease, contract,
agreement or other commitment of any sort that will survive the
Closing (including any contract for capital items or expenditures),
with respect to the Property requiring payments to or by Transferor in
excess of $5000 per year, or the performance of services by Transferor
the value of which exceeds $5,000 per year.
(c) Cost of Tenant Improvements and Leasing Commissions. In connection with
any new leases or modifications of existing Leases entered into between the
Effective Date and the Closing and approved by Transferee, the cost of
tenant improvement work and leasing commissions shall be prorated between
Transferee and Transferor in proportion to the ratio between the portion of
the new lease term prior to the Closing Date and the portion of the new
lease term after the Closing Date. Except as set forth in Schedule II.E.3,
Transferor shall be responsible for the cost of tenant improvement work and
leasing commissions for all Leases (and amendments thereto) entered into
prior to the Effective Date (regardless of when the same are payable), and
Transferor's obligations with respect thereto shall survive the Closing.
14. Cooperation
(a) Before Closing. Transferor and Transferee shall cooperate and do all
acts as may be reasonably required or requested by the other with regard to
the fulfillment of any Condition Precedent or the consummation of the
transactions contemplated hereby including execution of any documents,
applications or permits. Transferor hereby irrevocably authorizes
Transferee and its agents to make all inquiries of any third party,
including any governmental authority, as Transferee may reasonably require
to complete its due diligence.
(b) After Closing. For a period of three years after the Closing,
Transferor will give Transferee timely and complete access to the
historical financial and property records of Transferor relating to its
acquisition, ownership and operation of the Property, and Transferor agrees
that it will not destroy any of the records during any such period of time
without the prior written consent of Transferee. During the first year
after the Closing, Transferor will provide to Transferee on a timely and
complete basis such historical financial information with respect to the
acquisition, ownership and operation of the Property as Transferee may
reasonably request in connection with
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any reports which GLB is required to file with the Securities & Exchange
Commission or the New York Stock Exchange.
15. Non-Consummation of the Transaction. If the transaction is not consummated
on or before the Closing Date, the following provisions shall apply:
(a) No Default. If the transaction is not consummated for a reason other
than a default by one of the parties, then (i) Title Company and each party
shall return to the depositor thereof and all funds and items which were
deposited hereunder; (ii) Transferor and Transferee shall each bear
one-half of any Escrow cancellation charges. Any return of funds or other
items by the Title Company or any party as provided herein shall not
relieve either party of any liability it may have for its wrongful failure
to close.
(b) Default by Transferor. If the transaction is not consummated as a
result of a default by Transferor, then Transferee may either (i) terminate
this Agreement by delivery of notice of termination to Transferor,
whereupon Transferor shall pay to Transferee any title, escrow, legal and
inspection fees incurred by Transferee and any other expenses incurred by
Transferee in connection with the performance of its review under the
Section entitled "Transferee's Due Diligence" (including, without
limitation, environmental and engineering consultants' fees and expenses),
in which case neither party shall have any further rights or obligations
hereunder; or (ii) continue this Agreement pending Transferee's action for
specific performance and/or damages.
(c) Default by Transferee. If the Closing does not occur as a result of a
default by Transferee, then (i) Transferee shall pay all escrow
cancellation charges, (ii) Transferee shall pay to Transferor $100,000 as
its full and complete liquidated damages and its sole and exclusive remedy
for Transferee's default. THE PARTIES HAVE AGREED THAT TRANSFEROR'S ACTUAL
DAMAGES, IN THE EVENT OF A DEFAULT BY TRANSFEREE, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR
INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT $100,000 HAS BEEN AGREED UPON,
AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF TRANSFEROR'S
DAMAGES AND AS TRANSFEROR'S EXCLUSIVE REMEDY AGAINST TRANSFEREE, AT LAW OR
IN EQUITY, IN THE EVENT OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF
TRANSFEREE.
INITIALS: Transferor _____ Transferee _____
16. Miscellaneous
(a) Disclosure of Transaction. Prior to the Closing, neither party shall
publicly announce or discuss the execution of this Agreement or the
transaction contemplated
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hereby except in accordance with the following. Neither party shall
publicly announce or discuss the execution of this Agreement or the
transaction contemplated hereby unless: (i) the information disseminated by
such party is limited to the names of the Transferor and Transferee; a
general description of the Property including size, type and location; the
amount and nature of the Consideration; and Transferee's anticipated yield
from the acquisition of the Property; or (ii) the announcing party has
obtained the prior written consent of the other party, which shall not be
unreasonably withheld.
(b) Possession. Possession of the Property shall be delivered to Transferee
upon the Closing.
(c) Notices. Any notice, consent or approval required or permitted to be
given under this Agreement shall be in writing and shall be deemed to have
been given upon (i) hand delivery, (ii) one (1) day after being deposited
with Federal Express, DHL Worldwide Express or another reliable overnight
courier service or transmitted by facsimile telecopy, or (iii) two (2) days
after being deposited in the United States mail, registered or certified
mail, postage prepaid, return receipt required, and addressed as indicated
below, or such other address as either party may from time to time specify
in writing to the other.
If to Transferee: If to Transferor:
Glenborough Realty Trust Incorporated Ronald E. Soderling, Trustee
400 South El Camino Real, 11th Floor 4040 Barranca Parkway, Suite 210
San Mateo, CA 94402-1708 Irvine, CA 92604-5766
Attention: Stephen Saul
with a copy to: with a copy to:
Glenborough Realty Trust Incorporated Bryan Cave LLP
400 South El Camino Real, 11th Floor 18881 Van Karman, Suite 1500
San Mateo, CA 94402-1708 Irvine, CA 92612-1582
Attention: G. Lee Burns, Jr. Attention: Steven H. Sunshine
(d) Brokers and Finders. Transferee has agreed to pay to Provine &
Associates a brokerage fee pursuant to the terms of a separate agreement
between Transferee and Provine & Associates. Except as set forth in the
preceding sentence, neither party has had any contact or dealings regarding
the Property, or any communication in connection with the subject matter of
this transaction. through any real estate broker or other person who can
claim a right to a commission or finder's fee in connection with the
contemplated herein. In the event that any broker or finder perfects a
claim for a commission or finder's fee based upon any such contact,
dealings or communication, the party through whom the broker or finder
makes its claim shall be responsible for said commission or fee and shall
indemnify and hold harmless the other party from and against all
liabilities, losses, costs and expenses (including reasonable attorneys'
fees)
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arising in connection with such claim for a commission or finder's fee. The
provisions of this Subsection shall survive the Closing.
(e) Joint and Several Liability. If Transferor consists of two (2) or more
parties, each of such parties (and each of their respective general
partners if applicable) shall be liable for Transferor's obligations under
this Agreement, and all documents executed in connection herewith, and the
liability of such parties shall be joint and several.
(f) Successors and Assigns. Subject to the following, this Agreement shall
be binding upon, and inure to the benefit of, the parties and their
respective successors, heirs, administrators and assigns. Transferee shall
have the right, with notice to Transferor (but without the necessity of
Transferor's consent), to assign its right, title and interest in and to
this Agreement to one or more assignees at any time before the Closing
Date; provided, however that such assignee(s) shall assume all obligations
of Transferee, and such assignment and assumption shall not release
Transferee from any obligation hereunder. Transferor shall not have the
right to assign its interest in this Agreement. Notwithstanding anything in
the foregoing to the contrary, from and after the first anniversary of the
Closing Date, Transferor shall have the right from time to time to transfer
any or all of its right, title and interest in the OP Units.
(g) Amendments. Except as otherwise provided herein, this Agreement may be
amended or modified only by a written instrument executed by Transferor and
Transferee.
(h) Governing Law. This Agreement has been negotiated and executed in San
Mateo County, California and the substantive laws of the State of
California, without reference to its conflict of laws provisions, will
govern the validity, construction, and enforcement of this Agreement.
(i) Merger of Prior Agreements. This Agreement and the Addenda, Exhibits
and Schedules hereto constitute the entire agreement between the parties
and supersede all prior agreements and understandings between the parties
relating to the subject matter hereof.
(j) Arbitration of Disputes. Any controversy, claim , counterclaim, or
disputes between or among the parties hereto arising out of or relating to
the interpretation, application, breach or enforcement of this Agreement or
any related agreements or instruments ("Subject Documents") ("Dispute"),
shall, at the option of any party, and at that party's expense, be
submitted to mediation, using either the American Arbitration Association
(AAA) or Judicial Arbitration and Mediation Services, Inc. (JAMS). If
mediation is not used, or if it is used and it fails to resolve the Dispute
within 30 days from the date AAA or JAMS is engaged, then the Dispute shall
be determined by neutral binding arbitration in accordance with the
Commercial Arbitration Rules then in effect of either JAMS or AAA (at the
option of the party
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initiating the arbitration) and Title 9 of the U.S. Code, notwithstanding
any other choice of law provision(s) herein or in the Subject Documents.
Any controversy concerning whether a Dispute is arbitrable shall be
determined by the arbitrator(s). The parties agree that related arbitration
proceedings may be consolidated. The arbitrator shall prepare written
reasons for the award. The parties hereto agree that the arbitrator shall
be empowered to grant equitable, as well as legal, relief, including,
without limitation, the power to compel specific performance of this
Agreement. The parties further consent that the initiation of mediation
and/or arbitration pursuant to these provisions shall constitute an action
or the equivalent for purposes of determining a party's right to file a lis
pendens in the official records of the jurisdiction where the Property
is/are located. The parties consent that judgment on the award rendered may
be entered in any state court sitting in the state of California, and that
any mediation and/or arbitration shall take place in Irvine, California.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE
THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE
BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL,
UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING
TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER AUTHORITY OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE
TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION
OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
____________ ____________
Transferor Transferee
(k) Enforcement. If either party fails to perform any of its obligations
under this Agreement or if a dispute arises between the parties concerning
the meaning or interpretation of any provision of this Agreement, then the
defaulting party or the party not prevailing in such dispute shall pay any
and all costs and expenses incurred by the other party on account of such
default and/or in enforcing or establishing its rights hereunder,
including, without limitation, arbitration or court costs and attorneys'
fees and disbursements. Any such attorneys' fees and other expenses
incurred by either party in enforcing a judgment in its favor under this
Agreement shall be recoverable separately from and in addition to any other
amount included in such judgment, and
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such attorneys' fees obligation is intended to be severable from the other
provisions of this Agreement and to survive and not be merged into any such
judgment.
(l) Time of the Essence. Time is of the essence of this Agreement.
(m) Severability. If any provision of this Agreement. or the application
thereof to any person, place, or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable or void, the remainder
of this Agreement and such provisions as applied to other persons, places
and circumstances shall remain in full force and effect.
(n) Marketing. Transferor agrees not to market or show the Property to any
other prospective purchasers during the term of this Agreement.
(o) Confidentiality. Transferee and Transferor shall each maintain as
confidential any and all material or information about the other or, in the
case of Transferee and its agents, employees, consultants and contractors,
about the Property, and shall not disclose such information to any third
party, except, in the case of information about the Property and
Transferor, to Transferee's investment bankers, lender or prospective
lenders, insurance and reinsurance firms, attorneys, environmental
assessment and remediation service firms and consultants, as may be
reasonably required for the consummation of the transaction contemplated
hereunder and/or as required by law.
(p) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
(q) Addenda, Exhibits and Schedules. All addenda, exhibits and schedules
referred to herein are, unless otherwise indicated, incorporate herein by
this reference as though set forth herein in full.
(r) Construction. Headings at the beginning of each section and subsection
are solely for the convenience of the parties and are not a part of the
Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine and
vice versa. This Agreement shall not be construed as if it had been
prepared by one of the parties, but rather as if both parties had prepared
the same. In the event the date on which Transferor or Transferee is
required to take any action under the terms of this Agreement is not a
business day, the action shall be taken on the next succeeding business
day.
(s) Property Condition. Except for the Representations and Warranties of
Transferor specifically set forth herein, the Property is being sold and
conveyed by Transferee to Transferor "AS IS, WHERE IS, WITH ALL FAULTS", in
such condition as the same may be on the Closing Date, without any
representations and
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warranties by the Transferor as to any conditions of the Property,
including, without limitation, surface and subsurface environmental
conditions, whether latent or patent,. Except for the Representations and
Warranties of Transferor specifically set forth herein, Transferor makes no
guarantee, warranty or representation, express or implied, as to the
quality, character, or condition of the Property (or any part thereof) or
the fitness of the Property (or any part thereof) for any use or purpose or
any representation as to the nonexistence of any toxic or hazardous waste.
Except for any claim related to a breach of Transferor's express
representations and warranties, Transferee shall have no claim, in law or
in equity, based upon the condition of the Property or the failure of the
Property to meet any standards. In no event shall Transferor be liable for
any incidental, special, exemplary or consequential damages, including,
without limitation, loss of profits or revenue, interference with business
operations, loss of tenants, lenders, investors, buyers, diminution in
value of the Property, or inability to use the Property, due to the
condition of the Property, absent a breach of Transferor's express
Representations and Warranties contained herein. Transferee represents and
warrants to Transferor that upon expiration of the Due Diligence Period,
Transferee will have had ample opportunity to make a proper inspection,
examination and investigation of the Property to familiarize itself with
its condition and that it will do so to its satisfaction. Transferee agrees
that, upon acceptance of the condition of the Property hereunder, and
except for its reliance on the representations and warranties of Transferor
contained herein, it shall purchase and accept title to the Property
including any and all environmental conditions. In the event that any
hazardous substances are discovered on, at or under the Property, except
for any claim for breach of any representation or warranty of Transferee
specifically made herein, Transferee shall not maintain any action or
assert any claim against Transferor, its successors and their respective
members, employees and agents arising out of or relating to any such
hazardous substances, including, without limitation, any for contribution
or the generation, use, handling, treatment, removal, storage,
decontamination, cleanup, transport or disposal thereof. The provisions of
this Section shall survive the Closing or any termination of this
Agreement.
(t) Tax Free Exchange. As an accommodation to Transferee, Transferor agrees
to cooperate with Transferee to accomplish an I.R.C. Section 1031 like kind
tax deferred exchange, provided that the following terms and conditions are
met; (i) Transferee shall give Transferor notice of any desired exchange
not later than two (2) days prior to the Closing Date; (ii) Transferor
shall in no way be liable for any additional costs, fees and/or expenses
relating to the exchange; (iii) in no way shall the Closing be contingent
or otherwise subject to the consummation of the exchange, and the Closing
shall timely occur despite any failure, for what ever reason, of the
parties to the exchange to effect the same; and (iv) Transferor shall not
be required to make any representations or warranties nor assume or incur
any obligations or personal liability whatsoever in connection with the
exchange transaction.
