United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-13454
NATIONAL PROPERTY INVESTORS 7
(Exact name of registrant as specified in its charter)
California 13-3230613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, Post Office Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL PROPERTY INVESTORS 7
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2004
Assets
Cash and cash equivalents $ 697
Receivables and deposits 364
Restricted escrows 181
Other assets 292
Investment property:
Land $ 1,094
Buildings and related personal property 9,921
11,015
Less accumulated depreciation (7,249) 3,766
Assets held for sale 2,190
$ 7,490
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 27
Tenant security deposit liabilities 15
Accrued property taxes 14
Other liabilities 200
Mortgage note payable 5,127
Liabilities related to assets held for sale 3,860
Partners' Deficit:
General partner $ (319)
Limited partners (60,517 units
issued and outstanding) (1,434) (1,753)
$ 7,490
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2004 2003
(Restated)
Revenues:
Rental income $ 296 $ 333
Other income 17 16
Total revenues 313 349
Expenses:
Operating 97 96
General and administrative 49 112
Depreciation 94 94
Interest 93 95
Property taxes 12 12
Total expenses 345 409
Loss from continuing operations (32) (60)
Income (loss) from discontinued operations 14 (12)
Net loss $ (18) $ (72)
Net loss allocated to general partner (1%) -- (1)
Net loss allocated to limited partners (99%) (18) (71)
$ (18) $ (72)
Per limited partnership unit:
Loss from continuing operations $ (0.52) $ (0.97)
Income (loss) from discontinued operations 0.22 (0.20)
$ (0.30) $ (1.17)
Distributions per limited partnership unit $ 42.93 $ 5.37
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 60,517 $ 1 $30,259 $30,260
Partners' (deficiency) capital
at December 31, 2003 60,517 $ (293) $ 1,182 $ 889
Distributions to partners -- (26) (2,598) (2,624)
Net loss for the three months
ended March 31, 2004 -- -- (18) (18)
Partners' deficit at
March 31, 2004 60,517 $ (319) $(1,434) $(1,753)
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2004 2003
Cash flows from operating activities:
Net loss $ (18) $ (72)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation 191 530
Amortization of loan costs 4 19
Change in accounts:
Receivables and deposits 9 (44)
Other assets (63) (51)
Accounts payable (208) 14
Tenant security deposit liabilities (1) (6)
Accrued property taxes 30 102
Other liabilities (147) (96)
Due to affiliates (72) --
Net cash (used in) provided by operating activities (275) 396
Cash flows from investing activities:
Property improvements and replacements (39) (95)
Net withdrawals from restricted escrows 88 10
Net cash provided by (used in) investing activities 49 (85)
Cash flows from financing activities:
Loan costs paid (15) --
Payments on mortgage notes payable (66) (105)
Distributions to partners (2,624) (329)
Net cash used in financing activities (2,705) (434)
Net decrease in cash and cash equivalents (2,931) (123)
Cash and cash equivalents at beginning of period 3,628 614
Cash and cash equivalents at end of period $ 697 $ 491
Supplemental disclosure of cash flow information:
Cash paid for interest $ 141 $ 430
See Accompanying Notes to Financial Statements
NATIONAL PROPERTY INVESTORS 7
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of National Property Investors 7
(the "Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of NPI Equity Investments, Inc. (the "Managing General Partner"),
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
month period ended March 31, 2004 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2004. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2003. The Managing General Partner is an affiliate of Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the accompanying statement of operations for the three months ended March 31,
2003 has been restated to reflect the operations of Patchen Place, Northwoods I
& II and South Point Apartments as loss from discontinued operations due to
their sales in 2003. Patchen Place was sold in October 2003 and Northwoods I and
II and South Point were sold in December 2003. In addition, The Pines of Roanoke
Apartments is included in income (loss) from discontinued operations for the
three months ended March 31, 2004 and 2003 due to its sale in April 2004.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
Partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
During the three months ended March 31, 2004 and 2003, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from all
of the Partnership's properties as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$36,000 and $92,000 for the three months ended March 31, 2004 and 2003,
respectively, which is included in operating expenses and loss from discontinued
operations.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $26,000 and
$69,000 for the three months ended March 31, 2004 and 2003, respectively, which
is included in general and administrative expenses and investment properties.
Included in these amounts are fees related to construction management services
provided by an affiliate of the Managing General Partner of approximately $2,000
for both the three months ended March 31, 2004 and 2003. The construction
management service fees are calculated based on a percentage of additions to
investment properties.
For services relating to the administration of the Partnership and operation of
Partnership properties, the Managing General Partner is entitled to receive
payment for non-accountable expenses up to a maximum of $150,000 per year from
distributions from operations, based upon the number of Partnership units sold,
subject to certain limitations. The Managing General Partner received
approximately $29,000 in reimbursements for the three month period ended March
31, 2003, which is included in general and administrative expenses. No such fees
were earned during the same period in 2004.
