-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KqA21PV0HbqaMiOdPc9rQ4Xd6EfsmEjxtQG/c96Glo+j1e3sOyfbiLdEjZvX3RZ0 fn3RlXuTFn5rAZL2IL309w== 0000950149-97-001850.txt : 19971016 0000950149-97-001850.hdr.sgml : 19971016 ACCESSION NUMBER: 0000950149-97-001850 CONFORMED SUBMISSION TYPE: SC 13E3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19971014 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TRIAD PARK LLC CENTRAL INDEX KEY: 0001037037 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 943264115 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3 SEC ACT: SEC FILE NUMBER: 005-51409 FILM NUMBER: 97695533 BUSINESS ADDRESS: STREET 1: 3055 TRIAD DR CITY: LIVERMORE STATE: CA ZIP: 94550 BUSINESS PHONE: 5104490606 MAIL ADDRESS: STREET 1: 3055 TRIAD DRIVE CITY: LIVERMORE STATE: CA ZIP: 94550 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TRIAD PARK LLC CENTRAL INDEX KEY: 0001037037 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 943264115 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3 BUSINESS ADDRESS: STREET 1: 3055 TRIAD DR CITY: LIVERMORE STATE: CA ZIP: 94550 BUSINESS PHONE: 5104490606 MAIL ADDRESS: STREET 1: 3055 TRIAD DRIVE CITY: LIVERMORE STATE: CA ZIP: 94550 SC 13E3 1 RULE 13E-3 TRANSACTION STATEMENT 1 As filed with the Securities and Exchange Commission on October 14, 1997 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13E-3 RULE 13E-3 TRANSACTION STATEMENT (Pursuant to Section 13(e) of the Securities Exchange Act of 1934) TRIAD PARK, LLC (Name of Issuer) TRIAD PARK, LLC RICHARD C. BLUM & ASSOCIATES, LP TPL ACQUISITION, LLC (Name of Person(s) Filing Statement) MEMBERSHIP INTERESTS, NO PAR VALUE (Title of Class of Securities) 895814 10 1 (CUSIP Number of Class of Securities) PATRICK J. KERNAN MURRAY A. INDICK GENERAL COUNSEL MANAGING DIRECTOR, GENERAL COUNSEL TRIAD PARK, LLC RICHARD C. BLUM & ASSOCIATES, L.P. 3055 TRIAD DRIVE 909 MONTGOMERY STREET, SUITE 400 LIVERMORE, CALIFORNIA 94550-9559 SAN FRANCISCO, CALIFORNIA 94133 (510) 449-0606 (415) 434-1111 (Name, Address and Telephone Number of Person Authorized to Receive Notice and Communications on Behalf of Person(s) Filing Statement) Copies to: EDWARD S. MERRILL MCCUTCHEN, DOYLE, BROWN & ENERSEN, LLP THREE EMBARCADERO CENTER SAN FRANCISCO, CALIFORNIA 94111-4067 (415) 393-2000 This statement is filed in connection with: |X| a. The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C or Rule 13d-3(c) under the Securities Exchange Act of 1934. [ ] b. The filing of a registration statement under the Securities Act of 1933. [ ] c. A Tender Offer [ ] d. None of the above. Check the following box if the soliciting materials or information statement referred to in check box (a) are preliminary copies: |X| 2 CALCULATION OF FILING FEE
- ----------------------------------------------------------------------------- Transaction Valuation* Amount of Filing Fee - ----------------------------------------------------------------------------- $23,358,673 $4,672 - -----------------------------------------------------------------------------
* For purposes of calculating fee only. This amount assumes the purchase at a price of $1.32 per share of 17,695,965 outstanding shares of Company Membership Interests. The amount of the filing fee, calculated in accordance with Regulation 240.0-11 of the Securities Exchange Act of 1934, equals 1/50th of one percent of the value of the membership interests purchased. [ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED IN RULE 0-11(a)(2) AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR SCHEDULE AND THE DATE OF ITS FILING. Amount Previously Paid: Filing Parties: Form or Registration No: Date Filed: CROSS REFERENCE SHEET (PURSUANT TO GENERAL INSTRUCTION F TO SCHEDULE 13E-3) INTRODUCTION This Rule 13E-3 Transaction Statement is being filed in connection with the proposed merger (the "Merger") of TPL Acquisition, LLC, a Delaware limited liability company (the "Acquisition LLC") and an affiliate of Richard C. Blum & Associates, LP, a California limited partnership ("RCBA"), with and into Triad Park, LLC, a Delaware limited liability company (the "Company"), pursuant to the terms and conditions of an Agreement of Merger dated September 9, 1997 (the "Merger Agreement") among the Company, RCBA and the Acquisition LLC, a copy of which is attached hereto as Exhibit (c)(1). Upon consummation of the Merger, (i) the separate corporate existence of the Acquisition LLC will cease and the Company will continue as the surviving company, and (ii) each outstanding membership interest, no par value, of the Company (the "Shares") will be converted into the right to receive $1.32 in cash. The Cross Reference Sheet is being supplied pursuant to General Instruction F to Schedule 13E-3 and shows the location in the Company's preliminary proxy statement (the "Proxy Statement"), concurrently being filed with the Securities and Exchange Commission (the "SEC") in connection with the proposed Merger, of information required to be included in response to items of this Statement. A copy of the Proxy Statement is attached hereto as Exhibit (d)(1). The information in the Proxy Statement, including all exhibits thereto, is hereby expressly incorporated herein by reference and the responses to each item are qualified in their entirety by the provisions of the Proxy Statement. All information in, or incorporated by reference in, the Proxy Statement or this Statement concerning the Company or its advisors, or 2 3 actions or events with respect to any of them, was provided by the Company, and all information in, or incorporated by reference in, the Proxy Statement or this Statement concerning RCBA, the Acquisition LLC or their affiliates, or actions or events with respect to them, was provided by RCBA. The Proxy Statement incorporated by reference in this filing is in preliminary form and is subject to completion or amendment. In addition, the information in this preliminary Proxy Statement is intended to be solely for the information and use of the SEC, and should not be relied upon by any other person for any purpose. Capitalized terms used but not defined in this Statement shall have the respective meanings given them in the Proxy Statement. As of September 10, 1997, RCBA owned 1,998,158 Shares, representing approximately 10.1% of the voting power of the total outstanding Shares of the Company. Neither the Company nor RCBA believes that RCBA or the Acquisition LLC was then an affiliate of the Company, and the filing of this Schedule 13E-3 does not constitute an admission by RCBA or the Acquisition LLC that either entity is an affiliate of the Company. SCHEDULE 13E-3 ITEM NUMBER AND RESPONSE AND/OR LOCATION IN PROXY CAPTION STATEMENT ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION (a) Front Cover Page and "SUMMARY--The Company," which information is incorporated herein by this reference. (b) "SUMMARY--Record Date; Shareholders Entitled to Vote; Quorum" and "THE SPECIAL MEETING--Record Date; Shareholder Approval," which information is incorporated herein by this reference. (c) "SUMMARY--Market Price and Dividend Data," which information is incorporated herein by this reference. (d) "SUMMARY--Market Price and Dividend Data," which information is incorporated herein by this reference. (e)-(f) "SPECIAL FACTORS--Redemption of Shares," which information is incorporated herein by this reference. ITEM 2.IDENTITY AND BACKGROUND This Statement is being jointly filed by the Company (the issuer of the equity securities that are the subject of the Merger), RCBA and the Acquisition LLC. 3 4 (a)-(d) "SUMMARY--The Company" and "--RCBA" and "MANAGEMENT OF THE COMPANY, RCBA AND THE ACQUISITION LLC," which information is incorporated herein by this reference. (e), (f) To the best of the undersigneds' knowledge, none of the persons with respect to whom information is provided in response to this Item was during the last five years (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining further violations of, or prohibiting activities subject to, federal or state securities laws or finding any violations of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS (a)(1) "SPECIAL FACTORS--Background of the Merger-History of Relationship Between the Company and RCBA" which information is incorporated herein by this reference. (a)(2) "SPECIAL FACTORS--Background of the Merger-Contacts and Negotiations with RCBA" which information is incorporated herein by this reference. (b) "SPECIAL FACTORS--Background of the Merger-Discussions with Third Parties" which information is incorporated herein by this reference. ITEM 4. TERMS OF THE TRANSACTION (a) Front Cover Page, "SUMMARY--The Merger," "THE MERGER AGREEMENT" and "EXHIBIT A--Agreement of Merger," which information is incorporated herein by this reference. (b) "SPECIAL FACTORS--Purpose and Structure of the Merger," and "--Interests of Certain Persons in the Merger," which information is incorporated herein by this reference. 4 5 ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE (a)-(e) "SPECIAL FACTORS--Plans for the Company After the Merger" and "MANAGEMENT OF THE COMPANY, RCBA AND THE ACQUISITION LLC," which information is incorporated herein by this reference. (f), (g) "SPECIAL FACTORS--Certain Effects of the Merger," which information is incorporated herein by this reference. ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION (a), (b) "SPECIAL FACTORS--Sources and Uses of Funds," which information is incorporated herein by this reference. (c) Not applicable. (d) Not applicable. ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS (a)-(c) "SPECIAL FACTORS--Background of the Merger," "--Purpose and Structure of the Merger," "--Recommendation of the Company's Advisory Board," "--Perspective of RCBA on the Merger" and "--Certain Effects of the Merger," which information is incorporated herein by this reference. (d) "SUMMARY-The Merger," "--Interests of Certain Persons in the Merger" and "--Federal Income Tax Consequences," "SPECIAL FACTORS--Background of the Merger," "--Plans for the Company After the Merger," "--Certain Effects of the Merger," "--Interests of Certain Persons in the Merger" and "--Certain Federal Income Tax Consequences" and "MANAGEMENT OF THE COMPANY, RCBA AND THE ACQUISITION LLC," which information is incorporated herein by this reference. 5 6 ITEM 8. FAIRNESS OF THE TRANSACTION (a) "SUMMARY--Special Factors-- Recommendation of the Company's Advisory Board" and "SPECIAL FACTORS--Recommendation of the Company's Advisory Board," which information is incorporated herein by this reference. (b) "SUMMARY--Special Factors-- Recommendation of the Company's Advisory Board" and "--Sedway Report" and "SPECIAL FACTORS--Background of the Merger," "--Purpose and Structure of the Merger," and "--Recommendation of the Company's Advisory Board," which information is incorporated herein by this reference. (c) "THE SPECIAL MEETING--Record Date; Shareholder Approval," which information is incorporated herein by this reference. (d)-(e) "SPECIAL FACTORS--Background of the Merger" and "--Sedway Report," which information is incorporated herein by this reference. (f) "SPECIAL FACTORS--Background of the Merger," which information is incorporated herein by this reference. ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS (a)-(c) "SUMMARY--Special Factors--Sedway Report," "SPECIAL FACTORS--Background of the Merger" and "--Sedway Report," which information is incorporated herein by this reference. ITEM 10. INTEREST IN SECURITIES OF THE ISSUER 6 7 (a) "SUMMARY--Voting of Shares Owned by RCBA," "THE SPECIAL MEETING--Record Date; Shareholder Approval," "SPECIAL FACTORS--Background of the Merger" and "--Interests of Certain Persons in the Merger" and "SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS," which information is incorporated herein by this reference. (b) "SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS--Transactions by Certain Persons in the Shares," which information is incorporated herein by this reference. ITEM 11. CONTRACTS, ARRANGEMENTS "SPECIAL FACTORS--Background of the OR UNDERSTANDINGS WITH RESPECT TO Merger," "--Interests of Certain Persons THE ISSUER'S SECURITIES in the Merger," and "--Recommendation of the Company's Advisory Board," which information is incorporated herein by this reference. ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO THE TRANSACTION (a), (b) "THE SPECIAL MEETING--Record Date; Shareholder Approval," "SPECIAL FACTORS --Background of the Merger," "--Recommendation of the Company's Advisory Board" and "--Interests of Certain Persons in the Merger" and "SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS," which information is incorporated herein by this reference. ITEM 13. OTHER PROVISIONS OF THE TRANSACTION (a) "SUMMARY--Dissenters' Rights," and "RIGHTS OF DISSENTING SHAREHOLDERS," which information is incorporated herein by this reference. (b), (c) Not applicable. 7 8 ITEM 14. FINANCIAL INFORMATION The Company's Information Statement on Form 10-SB dated June 20, 1997 and its Quarterly Reports on Form 10-QSB for the quarter ended June 30, 1997 and for the quarter ended September 30, 1997 (to be filed on or before November 14, 1997) are incorporated by reference in the Proxy Statement and the Forms 10-QSB will be delivered to shareholders of the Company with the Proxy Statement. The Company's audited financial statements contained in the Form 10-SB and unaudited financial statements for the periods covered by the Forms 10-QSB are incorporated herein by this reference. ITEM 15. PERSON AND ASSETS EMPLOYED, RETAINED OR UTILIZED (a), (b) "THE SPECIAL MEETING--Proxies," "SPECIAL FACTORS--Sources and Uses of Funds" and "THE MERGER AGREEMENT--Payment for Shares," which information is incorporated herein by this reference. ITEM 16. ADDITIONAL INFORMATION See the text of the Proxy Statement. ITEM 17. MATERIALS TO BE FILED AS EXHIBIT NUMBER AND DESCRIPTION (EXHIBITS EXHIBITS MARKED WITH AN ASTERISK (*) ARE FILED HEREWITH) (a) Not applicable. (b) (b)(1) Triad Park Real Estate Asset Strategy, prepared by Sedway Group, dated July 22, 1997.* (c) (c)(1) Agreement of Merger dated as of September 9, 1997 by and between TPL Acquisition, LLC, Richard C. Blum & Associates, LP and the Company, which is Exhibit A to the Proxy Statement and is incorporated herein by this reference. (c)(2) Independent Contractor Services Agreement, dated February 27, 1997, between the Company and Larry McReynolds.* (d) (d)(1) Preliminary copy of Letter to Stockholders, Notice of Special Meeting, Proxy Statement and form of Proxy for the Special Meeting of Shareholders of the Company to be held on December __, 1997.* 8 9 (e) Not applicable. (f) Not applicable. SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. October 14, 1997 RICHARD C. BLUM & ASSOCIATES, LP By: RICHARD C. BLUM & ASSOCIATES, INC., its sole general partner By: /s/ MARC T. SCHOLVINCK ----------------------------- Name: Marc T. Scholvinck Title: Managing Director & Chief Financial Officer October 14, 1997 TPL ACQUISITION, LLC RICHARD C. BLUM & ASSOCIATES, LP By: RICHARD C. BLUM & ASSOCIATES, INC., its sole general partner By: /s/ MARC T. SCHOLVINCK ----------------------------------- Name: Marc T. Scholvinck Title: Managing Director & Chief Financial Officer October 14, 1997 TRIAD PARK, LLC By: 3055 Management Corp., its Manager By: /s/ JAMES R. PORTER ----------------------------------- Name: James R. Porter Title: Vice President 9 10 EXHIBIT INDEX Exhibit Number Description ------ ----------- (a) Not applicable. (b) (b)(1) Triad Park Real Estate Asset Strategy, prepared by Sedway Group, dated July 22, 1997. (c) (c)(1) Agreement of Merger dated as of September 9, 1997 by and between TPL Acquisition, LLC, Richard C. Blum & Associates, LP and the Company, which is Exhibit A to the Proxy Statement and is incorporated herein by this reference. (c)(2) Independent Contractor Services Agreement, dated February 27, 1997, between the Company and Larry McReynolds. (d) (d)(1) Preliminary copy of Letter to Stockholders, Notice of Special Meeting, Proxy Statement and form of Proxy for the Special Meeting of Shareholders of the Company to be held on December __, 1997. (e) Not applicable. (f) Not applicable. 10 EX-99.1 2 REAL ESTATE ASSET STRATEGY 1 EXHIBIT (b)(1) SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS TRIAD PARK REAL ESTATE ASSET STRATEGY PREPARED FOR: BOARD OF DIRECTORS, TRIAD PARK, LLC JULY 22, 1997 2 [SEDWAY GROUP LETTERHEAD] July 22, 1997 Board of Directors Triad Park, LLC 3055 Triad Drive Livermore, CA 94550 RE: TRIAD PARK REAL ESTATE ASSET STRATEGY Dear Sirs: Sedway Group is pleased to present its real estate asset strategy for Triad Park in Livermore, California. This report has been prepared solely for the use of the Board of Directors of Triad Park, LLC, and is a confidential document to be used for decision-making purposes. As discussed in more detail in the attached report, Sedway Group recommends that an orderly disposition of the property be implemented immediately in order to capture the present strong market conditions and the momentum that Lincoln Technology Park will generate. The disposition strategy is anticipated to take about three-and-one-half years and result in proceeds with a net present value of $25.6 million. The following report includes an overview section, followed by a discussion of market issues and recommendations, and concludes with a presentation of the financial analysis of the disposition strategy. The results of our engagement are also subject to the assumptions and limiting conditions appended to the end of this report. We appreciate this opportunity to assist in this important and challenging assignment and look forward to discussing our findings with the Board at its July 28, 1997, meeting. Sincerely, /s/ MICHAEL J. CONLON /s/ MARY A. SMITHERAM-SHELDON - --------------------- ----------------------------- Michael J. Conlon, CRE Mary A. Smitheram-Sheldon Principal Manager MJC/MASS:nam Enclosure 3 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL OVERVIEW TRIAD PARK HISTORY Triad Park, totaling 396 gross acres, was purchased by Triad Systems Corporation (Triad) in 1984 with the vision of creating an environment similar to Stanford Business Park. At that time, the belief was that, with a tight real estate market in Santa Clara County, other firms would follow Triad from the expensive Silicon Valley to the relatively spacious and inexpensive Livermore. Despite the 1987 completion of 219,800 square feet for Triad, the sale of a few parcels of land (Wang NMR in 1987, Vista West/Impact and Boulangerie de France in 1989), and the construction of the Marriott Residence Inn (Boulangerie de France resale) and Comfort Inn (out-parcel), the original vision was never realized due to economic and real estate recessions and competition. In the early 1990s, Triad obtained approval to change the allowed uses to include commercial/retail and residential. Sales activity within Triad Park since 1990 is summarized in Exhibit 1 (exhibits are included at the end of this report). With the exception of the Costco sale in 1993, all the sales activity took place in 1996. (Exhibit 1 also includes two resales of portions of Boulangerie de France=s land for informational purposes.) Triad sold nearly 30 acres in 1996 in five transactions. For all but the Lincoln sale, Triad financed 75 percent of the sale price. Of these five sales, three (totaling 9.39 acres) have proposed uses related to the corporate lodging core established by the Marriott Residence Inn, Comfort Inn and the new Hampton Inn. Two sites are slated for a Hilton Garden Inn (with a restaurant) and a Marriott Courtyard. The third site is planned for one or more restaurants or food-related commercial. The two other sales (totaling 20.2 acres) are for office/R&D uses. TRIAD PARK B CURRENT SITUATION Current uses in Triad Park include the Triad complex, other office/R&D/light industrial facilities (Wang NMR, Vista West/Impact, plus Lincoln Technology Park under construction), lodging (Marriott Residence Inn, Comfort Inn, Hampton Inn), and other commercial (Exxon service station with mini-mart, Wendy=s and Baskin-Robbins; Harley Davidson Dealership; Costco). The holdings of Triad Park, LLC include the Triad facility located on 15.06 acres and 293.9 acres of undeveloped land. The Triad facility consists of a three-building complex totaling 219,800 square feet that has been leased to Triad for five years commencing February 27, 1997. Although there is a five-year renewal option, the corporate strategy for Triad is uncertain as to its future commitment to its Livermore presence due to the recent merger. Of the 293.9 acres of undeveloped land, 110.8 acres are designated for open space and 4.5 acres are reserved for a future freeway interchange. Triad Park, LLC owns about 179 gross acres of development land, or 142 net acres, with the following breakdown (based on the current planned uses): TRIAD PARK REAL ESTATE STRATEGY 1 JULY 1997 4 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL
=============================================================================== Use Gross Size Net Size =============================================================================== Residential 28.1 acres 24.7 acres Office/R&D 127.1 acres 93.9 acres Commercial/Retail 23.4 acres 23.4 acres - ------------------------------------------------------------------------------- TOTAL 178.6 ACRES 142.0 ACRES ===============================================================================
Recent potential sales activity within the park has included the following: - - Lots 1 and 2 (19.4 acres) in escrow to Gibson Speno Company; - - Discussions with Gibson Speno Company to acquire Lot 3; - - Discussions with Tom Terrill to acquire a portion of Lot 7 (formerly the HHH Investments/ Micro Dental option parcel); - - The first rights agreement with Lincoln Property Company for multiple parcels, including a Astrike price@ of $4.00 per square foot (net of bonds) for Lot 9; - - An offer on Lot 9A at $3.60 per square foot (net of bonds);(1) and - - A joint venture agreement with Jeffrey Kendall for a retail development on Lot 16 that included a potential Taco Bell (now expired). SEDWAY GROUP ENGAGEMENT Triad Systems Corporation was recently merged with Cooperative Computing, Inc. into CCI/Triad. As part of the merger, the real estate at Triad Park was spun off into a separate entity, Triad Park, LLC, and the Board of Directors of this entity desires to reevaluate the ownership and disposition strategy of its assets. Triad Park, LLC retained Sedway Group to provide a strategy to maximize the value of the real estate assets. As part of this assignment, Sedway Group has performed the following tasks: - - Met with Triad Park management and reviewed the current status of the Park; - - Inspected Triad Park and its environs; - - Read various documents related to the park, including an appraisal prepared by Carneghi-Bautovich & Partners, the listing agreement with Grubb & Ellis, the Gibson Speno Company agreement (portions), the January 1997 Lincoln Property Company offer, the Lincoln Property Company first rights of offer clause, the lease and lease amendment pertaining to the Triad building complex, tax and assessment bond information, etc. - - Held telephone interviews with members of the Triad Park, LLC Board of Directors; - - Held telephone discussions with brokers, developers, and land owners active in Livermore and the Tri-Valley area; - - Reviewed market information provided by Grubb & Ellis; and - ---------- (1) A recent discussion with Grubb & Ellis indicates that the sale price on this lot has been negotiated up to $3.71 per square foot. TRIAD PARK REAL ESTATE STRATEGY 2 JULY 1997 5 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL - - Compiled the information gathered from all sources into a reasonable disposition program and prepared a cash flow analysis. MARKET ISSUES The strategy that maximizes the value of Triad Parks real estate is dependent upon many market-related issues. The most important of these market issues is location. Another pertains to the perception of Triad Park. Of course, market conditions are also very important to the real estate strategy. LOCATION IN THE CITY OF LIVERMORE The most important factor influencing Triad Park is its location in Livermore. To quote one broker, "Livermore is not Pleasanton," or expanded, "Livermore is not now, nor ever will be, Pleasanton."(2) Pleasanton is a well-established office and research and development (R&D) market, with an image as a desirable corporate address. Pleasanton offers an excellent location at the nexus of I-580 and I-680 and high-quality corporate park environments. Pleasanton possesses a wide variety of product and currently has an active speculative market (although many buildings end up becoming build-to-suits before completion). Companies, especially those that are image-conscious, are willing to pay a premium to locate or remain in Pleasanton. In addition, businesses that occupy office and R&D space often view their employees as their greatest assets. For these firms, real estate occupancy costs are secondary to their employees and they prefer to locate in an area where they can attract and retain top talent. Lastly, due to Pleasanton=s established office and R&D markets, it is a less risky location for owner-users with respect to their real estate asset exit strategies. In contrast, Livermore is viewed mainly as a distribution, warehouse, service center, and light assembly location, capitalizing on its strength of lower land prices and thus lower occupancy costs (to buy or rent). This occupancy expense savings is more appealing to space-using businesses such as distributors and manufacturers (or these divisions of larger firms). As a result, there is basically no significant multitenant office or R&D product in Livermore, with such uses considered Apioneering@ by market participants. Thus, even though Triad Park and Livermore are only a few miles east of the I-580/I-680 interchange, they possess a vastly different and less desirable location compared to Pleasanton. TRIAD PARK PERCEPTION Although Triad Park is the westernmost business park in Livermore, the park itself, as it is presently improved, does not convey the image needed in order to compete with Pleasanton's corporate office and R&D parks. The development program to date lacks focus, which is evident in the existing and - ---------- (2) Although Pleasanton is the focus of the Tri-Valley, Dublin and San Ramon are also important components and competitors in this market area. However, when comparing Livermore to the rest of the Tri-Valley, the comparison is often made in reference to Pleasanton. TRIAD PARK REAL ESTATE STRATEGY 3 JULY 1997 6 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL proposed mix of uses. This lack of cohesiveness has resulted in "historical accidents" at the park, such as the conglomeration of corporate lodging facilities, service station, and Costco, and in a lack of amenities that indicate a quality corporate environment. More specifically, the issues with the perception of Triad Park are as follows: - - The current development in Triad Park is more indicative of a hodgepodge created to respond to the dire economic conditions of the early 1990s than of a uniformly planned corporate park. - - The present pylon sign for Triad Park leads one to believe that it is a highway rest stop rather than a quality corporate park. - - There is no entry monument with landscaping to convey to visitors a sense of arrival at Triad Park (there is no "there" there). - - The park does not have the amenities needed for a corporate environment. - - Until the Shea Business Park project moves forward significantly, there is only one route in and out of the park, which is Airway Boulevard. The interchange between I-580 and Airway Boulevard requires modernization. CURRENT MARKET CONDITIONS - RETAIL The I-580 corridor is already populated by numerous retail centers. The corridor's demand for retail space is basically saturated, and the market is generally perceived as being overbuilt. New construction of retail space will not be speculative but will be driven by the expansion of retail chains. However, this construction would most logically take place at available locations near established retail concentrations in the corridor. In some areas experiencing substantial residential development, a modest amount of neighborhood-serving retail space may be built. Triad Park does not offer an appropriate location for either convenience (neighborhood-serving) or comparison (regional-serving) retail space. For this reason, the proposed Kendall project on Lot 16 never attracted co-tenants for the Taco Bell. Triad Park has established itself as a corporate lodging center with three existing limited service/extended stay hotels, plus two more that were recently approved. The existing and anticipated lodging space and employee base have created a modest need for food in the park, which will grow over time as the park is built-out. However, the sites most logical for food uses are located on Constitution Way and are controlled by other entities. (There are three potential food user sites, but we do not expect all three to be developed with food in the near future.) CURRENT MARKET CONDITIONS - OFFICE AND R&D Following Bay Area and Silicon Valley trends, the Tri-Valley office and R&D markets have improved dramatically in the past two years. According to Grubb & Ellis in its 1997 market forecast, Tri-Valley Class A office and R&D/flex rents increased by more than 20 percent in 1996. In addition, Tri-Valley TRIAD PARK REAL ESTATE STRATEGY 4 JULY 1997 7 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL R&D/flex land prices increased by 25 percent over 1995 and 1996.3 Net office absorption in Tri-Valley in 1996 was just over 100,000 square feet; net industrial space absorption was 29,000 square feet. Prospects in the Tri-Valley are good through 1997 and 1998. However, with a significant amount of new construction underway, the potential for continued dramatic declines in vacancy or increases in rental rates is not as great as was realized in the past two years (i.e., rents increasing at a decreasing rate). The market's potential after 1998 is still expected to be healthy, but expected substantial new construction make this time period less certain. Pleasanton is the dominant location in the Tri-Valley. Although Pleasanton presently has a low 3.0 percent office vacancy rate, there is substantial construction activity and there is still abundant, albeit expensive, vacant land in Hacienda Business Park and other quality Pleasanton locations. Brittania, Opus Southwest, Parkway Properties and CM Capital all have office/R&D projects under construction in Pleasanton. These projects, totaling over 500,000 square feet (not including the 130,000-square-foot Brittania VI, which is pre-leased to Pro Business), are predominantly speculative, although it is likely that this space will be substantially pre-leased before completion. Dublin and San Ramon similarly have office vacancy rates near 3.0 percent, with new speculative construction underway in Bishop Ranch totaling over 400,000 square feet. Livermore has already experienced some benefits related to the tight market in Pleasanton. The new 115,000-square-foot California State Automobile Association complex (the first phase of which is completed) on the south side of I-580 is one example, while the other is the Lincoln Technology Park in Triad Park, which is currently under construction. The tight Pleasanton market may result in some users moving to Livermore; however, it will not cause an exodus of firms. Motivations for companies either to remain in Pleasanton or move include the following: - - Some image-conscious tenants are willing to pay a premium for Pleasanton=s established identity and corporate environment. These firms are likely to be major name employers. - - Companies with significant employee assets would likely select Pleasanton because of its convenient location and greater employee amenities. - - On the other hand, some companies may experience sticker shock when their leases in Pleasanton buildings come up for renewal. The more price-sensitive and less image-conscious of these firms may consider a move. - - In addition, some companies' current and projected growth may result in space needs that cannot be accommodated in Pleasanton in the required time frame. - ---------- (3) Although these statistics are quoted for the Tri-Valley overall, for office and R&D space, the Tri-Valley basically consists of Pleasanton, Dublin and San Ramon. As already noted, the main competitor for Livermore is Pleasanton; however, both Dublin and San Ramon share the same market strength and desirability as Pleasanton. TRIAD PARK REAL ESTATE STRATEGY 5 JULY 1997 8 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL - - Also, back-office (clerical and administrative) components of large corporations may find that a Livermore location is closer to many of its employees, who may live in areas such as Livermore, Brentwood, Discovery Bay, and Tracy. - - Lastly, in some situations, some companies may grow weary of the competition for space in Pleasanton and opt to relocate. Broker consensus is that, if there ever was a time for Livermore and Triad, that time is now. The current real estate cycle is expected to last about another three years (more or less, excluding an external shock to the economy or a dramatic increase in interest rates).(4) However, with significant amounts of new space under construction and in the planning stages, especially relative to 1996 net absorption, the strongest part of the future market will be in the next year. Space is currently tight and expensive in Pleasanton, primarily due to expansion of Tri-Valley firms. Companies relocating out of the similarly tight (and more expensive) Silicon Valley and Peninsula markets are creating some additional demand. However, many of these firms also consider Fremont and nearby communities when making their relocation decisions. There is a window of opportunity that must be capitalized on before it closes.