AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
between
FLAGS INVESTMENT INC.,
a California corporation
as Seller
and
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
as Buyer
TABLE OF CONTENTS
Page
1. DEFINITIONS 1
1.1 "Appurtenances 1
1.2 "Assignment and Assumption of Leases 1
1.3 "Assignment of Intangible Property 1
1.4 "Xxxx of Sale 2
1.5 "Business Day(s)" 2
1.6 "Closing 2
1.7 "Closing Date 2
1.8 "Code 2
1.9 "Deed 2
1.10 "Deposit 2
1.11 "Due Diligence Period 2
1.12 "Escrow Holder 2
1.13 "Fixtures 2
1.14 "Governmental Regulations 3
1.15 "Hazardous Materials 3
1.16 "Intangible Property" 3
1.17 "Intellectual Property" 3
1.18 "Land 3
1.19 "Leases 4
1.20 "Licenses and Permits 4
1.21 "Notice To Tenants 4
1.22 "Personal Property 4
1.23 "Property" 4
1.24 "Purchase Price 4
1.25 "Real Property 4
1.26 "Records and Plans 4
1.27 "Schedule of Tenant Improvement
Allowances and Commissions" 4
1.28 "Service Contracts 4
1.29 "Tenant Estoppels 5
1.30 "Title Company 5
1.31 "Title Policy 5
1.32 "Transfer Documents" 5
1.33 "Transferor's Certificate 5
1.34 "Warranties 5
2. ESCROW 5
3. AGREEMENT TO SELL; PURCHASE PRICE 5
3.1 Deposit 6
3.2 Balance of Purchase Price 6
4. DELIVERIES AT CLOSING; CLOSING PROCEDURES 6
4.1 By Seller 6
4.2 By Buyer 7
4.3 By Buyer and Seller 7
4.4 Closing Procedures 7
5. REPRESENTATIONS AND WARRANTIES 8
5.1 Seller's Representations and Warranties. 8
5.2 Buyer's Representations and Warranties. 10
6. SELLER'S OBLIGATIONS 10
6.1 Further Liens and Encumbrances 10
6.2 Leases; Other Contracts; Interim
Activities 11
6.3 Property Management and Operation 11
6.4 Cooperation with Representatives 11
6.5 No Removal of Personal Property 11
6.6 Obtaining Estoppels and Consents 11
6.7 Service Contracts 12
6.8 Post-Closing Financial Records 12
6.9 Audit Rights 12
6.10 Management and Listing Agreements 13
6.11 Other Obligations 13
7. TITLE TO REAL PROPERTY 13
8. CONDITIONS PRECEDENT/CONCURRENT TO CLOSING; CLOSING
DATE 13
8.1 Buyer's Conditions 13
8.1.1 Representations, Warranties
and Covenants of Seller 13
8.1.2 Seller's Deliveries 14
8.1.3 No Material Changes 14
8.1.4 Delivery of Pre-Closing
Documents and Agreements 14
8.1.5 Title Insurance 14
8.1.6 Due Diligence Approval 14
9. DUE DILIGENCE PERIOD 14
9.1 Matters To Be Reviewed 14
9.1.1 Title 15
9.1.2 Inspections and Studies 16
9.2 Indemnity 17
9.3 Insurance 18
9.4 Return of Documents 18
9.5 Notice of Objections 18
10. PRORATIONS 18
10.1 Current Rent 18
10.2 Rent Arrears 18
10.3 Tenant Improvement Allowances and
Brokerage Commissions 19
10.4 Security Deposits 19
10.5 Other Prorations 19
10.6 Preliminary Closing Adjustment 20
10.7 Post-Closing Reconciliation 20
10.8 Survival 20
11. COSTS AND EXPENSES 20
11.1 Closing Costs 20
11.2 Delivery of Possession 20
12. AS-IS 20
13. CONDEMNATION AND DESTRUCTION 21
13.1 Eminent Domain or Taking 21
13.2 Damage or Destruction 22
14. REMEDIES 23
14.1 Buyer's Remedies 23
14.2 Seller's Remedies 24
15. BROKERAGE COMMISSIONS 25
16. NOTICE 25
17. MISCELLANEOUS 26
17.1 Survival 26
17.2 No Recording. 26
17.3 Parties in Interest 26
17.4 Section Headings 26
17.5 No Oral Modifications 26
17.6 Full Integration 26
17.7 Binding Effect 27
17.8 Seller's Advice of Counsel 27
17.9 Attorneys' Fees 27
17.10 Governing Law 27
17.11 Confidentiality 27
17.12 Captions 28
17.13 Severability 28
17.14 Time of the Essence 28
17.15 Non-Waiver 28
17.16 Facsimile 28
17.17 Further Assurances 28
17.18 Counterparts 28
17.20 WAIVER OF JURY TRIAL 28
17.21 1721 ''1031 Exchange 28
17.22 Arbitration 29
AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
THIS AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW
INSTRUCTIONS ("Agreement") dated as of the 11th day of March
1998, is by and between Flags Investment Inc., a California
corporation ("Seller"), and Arden Realty Limited Partnership, a
Maryland limited partnership ("Buyer"). Capitalized terms used
in the Recitals below, not otherwise defined therein, shall have
the meanings ascribed to them in Section 1 of this Agreement.
R E C I T A L S
WHEREAS, this Agreement is made and entered into with
reference to the following facts:
WHEREAS, Seller is the owner of the Property.
WHEREAS, Buyer desires to purchase, and Seller desires
to sell, the Property on the terms and conditions set forth in
this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing
recitals, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer
and Seller agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
1.1 "Appurtenances" means all rights, privileges
and easements appurtenant to the Land, including, without
limitation, all minerals, oil, gas and other hydrocarbon sub
stances in, on and under the Land, as well as all development
rights, air rights, water, water rights and water stock relating
to the Land and any other easements appurtenant to the Land.
1.2 "Assignment and Assumption of Leases" means
the Assignment and Assumption of Leases, to be duly executed and
delivered by Seller and Buyer in accordance with Sections 4.1 and
4.2 of this Agreement. The Assignment and Assumption of Leases
shall be in the form of, and upon the terms contained in,
Exhibit "C".
1.3 "Assignment of Intangible Property" means the
Assignment of Intangible Property, to be duly executed and
delivered by Seller and Buyer in accordance with Sections 4.1 and
4.2 of this Agreement. The Assignment of Intangible Property
shall be in the form of, and upon the terms contained in,
Exhibit "B".
1.4 "Xxxx of Sale" means the Xxxx of Sale, to be
duly executed and delivered by Seller in accordance with
Section 4.1 of this Agreement, conveying to Buyer all of the
Personal Property. The Xxxx of Sale shall be in the form of, and
upon the terms contained in, Exhibit "D".
1.5 "Business Day(s)" or "business day(s)" means
a day when Escrow Holder is open for business.
1.6 "Closing" means the consummation of the
conveyances of the Property (including the recording of the
Deed), the Leases and the other transactions contemplated under
this Agreement, all of which shall occur on or before the Closing
Date.
1.7 "Closing Date" means March 31, 1998, unless
otherwise mutually agreed to in writing by Buyer and Seller or
extended pursuant to the terms of this Agreement.
1.8 "Code" means the United States Internal
Revenue Code of 1986, as amended.
1.9 "Deed" means the Grant Deed, to be duly
executed, acknowledged and delivered in recordable form by Seller
in accordance with Section 4.1 of this Agreement conveying to
Buyer good and marketable fee simple title to the Real Property.
The Deed shall be in the form of, and upon the terms contained
in, Exhibit "E".
1.10 "Deposit" means the sum of One Hundred
Thousand Dollars ($100,000.00) to be delivered to Escrow Holder
within two (2) business days after the mutual execution of this
Agreement by Buyer and Seller and delivery of the same to Escrow
Holder in accordance with Section 3.1 of this Agreement.
1.11 "Due Diligence Period" means the period
commencing on the date this Agreement is executed and delivered
by both Buyer and Seller and ending at 6:00 p.m. (California
time) on March 30, 1998.
1.12 "Escrow Holder" means Chicago Title Company,
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000, Attn:
Xxx Xxxxxxxx; Escrow No. 7135783X70.
1.13 "Fixtures" means all fixtures placed on,
attached to, or located at and used in connection with the
operation of, the Land and which are owned by Seller.
1.14 "Governmental Regulations" means any local,
state, and federal laws, ordinances, rules, requirements,
resolutions, policy statements and regulations (including, with
out limitation, those relating to land use, subdivision, zoning,
environmental, labor relations, notification of sale to employer,
Hazardous Materials, occupational health and safety, water,
earthquake hazard reduction and building and fire codes) bearing
on the construction, development, alteration, rehabilitation,
maintenance, use, operation, or sale of the Property.
1.15 "Hazardous Materials" means any hazardous or
toxic substance, material or waste which is or becomes regulated
by any local governmental authority, any agency of the State of
California or any agency of the United States Government. The
term "Hazardous Materials" includes, without limitation, any
material or substance which (a) contains petroleum or any
petroleum by-products, (b) contains asbestos, (c) contains urea
formaldehyde foam insulation, (d) is designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution
Control Act (33 U.S.C. ' 1317), (e) is defined as a "hazardous
waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. ' 6901 (42 U.S.C.
