Purchase and Sale Agreement - Catellus Development Corp. and California Public Employees' Retirement System (CalPERS)


                           PURCHASE AND SALE AGREEMENT

     THIS PURCHASE AND SALE AGREEMENT (this "Agreement"), dated as of December
                                             ---------
12, 2001 is by and between Catellus Development Corporation, a Delaware
corporation ("Catellus"), and California Public Employees' Retirement System, a
              --------
government employee pension fund, which is a unit of the State and Consumer
Services Agency of the State of California ("CalPERS").
                                             -------

          WHEREAS, CalPERS is the beneficial owner of 18,782,276 shares of
Catellus common stock, par value $.01 per share ("Common Stock"), of which
                                                  ------------
CalPERS desires to sell and Catellus desires to purchase 10,600,000 of such
shares (the "Catellus Shares") subject to the terms described herein;
             ---------------

          NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements and warranties herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

     1.   Purchase and Sale. Subject to the terms and upon the conditions herein
          -----------------
     set forth, Catellus agrees to purchase and CalPERS agrees to sell on the
     Closing Date (as hereinafter defined) the Catellus Shares, free and clear
     of all liens, encumbrances, claims and security interests, in exchange for
     the delivery by Catellus to CalPERS of an aggregate amount equal to
     $183,120,300 (the "Purchase Price") in immediately available funds,
                        --------------
     payable by wire transfer;

     2.   Representations and Warranties of Catellus. Catellus hereby represents
          ------------------------------------------
and warrants to CalPERS as follows:

          (a)  Due Organization. Catellus is duly organized, validly existing
               ----------------
               and in good standing under the laws of the State of Delaware.

          (b)  Authorization. Catellus has the requisite corporate power to
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               enter into this Agreement and the transactions and agreements
               contemplated hereby and to carry out its obligations hereunder.
               This Agreement has been duly authorized, executed and delivered
               by Catellus and constitutes a valid and binding agreement
               enforceable against Catellus in accordance with its terms.
               Neither the execution and delivery of this Agreement, the
               consummation of the transactions and agreements contemplated
               hereby, nor compliance with the terms, conditions or provisions
               of this Agreement will be a violation of any provision of law
               applicable to Catellus; of any of the terms, conditions or
               provisions of Catellus' Restated Certificate of Incorporation, as
               amended, or bylaws or of any material agreement or instrument to
               which it or one of its subsidiaries is a party or by which it or
               one of its subsidiaries or its or their material properties may
               be bound, or





               constitute a default or create a right of termination or
               acceleration thereunder, except for any such violation, default
               or right of termination or acceleration which has been waived or
               consented to in connection with the transactions contemplated
               hereby. The Board of Directors of Catellus has duly approved this
               Agreement and the transactions contemplated hereby. No consent,
               approval, authorization, or order of, or qualification with, any
               governmental body or agency is required for the performance of
               any of Catellus' obligations hereunder.

          (c)  Common Stock Outstanding. As of November 30, 2001, Catellus had
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               issued and outstanding 97,155,082 shares of Common Stock, and
               Catellus has not repurchased any shares of its Common Stock since
               November 30, 2001 through the date hereof. From November 1, 2001
               through the date hereof, the Company has not sold any shares of
               its Common Stock, other than shares of Common Stock issued or
               issuable upon exercise of stock options.

          (d)  Disclosure of Information. Catellus is not currently engaged in
               -------------------------
               any discussions or negotiations regarding a sale of all or
               substantially all of the assets of Catellus, or a merger,
               consolidation or other business combination involving Catellus in
               which the shareholders of Catellus would own less than 50% of the
               surviving entity, nor does Catellus have any current plan or
               intention to engage in any such discussions or negotiations.

     3.   Representations and Warranties of CalPERS. CalPERS hereby represents
          -----------------------------------------
and warrants to Catellus as follows:

          (a)  Due Organization. CalPERS is duly organized and validly existing
               ----------------
               under the laws of the State of California.