(5) The limited time frame of market opportunity is especially true given the potential for significant competition by the office and R&D components of the planned Dublin Ranch and Shea Business Park projects. Shea Business Park has already started marketing its sites, and Dublin Ranch is expected to start marketing in the near future. However, both of these projects require major infrastructure, and any building development will not be possible until after 2000. While both projects represent significant competition to Triad Park, Dublin Ranch in particular will have a detrimental effect on any unsold land at Triad Park due to its much superior location (closer to I-580/I-680 and in the City of Dublin). RECOMMENDATIONS Based on its investigations, Sedway Group has prepared a series of recommendations for Triad Park, LLC regarding the disposition of its real estate assets, land use issues, park image and environment issues, and marketing program. - ---------- (4) Typical real estate cycles last about seven to eight years trough-to- trough, and one could make the argument that the present Tri-Valley office and R&D market is about half-way through the present cycle. (5) It is important to remember that Livermore's nascent office/R&D market depends on and is secondary to Pleasanton. To the extent Pleasanton has little space available, Livermore becomes a more viable choice. However, when vacancies in Pleasanton increase as more space is built than absorbed, companies will have ample selections and will not be as likely to consider a move. TRIAD PARK REAL ESTATE STRATEGY 6 JULY 1997 9 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL REAL ESTATE ASSET DISPOSITION STRATEGY Sedway Group recommends an aggressive but orderly real estate asset disposition program that would likely span about three-and-one-half years. Sedway Group believes that this strategy would maximize the value of Triad Park, LLC's holdings. The recommended strategy, with absorption estimates and pricing, is summarized by Exhibit 2 and is more fully described in this and the following sections. We considered a shorter-term disposition, but in our opinion this would be akin to a fire-sale liquidation that is inappropriate given current strong real estate market conditions. Such a liquidation is also inappropriate given the financial capability of Triad Park, LLC to hold the property for a number of years. In addition, we considered a longer-term strategy and determined that this would certainly span the real estate cycle and would likely bring the park=s land in direct competition with Dublin Ranch and Shea Business Park. Sedway Group also recommends that the disposition plan be swiftly implemented. As mentioned above, now is the time to capitalize on very low vacancy levels. Rents and land/building prices have recently risen so rapidly in Pleasanton that some tenants may experience sticker shock when their leases come up for renewal. Less image-conscious and more price-sensitive tenants may give Livermore and Triad Park serious consideration. Swift implementation of the disposition plan will also allow Triad Park to build on the momentum expected by the completion and occupancy of Lincoln Technology Park. From our perspective, the disposition strategy should contain three key components B a well-defined site plan and specific land use groupings; a focused park image repositioning; and an aggressive, sophisticated marketing program managed by an experienced development team. Each of the three components is discussed in the following sections. LAND USE RECOMMENDATIONS The present Triad Park land use plan includes residential (Lots 1 to 3), Business Commercial/Light Industrial (Lots 4 to 12), Service Commercial/Retail (Lots 13 and 16 to 20), and Retail and Office Commercial/Light Industrial (Lots 21 to 25). The discussion below is illustrated by the color-coded land use map presented as Exhibit 3. RESIDENTIAL. We recommend that Triad Park, LLC simply follow through the current agreements, since the majority of the residential component is already under contract. We recommend that Triad Park, LLC close escrow with Gibson Speno on Lots 1 and 2, and continue dialogue with respect to Lot 3. Based on discussions with management and the appraisal, as well as Lot 3's slope restrictions, Sedway Group believes that it is likely that this lot would be developed with five large-lot home sites. However, an agreement may be reached with Gibson Speno to result in the integration of this lot into Lot 2's planned duet home development. This agreement could change the timing and the sales price of this lot. BUSINESS COMMERCIAL/LIGHT INDUSTRIAL. We recommend that Triad Park, LLC aggregate the business commercial/light industrial land (Lots 4 to 12) into three components to form a well-defined disposition strategy: TRIAD PARK REAL ESTATE STRATEGY 7 JULY 1997 10 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL - - TRIAD CAMPUS AND EXPANSION LAND. This consists of the 15.1 acres improved with the three leased Triad buildings, plus Lots 4, 5, 6 and 8 (42.1 acres gross, 27.9 acres net, including 1.5 acres shifted from Lot 7). It is important that this asset is sold as soon as reasonably possible while there is sufficient time remaining on the Triad lease and a healthy real estate investment market, based on the uncertainty over the corporate plans for Triad=s Livermore location. Lots 5 and 8 are natural expansion areas for current and future users of the campus (with little potential for other development due to their location and slope restrictions). Lots 4 and 6 could also be used for expansion or resold individually. - - MULTITENANT COMPONENT. This consists of Lots 7, 9 and 9A, which are anticipated to be developed with a variety of multitenant product serving a range of user sizes. This multitenant component will bring to the park vitality from multiple businesses with a variety of sizes and momentum. We recommend the following for these lots. - Lot 7 (a 3.5-acre portion, the rest of which is allocated to Lot 8) should be sold to Tom Terrill, who is also reportedly purchasing the former Micro Dental site, for multitenant office/R&D product aimed at tenants less than 15,000 square feet (too small for Lincoln Technology Park). - Lot 9 is expected to represent Phase II of Lincoln Technology Park (which Lincoln needs to buy in order to preserve its right of first offer agreement). Triad Park, LLC should work proactively with Lincoln so that Lincoln Technology Park is fully leased and to ensure their acquisition of this lot. - Lot 9A has received an offer at $3.60 per square foot (which has been reportedly negotiated up to $3.71 per square foot) from a developer proposing a technology incubator project. This offer should be accepted and Triad Park, LLC should work proactively with the developer to make this project happen. If this deal falls through, Triad Park, LLC should encourage Lincoln Property Company to acquire this site for their Lincoln Technology Park project. - - CORPORATE USER/DEVELOPER. This consists of Lots 10 to 12. Triad Park, LLC should continue to work with DES to develop functional design alternatives for the 27.1-acre net area. The anticipated buyer of this land would be a corporate user or a built-to-suit developer. SERVICE COMMERCIAL/RETAIL AND RETAIL AND OFFICE COMMERCIAL/LIGHT INDUSTRIAL. The most challenging portion of Triad Park is the southeast, with Lots 16 to 25. To be developable, this portion of the park needs a clear direction regarding land use, substantial infrastructure improvements, and acquisition of two key out-parcels. Sedway Group believes that the Aservice commercial/retail@ component on Lots 16 to 20 is ill-conceived. The retail market discussion presented earlier in this report indicated that the I-580 retail market is saturated and if any retail development were to occur, it would take place near existing retail concentrations. Within Triad Park, the most logical site for retail development, consisting mainly of food services, is located in the Retail/Lodging Center noted on Exhibit 3. There are three prime sites TRIAD PARK REAL ESTATE STRATEGY 8 JULY 1997 11 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL in this area for such food services, all of which are owned by third parties: New West Petroleum=s 1.954 acres (listed at $10.00 per square foot net of bonds), Livermore Partners LLC's 1.4 acres (listed at $10.00 per square foot net of bonds), and D=Ambrosio Brothers' 1.81 acres (listed at $8.50 per square foot net of bonds, increasing to $10.00 per square foot as of October 1, 1997, or may be retained and developed by the owner). The small parcel sizes and high listing prices of lots 16 to 20 appear unrealistic. Instead, we recommend that this service commercial/retail land be combined into larger parcels with lower prices commensurate with other office/R&D land in the park. In fact, these parcels would benefit if combined with Lots 21 to 23 and potentially Lots 24 and 25. Thus, there could be one or two corporate campus sites of either 35.9 acres (one campus) or 16.0 and 19.9 acres (two sites). A small premium is applicable for the land=s freeway visibility. Furthermore, the out-parcels adjacent to the park on the west side of Colliers Canyon Road should be incorporated into the park (primarily the Cabrita and Chu land and potentially the Davina land also). Inclusion of these out-parcels would Asquare off@ the site and remove incompatible uses that may detract from its desirability. There is one small parcel, Lot 13, that possesses the greatest potential for service commercial/retail use. However, this site will not have access until the western portion of North Canyons Parkway is developed, which would take place after Lots 10 to 12 are sold. The eventual type of user for this site is speculative at this time. LAND USE SUMMARY. Therefore, Sedway Group recommends that Triad Park, excluding the Retail/Lodging Center, be segmented into the following components: - Residential Land (Lots 1 and 2 B 19.4 acres to Gibson Speno; Lot 3 B 5.28 net acres usable to be sold); - Triad Campus and Expansion Land (219,800 square feet on 15.1 acres and Lots 4, 5, 6 and 8 B 42.1 gross, 27.9 net, acres); - Multitenant Component (Lincoln Technology Park B 19.2 acres, with Lot 9 B 13.8 acres to be sold; Terrill B 14.18 acres, with Lot 7 B 3.5 acres to be sold; and incubator Lot 9A, or more Lincoln, 5.6 acres); - Corporate User/Developer (Lots 10 through 12 B 46.1 gross, 27.1 net, acres); - Corporate User/Developer (Lots 16 to 25 B 35.9 acres, could be split into two: 19.9 and 16.0 acres); and - Future Service Commercial/Retail (Lot 13 B 3.5 acres). PARK IMAGE AND ENVIRONMENT ISSUES Triad Park presently does not have a well-defined image or an environment consistent with a corporate park. Although these considerations are fairly intangible compared to land, buildings and occupancy costs, they are very important for corporate users. SIGNAGE AND ENTRY STATEMENT. Triad Park needs an entry monument with landscaping to tell visitors that they have arrived. The current pylon sign identifying the park from I-580 is detrimental to the TRIAD PARK REAL ESTATE STRATEGY 9 JULY 1997 12 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL park's image, as it creates the impression of a highway rest stop, not a corporate park. This pylon sign should be redesigned or removed, if possible, and replaced with a monument appropriate for a corporate location.(6) Although an entry monument and landscaping is essential, it does not need to be of the quality and scale as those in Pleasanton. The entry to the park is also not of corporate quality, due to the fact that the first development one sees when entering the park is the Exxon service station. In addition, there is an out-parcel to the west of the Exxon station site over which Triad Park, LLC appears to have no real control. The development of this parcel could potentially create more issues at the entry. We recommend that the entry be upgraded as development proceeds. AMENITIES. Triad Park has one very distinct and plentiful amenity: corporate lodging. However, there is very little in the way of other amenities for the park's businesses and employees. Food services are in need at the park. Presently the only food choices are Wendy's, Baskin-Robbins and Costco's hot dog and pizza stand. A range of food services, from sit-down restaurants to delis, are needed at the park. The logical location for these uses is in the Retail/Lodging Center. Another needed amenity is business services (overnight delivery, copying, supplies, ATM, etc.). This type of service could be placed in a multitenant retail building in the Retail/Lodging Center, or in the ground floor of a multitenant office/R&D building. The provision of these amenities should be encouraged, even if they located on a third party's parcel.7 Another image consideration that is entwined with the disposition program is offering a potential large land purchaser naming rights to the park. Such a carrot may not only secure a significant land sale but also provide a fresh start for the park. MARKETING PROGRAM Sedway Group recommends that the disposition of the park be based on an aggressive, sophisticated marketing plan including a clear land use strategy; a coordinated program of presentations to brokers, developers, and a wide range of investors including REITs for the buildings; and integration of financing and other key deal points into the offering. We also recommend that Triad Park, LLC create an experienced development team to manage the disposition. The team should include, or have immediate access to, expertise in brokerage, architecture, construction management, off-balance-sheet financing, and built-to-suit development. Finally, we recommend that Triad Park, LLC plan to work with multiple developers, investors and contractors in the park. Given the size of the park and the need to absorb a very large inventory of - ---------- (6) There may be a problem with removing this sign, since it is not located on Triad Park land and portions of the sign are owned by different entities. However, we recommend addressing this issue. (7) This recommendation is made with the recognition that amenities require a population that requires amenities. This chicken-and-egg situation is not easily resolved. TRIAD PARK REAL ESTATE STRATEGY 10 JULY 1997 13 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL undeveloped land, we suggest that perhaps three or four developers be involved in different elements of the park to maximize the value of the real estate assets. FINANCIAL ANALYSIS OF RECOMMENDED DISPOSITION STRATEGY Exhibits 4 through 7 present the financial analysis of the recommended disposition strategy. Exhibit 4 presents a brief summary of the results of the financial analysis for the various components, while Exhibit 5 presents our land and price conclusions lot by lot (5A) and use by use group (5B), along with a comparison with the Carneghi-Bautovich appraisal and Grubb & Ellis listing. Exhibit 5B also presents other cash flow assumptions. Exhibit 6 illustrates the cash flow by land use group, including the Triad complex. Exhibit 7 is the summary cash flow projection. Key assumptions are summarized as follows: - - LAND PRICES. Prices are net of assessment bonds, which are assumed by the buyer, and are based on the gross acre. The gross acre is used since purchasers of partially usable sites assume the bonds based on gross acreage. Prices are based on sales within the park, current escrows and offers, listing prices, and information presented in the Carneghi-Bautovich and Partners appraisal. - - TRIAD CAMPUS. The projected building rental revenue and reimbursements for taxes and assessments are based on the current lease agreement. The sales price for the campus is based on the Carneghi-Bautovich and Partners appraisal and the recent Lincoln Property Company=s verbal offer (considered slightly low). Active marketing or a competitive bid process will likely yield a higher price from either Lincoln or another aggressively growing real estate entity. - - ABSORPTION. Absorption is based on outstanding escrows, offers, first rights agreements, and indication of interest. We also assume that momentum is created by a full commitment to the disposition program, with appropriate marketing and exposure, as well as the completion and occupancy of the Lincoln Technology Park. Sale of the Triad Campus and Expansion Land is timed to reflect interest, as demonstrated by Lincoln Property Company's recent verbal offer. - - COMMISSIONS. Commissions are 6.0 percent on the land sale price (net of bonds) and 2.0 percent on the buildings' sale price. Although the Grubb & Ellis listing agreement calls for a sliding scale of commissions, we used 6.0 percent to reflect the potential for other expenses related to marketing and selling the land. - - HOLDING COSTS. Holding costs include real estate taxes (tax rate 1.1849 percent), annual payments on assessment bonds, and overhead, including payments to the park's maintenance association. - - DEVELOPMENT COSTS. Development costs are reflected by the increase in payments on assessment bonds. Due to the short-term nature of the financial analysis, the actual development costs and city recapture has not been modeled. - - BUILDING LOAN. The principal and interest on the existing loan are assumed to be paid per the amortization schedule. We assume that the land parcels presently encumbered by the loan are TRIAD PARK REAL ESTATE STRATEGY 11 JULY 1997 14 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL released, based on plans for such a release agreement, and that the building complex is the only encumbered portion of the park. - - DISCOUNT RATE. An annual discount rate of 15.0 percent is assumed for both the land sell-out and the building equity cash flow analysis. Employing the discounted cash flow analysis, as summarized in Exhibit 4, the total present value is calculated at $25.6 million. TRIAD PARK REAL ESTATE STRATEGY 12 JULY 1997 15 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL GENERAL ASSUMPTIONS AND LIMITING CONDITIONS This report is made subject to the following assumptions and limiting conditions. 1. No responsibility is assumed for legal matters. Title to the property is assumed to be marketable and to be free and clear of all liens, encumbrances and special assessments, unless otherwise noted. Unless otherwise stated, easements are assumed to not adversely impact development potential of the property. 2. The factual data utilized in this analysis, including land and building area, have been obtained from sources deemed to be reliable; however, no responsibility is assumed for their accuracy. 3. Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyls, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, or other environmental conditions, were not called to the attention of nor did the authors become aware of such during any inspection undertaken on this assignment. The authors have no knowledge of the existence of such materials on or in the property unless otherwise stated. The authors, however, are not qualified to test such substances or conditions. If the presence of such substances, such as asbestos, urea formaldehyde foam insulation, or other hazardous substances or environmental conditions, may affect the value of the property, the value estimated is predicated on the assumption that there is no such condition on or in the property or in such proximity thereto that it would cause a loss in value. No responsibility is assumed for any such conditions, nor for any expertise or engineering knowledge required to discover them. 4. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. No warranty or representation is made that these projections will materialize. 5. The compensation for this report is in no way contingent upon any value estimate contained in this report. 6. Neither all nor any part of the contents of this report shall be conveyed to the public through advertising, public relations, news, sales or other media, without the written consent and approval of the author. 7. No engineering study has been made or is implied by this report on the condition and size of the subject property. It is assumed that there are no unusual soils conditions that would constrain development, other than those specifically stated herein. TRIAD PARK REAL ESTATE STRATEGY 13 JULY 1997 16 SEDWAY GROUP REAL ESTATE AND URBAN ECONOMICS CONFIDENTIAL 8. No testimony is required or implied on the part of the authors in any court or before any board of appeals or board of supervisors acting in such capacity, unless arrangements have been made previously. 9. Due to extraneous and yet undeterminable factors that affect sales price, any estimate of value stated herein for the subject property is not necessarily the ultimate sales price for the property. TRIAD PARK REAL ESTATE STRATEGY 14 JULY 1997 17 EXHIBIT 1 TRIAD PARK, LLC TRIAD PARK LAND SALES ACTIVITY 1990 TO 1997 (1)
- ---------------------------------------------------------------------------- SITE SIZE SALE SALE PRICE IDENTIFICATION (ACRES) DATE BUYER NET OF BONDS - ---------------------------------------------------------------------------- Costco Site 15.22 7/93 Costco $1,720,802 2850 Constitution 1.99 5/96 Brahma Enterprises $ 465,000 W/S Constitution 2.42 5/96 Livermore Partners $ 575,000 E/S Constitution 3.44 8/96 Duffel/Kendall $ 449,540 E/S Constitution 1.81 9/96 D'Ambrosio Brothers $ 320,000 NEC N. Canyons Pkwy 9.18 9/96 HHH Investment $1,389,087 & Independence NWC N. Canyons Pkwy 11.02 9/96 Lincoln Property $1,636,267 & Independence E/S Constitution 4.147 12/96 Patel $ 669,735 - ----------------------------------------------------------------------------
- ---------------------------------------------------------- SITE PRICE/SF IDENTIFICATION NET OF BONDS DEVELOPMENT - ---------------------------------------------------------- Costco Site $2.60 Costco Store & offices 2850 Constitution $5.36 Hampton Inn W/S Constitution $5.45 Harley Davidson (ptn) Freeway retail (ptn) E/S Constitution $3.00 Marriott Courtyard E/S Constitution $4.06 Restaurant(s) NEC N. Canyons Pkwy $3.47 Office/R&D & Independence NWC N. Canyons Pkwy $3.41 Office/R&D & Independence E/S Constitution $3.71 Hilton Garden Inn - ----------------------------------------------------------
- ---------------------------------------------------------------------- SITE IDENTIFICATION COMMENTS - ---------------------------------------------------------------------- Costco Site 2850 Constitution Resale portion of Boulangerie de France land W/S Constitution Resale portion of Boulangerie de France land 1.4-ac. portion marketed for resale at $10.00/SF net of bonds E/S Constitution Planning Commission approval 7/1/97 E/S Constitution Marketing site for resale at $8.50/SF net of bonds. Listing price goes up to $10.00/SF as of 10/1/97. Despite interest, owners are not accepting offers as they are still considering developing site with one or more restaurants. NEC N. Canyons Pkwy Buyer has decided to remain in Dublin and & Independence has reportedly entered into contract to resell the site at a price near acquisition cost. NWC N. Canyons Pkwy Lincoln Technology Park, 145,000 square feet, & Independence recently commenced construction. E/S Constitution Planning Commission approval 7/1/97
NOTES: (1) Prior to 1990, activity within the park included Wang, NMR (1987), Vista West and Boulangerie de France (1989) Sources: Carneghi-Boutovich & Partners; Triad Park LLC; Gateway Commercial; D'Ambrosio Brothers; brokers; and Sedway Group. 18 EXHIBIT 2 TRIAD PARK RECOMMENDED DISPOSITION PROGRAM PRICING AND ABSORPTION MATRIX JULY 1997
NET RETAIL SALES PRICE OF GROSS LAND ($/PSF) GROSS ACRES SOLD TIME OF SALE PERCENTAGE 2ND HALF 1ST HALF 2ND HALF 1ST HALF 2ND HALF LOT NUMBER GROSS ACRE BUILDABLE NET ACRES 1997 1998 1998 1999 1999 - ---------------------------------------------------------------------------------------------------------------- Lot 1 13.90 100.0% 13.90 $3.43 Lot 2 5.50 100.0% 5.50 $3.43 Lot 3 8.70 60.7% 5.28 - ---------------------------------------------------------------------------------------------------------------- RESIDENTIAL 28.10 87.8% 24.68 19.40 - ---------------------------------------------------------------------------------------------------------------- Lot 4 5.30 100.0% 5.30 $4.50 Lot 5 22.40 45.2% 10.12 $0.55 Lot 6 4.90 100.0% 4.90 $4.50 Lot 8 9.50 79.8% 7.58 $0.55 - ---------------------------------------------------------------------------------------------------------------- TRIAD CAMPUS/ EXPANSION 42.10 66.3% 27.90 42.10 - ---------------------------------------------------------------------------------------------------------------- Lot 7 3.50 100.0% 3.50 $3.67 Lot 9 13.80 98.3% 13.56 $4.00 Lot 9A (1) 5.60 100.0% 5.60 $3.60 - ---------------------------------------------------------------------------------------------------------------- MULTI-TENANT COMPONENT 22.90 99.0% 22.66 17.30 5.60 - ---------------------------------------------------------------------------------------------------------------- Lot 10 16.10 58.5% 9.42 $1.00 Lot 11 20.20 48.9% 9.88 $1.00 Lot 12 9.80 79.5% 7.79 $1.00 - ---------------------------------------------------------------------------------------------------------------- CORPORATE USER/ DEVELOPER 46.10 58.8% 27.09 46.10 - ---------------------------------------------------------------------------------------------------------------- Lot 13 3.50 100.0% 3.50 - ---------------------------------------------------------------------------------------------------------------- QUASI COMMERCIAL 3.50 100.0% 3.50 - ---------------------------------------------------------------------------------------------------------------- Lot 14 4.54 100.0% 0.00 $0.00 - ---------------------------------------------------------------------------------------------------------------- ROADS AND FREEWAY RAMPS 4.54 0.0% 0.00 0.00 - ---------------------------------------------------------------------------------------------------------------- Lot 16 2.60 100.0% 2.60 $4.00 Lot 17 0.80 100.0% 0.80 $4.00 Lot 18 1.30 100.0% 1.30 $4.00 Lot 19 3.00 100.0% 3.00 $4.00 Lot 20 2.80 100.0% 2.80 $4.00 Lot 21 1.00 100.0% 1.00 $4.00 Lot 22 3.60 100.0% 3.60 $4.00 Lot 23 4.80 100.0% 4.80 $4.00 Lot 24 10.50 100.0% 10.50 $4.00 Lot 25 5.50 100.0% 5.50 $4.00 - ---------------------------------------------------------------------------------------------------------------- CORPORATE USER/ DEVELOPER 35.90 100.0% 35.90 35.90 - ---------------------------------------------------------------------------------------------------------------- OPEN SPACE/ AGRICULTURAL 110.80 0.0% 0.00 - ---------------------------------------------------------------------------------------------------------------- OPEN SPACE/ AGRICULTURAL 110.80 0.00 - ---------------------------------------------------------------------------------------------------------------- TOTALS (2) 293.94 48.22% 141.73 36.70 47.70 46.10 0.00 35.90 - ----------------------------------------------------------------------------------------------------------------
NET RETAIL SALES PRICE OF GROSS LAND ($/PSF) GROSS ACRES SOLD TIME OF SALE
1ST HALF 2ND HALF LOT NUMBER 2000 2000 COMMENTS - ------------------------------------------------------------------------------------------ Lot 1 Gibson Speno Escrow Lot 2 Gibson Speno Escrow Lot 3 $1.06 Residential Developer - ------------------------------------------------------------------------------------------ RESIDENTIAL 8.7 - ------------------------------------------------------------------------------------------ Lot 4 Competitive Bid Lot 5 Competitive Bid Lot 6 Competitive Bid Lot 8 Competitive Bid - ------------------------------------------------------------------------------------------ TRIAD CAMPUS/ EXPANSION - ------------------------------------------------------------------------------------------ Lot 7 Tom Terrill (or affiliate) Lot 9 Lincoln Technology Park Lot 9A (1) Speculative Developer or Lincoln Property - ------------------------------------------------------------------------------------------ MULTI-TENANT COMPONENT - ------------------------------------------------------------------------------------------ Lot 10 Corporate User or Developer Lot 11 Corporate User or Developer Lot 12 Corporate User or Developer - ------------------------------------------------------------------------------------------ CORPORATE USER/ DEVELOPER - ------------------------------------------------------------------------------------------ Lot 13 $4.00 - ------------------------------------------------------------------------------------------ QUASI COMMERCIAL 3.50 - ------------------------------------------------------------------------------------------ Lot 14 Dedicate to City - ------------------------------------------------------------------------------------------ ROADS AND FREEWAY RAMPS - ------------------------------------------------------------------------------------------ Lot 16 Corporate User or Developer Lot 17 Corporate User or Developer Lot 18 Corporate User or Developer Lot 19 Corporate User or Developer Lot 20 Corporate User or Developer Lot 21 Corporate User or Developer Lot 22 Corporate User or Developer Lot 23 Corporate User or Developer Lot 24 Corporate User or Developer Lot 25 Corporate User or Developer - ------------------------------------------------------------------------------------------ CORPORATE USER/ DEVELOPER - ------------------------------------------------------------------------------------------ OPEN SPACE/ AGRICULTURAL $0.03 Trust/Public Agency - ------------------------------------------------------------------------------------------ OPEN SPACE/ AGRICULTURAL 0.00 - ------------------------------------------------------------------------------------------ TOTALS (2) 8.70 3.50 - ------------------------------------------------------------------------------------------
NET BUILDING VALUE ($/PSF) NET ACRES SOLD TIME OF SALE PERCENTAGE 2ND HALF 1ST HALF 2ND HALF 1ST HALF 2ND HALF BUILDING GROSS ACRES BUILDABLE NET ACRES 1997 1998 1998 1999 1999 - ---------------------------------------------------------------------------------------------------------------- TRIAD CORPORATE CAMPUS 15.06 100.0% 15.06 $100 - ---------------------------------------------------------------------------------------------------------------- 15.06 - ----------------------------------------------------------------------------------------------------------------
1ST HALF 2ND HALF BUILDING 2000 2000 COMMENTS - ---------------------------------------------------- TRIAD CORPORATE CAMPUS - ---------------------------------------------------- - ---------------------------------------------------- - ----------------------------------------------------
Notes: (1) The sale price for this parcel has been reportedly negotiated up to $3.71 per square foot. (2) Net acres does not include open space/agricultural of 110.80 acres and 4.54 acres (Lot 14). Source: Sedway Group. 19 EXHIBIT 3 RECOMMENDED LAND USE CATEGORIES [MAP] 20 EXHIBIT 4 TRIAD PARK RECOMMENDED DISPOSITION PROGRAM NET PRESENT VALUE SUMMARY JULY 1997
TOTAL LAND FOR SALE BEFORE TRIAD SYSTEMS CORPORATION BUILDING AND PROJECT OVERHEAD ================================================ Gross Acres (excluding Lot 14 and open space/agricultural) 178.60 Net Present Value $13,776,441 Net Present Value/PSF of Land Area $1.77 TRIAD SYSTEMS CORPORATION BUILDING ================================================ Gross Acres 15.06 Building Square Footage 219,818 Net Present Value $12,111,214 Net Present Value/PSF of Bldg. Area $55.10 Net Present Value/PSF of Land Area $18.46 PROJECT OVERHEAD ================================================ Net Present Value ($276,859) TOTAL NET PRESENT VALUE: ================================================ Net Present Value $25,610,796 Net Present Value (Rounded) $25,600,000 ===================
Source: Sedway Group. 21 EXHIBIT 5A TRIAD PARK RECOMMENDED DISPOSITION PROGRAM DETAILED SALES PRICE ANALYSIS JULY 1997
PERCENTAGE LOT NUMBER GROSS ACRES BUILDABLE NET ACRES - --------------------------------------------------------------------- Lot 1 13.90 100.0% 13.90 Lot 2 5.50 100.0% 5.50 Lot 3 8.70 60.7% 5.28 - --------------------------------------------------------------------- RESIDENTIAL 28.10 87.8% 24.68 - --------------------------------------------------------------------- Lot 4 5.30 100.0% 5.30 Lot 5 22.40 45.2% 10.12 Lot 6 4.90 100.0% 4.90 Lot 8 9.50 79.8% 7.58 - --------------------------------------------------------------------- TRIAD CAMPUS/EXPANSION 42.10 66.3% 27.90 - --------------------------------------------------------------------- Lot 7 3.50 100.0% 3.50 Lot 9 13.80 98.3% 13.56 Lot 9A 5.60 100.0% 5.60 - --------------------------------------------------------------------- MULTI-TENANT COMPONENT 22.90 99.0% 22.66 - --------------------------------------------------------------------- Lot 10 16.10 58.5% 9.42 Lot 11 20.20 48.9% 9.88 Lot 12 9.80 79.5% 7.79 - --------------------------------------------------------------------- CORPORATE USER/DEVELOPER 46.10 58.8% 27.09 - --------------------------------------------------------------------- Lot 13 3.50 100.0% 3.50 - --------------------------------------------------------------------- QUASI COMMERCIAL 3.50 100.0% 3.50 - --------------------------------------------------------------------- Lot 14 4.54 100.0% 0.00 - --------------------------------------------------------------------- ROADS AND FREEWAY RAMPS 4.54 100.0% 0.00 - --------------------------------------------------------------------- Lot 16 2.60 100.0% 2.60 Lot 17 0.80 100.0% 0.80 Lot 18 1.30 100.0% 1.30 Lot 19 3.00 100.0% 3.00 Lot 20 2.80 100.0% 2.80 Lot 21 1.00 100.0% 1.00 Lot 22 3.60 100.0% 3.60 Lot 23 4.80 100.0% 4.80 Lot 24 10.50 100.0% 10.50 Lot 25 5.50 100.0% 5.50 - --------------------------------------------------------------------- CORPORATE USER/DEVELOPER 35.90 100.0% 35.90 - --------------------------------------------------------------------- Open Space/Agricultur 110.80 0.0% 0.00 - --------------------------------------------------------------------- OPEN SPACE/AGRICULTURAL 110.80 0.00 - --------------------------------------------------------------------- TOTALS (1) 293.94 48.2% 141.73 - --------------------------------------------------------------------- - --------------------------------------------------------------------- - --------------------------------------------------------------------- PERCENTAGE BUILDING GROSS ACRES BUILDABLE NET ACRES - --------------------------------------------------------------------- TRIAD CORPORATE CAMPUS 15.06 100.0% 15.06 - ---------------------------------------------------------------------
SEDWAY GROUP APPRAISAL GRUBB & ELLIS - ---------------------------------------------------------------------------------------------- NET SALES PRICE OF NET VALUE OF NET LISTING GROSS LAND GROSS LAND PRICE OF GROSS LOT NUMBER ($/PSF) ($/PSF) LAND ($/PSF) - ---------------------------------------------------------------------------------------------- Lot 1 $3.43 $2.74 N/Av Lot 2 $3.43 $5.17 N/Av Lot 3 $1.06 $1.74 N/Av - ---------------------------------------------------------------------------------------------- RESIDENTIAL $2.70 $2.91 N/AV - ---------------------------------------------------------------------------------------------- Lot 4 $4.50 $3.90 $5.00 Lot 5 $0.55 $0.00 $2.00 Lot 6 $4.50 $3.92 $5.00 Lot 8 $0.55 $0.20 $2.00 - ---------------------------------------------------------------------------------------------- TRIAD CAMPUS/EXPANSION $1.51 $1.48 $3.10 - ---------------------------------------------------------------------------------------------- Lot 7 $3.67 $3.02 $4.00 Lot 9 $4.00 $2.77 $4.00 Lot 9A $3.60 $2.77 $4.00 - ---------------------------------------------------------------------------------------------- MULTI-TENANT COMPONENT $3.85 $2.81 $4.00 - ---------------------------------------------------------------------------------------------- Lot 10 $1.00 $0.59 $2.00 Lot 11 $1.00 $0.09 $2.00 Lot 12 $1.00 $1.69 $2.00 - ---------------------------------------------------------------------------------------------- CORPORATE USER/DEVELOPER $1.00 $0.60 $2.00 - ---------------------------------------------------------------------------------------------- Lot 13 $6.00 $4.02 $7.00 - ---------------------------------------------------------------------------------------------- QUASI COMMERCIAL $6.00 $4.02 $7.00 - ---------------------------------------------------------------------------------------------- Lot 14 $0.00 $0.00 $0.00 - ---------------------------------------------------------------------------------------------- ROADS AND FREEWAY RAMPS $0.00 $0.00 $0.00 - ---------------------------------------------------------------------------------------------- Lot 16 $4.00 $4.52 $6.50 Lot 17 $4.00 $4.52 $6.50 Lot 18 $4.00 $4.52 $6.50 Lot 19 $4.00 $4.52 $6.50 Lot 20 $4.00 $4.52 $6.50 Lot 21 $4.00 $4.52 $6.50 Lot 22 $4.00 $4.02 $6.50 Lot 23 $4.00 $3.02 $6.50 Lot 24 $4.00 $3.02 $6.00 Lot 25 $4.00 $3.52 $6.00 - ---------------------------------------------------------------------------------------------- CORPORATE USER/DEVELOPER $4.00 $3.68 $6.28 - ---------------------------------------------------------------------------------------------- Open Space/Agricultur $0.03 $0.03 N/Av - ---------------------------------------------------------------------------------------------- OPEN SPACE/AGRICULTURAL N/AP N/AP N/AP - ---------------------------------------------------------------------------------------------- TOTALS (1) $2.45 $2.14 N/AV - ----------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------- SEDWAY GROUP APPRAISAL GRUBB & ELLIS - ---------------------------------------------------------------------------------------------- GROSS BUILDING GROSS SALES PRICE GROSS SALES PRICE SALES PRICE - ---------------------------------------------------------------------------------------------- TRIAD CORPORATE CAMPUS $22,000,000 $22,000,000 N/AV - ----------------------------------------------------------------------------------------------
Notes: (1) Does not include open space/agricultural of 110.80 acres and 4.54 acres (Lot 14) for land value calculation purposes. Sources: Carneghi-Boutovich & Partners; Grubb & Ellis; Triad Park, LLC.; and Sedway Group. 22 EXHIBIT 5B TRIAD PARK RECOMMENDED DISPOSITION PROGRAM SALES PRICE ANALYSIS BY LAND USE GROUP JULY 1997
PERCENTAGE LOT NUMBER GROSS ACRES BUILDABLE NET ACRES - --------------------------------------------------------------------- - --------------------------------------------------------------------- Residential 28.10 87.8% 24.68 - --------------------------------------------------------------------- Triad Campus/Expansion 42.10 66.3% 27.90 - --------------------------------------------------------------------- Multi-Tenant Component 22.90 99.0% 22.66 - --------------------------------------------------------------------- Corporate User/Developer 46.10 58.8% 27.09 - --------------------------------------------------------------------- Quasi Commercial 3.50 100.0% 3.50 - --------------------------------------------------------------------- Roads and Freeway Ramps 4.54 100.0% 0.00 - --------------------------------------------------------------------- Corporate User/Developer 35.90 100.0% 35.90 - --------------------------------------------------------------------- Open Space/Agricultural 110.80 0.0% 0.00 - --------------------------------------------------------------------- TOTALS (1) 293.94 48.2% 141.73
- --------------------------------------------------------------------- PERCENTAGE BUILDING GROSS ACRES BUILDABLE NET ACRES - --------------------------------------------------------------------- TRIAD CORPORATE CAMPUS 15.06 100.0% 15.06 - --------------------------------------------------------------------- OTHER ASSUMPTIONS Annual Discount Rate: Developable Land Sales 15.00% Annual Discount Rate - Triad Building: 15.00% Annual Discount Rate - Project Wide Expenditures: 15.00% Cost of Sales as % of Gross Sales Price: (2) - ---------------------------------------------------------------------
SEDWAY GROUP APPRAISAL GRUBB & ELLIS - ---------------------------------------------------------------------------------------- NET SALES PRICE OF NET VALUE OF NET LISTING GROSS LAND GROSS LAND PRICE OF GROSS LOT NUMBER ($/PSF) ($/PSF) LAND ($/PSF) - ---------------------------------------------------------------------------------------- Residential $2.70 $2.91 N/Av Triad Campus/Expansion $1.51 $1.48 $3.10 - ---------------------------------------------------------------------------------------- Multi-Tenant Componen $3.85 $2.81 $4.00 - ---------------------------------------------------------------------------------------- Corporate User/Developer $1.00 $0.60 $2.00 - ---------------------------------------------------------------------------------------- Quasi Commercial $6.00 $4.02 $7.00 - ---------------------------------------------------------------------------------------- Roads and Freeway Ramps $0.00 $0.00 $0.00 - ---------------------------------------------------------------------------------------- Corporate User/Developer $4.00 $3.68 $6.28 - ---------------------------------------------------------------------------------------- Open Space/Agricultural N/Ap N/Ap N/Ap - ---------------------------------------------------------------------------------------- TOTALS (1) $2.45 $2.14 N/AV - ----------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------- SEDWAY GROUP APPRAISAL GRUBB & ELLIS - ---------------------------------------------------------------------------------------------- GROSS BUILDING GROSS SALES PRICE GROSS SALES PRICE SALES PRICE - ---------------------------------------------------------------------------------------------- TRIAD CORPORATE CAMPUS $22,000,000 $22,000,000 N/AV - ----------------------------------------------------------------------------------------------
Notes: (1) Does not include open space/agricultural of 110.80 acres and 4.54 acres (Lot 14) for land value calculation purposes. (2) 6 percent for land, 2 percent for building. Sources: Carneghi-Boutovich & Partners; Grubb & Ellis; Triad Park, LLC.; and Sedway Group. 23 EXHIBIT 6 PAGE 1 TRIAD PARK DEVELOPMENT PROFORMA: SEMI ANNUAL ANALYSIS CASH FLOW SUMMARY RECOMMENDED DISPOSITION PROGRAM JULY 1997