' 6903), or (f) is defined as a "hazardous substance" pursuant to
Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ' 9601 (42 U.S.C.
' 9601). Each reference to a statute or law in this definition
shall be deemed to include any amendments thereto which are
enacted from time to time.
1.16 "Intangible Property" means all of Seller's
right, title and interest in and to any and all intangible
personal property now and through the Closing Date owned by
Seller and used in connection with the ownership, construction,
development, use and/or operation of the Real Property and/or
Personal Property, including, without limitation, all trade names
of the Real Property, any and all claims and causes of action
(but excluding any counterclaims that Seller may have under those
matters which Seller is indemnifying Buyer against under this
Agreement and any agreement which is attached as an Exhibit
hereto), the Service Contracts (to the extent approved in writing
by Buyer), the Licenses and Permits, the Intellectual Property
and the Records and Plans and the Warranties.
1.17 "Intellectual Property" means any and
all intellectual property owned by Seller or licensed to Seller
and used in connection with the ownership, use and/or operation
of the Real Property and/or Personal Property, including, without
limitation, trade names, logos, derivations, slogans and other
marks owned or used by or licensed to Seller and associated with
the Real Property and/or Personal Property.
1.18 "Land" means the real property located at
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, as legally
described in Exhibit "A".
1.19 "Leases" means the existing leases relating
to the Real Property, which Leases are listed on Exhibit "F".
1.20 "Licenses and Permits" means all of Seller's
right, title, interests, privileges, benefits and remedies in, to
and under all authorizations, approvals, permits, certificates of
occupancy, licenses, agreements, variances, tentative maps, final
maps, plans and specifications and land use entitlements held by
Seller and/or relating to the construction, reconstruction,
occupancy, operation or use of any part of the Real Property or
Personal Property (e.g., all building permits and certificates of
occupancy).
1.21 "Notice To Tenants" means the notice from
Seller to the tenants under the Leases whereby such tenants are
notified that the Property has been transferred by Seller to
Buyer and instructing the tenants to pay any and all rents and
other sums payable under the Leases from and after the Closing
directly to Buyer or as otherwise directed by Buyer, in the form
of Exhibit "G".
1.22 "Personal Property" means all personal
property of Seller located on or in or used in connection with
the Real Property.
1.23 "Property" means the Real Property, the
Personal Property and the Intangible Property.
1.24 "Purchase Price" means the sum of Four
Million Nine Hundred Thousand Dollars ($4,900,000).
1.25 "Real Property" means the Land, the
improvements situated on the Land, the Fixtures and the Appurten
ances.
1.26 "Records and Plans" means (a) all books and
records maintained in connection with the ownership, development,
construction, maintenance or operation of the Property, (b) all
preliminary, final and "as-built" plans and specifications
respecting the Real Property, and (c) all physical, structural
and environmental reviews, architectural drawings, and
engineering, soil, seismic, geologic and architectural reports,
studies and certificates and other documents pertaining to the
Real Property which are within the possession of, under the
control of, or reasonably available to Seller.
1.27 "Schedule of Tenant Improvement
Allowances and Commissions" means the schedule of unpaid tenant
improvement allowances and brokerage commissions for Leases
entered into prior to the date of this Agreement, which Schedule
is attached hereto as Exhibit "L"."
1.28 "Service Contracts" means any and all
management agreements, service contracts, brokerage agreements,
art contracts, landscaping contracts, equipment leases,
maintenance agreements and all other contracts for the provision
of labor, services, materials or supplies to or for the benefit
of the Real Property, together with all supplements, amendments
and modifications thereto, including without limitation those
documents which are set forth on Exhibit "H" attached to this
Agreement.
1.29 "Tenant Estoppels" means the written
statements in the form of, and upon the terms contained in,
Exhibit "I", in favor of Buyer from the tenants which are parties
to the Leases, dated not earlier than fifteen (15) days prior to
the Closing Date.
1.30 "Title Company" means Chicago Title Company,
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000, Attn:
Xxxx Xxxxxx; Title Order No. 7135783X52.
1.31 "Title Policy" means an ALTA owner's title
policy (Form B-1970) issued by the Title Company for the benefit
of Buyer, which Title Policy shall have a liability limit in the
amount of the Purchase Price, shall include those endorsements
requested by Buyer and shall show only those matters which
constitute Permitted Exceptions (defined below).
1.32 "Transfer Documents" means the Deed,
Xxxx of Sale, Assignment of Intangible Property and Assignment
and Assumption of Leases.
1.33 "Transferor's Certificate" means the
certificate, to be duly executed by Seller under penalty of
perjury and delivered by Seller in accordance with Section 4.1 of
this Agreement, certifying that Seller is not a "foreign person"
in accordance with the provisions of Section 1445 of the Code and
any similar provisions of applicable state law. The Transferor's
Certificate shall be in the form of, and upon the terms contained
in, Exhibit "J".
1.34 "Warranties" means all third party warranties
and guarantees relating to the Property which are set forth on
Exhibit "M".
2. ESCROW. The purchase and sale of the Property
shall be consummated through an escrow at Escrow Holder. As soon
as reasonably practicable following the mutual execution of this
Agreement, but in no event later than three (3) days after the
date of this Agreement, the parties shall deliver to Escrow
Holder a fully executed counterpart of this Agreement, which
shall constitute its escrow instructions. The parties shall
execute such additional escrow instructions, not inconsistent
with this Agreement, as Escrow Holder shall deem reasonably
necessary for its protection. In the event of any conflict
between this Agreement and any additional escrow instructions,
the terms of this Agreement shall govern.
3. AGREEMENT TO SELL; PURCHASE PRICE. Seller agrees
to sell to Buyer, and Buyer agrees to purchase from Seller, the
Property in accordance with the terms, and subject to the
conditions, of this Agreement. The Purchase Price for the
Property will be paid as follows:
3.1 Deposit. Within two (2) business days after
the execution of this Agreement by Buyer and Seller and delivery
of the same to Escrow Holder, Buyer will deliver the Deposit to
Escrow Holder to hold in trust. Escrow Holder will invest the
Deposit in an interest bearing account with a responsible
federally-insured institutional lender approved by Buyer and
Seller, and interest will be for the account of Buyer except as
otherwise provided in this Agreement and will be credited against
the Purchase Price at Closing. The Deposit shall be fully
refundable to Buyer until the expiration of the Due Diligence
Period.
3.2 Balance of Purchase Price. The entire
balance of the Purchase Price (after taking into account the
adjustments described in Sections 10 and 11), shall be paid to
Seller, in immediately available funds, through Escrow Holder, at
Closing.
4. DELIVERIES AT CLOSING; CLOSING PROCEDURES. The
Closing will take place on the Closing Date. Buyer may elect to
close escrow on an earlier date by giving written notice to
Seller and Escrow Holder of its intent to close escrow earlier at
least five (5) business days in advance of such earlier date, and
upon Seller's receipt of such notice, the earlier date shall
become the new Closing Date.
4.1 By Seller. At least one (1) business day
prior to the Closing, Seller shall deliver or cause to be
delivered to Escrow Holder (unless otherwise indicated) the
following items, duly executed and, where appropriate,
acknowledged by Seller:
4.1.1 The Deed.
4.1.2 Two (2) originals of the Xxxx of Sale.
4.1.3 Two (2) original counterparts of the
Assignment of Intangible Property.
4.1.4 Two (2) original counterparts of the
Assignment and Assumption of Leases.
4.1.5 Two (2) originals of the Transferor's
Certificate.
4.1.6 Originals of the Tenant Estoppels
(to be delivered directly to Buyer).
4.1.7 Evidence reasonably satisfactory
to Buyer of the termination of any property management agreement
and brokerage listing agreement for the Property as provided in
Section 6.10 hereof.
4.1.8 All such further confirmations,
satisfactions, releases, approvals, consents and any and all such
further instruments as may be reasonably necessary, appropriate,
expedient or proper in the reasonable opinion of Title Company in
order to issue the Title Policy.
4.2 By Buyer. At least one (1) business day
prior to the Closing, Buyer will deliver or cause to be delivered
to Escrow Holder or the Seller the following items, duly executed
and, where appropriate, acknowledged by Buyer:
4.2.1 The net balance of the Purchase Price,
to be paid in accordance with Sections 3.2 of this Agreement,
after deducting both the Deposit plus any interest accrued
thereon and after taking into account the adjustments and cost
allocations in accordance with Sections 10 and 11.
4.2.2 Two (2) counterparts of the
Assignment of Intangible Property and the Assignment and
Assumption of Leases.
4.3 By Buyer and Seller. At the Closing, Seller
will deliver to all of the tenants of the Property the Notice to
Tenants. Buyer and Seller will furthermore each deposit such
other instruments consistent with this Agreement as are
reasonably required to effectuate the transactions contemplated
under this Agreement.