          (b)  Authorization. CalPERS has the requisite power to enter into this
               -------------
               Agreement and the transactions and agreements contemplated hereby
               and to carry out its obligations hereunder and thereunder. This
               Agreement has been duly authorized, executed and delivered by
               CalPERS and constitutes a valid and binding agreement of CalPERS
               enforceable against CalPERS in accordance with its terms. Neither
               the execution and delivery of this Agreement, consummation of the
               transactions and agreements contemplated hereby, nor compliance
               with the terms, conditions or provisions of this Agreement, will
               be a violation of any provision of law applicable to CalPERS; of
               any statutes governing the organization and operation of CalPERS;
               or of any material agreement or instrument to which CalPERS is a
               party or by which CalPERS or any of its material properties may
               be bound, or constitute a default or create a right of
               termination or acceleration thereunder, except for any such
               violation, default or right of termination or acceleration which
               has been waived or consented to in connection with the
               transactions contemplated hereby.





               The Board of Administration of CalPERS has duly approved this
               Agreement and the transactions contemplated hereby. No consent,
               approval, authorization, or order of or qualification with, any
               governmental body or agency is required for the performance of
               any of CalPERS' obligations hereunder.

          (c)  Title. CalPERS owns the Catellus Shares free and clear of all
               -----
               liens, encumbrances, claims and security interests.

          (d)  Ownership. CalPERS is the sole beneficial owner of the Catellus
               ---------
               Shares and the Remaining Shares. To its knowledge, the Catellus
               Shares and the Remaining Shares are the only securities of
               Catellus beneficially owned by CalPERS, and from November 1, 2001
               to the date hereof, CalPERS has not purchased any shares of the
               Catellus Common Stock. For purposes of this Section 3(d), the
               term "knowledge" shall be deemed limited to the actual knowledge
               of Michael McCook and Kent Haggerty.

     4.   Public Announcements. The parties hereto will consult with each other
          --------------------
before issuing, and provide each other with the reasonable opportunity to review
and comment upon, any press release or other written public statements with
respect to the transactions contemplated by this Agreement, and shall not issue
any such press release or make any such public statement without the reasonable
consent of the other party, except as may be required by applicable law, rule or
regulation, by court process or by obligations pursuant to any listing agreement
with any national securities exchange or transaction reporting system so long as
the other party is notified promptly by the disclosing party of such press
release or public statement. For the avoidance of doubt, the parties acknowledge
that CalPERS will be filing, with respect to these transactions, an amendment to
its report on Schedule 13D, and Catellus will be filing, with respect to these
transactions, a Current Report on Form 8-K.

     5.   Closing. Subject to the satisfaction of the conditions set forth in
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          Section 6 and Section 7, the purchase and sale of the Catellus Shares
          (the "Closing") shall occur at 10:00 am (Pacific time) on December 14,
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          2001, or on such later date as shall be agreed upon by Catellus and
          CalPERS as soon as reasonably practicable thereafter (such date being
          the "Closing Date"). The Closing shall take place at the offices of
               ------------
          Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles,
          California 90071, at which time the parties shall make the deliveries
          described below, in addition to any other documents required to be
          delivered under this Agreement.

          (a)  Deliveries by Catellus. At the Closing, Catellus shall deliver or
               ----------------------
               cause to be delivered the following to CalPERS:

               (1)  $183,120,300 by wire transfer of immediately available
                    funds to the account specified by CalPERS;

               (2)  a certificate of Catellus' secretary certifying resolutions
                    of the Board of Directors of Catellus approving this
                    Agreement and the





                         transactions contemplated hereby (together with an
                         incumbency and signature certificate regarding the
                         officer(s) signing on behalf of Catellus);

                    (3)  a certificate, dated the Closing Date, of an executive
                         officer of Catellus, certifying that, as of such date,
                         the representations and warranties of Catellus
                         contained herein are accurate, true and correct with
                         the same force and effect as though made on and as of
                         such date; and

                    (4)  certificates representing the Remaining Shares.

