1 EXHIBIT 10.2 RESTRUCTURING AGREEMENT TERRACE GARDENS TRANSACTION RESTRUCTURING AGREEMENT ----------------------- THIS RESTRUCTURING AGREEMENT, dated as of May 23, 1997 (this "Agreement"), by and among PGP TERRACE GARDENS HOLDINGS INC., a Delaware...

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EXHIBIT 10.2

RESTRUCTURING AGREEMENT

TERRACE GARDENS TRANSACTION

RESTRUCTURING AGREEMENT
-----------------------

THIS RESTRUCTURING AGREEMENT, dated as of May 23, 1997 (this
"Agreement"), by and among PGP TERRACE GARDENS HOLDINGS INC., a Delaware
corporation (herein, "PGP-TG"), PACIFIC GULF PROPERTIES INC., a Maryland
corporation (herein, "PGP"), TERRACE GARDENS APARTMENTS, a California general
partnership, and all of the general partners thereof, namely XXXXXX X. SHORT and
XXXXXXX X. SHORT, as trustees of the Short Family Trust under Declaration of
Trust dated May 1, 1989, XXXXX X. XXXXX, XXXXX X. XXXXX, XXXXXXX X. XXXXXXX, as
trustee of the Xxxxxxx Family Trust dated May 4, 1989, XXXXXX X. XXXXXXX, as
trustee of the Xxxxxxx Family Trust dated May 4, 1989, 225 UNITS LIMITED, a
California limited partnership (collectively, the "Existing Partners").

WITNESSETH:

WHEREAS, Terrace Gardens Apartments is a general partnership formed
pursuant to that certain Partnership Agreement, dated November 1, 1983, as
amended, and existing under the laws of the State of California (the "California
General Partnership");

WHEREAS, the California General Partnership owns and manages a 225-unit
apartment complex known as the Terrace Gardens Apartments (the "Property") in
the City of Escondido, County of San Diego, California;

WHEREAS, the California General Partnership desires to convert from a
California general partnership to a Delaware limited partnership (the "Delaware
Limited Partnership");

WHEREAS, Section 17-217 of the Delaware Revised Uniform Limited
Partnership Act, 6 Del.C. ss. 17-101, et seq., and Article 9 of the Uniform
Partnership Act of 1994 authorize thE conversion of the California General
Partnership to the Delaware Limited Partnership;

WHEREAS, PGP-TG will be admitted as a general partner of the California
General Partnership upon execution of the California General Partnership
Amendments, and will, upon Conversion, be the sole general partner of the
Delaware Limited Partnership; and

WHEREAS, the Existing Partners of the California General Partnership
will, upon Conversion, be the limited partners of the Delaware Limited
Partnership.

NOW, THEREFORE, the parties hereto hereby agree as follows:

ARTICLE 1
DEFINITIONS

Certain of the terms used in this Agreement that are not otherwise
defined herein shall have the meanings set forth below.

1.1. "Amended Statement of Partnership" means that certain amendment
to the Statement of Partnership currently on record with the County Recorder's
Office of San Diego County.

1.2. "Approved Title Form" shall mean the Preliminary Report for the
Property in the form of, and containing the exceptions, described on Exhibit K.

1.3. "Appurtenances" shall mean all rights, privileges, interests,
licenses, claims, easements, benefits, covenants, conditions and servitudes of
any type or nature which are appurtenant to or otherwise benefit a parcel of
Land and/or the Improvements located thereon, including without limitation, all
minerals, oil, gas and other hydrocarbon substances on or under the Land, as
well as all development rights, air rights, water, water rights and water stock
relating to a parcel of Land and any other easements, rights of way or
appurtenances and used in connection with the beneficial operation, use and
enjoyment of such Land and/or Improvements or any other appurtenance, together
with all rights of the California General Partnership in and to streets,
sidewalks, alleys, gores, strips, driveways, parking areas and areas adjacent
thereto or used in connection therewith, and all rights of the California
General Partnership in any land lying in the bed of any existing or proposed
street adjacent to any Land.

1.4. "Bankruptcy Code" shall mean Title 11 of the U.S. Code, as now
constituted or hereafter amended.

1.5. "California General Partnership Amendments" shall mean the
amendments to the general partnership agreement of the California General
Partnership substantially in the form attached hereto as Exhibit G and Exhibit
H.

1.6. "CAL. UPA" shall mean the California Uniform Partnership Act of
1994, Section 16100 et seq. of the California Corporations Code.

1.7. "Certificate of Limited Partnership" means the Certificate of
Limited Partnership required to be filed with the Secretary of State of the
State of Delaware pursuant to Section 17- 217 of the DEL. RULPA.

1.8. "Closing" shall mean the consummation of the Conversion. The
Conversion shall occur not later than the Closing Deadline.

1.9. "Closing Deadline" shall mean June 16, 1997.

1.10. "Code" shall mean the Internal Revenue Code of 1986, as amended,
including all tax regulations promulgated thereunder.

1.11. "Conditions Precedent" shall mean, collectively, the PGP-TG
Conditions Precedent and the Existing Partners Conditions Precedent, each set
forth in Article 7 and Article 8, respectively, of this Agreement.

1.12. "Contracts" shall mean all written or oral management,
architectural, engineering, leasing, insurance, bonding, construction,
financing, guarantee, indemnity, service, maintenance, operating, repair,
collective bargaining, employment, employee benefit, equipment leasing, supply,
warranty, purchase, consulting, professional service, advertising, promotion,
public relations and other contracts and commitments (excluding the Leases) in
any way relating to the Property or any part thereof. The foregoing shall not,
however, include any contract of engagement for the legal services of Sheppard,
Mullin, Xxxxxxx & Xxxxxxx.

1.13. "Conversion Agreement" shall mean the Agreement and Plan of
Conversion required to be executed by PGP-TG and the Existing Partners under the
DEL. RULPA and the CAL. UPA.

1.14. "Conversion" shall mean the conversion of the California General
Partnership to the Delaware Limited Partnership as contemplated under this
Agreement and the other Transaction Documents referred to herein, and shall also
include the refunding of the Tax Exempt Debt, the execution of the California
General Partnership Amendments, the execution of the LP Agreement and all other
transactions related to the foregoing.

1.15. "Deferred Maintenance" shall mean all costs identified by PGP-TG
as costs of deferred maintenance to the California General Partnership assets.

1.16. "Delaware Certificate of Conversion" shall mean the Certificate
of Conversion required to be filed with the Secretary of State of the State of
Delaware pursuant to Section 17- 217 of the DEL. RULPA.

1.17. "Delaware Limited Partnership" means Terrace Gardens - PGP, L.P.,
a Delaware limited partnership.

1.18. "DEL. RULPA" shall mean the Delaware Revised Uniform Limited
Partnership Act, 6 Del.C. ss. 17-101, et seq.

1.19. "Deposits and Reimbursements" shall mean (a) deposits made with
or tendered to utility companies to secure service or to permit the California
General Partnership or their predecessors in interest to tie in to existing
service grids or to cause a utility company to install

connections or extensions necessary to provide service, (b) deposits made by the
California General Partnership or their predecessors in interest with any
bonding or surety company or deposits, bonds or other financial security devices
posted with or for the benefit of any governmental or quasi-governmental agency
in connection with subdivision or public improvement bonds obtained by the
California General Partnership or their predecessors in interest or in
connection with any development agreement, subdivision agreement, parcel map or
tract map, and (c) any refundable fees, payments or reimbursements which the
California General Partnership or its predecessors in interest or the
then-current owner or occupant of the Real Property or Improvements is entitled
to receive from any governmental or quasi-governmental or private body in
respect of the ownership and development of the Land or Improvements or any
public improvements made in connection with the Land or Improvements.

1.20. "Effective Date" shall mean the effective date set forth in the
Delaware Certificate of Conversion is filed with the Secretary of State of the
State of Delaware.

1.21. "Environmental Requirements" shall mean all applicable statutes,
regulations, rules, ordinances, codes, licenses, permits, orders, approvals,
plans, authorizations, concessions, franchises and similar items, of all
governmental agencies, departments, commissions, boards, bureaus or
instrumentalities of the United States, states and political subdivisions
thereof and all applicable judicial and administrative and regulatory decrees,
judgments and orders relating to the protection of human health or the
environment, including, without limitation: (i) all requirements, including but
not limited to those pertaining to reporting, licensing, permitting,
investigation and remediation of emissions, discharges, releases or threatened
releases of Hazardous Materials, chemical substances, pollutants, contaminants
or hazardous or toxic substances, materials or wastes whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal
transport or handling of chemical substances, pollutants, contaminants or
hazardous or toxic substances, materials, or wastes, whether solid, liquid or
gaseous in nature; and (ii) all requirements pertaining to the protection of the
health and safety of employees or the public.

1.22. "Exchange Rights Agreement" shall mean that certain Exchange
Rights Agreement, in substantially the form attached hereto as Exhibit B.

1.23. "Existing Contracts" shall mean those Contracts identified on
Exhibit I.

1.24. "Existing Partners" shall mean the existing partners of the
California General Partnership and who will, upon Conversion, become the limited
partners of the Delaware Limited Partnership pursuant to the LP Agreement.

1.25. "Existing Partners' Conditions Precedent" shall have the meaning
contained in Article 8.

1.26. "Hazardous Materials" shall mean (i) any flammables, explosive or
radioactive materials, contaminants or hazardous or toxic wastes, materials or
substances or related materials whether solid, liquid or gaseous in nature,
including, without limitation, substances defined as "hazardous substances,"
"hazardous materials," "toxic substances" or "solid waste" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Sec. 9601, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq.; the Toxic Substances Control Act, 15 U.S.C., Section 2601
et seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section
6901 et seq.; and in the regulations adopted and publications promulgated
pursuant to said laws; (ii) those substances listed in the United States
Department of Transportation Table (49 C.F.R. 172.101 and amendments thereto) or
by the Environmental Protection Agency (or any successor agency) as hazardous
substances (40 C.F.R. Part 302 and amendments thereto); (iii) those substances
defined as "hazardous wastes," "hazardous substances" or "toxic substances" in
any similar federal, state or local laws or in the regulations adopted and
publications promulgated pursuant to any of the foregoing laws or which
otherwise are regulated by any governmental authority, agency, department,
commission, board or instrumentality of the United States of America, the State
of California or any political subdivision thereof; (iv) any pollutant or
contaminant or hazardous, dangerous or toxic chemicals, materials, or substances
within the meaning of any other applicable federal, state, or local law,
regulation, ordinance, or requirement (including consent decrees and
administrative orders) relating to or imposing liability or standards of conduct
concerning any hazardous, toxic, or dangerous waste, substance or material all
as amended; (v) petroleum or any by-products thereof; (vi) any radioactive
material, including any source, special nuclear or by-product material as
defined at 42 U.S.C. Sections 2011 et seq., as amended, and in the regulations
adopted and publications promulgated pursuant to said law; (vii) asbestos in any
form or condition; and (viii) polychlorinated biphenyls.

1.27. "Improvements" shall mean all improvements, structures or fixtures
constructed upon the Land and/or Appurtenances, including without limitation,
all buildings and structures presently located on the Land and/or Appurtenances,
all apparatus, equipment and appliances presently located on the Land and/or
Appurtenances, and used in connection with the operation or occupancy thereof,
such as heating and air conditioning systems and facilities used to provide any
utility services, parking services, refrigeration, ventilation, garbage
disposal, recreation or other services thereto, and all landscaping and
leasehold improvements of tenants, if any, which become the property of the
lessor upon termination of a Lease.

1.28. "Indemnification Agreement" shall mean that certain
indemnification agreement, dated June 12, 1997, by and among PGP, the Delaware
Limited Partnership, Morning View Terrace - PGP, L.P., and Pacific Inland
Communities, LLC.

1.29. "Insolvency Laws" shall mean any applicable federal or state
bankruptcy law or other similar law.

1.30. "Intangible Personal Property" shall mean all of the California
General Partnership's right, title, claim, interest and estate in, to and under
any and all (i) intangible personal property owned by the California General
Partnership which relates in any manner to or arises from or in connection with
the Real Property and/or Tangible Personal Property and any and all other
property, rights in or to property, general intangibles and contractual rights
which the California General Partnership may have which are necessary or useful
in connection with, or otherwise affect or relate to, the acquisition,
development, improvement, holding, use, operation, maintenance, leasing or sale
of the Real Property and/or Tangible Personal Property, including, but not
limited to, any and all plans, specifications, subdivision maps and filings with
respect thereto, applications, entitlements, Licenses and Entitlements,
subdivision or other bonds, Deposits and Reimbursements, engineering or soil
reports, environmental and hazardous and toxic waste reports and studies,
surveys, maps, correspondence, inspection reports, management reports, marketing
reports, marketing displays and brochures, all contract rights, warranties from
contractors, architects, engineers and material and labor suppliers whether
written or implied, copies of all books and records (provided all original
Leases and Lease files are included in this definition), all claims, choses in
action, judgments, remedies, damages and causes of action all easements,
licenses and rights-of-way, occupancy or use agreements and all other documents
affecting or relating to the Real Property and/or Tangible Personal Property;
(ii) insurance proceeds received after Closing on account of a pre-Closing
event, but only to the extent of costs or liabilities not covered by the
Existing Partners' indemnity; (iii) any trademark, service xxxx, trade name or
name customarily used or associated with the Real Property and/or Tangible
Personal Property, and (iv) any and all other warranties, guarantees, permits,
entitlements and other intangible rights of any type or nature.

