FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
This First Amendment to Agreement of Purchase and Sale
and Joint Escrow Instructions (this "Amendment") is entered into
as of the 31st day of March, 1998 by and between Flags
Investment, Inc., a California corporation ("Seller"), and Arden
Realty Limited Partnership, a Maryland limited partnership
("Buyer").
RECITALS
WHEREAS, Buyer and Seller entered into that certain
Agreement of Purchase and Sale and Joint Escrow Instructions
dated March 11, 1998 (the "Purchase Agreement"), pursuant to
which Seller agreed to sell and Buyer agreed to buy the
"Property" referenced therein, including the real property
located at 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx.
Capitalized terms used in this Amendment and otherwise defined
shall have the meaning ascribed to such terms as set forth in the
Purchase Agreement.
WHEREAS, Buyer has objected to the amount to the tenant
improvement allowance for Shuwarger & Company as set forth on
Exhibit "L" of the Purchase Agreement;
WHEREAS, Buyer has received a Tenant Estoppel from
Xxxxxx, Xxxxx & Xxxxx, LLP ("WKB"), the tenant occupying the
entire third floor of the Property, wherein WKB contends that (i)
it has prepaid rent under its lease in the amount of Twenty-Four
Thousand Five Hundred Six and 80/00 Dollars ($24,506.80)
("Prepaid Rent") and (ii) it has an option to extend the term of
its lease.
WHEREAS, WKB contends that the Prepaid Rent was
delivered to Seller in order to be applied to the payment of rent
due under its lease for the first (1st) and sixteenth (16th)
months of its original lease term, and that such Prepaid Rent was
not properly credited to WKB's rental obligations under its lease
by Seller.
WHEREAS, Seller disagrees with WKB's contention
regarding the Prepaid Rent and believes that the Prepaid Rent was
properly credited to WKB's rental obligations under its lease and
Seller disagrees that WKB has a remaining option to extend the
term of its lease.
WHEREAS, Buyer and Seller now desire to amend the
Purchase Agreement as set forth below and establish an escrow
holdback account with Escrow Holder upon and subject to the terms
and conditions set forth below.
AGREEMENT
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 hereby agree as follows:
1. Escrow Holdback Account.
(a) Buyer and Seller hereby establish an escrow
holdback account with Escrow Holder ("Holdback Account") pursuant
to which Escrow Holder shall hold a sum equal to the Prepaid Rent
from the proceeds of the Purchase Price (the "Holdback Amount")
and not disburse said amount to any party until Escrow Holder is
authorized to do so as provided herein. Escrow Holder shall
invest the Holdback Amount in an interest bearing account with a
responsible federally-insured institutional lender approved by
Buyer and Seller and interest shall accrue for the account of the
party to whom the Holdback Amount (or such portions thereof) is
disbursed pursuant to the instructions set forth herein. Seller
shall be responsible for the payment of all charges and fees
imposed by Escrow Holder in connection with its duties hereunder.
(b) Escrow Holder shall hold the Holdback Amount until
the Disbursement Date (as defined below), at which time Escrow
Holder shall deliver to Buyer and/or Seller (as applicable) the
Holdback Amount (or such portion thereof as set forth in the
Final Resolution (as defined below)), plus all interest accrued
thereon for the benefit of such party. The Disbursement Date
shall be the earlier of (i) the date that Buyer delivers to
Escrow Holder evidence that the dispute between WKB and Seller
regarding the payment and application of the Prepaid Rent, as set
forth above, (the "Dispute") has reached Final Resolution, (ii)
the date that Buyer delivers to Escrow Holder and Seller evidence
that WKB has withheld or offset all or any portion of the Prepaid
Rent amount from or against rent due or which shall become due
under its lease (a "Withholding Event") or (iii) May 15, 1998,
but only if Escrow Holder has not received written evidence of
Seller's commencement of an action for declaratory relief against
WKB, as more particularly set forth in paragraph 2 below. If the
Disbursement Date occurs pursuant to subparagraph (ii) or (iii)
above, then Escrow Holder shall deliver to Buyer the entire
Holdback Amount plus all interest accrued thereon, without
further instruction.