LAND USE - ---------------------------------- RESIDENTIAL YEAR 2NDHALF97 1STHALF98 2NDHALF98 1STHALF99 2NDHALF99 ---- --------- --------- --------- --------- --------- Percentage of Total Development 78.61% 0.00% 0.00% 0.00% 0.00% Gross Acres Sold 19.40 0.00 0.00 0.00 0.00 Land Value Annual Growth Rates 0.00% 3.00% 3.00% 3.00% 3.00% Land Sale Value $2,900,000 $0 $0 $0 $0 Cost of Land Sales (87,000) 0 0 0 0 Net Land Sales Proceeds 2,813,000 0 0 0 0 Holding Costs (6,895) (6,964) (7,034) (7,104) (7,175) Land Sales Net of Holding Costs 2,806,105 (6,964) (7,034) (7,104) (7,175) Miscellaneous Revenues 0 0 0 0 0 Miscellaneous Expenses 0 0 0 0 0 - ----------------------------------------------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide $2,806,105 ($6,964) ($7,034) ($7,104) ($7,175) TRIAD CAMPUS EXPANSION YEAR 2NDHALF97 1STHALF98 2NDHALF98 1STHALF99 2NDHALF99 ---- --------- --------- --------- --------- --------- Percentage of Total Development 0.00% 100.00% 0.00% 0.00% 0.00% Gross Acres Sold 0.00 42.10 0.00 0.00 0.00 Land Value Annual Growth Rates 0.00% 3.00% 3.00% 3.00% 3.00% Land Sale Value $0 $2,763,664 $0 $0 $0 Cost of Land Sales 0 (165,820) 0 0 0 Net Land Sales Proceeds 0 2,597,844 0 0 0 Holding Costs (137,282) 0 0 0 0 Land Sales Net of Holding Costs (137,282) 2,597,844 0 0 0 Miscellaneous Revenues 0 0 0 0 0 Miscellaneous Expenses 0 0 0 0 0 - ----------------------------------------------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide ($137,282) $2,597,844 $0 $0 $0 MULTI-TENANT COMPONENT YEAR 2NDHALF97 1STHALF98 2NDHALF98 1STHALF99 2NDHALF99 ---- --------- --------- --------- --------- --------- Percentage of Total Development 75.29% 24.71% 0.00% 0.00% 0.00% Gross Acres Sold 17.30 5.60 0.00 0.00 0.00 Land Value Annual Growth Rates 0.00% 3.00% 3.00% 3.00% 3.00% Land Sale Value $2,964,040 $878,170 $0 $0 $0 Cost of Land Sales (173,797) (52,690) 0 0 0 Net Land Sales Proceeds 2,790,243 825,479 0 0 0 Holding Costs (20,600) 0 0 0 0 Land Sales Net of Holding Costs 2,769,643 825,479 0 0 0 Miscellaneous Revenues 0 0 0 0 0 Miscellaneous Expenses 0 0 0 0 0 - ----------------------------------------------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide $2,769,643 $825,479 $0 $0 $0 Source: Sedway Group. - -----------------------------------------------------------------------------------------------------------------------------------
LAND USE - ---------------------------------- RESIDENTIAL 1STHALF00 2NDHALF00 1STHALF01 TOTAL --------- --------- --------- ----- Percentage of Total Development 0.00% 21.39% 0.00% 100.00% Gross Acres Sold 0.00 8.70 0.00 28.10 Land Value Annual Growth Rates 3.00% 3.00% 3.00% Land Sale Value $0 $432,756 $0 $3,332,756 Cost of Land Sales 0 (25,965) 0 (112,965) Net Land Sales Proceeds 0 406,791 0 3,219,791 Holding Costs (7,247) 0 0 (42,421) Land Sales Net of Holding Costs (7,247) 406,791 0 3,177,370 Miscellaneous Revenues 0 0 0 0 Miscellaneous Expenses 0 0 0 0 - --------------------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide ($7,247) $406,791 $0 $3,177,370 TRIAD CAMPUS EXPANSION 1STHALF00 2NDHALF00 1STHALF01 TOTAL --------- --------- --------- ----- Percentage of Total Development 0.00% 0.00% 0.00% 100.00% Gross Acres Sold 0.00 0.00 0.00 42.10 Land Value Annual Growth Rates 3.00% 3.00% 3.00% Land Sale Value $0 $0 $0 $2,763,664 Cost of Land Sales 0 0 0 (165,820) Net Land Sales Proceeds 0 0 0 2,597,844 Holding Costs 0 0 0 (137,282) Land Sales Net of Holding Costs 0 0 0 2,460,562 Miscellaneous Revenues 0 0 0 0 Miscellaneous Expenses 0 0 0 0 - --------------------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide $0 $0 $0 $2,460,562 MULTI-TENANT COMPONENT 1STHALF00 2NDHALF00 1STHALF01 TOTAL --------- --------- --------- ----- Percentage of Total Development 0.00% 0.00% 0.00% 100.00% Gross Acres Sold 0.00 0.00 0.00 22.90 Land Value Annual Growth Rates 3.00% 3.00% 3.00% Land Sale Value $0 $0 $0 $3,842,210 Cost of Land Sales 0 0 0 (226,487) Net Land Sales Proceeds 0 0 0 3,615,722 Holding Costs 0 0 0 (20,600) Land Sales Net of Holding Costs 0 0 0 3,595,122 Miscellaneous Revenues 0 0 0 0 Miscellaneous Expenses 0 0 0 0 - --------------------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide $0 $0 $0 $3,595,122 Source: Sedway Group. - ---------------------------------------------------------------------------------------------------------
24 EXHIBIT 6 PAGE 2 TRIAD PARK DEVELOPMENT PROFORMA: SEMI ANNUAL ANALYSIS CASH FLOW SUMMARY RECOMMENDED DISPOSITION PROGRAM JULY 1997
LAND USE - ----------------------------------- CORPORATE USER/DEVELOPER YEAR 2NDHALF97 1STHALF98 2NDHALF98 ---- --------- --------- --------- Percentage of Total Development 0.00% 0.00% 100.00% Gross Acres Sold 0.00 0.00 46.10 Land Value Annual Growth Rates 3.00% 3.00% 3.00% Land Sale Value $ 0 $ 0 $ 2,038,238 Cost of Land Sales 0 0 (122,294) Net Land Sales Proceeds 0 0 1,915,943 Holding Costs (143,517) (175,229) 0 Land Sales Net of Holding Costs (143,517) (175,229) 1,915,943 Miscellaneous Revenues 0 0 0 Miscellaneous Expenses 0 0 0 - ----------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide ($ 143,517) ($175,229) $ 1,915,943 QUASI COMMERCIAL YEAR 2NDHALF97 1STHALF98 2NDHALF98 ---- --------- --------- --------- Percentage of Total Development 0.00% 0.00% 0.00% Gross Acres Sold 0.00 0.00 0.00 Land Value Annual Growth Rates 0.00% 3.00% 3.00% Land Sale Value $0 $0 $0 Cost of Land Sales 0 0 0 Net Land Sales Proceeds 0 0 0 Holding Costs (14,778) (17,225) (23,588) Land Sales Net of Holding Costs (14,778) (17,225) (23,588) Miscellaneous Revenues 0 0 0 Miscellaneous Expenses 0 0 0 - ----------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide ($14,778) ($17,225) ($23,588) ROADS AND FREEWAY RAMPS YEAR 2NDHALF97 1STHALF98 2NDHALF98 ---- --------- --------- --------- Percentage of Total Development 100.00% 0.00% 0.00% Gross Acres Sold 4.54 0.00 0.00 Land Value Annual Growth Rates 0.00% 3.00% 3.00% Land Sale Value $0 $0 $0 Cost of Land Sales 0 0 0 Net Land Sales Proceeds 0 0 0 Holding Costs 0 0 0 Land Sales Net of Holding Costs 0 0 0 Miscellaneous Revenues 0 0 0 Miscellaneous Expenses 0 0 0 - ----------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide $0 $0 $0
LAND USE - ----------------------------------- CORPORATE USER/DEVELOPER 1STHALF99 2NDHALF99 1STHALF00 2NDHALF00 1STHALF01 TOTAL --------- --------- --------- --------- --------- ----- Percentage of Total Development 0.00% 0.00% 0.00% 0.00% 0.00% 100.00% Gross Acres Sold 0.00 0.00 0.00 0.00 0.00 46.10 Land Value Annual Growth Rates 3.00% 3.00% 3.00% 3.00% 3.00% Land Sale Value $ 0 $ 0 $ 0 $ 0 $ 0 $ 2,038,238 Cost of Land Sales 0 0 0 0 0 (122,294) Net Land Sales Proceeds 0 0 0 0 0 1,915,943 Holding Costs 0 0 0 0 0 (318,746) Land Sales Net of Holding Costs 0 0 0 0 0 1,597,198 Miscellaneous Revenues 0 0 0 0 0 0 Miscellaneous Expenses 0 0 0 0 0 - --------------------------------------------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,597,198 QUASI COMMERCIAL 1STHALF99 2NDHALF99 1STHALF00 2NDHALF00 1STHALF01 TOTAL --------- --------- --------- --------- --------- ----- Percentage of Total Development 0.00% 0.00% 0.00% 100.00% 0.00% 100.00% Gross Acres Sold 0.00 0.00 0.00 3.50 0.00 3.50 Land Value Annual Growth Rates 3.00% 3.00% 3.00% 3.00% 3.00% Land Sale Value $0 $0 $0 $985,456 $0 $985,456 Cost of Land Sales 0 0 0 (59,127) 0 (59,127) Net Land Sales Proceeds 0 0 0 926,329 0 926,329 Holding Costs (23,644) (23,752) (23,808) 0 0 (126,796) Land Sales Net of Holding Costs (23,644) (23,752) (23,808) 926,329 0 799,533 Miscellaneous Revenues 0 0 0 0 0 0 Miscellaneous Expenses 0 0 0 0 0 0 - ----------------------------------------------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide ($23,644) ($23,752) ($23,808) $926,329 $0 $799,533 ROADS AND FREEWAY RAMPS 1STHALF99 2NDHALF99 1STHALF00 2NDHALF00 1STHALF01 TOTAL --------- --------- --------- --------- --------- ----- Percentage of Total Development 0.00% 0.00% 0.00% 0.00% 0.00% 100.00% Gross Acres Sold 0.00 0.00 0.00 0.00 0.00 4.54 Land Value Annual Growth Rates 3.00% 3.00% 3.00% 3.00% 3.00% Land Sale Value $0 $0 $0 $0 $0 $0 Cost of Land Sales 0 0 0 0 0 0 Net Land Sales Proceeds 0 0 0 0 0 0 Holding Costs 0 0 0 0 0 0 Land Sales Net of Holding Costs 0 0 0 0 0 0 Miscellaneous Revenues 0 0 0 0 0 0 Miscellaneous Expenses 0 0 0 0 0 0 - ---------------------------------------------------------------------------------------------------------------------------------- Net Cash Flow Before Bldg/Before Project Wide $0 $0 $0 $0 $0 $0
Source: Sedway Group. 25 EXHIBIT 6 PAGE 3 TRIAD PARK DEVELOPMENT PROFORMA: SEMI ANNUAL ANALYSIS CASH FLOW SUMMARY RECOMMENDED DISPOSITION PROGRAM JULY 1997
LAND USE CORPORATE USER/DEVELOPER Year 2ndHalf97 1stHalf98 2ndHalf98 1stHalf99 2ndHalf99 ---- ----------- ----------- ----------- ----------- ----------- Percentage of Total Development 0.00% 0.00% 0.00% 0.00% 100.00% Gross Acres Sold 0.00 0.00 0.00 0.00 35.90 Land Value Annual Growth Rates 0.00% 3.00% 3.00% 3.00% 3.00% Land Sale Value $ 0 $ 0 $ 0 $ 0 $ 6,639,058 Cost of Land Sales 0 0 0 0 (398,343) Net Land Sales Proceeds 0 0 0 0 6,240,715 Holding Costs (133,056) (157,964) (223,048) (223,426) 0 Land Sales Net of Holding Costs (133,056) (157,964) (223,048) (223,426) 6,240,715 Miscellaneous Revenues 0 0 0 0 0 Miscellaneous Expenses 0 0 0 0 0 ----------- ----------- ----------- ----------- ----------- Net Cash Flow Before Bldg/ Before Project Wide $ (133,056) $ (157,964) $ (223,048) $ (223,426) $ 6,240,715
LAND USE CORPORATE USER/DEVELOPER 1stHalf00 2ndHalf00 1stHalf01 TOTAL ----------- ----------- ----------- ----------- Percentage of Total Development 0.00% 0.00% 0.00% 100.00% Gross Acres Sold 0.00 0.00 0.00 35.90 Land Value Annual Growth Rates 3.00% 3.00% 3.00% Land Sale Value $ 0 $ 0 $ 0 $ 6,639,058 Cost of Land Sales 0 0 0 (398,343) Net Land Sales Proceeds 0 0 0 6,240,715 Holding Costs 0 0 0 (737,493) Land Sales Net of Holding Costs 0 0 0 5,503,221 Miscellaneous Revenues 0 0 0 0 Miscellaneous Expenses 0 0 0 0 ----------- ----------- ----------- ----------- Net Cash Flow Before Bldg/ Before Project Wide Expend $ 0 $ 0 $ 0 $ 5,503,221
OPEN SPACE/AGRICULTURAL Year 2ndHalf97 1stHalf98 2ndHalf98 1stHalf99 2ndHalf99 ---- ----------- ----------- ----------- ----------- ----------- Percentage of Total Development 0.00% 0.00% 0.00% 0.00% 0.00% Gross Acres Sold 0.00 0.00 0.00 0.00 0.00 Land Value Annual Growth Rates 0.00% 3.00% 3.00% 3.00% 3.00% Land Sale Value $ 0 $ 0 $ 0 $ 0 $ 0 Cost of Land Sales 0 0 0 0 0 Net Land Sales Proceeds 0 0 0 0 0 Holding Costs 0 0 0 0 0 Land Sales Net of Holding Costs 0 0 0 0 0 Miscellaneous Revenues 0 0 0 0 0 Miscellaneous Expenses 0 0 0 0 0 ----------- ----------- ----------- ----------- ----------- Net Cash Flow Before Bldg/ Before Project Wide Expend $ 0 $ 0 $ 0 $ 0 $ 0
OPEN SPACE/AGRICULTURAL 1stHalf00 2ndHalf00 1stHalf01 TOTAL ----------- ----------- ----------- ----------- Percentage of Total Development 0.00% 100.00% 0.00% 100.00% Gross Acres Sold 0.00 110.80 0.00 110.80 Land Value Annual Growth Rates 3.00% 3.00% 3.00% Land Sale Value $ 0 $ 155,984 $ 0 $ 155,984 Cost of Land Sales 0 (9,359) 0 (9,359) Net Land Sales Proceeds 0 146,625 0 146,625 Holding Costs 0 0 0 0 Land Sales Net of Holding Costs 0 146,625 0 146,625 Miscellaneous Revenues 0 0 0 0 Miscellaneous Expenses 0 0 0 0 ----------- ----------- ----------- ----------- Net Cash Flow Before Bldg/ Before Project Wide Expend $ 0 $ 146,625 $ 0 $ 146,625
Acres Bldg. SF ----- -------- ------------ ------------ ------------ ------------ ------------ TRIAD BUILDING 15.06 219,818 $ 0.48 $ 0.48 $ 0.00 $ 0.00 $ 0.00 REVENUE Building/Land Sale $ 0 $ 22,000,000 $ 0 $ 0 $ 0 Triad Rental Income 1,252,860 1,252,860 0 0 0 Reimbursement: Assessments 40,270 50,564 0 0 0 Reimbursement: Taxes 124,500 126,990 0 0 0 Total Building Revenue $ 1,417,630 $ 23,430,414 $ 0 $ 0 $ 0 EXPENDITURES Assessments $ (40,270) $ (50,564) $ 0 $ 0 $ 0 Property Taxes (124,500) (126,990) 0 0 0 Debt Service - Principal (547,819) (8,680,103) 0 0 0 Debt Service - Interest (444,466) (416,854) 0 0 0 Cost of Sales 2.00% 0 (440,000) 0 0 0 Total Building Expenditures $ (1,157,055) $ (9,714,511) $ 0 $ 0 $ 0 TOTAL BUILDING CASH FLOW $ 260,575 $ 13,715,903 $ 0 $ 0 $ 0 NET CASH FLOW: AFTER BLDG/ BEFORE PROJECT WIDE EXPEND $ 5,395,999 $ 16,772,917 $ 1,665,318 $ (251,099) $ 6,212,893 PROJECT WIDE EXPENDITURES Overhead - Professional Fees (102,759) (78,301) (54,663) (54,663) (21,256) ------------ ------------ ------------ ------------ ------------ TOTAL PROJECT WIDE EXPENDITURES $ (102,759) $ (78,301) $ (54,663) $ (54,663) $ (21,256) NET CASH FLOW: AFTER BLDG/ AFTER PROJECT WIDE EXPEND $ 5,293,239 $ 16,694,615 $ 1,610,654 $ (305,762) $ 6,191,638 ============ ============ ============ ============ ============
TRIAD BUILDING REVENUE Building/Land Sale $ 0 $ 0 $ 0 $ 22,000,000 Triad Rental Income 0 0 0 2,505,720 Reimbursement: Assessments 0 0 0 90,834 Reimbursement: Taxes 0 0 0 251,490 Total Building Revenue $ 0 $ 0 $ 0 $ 24,848,044 EXPENDITURES Assessments $ 0 $ 0 $ 0 $ (90,834) Property Taxes 0 0 0 (251,490) Debt Service - Principal 0 0 0 (9,227,922) Debt Service - Interest 0 0 0 (861,320) Cost of Sales 0 0 0 (440,000) Total Building Expenditures $ 0 $ 0 $ 0 $(10,871,566) TOTAL BUILDING CASH FLOW $ 0 $ 0 $ 0 $ 13,976,478 NET CASH FLOW: AFTER BLDG/BEFORE PROJECT WIDE EXPEND $ (27,919) $ 1,333,120 $ 0 $ 31,101,228 PROJECT WIDE EXPENDITURES Overhead - Professional Fees (21,256) 0 0 (332,898) ------------ ------------ ------------ ------------ TOTAL PROJECT WIDE EXPENDITURES $ (21,256) $ 0 $ 0 $ (332,898) NET CASH FLOW: AFTER BLDG/ AFTER PROJECT WIDE EXPEND $ (49,174) $ 1,536,557 $ 56,813 $ 31,028,580 ============ ============ ============ ============
Source: Sedway Group. 26 EXHIBIT 7 TRIAD PARK DEVELOPMENT PROFORMA: SEMI ANNUAL ANALYSIS CASH FLOW SUMMARY RECOMMENDED DISPOSITION PROGRAM JULY 1997
LAND USE TOTAL Year 2ndHalf97 1stHalf98 2ndHalf98 1stHalf99 2ndHalf99 ----- ------------ ------------ ------------ ------------ ------------ Percentage of Total Development -- -- -- -- -- Gross Acres Sold 41.24 47.70 46.10 0.00 35.90 Land Value Annual Growth Rates -- -- -- -- -- Land Sale Value $ 5,864,040 $ 3,641,834 $ 2,038,238 $ 0 $ 6,639,058 Cost of Land Sales (260,797) (218,510) (122,294) 0 (398,343) Net Land Sales Proceeds 5,603,243 3,423,324 1,915,943 0 6,240,715 Holding Costs (467,819) (366,310) (250,626) (251,099) (27,822) Land Sales Net of Holding Costs 5,135,424 3,057,014 1,665,318 (251,099) 6,212,893 Miscellaneous Revenues 0 0 0 0 0 Miscellaneous Expenses 0 0 0 0 0 ------------ ------------ ------------ ------------ ------------ Net Cash Flow Before Bldg/ Before Project Wide $ 5,135,424 $ 3,057,014 $ 1,665,318 $( 251,099) $ 6,212,893
1stHalf00 2ndHalf00 1stHalf01 TOTAL ------------ ------------ ------------ ------------ Percentage of Total Development -- -- -- -- Gross Acres Sold 0.00 123.00 0.00 293.94 Land Value Annual Growth Rates -- -- -- -- Land Sale Value $ 0 $ 1,574,196 $ 0 $ 19,757,366 Cost of Land Sales 0 (94,452) 0 (1,094,397) Net Land Sales Proceeds 0 1,479,744 0 18,662,969 Holding Costs (27,919) 0 0 (1,391,595) Land Sales Net of Holding Costs (27,919) 1,479,744 0 17,271,374 Miscellaneous Revenues 0 0 0 0 Miscellaneous Expenses 0 0 0 0 ------------ ------------ ------------ ------------ Net Cash Flow Before Bldg/ Before Project Wide $ (27,919) $ 1,479,744 $ 0 $ 17,271,374
Acres Bldg. SF ----- -------- TRIAD BUILDING 15.06 219,818 REVENUE Building/Land Sale $ 0 $ 22,000,000 $ 0 $ 0 $ 0 Triad Rental Income 1,252,860 1,252,860 0 0 0 Reimbursement: Assessments 40,270 50,564 0 0 0 Reimbursement: Taxes 124,500 126,990 0 0 0 Total Building Revenue $ 1,417,630 $ 23,430,414 $ 0 $ 0 $ 0 EXPENDITURES Assessments $ (40,270) $ (50,564) $ 0 $ 0 $ 0 Property Taxes (124,500) (126,990) 0 0 0 Debt Service - Principal (547,819) (8,680,103) 0 0 0 Debt Service - Interest (444,466) (416,854) 0 0 0 Cost of Sales 2.00% 0 (440,000) 0 0 0 Total Building Expenditures $ (1,157,055) $ (9,714,511) $ 0 $ 0 $ 0 TOTAL BUILDING CASH FLOW $ 260,575 $ 13,715,903 $ 0 $ 0 $ 0 NET CASH FLOW: AFTER BLDG/ BEFORE PROJECT WIDE EXPEND $ 5,395,999 $ 16,772,917 $ 1,665,318 $ (251,099) $ 6,212,893 PROJECT WIDE EXPENDITURES Overhead - Professional Fees (102,759) (78,301) (54,663) (54,663) (21,256) ------------ ------------ ------------ ------------ ------------ TOTAL PROJECT WIDE EXPENDITURES $ (102,759) $ (78,301) $ (54,663) $ (54,663) $ (21,256) NET CASH FLOW: AFTER BLDG/ AFTER PROJECT WIDE EXPEND $ 5,293,239 $ 16,694,615 $ 1,610,654 $ (305,762) $ 6,191,638 ============ ============ ============ ============ ============
Building/Land Sale $ 0 $ 0 $ 0 $ 22,000,000 Triad Rental Income 0 0 0 2,505,720 Reimbursement: Assessments 0 0 0 90,834 Reimbursement: Taxes 0 0 0 251,490 Total Building Revenue $ 0 $ 0 $ 0 $ 24,848,044 EXPENDITURES Assessments $ 0 $ 0 $ 0 $ (90,834) Property Taxes 0 0 0 (251,490) Debt Service - Principal 0 0 0 (9,227,922) Debt Service - Interest 0 0 0 (861,320) Cost of Sales 0 0 0 (440,000) Total Building Expenditures $ 0 $ 0 $ 0 $(10,871,566) TOTAL BUILDING CASH FLOW $ 0 $ 0 $ 0 $ 13,976,478 NET CASH FLOW: AFTER BLDG/ BEFORE PROJECT WIDE EXPEND $ (27,919) $ 1,333,120 $ 0 $ 31,101,228 PROJECT WIDE EXPENDITURES Overhead - Professional Fees (21,256) 0 0 (332,898) ------------ ------------ ------------ ------------ TOTAL PROJECT WIDE EXPENDITURES $ (21,256) $ 0 $ 0 $ (332,898) NET CASH FLOW: AFTER BLDG/ AFTER PROJECT WIDE EXPEND $ (49,174) $ 1,536,557 $ 56,813 $ 31,028,580 ============ ============ ============ ============
Source: Sedway Group. EX-99.2 3 AGREEMENT OF MERGER DATED 9/9/97 1 EXHIBIT (C)(1) AGREEMENT OF MERGER BY AND BETWEEN TPL ACQUISITION, LLC, RICHARD C. BLUM & ASSOCIATES, LP AND TRIAD PARK, LLC DATED AS OF SEPTEMBER 9, 1997 2 AGREEMENT OF MERGER AGREEMENT OF MERGER dated as of September 9, 1997 (this "Merger Agreement") between TPL ACQUISITION, LLC, a Delaware limited liability company ("Acquisition"), RICHARD C. BLUM & ASSOCIATES, LP, a California limited partnership ("RCBA") and TRIAD PARK, LLC, a Delaware limited liability company (the "Company"). W I T N E S S E T H: WHEREAS, Section 18-209 of the Delaware Limited Liability Company Act (the "LLCA") authorizes the merger of one Delaware limited liability company with and into another Delaware limited liability company; WHEREAS, the manager of Acquisition (the "Acquisition Manager") and holders of membership interests in Acquisition (the "Acquisition Share Holders") have determined that it is advisable and in the best interests of Acquisition and the Acquisition Share Holders, for Acquisition to merge with and into the Company with the result that the Acquisition Share Holders shall acquire all of the membership interests in the Company (the "Company Shares"); WHEREAS, in furtherance of such acquisition, the Acquisition Manager has approved a merger (the "Merger") of Acquisition with and into the Company in accordance with the LLCA upon the terms and subject to the conditions set forth herein, and the manager (the "Company Manager") and advisory board (the "Advisory Board") of the Company have approved the Merger in accordance with the LLCA, upon the terms and subject to the conditions set forth herein, and recommend that the Merger be accepted by the holders of the Company Shares (the "Company Share Holders"); NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties and agreements contained herein, the parties hereto agree as follows: SECTION 1. MERGER 1.1 MERGER. Upon the terms and subject to the conditions hereof, on the Effective Date (as defined below in Section 1.2), Acquisition shall be merged into the Company and the separate existence of Acquisition shall thereupon cease, and the name of the Company, as the limited liability company surviving in the Merger (the "Surviving LLC"), shall by virtue of the Merger remain "Triad Park, LLC." 1 3 1.2 EFFECTIVE DATE OF THE MERGER. The Merger shall become effective when a properly executed Certificate of Merger is duly filed with the Secretary of State of the State of Delaware, or at such later date and time as may be specified therein, which filing shall be made as soon as practicable after the closing of the transactions contemplated by this Merger Agreement in accordance with Section 3.6. When used in this Merger Agreement, the term "Effective Date" shall mean the date and time at which such filing shall have been made or such later date and time as may be specified in such filing. 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in the applicable provisions of the LLCA. Without limiting the generality of the foregoing, and subject thereto, at the Effective Date, except as otherwise provided herein, all of the property, rights, privileges, powers and franchises of Acquisition and the Company shall vest in the Surviving LLC, and all debts, liabilities and duties of Acquisition and the Company shall become the debts, liabilities and duties of the Surviving LLC. 1.4 CERTAIN EXPENSES. Subject to the requirements of this Section 1.4 and beginning with the date of this Merger Agreement, Acquisition shall promptly pay its and the Company's attorneys' fees and costs and all legitimate costs of the transaction, including but not limited to printing and mailing fees and filing fees with the Securities and Exchange Commission (the "Commission"), as incurred, in connection with the preparation of documents and solicitation of proxies required under the federal securities laws. In the event that the Company retains its counsel for the solicitation of proxies, Acquisition's obligations under this Section 1.4 shall be limited to $100,000 for attorney's fees and costs, assuming one round of comments from the Commission to the submitted documents. Acquisition shall pay actual time and expenses for work arising out of additional rounds of comments. SECTION 2. THE SURVIVING LLC 2.1 LIMITED LIABILITY COMPANY AGREEMENT. The limited liability company agreement of Acquisition as in effect immediately prior to the Effective Date shall be the limited liability company agreement of the Surviving LLC after the Effective Date except that Section 1.2 thereof shall be amended to state that the name of the company is Triad Park, LLC, and subject to Section 7.4(c), thereafter may be amended in accordance with its terms and as provided by law and this Merger Agreement. 2.2 BY-LAWS. The by-laws of Acquisition as in effect on the Effective Date shall be the by-laws of the Surviving LLC. 2.3 MANAGER; ADVISORY BOARD. The Acquisition Manager immediately prior to the Effective Date shall be the manager of the Surviving LLC. The Surviving LLC shall not have an advisory board. SECTION 3. CONVERSION OF SECURITIES 3.1 CONVERSION. As of the Effective Date, by virtue of the Merger and without any action on the part of any Company Share Holder: 2 4 (a) All Company Shares that are held by the Company and any Company Shares owned by Acquisition shall be canceled. (b) Each remaining issued and outstanding Company Share issued and outstanding immediately prior to the Effective Date shall be converted into the right to receive in cash in the amount of $1.32 per Company Share (the "Merger Consideration"). (c) Each issued and outstanding membership interest in Acquisition ("Acquisition Share") shall be converted into and become one membership interest in the Surviving LLC. 3.2 DISBURSEMENT OF MERGER CONSIDERATION. (a) Pursuant to an irrevocable agreement to be entered into on or before the Effective Date between Acquisition and a disbursing agent (the "Disbursing Agent") for the benefit of the Company Share Holders (which shall be a commercial bank or trust company with capital of at least $350,000,000 or otherwise reasonably satisfactory to the Company and Acquisition), Acquisition or the Surviving LLC shall deposit or cause to be deposited with the Disbursing Agent, in trust for the benefit of the Company's Share Holders, at the Closing, the Merger Consideration consisting of the cash (in immediately available funds) to which the Company Share Holders shall be entitled pursuant to Section 3.1(b). Pending any payments of cash pursuant to Section 3.1(b) of this Merger Agreement, such funds shall be held and invested by the Disbursing Agent in interest bearing investments with minimal or no risk to capital as directed by the Surviving LLC, and any earnings with respect to such funds shall be paid to the Surviving LLC when requested by the Surviving LLC. Any funds remaining with the Disbursing Agent one year after the Effective Date shall be released by the Disbursing Agent to the Surviving LLC after which time persons entitled thereto may look, subject to applicable escheat and other similar laws, only to the Surviving LLC for delivery thereof. (b) Promptly upon the Effective Date the Surviving LLC shall notify the Disbursing Agent of the effectiveness of the Merger and shall cause the Disbursing Agent, pursuant to the irrevocable instructions, to mail to each person who was, at the Effective Date, a record holder of an outstanding certificate or certificates which prior thereto represented Company Shares ("Certificates") a notice and transmittal form advising such holder of the effectiveness of the Merger and the procedure for surrendering to the Disbursing Agent Certificates for exchange for the Merger Consideration. Each holder of Certificates, upon proper surrender thereof to the Disbursing Agent together with such transmittal form, duly completed and validly executed in accordance with the instructions thereto, shall be entitled to receive the Merger Consideration evidenced by such Certificates, without any interest thereon, in exchange for such Certificates and such Certificates shall forthwith be canceled. Until properly surrendered and exchanged, Certificates shall, after the Effective Date, be deemed for all purposes to evidence only the right to receive the Merger Consideration. Notwithstanding the foregoing, neither the Disbursing Agent nor any party hereto shall be liable to a holder of Certificates for any amount which may be required to be paid to a public official pursuant to any applicable abandoned property, escheat or similar law. 3 5 (c) If delivery of the Merger Consideration in respect of canceled Company Shares is to be made to a person other than the person in whose name a surrendered Certificate is registered, it shall be a condition to such delivery or payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such a delivery or payment shall have paid any transfer and other taxes required by reason of such delivery or payment in a name other than that of the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving LLC and the Disbursing Agent that such tax either has been paid or is not payable. 3.3 COMPANY SHARE HOLDERS' MEETING. Unless this Merger Agreement has been terminated pursuant to Section 9.1, the Company shall take all action necessary, in accordance with applicable law and its limited liability company agreement and by-laws, to convene a special meeting of the Company Share Holders entitled to vote thereat (the "Company Meeting") as promptly as practicable for the purpose of considering and taking action upon this Merger Agreement. Subject to Section 7.6(c), the Company Manager and Advisory Board will recommend that Company Share Holders entitled to vote thereon vote in favor of and approve the Merger and the adoption of this Merger Agreement at the Company Meeting. At the Company Meeting, all of the Company Shares then owned by Acquisition, or with respect to which Acquisition holds the power to direct the voting, shall be voted in favor of approval of the Merger and adoption of this Merger Agreement. 3.4 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the close of business on the Effective Date, the Company Share transfer books shall be closed and no transfer of any Company Shares shall be made thereafter. In the event that, after the Effective Date, Certificates are presented to the Surviving LLC, they shall be canceled and exchanged for the Merger Consideration as provided in Sections 3.1(b). 3.5 ASSISTANCE IN CONSUMMATION OF THE MERGER. Each of Acquisition and the Company shall provide all reasonable assistance to, and shall cooperate with, each other to bring about the consummation of the Merger as soon as possible in accordance with the terms and conditions of this Merger Agreement. 3.6 CLOSING. The closing of the transactions contemplated by this Merger Agreement shall take place (i) at the offices of Richard C. Blum & Associates, L.P ("RCBA"), 909 Montgomery Street, Suite 400, San Francisco, CA 94133 at 10:00 A.M. local time as soon as practicable (but in any event within three business days) after the day on which the last of the conditions set forth in Section 8 is fulfilled or waived, but in no event later than January 31, 1998, or (ii) at such other time and place as Acquisition and the Company shall agree in writing. SECTION 4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION & RCBA Acquisition and RCBA represent and warrant to the Company as follows: 4.1 EXISTENCE; GOOD STANDING; AUTHORITY. Acquisition is a limited liability company organized, validly existing and in good standing under the laws of the State of 4 6 Delaware, and will be, by October 15, 1997, duly licensed or qualified to do business as a foreign limited liability company in, and in good standing under the laws of, the State of California, which constitutes all of the jurisdictions in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified would not materially and adversely affect the ability of Acquisition to consummate the transactions contemplated by this Merger Agreement. RCBA is a limited partnership organized, validly existing and in good standing under the laws of the State of California, and is in good standing under the laws of California. Acquisition and RCBA have all requisite power and authority to own, operate and lease its properties and carry on its business as and where now conducted. The copies of the limited liability company agreement and by-laws of Acquisition to be delivered to the Company within three (3) business days of the date of this Merger Agreement are true and correct and are in full force and effect, and there have not been any amendments or alterations to such documents. 4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Acquisition and RCBA have the requisite power and authority to execute and deliver this Merger Agreement and to perform their respective obligations hereunder. The execution and delivery of this Merger Agreement by Acquisition and RCBA, and consummation by Acquisition of the transactions contemplated hereby, have been duly authorized by all requisite action under Acquisition's limited liability company agreement, RCBA's limited partnership agreement, their respective by-laws and applicable law. The Acquisition Manager is authorized as it deems appropriate to execute, acknowledge, verify, deliver, file and record, for and in the name of Acquisition, the Certificate of Merger and any and all other documents and instruments required to consummate the transactions contemplated hereunder. This Merger Agreement constitutes a valid and binding obligation of Acquisition and RCBA enforceable against Acquisition and RCBA in accordance with its terms. No other proceedings on the part of Acquisition or RCBA are necessary to authorize this Merger Agreement and the transactions contemplated hereby. 4.3 PROXY STATEMENT. None of the information supplied in writing by Acquisition and its affiliates specifically for inclusion in the proxy statement of the Company (the "Proxy Statement") required to be mailed to the Company Share Holders in connection with the Merger shall, at the time the Proxy Statement is mailed, at the time of the Company Meeting or at the Effective Date, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 4.4 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and delivery of this Merger Agreement by Acquisition nor the consummation of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the limited liability company agreement, limited partnership agreement or the respective by-laws of Acquisition or RCBA, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (each a "Governmental Entity"), except (A) pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (B) the filing of the Certificate of Merger pursuant to the LLCA or (C) where the failure to obtain such 5 7 consent, approval, authorization or permit, or to make such filing or notification, would not prevent or delay consummation of the Merger or would not otherwise prevent Acquisition from performing its obligations under this Merger Agreement; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, license, agreement or other instrument or obligation to which Acquisition is a party or by which it or any of its assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not materially and adversely affect the ability of Acquisition to consummate the transactions contemplated by this Merger Agreement; or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Acquisition, or any of its assets, except for violations which would not materially and adversely affect the ability of Acquisition to consummate the transactions contemplated by this Merger Agreement. 4.5 FINANCING. Acquisition at the Effective Date, will have or will have deposited with the Disbursing Agent (as appropriate) the funds necessary to consummate the Merger and the transactions contemplated hereby, and to pay related fees and expenses. SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as provided to the contrary in the attached disclosure schedule (the "Disclosure Schedule") and the specific Schedules referenced in this Section 5, the Company makes the representations and warranties to Acquisition in the following subsections of this Section. The qualifications, exceptions and disclosures in the Disclosure Schedule are applicable regardless of whether or not the individual representation or warranty is qualified by a reference to all or any part of the Disclosure Schedule. For purposes of this Section 5, "to the best of the Company's knowledge" or "known to the Company" or the like shall mean the actual knowledge (without any obligation of further investigation and without any personal liability) of James R. Porter, Stanley F. Marquis, Larry D. McReynolds and Patrick J. Kernan. 5.1 EXISTENCE; GOOD STANDING; AUTHORITY. The Company is a limited liability company organized, validly existing and in good standing under the laws of the State of Delaware, and is duly licensed or qualified to do business as a foreign limited liability company in, and is in good standing under the laws of, the jurisdictions set forth in Schedule 5.1, which constitute all of the jurisdictions in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect (as defined below). The Company has all requisite power and authority to own, operate and lease its properties and carry on its business as and where now conducted. The copies of the limited liability company agreement and by-laws of the Company delivered to Acquisition are true and correct and are in full force and effect, and there have not been any amendments or alterations to such documents. As used in this Merger Agreement, "Material Adverse Effect" shall mean a material adverse effect on the business, assets, liabilities, condition (financial or otherwise), prospects or results of operations of the Company. 6 8 5.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. The Company has the requisite power and authority to execute and deliver this Merger Agreement and to perform its obligations hereunder. The execution and delivery of this Merger Agreement by the Company, and consummation by the Company of the transactions contemplated hereby, have been duly authorized by all requisite action under the Company's limited liability company agreement, by-laws and the LLCA, subject only in the case of this Merger Agreement, to the requisite approval of this Merger Agreement by the holders of a majority of the Company Shares. The Company Manager is authorized as it deems appropriate to execute, acknowledge, verify, deliver, file and record, for and in the name of the Company the Certificate of Merger and any and all other documents and instruments required to consummate the transactions contemplated hereunder. This Merger Agreement constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms. Except for the requisite approval by the holders of Company Shares, no other proceedings on the part of the Company are necessary to authorize this Merger Agreement and the transactions contemplated hereby. 5.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and delivery of this Merger Agreement by the Company nor the consummation of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the limited liability company agreement or by-laws of the Company, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (A) pursuant to the Exchange Act, (B) the filing of the Certificate of Merger pursuant to the LLCA or (C) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not cause a Material Adverse Effect; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, license, agreement or other instrument or obligation to which the Company is a party or by which it or any of its assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not materially and adversely affect the ability of the Company to consummate the transactions contemplated by this Merger Agreement; or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its assets, except for violations which would not cause a Material Adverse Effect. 5.4 CAPITALIZATION. As of the date hereof, 19,708,123 Company Shares were validly issued and outstanding. As of the date hereof, there are no bonds, debentures, notes, other indebtedness or any other interest having the right to vote on any matters on which the Company's Share Holders may vote issued or outstanding. As of the date hereof, there are no options, warrants, calls or other rights, agreements or commitments presently outstanding obligating the Company to issue, deliver or sell Company Shares or debt securities, or obligating the Company to grant, extend or enter into any such option, warrant, call or other such right, agreement or commitment, other than pursuant to the Rights Agreement ("Rights Agreement") dated as of April 28, 1997, between the Company and GEMISYS Corporation, as Rights Agent. 