Document:

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                                                                EXHIBIT 10.2

                          SECURITIES PURCHASE AGREEMENT

                                  By and Among

                             PRICE ENTERPRISES, INC.

                                       and

                     WARBURG, PINCUS EQUITY PARTNERS, L.P.,
              WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.,
              WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V.,
              WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V.

                           Dated as of March 21, 2001

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                                TABLE OF CONTENTS

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                                                                                                    PAGE
<S>                                                                                                 <C>
ARTICLE I.  DEFINITIONS...............................................................................5

Section 1.1.  Definitions.............................................................................5

ARTICLE II.  PURCHASE OF COMPANY PREFERRED SHARES; CLOSING ..........................................11

Section 2.1.  Authorization of Securities............................................................11
Section 2.2.  Securities Purchase....................................................................11
Section 2.3.  Additional Agreements and Closing Deliveries...........................................12

ARTICLE III.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....... .................................12

Section 3.1.  Existence; Good Standing; Authority; Compliance with Law...............................12
Section 3.2.  Authority Relative to Agreements; Approvals............................................13
Section 3.3.  Capitalization.........................................................................14
Section 3.4.  Subsidiaries...........................................................................15
Section 3.5.  Other Interests........................................................................15
Section 3.6.  No Conflicts; No Defaults; Required Filings and Consents...............................15
Section 3.7.  SEC Documents..........................................................................16
Section 3.8.  Litigation.............................................................................17
Section 3.9.  Absence of Certain Changes.............................................................17
Section 3.10.  Undisclosed Liabilities...............................................................18
Section 3.11.  Taxes.................................................................................18
Section 3.12.  Books and Records.....................................................................20
Section 3.13.  Properties............................................................................20
Section 3.14.  Environmental Matters.................................................................25
Section 3.15.  Employee Benefit Plans................................................................27
Section 3.16.  Employee and Labor Matters............................................................28
Section 3.17.  Insurance.............................................................................29
Section 3.18.  No Brokers............................................................................29
Section 3.19.  Proxy Statement and Other Information.................................................30
Section 3.20.  Vote Required.........................................................................30
Section 3.21.  Opinion of Financial Advisor..........................................................30
Section 3.22.  Related Party Transactions............................................................30
Section 3.23.  Contracts and Commitments.............................................................31
Section 3.24.  Maryland Takeover Law.................................................................31
Section 3.25.  Intellectual Property.................................................................31
Section 3.26.  Investment Company....................................................................33
Section 3.27.  Full Disclosure.......................................................................33
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<S>                                                                                                <C>
ARTICLE IV.  REPRESENTATIONS AND WARRANTIES OF BUYER ...............................................33

Section 4.1.  Organization..........................................................................33
Section 4.2.  Due Authorization.....................................................................33
Section 4.3.  Conflicting Agreements and Other Matters..............................................33
Section 4.4.  Acquisition for Investment; Sophistication............................................34
Section 4.5.  REIT Qualification Matters............................................................34
Section 4.6.  Access to Information.................................................................34
Section 4.7.  Accuracy of Information...............................................................35

ARTICLE V.   COVENANTS RELATING TO CLOSINGS.........................................................35

Section 5.1.  Taking of Necessary Action............................................................35
Section 5.2.  Public Announcements..................................................................36
Section 5.3.  No Solicitation of Transactions.......................................................36
Section 5.4.  Notice of Breaches....................................................................38
Section 5.5.  Access to Information.................................................................38
Section 5.6.  Regulatory and Other Approvals........................................................38
Section 5.7.  Conduct of Business by the Company Prior to Closing...................................39
Section 5.8.  Environmental Assessments.............................................................42
Section 5.9.  Fulfillment of Conditions.............................................................42
Section 5.10. Confidentiality.......................................................................42

ARTICLE VI.  CERTAIN ADDITIONAL COVENANTS ..........................................................42

Section 6.1.  Resale................................................................................42
Section 6.2.  REIT Status...........................................................................43
Section 6.3.  Financial and Business Information....................................................43
Section 6.4.  Board Committees; Expenses............................................................43
Section 6.5.  Terms of Exchange Offer...............................................................43
Section 6.6.  Agreement to Vote Shares..............................................................43
Section 6.7.  REIT Certification....................................................................43
Section 6.8.  Additional Shares.....................................................................44

ARTICLE VII.  CONDITIONS TO CLOSING ................................................................44

Section 7.1.  Conditions of Purchase................................................................44
Section 7.2.  Conditions of Sale....................................................................46

ARTICLE VIII.  SURVIVAL; INDEMNIFICATION ...........................................................47

Section 8.1.  Survival of Representations and Warranties............................................47
Section 8.2.  Indemnification by the Company........................................................47
Section 8.3.  Indemnification by Buyer..............................................................48
Section 8.4.  Damages Threshold.....................................................................48
Section 8.5.  Third-Party Claims....................................................................48
Section 8.6.  REIT Indemnification..................................................................49
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<S>                                                                                                   <C>
ARTICLE IX.  TERMINATION                                                                            49

Section 9.1.  Termination...........................................................................49
Section 9.2.  Procedure and Effect of Termination...................................................50
Section 9.3.  Expenses and Taxes....................................................................51

ARTICLE X.  MISCELLANEOUS...........................................................................52

Section 10.1.  Counterparts.........................................................................52
Section 10.2.  Governing Law........................................................................52
Section 10.3.  Entire Agreement.....................................................................52
Section 10.4.  Notices..............................................................................52
Section 10.5.  Successors and Assigns...............................................................53
Section 10.6.  Headings.............................................................................53
Section 10.7.  Amendments and Waivers...............................................................53
Section 10.8.  Interpretation; Absence of Presumption...............................................53
Section 10.9.  Severability.........................................................................54
Section 10.10.  Further Assurances..................................................................54
Section 10.11.  Specific Performance................................................................54
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Exhibits

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<S>            <C>
Exhibit A      Purchase Price
Exhibit B      Price Voting Stockholders Agreement
Exhibit C      Registration Rights Agreement
Exhibit D      Form of Warrant
Exhibit E      Resolutions of the Company
Exhibit F      Form of Amended Articles of Incorporation
Exhibit G      Form of REIT Representation Certificate of Buyer
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SELLER DISCLOSURE LETTER

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<S>                    <C>
Schedule 1.1           Contemplated Transactions
Schedule 3.1           Existence; Good Standing; Authority; Compliance with Law
Schedule 3.3           Capitalization
Schedule 3.4           Subsidiaries
Schedule 3.5           Other Interests
Schedule 3.6           No Conflicts; No Defaults; Required Filings or Consents
Schedule 3.8           Litigation
Schedule 3.10          Undisclosed Liabilities
Schedule 3.11          Taxes
Schedule 3.13          Properties
Schedule 3.14          Environmental Matters
Schedule 3.15          Employee Benefit Plans
Schedule 3.15(k)       Employment Related Payments
Schedule 3.17          Insurance
Schedule 3.22          Related Party Transactions
Schedule 3.23          Contracts & Commitments
Schedule 3.25          Intellectual Property
Schedule 5.7           Conduct of Business by the Company
Schedule 7(i)          Non-Investor Nominee Directors

</TABLE>

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                  THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated
as of March 21, 2001, is made by and among Price Enterprises, Inc., a Maryland
corporation (the "Company"), and Warburg, Pincus Equity Partners, L.P., a
Delaware limited partnership, Warburg, Pincus Netherlands Equity Partners I,
C.V., a Netherlands limited partnership, Warburg, Pincus Netherlands Equity
Partners II, C.V., a Netherlands limited partnership, and Warburg, Pincus
Netherlands Equity Partners III, C.V., a Netherlands limited partnership (each,
a "Warburg Entity," and collectively, "Buyer").

                                    RECITALS:

                  WHEREAS, the Company has entered into an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of the date hereof, by and among Excel
Legacy Corporation ("Legacy"), the Company and PEI Merger Sub, Inc., a wholly
owned subsidiary of the Company ("Merger Sub"), to effect a merger between
Legacy and Merger Sub (the "Merger");

                  WHEREAS, subject to the terms and conditions hereof, the
Company desires to sell to Buyer and Buyer desires to purchase from the Company
(i) an aggregate 17,985,612 of 9% Series B Junior Convertible Redeemable
Preferred Stock, $.0001 par value per share (the "Company Series B Preferred
Shares"), and (ii) one or more warrants, each substantially in the form of
EXHIBIT D hereto, to purchase an aggregate of 2,500,000 shares of Common Stock
of the Company, $.0001 par value per share ("Company Common Shares"), in
accordance with the terms of such warrant at an exercise price of $8.25 per
share (the "Warrants");

                  WHEREAS, the Board of Directors (the "Board"), based on the
unanimous recommendation of a special committee of independent directors of the
Company (the "Special Committee"), has approved, and deems it advisable and in
the best interests of the stockholders of the Company to consummate, the
transactions contemplated by this Agreement, upon the terms and subject to the
conditions set forth herein;

                  WHEREAS, as an inducement to Buyer to enter into this
Agreement, each of the Board and certain stockholders has approved the terms of
a Voting Stockholders Agreement in the form of EXHIBIT B (the "Voting
Stockholders Agreement") to be entered into by the Company, Buyer and other
stockholders, concurrently with the execution of this Agreement pursuant to
which each of such stockholders has agreed to vote its capital stock holdings
for approval of the transactions contemplated by this Agreement; and

                  WHEREAS, as an inducement to Buyer to enter into this
Agreement, each of the Board and certain stockholders has approved the terms of
a Registration Rights Agreement in the form of EXHIBIT C (the "Registration
Rights Agreement") to be entered into by the Company, Buyer and other
stockholders;

                  NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties agree as follows:

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                                   ARTICLE I.

                                   DEFINITIONS

     Section 1.1. DEFINITIONS. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:

                  "Affiliate" shall mean any (a) director, officer or
stockholder holding 5% or more of the capital stock (on a fully-diluted basis)
of such person, (b) spouse, parent, sibling or descendant of such person (or a
spouse, parent, sibling or descendant of a director, officer, or partner of such
person) and (c) other person that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such person. The term "control" includes, without limitation, the possession,
directly or indirectly, of the power to direct the management and policies of a
person, whether through the ownership of voting securities, by contract or
otherwise. Any person that beneficially owns, directly or indirectly, 25% or
more of the voting securities of another person or any person that designates
one or more members of the board of directors of another person shall be deemed
to control such other person.

                  "Agreement" shall have the meaning set forth in the first
paragraph hereof.

                  "Amended Articles of Incorporation" shall have the meaning set
forth in Section 5.1(b).

                  "Articles of Incorporation" shall mean the Company's Articles
of Incorporation filed with the SDAT, as amended and supplemented.

                  "Blue Sky Laws" shall have the meaning set forth in Section
3.6(e).

                  "Board" shall have the meaning set forth in the recitals.

                  "Business Day" shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking institutions in
the State of New York generally are authorized or required by law or other
government actions to close.

                  "Buyer" shall have the meaning set forth in the first
paragraph hereof.

                  "Buyer Indemnified Persons" shall have the meaning set forth
in Section 8.2.

                  "Buyer Ownership Ratio" shall have the meaning set forth in
Section 6.8.

                  "Bylaws" shall have the meaning set forth in Section 3.1(f).

                  "CERCLIS" shall have the meaning set for the in Section
3.14(h).

                  "Charter Documents" shall mean the certificate or articles of
incorporation or bylaws (in the case of a corporation), trust agreement, deed or
trustees' regulations (in the case of a trust), limited liability company or
operating agreement or registration certificate (in the case of

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a limited liability company) or agreement or certificate of partnership or joint
venture (in the case of a partnership or joint venture) or co-tenancy agreement.

                  "Closing" shall have the meaning set forth in Section 2.2(b).

                  "Closing Date" shall have the meaning set forth in Section
2.2(b).

                  "Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder as in effect on the date
hereof.

                  "Collateral Shares" shall have the meaning set forth in
Section 6.8.

                  "Commitment" shall have the meaning set forth in Section 3.9.

                  "Company" shall have the meaning set forth in the first
paragraph hereof.

                  "Company Common Share" shall have the meaning set forth in the
recitals hereof.

                  "Company Indemnified Person" shall have the meaning set forth
in Section 8.3.

                  "Company Material Adverse Effect" shall have the meaning set
forth in Section 3.1(a).

                  "Company Preferred Shares" shall mean the Company Series A
Preferred Shares and the Company Series B Preferred Shares.

                  "Company Property" and "Company Properties" shall have the
respective meanings set forth in Section 3.13(a).

                  "Company Reports" shall have the meaning set forth in Section
3.7.

                  "Company Series A Preferred Shares" shall have the meaning set
forth in Section 3.3.

                  "Company Series B Preferred Shares" shall have the meaning set
forth in the recitals hereof.

                  "Company Stockholders Meeting" shall have the meaning set
forth in Section 5.1(b) hereof.

                  "Company Subsidiaries" shall have the meaning set forth in
Section 3.4.

                  "Competing Transaction" shall mean (other than the Merger or
any Contemplated Transaction) (i) any acquisition in any manner, directly or
indirectly (including through any option, right to acquire or other beneficial
ownership), of more than 25% of the equity securities, on a fully diluted basis,
of the Company by a single person or a group of related persons, or all or
substantially all of the assets of the Company, other than any of the
transactions contemplated by this Agreement or (ii) any merger, consolidation,
share exchange, recapitalization, other business

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combination, or liquidation of the Company, other than any of the transactions
contemplated by this Agreement.

                  "Contemplated Transactions" shall mean those certain real
estate transactions contemplated by the Company on the date hereof and disclosed
to Buyer on Schedule 1.1 of the Disclosure Letter.

                  "Contracts" shall have the meaning set forth in Section
3.6(d).

                  "Conversion Shares" shall mean the Company Common Shares
issuable upon conversion of the Company Series B Preferred Shares and upon
exercise of the Warrant.

                  "Damages" shall have the meaning set forth in Section 8.2.

                  "Disclosure Letter" shall have the meaning set forth in
Section 3.1(c).

                  "Encumbrance" and "Encumbrances" shall have the respective
meanings set forth in Section 3.12(i).

                  "Environmental Laws" shall mean any and all federal, state and
local statutes, laws (including common law), ordinances, rules, regulations,
orders, permits, judgments, and directives concerning the protection of the
environment, natural resources, human health and safety and employee health and
safety, including, without limitation, the federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended ("CERCLA"), the
federal Resource Conservation and Recovery Act, as amended, the Emergency
Planning and Community Right-to-Know Act of 1986, the Clear Water Act, the Clean
Air Act, the Safe Drinking Water Act, the Occupational Safety and Health Act and
analogous state or local laws, and the rules and regulations adopted and
promulgated pursuant to each of the foregoing Environmental Laws.

                  "ERISA" shall have the meaning set forth in Section 3.15(a).

                  "ERISA Affiliate" shall have the meaning set forth in Section
3.15(b).

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.

                  "Financial Statements" shall have the meaning set forth in
Section 3.7.

                  "GAAP" shall mean United States generally accepted accounting
principles.

                  "Governmental Entity" shall have the meaning set forth in
Section 3.1(d).

                  "Ground Lease" and "Ground Leases" shall have the respective
meanings set forth in Section 3.13(a).

                  "Hazardous Materials" shall have the meaning set forth in
Section 3.14(d).

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                  "Indemnification Period" shall have the meaning set forth in
Section 8.1.

                  "Indemnified Party" shall mean Buyer or the Company, as the
context may require, pursuant to Article 8 hereof.

                  "Insured Matters" shall have the meaning set forth in Section
3.13(j).

                  "Intellectual Property" shall mean all of the following, owned
or used in the business of the Company or its Subsidiaries: (i) trademarks and
service marks (registered or unregistered), trade dress, product configurations,
trade names and other names and slogans embodying business or product goodwill
or indications of origin, applications or registrations in any jurisdiction
pertaining to the foregoing and goodwill associated therewith; (ii) patentable
inventions (whether patentable or unpatentable), discoveries, improvements,
ideas, know-how, formula methodology, processes, technology, computer programs
and software (including password unprotected interpretive code or source code,
object code, development documentation, programming tools, drawings,
specifications and data) and applications and patents in any jurisdiction
pertaining to the foregoing, including re-issues, continuations, divisions,
continuations-in-part, renewals or extensions; (iii) trade secrets, including
confidential and other non-public information and the right in any jurisdiction
to limit the use of disclosure thereof; (iv) copyrights in writings, designs,
software programs and software, mask works or other works, applications or
registrations in any jurisdiction for the foregoing and moral rights related
thereto; (v) databases and database rights; (vi) Internet Web sites, domain
names and applications and registrations pertaining thereto; (vii) licenses,
immunities, covenants not to sue and the like relating to the foregoing; (viii)
books and records describing or used in connection with the foregoing; and (ix)
claims or causes of action arising out of or related to past, present or future
infringement or misappropriation of the foregoing.

                  "Investor Nominees" shall have the meaning set forth in
Section 7.1(i).

                  "IRS" shall mean the Internal Revenue Service.

                  "Knowledge" shall mean, with respect to the Company, the
actual knowledge of the officers of the Company, or the knowledge which an
ordinary and prudent business person employed in the same capacity in the same
type and size of business as the Company would be reasonably expected to have.

                  "Lease" and "Leases" shall have the respective meanings set
forth in Section 3.12(a).

                  "Legacy Competing Transaction" shall mean (other than the
Merger or any Contemplated Transaction) (i) any acquisition in any manner,
directly or indirectly (including through any option, right to acquire or other
beneficial ownership), of more than 25% of the equity securities, on a fully
diluted basis, of Legacy by a single person or a group of related persons, or
all or substantially all of the assets of Legacy, other than any of the
transactions contemplated by this Agreement or (ii) any merger, consolidation,
share exchange, recapitalization, other business combination, or liquidation of
Legacy, other than any of the transactions contemplated by this Agreement.

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                  "Listed Intellectual Property" shall have the meaning set
forth in Section 3.25(b).

                  "Merger Agreement" shall have the meaning set forth in the
Recitals.

                  "Multiemployee Plan" shall have the meaning set forth in
Section 3.15(b).

                  "Nasdaq" shall mean The Nasdaq National Market.

                  "Options" shall have the meaning set forth in Section 3.3(f).

                  "Other Filings" shall have the meaning set forth in Section
5.1(b).

                  "Pension Plan" shall have the meaning set forth in Section
3.15(c).

                  "Permits" shall have the meaning set forth in Section 3.1(e).

                  "Permitted Encumbrances" shall have the meaning set forth in
Section 3.13(i).

                  "Person" shall mean an individual or a corporation,
partnership, limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.

                  "Plans" shall have the meaning set forth in Section 3.15(a).

                  "Preferred Offer" shall have the meaning set forth in the
Amended Articles of Incorporation.

                  "Project Debt" shall mean the debt incurred in connection with
the projects set forth in Schedule 1.1 of the Disclosure Letter under the
heading "Debt Incurrence."

                  "Property Restrictions" shall have the meaning set forth in
Section 3.13(i).

                  "Proxy Statement" shall have the meaning set forth in Section
5.1(b).

                  "Purchase Price" shall have the meaning set forth in Exhibit
A.

                  "REA" and "REAs" shall have the respective meanings set forth
in Section 3.13(g).

                  "Registration Rights Agreement" shall have the meaning set
forth in the recitals hereof.

                  "Regulatory Filings" shall have the meaning set forth in
Section 3.6(e).

                  "REIT" shall have the meaning set forth in Section 7.1(f).

                  "Rent Roll" shall have the meaning set forth in Section
3.13(a).

                  "SDAT" shall have the meaning set forth in Section 3.6(e).

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                  "SEC" shall mean the Securities and Exchange Commission.

                  "Securities" means the collective reference to the Company
Series B Preferred Shares and the Warrants.

                  "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.

                  "Securities Laws" mean the Exchange Act and the Securities
Act.

                  "Security Deposits" shall have the meaning set forth in
Section 3.13(c).

                  "Special Committee" shall have the meaning set forth in the
recitals.

                  "Stockholder Approval" shall have the meaning set forth in
Section 7.1(j).

                  "Stockholders Meeting" shall have the meaning set forth in
Section 5.1(c).

                  "Subsequent Transaction" shall have the meaning set forth in
Section 5.3.

                  "Subsidiary" shall mean, with respect to any party, any
corporation, partnership, joint venture, limited liability company, business
trust or other entity, of which such party directly or indirectly owns or
controls more than 50% of the equity interests.

                  "Superior Proposal" shall have the meaning set forth in
Section 5.3.

                  "Taxes" shall mean all federal, state, local and foreign
income, property, sales, franchise, employment, excise, withholding,
estimated and other taxes, tariffs or governmental charges of any nature
whatsoever including any liability under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), together with penalties,
interest or additions to Tax with respect thereto; and the term "Tax" shall
mean any of the foregoing Taxes.

                  "Tax Return" shall mean all returns, declarations, reports,
statements, and other documents required to be filed with any federal, state,
local or foreign tax authority in respect of Taxes.

                  "Tender Offer" shall have the meaning set forth in the
Merger Agreement.

                  "Termination Fee" shall have the meaning set forth in Section
9.2(b).

                  "Third Party Claim" shall have the meaning set forth in
Section 8.5.

                  "Third Party Indemnified Party" shall have the meaning set
forth in Section 8.5.

                  "Third Party Indemnifying Party" shall have the meaning set
forth in Section 8.5.

                  "Title Policy" and "Title Policies" shall have the respective
meanings set forth in Section 3.13(j).