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<PAGE>
The 1031 Exchange Transaction in question will involve funds held by
exchange facilitators for the benefit of Glenborough Fund III, Limited
Partnership ("Fund III"). Transferor agrees to convey a proportionate share
of the equitable and beneficial ownership of the Property to Fund III, and
Transferee and Fund III direct that legal title be transferred directly to
Glenborough Fund V, Limited Partnership, a Delaware limited partnership.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
Transferor
________________________
Ronald E. Soderling, Trustee,
or his successor in Trust U/D/T
dated February 20, 1996, and any
amendments thereto.
Date: June _______, 1997
Transferee
Glenborough Properties, L.P.,
a California limited partnership
By Glenborough Realty Trust Incorporated
a Maryland corporation
its General Partner
By __________________________________
its:
Date: June _______, 1997
As to its limited obligations hereunder and in the Addenda, Exhibits and
Schedules Glenborough Realty Trust Incorporated a Maryland corporation
By: _________________________
its:
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<PAGE>
Summary Description of Addenda, Exhibits and Schedules
Not Attached to
Contribution Agreement between
Ronald E. Soderling, Trustee,
And
Glenborough Properties, L.P.
Addenda
I Definitions.
II Transferor's Representations and Warranties.
III Due Diligence Materials to be Delivered by Transferor to Transferee.
IV Description of Method of Delivery of Certain Documents by Transferor
After Closing.
V Additional Provisions Governing the Delivery of OP Units by
Glenborough Properties, L.P. to Ronald E.Soderling, Trustee.
Exhibits
A Form of Deed.
B Form of Assignment and Assumption of Leases.
C Form of Warranty Bill of Sale.
D Form of Assignment and Assumption of Service Contracts,
Warranties and Guaranties, and Other Intangible Property.
E Certificate of Transferor Other Than an Individual (FIRPTA Affidavit).
F Form of Tenant Estoppel Certificate .
G Form of Notice to Tenants regarding Transfer.
H Form of Closing Certificate of Transferor.
I Form of Closing Proration Statement.
J Form of Lease for Suite 210 at the Property to be executed by an
Affiliate of Transferor at Closing.
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K Form of Registration Rights Agreement to be executed by Closing
governing the rights of the parties thereto relating to the SEC
Registration of any Shares to be held by Transferor.
L Form of Subscription Documents to be executed by Transferor
verifying Transferor's status as an Accredited Investor for
Securities Laws Purposes.
Schedules
1. Description of Land.
2. Permitted Title Exceptions at Closing.
3. List of Title Policy Endorsements required by Transferee.
4. Listing of Personal Property transferred to Transferee.
5. Listing of Existing Contracts regarding Property Operation.
6. Description of Other Interests being transferred to Transferee.
7. Listing of Environmental Reports delivered to Transferee.
8. Rent Roll.
9. Tenant Delinquency Report.
10. Description of Existing Secured Loans encumbering the Property.
11. Related Transactions that were a condition to closing.
II.C.1. Transferor's Listing of Property Defects.
II.C.2. Transferor's Listing of Violations of Laws and Regulations concerning
property operation.
II.C.3. Transferor's Description of Regulatory or Condemnation Proceedings.
II.D.3. Transferor's Description of Lease Exceptions and Tenant Defaults.
II.D.7. Transferor's Description of Pending Brokerage Fees Due to Third
Parties.
II.E.2. Transferor's Description of Litigation involving the Property.
II.E.3. Transferor's Description of Tenant Improvements Costs and
Leasing Commissions that remain the Transferor's Responsibility.
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<PAGE>
Agreement of Purchase and Sale
between
CIGNA Income Realty-I Limited Partnership
and
Connecticut General Equity Properties-I Limited Partnership
and
Westford Office Venture,
as Sellers,
and
Glenborough Properties, L.P.,
as Purchaser
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<PAGE>
Agreement Of Purchase And Sale
This AGREEMENT OF PURCHASE AND SALE is made by and between CIGNA Income
Realty-I Limited Partnership, a Delaware limited partnership ("CIR"),
Connecticut General Equity Properties-I Limited Partnership, a Connecticut
limited partnership ("CGEP"), and Westford Office Venture, a Connecticut general
partnership ("WOV") (each, individually a "Seller," and collectively, the
"Sellers"), and Glenborough Properties, L.P., a California limited partnership
("Purchaser"), as of the "Effective Date" (as defined below).
1. Property
Each Seller hereby agrees to sell, and Purchaser hereby agrees to buy, all
of the following property: (a) the real property described in Schedule 1.1
hereto and indicated on said Schedule 1.1 as being sold by such Seller, together
with all and singular easements, covenants, agreements, rights, privileges,
tenements, hereditaments and appurtenances thereunto now or hereafter belonging
or appertaining thereto (each, a "Land Parcel," and collectively, the "Land");
(b) any and all buildings (collectively, the "Buildings") and other improvements
of every kind located in, on and over each Land Parcel (with respect to a
particular Land Parcel, "Individual Improvements," and collectively, the
"Improvements"); (c) all tenant leases relating to each of the Individual
Improvements, being the leases referred to respectively on the Rent Rolls
attached hereto as Schedule 1.2 and all guarantees thereof, (each Land Parcel,
together with the Individual Improvements and the tenant leases related thereto,
is referred to herein as an "Individual Real Property"; all such Individual Real
Properties are referred to herein, collectively, as the "Real Property"); and
(d) all fixtures, equipment, and other personal property, both tangible and
intangible, including, but not limited to, the contracts listed in Schedule 1.3,
excluding only the leasing brokerage agreements, property management agreements
and other contracts that Purchaser elects to exclude by written notice to the
Sellers pursuant to Section 6.5 hereof, and the following items, to the extent
of the respective Seller' s right, title and interest thereto, and to the extent
assignable by such Seller without obtaining the consent thereto by any
third-party: all general intangibles relating to design, development, operation,
management and use of each Individual Real Property, all certificates of
occupancy, zoning variances, building, use or other permits, approvals,
authorizations, licenses and consents obtained from any governmental authority
in connection with the development, use, operation or management of each
Individual Real Property, any telephone numbers and listings used in connection
with the operation of each Individual Real Property and the leasing thereof,
goodwill in connection with each Individual Real Property, any data concerning
tenants of each Individual Real Property to the extent related to the Real
Property, all soils tests, engineering reports, architectural drawings, plans
and specifications relating to all or any portion of each Individual Real
Property, all payment and performance
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bonds or warranties or guarantees relating to each Individual Real Property,
trade names, fictitious business names, and other source and business
identifiers, including, but not limited to, the names set forth on Schedule 1.4
hereto, owned by each Seller and contained in or related to any of the
Individual Improvements being sold by such Seller (with respect to an Individual
Real Property, "Individual Personal Property," and collectively, the "Personal
Property") (collectively, an Individual Real Property and the Individual
Personal Property related thereto are sometimes referred to herein as an
"Individual Property;" collectively, the Real Property and the Personal Property
are sometimes referred to herein as the "Property").
It shall be a condition to Purchaser' s obligation hereunder to purchase
any Individual Property that each Seller shall consummate the Closing with
respect to all of its Individual Properties.
2. Purchase Price and Deposits
The purchase price which the Purchaser agrees to pay and the Sellers agree
to accept for the Property shall be the sum of Forty-Four Million Two Hundred
Four Thousand Dollars ($44,204,000) (hereinafter referred to as the "Purchase
Price"), subject to adjustment as provided in Section 5 hereof, payable as
follows:
(a) An earnest money deposit (the "Deposit") of Four Hundred Forty-Two
Thousand Forty Dollars ($442,040), in cash, to be deposited by Purchaser with
Chicago Title Company at its office located at 700 South Flower Street, Suite
900, Los Angeles, California 90017 (the "Escrow Holder"), upon delivery of three
(3) executed copies of this Agreement to Escrow Holder, such amount to be held
in escrow by Escrow Holder, and deposited in an interest-bearing account; and
(b) The balance of the Purchase Price shall be paid at time of Closing by
wire transfer of immediately available Federal funds through the Escrow Holder,
with the transfer of funds to the Sellers to be completed on the day of the
Closing.
Schedule 2.1 hereto indicates the portion of the Purchase Price allocated
to each Individual Property (each, an "Allocated Portion of the Purchase
Price"); provided, however, that such allocation is intended solely for the
purposes of Paragraphs 6.4, 7.1 and 7.2 hereof and Exhibit A-3 hereto, and shall
not be binding on the parties for any other purpose whatsoever.
The Deposit and all interest earned thereon shall be paid to the Sellers at
the Closing as a credit against the Purchase Price. Purchaser shall provide the
Escrow Holder with its tax identification number, and all interest shall be for
Purchaser' s account for tax purposes.
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In addition to the Deposit, Purchaser shall deposit three (3) fully
executed copies of this Agreement with the Escrow Holder immediately after all
parties have executed it. The date of such deposit shall be acknowledged by the
Escrow Holder on all copies, and such date shall be the "Effective Date" of this
Agreement. The Escrow Holder shall retain one copy of this Agreement and deliver
one copy hereof to each of Purchaser and the Sellers.
3. Failure to Close
If the Sellers have complied with all of the covenants and conditions
contained herein and are ready, willing and able to convey the Property in
accordance with this Agreement and Purchaser fails to consummate this Agreement
and take title by reason of a default on Purchaser' s part, then the parties
hereto recognize and agree that the damages that the Sellers will sustain as a
result thereof will be substantial, but difficult if not impossible to
ascertain. Therefore, the parties agree that, in the event of Purchaser' s
default as aforesaid, the Sellers shall, as their sole remedy, (a) retain the
Deposit plus interest earned thereon, and (b) be entitled to recover from Buyer
cash in the amount of Four Hundred Forty-Two Thousand Forty Dollars ($442,040),
as liquidated damages, and no party shall have any further rights or obligations
with respect to any other under this Agreement, except for the surviving
covenants (hereinafter defined). the Sellers acknowledge and agree that the sum
of (A) the Deposit plus interest earned thereon, and (B) $442,040, is a
reasonable estimate of and bears a reasonable relationship to the damages that
would be suffered and costs incurred by the Sellers as a result of having
withdrawn the Property from sale and the failure of Closing to occur due to a
default by Purchaser under this Agreement and (2) Purchaser seeks to limit its
liability under this Agreement to the amount of the sum of (A) the Deposit plus
interest earned thereon, and (B) $442,040, in the event this Agreement is
terminated and the transaction contemplated by this Agreement does not close due
to a default by Purchaser hereunder.
Purchaser Sellers
Initials: __________ ___________
___________
___________
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<PAGE>
4. Closing and Transfer of Title
4.1 Closing
The parties hereto agree to conduct a closing of this sale (the "Closing")
at 8:00 A.M. P.S.T., on or before February 17, 1997; provided, however, that if
CIR and CGEP have not obtained the Limited Partner Approvals (as defined in
Paragraph 15.14) by February 10, 1997, then, subject to the provisions of
Paragraph 15.14, the date of the Closing shall be extended until the fifth (5th)
calendar day after such Limited Partner Approvals have been obtained (the
"Closing Date"), in the office of the Escrow Holder located at 700 South Flower
Street, Suite 900, Los Angeles 90017, or at such other place as may be agreed
upon by the parties hereto. This Agreement shall terminate if transfer of title
is not completed by the Closing Date (unless such failure to close is due to the
Sellers' default, the date for Closing is extended pursuant to any provision
hereof, including, without limitation, the matters described in Sections 6.3,
6.4, 6.5 and Section 7 hereof, or the date for Closing is extended by agreement
of the parties, which agreement shall be confirmed in writing).
4.2 Closing Procedure
With respect to each Individual Property, the Seller that owns such
Individual Property shall execute and deliver or cause to be delivered either to
Escrow Holder or Purchaser on or before the Closing (or such earlier date as
specifically provided below for any particular item), each of the following
items:
(a) a deed, in the appropriate form attached hereto as Exhibit A-1 through
A-4, depending on the state where the Individual Property is located, duly
acknowledged and proper for recording, conveying such Individual Property to
Purchaser, subject, however, to (i) (A) such easements, rights of way,
encumbrances, liens, covenants, restrictions, or other matters of record as
shall have been approved by Purchaser pursuant to Section 6.4, and (B) such
matters shown on the Survey (as defined in Section 6.3) of such Individual Real
Property as shall have been approved by Purchaser pursuant to Section 6.3, (ii)
taxes not yet due and payable, (iii) the rights of lessees and licensees of
space in the Individual Improvements included in such Individual Property at the
time of Closing (to the extent shown on the Rent Roll for such Individual
Improvements, which Rent Roll shall have been approved by Purchaser), and (iv)
any encumbrances created or permitted by the terms of this Agreement approved by
such Seller and Purchaser;
(b) a Bill of Sale in the form attached hereto as Exhibit B, dated as of
the date of Closing conveying to Purchaser any and all Individual Personal
Property pertaining to such Individual Real Property;
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(c) an Assignment and Assumption of Leases in the form attached hereto as
Exhibit C dated the date of Closing, assigning all of the landlord' s right,
title and interest in and to any tenant and other leases covering all or any
portion of such Individual Real Property;
(d) Tenant Notification Agreements (the "Tenant Notices"), dated the date
of the Closing of such Individual Property and complying with applicable
statutes in order to relieve such Seller of liability for tenant security
deposits (provided the security deposits are paid to Purchaser), notifying the
tenants of such Individual Real Property that such Individual Property has been
sold to Purchaser and directing the tenants to pay rentals to Purchaser (or
Purchaser' s designated agent);
(e) the originals of all leases and such Seller' s complete tenant files
with respect to current tenants of such Individual Real Property, including all
subleases, lease modifications, license agreements, tenant improvement
construction contracts, move-in leases, financial statements on all tenants,
credit reports on all tenants, names and phone numbers of tenant contacts, and
other correspondence with tenants, all to the extent in such Seller' s or its
property manager' s possession, all agreements for the payments of any leasing
commissions which have not been paid in full, and, to the extent in such Seller'
s possession or under such Seller' s control, as-built plans and specifications,
maintenance and service and any other contracts that are to be assumed, and such
Seller' s complete files with respect to the maintenance of such Individual
Property, including correspondence with service providers to the extent in such
Seller' s or its property manager' s possession, all licenses, permits and
certificates of occupancy of such Individual Property or such Individual
Improvements to the extent the same are in such Seller' s or its property
manager' s possession or control;
(f) at least five (5) days prior to Closing, tenant estoppel certificates
on the form attached hereto as Exhibit D and consistent with the information
contained in the respective Rent Rolls, executed by such tenants of such
Individual Real Properties as are set forth on Schedule 4.1 attached hereto;
(g) such Seller' s certification as to those matters which would be covered
in a tenant estoppel certificate for any lease for which an estoppel certificate
is not obtained from a tenant prior to Closing;
(h) an updated Rent Roll for such Individual Real Property, in the form of
the Rent Rolls attached hereto as Schedule 1.2, dated within fifteen (15) days
of the date of the Closing;
(i) Federal and, to the extent applicable, State affidavits that Seller in
not a "foreign person" in the forms attached as Exhibit E-1 and E-2,
respectively;
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(j) a master key or duplicate key for all locks in such Individual
Improvements;
(k) to the extent in the possession of such Seller or such Seller' s
property management company, all maintenance records, all engineering records
and reports (e.g., soils, compaction, concrete tests, structural, mechanical
systems), and any environmental studies, sprinkler or other life safety system
reports or testing certifications with respect to such Individual Real Property;
(l) a list of the amount of all tenant security deposits;
(m) accounts receivable report as of a date no earlier than December 10,
1996;
(n) any letters of intent (executed or otherwise) with prospective tenants;
(o) historical financials, including balance sheets and income statements
for prior three (3) years;
(p) year-to-date operating statements;
(q) to the extent in the possession of such Seller or such Seller' s
property management company, copies of real estate tax bills (including special
assessments) for prior five (5) years, including evidence of payment;
(r) all site or plot plans for such Individual Real Property in the
possession of such Seller or its property manager;
(s) any unrecorded reciprocal easement agreements with respect to such
Individual Real Property in the possession of such Seller or its property
manager;
(t) to the extent in the possession of such Seller or such Seller' s
property management company, any warranties or guaranties in effect with respect
to such Individual Real Property or any component thereof (e.g. roof, HVAC);
(u) to the extent in the possession of such Seller or such Seller' s
property management company, copies of utility bills for the Property for the
past three (3) years;
(v) copies of all billings to tenants for the past three (3) years for
utilities, taxes, insurance and other CAM charges, together with the supporting
calculations of the same; and
(w) complete and correct copies of all consents described in Paragraph
10.2(e).