For managing the affairs of the Partnership, the Managing General Partner of the
Partnership is entitled to receive a partnership management fee. The fee is
equal to 4% of the Partnership's adjusted cash from operations, as defined in
the Partnership Agreement, in any year, provided that 50% of the fee shall not
be paid until the Partnership has distributed to the limited partners adjusted
cash from operations in such year which is equal to 5% of the limited partners'
adjusted invested capital, as defined, on a non-cumulative basis. In addition,
50% of the fee shall not be paid until the Partnership has distributed to the
limited partners adjusted cash from operations in such year which is equal to 8%
of the limited partners' adjusted invested capital on a non-cumulative basis.
The fee shall be paid when adjusted cash from operations is distributed to the
limited partners. The Managing General Partner was not entitled to receive this
fee during the three months ended March 31, 2004 or 2003.
NPI Equity, on behalf of the Partnership and certain affiliated partnerships,
has established a revolving credit facility (the "Partnership Revolver") to be
used to fund deferred maintenance and working capital needs of the Partnership
and certain other affiliated partnerships in the National Property Investors
Partnership Series. The maximum draw available to the Partnership under the
Partnership Revolver is $500,000. Loans under the Partnership Revolver will have
a term of 365 days, be unsecured and bear interest at the prime rate plus 2% per
annum. The maturity date of any such borrowing accelerates in the event of: (i)
the removal of NPI Equity as the managing general partner (whether or not for
cause); (ii) the sale or refinancing of a property by the Partnership (whether
or not a borrowing under the Partnership Revolver was made with respect to such
property); or (iii) the liquidation of the Partnership. At March 31, 2004, the
Partnership had no outstanding amounts due under this Partnership Revolver.
The Partnership insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty and vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the
Managing General Partner. During 2004, the Partnership anticipates its cost for
insurance coverage and fees associated with policy claims administration will be
approximately $13,000. The Partnership was charged approximately $92,000 in
2003.
Note C - Contingencies
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its Managing General Partner and
several of their affiliated partnerships and corporate entities. The action
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that are named as nominal defendants, challenging, among other
things, the acquisition of interests in certain Managing General Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities that were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; management of the partnerships
by the Insignia affiliates; and the series of transactions which closed on
October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties
Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, during the third quarter of 2001, a complaint (the "Heller action")
was filed against the same defendants that are named in the Nuanes action,
captioned Heller v. Insignia Financial Group. On or about August 6, 2001,
plaintiffs filed a first amended complaint. The Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary duty, unfair competition, conversion, unjust enrichment, and
judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the Managing General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval, if it is granted, and to
provide partners with the independent appraisals at the time of these tenders.
The proposed settlement also provided for the limitation of the allowable costs
which the Managing General Partner or its affiliates will charge the
Partnerships in connection with this litigation and imposes limits on the class
counsel fees and costs in this litigation. On April 11, 2003, notice was
distributed to limited partners providing the details of the proposed
settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety. On January 28, 2004, Objector filed his
opening brief in his pending appeal. On April 23, 2004, the Managing General
Partner and its affiliates filed a response brief in support of the settlement
and the judgment thereto. Plaintiffs have also filed a brief in support of the
settlement. Objector is scheduled to file a reply brief no later than May 13,
2004.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General
Partner, was served with a Complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs
filed an amended complaint also naming NHP Management Company, which is also an
affiliate of the Managing General Partner. The Complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the Complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The Defendants have filed an answer to the Amended Complaint denying
the substantive allegations. Discovery is currently underway.
The Managing General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment property that are not of a routine nature
arising in the ordinary course of business.
Pursuant to a formal order of investigation received by AIMCO on March 29, 2004,
the Central Regional Office of the United States Securities and Exchange
Commission is conducting an investigation relating to certain matters. AIMCO
believes the areas of investigation include AIMCO's miscalculated monthly net
rental income figures in third quarter 2003, forecasted guidance, accounts
payable, rent concessions, vendor rebates, and capitalization of expenses and
payroll. AIMCO is cooperating fully. AIMCO does not believe that the ultimate
outcome will have a material adverse effect on its consolidated financial
condition or results of operations taken as a whole. Similarly, the Managing
General Partner does not believe that the ultimate outcome will have a material
adverse effect on the Partnership's financial condition or results of operations
taken as a whole.
Note D - Subsequent Event
On April 30, 2004, the Partnership sold The Pines of Roanoke Apartments to an
unrelated third party for approximately $9,300,000. After payment of closing
costs, the gain on the sale of The Pines of Roanoke Apartments was approximately
$6,566,000. Assets and liabilities of The Pines of Roanoke Apartments are
classified as held for sale in the accompanying balance sheet at March 31, 2004.
The Pines of Roanoke Apartments had revenues of approximately $370,000 and
$364,000 for the three months ended March 31, 2004 and 2003, respectively. The
Partnership is evaluating the proceeds, if any, to be distributed to the
partners.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for each of the
three month periods ended March 31, 2004 and 2003:
Average Occupancy
2004 2003
Fairway View II Apartments (1) 82% 92%
Baton Rouge, Louisiana
(1) The Managing General Partner attributes the decrease in occupancy at
Fairway View II Apartments to strong competition from new construction in
the local market area.