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                  "Transaction Documents" shall mean this Agreement, the
Registration Rights Agreement and the Voting Stockholders Agreement.

                  "Utility Equipment" shall have the meaning set forth in
Section 3.13(s).

                  "Voting Proposals" shall have the meaning set forth in Section
5.1(b) hereof.

                  "Voting Stockholders Agreement" shall have the meaning set
forth in the recitals hereof.

                  "Warrants" shall have the meaning set forth in the recitals.

                                  ARTICLE II.

                  PURCHASE OF COMPANY PREFERRED SHARES; CLOSING

     Section 2.1. AUTHORIZATION OF SECURITIES. Prior to the Closing, the Company
shall have duly (i) designated, created and authorized the Company Series B
Preferred Shares and the issuance and sale of shares thereof pursuant to this
Agreement and (ii) authorized the Warrants and the issuance and sale thereof
pursuant to this Agreement.

     Section 2.2. SECURITIES PURCHASE.

          (a) SALE AND PURCHASE. At the Closing, the Company shall issue and
     sell to Buyer, and Buyer shall purchase from the Company, for an aggregate
     purchase price of $100,000,000 (i) a total of 17,985,612 shares of Company
     Series B Preferred Shares, having the rights, preferences, privileges and
     restrictions set forth in the Amended Articles of Incorporation, each share
     convertible into shares of Company Common Shares in accordance with the
     terms of the Amended Articles of Incorporation, and (ii) the Warrants,
     having the terms set forth in the form of Warrant attached hereto as
     EXHIBIT D, to purchase an aggregate of 2,500,000 shares of Company Common
     Shares. The number of Shares and Warrants to be purchased at the Closing by
     each Buyer, and the portion of the aggregate purchase price to be paid by
     each Buyer, are set forth next to each Buyer's name on EXHIBIT A hereto.

          (b) DELIVERY OF SECURITIES; PAYMENT OF PURCHASE PRICE. The closing of
     the purchase and sale of the Securities (the "Closing") shall take place
     immediately subsequent to the Merger following the satisfaction or waiver
     of each of the conditions set forth in Section 7.1 hereof or such other
     date as Buyer and the Company agree in writing (the "Closing Date").
     Delivery of the Securities purchased by Buyer pursuant to this Agreement
     will be made at the Closing by the Company delivering to Buyer, against
     payment of the purchase price therefor, (i) a stock certificate or
     certificates, dated the Closing Date, free and clear of all Encumbrances
     (unless created by Buyer or any of its Affiliates), representing the number
     of Company Series B Preferred Shares purchased by Buyer with each
     certificate being registered in the name of Buyer and (ii) Warrant
     Certificates, dated the Closing Date, representing the number of Warrants
     purchased by Buyer, with each such certificate being registered in the name
     of the respective Buyer, duly executed and delivered by the Company and
     Buyer. Payment by Buyer of the agreed purchase price for the Company Series
     B Preferred Shares and Warrants shall be made by

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     wire transfer (to the account of the Company previously designated by it in
     writing) and the Company shall acknowledge receipt from Buyer of payment in
     full.

     Section 2.3. ADDITIONAL AGREEMENTS AND CLOSING DELIVERIES.

          (a) In addition to the other obligations required hereby, at the
     Closing, the Company shall deliver, or cause to be delivered, to Buyer the
     following: all certificates and other instruments and documents required by
     this Agreement to be delivered by the Company to Buyer at or prior to the
     Closing.

          (b) In addition to the delivery of the Purchase Price and the other
     obligations required hereby, at the Closing, Buyer shall deliver, or cause
     to be delivered, to the Company the following: if not previously delivered
     to the Company, all other certificates, documents, instruments and writings
     required pursuant hereto to be delivered by or on behalf of Buyer at or
     before the Closing.

     Section 2.4. TIME AND PLACE OF CLOSING. The Closing shall take place at
10:00 a.m. San Diego time on the Closing Date at the offices of Latham &
Watkins, 12636 High Bluff Drive, San Diego, California or at such other place
and time as the Company and Buyer shall mutually agree.

                                  ARTICLE III.

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants to Buyer as follows:

     Section 3.1. EXISTENCE; GOOD STANDING; AUTHORITY; COMPLIANCE WITH LAW.

          (a) The Company is a corporation duly incorporated, validly existing
     and in good standing under the laws of the State of Maryland. The Company
     is duly licensed or qualified to do business as a foreign corporation and
     is in good standing under the laws of any other state of the United States
     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 individually or in
     the aggregate is not having and could not be reasonably expected to have a
     material adverse effect on the business, assets, liabilities, results of
     operations, condition (financial or otherwise) of the Company and its
     Subsidiaries taken as a whole (a "Company Material Adverse Effect"). The
     Company has all requisite corporate power and authority to own, operate,
     lease and encumber its assets and properties and carry on its business as
     now conducted.

          (b) Each of the Company's Subsidiaries is a limited liability company,
     corporation or partnership duly organized, validly existing and in good
     standing under the laws of its jurisdiction of incorporation or
     organization, has the power and authority to own its assets and properties
     and to carry on its business as it is now being conducted, and is duly
     qualified to do business and is in good standing in each jurisdiction in
     which the ownership, lease or use of its property or the conduct of its
     business requires such qualification, except for jurisdictions in

                                       12
<PAGE>

     which such failure to be so qualified or to be in good standing would not
     have a Company Material Adverse Effect.

          (c) Schedule 3.1 of the letter dated the date hereof and delivered by
     the Company concurrently with the execution and delivery of this Agreement
     (the "Disclosure Letter") sets forth, as of the date hereof, (i) the name
     and jurisdiction of incorporation or organization of each Subsidiary of the
     Company and (ii) if any Subsidiary is not wholly owned, directly or
     indirectly, by the Company, the record and beneficial owners of outstanding
     shares of its capital stock or beneficial interests, as applicable.

          (d) Within the past three years neither the Company nor any of its
     Subsidiaries has received written notice that it is in violation of any
     order of any federal, state, local or foreign governmental body, court,
     arbitration board, tribunal, commission, agency or authority ("Governmental
     Entity"), or any law, ordinance, governmental rule or regulation to which
     the Company or any Company Subsidiary or any of their respective properties
     or assets is subject, where such notice remains pending and any such
     alleged violation would have a Company Material Adverse Effect.

          (e) To the Knowledge of the Company, the Company and its Subsidiaries
     hold all material permits, registrations, licenses, variances, exemptions,
     orders and approvals of all Governmental Entities necessary for the lawful
     conduct of their respective businesses (the "Permits") and have taken all
     material actions required by applicable law or governmental regulations in
     connection with their business as now conducted. The Company and its
     Subsidiaries are in material compliance with the terms of the Permits and
     such Permits are valid and in full force and effect.

          (f) True and correct copies of the Company's Charter Documents and the
     Bylaws of the Company (the "Bylaws") have been made available to Buyer.

     Section 3.2. AUTHORITY RELATIVE TO AGREEMENTS; APPROVALS.

          (a) The execution, delivery and performance of the Transaction
     Documents have been duly and validly authorized by all necessary action on
     the part of the Company. This Agreement and the Voting Stockholders
     Agreement have been duly executed and delivered by the Company for itself,
     and upon the Closing, the Registration Rights Agreement shall be duly
     executed and delivered by it and upon execution and delivery by Buyer,
     constitute the valid and legally binding obligations of the Company,
     enforceable against the Company in accordance with their terms, subject to
     applicable bankruptcy, insolvency, moratorium or other similar laws
     relating to creditors' rights or general principles of equity.

          (b) The Special Committee and the Board have, as of the date hereof,
     approved the Transaction Documents and the transactions contemplated hereby
     and thereby, and the Special Committee and the Board have determined to
     recommend that the stockholders of the Company vote in favor of the Voting
     Proposals.

          (c) The Company Series B Preferred Shares, the Conversion Shares and
     the Company Common Shares to be issued pursuant to the Warrants have been
     duly authorized and

                                       13
<PAGE>

     reserved for issuance, and will be issued in accordance with the
     registration or qualification requirements of the Securities Act and any
     relevant state securities laws or pursuant to valid exemptions therefrom,
     and upon issuance in accordance with the provisions of this Agreement and
     the Warrant will be duly and validly issued, fully paid and nonassessable
     and not subject to any preemptive or similar rights, except that
     stockholders may be subject to further assessment with respect to certain
     claims for tort, contract, taxes, statutory liability and otherwise in some
     jurisdictions to the extent such claims are not satisfied by the Company.

          (d) The issue and sale of the Company Series B Preferred Shares and
     the Warrants hereunder will not give any stockholder of the Company the
     right to demand payment for its shares under Maryland law or give rise to
     any preemptive or similar rights.

     Section 3.3. CAPITALIZATION.

          (a) The authorized shares of capital stock of the Company consist of
     100,000,000 shares of capital stock, $.0001 par value per share, of which
     74,000,000 are classified as Company Common Shares and 26,000,000 are
     classified as 8 3/4% Series A Cumulative Redeemable Preferred Stock (the
     "Company Series A Preferred Shares").

          (b) As of March 16, 2001, the Company had issued and outstanding
     13,309,006 Company Common Shares and 23,915,296 Company Series A Preferred
     Shares.

          (c) Immediately following the consummation of the transactions
     contemplated by this Agreement, the authorized shares of capital stock of
     the Company shall consist of 150,000,000 shares of capital stock, $.0001
     par value per share, of which 97,038,596 shall be classified as Company
     Common Shares, 27,849,771 shall be classified as the Company Series A
     Preferred Shares and 25,111,633 shall be classified as Company Series B
     Preferred Shares.

          (d) Except as set forth in Schedule 3.3 of the Disclosure Letter
     immediately following the consummation of the transactions contemplated by
     this Agreement, the Company will have issued and outstanding 53,686,439
     Company Common Shares, 23,915,296 Company Series A Preferred Shares and
     17,985,612 Company Series B Preferred Shares.

          (e) Except for the Company Series A Preferred Shares and as set forth
     in Schedule 3.3 of the Disclosure Letter, the Company has no outstanding
     shares, bonds, debentures, notes or other obligations the holders of which
     have the right to vote (or which are convertible into or exercisable for
     securities having the right to vote (other than the Options)) with the
     holders of Company Common Shares on any matter. All such issued and
     outstanding Company Common Shares and Company Series A Preferred Shares
     are, and all shares reserved for issuance will be, upon issuance in
     accordance with the terms specified in the instruments or agreements
     pursuant to which they are issuable, duly authorized, validly issued, fully
     paid, nonassessable and free of preemptive rights, except that stockholders
     may be subject to further assessment with respect to certain claims for
     tort, contract, taxes, statutory liability and otherwise in some
     jurisdictions to the extent such claims are not satisfied by the Company.

                                       14
<PAGE>

          (f) Except as set forth in Schedule 3.3 of the Disclosure Letter,
     there are no existing options, warrants, calls, subscriptions, convertible
     securities, or other rights, agreements or commitments which obligate the
     Company or any of its Subsidiaries to issue, transfer or sell any shares of
     stock of the Company or any of its Subsidiaries (collectively, "Options").

          (g) The Company has paid all declared dividends on the Company Series
     A Preferred Shares.

          (h) There are no agreements or understandings to which the Company is
     a party with respect to the voting of any Company Common Shares or which
     restrict the transfer of any such shares, nor does the Company have
     Knowledge of any such agreements or understandings with respect to the
     voting of any such shares or which restrict the transfer of any such shares
     other than those set forth in the Charter Documents with respect to the
     maintenance of the Company as a REIT and the share ownership limit set
     forth therein. Other than with respect to the Series A Preferred Shares,
     there are no outstanding contractual obligations of the Company to
     repurchase, redeem or otherwise acquire any Company Common Shares or any
     other securities of the Company.

          (i) The Company is not under any obligation, contingent or otherwise,
     by reason of any agreement to register any of its securities under the
     Securities Act.

     Section 3.4. SUBSIDIARIES. Except as set forth in Schedule 3.4 of the
Disclosure Letter, the Company owns directly or indirectly each of the
outstanding shares of capital stock or all of the partnership or other equity
interests of each of its Subsidiaries (the "Company Subsidiaries"). Each of the
outstanding shares of capital stock of or other equity interest in each of the
Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned by the Company or a wholly-owned Company Subsidiary
free and clear of all Encumbrances. There are no outstanding Options (except as
set forth in Schedule 3.3 of the Disclosure Letter) obligating the Company or
any Company Subsidiary to issue or sell any shares of capital stock of, or other
equity interest in, any Subsidiary of the Company or to grant, extend or enter
into any such option or voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person other than
the Company or any Company Subsidiary with respect to the voting of or the right
to participate in dividends or other earnings on any capital stock of any
Company Subsidiary.

     Section 3.5. OTHER INTERESTS. Except for interests in the Company
Subsidiaries and as set forth in Schedule 3.5 of the Disclosure Letter, neither
the Company nor any Company Subsidiary owns directly or indirectly any interest
or investment (whether equity or debt) in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture, business, limited liability company,
trust or entity (other than investments in short-term investment securities).

     Section 3.6. NO CONFLICTS; NO DEFAULTS; REQUIRED FILINGS AND CONSENTS.
Neither the execution and delivery by the Company hereof, nor the consummation
by the Company of the transactions contemplated hereby in accordance with the
terms hereof, will:

                                       15
<PAGE>

          (a) conflict with, violate or result in a breach of any provisions of
     (i) the Charter Documents or Bylaws of the Company or (ii) the Charter
     Documents of any Company Subsidiary (assuming, in each case, the Company's
     receipt of an executed certificate in the form of Exhibit G for each
     Warburg Entity);

          (b) result in any material breach or violation of, a default under, or
     the triggering of any payment or other obligations pursuant to, or
     accelerate vesting under, any compensation plan or any grant or award of
     the Company or any Company Subsidiary;

          (c) violate or conflict with any statute, law, rule, ordinance,
     regulation, judgment, order, writ, decree, permit or injunction of any
     Governmental Entity applicable to the Company or its Subsidiaries;

          (d) violate or conflict with or result in any material breach of any
     material provision of, or constitute a default (or any event which, with
     notice or lapse of time or both, would constitute a default) under, or
     result in the termination or in a right of termination or cancellation of,
     or accelerate the performance required by, or result in the creation of any
     Encumbrance upon any of the properties of the Company or its Subsidiaries
     under, or result in being declared void, voidable or without further
     binding effect, or result in or give to any person any right of payment or
     reimbursement, termination, cancellation or modification of any of the
     terms, conditions or provisions of any note, bond, mortgage, indenture,
     deed to secure debt, security agreement, reciprocal easement agreement,
     management agreement, leasing agreement or deed of trust or any license,
     franchise, permit, lease, sublease, occupancy agreement, contract,
     agreement or other instrument, commitment or obligation (collectively,
     "Contracts") to which the Company or its Subsidiaries is a party, or by
     which the Company or its Subsidiaries or any of their respective assets or
     properties is bound or affected in each case, as the same may have been
     modified, amended, extended or renewed; or

          (e) require any consent, registration, declaration, filing, approval
     or authorization of, or declaration, filing or registration with, any other
     party to any contract, or any Governmental Entity, other than any filings
     required under the Securities Act, the Exchange Act, state securities laws
     ("Blue Sky Laws"), the laws of any foreign country in which the Company or
     its Subsidiaries conducts any business or owns any property or assets
     (collectively, the "Regulatory Filings"), and any material filings required
     to be made with the Department of Assessments and Taxation of the State of
     Maryland ("SDAT") or any national securities exchange on which the Company
     Common Shares are listed. Except as set forth in Schedule 3.6 of the
     Disclosure Letter and the Schedules thereto, no consent, approval or action
     of, filing with or notice to, any other party to any contract, or any
     Governmental Entity or other public or private third party is necessary or
     required under any of the terms, conditions or provisions of any law or
     order of any Governmental Entity or any Contract to which the Company or
     any Company Subsidiary or any of their respective assets or properties is
     bound for the execution and delivery of this Agreement, the performance by
     the Company of its obligations hereunder or the consummation of the
     transactions contemplated hereby.

     Section 3.7. SEC DOCUMENTS. The Company has made available to Buyer prior
to the execution of this Agreement a true and complete copy of each form,
report, schedule, registration statement (as declared effective and any
post-effective amendments), definitive proxy statement

                                       16
<PAGE>

and other documents (together with all amendments thereof and supplements
thereto) filed by the Company or any Company Subsidiary with the SEC since
December 31, 1999 (as such documents have since the time of their filing been
amended or supplemented, the "Company Reports"), which are all the documents
(other than preliminary material) that the Company or any other Company
Subsidiary were required to file under the Securities Laws since such date. The
Company has timely filed all Company Reports since December 31, 1999. As of
their respective dates, the Company Reports (i) complied in all material
respects with the applicable requirements of the Securities Laws and (ii) 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 made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the audited consolidated financial statements and unaudited
interim financial statements ("Financial Statements") of the Company included in
or incorporated by reference into the Company Reports (including in each case
the related notes and schedules) complied as to form in all material respects
with the Securities Laws and fairly presents the consolidated financial position
of the Company and its Subsidiaries as of its date and each of the consolidated
statements of income, retained earnings, results of operations and cash flows of
the Company included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and the Company Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which would
not be material in amount or effect), in each case in accordance with GAAP
consistently applied during the periods involved, except as may be noted therein
and except, in the case of the unaudited statements, as permitted by Form 10-Q
or Form 8-K of the SEC.

     Section 3.8. LITIGATION. Except as set forth in Schedule 3.8 of the
Disclosure Letter, there are (i) not in effect any orders, injunctions or
decrees of any Governmental Entity to which the Company or any Company
Subsidiary is a party or by which any of its properties or assets are bound or,
to the Knowledge of the Company, any such orders, injunctions or decrees
relating to the Company to which any of its directors, officers, employees or
agents is a party, and (ii) no actions, suits, arbitrations or proceedings
pending or, to the Knowledge of the Company, threatened against, relating to or
affecting the Company or any Company Subsidiary or, except as set forth in
Schedule 3.8 of the Disclosure Letter and fully covered by insurance, relating
to any of the Company Properties. To the Knowledge of the Company, there are no
Governmental Entity investigations or audits pending or threatened against,
relating to or affecting the Company, any of the Company Subsidiaries or any of
their respective assets or properties or against any of its directors, trustees,
officers, employees or agents in such capacity or, to the Knowledge of the
officers of the Company, threatened against the Company or any Company
Subsidiary or against any of its directors, trustees, officers, employees or
agents in such capacity at law or in equity, or before or by any federal or
state commission, board, bureau, agency or instrumentality.

     Section 3.9. ABSENCE OF CERTAIN CHANGES. Except as expressly disclosed in
the Company Reports filed prior to the date hereof, since December 31, 1999, the
Company and its Subsidiaries have conducted their business only in the ordinary
course of such business consistent with past practices and there has not been
(i) any Company Material Adverse Effect, (ii) any material commitment,
contractual obligation, borrowing, capital expenditure or

                                       17
<PAGE>

transaction (each, a "Commitment") entered into by the Company or any of its
Subsidiaries, other than Commitments in the ordinary course of business and/or
the Merger Agreement, (iii) any action taken which, if taken after the date
hereof, would constitute a breach of any provision or covenant herein, or (iv)
any material change in the Company's accounting principles, practices or
methods.

     Section 3.10. UNDISCLOSED LIABILITIES. Except (a) as disclosed in the
Financial Statements, and (b) for liabilities and obligations (i) incurred in
the ordinary course of business and consistent with past practice since December
31, 1999, (ii) pursuant to the terms of this Agreement, (iii) as disclosed on
Schedule 3.10 of the Disclosure Letter, the Company does not have any debt,
obligation or liability (whether accrued, absolute, contingent, liquidated or
otherwise, whether due or to become due, whether or not known to the Company)
arising out of any transaction entered into at or prior to the Closing, or any
act or omission at or prior to the Closing, including taxes with respect to or
based upon the transactions or events occurring at or prior to the Closing, and
including, without limitation, unfunded past service liabilities under any
pension, profit sharing or similar plan.

     Section 3.11. TAXES.