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With respect to items (e), (j) and (m) through (w) listed above, each
Seller shall be deemed to have delivered such items to Purchaser with respect to
a particular Individual Property owned by such Seller when such Seller has
caused such items to be packaged and, after two (2) business days' written
notice to Purchaser, made available for Purchaser to pick up at the office of
the property manager for such Individual Property (which property manager shall
be identified by name and address in such written notice of such Seller).
Notwithstanding any of the foregoing, Purchaser agrees that with respect to the
Individual Real Property identified on Schedule 1.1 as Westford Corporate
Center, items (e), (j) and (m) through (w) shall be deemed timely delivered if
delivered to Purchaser within two (2) business days after the Closing.
4.3 Purchaser' s Performance
At the Closing, Purchaser will cause the Purchase Price to be delivered to
the Escrow Holder, will execute and deliver the Tenant Notices, the Assignment
and Assumption of Leases, and the Bill of Sale for each of the Individual
Properties.
4.4 Evidence of Authority; Miscellaneous
Both parties will deliver to the Escrow Holder and each other such evidence
or documents as may reasonably be required by the Escrow Holder or any hereto
evidencing the power and authority of the Sellers and Purchaser and the due
authority of, and execution and delivery by, any person or persons who are
executing any of the documents required hereunder in connection with the sale of
the Property. Both parties will execute and deliver such other documents as are
reasonably required to effect the intent of this Agreement.
5. Prorations of Rents, Taxes, etc.
Real estate taxes for the year of Closing and any bond or assessment which
is a lien against any Individual Real Property (or which is pending and may
become a lien against any Individual Real Property) shall be prorated as of
12:01 A.M. on Closing Date either using actual tax or assessment figures or, if
actual figures are not available, then using as a basis for said proration the
most recent assessed value of such Individual Real Property multiplied by the
current tax or assessment rate, with a subsequent cash adjustment to be made
between Purchaser and the respective Seller when actual tax or assessment
figures are available. Personal property taxes, annual permit, license or
inspection fees, sewer charges, amounts payable under any contract or agreement
that will be continued after the Closing, and other expenses normal to the
operation and maintenance of the Property shall also be prorated as of the date
of Closing. Rents that have been collected for the month of the Closing and for
subsequent months will be prorated at the Closing, effective as of the date of
the Closing. Such rents shall be deemed to include,
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without limitation, percentage rents, escalation charges for real estate taxes,
parking charges, common area expenses, marketing fund charges, operating
expenses, maintenance escalation rents or charges, cost-of-living increases or
other charges of a similar nature, if any, and any additional charges and
expenses payable under tenant leases (whether such collection occurs prior to,
on or after the date of the Closing). After the Closing, Purchaser shall have
the exclusive right to enforce claims for rents and all other obligations due
and owing under the Leases and terminate any Leases as Purchaser, in its sole
discretion, deems appropriate. With regard to rents that are delinquent as of
the date of the Closing, (i) no proration will be made at the Closing, (ii)
Purchaser will make a good faith effort after the Closing to collect the rents
in the usual course of Purchaser' s operation of the Property, and (iii)
Purchaser will apply all rents collected first to the current rents and the
excess amount, if any, shall be applied to the delinquent rent owed to the
Sellers. It is agreed, however, that Purchaser will not be obligated to
institute any lawsuit or other collection procedures or terminate any lease to
collect delinquent rents. Rents collected by Purchaser after the Closing Date,
to which a Seller is entitled, shall be promptly paid to such Seller. To the
extent delinquent rents or other amounts are collected by Purchaser, Purchaser
may deduct from the amount owed to the Sellers an amount equal to the
out-of-pocket third-party collection costs actually incurred by Purchaser in
collecting such rents and other amounts. As of the Closing Date, Purchaser shall
be entitled to a credit for any tenant deposits under the leases, and the
Sellers shall retain the same. Final readings on all gas, water and electric
meters shall be made as of the date of Closing, if possible. If final readings
are not possible, gas, water and electricity charges will be prorated based on
the most recent period for which costs are available. Any Seller that has made
any deposits with utility companies shall be entitled to seek a refund of such
deposits and shall be solely responsible for recovering the same. Purchaser
shall be responsible for making all arrangements for the continuation of utility
services. After the Closing, Purchaser will assume full responsibility for all
security deposits and advance rental deposits of current tenants of the Real
Property currently held by the Sellers, which items will be itemized by the
Sellers and transferred and credited to Purchaser at the Closing. At the
Closing, the Sellers shall deliver to Purchaser all letters of credit and other
collateral given to any Seller or any of such Seller' s affiliates or
predecessors-in-interest pursuant to any of the leases, less any portions
thereof applied in accordance with the respective lease (together with a
statement regarding such applications).
If any tenants for any Individual Real Property are required to pay
percentage rents, escalation charges for real estate taxes, parking charges,
marketing fund charges, operating expenses, maintenance escalation rents or
charges, cost-of-living increases or other charges of a similar nature
("Additional Rents") and such Additional Rents are not finally adjusted between
the landlord and tenant under any lease until after the Closing, then Purchaser
shall submit to the applicable Seller within sixty (60) days after such
Additional Rents are finally adjusted with any
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tenant, a supplemental statement (the "Supplemental Statement") to the extent
such Additional Rents have been finally adjusted between Purchaser and such
tenant, containing a calculation of the prorations of such Additional Rents,
prepared based on the principles set forth in this Section 5, provided that in
making such adjustment, (i) the parties shall exclude any Additional Rents
arising from increased real property taxes for such Individual Real Property to
the extent such increase is the result of Purchaser' s purchase of the Property,
and (ii) no amount of Additional Rent found to be owing to Purchaser from any
tenant shall be offset against any amount of Additional Rent found to be owed by
Purchaser to any other tenant unless such amount owed to Purchaser is actually
collected by Purchaser. To the extent the Supplemental Statement indicates that
one party is entitled to any amounts under this paragraph, the other party shall
pay such sum to such party within thirty (30) days after the delivery of the
Supplemental Statement.
Notwithstanding anything to the contrary contained in this Section 5, (i)
if the amount of the real property taxes and assessments payable with respect to
any Individual Real Property for any period prior to Closing is determined to be
more than the amount of such real property taxes and assessments that is
prorated herein (in the case of the current year) or that was paid by the
applicable Seller (in the case of any prior year), due to a reassessment of the
value of such Individual Real Property or otherwise, such Seller and Purchaser
shall promptly adjust the proration of such real property taxes and assessments
after the determination of such amounts, and such Seller shall pay to Purchaser
any increase in the amount of such real property taxes and assessments
applicable to any period prior to Closing; provided, however, that such Seller
shall not be required to pay to Purchaser any portion of such increase which is
payable by tenants of such Individual Real Property under their respective
leases; and (ii) if the amount of the real property taxes and assessments
payable with respect to any Individual Real Property for any period prior to
Closing is determined to be less than the amount of such real property taxes and
assessments that is prorated herein (in the case of the current year) or that
was paid by the applicable Seller (in the case of any prior year), due to an
appeal of the taxes by such Seller, a reassessment of the value of such
Individual Real Property or otherwise, such Seller and Purchaser shall promptly
adjust the proration of such real property taxes and assessments after the
determination of such amounts, and (a) Purchaser shall pay to such Seller any
refund received by Purchaser representing such a decrease in the amount of such
real property taxes and assessments applicable to any period prior to Closing;
provided, however, that Purchaser shall not be required to pay to such Seller
any portion of such refund which is payable to tenants of such Individual Real
Property under their respective leases; and (b) Seller shall be entitled to
retain any refund received by such Seller representing such a decrease in the
amount of such real property taxes and assessments applicable to any period
prior to Closing; provided, however, that such Seller shall pay to Purchaser
that portion of any such refund that is payable to tenants of such Individual
Real Property under their respective leases.
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A separate closing statement shall be prepared for each Individual Property
by Escrow Holder, and approved by Buyer and the respective Seller, showing in
detail the prorations for such Individual Property. All prorations shall be
based on a 365-day year.
6. Purchaser Inspections, Contingencies, and Elections
6.1 Document Inspection
With respect to each Individual Real Property, the Seller that owns such
Individual Real Property shall deliver to Purchaser for Purchaser' s review the
following items at the following times:
(a) promptly after the Effective Date, current operating and capital
budgets;
(b) promptly after the Effective Date, copies of all service, maintenance,
management or other operations contracts and copies of all correspondence with
such service providers, to the extent in such Seller' s or its property manager'
s possession;
(c) promptly after the Effective Date, a list of any tenants with rent
pre-paid more than 30 days in advance; and
(d) promptly after the Effective Date, the most recent leasing status
report from leasing broker, and monthly thereafter until the Closing, updated
versions of the same.
Purchaser acknowledges that before execution of this Agreement each Seller
has made available for Purchaser' s review the standard lease form used by such
Seller with respect to its respective Individual Real Properties.
Purchaser agrees that if for any reason the Closing is not consummated,
Purchaser will immediately return to the Sellers all materials furnished to
Purchaser pursuant to this Section 6.1.
Purchaser acknowledges and agrees that notwithstanding the Sellers'
obligations under this Section 6.1 to make the items listed in this Section 6.1
available for Purchaser' s inspection, such obligations of the Sellers do not
create any condition to Purchaser' s obligations hereunder to purchase the
Property.
Purchaser shall have the right to inspect each Seller' s files relating to
such Seller' s Individual Real Properties before and after the Closing for such
period of time as is necessary for Purchaser to prepare an "8-K" filing and an
"8-K/A" filing relating to this transaction with the United States Securities
and Exchange Commission; provided, however, that such period of time shall not
extend beyond
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the ninetieth (90th) calendar day following the Closing. Each Seller shall
cooperate generally with Purchaser in preparing such "8-K" and "8-K/A" filings;
provided, however, that such cooperation of the Sellers shall not be deemed to
imply any representation or warranty by any Seller regarding the adequacy or
accuracy of any information included in such filings.
6.2 Physical Inspection
In addition to the items set forth in Section 6.1, the Sellers have made,
and prior to the Closing will continue to make, the Property available for
inspection by Purchaser and Purchaser shall, at Purchaser' s risk, be entitled
to conduct an engineering and a Phase I environmental audit of each Individual
Real Property and in connection therewith, to undertake such physical inspection
of such Individual Real Property as Purchaser deems appropriate. Such inspection
shall be conducted at reasonable times upon reasonable oral or written notice to
the applicable Seller' s property manager. Such Seller shall have the right to
designate a representative to accompany Purchaser' s employees, agents, and
independent contractors on any such inspections. Notwithstanding any of the
foregoing, Purchaser shall not be entitled to conduct a Phase II environmental
audit of any Individual Property without the prior written consent of the
applicable Seller, which consent shall not be unreasonably withheld or delayed.
Consent to any Phase II environmental audit shall be expressly conditioned on
the applicable Seller' s approval, not to be unreasonably withheld or delayed,
of (i) the person or persons proposed by Purchaser to perform such audit, and
(ii) the nature and extent of the actions to be taken in the performance of such
audit.
Purchaser hereby agrees to pay, protect, defend, indemnify and save each
Seller harmless against all liabilities, obligations, claims (including
mechanic' s lien claims), damages, penalties, causes of action, judgments, costs
and expenses (including, without limitation, attorneys' fees and expenses)
imposed upon, incurred by or asserted against such Seller in connection with or
arising out of the entry upon any Individual Real Property by Purchaser' s
employees, agents or independent contractors and the actions of such persons on
such Individual Real Property. In the event any part of any Individual Property
is damaged or excavated by Purchaser, its employees, agents or independent
contractors, Purchaser agrees in the event its purchase hereunder is not
consummated, to make such additional payments to the Seller that owns such
Individual Property as may be reasonably required to return such Individual
Property to its condition immediately prior to such damage or excavation or, at
such Seller' s option, to cause such work reasonably required to return such
Individual Property to its condition immediately prior to such damage or
excavation to be done. Notwithstanding any provision to the contrary herein,
Purchaser' s obligations under this subparagraph shall survive the expiration or
termination of this Agreement, and shall survive Closing.
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Purchaser acknowledges and agrees that notwithstanding the Sellers'
obligations under this Section 6.2 to make the Property available for inspection
by Purchaser, such obligations of the Sellers do not create any condition to
Purchaser' s obligations hereunder to purchase the Property.