4.4 Closing Procedures. Provided that Escrow
Holder has received the documents and funds described in
Sections 4.1 and 4.2 above and has not received notice from any
party hereto either that an agreement of another party hereunder
has not been performed, that a condition set forth herein has not
been satisfied or waived or that this Agreement has terminated
(by its terms or by an election duly made hereunder), and further
provided that the Title Company has delivered to Buyer an
unconditional (or, if there are any conditions, Seller has
provided Buyer and Title Company with reasonable assurances that
such conditions will be satisfied and eliminated on or before the
Closing Date) commitment to issue the Title Policy, Escrow Holder
is authorized and instructed at 8:00 a.m. on the Closing Date to:
4.4.1 Record the Deed with the County
Recorder of Los Angeles County, California.
4.4.2 Cause the Title Policy to be
issued by the Title Company.
4.4.3 Deliver to Buyer: Originals of the
Assignment and Assumption of Leases, the Assignment of Intangible
Property, the Xxxx of Sale, the Transferor's Certificate, all
documents and items required to be delivered by Seller pursuant
to Sections 4.1 and 8.1.4 or any other provision of this
Agreement, not otherwise previously delivered directly to Buyer,
all other items deposited by Seller with Escrow Holder pertaining
to the Property, and any funds deposited by Buyer in excess of
the amount to be paid by Buyer under the terms of this Agreement.
4.4.4 Deliver to Seller: the Purchase Price
after taking into account the adjustments and cost allocations in
accordance with Sections 10 and 11, original counterparts of the
Assignment and Assumption of Leases and the Assignment of
Intangible Property and any other document deposited by Buyer
with Escrow Holder for delivery to Seller at the Closing.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Seller's Representations and Warranties.
Seller makes the following representations and warranties to
Buyer, upon which warranties and representations Buyer has relied
and will continue to rely, all of which are true as of the date
of this Agreement and will be true and correct as of the Closing:
5.1.1 Organization. Seller is duly
organized, validly existing and in good standing under the laws
of the State of California and is duly qualified to do business
in the State of California. The execution, delivery and
performance of this Agreement and the other documents
contemplated this Agreement by Seller, and the performance by
Seller of the obligations under this Agreement and the other
documents contemplated by this Agreement (i) are within the power
of Seller; (ii) have been duly authorized by all requisite
corporate action; and (iii) will not violate any provision of
law, any order of any court or agency of government, the charter
documents of Seller or its shareholders, or any indenture,
agreement or any other instrument to which Seller is a party.
This Agreement and each of the other documents described in this
Agreement when executed and delivered to Buyer, will constitute
legal, valid and binding obligations enforceable against Seller
in accordance with the terms of such documents.
5.1.2 Seller has full legal power and
authority to enter into and perform this Agreement in accordance
with its terms. The execution, delivery and performance of this
Agreement and all documents in connection therewith are not in
contravention of or in conflict with any deed of trust, agreement
or undertaking to which Seller is a party or by which Seller or
any of its property, including the Property, may be bound or
affected following the Closing. The execution and delivery of
this Agreement and the performance by Seller of its obligations
hereunder require no further action or approval in order to
constitute this Agreement as a binding and enforceable obligation
of Seller, and all such actions have been duly taken by Seller.
5.1.3 Seller is the owner of the
Personal Property and has good title thereto, free and clear of
all liens, claims and security interests whatsoever, except as
otherwise disclosed to Buyer in writing.
5.1.4 Except as disclosed to Buyer
during the Due Diligence Period or as contained in the materials
delivered to Buyer during the Due Diligence Period, Seller has no
actual knowledge (without any duty of inquiry required) of any:
a. Notification from any governmental
authority notifying Seller of any (a) violation of any
Governmental Regulations or any city, County, State, Federal,
building, zoning, fire, health code, regulation, ordinance or
covenant, filed or issued against the Property; or (b) impending
or threatened special assessments on the Property or (c) other
actions or proceedings with respect to the Property.
b. Existing, proposed or contemplated plan
to widen, modify or realign any existing street or highway or any
existing, proposed or contemplated eminent domain proceeding that
would result in the taking of all or any part of the Property;
c. Litigation, legal, administrative,
arbitration or other proceeding or governmental investigations
pending or threatened in writing against Seller or the Property
that could reasonably be expected to materially and adversely
affect Seller's or Buyer's ability to perform their respective
obligations hereunder, or Buyer's use of the Property for its
existing purposes;
d. Underground storage tanks located on or
under the land or storage or disposal on the Property of any
Hazardous Materials and Seller has received no notice from any
governmental authority requiring the removal of any Hazardous
Materials or other toxic or hazardous waste, material or
substance from the Property.
e. Leases (or tenancy or other rights of
occupancy or use for any portion of the Property under which any
party has a right to occupy the Property, other than pursuant to
the Leases), Service Contracts or Warranties, other than those
disclosed on Exhibits "F," "H" and "M" attached hereto.
f. Unpaid tenant improvement allowances or
brokerage or leasing commissions or in connection with any of the
Leases, other than those disclosed on Exhibit "L".
5.1.5 Security Deposits. Except as
otherwise disclosed to Buyer in writing prior to the expiration
of the Due Diligence Period, no part of any security deposits for
the Property have been applied to amounts due under any Leases.
5.1.6 Use Permits and Other Approvals.
To Seller's actual knowledge (without any duty of inquiry
required), the Licenses and Permits and easements and rights of
way, including proof of dedication, are all in full force and
effect.
5.1.7 Compliance with Agreements. To
Seller's actual knowledge (without any duty of inquiry required),
no default exists under any covenant, restriction or agreement
related to or affecting the Property or the Leases, except as
previously disclosed to Buyer.
5.1.8 Financial Position. The financial
statements and all financial data heretofore delivered to Buyer
relating to Seller or the Property, including, without
limitation, the Rent Roll and all operating statements, are true,
correct and complete in all respects as of the date thereof.
5.1.9 Agreements. To Seller's actual
knowledge (without any duty of inquiry required), the Licenses
and Permits, Records and Plans, Service Contracts, Warranties,
and all other (i) books and records relating to or affecting the
Property, and (ii) contracts or documents delivered to Buyer
pursuant to this Agreement or in connection with the execution
hereof, are true, correct and complete.
5.2 Buyer's Representations and Warranties.
Buyer makes the following representation and warranty to Seller
upon which representation and warranty Seller has relied and will
continue to rely, all of which are true as of the date of this
Agreement and will be true and correct as of the Closing:
5.2.1 Organization. Buyer is duly organized,
validly existing and in good standing under the laws of the State
of Maryland and is duly qualified to do business in the State of
California. The execution and delivery of this Agreement and the
other documents contemplated this Agreement by Buyer, and the
performance by Buyer of the obligations under this Agreement and
the other documents contemplated in this Agreement (i) are within
the power of Buyer; (ii) have been duly authorized by all
requisite partnership action and corporate action on the part of
all of its constituent corporate partners; and (iii) will not
violate any provision of law, any order of any court or agency of
government, the charter documents of Buyer or its general
partners, or any indenture, agreement or any other instrument to
which Buyer is a party. This Agreement and each of the other
documents described in this Agreement when executed and delivered
to Buyer, will constitute legal, valid and binding obligations
enforceable against Buyer in accordance with the terms of such
documents.
6. SELLER'S OBLIGATIONS. Seller hereby covenants to
Buyer, upon which covenants Buyer has relied and will continue to
rely, that for the period from the date of this Agreement through
and including the Closing Date:
6.1 Further Liens and Encumbrances. Seller will
not subject the Property to any additional liens, encumbrances,
covenants, conditions, easements, rights of way after the date of
this Agreement. Seller will not hereafter modify, extend, renew,
replace or otherwise change any of the terms, covenants or
conditions of any of the documents or agreements affecting the
Property, or enter into any new agreements affecting the
Property, without the prior written consent of Buyer, which
consent shall not be unreasonably withheld, conditioned or
delayed.
6.2 Leases; Other Contracts; Interim Activities.
Seller will not hereafter terminate, modify, extend, renew,
amend, replace or otherwise change any of the Leases or existing
contracts or enter into new leases or contracts affecting the
Property except with the prior written consent of Buyer, which
consent will not be unreasonably withheld, conditioned or
delayed. If Buyer fails to respond to Seller's written request
for such consent within five (5) business days of Buyer's receipt
of such request, then such silence shall be conclusively presumed
to constitute Buyer's consent to the matters specifically
enumerated and set forth in Seller's written request. From and
after the expiration of the Due Diligence Period, Seller shall
not apply for or otherwise deal with any governmental authority
regarding the development, entitlement or subdivision of the Real
Property without the prior written consent of Buyer, which may be
withheld in Buyer's sole and absolute discretion.
6.3 Property Management and Operation. Seller
shall provide all services and operate, manage and maintain the
Property (including mechanical equipment of every kind used in
the operation thereof) in such a manner that the Property shall
be in the same condition on the Closing Date as on the date of
this Agreement, ordinary wear and tear excepted. Without
limiting the foregoing, Seller shall perform all of its
obligations under the Leases and the Service Contracts.