(c) As used herein, the term "Final Resolution" shall
mean Seller's delivery to Escrow Holder of, and Buyer's delivery
to Escrow Holder of written approval (not to be unreasonably
withheld or delayed) of:
i) A fully executed written agreement by and
between WKB and Seller setting forth, among
other things, the disposition of the Prepaid
Rent and which also contains language
substantially similar to the following:
"Release. WKB hereby releases and forever discharges
Flags Investment Inc., a California corporation, and
Arden Realty Limited Partnership, a Maryland limited
partnership, and their respective officers, directors,
affiliates, partners, agents, employees,
representatives, attorneys and their respective heirs,
executors, administrators, successors and assigns, and
each of them, from any and all claims, demands,
damages, debts, liabilities, judgments, obligations,
causes of action, suits, expenses and costs (including,
without limitation, attorney's fees and costs), of
whatever nature, character or description (collectively
" Losses"), whether known or unknown, anticipated or
unanticipated, which WKB may have or may hereafter have
or claim to have against the released parties in
connection with the $24,506,80 prepaid rent paid by WKB
under its lease. In furtherance of this intention, WKB
acknowledges that it is familiar with Section 1542 of
the Civil Code of the State of California, which
provides as follows ("Section 1542"):
'A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the releases,
which if known by him must have materially
affected his settlement with debtor.'
The parties hereby waive and relinquish any rights and
benefits which they may have under Section 1542" or;
ii) A final judgment entered in a declaratory
relief action between Seller and WKB which
fully and finally resolves all Disputes
regarding the Prepaid Rent. For purposes of
this paragraph a judgment will be deemed to
be "final" when it has been entered and the
time for appeal has passed without either
party filing a notice of appeal or, if an
appeal is taken from such judgment, then such
appeal has been litigated to a final
adjudication.
(d) Buyer and Seller each agree to sign such further
instructions and take such further actions as Escrow Holder may
reasonably require in connection with its duties under this
Amendment.
(e) Upon the occurrence of a Withholding Event, and
provided that Escrow Holder has delivered to Buyer the Holdback
Amount and all interest accrued thereon, Buyer shall be deemed
(without the necessity of any further action) to have assigned to
Seller any and all claims for damages it may have against WKB
with respect to the Prepaid Rent, but Seller shall have no right
to and shall not (i) commence or pursue any unlawful detainer or
eviction action against WKB, (ii) terminate WKB's lease or its
right to possession or use thereunder or (iii) take any action
which could entitle any WKB to terminate its lease.
2. Obligations of Seller. Seller hereby agrees to
use reasonable efforts to resolve the Dispute with WKB within
thirty (30) days following the date hereof. If WKB and Seller
have not reached a Final Resolution within said thirty (30) day
period, then Seller shall have fifteen (15) days following the
expiration of said thirty (30) day period (the "15 Day Filing
Period") to commence an action for declaratory relief against WKB
to resolve the Dispute. The "commencement of an action for
declaratory relief" shall be deemed to have occurred when
Seller's claim for declaratory relief against WKB is filed with a
court of competent jurisdiction. Seller shall deliver to Buyer
and Escrow Holder written evidence of the commencement of its
action for declaratory relief prior to the expiration of the 15
Day Filing Period. Seller's failure to do so shall constitute
its irrevocable instructions to Escrow Holder to release the
entire Holdback Amount, and all interest accrued thereon,
directly to Buyer without further instructions. In the event
that an action for declaratory relief is timely commenced by
Seller as provided above, then Seller agrees to diligently and
continually prosecute such action in good faith, until final
judgment is reached. Nothing herein shall prevent Seller from
commencing an action for declaratory relief against WKB sooner
than the time periods set forth herein.
3. Indemnity. Seller hereby agrees to indemnify,
protect and defend Buyer and Buyer's officers, partners,
directors, agents, shareholders, representatives, employees,
attorneys, affiliates, beneficiaries, subsidiaries, successors
and assigns (collectively "Buyer's Parties") against and hold
Buyer and Buyer's Parties harmless from, and to reimburse Buyer
and Buyer's Parties for any and all Losses (as defined in
paragraph 1(c) above) arising out of or relating to the Dispute.