          (a) The Company and each Company Subsidiary have (i) timely filed all
     Tax Returns required to be filed by any of them prior to the date hereof
     and all such Tax Returns are correct and complete in all material respects,
     (ii) paid all material Taxes for which they are separately or jointly
     liable, whether or not such Taxes are shown as due on Tax Returns, (iii)
     paid or caused to be paid or adequately accrued or reserved on its most
     recent balance sheet for all material Taxes which have become due and
     payable pursuant to any assessment, deficiency notice, 30-day letter or
     other notice received by it, (iv) accrued or reserved on its most recent
     balance sheet for any material liability for Taxes of the Company or any of
     its Subsidiaries not yet due and payable, and (v) complied in all material
     respects with all applicable laws relating to Taxes, including withholding
     Taxes. The Company has not received any notice of any audit (not since
     closed) of any Tax Return filed by the Company with respect to any tax year
     ending after December 1996, and the Company has not been notified by the
     IRS or any state or local taxing authority that any such audit is
     contemplated or pending. Neither the Company nor any of its Subsidiaries
     has executed or filed with the IRS or any other taxing authority any
     agreement now in effect extending the period for assessment or collection
     of any Taxes. There is no action, suit, proceeding, investigation, audit or
     claim now pending against, or initiated with respect to, the Company or any
     of its Subsidiaries in respect of any Tax. Neither the Company nor any of
     its Subsidiaries has Knowledge of any such action, suit, proceeding,
     investigation, audit, or claim being threatened by any tax authority
     against, or with respect to, the Company or any of its Subsidiaries in
     respect of any Tax (For this purpose, knowledge of any Company employee
     whose course of employment includes tax matters is deemed to constitute
     Knowledge). No property of the Company or any of its Subsidiaries is
     "tax-exempt use property" within the meaning of section 168(h) of the Tax
     Code. Neither the Company nor any of its Subsidiaries is a party to any
     lease made pursuant to former Section 168(f)(8) of the Internal Revenue
     Code of 1954. No ruling with respect to Taxes (other than a request for a
     determination of the status of a qualified pension plan) has been requested
     by or on behalf of the Company or any of its Subsidiaries. Except as set
     forth in Schedule 3.11 of the Disclosure Letter, no closing agreement
     pursuant to section 7121 of the Code (or any predecessor provision)

                                       18
<PAGE>

     or any similar provision of any state, local or foreign law has been
     entered into by or on behalf of the Company or any Company Subsidiary.
     Except as set forth in Schedule 3.11 of the Disclosure Letter, no
     jurisdiction where the Company or any Company Subsidiary has not filed a
     Tax Return has made a claim that the Company or such Company Subsidiary is
     required to file a Tax Return in such jurisdiction. All material elections
     with respect to Taxes of the Company or any Company Subsidiary are set
     forth in Schedule 3.11 of the Disclosure Letter. The Company and each
     Company Subsidiary have previously made available to Buyer complete and
     accurate copies of each of (i) all audit reports, letter rulings and
     technical advice memoranda relating to federal, state, local or foreign
     Taxes due with respect to the income or business of the Company or any
     Subsidiary, (ii) all income Tax Returns filed with any taxing authority (or
     the relevant portions of any combined, consolidated, or unitary Tax Return
     filed in any jurisdiction of which the Company or any Subsidiary is a
     member, including, without limitation, information relating to the
     computation of taxable income) filed by or on behalf of the Company or any
     Subsidiary in the last six years, and (iii) any closing agreement,
     settlement agreement or similar agreement or arrangement entered into by or
     on behalf of the Company or any Subsidiary with any taxing authority. The
     Company has incurred no liability for Taxes under Section 857(b), 860(c) or
     4981 of the Code, including any Tax arising from a prohibited transaction
     described in Section 857(b)(6) of the Code. There are no Tax liens upon the
     assets of the Company or any of the Company Subsidiaries except liens for
     Taxes not yet due or payable. Except as between or among the Company and
     the Company Subsidiaries, neither the Company nor any Company Subsidiary is
     a party to any agreement relating to a sharing or allocation of Taxes, or
     has any liability for Taxes of any person other than the Company and the
     Company Subsidiaries under Treas. Reg. Section 1.1502-6 (or any similar
     provision of state, local or foreign law), by contract or otherwise.

          (b) The Company (i) has elected to be taxed as a REIT commencing with
     its short taxable year ended December 31, 1997, (ii) has been subject to
     taxation and has filed its Tax Returns consistent with its status as a REIT
     and has satisfied all requirements to qualify as a REIT for all taxable
     years commencing with its short taxable year ended December 31, 1997
     through its taxable year ended December 31, 2000, (iii) has operated since
     December 31, 2000 to the date of this representation, and intends to
     continue to operate, in such a manner so as to qualify as a REIT (for U.S.
     federal and California State income tax purposes) for its taxable year
     ending on December 31, 2001, and (iv) has not taken or omitted to take any
     action which would result in a challenge to its status as a REIT, has not
     received notice of such a challenge, and to the knowledge of the executive
     officers of the Company, no such challenge is pending or threatened (for
     this purpose, knowledge of any Company employee is deemed to constitute
     Knowledge). The Company represents that each of its Corporate Subsidiaries
     is, and at all times since its affiliation with the Company has qualified
     as, a qualified REIT subsidiary as defined in Section 856(i) of the Code,
     and that each of its Subsidiaries that is a partnership, limited liability
     company, joint venture or other legal entity (other than a corporation) has
     been treated since its formation and continues to be treated for federal
     income tax purposes as a partnership or disregarded as an entity separate
     from its owner and not as an association taxable as a corporation. Except
     as set forth in Schedule 3.11 of the Disclosure Letter, none of the Company
     or the Company Subsidiaries (i) as of December 31, 2000, holds any assets
     the disposition of which would be subject to results similar to Section
     1374 of the Code as a result of an election

                                       19
<PAGE>

     under IRS Notice 88-19 or Temporary Treasury Regulation Section 1.337-5T or
     (ii) any earnings and profits accumulated in any non-REIT year within the
     meaning of Section 857 of the Code.

          (c) The Company has not agreed, and is not required, to make any
     adjustment under Section 481(a) of the Code.

          (d) The Company has not, with regard to any assets or property held or
     acquired by it, filed a consent to the application of Section 341(f) of the
     Code or agreed to have Section 341(f)(2) of the Code apply to any
     disposition of a "subsection (f) asset" (as such term is defined in Section
     341(f)(4) of the Code) owned by the Company.

          (e) Neither the Company nor any of its Subsidiaries is a "foreign
     person" as such term is defined in Section 1445(f)(3) of the Code.

     Section 3.12. BOOKS AND RECORDS.

          (a) The books of account and other financial records of the Company
     and its Subsidiaries (i) are in all material respects true, complete and
     correct, (ii) have been maintained in accordance with sound business
     practices, (iii) have been maintained in a manner consistent with past
     practice, (iv) have recorded therein all the properties and assets and
     liabilities of the Company required to be reflected under GAAP, (v) reflect
     all transactions entered into by the Company or the Company Subsidiaries or
     to which the Company or the Company Subsidiaries is a party and (vi) are
     accurately reflected in the Financial Statements included in the Company
     Reports.

          (b) The minute books and other records of the Company and its
     Subsidiaries, contain in all material respects accurate records of all
     meetings and accurately reflect in all material respects all other trust or
     corporate action of the stockholders and trustees or directors and any
     committees thereof of the Company and its Subsidiaries and all actions of
     the partners or members of the Company's Subsidiaries.

     Section 3.13. PROPERTIES.

          (a) The Company and its Subsidiaries own good and marketable fee
     simple title to, or hold valid ground leases (each a "Ground Lease," and
     collectively "Ground Leases") in, each of the real properties identified
     separately as owned or leased real property in Schedule 3.13 of the
     Disclosure Letter and the improvements situated thereon (each a "Company
     Property," and collectively the "Company Properties"), which are all of the
     real estate properties owned or leased directly or indirectly by them.
     Schedule 3.13 of the Disclosure Letter sets forth a true, correct and
     complete copy of the rent rolls of the Company Properties (the "Rent Roll")
     as of March 1, 2001 and identifies all leases, as amended, supplemented or
     modified of greater than 10,000 square feet and a term of greater than
     three years (each a "Lease", and collectively, "Leases"). None of the
     Company Properties is subject to any right or option of any other person to
     purchase or lease or otherwise obtain title to, or any interest in, such
     Company Property. Other than the rights of tenants under the Leases no
     person, other than the Company or its Subsidiaries has the right to use,
     occupy or lease any of the Company Properties.

                                       20
<PAGE>

          (b) Except as identified on Schedule 3.13 of the Disclosure Letter, no
     tenant under any of the Leases has made any claim of material default by
     the landlord which continues uncured as of the date hereof. Neither the
     Company nor any of its Subsidiaries has sent any notice of material default
     to any of the lessees under any of the Leases, which default has not been
     cured, and, to the Knowledge of the Company and its Subsidiaries, there
     currently exist no defaults by any of the tenants under any of the Leases.

          (c) There are no leases executed by the Company or its Subsidiaries or
     other rights of occupancy or use granted by the Company or its Subsidiaries
     or their predecessors in title of any portion of any of the Company
     Properties other than the Leases. Each of the Leases is valid and
     subsisting and in full force and effect, and no rents or other payments or
     deposits are held by the Company, the Company's Subsidiaries or their
     agent, except the security deposits (together with the amount of accrued
     and unpaid interest thereon) described on the Rent Roll (the "Security
     Deposits") and rents prepaid for the current month. The Rent Roll reflects
     all of the Leases as modified, amended or supplemented. Except as set forth
     in Schedule 3.13 of the Disclosure Letter, no material amount due under any
     Lease remains unpaid and no material controversy, claim, dispute or
     disagreement exists between the parties to the Leases. The Company and/or
     its Subsidiaries has completed all material tenant improvement work and
     other alteration required to be performed by the Company and/or its
     Subsidiaries prior to the date hereof pursuant to such Lease.

          (d) Except as set forth in Schedule 3.13 of the Disclosure Letter, no
     rents due under, or any other interest in, any of the Leases have been
     assigned, pledged or encumbered in any way.

          (e) All Security Deposits are being, and have been, held in compliance
     in all material respects with all laws, ordinances, order, rules,
     regulations and requirements of any governmental entity which may be
     applicable thereto.

          (f) No broker, finder, investment banker or other person is entitled
     to any broker's commission, finders fee or other fee or commission payable
     by the Company or any of its Subsidiaries with respect to the Properties
     except as disclosed in the Company Reports.

          (g) Schedule 3.13 of the Disclosure Letter lists all (i) agreements
     under which the Company or its Subsidiaries hold, operate or manage any
     real property owned or leased by any third party and , (ii) (other than
     agreements which terminate on no more than 30 days notice and which
     obligate the Company or its subsidiaries for monthly payments of less than
     or equal to $10,000 per month) agreements under which any third party
     holds, operates or manages any of the Company Properties. There are no
     reciprocal easement agreements, construction, operating and reciprocal
     easement agreements, operating agreements, development agreements and
     similar agreements (each an "REA", and collectively "REAs") which are
     likely to have a material adverse effect on the Company Property to which
     such REAs relate.

          (h) Neither Company nor any of its Subsidiaries has received any
     notice of any material default under any of the Ground Leases and, to its
     Knowledge, neither Company nor any of its Subsidiaries is in default under
     any of the Ground Leases. Neither the Company nor any of its Subsidiaries
     has sent any notice of default to any of the lessors under any of the

                                       21
<PAGE>

     Ground Leases which default has not been cured, and, to the Knowledge of
     the Company and its Subsidiaries, there currently exist no material
     defaults by any of the ground lessors under any of the Ground Leases. To
     the Knowledge of Company and its Subsidiaries, no conditions currently
     exist which may foreseeably lead to a material default by the Company, its
     Subsidiaries or any lessor under any of the Ground Leases. Schedule 3.13 of
     the Disclosure Letter sets forth the expiration date of each Ground Lease
     and any extension or renewal options thereto.

          (i) The Company Properties are not subject to any rights of way,
     written agreements (other than leases, subleases or occupancy agreements),
     laws, ordinances and regulations affecting building use or occupancy or
     reservations of an interest in title (collectively, "Property
     Restrictions"), liens, claims, encumbrances, mortgages or deeds of trust,
     charges which are liens, security interests, rights-of-way, easements,
     encroachments or other encumbrances of any kind (each an "Encumbrance" and,
     collectively, "Encumbrances"), other than (i) Encumbrances set forth on the
     Title Policies (as hereinafter defined), (ii) Encumbrances, whether or not
     of record, which do not, individually or in the aggregate, have a Company
     Material Adverse Effect on the operation of the business of the Company and
     its Subsidiaries as presently conducted, the present use of the Company
     Properties or the value of the Company Properties subject thereto or
     affected thereby, (iii) Encumbrances for taxes, assessments or governmental
     charges which may be liens but are not yet due and payable or which are
     being contested in good faith and without risk of the Company Properties
     being forfeited or sold in connection with such contest, (iv) Encumbrances
     that a current, accurate survey of the Company Properties would disclose,
     provided that such Encumbrances do not, individually or in the aggregate,
     have a Company Material Adverse Effect on the operation of the business of
     the Company and its Subsidiaries as presently conducted, the present use of
     the Company Properties or the value of the Company Properties subject
     thereto or affected thereby and (v) Property Restrictions imposed or
     promulgated by law or any governmental body or authority with respect to
     real property, including zoning regulations (excluding Encumbrances under
     Environmental Laws which are addressed in Section 3.14 hereof) (subclauses
     (i) through (v), collectively, "Permitted Encumbrances").

          (j) Valid policies of title insurance (each a "Title Policy", and
     collectively, "Title Policies") have been issued insuring the Company's or
     one or more of its Subsidiaries' fee simple or leasehold title to each of
     the Company Properties owned in fee or by leasehold in amounts at least
     equal to the purchase price thereof, subject only to the matters set forth
     therein or disclosed above, and such policies are, at the date hereof, in
     full force and effect. After giving effect to the transactions contemplated
     hereby, the Company will have adequate title insurance, property insurance
     and liability insurance. The Company and its Subsidiaries have no knowledge
     of any defects, liens, encumbrances, adverse claims or other matters to be
     insured against under any of the Title Policies (collectively, "Insured
     Matters") that could result in the issuer of any Title Policy denying its
     liability to the Company or a Company Subsidiary on the grounds that the
     Company or a Company Subsidiary had Knowledge of such Insured Matters
     solely by reason of notice thereof imputed to it as matter of law through
     either the Company, its Subsidiary or any Affiliate thereof. Schedule 3.13
     of the Disclosure Letter contains a true, complete and accurate list
     including the amounts thereof of all policies of insurance with respect to
     the Company Properties, which policies are in full force and effect. All
     premiums for such insurance policies have been paid in full. To the
     Company's and its Subsidiaries' Knowledge,

                                       22
<PAGE>

     neither the Company nor its Subsidiaries have performed, permitted or
     suffered any act or omission which would cause the insurance coverage
     provided in said policies to be reduced, canceled, denied or disputed and
     neither the Company nor any of its Subsidiaries has received (and has no
     Knowledge of) any notice or request from any insurance company or Board of
     Fire Underwriters (or organization exercising functions similar thereto)
     canceling or threatening to cancel any of said policies or denying or
     disputing coverage thereunder.

          (k) The Company and its Subsidiaries shall reasonably cooperate with
     the Buyer in the event that the Buyer elects to order a title commitment,
     purchase title insurance and/or order surveys with respect to any or all of
     the Company Properties, including executing all title affidavits or other
     documents reasonably and customarily required by the title company issuing
     such title commitments, insurance and/or surveys. The cost and expense of
     obtaining such title commitment, and any and all endorsements, affirmative
     insurance or modifications thereto, shall be borne by Buyer.

          (l) If requested by Buyer, the Company and its Subsidiaries shall use
     reasonable efforts to assist the Buyer at Buyer's cost and expense, in
     obtaining a non-imputation endorsement or similar title insurance coverage
     in favor of the Buyer with respect to each title insurance policy currently
     in effect with respect to any Company Properties including, without
     limitation, the execution of any affidavits or other documents, as
     reasonably required by each such title company, in order to induce each
     such title company to issue such endorsements or similar coverage.

          (m) The Buyer may obtain current surveys of all of the Company
     Properties as deemed necessary or advisable by the Buyer in its sole
     discretion. The cost and expense of such surveys shall be borne exclusively
     by Buyer. If the Buyer elects to obtain current surveys, such surveys shall
     (i) be prepared by a surveyor or engineer licensed in the state in which
     the specific Company Property is located (each such survey shall be
     prepared in accordance with the Minimum Standard Detail Requirements for
     ALTA/ACSM Land Title Surveys adopted by the American Land Title Association
     and the American Congress on Surveying & Mapping 1997, certified to the
     Buyer's title insurance company (if any), the Buyer, and mortgagee of the
     Buyer and such other parties as the Buyer may designate) and (ii) not
     disclose any matters relating to the Company's or its Subsidiaries' title
     to the subject Company Property which make any of the representations or
     warranties contained herein inaccurate.

          (n) Any material certificate or Permit from any Governmental Entity
     having jurisdiction over any of the Company Properties and any agreement,
     easement or other right which is necessary to permit the lawful use and
     operation of the buildings and improvements on any of the Company
     Properties or which is necessary to permit the lawful use and operation of
     all driveways, roads and other means of egress and ingress to and from any
     of the Company Properties which are currently occupied and are material to
     the operation of the property have been obtained and are in full force and
     effect. The Company is not in receipt of any notice of any material
     violation of any federal, state or municipal law, ordinance, order,
     regulation or requirement affecting any portion of any of the Company
     Properties issued by any Governmental Entity and which have not been fully
     remedied and discharged of record.

                                       23
<PAGE>

          (o) There are (i) to the Knowledge of the Company, no material
     structural defects relating to the Company Properties, (ii) to the best
     knowledge of the Company, no Company Properties whose building systems are
     not in working order in any material respect (except for normal maintenance
     and operating systems failures which in any event are the subject of
     adequate pending repair procedures), (iii) no instances of physical damage
     to any Company Property in excess of $100,000 for which there is no
     insurance in effect covering the cost of the restoration as of the date
     hereof or (iv) other than routine capital expenditures, no current
     renovations or restorations of any Company Property underway or for which
     contracts have been entered into the cost of which exceeds $250,000. There
     is no work other than routine capital expenditures currently in progress or
     contemplated at any of the Company Properties where the amount remaining to
     be paid to complete such work is in excess of $100,000.

          (p) Neither the Company nor any Company Subsidiary has received any
     written notice to the effect that, or has Knowledge of, (i) any
     condemnation, eminent domain, incorporation, annexation or moratorium or
     rezoning or similar proceedings pending or threatened with respect to any
     of the Company Properties or (ii) any zoning, building or similar law,
     code, ordinance, order or regulation is or will be violated in any material
     respect by the Company or its Subsidiaries by the continued maintenance,
     operation or use of any buildings or other improvements on any of the
     Company Properties as currently maintained, used or operated by the Company
     or its Subsidiaries or by the continued maintenance, operation or use of
     the parking areas as currently maintained, used or operated by the Company
     or its Subsidiaries which is not insured over and where the remedying of
     such violations would adversely affect (other than in an immaterial manner)
     the relevant Company Property. Neither the Company nor its Subsidiaries
     have received written notice from any Governmental Entity, any tenant under
     a Lease or any party to any other agreement or document, or otherwise has
     Knowledge, that the number of parking spaces at any Company Property is
     required under any legal requirement, any Lease, or any REA, to be
     increased above the number of parking spaces existing on the date hereof.

          (q) All work to be performed, payments to be made and actions to be
     taken by the Company or its Subsidiaries prior to the date hereof pursuant
     to any agreement entered into with a governmental body or authority in
     connection with a site approval, zoning reclassification or other similar
     action relating to the Company Properties (E.G., Local Improvement
     District, Road Improvement District, Environmental Mitigation) has been
     performed, paid or taken, as the case may be, in all material respects, and
     the Company is not aware of any planned or proposed work, payments or
     actions that may be required after the date hereof pursuant to such
     agreements.

          (r) The Company or its Subsidiaries own all personalty located at the
     Company Properties except (i) personalty owned by tenants and (ii) material
     personalty that is leased and identified on Schedule 3.13 of the Disclosure
     Letter. All improvements on the Company Properties are in good condition
     and repair (normal wear and tear excepted) and have not suffered any
     casualty or other material damage that has not been repaired in all
     material respects with respect to such Company Properties. To the Company's
     and its Subsidiaries' Knowledge, there is no material latent or patent
     structural, mechanical or other significant defect, soil condition or
     deficiency in the improvements located on the Company Properties.

                                       24
<PAGE>

          (s) All HVAC, electric, gas, fire-safety, plumbing, mechanical and
     other systems at each of the Company Properties are in good, working
     condition and no portion of the same presently require replacement or
     significant repair (I.E., repairs which are ordinarily capitalized under
     generally accepted accounting principles). Neither the Company nor any of
     its Subsidiaries has received any notice from any utility company or
     municipality of the possible discontinuation of currently available or
     otherwise necessary sewer, water, electric, gas, telephone or other
     utilities or services for the Company Properties.

          (t) The Company owns less than $50,000,000 of non-exempt assets as
     such term is construed under Section 802.4 of the rules and regulations
     promulgated under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
     as amended.

          (u) To the Company's Knowledge, the Company has provided Buyer with
     access to any and all certificates, licenses, permits, leases, subleases,
     occupancy agreements, ground leases, operating agreements, books, records,
     documents, contracts and information relating to the Company Properties and
     the ownership and operation thereof which are in possession and control of
     Company or any of its Subsidiaries.

          (v) There is no single item of furniture, equipment, vehicles,
     computers, asset (other than real property owned or leased by the Company
     and its Subsidiaries) having a value individually in excess of $150,000,
     owned by the Company and its Subsidiaries and none of such assets is in
     need of repair or replacement, other than in the ordinary course of
     business.

          (w) There are no tax abatements or exemptions specifically affecting
     the Company Properties, and the Company and its Subsidiaries has not
     received any written notice of (and the Company and its Subsidiaries do not
     have any Knowledge of) any proposed increase in the assessed valuation of
     the Company Properties or of any proposed public improvement assessments
     which abatements, exemptions, assessments or increases in valuation could
     reasonably be expected to have a Company Material Adverse Effect. None of
     the Company Properties are located in any conservation or historic
     district, or are historically certified, subject to historic preservation
     rules, regulations or requirements or designated as a landmark. No
     application or proceeding for any such certification or designation is
     pending or, to the Company's or its Subsidiaries' Knowledge, is threatened.
     To the Knowledge of the Company, none of the Company Properties are located
     in an area that has been identified as having special flood hazards.

          (x) The Company shall pay all recording fees, transfer taxes or other
     similar taxes, if any, payable in connection with the Company Properties by
     reason of the transactions contemplated herein.