6.4 Cooperation with Representatives. Seller
shall cooperate with Buyer and its accountants, counsel and/or
other representatives in providing information and materials
pertaining to the operation and marketing of the Property,
including access to the Property, provided that Seller shall not
be required to incur any unreasonable expense (except for
Seller's attorney's fees and costs, which shall be at Seller's
sole cost and expense) and such access shall be upon prior
written or facsimile notice by Buyer to Seller or Seller's
property manager (i.e. K.O. Investment, Inc.), and subject to
Seller's consent which shall not be unreasonably withheld,
conditioned or delayed. Without limiting the generality of the
foregoing, from and after the execution and delivery of this
Agreement, Seller shall allow a representative or representatives
of Buyer access to the Property for the purpose of (a) meeting
with and interviewing tenants of the Property provided that (i)
such communication does not unreasonably interfere with Tenant's
operation of their business or place unreasonable demands on
their time, and (ii) Seller shall have no responsibility to make
tenants available to Buyer, although if Buyer wants to
communicate with a specific tenant, Buyer may request Seller to
inform the tenant to expect Buyer's call and to cooperate with
Buyer, and (b) performing such investigations and analyses of the
Property as Buyer may reasonably require.
6.5 No Removal of Personal Property. Seller will
not remove any of the Personal Property unless the Personal
Property so removed is simultaneously replaced with substantially
similar Personal Property of similar quality or utilities.
6.6 Obtaining Estoppels and Consents. Seller
shall use commercially reasonable efforts (without requiring
Seller to incur any cost or expense, except for Seller's
attorney's fees and costs, which shall be at Seller's sole cost
and expense) to obtain all written consents from third parties
required or reasonably requested by Buyer or its accountants,
counsel or other representatives in connection with this
Agreement, except that Seller shall deliver to Buyer, at least
two (2) business days prior to the expiration of the Due
Diligence Period, the Tenant Estoppels for Buyer's review and
approval. Buyer agrees to use commercially reasonable efforts to
complete and provide to Seller, within five (5) business days
after the date that this Agreement is executed by Buyer and
Seller and is delivered to Escrow Holder, Schedule A for each
Tenant Estoppel, provided, however, that Buyer's failure to do so
shall not relieve Seller of its obligations hereunder nor
constitute a default of Buyer under this Agreement. Seller
agrees to attach the applicable Schedule A to the applicable
Tenant Estoppel before delivery of the Tenant Estoppel to the
applicable tenant. If Seller does not receive a completed
Schedule A for any Tenant Estoppel within the above mentioned
five (5) business day period, then Seller shall provide written
notice ("Schedule A Notice") to Buyer indicating those Tenant
Estoppels for which Seller has not received a completed Schedule
A. If Seller does not receive completed Schedule A's for the
Tenant Estoppels identified in the Schedule A Notice within two
(2) business days after Buyer's receipt of the Schedule A Notice,
then Seller may deliver such Tenant Estoppel(s) to the applicable
Tenant(s) without reference to the attachment of Schedule A
thereon. Seller hereby acknowledges and agrees that Buyer's
review and approval of the Tenant Estoppels is a condition
precedent to Buyer's obligations to close this transaction under
this Agreement.
6.7 Service Contracts. Seller shall deliver
notices of termination to any vendors under the Service Contracts
which have been designated in writing by Buyer to be terminated
("Disapproved Service Contract List") provided that the
Disapproved Service Contract List is delivered by Buyer to Seller
on or before the expiration of the Due Diligence Period.
Notwithstanding the foregoing, Buyer disapproves of all Service
Contracts pertaining to property management and leasing for the
Property. Seller shall, within two (2) days following the later
of the expiration of the Due Diligence Period or Buyer's delivery
of the Disapproved Service Contract List, deliver termination
notices to each of the vendors with respect to the Service
Contracts so designated by Buyer in the Disapproved Service
Contract List. Seller shall be solely responsible for all costs
and expenses associated with the termination of the Service
Contracts set forth by Buyer in the Disapproved Service Contract
List, and shall indemnify, defend, and hold Buyer harmless from
and against same.
6.8 Post-Closing Financial Records. As soon as
reasonably practicable following the Closing Date, Seller shall
deliver to Buyer the following: (a) a final income statement
through the Closing Date, (b) a final cumulative general ledger
through the Closing Date, (c) a final aged delinquency listing,
including all security deposits received by Seller, (d) final
operating statements for calendar year 1997 and (e) a
reconciliation statement showing the actual operating and common
area maintenance expenses and costs for calendar year 1997.
6.9 Audit Rights. At Buyer's request at any time
from and after the date hereof until the date that is one (1)
year after the Closing Date, Seller shall, at Buyer's expense,
provide to Buyer's designated independent auditor access to the
books and records of the Property, regarding the period for which
Buyer is required to have audited financial statements prepared
with respect to the Property as may be required by the Securities
and Exchange Commission, to the extent that such books, records
and related information are in Seller's possession or control and
relate to the period during which Seller held title to the
Property. Further, Seller agrees to provide to such auditor a
representation letter regarding the books and records of the
Property, in substantially the form of Exhibit "K" attached
hereto, in connection with the normal course of auditing the
Property in accordance with generally accepted auditing
standards.
6.10 Management and Listing Agreements.
Seller agrees to terminate, at Seller's sole cost and expense,
any property management agreement and brokerage leasing
agreement effective as of the Closing Date. Seller shall be
solely responsible for all costs and expenses associated with the
termination of any property management agreement and brokerage
leasing agreement, and shall indemnify, defend and hold Buyer and
Buyer's officers, directors, employees, representatives and
agents harmless from and against same.
6.11 Other Obligations. Seller shall
deliver to Buyer, no later than five (5) business days after the
Date of this Agreement, the lists of personal property to be
attached to Schedule 1 and Schedule 2 of the Xxxx of Sale and all
other information necessary to complete Exhibits "F," "H" and
"L."
7. TITLE TO REAL PROPERTY. At Closing, title to the
Real Property will be conveyed to Buyer by Seller by the Deed,
subject only to the following matters ("Permitted Exceptions"):
7.1 non-delinquent property taxes, assessments
and liens;
7.2 matters of title respecting the Real Property
approved or deemed approved by Buyer in accordance with this
Agreement; and
7.3 matters affecting the condition of title to
the Real Property created by or with the written consent of
Buyer.
8. CONDITIONS PRECEDENT/CONCURRENT TO CLOSING;
CLOSING DATE.
8.1 Buyer's Conditions. Buyer shall not be
required to close the transaction provided for under this
Agreement, unless and until Buyer deems that each and every one
of the following conditions has been fulfilled:
8.1.1 Representations, Warranties and
Covenants of Seller. Seller shall have duly and timely performed
each and every covenant to be performed by Seller under this
Agreement and the representations and warranties set forth in
this Agreement shall be true and correct as of the Closing in all
respects.
8.1.2 Seller's Deliveries. Seller shall have
duly and timely delivered to Escrow Holder or Buyer, as
applicable, all of the items described in Section 4.1 of this
Agreement.
8.1.3 No Material Changes. At the Closing,
there will be no material adverse changes in the physical or
financial condition of the Property which were discovered by
Buyer after the Due Diligence Period.
8.1.4 Delivery of Pre-Closing Documents and
Agreements. Seller shall have delivered to Buyer on or before
the Closing Date the following (to the extent in Seller's
possession, control or otherwise reasonably available to Seller,
provided that Seller shall not be required to incur any cost or
expense in connection therewith except for Seller's attorney's
fees and costs):
8.1.4.1 Originals of the Leases and
tenant and other files for and
concerning the Property;
8.1.4.2 Originals of all Records and
Plans;
8.1.4.3 Originals of all Licenses
and Permits;
8.1.4.4 Originals of all Warranties;
and
8.1.4.5 Originals and all duplicates
of all keys (individually
labeled) for the Property.
8.1.5 Title Insurance. The Title Company
will have issued or have unconditionally and irrevocably
committed to issue the Title Policy to Buyer, provided that if
there are any conditions, then if Seller has provided to Buyer
and Title Company reasonable assurances that such conditions will
be satisfied and eliminated on or before the Closing Date, then
this condition shall be deemed satisfied.
8.1.6 Due Diligence Approval. Buyer shall
have approved (or be deemed to have approved) all matters to be
reviewed in accordance with Section 9 of this Agreement.
9. DUE DILIGENCE PERIOD:
9.1 Matters To Be Reviewed. Buyer's obligation
to close the purchase of the Property and to pay the Purchase
Price shall be subject to and conditioned upon Buyer's complete
satisfaction with all of the following items, each of which Buyer
shall have the right to review and approve or disapprove in
Buyer's sole and absolute discretion during the Due Diligence
Period:
9.1.1 Title. Buyer will have until 6:00 p.m.
(California time) on the expiration of the Due Diligence Period
to examine and approve all matters of title (including matters
relating to an ALTA survey for the Property prepared and dated
after the date of this Agreement ("Survey")) and to notify Seller
in writing of any defects in title or the Survey. Seller shall,
at its sole cost and expense, within three (3) days following the
date this Agreement is executed and delivered by Buyer and
Seller, deliver to Buyer a current preliminary report
("Preliminary Report") issued by the Title Company and relating
to the Real Property, together with all underlying documents
relating thereto. If Buyer fails to notify Seller in writing of
any objections to title or the Survey prior to the expiration of
the Due Diligence Period, then title to the Property and the
Survey shall be conclusively deemed to be approved by Buyer. If
Buyer timely notifies Seller in writing of specific objections to
title or the Survey prior to the expiration of the Due Diligence
Period, then Seller will have five (5) days after receipt of
Buyer's notification of any objection in which to advise Buyer
that:
9.1.1.1 Seller will remove any
objectionable exceptions on or before the Closing Date; or
9.1.1.2 Seller will not cause the
exceptions to be removed.