4. Tenant Improvement Allowance for Shuwarger &
Company. Buyer and Seller hereby agree that tenant improvement
allowance for Shuwarger & Company as set forth on Exhibit "L" to
the Purchase Agreement is hereby amended to read as follows:
"TENANT IMPROVEMENT ALLOWANCE NOT PAID YET
# 150 Shuwarger & Company $15.000.00."
Buyer and Seller agree that said amount shall be credited to
Buyer at Closing, as more particularly set forth in the Purchase
Agreement.
5. Due Diligence Period and Closing Date. The
expiration of the Due Diligence Period is hereby extended to 6:00
p.m. (California time) on April 8, 1998, but only with respect to
Buyer's review and approval of the Tenant Estoppel for WKB and
the resolution, to Buyer's sole satisfaction, of all issues
pertaining to, regarding, or arising out of WKB's claim that it
has an option to extend its lease term. The Closing Date is
hereby extended to April 9, 1998, or sooner if agreed to by Buyer
and Seller.
6. Resolution of Objections. The execution and
delivery by Buyer and Seller of this Amendment to each other
shall constitute the parties resolution of the objections raised
in paragraphs 1, 2 and 4 of that certain letter from Buyer's
attorney to Seller and Seller's attorney dated March 30, 1998, a
copy of which is attached hereto as Exhibit "A."
7. Estimated Settlement Statement. Seller hereby
authorizes Xxxxx Xxxxx of K.O. Investment to sign and approve all
settlement statements on behalf of Seller which are prepared by
Escrow Holder in connection with the Closing.
8. Ratification of Purchase Agreement. Except as
specifically amended by this Amendment, Buyer and Seller agree
that the Purchase Agreement shall remain in full force and effect
without modification. The terms and conditions of this Amendment
and the establishment of the Holdback Account shall survive the
Closing as set forth in the Purchase Agreement. Nothing contained
herein shall be deemed a waiver of any rights of Buyer or Seller
under the Purchase Agreement.
9. Counterparts. This Agreement may be executed in
duplicate counterparts, each of which shall be deemed an
original, but all of which, when taken together, shall
constitute one and the same instrument.
10. Facsimile. Each party shall be authorized to rely
on the signatures of the other party on this Amendment which are
delivered by facsimile as constituting duly authorized,
irrevocable, actual, current delivery of this Amendment binding
upon such other party. Each party that delivers such facsimile
signatures to any other parties agrees to deliver an executed
original of the same to the parties so receiving the previous
facsimile signature within five (5) business days after the
delivery of such facsimile signature, but the failure to so
deliver an executed original shall not effect the validity and
enforceability of this Amendment.
11. Brokers. Seller hereby represents and warrants
to Buyer that Seller has not dealt with any broker, agent or
other person with respect to that certain Third Amendment to
Office Lease dated March 31, 1998, by and between Seller and WKB
(the "Third Amendment"), and no broker, agent or other person is
entitled to any commission or compensation with respect to the
preparation of or matters contained in the Third Amendment and
the option term set forth therein. Seller agrees to indemnify,
defend, protect and hold Buyer harmless from and against any and
all Losses (as defined in paragraph 1(c) above) incurred or
suffered by Buyer in connection with any broker, agent or other
person claiming a commission or other form of compensation by
virtue of having dealt with Seller with regard to the Third
Amendment or the option contained therein.
12. Remedies. Without limiting any remedies available
to Buyer as provided by law, Buyer shall also have the right to
bring an action for specific performance against Seller to
enforce terms and provisions of this Amendment. In the event any
such action is commenced by Buyer, then the prevailing party in
such action shall be entitled to recover its attorney's fees as
provided in Section 17.9 of the Purchase Agreement.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
SIGNATURES BEGIN ON THE FOLLOWING PAGE NOTWITHSTANDING THAT THE
SIGNATURE PAGE IS DESIGNATED AS PAGE "4"]
IN WITNESS WHEREOF, Buyer and Seller have executed this
Amendment as of the date first set forth above.
SELLER
FLAGS INVESTMENT, INC., a
California corporation,
By: /s/ Xxxxxx Xxxxxxxxx
Name: Hajimi Matsunaga
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
Name: Xxxxxx Xxxxxxx
Its: President and COO