6.3 Survey Contingency
Purchaser' s obligation to purchase the Property is subject to its review
and approval, within the ten (10) day period provided below, of a current survey
of each Individual Real Property by a registered surveyor certified to Purchaser
(each, a "Survey," and collectively, the "Surveys"), which Surveys Purchaser
shall procure within thirty (30) days after the Effective Date, or as soon
thereafter as practicable. Each Survey shall show the location of all
improvements, structures, driveways, parking areas, easements, rights of way,
and any encroachments and shall specify whether the subject Individual Real
Property is within a 100-year flood plain or flood way, and shall contain a
certification of the surveyor satisfactory in form and substance to Purchaser.
Each Survey shall further set forth a legal description of the boundaries of the
subject Individual Real Property in accordance with local practices.
With respect to each Survey, Purchaser shall have until ten (10) days after
its receipt of each Survey and the related Title Report (as defined below) and
copies of all items and documents referred to therein for the applicable
Individual Property to approve or object in writing to such Survey, including
any objection to the boundaries set forth in such Survey and to the legal
description. Any such written notice shall state all of Purchaser' s objections
with specificity. Upon receipt of such notice, the Seller that owns the subject
Individual Real Property may, but shall not be obligated to, cure such
objections. If such Seller cures such objections within 15 days, or, if such
objections are such that they cannot be cured within 15 days and such Seller has
commenced curing such objections and thereafter diligently proceeds to perfect
such cure (but in no event beyond 30 days unless agreed to by Purchaser), then
this Agreement shall continue in force and effect, and the Closing Date shall be
adjusted accordingly. If such Seller is unable to, or chooses not to, cure such
objections within the time permitted, this Agreement shall terminate, the
Sellers shall instruct the Escrow Holder to return the Deposit plus all interest
earned thereon to Purchaser, and no party shall have any further obligations
hereunder except for the Surviving Covenants. Notwithstanding the foregoing,
however, Purchaser may waive such objections that such Seller is unable to or
chooses not to cure, and upon receipt by such Seller of such waiver in full from
Purchaser within 10 days of notice from such Seller that it is unable or chooses
not to cure such objections, this Agreement shall remain in full force and
effect with no reduction in the Purchase Price.
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If requested by the Sellers, Purchaser will confirm in writing whether this
survey contingency has been satisfied and, if so, the date on which it was
satisfied.
6.4 Title Contingency
Purchaser' s obligation to purchase the Property is subject to its
approval, within the time period set forth below, with respect to each
Individual Real Property, of a preliminary title report for an A.L.T.A. Owner' s
Title Insurance Policy (Form B, rev. 10/17/70) (each, individually, a "Title
Report," and collectively, the "Title Reports"), dated not earlier than December
1, 1996, issued by the Escrow Holder, and all items and documents referred to in
the Title Report. Purchaser shall procure each such Title Report and the items
and documents referred to therein within thirty (30) days after the Effective
Date, or as soon thereafter as practicable. Each Title Report will commit the
Escrow Holder to issue to Purchaser at the Closing an Owner' s Title Policy (as
defined below) relating to the Individual Real Property that is the subject of
such Title Report, in the amount of the applicable Allocated Portion of the
Purchase Price. Upon receipt of each Title Report and accompanying documents by
Purchaser, Purchaser shall have until the date ten (10) days after receipt of
all such items and the related Survey to approve such Title Report or to state
any objections in writing. Such written notice of objection shall state all of
Purchaser' s objections with specificity. Upon receipt of such notice, the
Seller that owns the subject Individual Real Property may, but shall not be
obligated to, cure such objection(s); provided that such Seller shall be
obligated to remove any monetary liens of an ascertainable amount other than any
lien for taxes or assessments which are not yet due and payable. If such Seller
cures such objections within 15 days, or, if such objections are such that they
cannot be cured within 15 days and such Seller has commenced curing such
objections and thereafter diligently proceeds to perfect such cure (but in no
event beyond 30 days unless otherwise agreed to by Purchaser), then this
Agreement shall continue in full force and effect and the Closing Date shall be
adjusted accordingly. If such Seller is unable or chooses not to cure such
objections within the time permitted, then this Agreement shall terminate, the
Sellers shall instruct the Escrow Holder to return the Deposit plus all interest
earned thereon to Purchaser, and no party shall have any further obligations
hereunder except for the Surviving Covenants. Notwithstanding the foregoing,
however, Purchaser may waive such objections that such Seller is unable or
chooses not to cure within 10 days after receipt of a notice that such Seller is
unable or chooses not to cure such objections, and upon receipt by such Seller
of such waiver in full from Purchaser, this Agreement shall remain in full force
and effect with no reduction in the Purchase Price.
If requested by the Sellers, Purchaser will confirm in writing whether this
title contingency has been satisfied and, if so, the date on which it was
satisfied.
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As a condition precedent to Closing, the Escrow Holder shall deliver to the
Purchaser, for each Individual Real Property, an Owner' s Title Insurance Policy
(each, an "Owner' s Title Policy," and collectively, the "Owner' s Title
Policies") dated no earlier than the date of the recording of the Deed conveying
the Individual Real Property insured by such Owner' s Title Policy, in the full
amount of the applicable Allocated Portion of the Purchase Price, insuring that
good and indefeasible fee simple title to such Individual Real Property is
vested in Purchaser, together with such endorsements as shall be specified by
Purchaser in its title approval notice given pursuant to this Section 6.4, and
containing no exceptions to such title other than the standard printed
exceptions (provided, however, that (i) the printed survey exception must be
deleted, except for matters shown on the applicable Survey and either approved
by Purchaser or as to which objection has been waived by Purchaser, (ii) the
exception as to ad valorem taxes shall be limited to taxes for the current and
subsequent years, (iii) there shall be no exception for creditors' rights, and
(iv) the exception for tenants and parties in possession shall be limited to the
rights as tenants only (with no options to purchase or rights of first refusal
or first offer to sell such Individual Real Property to such tenants) of those
tenants, licensees, and occupants shown on the applicable Rent Roll delivered at
Closing), those items listed on Schedule "B" of the applicable Title Report that
either were approved by Purchaser or as to which objection has been expressly
waived by Purchaser, and encumbrances created or permitted by the terms of this
Agreement. If the Escrow Holder cannot deliver the Owner' s Title Policies to
Purchaser as described herein, this Agreement shall terminate, the Sellers shall
instruct the Escrow Holder to return the Deposit plus all interest earned
thereon to Purchaser, and no party shall have any further obligations hereunder
except for the Surviving Covenants, except to the extent Escrow Holder' s
inability to deliver the Owner' s Title Policies is due to any of the Sellers'
failure to cure any title objection which it has agreed to cure pursuant to this
Section 6.4.
6.5 Election With Respect to Contracts and Agreements
The Sellers agree to terminate, effective on or before the day of Closing,
any and all leasing brokerage agreements and property management agreements
relating to the Real Property or any Individual Real Property. With respect to
contracts and agreements other than leasing brokerage agreements and property
management agreements, each Seller shall provide to Purchaser, within ten (10)
days after the Effective Date, with respect to each Individual Property owned by
such Seller, a list of such other contracts and agreements pertaining to such
Individual Real Property. Purchaser shall have fifteen (15) days after receipt
of all such lists to deliver written notice to the Sellers as to which, if any,
of the contracts and agreements described on such lists it elects to assume, and
which, if any, of such contracts and agreements it elects to reject.
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7. Loss due to Casualty or Condemnation
7.1 Loss Due to Condemnation
In the event any condemnation is instituted or any Seller receives written
notice that any condemnation is threatened with respect to (i) all or a
Substantial Portion (as hereinafter defined) of any Individual Real Property
which condemnation shall or would render a Substantial Portion of such
Individual Real Property untenantable, or (ii) any portion of the parking area
of any Individual Real Property, such Seller shall give Purchaser prompt notice
of the same, and Purchaser may, upon written notice to such Seller given within
10 days of receipt of notice of such event, cancel this Agreement, in which
event this Agreement shall terminate, the Sellers shall instruct the Escrow
Holder to return the Deposit plus all interest earned thereon to Purchaser, and
no party shall have any rights or obligations hereunder except for the Surviving
Covenants. In the event that Purchaser does not elect to terminate, or if the
condemnation affects less than a Substantial Portion and does not affect any
parking area, then this Agreement shall remain in full force and effect, and
such Seller shall be entitled to all monies received or collected by reason of
such condemnation prior to Closing. In such event, the transaction hereby
contemplated shall close in accordance with the terms and conditions of this
Agreement except that there will be an abatement of the Purchase Price equal to
the amount of the gross proceeds received by such Seller by reason of such
condemnation prior to Closing; provided, however, that if any separate award is
made for costs and attorney' s fees, such Seller shall be entitled to keep such
separate award. If such Seller shall not have received all monies owed it by
reason of such condemnation prior to the Closing, then such Seller shall assign
any interest it has in the pending award to Purchaser. For purposes of this
Section 7.1, a Substantial Portion shall mean a condemnation of any portion of
an Individual Real Property, the value of which portion exceeds five percent
(5%) of the Allocated Portion of the Purchase Price applicable to such
Individual Real Property.
7.2 Loss Due to Casualty
In the event of Substantial Loss or Damage (as hereinafter defined) to any
Individual Real Property by fire or other casualty (not resulting from acts of
Purchaser), any party may, or, if the fire or other casualty results from acts
of Purchaser, the applicable Seller may, upon written notice to the other party
given within 10 days of receipt of notice of such event, cancel this Agreement
in which event this Agreement shall terminate, the Sellers shall instruct the
Escrow Holder to return the Deposit plus interest earned thereon to Purchaser,
and no party shall have any rights or obligations hereunder except for the
Surviving Covenants. In the event that no party elects to terminate, or if the
casualty results in less than Substantial Loss or Damage, then this Agreement
shall remain in full force and
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effect and the Seller that owns such Individual Real Property shall be entitled
to all insurance proceeds received or collected by reason of such damage or
loss, whereupon the transaction hereby contemplated shall close in accordance
with the terms and conditions of this Agreement except that there will be
abatement of the Purchase Price equal to the amount of the gross proceeds, plus
such Seller' s deductible, or, in the case of an uninsured loss, by the cost to
repair such damage or loss, provided that such abatement will be reduced by the
amount expended by such Seller in accordance with Section 8 hereof for
restoration of such Individual Real Property following the casualty, and
provided, further, that such abatement will be further reduced by the amount
that the gross proceeds include any separate award for costs (including
preservation costs) and attorney' s fees. Alternatively, Purchaser may, in its
discretion, have such Seller repair or replace the damaged Property, and there
shall be no abatement of the Purchase Price in such case. However, Purchaser
shall not be entitled to require such Seller to effect repair or replacement
unless the repair or replacement will take no more than three (3) months to
complete. For purposes of this Section 7.2, "Substantial Loss or Damage` shall
mean loss or damage to the parking and/or any portion of any Building the cost
for repair of which exceeds five percent (5%) of the Allocated Portion of the
Purchase Price applicable to such Individual Real Property.
8. Operation of the Property
Between the time of execution of this Agreement and the Closing, each
Seller shall maintain its respective Individual Properties in good condition and
repair, reasonable wear and tear excepted, shall perform all work required to be
done under the terms of any lease or agreement relating to any such Individual
Property, shall timely make all repairs, maintenance and replacement of
equipment or improvements, and shall keep such Individual Properties insured
against casualties on commercially reasonable terms and in commercially
reasonable amounts, the same as though such Seller were retaining such
Individual Properties and at such Seller' s sole cost and expense; except that
in the event of a fire or other casualty, damage or loss, such Seller shall have
no duty to repair said damage except as otherwise provided in Section 7.2 of
this Agreement. However, such Seller may repair any such damage with Purchaser'
s prior, written approval and may, without Purchaser' s approval, repair damage
where such repair is necessary in such Seller' s reasonable opinion to preserve
and protect the health and safety of tenants of any such Individual Property or
to preserve any such Individual Property from imminent risk of further damage or
if required to do so by such Seller' s insurance carrier. Any such emergency
repairs shall be reported to Purchaser within 24 hours of their commencement and
48 hours of their completion.
Except as provided below, from and after the Effective Date until the
Closing Date, no Seller shall lease any portion of any Individual Real Property
or amend or terminate any existing lease or enter into any other agreements
affecting any
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Individual Property that will survive the Closing, without first obtaining
Purchaser' s written approval, which approval shall not be unreasonably denied
or delayed. Purchaser shall have three (3) business days from the date any
Seller provides Purchaser with a copy of any new lease, modification or
termination of any existing lease, or any other new agreement affecting any
Individual Property, together with any information reasonably requested by
Purchaser regarding such tenant or agreement, to approve or reject such lease,
modification, termination or agreement. If Purchaser fails to respond within
said time period, it shall be deemed to have approved said lease, modification,
termination or agreement, as applicable. Purchaser shall bear the cost of all
tenant improvement allowances and leasing commissions for leases entered into
after the Effective Date until the Closing Date entered into by any Seller with
Purchaser' s approval or deemed approved by Purchaser as provided for herein,
unless the sale of the Property is not consummated as contemplated herein.
Notwithstanding the foregoing, the Seller that owns the Individual Real Property
identified on Schedule 1.1 as the "Overlook" project (the "Overlook Project")
may, with respect to any portion thereof, and without first obtaining Purchaser'
s written approval, enter into any standard form lease at prevailing market
rates for a term not exceeding twelve (12) months, and/or amend (but not extend
for a term exceeding twelve (12) months) or terminate any existing lease,
provided that in each case such Seller shall exercise prudent business judgment
as if it were retaining the Overlook Project for itself and shall not grant any
concession except in accordance with prevailing market conditions.
No Seller shall actively market any Individual Property for sale or
negotiate the possible sale of any Individual Property with any party other than
Purchaser, unless this Agreement is terminated as provided herein.
9. Broker
Purchaser and the Sellers represent to each other that they have dealt with
no agent or broker who in any way has participated as a procuring cause of the
sale of the Property, except K/B Realty Advisors ("Broker"). Purchaser shall pay
a commission to Broker at the Closing pursuant to a separate brokerage agreement
between Purchaser and Broker. Purchaser and the Sellers each agree to defend,
indemnify and hold harmless the other for any and all judgments, costs of suit,
attorneys' fees, and other reasonable expenses which the other may incur by
reason of any action or claim against the other by any broker, agent, or finder
with whom the indemnifying party has dealt arising out of this Agreement or any
subsequent sale of any Individual Property to Purchaser except for the
above-described commissions, which shall be paid by Purchaser at the Closing.
The provisions of this Section 9 shall survive the Closing and any termination
of this Agreement.