If Seller fails to notify Buyer of its
election to remove or not cause the removal of any objectionable
exceptions within said five (5) day period, then Seller shall be
deemed to have agreed to remove all objectionable exceptions on
or before the Closing Date. However, if Seller advises Buyer
that it will not cause the exceptions to be removed, Buyer will
have five (5) days from its receipt of Seller's notice to elect
to:
(i) proceed with the purchase and
acquire the Property subject to such exceptions, but conditioned
upon Seller fulfilling each and every one of its other
obligations hereunder and all of the other conditions precedent
in favor of Buyer having been duly and timely satisfied; or
(ii) terminate this Agreement by
written notice to Seller, in which case the Deposit, and any
interest thereon, will be immediately returned to Buyer without
further instructions from Seller, and all rights and obligations
of the parties existing hereunder shall terminate and be of no
further force or effect, except any rights and obligations which
are expressly stated to survive the termination of this
Agreement. In the event of such termination, Buyer shall deliver
to Seller copies of all inspections and reports performed or
caused to be performed by Buyer in connection with the Property,
provided that Seller has first reimbursed Buyer for the actual
cost thereof, and then only to the extent that delivery of such
inspections and reports to Seller is permissible under such
documents.
If Buyer does not give Seller written notice
of its election within said five (5) day period, Buyer will be
conclusively deemed to have elected to terminate this Agreement
as described in (ii) above. Furthermore, if Buyer notifies Seller
of any specific objections to title or the Survey prior to the
expiration of the Due Diligence Period, then the Closing Date
shall be extended by the number of days that it takes for Buyer
and Seller to resolve any objectionable exceptions as provided in
this Section 9.1.1 or to proceed with the purchase of the
Property or terminate this Agreement, in accordance with the time
periods provided for herein.
If Seller commits (or is deemed to have
committed) to remove any objection to title or the Survey and
fails to do so by the Closing Date, Buyer may deduct from the
Purchase Price the reasonable cost of removing any such
objection(s) and the Closing shall proceed without any further
remedies of Buyer against Seller in connection with Seller's
failure to remove such objection. If, however, such objection(s)
cannot be removed by the payment of money, then Seller will be in
default under this Agreement and Buyer may, at Buyer's election,
terminate this Agreement and pursue its remedies as set forth in
Section 14 of this Agreement.
Notwithstanding anything to the contrary in
this Section 9.1.1, if a new or supplemental title exception or
matter is discovered or identified after the Title Company first
delivers the Preliminary Report to Buyer, then, as it relates to
Buyer's review and approval of such new or supplemental matter,
the Due Diligence Period shall be extended for a period of five
(5) business days following the date of Buyer's receipt of the
new or supplemental title exception or matter and all underlying
documents relating thereto.
9.1.2 Inspections and Studies. Buyer will
have until 6:00 p.m. (California time) on the expiration of the
Due Diligence Period to conduct (as applicable) and review and
approve the Tenant Estoppels, the schedules of personal property
to be attached as Schedule 1 and Schedule 2 to the Xxxx of Sale,
and any and all inspections, investigations, tests, studies
(including feasibility studies and other economic models) and
appraisals as Buyer may have elected to make or obtain with
respect to the Property and/or the operation and financial
condition of the Property, including, without limitation,
financial analyses of the books and records, environmental
inspections and studies, structural and mechanical
investigations, appraisals, and analyses of the Property's
compliance with Governmental Regulations. Subject to Section
6.4, Buyer and Buyer's representatives, agents and designees will
have the right to enter the Property at all reasonable times,
upon reasonable oral notice to perform all such investigations of
the Property, and to conduct interviews with (i) tenants of the
Property, (ii) property management personnel of Seller, and (iii)
such other parties as Buyer may deem appropriate in its sole
discretion. Seller will cooperate with Buyer and its
representatives in that regard. Seller shall deliver to Buyer at
Seller's sole cost and expense, within two (2) days (unless
indicated otherwise below) following the date this Agreement is
executed and delivered by Buyer and Seller, a copy of all
information in Seller's possession or control which is reasonably
related to the Property, plus the following items:
9.1.2.1 To the extent in Seller's
possession, an ALTA "as-built" survey of the Real Property
prepared by a licensed surveyor;
9.1.2.2 The Leases and all
modifications or amendments and guaranties relating thereto; any
inspection report recently performed at the Property of certain
building systems (including sprinklers, standpipe and emergency
lights); all tenant correspondence and all current financial
statements of tenants to the extent the same are in Seller's
possession or control; all contracts (including the Service
Contracts), agreements and management agreements; all "operating
statements" for the last three (3) calendar years for the
Property and a year-to-date operating statement for the calendar
year 1998, a balance sheet dated no earlier than December 31,
1997; an income statement for the last two (2) calendar years and
a year-to-date income statement for the calendar year 1998, each
such statement to be certified by Seller as being true, correct
and complete reports prepared by Seller in the ordinary course of
business; a cumulative general ledger for year-to-date 1998,
reports (including all environmental reports, soils reports,
surveys and plans and specifications affecting or relating to the
Property, and all modifications or amendments thereto); all
Records and Plans, Warranties, Licenses and Permits and
governmental approvals obtained or held by Seller and relating to
the development, construction, operation, use or occupancy of any
of the Property.
9.1.2.3 A current rent roll (to be
updated as of the expiration of the Due Diligence Period and as
of the Closing), prepared and certified by Seller as being true,
correct and complete and listing for each tenant at the Property
such information that is contained in the rent roll set forth on
Exhibit "N" attached hereto ("Rent Roll").
9.1.2.4 Reports of insurance
carriers, if any, insuring the Property during the period of
Seller's ownership of the Property and each portion thereof
respecting the claims history of the Property; insurance
certificates of Seller and tenants respecting the Property; all
correspondence, reports, and notices pertaining to the existence
of toxic or Hazardous Materials and/or waste at the Property; all
permits, reports, certificates and notices pertaining to the
existence, removal and/or decommission of any and all storage
tanks located on, at or underneath the Property; all brokerage
and commission agreements; all agreements entered by Seller and
Seller's affiliates affecting the Property and/or income and cash
flow to be received from the Property that will survive the
Closing; tax bills and assessments for the current year and the
three (3) year period immediately preceding the current year; any
and all information in Seller's possession respecting the
creditworthiness of the tenants under the Leases at the Property;
all written reports respecting incidents of theft, burglary or
crimes attempted or committed at, on or to the Property or other
such incidents which are the subject of litigation; and such
other information reasonably requested by Buyer of Seller in
writing during the Due Diligence Period.
9.2 Indemnity. Buyer agrees to indemnify, defend
and hold Seller and its officers, employees and agents harmless
from any and all injuries, losses, liens, claims, actions, causes
of action, proceedings, lawsuits, judgments, obligations,
liabilities, costs, expenses or damages (including reasonable
attorneys' fees and court costs) sustained by Seller to the
extent same results from or arises out of any inspections by
Buyer or any of its representatives pursuant to Section 9.1.2
above.
9.3 Insurance. Prior to any entry, Buyer shall
obtain, maintain and provide Seller, or shall cause any
consultant, contractor or other person entering the Property to
obtain, maintain and provide Seller, with proof of comprehensive
general liability insurance in the amount of at least $1,000,000
combined, single limit coverage, naming Seller as an additional
insured.
9.4 Return of Documents. If this transaction
fails to close, then Buyer shall immediately return to Seller at
Buyer's sole cost and expense the copies and originals of all
documents received by Buyer from Seller pursuant to Section 9.1.2
and its subparagraphs.
9.5 Notice of Objections.
9.5.1 If Buyer fails to notify Seller in
writing of any objections to the items set forth in Section 9.1.2
on or before the expiration of the Due Diligence Period, Buyer
shall be conclusively deemed to have approved such items.
9.5.2 If Buyer notifies Seller in writing of
any objections to the condition of the Property or any other
matters relating to the Property and/or operation or financial
condition of the Property as set forth in Section 9.1.2 on or
before the expiration of the Due Diligence Period, the parties
will have five (5) business days to agree upon a resolution of
the objection(s). If the parties cannot agree within the five
(5) business day period, then Buyer may terminate this Agreement
by delivering written notice to Seller (which notice must be
given within three (3) business days after the expiration of the
five (5) business day period), in which event the Deposit and any
interest accrued thereon shall be immediately returned to Buyer
without further instructions from Seller, and all rights and
obligations of the parties existing hereunder shall terminate and
be of no further force or effect, except any rights and
obligations which are expressly stated to survive the termination
of this Agreement. The Closing Date shall be extended by the
number of days that it takes for Buyer and Seller to resolve any
objections raised under this Section 9.5, including the three (3)
day period that Buyer has to terminate this Agreement, as
provided in this Section 9.5.2 above.