            (b)     Deliveries by CalPERS.  At or prior to the Closing, CalPERS
                    ---------------------
                    shall deliver or cause to be delivered the following:

                    (1)  At least two business days prior to the Closing, (i) a
                         copy of the certificate or certificates representing
                         the 18,782,276 shares of Common Stock owned by CalPERS
                         shall be delivered to American Stock Transfer & Trust
                         Company, accompanied by an executed stock power with
                         respect to the Catellus Shares; and (ii) the names and
                         denominations of the Remaining Shares;

                    (2)  On or prior to the Closing, an actual certificate or
                         certificates representing the 18,782,276 shares of
                         Common Stock owned by CalPERS shall be delivered to
                         American Stock Transfer & Trust Company, accompanied by
                         an executed stock power with respect to the Catellus
                         Shares;

                    (3)  a certificate of an executive officer of CalPERS
                         certifying delegation resolutions of the Board of
                         Administration of CalPERS approving this Agreement and
                         the transactions contemplated hereby (together with an
                         incumbency and signature certificate regarding the
                         officer(s) signing on behalf of CalPERS) to Catellus;
                         and

                    (4)  a certificate, dated the Closing Date, of an executive
                         officer of CalPERS, certifying that, as of such date,
                         the representations and warranties of CalPERS contained
                         herein are accurate, true and correct with the same
                         force and effect as though made on and as of such date
                         to Catellus.

        6.  Conditions to the Obligations of Catellus.  The obligations of
            -----------------------------------------
Catellus under this Agreement are subject to the fulfillment of each of the
following conditions:

            (a)     Performance. CalPERS shall have performed and complied
                    -----------
                    in all material respects with all agreements, covenants,
                    obligations and conditions required by this Agreement
                    to be performed or complied with by it.



          (b)       Injunctions. No preliminary or permanent injunction or other
                    -----------
                    final order by any United States federal or state court
                    shall have been issued which prevents the consummation of
                    the transactions contemplated hereby.

     7.   Conditions to the Obligations of CalPERS.  The obligations of CalPERS
          ----------------------------------------
under this Agreement are subject to the fulfillment of each of the following
conditions:

          (a)       Performance. Catellus shall have performed and complied in
                    -----------
                    all material respects with all agreements, covenants,
                    obligations and conditions required by this Agreement to be
                    performed or complied with by it.

          (b)       Injunctions. No preliminary or permanent injunction or other
                    -----------
                    final order by any United States federal or state court
                    shall have been issued which prevents the consummation of
                    the transactions contemplated hereby.

     8.   Termination of Existing Agreements. Effective upon the Closing, the
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Existing Agreements (as defined below) shall terminate without any further
action by the parties hereto or thereto and all rights and obligations arising
out of, or related to any of the Existing Agreements shall terminate and neither
CalPERS nor the Company shall have any obligations or rights thereunder to the
other party thereto on or after the Closing Date. "Existing Agreements" shall
                                                   -------------------
mean: (i) the Agreement dated as of January 14, 1993, as amended by Amendment
No. 1 to Agreement dated as of February 4, 1993, between Catellus and Bay Area
Real Estate Investment Associates L.P. (predecessor in interest of CalPERS)
("BAREIA"), (ii) the Stockholders Agreement dated as of January 29, 1993 among
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BAREIA, Olympia & York SF Holding Corporation ("Olympia"), Itel Corporation
                                                -------
("Itel") and Catellus, (iii) the Standby Stockholders Agreement dated as of
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February 4, 1993 among BAREIA, Itel and Catellus and (iv) the Stock Subscription
Agreement between BAREIA and Santa Fe Pacific Realty Corporation ("Santa Fe")
                                                                   --------
dated as of November 13, 1989, as amended by Amendment No. 1 to Stock
Subscription Agreement dated as of December 29, 1989, between BAREIA and Santa
Fe.

     9.   Removal of Legend. Upon the satisfaction of the following condition,
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Catellus shall instruct the transfer agent to remove any restrictive legend from
any certificate or certificates representing the 8,182,276 shares of Common
Stock owned by CalPERS immediately after the Closing (the "Remaining Shares")
                                                           ----------------
and to issue a certificate (which may be the certificate referred to in Section
5(a)(4) above) representing the Remaining Shares in the name of CalPERS or its
nominee: Catellus and its transfer agent shall have received a written opinion
of outside counsel to CalPERS in the form attached hereto as Exhibit A.