1.31. "Land" shall mean the parcels of real property described on the
Approved Title Form in Exhibit K attached hereto.

1.32. "Law(s)" shall mean all applicable housing and building codes,
environmental, life safety, laws, rules and regulations including without
limitation, those related to handicapped or disabled (including without
limitation ADA and the Fair Housing Amendments Act of 1988) and land use and
zoning laws and regulations, and other applicable local, state and federal laws
and regulations.

1.33. "Leases" shall mean all leases, occupancy agreements and other
similar agreements, together with all modifications, extensions and renewals
thereof, and any guarantees of any of the foregoing with respect to or demising
any part of the Property, which are described on a Rent Roll.

1.34. "Licenses and Entitlements" shall mean all licenses, franchises,
certifications, authorizations, approvals, rights, privileges, entitlements and
permits issued or approved by any governmental or quasi-governmental authority
or other person or entity having authority over the Property, and all
applications, filings and submittals therefor, in each case relating to the
operation, ownership, subdivision, development, use or maintenance of the
Property or any part

thereof, including, without limitation, construction permits, grading permits,
elevator permits, machinery permits, business licenses, ingress and egress
permits, development agreements, subdivision, parcel and tract maps and
approvals thereof, plans and/or permits required under the applicable zoning
regulations, variances, utility agreements and commitments, improvement
agreements, certificates of occupancy and the like, but excluding therefrom for
all purposes of this Agreement any licenses issued to or solely on behalf of any
Tenant.

1.35. "Losses and Liabilities" shall mean any and all obligations,
liabilities, claims, liens or encumbrances, demands, losses, damages, causes of
action, judgments, costs and expenses (including attorneys' fees), whether
direct, contingent or consequential, and no matter how arising, incurred or
suffered by any indemnified party.

1.36. "LP Agreement" shall mean the Limited Partnership Agreement among
PGP-TG and the Existing Partners governing the Delaware Limited Partnership,
substantially in the form attached hereto as Exhibit A, with such additions
thereto and changes therein as are approved by the parties executing the same,
with such approval to be conclusively evidenced by the execution and delivery
thereof.

1.37. "Net Value" shall mean $10,000,000 minus the outstanding principal
balance of the Tax Exempt Debt as of the Effective Date.

1.38. "Partnership Units" shall mean the partnership units granted upon
execution of the California General Partnership Amendments.

1.39. "Personal Property" shall mean the Tangible Personal Property and
the Intangible Personal Property.

1.40. "PGP" shall mean Pacific Gulf Properties Inc., a Maryland
corporation.

1.41. "PGP-TG Capital Contribution" shall mean cash to be contributed at
Closing by PGP-TG to the California General Partnership in the amount of up to
$250,000 to pay Transaction Expenses; provided, however, that, following a
reconcilliation of all Transaction Expenses following closing, should the
Transaction Expenses exceed $250,000, PGP-TG may contribute such additional
amounts as necessary to pay such Transaction Expenses and will receive a capital
account credit for such amount.

1.42. "PGP-TG Conditions Precedent" shall mean the conditions precedent
described in Article 7.

1.43. "PGP-TG" shall mean PGP Terrace Gardens Holdings Inc., a Delaware
corporation which will operate as the general partner of the Delaware Limited
Partnership.

1.44. "PGP Share Price" shall mean, with respect to the common stock of
Pacific Gulf

Properties Inc., a Maryland corporation, the average closing price on the New
York Stock Exchange for the ten (10) consecutive trading days immediately
preceding the Effective Date.

1.45. "Property" shall mean the Terrace Gardens Apartments located in
the City of Escondido, County of San Diego, California, including all Real
Property and Personal Property.

1.46. "Property Tax Refunds" shall mean all amounts which the California
General Partnership or the Delaware Limited Partnership is entitled to receive
or receives with respect to property taxes, assessments or community facility
district taxes or assessments paid prior to the Effective Date. The California
General Partnership has assigned all right, title and interest in the Property
Tax Refunds to the Existing Partners.

1.47. "Qualified Project Costs" shall mean costs in connection with the
acquisition, construction and installation of the Property financed by Tax
Exempt Debt, but only to the extent that (i) such costs were paid or incurred by
or on account of the California General Partnership or any related person on or
after the applicable inducement date, the date of the first official action by
the issuer of the Tax Exempt Debt expressing its intent to issue revenue bonds
to assist in financing such Property, (ii) such costs are chargeable to such
Property's capital account or would be so chargeable either with a proper
election by the California General Partnership or but for a proper election by
the California General Partnership to deduct such costs, within the meaning of
old Treasury Regulation 1.103-8(a)(1); (iii) if any portion of the Property was
constructed by a related person of the California General Partnership (whether
as a general contractor or a subcontractor), such costs include only the actual
out-of-pocket costs incurred by such related person in constructing the Property
(or any portion thereof) and not, for example, intercompany profits resulting
from members of an affiliated group (within the meaning of Section 1504 of the
Code) participating in the construction of the Property or payments received by
such related person due to early completion of the Property (or any portion
thereof); (iv) such costs do not constitute leasing commissions, costs of
advertising for the Property or other cost related to the rental of units in the
Property or management fees for the management and operation of the Property
after the completion date of such Property; and (v) such costs are used to
finance residential rental property described in Section 103(b)(4)(A) of the
Code and Section 1.103-8(b) of the Treasury Regulations.

1.48. "Real Property" shall mean the Land, Improvements and
Appurtenances.

1.49. "Rent Roll" shall mean the current gross rent roll of the
Property, listing for each tenant the (a) name, (b) location of leased premises,
(c) rent, (d) obligation for reimbursement of expenses, (e) amount of security
deposit and rent paid more than thirty (30) days in advance, (f) lease
commencement date, (g) lease termination date, (h) any free rent, or other
unexpired concessions, if any, and (i) a description of any uncured defaults,
certified by the California General Partnership as true, complete and correct,
and delivered to PGP-TG under certificate of authenticity and accuracy by the
California General Partnership concurrently with the execution and delivery
hereof, a copy of which is set forth as Exhibit J. The omission of any

item listed in (a)-(j), inclusive, from the Rent Roll (as certified by the
California General Partnership) shall be deemed to be intentional and shall
constitute a representation that the omitted items are not in existence or are
otherwise inapplicable.

1.50. "Tangible Personal Property" shall mean and include any and all
tangible personal property owned by the California General Partnership located
at, upon or about, or affixed or attached to, or installed in the Real Property,
or used or to be used in connection with or incorporated into or otherwise
relating to the Real Property or its ownership, use, development, construction,
maintenance, management, operation, marketing, leasing, occupancy, sale or
financing, including, but not limited to, fixtures, furniture, furnishings,
tools, machinery, appliances and other apparatus and equipment, supplies and
other inventories, office equipment, communications equipment, vehicles, storage
tanks, spare and replacement parts, fuel plans, specifications, operational
handbooks, machinery and/or equipment operational instructions and/or
specifications, surveys, drawings, and records, files and papers, whether in
hard copy or computer format, including, without limitation, structural and
engineering information, sales and promotional literature, manuals and data,
sales and purchase correspondence, lists of present and former suppliers, lists
of present and former lessees and clients, personnel and employment records, and
any information relating to taxes imposed on the Real Property.

1.51. "Tax Exempt Debt" shall mean the existing tax exempt financing
encumbering the Property which is to be refunded as a part of the Conversion.

1.52. "Tax Exempt Debt Instruments" shall mean the Tax Exempt Debt and
the agreements and other instruments described on Exhibit C entered into or
evidencing the Tax Exempt Debt.

1.53. "Tax Exempt Debt Refunding Instruments" shall mean the Tax Exempt
Refunding Debt and the agreements and other instruments to be entered into or
otherwise evidencing the Tax Exempt Refunding Debt.

1.54. "Tax Exempt Debt Reserves" shall mean all amounts deposited with
the City of Escondido or the Bank of America as a reserve in connection with the
Tax Exempt Debt. The California General Partnership has assigned all right,
title and interest in the Tax Exempt Debt Reserves to the Existing Partners.

1.55. "Tax Exempt Refunding Debt" shall mean the tax exempt financing
which will refund the Tax Exempt Debt and will thereafter encumber the Property.

1.56. "Tenant" shall mean each lessee or tenant occupying any portion of
the Property.

1.57. "Term Sheet" shall mean that certain Term Sheet for the Terrace
Gardens Transaction, effective as of April 4, 1997, and executed by PGP and all
Existing Partners.

1.58. "Transaction Documents" shall mean this Agreement, the Conversion
Agreement, the California General Partnership Amendments, the LP Agreement, the
Exchange Rights Agreement, the Tax Exempt Debt Refunding Instruments and any
other document or agreement contemplated by the foregoing.

1.59. "Transaction Expenses" shall mean an amount of cash equal to the
sum of: (i) all fees, costs and expenses incurred in connection with the
negotiation, drafting and completion of the Transaction Documents; (ii) all
fees, costs and expenses incurred in connection with all agreements, documents
and other instruments relating to the admission of PGP-TG to the California
General Partnership; (iii) all fees, costs and expenses of an audited financial
statement and operating statement for the California General Partnership for the
year 1996 as prepared by Ernst & Young and necessary, in the judgment of PGP or
PGP-TG, to satisfy all applicable reporting requirements under Federal
securities laws; (iv) all costs of refinancing the outstanding principal balance
of the Tax Exempt Debt with debt that is credit-enhanced by the Federal National
Mortgage Association; and (v) all due diligence expenses, including out of
pocket expenses, of PGP or PGP-TG for inspection of the California General
Partnership's assets.

ARTICLE 2
AGREEMENTS REGARDING CONVERSION

SECTION 2.1. THE CALIFORNIA GENERAL PARTNERSHIP AMENDMENTS. Subject to
and upon the terms and conditions of this Agreement, at the Closing the Existing
Partners and PGP- TG do hereby agree to execute and deliver the California
General Partnership Amendments.

SECTION 2.2. THE CONVERSION.

(a) At Closing, after satisfaction or, to the extent permitted
hereunder, waiver by PGP-TG and the Existing Partners of the Conditions
Precedent and all conditions of the Conversion set forth in the Transaction
Documents, the California General Partnership shall file the following:

1. The Certificate of Limited Partnership with the Secretary
of State of the State of Delaware;

2. The Delaware Certificate of Conversion with the Secretary
of State of the State of Delaware;

3. Registration of Foreign Limited Partnership, filed with
the Secretary of State of the State of California;

4. The Amended and Restated Statement of Partnership with the
County Recorder of the County of San Diego; and

5. All other filings or recordings required by either
California law or Delaware law in connection with the Conversion.

(b) The Conversion shall become effective on the Effective Date.

(c) At the Effective Date, the California General Partnership shall
be converted to the Delaware Limited Partnership in accordance with Section
17-217 of the DEL. RULPA and Article 9 of the CAL. UPA.

(d) The name of the Delaware Limited Partnership shall be "Terrace
Gardens - PGP, L.P."

(e) The Conversion Agreement shall be made available to PGP-TG and
any Existing Partner upon request.

(f) An executed copy of the Conversion Agreement shall be kept
permanently at the principal office of the Delaware Limited Partnership.

SECTION 2.3. CONTRIBUTION OF CAPITAL.

(a) At the Closing, PGP shall cause, and PGP-TG shall contribute, the
PGP-TG Capital Contribution to the California General Partnership.

SECTION 2.4. CONTINUATION OF INTERESTS.

(a) Upon execution of the California General Partnership Amendments,
the Existing Partners shall own Partnership Units. The number of Partnership
Units owned by Existing Partners shall be equal to the Net Value of the
California General Partnership divided by the PGP Share Price. The total
Partnership Units owned by the Existing Partners shall be allocated among the
individual Existing Partners as set forth in Exhibit N attached hereto. The
"ownership interest" of the individual Existing Partners shall be determined by
dividing the number of Partnership Units owned by such Existing Partner by the
total number of Partnership Units owned by all Existing Partners from time to
time.

(b) In conjunction with the refunding of the Tax Exempt Debt, if the
City of Escondido requires (i) any restrictions on the Property which are in
addition to the restrictions that currently encumber the Property or (ii) a
maturity date for the Tax Exempt Refunding Debt of sooner than the year 2027,
and either of which adversely affects the annual projected gross revenues from
the Property, the Net Value shall be readjusted by subtracting the annual
difference in gross revenue over the life of the Tax Exempt Refunding Debt
divided by .085. The Existing Partners' Partnership Units shall then be adjusted
correspondingly.

Partnership shall be equivalent to the interests of PGP-TG and the Existing
Partners in the California General Partnership prior to the Conversion but after
execution of the California General Partnership Amendments.

(d) At the Effective Date, distributions from the Delaware Limited
Partnership shall be governed by the provisions set forth in the LP Agreement.