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10. Representations and Warranties
10.1 Limitations on Representations and Warranties
Purchaser hereby agrees and acknowledges that, except as set forth in
Section 10.2 below or in any document delivered by any Seller at Closing,
neither the Sellers, nor any of them, nor any agent, attorney, employee or
representative of the Sellers or any of them has made any representation
whatsoever regarding the subject matter of this sale, or any part thereof,
including (without limiting the generality of the foregoing) representations as
to the physical nature or condition of any Individual Property or the
capabilities thereof, and that Purchaser, in executing, delivering and/or
performing this Agreement, does not rely upon any statement and/or information
to whomever made or given, directly or indirectly, orally or in writing, by any
individual, firm or corporation on behalf of any Seller, except as set forth in
Section 10.2 below or in any document delivered by such Seller at closing.
Purchaser agrees to take the Real Property and the Personal Property "as is," as
of the date hereof, reasonable wear and tear, and minor damage caused by the
removal of any personal property or fixtures not included in this sale,
excepted. Except as set forth in Section 10.2 below, no Seller makes any
representation or warranty as to the physical condition of any Individual
Property or the suitability thereof for any purpose for which Purchaser may
desire to use it. Each Seller hereby expressly disclaims any warranties of
merchantability and/or fitness for a particular purpose and any other warranties
or representations as to the physical condition of any Individual Property.
Purchaser, by acceptance of the Deed for each Individual Property, agrees that
it has inspected such Individual Property and accepts same "as is" and "with all
faults".
10.2 Representations and Warranties
Each Seller makes the following representations and warranties with respect
to itself and the Individual Properties being sold by it, and agrees that
Purchaser' s obligations under this Agreement are conditioned upon the truth and
accuracy of such representations and warranties, both as of this date and as of
the date of the Closing:
(a) Such Seller (in the case of CIR or CGEP) is a limited partnership, duly
organized, validly existing and in good standing under the laws of Delaware (in
the case of CIR) or Connecticut (in the case of CGEP), and qualified to transact
business and in good standing in each state in which any Individual Property
owned by such Seller is located; and such Seller (in the case of WOV) is a
general partnership, duly organized and validly existing under the laws of
Connecticut;
(b) Such Seller has the requisite partnership power and authority to enter
into this Agreement and convey the Individual Properties it owns to Purchaser;
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(c) Subject to Section 15.14 below, this Agreement has been duly executed
and delivered by such Seller;
(d) Neither the execution and delivery of this Agreement, the consummation
of the transactions contemplated by this Agreement, nor the compliance with the
terms and conditions hereof will (i) violate or conflict, in any material
respect, with any statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restrictions of any government, governmental
agency or court to which such Seller is subject, or (ii) to the best of such
Seller' s knowledge, result in any material breach or the termination of any
lease, agreement or other instrument or obligation to which such Seller is a
party or by which any Individual Property owned by such Seller may be subject,
or cause a lien or other encumbrance to attach to any such Individual Property;
(e) All material consents required from any governmental authority or third
party in connection with the execution and delivery of this Agreement by such
Seller or the consummation by such Seller of the transactions contemplated
hereby (other than any third-party consents which may be required in order for
such Seller to assign any licenses, certificates of occupancy, permits,
warranties, guarantees (other than tenant guarantees) in connection with the
Individual Properties owned by such Seller) have been made or obtained or shall
have been made or obtained by the Closing Date.
(f) To the best of such Seller' s knowledge, such Seller has received no
notice of any existing, pending or threatened litigation, governmental
investigation, administrative proceeding, condemnation or sale in lieu thereof,
or environmental, zoning or other land use regulation proceedings with respect
to any portion of any Individual Real Property owned by such Seller, except as
noted on Schedule 10.2.1 hereto;
(g) Except for those tenants and licensees in possession of portions of the
Individual Real Properties owned by such Seller under written leases or license
agreements for space in such Individual Real Properties, as shown in the
applicable Rent Rolls, there are no parties in possession of, or claiming any
possession to any portion of any such Individual Real Property as lessees,
tenants at sufferance, licensees, trespassers, sublessees (to the best of such
Seller' s knowledge), or otherwise;
(h) The updated Rent Rolls for the Individual Real Properties owned by such
Seller, which shall be delivered at the Closing, will be true, correct and
complete as of the date set forth thereon; no tenant will be entitled to any
rebates, rent concessions, or free rent (other than as reflected in the
estoppels, such Seller' s certificates delivered pursuant to Section 4.2(g)
hereof, or, with respect to the Overlook Project, in accordance with prevailing
market conditions at the time such
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lease is entered into) and no rents due under any of the tenant or other leases
will have been assigned, hypothecated, or encumbered, to any party except
pursuant to documents to be released at Closing;
(i) There are no attachments or executions affecting any Individual
Property owned by such Seller, general assignments for the benefit of creditors,
or voluntary or involuntary proceedings in bankruptcy, pending or, to the best
of such Seller' s knowledge, threatened against such Seller;
(j) During the period of such Seller' s ownership of each Individual
Property owned by such Seller, such Seller has not itself, and to the best of
such Seller' s knowledge no prior owner or current or prior tenant or other
occupant of all or any part of any such Individual Property at any time has,
used Hazardous Materials (hereinafter defined) on, from, or affecting any such
Individual Property in any manner that violates federal, state, or local laws,
ordinances, rules, or regulations governing the use, storage, treatment,
transportation, generation, or disposal of Hazardous Materials (collectively,
the "Environmental Laws"), and to the best of Seller' s knowledge no Hazardous
Materials have been disposed of on such Individual Property. "Hazardous
Materials" shall mean any flammable substances, explosives, radioactive
materials, hazardous wastes, toxic substances, pollutants, pollution, or related
materials regulated under any of the Environmental Laws (to the extent any such
substances, materials or wastes exceed permitted concentrations);
Notwithstanding anything contained herein to the contrary, "Hazardous
Materials" shall not include any ordinary use and incidental storage of small
and insignificant amounts of substances reasonably necessary for the regular and
ordinary maintenance of any Individual Property, or consumed in the repair and
ordinary use of common office business machines, nor to gasoline, oil, and other
automotive fluids to the extent that they are contained in the common and
ordinary manner in motor vehicles visiting any Individual Real Property, in each
case provided that the same do not constitute, give rise to, or create any
substantial risk of any violation of any requirements of any Environmental Law.
(k) Except as set forth on Schedule 10.2.2 hereto at the time of Closing,
there will be no outstanding written or oral contracts made by such Seller for
any improvements to any Individual Real Property owned by such Seller which have
not been fully paid for and such Seller shall cause to be discharged all
mechanics' and materialmen' s liens arising from any labor or materials
furnished to any such Individual Real Property prior to the time of Closing.
Except as set forth on said Schedule 10.2.2, as of the Closing Date, such Seller
shall have completed all punch-list items with respect to any tenant
improvements constructed by such Seller as landlord under the leases. Except as
set forth on said Schedule 10.2.2, as of the Closing Date, such Seller shall
have paid in full any of landlord' s leasing
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costs or obligations in connection with the leases, including, but not limited
to, any costs incurred by such Seller in connection with any tenant
improvements.
(l) Except as set forth on Schedule 10.2.3 hereto, Seller has not received
any written notice that the use or operation of any Individual Property owned by
such Seller fails to comply in any material respect with any applicable
restrictive covenant, building code, environmental, zoning or land use law, or
any other applicable local, state or federal law or regulation (collectively,
"Laws").
(m) Such Seller has not received notice of any special improvement
district, special use district or special assessment applicable to any
Individual Real Property owned by such Seller.
10.3 Seller' s Knowledge
Whenever the term "to the best of such Seller' s knowledge" is used in this
Agreement or in any representations and warranties given to Purchaser at
Closing, such knowledge shall be (i) in the case of CIR and the Individual Real
Property identified on Schedule 1.1 as Woodlands Tech Center, the actual
knowledge of John Carey, who is the president of the general partner of CIR, or
Ruth Van Winkle, who is the asset manager assigned to such Individual Real
Property, after review of the files of Cigna Investments, Inc. (which CIR
represents to Purchaser are the relevant files of CIR applicable to such
Individual Real Property) and inquiry of CIR' s property managers regarding such
Individual Real Property and each of the matters addressed in the
representations and warranties set forth in Section 10.2; (ii) in the case of
CIR and the Individual Real Property identified on Schedule 1.1 as Piedmont
Plaza Shopping Center, the actual knowledge of John Carey or Sean Williams, who
is the asset manager assigned to such Individual Real Property, after review of
the files of Cigna Investments, Inc. (which CIR represents to Purchaser are the
relevant files of CIR applicable to such Individual Real Property) and inquiry
of CIR' s property managers regarding such Individual Real Property and each of
the matters addressed in the representations and warranties set forth in Section
10.2; (iii) in the case of CIR and the Individual Real Property identified on
Schedule 1.1 as the Overlook Apartments, the actual knowledge of John Carey or
Steven Jacobs, who is the asset manager assigned to such Individual Real
Property, after review of the files of Cigna Investments, Inc. (which CIR
represents to Purchaser are the relevant files of CIR applicable to such
Individual Real Property) and inquiry of CIR' s property managers regarding such
Individual Real Property and each of the matters addressed in the
representations and warranties set forth in Section 10.2; (iv) in the case of
CGEP and the Individual Real Property identified on Schedule 1.1 as Woodlands
Plaza II, the actual knowledge of John Carey, who is the president of the
general partner of CGEP, or Ruth Van Winkle, who is the asset manager assigned
to such Individual Real Property, after review of the files of Cigna
Investments, Inc. (which CGEP represents to Purchaser are the relevant files of
CGEP applicable to such Individual Real Property) and inquiry of CGEP' s
property managers regarding such Individual Real Property and each of the
matters addressed in the representations and warranties set forth in Section
10.2, (v) in the case of CGEP and the Individual Real Property identified on
Schedule 1.1 as Lake Point I, II and III, the actual knowledge of John Carey or
Annette Sanders, who is the asset manager assigned to such Individual Real
Property, after review of the files of Cigna Investments, Inc. (which CGEP
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represents to Purchaser are the relevant files of CGEP applicable to such
Individual Real Property) and inquiry of CGEP' s property managers regarding
such Individual Real Property and each of the matters addressed in the
representations and warranties set forth in Section 10.2, and (vi) in the case
of WOV and the Individual Real Property identified on Schedule 1.1 as Westford
Corporate Center, the actual knowledge of John Carey, who is the president of
the general partner of each of the general partners of WOV, or Peter Clark, who
is the asset manager assigned to such Individual Real Property (together with
John Carey, Ruth Van Winkle, Sean Williams, Steven Jacobs and Annette Sanders,
collectively, the "Key Personnel"), after review of the files of Cigna
Investments, Inc. (which WOV represents to Purchaser are the relevant files of
WOV applicable to such Individual Real Property) and inquiry of WOV' s property
managers regarding such Individual Real Property and each of the matters
addressed in the representations and warranties set forth in Section 10.2.
No Seller shall have any duty to conduct any further inquiry in making any
such representations and warranties, and no knowledge of any other person shall
be imputed to any Key Personnel. Purchaser acknowledges that no Seller is a
hands-on owner, and each Seller employs third-party management to oversee the
daily operations of the Individual Properties owned by such Seller and that each
Seller has limited first-hand information and knowledge pertaining to the daily
operations of the Individual Properties owned by such Seller.
10.4 Survival
All representations and warranties contained in Section 10.2 will survive
the Closing of this transaction (but only as to the status of facts as they
exist as of the Closing, it being understood that no Seller makes any
representations or warranties which would apply to changes or other matters
occurring after the Closing); provided that such representations and warranties
other than those set forth in Section 10.2 (a), (b), (c), (d), and (e), shall
expire on the date one (1) year from the date of Closing, and no action on such
representations and warranties may be commenced after such expiration.
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11. Indemnification
11.1 The Sellers' Indemnification
Each Seller on behalf of itself, its affiliates, its successors and
assigns, and any independent property managers which such Seller has hired to
manage the Individual Properties owned by such Seller does hereby agree to
indemnify and hold Purchaser, its successors and assigns harmless from and
against all costs, charges and expenses related to the ownership, management and
operation of such Individual Properties prior to the Closing Date, but not
thereafter, including, costs (i) for any labor performed on, or materials
furnished to such Individual Properties prior to the Closing Date, (ii) for any
leasing commissions or other fees or commissions due in connection with any
lease renewals or lease extensions which are entered into prior to the Closing
Date, (iii) for compliance with any laws, requirements or regulations of, or
taxes, assessments or other charges due to any governmental authority, but only
to the extent any such liability is attributable to acts, omissions, events or
transactions which first occurred during such Seller' s period of ownership of
such Individual Properties, and such liability is caused by any Seller, its
agents, contractors and/or its employees only, and not by any other party or
parties, excluding any and all costs of compliance with presently-existing and
future environmental laws, any environmental remediation costs, and any costs
of, or awards of damages for, damage to the environment to natural resources, or
to any third party (collectively, "Environmental Compliance"), it being the
intent of this Agreement, as between Purchaser and the Sellers, that neither the
Sellers nor Purchaser provide any contractual indemnification to Purchaser for
such Environmental Compliance, but also that no party intends to release any
other claims with respect to Environmental Compliance, including claims under
CERCLA, (iv) for any other charges or expenses whatsoever pertaining to such
Individual Properties or to the ownership, title, possession, use or occupancy
of such Individual Properties but only to the extent any such liability is
attributable to acts, omissions, events or transactions which first occurred
during such Seller' s period of ownership of such Individual Properties, and is
caused by such Seller, its agents, contractors and/or its employees, or (v) for
any breach of the representations or warranties in Section 10.2 hereof.
Notwithstanding the foregoing, Purchaser shall not be entitled to
indemnification by any Seller for any breach of the representations and
warranties of such Seller contained in Section 10.2 hereof (excluding, however,
such Seller' s representations and warranties set forth in Section 10.2(a), (b),
(c), (d) and (e)) unless Purchaser makes a written claim for such
indemnification within one (1) year from the Closing Date. Each Seller on behalf
of itself, its affiliates, its successors and assigns, and any independent
property managers which such Seller has hired to manage the Individual
Properties owned by such Seller does hereby agree to indemnify and hold
Purchaser, its successors and assigns harmless from
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and against all liabilities, damages, claims, charges, costs and expenses
incurred in connection with any third party claims involving such Individual
Properties and which relate to acts, omissions, events or transactions which
occurred prior to the Closing.