     10.  Survival. The representations and warranties of the parties shall
          --------.
survive the Closing forever.

     11.  Indemnification.
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          (a)       Each party (the "Indemnifying Party") agrees to indemnify
                                     ------------------
                    the other party, and each of their affiliates and their
                    respective officers, directors, employees, agents and
                    representatives (each, an "Indemnified Party" and together
                                               -----------------
                    the "Indemnified Parties") against, and agrees to hold each
                         -------------------
                    of them harmless from, any and all liabilities, losses,
                    costs, claims, damages,



                    penalties and expenses (including, without limitation,
                    reasonable attorneys' fees and expenses and costs of
                    investigation and litigation) ("Losses") (i) incurred or
                                                    ------
                    suffered by them relating to or arising out of or in
                    connection with any breach of or any inaccuracy in any
                    representation or warranty made by the Indemnifying Party in
                    this Agreement or any document delivered by it at the
                    Closing pursuant to Section 5 hereof or (ii) arising out of
                    or in connection with any action, suit, inquiry, or
                    proceeding against or involving any Indemnified Party as a
                    result of any Indemnifying Party's actions (or lack thereof)
                    in connection with the negotiation or execution of this
                    Agreement or any of the transactions contemplated hereby, or
                    based upon any allegation or claim that the Indemnified
                    Party is in any way responsible or liable for any action (or
                    lack thereof) of the Indemnifying Party. No person shall be
                    entitled to indemnification hereunder to the extent that the
                    act or omission of such person for which indemnification is
                    claimed arises out of such person's fraud, bad faith or
                    willful misconduct.

          (b)       As soon as is reasonably practicable after becoming aware of
                    a claim for indemnification under this Agreement, the
                    Indemnified Party shall promptly give notice to the
                    Indemnifying Party of such claim and the amount the
                    Indemnified Party will be entitled to receive hereunder from
                    the Indemnifying Party; provided that the failure of the
                    Indemnified Party to give notice shall not relieve the
                    Indemnifying Party of its obligations hereunder except to
                    the extent (if any) that the Indemnifying Party shall have
                    been prejudiced thereby. If the Indemnifying Party agrees
                    that it has an indemnification obligation but objects that
                    it is obligated to pay only a lesser amount, the Indemnified
                    Party shall nevertheless be entitled to recover promptly
                    from the Indemnifying Party the lesser amount, without
                    prejudice to the Indemnified Party's claim for the
                    difference.

          (c)       After receiving a claim as set forth above, the Indemnifying
                    Party may, at its own expense, (i) participate in the
                    defense of any claim, suit, action or proceeding and (ii)
                    except in the case of a claim indemnification for which is
                    available pursuant to clause (ii) of paragraph (a) above, as
                    to which this clause (ii) shall be inapplicable, upon notice
                    to the Indemnified Party and the Indemnifying Party's
                    delivering to the Indemnified Party a written agreement that
                    the Indemnified Party is entitled to indemnification for all
                    Losses arising out of such claim, suit, action or
                    proceeding, assume the defense thereof; provided, however,
                    that (x) the Indemnifying Party's counsel is reasonably
                    satisfactory to the Indemnified Party, and (y) the
                    Indemnifying Party shall thereafter consult with the
                    Indemnified Party upon the Indemnified Party's reasonable
                    request for such consultation from time to time with respect
                    to such claim, suit, action or proceeding. If the
                    Indemnifying Party assumes such defense, the Indemnified
                    Party shall have the right (but not the duty) to participate
                    in the defense thereof and to employ counsel, at its own
                    expense, separate from the counsel employed by the
                    Indemnifying Party. If, however, the Indemnified Party
                    reasonably



               determines in its judgment that representation by the
               Indemnifying Party's counsel of both the Indemnifying Party and
               the Indemnified Party would present such counsel with a conflict
               of interest, then such Indemnified Party may employ separate
               counsel to represent or defend it in any such claim, action, suit
               or proceeding and the Indemnifying Party shall pay the reasonable
               fees and disbursements of such separate counsel. Whether or not
               the Indemnifying Party chooses to defend or prosecute any such
               claim, suit, action or proceeding, all of the parties hereto
               shall cooperate in the defense or prosecution thereof.