(e) At the Effective Date, allocations of profit and loss shall be
governed by the provisions set forth in the LP Agreement.

SECTION 2.5. EXCHANGE OF PARTNERSHIP INTERESTS. As provided in and
subject to the Exchange Rights Agreement, the Existing Partners of the Delaware
Limited Partnership shall have the right, exercisable in their discretion, to
sell their Partnership Units to PGP for common stock of PGP or cash, at PGP's
election. The Exchange Rights Agreement shall be substantially in the form
attached hereto as Exhibit B, with such additions thereto and changes therein as
are approved by the parties executing the same, with such approval to be
conclusively evidenced by the execution and delivery of the Exchange Rights
Agreement. Notwithstanding any provision herein to the contrary, if the Property
is sold, all Partnership Units held by the Existing Partners shall be
mandatorily converted to the common stock of PGP and shall be automatically
deemed tendered for acquisition by PGP pursuant to Section 4 of the Exchange
Rights Agreement; provided, however, that the immediately preceding sentence
shall not apply in the event the Property is sold for less than its Carrying
Value (as that term is defined in the LP Agreement) or is otherwise sold for a
loss for either book or tax purposes.

SECTION 2.6. SAME ENTITY. Pursuant to the CAL. UPA and for all
purposes, upon Conversion the Delaware Limited Partnership shall be the same
entity that existed before Conversion.

SECTION 2.7. RIGHTS UPON CONVERSION. At the Effective Date, for all
purposes of the laws of the State of Delaware and the State of California, all
of the rights, privileges and powers of the California General Partnership, and
all of the Property, real and personal and mixed, and all debts due to such
California General Partnership, as well as all other things and causes of action
belonging to the California General Partnership, shall be vested in the Delaware
Limited Partnership and shall thereafter be the Property of the Delaware Limited
Partnership, and the title to any Property vested by deed or otherwise in the
California General Partnership shall not revert or be in any way impaired by
reason of the DEL. RULPA; but all rights of creditors and all liens upon any
Property of the California General Partnership shall be preserved unimpaired,
and all debts, liabilities and duties of the California General Partnership
shall thenceforth attach to the Delaware Limited Partnership, and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.

SECTION 2.8. PRORATIONS.

(a) Nature and Purpose of Prorations. Even though the California
General Partnership and the Delaware Limited Partnership are the same entity and
the transaction provided herein does not involve the transfer of assets, the
parties have agreed to certain prorations as if assets were being transferred in
order to reflect the economic agreement of the parties. The prorations shall be
between the Existing Partners and the Delaware Limited Partnership. For the
purpose of determining the net proration credit and debit, the Existing Partners
shall be credited with all cash of the California General Partnership at the
Closing. As between the Existing Partners and the Delaware Limited Partnership,
the Delaware Limited Partnership shall be deemed to be the owner of the assets
of the Delaware Limited Partnership on the date of the Closing. The sum of the
amounts prorated to the Delaware Limited Partnership shall be subtracted from
the sum of the amounts prorated to the Existing Partners, and the difference (if
positive) shall be referred to herein as the "Net Credit to the Existing
Partners." The sum of the amounts prorated to the Existing Partners shall be
subtracted from the sum of the amounts prorated to the Delaware Limited
Partnership, and the difference (if positive) shall be referred to herein as the
"Net Credit to the Delaware Limited Partnership." The California General
Partnership has distributed to the Existing Partners all right, title and
interest in and to such Net Credit to the Existing Partners, and if the
prorations result in a Net Credit to the Existing Partners, the Delaware Limited
Partnership shall pay in cash an amount equal to the Net Credit to the Existing
Partners on the Closing. If the Delaware Limited Partnership does not have
sufficient cash to make such a payment, the Delaware Limited Partnership shall,
as soon as possible after the Closing, pay the deficiency to the Existing
Partners. If the prorations result in a Net Credit to the Delaware Limited
Partnership, the Existing Partners shall contribute cash to the California
General Partnership on the Closing in the amount thereof.

(b) Items to Prorate. All real estate taxes and assessments levied
against the Real Property, all personal property taxes levied with respect to
the Tangible Personal Property, if any, rents and other payments then due and
payable under any of the Tenant Leases and all other income from or charges
against any of the Property (including, without limitation, all operating
expenses) shall be prorated as of the Closing in accordance with the principles
contained in paragraph (c) below.

1. The term "Current Month Rents" means Rents which are payable
under the Leases in the month ("Current Month") in which the Closing occurs.
Current Month Rents which have actually been received by the California General
Partnership shall be prorated as of the Closing. All Rents due prior to the
Current Month and unpaid, and the Existing Partners' pro rata share of any
unpaid Rents for the Current Month (collectively "Existing Partner Rents")

shall be the property of the Existing Partners and shall be collected as
provided in paragraph (e) below.

2. As used herein, "Security Deposits" shall means the amount
of all money or other things of value (including without limitation,
certificates of deposit, letters of credit or the like), whether designated as
security deposits, prepaid rents or by some other name, given by tenants under
the Leases and which are conditionally repayable to such tenants or applicable
to future rent obligations under the terms of the Leases. Security Deposits
shall be credited to the Delaware Limited Partnership. The Delaware Limited
Partnership shall assume the Security Deposits to the extent of such credit.

3. Current Month Rents and other payments under the Leases
shall be prorated based only on the current ascertainable amounts of such rents.

4. Current Month Rents and other payments received that are due
under the Leases for that portion of the Current Month or any other month which
is on or after the date of the Closing shall be credited to the Delaware Limited
Partnership.

5. Any other prorated items shall similarly be prorated based
only on currently ascertainable amounts of such payments and items.

6. If possible, utility charges shall be prorated based on
meter readings taken on the date of the Closing, but if that does not occur,
utility charges will be prorated based on the assumption that utility charges
were uniformly incurred during the billing period.

7. All unpaid expenses associated with services provided, or
goods delivered and consumed, to the California General Partnership prior to the
Closing shall be allocated to the Existing Partners.

8. All costs associated with termite eradication which shall be
credited as an expense to the California General Partnership.

(d) Post-Closing Proration Adjustments. As soon after the Closing as
all of the relevant information is available, the Delaware Limited Partnership
and the Existing Partners shall adjust the prorations made on the date of the
Closing to prorate as of date of the Closing any items of proration as set forth
in paragraph (b) above (including subsequent or supplementary real estate tax
bills) if such items of proration relate to events occurring prior to the date
of the Closing.

(e) Post-Closing Collection of Existing Partner Rents. The Existing
Partners hereby appoint the Delaware Limited Partnership as their agent to
collect the Existing Partners' prorated portion of the Rents. The Delaware
Limited Partnership shall not be obligated to pursue any legal remedy or incur
any costs in order to collect the Existing Partners' prorated portion of the

Rents other than the issuance of normal tenant xxxxxxxx. All rents collected by
the Delaware Limited Partnership shall be applied first against amounts due the
Delaware Limited Partnership and then to the Existing Partners' prorated portion
of the Rents. Within twenty (20) days after the end of each calendar month
starting with the month in which the Closing occurs (i) the Delaware Limited
Partnership shall submit to the Existing Partners a statement showing the amount
of the Existing Partners' pro rata portion of the Rents, if any, collected by
the Delaware Limited Partnership during such month, and (ii) the Delaware
Limited Partnership shall remit to Existing Partners all of the Existing
Partners' pro rata portion of the Rents collected by the Delaware Limited
Partnership during such month.

(f) Property Tax Refunds. Property Tax Refunds have been assigned by
the California General Partnership to the Existing Partners. In the event that
the Delaware Limited Partnership should receive any Property Tax Refunds, it
shall promptly, and in no event later than ten (10) days after receipt thereof,
remit the same to the Existing Partners.

(g) Tax Exempt Debt Reserves. Tax Exempt Debt Reserves have been
assigned by the California General Partnership to the Existing Partners. In the
event that the Delaware Limited Partnership should receive any Tax Exempt Debt
Reserves, it shall promptly, and in no event later than ten (10) days after
receipt thereof, remit the same to the Existing Partners.

(h) Remittance to Existing Partners. For all purposes of this Section
2.8, the obligation of the Delaware Limited Partnership to remit any funds or
submit any reports or statements to the Existing Partners shall be satisfied by
the remittance of funds or the submission of reports or statements to the person
identified in Section 12.3 herein. The Delaware Limited Partnership shall not be
required to distribute funds, reports or statements to any Existing Partner
other than the person identified in Section 12.3 herein. The Existing Partners
acknowledge and agree that (i) the person identified in Section 12.3 herein
shall be solely responsible for distributing all funds, reports or statements to
individual Existing Partners and (ii) the Existing Partners are responsible for
notifying, in writing, the Delaware Limited Partnership of any change in the
identity of the person identified in Section 12.3.

(i) Fees and Costs. Any fees, costs, or expenses associated with the
withdrawal, return or collection of the Property Tax Refunds and the Tax Exempt
Debt Reserves, including, without limitation, any investment breakage fees or
early withdrawal penalties, shall be borne solely by the Existing Partners.

SECTION 2.9. CONVERSION NOT A DISSOLUTION. Pursuant to Section 17-217 of
the DEL. RULPA and Section 16909 of the CAL. UPA, the Conversion of the
California General Partnership to the Delaware Limited Partnership shall not
constitute a dissolution of the California General Partnership, and the
California General Partnership shall not be required to wind up its affairs or
pay its liabilities and distribute its assets.

SECTION 2.10. MANAGEMENT AND FEES.

(a) PGP shall provide property and entity level management and
services for the Delaware Limited Partnership in accordance with the management
agreement, the form of which is attached hereto as Exhibit M. The management
agreement shall be substantially in the form attached hereto as Exhibit M, with
such additions thereto and changes therein as are approved by the parties
executing the same, with such approval to be conclusively evidenced by the
execution and delivery of the management agreement.

(b) In exercising its management duties, PGP shall not retain the
existing employees and management agents of the California General Partnership
for the Property. Unless PGP-TG or PGP provides the Existing Partners with
written notice to the contrary, the California General Partnership shall (i)
cause all employment and management agreements respecting the Property to be
terminated effective as of the date of the Closing (but not before), and deliver
evidence of such termination to PGP-TG, and (ii) remove all employees and
management personnel from the Property on the date of the Closing (but not
before).

SECTION 2.11. THE LP AGREEMENT. At the Closing, the partnership
agreement of the California General Partnership shall be amended and restated in
its entirety by the execution of the LP Agreement. The LP Agreement shall be the
limited partnership agreement of the Delaware Limited Partnership unless and
until further amended in accordance with its terms and applicable law. The LP
Agreement shall be substantially in the form attached hereto as Exhibit A. At
the Closing, the LP Agreement shall be executed by PGP-TG and all Existing
Partners.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PGP-TG AND PGP

SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF PGP-TG AND PGP. PGP-TG
and PGP hereby make the representations, warranties, and covenants, as
applicable, set forth in this Article 3.

SECTION 3.2. ORGANIZATION, POWER AND AUTHORITY, AND QUALIFICATION.
PGP-TG is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has the requisite power and
authority to carry on its business as it is now being conducted. PGP is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland, and has the requisite power and authority to carry on
its business as it is now being conducted.

SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT. PGP-TG and PGP have
taken all actions necessary to authorize the execution, delivery and performance
by PGP-TG and PGP of this Agreement, and no other actions on the part of PGP-TG
or PGP are necessary in this regard.

SECTION 3.4. BINDING OBLIGATION. This Agreement has been duly and
validly executed and delivered by PGP-TG and constitutes a valid and binding
agreement of PGP-TG enforceable against PGP-TG in accordance with its terms.
This Agreement has been duly and validly executed and delivered by PGP and
constitutes a valid and binding agreement of PGP enforceable against PGP in
accordance with its terms.

SECTION 3.5. NO VIOLATION. The execution and delivery by PGP-TG and PGP
of this Agreement and the consummation of the Conversion will not result in or
constitute any of the following: (i) a default, breach, or violation, or an
event that, with notice or lapse of time or both, would be a default, breach, or
violation, of the corporate organizational documents of PGP-TG or PGP or any
promissory note, conditional sales contract, commitment, indenture, mortgage,
deed of trust, or other agreement, instrument or arrangement to which PGP-TG or
PGP is a party; (ii) an event that would permit any party to accelerate the
maturity of any indebtedness or other obligation of PGP-TG or PGP; or (iii) a
violation or conflict with any term or provision of any judgment, decree, order,
statute, injunction, rule or regulation of a governmental unit applicable to
PGP-TG or PGP.

SECTION 3.6. BANKRUPTCY. There are no attachments, executions or
assignments for the benefit of creditors, or voluntary or involuntary
proceedings in bankruptcy, or under any other debtor relief laws, contemplated
by or pending or threatened against PGP-TG or PGP. Without limiting the
generality of the foregoing, none of the following have been done by, against or
with respect to PGP-TG or PGP: (A) the commencement of a case under Title 11 of
the U.S. Code, as now constituted or hereafter amended, or under any other
applicable federal or state bankruptcy law or other similar law; (B) the
appointment of a trustee or receiver of any property interest; (C) an assignment
for the benefit of creditors; (D) an attachment, execution or other judicial
seizure of a substantial property interest; (E) the taking of, failure to take,
or submission to, any action indicating an inability to meet its financial
obligations as they accrue; or (F) a dissolution or liquidation.