11.2 Purchaser' s Indemnification
Purchaser on behalf of itself, its successors and assigns does hereby agree
to indemnify and hold each Seller, its successors and assigns, and any
independent property managers which such Seller has hired to manage the
Individual Properties owned by such Seller, harmless from and against all costs,
charges and expenses relating to the ownership, management and operation of such
Individual Properties from and after the Closing Date, including costs (i) for
any labor performed on, or materials furnished to such Individual Properties
subsequent to the Closing Date, (ii) for any leasing commissions disclosed to
Purchaser prior to the date of this Agreement and due in connection with any
lease renewals or lease extensions which are entered into subsequent to the
Closing Date as described on Schedule 10.2.2 hereto, (iii) for compliance with
any laws, requirements or regulations of, or taxes, assessments, or other
charges due to any governmental authority (excluding Environmental Compliance),
but only to the extent that any such liability is attributable to any acts,
omissions, events or transactions which first occurred during Purchaser' s
period of ownership of such Individual Properties, and such liability is caused
by either Purchaser, its agents, contractors and/or its employees only and not
by any other party or parties, or (iv) for any other charges or expenses
whatsoever pertaining to such Individual Properties or to the ownership, title,
possession, use or occupancy of such Individual Properties, but only to the
extent any such liability is attributable to acts, omissions, events or
transactions which first occurred during Purchaser' s period of ownership of
such Individual Properties, and is caused by Purchaser, its agents, contractors,
and/or its employees.
Purchaser on behalf of itself, its affiliates, its successors and assigns,
and any independent property managers which Purchaser has hired to manage any of
the Individual Properties does hereby agree to indemnify and hold each Seller,
its successors and assigns harmless from and against all liabilities, damages,
claims, charges, costs and expenses incurred in connection with any third party
claims involving any of the Individual Properties and which relate to acts,
omissions, events or transactions which first occur following the Closing.
The provisions of this Section 11 shall survive the Closing and shall not
be limited by the provisions of Section 10.4 (except that nothing contained
herein is intended to extend the survivability of Section 10.2(j) beyond the
period set forth in Section 10.4).
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Except as specifically limited herein, nothing contained in this Section 11
is in any way intended to limit the rights of the Sellers or Purchaser to pursue
any remedies that may exist at law or in equity against any unrelated third
parties with respect to any liabilities covered by this Section 11.
12. Assignment
This Agreement may not be assigned or transferred by Purchaser except to an
affiliate of Purchaser. No assignment shall relieve Purchaser of any of its
obligations under this Agreement.
13. Notices
All notices hereunder or required by law shall be sent via United States
Mail, postage prepaid, certified mail, return receipt requested, via any
nationally recognized commercial overnight carrier with provisions for receipt,
or via telecopier followed by written notice as provided for herein, addressed
to the parties hereto at their respective addresses set forth below or as they
have theretofore specified by written notice delivered in accordance herewith:
Purchaser: Glenborough Properties, L.P.
400 South El Camino Real
San Mateo, CA 94402-1708
Attn: Frank E. Austin, Esq.
Fax#: 415.343.7438
With a copy to: Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
Attn: Craig B. Etlin, Esq.
Fax#: 415.268.7522
Sellers: CIGNA Income Realty-I Limited Partnership
Connecticut General Equity Properties-I
Limited Partnership
Westford Office Venture
c/o CIGNA Investment Group
900 Cottage Grove Road
Hartford, CT 06152-2311
Attn: Real Estate Investment Department
Asset Management, S-311
Fax#: 860.726.6327
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with a copy to: CIGNA Corporation
Investment Law Department
Mortgage and Real Estate Group, S-215A
900 Cottage Grove Road
Hartford, CT 06152-2215
Attn: Lawrence A. Cox, Esq.
Fax#: 860.726.8446
with a copy to: Kelley Drye & Warren LLP
101 Park Avenue
New York, NY 10178
Attn: Robert D. Bickford, Jr., Esq.
Fax#: 212.808.7897
Delivery will be deemed complete upon actual receipt or refusal to accept
delivery.
14. Expenses
Each Seller shall pay its own attorney' s fees and the costs incurred to
repay any liens filed against any Individual Property owned by such Seller
(other than taxes and assessments which are not yet due and payable). Purchaser
shall pay its due diligence expenses, its own attorney' s fees, the costs of the
Surveys, and any transfer taxes. Escrow fees, title premiums and all other
closing costs with respect to each Individual Real Property shall be allocated
according to the custom of the county in which such Individual Real Property is
located.
15. Miscellaneous
15.1 Successors and Assigns
All the terms and conditions of this Agreement are hereby made binding upon
the executors, heirs, administrators, successors and permitted assigns of all
parties hereto.
15.2 Gender
Words of any gender used in this Agreement shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, and vice versa, unless the context requires otherwise.
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15.3 Captions
The captions in this Agreement are inserted only for the purpose of
convenient reference and in no way define, limit or prescribe the scope or
intent of this Agreement or any part hereof.
15.4 Construction
No provision of this Agreement shall be construed by any Court or other
judicial authority against any party hereto by reason of such party' s being
deemed to have drafted or structured such provisions.
15.5 Entire Agreement
This Agreement constitutes the entire contract among the parties hereto and
supersedes all prior agreements and understandings between the parties relating
to the subject matter hereof, including, without limitation, the Letter of
Intent dated December 10, 1996, entered into by and between the Sellers and
Purchaser. Aside from this Agreement, there are no other oral or written
promises, conditions, representations, understandings or terms of any kind as
conditions or inducements to the execution hereof and none have been relied upon
by any party.
15.6 Recording
The parties agree that this Agreement shall not be recorded. If Purchaser
causes this Agreement or any notice or memorandum thereof to be recorded, this
Agreement shall be null and void at the option of the Sellers.
15.7 No Continuance
Purchaser acknowledges that there shall be no assignment, transfer or
continuance of any of Seller' s insurance coverage or of any property management
contract.
15.8 Time of Essence
Time is of the essence in this transaction.
15.9 Original Document
This Agreement may be executed by all parties in counterparts in which
event each shall be deemed an original.
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15.10 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. The parties recognize that, since the Individual
Properties are located outside of the State of New York, it may be necessary for
the parties to comply with certain aspects of the laws of the states in which
the Individual Properties are located in order to consummate the purchase and
sale of the Individual Properties pursuant hereto. The parties agree to comply
with such other laws to the extent necessary to consummate the purchase and sale
of the Individual Properties, provided that it is the parties' intent that the
provisions of this Agreement be applied to each Individual Property in a manner
which results in the greatest consistency possible. For this reason, the parties
have agreed that New York law shall govern with respect to the purchase and sale
of each Individual Property pursuant hereto to the greatest extent possible.
15.11 Acceptance of Offer
This Agreement constitutes the Sellers' offer to sell to Purchaser on the
terms set forth herein and must be accepted by Purchaser by signing three (3)
copies hereof and delivering them to Escrow Holder no later than 5:00 P.M.
E.S.T. on January 17, 1997. If Purchaser has not accepted this Agreement by such
date, then this Agreement and the offer represented hereby shall automatically
be revoked and shall be of no further force or effect.
15.12 Confidentiality
Purchaser and the Sellers agree that all documents and information
concerning the Property delivered to Purchaser, the subject matter of this
Agreement, and all negotiations will remain confidential prior to Closing. Prior
to closing, Purchaser and the Sellers will disclose such information only to
those parties required to know it, including, without limitation, employees of
any of the parties, consultants and attorneys engaged by any of the parties,
prospective or existing investors and lenders, and Purchaser' s insurance and
reinsurance firms.
15.13 Surviving Covenants
Notwithstanding any provisions hereof to the contrary, the provisions of
the Second paragraph of Section 6.2 hereof and the provisions of Section 9
hereof (collectively, the "Surviving Covenants") shall survive the closing and
any termination of this Agreement.
15.14 Approval
The Sellers' obligations to perform their respective duties hereunder are
contingent upon the obtaining of (i) all required approvals (the "Limited
Partner
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Approvals") of the transaction by the respective limited partners of CIR and
CGEP (the "Limited Partners") in accordance with their respective partnership
agreements, and (ii) the approvals of the boards of directors of the general
partners of each of CIR and CGEP (the "Board Approvals"). CIR and CGEP will each
seek such approvals promptly after the Effective Date, and will notify Purchaser
promptly of the decisions of such Limited Partners and boards of directors.
Without limiting the foregoing, CIR and CGEP shall (i) file proxy materials with
respect to the Limited Partner Approvals with the Securities and Exchange
Commission within three (3) business days after the Effective Date, and (ii) use
reasonable efforts to obtain the Limited Partner Approvals within twenty (20)
days after distributing such proxy materials to the Limited Partners. If the
Securities and Exchange Commission does not complete its review of such proxy
materials within thirty (30) days after the Effective Date, or if Purchaser does
not receive written notice from both CIR and CGEP, within ninety (90) days after
the Effective Date, that all of the Board Approvals and Limited Partner
Approvals have been obtained, then Purchaser shall have the right to terminate
this Agreement by giving written notice to the Sellers, which right to
terminate, if not previously exercised, shall itself terminate upon Purchaser' s
receipt of written notice from CIR and CGEP that such Board Approvals and
Limited Partner Approvals have been obtained. In the event this Agreement
terminates or is terminated pursuant to this Paragraph 15.14, the Sellers shall
instruct the Escrow Holder to return the Deposit plus all interest earned
thereon to Purchaser, and no party shall have any further rights or duties
hereunder except for the Surviving Covenants.
Executed by Sellers this _____ day of January, 1997.
Sellers: CIGNA Income Realty-I Limited Partnership,
a Delaware limited partnership
By: Cigna Realty Resources, Inc.-Tenth,
a Delaware corporation, its General Partner
By:________________________________
John D. Carey
President
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Connecticut General Equity Properties-I
Limited Partnership,
a Connecticut limited partnership
By: Connecticut General Realty Resources,
Inc.-Third,
a Delaware corporation, its General
Partner
By:_________________________
John D. Carey
President
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Westford Office Venture
a Connecticut general partnership
By: CIGNA Income Realty-I Limited
Partnership,
a Delaware limited partnership
By: Cigna Realty Resources, Inc.-Tenth,
a Delaware corporation, its General
Partner
By:_______________________________
John D. Carey
President
By: Connecticut General Equity Properties-I
Limited Partnership,
a Connecticut limited partnership
By: Connecticut General Realty
Resources, Inc.-Third, its General
Partner
By:_______________________________
John D. Carey
President
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Executed by Purchaser this _____ day of January, 1997.
Purchaser: Glenborough Properties, L.P.,
a California limited partnership
By: Glenborough Realty Trust Incorporated,
a Maryland corporation, General Partner
By:___________________________________
Name:_________________________________
Title:________________________________
Receipt of original copies of this Agreement executed by Seller and
Purchaser is acknowledged this _____ day of , 1997.
Escrow Holder: Chicago Title Company
By:___________________________________
Name:_________________________________
Title:________________________________
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Summary Description of Exhibits and Schedules
Not Attached to
Agreement of Purchase and Sale between
CIGNA Income Realty-I Limited Partnership
And
Connecticut General Equity Properties-I Limited Partnership
And
Westford Office Venture,
As Sellers, and
Glenborough Properties, L.P.,
As Purchaser
Exhibits
A-1 Form of Deed (Arizona)
A-2 Form of Deed (Florida)
A-3 Form of Deed (Massachusetts)
A-4 Form of Deed (Missouri)
B Bill of Sale
C Assignment and Assumption of Leases
D Form of Tenant Estoppel Certificate
E-1 Form of Seller's Affidavit of Non-Foreign Status
E-2 Form of Seller's Affidavit of Non-Foreign Status
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Schedules
1.1 Descriptions of Land Parcels
1.2 Rent Rolls
1.3 Contracts
1.4 Business Names
2.1 Allocation of Purchase Price
4.1 Tenant Estoppel Certificate Requirements
10.2.1 Pending Litigation
10.2.2 Tenant Improvements and Leasing Commissions to be borne by Purchaser
10.2.3 Violations of Law
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UNSECURED LOAN AGREEMENT
between
GLENBOROUGH PROPERTIES, L.P., a California limited partnership
and
WELLS FARGO BANK, NATIONAL ASSOCIATION
Executed as of June ___, 1997
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UNSECURED LOAN AGREEMENT
THIS UNSECURED LOAN AGREEMENT ("Agreement") is executed as of June ___, 1997, by
and between GLENBOROUGH PROPERTIES, L.P., a California limited partnership
("Borrower") and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Lender").
R E C I T A L
Borrower desires to borrow from Lender, and Lender agrees to loan to Borrower,
the extension of credit for which provision is made herein.
NOW, THEREFORE, Lender and Borrower agree as follows:
ARTICLE 1. DEFINITIONS
1.1 DEFINED TERMS. The following capitalized terms generally used in this
Agreement shall have the meanings defined or referenced below. Certain
other capitalized terms used only in specific sections of this
Agreement are defined in such sections.
"Account" - means an account opened now or hereafter with Lender in the
name of Borrower or Borrower's designee.
"Agreement" - shall have the meaning ascribed to such term in the
preamble hereto.
"Bankruptcy Code" - means the Bankruptcy Reform Act of 1978 (11 USC
Section 101-1330) as hereinafter amended or recodified.
"Borrower" - means GLENBOROUGH PROPERTIES, L.P., a California limited
partnership.
"Business Day" - means a day of the week (but not a Saturday, Sunday or
holiday) on which the offices of Lender are open to the public for
carrying on substantially all of Lender's business functions. Unless
specifically referenced in this Agreement as a Business Day, all
references to "days" shall be to calendar days.
"Default" - shall have the meaning ascribed to such term in Section 0.
" Extended Maturity Date" - means October 31, 1997.
" Funding Date" - means the date the Loan proceeds are disbursed.
"Guarantor" - GLENBOROUGH REALTY TRUST INCORPORATED, a Maryland
corporation.
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"Lender" - means WELLS FARGO BANK, NATIONAL ASSOCIATION.
"Loan" - means the principal sum that Lender agrees to lend and
Borrower agrees to borrow pursuant to the terms and conditions of this
Agreement: SIXTY MILLION AND NO/100THS DOLLARS ($60,000,000.00).
"Loan Documents" - means those documents, as hereafter amended,
supplemented, replaced or modified, properly executed and in recordable
form, if necessary, listed in Exhibit A as Loan Documents.
"Maturity Date" - means July 31, 1997.
"Note" - means that certain Term Note of even date herewith, in the
original principal amount of the Loan, executed by Borrower in favor of
Lender, as hereafter amended, supplemented, replaced or modified.
" Option to Extend" - means Borrower's option, subject to the terms and
conditions of Section 2.9, to extend the term of the Loan from the
Maturity Date to the Extended Maturity Date.
" Original Maturity Date" - means the Maturity Date.
"Other Related Documents" - means those documents, as hereafter
amended, supplemented, replaced or modified from time to time, properly
executed and in recordable form, if necessary, listed in Exhibit A as
Other Related Documents.
"Participant" - shall have the meaning ascribed to such term in Section
0.