7 9 5.5 NO SUBSIDIARIES. The Company does not directly or indirectly own any securities of or any other interest in any other corporation, partnership, joint venture or other business association or entity. 5.6 REPORTS AND FINANCIAL STATEMENTS. The Company has previously furnished Acquisition with true and complete copies of (i) its Registration Statement on Form 10-SB, as filed with the Commission, (ii) its Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997, as filed with the Commission and (iii) all other reports or registration statements filed by the Company with the Commission that the Company was required to file with the Commission (the documents listed in clauses (i) through (iii) being referred to herein collectively as the "Company SEC Reports"). As of their respective dates, the Company SEC Reports complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the Commission thereunder applicable to such Company SEC Reports. As of their respective dates, the Company SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and unaudited interim financial statements of the Company included in the Company SEC Reports comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto, and the financial statements included in the Company SEC Reports have been prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis (except as may be indicated therein or in the notes thereto) and fairly present in all material respects the financial position of the Company at the dates thereof and the results of its operations and changes in financial position for the periods then ended, subject, in the case of the unaudited interim financial statements, to normal year-end audit adjustments and any other adjustments described therein. 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the Company SEC Reports filed prior to the date hereof or in the Disclosure Schedule, since February 10, 1997, the date the Company was organized, there has not been (i) any transaction, commitment, dispute or other event or condition (financial or otherwise) of any character (whether or not in the ordinary course of business), individually or in the aggregate, having a Material Adverse Effect; (ii) any damage, destruction or loss, whether or not covered by insurance, which, insofar as reasonably can be foreseen, in the future would be likely to have a Material Adverse Effect; (iii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to the Company Shares; (iv) any material increase in the benefits under, or the establishment or amendment of, any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, performance awards, Company Share purchase or other employee benefit plan, or any increase in the compensation payable or to become payable to any of the employees of the Company, except for increases in salaries or wages payable or to become payable in the ordinary course of business and consistent with past practice; (v) any change by the Company in its significant accounting policies; or (vi) any entry into any commitment or transaction material to the Company 8 10 (including, without limitation, any borrowing or sale of assets) except in the ordinary course of business consistent with past practice. 5.8 PROPERTIES. (a) The title reports identified in the Disclosure Schedule list all real property owned (the "Owned Property") or leased as lessor or lessee (the "Leased Property" and collectively with the Owned Property, the "Property") by the Company. (b) Except as stated in the Disclosure Schedule, none of the Property is subject to any purchase options, rights of first refusal or other preferential purchase rights. (c) The Leased Property has been leased by the Company on the terms and conditions stated in the lease and amendments identified in the Disclosure Schedule. All obligations towards the lessors arising from the lease agreements referred to before have been complied with in all material respects. There are no disputes regarding those agreements pending or, to the knowledge of the Company, threatened. (d) To the best of the Company's knowledge, except as set forth on the Disclosure Schedule, no adjacent buildings or improvements extend across the boundaries of the Owned Property and no buildings or improvements forming part of the Owned Property extend onto any adjacent sites. (e) Other than properties in the Triad Business Park which have been sold, the Company has not owned or leased any Property except the Property. (f) The Disclosure Schedule contains a true, correct and complete list of all leases, subleases, tenancies, licenses and other rights of occupancy or use for all or any portion of any Property, and all guarantees and other agreements in respect thereof, all as amended, renewed and extended to the date thereof, whether oral or written (the "Leases"). (g) The Company has heretofore delivered to Acquisition a true, correct and complete copy of each Lease (or written summary thereof in the case of oral Leases). (h) Each current tenant (the "Tenant") is in actual possession of its leased premises. No Rents violate any applicable law. For purposes of this Section 5, the term "Rents" is defined to mean the basic, and additional and percentage rents, all pass-throughs of taxes, expenses or other items, and all other sums payable by the Tenant to the lessor (including, without limitation, utility charges) during the original and any renewal terms thereof. (i) The following is true with respect to each Lease: (1) the Lease is valid and subsisting and in full force and effect strictly in accordance with its terms and has not been modified, in writing or otherwise, except as set forth on the Disclosure Schedule; (2) no Lease contains any purchase or similar option; 9 11 (3) all obligations of the lessor thereunder which accrue prior to the Effective Date shall have been performed and paid for in full by the Company; (4) to the best of the Company's knowledge, there has been no default or event which, with the giving of notice or the lapse of time, or both, would constitute a default, on the part of the Tenant or the lessor thereunder, and the Tenant has not asserted and has no defense to, offset or claim against, its Rent or the performance of its other obligations under the Lease; (5) the Tenant has not prepaid any Rent; and (6) the Rents have been assigned to the Company's lender as additional security. There are no material construction, management, leasing, service, equipment, supply, maintenance or concession agreements (oral or written, formal or informal) with respect to or affecting all or any portion of the Property except as set forth on Schedule 5.21 (the "Property Contracts"). A current, complete and correct copy of each Property Contract has been delivered to Acquisition. Each Property Contract is valid and subsisting and all amounts due thereunder have been paid. Except as set out in the Disclosure Schedule, neither the Company nor any of its agents is in default under any Property Contract or, to the best of the Company's knowledge, has received any notice from any party to any Contract claiming the existence of any default or breach hereunder and no event or omission has occurred which, with the giving of notice or the lapse of time would constitute a default. Except as set out in the Disclosure Schedule, all Property Contracts are terminable without cause on thirty (30) days' notice or less without payment of any penalty or termination payment. (j) To the best of the Company's knowledge, the continued maintenance, operation and use of any buildings, structures or other improvements on each Property for their respective present purposes will not violate any federal, state, county or municipal laws, ordinances, orders, codes, regulations or requirements in certificates of occupancy relating to housing, building, safety, health, fire or zoning (together "Applicable Laws") affecting all or any portion of each improved Property. (k) To the best of the Company's knowledge, no written or oral notice has been given to the Company by any holder of any mortgage or deed of trust on any Property, by any insurance company which has issued a policy with respect to any of any Property, or by any board of fire underwriters (or other body exercising similar functions), any of which notices claim any defect or deficiency or request the performance of any repairs, alterations or other work to any Property. (l) All state, township, county, school district and other taxes levied or assessed against any Property and any penalties or interest due and payable thereon prior to the Effective Date, and all assessments of any kind levied prior to the Effective Date, if any, will have been paid in full by the Company and all appropriate tax returns relating to the same have been filed with the proper authorities. 10 12 (m) The Company has no notice of any proposed increase in the assessed valuation. To the best of the Company's knowledge, there is no proceeding pending for the reduction of the assessed valuation of all or any portion of any Property. (n) The Company has not received any written or oral notice for assessments for public improvements against any Property which remain unpaid, and to the best of the Company's knowledge, no such assessment has been proposed. 5.9 CONDEMNATION. There is no pending condemnation, expropriation, eminent domain or similar proceeding affecting all or any portion of any Property and, to the best of the Company's knowledge, no such proceeding is contemplated. 5.10 ENVIRONMENTAL MATTERS. For the purposes of this Merger Agreement: "Environmental Matters" means any matter arising out of, relating to or resulting from pollution, protection of the environment and human health or safety, health or safety of the public or employees, sanitation, and any matters relating to emissions, discharges, Releases or threatened Releases of Environmentally Relevant Materials or otherwise arising out of, resulting from or relating to the presence, manufacture, packaging, labeling, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of or exposure to Environmentally Relevant Materials or arising out of, resulting from, or relating to compliance with Environmental Laws. "Environmental Costs" means, without limitation, any costs of investigation, remediation, removal, or other response actions, losses, liabilities, obligations, payments, damages (including, but not limited to, bodily injury, death or property damage), civil or criminal fines or penalties, costs of shutdown, diminution in operations, product withdrawals or discontinuance of distribution of products (including, but not limited to, direct or indirect damages), judgments, settlements, interest, costs and expenses (including attorney's fees and costs) arising out of, relating to or resulting from any Environmental Matter. "Environmental Laws" means, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Sections 9601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Sections 11001 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Sections 136 et seq., the Clean Air Act, 42 U.S.C., Sections 7401 et seq., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. Sections 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. Sections 300f et seq., the Occupational Safety and Health Act, 29 U.S.C., Sections 641 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq., as any of the above statutes have been or may be amended from time to time, all rules and regulations promulgated pursuant to any of the above statutes, and any other federal, state or local law, statute, ordinance, rule or regulation governing Environmental Matters, as the same have been or may be amended from time to time, including any common law cause of action providing any right or remedy with respect to Environmental Matters, and all applicable judicial and administrative decisions, orders, and decrees relating to Environmental Matters. 11 13 "Environmentally Relevant Materials" means any pollutants, contaminants, or hazardous or toxic substances, materials, wastes, residual materials, constituents or chemicals that are regulated by, or form the basis for liability under any Environmental Laws, including but not limited to petroleum products, asbestos and radioactive materials. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, injecting, discharging, escaping, leaching, dumping or disposing (or threat of the same occurring) into the environment. (a) To the best of the Company's knowledge, the Company is in material compliance with all applicable Environmental Laws. There are no claims, notices, civil, criminal or administrative actions, suits, hearings, investigations, penalty assessments, inquiries or proceedings pending, asserted or, to the knowledge of the Company, threatened by any governmental or other entity that are based on or related to any Environmental Matters including, without limitation, the violation of any Environmental Laws or the violation of or the failure to have any required permits, licenses, authorizations, certificates, registrations and other governmental consents and approvals related to the handling, storage or disposal of Environmentally Relevant Materials ("Environmental Permits"). There are presently no outstanding judgments, decrees or orders of any court or governmental or administrative agency against or affecting the Company or Property arising from, relating to or resulting from Environmental Matters. (b) To the best of the Company's knowledge, except for ongoing matters related to various creeks, wetlands and wildlife at the Property, the Company has obtained and is in material compliance with all Environmental Permits required to be obtained by it under applicable Environmental Laws in order for the Company to conduct its business and operations, except where the failure to obtain any Environmental Permit would not cause a Material Adverse Effect. All such Environmental Permits are owned by or in the name of the Company, are in full force and effect and the Company has made in a timely manner all appropriate filings for issuance or renewal of such Environmental Permits. No application, action or proceeding is pending for the renewal or modification of any Environmental Permit; and no claim, application, complaint, action or proceeding is pending, asserted or, to the knowledge of the Company, threatened that may result in the denial of an application for renewal or transfer or the revocation, modification, non-renewal, restriction, or suspension of any Environmental Permit. The continued validity and existence of each of the Environmental Permits is only subject to the conditions set forth in each such Environmental Permit, and no additional expenditures are required to be made by the Company or any third party to maintain or comply with such Environmental Permits (except as specifically disclosed in such Environmental Permits and except for changes in applicable Environmental Laws after Closing). The continued validity of such Environmental Permits is not related to the continued association of one or more individuals or corporations or other entities with the Company. (c) To the best of the Company's knowledge, no Environmentally Relevant Materials have been Released or are present in connection with, arising from or relating to any of the Company's operations or businesses or at, on, about or under any Property either (a) in violation 12 14 of applicable Environmental Law or (b) which require or would require investigation, remediation or other response action under applicable Environmental Law. No Property is listed or, to the knowledge of the Company, proposed for listing (for which any of the Company or the Manager has received notice of such listing or such listing is otherwise publicly disseminated or a matter of public record) on the National Priority List pursuant to CERCLA (NPL), CERCLIS or any similar foreign, federal or state list of sites requiring investigation, remediation or other response action. To the best of the Company's knowledge, there are no underground storage tanks, polychlorinated biphenyls, asbestos-containing materials or surface impoundments at, on, under or within any Property, and there have been no underground storage tanks removed from or closed in place at any Property. The Company has not used any treatment, storage or disposal site for Environmentally Relevant Materials, or otherwise treated, stored, disposed of, transported, or arranged for the treatment, storage or disposal of any Environmentally Relevant Materials used, generated, handled, or managed by or on behalf of the Company or in connection with the business or Property to any place or location which (a) is listed or, to the best of the Company's knowledge, proposed for listing on the NPL, CERCLIS or any similar foreign, federal or state list; (b) to the best of the Company's knowledge, is in violation of any Environmental Laws; or (c) is the subject of enforcement action or other investigations which could lead to Environmental Costs to be incurred by any of the Company or the Surviving LLC. The Company has not, nor, to the best of the Company's knowledge has any other person reported or received any oral or written notice of a Release of any Environmentally Relevant Material used, generated or handled by or for the Company or in connection with the business or Property. Neither the Company, nor, to the best of the Company's knowledge, any other person has received any notice, demand, claim or request for information asserting that the Company is or may be a potentially responsible party at any location used for the storage, treatment or disposal of Environmentally Relevant Materials or where there has been a Release of any Environmentally Relevant Materials. (d) Except as listed in the Disclosure Schedule, there have been no investigations, reports, studies, inspections, audits, tests, reviews or other analyses conducted by the Company, the Manager, their respective employees or outside contractors at the direction of any such person in relation to the following matters: (i) Environmental Matters, including without limitation potential or actual soil or groundwater conditions at any Property or business now or previously owned, operated or leased by the Company; or (ii) the compliance of the Company's business or Property with applicable Environmental Laws ("Environmental Reports"). (e) To the best of the Company's knowledge, the Company is not aware of any facts or circumstances related to Environmental Matters concerning the Company, the business or operations of the Company or the Property which could reasonably be expected to lead to Environmental Costs by the Surviving LLC or the Company. 5.11 LITIGATION. Except as listed in the Disclosure Schedule, there is no suit, action or proceeding pending or, to the best of the Company's knowledge, threatened against or affecting the Company which, either alone or in the aggregate, is likely to have a Material Adverse Effect, nor is there any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator outstanding against 13 15 the Company having, or which, in the future is likely to have, either alone or in the aggregate, any Material Adverse Effect. 5.12 INFORMATION IN DISCLOSURE DOCUMENTS. None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in the Proxy Statement or any amendments or supplements thereto, at the time of the mailing of the Proxy Statement and any amendments or supplements thereto and at the time of the Company Meeting, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. 5.13 LABOR MATTERS. No labor organization or group of employees of the Company has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened to be brought or filed, with the National Labor Relations Board or any other labor relations tribunal or authority. There are no organizing activities, strikes, work stoppages, slowdowns, lockouts, material arbitrations or material grievances, or other material labor disputes pending or threatened against or involving the Company. 5.14 EMPLOYEE BENEFIT PLANS; ERISA. There are no employee benefit plans, programs, policies, practices, and other arrangements providing benefits to any employee or former employee (or beneficiary or dependent thereof) sponsored or maintained by the Company to which the Company contributes or is obligated to contribute ("Company Plans"). 5.15 COMPANY ACTION. The Manager and the Company Advisory Board (at a meeting duly called and held) has by the requisite vote (i) determined that the Merger is advisable and fair and in the best interests of the Company and its Share Holders, (ii) approved the Merger in accordance with the provisions of Section 18-209 of the LLCA, (iii) recommended the approval of this Merger Agreement and the Merger by the Company Share Holders and directed that the Merger be submitted for consideration by the Company's Share Holders entitled to vote thereon at the Company Meeting and (iv) adopted any necessary resolution having the effect of causing the Company not to be subject, to the extent permitted by applicable law, to any state anti-takeover law that may purport to be applicable to the Merger and the transactions contemplated by this Merger Agreement. 5.16 NO FAIRNESS OPINION. The Company has not received an opinion of any financial advisors to the Company to the effect that the consideration to be received by the Company's Share Holders in the Merger is fair to the Share Holders of the Company. 5.17 FINANCIAL ADVISOR. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Merger or the transactions contemplated by this Merger Agreement based upon arrangements made by or on behalf of the Company. 14 16 5.18 COMPLIANCE WITH APPLICABLE LAWS. To the best of the Company's knowledge, the Company holds all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities for the Properties in their current condition (the "Company Permits"). However the real property development business involves a continuous governmental permitting process and the Company makes no representation or warranty that the Company holds all permits of Governmental Entities (including discretionary permits and ministerial permits such as building permits) that (a) are additional, supplemental, or ancillary to approval that the Company currently holds for real property being developed and that would ordinarily be required or obtained only from time to time as such development proceeds or (b) would be required for the development of parts of the Property not yet being developed. The Company is in compliance with the terms of the Company Permits, except for such failures to comply which, singly or in the aggregate, would not have a Material Adverse Effect. To the best of the Company's knowledge, the businesses of the Company are not being, and have not been, conducted in violation of any law, ordinance or regulation of any Governmental Entity, except for possible violations which, individually or in the aggregate, do not and would not have a Material Adverse Effect. To the best of the Company's knowledge, no investigation or review by any Governmental Entity with respect to the Company is pending or threatened, nor has any Governmental Entity indicated an intention to conduct the same, other than those the outcome of which would not have a Material Adverse Effect. 5.19 LIABILITIES. Except as set forth in the Disclosure Schedule, as of June 30, 1997, the Company did not have any liability or obligation (absolute, accrued, contingent or otherwise, in contract, tort or otherwise and whether or not required by GAAP to be reflected in the Company's balance sheet or other books and records) (a "Liability"), other than such Liabilities which, individually or in the aggregate, would not have a Material Adverse Effect. From and after June 30, 1997, the Company has not incurred, suffered, permitted to exist or otherwise become subject to any Liability, other than Liabilities incurred in the ordinary course of business in accordance with past practice which, individually or in the aggregate, would not have a Material Adverse Effect. 5.20 TAXES. The Company has filed all material tax returns, declarations and reports required to be filed by any of them (taking into account all valid extensions of filing dates) and has paid, or has set up an adequate liability reserve in accordance with GAAP for the payment of, all taxes required to be paid in respect of the periods covered by such returns, declarations and reports. The information contained in such tax returns, declarations and reports is true, complete and accurate in all material respects. The Company is not delinquent in the payment of any tax, assessment or governmental charge, except where such delinquency has not had or would not reasonably be expected to have, a Material Adverse Effect. No material deficiencies for any taxes have been proposed, asserted or assessed against the Company that have not been finally settled or paid in full and no requests for waivers of the time to assess any such tax are pending. No tax return, declaration or report is currently under audit by any taxing authority, and as of the date hereof no written notice of any such audit has been received. For the purposes of this Merger Agreement, the term "tax" shall include all federal, state, local and foreign income, profits, franchise, gross receipts, payroll, sales, employment, use, property, withholding, excise 15 17 and other taxes, duties and assessments of any nature whatsoever together with all interest, penalties and additions imposed with respect to such amounts. 5.21 CERTAIN AGREEMENTS. Except as set forth on Schedule 5.21, the Company is not a party or subject to any oral or written (i) agreement, contract, indenture or other instrument relating to Indebtedness (as defined below) in an amount exceeding $100,000; (ii) joint venture agreement or arrangement or any other agreement which has involved or is expected to involve a sharing of revenues; (iii) lease for real or personal property in which the amounts of payments which the Company or any subsidiary is required to make on an annual basis exceeds $25,000; (iv) agreement, contract, policy, license, document, instrument, arrangement or commitment that limits in any material respect the freedom of the Company to compete in any line of business or with any person or in any geographical area or which would so limit the freedom of the Company after the Effective Date; (v) employment, consulting, severance, termination, or indemnification agreement, contract or arrangement providing for future payments with any current or former officer, consultant or employee which (A) exceeds $10,000 per annum or (B) requires aggregate annual payments or total payments over the life of such agreement, contract or arrangement to such current or former officer, consultant or employee in excess of $10,000 or $25,000, respectively, and is not terminable before and after the Merger by it on 30 days' notice or less without penalty or obligation to make payments related to such termination; or (vi) other agreement, contract, policy, license, document, instrument, arrangement or commitment not made in the ordinary course of business that is material to the Company. "Indebtedness" means any liability in respect of (A) borrowed money, (B) capitalized lease obligations, (C) the deferred purchase price of property or services (other than trade payables in the ordinary course of business) and (D) guarantees of any of the foregoing. The Company is not in default (or would be in default with notice or lapse of time, or both) under any indenture, note, credit agreement, loan document, lease, contract, policy, license, document, instrument, arrangement or commitment (a "Contract") whether or not such default has been waived, which default, alone or in the aggregate with other such defaults, would have a Material Adverse Effect. The Company is not a party to or bound by any Contract which upon execution of this Merger Agreement or consummation of the transactions contemplated hereby will (either alone or upon the occurrence of additional acts or events) result in the loss of any material benefit, the termination thereof or any payment becoming accelerated or due from the Company or the Surviving LLC which loss, termination or acceleration would have a Material Adverse Effect. SECTION 6. CONDUCT OF BUSINESS PENDING THE MERGER 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Prior to the Effective Date, unless Acquisition shall otherwise agree in writing: (a) the Company shall carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted, and shall use its diligent efforts to preserve intact its present business organizations, keep available the services of its present officers and employees and preserve their relationships with customers, suppliers and others having business dealings with them to the end that their goodwill and ongoing businesses shall 16 18 be unimpaired at the Effective Date. The Company shall (A) maintain insurance coverages and its books, accounts and records in the usual manner consistent with prior practices; (B) comply in all material respects with all laws, ordinances and regulations of Governmental Entities applicable to the Company; (C) maintain and keep its properties and equipment in good repair, working order and condition, ordinary wear and tear excepted; and (D) perform in all material respects its obligations under all contracts and commitments to which it is a party or by which it is bound, in each case other than where the failure to so maintain, comply or perform, either individually or in the aggregate, would not result in a Material Adverse Effect; (b) except as required by this Merger Agreement, the Company shall not and shall not propose to (A) sell or pledge or agree to sell or pledge any membership interest; (B) amend its limited liability company agreement or by-laws; (C) split, combine or reclassify its outstanding membership interests or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of membership interests of the Company, or declare, set aside or pay any dividend or other distribution payable in cash, securities or other property; or (D) directly or indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire any Company Shares; (c) the Company shall not (A) except as contemplated by this Merger Agreement, issue, deliver or sell or agree to issue, deliver or sell any additional shares of, or rights of any kind to acquire any shares of, its membership interest of any class, any Indebtedness or any options, rights or warrants to acquire, or securities convertible into membership interests; (B) acquire, lease or dispose of, or agree to acquire, lease or dispose of, any capital assets or any other assets other than in the ordinary course of business; (C) incur additional Indebtedness or encumber or grant a security interest in any asset or enter into any other material transaction other than in each case in the ordinary course of business (other than as set forth in Schedule 6.1); (D) acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, in each case in this clause (D) which are material, individually or in the aggregate, to the Company; or (E) enter into any contract, agreement, commitment or arrangement with respect to any of the foregoing; (d) the Company shall not, except as required to comply with applicable law, (A) adopt, enter into, terminate or amend any bonus, profit sharing, compensation, severance, termination, stock option, pension, retirement, deferred compensation, employment or other Company Plan, agreement, trust, fund or other arrangement for the benefit or welfare of any current or former officer, employee or independent contractor; (B) other than as set forth in Schedule 6.1, increase in any manner the compensation or fringe benefit of any officer, employee or independent contractor; (C) other than as set forth in Schedule 6.1, pay any benefit not provided under any existing plan or arrangement; (D) other than as set forth in Schedule 6.1, grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or Company Plan (including, without limitation, the grant of equity based or related awards, performance units or restricted equity, or the removal of existing restrictions or the acceleration of exercisability in any Company Plan or agreements or awards made thereunder); (E) take any action to fund or in any other way secure the payment of compensation or benefits under any employee plan, 17 19 agreement, contract or arrangement or Company Plan; or (F) adopt, enter into, amend or terminate any contract, agreement, commitment or arrangement to do any of the foregoing; (e) the Company shall not make any investments in non-investment grade securities; and (f) the Company shall not, except as required by law or GAAP, change any of its significant accounting policies or make or rescind any express or deemed election relating to taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or change any of its methods of reporting income or deductions for federal income tax purposes from those employed in the preparation of the federal income tax returns for the last taxable year. 6.2 NOTICE OF BREACH. Each party shall promptly give written notice to the other party upon becoming aware of the occurrence or, to its knowledge, impending or threatened occurrence, of any event which would cause or constitute a breach of any of its representations, warranties or covenants contained or referenced in this Merger Agreement and will use its best efforts to prevent or promptly remedy the same. Any such notification shall not be deemed an amendment of any Schedule hereto. SECTION 7. ADDITIONAL AGREEMENTS 7.1 ACCESS AND INFORMATION. Subject to the limitations imposed by third party confidentiality agreements, the Company shall afford to Acquisition and its accountants, counsel and other representatives full access during normal business hours (and at such other times as the parties may mutually agree) throughout the period prior to the Effective Date to all of its properties, books, contracts, commitments, records and personnel and, during such period, the Company shall furnish promptly to Acquisition (i) a copy of each report, schedule and other document filed or received by it pursuant to the requirements of federal or state securities laws, and (ii) all other information concerning its business, properties and personnel as Acquisition may reasonably request. The Company and Acquisition shall hold, and shall cause its employees and agents to hold, in confidence all such information in accordance with the terms of the Confidentiality Agreement, effective August 19, 1997, between Acquisition and the Company (the "Confidentiality Agreement"). Acquisition shall indemnify and hold the Company harmless from any and all claims, liens, losses or damage, including attorneys' fees, arising out of the physical presence of employees, agents or contractors of Acquisition or RCBA at the Company and out of any tests or inspections of the Company's Property by or on behalf of Acquisition or RCBA. 7.2 PROXY STATEMENT. (a) As promptly as practicable after the execution of this Merger Agreement, the Company and Acquisition shall prepare and the Company shall file with the Commission preliminary proxy materials which shall constitute the preliminary Proxy Statement. As promptly as practicable after comments are received from the Commission with respect to the preliminary proxy materials and after the furnishing by the Company and Acquisition of all 18 20 information required to be contained therein, the Company shall file with the Commission the definitive Proxy Statement. (b) Acquisition and the Company shall make all necessary filings with respect to the Merger under the Securities Act and the Exchange Act and the rules and regulations thereunder and under applicable blue sky or similar securities laws and shall use all reasonable efforts to obtain required approvals and clearances with respect thereto. 7.3 MEETING. As promptly as possible, the Company shall notice a Share Holder's meeting for the purpose of approving the Merger. The Company shall solicit management proxies to vote in favor of the Merger in connection with this meeting. 7.4 INDEMNIFICATION. (a) All rights to indemnification existing in favor of the current or former officers or employees of the Company as provided in the limited liability company agreement or by-laws, as in effect as of the date hereof, with respect to matters occurring through the Effective Date, shall survive the Merger and shall continue in full force and effect for a period of not less than six years from the Effective Date, provided, however, that, prior to the Effective Time and with Acquisition's prior consent (such consent not required if the cost does not exceed $110,000), the Company may purchase additional policies of directors' and officers' liability insurance of at least the same coverage as currently maintained by the Company, such policies to be pre-paid and in effect for a period of six years from the Effective Date. (b) In the event that any action, suit, proceeding or investigation relating hereto or to the transactions contemplated by this Merger Agreement is commenced, whether before or after the Effective Date, the parties hereto agree to cooperate and use their respective reasonable efforts to vigorously defend against and respond thereto. (c) The provisions of the limited liability company agreement and by-laws of the Surviving LLC pertaining to indemnification of current and former directors, officers and employees shall not be amended, repealed or otherwise modified for a period of six years after the Effective Date (or, in the case of matters which are pending but which have not been resolved prior to the sixth anniversary of the Effective Date, until such matters are finally resolved), in any manner that would adversely affect the rights thereunder of individuals who at any time on or prior to the Effective Date were directors, officers or employees of the Company in respect of actions or omissions occurring on or prior to the Effective Date (including, without limitation, the transactions contemplated by this Merger Agreement). 