SECTION 3.7. DISCLOSURE. No representation or warranty of PGP-TG or PGP
in this Agreement, or any information, statement or certificate furnished or to
be furnished by or on behalf of PGP-TG or PGP pursuant to this Agreement or any
Transaction Documents to which it is a party or in connection with the
Conversion contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein not misleading.
All documents delivered by PGP-TG or PGP to the Existing Partners, or made
available to the Existing Partners for review in connection with the this
Agreement and the Conversion, were at the time delivered or made available, and
will be at the time of Closing, true, correct and complete copies of all such
documents in PGP-TG's or PGP's possession or control.

SECTION 3.8. REPORTS. PGP-TG and PGP have filed all reports, if any,
required by the Securities Exchange Act of 1934, if any, and the information
contained therein is materially true and correct as of the date of each such
filing. There have been no material adverse

developments in the business and operations of PGP-TG or PGP since the last of
such reports so filed, if any.

SECTION 3.9. BROKERS. Neither PGP-TG nor PGP have employed any broker
or finder, or incurred any liability therefor, in connection with the
Conversion.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE EXISTING PARTNERS

SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE EXISTING PARTNERS.
The Existing Partners hereby make the representations, warranties, and
covenants, as applicable, set forth in this Article 4.

SECTION 4.2. ORGANIZATION, POWER AND AUTHORITY, AND QUALIFICATION. The
California General Partnership is duly organized, validly existing, and in good
standing under the laws of the State of California, and has the power to own all
of the Property and assets and to carry on its business as heretofore conducted.

SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. The California
General Partnership and each Existing Partner have taken all action necessary to
authorize the execution, delivery and performance of this Agreement, and no
other proceedings, consents or approvals on the part of the Existing Partners
are needed to authorize the execution and delivery of this Agreement. Further,
the California General Partnership and each Existing Partner will take all
action necessary to authorize the execution, delivery and performance of the
Transaction Documents to which they are a party and the consummation by the
Existing Partners of the Conversion contemplated hereunder. The parties
executing this Agreement have obtained all consents for such execution and have
been duly authorized to so execute.

SECTION 4.4. CONSENTS AND APPROVALS. The Existing Partners have obtained
all consents and approvals of third parties necessary for the consummation of
the Conversion and the execution and delivery of this Agreement and the
Transaction Documents to which they are a party.

SECTION 4.5. BINDING OBLIGATION. This Agreement has been duly and
validly executed and delivered by the California General Partnership and the
Existing Partners and constitutes a valid and binding agreement of the
California General Partnership and the Existing Partners enforceable against the
California General Partnership and the Existing Partners in accordance with its
terms.

SECTION 4.6. NO VIOLATION. The execution and delivery by the
California General Partnership and the Existing Partners of this Agreement and
the consummation of the Conversion will not result in or constitute any of the
following: (i) a default, breach, or violation, or an

event that, with notice or lapse of time or both, would be a default, breach, or
violation, of any Contract or any Lease, License or Entitlement, promissory
note, conditional sales contract, commitment, indenture, mortgage, deed of
trust, or other agreement (including partnership agreements), instrument or
arrangement to which the California General Partnership is a party or by which
it or the Property is bound; (ii) an event that would permit any party to
terminate any contract or to accelerate the maturity of any indebtedness or
other obligation of the California General Partnership; (iii) a violation or
conflict with any term or provision of any judgment, decree, order, statute,
injunction, rule or regulation of a governmental unit applicable to the
California General Partnership or the Property; or (iv) the creation or
imposition of any lien, charge or encumbrance on the Property.

SECTION 4.7. ADEQUATE DISCLOSURE. The California General Partnership and
all Existing Partners have been provided with, reviewed, and consented to this
Agreement. All Existing Partners have reviewed all of the facts and
circumstances of this transaction, and on that basis have executed this
Agreement.

SECTION 4.8. ABSENCE OF UNDISCLOSED LIABILITIES. Except for the Tax
Exempt Debt, obligations under any Contracts and Leases, if any, and liabilities
arising in the ordinary course of business, the California General Partnership
has no material liabilities of any nature, whether matured or unmatured, fixed
or contingent, regardless of whether the disclosure thereof would otherwise be
required by generally accepted accounting principles, which liabilities could or
would remain with the Property or be binding on the Delaware Limited Partnership
upon Conversion or which would have an adverse effect upon the Delaware Limited
Partnership or the Property.

SECTION 4.9. COMPLIANCE WITH LAWS. The use and operation of the Property
now is, and at the time of Closing will be, in compliance with all Laws which
are material to the ownership and operation of the Property. There are no facts
which would prevent the Delaware Limited Partnership from using and operating
the Property after Closing in the manner in which it is intended to be operated.

SECTION 4.10. RENT CONTROL. Except for certain regulatory restrictions
pertaining to the Tax Exempt Debt, the Property is not subject to any applicable
rent control ordinance or law and, to the knowledge of the Existing Partners, no
such ordinance or law is pending or threatened by any governmental authority,
agency or quasi-governmental entity with jurisdiction over the Property.

SECTION 4.11. LICENSES, PERMITS, CERTIFICATES OF OCCUPANCY, ZONING, ETC.
All Licenses and Entitlements required in connection with the construction, use,
or occupancy of the Property have been obtained and are in full force and effect
and in good standing. Neither the California General Partnership nor the
Existing Partners have taken any action or failed to take any action that would
result in the revocation of such Licenses and Entitlements nor have they
received written notice that any governmental entity has revoked or intends to
revoke any of

them due to a violation that has not been cured or otherwise resolved to the
complete satisfaction of such governmental entity. The California General
Partnership has obtained all necessary easements and approvals to insure
vehicular and pedestrian ingress to and egress from the Property. The California
General Partnership and Property are in compliance with the terms and provisions
of all of the covenants, conditions, restrictions, rights-of-way or easements
affecting the Property which are material to the ownership and operation of the
Property.

SECTION 4.12. ENVIRONMENTAL MATTERS. (i) Neither the California General
Partnership nor, to the knowledge of the Existing Partners, any previous owner,
tenant, occupant, user of the Property, or any other person, has engaged in or
permitted any operations or activities upon, or any use or occupancy of the
Property, or any portion thereof, for the purpose of or in any way involving the
handling, manufacture, treatment, storage, use, generation, release, discharge,
refining, dumping or disposal of any Hazardous Materials (whether legal or
illegal, accidental or intentional) on, under, in or about the Property, or
transported any Hazardous Materials to, from or across the Property, except in
all cases in compliance with Environmental Requirements; and (ii) to the
knowledge of the Existing Partners, no Hazardous Materials are presently
constructed, deposited, stored, or otherwise located on, under, in or about the
Property, except in all cases in compliance with Environmental Requirements. To
the knowledge of the Existing Partners, no real estate within 2,000 feet of the
Property is in material violation of Environmental Requirements.

SECTION 4.13. TAXES AND ASSESSMENTS. Neither the California General
Partnership nor the Existing Partners have received notice of and do not have
any knowledge of (i) any proposed increase in the assessed valuation of the
Property, or (ii) any existing or proposed assessment that has or may become a
lien on the Property.

SECTION 4.14. PHYSICAL CONDITION. To the knowledge of the Existing
Partners, there are no structural defects or deficiencies in the Improvements
which individually or in the aggregate would have a material adverse effect on
the California General Partnership or on the value of the Property. To the
knowledge of the Existing Partners, the Improvements and Tangible Personal
Property (including, without limitation, plumbing equipment, HVAC, electric
wiring and fixtures, gas distribution system, and water and sewage systems
presently on or in the Property) are in good working order and condition and are
sufficient to serve the needs of the Property. To the knowledge of the Existing
Partners, all water, sewer, gas, electric, telephone, and drainage facilities
and all other utilities required by law or by the normal use and operation of
the Property, including, without limitation, cable television service, and waste
water treatment facilities permanently dedicated to and reserved for the
Property, are and at the time of Closing will be installed to the property lines
of the Land, are and at the time of Closing will be connected pursuant to valid
unconditional permits, and are and at the time of Closing will be adequate to
service the Property and to permit compliance with all Laws.

SECTION 4.15. LEASES. The Rent Roll for the Property is true, complete
and accurate. Except for the Leases and the Tax Exempt Debt Instruments, there
are no other leases, licenses

or other agreements affecting the occupancy of the Property which would become
an obligation of the Delaware Limited Partnership after the Closing. There is no
default by the California General Partnership under any Lease.

SECTION 4.16. NO LITIGATION OR ADVERSE EVENTS. There are no
investigations, actions, suits, proceedings or claims pending or, to the
knowledge of the Existing Partners, threatened against or affecting the
California General Partnership or the Property, at law or in equity or before or
by any federal, state, municipal or other governmental department, commission,
board, agency, or instrumentality, domestic or foreign. Neither the California
General Partnership nor the Existing Partners have received notice of any, and
to the knowledge of the Existing Partners are not subject to any, order, writ,
injunction or decree of any court or federal, state, municipal or other
governmental agency or department, commission, board, agency or instrumentality.

SECTION 4.17. CONTRACTS AND AGREEMENTS. On the Effective Date, there
will be no outstanding written or oral Contracts made by the California General
Partnership in connection with the Property which in any way binds or affects
the Property or the Delaware Limited Partnership other than the Existing
Contracts and Leases. There are no Contracts for any improvements to the
Property which have not been fully paid for, and the California General
Partnership shall cause to be discharged all mechanics' and materialmen's liens,
if any, arising from any labor or materials furnished to the Property prior to
the Effective Date. With respect to each Existing Contract: (i) it has been duly
and validly executed and delivered by the California General Partnership; (ii)
it is in full force and effect; (iii) the copy of the Existing Contract
delivered by the California General Partnership to PGP-TG is true and accurate
and is unmodified; and (iv) the California General Partnership is not in default
under any Existing Contract and no event exists which, with the passage of time
or the giving of notice or both, would become a default thereunder on the part
of the California General Partnership, and (v) to the knowledge of the Existing
Partners, no other party to any Existing Contract is in default under the
Existing Contract and nor has any event occurred which, with the passage of time
or the giving of notice or both, would become a default thereunder.

SECTION 4.18. NO OTHER AGREEMENTS. To the knowledge of the Existing
Partners, there are no obligations in connection with the Property which will be
binding upon the Delaware Limited Partnership or affect the Property after
Closing and there are no assessments or bonds assessed or proposed to be
assessed, against the Property, except: (i) matters which are set forth in the
Approved Title Form; (ii) Existing Contracts; (iii) the Leases; and (iv) the Tax
Exempt Debt Refunding Instruments. To the knowledge of the Existing Partners
there are no existing or proposed easements, covenants, restrictions, agreements
or other documents which affect title to the Property and which are not
disclosed by the Approved Title Form or described in the Tax Exempt Debt
Refunding Instruments.

SECTION 4.19. NON-FOREIGN PERSON. No Existing Partner is a "foreign
person" as such term is defined in Section 1445(f) of the Internal Revenue Code
of 1986, as amended, the

California General Partnership is not subject to withholding under Section 26131
of the California Revenue and Taxation Code, and each Existing Partner is a
resident of California.

SECTION 4.20. EMPLOYEES. No employee of the California General
Partnership in connection with the Property is covered by a collective
bargaining agreement and there are no retroactive increases or other accrued and
unpaid sums owed to any such employee. There is no labor trouble, dispute,
grievance, controversy or strike pending or, to the knowledge of the Existing
Partners, threatened against the California General Partnership and the Existing
Partners do not know of any basis for any such trouble, dispute, grievance,
controversy or strike.

SECTION 4.21. BROKERS. Neither the California General Partnership nor
the Existing Partners have employed any broker or finder, or incurred any
liability therefor, in connection with the Conversion.

SECTION 4.22. OPERATING STATEMENTS. All operating statements and other
financial statements filed with any state or federal authority and provided by
the Existing Partners to PGP- TG fully reflect the matters stated therein,
including operation of the Property for the periods covered and, in all material
respects, accurately reflect all rents and other gross receipts, and all amounts
paid by the California General Partnership for electricity, water, sewer, other
utility services, insurance, fuel, maintenance and repairs (whether capitalized
or expensed), real estate taxes, payroll and payroll taxes and all other
operating and other expenses associated with the Property. Since the end of the
latest period covered by such financial statements, there have been no
transactions or occurrences materially affecting the operating expenses (or
items thereof) associated with the Property. The foregoing does not constitute a
representation and warranty as to future income or expenses of the Property.

SECTION 4.23. EXISTING DEBT. The only tax exempt debt encumbering the
Property is the Tax Exempt Debt. All Tax Exempt Debt Instruments are reflected
on Exhibit C. All of the information contained on the foregoing Exhibit is true,
accurate, and complete in all material respects.

SECTION 4.24. SECURITY DEPOSITS. All Tenant security deposits are
reflected on the Rent Roll. There are no other deposits held by the California
General Partnership, nor any of the Existing Partners, in connection with the
Property.