The Partnership's financial results are dependent upon a number of factors
including the ability to attract and maintain tenants at the investment
property, interest rates on mortgage loans, costs incurred to operate the
investment property, general economic conditions and weather. As part of the
ongoing business plan of the Partnership, the Managing General Partner monitors
the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expenses. As part of this plan, the
Managing General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, the Managing General Partner may use
rental concessions and rental rate reductions to offset softening market
conditions, accordingly, there is no guarantee that the Managing General Partner
will be able to sustain such a plan. Further, a number of factors which are
outside the control of the Partnership such as the local economic climate and
weather can adversely or positively impact the Partnership's financial results.
Results of Operations
The Partnership's net loss for the three months ended March 31, 2004 and 2003
was approximately $18,000 and $72,000, respectively. The decrease in net loss
for the three months ended March 31, 2004 is due to a decrease in total expenses
and a decrease in the loss from discontinued operations partially offset by a
decrease in total revenues.
In accordance with Statement of Financial Accounting Standards No. 144, the
accompanying statement of operations for the three months ended March 31, 2003
has been restated to reflect the operations of Patchen Place, Northwoods I and
II and South Point Apartments as loss from discontinued operations due to the
sale of these properties during 2003. In addition, The Pines of Roanoke
Apartments is included in income (loss) from discontinued operations for the
three months ended March 31, 2004 and 2003 due to its sale in April 2004.
Excluding the discontinued operations, the Partnership's loss from continuing
operations for the three months ended March 31, 2004 and 2003 was approximately
$32,000 and $60,000, respectively. The decrease in loss from continuing
operations for the three months ended March 31, 2004 is due to a decrease in
total expenses partially offset by a decrease in total revenues. Total revenues
decreased due to a decrease in rental income caused by a decrease in occupancy
at Fairway View II Apartments.
Total expenses decreased for the three months ended March 31, 2004 due to a
decrease in general and administrative expenses. General and administrative
expense decreased due to decreases in the management reimbursements paid to the
Managing General Partner, as allowed under the Partnership Agreement, and in the
fees paid to the Managing General Partner in connection with distributions from
operations. Included in general and administrative expenses for the three months
ended March 31, 2004 and 2003 are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
Liquidity and Capital Resources
At March 31, 2004, the Partnership had cash and cash equivalents of
approximately $697,000 compared to approximately $491,000 at March 31, 2003.
Cash and cash equivalents decreased by approximately $2,931,000 from the
Partnership's year ended December 31, 2003 due to approximately $2,705,000 of
cash used in financing activities and approximately $275,000 of cash used in
operating activities partially offset by approximately $49,000 of cash provided
by investing activities. Cash used in financing activities consisted of payments
of principal made on the mortgages encumbering Fairway View II and The Pines
Apartments, distributions to partners and loan cost additions. Cash provided by
investing activities consisted of the refund of escrows maintained by the
previous mortgage lenders partially offset by property improvements and
replacements. The Partnership invests its working capital reserves in interest
bearing accounts.
NPI Equity, on behalf of the Partnership and certain affiliated partnerships,
has established a revolving credit facility (the "Partnership Revolver") to be
used to fund deferred maintenance and working capital needs of the Partnership
and certain other affiliated partnerships in the National Property Investors
Partnership Series. The maximum draw available to the Partnership under the
Partnership Revolver is $500,000. Loans under the Partnership Revolver will have
a term of 365 days, be unsecured and bear interest at the prime rate plus 2% per
annum. The maturity date of any such borrowing accelerates in the event of: (i)
the removal of NPI Equity as the managing general partner (whether or not for
cause); (ii) the sale or refinancing of a property by the Partnership (whether
or not a borrowing under the Partnership Revolver was made with respect to such
property); or (iii) the liquidation of the Partnership. At March 31, 2004, the
Partnership had no outstanding amounts due under this Partnership Revolver.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership and to comply with Federal, state
and local legal and regulatory requirements. The Managing General Partner
monitors developments in the area of legal and regulatory compliance and is
studying new federal laws, including the Sarbanes-Oxley Act of 2002. The
Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures
with regard to governance, disclosure, audit and other areas. In light of these
changes, the Partnership expects that it will incur higher expenses related to
compliance, including increased legal and audit fees. Capital improvements for
the Partnership's property are detailed below.
Fairway View II
During the three months ended March 31, 2004, the Partnership completed
approximately $14,000 of capital improvements at Fairway View II Apartments,
consisting primarily of floor covering and air conditioning unit replacements.
These improvements were funded from operating cash flow. The Partnership
evaluates the capital improvement needs of the property during the year and
currently expects to complete an additional $98,000 in capital improvements
during the remainder of 2004. Additional capital improvements may be considered
and will depend on the physical condition of the property as well as replacement
reserves and the anticipated cash flow generated by the property.
The Pines
During the three months ended March 31, 2004, the Partnership completed
approximately $25,000 of capital improvements at The Pines Apartments,
consisting primarily of floor covering and roof replacements and heating system
upgrades. These improvements were funded from operating cash flow. Subsequent to
March 31, 2004 the property was sold.
The additional capital improvements will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering the investment property of approximately $5,127,000
matures December 1, 2021 at which time the loan is scheduled to be fully
amortized.
Pursuant to the Partnership Agreement, the term of the Partnership is scheduled
to expire on December 31, 2008. Accordingly, prior to such date the Partnership
will need to either sell its investment properties or extend the term of the
Partnership.