7.5 ADDITIONAL AGREEMENTS. (a) Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Merger Agreement, including using all reasonable efforts to obtain all necessary waivers, consents and approvals, to 19 21 effect all necessary registrations and filings (including, but not limited to, filings with all applicable Governmental Entities) and to lift any injunction or other legal bar to the Merger, subject to the appropriate vote of the Share Holders. Notwithstanding the foregoing, Acquisition shall not be required to take any action, and without Acquisition's prior written consent the Company shall agree not to take any action, that would in any way restrict or limit the conduct of business from and after the Effective Date by the Surviving LLC of either (including, without limitation, any divestiture of any business, product line or asset). (b) In case at any time after the Effective Date any further action is necessary or desirable to carry out the purposes of this Merger Agreement, the proper officers and/or directors of the Surviving LLC shall take all such necessary action. 7.6 NO SOLICITATION. (a) As used herein, the term "Acquisition Proposal" means any proposed (i) merger, consolidation or similar transaction involving the Company, (ii) sale, lease or other disposition directly or indirectly by merger, consolidation, share exchange or otherwise of either (A) assets of the Company representing 75% or more of the consolidated assets of the Company (based upon the valuations contained in the confidential report of the Sedway Group dated July 22, 1997 (the "Sedway Report")) in one transaction (but not solicitation of sales of individual parcels of the Property), or (B) all or substantially all of the undeveloped Property in one transaction (but not solicitation of sales of individual parcels of the undeveloped Property), (iii) issue, or other acquisition or disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 20% or more of the voting power of the Company or (iv) transaction in which any person shall or would acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act), or the right to acquire beneficial ownership, or any "group" (as such term is defined under the Exchange Act) shall have been formed which beneficially owns or would own or has or would have the right to acquire beneficial ownership of 20% or more of the outstanding Company Common Stock, other than transactions contemplated by this Merger Agreement. (b) The Company shall not, nor shall the Company authorize or permit its officers, employees, representatives, investment bankers, attorneys, accountants or other agents or affiliates to, take any action to solicit, initiate or encourage the submission of any Acquisition Proposal; provided, however, that if, at any time prior to the obtaining of Company Share Holder approval of the Merger, the Advisory Board determines in good faith by a majority vote, with the advice of outside counsel, that it is necessary to do so to avoid a breach of its fiduciary duties to Share Holders under applicable law, the Company may, in response to a written request for information, furnish information with respect to the Company to any person pursuant to a customary confidentiality agreement containing terms at least as favorable to the Company as those contained in the confidentiality agreements in place between the Company and Acquisition. The Company may discuss and negotiate terms with parties making unsolicited Acquisition Proposals. 20 22 (c) The Company may continue marketing parcels of the Property as part of its normal business operations. The Company shall provide Acquisition with a copy of any proposed agreement for any sale, exchange or other disposition of any part of the Property and consult with Acquisition before entering into any binding agreement. After the approval of this Agreement by the Advisory Board of the Company and except as provided in Section 7.6(d), the Company will not, without the express written consent of Acquisition, enter into any agreement for the disposition of any part of the Property. (d) Except as expressly permitted by this Section 7.6, neither the Advisory Board nor the Company Manager shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Acquisition, its approval or recommendation of the adoption and approval of the matters to be considered at the Company Meeting, (ii) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal, or (iii) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement or understanding (written or otherwise) related to any Acquisition Proposal (each, an "Acquisition Agreement"). Notwithstanding the foregoing, in the event that prior to the obtaining of Company Share Holder approval of the Merger, there exists a Superior Proposal (as defined herein), the Advisory Board may, if it determines in good faith by a majority vote, with the advice of outside counsel, that it is necessary to do so to avoid a breach of its fiduciary duties to Company Share Holders under applicable law, approve or recommend such Superior Proposal and terminate this Merger Agreement, provided (x) the Company shall have given Acquisition written notice (a "Superior Proposal Notice") at least five business days prior to such termination advising Acquisition that the Advisory Board has received a Superior Proposal which the Advisory Board has authorized and intends to effect, specifying the material terms and conditions of such Superior Proposal and identifying the person making such Superior Proposal, and (y) the Company, prior to terminating this Merger Agreement, makes irrevocable arrangements for Acquisition to be paid the amounts contemplated by Section 9.2(b) upon the termination of this Merger Agreement. For purposes of this Merger Agreement, a "Superior Proposal" means a definitive unconditioned agreement with a third party, with all due diligence investigations completed, to acquire, directly or indirectly, more than 50% of the membership interests of the Company, assets of the Company representing 75% or more of the real estate assets of the Company (based upon the valuations contained in the Sedway Report) in one transaction (but not solicitation of sales of individual parcels of the Property) or all or substantially all of the undeveloped Property in one transaction (but not solicitation of sales of individual parcels of the undeveloped Property), and otherwise on terms which the Advisory Board determines in its good faith judgment to be more favorable from a financial point of view to the Company Share Holders than this Merger Agreement, the Merger and the transactions contemplated hereby and for which financing, to the extent required, is then committed. (e) In addition to the obligations set forth in paragraphs (b) and (d) of this Section 7.6, the Company will promptly communicate to Acquisition a copy of any requests for information or proposals, including the identity of the person and its affiliates making the same, that it may receive. 21 23 (f) Nothing contained in this Section 7.6 shall prohibit the Company from taking and disclosing to the Company Share Holders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company Share Holders if, in the good faith judgment of the Advisory Board, with the advice of outside counsel, failure so to disclose would result in a violation of applicable law; provided, however, that neither the Company, the Company Manager nor the Advisory Board shall withdraw or modify, or propose publicly to withdraw or modify, its position with respect to the matters to be considered at the Company Meeting or approve or recommend, or propose publicly to approve or recommend, an Acquisition Proposal, except as provided in Section 7.6(d). 7.7 REDEMPTION OF RIGHTS. The Company shall, immediately prior to the Effective Date, cause the redemption of the rights issued under the Rights Agreement so that thereafter the holders of such rights shall have no rights thereunder other than the right to receive the redemption price therefor. The Company shall not amend the Rights Agreement in any manner that has the effect of rendering the Rights Agreement inapplicable, in whole or in part, to any third party unless, prior to or concurrently therewith, the Company takes substantially equivalent action with respect to Acquisition and in addition releases Acquisition from any limitations or restrictions imposed by the Confidentiality Agreement, including without limitation, restrictions upon the purchase of Company Shares, that prohibits Acquisition from purchasing Company Shares to the same extent and upon substantially equivalent terms as such third party. SECTION 8. CONDITIONS PRECEDENT 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligations of each party to effect the Merger shall be subject to the fulfillment at or prior to the Effective Date of the following conditions: (a) This Merger Agreement and the transactions contemplated hereby shall have been approved and adopted by the requisite vote of the Company Share Holders. (b) No temporary restraining order, preliminary or permanent injunction or other order by any court or other judicial or administrative body of competent jurisdiction (each, an "Injunction") which prohibits or prevents the consummation of the Merger shall have been issued and remain in effect (each party agreeing to use its best efforts to have any such Injunction lifted), and there shall not be any action taken, or any statute, rule, regulation or order (whether temporary, preliminary or permanent) enacted, entered or enforced which makes the consummation of the Merger illegal or prevents or prohibits the Merger. 8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. The obligation of the Company to effect the Merger shall be subject to the fulfillment at or prior to the Effective Date of the additional following conditions, unless waived by the Company: (a) Acquisition shall have performed in all material respects its agreements contained in this Merger Agreement required to be performed on or prior to the Effective Date and the 22 24 representations and warranties of Acquisition contained in this Merger Agreement shall be true in all material respects when made and on and as of the Effective Date as if made on and as of such date, except for representations and warranties that are by their express provisions made as of a specific date or dates, which were or will be true in all material respects at such time or times as stated therein, and the Company shall have received a certificate of the Acquisition Manager to that effect. (b) Intentionally Omitted. (c) The Merger Consideration shall have been deposited with the Dispersing Agent with irrevocable instructions to exchange the Company Shares for the Merger Consideration in accordance with Section 3.2(b) immediately upon notification by the Company and Acquisition of the Effective Date. 8.3 CONDITIONS TO OBLIGATIONS OF ACQUISITION TO EFFECT THE MERGER. The obligation of Acquisition to effect the Merger shall be subject to the fulfillment at or prior to the Effective Date of the additional following conditions, unless waived by Acquisition: (a) The Company shall have performed in all material respects its agreements contained in this Merger Agreement required to be performed on or prior to the Effective Date and the representations and warranties of the Company contained in this Merger Agreement shall be true in all material respects (except for any such representations or warranties which are qualified as to Material Adverse Effect, which shall be true and correct in all respects) when made and on and as of the Effective Date as if made on and as of such date, except for representations and warranties that are by their express provisions made as of a specific date or dates which were or will be true in all material respects (except for any such representations or warranties which are qualified as to Material Adverse Effect, which were or will be true and correct in all respects) at such date or dates, and Acquisition shall have received a certificate of the Company Manager to that effect. (b) Intentionally Omitted. (c) The Company shall have obtained all consents, appeals, releases or authorizations from, and shall have made all filings and registrations to or with, any person, including but not limited to any Governmental Entity, necessary to be obtained or made in order to consummate the transactions contemplated by this Merger Agreement. (d) Acquisition shall be satisfied, in its sole and absolute discretion, with the results of its due diligence investigation of the Company; provided, however, that this condition must be satisfied or waived no later than Monday September 8, 1997 at noon San Francisco time or the Company may elect to terminate this Agreement. As of the date of this Merger Agreement, the condition specified in this Section 8.3(d) has been satisfied. 23 25 SECTION 9. TERMINATION, AMENDMENT AND WAIVER 9.1 TERMINATION. This Merger Agreement may be terminated at any time prior to the Effective Date, whether before or after approval by the Company Share Holders: (a) by mutual consent of the Board of Directors of Acquisition and the Advisory Board; (b) by either Acquisition or the Company, if the Merger shall not have been consummated on or before January 31, 1998; provided that the right to terminate this Agreement pursuant to this Section 9.1(b) shall not be available to any party whose failure to perform in any material respect any covenant under this Merger Agreement has been the cause of or resulted in whole or in part in the failure of the Merger to be consummated before such date; (c) by either Acquisition or the Company, if there shall be any Order which is final and nonappealable preventing the consummation of the Merger; (d) by either Acquisition or the Company, if this Merger Agreement and the transactions contemplated hereby shall fail to receive the requisite vote for approval and adoption by the Company Share Holders at the Company Meeting; (e) by Acquisition if this Merger Agreement and the transactions contemplated hereby shall not have been submitted for approval and adoption by the Company Share Holders at the Company Meeting prior to January 31, 1998 unless the meeting is held later solely due to delays in obtaining approval of the Proxy Statement by the Commission; (f) by Acquisition, if the Advisory Board withdraws, modifies in a manner adverse to Acquisition, or refrains from making its recommendation concerning the Merger referred to in Section 3.3, or the Advisory Board shall have recommended to the Company Share Holders any Acquisition Proposal or the Company shall have entered into an Acquisition Agreement, or, other than in connection with the Company's delivery of a Superior Proposal Notice, the Advisory Board shall have resolved to do any of the foregoing; or (g) by the Company, if, pursuant to Section 7.6(d), (A) the Advisory Board has delivered to Acquisition a Superior Proposal Notice, (B) the Company has paid the Termination Fee (as defined in Section 9.2), and (C) five business days have passed since Acquisition received the Superior Proposal Notice. 9.2 EFFECT OF TERMINATION; FEES. (a) In the event of termination of this Merger Agreement by either Acquisition or the Company, as provided above, this Merger Agreement shall forthwith become void and (except for the willful breach of this Merger Agreement by any party hereto) there shall be no liability on the part of either the Company or Acquisition or their respective officers or employees; provided that the last sentence of Section 7.1 and Sections 9.2, 11.3 and 11.7 shall survive the termination. 24 26 (b) The Company shall pay to Acquisition a Termination Fee (as defined below) if: (i) Acquisition terminates this Merger Agreement pursuant to Section 9.1(e) or (f); or (ii) if Acquisition has waived the condition precedent in Section 8.3(d) within three business days after the receipt by Acquisition of the Superior Proposal Notice, the Company terminates this Merger Agreement pursuant to Section 9.1(g) and executes the agreement contemplating the Superior Proposal. (c) The Termination Fee shall be equal to $1.3 million. The Termination Fee shall be paid as promptly as practicable and in no event later than (A) in the event of termination by the Company as described in clause (ii) of Section 9.2(b), upon termination of the Merger Agreement and the execution of the Superior Proposal; or (B) in the event of termination by Acquisition as described in clause (i) of Section 9.2(b), five business days after such termination. 9.3 AMENDMENT. This Merger Agreement may be amended by the parties hereto, by or pursuant to action taken by the Acquisition Manager and the Advisory Board, at any time before or after approval hereof by the Company Share Holders, but, after such approval, no amendment shall be made which changes the amount or form of Merger Consideration or which in any way materially adversely affects the rights of the Company Share Holders, without the further approval of such Company Share Holders. This Merger Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 9.4 WAIVER. At any time prior to the Effective Date, the parties hereto, by or pursuant to action taken by the Acquisition Manager and Advisory Board, may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any documents delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions contained herein; provided, however, that no such waiver shall materially adversely affect the rights of the Company Share Holders and Acquisition. Any agreement on the part of a party hereto to any such extension or waiver shall be valid if set forth in an instrument in writing signed on behalf of such party. SECTION 10. COMMITMENTS OF RCBA RCBA shall cause Acquisition to be capitalized with all funds necessary for Acquisition to fulfill its obligations under the Merger Agreement and the transactions contemplated hereby. RCBA shall indemnify and hold the Company harmless from any and all claims, liens, losses or damage, including attorneys' fees, arising out of the physical presence of employees, agents or contractors of Acquisition or RCBA at the Company, out of any tests or inspections of the Company's Property by or on behalf of Acquisition or RCBA or out of a failure of Acquisition to pay the costs and expenses as provided for in Section 1.4. SECTION 11. GENERAL PROVISIONS 11.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. No representations, warranties or agreements in this Merger Agreement shall survive the Merger, except for the agreements contained in Sections 3.1, 3.2 and 3.4 and the 25 27 agreements referred to in Sections 7.4, 7.5, 11.1, 11.3 and 11.7. No claims for any breach of any representation or warranty may be brought by either party after the Effective Date. 11.2 NOTICES. All notices or other communications under this Merger Agreement shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telegram, telex, telecopy or other standard form of telecommunications, or by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: If to the Company: 3055 Management Corp. 3055 Triad Drive Livermore, CA 94550 Attention: James R. Porter Telecopy No.: 510-455-6917 With a copy to: McCutchen, Doyle, Brown & Enersen, LLP Three Embarcadero Center, 18th Floor San Francisco, CA 94111-4066 Attention: Edward S. Merrill Telecopy No.: 415-393-2286 If to Acquisition or RCBA: TPL Acquisition, LLC c/o Richard C. Blum & Associates, L.P. 909 Montgomery Street, Suite 400 San Francisco, CA 94133 Attention: Murray A. Indick Telecopy No.: 415-434-3130 or to such other address as any party may have furnished to the other parties in writing in accordance with this Section 11.2. 11.3 EXPENSES. All costs and expenses incurred in connection with this Merger Agreement and the transactions contemplated hereby (regardless of whether the Merger is consummated) shall be paid by the party incurring such expenses, and the incurrence and payment of transaction expenses by the Company shall not affect the Merger Consideration. 11.4 PUBLICITY. So long as this Merger Agreement is in effect, Acquisition and the Company agree to consult with each other in issuing any press release or otherwise making any public statement with respect to the transactions contemplated by this Merger Agreement, and 26 28 none of them shall issue any press release or make any public statement prior to such consultation, except as may be required by law. 11.5 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Merger Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Merger Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. 11.6 INTERPRETATION. The headings contained in this Merger Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Merger Agreement. 11.7 MISCELLANEOUS. This Merger Agreement (including the documents and instruments referred to herein) (a) constitute the entire agreement and supersede all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof (other than as provided in the Confidentiality Agreement, as the same may be amended); (b) except as provided in Section 7.4 of this Merger Agreement, are not intended to confer upon any other person any rights or remedies hereunder; (c) except for an assignment by Acquisition to one of its affiliates, shall not be as assigned by operation of law or otherwise; and (d) shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of Delaware (without giving effect to the provisions thereof relating to conflicts of law). This Merger Agreement may be executed in two or more counterparts which together shall constitute a single agreement. IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to be signed by their respective officers thereunder duly authorized all as of the date first written above. 27 29 TPL ACQUISITION, LLC By: RICHARD C. BLUM & ASSOCIATES, LP By: RICHARD C. BLUM & ASSOCIATES, INC., its sole general partner By: /s/ MARC T. SCHOLVINCK ----------------------------- Its: Managing Director & Chief Financial Officer TRIAD PARK, LLC By: 3055 MANAGEMENT CORP., its Manager By: /s/ JAMES R. PORTER ------------------------------- Its: Vice President RICHARD C. BLUM & ASSOCIATES, LP By: RICHARD C. BLUM & ASSOCIATES, INC., its sole general partner By: /s/ MARC T. SCHOLVINCK ------------------------------- Its: Managing Director & Chief Financial Officer 28 EX-99.3 4 INDEPENDENT CONTRACTOR SERVICES AGREEMENT 1 Exhibit (c)(2) Triad Park, LLC - -------------------------------------------------------------------------------- Contractor: Larry McReynolds Term: From February 27, 1997 to indefinite INDEPENDENT CONTRACTOR SERVICES AGREEMENT THIS AGREEMENT ("Agreement") is entered into by and between Triad Park, LLC, a Delaware Limited Liability Company "Triad Park"); and Larry McReynolds ("Contractor") as of February 27, 1997 (the "Effective Date"). 1. ENGAGEMENT OF SERVICES. 1.1 Project Assignments. TRIAD PARK may from time to time issue Project Assignments to Contractor in the form of the attached Exhibit A. Subject to the terms of this Agreement, Contractor will render services set forth in Project Assignments accepted by Contractor. Services will be rendered to the best of Contractor's ability, by the completion dates set forth in the relevant Project Assignment. 1.2 Performance of Services. TRIAD PARK selected Contractor to perform these services based upon TRIAD PARK receiving Contractor's personal service and therefore Contractor may not subcontract or otherwise delegate its obligations under this Agreement without TRIAD PARK's prior written consent. If Contractor is not a natural person, then before any employee, agent, or consultant of Contractor performs services in connection with this Agreement, that employee, agent, or consultant must have entered into a written agreement expressly for the benefit of TRIAD PARK and containing provisions substantially equivalent to this Section 1.2 and to Section 4 below. Contractor must provide a signed copy of that agreement to TRIAD PARK. 2. COMPENSATION. 2.1 Fees and Approved Expenses. TRIAD PARK will pay Contractor a fee for services rendered by Contractor pursuant to this Agreement as set forth in Exhibit "A". Contractor will not be reimbursed for any expenses incurred in connection with the performance of services under this Agreement, unless those expenses are approved in writing by an authorized manager of TRIAD PARK or expressly authorized in the relevant Project Assignment. Upon termination of this Agreement by either party for any reason, Contractor will be paid fees and expenses on a proportional basis as stated in the relevant Project Assignment for work which has been completed prior to and including the effective date of such termination. 2.2 Timing. Unless other terms are set forth in the Project Assignment for the work in progress, TRIAD PARK will pay Contractor for services and will reimburse Contractor for approved expenses within thirty (30) days after the date of Contractor's invoice, provided Contractor has furnished such documentation for those authorized expenses as TRIAD PARK may reasonably request. Contractor shall not issue an invoice to TRIAD PARK under this Agreement more often than on a bi-weekly basis. 3. INDEPENDENT CONTRACTOR RELATIONSHIP. 3.1 Nature of Relationship. Contractor and TRIAD PARK understand, acknowledge and agree that Contractor's relationship with TRIAD PARK will be that of an independent Contractor and nothing in this Agreement is intended to or should be construed to create a partnership, joint venture, or employment - ------------------------------------------------------------------------------- Page 1 2 Triad Park, LLC - -------------------------------------------------------------------------------- relationship. Since Contractor will not be an employee of TRIAD PARK, Contractor will not be entitled to any of the benefits which TRIAD PARK may make available to its employees, including, by way of example, group health or life insurance. Contractor is not an agent of TRIAD PARK as a result of or in the course of performing services pursuant to this Agreement and Contractor is not authorized to make any representation, contract or commitment on behalf of TRIAD PARK unless specifically requested or authorized in writing to do so by a duly authorized manager of TRIAD PARK. 3.2 Contractor Responsible for Taxes and Records. Contractor will be solely responsible for, and will file on a timely basis, all tax returns and payments required to be filed with or made to any federal, state or local tax authority with respect to Contractor's performance of services and receipt of fees under this Agreement. Contractor will be solely responsible for and must maintain adequate records of expenses incurred in the course of performing services under this Agreement. No part of Contractor's compensation will be subject to withholding by TRIAD PARK for the payment of social security, federal, sate or any other employee payroll tax. 4. TRADE SECRETS -- INTELLECTUAL PROPERTY RIGHTS. 4.1 Representations. Contractor represents that his performance of all of the terms of this Agreement does not, and will not, breach any agreement to keep in confidence proprietary information, knowledge or data of a third party and Contractor will not disclose to TRIAD PARK, or induce TRIAD PARK to use, any confidential or proprietary information belonging to third parties unless such use or disclosure is authorized in writing by such owners. 4.2 Confidential Information. (a) Contractor will maintain in confidence and will not disclose or use, either during or after the performance of his or her services hereunder, any proprietary or confidential information or know-how belonging to TRIAD PARK ("Confidential Information"), whether or not in written form, except to the extent required to perform duties on behalf of TRIAD PARK. Confidential Information refers to any information, not generally known in the relevant trade or industry, which was obtained from TRIAD PARK, or which was learned, discovered, developed, conceived, originated or prepared by Contractor during the term of this Agreement. Such Confidential Information includes, but is not limited to, computer programs and routines, technical and business information relating to TRIAD PARK's inventions or products, research and development, production processes, manufacturing and engineering processes, machines and equipment, finances, customers, marketing, and production and future business plans and any information which is identified as confidential by TRIAD PARK. Upon the termination of Contractor's services, Contractor will deliver to TRIAD PARK all written and tangible material in Contractor's possession incorporating the Confidential Information or otherwise relating to TRIAD PARK's business. These obligations with respect to Confidential Information extend to information belonging to third parties from whom information was received in confidence, including without limitation customers and suppliers of TRIAD PARK, who may have disclosed such information to Contractor as the result of Contractor's status as an independent consultant of TRIAD PARK. (b) All Confidential Information will remain the sole property of TRIAD PARK, and Contractor will have no rights to the Confidential Information, except as otherwise provided in this Agreement. - ------------------------------------------------------------------------------- Page 2 3 Triad Park, LLC - -------------------------------------------------------------------------------- (c) Contractor agrees that it will not use any Confidential Information except in accordance with the provisions of this Agreement and will not disclose any Confidential Information to any third party without the prior written consent of TRIAD PARK. TRIAD PARK hereby consents to such disclosure of its Confidential Information to the employees of Contractor as is necessary to allow Contractor to perform this Agreement and to obtain the benefits thereof. Contractor agrees to treat all Confidential Information in the same manner as it treats its own confidential information, but in no case will the degree of care used by Contractor be less than reasonable care. (d) Notwithstanding the other provisions of this Agreement, information shall not be deemed Confidential Information, and Contractor shall have no obligation with respect to any information which: (i) was in the public domain at the time it was disclosed or falls within the public domain, except through the fault of the Contractor; (ii) was disclosed after written approval of TRIAD PARK; or (iii) was rightfully communicated to Licensee from a party other than TRIAD PARK free of any obligation of confidence subsequent to the time it was communicated by TRIAD PARK to Contractor. 4.3 Conflict of Interest. Contractor agrees during the term of this Agreement not to accept work, enter into a contract or accept an obligation, inconsistent or incompatible with Contractor's obligations or the scope of services rendered for TRIAD PARK under this Agreement. Contractor warrants that to the best of his or her knowledge, there is no other contract or duty on his or her part now in force which is inconsistent with this Agreement. During the term of the Agreement, Contractor will not enter into any agreement, whether oral or written, which conflicts with the provisions of this Agreement. Contractor further agrees not to disclose to TRIAD PARK, or bring onto TRIAD PARK's premises, or induce TRIAD PARK to use any confidential information that belongs to anyone other than TRIAD PARK or Contractor. Contractor agrees to indemnify TRIAD PARK from any and all loss or liability incurred by reason of alleged breach by Contractor of any confidentiality or services agreement with any party other than TRIAD PARK. Anything to the contrary in this agreement notwithstanding, TRIAD PARK recognizes that Contractor is an employee of CCI/Triad and waves and releases any claims against Contractor arising out of any conflict of interest due to Contractor's employment with CCI/Triad. 4.4 Injunctive Relief for Breach. Contractor acknowledges and agrees that the obligations and promises of Contractor under this Agreement are of a unique, intellectual character that gives them particular value. Contractor further acknowledges and agrees that his or her breach of any of the promises or agreements contained in this Agreement will result in irreparable and continuing damage to TRIAD PARK for which there is no adequate remedy at law and, in the event of such breach, TRIAD PARK will be entitled to injunctive relief. 4.5 Return of TRIAD PARK's Property. Contractor acknowledges that the following are TRIAD PARK's sole and exclusive property: all documents, such as drawings, manuals, notebooks, reports, sketches, records, computer programs, employee lists, customer lists and the like in his custody or possession, whether delivered to Contractor by TRIAD PARK or made by Contractor in the performance of services under this Agreement, relating to the business activities of TRIAD PARK or its customers or suppliers and containing any information or data whatsoever, whether or not Confidential Information. Contractor agrees to promptly deliver all of TRIAD PARK's property and all copies of TRIAD PARK's property and Confidential Information in Contractor's possession to TRIAD PARK upon termination or expiration of this Agreement for any reason, or at any time upon TRIAD PARK's request. - ------------------------------------------------------------------------------- Page 3 4 Triad Park, LLC - -------------------------------------------------------------------------------- 5. TERM, TERMINATION, NON-INTERFERENCE WITH BUSINESS. 5.1 Term. The term of this Agreement will begin upon the Effective Date and will continue in force indefinitely, unless terminated earlier in accordance with Sections 5.2 or 5.3 below. 5.2 Termination by TRIAD PARK. Except while work by Contractor is in progress under a Project Assignment, TRIAD PARK may terminate this Agreement with or without cause, at any time upon thirty (30) days prior written notice to Contractor. TRIAD PARK also may terminate this Agreement immediately in its sole discretion upon Contractor's material breach of Article 4 and/or Section 5.4 of this Agreement and/or upon any acts of gross misconduct by Contractor directly affecting this Agreement or the independent contractor relationship. While work by Contractor is in progress under any Project Assignment governed by this Agreement, TRIAD PARK may terminate this Agreement for cause upon thirty (30) days' prior written notice to Contractor. Cause will be defined as any failure by Contractor to perform his or her obligations under this Agreement. 5.3 Termination by Contractor. Except while work by Contractor is in progress under a Project Assignment, Contractor may terminate this Agreement with or without cause at any time upon thirty (30) days' prior written notice to TRIAD PARK. 5.4 Non-interference with Business. During and for a period of two (2) years immediately following termination of this Agreement by either party, Contractor agrees not t interfere with the business of TRIAD PARK in any manner. By way of example and not limitation, Contractor agrees not to solicit, induce or encourage or cause others to solicit, induce or encourage any employee or independent contractor of TRIAD PARK to terminate or breach any employment, contractual or other relationship with TRIAD PARK. 6. GENERAL PROVISIONS. 6.1 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California as applied to agreements entered into and to be performed entirely within California between California residents. 6.2 Entire Agreement. This Agreement and the Exhibits attached hereto contain the entire agreement between the parties hereto, and supersede all simultaneous or prior oral or written agreements, regarding the subject matter of this Agreement. No modifications or amendments to this Agreement shall be binding upon the parties unless made by a writing signed by both parties. 6.3 Waiver. The waiver by either party of a breach of any provision contained herein shall not be effective unless in writing signed on behalf of the party against whom the waiver is asserted. Any waiver shall in no way be construed as a waiver of any succeeding breach of such provision or the waiver of the provision itself. 6.4 Assignment. This Agreement may not be assigned by Contractor without the prior written consent of TRIAD PARK. 6.5 Notices. All notices or reports permitted or required under this Agreement shall be in writing and shall be delivered by (i) personal delivery, (ii) telegram, (iii) telex, (iv) telecopier, (v) facsimile transmission or (vi) by certified or registered mail, return receipt requested, and shall be deemed given upon - ------------------------------------------------------------------------------- Page 4 5 Triad Park, LLC - -------------------------------------------------------------------------------- personal delivery, five (5) days after deposit in the mail, or upon acknowledgment of receipt of electronic transmission. Notices shall be sent to the addresses set forth at the end of this Agreement or such other address as either party may specify in writing and in accordance with this Section 6.5. 6.6 Survival. Each of the parties' obligations under Sections 4 and 5.4 will survive the termination or expiration of this Agreement. 6.7 Severability. In the event that any provision of this Agreement shall be unenforceable or invalid under any applicable law or be so held by applicable court decision, such unenforceability or invalidity shall not render this Agreement unenforceable or invalid as a whole, and, in such event, such provision shall be changed and interpreted so as to best accomplish the intended objectives and economic effects of such unenforceable or invalid provision within the limits of applicable law or applicable court decisions. 6.8 Choice of Forum. All disputes arising under this Agreement may be brought (i) in the Superior Court of the State of California in Alameda County, Hayward Branch, (ii) in the Municipal Court of the State of California, County of Alameda, Livermore/Pleasanton Judicial District, or (iii) the United States District Court for the Northern District of California (collectively the "Courts"). The Courts shall together have exclusive jurisdiction over disputes under this Agreement. Contractor hereby consents to personal jurisdiction of the above courts. 