SECTION 4.25. DEPOSITS AND REIMBURSEMENTS. Except for the Property Tax
Refunds and the Tax Exempt Debt Reserves, all Deposits and Reimbursements are
the property of the California General Partnership and shall, by operation of
law, become the property of the Delaware Limited Partnership, and the Existing
Partners shall not be entitled to any such Deposits and Reimbursements. The
California General Partnership has assigned all right, title and interest in the
Property Tax Refunds and the Tax Exempt Debt Reserves to the Existing Partners
and the same are not now the property of the California General Partnership and
will not become the property of the Delaware Limited Partnership.

SECTION 4.26. BANKRUPTCY. There are no attachments, executions or
assignments for the benefit of creditors, or voluntary or involuntary
proceedings in bankruptcy, or under any other debtor relief laws, contemplated
by or pending or threatened against the California General Partnership or any
Existing Partner. Without limiting the generality of the foregoing, none of the
following have been done by, against or with respect to the California General
Partnership or any Existing Partner or as concerns any right, claim or interest
of such California General Partnership or Existing Partner in or to any assets
or property of the California General Partnership as concerns any right, claim
or interest of such affiliate in or to any assets or property of the California
General Partnership: (A) the commencement of a case under the Bankruptcy Code or
any Insolvency Laws; (B) the appointment of a custodian, agent, trustee or
receiver of any property interest; (C) an assignment for the benefit of
creditors; (D) an attachment, execution or other judicial seizure of a
substantial property interest; (E) the taking of, failure to take, or submission
to, any action indicating an inability to meet its financial obligations as they
accrue; (F) a dissolution or liquidation; or (G) any property transferred,
concealed, or removed with intent to hinder, delay, or defraud creditors.

SECTION 4.27. DISCLOSURE. No representation or warranty of the Existing
Partners in this Agreement, or any information, statement or certificate
furnished or to be furnished by or on behalf of the Existing Partners pursuant
to this Agreement or in connection with the Conversion contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein not misleading. All documents delivered by the
Existing Partners to PGP-TG or PGP, or made available to PGP-TG or PGP for
review in connection with the Conversion, were at the time delivered or made
available, and will be at the time of Closing, true, correct and complete copies
of all such documents in the California General Partnership's or the Existing
Partners' possession or control. To the Existing Partners' knowledge, all of the
California General Partnership's files in connection with the Property in its
possession or control were delivered to or made available to PGP-TG or PGP for
its review and there are no documents required for a complete understanding of
or which are otherwise of significance in evaluating the Property which are not
contained in the California General Partnership's files or which have not been
delivered or made available to PGP-TG or PGP.

SECTION 4.28. SOLVENCY AND EQUIVALENCY OF VALUE REPRESENTATIONS.

(a) The California General Partnership is not or, by virtue of
the transactions contemplated by this Agreement, will not be, rendered any of
the following:

1. insolvent, as that term is used or defined under
any applicable Insolvency Law;

2. possessed of debts greater than the fair or salable
value of all of its Property;

3. generally not paying or unable to pay its debts as
they become due

or mature; or

4. engaged in any business or transaction, or is about
to engage in any business or transaction, for which any
Property remaining with it after the Conversion is
unreasonably small capital.

SECTION 4.29. EXISTENCE OF TAX EXEMPTION; GOOD COSTS/BAD COSTS DURING
CONSTRUCTION. Nothing has come to the attention of the Existing Partners, and
the Existing Partners have no knowledge of any facts or claims which would lead
them to believe, that interest on the Tax Exempt Debt has at any time, or will
prior to, the Closing (i) not been excluded from gross income for federal income
tax purposes, and (ii) is an item of tax preference for purposes of the federal
alternative minimum tax imposed on individuals and corporations, and (iii) is
further not exempt from personal income taxation imposed by the State of
California. The California General Partnership has complied with all covenants
contained in any and all documents and laws required to be complied with to
ensure that such interest payable with respect to the Tax Exempt Debt is and
continues to be excluded from gross income for federal income tax purposes. At
least ninety percent (90%) of the proceeds of the Tax Exempt Debt have been
expended to pay for Qualified Project Costs.

SECTION 4.30. INDEPENDENT TAX ADVICE. Each and every Existing Partner
does hereby represent that said Existing Partner has sought, or knowingly
declined, independent tax advice and has not relied upon PGP, PGP-TG, or their
counsel for evaluating the merits of this transaction. Among other things, it is
acknowledged that all state and federal income tax considerations and
consequences relevant to the California General Partnership and/or the Existing
Partners are not the responsibility of PGP or PGP-TG, and neither the California
General Partnership nor the Existing Partners have relied or will rely on PGP or
PGP-TG with regard thereto, but instead will rely on their own tax, business and
legal advisors therefor and with respect thereto. Each and every Existing
Partner does hereby acknowledge and agree that PGP and PGP-TG shall have no
liability, obligation, duty, or responsibility to the California General
Partnership or the Existing Partners for any tax consequence, impact, or affect
resulting, directly or indirectly, from any of the transactions contemplated by
this Agreement. In addition, the parties hereto have mutually agreed upon the
Net Value and PGP and PGP-TG shall have no liability, obligation, duty or
responsibility to the General Partnership or the Existing Partners for any tax,
economic, contractual, or other consequence, impact, or affect resulting,
directly or indirectly, from the foregoing valuation. All such liability,
obligation, duty, and responsibility for the tax consequences and the valuation
of the Property shall be that of the California General Partnership and the
Existing Partners, and the California General Partnership shall indemnify,
defend, save, and hold harmless PGP, PGP-TG and their officers, directors,
employees, agents, attorneys, advisors, and the like with respect thereto.

ARTICLE 5
COVENANTS AND AGREEMENTS OF PGP-TG

SECTION 5.1. NO TAX TERMINATION OR DISSOLUTION. As set forth in the LP
Agreement, PGP-TG and PGP hereby covenant and agree that for the five (5) year
period immediately following the Closing, PGP-TG and PGP will be restricted in
their ability to (i) sell, transfer or otherwise dispose of the Property, (ii)
pay down the Tax Exempt Refunding Debt, and (iii) in the case of PGP-TG, dispose
of its general partnership interest.

ARTICLE 6
COVENANTS AND AGREEMENTS OF THE EXISTING PARTNERS

SECTION 6.1. EXISTENCE OF TAX EXEMPTION; GOOD COSTS/BAD COSTS DURING
CONSTRUCTION. Prior to the Closing, the Existing Partners shall provide a
certificate regarding Qualified Project Costs substantially in the form of
Exhibit F attached hereto, with such back-up materials as requested by PGP-TG,
certifying that at least ninety percent (90%) of the proceeds of the Tax Exempt
Debt were expended to pay for Qualified Project Costs.

SECTION 6.2. ACTIONS AFFECTING ASSETS. The California General
Partnership shall not sell, assign, lease, pledge, transfer or encumber any of
the Property, or enter into any other consent, commitment, understanding or
other agreement, or incur any obligation or liability (contingent or absolute)
with respect to the Property or merge or consolidate with or into any other
entity or enter into any agreements relating thereto. The California General
Partnership and the Existing Partners shall use diligent efforts to avoid
knowingly committing or permitting to occur, any action which will result in a
violation of any Law between the date hereof and the Closing.

SECTION 6.3. ACCESS TO PROPERTY AND RECORDS. Upon reasonable notice and
during regular business hours, the California General Partnership shall give
PGP-TG, and its authorized representatives, full access to the California
General Partnership's personnel, properties, documents, contracts, facilities,
books, equipment and records and to the Property.

SECTION 6.4. LICENSE AND ENTITLEMENTS. Through the Closing, the
California General Partnership shall maintain all Licenses and Entitlements in
full force and effect, shall file timely all reports, statements, renewal
applications and other filings, and shall pay timely all fees and charges in
connection therewith that are required to keep the Licenses and Entitlements in
full force and effect.

SECTION 6.5. NO EXTRAORDINARY TRANSACTIONS. Until the Closing the
California General Partnership will conduct its business in the ordinary and
usual course as such business was conducted prior to the date hereof and not
engage in any extraordinary transactions without PGP-TG's prior written consent.
Extraordinary transactions shall include, without limitation,

the sale of any real property or any material asset, increase in compensation of
any employees, implementation, modification or termination of any plan for the
benefit of employees, issuance of any options, warrants or securities, borrowing
of any funds under existing credit arrangements or otherwise, entering into any
new contract or agreement (or extending any existing contract or agreement)
unless such is cancelable by the California General Partnership (and after the
Closing, by the Delaware Limited Partnership) in their discretion on a maximum
of thirty (30) days' notice.

SECTION 6.6. SOLICITATION OR NEGOTIATION. Neither the California General
Partnership nor any of the Existing Partners shall initiate or solicit any
inquiries or offers with respect to, and shall not agree to, any merger,
acquisition or other offer involving the California General Partnership, any
interest in the California General Partnership, or any of its Property or
securities.

SECTION 6.7. INSURANCE. Through the Closing, the California General
Partnership shall maintain in full force and effect substantially the same
public liability and casualty insurance coverage now in effect with respect to
the Property, at its own expense.

SECTION 6.8. TAXES AND ASSESSMENTS. Except as otherwise provided in this
Agreement, the California General Partnership shall pay or discharge before
delinquent all tax liabilities and obligations, including, without limitation,
those for federal, state or local income, property, unemployment, withholding,
sales, use and other taxes that are payable prior to the date of the Closing.

SECTION 6.9. BINDING COMMITMENTS. The California General Partnership
shall not make any material commitments or representations to any applicable
government authorities, any adjoining or surrounding property owners, any civic
association, any utility or any other similar person or entity that would in any
manner be binding upon the Delaware Limited Partnership or the Property without
PGP-TG's prior written consent in each case.

SECTION 6.10. OPERATION OF PROPERTY. The California General Partnership
shall continue to operate and maintain the Property in the ordinary course of
its business, consistent with past practice, and will maintain the Property in
substantially its present order and condition (and make all emergency repairs
and replacements), and the Property on the date of the Closing shall be in
substantially the same condition it was on the date this Agreement was executed
by PGP-TG, reasonable wear and tear excepted. Without limiting the generality of
the foregoing, no fixtures, equipment or other Personal Property shall be
removed from the Property unless prior to the date of the Closing the same are
replaced with similar items of at least equal quality and value.

SECTION 6.11. CLOSING INFORMATION. Five (5) business days prior to
Closing the California General Partnership shall deliver to PGP-TG a current
Rent Roll for the Property.

ARTICLE 7
PGP-TG'S CONDITIONS PRECEDENT

SECTION 7.1. PGP-TG'S CONDITIONS PRECEDENT. The obligation of PGP-TG to
consummate the Conversion shall be subject to fulfillment (or waiver) at or
prior to the Closing Deadline of the following conditions precedent (the "PGP-TG
Conditions Precedent"):

(a) Representations, Warranties and Covenants. The representations,
warranties and covenants made in this Agreement or in any other Transaction
Document by any person or entity other than PGP-TG shall be true and correct in
all material respects when made and on and as of the Effective Date as though
such representations, warranties and covenants were made on and as of the
Effective Date.

(b) No Material Adverse Change. None of the following shall have
occurred: (i) any actual, pending, or threatened taking of any portion of the
Property by condemnation or eminent domain; (ii) subject to Section 12.11,
destruction of any portion of the Property regardless of cause; (iii) the
discovery of any Hazardous Materials on the Property other than as disclosed in
writing by the Existing Partners to PGP-TG or PGP prior to the date hereof or
discussed in any environmental audit approved by PGP-TG for the Property prior
to the date hereof; (iv) if any data, information, facts or material provided to
or obtained by PGP-TG or PGP regarding the California General Partnership, the
Existing Partners, the Property, the Leases, the Rent Roll, the Transaction
Documents or the Tax Exempt Debt proves to be false or misleading in any
material respect, or if any new material adverse fact concerning the same comes
to the attention of PGP-TG, (v) significant adverse or worsening local,
regional, national or international business conditions, including without
limitation, rising interest rates; or (vi) any of the Existing Partners fail to
comply with the provisions of this Agreement or any other Transaction Document.

(c) PGP-TG Board Approval. The Board of Directors of PGP-TG shall have
approved this Agreement and the other Transaction Documents to which it is a
party and the Conversion.

(d) PGP Board Approval. The Board of Directors of PGP shall have
approved the Exchange Rights Agreement and any other Transaction Documents to
which it is a party.

(e) Delivery of Closing Requirements. Prior to or concurrently with the
Closing, the Existing Partners shall have executed and delivered, or caused to
be executed and delivered, each of the documents and items identified in Article
10, below to be executed and delivered by it.

(f) No Order or Injunction; Governmental Filings. The consummation of
the Conversion shall not have been restrained, enjoined or prohibited by any
order or injunction of

any court or governmental authority of competent jurisdiction. All actions by or
in respect of or filings with any governmental body, agency, official or
authority required to permit the consummation of the Conversion shall have been
obtained.

(g) PGP-TG's Approval of Tax Exempt Debt Refunding Instruments. PGP-TG
shall have received all of the Tax Exempt Debt Refunding Instruments and
approved the terms thereof.