The Partnership distributed the following amounts during the three months ended
March 31, 2004 and 2003 (in thousands, except per unit data):
Three Months Per Limited Three Months Per Limited
Ended Partnership Ended Partnership
March 31, 2004 Unit March 31, 2003 Unit
Operations $ -- $ -- $ 329 $ 5.37
Sale proceeds (1) 2,624 42.93 -- --
$2,624 $42.93 $ 329 $ 5.37
(1) Proceeds from the sales of South Point and Northwoods I and II Apartments
in December 2003.
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves and the timing of debt maturities,
refinancings and/or property sales. The Partnership's cash available for
distribution is reviewed on a monthly basis. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations after
required capital expenditures, to permit further distributions to its partners
during the remainder of 2004 or subsequent periods.
Other
In addition to its indirect ownership of the Managing General Partner interest
in the Partnership, AIMCO and its affiliates owned 41,649.67 limited partnership
units (the "Units") in the Partnership representing 68.82% of the outstanding
Units at March 31, 2004. A number of these Units were acquired pursuant to
tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its
affiliates will acquire additional Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private purchases or tender offers. Pursuant to the Partnership
Agreement, unit holders holding a majority of the Units are entitled to take
action with respect to a variety of matters that include, but are not limited
to, voting on certain amendments to the Partnership Agreement and voting to
remove the Managing General Partner. As a result of its ownership of 68.82% of
the outstanding Units, AIMCO and its affiliates are in a position to influence
all such voting decisions with respect to the Partnership. However, DeForest
Ventures II L.P., from whom AIMCO IPLP, L.P., an affiliate of the Managing
General Partner and of AIMCO, acquired 25,399 Units (41.97% of the units),
agreed for the benefit of non-tendering unit holders, that it would vote its
Units: (i) against any increase in compensation payable to the Managing General
Partner or to its affiliates; and (ii) on all other matters submitted by it or
its affiliates, in proportion to the votes cast by third party unit holders.
Except for the foregoing, no other limitations are imposed on IPLP's, AIMCO's or
any other affiliates right to vote each unit held. Although the Managing General
Partner owes fiduciary duties to the limited partners of the Partnership, the
Managing General Partner also owes fiduciary duties to AIMCO as its sole
stockholder. As a result, the duties of the Managing General Partner, as
Managing General Partner, to the Partnership and its limited partners may come
into conflict with the duties of the Managing General Partner to AIMCO, as its
sole stockholder.
Critical Accounting Policies and Estimates
The financial statements are prepared in accordance with accounting principles
generally accepted in the United States which require the Partnership to make
estimates and assumptions. The Partnership believes that of its significant
accounting policies, the following may involve a higher degree of judgment and
complexity.
Impairment of Long-Lived Assets
Investment property is recorded at cost, less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of a property may be impaired, the Partnership will make an assessment of
its recoverability by estimating the undiscounted future cash flows, excluding
interest charges, of the property. If the carrying amount exceeds the aggregate
future cash flows, the Partnership would recognize an impairment loss to the
extent the carrying amount exceeds the fair value of the property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment property. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Partnership evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area. Any
concessions given at the inception of the lease are amortized over the life of
the lease.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Managing General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Managing General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of California for the County of San Mateo. The plaintiffs named as
defendants, among others, the Partnership, its Managing General Partner and
several of their affiliated partnerships and corporate entities. The action
purported to assert claims on behalf of a class of limited partners and
derivatively on behalf of a number of limited partnerships (including the
Partnership) that are named as nominal defendants, challenging, among other
things, the acquisition of interests in certain Managing General Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities that were,
at one time, affiliates of Insignia; past tender offers by the Insignia
affiliates to acquire limited partnership units; management of the partnerships
by the Insignia affiliates; and the series of transactions which closed on
October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties
Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition, during the third quarter of 2001, a complaint (the "Heller action")
was filed against the same defendants that are named in the Nuanes action,
captioned Heller v. Insignia Financial Group. On or about August 6, 2001,
plaintiffs filed a first amended complaint. The Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary duty, unfair competition, conversion, unjust enrichment, and
judicial dissolution.
On January 8, 2003, the parties filed a Stipulation of Settlement in proposed
settlement of the Nuanes action and the Heller action.
In general terms, the proposed settlement provides for certification for
settlement purposes of a settlement class consisting of all limited partners in
this Partnership and others (the "Partnerships") as of December 20, 2002, the
dismissal with prejudice and release of claims in the Nuanes and Heller
litigation, payment by AIMCO of $9.9 million (which shall be distributed to
settlement class members after deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent appraisals of the Partnerships' properties by a Court appointed
appraiser. An affiliate of the Managing General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval, if it is granted, and to
provide partners with the independent appraisals at the time of these tenders.
The proposed settlement also provided for the limitation of the allowable costs
which the Managing General Partner or its affiliates will charge the
Partnerships in connection with this litigation and imposes limits on the class
counsel fees and costs in this litigation. On April 11, 2003, notice was
distributed to limited partners providing the details of the proposed
settlement.