6.9 Attorney's Fees. In the event any proceeding or lawsuit is brought by TRIAD PARK or Contractor in connection with this Agreement, the Contractor shall be entitled to receive its costs, expert witness fees and reasonable attorneys' fees, including costs and fees on appeal. THE PARTIES, INTENDING TO BE BOUND BY THE TERMS AND CONDITIONS HEREOF, HAVE CAUSED THIS AGREEMENT TO BE SIGNED BY THEIR DULY AUTHORIZED REPRESENTATIVES. TRIAD PARK, LLC CONTRACTOR: LARRY McREYNOLDS /s/ JAMES R. PORTER /s/ LARRY McREYNOLDS - ------------------------------ ------------------------ James R. Porter, Vice President Larry McReynolds - ------------------------------------------------------------------------------- Page 5 EX-99.4 5 PRE-LETTER, NOTICE, PROXY STATEMENT, AND FORM 1 TRIAD PARK, LLC 3055 TRIAD DRIVE LIVERMORE, CA 94550 NOVEMBER , 1997 DEAR SHAREHOLDER: You are cordially invited to attend a special meeting of shareholders of Triad Park, LLC (the "Company") to be held at the offices of the Company, 3055 Triad Drive, Livermore, California, on , December , 1997 at 9:00 a.m. local time (the "Special Meeting"). A Notice of the Special Meeting, a Proxy Statement, related information about the Company and a proxy card are enclosed. All holders of the Company's outstanding membership interests (the "Shares") as of November , 1997 are entitled to notice of and to vote at the Special Meeting. At the Special Meeting, you will be asked to consider and to vote upon a proposal to approve an Agreement of Merger, dated September 9, 1997 (the "Merger Agreement"), by and among the Company, Richard C. Blum & Associates, LP, a California limited partnership ("RCBA"), and TPL Acquisition, LLC, a Delaware limited liability company (the "Acquisition LLC"), an affiliate of RCBA, pursuant to which the Acquisition LLC will be merged into the Company (the "Merger"). If the Merger Agreement is approved and the Merger becomes effective, each outstanding Share will be converted into the right to receive $1.32 in cash. Approval of the Merger requires the affirmative vote of the holders of a majority of the voting power of all outstanding Shares. Details of the proposed Merger and other important information are set forth in the accompanying Proxy Statement, which you are urged to read carefully. YOUR ADVISORY BOARD HAS APPROVED THE MERGER AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. Whether or not you plan to attend the Special Meeting, please complete, sign and date the accompanying proxy card and return it in the enclosed postage prepaid envelope. If you attend the Special Meeting, you may revoke such proxy and vote in person if you wish, even if you have previously returned your proxy card. Thank you for your interest and participation. Sincerely, James R. Porter Vice President, 3055 Management Corp., Manager of the Company THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. 2 TRIAD PARK, LLC 3055 TRIAD DRIVE LIVERMORE, CALIFORNIA 94550 ------------------------ NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON , DECEMBER , 1997 ------------------------ To Shareholders of Triad Park, LLC: The Advisory Board has called a special meeting of the shareholders of Triad Park, LLC, a Delaware limited liability company (the "Company"), to be held at the offices of the Company, 3055 Triad Drive, Livermore, California, on , December , 1997 at 9:00 a.m. local time, including any adjournments or postponements (the "Special Meeting"), to consider and act upon the following matters: 1. To consider and vote upon a proposal to approve an Agreement of Merger, dated September 9, 1997 (the "Merger Agreement"), among the Company, Richard C. Blum & Associates, LP, a California limited partnership ("RCBA"), and TPL Acquisition, LLC, a Delaware limited liability company and affiliate of RCBA (the "Acquisition LLC"), pursuant to which, among other things, (i) the Acquisition LLC will be merged into the Company (the "Merger"), and (ii) each outstanding membership interest of the Company (the "Shares") will be converted into the right to receive $1.32 in cash (the "Merger Consideration"). A copy of the Merger Agreement is attached as Exhibit A to the accompanying Proxy Statement. 2. To transact such other business as may properly come before the Special Meeting. Only holders of record of the Shares at the close of business on November , 1997 are entitled to notice of and to vote at the Special Meeting. RCBA, which beneficially holds 1,998,158 Shares (representing approximately 10.1% of the voting power of the Shares) has notified the Company that it intends to vote its Shares in favor of the Merger. No appraisal or dissenters' rights are provided for the Company shareholders under applicable law, nor will the Company or RCBA be voluntarily providing appraisal rights to the Company shareholders who object to the transactions contemplated by the Merger Agreement. Therefore, if the Merger is approved, shareholders who voted against the Merger will be required to accept the Merger Consideration in exchange for their interests in the Company. See "RIGHTS OF DISSENTING SHAREHOLDERS." Your attention is directed to the Proxy Statement and its Exhibits and the other materials relating to the Company that have been included in this mailing for more complete information regarding the Merger Agreement and the Company. THE ADVISORY BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT. By Order of the Advisory Board James R. Porter Vice President, 3055 Management Corp., Manager of the Company Livermore, California November , 1997 YOUR VOTE IS IMPORTANT. ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE SPECIAL MEETING. 3 TRIAD PARK, LLC ------------------------ PROXY STATEMENT ------------------------ SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON , DECEMBER , 1997 ------------------------ This Proxy Statement is being furnished to the shareholders of Triad Park, LLC, a Delaware limited liability company (the "Company"), in connection with the solicitation by the Advisory Board of the Company of proxies to be voted at a special meeting of shareholders of the Company to be held at the offices of the Company, 3055 Triad Park, Livermore, California, on , December , 1997 at 9:00 a.m. local time, including any adjournments or postponements (the "Special Meeting"). At the Special Meeting, the shareholders of the Company will consider and vote upon a proposal to approve an Agreement of Merger, dated September 9, 1997 (the "Merger Agreement"), among the Company, Richard C. Blum & Associates, LP, a California limited partnership ("RCBA"), and TPL Acquisition, LLC, a Delaware limited liability company and affiliate of RCBA (the "Acquisition LLC"), pursuant to which, among other things, (i) the Acquisition LLC will be merged into the Company (the "Merger"), with the result that the Company will become an affiliate of RCBA, and (ii) each outstanding membership interest of the Company (the "Shares"), will be converted into the right to receive $1.32 in cash. See "The Merger Agreement -- Consideration To Be Received by Shareholders." This Proxy Statement is accompanied by a copy of the Company's Quarterly Report on Form 10-QSB for the quarters ended June 30 and September 30, 1997. These materials are specifically incorporated by reference in this Proxy Statement and are included to aid shareholders in their consideration of the Merger. Only holders of record of the Shares at the close of business on November , 1997 are entitled to notice of and to vote at the Special Meeting. This Proxy Statement is first being sent to shareholders on or about November , 1997. ------------------------ THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. 4 TABLE OF CONTENTS
PAGE ---- SUMMARY............................................................................... 1 Date, Time and Place of Special Meeting............................................. 1 Record Date; Shareholders Entitled to Vote; Quorum.................................. 1 Purpose of the Meeting.............................................................. 1 The Merger.......................................................................... 1 Effective Time of the Merger........................................................ 2 Voting of Shares Owned by RCBA...................................................... 2 Special Factors..................................................................... 2 Payment for Shares.................................................................. 3 Dissenters' Rights.................................................................. 3 Regulatory Approvals................................................................ 3 The Company......................................................................... 3 RCBA................................................................................ 3 Market Price and Dividend Data...................................................... 4 THE COMPANY........................................................................... 5 History............................................................................. 5 Business of the Company............................................................. 5 Properties of the Company........................................................... 5 THE SPECIAL MEETING................................................................... 8 General............................................................................. 8 Proposal to be Considered at the Special Meeting.................................... 8 Record Date; Shareholder Approval................................................... 8 Proxies............................................................................. 8 SPECIAL FACTORS....................................................................... 9 Background of the Merger............................................................ 9 Purpose and Structure of the Merger................................................. 12 Recommendation of the Company's Advisory Board...................................... 13 Sedway Report....................................................................... 14 Perspective of RCBA on the Merger................................................... 15 Plans for the Company After the Merger.............................................. 15 Certain Effects of the Merger....................................................... 16 Relationship Between the Company and RCBA........................................... 16 Interests of Certain Persons in the Merger.......................................... 16 Sources and Uses of Funds........................................................... 17 Certain Federal Income Tax Consequences............................................. 17 Redemptions of Shares............................................................... 19 Regulatory Approvals................................................................ 19 THE MERGER AGREEMENT.................................................................. 20 General............................................................................. 20 Effective Time...................................................................... 20 Consideration To Be Received by Shareholders........................................ 20 Payment for Shares.................................................................. 20 Operations of the Company Prior to the Merger....................................... 21 Conditions to Consummation of the Merger............................................ 21 Termination......................................................................... 22
i 5
PAGE ---- Termination Fee..................................................................... 23 Accounting Treatment................................................................ 23 RIGHTS OF DISSENTING SHAREHOLDERS..................................................... 23 SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS........................... 24 Share Ownership..................................................................... 24 Transactions by Certain Persons in the Shares....................................... 25 MANAGEMENT OF THE COMPANY, RCBA AND THE ACQUISITION LLC............................... 26 The Company......................................................................... 26 RCBA and Affiliates................................................................. 26 The Acquisition LLC................................................................. 27 Certain Proceedings................................................................. 27 SHAREHOLDER PROPOSALS................................................................. 27 INDEPENDENT PUBLIC ACCOUNTANTS........................................................ 27 INFORMATION INCORPORATED BY REFERENCE................................................. 28 AVAILABLE INFORMATION................................................................. 28 ADDITIONAL INFORMATION................................................................ 28 EXHIBIT A -- Agreement of Merger...................................................... A-1
ii 6 SUMMARY The following is a summary of certain information contained elsewhere in this Proxy Statement. The following summary is not intended to be complete and is qualified in its entirety by reference to the more detailed information contained in this Proxy Statement, in the materials accompanying this Proxy Statement, in the Exhibits and in the documents incorporated by reference. Shareholders are urged to review the entire Proxy Statement and accompanying materials carefully. DATE, TIME AND PLACE OF SPECIAL MEETING A Special Meeting of Shareholders of Triad Park, LLC will be held on , December , 1997 at 9:00 a.m. local time at the offices of the Company, 3055 Triad Drive, Livermore, California. RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE; QUORUM Only holders of record of the Company's membership interests (the "Shares") at the close of business on November , 1997 (the "Record Date") are entitled to notice of and to vote at the Special Meeting. On that date, there were approximately 19,708,123 Shares outstanding, held of record by approximately 1,358 shareholders. Each holder of Shares is entitled to one vote per Share on the matters to be voted upon at the Special Meeting. See "THE SPECIAL MEETING -- Record Date; Shareholder Approval." The presence, in person or by proxy, at the Special Meeting of the holders of a majority of the voting power of the outstanding Shares is necessary to constitute a quorum at the Special Meeting. PURPOSE OF THE MEETING At the Special Meeting, shareholders will consider and vote upon a proposal to approve the Merger Agreement, a copy of which is attached as Exhibit A to this Proxy Statement. See "THE SPECIAL MEETING -- Proposal To Be Considered at the Special Meeting." The Merger Agreement provides for the merger of the Acquisition LLC into the Company. THE MERGER Pursuant to the Merger Agreement, the Acquisition LLC will merge into the Company, with the result that the Company, as the surviving company (the "Surviving Company"), will become an affiliate of RCBA. See "THE MERGER AGREEMENT -- General." Each outstanding Share will be converted into the right to receive from the Acquisition LLC or RCBA $1.32 in cash, without interest (the "Merger Consideration"). See "THE MERGER AGREEMENT -- Consideration To Be Received by Shareholders." After the Merger, RCBA will own all of the outstanding membership interests of the Surviving Company. The Shares will no longer be traded on the open market and the registration of the Shares under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), will be terminated. See "SPECIAL FACTORS -- Certain Effects of the Merger." Approval of the Merger requires the affirmative vote of the holders of a majority of the voting power of all outstanding Shares. See "THE SPECIAL MEETING -- Record Date; Shareholder Approval." The Merger is subject to various closing conditions and the absence of any event that would have a material adverse effect on the assets, properties, liabilities, obligations, financial condition, results of operations or business of the Company. See "THE MERGER AGREEMENT -- Conditions to Consummation of the Merger." The Merger Agreement may, under specified circumstances, be terminated and the Merger abandoned at any time prior to the filing of a Certificate of Merger with the Delaware Secretary of State, notwithstanding approval of the Merger Agreement by the shareholders of the Company. The Merger Agreement requires the Company to pay the Acquisition LLC a termination fee of $1.3 million if the Merger is not consummated and if (i) the Merger Agreement shall not have been submitted for approval and adoption by the Company shareholders at a shareholder meeting prior to January 31, 1998 (unless the meeting is held later solely due to delays in obtaining approval of this proxy statement by the Securities and Exchange Commission (the 1 7 "Commission")), (ii) the Advisory Board of the Company recommends to the Company's shareholders a third party proposal regarding a merger, consolidation, sale of assets, sale of securities or similar transaction (an "Acquisition Proposal"), or (iii) the Company enters into an agreement with a third party regarding an Acquisition Proposal. See "THE MERGER AGREEMENT -- Termination" and "-- Termination Fee." EFFECTIVE TIME OF THE MERGER Unless otherwise agreed by the parties to the Merger Agreement or otherwise provided by law, the Merger will become effective upon the acceptance for recording of the Certificate of Merger by the Delaware Secretary of State (the "Effective Time"). Subject to approval of the Merger at the Special Meeting and the satisfaction or waiver of the terms and conditions in the Merger Agreement, the Effective Time is expected to occur as soon as practicable after the Special Meeting. See "THE MERGER AGREEMENT -- Effective Time." VOTING OF SHARES OWNED BY RCBA The General Partner of RCBA, which beneficially holds 1,998,158 Shares (representing approximately 10.1% of the outstanding Shares), has approved the Merger and has notified the Company that it intends to vote its Shares in favor of the Merger. Because RCBA is entitled to vote substantially less than 50.0% of the voting power of the outstanding Shares, approval of the Merger is not assured as a result of the voting power held by RCBA. See "THE SPECIAL MEETING -- Record Date; Shareholder Approval." SPECIAL FACTORS In determining whether to vote in favor of the Merger, shareholders of the Company should consider the following special factors, as well as the other factors discussed elsewhere in this Proxy Statement under the caption "SPECIAL FACTORS": PURPOSE AND STRUCTURE OF THE MERGER. The purpose of the Merger is to effect the sale of the Company to RCBA in a transaction that will provide the Company shareholders cash for their Shares at a price that the Advisory Board of the Company believes to be fair. The Advisory Board believes the Merger is the most effective means of achieving the purpose of liquidating the shareholders' investment in a reasonable time at a reasonable price. See "SPECIAL FACTORS -- Purpose and Structure of the Merger." RECOMMENDATION OF THE COMPANY'S ADVISORY BOARD. The Advisory Board of the Company has determined that the Merger is fair from a financial point of view to and in the best interests of the Company's shareholders (other than RCBA). The Advisory Board has approved the Merger Agreement and recommends that the Company's shareholders vote in favor of the proposal to approve and adopt the Merger Agreement. See "SPECIAL FACTORS--Recommendation of the Company's Advisory Board." SEDWAY REPORT. On July 22, 1997, Sedway Group, a real estate and urban economics firm ("Sedway Group") delivered a written report to the Company's Advisory Board recommending a disposition strategy for maximization of the Company's real estate assets. Sedway Group's report forecasted proceeds of $25.6 million if its disposition strategy was followed. See "SPECIAL FACTORS -- Sedway Report." INTERESTS OF CERTAIN PERSONS IN THE MERGER. In considering the recommendation of the Advisory Board of the Company with respect to the Merger Agreement and the transactions contemplated thereby, shareholders should be aware that certain officers and Advisory Board members of the Company have interests in connection with the consummation of the Merger that may conflict with the interests of the Company's shareholders. See "SPECIAL FACTORS -- Interests of Certain Persons in the Merger." FEDERAL INCOME TAX CONSEQUENCES. For federal income tax purposes, the Merger will be treated as a taxable sale or exchange of Shares for cash by each holder of the Shares. The amount of gain or loss to be recognized by each shareholder will be measured by the difference between the amount of cash received by such shareholder in connection with the Merger plus such shareholder's share of the Company's liabilities less such shareholder's tax basis in the Shares at the Effective Time. See "SPECIAL FACTORS -- Certain Federal Income Tax Consequences." 2 8 PAYMENT FOR SHARES As promptly as possible after the Effective Time, instructions will be furnished to holders of Shares regarding procedures to be followed to surrender their certificates and receive payment for their Shares. See "THE MERGER AGREEMENT -- Payment for Shares." DISSENTERS' RIGHTS No appraisal or dissenters' rights are provided for the Company shareholders under the Delaware limited liability company act or under the Company's limited liability company agreement, nor will the Company or RCBA be voluntarily providing appraisal rights to the Company shareholders who object to the transactions contemplated by the Merger Agreement. Therefore, if the Merger is approved, shareholders who voted against the Merger will be required to accept the Merger Consideration in exchange for their interests in the Company. See "RIGHTS OF DISSENTING SHAREHOLDERS." REGULATORY APPROVALS Although no particular regulatory approval is required in connection with the proposed Merger, state Attorneys General and private parties may bring legal actions under the federal or state antitrust laws under certain circumstances. See "SPECIAL FACTORS -- Regulatory Approvals." THE COMPANY The Company was formed on February 10, 1997. The Company's manager is 3055 Management Corp., a California corporation ("Management Corp."). The Company's primary assets consist of three buildings and improvements (comprising 220,000 square feet) situated on approximately 15 acres of land in Triad Park, Livermore, California (the "Headquarters") and 303 acres of undeveloped land located in Triad Park (the "Land", the Land and the Headquarters, collectively the "Property"). The Company was formed to liquidate its investment in the Property. In the absence of any liquidation, the Company's principal business has been to own, operate, improve and maintain the Property. The principal executive office of the Company is located at 3055 Triad Drive, Livermore, California 94550, and the Company's telephone number is (510) 449-0606. RCBA RCBA is a California limited partnership whose principal business is acting as general partner for investment partnerships and providing investment advisory and financial consulting services. RCBA is a registered investment adviser with the Commission. The sole general partner of RCBA is Richard C. Blum & Associates, Inc., a California corporation ("RCBA Inc."). RCBA Inc. is in turn controlled, for purposes of the federal securities laws, by Richard C. Blum, the Chairman and a substantial shareholder of RCBA Inc. The principal executive office of RCBA is located at 909 Montgomery Street, Suite 400, San Francisco, California 94133, and its telephone number is (415) 434-1111. 3 9 MARKET PRICE AND DIVIDEND DATA The Shares are publicly traded, although the Shares are not registered for trading on any exchange. The Company is aware that bid and ask prices have been quoted over the Internet under the symbol "TDPK." The following table sets forth the range of high and low bid quotations per Share as quoted on the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
BID QUOTATIONS --------------- HIGH LOW ----- ----- 1997 Third Quarter (July 31 through September 30)............... $1.26 $0.75 Fourth Quarter (through October 9)......................... $1.30 $1.26
On August 13, 1997, the last full day of trading prior to the filing of the RCBA Schedule 13D (as defined herein) which disclosed RCBA's interest in acquiring the Company, such reported high and low bid quotations per Share was $0.75 in both cases. On November , 1997, the last full day of trading prior to the printing of this Proxy Statement, the reported high and low bid quotations per Share were $ and $ , respectively. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THEIR SHARES. The Company has never paid a cash distribution on the Shares and does not anticipate paying any such distribution in the foreseeable future. 4 10 THE COMPANY HISTORY Prior to the Company's formation, the real estate assets now owned by the Company were owned by Triad Systems Corporation, a Delaware corporation ("Triad") and its wholly-owned subsidiary, 3055 Triad Dr. Corp., a California corporation ("3055 Triad Dr. Corp."). 3055 Triad Dr. Corp. was the owner of the Headquarters as well as a certain portion of the Land, and Triad was the owner of the remainder of the Land. On October 23, 1996, Cooperative Computing, Inc., a Texas corporation ("CCI"), through a wholly owned subsidiary, commenced a tender offer (the "Offer") to purchase all of the outstanding shares of common stock of Triad. The Offer contemplated that, among other things, certain real property assets of Triad and 3055 Triad Dr. Corp. would be spun off to the shareholders of Triad in a dividend to be declared prior to the consummation of the Offer. The dividend was declared on February 26, 1997. The Company was organized under the laws of the State of Delaware as a limited liability company on February 10, 1997 as a spin-off of Triad. At the time of the formation of the Company, 3055 Triad Dr. Corp., the owner of the Headquarters, was merged with and into Triad, with Triad being the surviving corporation. On February 27, 1997, the Offer was consummated, CCI merged with Triad, and Triad became known as Cooperative Computing, Inc., a Delaware corporation, aka CCI/Triad ("CCI/Triad"). BUSINESS OF THE COMPANY The Company's Shares are owned 99% by the former shareholders of Triad and 1% by Management Corp. The Management Corp. is the exclusive operator of the Company's business except that certain actions require the approval of its Advisory Board (the "Advisory Board"). The Advisory Board was responsible for considering, reviewing and analyzing the Merger Agreement and the other competing offers. The Company's main objective is to liquidate its investment in the Property. In the meantime, the Company will own, operate, improve and maintain the Property. The Company may enter into joint ventures with third parties for the purpose of disposing of the Property if the Advisory Board determines that such arrangements are appropriate to the purposes of the Company. There can be no assurance that the Company will be successful in its efforts to dispose of the Property or that the Company will realize a profit from its activities. The Company will be subject to all of the market forces which impact the ownership and operation of real property, including market supply and demand, interest rates, local, regional and national economic conditions, local land use policies and restrictions, construction costs, competition from other sellers and landlords, and the effects of inflation. The Company is unable to predict the amount of time it will take to completely dispose of the Property and wind up the Company. PROPERTIES OF THE COMPANY Pursuant to that certain Real Estate Distribution Agreement dated as of February 26, 1997 between Triad, 3055 Triad Dr. Corp., Management Corp. and the Company (the "Distribution Agreement"), Triad contributed to the Company certain of its real estate assets located in Livermore, California, consisting primarily of the Headquarters, subject to the existing first deed of trust, and the Land, subject to existing assessment bonds, and the right to certain refunds for infrastructure expenditures from the City of Livermore (the "Contribution"). In conjunction with the Contribution, the Company agreed in the Distribution Agreement to indemnify CCI/Triad against any claims relating to "Environmental Costs and Liabilities" associated with the Land or the Headquarters prior to the Contribution. These "Environmental Costs and Liabilities" include all costs, liabilities, losses, claims and expenses arising from or under any "environmental law." The term "environmental law" is defined to include any applicable law regulating or prohibiting releases into any part of the natural environment, or pertaining to the protection of natural resources, the environment and public and employee health and safety including, among other law, the Comprehensive Environmental Response, Compensation, 5 11 and Liability Act (CERCLA), the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act (RCRA), the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act, and the Occupational Safety and Health Act, and any applicable state or local statutes. Subject to certain limitations, the Company also agreed in the Distribution Agreement to indemnify CCI/Triad against certain taxes arising from, or relating to, among other things, any sale of the Property after October 17, 1996, the Company, the formation of the Company, the transfer by Triad or any affiliate of Triad of the Property to the Company, the assumption or refinancing of any liabilities with respect to the Property and the sale, exchange or distribution of interests in the Company by CCI/Triad. The Property consists of approximately 303 acres of unimproved land and the 220,000 (approximate) square feet of office contained in three separate buildings situated on 15 acres of land occupied by CCI/Triad. The Property is located on the north side of Interstate 580 in the City of Livermore, California. The City of Livermore is located approximately 40 miles southeast of San Francisco. All of the buildings are of concrete tilt-up construction and were built in 1987. Building G is a two story office building containing approximately 70,986 square feet. Building K is a 74,064 square foot single story research and development building and Building F is a single story industrial flex building of 74,768 square feet. The office build-out in Buildings K and F is 90 percent and 40 percent, respectively. The Company's management believes that the Headquarters is adequately insured. There are 689 parking spaces associated with the Headquarters. The parking area is landscaped and the areas between the buildings are improved as open courtyards, fenced with iron gates for controlled access. Although the buildings were primarily designed for owner-occupancy, they were also designed to be flexible to allow multi-tenant occupancy. The 303 acres of vacant land is divided into land use categories of residential, industrial/office flex, retail and open space. The residential portion consists of three lots comprising approximately 28.1 useable acres. The industrial/office flex portion is divided into eight lots and contains approximately 114.6 acres. The retail/commercial portion is divided into ten lots and contains approximately 35.9 useable acres. The total useable area for these lots is approximately 141 acres. In addition, there are two lots, one of approximately 112 acres designated for open space or agricultural use and one lot of 4.54 acres dedicated for transportation improvements. Finally, approximately 7.8 acres are to be developed as public roadways. Approximately half the required offsite improvements are in place, funded through a combination of assessment bonds and community facility bonds. The construction of the remaining offsite improvements are expected to be funded through additional community facility bonds, as further described below in the final paragraph of this section. Several of the vacant land sites are in escrow and most of the remaining sites are subject to a first right of refusal contract. Two residential lots, comprising 19.4 acres, are in escrow to be sold to a single purchaser for a total price of $2,900,000 plus current assessments and up to approximately $1,500,000 of future assessments on these lots and an adjacent lot. This transaction is subject to the satisfaction of several material conditions, and the closing is not assured. One 19.3 acre lot is subject to a seven day right of first offer held by Lincoln Property Co., starting at $3.99 per square foot and increasing 5% per year, plus assessments. In addition, Lincoln Property Co. has the right of first offer on 8 lots plus the above mentioned lot. Finally, a previous purchaser of a lot holds a three year option, commencing September 1996, on 3.4 to 6 acres of land adjacent to the lot it owns. The option price is $3.60 per square foot plus assessments for two years, increasing to $5.50 for the third year. The Property is partially improved with infrastructure improvements, including curbs, gutters, storm drains and typical utilities. A community facilities bond issue was completed on March 24, 1997, the proceeds of which funded the reimbursement to the Company of $1,485,000 for completed infrastructure, created a $600,000 security fund for future infrastructure obligations, and will fund $3,700,000 for in-progress infrastructure improvements. In addition, there are $7,000,000 of new bonds which are planned to be sold in the future to fund the remaining improvements required for completion of Triad Park. The current cost estimates for the required improvements indicate that the community facilities bond funding limits should be adequate to cover the expenses of the remaining items of improvement. However, design and engineering is 6 12 not complete and there is a significant possibility that the actual cost of the improvements may be greater than estimated and may exceed the bond funding limit. Any shortfall in the bond funding will be borne by the Company or by purchasers of lots, which may have an adverse impact on the value of the Land. The remaining required improvements are scheduled to be completed by 2000. 