     Section 3.14. ENVIRONMENTAL MATTERS. Except as set forth under the
appropriate subsection in Schedule 3.14 of the Disclosure Letter:

          (a) The activities and operations carried out by the Company and its
     Subsidiaries and, to the Knowledge of the Company, the activities and
     operations of all tenants and subtenants at the Company Properties are in
     compliance in all material respects with all applicable Environmental Laws.

                                       25
<PAGE>

          (b) No lien of record, deed or use restriction has been imposed on any
     of the Company Properties by any Governmental Entity under, any
     Environmental Law.

          (c) None of the Company and its Subsidiaries has received written
     notice or has Knowledge (i) of any pending or threatened litigation, claim,
     investigation or proceeding before any Governmental Entity against the
     Company or any Subsidiary under any Environmental Law or (ii) that the
     Company or any Subsidiary has any material liability or potential liability
     under any Environmental Law, or pursuant to any written agreement or, to
     the Knowledge of the Company, oral agreement in connection with any of the
     Company Properties, any previously owned or operated properties, or any
     activities or operations conducted by or on behalf of, or otherwise
     attributable to, the Company or any Subsidiary, or any of their respective
     predecessors.

          (d) To the Company's Knowledge, no hazardous substance including,
     without limitation, any flammable, explosive, radioactive material,
     hazardous waste, hazardous and toxic substance, asbestos-containing
     material, petroleum, or any other substance regulated by any Environmental
     Law as hazardous, toxic, dangerous or detrimental to human health and
     safety (collectively, "Hazardous Materials"), has been disposed of, or
     released in violation of any Environmental Law in or on the Company
     Properties.

          (e) There is no release of Hazardous Material present in, on or under
     any Company Properties, which is required to be reported, investigated,
     removed, remediated, monitored or otherwise addressed under any
     Environmental Law which could reasonably be expected to result in a
     material liability to the Company or any of its Subsidiaries or have a
     material adverse effect on the value or use of the affected property.

          (f) Any underground Hazardous Materials storage tanks presently or
     formerly located on any of the Company Properties have been closed, removed
     or upgraded in compliance in all material respects with Environmental Laws,
     and any contamination related to or released from such tanks, which could
     reasonably be expected to result in a material liability to the Company or
     any of its Subsidiaries or have a material adverse effect on the value or
     use of the affected property, has been remediated in accordance with
     Environmental Laws.

          (g) There are no dry cleaning establishments currently located on the
     Company Properties and to the Knowledge of the Company no dry cleaning
     establishments were formerly located on the Company Properties.

          (h) None of the Company Properties is listed or proposed for listing
     on the National Priorities List pursuant to CERCLA or the Comprehensive
     Environmental Response Compensation Liability List ("CERCLIS") or any
     analogous state lists.

          (i) To the Company's knowledge, no Hazardous Materials have been
     released in, on or under any property adjacent to any of the Company
     Properties which will result in any liability to the Company or Company
     Subsidiaries or in any diminution in value of any of the Company Properties
     which could reasonably be expected to result in a material liability to the
     Company or any of its Subsidiaries or have a material adverse effect on the
     value or use of the affected property.

                                       26
<PAGE>

          (j) The Company has provided all environmental assessments, audits,
     investigations, reports and similar information in its possession or in the
     possession of its representatives and/or agents to Buyer.

     Section 3.15. EMPLOYEE BENEFIT PLANS.

          (a) Schedule 3.15 of the Disclosure Letter sets forth all "employee
     benefit plans", as defined in Section 3(3) of Employee Retirement Income
     Security Act of 1974, as amended ("ERISA"), and all other material employee
     benefit arrangements, policies or payroll practices, including, without
     limitation, severance, sick leave, vacation pay, salary continuation for
     disability, retirement, deferred compensation, bonus, incentive, change of
     control, parachute, stock purchase, stock option, medical insurance, life
     insurance, tuition reimbursement and scholarship programs maintained for
     the benefit of, or to which contributions are made on behalf of, current or
     former employees of the Company. Such plans, arrangements, policies,
     programs and practices shall hereinafter be referred to as the "Plans".

          (b) None of the Plans is a "multiemployer plan", as defined in Section
     3(37) of ERISA ("Multiemployer Plan"). Neither the Company nor any trade or
     business (whether or not incorporated) which is or has ever been treated as
     a single employer with the Company under Section 414(b), (c), (m) or (o) of
     the Code ("ERISA Affiliate") has incurred any liability due to a complete
     or partial withdrawal from a Multiemployer Plan or due to the termination
     or reorganization of a Multiemployer Plan, except for any such liability
     which has been satisfied in full, and no events have occurred and no
     circumstances exist that could reasonably be expected to result in any such
     liability to the Company or any ERISA Affiliate.

          (c) None of the Plans is a "single-employer plan", as defined in
     Section 4001(a)(15) of ERISA ("Pension Plan"). Neither the Company nor any
     ERISA Affiliate has any outstanding liability under Section 4062 of ERISA
     to the Pension Benefit Guaranty Corporation or to a trustee appointed under
     Section 4042 of ERISA or under any other provision of Title IV of ERISA,
     and no events have occurred and no circumstances exist that could
     reasonably be expected to result in any such liability to the Company or
     any ERISA Affiliate. With respect to any plan sponsored by, or to which
     contributions are required of, the Company or any ERISA Affiliate, there
     does not exist any accumulated funding deficiency within the meaning of
     Section 412 of the Code or Section 302 of ERISA, whether or not waived.

          (d) Each of the Plans that are intended to qualify under Section
     401(a) of the Code, and the trusts maintained pursuant thereto, have been
     determined to be so qualified and exempt from federal income taxation under
     Section 501 of the Code by the IRS, and nothing has occurred with respect
     to the operation of any such Plans which could reasonably cause the loss of
     such qualification or tax exemption or the imposition of any material
     liability, penalty or tax under ERISA or the Code.

          (e) All contributions (including all employer contributions and
     employee contributions) required to have been made under the Plans or by
     law to any funds or trusts established thereunder or in connection
     therewith have been made by the due date thereof (including any valid
     extension), and all contributions for any period ending on or before the
     Closing Date which are not yet due will have been paid or accrued by the
     Closing Date.

                                       27
<PAGE>

          (f) There has been no material violation of ERISA or the Code with
     respect to the filing of applicable documents, notices or reports
     (including, but not limited to, annual reports filed on IRS Form 5500)
     regarding the Plans with the Department of Labor or the IRS, or the
     furnishing of such required documents to the participants or beneficiaries
     of the Plans.

          (g) True, correct and complete copies of the following documents, with
     respect to each of the Plans, have been made available to Buyer: (i) the
     plan and its related trust document, including any amendments thereto, (ii)
     the most recent IRS Forms 5500 filed with the IRS and (iii) current summary
     plan descriptions.

          (h) There are no pending actions, claims or lawsuits which have been
     asserted or instituted against the Plans, the assets of any of the trusts
     under such Plans or the Plans' sponsor or administrator, or to the
     Knowledge of the Company against any fiduciary of the Plans with respect to
     such Plans (other than routine benefit claims).

          (i) The Plans have been maintained, in all material respects, in
     accordance with their express terms and with all provisions of ERISA and
     the Code (including rules and regulations thereunder) and other applicable
     federal and state laws and regulations, and neither the Company nor any
     ERISA Affiliate has engaged in, or has Knowledge that a "party interest" or
     a "disqualified person" has engaged in, a "prohibited transaction", as
     defined in Section 4975 of the Code or Section 406 of ERISA, or taken any
     actions, or failed to take any actions, which could reasonably result in
     any material liability under ERISA or the Code. To the Knowledge of the
     Company, no fiduciary has any liability for breach of fiduciary duty or any
     other failure to act or comply in connection with the administration or
     investment of the assets of any of the Plans.

          (j) None of the Plans provide retiree health or life insurance
     benefits except as may be required by Section 4980B of the Code and Section
     601 of ERISA, any other applicable law or at the expense of the participant
     or the participant's beneficiary.

          (k) Except as set forth in Schedule 3.15(k) of the Disclosure Letter,
     neither the execution and delivery of this Agreement nor the consummation
     of the transactions contemplated hereby will (either alone or in connection
     with any subsequent event or act): (i) result in any material payment
     becoming due to any current or former employee of the Company, (ii)
     increase any benefits otherwise payable under any of the Plans, (iii)
     result in the acceleration of the time of payment or vesting of any
     benefits provided under any of the Plans, (iv) constitute a "change in
     control" under any Plan or (v) result in any payment by the Company that
     will not be deductible under Section 280G of the Code.

     Section 3.16. EMPLOYEE AND LABOR MATTERS.

          (a) Neither the Company nor any Subsidiary is a party to any labor or
     collective bargaining agreement and there are no labor or collective
     bargaining agreements which pertain to employees of the Company or any
     Subsidiary.

          (b) No employees of the Company or any Subsidiary are represented by
     any labor organization. No labor organization or group of employees of the
     Company or any

                                       28
<PAGE>

     Subsidiary has made a pending written demand for recognition or
     certification, and to the Knowledge of the Company, there are no
     representation or certification proceedings presently pending or threatened
     in writing to be brought or filed with the National Labor Relations Board
     or any other labor relations tribunal or authority. To the Knowledge of the
     Company, there are no organizing activities involving the Company or any
     Subsidiary pending with any labor organization or group of employees of the
     Company or any Subsidiary.

          (c) There are no strikes, work stoppages, slowdowns, lockouts,
     material arbitrations or material grievances or other material labor
     disputes pending or threatened in writing against or involving the Company
     or any Subsidiary. There are no unfair labor practice charges, grievances
     or complaints pending or threatened in writing by or on behalf of any
     employee or group of employees of the Company or any Subsidiary which, if
     individually or collectively resolved against the Company or any
     Subsidiary, as the case may be, could result in a material liability.

          (d) There are no complaints, charges or claims against the Company or
     any Subsidiary pending or threatened in writing to be brought or filed with
     any public or governmental entity, arbitrator or court based on, arising
     out of, in connection with, or otherwise relating to the employment or
     termination of employment by the Company or any of its Subsidiaries of any
     individual.

          (e) The Company and each Company Subsidiary are in compliance with all
     laws, regulations and orders relating to the employment of labor, including
     all such laws, regulations and orders relating to wages, hours, collective
     bargaining, discrimination, civil rights, safety and health, workers'
     compensation and the collection and payment of withholding and/or social
     security taxes and any similar employment tax except for immaterial
     non-compliance.

     Section 3.17. INSURANCE. Schedule 3.17 of the Disclosure Letter sets forth
all primary, excess and umbrella policies of general liability, fire, workers'
compensation, products liability, completed operations, employers' liability,
bonds and other forms of insurance providing insurance coverage to the Company
and its Subsidiaries including the name of insurer, limits of liability, per
occurrence and annual aggregate, if any, or combined single limit as applicable.
To the Company's Knowledge, all current policies set forth on Schedule 3.17 of
the Disclosure Letter are in full force and effect, and all premiums currently
payable or previously due and payable have been paid and no notice of
cancellation or termination has been received with respect to any such policy.
None of such policies contain a provision that would permit the termination,
limitation, lapse, exclusion, or change in the terms of coverage (including,
without limitation, a change in the limits of liability) by reason of the
consummation of the transactions contemplated by this Agreement. Except as set
forth in Schedule 3.17 of the Disclosure Letter, neither the Company nor any of
its Subsidiaries has received written notice from any insurance carrier
regarding defects or inadequacies in any Company Property, which, if not
corrected, would result in termination of the insurance coverage therefor or an
increase in the cost thereof.

     Section 3.18. NO BROKERS. The Company has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company or Buyer to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the

                                       29
<PAGE>

transactions contemplated hereby. The Company is not aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby. The Company and its
Subsidiaries hereby indemnify and hold Buyer harmless from and against all loss,
liability or expense (including, without limitation, reasonable attorneys fees
and disbursements) arising out of any claim or claims by any broker, finder or
similar agent for commissions, fees or other compensation in connection with
this transaction as a result of any breach of this Section 3.18.

     Section 3.19. PROXY STATEMENT AND OTHER INFORMATION. The Proxy Statement
and all of the information included or incorporated by reference therein (other
than any information supplied or to be supplied by Buyer for inclusion or
incorporation by reference therein) and any other documents to be filed by the
Company with the SEC or any other Governmental Entity in connection with
Stockholder Approval and the other transactions contemplated by this Agreement
will not, as of the date such Proxy Statement is first mailed to the
stockholders of the Company and as of the time of the meeting of the
stockholders of the Company in connection with the transactions contemplated
hereby, 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 are made, not
misleading. The Proxy Statement and such other documents filed with the SEC
under the Securities Laws will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated by
the SEC thereunder.

     Section 3.20. VOTE REQUIRED. The affirmative vote of the holders of a 66
2/3% of the outstanding shares of Merger Sub capital stock is required to
approve the Merger. A majority of the votes cast at the Company's Stockholder
Meeting by the holders of the outstanding Company Common Shares and Company
Series A Preferred Shares, voting together as a single class, is required to
approve (i) the issuance of Company Common Shares in connection with the Merger
Agreement and (ii) the transactions contemplated by this Agreement, other than
the Amended Articles of Incorporation. A majority of the outstanding votes
entitled to be cast by the holders of the outstanding Company Common Shares and
Company Series A Preferred Shares, voting together as a single class, is
required to approve the Amended Articles of Incorporation. No other vote of the
holders of any class or series of the Company securities is necessary to approve
the Transaction Documents and the transactions contemplated hereby and thereby.

     Section 3.21. OPINION OF FINANCIAL ADVISOR. The Company has received the
written opinion of American Appraisal Associates, to the effect that the
transactions contemplated by the Merger Agreement are fair to the Company from a
financial point of view. The Company has been authorized by such firm to permit
inclusion of such opinion, required descriptions thereof and its analysis in the
Proxy Statement.

     Section 3.22. RELATED PARTY TRANSACTIONS. Schedule 3.22 of the
Disclosure Letter sets forth a list of all arrangements, agreements and
contracts entered into by the Company or any of its Subsidiaries with any
person who is an officer, director or Affiliate of the Company or any of its
Subsidiaries, any relative of any of the foregoing or any entity of which any
of the foregoing is an Affiliate since December 31, 1998. The copies of such
documents, all of which have previously been made available to Buyer, are
true and correct. Except as set forth in Schedule

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<PAGE>

3.22 of the Disclosure Letter, no Affiliate of the Company (a) has any interest
of any kind in any Company Property or (b) directly or indirectly owns any
property which is adjacent to or in proximity with any Company Property. Except
as set forth in Schedule 3.22 of the Disclosure Letter or as otherwise
contemplated hereby or by the Voting Stockholders Agreement, to the Knowledge of
the Company, there exist no agreements among stockholders of the Company to act
in concert with respect to their voting or holding of Company securities.

     Section 3.23. CONTRACTS AND COMMITMENTS.

          (a) Schedule 3.23 of the Disclosure Letter sets forth all notes,
     debentures, bonds and other evidence of indebtedness and all guaranties of
     indebtedness of the Company and the Company Subsidiaries and identifies
     those which are secured or collateralized by mortgages, deeds of trust or
     other security interests in the Company Properties or personal property of
     the Company and its Subsidiaries. None of the Company or any Company
     Subsidiary has received any written notice of a default that has not been
     cured under any of the documents described in Schedule 3.23 of the
     Disclosure Letter or is in material default respecting any obligations
     thereunder beyond any applicable grace periods, and to the Knowledge of the
     Company, no event has occurred with respect to any party thereto which,
     with notice or the lapse of time, or both, would give rise to a material
     event of default. All options of the Company or any of its Subsidiaries to
     purchase real property are in full force and effect. Neither the Company
     nor any Company Subsidiary is in default with respect to any obligations,
     which individually or in the aggregate are material with respect to any
     joint venture agreement to which the Company or any Company Subsidiary is a
     party.

          (b) Except as disclosed in Schedule 3.23 of the Disclosure Letter, as
     of the date hereof, there are no outstanding contractual obligations of the
     Company or any Company Subsidiary to provide funds to, or to make any
     investment (in the form of a loan, capital contribution or otherwise) in
     any person.

     Section 3.24. MARYLAND TAKEOVER LAW. The terms of Sections 3-601 to 3-605
and 3-701 to 3-709 of the Maryland General Corporation Law will not apply to
Buyer or any transaction contemplated hereby. The resolutions in the form of
EXHIBIT E hereto have been adopted by the Company and have not been rescinded or
revoked.

     Section 3.25. INTELLECTUAL PROPERTY.

          (a) The Company and its Subsidiaries own all right, title and interest
     in and to, or have a valid and enforceable license to use, all the
     Intellectual Property used by them in connection with their respective
     businesses, which represents all intellectual property rights necessary to
     the conduct of such businesses as currently conducted. The Company and its
     Subsidiaries are in compliance in all material respects with all
     contractual obligations relating to the protection of such Intellectual
     Property. To the Knowledge of the Company, there are no conflicts with or
     infringements of any Intellectual Property by any third party. The conduct
     of the business of the Company or any of its Subsidiaries as currently
     conducted does not, to the Knowledge of the Company, conflict with or
     infringe any proprietary right of any third party. There is no claim, suit,
     action or proceeding pending or, to the Knowledge of the Company,
     threatened against the Company or any of its Subsidiaries that (i) alleges
     any such conflict or

                                       31
<PAGE>

     infringement with any third party's proprietary rights or (ii) challenges
     the Company's or any of its Subsidiaries' ownership or use of, or the
     validity or enforceability of any Intellectual Property.

          (b) Schedule 3.25 of the Disclosure Letter sets forth a complete and
     current list of registrations/patents and applications therefor pertaining
     to the Intellectual Property ("Listed Intellectual Property") and the owner
     of record, date of application or issuance and relevant jurisdiction as to
     each. All Listed Intellectual Property is owned by the Company or its
     Subsidiaries, free and clear of Encumbrances or claims of any nature other
     than Permitted Encumbrances. All Listed Intellectual Property is valid,
     subsisting, unexpired, in proper form and enforceable and all renewal fees
     and other maintenance fees that have fallen due on or prior to the
     effective date of this Agreement have been paid. No Listed Intellectual
     Property is the subject of any legal or governmental proceeding before any
     Governmental Entity in any jurisdiction, including any office action or
     other form of preliminary or final refusal of registration.

          (c) Schedule 3.25 of the Disclosure Letter sets forth a complete list
     of all (i) licenses, sublicenses and other agreements in which the Company
     or any of its Subsidiaries or any sublicensee of the Company or any of its
     Subsidiaries has granted to any person the right to use any Intellectual
     Property and (ii) all other consents, indemnifications, forbearances to
     sue, settlement agreements and licensing or cross-licensing arrangements to
     which the Company or any of its Subsidiaries is a party relating to the
     Intellectual Property or the proprietary rights of any third party. Neither
     the Company nor any of its Subsidiaries is under any obligation to pay
     royalties or other payments in connection with any license, sublicense or
     other agreement or restricted from assigning their rights respecting any
     Intellectual Property, nor will the Company or any of its Subsidiaries be,
     as a result of the execution and delivery of this Agreement or the
     performance of the Company's obligations under this Agreement, in material
     breach of any license, sublicense or other agreement relating to the
     Intellectual Property.

          (d) No former or present employee, officer or director of the Company
     or any of its Subsidiaries, or agent or outside contractor of the Company
     or any of its Subsidiaries, holds any right, title or interest, directly or
     indirectly, in whole or in part, in or to any Intellectual Property.

          (e) To the Knowledge of the Company, none of the Intellectual Property
     has been used, disclosed or appropriated to the detriment of the Company or
     any of its Subsidiaries for the benefit of any person other than the
     Company or any of its Subsidiaries, and no employee, independent contractor
     or agent of the Company or any of its Subsidiaries has misappropriated any
     trade secrets or other confidential information of any other person in the
     course of the performance of his or her duties as an employee, independent
     contractor or agent of the Company or any Subsidiary.

          (f) To the Knowledge of the Company, neither the Company's nor any
     Subsidiary's transmission, reproduction, use, display or modification
     (including framing and linking Web site content) of any of its Intellectual
     Property infringes or violates any proprietary or other right of any other
     person and, to the Knowledge of the Company, no claim relating to such
     infringement or violation is threatened or pending.

                                       32
<PAGE>

          (g) The Company and all its Subsidiaries own or have the right to use,
     disclose and transfer, without the consent of any other person, all
     computer software, software systems and databases and all other information
     systems used in their respective businesses.

          Section 3.26. INVESTMENT COMPANY. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

          Section 3.27. FULL DISCLOSURE. The Company has not knowingly failed
to disclose to Buyer any facts material to the Company's business, results of
operations, assets, liabilities, financial condition or prospects. No
representation or warranty by the Company in this Agreement and no statement
by the Company in any document referred to herein (including the Schedules
and Exhibits hereto), contains any untrue statement of a material fact or
omits to state any material fact necessary, in order to make the statement
made herein or therein, in light of the circumstances under which they were
made, not misleading.

                                  ARTICLE IV.

                     REPRESENTATIONS AND WARRANTIES OF BUYER

     Each Warburg Entity hereby represents and warrants jointly and severally to
the Company as follows:

     Section 4.1. ORGANIZATION. It is a limited partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. It has all requisite partnership power and authority to own,
operate, lease and encumber its properties and to carry on its business as now
conducted, and to enter into the Transaction Documents and to perform its
obligations hereunder and thereunder.