10 PRORATIONS. The following are to be prorated as
of the Closing Date, as follows:
10.1 Current Rent. Current rents under the Leases
shall be prorated as of the Closing Date, regardless of whether
such rents have been paid to Seller.
10.2 Rent Arrears. With respect to any rent
arrears arising under the Leases, Buyer shall pay to Seller any
rents actually collected that are applicable to the period
preceding the Closing Date, less reasonable collection charges;
provided, however, that it is hereby understood and agreed that
all rents collected by Buyer shall be applied first to unpaid
rents accruing after the Closing Date, and then, only after all
such past due rents have been collected, to unpaid rents accruing
prior to the Closing Date. Notwithstanding anything to contrary
herein, Seller shall have the exclusive right to enforce its
rights and remedies regarding any and all rent arrearages
applicable to the period preceding, but not including, the
Closing Date, but Seller shall have no right to and shall not (i)
commence or pursue any unlawful detainer or eviction action
against any tenants at the Property or (ii) terminate any Leases
or any parties' rights to possession or use thereunder or take
any action which could entitle any tenant to terminate its Lease.
10.3 Tenant Improvement Allowances and
Brokerage Commissions. Buyer shall receive a credit against the
Purchase Price at Closing for all unpaid tenant improvement
allowances, free rent and brokerage or leasing commissions
payable in connection with any leases entered into prior to the
date of this Agreement, as set forth in the approved Schedule of
Tenant Improvements Allowances and Commissions, as approved by
Buyer prior to the expiration of the Due Diligence Period.
10.4 Security Deposits. The security deposits
paid by the tenants pursuant to the Leases, and any interest
required to be paid thereon, shall be fully credited to Buyer at
Closing, to the extent such security deposits have not previously
been applied to amounts due under the tenant's respective lease.
Except in the event of any inaccuracy of Seller's representation
and warranty regarding security deposits or any dispute by a
tenant with respect to the amount of a security deposit being
held by Seller, Buyer shall thereafter assume full and exclusive
responsibility for repayment or proper application of such
security deposits and interest.
10.5 Other Prorations. Liability for all real
property taxes shall be prorated as of the Closing Date, and
liability for all common area maintenance, Property operation
expenses, and other recurring costs which are not otherwise paid
directly by tenants shall be prorated as of the Closing Date to
the extent actually paid by Seller prior to the Closing Date;
provided, however, Buyer shall not be responsible for any costs
or expenses pertaining to Service Contracts or other items of
expense which Buyer has not approved in writing. Buyer shall be
fully credited at Closing with any free rent under any of the
Leases which has not accrued as of the Closing. Seller shall
remain liable for any supplemental taxes attributable to any
period prior to the Closing. Seller reserves the right, at its
sole expense, to pursue appeals for reduction of property taxes
for the period prior to the Closing and any proceeds resulting
solely from any such reduction for the period prior to the
Closing shall belong solely to Seller, subject to the rights of
any tenants at the Property who may be entitled to refunds for
any such reduction pursuant to the terms of their respective
Leases. Buyer agrees to cooperate, at no cost to Buyer, in
connection with any such Seller's appeal. Seller shall indemnify
Buyer against any cost, liability, liability or expense incurred
by Buyer as a result of or arising out of any such appeal(s) by
Seller. Seller shall remain liable for any supplemental taxes
attributable to any period prior to the Closing. If any such
supplemental taxes shall be billed to Buyer or levied against the
Property after the Closing, then Seller agrees to pay its
prorated share thereof to Buyer within thirty (30) days of demand
therefor by Buyer. Any such sums not paid when due may be
advanced by Buyer, and such amounts shall bear interest from the
date of advance by Buyer until paid by Seller at the maximum
contract rate permitted by law.
10.6 Preliminary Closing Adjustment. Seller and
Buyer shall jointly prepare a preliminary closing adjustment
computation on the basis of the Leases and other sources, and
shall deliver such computation to the Escrow Holder prior to
Closing.
10.7 Post-Closing Reconciliation. All items
described in this Section 10 that are capable of being prorated
as of the Closing Date, shall be prorated as of the Closing Date.
All other items shall be reconciled within one hundred eighty
(180) days after the Closing Date to the extent that such items
may be reconciled within such one hundred eighty (180) day
period, or, to the extent such items may not be reconciled within
such one hundred eighty (180) day period, when such items may
first be reconciled after Closing.
10.8 Survival. The provisions of this Section 10
shall survive Closing.
11 COSTS AND EXPENSES. The closing costs shall be
allocated as follows:
11.1 Closing Costs.
(a) Seller shall pay the premium for the
CLTA portion of the Title Policy, Seller's share of prorations,
one-half of the escrow fees, all state and county transfer taxes,
all sales taxes, any other tax or assessment imposed as a result
of the transactions contemplated under this Agreement, and any
document recording charges and notary fees, including, without
limitation, any recording fees and notary charges with respect to
the Deed.
(b) Buyer shall pay one-half of the escrow
fees, the additional premium for the ALTA portion of the Title
Policy and its share of prorations.
(c) Each party will pay their own legal and
professional fees and fees of other consultants incurred by Buyer
and Seller, respectively.
11.2 Delivery of Possession. Simultaneously
with the Closing, Seller shall deliver possession and enjoyment
of the Property (including, without limitation, keys, files and
other Property documents) to Buyer and Buyer shall thereupon have
the immediate right to possess, develop, use, sell, encumber
and/or transfer the Property, or any part thereof for its own
account to the total exclusion of Seller.
12 AS-IS.
12.1 Except as specifically set forth in
this Paragraph and the representations set forth in Paragraph 5
above, the sale of the Property hereunder is and will be made on
an "as is" "where is" basis, without representations and
warranties of any kind or nature, express, implied or otherwise,
including but not limited to, any representation or warranty
concerning title to the Property, the physical condition of the
Property (including, but not limited to, the condition of the
soil, improvements, roof, brick veneer, HVAC system and
elevators, all unrepaired earthquake damage affecting the Real
Property and the presence of gypcrete floors in the stairwells
and under the carpets in tenant suites, the presence of water
seepage in the garage and exterior portion of the Real Property,
the environmental condition of the Property (including, but not
limited to, the presence or absence of hazardous substances on or
respecting the Property)), the compliance of the Property with
applicable laws and regulations, the financial condition of the
Property or any other representation or warranty respecting any
income, expenses, charges, liens or encumbrances, rights or
claims on, affecting or pertaining to the Property or any party
thereof. Buyer acknowledges that Buyer will examine, review and
inspect all matters which in Buyer's judgment bear upon the
Property and its value and suitability for Buyer's purposes, and
Seller shall cooperate with Buyer in making such information
available to Buyer for such examination. Except as to matters
specifically set forth in this Paragraph and the representations
set forth in Paragraph 5 above, Buyer will acquire the Property
solely on the basis of its own physical and financial
examinations, reviews and inspections and the title insurance
protection afforded by the Title Policy. Nothing set forth in
this Section 12.1 above shall constitute a waiver or release by
Buyer of any claims, liabilities, losses, costs, expenses
(including, but not limited to, attorneys fees and costs),
penalties or damages based upon any breach by Seller of the
representations, warranties and/or covenants of Seller expressly
provided in this Agreement (including, but not limited to, any
indemnification obligation of Seller expressly provided in this
Agreement) and any statutory rights of contribution with respect
to the environmental condition of the Property, all of which are
hereby expressly reserved by Buyer.
12.2 Without limiting the terms of Section 12.1
above, Seller discloses to Buyer and Buyer acknowledges it is
aware that one of the tenants at the Property, Xxx Xxx Roo, has
complained (i) for the last year or so about the adequacy of the
HVAC system serving the second floor of the Property, and (ii) on
one occasion that the elevator maintenance company took too long
to respond when one of Xxx Xxx Roo's employees got stuck in the
elevator. Seller has advised Buyer that it has disputed said
complaints with Xxx Xxx Roo. Seller shall provide Buyer with all
correspondence regarding said complaints in accordance with the
terms of Section 9.1.2 above
13 CONDEMNATION AND DESTRUCTION:
13.1 Eminent Domain or Taking. If proceedings
under a power of eminent domain relating to the Property or any
part thereof are commenced prior to the Closing Date, Seller
shall promptly inform Buyer in writing.
13.1.1 If such proceedings involve the
taking of title to all or any Material (defined below) interest
in the Property, Buyer may elect to terminate this Agreement by
notice in writing sent within ten (10) business days of Seller's
written notice to Buyer, in which case the Deposit, and any
interest thereon, shall be returned to Buyer without any further
instructions from Seller and neither party shall have any further
obligation to or rights against the other except any rights or
obligations of either party which are expressly stated to survive
termination of this Agreement.
13.1.2 If the proceedings do not involve
the taking of title to all or a Material interest in the Property
or if Buyer does not elect to terminate this Agreement, this
transaction will be consummated as described in this Agreement
and any award or settlement payable with respect to such
proceeding will be paid or assigned to Buyer upon the Closing.
13.1.3 For purposes of this Section
13.1, "Material" shall mean a taking which Buyer reasonably
determines materially and adversely affects the value or
operations of the Property.