On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector
("Objector") filed an appeal seeking to vacate and/or reverse the order
approving the settlement and entering judgment thereto. On November 24, 2003,
the Objector filed an application requesting the Court order AIMCO to withdraw
settlement tender offers it had commenced, refrain from making further offers
pending the appeal and auction any units tendered to third parties, contending
that the offers did not conform with the terms of the Settlement. Counsel for
the Objector (on behalf of another investor) had alternatively requested the
Court take certain action purportedly to enforce the terms of the settlement
agreement. On December 18, 2003, the Court heard oral argument on the motions
and denied them both in their entirety. On January 28, 2004, Objector filed his
opening brief in his pending appeal. On April 23, 2004, the Managing General
Partner and its affiliates filed a response brief in support of the settlement
and the judgment thereto. Plaintiffs have also filed a brief in support of the
settlement. Objector is scheduled to file a reply brief no later than May 13,
2004.
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General
Partner, was served with a Complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs
filed an amended complaint also naming NHP Management Company, which is also an
affiliate of the Managing General Partner. The Complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the Complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The Defendants have filed an answer to the Amended Complaint denying
the substantive allegations. Discovery is currently underway.
The Managing General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 3.4(a), Agreement of Limited Partnership, incorporated
by reference to Exhibit A to the Prospectus of the Partnership
dated July 5, 1978, included in the Partnership's Registration
Statement on Form S-11 (Reg. No. 2-599991).
Exhibit 3.4(b), Amendments to Agreement of Limited
Partnership, incorporated by reference to the Definitive Proxy
Statement of the Partnership, dated July 2, 1981.
Exhibit 3.4(c), Amendments to Agreement of Limited
Partnership, incorporated by reference to the Definitive Proxy
Statement of the Partnership, dated April 3, 1991.
Exhibit 3.4(d), Amendments to the Agreement of Limited
Partnership, incorporated by reference to the Statement
Furnished in Connection with the Solicitation of Consents of
the Partnership dated August 28, 1992.
Exhibit 10.25, Purchase and Sale Contract between Registrant
and Jackson Square Properties, LLC, dated February 21, 2004.
Exhibit 10.26, Amendment to Purchase and Sale Contract between
Registrant and Jackson Square Properties, LLC dated March 23,
2004.
Exhibit 31.1, Certification of equivalent of Chief Executive
Officer pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2, Certification of equivalent of Chief Financial
Officer pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1, Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
b) Reports on Form 8-K filed during the quarter ended March 31,
2004:
Current Report on Form 8-K dated December 30, 2003 and filed
on January 13, 2004 disclosing the sale of Southpoint
Apartments.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NATIONAL PROPERTY INVESTORS 7
By: NPI EQUITY INVESTMENTS, INC.
Its Managing General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President
and Chief Accounting Officer
Date: May 13, 2004
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of National Property
Investors 7;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 13, 2004
/s/Martha L. Long
Martha L. Long
Senior Vice President of NPI Equity
Investments, Inc., equivalent of the
chief executive officer of the
Partnership
Exhibit 31.2
CERTIFICATION
I, Thomas M. Herzog, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of National Property
Investors 7;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 13, 2004
/s/Thomas M. Herzog
Thomas M. Herzog
Senior Vice President and Chief
Accounting Officer of NPI Equity
Investments, Inc., equivalent of the
chief financial officer of the
Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of National Property
Investors 7 (the "Partnership"), for the quarterly period ended March 31, 2004
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Martha L. Long, as the equivalent of the Chief Executive Officer of
the Partnership, and Thomas M. Herzog, as the equivalent of the Chief Financial
Officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Martha L. Long
Name: Martha L. Long
Date: May 13, 2004
/s/Thomas M. Herzog
Name: Thomas M. Herzog
Date: May 13, 2004
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Exhibit 10.25
PURCHASE AND SALE CONTRACT
BETWEEN
NATIONAL PROPERTY INVESTORS 7,
a California limited partnership
AS SELLER
AND
JACKSON SQUARE PROPERTIES, LLC
a California limited liability company
AS PURCHASER
PINES OF ROANOKE APARTMENTS
ARTICLE 1 DEFINED TERMS.................................................1
ARTICLE 2 PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT...................6
2.1 Purchase and Sale................................................6
2.2 Purchase Price and Deposit.......................................6
2.3 Escrow Provisions Regarding Deposit..............................7
ARTICLE 3 FEASIBILITY PERIOD............................................8
3.1 Feasibility Period...............................................8
3.2 Expiration of Feasibility Period.................................8
3.3 Conduct of Investigation.........................................9
3.4 Purchaser Indemnification........................................9
3.5 Property Materials..............................................10
3.6 Property Contracts..............................................11
ARTICLE 4 TITLE........................................................11
4.1 Title Documents.................................................11
4.2 Survey..........................................................12
4.3 Objection and Response Process..................................12
4.4 Permitted Exceptions............................................13
4.5 Existing Deed of Trust..........................................13
ARTICLE 5 CLOSING......................................................13
5.1 Closing Date....................................................13
5.2 Seller Closing Deliveries.......................................14
5.3 Purchaser Closing Deliveries....................................14
5.4 Closing Prorations and Adjustments..............................15
5.5 Post Closing Adjustments........................................18