(h) Contingent Upon Closing Morning View Terrace Transaction. The
performance of the Conversion is contingent upon the closing of the "Conversion"
described in the Restructuring Agreement, dated as of May 23, 1997 for Morning
View Terrace, a California general partnership.

ARTICLE 8
EXISTING PARTNERS' CONDITIONS PRECEDENT

SECTION 8.1. EXISTING PARTNERS' CONDITIONS PRECEDENT. The obligation of
the Existing Partners to consummate the Conversion shall be subject to
fulfillment (or waiver) at or prior to the Closing Deadline of the following
conditions precedent (the "Existing Partners' Conditions Precedent"):

(a) Representations, Warranties and Covenants. The representations,
warranties and covenants made by PGP-TG in this Agreement or in any other
Transaction Document, and the representations, warranties and covenants made by
PGP-TG in the Exchange Rights Agreement or in any other Transaction Document to
which it is a party, shall be true and correct in all material respects when
made and on and as of the Effective Date as though such representations,
warranties and covenants were made on and as of the Effective Date.

(b) Delivery of Closing Requirements. Prior to or concurrently with
Closing, PGP- TG shall have executed and delivered, or caused to be executed and
delivered, each of the documents and items identified in Article 10, below to be
executed and delivered by it.

(c) No Order or Injunction; Governmental Filings. The consummation of
the Conversion shall not have been restrained, enjoined or prohibited by any
order or injunction of any court or governmental authority of competent
jurisdiction. All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of the
Conversion shall have been obtained.

(d) PGP-TG Capital Contribution. Concurrently with Closing, PGP-TG shall
contribute cash to the Delaware Limited Partnership in the amount of the PGP-TG
Capital Contribution.

(e) Refunding of Tax Exempt Debt. The refunding of the Tax Exempt Debt
shall have been consummated and all guarantees (or the equivalent) of the Tax
Exempt Debt or the credit enhancement relating to the Tax Exempt Debt shall have
been released.

(f) Contingent Upon Closing Morning View Terrace Transaction. The
performance of the Conversion is contingent upon the closing of the "Conversion"
described in the Restructuring Agreement, dated as of May 23, 1997 for Morning
View Terrace, a California general partnership.

ARTICLE 9
INDEMNITY

SECTION 9.1. INDEMNITY OF PGP-TG AND THE DELAWARE LIMITED PARTNERSHIP.
The Existing Partners jointly and severally shall save, hold harmless, indemnify
and defend PGP-TG and the Delaware Limited Partnership, their successors and
assigns and their officers, directors, employees, partners, agents and
representatives, from and against any Losses and Liabilities: (i) resulting from
the ownership or operation of the Property or the business affairs and
transactions of the California General Partnership or the Existing Partners,
prior to the Closing; (ii) resulting from any misrepresentation or inaccuracy in
or breach of any representation, warranty or covenant by the California General
Partnership or any of the Existing Partners in this Agreement or in the
Transaction Documents; or (iii) resulting from any claim, cause of action, or
the like, by the Existing Partners, the partners of 225 Units Limited, a
California limited partnership, or by any representative, successor or assign of
any such party (whether made individually, as a class, or derivatively, or any
other way) as a result of this Agreement, the Transaction Documents or the
Conversion, other than a claim for direct breach of an express representation,
warranty or covenant by PGP-TG, PGP or the Delaware Limited Partnership
hereunder or under the other Transaction Documents.

SECTION 9.2. INDEMNITY OF THE EXISTING PARTNERS. Except for Losses and
Liabilities covered by Section 9.1, PGP, PGP-TG or the Delaware Limited
Partnership, as the case may be, shall save, hold harmless, indemnify and defend
the Existing Partners, their respective successors and assigns and their
respective officers, directors, employees, partners, agents and representatives
from and against any and all Losses and Liabilities in any way resulting from
(i) any misrepresentation or inaccuracy in or breach of any representation,
warranty or covenant of PGP-TG, PGP or the Delaware Limited Partnership in this
Agreement or the Transaction Documents, or (ii) the failure of the Delaware
Limited Partnership to perform the obligations of the landlord under the Leases
(including, without limitation, the obligation to properly apply the Security
Deposits) and the Existing Contracts.

SECTION 9.3. OFFSET. Any Losses and Liabilities arising under Section
9.1 may be offset against all distributions and any other payments by the
Delaware Limited Partnership on account of (i) the Partnership Units held by the
Existing Partners (whether as an Existing

Partner or as a partner (or former partner) of 225 Units Limited), and (ii) in
the case of Losses and Liabilities attributable to a breach of any
representation, warranty or covenant relating to the Tax Exempt Debt or the Tax
Exempt Debt Instruments (including, but not limited to, those set forth in
Sections 4.23 and 4.29), all Partnership Units regardless of who holds the same.
Neither PGP, PGP-TG or the Delaware Limited Partnership shall seek to impose
liability or recovery against any partner (each an "Other Partner") of 225 Units
Limited other than a partner who is also an Existing Partner, nor seek offset or
recovery against any Other Party for any breaches of representations,
warranties, covenants, or indemnities hereunder, other than those relating to or
described in paragraph (ii) above; and, as to those relating to or described in
paragraph (ii) above, such offset and liability shall be limited to offsets
against all rights to distributions and stock upon exchange of Partnership Units
for common stock in PGP. Any amounts recoverable with respect to Partnership
Units held by the Other Partners (or their successors and assigns) shall be
recoverable by offset from such Other Limited Partners pro rata based on the
relative number of Partnership Units distributed to the Other Partners.

Subject to the foregoing limitations on remedies for Losses and
Liabilities, PGP, PGP-TG and the Delaware Limited Partnership may pursue any
right hereunder against the Existing Partners, any Existing Partner which is
also a partner of 225 Units Limited, or any other person or entity in any order
or priority, and no such action shall be a waiver or release of any rights,
claims, or causes of action of PGP-TG or the Delaware Limited Partnership
against any person or entity.

Each Existing Partner hereby unconditionally and irrevocably grants a
security interest in its Partnership Units to secure the foregoing obligations,
and agrees to deliver such documentation as PGP-TG and the Delaware Limited
Partnership reasonably deems necessary or appropriate to perfect such security
interest. Any distribution or other transfer of any Partnership Units by the
Existing Partners (including to the partners of 225 Units Limited) shall be made
subject to such security interest, and any transferee of such Partnership Units
shall, as a condition precedent to receiving such Partnership Units, be
obligated to acknowledge the existence of and take subject to such security
interest. The power of attorney provisions contained in Section 2.4 of the LP
Agreement shall apply with regard to the grant of the security interest herein.
The liability for Losses and Liabilities arising under Section 9.1 shall be
joint and several. PGP-TG and the Delaware Limited Partnership shall be entitled
to the offset described herein upon its reasonable determination of the
existence and amount of the Losses and Liabilities described in Section 9.1.
Upon liquidation of the Losses and Liabilities, any offset in excess of such
liquidated amount shall promptly be distributed to the Existing Partners
affected by the offset, pro-rata.

Notwithstanding the limitations on liability for Losses and Liabilities,
the Existing Partners shall have personal liability for the legal fees and other
costs and expenses described in Section 12.6 hereof if either the action or
proceeding which resulted in same was brought against the Existing Partner on
account of acts or omissions of such persons or entities (other than their
indemnity agreements as hereinabove provided), or such action or proceeding was

brought by such Existing Partners.

SECTION 9.4. EXCHANGE NOTICE. In the event any Losses and Liabilities
are outstanding at any time, if any party liable for such Losses and Liabilities
delivers an Exchange Notice pursuant to the terms of the Exchange Rights
Agreement, PGP-TG and the Delaware Limited Partnership will automatically obtain
a lien on the "Common Stock" (as defined in the Exchange Rights Agreement) and
any other securities received by the party delivering the Exchange Notice for
and to the extent of any such outstanding Losses and Liabilities. Any cash that
would have been received by the party delivering the Exchange Notice shall be
offset by PGP-TG and/or the Delaware Limited Partnership, as the case may be,
against any outstanding Losses and Liabilities of such party. Such party agrees
to take such actions and to execute any additional documentation that PGP-XX
xxxxx appropriate or necessary to create, evidence or perfect such lien.

SECTION 9.5. SURVIVAL OF PROVISIONS. No payments made pursuant to any of
the provisions of this Article 9 shall entitle the paying parties to any
repayment or reimbursement from, or any capital account credit in, the Delaware
Limited Partnership. The provisions of this Article 9 shall survive the Closing.

ARTICLE 10
THE CLOSING

SECTION 10.1. THE CLOSING. Subject to the terms and conditions of this
Agreement, the Closing shall take place promptly after satisfaction or waiver of
the conditions set forth in Articles 7 and 8 and this Article 10.

SECTION 10.2. DELIVERIES BY THE EXISTING PARTNERS. At Closing, the
Existing Partners shall deliver or cause to be delivered (except where specified
to remain at the management office of the Property) the following:

(a) The duly executed California General Partnership
Amendments;

(b) The duly executed Conversion Agreement;

(d) The duly executed Exchange Rights Agreement;

(e) The duly executed Indemnification Agreement;

(f) A duly executed affidavit by each Existing Partner that
he, she or it is not a "foreign person" within the meaning of Section 1445(f)(3)
of the Code in the form of Exhibit L;

(g) A duly executed Withholding Exemption Certificate (Form
590) for each Existing Partner;

(h) A "bring-down" certificate of the Existing Partners and
the California General Partnership certifying that the representations,
warranties and covenants made by the Existing Partners, individually and/or
collectively, in this Agreement or in any other Transaction Document were true
and correct in all material respects when made and are true and correct in all
material respects on and as of the date of the Closing as though such
representations, warranties and covenants were made on and as of the date of the
Closing;

(i) A duly executed legal opinion from Sheppard, Mullin,
Xxxxxxx & Hampton expressing the opinions described in Exhibit D attached
hereto;

(j) Such other documents and instruments as are necessary or
appropriate to consummate the Conversion in accordance with the Transaction
Documents;

(k) Such other documents and instruments as are necessary or
appropriate to consummate the refunding of the Tax Exempt Debt;

(l) All Tax Exempt Debt Refunding Instruments;

(m) The "good costs/bad costs" certificate described in
Section 6.1 hereof;

(n) All keys to the Property that are not in possession of
Tenants and originals of all Existing Contracts and all Leases (each of which
may be left at the applicable Property's management office);

(o) A duly executed UCC-1 Financing Statement in form and
content reasonably satisfactory to PGP-TG in connection with the grant of the
security interest in the Partnership Units contained in Article 9; and

(p) The amount of $237,937.50 (or such other amount as
determined by the trustee of the Tax Exempt Debt) shall be paid to the trustee
of the Tax Exempt Debt, which amount represents the accrued, but unpaid,
interest on the Tax Exempt Debt to and including the date of the refunding of
the Tax Exempt Debt.

SECTION 10.3. DELIVERIES BY PGP-TG. At Closing, PGP-TG, as the newly
constituted general partner of the Delaware Limited Partnership, shall deliver
the following:

(a) The duly executed California General Partnership
Amendments;

(b) The duly executed Conversion Agreement;

(d) The duly executed Indemnification Agreement;

(e) The Tax Exempt Debt Refunding Instruments to which it is a
party;

(f) A duly executed legal opinion from counsel to PGP-TG
expressing the opinions described in Exhibit E attached hereto;

(g) Such other documents and instruments as are necessary or
appropriate to consummate the Conversion in accordance with the Transaction
Documents; and

(h) A duly executed Exchange Rights Agreement.

SECTION 10.4. DELIVERIES BY PGP. At Closing, PGP shall deliver, or cause
to be delivered, the following:

(a) The duly executed Indemnification Agreement by PGP and
Morning View Terrace - PGP, L.P., a Delaware limited partnership; and

(b) A duly executed Exchange Rights Agreement.

SECTION 10.5. AUTHORIZED EXISTING PARTNERS SIGNATORY. The Existing
Partners do hereby authorize Xxxxxx X. Short, as trustee of the Short Family
Trust, to execute on behalf of all of the Existing Partners any and all
documents necessary to consummate the Conversion and the execution of the
Transaction Documents. Provided, however, that the California General
Partnership Amendments, the Conversion Agreement, the Delaware Certificate of
Conversion, and any other document which by law requires the signature of all
Existing Partners, must be signed by all of the Existing Partners.

SECTION 10.6. PAYMENT OF TRANSACTION EXPENSES AND DEFERRED MAINTENANCE.
The parties agree that if the Conversion is consummated, commencing from the
effective date of the Term Sheet, the Delaware Limited Partnership shall bear
all Transaction Expenses and Deferred Maintenance.

ARTICLE 11
TERMINATION

SECTION 11.1. TERMINATION. This Agreement may be terminated and the
Conversion may be abandoned at any time prior to the Effective Date:

(a) by mutual written consent of PGP-TG and all of the Existing
Partners; or

(b) by PGP-TG and the Existing Partners if there shall be any law or
regulation that makes consummation of the Conversion illegal or otherwise
prohibited, or if any judgment, injunction, order or decree enjoining the
California General Partnership from consummating the Conversion is entered and
such judgment, injunction, order or decree shall become final and nonappealable.