7 13 THE SPECIAL MEETING GENERAL This Proxy Statement is furnished in connection with the solicitation of proxies by the Advisory Board of the Company for a Special Meeting of Shareholders to be held on December , 1997 at 9:00 a.m. local time at the offices of the Company, 3055 Triad Drive, Livermore, California, and as may be adjourned to a later date. Shares represented by properly executed proxies received by the Company will be voted at the Special Meeting in accordance with the terms of the proxies, unless the proxies are revoked. See "-- Proxies" below. PROPOSAL TO BE CONSIDERED AT THE SPECIAL MEETING At the Special Meeting, the shareholders of the Company will consider and vote upon a proposal to approve and adopt the Merger Agreement. Pursuant to the Merger Agreement, the Acquisition LLC will merge with and into the Company, the separate corporate existence of the Acquisition LLC will cease, and the Company will be the Surviving Company. At the Effective Time, each outstanding Share will be converted into the right to receive $1.32 in cash. A copy of the Merger Agreement is attached as Exhibit A to this Proxy Statement. In addition to approval of the Merger Agreement and the Merger, shareholders of the Company may be asked to approve a proposal to adjourn the Special Meeting to permit further solicitation of proxies in the event there are not sufficient votes at the time of the Special Meeting to approve and adopt the Merger Agreement. It is not anticipated that any other matters will be brought before the Special Meeting. However, if other matters should come before the Special Meeting, it is intended that the holders of Proxies will vote upon them in their discretion, unless that authority is withheld in the Proxy. RECORD DATE; SHAREHOLDER APPROVAL Only holders of record of the Shares at the close of business on November , 1997 are entitled to notice of and to vote at the Special Meeting. On that date, there were 19,708,123 Shares outstanding, which were held of record by approximately 1,358 shareholders. Each Share entitles its holder to one vote concerning all matters properly coming before the Special Meeting. A majority of the voting power of the Shares entitled to vote, represented in person or by proxy, will constitute a quorum. Abstentions and broker non-votes (i.e. Shares held by brokers in street name, voting on certain matters due to discretionary authority or instructions from the beneficial owner but not voting on other matters due to lack of authority to vote on those matters without instructions from the beneficial owner) are counted for the purpose of establishing a quorum and will have the same effect as a vote against the approval of the Merger. The Merger must be approved by the holders of at least a majority of the voting power of all outstanding Shares. RCBA, which beneficially owns 1,998,158 Shares (representing approximately 10.1% of the voting power of the Shares), has notified the Company that it intends to vote its Shares in favor of the Merger. Because RCBA is entitled to vote substantially less than 50.0% of the voting power of all outstanding Shares, approval of the Merger is not assured as a result of the voting power held by RCBA. Although they have not specifically agreed to do so, the Company believes that each of the Advisory Board members and executive officers of the Company will vote the Shares with respect to which he has voting power in favor of the Merger. Such Shares represent less than 8% of the Shares entitled to vote at the Special Meeting. See "SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS." PROXIES Any Company shareholder entitled to vote at the Special Meeting may vote either in person or by duly authorized proxy. All Shares represented by properly executed proxies received prior to or at the Special Meeting and not revoked will be voted in accordance with the instructions indicated in the proxies. IF NO INSTRUCTIONS ARE INDICATED, THE PROXIES WILL BE VOTED FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND, IN THE DISCRETION OF THE 8 14 PERSONS NAMED IN THE PROXY, ON SUCH OTHER MATTERS AS MAY PROPERLY BE PRESENTED AT THE SPECIAL MEETING. A shareholder may revoke his or her proxy at any time prior to its use by delivering to the President of the Company a signed notice of revocation or a later dated and signed proxy or by attending the Special Meeting and voting in person. Attendance at the Special Meeting will not in itself constitute the revocation of a proxy. Expenses in connection with the solicitation of proxies will be paid by RCBA or the Acquisition LLC. Upon request, RCBA or the Acquisition LLC will reimburse brokers, dealers and banks, or their nominees, for reasonable expenses incurred in forwarding copies of the proxy material to the beneficial owners of the Shares which such persons hold of record. Solicitation of proxies will be made principally by mail. Proxies may also be solicited in person, or by telephone or telegraph, by officers and regular employees of the Company. SPECIAL FACTORS BACKGROUND OF THE MERGER HISTORY OF RELATIONSHIP BETWEEN THE COMPANY AND RCBA. The Company was formed in 1997 as a spin-off of Triad. RCBA's President and Chairman, Richard C. Blum ("Mr. Blum"), was a director of Triad from August 3, 1992 until February 26, 1997, when Triad was acquired by CCI as part of CCI's successful tender offer for all outstanding shares of Triad common stock. When Management Corp. was formed in February, 1997, all of the outstanding stock was issued in equal amounts to Mr. Blum, William W. Stevens ("Mr. Stevens") and James R. Porter ("Mr. Porter"), three former directors of Triad. Mr. Blum was also a vice president and director of Management Corp. On August 8, 1997, Mr. Blum resigned from the Board of Directors and also resigned as vice president of Management Corp. On September 5, 1997, Mr. Blum assigned his shares in Management Corp. over to Mr. Stevens and Mr. Porter. Mr. Blum was never a member of the Advisory Board. REAL ESTATE LISTING AGENT. On June 1, 1997, the Company engaged the real estate firm of Grubb & Ellis, the same real estate firm that had been previously engaged by Triad to represent it in certain real estate matters, to act as its exclusive listing agent in connection with the potential sale of the Property. From time to time, representatives of Grubb & Ellis have had discussions with senior management of the Company and the Company's Advisory Board concerning the Company's potential strategic alternatives with respect to the sale of the Property. Such discussions have been general in nature and did not result in any formal actions by the Company's Advisory Board. DISCUSSIONS WITH THIRD PARTIES. In addition to the negotiations with RCBA discussed below, the Company has had discussions with several other parties as described below. CONTACTS AND NEGOTIATIONS WITH EVEREST FINANCIAL. On August 28, 1997, Everest Financial, Inc. ("Everest"), in a letter to the Company, set forth the terms and conditions upon which it would be willing to acquire the Company. In the letter, Everest indicated that it was willing to undertake a tender offer for all of the Company's outstanding Shares at a price of $0.91 per Share (an aggregate purcase price of less than $18,000,000), subject to due diligence and other contingencies. CONTACTS AND NEGOTIATIONS WITH T.V.O.B. GENERAL PARTNERSHIP. On August 25, 1997, Jeffrey S. Kendall ("Mr. Kendall"), General Partner of T.V.O.B. General Partnership ("TVOB"), met with Stanley F. Marquis, a member of the Company's Advisory Board ("Mr. Marquis"), in a meeting initiated by Mr. Kendall, to discuss the general terms of a proposal whereby TVOB would acquire all of the Company's outstanding Shares. On August 26, 1997, TVOB, in a letter to the Company, indicated it would be willing to acquire the Company for a total price of $25,500,000. On August 29, 1997, Larry D. McReynolds, President of the Company ("Mr. McReynolds") and Mr. Marquis met with Mr. Kendall and Joseph A. Duffel ("Mr. Duffel"), General Partner of TVOB. The parties discussed general due diligence issues and certain contingent liabilities of the Company. Mr. Marquis 9 15 informed the TVOB representatives that their offer was lower than another offer previously received by the Company. In the course of the meeting, TVOB increased its offer for the Company to $26,500,000. On the morning of September 5, 1997, Mr. Kendall telephoned Mr. Marquis and verbally indicated that TVOB would be increasing its offer price to $27,000,000. On the afternoon of September 5, 1997, Mr. Duffel, in a letter delivered via facsimile to Mr. Marquis, changed TVOB's offer price to $26,900,000. In addition, Mr. Duffel proposed an alternative transaction structure in which the Company would join TVOB in a joint venture regarding the development of the Property. This proposal called for the Company to receive $1 million in cash at closing, with a $25.9 million wrap around mortgage on all of the Property. The Company would receive 10% imputed interest on $25.9 million, TVOB would liquidate the Property over three years, and all profits would be split evenly between TVOB and the Company. During all of the discussions with TVOB, TVOB never indicated whether it was willing to assume all of the contingent liabilities of the Company. On September 10, 1997, Mr. Marquis telephoned Mr. Duffel to inform him of the Advisory Board's decision to approve the Merger Agreement. CONTACTS AND NEGOTIATIONS WITH LINCOLN PROPERTY COMPANY. On September 5, 1997, Lincoln Property Company ("Lincoln"), in a letter to Mr. Marquis delivered via facsimile, indicated that it would be willing to purchase the assets of the Company for an aggregate purchase price of $30,000,000. The letter indicated that Lincoln would assume the bond assessments, but was silent as to the assumption of the Company's liabilities. Mr. Marquis telephoned Steven N. Dunn, Vice President of Lincoln ("Mr. Dunn"), to clarify Lincoln's position with respect to the Company's liabilities. Mr. Dunn told Mr. Marquis that the Lincoln offer contemplated that Lincoln would not assume any of the Company's liabilities, contingent or otherwise. In light of this clarification by Mr. Dunn, Mr. Marquis calculated that the aggregate value of Lincoln's offer to the Company's shareholders, after paying off the existing mortgage and before any real estate or transactions costs, was approximately $21,000,000. CONTACTS AND NEGOTIATIONS WITH GRIGGS RESOURCE GROUP. On September 8, 1997, shortly before a special meeting of the Advisory Board, Griggs Resource Group, on behalf of PeopleSoft, Inc., sent a letter to the Company that indicated PeopleSoft was willing to purchase all of the Company's remaining assets for an aggregate purchase price of $36,000,000, subject to (a) changes being made in the Company's lease with CCI/Triad (over which the Company had no control) and (b) a due diligence period of up to 60 days after the execution of a definitive agreement. Under the terms of this offer, PeopleSoft would not be assuming the existing mortgage. Thus, after deducting the existing mortgage and applicable commissions, the net realizable value of the PeopleSoft offer was approximately $26,000,000. However, PeopleSoft did not contemplate the assumption of the Company's contingent liabilities. The letter also indicated that PeopleSoft would be willing to consider a merger or tender offer structure. On September 10, 1997, Mr. Marquis telephoned Brian Griggs ("Mr. Griggs") of Griggs Resource Group to inform him of the Board's decision to approve the Merger Agreement. On September 12, 1997, Mr. Griggs, in a letter to Mr. Marquis, reiterated PeopleSoft's interest in acquiring the Company in an all-cash merger transaction. Subsequent to that date, Mr. Griggs has had several conversations with members of the Company's management regarding certain liabilities of the Company. On October 2, 1997, Mr. Marquis and McReynolds met with Mr. Griggs and Deborah J. Oxendine, Director of Real Estate and Administrative Services for PeopleSoft ("Ms. Oxendine"), in a meeting initiated by Mr. Griggs, to discuss the terms of PeopleSoft's offer. During the meeting, Ms. Oxendine reiterated PeopleSoft's interest in acquiring the Company and inquired as to what type of offer would be necessary to merit the Advisory Board's consideration. Mr. Marquis informed Ms. Oxendine and Mr. Griggs that any offer at this point would have to be higher than the sum of RCBA's offer plus the $1.3 million termination fee that the Company would be required to pay to RCBA in the event that the Advisory Board approved an alternative offer. 10 16 On October 6, 1997, Mr. McReynolds telephoned Mr. Griggs. During the conversation, Mr. Griggs informed Mr. McReynolds that PeopleSoft had entered into an exclusive negotiations agreement with Alameda County and the City of Dublin with the intent of purchasing property in the City of Dublin (approximately four miles west of Triad Park). Mr. Griggs indicated that PeopleSoft would not be continuing further discussions with the Company at this time. CONTACTS AND NEGOTIATIONS WITH RCBA. On August 8, 1997, in a letter from Mr. Blum to Mr. Porter, a member of the Company's Advisory Board, RCBA advised the Company that it was working on an offer to purchase all of the assets or membership interests of the Company, and that it expected to submit a more detailed offer to the Company within a week. On August 11, 1997, RCBA, in a letter from Mr. Blum to Mr. Porter, submitted a written proposal to the Company which indicated the material terms and conditions upon which RCBA would be willing to proceed in an acquisition of all of the assets or stock of the Company. In this letter, RCBA indicated it would be willing to purchase all of the outstanding Shares at a price of $1.20 per Share, inclusive of the debt on the Property. On August 12, 1997, the Company, in a letter from Mr. Porter to Mr. Blum, informed RCBA that the proposed terms were inadequate but that the Company would be interested in continuing discussions regarding a potential acquisition. In the letter, Mr. Porter pointed out that any transaction would have to contemplate RCBA assuming all of the Company's liabilities and, because of Mr. Blum's prior association with the Company as a member of the Board of Directors of Management Corp. (but not as a member of the Advisory Board), would have to include a mechanism whereby the Company could consider other offers that may be more favorable to the Company's shareholders. In its Schedule 13D filed with the Commission on August 14, 1997 (the "RCBA Schedule 13D"), RCBA confirmed the above contacts between RCBA and the Company and indicated that it was considering a response to the Company's letter of August 12, 1997. On August 15, 1997, the Advisory Board held a telephonic board meeting at which all Advisory Board members were present. The Advisory Board reviewed RCBA's proposal of August 11, and generally discussed the manner in which the Company should proceed in negotiating the proposed transaction. Later that same day, RCBA, in a letter from Mr. Blum to Mr. Porter delivered via facsimile, increased its offer price to $1.30 per Share. RCBA indicated that its offer was contingent upon completion of customary due diligence, including an engineering study of the Company's properties and environmental review. On August 18, 1997, the Advisory Board held a telephonic board meeting at which all Advisory Board members were present to consider RCBA's latest offer. Mr. Porter was instructed to further negotiate with RCBA in an attempt to obtain a price above $1.30 per Share. On August 18, 1997, Mr. Porter telephoned Mr. Blum to further negotiate the price at which RCBA was willing to purchase the Shares. In the course of the conversation, Mr. Blum agreed to a price of $1.32 per Share, the equivalent of a net purchase price of $26,014,722 since RCBA agreed to assume all of the Company's actual and contingent liabilities subject to negotiation of definitive documentation and other standard conditions. On August 25, 1997, Murray A. Indick, Managing Director and General Counsel of RCBA ("Mr. Indick") delivered to McCutchen, Doyle, Brown & Enersen, LLP, the Company's outside legal counsel ("McCutchen"), a draft merger agreement which contemplated a transaction whereby the Acquisition LLC would acquire the outstanding Shares for $1.32 per Share in cash. On August 29, 1997, Mr. Indick, Robert Zerbst, Managing Director of Westmark Realty Advisors LLC ("Mr. Zerbst"), Rick Mariano, an employee of RCBA ("Mr. Mariano"), Mr. McReynolds, Mr. Marquis, Patrick J. Kernan, legal counsel to the Company ("Mr. Kernan") and representatives of McCutchen met in McCutchen's offices in San Francisco, California to discuss the draft merger agreement. The parties discussed the structure of the proposed transaction and certain provisions contained in the draft merger agreement. Mr. Marquis disclosed that the Company had received two other proposals regarding the Property and 11 17 suggested that perhaps a tender offer would be the best structure for the proposed transaction. Mr. Indick indicated that RCBA was committed to proceeding with the transaction under a cash-out merger format. The parties also discussed certain provisions of the lease under which CCI/Triad leases the Headquarters from the Company. During these discussions pertaining to the CCI/Triad lease, Mr. McReynolds and Mr. Kernan, both of whom are employees of CCI/Triad, excused themselves from the meeting. Mr. Indick also submitted comments to the draft merger agreement. On September 5, 1997 Mr. Indick, Mr. Zerbst, Mr. Mariano, Mr. McReynolds, Mr. Marquis, Mr. Kernan and representatives of McCutchen again met in McCutchen's offices. Mr. Marquis disclosed that the Company was expecting to receive additional offers for the Property. The parties then negotiated specific provisions contained in the draft merger agreement, including those related to a termination fee and payment of the Company's transaction expenses. At the end of the meeting, the parties had agreed on all provisions in the draft merger agreement. On September 8, 1997, at a meeting of the Company's Advisory Board that included all members in attendance (Messrs. Porter, Stevens, Marquis and Martin W. Inderbitzen), and was also attended by Mr. Kernan, Mr. McReynolds and representatives of McCutchen, the parties discussed recent events, including a review of all proposals received by the Company to date. The Advisory Board considered the validity of each offer and the reputations of each potential acquiror, and also considered asking RCBA for a reduced termination fee in exchange for approving the draft merger agreement. The Advisory Board rejected Everest's offer because the offering price was far less than that offered by RCBA. The Advisory Board rejected both offers from TVOB because neither offer considered assuming all of the Company's contingent liabilities and because neither offer called for the entire purchase price to be paid up front at the time of the transaction's closing. In addition, the Advisory Board members expressed concerns about the ability of TVOB to fund the potential transaction. The Advisory Board also noted that TVOB had undertaken no due diligence. The Advisory Board rejected the offer from Lincoln because it was not in definitive form and because it did not contemplate assumption of the Company's current liabilities. In addition, the Lincoln offer was in the form of an asset sale and therefore did not contemplate assumption of the Company's contingent liabilities. As a result of not assuming any of the Company's liabilities, the Advisory Board concluded that the value of the Lincoln offer was significantly less than the proposal from RCBA. The Advisory Board rejected the offer from Griggs Resource Group because it was in preliminary form and was first submitted only minutes before the meeting. Additionally, the Advisory Board concluded that this offer did not appear to equal or exceed the value of the RCBA proposal since PeopleSoft would not be assuming the existing mortgage or the Company's contingent liabilties. Furthermore, any acquisition would be delayed for up to 60 days while PeopleSoft conducted due diligence. In rejecting these offers, the Advisory Board noted that any of the offerors could submit a more competitive offer at any time. The Advisory Board ultimately authorized Mr. Marquis and Mr. Edward S. Merrill ("Mr. Merrill") of McCutchen to contact Mr. Indick and propose that RCBA drop its request for an environmental due diligence contingency in exchange for which the Advisory Board would approve the draft merger agreement. The members of the Advisory Board concluded that a transaction in this form with RCBA offered significantly more value than the proposals from the other potential acquirors and consequently did not pursue negotiations with the other parties at that time. Mr. Marquis and Mr. Merrill telephoned Mr. Indick and advised him of the Advisory Board's proposal. Later in the evening on September 8, 1997, Mr. Indick telephoned Mr. Marquis and Mr. Merrill to inform them that RCBA had accepted the Advisory Board's proposal. Representatives of McCutchen and Mr. Indick then negotiated the remainder of the minor terms of the definitive Merger Agreement, and the Merger Agreement was executed on September 9, 1997. 12 18 PURPOSE AND STRUCTURE OF THE MERGER The primary benefit of the Merger to the Company's shareholders is the opportunity to sell all of their Shares at a price which represents a substantial premium over trading prices in effect immediately prior to the filing of the RCBA Schedule 13D, which disclosed RCBA's interest in acquiring the Company. The structure of the transaction as a cash merger provides a cash payment at a premium price to all holders of outstanding Shares and ensures the acquisition by the Acquisition LLC of all the outstanding Shares of the Company. The primary reason for the Company entering into the Merger Agreement is the Advisory Board's belief that the Merger is the most effective means of achieving the purpose of liquidating the shareholders' investment in a reasonable time at a reasonable price. The Advisory Board also believes that since RCBA is willing to assume the contingent liabilities of the Company, the Merger is the most advantageous transaction for the Company's shareholders, as opposed to an asset sale. The Company is obligated to indemnify CCI/Triad for certain taxes arising from, among other things, any transfer of the Property to the Company (see "THE COMPANY -- Properties of the Company"). Due to this indemnification obligation, the Company ordinarily would not be able to make final distributions to shareholders until after CCI/Triad's audit was complete, a process that could last up to three years, not including extensions. Instead, RCBA is prepared to assume all liabilities, contingent or otherwise, of the Company in conjunction with the Merger. As a result, the Company's shareholders will receive their proceeds shortly after the consummation of the Merger without any requirement to hold back contingency reserves. In addition, the Company is currently obligated to undertake approximately an additional $7,000,000 in improvements on the Property. The City of Livermore has indicated that it is willing to reimburse the Company for improvements undertaken and paid for by the Company by means of bond financings. Historically, the City of Livermore has fulfilled such reimbursement commitments to Triad. However, if the City of Livermore is unsuccessful in completing a bond offering, the Company would not receive any reimbursement for such improvements. Further, there is a significant chance the cost of the improvements undertaken by the Company will exceed the amount of the bond financings and the Company would be responsible for paying any such cost overruns. Again, RCBA is prepared to assume this potential liability of the Company in conjunction with the Merger, so the Company's shareholders will receive their full proceeds shortly after the consummation of the Merger. The Advisory Board also believes it significant that by entering into the Merger at this time the Company avoids ongoing operating expenses such as taxes (which are currently in excess of $1 million annually) and the costs of ongoing reporting requirements, including those related to securities filings made with the Commission. The Advisory Board believes that the Merger is the best available opportunity to maximize shareholder value at the present time. The $1.32 per share price to be received by the shareholders represents a premium of approximately 54% over the reported average closing price of the Shares for all trades reported during the period prior to the filing of the RCBA Schedule 13D. RCBA's purpose and reasons for engaging in the transaction contemplated by the Merger Agreement is to obtain ownership of the Company, thereby becoming entitled to the benefits of ownership including management and investment discretion with regard to the future of the real estate assets of the Company. This includes execution of a business plan that combines strategic undeveloped lots dispositions and developments of other lots for the Company's own account or for third parties, depending on market conditions. RCBA will receive the benefits, if any, of its decisions and will also bear the risk of loss. RECOMMENDATION OF THE COMPANY'S ADVISORY BOARD On September 8, 1997, the Company's Advisory Board, by unanimous vote, at a special board meeting held on that date, determined that the transactions contemplated by the Merger are fair from a financial point of view to and in the best interests of the shareholders of the Company other than (i) affiliates of the Company and (ii) RCBA and its affiliates (the "Unaffiliated Shareholders"), approved the Merger Agreement and resolved to recommend that the Company's shareholders approve the Merger Agreement. 13 19 In determining to approve and adopt the Merger Agreement, and in determining the fairness of the terms of the Merger to the Unaffiliated Shareholders, the Advisory Board considered the following factors, each of which, in the view of the Advisory Board, supported the determination to recommend the Merger: (i) the going concern value of the Company (as reflected in part by its historical operating results) and the net book value and liquidation value of the Company, each of which, on a per Share basis, was projected to be less than the $1.32 per Share being offered by RCBA; (ii) the historical market prices of the Company's Shares, particularly the fact that the Merger will enable the shareholders of the Company to realize a significant premium over the prices at which the Shares traded prior to the filing of the RCBA Schedule 13D; (iii) the conclusion contained in the Sedway Report that following a three-and-one-half year disposition strategy could result in proceeds with a net present value of $25.6 million and the fact that the Merger would result in proceeds of over $26 million (inclusive of Shares beneficially held by RCBA); (iv) the terms and conditions of the Merger Agreement, including the provision negotiated by the Company which allowed the Company to consider and respond to unsolicited offers after the date of the Merger Agreement; the fact that the Company may terminate the Merger Agreement in certain circumstances; the circumstances under which the termination fee is payable; and the relatively few substantive closing conditions; (v) the fact that, as discussed above in "-- Purpose and Structure of the Merger," RCBA is willing to assume all contingent liabilities of the Company, including those related to tax matters and construction of improvements on the Property; (vi) RCBA's positive reputation in the financial industry for its ability to fund and close transactions in which it has been involved; and (vii) the fact that the offer from RCBA, when considered on a net basis, was higher than the offers received from the other potential acquirors and that none of the other offers considered the assumption of the Company's liabilities, contingent or otherwise. In considering the fairness of the Merger to Unaffiliated Shareholders, the Advisory Board gave primary consideration to factors (i) through (v) above. It also gave consideration to factors (vi) and (vii) in determining whether to approve the Merger. The Company's Advisory Board did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the specific factors considered in reaching its conclusions. The executive officers of the Company have made no recommendation with respect to the Merger. If the Merger is not approved by the Company's shareholders and the Merger does not occur, the Company will continue its current operations as an independent company. However, for the reasons discussed above, it is possible that the Company would seek a business combination with another company. SEDWAY REPORT Shortly after its formation, the Company began considering various methods in order to effectuate an orderly disposition of the Property. Accordingly, on May 22, 1997, the Company's Advisory Board authorized Martin W. Inderbitzen, a member of the Advisory Board, and Mr. McReynolds to engage Sedway Group or a comparable firm for the purpose of preparing a report exploring various disposition strategies. On July 22, 1997, Sedway Group delivered its written report to the Company's Advisory Board (the "Sedway Report"). The Sedway Report does not relate to the Merger Consideration or the fairness of the Merger Consideration, or the fairness of the Merger to the Company, RCBA or shareholders who are not affiliates. However, the Sedway Report does relate to the value of the Company's real estate assets in a liquidation situation, and as such, was given strong consideration by the Company's Advisory Board during its decision making process. A copy of the Sedway Report, which sets forth the assumptions made and matters considered in, and limits on the review undertaken, is available for inspection and copying at the principal executive 14 20 offices of the Company during regular business hours by any interested shareholder or such shareholder's representative who has been so designated in writing. In preparing its report, Sedway Group met with Company management and reviewed the current status of Triad Park, inspected Triad Park and its environs, read various documents related to Triad Park, including the listing agreement with Grubb & Ellis and the lease pertaining to the Triad Park building complex, held telephone interviews with members of the Company's Advisory Board, held telephone discussions with brokers, developers, and land owners active in the Livermore area and reviewed market information provided by Grubb & Ellis. Sedway Group was asked to provide a strategy to maximize the value of the Company's real estate assets. The Sedway Report contains a history of Triad Park and a summary of the current situation at Triad Park. The Sedway Report also contains a market overview, including current market conditions for retail, office and R&D properties. The Sedway Report recommends an "aggressive but orderly real estate disposition program" including certain improvements to the Triad Park area and a multi-faceted marketing program. According to the Sedway Report, the proposed strategy should "result in proceeds with a net present value of $25.6 million." The Sedway Report also includes a presentation of the financial analysis of the disposition strategy and assumptions and limiting conditions. GENERAL. The summary set forth above does not purport to be a complete description of the analyses performed by Sedway Group. The preparation of a report similar to the Sedway Report involves various determinations and assumptions and therefore is not readily susceptible to summary description. Accordingly, Sedway Group believes that its report must be considered as a whole and that selected portions of its report and the factors considered by it, without considering all analyses and factors, could create an incomplete view of the evaluation process underlying its report. In preparing its report, Sedway Report made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. Sedway Group is a nationally recognized full-service real estate and urban economics consulting firm engaged, among other things, in market research and analysis, real estate strategy and asset management (including acquisition and disposition strategies), financial analysis and valuation services. Sedway Group has substantial experience in major land uses (residential, retail, office, industrial, hotel and mixed use) and in specialized areas such as entertainment retail, public/private transactions and economic revitalization. It was the opinion of the Advisory Board that Sedway Group was very familiar and experienced with economic analysis in the Tri-Valley region of Northern California. At the time that the Advisory Board was seeking a firm to undertake the analysis, Sedway Group was conducting similar analyses in the City of Livermore and in the Tri-Valley area. Members of the Advisory Board were also personally familiar with Sedway Group, and all agreed that Sedway Group had a positive business reputation in the community. All of these factors were considered by the Advisory Board when it chose Sedway Group to prepare the economic report. The Company has paid Sedway Group approximately $15,000 for preparing the Sedway Report. No portion of the fee payable to Sedway Group is contingent upon consummation of the Merger or similar type of transaction. PERSPECTIVE OF RCBA ON THE MERGER The determination of the Merger Consideration resulted from extensive arm's-length negotiation between the Company and RCBA and their respective representatives. See "-- Background of the Merger." At the conclusion of the negotiation process, RCBA offered to acquire the Company for a price of $1.32 per Share. In determining such price, RCBA analyzed the real estate market in Northern California generally, and the development of the Company owned sites in particular, taking into account current market conditions. RCBA did not undertake any formal or informal evaluation of its own as to the fairness of the Merger Consideration to the Company shareholders. 15 21 PLANS FOR THE COMPANY AFTER THE MERGER Effective upon consummation of the Merger, the manager of the Acquisition LLC will be the initial manager of the Surviving Company. The Surviving Company will not have an Advisory Board. Except as otherwise indicated in this Proxy Statement, RCBA does not have any other present plans or proposals which relate to or would result in an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, a sale or transfer of a material amount of assets of the Company or any of its subsidiaries or any material change in the Company's capitalization or any other material changes in the Company's corporate structure or business or the composition of the Company's management. CERTAIN EFFECTS OF THE MERGER As a result of the Merger, the entire equity interest of the Company will be owned by RCBA, and the current shareholders will have no continuing interest in the Company. Therefore, following the Merger, the shareholders of the Company other than RCBA will no longer benefit from any increases in the value of the Company and will no longer bear the risk of any decreases in the value of the Company. Following the Merger, RCBA and its affiliates will own 100% of the Company and will have complete control over the management and conduct of the Company's business, all income generated by the Company and any future increase in the Company's value. Similarly, RCBA will also bear the risk of any losses incurred in the operation of the Company and any decrease in the value of the Company. The Shares are currently registered as a class of securities under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are not listed on a national securities exchange or quoted on the Nasdaq National Market and there are fewer than 300 record holders of the Shares. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its shareholders and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing trading provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with shareholders' meetings pursuant to Section 14(a), and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Company. It is the present intention of RCBA to cause the Company to make an application for the termination of the registration of the Shares under the Exchange Act as soon as practicable after the Effective Time of the Merger. RELATIONSHIP BETWEEN THE COMPANY AND RCBA NO INTERCOMPANY BUSINESS RELATIONSHIP. Not including the Merger Agreement, the transactions contemplated thereby, or as otherwise disclosed in this Proxy Statement, there have been no business relationships between the Company and either RCBA or the Acquisition LLC. INTERESTS OF CERTAIN PERSONS IN THE MERGER In considering the recommendation of the Advisory Board of the Company with respect to the Merger Agreement and the transactions contemplated thereby, shareholders should be aware that certain members of the Advisory Board and management of the Company have certain interests in the Merger in addition to the interests of shareholders of the Company generally. In connection with the Advisory Board's determination that the Merger is fair to the Company's shareholders (excluding RCBA and its affiliates), the Advisory Board carefully considered conflict of interest issues relating to the matters described below. INDEPENDENT CONTRACTOR SERVICES AGREEMENT. Larry D. McReynolds, President of the Company, has an Independent Contractor Services Agreement with the Company, under which he is currently paid an annual base salary of approximately $108,000, of which the Company is responsible for 50%. Mr. McReynold's independent contractor agreement provides for bonus compensation in the event of certain "changes in control" of the Company, including a merger involving the Company. Upon consummation of the Merger, 16 22 Mr. McReynolds is entitled to receive a bonus of less than 1% of the net value paid to the Company's shareholders, which is estimated to be approximately $200,000. INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Merger Agreement provides that, for a period of not less than six years following the Effective Time, the Surviving Company will maintain in effect all rights of indemnification of the officers, directors or employees of the Company provided in its limited liability company agreement or bylaws. RCBA has also agreed to allow the Company, with the Acquisition LLC's prior consent (such consent is not required if the cost does not exceed $110,000), to purchase additional policies of directors' and officers' liability insurance of at least the same coverage as currently maintained by the Company, such policies to be pre-paid and in effect for a period of six years from the Effective Time. SOURCES AND USES OF FUNDS MERGER CONSIDERATION, FEES AND EXPENSES. RCBA estimates that the total consideration payable to shareholders other than RCBA and its affiliates upon consummation of the Merger will be approximately $23,359,000. The estimated fees and expenses incurred or to be incurred by RCBA in connection with the Merger are legal fees and expenses of $75,000 and miscellaneous fees of $25,000. RCBA expects to use working capital funds to make such payments and pay such fees and expenses. The estimated fees and expenses incurred or to be incurred by the Company in connection with the Merger, which will be paid by RCBA or the Acquisition LLC, are approximately as follows. Legal fees and expenses................................... $ 100,000 Printing and mailing fees................................. 10,000 Commission filing fee..................................... 4,672 Disbursing Agent fees..................................... 7,000 Miscellaneous fees........................................ 5,000 Total Fees and Expenses................................... $ 126,672