13.2 Damage or Destruction. Except as provided in
this paragraph, prior to the Close of Escrow the entire risk of
loss of damage by earthquake, flood, hurricane, landslide, fire
or other casualty is borne and assumed by Seller. If, prior to
the Closing Date, any part of the Property is damaged or
destroyed by earthquake, flood, landslide, fire or other
casualty, Seller will promptly inform Buyer of such fact in
writing and advise Buyer as to the extent of the damage.
13.2.1 If such damage or destruction is
Material (as defined below), Buyer has the option to terminate
this Agreement upon written notice to the Seller given not later
than ten (10) business days after receipt of Seller's written
notice to Buyer advising of such damage or destruction.
13.2.2 If this Agreement is so
terminated, the Deposit and any interest thereon, shall be
returned to Buyer without any further instructions from Seller,
and neither party shall have any further obligation to or rights
against the other except any rights or obligations of either
party which are expressly stated to survive termination of this
Agreement.
13.2.3 If Buyer does not timely exercise
this option to terminate this Agreement, or if the casualty is
not Material, Seller will assign to Buyer all of Seller's right,
title and interest in and to any and all insurance proceeds under
Seller's insurance policies relating to such damage or
destruction, and shall reduce the Purchase Price by the amount of
the deductible and any other amount not covered by insurance
under such policies (including reasonably anticipated post-
Closing rental loss, except to the extent covered by insurance,
through to completion of such repair and restoration resulting
from such casualty), and this transaction will close pursuant to
the terms of this Agreement.
13.2.4 For purposes of this Section
13.2, "Material" is deemed to be any damage or destruction to the
Property where the cost of repair or replacement is estimated to
be more than 10% of the Purchase Price.
13.2.5 Survival. The provisions of
Section 13.2.3 shall survive the Closing.
14 REMEDIES:
14.1 Buyer's Remedies. IN THE EVENT THAT SELLER
SHALL FAIL TO CONSUMMATE THIS AGREEMENT FOR ANY REASON, EXCEPT
BUYER'S DEFAULT OR A TERMINATION OF THIS AGREEMENT BY BUYER OR
SELLER PURSUANT TO A RIGHT TO DO SO UNDER THE PROVISIONS HEREOF,
BUYER SHALL HAVE THE FOLLOWING REMEDIES, WHICH SHALL BE BUYER'S
SOLE AND EXCLUSIVE REMEDIES BASED UPON A DEFAULT BY SELLER. SUCH
REMEDIES SHALL NOT BE CUMULATIVE, MEANING BUYER MAY EXERCISE ONE
(1) BUT NOT BOTH OF SUCH REMEDIES. BUYER SHALL DELIVER TO SELLER
AND ESCROW HOLDER NOTICE OF ITS ELECTION OF REMEDIES WITHIN TWO
(2) DAYS AFTER SELLER'S DEFAULT. THE SOLE REMEDIES AVAILABLE TO
BUYER ARE AS FOLLOWS:
(i) BUYER MAY TERMINATE THIS AGREEMENT, IN
WHICH CASE ESCROW HOLDER SHALL IMMEDIATELY RETURN THE DEPOSIT,
TOGETHER WITH ANY INTEREST EARNED THEREON, TO BUYER, UPON
EXECUTION OF CANCELLATION INSTRUCTIONS BY BUYER, AND SELLER SHALL
PAY ANY ESCROW CANCELLATION CHARGES. IN ADDITION, BUYER SHALL
HAVE THE RIGHT TO PURSUE AN ACTION AGAINST SELLER FOR ALL ACTUAL
OUT-OF-POCKET (BUT NOT CONSEQUENTIAL) DAMAGES SUFFERED BY BUYER;
OR
(ii) BUYER MAY BRING AN ACTION FOR SPECIFIC
PERFORMANCE AGAINST SELLER WITH RESPECT TO THIS AGREEMENT BUT
ONLY UNDER THE FOLLOWING CONDITIONS AND CIRCUMSTANCES:
(a) BUYER SHALL HAVE FULLY PERFORMED
ALL OBLIGATIONS OF BUYER UNDER THIS AGREEMENT, EXCEPT THAT WITH
RESPECT TO DEPOSITING THE BALANCE OF THE PURCHASE PRICE, BUYER
SHALL HAVE EVIDENCED TO SELLER'S REASONABLE SATISFACTION THAT
BUYER IS READY, WILLING AND ABLE TO TIMELY DEPOSIT SAID FUNDS IN
ESCROW;
(b) THE ACTION SHALL BE COMMENCED,
AND SERVICE OF PROCESS UPON SELLER MADE, NOT LATER THAN FORTY-
FIVE (45) DAYS AFTER SELLER'S DEFAULT; AND
(c) ALL OF THE ISSUES IN SUCH ACTION,
WHETHER OF FACT OR LAW, SHALL BE HEARD BY A REFERENCE PROCEEDING
PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE, SECTION 638,
ET. SEQ. WITHIN TEN (10) DAYS FOLLOWING THE COMMENCEMENT OF ANY
SUCH ACTION, THE PARTIES SHALL MAKE APPLICATION TO THE COURT IN
WHICH THE ACTION IS PENDING FOR THE APPOINTMENT OF A RETIRED
SUPERIOR COURT JUDGE OR COURT OF APPEAL JUSTICE FROM THE THEN
CURRENT LIST OF RETIRED JUDGES AVAILABLE TO SERVE AS REFEREES IN
THE COUNTY IN WHICH SUCH ACTION IS COMMENCED TO SERVE AS THE
REFEREE. THE REFEREE CHOSEN SHALL BE DEEMED QUALIFIED ONLY IF HE
IS WILLING TO AGREE TO HEAR THE SUBJECT ACTION WITHIN TWENTY (20)
DAYS FOLLOWING THE DATE OF APPLICATION TO THE COURT, TO HEAR THE
SUBJECT ACTION ON CONSECUTIVE DAYS AND TO RENDER A DECISION
WITHIN A FURTHER FIFTEEN (15) DAY PERIOD. THE PARTIES SHALL
ADVANCE, IN EQUAL SHARES, THE FEES AND EXPENSES OF THE REFEREE
SELECTED PURSUANT TO THIS PROVISION, BUT THE LOSING PARTY IN ANY
SUCH ACTION SHALL REIMBURSE THE PREVAILING PARTY FOR ANY AND ALL
FEES AND EXPENSES PREVIOUSLY ADVANCED BY SUCH PREVAILING PARTY
FOR THE REFEREE.
14.2 Seller's Remedies. IF BUYER SHOULD FAIL TO
CONSUMMATE THIS AGREEMENT AS A RESULT OF BUYER'S DEFAULT UNDER
THE TERMS OF THIS AGREEMENT, THEN SELLER, AS ITS SOLE AND
EXCLUSIVE REMEDY, MAY TERMINATE THIS AGREEMENT BY NOTIFYING BUYER
THEREOF AND RECEIVE OR RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES.
THE PARTIES AGREE THAT SELLER WILL SUFFER DAMAGES IN THE EVENT OF
BUYER'S DEFAULT ON ITS OBLIGATIONS. ALTHOUGH THE AMOUNT OF SUCH
DAMAGES IS DIFFICULT OR IMPOSSIBLE TO DETERMINE, THE PARTIES
AGREE THAT THE AMOUNT OF THE DEPOSIT IS A REASONABLE ESTIMATE OF
SELLER'S LOSS IN THE EVENT OF BUYER'S DEFAULT. THUS, SELLER
SHALL ACCEPT AND RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES BUT NOT
AS A PENALTY. SELLER HEREBY ACKNOWLEDGES AND AGREES SUCH
LIQUIDATED DAMAGES SHALL CONSTITUTE SELLER'S SOLE AND EXCLUSIVE
REMEDY AND SELLER HEREBY WAIVES THE PROVISIONS OF CALIFORNIA
CIVIL CODE SECTION 3389 AND ANY OTHER APPLICABLE EXISTING OR
FUTURE LAW PERMITTING A CONTRACT TO BE ENFORCED EVEN THOUGH
DAMAGES ARE LIQUIDATED FOR ITS BREACH.
SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND
UNDERSTAND THE PROVISIONS OF THE FOREGOING PROVISION AND BY THEIR
INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
Seller: /s/ HM Buyer: /s/ VJC
15 BROKERAGE COMMISSIONS. Upon the Close of Escrow,
Seller shall pay a commission in the amount of two percent (2%)
of the Purchase Price to be split as follows: one and one
percent (1%) to K.O. Investment Inc., one percent (1%) to Hilton
& Xxxxxx. Buyer shall have no responsibility for any of said
commissions. Each party hereby represents and warrants to the
other that except as set forth in this paragraph it has not
incurred any obligation to any third party for the payment of any
real estate commission, finder's fee or other like sum in
connection with the sale of the Property to Buyer, and each party
hereby agrees to indemnify and hold the other party harmless from
and against any and all claims, demands, causes of action and
costs, including attorneys' fees and costs, made, brought or
sought against or from the other arising out of any agreement for
the payment of a real estate commission, finder's fee or other
like sum entered into between either party and a third party in
connection with the sale of the Property to Buyer.