SECTION 11.2. EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 11.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto.

SECTION 11.3. PAYMENT OF TRANSACTION EXPENSES UPON TERMINATION. Except
as provided below, if this Agreement is terminated pursuant to Section 11.1,
PGP-TG and the Existing Partners shall split 50/50 the Transaction Expenses,
except Transaction Expenses relating to the refinancing of the Tax Exempt Debt
which shall be paid fully by the California General Partnership. The foregoing
50/50 split of Transaction Expenses assumes neither party has a cause of action
for its expense reimbursement due to the breach of the other party, as described
in Section 11.4. If the Existing Partners terminate this Agreement due to
adverse tax ramifications caused by the Conversion, and PGP-TG consents to such
termination, the Existing Partners or the California General Partnership shall
pay all Transaction Expenses.

SECTION 11.4. UNILATERAL TERMINATION. In the event that PGP-TG or any of
the Existing Partners fails to perform or observe any of the covenants,
agreements or conditions on its or their part contained in this Agreement or
other Transaction Documents, said party shall be considered in default under
this Agreement.

If an event of default shall occur, any of the non-defaulting parties
may, in their discretion, proceed to protect or enforce their rights under this
Agreement and any of the other Transaction Documents by a suit in equity or
action at law, either for the specific performance of any covenant or agreement
contained herein or therein, or in aid of the execution of any power herein or
therein granted, or by mandamus or other appropriate proceeding for the
enforcement of any other legal or equitable remedy as the aggrieved party or
parties shall deem most effectual in support of any of their rights or duties
hereunder.

No delay or omission of any party to exercise any right or power arising
from any default shall impair any such right or power or shall be construed to
be a waiver of any such default or acquiescence therein, and every power and
remedy given by this Article 11 to the parties to this Agreement may be
exercised from time to time and as often as shall be deemed expedient. In case
any party shall have proceeded to enforce any right under this Agreement, and
such proceedings shall have been discontinued or abandoned because of waiver or
for any other reason, or shall have been determined adversely to said party,
then and in every such case all of the parties to this Agreement, severally and
respectively, shall be restored to their former

positions and rights hereunder; and all remedies, rights and powers of the
parties shall continue as though no such proceedings had been taken.

No remedy herein conferred upon or reserved to any party hereunder is
intended to be exclusive of any other remedy, but each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity.

ARTICLE 12
MISCELLANEOUS

SECTION 12.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The following
provisions shall survive the Closing: (i) all representations and warranties
contained in this Agreement, (ii) any indemnification provisions of this
Agreement, including, but not limited to, those set forth in Section 4.30 and
Article 9, and (iii) any provision in this Agreement which states that it shall
survive the Closing or a merger of this Agreement in any judgment.

SECTION 12.2. AMENDMENTS; NO WAIVERS.

(a) Any provision of this Agreement may, subject to applicable law,
be amended or waived prior to the Effective Date if, and only if, such amendment
or waiver is in writing and signed by PGP-TG and the Existing Partners.

(b) No failure or delay by any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.

SECTION 12.3. NOTICES. Any notice, consent or approval required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given upon (i) hand delivery, (ii) one (1) business day
after being deposited with Federal Express or another reliable overnight courier
service or next day delivery or transmitted by facsimile telecopy, or (iii) two
(2) business days after being deposited in the United States mail, registered or
certified mail, postage prepaid, return receipt required, and addressed as
follows:

If to any of the
Existing Partners: The Existing Partners
c/o Xxxxxx X. Short
000 Xxxxxxx Xxxxxx, Xxxxx 0
Xxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000

With a copy to: Sheppard, Mullin, Xxxxxxx & Xxxxxxx
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000

If to the Delaware
Limited Partnership : Pacific Gulf Properties Inc.
000 Xxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000

With a copy to: Xxx, Castle & Xxxxxxxxx LLP
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000

or such other address as either party may from time to time specify in writing
to the other.

SECTION 12.4. INTEGRATION. All prior or contemporaneous agreements,
contracts, promises, representations, and statements, if any, among PGP-TG and
the Existing Partners, or their representatives, are merged into this Agreement,
and this Agreement shall constitute the entire understanding between the General
Partners with respect to the subject matter hereof. Provided, however, any
agreement, contract, or document dated subsequent to the date of this Agreement
(whether or not executed contemporaneously with this Agreement) shall not be
merged into this Agreement, including, without limitation the Conversion
Agreement, the California General Partnership Amendments, the LP Agreement, the
Exchange Rights Agreement, and the Tax Exempt Debt Refunding Instruments.

SECTION 12.5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto.

SECTION 12.6. ENFORCEMENT. If any party hereto institutes any action or
proceeding to interpret or enforce any provision of this Agreement or for an
alleged breach of any provision of this Agreement, the prevailing party shall be
entitled to recover its actual attorneys' fees and all fees, costs and expenses
incurred in connection with such action or proceeding. Such attorneys' fees,
fees, costs and expenses shall include post judgment attorneys' fees, fees,
costs and expenses incurred on appeal or in collection of any judgment. This
provision is separate and several and shall survive the merger of this provision
into any judgment on this Agreement. No person or entity other than the parties
hereto is or shall be entitled to bring any action to enforce any provision of
this Agreement against any of the parties hereto, and the covenants and
agreements set forth in this Agreement shall be solely for the benefit of, and
shall be enforceable only by, the parties hereto or their respective successors
and assigns as permitted hereunder.

SECTION 12.7. CONFIDENTIALITY. The California General Partnership and
the Existing Partners agree to maintain as confidential and, except as required
by law, to not disclose to any third parties, other than to themselves,
attorneys, and accounting and business advisors, all information in their
possession concerning the Conversion. None of the Existing Partners shall make
any public announcement by way of press release or otherwise of the Conversion,
but they shall be entitled to describe the Conversion contemplated hereunder
amongst themselves and any constituent partners. PGP-TG shall have the right to
disclose any and all information in its possession (confidential or otherwise)
concerning the California General Partnership and/or the Conversion for purposes
of making any press release concerning the Conversion as PGP-XX xxxxx necessary
or appropriate in its sole and absolute discretion to comply with laws, whether
securities, real estate or otherwise.

SECTION 12.8. SEVERABILITY. If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other persons,
places and circumstances shall remain in full force and effect.

SECTION 12.9. EXHIBITS. All exhibits attached hereto are incorporated
herein as though fully set forth herein.

SECTION 12.10. FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties and to prepare, execute, and deliver any further required
instruments, and shall take or cause to be taken such other or further action as
either party shall reasonably request at any time or from time to time in order
to consummate the terms and provisions and to carry into effect the intents and
purposes of this Agreement and the Transaction Documents.

SECTION 12.11. RISK OF LOSS. In the event of any of loss or damage to
all or any part of the Property by fire or other casualty prior to the Closing
that PGP or PGP-TG reasonably believes could be in excess of $200,000 on the
Property, or which materially impedes access to such Property, then
notwithstanding the existence of any casualty insurance, PGP or PGP-TG shall
have the option in their sole discretion to: (i) terminate this Agreement and
any other Transaction Document to which it is a party in their entirety; or (ii)
continue this Agreement and any Transaction Document to which it is a party,
whereupon all available insurance will be used to repair the damage (with
appropriate adjustments to the value of the Property to account for any
deductible). The provisions of subsection (ii) above shall apply (and survive
Closing) in the event of any loss or damage in an amount less than $200,000
provided that (a) said loss is an insurable loss, (b) the California General
Partnership is actually insured against such loss, and (c) any proceeds of said
insurance are assigned to the Delaware Limited Partnership to be used to repair
the damage at the discretion of PGP or PGP-TG. PGP or PGP-TG may terminate this
Agreement and any other Transaction Document to which it is a party in their
entirety for a loss of less than $200,000 which does not meet the conditions set
forth in paragraphs (a), (b) and (c) above.

SECTION 12.12. LEGAL REPRESENTATION. Each party has been represented by
legal counsel in connection with the negotiation of the Conversion herein
contemplated and the drafting and negotiation of this Agreement and the
Transaction Documents. Xxx, Castle & Xxxxxxxxx LLP ("CCN") has represented
solely PGP-TG, and Sheppard, Mullin, Xxxxxxx & Xxxxxxx ("SMRH") has represented
solely the California General Partnership, in connection with the negotiation,
drafting, transactions and matters contemplated under this Agreement and any
other Transaction Documents relating to the transactions or matters covered
hereby, the LP Agreement and all matters, things, documents and transactions
contemplated under the LP Agreement and under this Agreement or the other
Transaction Documents. CCN has not provided legal services to or been legal
counsel for the California General Partnership, the Existing Partners, and none
of the foregoing has relied on CCN in that regard. SMRH has not provided legal
services to or been legal counsel for PGP or PGP-TG and none of the foregoing
has relied on SMRH in that regard. The normal rule of construction that
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any other Transaction Documents.

SECTION 12.13. TIME OF THE ESSENCE. Time is of the essence of this
Agreement.

SECTION 12.14. GOVERNING LAW. This Agreement shall be construed in
accordance with and government by the laws of the State of California, without
giving effect to principles of conflicts of law.

SECTION 12.15. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
The signature of each Existing Partner constitutes execution as an Existing
Partner on its own behalf and as a partner of the

California General Partnership.

IN WITNESS WHEREOF, the parties hereto have caused this Restructuring
Agreement to be duly executed by their respective authorized representatives as
of the day and year first- above written.

TERRACE GARDENS APARTMENTS,
A CALIFORNIA GENERAL PARTNERSHIP

---------------------------------
Xxxxx X. Xxxxx, an individual

THE SHORT FAMILY TRUST

By:
-----------------------------
Xxxxxx X. Short, Trustee

By:
----------------------------
Xxxxxxx X. Short, Trustee

225 UNITS LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP

By:
-----------------------------
Xxxxxx X. Short
General Partner

[signatures for Restructuring Agreement continued on page 40]

[signatures for Restructuring Agreement continued from page 39]

THE XXXXXXX FAMILY TRUST

By:
------------------------------------
Xxxxxxx X. Xxxxxxx, Trustee

By:
------------------------------------
Xxxxxx X. Xxxxxxx, Trustee

PGP TERRACE GARDENS HOLDINGS INC.,
A DELAWARE CORPORATION

By:
------------------------------------
Name:
Title:

PACIFIC GULF PROPERTIES INC.,
A MARYLAND CORPORATION

By:
------------------------------------
Name:
Title:

EXHIBIT A

LP AGREEMENT

EXHIBIT B

EXCHANGE RIGHTS AGREEMENT

EXHIBIT C

TAX EXEMPT DEBT INSTRUMENTS

1. Indenture of Trust, dated as of June 1, 1985, as amended by the
First Supplemental Indenture, dated as of January 14, 1992,
between the Issuer and the Trustee;

2. Loan Agreement, dated as of June 1, 1985, among the Issuer, the
Trustee and the Developer;

3. Regulatory Agreement and Declaration of Restrictive Covenants,
dated as of June 1, 1985, among the Issuer, the Trustee and the
Developer;

4. Letter of Credit No. 101, dated June 4, 1985, issued by the
Credit Bank;

5. Reimbursement Agreement, dated as of June 1, 1985, between the
Credit Bank and the Developer; and

6. Surety Bond, dated June 4, 1985, issued by the Surety.

For purposes of this Exhibit, the following terms have the following
definitions:

"Issuer" shall mean the City of Escondido.
"Trustee" shall mean First Trust of California, National Association.
"Developer" shall mean Terrace Gardens Apartments, a California general
partnership.
"Credit Bank" shall mean Glendale Federal Bank, Federal Savings Bank.
"Surety" shall mean Industrial Indemnity Company.

EXHIBIT D

CALIFORNIA GENERAL PARTNERSHIP LEGAL OPINION

At the Closing, the California General Partnership shall cause to be
delivered to PGP-TG an opinion of counsel, in form and substance reasonably
acceptable to PGP-TG, containing the legal opinion that: (i) each Existing
Partner has the power and authority to enter into and perform its obligations
under the Transaction Documents to which they are a party; (ii) all partners of
the Existing Partners (and all of the partners of Short Morning View Ltd., a
California limited partnership) have consented to the Conversion and the
execution of the Transaction Documents; (iii) the Transaction Documents to which
they are a party have been duly authorized by all necessary action on the part
of each Existing Partner, and have been duly executed and delivered by each
Existing Partner; and (iv) the Transaction Documents to which they are a party
constitute the legally valid and binding obligations of the Existing Partners,
enforceable in accordance with their respective terms, except as enforcement may
be limited by bankruptcy laws or the laws affecting the rights of creditors
generally. Additionally, in rendering the enforceability opinion described in
clause (iv) above, counsel for the Existing Partners shall be entitled to rely
on the representation of the Existing Partners, without further investigation,
that the solicitation materials utilized by the Existing Partners to obtain the
approval of the constituents of the Existing Partners to the Transaction
Documents to which they are a party and the transactions herein contemplated did
not misstate or omit to state any material fact, and were otherwise accurate and
complete in all material respects.