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER.......19
6.1 Seller's Representations........................................19
6.2 AS-IS...........................................................20
6.3 Survival of Seller's Representations............................21
6.4 Definition of Seller's Knowledge................................21
6.5 Representations And Warranties Of Purchaser.....................21
ARTICLE 7 OPERATION OF THE PROPERTY....................................22
7.1 Leases and Property Contracts...................................22
7.2 General Operation of Property...................................22
7.3 Liens...........................................................22
ARTICLE 8 CONDITIONS PRECEDENT TO CLOSING..............................23
8.1 Purchaser's Conditions to Closing...............................23
8.2 Seller's Conditions to Closing..................................23
ARTICLE 9 BROKERAGE....................................................24
9.1 Indemnity.......................................................24
9.2 Broker Commission...............................................24
9.3 Broker Signature Page...........................................24
9.4 Purchaser's Consultant..........................................25
ARTICLE 10 DEFAULTS AND REMEDIES........................................25
10.1 Purchaser Default...............................................25
10.2 Seller Default..................................................25
ARTICLE 11 RISK OF LOSS OR CASUALTY.....................................26
11.1 Major Damage....................................................26
11.2 Minor Damage....................................................26
11.3 Repairs.........................................................27
ARTICLE 12 EMINENT DOMAIN...............................................27
12.1 Eminent Domain..................................................27
ARTICLE 13 MISCELLANEOUS................................................27
13.1 Binding Effect of Contract......................................27
13.2 Exhibits And Schedules..........................................27
13.3 Assignability...................................................27
13.4 Binding Effect..................................................28
13.5 Captions........................................................28
13.6 Number And Gender Of Words......................................28
13.7 Notices.........................................................28
13.8 Governing Law And Venue.........................................30
13.9 Entire Agreement................................................30
13.10 Amendments......................................................30
13.11 Severability....................................................30
13.12 Multiple Counterparts/Facsimile Signatures......................30
13.13 Construction....................................................30
13.14 Confidentiality.................................................30
13.15 Time Of The Essence.............................................31
13.16 Waiver..........................................................31
13.17 Attorneys Fees..................................................31
13.18 Time Periods....................................................31
13.19 1031 Exchange...................................................31
13.20 No Personal Liability of Officers, Trustees or Directors
of Seller's Partners............................................32
13.21 No Exclusive Negotiations.......................................32
13.22 ADA Disclosure..................................................32
13.23 No Recording....................................................32
13.24 Relationship of Parties.........................................33
13.25 Dispute Resolution..............................................33
13.26 AIMCO Marks.....................................................33
13.27 Non-Solicitation of Employees...................................33
13.28 Survival........................................................34
13.29 Multiple Purchasers.............................................34
ARTICLE 14 LEAD-BASED PAINT DISCLOSURE..................................34
14.1 Disclosure......................................................34
14.2 Consent Agreement...............................................34
PURCHASE AND SALE CONTRACT
THIS PURCHASE AND SALE CONTRACT (this "Contract") is entered into as of
the 12th day of February, 2004 (the "Effective Date") by and between NATIONAL
PROPERTY INVESTORS 7, a California limited partnership, having an address at
4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237 ("Seller"),
and JACKSON SQUARE PROPERTIES, LLC, a California limited liability company,
having a principal address at 500 Washington Street, Suite 700, San Francisco,
California 94111 ("Purchaser").
NOW, THEREFORE, in consideration of mutual covenants set forth herein,
Seller and Purchaser hereby agree as follows:
RECITALS
A.....Seller owns the real estate located in the County of Roanoke,
Virginia, as more particularly described in Exhibit A attached hereto and made a
part hereof, and the improvements thereon, commonly known as Pines at Roanoke
Apartments, located at 4630 Roxbury Lane, Roanoke, Virginia 24018.
B.....Purchaser desires to purchase, and Seller desires to sell, such
land, improvements and certain associated property, on the terms and conditions
set forth below.
ARTICLE 1...
DEFINED TERMS
1.1 Unless otherwise defined herein, any term with its initial letter
capitalized in this Contract shall have the meaning set forth in this ARTICLE 1.
1.1.1 "ADA" shall have the meaning set forth in Section 13.22.
1.1.2 "Additional Deposit" shall have the meaning set forth in Section
2.2.2.
1.1.3 "AIMCO" shall have the meaning set forth in Section 14.2.
1.1.4 "AIMCO Marks" means all words, phrases, slogans, materials, software,
proprietary systems, trade secrets, proprietary information and lists, and other
intellectual property owned or used by Seller, the Property Manager, or AIMCO in
the marketing, operation or use of the Property (or in the marketing, operation
or use of any other properties managed by the Property Manager or owned by AIMCO
or an affiliate of either Property Manager or AIMCO).
1.1.5 [Intentionally left blank].
1.1.6 [Intentionally left blank].
1.1.7 [Intentionally left blank].
1.1.8 "Broker" shall have the meaning set forth in Section 9.1.
1.1.9 "Business Day" means any day other than a Saturday or Sunday or Federal
holiday or legal holiday in the States of California, Colorado or Texas or
Commonwealth of Virginia.