     Section 4.2. DUE AUTHORIZATION. The execution, delivery and performance of
the Transaction Documents have been duly and validly authorized by all necessary
partnership action on its part. This Agreement and the Voting Stockholders
Agreement have been duly executed and delivered by it and, upon the Closing, the
Registration Rights Agreement shall be duly executed and delivered by it and,
upon execution and delivery by the Company, constitute the valid and legally
binding obligations of it, enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
or general principles of equity.

     Section 4.3. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the
execution and delivery of this Agreement nor the consummation by it of the
transactions contemplated hereby in accordance with the terms hereof will (a)
conflict with, violate or result in a breach of (i) any provision of its
partnership agreement or its Certificate of Limited Partnership any statute,
law, rule, ordinance, regulation, judgment, order, writ, decree, permit or
injunction or (ii) of any Governmental Entity applicable to such Warburg Entity,
or (b) require any consent, approval or other action by or any notice to or
filing with any Governmental Entity pursuant to, its organizational documents or
any instrument, order, judgment, decree, statute, law, rule or regulation of any
Governmental Entity by which Buyer is bound, except for filings after any
Closing under Section 13(d) or Section 16 of the Exchange Act.

                                       33
<PAGE>

     Section 4.4. ACQUISITION FOR INVESTMENT; SOPHISTICATION.

          (a) It is acquiring the Securities for its own account for the purpose
     of investment and not with a view to or for sale in connection with any
     distribution thereof, and it has no present intention or plan to effect any
     distribution of the Securities; provided that the disposition of the
     Company Series B Preferred Shares and the Company Common Shares purchased
     pursuant to the Warrants owned by it shall at all times be and remain
     within its control, subject to the provisions of this Agreement and the
     Registration Rights Agreement; and provided further that it shall have the
     right at all times to sell or otherwise dispose of all or any part of such
     securities under a registration under the Securities Act (subject to the
     terms of the Registration Rights Agreement) or under an exemption from said
     registration available under the Securities Act. The certificate(s)
     representing the Securities shall bear a prominent legend with respect to
     the restrictions on transfer under the Securities Act and under applicable
     state securities laws and the restrictions set forth in the Charter
     Documents with respect to REIT ownership restrictions. Prior to any
     proposed transfer of the Securities, unless such transfer is made pursuant
     to an effective registration statement under the Securities Act, Buyer will
     deliver to the Company an opinion of counsel to the effect that the
     Securities may be sold or otherwise transferred without registration under
     the Securities Act. The Company will remove the legend relating to
     Securities Act restrictions from any Securities if Buyer delivers to the
     Company an opinion of counsel, reasonably satisfactory in form and
     substance to the Company, to the effect that such Securities are no longer
     subject to transfer restrictions under the Securities Act. Upon original
     issuance thereof, and until such time as the same shall have been
     registered under the Securities Act or sold pursuant to Rule 144
     promulgated thereunder (or any similar rule or regulation), each
     certificate for the Company Series B Preferred Shares and the Warrant(s)
     shall bear a restricted securities legend and the REIT share ownership
     legend referred to above. It is able to bear the economic risk of the
     acquisition of the Securities pursuant hereto and can afford to sustain a
     total loss on such investment, and has such knowledge and experience in
     financial and business matters that it is capable of evaluating the merits
     and risks of the proposed investment.

          (b) It is an "accredited investor" as such term is defined in
     Regulation D promulgated under the Securities Act.

     Section 4.5. REIT QUALIFICATION MATTERS. With respect to each Warburg
Entity, the representations, certificates, warranties and covenants set forth in
Exhibit G hereto are true, correct and complete.

     Section 4.6. ACCESS TO INFORMATION. It acknowledges receipt of the Company
Reports and Disclosure Letter and further acknowledges that it has reviewed the
Company Reports and Disclosure Letter and has been afforded (a) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
transactions contemplated hereby and the merits and risks of investing in the
Securities, (b) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment and (c) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to

                                       34
<PAGE>

verify the accuracy and completeness of the information contained in the Company
Reports and the Disclosure Letter. Neither such inquiries nor any other
investigation conducted by or on behalf of Buyer or its representatives or
counsel shall modify, amend or affect Buyer's right to rely on the truth,
accuracy and completeness of the Company Reports and the Disclosure Letter and
the Company's representations and warranties contained in this Agreement.

     Section 4.7. ACCURACY OF INFORMATION. The information regarding such
Warburg Entity supplied or to be supplied by it for inclusion or incorporation
by reference into the Proxy Statement will not, as of the date such Proxy
Statement is first mailed to the stockholders of the Company and as of the
meeting of the stockholders of the Company in connection with the transactions
contemplated hereby, 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 are
made, not misleading.

                                   ARTICLE V.

                         COVENANTS RELATING TO CLOSINGS

     Section 5.1. TAKING OF NECESSARY ACTION.

          (a) Each party hereto agrees to use its commercially reasonable
     efforts to take or cause to be taken all action 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 the Transaction Documents, subject to the terms and conditions hereof
     and thereof, including all actions and things necessary to cause all
     conditions precedent set forth in Article 7 to be satisfied.

          (b) As promptly as practicable after the date hereof, the Company
     shall prepare and file with the SEC a preliminary proxy statement, as may
     be amended or supplemented (as amended and supplemented the "Proxy
     Statement") by which the Company's stockholders will be asked to approve,
     among other things, (i) an amendment and restatement to the Articles of
     Incorporation (the "Amended Articles of Incorporation"), the form of which
     is attached hereto as EXHIBIT F, (ii) issuance of Company Common Shares in
     connection with the Merger Agreement and (iii) the transactions
     contemplated by this Agreement, including but not limited to the issuance
     of Company Series B Preferred Shares pursuant to this Agreement (the
     "Voting Proposals"). The Company shall use its reasonable efforts to
     respond to any comments of the SEC, and to cause the Proxy Statement to be
     mailed to the Company's stockholders at the earliest practicable time. As
     promptly as practicable after the date hereof, the Company shall prepare
     and file any other filings required of the Company or its Subsidiaries
     under the Exchange Act, the Securities Act or any other federal, state or
     local laws relating to this Agreement and the transactions contemplated
     hereby, and state takeover laws (the "Other Filings"). The Company and
     Buyer will notify each other of the receipt of any comments from the SEC or
     its staff and of any request by the SEC or its staff or any other
     government officials for amendments or supplements to the Proxy Statement
     or any Other Filing or for additional information and will supply each
     other with copies of all correspondence between each of them or any of
     their respective representatives, on the one hand, and the SEC or its staff
     or any other government officials, on the other hand, with respect to the
     Proxy Statement or any Other Filing. The Proxy

                                       35
<PAGE>

     Statement and any Other Filing shall comply in all material respects with
     all applicable requirements of law. Buyer shall provide the Company all
     information about Buyer required to be included or incorporated by
     reference in the Proxy Statement or any Other Filing and shall otherwise
     cooperate with the Company in taking the actions described in this
     paragraph. Whenever any event occurs which is required to be set forth in
     an amendment or supplement to the Proxy Statement or any Other Filing, the
     Company or Buyer, as the case may be, shall inform the other party of such
     occurrence and cooperate in filing with the SEC or its staff or any other
     government officials, and/or mailing to stockholders of the Company, such
     amendment or supplement. Subject to Section 5.3 herein, the Proxy Statement
     shall include the recommendation of the Board that the stockholders of the
     Company vote in favor of and approve the Voting Proposals. The Company
     shall use its best efforts to obtain such approval.

          (c) The Company shall call a meeting of its stockholders (the "Company
     Stockholders Meeting") to be held as promptly as practicable after the date
     hereof, for the purpose of voting on the Voting Proposals, provided that
     should a quorum not be obtained at such meeting of the stockholders, the
     meeting of the stockholders shall be postponed or adjourned in order to
     permit additional time for soliciting and obtaining additional proxies or
     votes. At such meeting, the Company shall use its best efforts to solicit
     from holders of Company Common Shares and Company Series A Preferred Shares
     proxies in favor of the Voting Proposals. The Company agrees that it shall
     vote, or cause to be voted, in favor of the Voting Proposals all Company
     Common Shares and Company Series A Preferred Shares directly or indirectly
     owned by it.

     Section 5.2. PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure
obligations imposed by law and any stock exchange or similar rules and the
confidentiality provisions contained in this Section 5.9, the Company and Buyer
will cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to the
Transaction Documents and any of the transactions contemplated hereby or
thereby. If a party is required by law or any stock exchange or similar rule to
issue a news release or other public announcement, it shall advise the other
party in advance thereof and use reasonable efforts to cause a mutually
agreeable release or announcement to be issued.

     Section 5.3. NO SOLICITATION OF TRANSACTIONS.

          (a) Unless and until this Agreement is terminated in accordance with
     its terms, neither the Company nor its Subsidiaries shall, directly or
     indirectly, through any officer, director, agent or otherwise, initiate,
     solicit or knowingly encourage (including by way of furnishing non-public
     information or assistance), or take any other action to facilitate
     knowingly, any inquiries or the making of any proposal that constitutes, or
     may reasonably be expected to lead to, any Competing Transaction, or enter
     into or maintain or continue discussions or negotiate with any person or
     entity in furtherance of such inquiries or to obtain a Competing
     Transaction, or agree to or endorse any Competing Transaction, or authorize
     or knowingly permit any of the officers, directors or employees of such
     party or any of its Subsidiaries or any investment banker, financial
     advisor, attorney, accountant or other representative retained by such
     party or any of such party's Subsidiaries to take any such action, and the
     Company immediately shall notify Buyer orally (within 24 hours) and in
     writing (within 48 hours) of all of the relevant details relating to all
     inquiries and proposals which any officer or director of the

                                       36
<PAGE>

     Company may receive relating to any of such matters including, without
     limitation, the identity of the person making such inquiry or proposal and
     all accompanying information and if such inquiry or proposal is in writing,
     the Company shall deliver to Buyer a copy of such inquiry or proposal;
     PROVIDED HOWEVER, that nothing contained in this Section 5.3 or any other
     provision hereof shall prohibit the Company or the Board of Directors from
     taking and disclosing to the Company's stockholders a position with respect
     to a tender or exchange offer by a third party pursuant to Rules 14d-9 and
     14e-2 promulgated under the Exchange Act. The Company shall promptly
     provide to Buyer any non-public information regarding the Company provided
     to any other party which was not previously provided to Buyer.

          (b) Notwithstanding the foregoing, prior to the termination of this
     Agreement, the Company may furnish information concerning its business,
     properties or assets to any Person pursuant to appropriate confidentiality
     agreements, and may negotiate and participate in discussions and
     negotiations with such Person concerning a Competing Transaction (PROVIDED
     that the Company shall not agree to any exclusive right to negotiate with
     the Company) if (x) such entity or group has on an unsolicited basis
     submitted a bona fide written proposal to the Company relating to any such
     transaction that provides for consideration which the Board determines in
     good faith, after receiving an opinion from a nationally recognized
     investment banking firm, is more favorable to the Company and its
     stockholders than the terms of this Agreement (taking into account all
     relevant factors) and which is not conditioned upon obtaining additional
     financing not fully committed at such time, and (y) in the opinion of the
     Board, after receiving advice from outside legal counsel to the Company,
     the failure to provide such information or access or to engage in such
     discussions or negotiations could reasonably cause the Board of Directors
     to breach its duties to the Company's stockholders under applicable law (a
     Competing Transaction which satisfies clauses (x) and (y) being referred to
     herein as a "Superior Proposal"). The Company shall promptly provide to
     Buyer any nonpublic information regarding the Company provided to any other
     party which was not previously provided to Buyer. If the Company, after
     consultation with outside legal counsel, believes that a breach of its
     duties to the Company's stockholders could reasonably occur, the Board may
     (subject to this and the following sentences) inform the Company's
     stockholders that it no longer believes that consummating the transaction
     contemplated by this Agreement is in the best interests of the Company's
     stockholders and no longer recommends approval (a "Subsequent
     Determination"), but only at a time that is after the fifth business day
     following Buyer's receipt of written notice advising that the Board of
     Directors has received a Superior Proposal specifying the material terms
     and conditions of such Superior Proposal (and including a copy thereof with
     all accompanying documentation), identifying the Person making such
     Superior Proposal and stating that it intends to make a Subsequent
     Determination. Notwithstanding anything herein to the contrary, prior to
     and including such fifth day the Company may make such public disclosure
     that is in its good faith view, after consultation with outside legal
     counsel, required under the Federal securities laws. After providing such
     notice, the Company shall provide a reasonable opportunity to Buyer to make
     such adjustments in the terms and conditions of this Agreement as would
     enable the Company to proceed with its existing recommendation to its
     stockholders without a Subsequent Determination. At any time after five
     business days following notification to Buyer of the Company's intent to do
     so and if the Company has otherwise complied with the terms of this Section
     5.3(b), the Board of Directors may terminate this Agreement pursuant to
     Section 9.1(g) and enter into an agreement with respect to a Superior
     Proposal; PROVIDED that the

                                       37
<PAGE>

     Company shall, concurrently with entering into such agreement, pay or cause
     to be paid to Buyer the Termination Fee (as defined in Section 9.2(b)
     hereof). Notwithstanding any other provision of this Agreement, unless the
     Agreement is previously terminated, the Company shall submit this Agreement
     to its stockholders, whether or not the Board makes a Subsequent
     Determination or otherwise withdraws, modifies or fails to make or refrains
     from making its existing recommendation.

          (c) Except as set forth in Section 5.3(b), neither the Board nor any
     committee thereof shall (i) withdraw or modify, or propose to withdraw or
     modify, in a manner adverse to Buyer, the approval or recommendation by the
     Board or any such committee the transaction contemplated by this Agreement,
     (ii) approve or recommend, or propose to approve or recommend, any
     Competing Transaction or (iii) enter into any agreement with respect to any
     Competing Transaction.

     Section 5.4. NOTICE OF BREACHES. Each party will notify the other of any
event, transaction or circumstance, as soon as practical after it becomes known
to such party, that causes or will cause any covenant or agreement of such party
under this Agreement to be breached or that renders or will render untrue any
representation or warranty of such party contained in this Agreement. Each party
also will notify the other in writing of any violation or breach, as soon as
practical after it becomes known to such party, of any covenant or agreement
made by such party. No notice given pursuant to this paragraph shall have any
effect on the covenants or agreements contained in this Agreement for purposes
of determining satisfaction of any condition contained herein.

     Section 5.5. ACCESS TO INFORMATION. The Company shall, and shall cause each
of its Subsidiaries to, throughout the period from the date hereof until the
Closing has been made, (i) provide Buyer and its Representatives with full
access, upon reasonable prior notice and during normal business hours, to all
officers, employees, agents and accountants of the Company and its Subsidiaries
and their respective assets, properties and material books and records, but only
to the extent that such access does not unreasonably interfere with the business
and operations of the Company and its Subsidiaries, and (ii) furnish promptly to
such persons (x) a copy of each report, statement, schedule and other document
filed or received by the Company or any of its Subsidiaries pursuant to the
requirements of federal or state securities laws and each material report,
statement, schedule and other document filed with any other Governmental Entity
and (y) all other information and data (including, without limitation, copies of
Contracts, Plans and other material books and records and environmental
assessments, investigations or studies concerning the properties of such party
or the business or operations conducted thereon) concerning the business and
operations of the Company and its Subsidiaries as the other party or any of such
other persons reasonably may request. No investigation pursuant to this
paragraph or otherwise shall affect any representation or warranty contained in
this Agreement or any condition to the obligations of the parties hereto.

     Section 5.6. REGULATORY AND OTHER APPROVALS. Subject to the terms and
conditions of this Agreement and without limiting the provisions of Section
5.1(c), each party will proceed diligently and in good faith to, as promptly as
practicable, (a) obtain all consents, approvals or actions of, make all filings
with and give all notices to Governmental Entities or any other public or
private third parties required to consummate the issuance of the Company Series
B Preferred

                                       38
<PAGE>

Shares and the other matters contemplated hereby and (b) provide such other
information and communications to such Governmental Entities or other public or
private third parties as the other party or such Governmental Entities or other
public or private third parties may reasonably request in connection therewith.

     Section 5.7. CONDUCT OF BUSINESS BY THE COMPANY PRIOR TO CLOSING. During
the period from the date of this Agreement until the earlier to occur of the
Closing or the termination of this Agreement, each of the Company and its
Subsidiaries shall use all commercially reasonable efforts to preserve intact in
all material respects their present business organizations, goodwill reputation,
to keep available the services of their key officers and employees, to maintain
their assets and properties in good working order and condition, ordinary wear
and tear excepted, to maintain insurance on their tangible assets and businesses
in such amounts and against such risks and losses as are currently in effect, to
preserve their relationships with ground lessors, tenants and other occupiers of
properties, customers, suppliers, lenders, joint venture partners and others
having significant business dealings with them and to comply in all material
respects with all laws and orders of all Governmental Entities applicable to
them, and the Company shall not, nor permit any Company Subsidiary, except as
otherwise expressly provided for in this Agreement, or as set forth in Schedule
5.7 of the Disclosure Letter, or as consented to in writing by Buyer, which
consent shall not be unreasonably withheld, or as contemplated by the Merger,
the Exchange Offer, the Tender Offer or the Contemplated Transactions, as
applicable:

          (a) incorporate or organize any new Subsidiary of such party, unless
     such Subsidiary shall be wholly owned, directly or indirectly, by such
     party and the Buyer shall receive prompt notice of such incorporation or
     organization, including the information that would have been disclosed
     pursuant to Article III hereof had such Subsidiary been in existence on the
     date hereof;

          (b) amend or propose to amend the Company's Articles of Incorporation
     or Bylaws or any of the Company Subsidiaries' Charter Documents or permit
     the amendment of the Company's Articles of Incorporation or Bylaws or of
     any Charter Documents of the Company Subsidiaries;

          (c) declare, set aside or pay any dividend other than in the ordinary
     course of business consistent with past practice or make any other
     distribution or payment with respect to any shares of its capital stock,
     directly or indirectly redeem, purchase or otherwise acquire any shares of
     its capital stock or capital stock of any of its Subsidiaries, or make any
     commitment for any such action;

          (d) issue, deliver, sell or otherwise transfer or authorize or propose
     the issuance, delivery, sale or other transfer of, or permit the Company or
     any Company Subsidiary to issue, deliver, sell or otherwise transfer, or
     authorize or propose the issuance, delivery, sale or other transfer of, any
     shares of capital stock of, or beneficial or other equity interests in,
     such party or any of its Subsidiaries or Affiliates or any option with
     respect thereto;

          (e) except, with respect to loans or capital contributions to any of
     the Company Subsidiaries that exist on the date hereof, to the extent (i)
     required under the express terms of the Company's Charter Documents or
     Bylaws or any Company Subsidiary's applicable

                                       39
<PAGE>

     Charter Document or (ii) in the reasonable good faith judgment of the
     Company, as applicable, necessary under the circumstances to satisfy the
     current cash needs of the Company or its Subsidiaries provide funds to, or
     make any investment (in the form of a loan, capital contribution or
     otherwise) in (or permit any of such Company Subsidiaries to take any such
     action with respect to), any person;

          (f) acquire (by merging or consolidating with, or by purchasing a
     substantial equity interest in or a substantial portion of the assets of,
     or by any other manner) or permitting the Company or any Company Subsidiary
     to acquire any business or any corporation, partnership, association or
     other business organization or division thereof with assets in excess of
     $25,000,000 or acquire any material assets (other than with respect to the
     Contemplated Transactions) in an amount which exceeds $30,000,000 in the
     aggregate;

          (g) mortgage or otherwise encumber or subject to any Encumbrance or
     sell, lease or otherwise dispose of any of its material properties or
     assets (which, in the case of the Company shall be deemed to include,
     without limitation, the Company Properties described on Schedule 3.13 of
     the Disclosure Letter) or assign or encumber the right to receive income,
     dividends, distributions and the like;

          (h) make or agree to make any new capital expenditures in excess of
     $5,000,000 in the aggregate;

          (i) incur (which shall not be deemed to include entering into credit
     agreements, lines of credit or similar arrangements until borrowings are
     made or committed to be borrowed under such arrangements) any indebtedness
     for borrowed money or guarantee any such indebtedness, or permit to take
     any such action, other than (i) Project Debt, (ii) to meet the current cash
     needs of the Company and its Subsidiaries business in an aggregate amount
     not to exceed $25,000,000, to permit the Company to perform its obligations
     hereunder or (iii) to effect a redemption of indebtedness permitted by
     clause (j);

          (j) voluntarily purchase, cancel, prepay or otherwise provide for a
     complete or partial discharge in advance of a scheduled repayment date with
     respect to, or waive any right under, or otherwise modify the provisions
     of, any indebtedness, or guarantee of indebtedness, for borrowed money, or
     permit the Company or any Company Subsidiaries to take any of such actions,
     other than the redemption of indebtedness substantially from the proceeds
     of new indebtedness, the provisions of which are not materially less
     advantageous to the issuer thereof than those of, and the "ALL-IN" cost of
     which (determined in accordance with sound financial practice) shall not
     exceed that of, the indebtedness so redeemed;

          (k) enter into, adopt, amend in any material respect (except as may be
     required by applicable law) or terminate any Plan, as the case may be, or
     grant any options, awards or other benefits or increase compensation,
     except for normal increases in benefits and compensation in the ordinary
     course of business consistent with past practice that, in the aggregate, do
     not result in a material increase in benefits or compensation expense to
     the Company and the Company Subsidiaries or amend or modify any employment
     agreement with any officer of the Company and, taken as a whole, grant any
     options, awards or other benefits or increase the compensation of the
     officers of the Company or any Company Subsidiary for whom

                                       40
<PAGE>

     executive compensation disclosure would be required to be made on a proxy
     statement for an annual meeting under Regulation 14A under the Exchange Act
     and Item 402 of Regulation S-K promulgated by the SEC (assuming for this
     purpose that each of the Company and the Company Subsidiaries are subject
     to such disclosure requirements);

          (l) enter into any Contract, or amend or modify any existing Contract,
     or engage in any new transaction outside the ordinary course of business
     consistent with past practice or not on an arm's-length basis, or permit
     any of the Company or any Company Subsidiary to take such actions, with any
     affiliate of such party other than transactions among the Company and the
     Company Subsidiaries;

          (m) make any change in the lines of business in which the Company and
     its Subsidiaries participate or are engaged;

          (n) enter into any Contract, commitment or arrangement to do or engage
     in any action the consummation of which would be prohibited by the
     foregoing;

          (o) make any changes in its accounting methods or policies except as
     required by law, the SEC or generally accepted accounting principles;

          (p) fail to maintain and cause its Subsidiaries to maintain insurance
     in such amounts and against such risks as are customary for companies;

          (q) obtain any equity or debt financing (including any private or
     public offering of the Company's capital stock);

          (r) except following an event of default thereunder, enter into any
     voluntary termination of a Lease material to the shopping center to which
     such Lease pertains, unless such Lease is promptly replaced by a lease with
     equal or greater value (including rent, term and quality of tenant);

          (s) enter into any Lease which would impair the Company's ability to
     qualify as a REIT;

          (t) take any action or fail to take any action, if such action or
     failure to act could cause the Company to fail to quality as a REIT;

          (u) make any material Tax election or settle or compromise any
     material liability for Taxes;

          (v) amend or waive any covenant, condition or provision of the Merger
     Agreement;

          (w) make any loan of money to or investment in, or purchase any equity
     interest in, buy any property from or sell any property to, or enter into
     any partnership or joint venture with Legacy other than pursuant to
     arrangements existing between the Company and Legacy set forth on Schedule
     5.7 of the Disclosure Letter that have been disclosed to Buyer on

                                       41
<PAGE>

     the date hereof nor amend or waive any term, provision or condition in any
     Contract with Legacy;

          (x) amend or waive any term or provision or condition of the voting
     agreements set forth in Schedule 5.7 of the Disclosure Letter in connection
     with the Merger; or

          (y) amend or waive any term or provision or condition of the Tender
     Offer (as defined in the Merger Agreement).