EXHIBIT E

LEGAL OPINION OF PGP-TG

At the Closing, the PGP-TG shall cause to be delivered to the Existing
Partners an opinion of counsel, in form and substance reasonably acceptable to
the Existing Partners, containing the legal opinion that: (i) PGP-TG has the
power and authority to enter into and perform its obligations under the
Transaction Documents to which it is a party; (ii) the Transaction Documents to
which it is a party have been duly authorized by all necessary action on the
part of PGP-TG, and have been duly executed and delivered by PGP-TG; (iii) the
Transaction Documents to which it is a party constitute the legally valid and
binding obligations of PGP-TG, enforceable in accordance with their respective
terms, except as enforcement may be limited by bankruptcy laws or the laws
affecting the rights of creditors generally.

EXHIBIT F

QUALIFIED PROJECT COSTS

Total "Proceeds"

Par Amount
Cost on Issuance
Paydown on Bonds
Investment Earnings

Total "Proceeds"

Project "Good Costs"

Land (Title and Closing)
Construction Costs
Interest/Taxes During Construction
Supervisor's and Contractor's Fees

Total "Good Costs"

Percentage of "Good Costs" to "Proceeds"

EXHIBIT G

CALIFORNIA GENERAL PARTNERSHIP AMENDMENT NO. 1

EXHIBIT H

CALIFORNIA GENERAL PARTNERSHIP AMENDMENT NO. 2

EXHIBIT I

EXISTING CONTRACTS

1. Vendor: Xxxxx Pest Control Co.

Date of Contract: 2/27/96

Term/Cancellation: 12 months, thereafter 30 days
written

Services: Pest Control

2. Vendor: Xxxxx Fargo Guard Services

Date of Contract: 3/1/97

Term/Cancellation: 30 days written notice

Services: Security Services

EXHIBIT J

RENT ROLL

EXHIBIT K

APPROVED TITLE FORM

EXHIBIT L

CERTIFICATION OF NON-FOREIGN STATUS

The undersigned hereby certifies the following:

1. The undersigned is not a foreign corporation, foreign
partnership, foreign trust, foreign estate or foreign person (as those terms are
defined in the Internal Revenue Code of 1986, as amended (the "Code") and the
Income Tax Regulations promulgated thereunder);

2. The undersigned's U.S. employer or tax (social security)
identification number is ____________________.

The undersigned understands that this Certification of Non-Foreign
Status may be disclosed to the Internal Revenue Service by PGP Terrace Gardens
Holdings Inc., a Delaware corporation, general partner of Terrace Gardens - PGP,
L.P., a Delaware limited partnership (the "General Partner"), and that any false
statement contained herein could be punished by fine, imprisonment, or both.

The undersigned hereby agrees to indemnify, defend and hold the General
Partner harmless from and against any and all obligations, liabilities, claims,
losses, actions, causes of action, rights, demands, damages, costs and expenses
of every kind, nature or character whatsoever (including, without limitation,
reasonable attorneys' fees and court costs) incurred by the General Partner as a
result of: (i) the undersigned's failure to pay U.S. Federal income tax which
the undersigned is required to pay under applicable U.S. law; or (ii) any false
or misleading statement contained herein.

Under penalty of perjury I declare that I have examined this
Certification of Non-Foreign Status and to the best of my knowledge and belief
it is true and correct and complete, and I further declare that I have authority
to sign this document.

Date: June 12, 1997

_____________________________, a

------------------------

By: ________________________

________________________
(Print Name and Title)

EXHIBIT M

PROPERTY MANAGEMENT AGREEMENT

EXHIBIT N

INTEREST OF EXISTING PARTNERS

EXISTING PARTNER INTEREST
---------------- --------

Short Family Trust 33.196139%

Xxxxxxx Family Trust 42.190000%

Xxxxx and Xxxxx Xxxxx 16.841290%

225 Units Limited 7.772571%

TABLE OF CONTENTS

ARTICLE 1
DEFINITIONS................................................................................ 2

ARTICLE 2
AGREEMENTS REGARDING CONVERSION............................................................ 10

SECTION 2.1. THE CALIFORNIA GENERAL PARTNERSHIP AMENDMENTS................. 10
SECTION 2.2. THE CONVERSION................................................ 10
SECTION 2.3. CONTRIBUTION OF CAPITAL....................................... 11
SECTION 2.4. CONTINUATION OF INTERESTS..................................... 11
SECTION 2.5. EXCHANGE OF PARTNERSHIP INTERESTS............................. 12
SECTION 2.6. SAME ENTITY................................................... 12
SECTION 2.7. RIGHTS UPON CONVERSION........................................ 12
SECTION 2.8. PRORATIONS.................................................... 13
SECTION 2.9. CONVERSION NOT A DISSOLUTION.................................. 15
SECTION 2.10. MANAGEMENT AND FEES........................................... 16
SECTION 2.11. THE LP AGREEMENT.............................................. 16

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PGP-TG AND PGP........................................... 16

SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF PGP-TG AND PGP.............. 16
SECTION 3.2. ORGANIZATION, POWER AND AUTHORITY, AND QUALIFICATION.......... 16
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT.......................... 16
SECTION 3.4. BINDING OBLIGATION............................................ 17
SECTION 3.5. NO VIOLATION.................................................. 17
SECTION 3.6. BANKRUPTCY.................................................... 17
SECTION 3.7. DISCLOSURE.................................................... 17
SECTION 3.8. REPORTS....................................................... 17
SECTION 3.9. BROKERS....................................................... 18

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE EXISTING PARTNERS.................................... 18

SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE EXISTING PARTNERS....... 18
SECTION 4.2. ORGANIZATION, POWER AND AUTHORITY, AND QUALIFICATION.......... 18
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT.......................... 18
SECTION 4.4. CONSENTS AND APPROVALS........................................ 18
SECTION 4.5. BINDING OBLIGATION............................................ 18
SECTION 4.6. NO VIOLATION.................................................. 18
SECTION 4.7. ADEQUATE DISCLOSURE........................................... 19
SECTION 4.8. ABSENCE OF UNDISCLOSED LIABILITIES............................ 19
SECTION 4.9. COMPLIANCE WITH LAWS.......................................... 19
SECTION 4.10. RENT CONTROL.................................................. 19
SECTION 4.11. LICENSES, PERMITS, CERTIFICATES OF OCCUPANCY, ZONING, ETC..... 19
SECTION 4.12. ENVIRONMENTAL MATTERS......................................... 20
SECTION 4.13. TAXES AND ASSESSMENTS......................................... 20
SECTION 4.14. PHYSICAL CONDITION............................................ 20
SECTION 4.15. LEASES........................................................ 20
SECTION 4.16. NO LITIGATION OR ADVERSE EVENTS............................... 21
SECTION 4.17. CONTRACTS AND AGREEMENTS...................................... 21

SECTION 4.18. NO OTHER AGREEMENTS.......................................... 21
SECTION 4.19. NON-FOREIGN PERSON........................................... 21
SECTION 4.20. EMPLOYEES.................................................... 22
SECTION 4.21. BROKERS...................................................... 22
SECTION 4.22. OPERATING STATEMENTS......................................... 22
SECTION 4.23. EXISTING DEBT................................................ 22
SECTION 4.24. SECURITY DEPOSITS............................................ 22
SECTION 4.25. DEPOSITS AND REIMBURSEMENTS.................................. 22
SECTION 4.26. BANKRUPTCY................................................... 23
SECTION 4.27. DISCLOSURE................................................... 23
SECTION 4.28. SOLVENCY AND EQUIVALENCY OF VALUE REPRESENTATIONS............ 23
SECTION 4.29. EXISTENCE OF TAX EXEMPTION; GOOD COSTS/BAD COSTS
DURING CONSTRUCTION.......................................... 24
SECTION 4.30. INDEPENDENT TAX ADVICE....................................... 24

ARTICLE 5
COVENANTS AND AGREEMENTS OF PGP-TG......................................................... 25

SECTION 5.1. NO TAX TERMINATION OR DISSOLUTION............................. 25

ARTICLE 6
COVENANTS AND AGREEMENTS OF THE EXISTING PARTNERS.......................................... 25

SECTION 6.1. EXISTENCE OF TAX EXEMPTION; GOOD COSTS/BAD COSTS
DURING CONSTRUCTION........................................... 25
SECTION 6.2. ACTIONS AFFECTING ASSETS...................................... 25
SECTION 6.3. ACCESS TO PROPERTY AND RECORDS................................ 25
SECTION 6.4. LICENSE AND ENTITLEMENTS...................................... 25
SECTION 6.5. NO EXTRAORDINARY TRANSACTIONS................................. 25
SECTION 6.6. SOLICITATION OR NEGOTIATION................................... 26
SECTION 6.7. INSURANCE..................................................... 26
SECTION 6.8. TAXES AND ASSESSMENTS......................................... 26
SECTION 6.9. BINDING COMMITMENTS........................................... 26
SECTION 6.10. OPERATION OF PROPERTY......................................... 26
SECTION 6.11. CLOSING INFORMATION........................................... 26

ARTICLE 7
PGP-TG'S CONDITIONS PRECEDENT.............................................................. 27

SECTION 7.1. PGP-TG'S CONDITIONS PRECEDENT................................. 27

ARTICLE 8
EXISTING PARTNERS' CONDITIONS PRECEDENT.................................................... 28

SECTION 8.1. EXISTING PARTNERS' CONDITIONS PRECEDENT....................... 28

ARTICLE 9
INDEMNITY.................................................................................. 29

SECTION 9.1. INDEMNITY OF PGP-TG AND THE DELAWARE LIMITED PARTNERSHIP...... 29
SECTION 9.2. INDEMNITY OF THE EXISTING PARTNERS............................ 29
SECTION 9.3. OFFSET........................................................ 29
SECTION 9.4. EXCHANGE NOTICE............................................... 31
SECTION 9.5. SURVIVAL OF PROVISIONS........................................ 31

ARTICLE 10
THE CLOSING................................................................................ 31

SECTION 10.1. THE CLOSING.................................................. 31
SECTION 10.2. DELIVERIES BY THE EXISTING PARTNERS.......................... 31
SECTION 10.3. DELIVERIES BY PGP-TG......................................... 32
SECTION 10.4. DELIVERIES BY PGP............................................ 33
SECTION 10.5. AUTHORIZED EXISTING PARTNERS SIGNATORY....................... 33
SECTION 10.6. PAYMENT OF TRANSACTION EXPENSES AND DEFERRED MAINTENANCE..... 33

ARTICLE 11
TERMINATION................................................................................ 33

SECTION 11.1. TERMINATION.................................................. 33
SECTION 11.2. EFFECT OF TERMINATION........................................ 34
SECTION 11.3. PAYMENT OF TRANSACTION EXPENSES UPON TERMINATION............. 34
SECTION 11.4. UNILATERAL TERMINATION....................................... 34

ARTICLE 12
MISCELLANEOUS.............................................................................. 35

SECTION 12.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES................... 35
SECTION 12.2. AMENDMENTS; NO WAIVERS....................................... 35
SECTION 12.3. NOTICES...................................................... 35
SECTION 12.4. INTEGRATION.................................................. 36
SECTION 12.5. SUCCESSORS AND ASSIGNS....................................... 37
SECTION 12.6. ENFORCEMENT.................................................. 37
SECTION 12.7. CONFIDENTIALITY.............................................. 37
SECTION 12.8. SEVERABILITY................................................. 37
SECTION 12.9. EXHIBITS..................................................... 37
SECTION 12.10. FURTHER ASSURANCES........................................... 37
SECTION 12.11. RISK OF LOSS................................................. 38
SECTION 12.12. LEGAL REPRESENTATION......................................... 38
SECTION 12.13. TIME OF THE ESSENCE.......................................... 38
SECTION 12.14. GOVERNING LAW................................................ 38
SECTION 12.15. COUNTERPARTS; EFFECTIVENESS.................................. 38

EXHIBIT A - LP AGREEMENT
EXHIBIT B - EXCHANGE RIGHTS AGREEMENT
EXHIBIT C - TAX EXEMPT DEBT INSTRUMENTS
EXHIBIT D - CALIFORNIA GENERAL PARTNERSHIP LEGAL OPINION
EXHIBIT E - LEGAL OPINION OF PGP
EXHIBIT F - QUALIFIED PROJECT COSTS
EXHIBIT G - CALIFORNIA GENERAL PARTNERSHIP AMENDMENT NO. 1
EXHIBIT H - CALIFORNIA GENERAL PARTNERSHIP AMENDMENT NO. 2
EXHIBIT I - EXISTING CONTRACTS
EXHIBIT J - RENT ROLL
EXHIBIT K - APPROVED TITLE FORM
EXHIBIT L - CERTIFICATION OF NON-FOREIGN STATUS
EXHIBIT M - PROPERTY MANAGEMENT AGREEMENT
EXHIBIT N - INTEREST OF EXISTING PARTNERS

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1 EXHIBIT 10.2 RESTRUCTURING AGREEMENT TERRACE GARDENS TRANSACTION RESTRUCTURING AGREEMENT ----------------------- THIS RESTRUCTURING AGREEMENT, dated as of May 23, 1997 (this "Agreement"), by and among PGP TERRACE GARDENS HOLDINGS INC., a Delaware...

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