Certain of the Company's officers will receive certain payments if the Merger is consummated. See "-- Interest of Certain Persons in the Merger." SOLICITATION FEES AND EXPENSES. Neither RCBA nor the Company will pay any fees or commissions to any broker or dealer or any other person for soliciting Company shareholders with respect to the Merger. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by RCBA or the Acquisition LLC for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. CERTAIN FEDERAL INCOME TAX CONSEQUENCES Under currently existing provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury Regulations promulgated thereunder, applicable judicial decisions and administrative rulings, all of which are subject to change, the federal income tax consequences described below are expected to arise in connection with the Merger. Due to the complexity of the Code, the following discussion is limited to the material federal income tax aspects of the Merger for a Company shareholder who is a citizen or resident of the United States. The general tax principles discussed below are subject to retroactive changes that may result from subsequent amendments to the Code. The following discussion does not address potential foreign, state, local and other tax consequences, nor does it address taxpayers subject to special treatment under the federal income tax laws, such as insurance companies, tax-exempt organizations, regulated investment companies, S corporations and taxpayers subject to the alternative minimum tax. Neither the Company nor RCBA has requested either the Internal Revenue Service or counsel to rule or issue an opinion on the federal income tax consequences of the Merger. ALL SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, FOREIGN, STATE AND LOCAL TAX CONSEQUENCES OF THE DISPOSITION OF THEIR SHARES IN THE MERGER. 17 23 Merger as Sale of Shares Although the transaction will be cast in the form of the merger of the Company with Acquisition LLC, for federal income tax purposes it is anticipated that the Merger will be treated as a taxable sale of Shares by each holder of Shares. Accordingly, each holder of Shares will recognize gain or loss by reason of the consummation of the Merger. Measure of Gain or Loss A shareholder's gain or loss in the Merger will be equal to the difference between the consideration received in the Merger and the shareholder's adjusted basis in the shareholder's Shares. The consideration received will be equal to the sum of the cash received plus the shareholder's allocable share of the Company's liabilities. A shareholder's initial basis in the Shares will be the cost of the Shares plus the shareholder's allocable share of the Company's liabilities. For shares received in the distribution from Triad, the shareholder's "cost" of the Shares will be the fair market value of the Shares at the time of the distribution. The basis of the Shares will be increased by the shareholder's share of Company income and by any increases in the shareholder's share of Company liabilities. The basis will be reduced (but not below zero) by distributions from the Company, by the shareholder's share of Company losses, by decreases in the shareholder's share of Company liabilities and by the shareholder's share of expenditures of the Company that are neither deductible in computing taxable income nor required to be capitalized. It will not be possible to determine the precise amount of gain or loss on the sale of the Shares until after the Effective Time, because the calculation of gain or loss requires a determination of the Company's liabilities as of the Effective Time and the shareholder's share of the Company's income, gain, loss and deduction for the taxable year in which the Merger occurs. Following the Effective Time, the Company's books will be closed and the shareholders will receive the information they require to determine the adjusted basis of their Shares and the consideration received in the Merger. Character of Gain or Loss The Shares represent interests in the Company, which is taxed as a partnership for federal income tax purposes. Generally, gain or loss on the sale of a partnership interest is capital gain or loss under Section 741 of the Code. An exception to this general rule is provided in Section 751 of the Code, which treats as ordinary income or ordinary loss any gain or loss on unrealized receivables or inventory items (including real property held for sale to customers). A substantial portion of the Property is land held by the Company for sale to customers and any gain or loss attributable to such land will be ordinary income or loss to the shareholders in the Merger. Although the precise amount cannot be calculated until after the Effective Time, it is estimated that each shareholder who received Shares from Triad in the distribution will recognize approximately $ ordinary gain per Share in the Merger. The balance of gain, if any, will be capital gain. If a shareholder who is an individual (and any individual who is a partner in a partnership that is a shareholder) has held the Shares for more than 12 months but less than 18 months as of the Effective Time, any capital gain will be long term capital gain and will be subject to federal tax at not more than a 28% tax rate. If the Shares have been held for more than 18 months as of the Effective Time, any capital gain will be subject to federal tax at not more than a 20% tax rate. However, it is not anticipated that any of the Shares will have been held for 18 months as of the Effective Time and it is possible that none of the Shares will have been held for more than 12 months at the Effective Time. Any capital gain on Shares held for 12 months or less will be short term capital gain and will be subject to tax at the rates applicable to ordinary income. Company Income or Loss Prior to the Merger Each shareholder will receive an allocation of the shareholder's share of the Company's income or loss for the periods prior to the Merger. Shareholders should review the discussion in the Company's Information 18 24 Statement mailed to shareholders on or about August 21, 1997 under "Tax Considerations" for a summary of the federal income tax consequences of the Company's operations. If the Company has taxable income during the periods prior to the Merger, it is not anticipated that the Company will make any distributions to shareholders and shareholders may be required to pay federal income taxes on Company income. Reporting and Withholding Cash payments made pursuant to the Merger will be reported to the extent required by the Code to shareholders of the Company and the Internal Revenue Service. The payments will ordinarily not be subject to withholding of federal income tax. However, backup withholding of such tax at a rate of 31% may apply to certain shareholders by reason of the events specified in Section 3406 of the Code and related Treasury Regulations, which include failure of a shareholder to supply the Company or its agent with the shareholder's taxpayer identification number. Accordingly, each Company shareholder will be asked to provide the shareholder's correct taxpayer identification number on a Substitute Form W-9 which is to be included in the letter of transmittal to be sent to shareholders relating to their Shares. Withholding may also apply to Company shareholders who are otherwise exempt from such withholding, such as a foreign person, if that person fails to properly document its status as an exempt recipient. REDEMPTIONS OF SHARES In August, 1997, as part of the consummation of a transaction completed as a part of the formation of the Company, the Management Corp. paid its promissory note due the Company in full, Messrs. Porter and Stevens paid their respective promissory notes due the Management Corp. in full, and the Company redeemed 99,536 Shares from each of Mr. Porter and Mr. Stevens at a price of $0.72 per Share. The net effect of the transaction was to reduce the outstanding Shares of the Company to 19,708,123, the same as the number of Triad Systems Corporation shares which existed immediately prior to formation of the Company and to reduce the number of Shares beneficially owned by Mr. Stevens and Mr. Porter to the same number of Shares they owned in Triad Systems Corporation immediately prior to formation of the Company. REGULATORY APPROVALS Although no particular regulatory approval is required in connection with the proposed Merger, state Attorneys General and private parties may bring legal actions under the federal or state antitrust laws under certain circumstances. There can be no assurance that a challenge to the proposed Merger on antitrust grounds will not be made or of the result if such a challenge is made. 19 25 THE MERGER AGREEMENT The information in this summary is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is attached as Exhibit A to this Proxy Statement. GENERAL The Company, the Acquisition LLC and RCBA entered into the Merger Agreement effective September 9, 1997. If the shareholders of the Company approve the Merger Agreement, the Acquisition LLC will be merged with and into the Company, with the result that the separate corporate existence of the Acquisition LLC will then cease. The Company will be the Surviving Company and will be an affiliate of RCBA. At the Effective Time, the Shares will be converted automatically into the right to receive cash, as described below. See "-- Consideration to be Received by Shareholders." The Shares will no longer be listed or traded in any public market, and the registration of the Shares under the Exchange Act will be terminated. EFFECTIVE TIME If the Merger Agreement is adopted by the majority vote of the Company's shareholders, the Merger will be consummated and become effective upon the acceptance for record of the Certificate of Merger by the Delaware Secretary of State on a date as soon as practicable after conditions to the Merger are satisfied (or waived to the extent permitted), or such other date agreed on by the parties. It is currently contemplated that the Effective Time will occur on or about December 31, 1997. There can be no assurance that all conditions to the Merger will be satisfied. See "-- Conditions to Consummation of the Merger." CONSIDERATION TO BE RECEIVED BY SHAREHOLDERS In connection with the Merger, each Share outstanding immediately prior to the Effective Time will be converted into the right to receive $1.32 in cash, without interest (the cash consideration per share to be paid to the Company's shareholders in the Merger being sometimes referred to herein as the "Merger Consideration")." PAYMENT FOR SHARES Payment for Shares. First Trust of California, National Association (the "Disbursing Agent") will act as the paying agent for payment of the Merger Consideration to the holders of the Shares. Instructions with regard to the surrender of certificates formerly representing Shares, together with the letter of transmittal to be used for that purpose, will be mailed to shareholders as soon as practicable after the Effective Time. As soon as practicable following receipt from the shareholder of a duly executed letter of transmittal, together with certificates formerly representing Shares and any other items specified by the letter of transmittal, the Disbursing Agent will pay the Merger Consideration to the shareholder, by check or draft. After the Effective Time, the holder of a certificate formerly representing Shares will cease to have any rights as a shareholder of the Company, and the holder's sole right will be to receive the Merger Consideration with respect to the Shares. If payment is to be made to a person other than the person in whose name the surrendered certificate is registered, it will be a condition of payment that the certificates so surrendered be properly endorsed or otherwise in proper form for transfer and that the person requesting the payment shall pay any transfer or other taxes required by reason of the payment or establish to the satisfaction of the Surviving Company that the taxes have been paid or are not applicable. No transfer of Shares outstanding immediately prior to the Effective Time will be made on the stock transfer books of the Surviving Company after the Effective Time. To the extent permitted by law, the appointment of the Disbursing Agent may be terminated at any time by RCBA upon notice to the Disbursing Agent, or by the Disbursing Agent upon 30 days notice to RCBA. Any portion of the Merger Consideration remaining undistributed one year after the Effective Time will be returned to the Surviving Company, and any holders of unsurrendered Share certificates may surrender them 20 26 to the Surviving Company and (subject to abandoned property, escheat or similar laws) receive the Merger Consideration to which they are entitled. SHAREHOLDERS OF THE COMPANY SHOULD NOT FORWARD THEIR SHARE CERTIFICATES TO THE DISBURSING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND SHOULD NOT RETURN THEIR SHARE CERTIFICATES WITH THE ENCLOSED PROXY. No Interest on Payment Amounts. In no event will holders of Shares be entitled to receive payment of any interest on the Merger Consideration. OPERATIONS OF THE COMPANY PRIOR TO THE MERGER The Company has agreed that, prior to the Effective Time, the business of the Company will be conducted in accordance with certain restrictions set forth in the Merger Agreement. Among other things, the Company has agreed that, except as the Company and the Acquisition LLC may otherwise agree, the Company will operate only in the ordinary course of business, and the Company will not do any of the following: (a) take any action which would or could reasonably be expected to jeopardize any of its material contracts or its good standing with any applicable governmental agency with jurisdiction over the Company, or (b) declare, set aside or pay any dividend or other distribution in respect of its membership interests, whether in securities, cash, or other property, redeem, repurchase or otherwise acquire any of its outstanding Shares, or issue any membership interests or any right to acquire or convert into membership interests. In addition, the Company has agreed that until the earlier of the termination of the Merger Agreement or the Effective Time, neither the Company nor any of its employees or representatives will take any action to solicit, initiate or encourage the submission of any Acquisition Proposal (as defined below) or enter into any agreement for or relating to any Acquisition Proposal (an "Acquisition Agreement"). Notwithstanding the foregoing, at any time prior to obtaining the approval of the Company shareholders to the Merger, the Company may, in response to an unsolicited written request for information made by a third party to the Company, provide information to or have discussions or negotiations with the third party if the Advisory Board of the Company, after having considered the advice of outside counsel, has determined in good faith that it is the fiduciary duty under applicable law of such Advisory Board members to do so. An Acquisition Proposal is defined in the Merger Agreement as a proposal for any (i) merger, consolidation or similar transaction involving the Company, (ii) sale, lease or other disposition directly or indirectly by merger, consolidation, share exchange or otherwise of either (a) assets of the Company representing 75% or more of the consolidated assets of the Company in one transaction, or (b) all or substantially all of the undeveloped Property on one transaction (but not including solicitation of sales of individual parcels of the undeveloped Property), (iii) issuance, or other acquisition or disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 20% or more of the voting power of the Company, or (iv) transaction in which any person or group of persons would acquire beneficial ownership or the right to acquire beneficial ownership, or any group shall have been formed which beneficially owns or would own or would have the right to acquire beneficial ownership of 20% or more of the outstanding Shares, other than transactions contemplated by the Merger Agreement. CONDITIONS TO CONSUMMATION OF THE MERGER The Merger will occur only if the Merger Agreement is approved and adopted by majority vote of the holders of the Shares. Consummation of the Merger also is subject to the satisfaction of the following conditions specified in the Merger Agreement, unless the conditions are waived (to the extent waiver is permitted by law). The failure of any of these conditions to be satisfied, if not waived, would prevent consummation of the Merger. The obligations of the Acquisition LLC to consummate the Merger are subject to satisfaction of the following conditions: (i) the Merger shall have been approved by a majority vote of the shareholders of the Company, (ii) no temporary restraining order, preliminary or permanent injunction or other order of any court 21 27 or other judicial or administrative body of competent jurisdiction (each, an "Injunction") which prohibits or prevents the consummation of the Merger shall have been issued and remain in effect, (iii) the Company shall have performed in all material respects its agreements contained in the Merger Agreement required to be performed on or prior to the Effective Time, (iv) each of the representations and warranties of the Company contained in the Merger Agreement shall be true in all material respects when made on and as of the Effective Time, and (v) the Company shall have obtained all consents, appeals, releases or authorizations from, and shall have made all filings and registrations to or with, any person necessary to be obtained or made in order to consummate the transactions contemplated by the Merger Agreement. The obligations of Company to consummate the Merger are subject to satisfaction of the following conditions: (i) the Merger shall have been approved by a majority vote of the shareholders of the Company, (ii) no Injunction which prohibits or prevents the consummation of the Merger shall have been issued and remain in effect, (iii) the Acquisition LLC shall have performed in all material respects its agreements contained in the Merger Agreement required to be performed on or prior to the Effective Time, (iv) each of the representations and warranties of the Acquisition LLC contained in the Merger Agreement shall be true in all material respects when made on and as of the Effective Time, and (v) the Merger Consideration shall have been deposited with the Disbursing Agent with irrevocable instructions to exchange the Shares for the Merger Consideration in accordance with the terms of the Merger Agreement immediately upon notification by the Company and the Acquisition LLC of the Effective Time. TERMINATION The Merger Agreement may be terminated and the Merger abandoned at any time prior to the filing of Certificate of Merger with the Delaware Secretary of State whether before or after action by the Company's shareholders and without further approval by the Company's shareholders under any of the following circumstances: (i) by mutual consent of the Board of Directors of the Acquisition and the Company's Advisory Board; (ii) by either the Acquisition LLC or the Company, if the Merger shall have not been consummated on or before January 31, 1998; provided that this particular right to terminate shall not be available to any party whose failure to perform in any material respect any covenant under the Merger Agreement has been the cause of or resulted in whole or in part in the failure of the Merger to be consummated before January 31, 1998; (iii) by either the Acquisition LLC or the Company, if there shall be any Injunction or other order by any court which is final and nonappealable preventing the consummation of the Merger; (iv) by either the Acquisition LLC or the Company if the Company shareholders do not approve the Merger Agreement and the transactions contemplated thereby; or (v) by the Acquisition LLC if the Merger Agreement and the transactions contemplated thereby shall not have been submitted for approval by the Company's shareholders by January 31, 1998. In addition, the Merger Agreement may be terminated by (a) the Acquisition LLC, if the Advisory Board withdraws, modifies in a manner adverse to the Acquisition LLC, or refrains from making its recommendation concerning the Merger, or the Advisory Board shall have recommended to the Company shareholders any Acquisition Proposal or the Company shall have entered into an Acquisition Agreement, or, other than in connection with the Company's delivery of a Superior Proposal Notice (as defined below), the Advisory Board shall have resolved to do any of the foregoing, and (b) by the Company, if by a good faith vote, with the advice of outside legal counsel, in order to avoid breaching its fiduciary duties to Company shareholders under applicable law, (1) the Advisory Board has delivered to the Acquisition LLC a Superior Proposal Notice, (2) the Company has paid the Termination Fee (as defined below), and (3) five business days have passed since the Acquisition LLC received the Superior Proposal Notice. A "Superior Proposal Notice" is written notice advising the Acquisition LLC that the Advisory Board has received a Superior Proposal (as defined below) which the Advisory Board has authorized and intends to effect, specifying the material terms and conditions of such Superior Proposal and identifying the person making the Superior Proposal. A "Superior Proposal" is a definitive unconditioned agreement with a third party, with all due diligence investigations completed, to acquire, directly or indirectly, more than 50% of the membership interests of the Company, assets of the Company representing 75% or more of the real estate assets of the Company in one transaction (but not solicitation of sales of individual parcels of the Property) or all or 22 28 substantially all of the undeveloped Property in one transaction (but not solicitation of sales of individual parcels of the undeveloped Property), and otherwise on terms which the Advisory Board determines in its good faith judgment to be more favorable from a financial point of view to the Company shareholders than the Merger Agreement, the Merger and the transactions contemplated thereby and for which financing, to the extent required, is then committed. TERMINATION FEE The Merger Agreement requires the Company to pay the Acquisition LLC a termination fee of $1.3 million (the "Termination Fee") if the Board of Directors of the Company takes the action described in clause (b) above under the caption "-- Termination," (but only if the Company executes the agreement contemplating the Superior Proposal within three business days after the receipt by the Acquisition LLC of the Superior Proposal Notice) or the Merger Agreement is terminated by the Acquisition LLC for any of the reasons set forth in clauses (v) or (a) above under such caption. ACCOUNTING TREATMENT The Merger will be accounted for under the purchase method of accounting under which the total consideration paid in the Merger will be allocated among the Surviving Company's consolidated assets and liabilities based on the fair values of the assets acquired and liabilities assumed. RIGHTS OF DISSENTING SHAREHOLDERS No appraisal rights are provided for the Company shareholders under the Delaware limited liability company act or under the Company's limited liability company agreement. Neither the Company, RCBA or the Acquisition LLC will be voluntarily providing appraisal rights to the Company shareholders who object to the transactions contemplated by the Merger Agreement. Neither the Company nor RCBA is aware of any appraisal rights available to objecting shareholders under applicable law. 23 29 SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS SHARE OWNERSHIP The following table sets forth certain information, as of June 30, 1997, with respect to the beneficial ownership of Shares by (i) all persons known by the Company to beneficially own more than 5% of the outstanding Shares, (ii) each Advisory Board member of the Company, (iii) each executive officer of the Company, and (iv) all executive officers and directors of the Company as a group. For purposes of this table, beneficial ownership of securities is defined in accordance with the rules of the Commission and means generally the power to vote or dispose of securities, regardless of any economic interest therein. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment power with respect to the Shares indicated.
AMOUNT AND NATURE OF NAME AND ADDRESS OF BENEFICIAL OWNERSHIP BENEFICIAL OWNER OF SHARES PERCENT OF CLASS(1) - -------------------------------------------------------- -------------------- ------------------- Richard C. Blum......................................... 2,012,158(2) 10.2% 909 Montgomery Street, Suite 400 San Francisco, CA 94133 Manchester Securities Corp.............................. 1,914,760(3) 9.7% 712 Fifth Avenue New York, NY 10019 Farallon Capital Management, L.L.C...................... 1,569,900(4) 8.0% One Maritime Plaza, Suite 1325 San Francisco, CA 94111 Pioneering Management Corporation....................... 1,237,950 6.3% 60 State Street Boston, MA 02109 Gabelli Funds, Inc...................................... 1,031,200(5) 5.2% One Corporate Center Rye, New York 10580-1434 James R. Porter......................................... 828,664 4.2% 3055 Triad Drive Livermore, CA 94550 William W. Stevens...................................... 324,154(6) 1.6% 3055 Triad Drive Livermore, CA 94550 3055 Management Corp.................................... 199,072(7) 1.0% 3055 Triad Drive Livermore, CA 94550 Stanley F. Marquis...................................... 136,824 0.7% 3055 Triad Drive Livermore, CA 94550 Larry D. McReynolds..................................... 19,317 0.1% 3055 Triad Drive Livermore, CA 94550 Martin W. Inderbitzen................................... 0 0% 3055 Triad Drive Livermore, CA 94550 All Executive Officers and Advisory Board Members as a Group................................................. 1,508,031 7.7%
- --------------- (1) Except as indicated in the footnotes to this table, the persons named in the table have sole voting and investment power with respect to all Shares shown as beneficially owned by them, subject to community property laws, where applicable. (2) Richard C. Blum ("Mr. Blum") is a controlling person and Chairman of Richard C. Blum & Associates Inc. ("Inc."), which is the general partner of Richard C. Blum & Associates LP ("LP"). These Shares 24 30 are directly owned by three limited partnerships for which LP is the general partner (BK Capital Partners II, 111,111 Shares; BK Capital Partners III, 500,000 Shares; and BK Capital Partners IV, 1,387,047 Shares). Mr. Blum disclaims beneficial ownership of these securities except to the extent of his pecuniary interest thereof. (3) Manchester Securities Corp. is wholly-owned by Elliott Associates, L.P. ("Elliott"). Paul E. Singer ("Singer") and Braxton Associates, L.P., a New Jersey limited partnership, which is controlled by Singer, are the general partners of Elliott. (4) Includes 1,363,200 Shares held by Farallon Capital Partners, L.P. and 206,700 Shares held by Tinicum Partners, L.P. (5) Includes 205,000 Shares held by GAMCO Investors, Inc., 169,900 Shares held by Gabelli Performance Partnership L.P. and 656,300 Shares held by Gabelli Associates Fund. Mario J. Gabelli is the Chairman, Chief Executive Officer and Chief Investment Officer of Gabelli Funds, Inc. (6) Includes 324,154 Shares held as tenant-in-common with Virda J. Stevens. (7) In addition to the totals shown in the above table, Messrs. Porter and Stevens are deemed to be the beneficial owners of 199,072 Shares by virtue of their respective 50% equity ownership in 3055 Management Corp. TRANSACTIONS BY CERTAIN PERSONS IN THE SHARES No transactions in the Company's Shares were effected by any Advisory Board member or executive officer of the Company during the 60 day period preceding the date of this Proxy Statement. 25 31 MANAGEMENT OF THE COMPANY, RCBA AND THE ACQUISITION LLC Certain information concerning the directors and executive officers of the Company, RCBA and the Acquisition LLC is set forth below. Unless otherwise indicated, each such person is a citizen of the United States and the address of each such person is that of the Company, RCBA or the Acquisition LLC, as the case may be. Such addresses are set forth under the caption "SUMMARY -- The Company" and "-- RCBA." THE COMPANY The names, ages, principal occupations and employment history for the past five years of the members of the Advisory Board and executive officers of the Company, and the Board of Directors and executive officers of the Management Corp. are set forth below. James R. Porter, 61, has been a member of the Company's Advisory Board since the Company's inception in February, 1997, and has been a director and Vice President of the Management Corp. since its inception in February, 1997. He is Chairman of the Board of CCI/Triad. He was President and Chief Executive Officer of Triad from September, 1985 until its merger with Cooperative Computing, Inc. in February, 1997. He is also a director of Silicon Valley Bank, Brock International, Inc. and Cellular Technical Services, Inc. William W. Stevens, 65, has been a member of the Company's Advisory Board since the Company's inception in February, 1997, and has been a director and Chairman of the Management Corp. since its inception in February, 1997. He was Chairman of the Board of Triad from 1972 until its merger with Cooperative Computing, Inc. in February, 1997. He is the founder of Triad and was its President and Chief Executive Officer from its inception until September, 1985. Stanley F. Marquis, 54, has been a member of the Company's Advisory Board since the Company's inception in February, 1997. He was President of Triad Systems Financial Corporation from August, 1983 until June 30, 1997. Mr. Marquis was also Treasurer of Triad from September, 1987 until June 30, 1997, and was its Vice President, Finance from December, 1994 until March, 1997. Martin W. Inderbitzen, 45, has been a member of the Company's Advisory Board since March, 1997. He has been a member of the State Bar of California since 1976, maintaining a private general civil law practice since that time. His practice has emphasized land use entitlement and zoning work almost exclusively for the past ten years. Larry D. McReynolds, 52, has been the President of the Company since its inception in February, 1997. He joined Triad in September, 1984 as its Manager, Facilities and became Manager, Real Estate and Facilities in June, 1992. In July, 1994 he also assumed responsibility for Triad's Office Services. He is currently employed in similar capacities for CCI/Triad. RCBA AND AFFILIATES RCBA. The names, principal occupations and employment history for the past five years of the directors and executive officers of RCBA are set forth below. Richard C. Blum, 62, has been President and Chairman of RCBA since 1994 and has been President and Chairman of RCBA Inc. since 1985. Nils Colin Lind, 41, has been Managing Director of RCBA since 1994 and has been Managing Director of RCBA Inc. since 1987. Mr. Lind is a Norwegian citizen. Jeffrey W. Ubben, 36, has been Managing Director of Investments of RCBA since April, 1995. Prior to that, he was a portfolio manager for Fidelity Management and Research Company from March, 1991 until March, 1995. 26 32 William C. Johnston, 44, has been Managing Director of Investments of RCBA since August, 1997. Prior to that, he was a Managing Director of APAC Holdings Ltd., a direct investment firm in Hong Kong, from 1991 until July, 1997. John C. Walker, 36, has been a Managing Director of RCBA since April, 1997. Prior to that, he held various positions with Pexco Holdings, Inc. from Ocotber, 1992 until March, 1997. Murray A. Indick, 38, has been Managing Director and General Counsel of RCBA since April, 1997. He was a partner with the law firm of Dechert Price & Rhoads from December, 1996 until March, 1997. He was with the law firm of Wilmer, Cutler & Pickering from November, 1985 to March, 1992 and from September, 1993 until November, 1996, and was Deputy General Counsel of First American Bankshares from April, 1992 until August, 1993. George F. Hamel, Jr., 40, has been Managing Director of Marketing of RCBA since April, 1996. He was Vice President of Private Capital Management, Inc. from March, 1992, until March, 1996. Marc T. Scholvinck, 40, has been Managing Director and Chief Financial Officer of RCBA since March, 1996. He was Vice President and Controller of RCBA from November, 1995 until March, 1996, and was Director of Finance and Controller of RCBA Inc. from January, 1994 until November, 1995, positions he also held with RCBA Inc. from August, 1991 until March, 1993. He was a self-employed financial consultant from March, 1993 until December, 1993 and served as Financial Director of Leopard Rock Hotel (Pty) Ltd. during that period. Thomas L. Kempner, 70, has been a Director of RCBA, Inc. since May, 1985. He has been Chairman of Loeb Partners Corp. since December, 1979. THE ACQUISITION LLC RCBA is the Managing Member of the Acquisition LLC. All information regarding the directors and executive officers of RCBA may be found in the preceding section. CERTAIN PROCEEDINGS During the past five years, neither the Company, RCBA, the Acquisition LLC, nor any of the individuals named above with respect to those entities has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors), or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding been or become subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws of finding any violation with respect to such laws. SHAREHOLDER PROPOSALS In the event the Merger is not consummated for any reason, proposals of shareholders intended to be presented at the 1998 annual meeting of shareholders must be received by the Company at its principal executive offices not later than December 15, 1997 for inclusion in the Company's proxy statement and form of proxy relating to that meeting. Shareholders should mail any proposals by certified mail return receipt requested. INDEPENDENT PUBLIC ACCOUNTANTS The financial statements of the Company as of September 30, 1996, incorporated by reference in this Proxy Statement, have been audited by Coopers & Lybrand LLP, independent public accountants. A representative of Coopers & Lybrand LLP will be at the Special Meeting to answer questions by shareholders and will have the opportunity to make a statement if so desired. 27 33 INFORMATION INCORPORATED BY REFERENCE The Company's Information Statement on Form 10-SB dated June 20, 1997, Quarterly Report on Form 10-QSB for the quarters ended June 30, 1997 and September 30, 1997 and its Current Reports on Form 8-K dated September 10, 1997 and September 15, 1997 as filed by the Company with the Commission (Commission File No. 0-22343), are incorporated by reference into this Proxy Statement. All documents filed by the Company pursuant to sections 13(a), 13(c), 14 or 15(d) or the Exchange Act after the date of this Proxy Statement and prior to the date of the Special Meeting shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such documents. Copies of the documents (without exhibits) incorporated by reference in this Proxy Statement are available without charge upon written or oral request from Larry D. McReynolds, President, Triad Park, LLC, 3055 Triad Drive, Livermore, California 94550 (telephone (510)449-0606). AVAILABLE INFORMATION The Company is subject to the informational reporting requirements of the Exchange Act and, in accordance therewith, files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information can be inspected and copies made at the public reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and the Commission's regional offices at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be obtained from the Public Reference Section of Commission at its Washington, D.C. address at prescribed rates. The Commission also maintains a Web site address, http://www.sec.gov. ADDITIONAL INFORMATION This Proxy Statement contains information disclosed pursuant to Rule 13e-3 under the Exchange Act, which governs so-called "going private" transactions by certain issuers and their affiliates. At the time the Company and RCBA entered into the Merger Agreement, RCBA owned 1,998,158 Shares which represents approximately 10.1% of the voting power of the Company's Shares. Although neither the Company nor RCBA believes that RCBA or the Acquisition LLC was than an "affiliate" of the Company within the meaning of Rule 13e-3(a)(1) of the Exchange Act, RCBA, the Acquisition LLC and the Company are filing a Rule 13e-3 Transaction Statement ("Schedule 13E-3") with the Commission to furnish information with respect to the transactions described herein. This Proxy Statement does not contain all of the information set forth in the Schedule 13E-3, parts of which are omitted in accordance with the regulations of the Commission. The Schedule 13E-3, and any amendments thereto, including exhibits filed as part thereof, will be available for inspection and copying at the offices of the Commission as set forth above. By Order of the Advisory Board James R. Porter Vice President, 3055 Management Corp., Manager of the Company Livermore, California November , 1997 28 34 TRIAD PARK, LLC 3055 TRIAD DRIVE LIVERMORE, CALIFORNIA 94550 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS DECEMBER , 1997 THIS PROXY IS SOLICITED ON BEHALF OF THE ADVISORY BOARD The undersigned appoints Larry D. McReynolds and Stanley F. Marquis, and each of them, with power to act without the other and with all the right of substitution in each, the proxies of the undersigned to vote all shares of Triad Park, LLC (the "Company") held by the undersigned on November , 1997, at the Special Meeting of Shareholders of the Company, to be held on December , 1997 at 9:00 a.m. local time at the offices of the Company, 3055 Triad Drive, Livermore, California 94550, and all adjournments thereof, with all powers the undersigned would possess if present in person. All previous proxies given with respect to the meeting are revoked. Receipt of Notice of Special Meeting of Shareholders and Proxy Statement is acknowledged by your execution of this proxy. Complete, sign, date, and return this proxy in the addressed envelope -- no postage required. Please mail promptly to save further solicitation expenses. 1. Approval of Merger Agreement, dated [ ] FOR THE MERGER [ ] AGAINST THE MERGER [ ] ABSTAIN September 9, 1997, by and between TPL Acquisition, LLC, Richard C. Blum & Associates, LP and Triad Park, LLC
(continued, and to be dated and signed, on other side) 35 2. To vote with discretionary authority upon such other matters as may come before the meeting. (Discretionary authority will be only exercised with respect to votes in favor or abstentions.) [ ] APPROVED [ ] WITHHELD THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS PROVIDED BY THE UNDERSIGNED SHAREHOLDER, THIS PROXY WILL BE VOTED "FOR" ITEM 1 LISTED HEREIN, UPON ALL OTHER MATTERS, THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST INTERESTS OF THE COMPANY. SIGNATURE(S) ----------------------------------- ----------------------------------- Dated: , 1997 INSTRUCTION: When shares are held by joint tenants, all joint tenants should sign. When signing as attorney, executor, administrator, trustee, custodian, or guardian, please give full title as such. If shares are held by a corporation, this proxy should be signed in full corporate name by its president or other authorized officer. If a partnership holds the shares subject to this proxy, an authorized person should sign in the name of such partnership. -----END PRIVACY-ENHANCED MESSAGE-----