     Section 5.8. ENVIRONMENTAL ASSESSMENTS. The Company shall, at the request
of Buyer, engage a qualified independent environmental consultant to undertake
environmental site assessments on which Buyer may rely, (including, without
limitation, sampling of soil, groundwater and air quality) at any Company
Property where prior assessments have identified an environmental condition or
issue which, in Buyer's sole opinion, could lead to potential liability under
Environmental Laws; provided that the costs of such assessments shall be borne
by Buyer. Such assessments shall be undertaken as soon as practicable, and in
any event, in sufficient time to ensure that the results of the assessment will
be available to Buyer ten days prior to Closing. The Company shall provide
copies of all assessments and results to Buyer immediately upon receipt. Buyer
shall approve the environmental consultant and scope of work for any assessment,
prior to initiation of the assessment. Such approval shall not be unreasonably
withheld.

     Section 5.9. FULFILLMENT OF CONDITIONS. Subject to the terms and conditions
of this Agreement, each party will take or cause to be taken all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the other's obligations contained in this Agreement
and to consummate and make effective the transactions contemplated by this
Agreement.

     Section 5.10. CONFIDENTIALITY. Buyer shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished or made available to it by the Company concerning the Company and its
Subsidiaries' businesses, operations and financial positions and shall not use
such information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Closing Date, Buyer shall promptly return or certify the destruction of all
documents and copies thereof, and all work papers containing confidential
information received from the Company.

                                  ARTICLE VI.

                          CERTAIN ADDITIONAL COVENANTS

     Section 6.1. RESALE. Buyer acknowledges and agrees that the Securities that
Buyer will acquire at the Closing will not be registered under the Securities
Act and may only be sold or otherwise disposed of in one or more transactions
registered under the Securities Act and, where applicable, relevant state
securities laws or as to which an exemption from the registration requirements
of the Securities Act and, where applicable, such state securities laws is
available, and Buyer agrees that the certificates representing such Securities
shall bear a legend to that effect and a legend as to their status as restricted
securities.

                                       42
<PAGE>

     Section 6.2. REIT STATUS. From and after the date hereof and so long as
Buyer owns 10% or more of the outstanding Company Common Shares (on an as
converted basis) unless the Investor Nominees consent to doing otherwise, the
Company will elect to be taxed as a REIT in its federal income tax returns, will
comply in all material respects with all applicable laws, rules and regulations
of the Code relating to a REIT, and will not take any action or fail to take any
action which would reasonably be expected to, alone or in conjunction with any
other factors, result in the loss of its status as a REIT for federal income tax
purposes.

     Section 6.3. FINANCIAL AND BUSINESS INFORMATION. The Company shall deliver
to Buyer promptly upon their becoming available, one copy of each Financial
Statement, report, notice or Proxy Statement sent by the Company to its
stockholders generally, of each Financial Statement, report, notice or Proxy
Statement sent by the Company or any of its Subsidiaries to the SEC or any
successor agency, if applicable, of each regular or periodic report and any
registration statement or prospectus or written communication (other than
transmittal letters) in respect thereof filed by the Company or any Subsidiary
with, or received by such person in connection therewith from, any domestic or
foreign securities exchange, the SEC or any successor agency or any foreign
Governmental Entity performing functions similar to the SEC and of any press
release issued by the Company or any Subsidiary, and of any material of any
nature whatsoever prepared by the SEC or any successor agency thereto or any
state blue sky or securities law commission which relates to affects in any way
the Company or any Subsidiary.

     Section 6.4. BOARD COMMITTEES; EXPENSES. The Company shall take all action
within its power to cause at least one Investor Nominee to be a member of all
committees of the Board until such time as the Buyer is no longer entitled to
appoint designees to the Board under the Amended Articles of Incorporation. The
Company shall pay the reasonable out-of-pocket expenses of each Investor Nominee
incurred in connection with attending any Board meetings or Board committee
meetings.

     Section 6.5. TERMS OF EXCHANGE OFFER. The Company shall not take any action
to change the terms and conditions of the Exchange Offer (as defined in the
Merger Agreement) without the consent of Buyer.

     Section 6.6. AGREEMENT TO VOTE SHARES. Each Warburg Entity shall vote all
of its Company Series B Preferred Shares (and all Conversion Shares and other
shares of capital stock of the Company held by such Warburg Entity on the
relevant date), and shall use its reasonable efforts to cause each Investor
Nominee, subject to such Investor Nominee's obligations to the Company and its
stockholders, to vote, in favor of approval of the Exchange Offer (as defined in
the Merger Agreement) and the Preferred Offer (as defined in the Merger
Agreement), and each other transaction necessary or appropriate to consummate
the foregoing transactions, to the extent any such vote is sought by the
Company, at any meeting of the Board or stockholders of the Company called for
such purpose (and any adjournment or postponement thereof) or by written action
without a meeting or otherwise.

     Section 6.7. REIT CERTIFICATION. From and after the date hereof, each
Warburg Entity shall not take any action, or fail to take any action, that would
make any of the representations, certifications or warranties set forth in
EXHIBIT G untrue.

                                       43
<PAGE>

     Section 6.8. ADDITIONAL SHARES. In the event that any of the Company Common
Shares (the "Collateral Shares") owned by Legacy that are held as collateral for
the 9.0% Convertible Redeemable Subordinated Secured Debentures due 2004 or
10.0% Senior Redeemable Secured Notes due 2004 are transferred to any Person or
otherwise become beneficially held by, any Person other than the Company or any
of its direct or indirect wholly-owned subsidiaries, then the Company shall take
all actions necessary to issue to Buyer that number of additional Company Series
B Preferred Shares that would result in the Buyer Ownership Ratio immediately
subsequent to such transfer or beneficial ownership change being equal to the
Buyer Ownership Ratio immediately prior to such transfer; provided, that if the
Closing shall not have occurred prior to any such transfer of Collateral Shares
then the amount of Company Series B Preferred Shares set forth on Exhibit A
shall be proportionately increased such that the Buyer Ownership Ratio
immediately subsequent to Closing would equal the Buyer Ownership Ratio at
Closing assuming that the Collateral Shares so transferred were not outstanding
at Closing. For purposes hereof, the "Buyer Ownership Ratio" shall mean the
quotient obtained by dividing (i) the number of Company Common Shares (assuming
conversion of the Company Series B Preferred Shares) owned by Buyer by (ii) the
number of Company Common Shares outstanding (assuming conversion of the Company
Series B Preferred Shares) less any Collateral Shares.

                                  ARTICLE VII.

                              CONDITIONS TO CLOSING

     Section 7.1. CONDITIONS OF PURCHASE. The obligations of Buyer to purchase
and pay for the Securities at the Closing are subject to satisfaction or waiver
of each of the following conditions precedent:

          (a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and
     warranties of the Company contained in this Agreement that are modified by
     materiality or the Company Material Adverse Effect shall be true and
     correct in all respects, and those that are not so modified shall be true
     and correct in all material respects, on the date hereof (provided that the
     representations and warranties in Sections 3.1, 3.2, 3.3, 3.4, 3.6 and 3.14
     shall be true in all respects) and as of the Closing Date as if made on the
     Closing Date (except for representations and warranties that speak as of a
     specific date or time other than the Closing Date (which need only be true
     and correct as of such date or time)). The covenants and agreements of the
     Company to be performed on or before the Closing Date in accordance with
     this Agreement shall have been duly performed in all material respects. The
     Company shall have delivered to Buyer at the Closing a certificate of an
     appropriate officer in the form and substance reasonably satisfactory to
     Buyer dated the Closing Date certifying as to the Company's compliance with
     this Section 7.1(a).

          (b) NO INJUNCTION. There shall not be in effect any final order,
     decree or injunction of a court or agency of competent jurisdiction which
     enjoins or prohibits consummation of the transactions contemplated hereby
     and there shall be no pending actions which would reasonably be expected to
     have a material adverse effect on the ability of the Company to consummate
     the transactions contemplated hereby or to issue the Securities.

                                       44
<PAGE>

          (c) PROCEEDINGS. All corporate and other proceedings to be taken by
     the Company in connection with the transactions contemplated hereby and all
     documents incident thereto shall be reasonably satisfactory in form and
     substance to Buyer and Buyer shall have received all such counterpart
     originals or certified or other copies of such documents as they may
     reasonably request.

          (d) REIT STATUS. The Company shall have elected to be taxed as a REIT
     in its most recent federal income Tax Return, and shall be in compliance
     with all applicable laws, rules and regulations, including the Code,
     necessary to permit it to be taxed as a REIT, unless the Investor Nominees
     shall have consented to changing such election. The Company shall not have
     taken any action or have failed to take any action which would, alone or in
     conjunction with any other factors, result in the loss of its status as a
     REIT for federal income tax purposes, unless the Investor Nominees shall
     have consented to taking or omitting to take such action.

          (e) DOMESTICALLY CONTROLLED REIT. The Company is, and after giving
     effect to the Closing will be, a "domestically-controlled REIT" within the
     meaning of Section 897(h)(4)(B) of the Code.

          (f) OPINION OF COUNSEL. On or prior to the date of the Closing, the
     Company shall have delivered to Buyer an opinion of Latham & Watkins,
     counsel for the Company in form and substance reasonably acceptable to
     Buyer. The Company shall have also delivered to Buyer the opinion of Latham
     & Watkins, counsel for the Company, in form and substance reasonably
     acceptable to Buyer that the Company qualifies as a real estate investment
     trust within the meaning of Section 856 of the Code ("REIT").

          (g) RELATED TRANSACTIONS. Each of the Voting Stockholders Agreement
     and the Registration Rights Agreement shall have been executed, the
     forms of which are attached as Exhibit B and Exhibit C.

          (h) NO MATERIAL ADVERSE CHANGE. There shall not have been any
     change, event or occurrence which, individually or in the aggregate, has
     had or could reasonably be expected to have a Company Material Adverse
     Effect.

          (i) INVESTOR NOMINEES. Reuben S. Leibowitz and Melvin L. Keating
     (the "Investor Nominees") shall have become members of the Board and the
     individuals listed on Schedule 7(i) of the Disclosure Letter shall
     constitute the remaining members of the Board.

          (j) STOCKHOLDER APPROVAL. The Company shall have obtained the
     required stockholder approval necessary to approve the Voting Proposals
     (collectively, the "Stockholder Approval").

          (k) MERGER CONSUMMATED. The Merger shall have been consummated.

          (l) NASDAQ LISTING. The Conversion Shares shall have been approved
     for listing on Nasdaq or such other national securities exchange as the
     Board may determine.

                                       45
<PAGE>

               (m) AMENDED ARTICLES OF INCORPORATION. The Company shall have
          filed an Amended Articles of Incorporation, the form of which is
          attached as EXHIBIT F hereto, with the SDAT, and satisfactory evidence
          of such filing shall have been delivered to Buyer.

               (n) EMPLOYMENT AGREEMENT WAIVERS. The Company shall have obtained
          all necessary waivers and consents such that none of the transactions
          contemplated either hereunder or pursuant to the Merger Agreement
          shall constitute a "Change in Control" for purposes of any agreement
          listed on 3.15(k) hereof (as defined in each such agreement).

               (o) ADDITIONAL DELIVERIES. All other documents, instruments and
          writings required to be delivered prior to the Closing.

               (p) TAXABLE REIT SUBSIDIARY. Legislation is enacted in the State
          of California on or prior to the Closing conforming California law to
          federal law with respect to the treatment of taxable REIT subsidiaries
          (as defined in Section 856(l)) of the Code, or Buyer otherwise
          determines in its reasonable discretion that the Company's proposed
          method of operation will enable the Company to qualify as a real
          estate investment trust for California state income tax purposes.

     Section 7.2. CONDITIONS OF SALE. The obligation of the Company to issue and
sell the Securities at the Closing is subject to satisfaction or waiver of each
of the following conditions precedent:

          (a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and
     warranties of Buyer that are modified by materiality shall be true and
     correct in all respects and those that are not so modified shall be true
     and correct in all material respects, on the date hereof, and as of the
     Closing Date as if made on the Closing Date (except for representations and
     warranties that speak as of a specific date or time other than the Closing
     Date (which need only be true and correct as of such date or time)). The
     covenants and agreements of Buyer to be performed on or before the Closing
     Date in accordance with this Agreement shall have been duly performed in
     all material respects. Buyer shall have delivered to the Company at the
     Closing a certificate of an appropriate officer in form and substance
     reasonably satisfactory to the Company dated the Closing Date certifying as
     to Buyer's compliance with this Section 7.2(a). Each Warburg Entity shall
     have delivered to the Company at the Closing a certificate of an
     appropriate officer in the form of Exhibit G hereto.

          (b) NO INJUNCTION. There shall not be in effect any final order,
     decree or injunction of a court or agency of competent jurisdiction which
     enjoins or prohibits consummation of the transactions contemplated hereby
     and there shall be no pending actions which would reasonably be expected to
     have a material adverse effect on the ability of Buyer to consummate the
     transactions contemplated hereby or to acquire the Securities.

          (c) PROCEEDINGS. All corporate and other proceedings to be taken by
     Buyer in connection with the transactions contemplated hereby and all
     documents incident thereto shall be reasonably satisfactory in form and
     substance to the Company and the Company shall have received all such
     counterpart originals or certified or other copies of such documents as it
     may reasonably request.

                                       46
<PAGE>

          (d) STOCKHOLDER APPROVAL. The Company shall have obtained the required
     Stockholder Approval.

          (e) MERGER CONSUMMATED. The Merger shall have been consummated.

          (f) REIT CERTIFICATE. The Company shall have received an executed REIT
     Representation Certificate of Buyer in the form of EXHIBIT G from each
     Warburg Entity.

                                 ARTICLE VIII.

                            SURVIVAL; INDEMNIFICATION

     Section 8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations, warranties, covenants and agreements of each of the parties to
this Agreement made herein or in any certificate or other instrument delivered
by one of the parties to this Agreement (except covenants and agreements which
are expressly required to be performed and are performed in full on or before
the Closing Date), shall be considered to have been relied upon by each of the
other parties to this Agreement, as the case may be, and shall survive the
Closing Date and the consummation of the transactions contemplated by this
Agreement, except that, subject to this Section 8.1, the representations and
warranties set forth in Article III and Article IV shall survive the Closing for
a period terminating on the date eighteen (18) months after the Closing Date
(the "Indemnification Termination Date" and such period, the "Indemnification
Period"); provided that (i) the representations and warranties contained in
Sections 3.1, 3.2, 3.3, 3.4, 4.1, 4.2, 4.4 and 4.5 shall survive indefinitely
and (ii) the representations and warranties contained in Section 3.14, shall
survive for a period of seven years from the Closing. Notwithstanding the
previous sentence, if any claims for indemnification have been asserted with
respect to any such representations and warranties prior to the Indemnification
Termination Date, the representations and warranties on which any such claims
are based shall continue in effect until final resolution of any claims, and
provided further that representations, warranties and covenants relating to
Taxes shall survive until 30 days after expiration of all applicable statutes of
limitations relating to such Taxes. All covenants to be performed after the
Closing Date shall continue indefinitely.

     Section 8.2. INDEMNIFICATION BY THE COMPANY.

          Subject to the limitations set forth in this Section 8.2, from and
after the Closing Date, the Company shall protect, defend, indemnify and hold
harmless Buyer and their respective affiliates, officers, directors, employees,
representatives and agents (Buyer and each of the foregoing persons or entities
is hereinafter referred to individually as a "Buyer Indemnified Person" and
collectively as "Buyer Indemnified Persons") from and against any and all
losses, costs, damages, liabilities, fees (including without limitation
reasonable attorneys' fees) and expenses (collectively, the "Damages"), that any
of the Buyer Indemnified Persons incurs by reason of, or in connection with any
claim, demand, action or cause of action alleging, any misrepresentation, breach
of, or default in connection with, any of the representations, warranties,
covenants or agreements of the Company contained in this Agreement, including
any exhibits or schedules attached hereto, of which Buyer notifies the Company
in writing during the Indemnification Period. Damages in each case shall be net
of the amount of any insurance proceeds and indemnity and contribution actually
recovered by Buyer.

                                       47
<PAGE>

     Section 8.3. INDEMNIFICATION BY BUYER.

          Subject to the limitations set forth in this Section 8.3, from and
after the Closing Date, Buyer shall protect, defend, indemnify and hold harmless
the Company and its respective affiliates, officers, directors, employees,
representatives and agents (each of the foregoing persons or entities is
hereinafter referred to individually as a "Company Indemnified Person" and
collectively as "Company Indemnified Persons") from and against any and all
Damages that any of the Company Indemnified Persons incurs by reason of or in
connection with any claim, demand, action or cause of action alleging,
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of Buyer contained in this
Agreement, including any exhibits or schedules attached hereto, of which the
Company notifies Buyer in writing during the Indemnification Period. Damages in
each case shall be net of the amount of any insurance proceeds and indemnity and
contribution actually recovered by the Company Indemnified Person.

     Section 8.4. DAMAGES THRESHOLD.

          (a) Notwithstanding the foregoing, Buyer may not receive any
     indemnification under this Article 8 unless and until Damages in the
     aggregate amount are in excess of $2,000,000 and such amount is determined
     pursuant to this Article 8 to be payable; provided that this sentence shall
     not apply to Damages resulting from any breach of the representations and
     warranties contained in Sections 3.3 (Capitalization) and 3.16 (No
     Brokers), and the Company shall then only be liable for Damages in excess
     of such amount. The maximum aggregate liability of the Company pursuant to
     its indemnification obligations under this Article 8 shall be $100,000,000.

          (b) Notwithstanding the foregoing, the Company may not receive any
     indemnification under this Article 8 unless and until Damages in the
     aggregate amount are in excess of $2,000,000 and such amount is determined
     pursuant to this Article 8 to be payable, any Buyer shall then only be
     liable for Damages in excess of such amount. The maximum aggregate
     liability of Buyer pursuant to its indemnification obligations under this
     Article 8 shall be $100,000,000.

     Section 8.5. THIRD-PARTY CLAIMS.

          (a) If any third party shall notify any party (the "Third-Party
     Indemnified Party") with respect to any matter (a "Third-Party Claim")
     which may give rise to a claim for indemnification against any other party
     (the "Third-Party Indemnifying Party") under this Article 8, then the
     Third-Party Indemnified Party shall promptly (and in any event within ten
     (10) business days after receiving notice of the Third-Party Claim) notify
     the Third-Party Indemnifying Party thereof in writing; provided, however,
     that failure to provide such notice on a timely basis shall not release the
     Third-Party Indemnifying Party from any of its obligations under this
     Article 8 except to the extent the Third-Party Indemnifying Party is
     materially prejudiced by such failure.