16 NOTICE. All notices, requests, demands or
documents which are required or permitted to be given or served
hereunder shall be in writing and (a) delivered personally,
(b) delivered by a national overnight courier (i.e., FedEx), or
(c) transmitted by facsimile, addressed as follows:
To Seller at: Flags Investment, Inc.
0000 Xxxxxx xx xxx Xxxxx, Xxx. 000
Xxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxxx
1999 Avenue of the Stars, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
To Buyer at: Arden Realty Limited Partnership
0000 Xxxxxxxx Xxxx., Xxxxx 000 X
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Mr. Xxxxxx Xxxxxxx
Xx. Xxxxxxxx Xxxx
Facsimile: (000) 000-0000
with a copy to:
Jeffer, Mangels, Xxxxxx & Xxxxxxx LLP
2121 Avenue of the Stars, Xxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
Notice shall be deemed to have been delivered only upon actual
delivery to the intended addressee in the case of either
personal, courier, or facsimile delivery. The addresses for
purposes of this paragraph may be changed by giving written
notice of such change in the manner provided herein for giving
notices. Unless and until such written notice is delivered, the
latest information stated by written notice, or provided herein
if no written notice of change has been delivered, shall be
deemed to continue in effect for all purposes hereunder.
17 MISCELLANEOUS:
17.1 Survival. The representations and
warranties contained in this Agreement shall survive for a period
of six (6) months following the Closing Date.
17.2 No Recording. Neither this Agreement, nor
any memorandum of this Agreement, shall be recorded by Buyer, or
by anyone acting on its behalf, in any public office, any such
recording shall, at Seller's option, be a default by Buyer
hereunder.
17.3 Parties in Interest. As and when used
herein, the terms, "Seller" and "Buyer" mean and include, and
this Agreement their respective successor and assigns and shall
be binding upon and inure to the benefit of, the above-named
Seller and Buyer and their respective successors and permitted
assigns.
17.4 Section Headings. The headings of sections
are inserted only for convenience and shall in no way define,
describe or limit the scope or intent of any provision of this
Agreement.
17.5 No Oral Modifications. This Agreement may
not be amended or modified except in writing executed by all
parties hereto.
17.6 Full Integration. Buyer and Seller each
acknowledge that there are no other agreements or representa
tions, either oral or written, express or implied, that are not
embodied in this Agreement, and this Agreement, the Exhibits
attached to this Agreement, and the Transfer Documents, represent
a complete integration of all the prior and contemporaneous
agreements and understandings and documents.
17.7 Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and
their respective successors and assigns, and no other party shall
be a beneficiary hereunder.
17.8 Seller's Advice of Counsel. Seller
acknowledges that (a) Buyer has not made any representation as to
the Federal or State tax implications relating to the
transactions contemplated herein, (b) Seller has thoroughly read
and reviewed the terms and provisions of this Agreement and the
Exhibits attached hereto and is familiar with the terms of this
Agreement, (c) the terms and provisions contained in this
Agreement are clearly understood by Seller and have been fully
and unconditionally consented to by it, (d) Seller has had full
benefit and advice of counsel of its own selection, in regard to
understanding the terms, meaning and effect of this Agreement,
(e) the execution of this Agreement and of the other documents
executed pursuant to this Agreement is done freely, voluntarily,
with full knowledge, and without duress, (f) in executing this
Agreement, Seller is relying on no other representations, either
written or oral, express or implied, made to it by any other
party to this Agreement, and the consideration received by it
under this Agreement has been actual and adequate.
17.9 Attorneys' Fees. If an action is commenced
by a party hereto resulting from a dispute with respect to the
transactions contemplated herein, the prevailing party shall be
entitled to recover its attorneys' fees and costs from the other
party in such action. As used herein, the term "attorneys' fees"
means attorneys' fees whether or not litigation ensues and if
litigation ensues whether incurred at trial, on appeal, on
discretionary review or otherwise.
17.10 Governing Law. This Agreement will be
governed by, interpreted under, and construed and enforced in
accordance with the laws of the State of California, with venue
in the city and County of Los Angeles, California.
17.11 Confidentiality. Unless otherwise
agreed to in writing by Seller and Buyer, each party will use
reasonable efforts to keep confidential the terms of this
Agreement, the possible sale of the Property, and all documents,
financial statements, reports or other information provided to,
or generated by the other party relating to the Property, and
will use reasonable efforts to not disclose any such information
to any person other than (a) those employed by Seller or Buyer;
(b) those who are actively and directly participating in the
evaluation of the Property and the negotiation and execution of
this Agreement or financing of the purchase of the Property; and
(c) governmental, administrative, regulatory or judicial authori
ties in the investigation of the compliance of the Property with
applicable legal requirements; and (d) third parties as required
under applicable law. The provisions of this paragraph will
survive the termination of this Agreement other than by Closing.
From and after the Closing, the obligations of the parties under
this paragraph shall cease and be of no further force or effect.
17.12 Captions. The captions contained in
this Agreement are for convenience only and are not intended to
limit or define the scope or effect of any provision of this
Agreement.
17.13 Severability. The invalidity,
illegality or unenforceability of any provision of this Agreement
shall not affect the enforceability of any other provision of
this Agreement, all of which shall remain in full force and
effect.
17.14 Time of the Essence. Time is of the
essence of this Agreement and of the obligations required
hereunder.
17.15 Non-Waiver. No delay or failure by any
party to exercise any right hereunder, and no partial or single
exercise of any such right, shall constitute a waiver of that or
any other right, unless otherwise expressly provided herein.
17.16 Facsimile. The parties hereto and
their respective successors and assigns are hereby authorized to
rely upon the signatures of each person and entity on this
Agreement which are delivered by facsimile as constituting a duly
authorized, irrevocable, actual, current delivery of this
Agreement with original ink signatures of each person and entity.
17.17 Further Assurances. Buyer and Seller
agree to execute all documents and instruments reasonably
required in order to consummate the purchase and sale
contemplated in this Agreement.
17.18 Counterparts. This Agreement may be
executed in any number of counterparts and each such counterpart
shall be deemed to be an original, but all of which, when taken
together, shall constitute one Agreement.
17.19 Seller's Indemnities. Seller's
indemnities set forth in Sections 6.7 and 6.10 hereof shall
survive the Closing and the execution and delivery of the Deed.
17.20 WAIVER OF JURY TRIAL. EACH PARTY
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION SEEKING
SPECIFIC PERFORMANCE OF ANY PROVISION OF THIS AGREEMENT, FOR
DAMAGES FOR ANY BREACH UNDER THIS AGREEMENT, OR OTHERWISE FOR
ENFORCEMENT OF ANY RIGHT OR REMEDY HEREUNDER.
17.21 ' 1031 Exchange. Buyer agrees to
cooperate with Seller in completing an exchange qualifying for
non-recognition under Internal Revenue Code Section 1031 and the
applicable provisions of the California Revenue and Taxation
Code, as may be amended from time to time. Seller and Buyer
agree, however, that the consummation of the transactions
contemplated by this Agreement are not predicated or conditioned
upon completion of such an exchange. If Seller elects to
complete and exchange, Buyer, shall execute all escrow
instructions, documents, agreements, or instruments reasonably
requested by the Seller to complete the exchange. Buyer shall
incur no additional liabilities, expenses or costs as a result of
or connected with the exchange. Seller agrees to indemnify,
defend and hold Buyer harmless from any liability, damages or
costs (including, but not limited to, reasonable attorneys' fees
and costs) that may arise from Buyer's participation in the
exchange.
17.22 Arbitration. Except as otherwise
provided in Section 14.1 above, any controversy or claim arising
out of or relating to this Agreement or breach thereof shall be
resolved by binding, non-appealable arbitration before a retired
judge of the Superior Court of the State of California for the
County of Los Angeles (the "Los Angeles Superior Court") in the
following manner:
(a) The arbitration shall begin by one
party serving a complaint and a demand for arbitration upon other
parties. The party serving the demand shall include with the
demand a list of five retired judges of Los Angeles Superior
Court from the then available list of retired judges willing to
act as private judges. The responding party shall then have ten
days to select the arbitrator from the list of five. If the
selected arbitrator is unavailable, the responding party may
choose another name; with the process repeated until the list of
five is exhausted. If none of the five judges is available, the
responding party may select a judge from the list of available
retired judges.
(b) The arbitration shall take place in Los
Angeles, California at a time and place selected by the
arbitrator.
(c) The parties to the arbitration may have
all rights and powers afforded to a civil litigant in Los Angeles
Superior Court, including the ability to conduct full discovery.
The arbitrator shall be governed by the rules of civil procedure
for actions filed in California Superior Courts as set forth in
California Code of Civil Procedure ("CCP"). The arbitrator may
deviate from the rules by stipulation of the parties.
(d) The parties shall evenly divide the
cost of the arbitrator's fees. The arbitrator shall have the
power, as part of any award, to include these fees as an element
of recovery.
Buyer and Seller have executed this Agreement as of the
date written above.
"SELLER"
FLAGS INVESTMENT INC., a California
corporation
By:/s/ Xxxxxx Xxxxxxxxx
Name: Xxxxxx Xxxxxxxxx
Title: President
"BUYER"
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Arden Realty, Inc., a Maryland
corporation, its general partner
By:/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. xxxxxxx
Its: President and COO