          (d)  Notwithstanding anything in this Section 11 to the contrary,
               neither the Indemnifying Party nor the Indemnified Party shall,
               without the written consent of the other, settle or compromise
               any claim or permit a default or consent to entry of any judgment
               unless the claimant and such party provide to such other party an
               unqualified release from all liability in respect of such claim.
               Notwithstanding the foregoing, if a settlement offer solely for
               money damages is made by the applicable third party claimant, and
               the Indemnifying Party notifies the Indemnified Party in writing
               of the Indemnifying Party's willingness to accept the settlement
               offer and pay the amount called for by such offer, and the
               Indemnified Party declines to accept such offer, the Indemnified
               Party may continue to contest such claim, free of any
               participation by the Indemnifying Party, and the amount of any
               ultimate liability with respect to such claim that the
               Indemnifying Party has an obligation to pay hereunder shall be
               limited to the lesser of (i) the amount of the settlement offer
               that the Indemnified Party declined to accept or (ii) the
               aggregate Losses of the Indemnified Party with respect to such
               claim. If the Indemnifying Party makes any payment on any claim,
               the Indemnifying Party shall be subrogated, to the extent of such
               payment, to all rights and remedies of the Indemnified Party to
               any insurance benefits or other claims of the Indemnified Party
               with respect to such claim.

          (e)  In the event that the Indemnifying Party does not elect to assume
               the defense of any claim, suit, action or proceeding, then any
               failure of the Indemnified Party to defend or to participate in
               the defense of any such claim, suit, action or proceeding or to
               cause the same to be done, shall not relieve the Indemnifying
               Party of its obligations hereunder.

     12. Successors and Assigns. This Agreement shall be binding upon, and inure
         ----------------------
to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors, assigns and affiliates.

     13. Notices. Any notice or other communication provided for herein or given
         -------
hereunder to a party hereto shall be in writing and shall be given by delivery,
by telex, telecopier or by mail (registered or certified mail, postage prepaid,
return receipt requested) to the respective parties as follows:



                           If to Catellus:

                           Catellus Development Corporation
                           201 Mission Street, Second Floor
                           San Francisco, California  94105
                           Attention:  C. William Hosler
                           Facsimile:  (415) 974-4502

                           with a copy to:

                           Latham & Watkins
                           633 West Fifth Street
                           Suite 4000
                           Los Angeles, California  90071
                           Attention:  Brian Cartwright, Esq.
                           Facsimile:  (213) 891-8763

                           If to CalPERS:

                           California Public Employees' Retirement System
                           Lincoln Plaza
                           400 "P" Street
                           Sacramento, California 95814
                           Attention:  Michael McCook
                           Facsimile:  (916) 326-3965

                           with a copy to:

                           Hogan & Hartson L.L.P.
                           Columbia Square
                           555 Thirteenth Street, N.W.
                           Washington, D.C.  20004-1109
                           Attention:  Alan L. Dye
                           Facsimile:  (202) 637-5910

or to such other address with respect to a party as such party shall notify the
other in writing.

     14. Waiver. No party may waive any of the terms or conditions of this
         ------
Agreement, nor may this Agreement be amended or modified, except by a duly
signed writing referring to the specific provision to be waived, amended or
modified.

     15. Entire Agreement. This Agreement constitutes the entire agreement with
         ----------------
respect to the subject matter hereof, and supersedes all other prior agreements
and understandings, both written and oral, among the parties hereto and their
affiliates.



     16. Expenses. Regardless of whether the transactions contemplated hereby
         --------
are consummated, each party hereto shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.

     17. Captions. The Section and Paragraph captions herein are for convenience
         --------
of reference only, do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions hereof.

     18. Counterparts. This Agreement may be executed in one or more
         ------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.

     19. Governing Law. This Agreement shall be governed by, and construed and
         -------------
enforced in accordance with, the laws of the State of Delaware.

     20. No Presumption Against Drafter. Each of the parties hereto has jointly
         ------------------------------
participated in the negotiation and drafting of this Agreement. In the event of
an ambiguity or a question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by each of the parties hereto and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement.



     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the day and year first executed.

                                 CATELLUS DEVELOPMENT CORPORATION

                                 By: /s/ Nelson C. Rising
                                    Name: Nelson C. Rising
                                    Title: Chairman and Chief Executive Officer


                                 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM


                                 By: /s/ Michael McCook
                                    Name: Michael McCook
                                    Title: Senior Investment Officer-Real Estate