          (b) The Third-Party Indemnifying Party shall, upon receipt of such
     notice and upon its notifying the Third-

                                       48
<PAGE>

     Party Indemnified Party in writing that it shall indemnify all Third-Party
     Indemnified Parties in respect of such matter, be entitled to participate
     in or, at the Third-Party Indemnifying Party's option, assume at its own
     expense the defense, appeal or settlement of such Third-Party Claim with
     respect to which such indemnity has been invoked with counsel of its own
     choosing (who shall be reasonably satisfactory to the Third-Party
     Indemnified Party, PROVIDED, HOWEVER, that Willkie Farr & Gallagher, Latham
     & Watkins and Munger Tolles & Olson LLP are hereby deemed satisfactory to
     the Third-Party Indemnified Party), and the Third-Party Indemnified Party
     shall fully cooperate at the expense of the Third-Party Indemnifying Party
     with the Third-Party Indemnifying Party in connection therewith including
     contesting such Third-Party Claim or making any counterclaim against the
     person asserting such Third-Party Claim; provided, however, that if the
     Third-Party Indemnifying Party assumes the defense, appeal or settlement of
     such Third-Party Claim, the Third-Party Indemnified Party shall be entitled
     to employ one counsel to represent itself if an actual conflict of interest
     exists in the opinion of counsel to the Third-Party Indemnified Party
     between the Third-Party Indemnifying Party and the Third-Party Indemnified
     Party in respect of such Third-Party Claim and in that event the reasonable
     fees and expenses of one such counsel shall be paid by the Third-Party
     Indemnifying Party; and provided, further, that any Third-Party Indemnified
     Party is hereby authorized prior to the date on which it receives written
     notice from the Third-Party Indemnifying Party that it intends to assume
     the defense, appeal or settlement of such Third-Party Claim, to file any
     motion, answer or other pleading and take such other action which it shall
     reasonably deem necessary to protect its interest or that of the
     Third-Party Indemnifying Party until the date on which the Third-Party
     Indemnified Party receives such notice from the Third-Party Indemnifying
     Party. In the event that the Third-Party Indemnifying Party fails to assume
     the defense, appeal or settlement of such Third-Party Claim within twenty
     (20) days after receipt of notice thereof from the Third-Party Indemnified
     Party, such Third-Party Indemnified Party shall have the right to undertake
     the defense or appeal of or settle or compromise such Third-Party Claim on
     behalf of and for the account and risk of the Third-Party Indemnifying
     Party.

          (c) Except as set forth in the last sentence of Section 8.5(b) above,
     no claim or demand may be settled without the consent of the Third-Party
     Indemnifying Party, which consent shall not be unreasonably delayed or
     withheld. Unless the claim or demand seeks only dollar damages (all of
     which are to be paid by the Third-Party Indemnifying Party), no such claim
     or demand may be settled by the Third-Party Indemnifying Party without the
     consent of the Third-Party Indemnified Party, which consent shall not be
     unreasonably delayed or withheld.

     Section 8.6. REIT INDEMNIFICATION. Notwithstanding anything in this
Agreement to the contrary, the Company shall have the remedies set forth in
Exhibit G in addition to those set forth in this Article VIII in the event of a
breach of the representations, certifications, warranties and/or covenants set
forth in Exhibit G.

                                  ARTICLE IX.

                                   TERMINATION

     Section 9.1. TERMINATION. This Agreement may be terminated at any time by:

          (a) the mutual consent of Buyer and the Company;

                                       49
<PAGE>

          (b) either the Company or Buyer, in the event that Stockholder
     Approval shall not have been obtained at a duly held meeting of
     stockholders or at any adjournment thereof;

          (c) either the Company or Buyer, if the Board shall have withdrawn,
     modified or failed to make or refrained from making its recommendation that
     the stockholders of the Company approve the (i) Voting Proposals or (ii)
     any other item described in the Proxy Statement;

          (d) either the Company or Buyer, if there has been a material breach
     of any representation, warranty, covenant or agreement on the part of the
     nonterminating party set forth in this Agreement, which breach is not
     curable or, if curable, has not been cured within twenty (20) days
     following receipt by the nonterminating party of notice of such breach from
     the terminating party;

          (e) either the Company or Buyer, if any court of competent
     jurisdiction or other competent Governmental Entity shall have issued an
     order making illegal or otherwise restricting, preventing or prohibiting
     the consummation of this Agreement or any of the transactions contemplated
     hereby and such order shall have become final and nonappealable;

          (f) either the Company or Buyer, in the event the transactions
     contemplated by the Merger Agreement are not consummated by November 21,
     2001.

          (g) the Company to allow the Company to enter into an agreement in
     accordance with Section 5.3(b) with respect to a Superior Proposal which
     the Board has determined is more favorable to the stockholders of the
     Company than the transactions contemplated hereby; PROVIDED that it has
     complied with all provisions thereof, including the notice provision
     therein, and that it makes simultaneous payment of the Termination Fee.

     Section 9.2. PROCEDURE AND EFFECT OF TERMINATION.

          (a) In the event of termination of this Agreement by either or both of
     the Company and Buyer pursuant to Section 9.1 hereof, written notice
     thereof shall forthwith be given by the terminating party to the other
     party hereto, and this Agreement shall thereupon terminate and become void
     and have no effect, and the transactions contemplated hereby shall be
     abandoned without further action by the parties hereto, except that the
     provisions of Sections 5.2 (Public Announcements), 5.9 (Confidentiality),
     9.3 (Expenses and Taxes), 10.2 (Governing Law), and 10.4 (Notices), and any
     related definitional, interpretive or other provisions necessary for the
     logical interpretation of such provisions, shall survive the termination of
     this Agreement; provided, however, that such termination shall not relieve
     any party hereto of any liability for any breach of this Agreement.

          (b) In the event that (i) this Agreement is terminated pursuant to
     Section 9.1(b) or Section 9.1(f), or (ii) Buyer terminates this Agreement
     due to a breach by the Company of any representation, warranty, covenant or
     agreement pursuant to Section 9.1(d) as applicable to the Company, then
     Buyer shall become entitled to receive from the Company a termination fee
     of $1,000,000 (taking into account all legal and other costs and expenses
     incurred in connection with this Agreement) and in the event this Agreement
     is terminated by Buyer

                                       50
<PAGE>

     pursuant to Section 9.1(c) or by the Company pursuant to Section 9.1(g),
     then in any such case the Company shall pay simultaneously with such
     termination if pursuant to Section 9.1(g) and promptly, but in no event
     later than two business days after the date of such termination or event if
     pursuant to Section 9.1(c) a termination fee of $4,000,000 (taking into
     account all legal and other costs and expenses incurred in connection with
     this Agreement) (collectively, the "Termination Fee").

          (c) If Buyer shall have terminated this Agreement pursuant to Section
     9.1(b) or Section 9.1(d) or Section 9.1(f) and within one year of any such
     termination (i) the Company shall have entered into a definitive agreement
     with respect to a Competing Transaction or a Competing Transaction with
     respect to the Company shall have been consummated or (ii) Legacy shall
     have entered into a definitive agreement with respect to a Legacy Competing
     Transaction or a Legacy Competing Transaction with respect to Legacy shall
     have been consummated, then in any such case the Company shall pay
     promptly, but in no event later than two business days after the date of
     such event to Buyer an additional termination fee of $3,000,000, which
     amount shall be payable by wire transfer to an account specified by Buyer.

          (d) The parties acknowledge that the agreements contained in the
     preceding paragraph are an integral part of the transactions contemplated
     by this Agreement and that without these agreements, Buyer would not enter
     into this Agreement; accordingly, if the Company fails promptly to pay the
     amounts due in accordance with the terms of such paragraph, and in order to
     obtain any such payment, Buyer commences a suit which results in a judgment
     against the Company for any such payment, the Company shall pay to Buyer
     its cost and expenses (including reasonable attorneys' fees and expenses)
     in connection with such suit.

     Section 9.3. EXPENSES AND TAXES.

          (a) The Company agrees to pay at the Closing the reasonable fees and
     expenses of Buyer, of up to $500,000, incurred in connection with the
     investigation and diligence of the Company and incurred in connection with
     the negotiation, preparation, execution and delivery of this Agreement.

          (b) The Company will pay, and save and hold Buyer harmless from any
     and all liabilities (including interest and penalties) with respect to, or
     resulting from any delay or failure in paying, stamp and other taxes (other
     than income taxes) or recording fees, if any, which may be payable or
     determined to be payable on the execution and delivery or acquisition of
     the Securities or the Conversion Shares.

          (c) Except as set forth in this Agreement, whether or not the purchase
     of the Securities is consummated, all legal and other costs and expenses
     incurred in connection with this Agreement and the transactions
     contemplated hereby shall be paid by the party incurring such costs and
     expenses.

                                       51
<PAGE>

                                   ARTICLE X.

                                  MISCELLANEOUS

     Section 10.1. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other party. Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of this Section 10.1,
provided receipt of copies of such counterparts is confirmed.

     Section 10.2. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO THE CHOICE OF LAW PRINCIPLES THEREOF.

     Section 10.3. ENTIRE AGREEMENT. This Agreement, the Warrant, the
Registration Rights Agreement, and the Voting Stockholders Agreement and the
Schedules and Exhibits hereto contain the entire agreement and supersede any and
all other prior agreements and undertakings, both written and oral, between the
parties with respect to the subject matter hereof. There are no agreements,
understandings, representations or warranties between the parties other than
those set forth or referred to herein. This Agreement is not intended to confer
upon any person not a party hereto (and their successors and assigns) any rights
or remedies hereunder.

     Section 10.4. NOTICES. All notices and other communications hereunder shall
be sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telefax or other electronic transmission service
to the appropriate address or number as set forth below. Notices to the Company
shall be addressed to:

                           Price Enterprises, Inc.
                           17140 Bernardo Center Drive
                           Suite 300
                           San Diego, California 92128
                           Attention:  Gary B. Sabin and S. Eric Ottesen
                           Facsimile:  (858) 675-9405

         with a copy to:

                           Latham & Watkins
                           12636 High Bluff Drive
                           Suite 300
                           San Diego, California 92130
                           Attention:  Scott N. Wolfe, Esq.
                           Facsimile:  (858) 523-5450

or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:

                                       52
<PAGE>

                           Warburg, Pincus Equity Partners, L.P.
                           466 Lexington Avenue, 10th Floor
                           New York, New York  10017
                           Attention:  Reuben S. Leibowitz
                           Facsimile:  (212) 716-5100

         with a copy to:

                           Willkie Farr & Gallagher
                           787 Seventh Avenue
                           New York, New York  10019
                           Attention:  Steven A. Seidman, Esq.
                           Facsimile:  (212) 728-8111

     Section 10.5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors.
This Agreement shall not be assigned by operation of law or otherwise, except
that Buyer may assign all or any of its rights hereunder to any Affiliate of
Buyer in which Warburg, Pincus & Co. is the general partner.

     Section 10.6. HEADINGS. The Section, Article and other headings contained
in this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.

     Section 10.7. AMENDMENTS AND WAIVERS. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by each of the
parties hereto. Either party hereto may, in its sole discretion and only by an
instrument in writing, waive compliance by the other party hereto with any term
or provision hereof on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term or
provision hereof shall not be construed as a waiver of any subsequent breach.

     Section 10.8. INTERPRETATION; ABSENCE OF PRESUMPTION.

          (a) For the purposes hereof, (i) words in the singular shall be held
     to include the plural and vice versa and words of one gender shall be held
     to include the other gender as the context requires, (ii) the terms
     "hereof", "herein", and "herewith" and words of similar import shall,
     unless otherwise stated, be construed to refer to this Agreement as a whole
     (including all of the Schedules and Exhibits hereto) and not to any
     particular provision of this Agreement, and Article, Section, paragraph,
     Exhibit and Schedule references are to the Articles, Sections, paragraphs,
     Exhibits and Schedules to this Agreement unless otherwise specified, (iii)
     the word "including" and words of similar import when used in this
     Agreement shall mean "including, without limitation," unless the context
     otherwise requires or unless otherwise specified, (iv) the word "or" shall
     not be exclusive and (v) provisions shall apply, when appropriate, to
     successive events and transactions.

                                       53
<PAGE>

          (b) This Agreement shall be construed without regard to any
     presumption or rule requiring construction or interpretation against the
     party drafting or causing any instrument to be drafted.

     Section 10.9. SEVERABILITY. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.

     Section 10.10. FURTHER ASSURANCES. The Company and Buyer agree that, from
time to time, whether before, at or after the Closing Date, each will execute
and deliver such further instruments of conveyance and transfer and take such
other action as may be necessary to carry out the purposes and intents hereof.

     Section 10.11. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that the other parties would be damaged irreparably in
the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the parties agrees that the other parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the parties and the matter in
addition to any other remedy to which they may be entitled, at law or in equity.

                            [signature page follows]

                                       54
<PAGE>

         IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.

                                 PRICE ENTERPRISES, INC.

                                 By: /s/ S. ERIC OTTESEN
                                     -------------------------------------
                                     Name:  S. Eric Ottesen
                                     Title:  Senior Vice President

                                 WARBURG, PINCUS EQUITY PARTNERS, L.P.

                                 By:  Warburg, Pincus & Co., its General Partner

                                 By: /s/ REUBEN S. LEIBOWITZ
                                     -------------------------------------
                                     Name:  Reuben S. Leibowitz
                                     Title:  Partner

                                 WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS,
                                   I, C.V.

                                 By:  Warburg, Pincus & Co., its General Partner

                                 By: /s/ REUBEN S. LEIBOWITZ
                                     -------------------------------------
                                     Name:  Reuben S. Leibowitz
                                     Title:  Partner

                                 WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS,
                                   II, C.V.

                                 By:  Warburg, Pincus & Co., its General Partner

                                 By: /s/ REUBEN S. LEIBOWITZ
                                     -------------------------------------
                                     Name:  Reuben S. Leibowitz
                                     Title:  Partner

                                 WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS,
                                   III, C.V.

                                 By:  Warburg, Pincus & Co., its General Partner

                                 By: /s/ REUBEN S. LEIBOWITZ
                                     -------------------------------------
                                     Name:  Reuben S. Leibowitz
                                     Title:  Partner

<PAGE>

                                   EXHIBIT A

      BUYER                     NUMBER OF SHARES             PURCHASE PRICE

Warburg, Pincus Equity
Partners, L.P.                     16,996,404                  $94,500,000

Warburg, Pincus Netherlands
Equity Partners I, C.V.               539,568                   $3,000,000

Warburg, Pincus Netherlands
Equity Partners II, C.V.              359,712                   $2,000,000

Warburg, Pincus Netherlands
Equity Partners III, C.V.              89,928                     $500,000

                       Total       17,985,612                  $100,000,000

                                       56<PAGE>

                                                                  EXHIBIT 10.3

                                VOTING AGREEMENT

                  VOTING AGREEMENT, dated as of March 21, 2001 (the
"Agreement"), by and among Warburg, Pincus Equity Partners L.P., a Delaware
limited partnership ("Warburg"), Price Enterprises, Inc., a Maryland corporation
(the "Company") and Excel Legacy Corporation, a Delaware corporation ("Legacy"
or the "Stockholder").

                              W I T N E S S E T H:

                  WHEREAS, contemporaneously with the execution and delivery of
this Agreement, Legacy, the Company and PEI Merger Sub, Inc., a wholly owned
subsidiary of the Company ("Merger Sub") are entering into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), which provides
for, upon the terms and subject to the conditions set forth therein, the merger
of Merger Sub with and into Legacy (the "Merger");

                  WHEREAS, contemporaneously with the execution and delivery of
this Agreement, Warburg and the Company are entering into a Securities Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), which
provides for, upon the terms and subject to the conditions set forth therein,
the purchase by Warburg of (i) an aggregate of 17,985,612 shares of 9% Series B
Junior Convertible Redeemable Preferred Stock, $.0001 par value per share
("Company Series B Preferred Shares"), of the Company and (ii) one or more
warrants, each substantially in the form of Exhibit D thereto, to purchase an
aggregate of 2,500,000 shares of Common Stock of the Company, $.0001 par value
per share ("Company Common Shares"), in accordance with the terms of such
warrants at an exercise price of $8.25 per share (the "Warburg Investment");

                  WHEREAS, pursuant to the terms of the Purchase Agreement, the
Company must amend and restate its Articles of Incorporation (as defined in the
Purchase Agreement) in the form attached as Exhibit G to the Purchase Agreement;

                  WHEREAS, as of the date hereof, each Stockholder owns
(beneficially and of record) the number of Company Common Shares and 8 3/4%
Series A Cumulative Redeemable Preferred Shares, par value $.0001 per share
("Company Series A Preferred Shares") set forth opposite such Stockholder's name
on Schedule I hereto (all such shares and associated rights so owned and which
may hereafter be acquired by such Stockholder prior to the termination of this
Agreement, whether upon the exercise of options or by means of purchase,
dividend, distribution or otherwise, being referred to herein as such
Stockholder's "Shares");

                  WHEREAS, as a condition to their willingness to enter into the
Purchase Agreement, the Company and Warburg have requested that the Stockholder
enter into this Agreement; and

                  WHEREAS, in order to induce the Company and Warburg to enter
into the Purchase Agreement, the Stockholder is willing to enter into this
Agreement.

                  NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the Company, Warburg and the Stockholder hereby agree as follows:

<PAGE>

                                   ARTICLE I.

                       TRANSFER AND VOTING OF SHARES; AND
                       OTHER COVENANTS OF THE STOCKHOLDER

         Except as set forth in Exhibit A hereto, the Stockholder hereby agrees
as follows:

     SECTION 1.1. VOTING OF SHARES. From the date hereof until the termination
of this Agreement pursuant to Section 5.2 hereof (the "Term"), at any meeting of
the stockholders of the Company, however called, and in any action by consent of
the stockholders of the Company, the Stockholder shall vote its Shares in favor
of (i) the Amended Articles of Incorporation (as defined in the Purchase
Agreement), (ii) the issuance of Company Common Shares in connection with the
Merger Agreement and (iii) any other matter necessary for consummation of the
transactions contemplated by the Merger Agreement and the Purchase Agreement
(including, but not limited to, the issuance of Company Series B Preferred
Shares pursuant to the Purchase Agreement) which is considered at any such
meeting of stockholders or in such consent, and in connection therewith to
execute any documents which are necessary or appropriate in order to effectuate
the foregoing, including the ability for the Company or its nominees to vote
such Shares directly.

     SECTION 1.2. NO INCONSISTENT ARRANGEMENTS.

          (a) Except as contemplated by this Agreement and the Purchase
     Agreement, the Stockholder shall not during the Term (i) grant any proxy,
     power-of-attorney or other authorization in or with respect to such Shares,
     (ii) deposit such Shares into a voting trust or enter into a voting
     agreement or arrangement with respect to such Shares, or (iii) take any
     other action that would in any way restrict, limit or interfere with the
     performance of its obligations hereunder or the transactions contemplated
     hereby or by the Purchase Agreement.

          (b) The Stockholder may sell, transfer, assign, pledge or otherwise
     dispose of any or all of the Stockholder's Shares to any person or entity
     who agrees in writing to be bound by the provisions of this Agreement (a
     "Permitted Transferee"), and any sale, transfer, pledge or other
     disposition of such Shares to any person or entity other than a Permitted
     Transferee shall be null and void and of no effect.

     SECTION 1.3. PROXY. The Stockholder hereby revokes any and all prior
proxies or powers of attorney in respect of any of the Stockholder's Shares and
constitutes and appoints the Company, or any nominee of the Company, with full
power of substitution and resubstitution, at any time during the Term, as its
true and lawful attorney and proxy (its "Proxy"), for and in its name, place and
stead, to demand that the Secretary of the Company call a special meeting of the
stockholders of the Company for the purpose of considering any matter referred
to in Section 1.1 (if permitted under the Articles of Incorporation and the
By-Laws (as defined in the Purchase Agreement)) and to vote each of such Shares
as its Proxy, at every annual, special, adjourned or postponed meeting of the
stockholders of the Company, including the right to sign its name (as
stockholder) to any consent, certificate or other document relating to the
Company that Maryland Law may permit or require as provided in Section 1.1.

                                       2
<PAGE>

                  THE FOREGOING PROXY AND POWER OF ATTORNEY ARE
         IRREVOCABLE AND COUPLED WITH AN INTEREST THROUGHOUT THE TERM.

     SECTION 1.4. STOP TRANSFER. The Stockholder shall not request that the
Company register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Stockholder's Shares, unless
such transfer is made in compliance with this Agreement.

     SECTION 1.5. INDEMNIFICATION OF STOCKHOLDER. The Company will indemnify the
Stockholder against all claims, actions, suits, proceedings or investigations,
losses, damages, liabilities (or actions in respect thereof), costs and expenses
(including reasonable fees and expenses of counsel) arising out of or based upon
the execution or delivery of this Agreement or the performance by the
Stockholder of its obligations hereunder and in the event of any such claim,
action, suit, proceeding or investigation unless the Company shall have assumed
the defense thereof as provided below, (i) the Company shall pay as incurred the
reasonable fees and expenses of counsel selected by the Stockholder, which
counsel shall be reasonably satisfactory to the Company, promptly as statements
therefor are received, and (ii) the Company will cooperate in the defense of any
such matter; PROVIDED, HOWEVER, that the Company shall not be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld); and PROVIDED, FURTHER, that the Company shall not be
obliged pursuant to this Section 1.5 to pay the fees and disbursements of more
than one counsel for the Stockholder in any single action except to the extent
that, in the opinion of counsel for the Stockholder, representation of the
Company and the Stockholder by the same counsel would be inappropriate under the
applicable standards of professional conduct. In the event any person asserts a
claim against the Stockholder for which the Stockholder intends to seek
indemnification hereunder, the Stockholder shall give prompt notice to the
Company, and shall permit the Company to assume the defense of any such claim or
any litigation resulting therefrom with counsel selected by the Company, which
counsel shall be Latham & Watkins (unless such firm shall have a conflict of
interest) or other counsel reasonably acceptable to the Stockholder; provided
that the Stockholder may participate in such defense at its own expense, and
provided further that the failure of the Stockholder to give notice as provided
herein shall not relieve the Company of its obligations under this Section 1.5
except to the extent the Company is materially prejudiced thereby. The Company
shall not, in the defense of any such claim or litigation, except with the
consent of the Stockholder being indemnified, consent to the entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to the Stockholder of a
release from all liability in respect of such claim or litigation. The
Stockholder shall promptly furnish such information regarding itself or the
claim in question as the Company may reasonably request and as shall be
reasonably required in connection with the defense of such claim and litigation
resulting therefrom.