1.1.10......"Closing" means the consummation of the purchase and sale and
related transactions contemplated by this Contract in accordance with the terms
and conditions of this Contract.
1.1.11......"Closing Date" means the date on which date the Closing of the
conveyance of the Property is required to be held pursuant to Section 5.1.
1.1.12......"Code" shall have the meaning set forth in Section 2.3.6.
1.1.13......"Consent Agreement" shall have the meaning set forth in Section
14.2.
1.1.14......"Consultants" shall have the meaning set forth in Section 3.1.
1.1.15......"Damage Notice" shall have the meaning set forth in Section
11.1.
1.1.16......"Deed" shall have the meaning set forth in Section 5.2.1.
1.1.16.5 "Deed of Trust" shall have the meaning set forth in Section 4.5.
1.1.17......"Deposit" means, to the extent actually deposited by Purchaser with
Escrow Agent, the Initial Deposit and the Additional Deposit.
1.1.18......"Escrow Agent" shall have the meaning set forth in Section 2.2.1.
1.1.19......"Excluded Permits" means those Permits which, under applicable law,
are nontransferable and such other Permits, if any, as may be designated as
Excluded Permits on Schedule 1.1.19.
1.1.20......"Existing Survey" shall have the meaning set forth in Section 4.2.
1.1.21......"Feasibility Period" shall have the meaning set forth in Section
3.1.
1.1.21.5 "FHA" shall have the meaning set forth in Section 13.22.
1.1.22......"Final Response Deadline" shall have the meaning set forth in
Section 4.3.
1.1.23......"Fixtures and Tangible Personal Property" means all fixtures,
furniture, furnishings, fittings, equipment, machinery, apparatus, appliances
and other articles of tangible personal property located on the Land or in the
Improvements as of the Effective Date and used or usable in connection with the
occupation or operation of all or any part of the Property, but only to the
extent transferable. The term "Fixtures and Tangible Personal Property" does not
include (a) equipment leased by Seller and the interest of Seller in any
equipment provided to the Property for use, but not owned or leased by Seller,
or (b) property owned or leased by any Tenant or guest, employee or other person
furnishing goods or services to the Property, or (c) property and equipment
owned by Seller, which in the ordinary course of business of the Property is not
used exclusively for the business, operation or management of the Property, or
(d) the property and equipment, if any, expressly identified in Schedule 1.1.23.
1.1.24......"General Assignment" shall have the meaning set forth in Section
5.2.3.
1.1.25......"Good Funds" shall have the meaning set forth in Section 2.2.1.
1.1.26......"Improvements" means all buildings and improvements located on
the Land taken "as is."
1.1.27......"Initial Deposit" shall have the meaning set forth in Section
2.2.1.
1.1.28......"Land" means all of those certain tracts of land located in the
Commonwealth of Virginia described on Exhibit A, and all rights, privileges and
appurtenances pertaining thereto.
1.1.29......"Lease(s)" means the interest of Seller in and to all leases,
subleases and other occupancy contracts, whether or not of record, which provide
for the use or occupancy of space or facilities on or relating to the Property
and which are in force as of the Closing Date for the applicable Property.
1.1.30......""Leases Assignment" shall have the meaning set forth in Section
5.2.4.
1.1.31......"Lender" means Federal Home Loan Mortgage Corporation, as assignee
of, and whose servicer is, GMAC Commercial Mortgage Corporation.
1.1.31.5 "Lender Fees" shall mean all fees and expenses (including, without
limitation, all prepayment penalties and pay-off fees) imposed or charged by
Lender or its counsel in connection with the Loan Payoff, and, to the extent
that the Loan Payoff occurs on a date other than as permitted under the Note and
Deed of Trust, any amounts of interest charged by Lender for the period from the
Closing Date to the permitted prepayment date, the amount of the Lender's Fees
to be determined as of the Closing Date.
1.1.31.5.5 "Liability Cap" has the meaning set forth in Section 6.3.
1.1.32......"Loan" means the indebtedness owing to Lender evidenced by the
Note.
1.1.33......[Intentionally left blank].
1.1.34......"Loan Balance" shall have the meaning set forth in Section
2.2.3.
1.1.35......"Loan Payoff" shall have the meaning set forth in Section 5.4.7.
1.1.36......"Losses" shall have the meaning set forth in Section 3.4.1.
1.1.37......"Materials" shall have the meaning set forth in Section 3.5.
1.1.38......"Miscellaneous Property Assets" means all contract rights, leases,
concessions, warranties, plans, drawings and other items of intangible personal
property relating to the ownership or operation of the Property and owned by
Seller, excluding, however, (a) receivables, (b) Property Contracts, (c) Leases,
(d) Permits, (e) cash or other funds, whether in petty cash or house "banks," or
on deposit in bank accounts or in transit for deposit, (f) refunds, rebates or
other claims, or any interest thereon, for periods or events occurring prior to
the Closing Date, (g) utility and similar deposits, (h) insurance or other
prepaid items, (i) Seller's proprietary books and records, or (j) any right,
title or interest in or to the AIMCO Marks. The term "Miscellaneous Property
Assets" also shall include all of Seller's rights, if any, in and to the name
"Pines at Roanoke" as it relates solely to use in connection with the Property
(and not with respect to any other property owned or managed by Seller, Property
Manager, AIMCO, or their respective affiliates).