"Prime Rate" - means a base rate of interest which Lender establishes
from time to time and which serves as the basis upon which the
effective rates of interest are calculated for those loans making
reference thereto. Any change in an effective rate due to a change in
the Prime Rate shall become effective on the day each such change is
announced within Lender.
"Term Note" - shall have the meaning ascribed to such term in Section
0.
1.2 EXHIBITS INCORPORATED. Exhibits A and B attached hereto, are hereby
incorporated into this Agreement.
ARTICLE 2. LOAN
2.1 LOAN. By and subject to the terms of this Agreement and each other
document identified on Exhibit A hereto as a Loan Document, Lender
agrees to lend to Borrower and Borrower agrees to borrow from Lender up
to the principal sum of SIXTY MILLION AND NO/100THS DOLLARS
($60,000,000.00).
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2.2 LOAN UNSECURED. This Loan is unsecured.
2.3 TERM NOTE. The Loan shall be evidenced by a promissory note ("Term
Note") in the form of Exhibit B attached.
2.4 INTEREST; PAYMENTS. Except as otherwise provided in any Loan Document,
interest shall accrue upon the outstanding principal balance of the
Loan at the rate(s) provided in the Term Note, and such interest and
all outstanding principal of the Loan shall be payable as required
therein.
2.5 PURPOSE. The proceeds of the Loan shall be used for the purpose of
satisfying that certain $40,000,000.00 existing loan from Lender to
Borrower as evidenced by, among other things, that certain
$40,000,000.00 Term Note dated April 25, 1997 from Borrower to Lender
and for the purpose of reducing the principal balance outstanding under
the Credit Agreement (hereinafter defined).
2.6 MATURITY DATE. The Maturity Date of the Loan shall be July 31, 1997, on
which date all sums due and owing under this Agreement and the other
Loan Documents shall be payable in full. All payments due to Lender
under this Agreement, whether at the Maturity Date or otherwise, shall
be paid in immediately available funds.
2.7 CREDIT FOR PRINCIPAL PAYMENTS. Any payment made upon the outstanding
principal balance of the Loan shall be credited as of the Business Day
received, provided such payment is received by Lender no later than
11:00 a.m. (Pacific Standard Time or Pacific Daylight Time, as
applicable) and constitutes immediately available funds. Any principal
payment received after said time, or which does not constitute
immediately available funds, shall be credited upon such funds having
become unconditionally and immediately available to Lender.
2.8 GUARANTY(S). All obligations of Borrower to Lender under the Loan
Documents shall be guaranteed by GLENBOROUGH REALTY TRUST INCORPORATED,
a Maryland corporation and such guaranty(s) shall be evidenced by and
subject to the terms of a form of guaranty to be furnished by Lender.
2.9 OPTION TO EXTEND. Borrower shall have the option to extend the term of
the Loan from the Maturity Date (for purposes of this Section, "
Original Maturity Date" ), to the Extended Maturity Date, upon
satisfaction of each of the following conditions precedent:
(a) Borrower shall provide Lender with written notice of
Borrower's request to exercise the Option to Extend not more than forty-five
(45) days but not less than fifteen (15) days prior to the Original Maturity
Date; and
(b) As of the date of Borrower's delivery of notice of request to
exercise the Option to Extend, and as of the Original Maturity Date, no Default
shall have occurred and be continuing, and no event or condition which, with the
giving of notice or the passage of time or both, would constitute a Default
shall have occurred and be continuing and Borrower shall so certify in writing.
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ARTICLE 3. DISBURSEMENT
CONDITIONS PRECEDENT. Lender's obligation to make any disbursements or take any
other action under the Loan Documents shall be subject at all times to
satisfaction of each of the following conditions precedent:
Compliance. The representations and warranties contained herein shall be true on
and as of the date of the signing of this Agreement and on the date such action
is to be taken, with the same effect as though such representations and
warranties had been made on and as of such dates, and on such dates no Default,
as defined in this Agreement, shall exist and no event or circumstance shall
have occurred or arisen which would constitute a Default but for any unsatisfied
requirement for the giving of notice or passage of time.
Documentation. Prior to taking any such action hereunder, Borrower shall have
delivered to Lender all Loan Documents and such other documents, instruments,
policies, forms of evidence and other materials as Lender may request under the
terms of the Loan Documents.
Approval of Lender's Counsel. All legal matters incidental to such action shall
be satisfactory to counsel of Lender.
ACCOUNT, PLEDGE AND ASSIGNMENT, AND DISBURSEMENT AUTHORIZATION. The proceeds of
the Loan, when qualified for disbursement, shall be deposited into the Account
or otherwise disbursed to or for the benefit or account of Borrower under the
terms of this Agreement; provided, however, that any direct disbursements from
the Loan which are made by means of wire transfer, shall be subject to the
provisions of any funds transfer agreement which is identified in Exhibit A
hereto. As security for Borrower's performance under the Loan Documents,
Borrower hereby irrevocably pledges and assigns to Lender all monies at any time
deposited in the Account.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
As a material inducement to Lender's entry into this Agreement, Borrower
represents and warrants to Lender as of the date hereof and continuing
thereafter that:
AUTHORITY/ENFORCEABILITY. If other than an individual, Borrower is in compliance
with all laws and regulations applicable to its organization, existence and
transaction of business and has all necessary rights and powers to borrow as
contemplated by the Loan Documents.
BINDING OBLIGATIONS. Borrower is authorized to execute, deliver and perform its
obligations under the Loan Documents, and such obligations shall be valid and
binding obligations of Borrower.
FORMATION AND ORGANIZATIONAL DOCUMENTS. Borrower has delivered to Lender all
formation and organizational documents of Borrower, of the partners, joint
venturers or members of Borrower, if any,
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and of all guarantors of the Loan, if any, and all such formation and
organizational documents remain in full force and effect and have not been
amended or modified since they were delivered to Lender. Borrower shall
immediately provide Lender with copies of any amendments or modifications of the
formation or organizational documents.
NO VIOLATION. Borrower's execution, delivery, and performance under the Loan
Documents do not: (a) require any consent or approval not heretofore obtained
under any partnership agreement, operating agreement, articles of incorporation,
bylaws or other document; (b) conflict with, or constitute a breach or default
or permit the acceleration of obligations under any agreement, contract, lease,
or other document by which the Borrower is bound or regulated; or (c) violate
any statute, law, regulation or ordinance, or any order of any court or
governmental entity.
LITIGATION. Except as disclosed to Lender in writing, there are no claims,
actions, suits, or proceedings pending, or to Borrower's knowledge threatened,
against Borrower.
FINANCIAL CONDITION. All financial statements and information heretofore
delivered to Lender by Borrower, including, without limitation, information
relating to the financial condition of Borrower, the partners, joint venturers
or members of Borrower, and/or any guarantors, fairly and accurately represent
the financial condition of the subject thereof and have been prepared (except as
noted therein) in accordance with generally accepted accounting principles
consistently applied. Borrower acknowledges and agrees that Lender may request
and obtain additional information from third parties regarding any of the above,
including, without limitation, credit reports.
NO MATERIAL ADVERSE CHANGE. There has been no material adverse change in the
financial condition of Borrower and/or Guarantor since the dates of the latest
financial statements furnished to Lender and, except as otherwise disclosed to
Lender in writing, Borrower has not entered into any material transaction which
is not disclosed in such financial statements.
ACCURACY. All reports, documents, instruments, information and forms of evidence
delivered to Lender concerning the Loan or security for the Loan or required by
the Loan Documents are accurate, correct and sufficiently complete to give
Lender true and accurate knowledge of their subject matter, and do not contain
any misrepresentation or omission.
TAXES. Borrower has filed all required federal, state, county and municipal tax
returns and has paid all taxes owed and payable, and Borrower knows of no basis
for additional assessment with respect to any taxes.
NO SUBORDINATION. There is no agreement, indenture, contract or instrument to
which Borrower is a party or by which Borrower may be bound that requires the
subordination in right of payment of any of Borrower's obligations subject to
this Agreement to any other obligation of Borrower.
PERMITS; FRANCHISES. Borrower possesses, and will hereafter possess, all
permits, memberships, franchises, contracts and licenses required and all
trademark rights, trade names, trade name rights, patents, patent rights and
fictitious name rights necessary to enable it to conduct the business in which
it is now engaged without conflict with the rights of others.
OTHER OBLIGATIONS. Borrower is not in default on any obligation for borrowed
money, any purchase money obligation or any other material lease, commitment,
contract, instrument or obligation.
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ARTICLE 5. COVENANTS OF BORROWER
Borrower covenants that so long as any credit remains available hereunder, and
until payment in full of all amounts owing under the Loan Documents:
OTHER INDEBTEDNESS. Without the prior written consent of Lender, Borrower shall
not create, incur or permit to exist any liabilities resulting from borrowings,
loans or advances, whether secured or unsecured, except the liabilities of
Borrower to Lender for money borrowed hereunder. Borrower shall not encumber or
sell any or all of the Cigna Properties without the prior written consent of
Lender unless the refinance or sale proceeds are used to payoff the Loan in its
entirety.
MERGER, CONSOLIDATION, SALE OF ASSETS. Borrower shall not merge into or
consolidate with any corporation or other entity, or sell, lease, assign,
transfer or otherwise dispose of all or substantially all of its assets other
than in the ordinary course of business. Borrower agrees to apply all of the
proceeds raised through an additional equity offering done by or for the benefit
of the Borrower or the Guarantor towards the repayment of the Loan.
GUARANTEES. Without the prior written consent of Lender, Borrower shall not
guarantee or become liable in any way as a surety, endorser (other than as
endorser of negotiable instruments in the ordinary course of business) or
accommodation endorser or otherwise for debt or obligations of any other person
or entity.
DIVIDENDS, DISTRIBUTIONS. Without the prior written consent of Lender, Borrower
shall not declare or pay any dividend or distritution either in cash, stock on
Borrower's stock now or hereafter outstanding; or redeem, retire, purchase or
otherwise acquire any shares of any class of Borrower's stock or partnership
interests now or hereafter outstanding.
EXPENSES. Borrower shall immediately pay Lender upon demand all costs and
expenses incurred by Lender in connection with: (a) the preparation of this
Agreement, all other Loan Documents and Other Related Documents contemplated
hereby; (b) the administration of this Agreement, the other Loan Documents and
Other Related Documents for the term of the Loan; and (c) the enforcement or
satisfaction by Lender of any of Borrower's obligations under this Agreement,
the other Loan Documents or the Other Related Documents. For all purposes of
this Agreement, Lender's costs and expenses shall include, without limitation,
all legal fees and expenses, accounting fees and auditor fees. If any of the
services described above are provided by an employee of Lender, Lender's costs
and expenses for such services shall be calculated in accordance with Lender's
standard charge for such services.
ERISA COMPLIANCE. Borrower shall at all times comply with the provisions of
ERISA with respect to any retirement or other employee benefit plan to which it
is a party as employer, and as soon as possible after Borrower knows, or has
reason to know, that any Reportable Event (as defined in ERISA) with respect to
any such plan of Borrower has occurred, it shall furnish to Lender a written
statement setting forth details as to such Reportable Event and the action, if
any, which Borrower proposes to take with respect thereto, together with a copy
of the notice of such Reportable Event furnished to the Pension Benefit Guaranty
Corporation.
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EXISTENCE. If other than a natural person or persons, Borrower shall preserve
and maintain its existence and all of its rights, privileges and franchises;
conduct its business in an orderly, efficient, and regular manner; and comply
with the requirements of all applicable laws, rules, regulations and orders of a
governmental authority.
TAXES AND OTHER LIABILITIES. Borrower shall pay and discharge when due any and
all indebtedness, obligations, assessments and taxes, both real and personal,
owed by or relating to Borrower and Borrower's properties (including federal and
state income taxes), except such as Borrower may in good faith contest or as to
which a bona fide dispute may arise, provided provision is made to the
satisfaction of Lender for eventual payment thereof in the event that it is
found that the same is an obligation of Borrower.
NOTICE. Borrower shall promptly give notice in writing to Lender of: (a) any
litigation pending or threatened against Borrower; (b) the occurrence of any
breach or default in the payment or performance of any obligation owing by
Borrower to any person or entity, other than Lender; (c) any change in the name
of Borrower, and in the case of a Borrower which is an organization, any change
in its identity or organizational structure; (d) any uninsured or partially
uninsured loss through fire, theft, liability damage; or (e) any termination or
cancellation of any insurance policy which Borrower is required herein to
maintain.
INSURANCE. Borrower shall maintain and keep in force insurance of the types and
in amounts customarily carried in lines of business similar to Borrower's,
including but not limited to fire, extended coverage, public liability, damage
and workers' compensation, carried in companies and in amounts satisfactory to
Lender, and deliver to Lender from time to time at Lender's request schedules
setting forth all insurance then in effect.
FACILITIES. Borrower shall keep all Borrower's properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that Borrower's
properties shall be fully and efficiently preserved and maintained.
ARTICLE 6. REPORTING COVENANTS
FINANCIAL INFORMATION. Borrower shall deliver to Lender, as soon as available,
but in no event later than one hundred twenty (120) days after Borrower's fiscal
year end, current financial statements (including, without limitation, an income
and expense statement and balance sheet) signed by chief financial officer
together with any other financial information requested by Lender for the
following persons and entities:
Borrower,
Glenborough Realty Trust Incorporated
Within twenty (20) days of Lender's request, Borrower shall also deliver to
Lender such quarterly and other financial information regarding any persons or
entities in any way obligated on the Loan as Lender may specify. If audited
financial information is prepared, Borrower shall deliver to Lender copies of
that information within fifteen (15) days of its final preparation. Except as
otherwise agreed to by Lender, all such financial information shall be prepared
in accordance with generally accepted accounting principles consistently
applied.
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Within twenty (20) days of Lender's request, Borrower shall also deliver to
Lender, an updated rent roll and operating statement on the Cigna Properties.
BOOKS AND RECORDS. Borrower shall maintain complete books of account and other
records in accordance with generally accepted accounting principles consistently
applied, and permit any representative of Lender, at any reasonable time, to
inspect, audit and examine such books and records, to make copies of the same,
and to inspect the properties of Borrower.