                                       3
<PAGE>

                                  ARTICLE II.

                REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER

                  Except as set forth in Exhibit A hereto, the Stockholder
hereby represents and warrants to the Company and Warburg as follows:

     SECTION 2.1. DUE AUTHORIZATION, ETC. The Stockholder has all requisite
power and authority to execute, deliver and perform this Agreement, to appoint
the Company as its Proxy and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement, the appointment of
the Company as Stockholder's Proxy and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of the Stockholder. This Agreement has been duly executed and delivered by
or on behalf of the Stockholder and constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding for such remedy may be brought. There is no
beneficiary or holder of a voting trust certificate or other interest of any
trust of which the Stockholder is trustee whose consent is required for the
execution and delivery of this Agreement of the consummation by the Stockholder
of the transactions contemplated hereby.

     SECTION 2.2. NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.

          (a) The execution and delivery of this Agreement by the Stockholder
     does not, and the performance of this Agreement by the Stockholder will
     not, (i) conflict with or violate any trust agreement or other similar
     documents relating to any trust of which the Stockholder is trustee, (ii)
     conflict with or violate any law applicable to the Stockholder or by which
     the Stockholder or any of the Stockholder's properties is bound or affected
     or (iii) result in any breach of or constitute a default (or an event that
     with notice or lapse of time or both would become a default) under, or give
     to others any rights of termination, acceleration or cancellation of, or
     result in the creation of a lien or encumbrance on any assets of the
     Stockholder, including, without limitation, the Stockholder's Shares,
     pursuant to, any note, bond, mortgage, indenture, contract, agreement,
     lease, license, permit, franchise or other instrument or obligation to
     which the Stockholder is a party or by which the Stockholder or any of the
     Stockholder's assets is bound or affected, except, in the case of clauses
     (ii) and (iii), for any such breaches, defaults or other occurrences that
     would not prevent or delay the performance by the Stockholder of such
     Stockholder's obligations under this Agreement.

          (b) The execution and delivery of this Agreement by the Stockholder
     does not, and the performance of this Agreement by the Stockholder will
     not, require any consent, approval, authorization or permit of, or filing
     with or notification to, any governmental or regulatory authority (other
     than any necessary filing under the HSR Act or approvals or consents
     required under applicable foreign antitrust or competition laws or the
     Exchange Act), domestic or foreign, except where the failure to obtain such
     consents, approvals, authorizations or permits, or to make such filings or
     notifications, would not prevent or delay the performance by the
     Stockholder of the Stockholder's obligations under this Agreement.

                                       4
<PAGE>

     SECTION 2.3. TITLE TO SHARES. The Stockholder is the sole record and
beneficial owner of its Shares, free and clear of any pledge, lien, security
interest, mortgage, charge, claim, equity, option, proxy, voting restriction,
voting trust or agreement, understanding, arrangement, right of first refusal,
limitation on disposition, adverse claim of ownership or use or encumbrance of
any kind ("Encumbrances") other than restrictions imposed by the securities laws
or pursuant to this Agreement and the Purchase Agreement.

     SECTION 2.4. NO FINDER'S FEES. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder. The Stockholder, on behalf of itself and its affiliates, hereby
acknowledges that it is not entitled to receive any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated hereby or by the Purchase Agreement.

                                  ARTICLE III.

                        REPRESENTATIONS AND WARRANTIES OF
                             THE COMPANY AND WARBURG

     SECTION 3.1. The Company hereby represents and warrants to Warburg and the
Stockholder as follows:

          (a) EXISTENCE; GOOD STANDING; AUTHORITY. The Company is a corporation
     duly incorporated, validly existing and in good standing under the laws of
     the State of Maryland. The Company is duly licensed or qualified to do
     business as a foreign corporation and is in good standing under the laws of
     any other state of the United States 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 individually or in the aggregate is not having and could not
     be reasonably expected to have a material adverse effect on the business,
     assets, liabilities, results of operations, condition (financial or
     otherwise) of the Company and its Subsidiaries (as defined in the Purchase
     Agreement) taken as a whole (a "Company Material Adverse Effect"). The
     Company has all requisite corporate power and authority to own, operate,
     lease and encumber its assets and properties and carry on its business as
     now conducted.

     Each of the Company's Subsidiaries is a limited liability company,
corporation or partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, has the
power and authority to own its assets and properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership, lease or use of
its property or the conduct of its business requires such qualification, except
for jurisdictions in which such failure to be so qualified or to be in good
standing would not have a Company Material Adverse Effect.

     True and correct copies of the Charter and the Bylaws of the Company (the
"Bylaws") have been made available to Warburg.

                                       5
<PAGE>

          (b) AUTHORITY RELATIVE TO AGREEMENTS. The execution, delivery and
     performance of the Transaction Documents have been duly and validly
     authorized by all necessary corporate action on the part of the Company.
     This Agreement and the Purchase Agreement have been duly executed and
     delivered by the Company for itself and upon Closing, the Registration
     Rights Agreement shall be duly executed and delivered by it, and upon the
     execution and delivery by the parties thereto, shall constitute the valid
     and legally binding obligations of the Company, enforceable against the
     Company in accordance with their terms, subject to applicable bankruptcy,
     insolvency, moratorium or other similar laws relating to creditors' rights
     or general principles of equity.

     SECTION 3.2. Warburg hereby represents and warrants to the Company and the
Stockholder as follows:

          (a) ORGANIZATION. Warburg is a limited partnership duly organized,
     validly existing and in good standing under the laws of its jurisdiction of
     organization. It has all requisite partnership power and authority to own,
     operate, lease and encumber its properties and to carry on its business as
     now conducted, and to enter into the Transaction Documents and to perform
     its obligations hereunder and thereunder.

          (b) DUE AUTHORIZATION. The execution, delivery and performance of the
     Transaction Documents have been duly and validly authorized by all
     necessary partnership action on its part. This Agreement and the Purchase
     Agreement have been duly executed and delivered by it and, upon the
     Closing, the Registration Rights Agreement shall be duly executed and
     delivered by it and, upon execution and delivery by the Company, constitute
     the valid and legally binding obligations of it, enforceable against it in
     accordance with their terms, subject to applicable bankruptcy, insolvency,
     reorganization, moratorium or other similar laws now or hereafter in effect
     relating to creditors' rights or general principles of equity.

                                  ARTICLE IV.

                               NEGATIVE COVENANTS

     SECTION 4.1. CONDUCT OF BUSINESS BY LEGACY PRIOR TO CLOSING. During the
period from the date of this Agreement until the termination of this Agreement,
except as set forth in Exhibit A hereto or with respect to the Contemplated
Transactions (as defined in the Purchase Agreement) or as contemplated by this
Agreement or the Purchase Agreement, unless Warburg has consented in writing
thereto, which consent shall not be unreasonably withheld, each of Legacy and
its Subsidiaries shall use all commercially reasonable efforts to preserve
intact in all material respects their present business organizations, goodwill
reputation, to keep available the services of their key officers and employees,
to maintain their assets and properties in good working order and condition,
ordinary wear and tear excepted, to maintain insurance on their tangible assets
and businesses in such amounts and against such risks and losses as are
currently in effect, to preserve their relationships with ground lessors,
tenants and other occupiers of properties, customers, suppliers, lenders, joint
venture partners and others having significant business dealings with it and to
comply in all material respects with all laws and orders of all Governmental
Entities applicable to them, and Legacy shall not, nor permit any Legacy
Subsidiary, to:

                                       6
<PAGE>

          (a) incorporate or organize any new Subsidiary, unless such Subsidiary
     shall be wholly owned, directly or indirectly, by such party and Warburg
     shall receive prompt notice of such incorporation or organization;

          (b) amend or propose to amend its Certificate of Incorporation or
     By-Laws or any of its Subsidiaries' Charter Documents or permit the
     amendment of its Certificate of Incorporation or By-Laws or of any Charter
     Documents of its Subsidiaries;

          (c) declare, set aside or pay any dividend other than in the ordinary
     course of business and consistent with past practice or make any other
     distribution or payment with respect to any shares of its capital stock,
     except in connection with the use of shares of capital stock to pay the
     exercise price or tax withholding in connection with stock-based employee
     benefit plans of Legacy, directly or indirectly redeem, purchase or
     otherwise acquire any shares of its capital stock or capital stock of any
     of its Subsidiaries, or make any commitment for any such action;

          (d) issue, deliver, sell or otherwise transfer or authorize or propose
     the issuance, delivery, sale or other transfer of or permit Legacy or any
     Legacy Subsidiary to issue, deliver, sell or otherwise transfer or
     authorize or propose the issuance, delivery, sale or other transfer of, any
     shares of capital stock of, or beneficial or other equity interests in,
     such party or any of its Subsidiaries or Affiliates or any option with
     respect thereto;

          (e) except, with respect to loans or capital contributions to any of
     Legacy's Subsidiaries that exist on the date hereof, to the extent (i)
     required under the express terms of the Legacy's Certificate of
     Incorporation or By-Laws or any Charter Documents applicable to any Legacy
     Subsidiary or Affiliate or (ii) in the reasonable good faith judgment of
     Legacy, as applicable, necessary under the circumstances to satisfy the
     current cash needs of Legacy, its Affiliates or its Subsidiaries provide
     funds to, or make any investment (in the form of a loan, capital
     contribution or otherwise) in (or permit any of such Legacy Subsidiaries to
     take any such action with respect to), any person;

          (f) acquire (by merging or consolidating with, or by purchasing a
     substantial equity interest in or a substantial portion of the assets of,
     or by any other manner) any business or any corporation, partnership,
     association or other business organization or division thereof with assets
     (other than with respect to the Contemplated Transactions) in excess of
     $25,000,000 or acquire any material assets in an amount which exceeds
     $30,000,000 in the aggregate;

          (g) mortgage or otherwise encumber or subject to any Encumbrance or
     sell, lease or otherwise dispose of any of its material properties or
     assets or assign or encumber the right to receive income, dividends,
     distributions and the like;

          (h) make or agree to make any new capital expenditures in excess of
     $5,000,000 in the aggregate;

          (i) incur (which shall not be deemed to include entering into credit
     agreements, lines of credit or similar arrangements until borrowings are
     made or committed to be borrowed under such arrangements) any indebtedness
     for borrowed money or guarantee any such indebtedness, other than (i) such
     debt incurred in connection with the projects set forth in Schedule 1.1 of
     the Disclosure Letter under the heading "Debt Incurrence," (ii) to meet the
     current cash needs of

                                       7
<PAGE>

     Legacy and its Subsidiaries business in an aggregate amount not to exceed
     $25,000,000, to permit Legacy to perform its obligations hereunder or (iii)
     to effect a redemption of indebtedness permitted by clause (j);

          (j) voluntarily purchase, cancel, prepay or otherwise provide for a
     complete or partial discharge in advance of a scheduled repayment date with
     respect to, or waive any right under, or otherwise modify the provisions
     of, any indebtedness, or guarantee of indebtedness, for borrowed money, or
     permit Legacy or any Legacy Subsidiaries to take any such actions, other
     than the redemption of indebtedness substantially from the proceeds of new
     indebtedness, the provisions of which are not materially less advantageous
     to the issuer thereof than those of, and the "ALL-IN" cost of which
     (determined in accordance with sound financial practice) shall not exceed
     that of, the indebtedness so redeemed;

          (k) enter into, adopt, amend in any material respect (except as may be
     required by applicable law) or terminate any Plan, as the case may be, or
     grant any options, awards or other benefits or increase compensation,
     except for normal increases in benefits and compensation in the ordinary
     course of business consistent with past practice that, in the aggregate, do
     not result in a material increase in benefits or compensation expense to
     Legacy and Legacy Subsidiaries or amend or modify any employment agreement
     with any officer of Legacy and, taken as a whole, grant any options, awards
     or other benefits or increase the compensation of the officers of Legacy or
     any Legacy Subsidiary for whom executive compensation disclosure would be
     required to be made on a proxy statement for an annual meeting under
     Regulation 14A under the Exchange Act and Item 402 of Regulation S-K
     promulgated by the SEC (assuming for this purpose that each of Legacy and
     the Legacy Subsidiaries are subject to such disclosure requirements);

          (l) enter into any Contract, or amend or modify any existing Contract,
     or engage in any new transaction outside the ordinary course of business
     consistent with past practice, not on an arm's-length basis, or permit any
     of Legacy or any Legacy Subsidiary to take such actions, with any Affiliate
     of such party other than transactions among Legacy and the Legacy
     Subsidiaries;

          (m) make any change in the lines of business in which Legacy and its
     Subsidiaries participate or are engaged;

          (n) enter into any Contract, commitment or arrangement to do or engage
     in any action the consummation of which would be prohibited by the
     foregoing;

          (o) make any changes in its accounting methods or policies except as
     required by law, the SEC or generally accepted accounting principles;

          (p) fail to maintain and cause its Subsidiaries to maintain insurance
     in such amounts and against such risks as are customary for companies;

          (q) obtain any equity or debt financing (including any private or
     public offering of the Company's capital stock);

          (r) except following an event of default thereunder, enter into any
     voluntary termination of a Lease material to the shopping center to which
     such Lease pertains, unless such Lease is

                                       8
<PAGE>

     promptly replaced by a lease with equal or greater value (including rent,
     term and quality of tenant);

          (s) make any material tax election or settle or compromise any
     material liability for taxes;

          (t) make any loan of money to or investment in, or purchase any equity
     interest in, buy any property from or sell any property to, or enter into
     any partnership or joint venture with the Company other than pursuant to
     arrangements existing between the Company and Legacy set forth on Schedule
     5.7 of the Disclosure Letter that have been disclosed to Buyer on the date
     hereof, nor amend or waive any covenant, condition or provision of the
     Merger Agreement or any of the other agreements contemplated thereby;

          (u) amend or waive any term or provision or condition of the voting
     agreements set forth in Schedule 5.7 of the Disclosure Letter in connection
     with the Merger; or

          (v) amend or waive any term, provision or condition in any Contract
     with the Company.

                                   ARTICLE V.

                                  MISCELLANEOUS

     SECTION 5.1. DEFINITIONS. Terms used but not otherwise defined in this
Agreement have the meanings ascribed to such terms in the Purchase Agreement.

     SECTION 5.2. TERMINATION. This Agreement shall terminate and be of no
further force and effect (i) by the written mutual consent of the parties hereto
or (ii) automatically and without any required action of the parties hereto upon
the earlier of (A) closing of the Warburg Investment or (B) the termination of
the Purchase Agreement. No such termination of this Agreement shall relieve any
party hereto from any liability for any breach of this Agreement prior to
termination.

     SECTION 5.3. FURTHER ASSURANCE. From time to time, at another party's
request and without consideration, each party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transaction contemplated by this Agreement.

     SECTION 5.4. CERTAIN EVENTS. The Stockholder agrees that this Agreement and
the Stockholder's obligations hereunder shall attach to the Stockholder's Shares
and shall be binding upon any person or entity to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or otherwise,
including, without limitation, the Stockholder's permitted successors and
assigns. Notwithstanding any transfer of Shares, the transferor shall remain
liable for the performance of all its obligations under this Agreement.

     SECTION 5.5. NO WAIVER. The failure of any party hereto to exercise any
right, power, or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, any custom or practice of the
parties at variance with the terms hereof shall not constitute a waiver by

                                       9
<PAGE>

such party of its right to exercise any such or other right, power or remedy or
to demand such compliance.

     SECTION 5.6. SPECIFIC PERFORMANCE. The Stockholder acknowledges that if the
Stockholder fails to perform any of its obligations under this Agreement
immediate and irreparable harm or injury would be caused to the Company and
Warburg for which money damages would not be an adequate remedy. In such event,
the Stockholder agrees that each of the Company and Warburg shall have the
right, in addition to any other rights it may have, to specific performance of
this Agreement. Accordingly, if the Company or Warburg should institute an
action or proceeding seeking specific enforcement of the provisions hereof, the
Stockholder hereby waives the claim or defense that the Company or Warburg, as
the case may be, has an adequate remedy at law and hereby agrees not to assert
in any such action or proceeding the claim or defense that such a remedy at law
exists. The Stockholder further agrees to waive any requirements for the
securing or posting of any bond in connection with obtaining any such equitable
relief.

     SECTION 5.7. NOTICE. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made (i) as of the date delivered or sent by facsimile if delivered
personally or by facsimile, (ii) on the first business day following the date of
such mailing, if mailed by overnight courier, and (iii) on the third business
day after deposit in the U.S. mail, if mailed by registered or certified mail
(postage prepaid, return receipt requested), in each case to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice, except that notices of changes of address shall be effective
upon receipt):

          (a) If to the Company:

              Price Enterprises, Inc.
              17140 Bernardo Center Drive
              Suite 300
              San Diego, California 92128
              Attention: Gary B. Sabin and S. Eric Ottesen
              Facsimile: (858) 675-9405

              with a copy to:

              Latham & Watkins
              12636 High Bluff Drive
              Suite 300
              San Diego, California 92130
              Attention: Scott N. Wolfe
              Facsimile: (858) 523-5450

     or at such other address and to the attention of such other person as the
     Company may designate by written notice to Warburg and each Stockholder.

                                       10
<PAGE>

          (b) If to Warburg:

              Warburg, Pincus Equity Partners, L.P.
              466 Lexington Avenue, 10th Floor
              New York, New York 10017
              Attention: Reuben S. Leibowitz
              Facsimile: (212) 716-5100

              with a copy to:

              Willkie Farr & Gallagher
              787 Seventh Avenue
              New York, New York  10019
              Attention:  Steven A. Seidman
              Facsimile: (212) 728-8111

          (c) If to the Stockholder, at the address set forth below the
     Stockholder's name on Schedule I hereto.

     SECTION 5.8. EXPENSES. Except as otherwise expressly set forth herein or in
the Purchase Agreement, all fees, costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such fees, costs and expenses.

     SECTION 5.9. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

     SECTION 5.10. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the maximum extent
possible.

     SECTION 5.11. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, the Purchase Agreement and the other Transaction Documents constitute
the entire agreement and supersede any and all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof, and this Agreement is not intended to
confer upon any other person any rights or remedies hereunder.

     SECTION 5.12. ASSIGNMENT. Other than as contemplated by Section 1.2(b)
hereof, this Agreement shall not be assigned, by operation of law or otherwise,
by either party hereto and any attempted assignment of this Agreement other than
as provided in this Section 5.12 shall be null and void and of no effect.

                                       11
<PAGE>

     SECTION 5.13. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland applicable to
contracts executed in and to be performed entirely within that State.

     SECTION 5.14. AMENDMENTS AND WAIVERS. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by each of the
parties hereto. The parties hereto may, in their sole discretion and only by an
instrument in writing signed by each of the parties hereto, waive compliance by
any party hereto with respect to any term or provision hereof. The waiver of the
parties hereto of a breach of any term or provision hereof shall not be
construed as a waiver of any subsequent breach.

     SECTION 5.15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which shall
constitute one and the same agreement.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       12
<PAGE>

                  IN WITNESS WHEREOF, the Company, Warburg and the Stockholder
have caused this Agreement to be executed as of the date first written above.

                                       PRICE ENTERPRISES, INC.

                                       By: /s/ RICHARD B. MUIR
                                           -------------------------------
                                           Name:   Richard B. Muir
                                           Title:  Executive Vice President

                                       WARBURG, PINCUS EQUITY PARTNERS, L.P.

                                       By: /s/ REUBEN S. LEIBOWITZ
                                           -------------------------------
                                           Name:  Reuben S. Leibowitz
                                           Title:  Partner

                                       EXCEL LEGACY CORPORATION

                                       By: /s/ S. ERIC OTTESEN
                                           -------------------------------
                                           Name:  S. Eric Ottesen
                                           Title:  Senior Vice President

<PAGE>

                                   SCHEDULE I

<TABLE>
<CAPTION>
       Name and Address              Number of Common           Number of Series A
        of Stockholder                 Shares Owned           Preferred Shares Owned
       ----------------              ----------------         ----------------------
<S>                                  <C>                      <C>
Excel Legacy Corporation               12,154,289                     None
17140 Bernardo Center Drive
Suite 300
San Diego, California 92128
</TABLE>

<PAGE>

                                    EXHIBIT A

         The shares of Common Stock of Price Enterprises, Inc. held by Excel
Legacy Corporation ("Legacy") are pledged as security for Legacy's obligations
under (a) that certain Indenture, dated November 5, 1999, with respect to
Legacy's outstanding 10.0% Senior Redeemable Secured Notes due 2004, (b) that
certain Indenture, dated November 5, 1999, with respect to Legacy's outstanding
9.0% Convertible Redeemable Subordinated Secured Debentures due 2004 and (c)
that certain Note Purchase Agreement, dated October 6, 1999, with respect to
Legacy's outstanding Secured Promissory Note in favor of Sol Price. The
transactions contemplated by this Voting Agreement are subject to the prior
rights of the collateral agents under the pledge agreements associated with such
transactions.

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