ARTICLE 7. DEFAULTS AND REMEDIES
DEFAULT. The occurrence of any one or more of the following shall constitute an
event of default (hereinafter, "Default") under this Agreement and the other
Loan Documents:
Payment; Performance. Borrower's failure to pay when due any sum, to perform
when due any other obligation, or to observe any covenant, the payment,
performance, or observance of which is required under the Note or any of the
other Loan Documents; provided, however, that wherever provision is made for a
time period during which Borrower may undertake to remedy such failure, then
such failure shall constitute a Default only if it is not remedied within that
time period; or
Performance of Other Obligations. The occurrence of a breach or default in the
payment or performance of any obligation imposed by any instrument or agreement
(other than the Loan Documents) pursuant to which Borrower has borrowed money
from, or incurred liability to, any person or entity including Lender; or
Attachment. The sequestration or attachment of, or any levy or execution upon,
any assets of Borrower which sequestration, attachment, levy or execution is not
released expunged or dismissed prior to the earlier of thirty (30) days or the
sale of the assets affected thereby; or
Representations and Warranties. (i) The failure of any representation or
warranty of Borrower in any of the Loan Documents and the continuation of such
failure for more than ten (10) days after written notice to Borrower from Lender
requesting that Borrower cure such failure; or (ii) any material adverse change
in the financial condition of Borrower or any other person or entity in any
manner obligated to Lender under the Loan Documents from the financial condition
represented to Lender as of the date hereof; or
Voluntary Bankruptcy; Insolvency; Dissolution. (i) The filing of a petition by
Borrower for relief under the Bankruptcy Code, or under any other present or
future state or federal law regarding bankruptcy, reorganization or other debtor
relief law; (ii) the filing of any pleading or an answer by Borrower in any
involuntary proceeding under the Bankruptcy Code or other debtor relief law
which admits the jurisdiction of the court or the petition's material
allegations regarding Borrower's insolvency; (iii) a general assignment by
Borrower for the benefit of creditors; or (iv) Borrower applying for, or the
appointment of, a receiver, trustee, custodian or liquidator of Borrower or any
of its assets; or
Involuntary Bankruptcy. The failure of Borrower to effect a full dismissal of
any involuntary petition under the Bankruptcy Code or under any other debtor
relief law that is filed against Borrower or in any way restrains or limits
Borrower or Lender regarding the Loan prior to the earlier of the entry of any
court order
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granting relief sought in such involuntary petition, or thirty (30) days after
the date of filing of such involuntary petition; or
Partners; Guarantors. The occurrence of any of the events specified in Article 0
(0) or 0 (0) as to any person or entity other than Borrower, which is in any
manner obligated to Lender under the Loan Documents; or
Death or Incapacity of Borrower. The death or incapacity of Borrower, if an
individual; or
Change In Management or Control. The occurrence of any material management or
organizational change in Borrower or in the partners, venturers or members of
Borrower, including, without limitation, any partnership, joint venture or
member dispute which Lender determines, in its sole and absolute discretion,
shall have a material adverse effect on the Loan or on the ability of Borrower
or its partners, venturers or members to perform their obligations under the
Loan Documents; or
Default Under Credit Agreement. The occurrence of an Event of Default under and
as defined in that certain credit agreement dated July 11, 1996 " Credit
Agreement" executed by Glenborough Properties, L.P., a California limited
partnership, in favor of Wells Fargo Bank, National Association, as Agent for
itself and other lenders, as lender. Notwithstanding anything to the contrary,
Lender acknowledges that funding of the Loan shall cause an Event of Default
under paragraph 9.07 of the Credit Agreement and Lender acknowledges that said
Event of Default shall not cause a Default hereunder.
ACCELERATION UPON DEFAULT; REMEDIES. Upon the occurrence of any Default
specified in this Article, Lender may, at its sole option, declare all sums
owing to Lender under the Note, this Agreement and the other Loan Documents
immediately due and payable. Upon such acceleration, Lender may, in addition to
all other remedies permitted under this Agreement and the other Loan Documents
and at law or equity, apply any sums in the Account to the sums owing under the
Loan Documents and any and all obligations of Lender to fund further
disbursements under the Loan shall terminate.
RIGHT OF CONTEST. Borrower may contest in good faith any claim, demand, levy or
assessment by any person other than Lender which would constitute a Default, if
Borrower pursues the contest diligently and in a manner which Lender determines
will not be prejudicial to Lender nor impair the rights of Lender under the Loan
Documents.
ARTICLE 8. MISCELLANEOUS PROVISIONS
INDEMNITY. Borrower hereby agrees to defend, indemnify and hold harmless Lender,
its directors, officers, employees, agents, successors and assigns from and
against any and all losses, damages, liabilities, claims, actions, judgments,
court costs and legal or other expenses (including, without limitation,
attorneys' fees and expenses) which Lender may incur as a direct or indirect
consequence of: (a) the purpose to which Borrower applies the Loan proceeds; (b)
the failure of Borrower to perform any obligations as and when required by this
Agreement or any of the other Loan Documents; (c) any failure at any time of any
of Borrower's representations or warranties to be true and correct; or (d) any
act or omission by Borrower, or any constituent partner or member of Borrower.
Borrower shall immediately pay to Lender upon demand any amounts owing under
this indemnity, together with interest from the date the indebtedness arises
until
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paid at the rate of interest applicable to the principal balance of the Note.
BORROWER'S DUTY TO INDEMNIFY LENDER SHALL SURVIVE THE REPAYMENT OF THE LOAN.
FORM OF DOCUMENTS. The form and substance of all documents, instruments, and
forms of evidence to be delivered to Lender under the terms of this Agreement
and any of the other Loan Documents shall be subject to Lender's approval and
shall not be modified, superseded or terminated in any respect without Lender's
prior written approval.
NOTICES. All notices, demands, or other communications under this Agreement and
the other Loan Documents shall be in writing and shall be delivered to the
appropriate party at the address set forth on the signature page of this
Agreement (subject to change from time to time by written notice to all other
parties to this Agreement). All communications shall be deemed served upon
delivery of, or if mailed, upon the first to occur of receipt or the expiration
of three (3) days after the deposit in the United States Postal Service mail,
postage prepaid and addressed to the address of Borrower or Lender at the
address specified; provided, however, that non-receipt of any communication as
the result of any change of address of which the sending party was not notified
or as the result of a refusal to accept delivery shall be deemed receipt of such
communication.
RELATIONSHIP OF PARTIES. The relationship of Borrower and Lender under the Loan
Documents is, and shall at all times remain, solely that of borrower and lender,
and Lender neither undertakes nor assumes any responsibility or duty to Borrower
or to any third party, except as expressly provided in this Agreement and the
other Loan Documents.
ATTORNEYS' FEES AND EXPENSES; ENFORCEMENT. If any attorney is engaged by Lender
to enforce or defend any provision of this Agreement, any of the other Loan
Documents or Other Related Documents, or as a consequence of any Default under
the Loan Documents, with or without the filing of any legal action or
proceeding, Borrower shall immediately pay to Lender, upon demand, the amount of
all attorneys' fees and expenses and all costs incurred by Lender in connection
therewith, together with interest thereon from the date of such demand until
paid at the rate of interest applicable to the principal balance of the Note as
specified therein.
IMMEDIATELY AVAILABLE FUNDS. Unless otherwise expressly provided for in this
Agreement, all amounts payable by Borrower to Lender shall be payable only in
United States currency, immediately available funds.
LENDER'S CONSENT. Wherever in this Agreement there is a requirement for Lender's
consent and/or a document to be provided or an action taken "to the satisfaction
of Lender", it is understood by such phrase that Lender shall exercise its
consent, right or judgment in a reasonable manner given the specific facts and
circumstance applicable at the time.
LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Borrower agrees that
Lender may elect, at any time, to sell, assign or grant participations in all or
any portion of its rights and obligations under the Loan Documents, and that any
such sale, assignment or participation may be to one or more financial
institutions, private investors, and/or other entities, at Lender's sole
discretion ("Participant"). Borrower further agrees that Lender may disseminate
to any such actual or potential purchaser(s), assignee(s) or participant(s) all
documents and information (including, without limitation, all financial
information) which has been or is hereafter provided to or known to Lender with
respect to: (a) any party connected with
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the Loan (including, without limitation, the Borrower, any partner or member of
Borrower, any constituent partner or member of Borrower and any guarantor);
and/or (b) any lending relationship other than the Loan which Lender may have
with any party connected with the Loan. In the event of any such sale,
assignment or participation, Lender and the parties to such transaction shall
share in the rights and obligations of Lender as set forth in the Loan Documents
only as and to the extent they agree among themselves. In connection with any
such sale, assignment or participation, Borrower further agrees that the Loan
Documents shall be sufficient evidence of the obligations of Borrower to each
purchaser, assignee, or participant, and upon written request by Lender,
Borrower shall enter into such amendments or modifications to the Loan Documents
as may be reasonably required in order to evidence any such sale, assignment or
participation. The indemnity obligations of Borrower under the Loan Documents
shall also apply with respect to any purchaser, assignee or participant.
WAIVER OF RIGHT TO TRIAL BY JURY0 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY
TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS,
INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b)
IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR
HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO,
IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY
JURY.
SEVERABILITY. If any provision or obligation under this Agreement and the other
Loan Documents shall be determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable, that provision shall be deemed severed from
the Loan Documents and the validity, legality and enforceability of the
remaining provisions or obligations shall remain in full force as though the
invalid, illegal, or unenforceable provision had never been a part of the Loan
Documents, provided, however, that if the rate of interest or any other amount
payable under the Note or this Agreement or any other Loan Document, or the
right of collectibility therefore, are declared to be or become invalid, illegal
or unenforceable, Lender's obligations to make advances under the Loan Documents
shall not be enforceable by Borrower.
NO WAIVER; SUCCESSORS. No waiver shall be implied from any failure of Lender to
take, or any delay by Lender in taking, action concerning any Default or failure
of condition, or from any previous waiver of any similar or unrelated Default or
failure of condition. Any waiver or approval hereunder must be in writing and
shall be limited to its specific terms. The terms and provisions hereof shall
bind and inure to the benefit of the heirs, successors and assigns of the
parties.
TIME. Time is of the essence of each and every term of this Agreement.
Page 196 of 199
<PAGE>
HEADINGS. All article, section or other headings appearing in this Agreement and
any of the other Loan Documents are for convenience of reference only and shall
be disregarded in construing this Agreement and any of the other Loan Documents.
GOVERNING LAW. This Agreement shall be governed by, and construed and enforced
in accordance with the laws of the State of California, except to the extent
preempted by Federal laws. Borrower and all persons and entities in any manner
obligated to Lender under the Loan Documents consent to the jurisdiction of any
Federal or State Court within the State of California having proper venue and
also consent to service of process by any means authorized by California or
Federal Law.
INTEGRATION; INTERPRETATION. The Loan Documents contain or expressly incorporate
by reference the entire agreement of the parties with respect to the matters
contemplated therein and supersede all prior negotiations or agreements, written
or oral. The Loan Documents shall not be modified except by written instrument
executed by all parties. Any reference to the Loan Documents includes any
amendments, renewals or extensions now or hereafter approved by Lender in
writing.
JOINT AND SEVERAL LIABILITY. The liability of all persons and entities obligated
in any manner under this Agreement and any of the Loan Documents shall be joint
and several.
COUNTERPARTS. This Agreement, any of the other Loan Documents (except for the
Note), any Other Related Documents and any subsequent modifications, amendments,
waivers, consents or supplements thereof, if any, may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original and all such counterparts together, shall constitute one and the
same instrument.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of the
date appearing on the first page of this Agreement.
" LENDER"
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By:____________________________
Lezlie J.Beam
Its: Vice President
Page 197 of 199
<PAGE>
Lender's Address: With a copy to:
Real Estate Group (AU# 3201) WELLS FARGO BANK, NATIONAL
333 South Grand Avenue, 9th Floor ASSOCIATION
Los Angeles, CA 90071 Disbursement Center
Attention: Cathryn Berg 2120 East Park Place, Suite 100
El Segundo, CA 90245
Attention: Manager
" BORROWER"
Borrower's Address:
GLENBOROUGH PROPERTIES, L.P., a 400 South El Camino Real
California limited partnership San Mateo, CA 94402
By: GLENBOROUGH REALTY TRUST Attention: Stephen R. Saul
INCORPORATED, a Maryland corporation,
General Partner
By:__________________________________
Its:_________________________________
Page 198 of 199
<PAGE>
EXHIBIT A
Loan No. 1856TOL
EXHIBIT A - DOCUMENTS
Exhibit A to UNSECURED LOAN AGREEMENT between GLENBOROUGH PROPERTIES, L.P., a
California limited partnership, as "Borrower", and WELLS FARGO BANK, NATIONAL
ASSOCIATION, as "Lender", dated as of April 25, 1997.
LOAN DOCUMENTS. The documents numbered 1.1 through 1.7, inclusive, and
amendments, modifications and supplements thereto which have received the prior
written consent of Lender, together with any documents executed in the future
that are approved by Lender and that recite that they are "Loan Documents" for
purposes of this Agreement are collectively referred to herein as the Loan
Documents.
This Agreement.
The Term Note of even date herewith in the original principal amount of the Loan
made by Borrower payable to the order of Lender.
CoPartnership, Joint Venture or Association Borrowing Certificate of even date
herewith executed by Glenborough Realty Trust Incorporated, a Maryland
corporation, GPA, Ltd, a California limited partnership and Robert Batinovich.
Corporate Resolution Authorizing Execution of Guaranty and Endorsement and
Hypothecation of Property of even date herewith certified by _________________
as Secretary of Glenborough Realty Trust Incorporated, a Maryland corporation.
Corporate Resolution Authorizing Partnership Activity of even date herewith
certified by _________________ as Secretary of Glenborough Realty Trust
Incorporated, a Maryland corporation.
1.6 Disbursement Authorization of even date herewith executed by Borrower.
1.7 Opinion of Borrower's in-house legal counsel dated of even date
herewith executed by Frank Austin on behalf of Borrower and Guarantor.
Other Related Documents (Which Are Not Loan Documents):
Repayment Guaranty of even date herewith executed by Glenborough Realty Trust
Incorporated, a Maryland corporation as Guarantor in favor of Lender.
Funds Transfer Agreement for Disbursement of Loan Proceeds of even date
herewith, executed by and between Borrower and Wells Fargo Bank, National
Association.
Page 199 of 199
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000929454
<NAME> GLENBOROUGH REALTY TRUST INCORPORATED
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 3,352
<SECURITIES> 0
<RECEIVABLES> 1,814
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,166
<PP&E> 346,287
<DEPRECIATION> 30,450
<TOTAL-ASSETS> 337,170
<CURRENT-LIABILITIES> 3,597
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 163,644
<TOTAL-LIABILITY-AND-EQUITY> 337,170
<SALES> 0
<TOTAL-REVENUES> 22,496
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,463
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,800
<INCOME-PRETAX> 7,233
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,233
<DISCONTINUED> 0
<EXTRAORDINARY> (629)
<CHANGES> 0
<NET-INCOME> 6,604
<EPS-PRIMARY> $0.55
<EPS-DILUTED> $0.55
</TABLE>