1.1.39......"Note" means that certain Multifamily Note in the original principal
amount of $4,225,000, dated December 9, 1999, executed by Seller and payable to
the order of GMAC Commercial Mortgage Company.
1.1.40......"Objection Deadline" shall have the meaning set forth in Section
4.3.
1.1.41......"Objection Notice" shall have the meaning set forth in Section
4.3.
1.1.42......"Objections" shall have the meaning set forth in Section 4.3.
1.1.43......"Permits" means all licenses and permits granted by any governmental
authority having jurisdiction over the Property owned by Seller and required in
order to own and operate the Property.
1.1.44......"Permitted Exceptions" shall have the meaning set forth in Section
4.4.
1.1.45......"Property" means (a) the Land and Improvements and all rights of
Seller, if any, in and to all of the easements, rights, privileges, and
appurtenances belonging or in any way appertaining to the Land and Improvements,
(b) the right, if any and only to the extent transferable, of Seller in the
Property Contracts, Leases, Permits (other than Excluded Permits), and the
Fixtures and Tangible Personal Property, and (c) the Miscellaneous Property
Assets owned by Seller which are located on the Property and used in its
operation.
1.1.46......"Property Contracts" means all contracts, agreements, equipment
leases, purchase orders, maintenance, service, or utility contracts and similar
contracts, excluding Leases, which relate to the ownership, maintenance,
construction or repair and/or operation of the Property, but only to the extent
the assignment of such contract to Purchaser is permitted pursuant to the
express terms of such contract and not including (a) any national contracts
entered into by Seller, Property Manager, or AIMCO with respect to the Property
(i) which terminate automatically upon transfer of the Property by Seller, or
(ii) which Seller, in Seller's sole discretion, elects to terminate with respect
to the Property effective as of the Closing Date, or (b) any property management
contract for the Property. Property Contracts shall not include forward or
similar long-term contracts to purchase electricity, natural gas, or other
utilities which contracts shall be "Utility Contracts" governed by the
provisions of Section 5.4.11.
1.1.47......"Property Contracts Notice" shall have the meaning set forth in
Section 3.6.
1.1.48......"Property Manager" means the current property manager of the
Property.
1.1.49......"Proration Schedule" shall have the meaning set forth in Section
5.4.1.
1.1.50......"Purchase Price" means the consideration to be paid by Purchaser to
Seller for the purchase of the Property pursuant to Section 2.2.
1.1.51......"Regional Property Manager" shall have the meaning set forth in
Section 6.4.
1.1.52......"Remediation" shall have the meaning set forth in Section 14.2.
1.1.52.5 "Report" shall have the meaning set forth in Section 14.2.
1.1.53......[Intentionally left blank]
1.1.54......"Response Deadline" shall have the meaning set forth in Section
4.3.
1.1.55......"Response Notice" shall have the meaning set forth in Section
4.3.
1.1.55.5 "Section 1031 Exchange" shall have the meaning set forth in Section
13.19.
1.1.56......"Seller's Indemnified Parties" shall have the meaning set forth
in Section 3.4.1
1.1.57......"Seller's Representations" shall have the meaning set forth in
Section 6.1.
1.1.58......"Survey" shall have the meaning ascribed thereto in Section 4.2.
1.1.59......"Survival Period" shall have the meaning set forth in Section
6.3.
1.1.60......"Survival Provisions" shall have the meaning set forth in
Section 13.28.
1.1.61......"Tenant" means any person or entity entitled to occupy any portion
of the Property under a Lease.
1.1.62......"Tenant Deposits" means all security deposits, prepaid rentals,
cleaning fees and other refundable deposits and fees collected from Tenants,
plus any interest accrued thereon, paid by Tenants to Seller pursuant to the
Leases. Tenant Deposits shall not include any non-refundable deposits or fees
paid by Tenants to Seller, either pursuant to the Leases or otherwise.
1.1.63......"Tenant Security Deposit Balance" shall have the meaning set forth
in Section 5.4.6.2.
1.1.64......"Terminated Contracts" shall have the meaning set forth in
Section 3.6.
1.1.65......"Testing" shall have the meaning set forth in Section 14.2.
1.1.66......"Third-Party Reports" means any reports, studies or other
information prepared or compiled for Purchaser by any Consultant or other
third-party in connection with Purchaser's investigation of the Property.
1.1.67......"Title Commitment" shall have the meaning ascribed thereto in
Section 4.1.
1.1.68......"Title Documents" shall have the meaning set forth in Section 4.1.
1.1.69......"Title Insurer" shall have the meaning set forth in Section 2.2.1.
1.1.70......"Title Policy" shall have the meaning set forth in Section 4.1.
1.1.71......"Uncollected Rents" shall have the meaning set forth in Section
5.4.6.1.
1.1.72......"Utility Contract " shall have the meaning set forth in Section
5.4.11.
1.1.73......"Vendor Terminations" shall have the meaning set forth in
Section 5.2.5.
ARTICLE 2...
PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT
2.1 Purchase and Sale. Seller agrees to sell and convey the Property to
Purchaser and Purchaser agrees to purchase the Property from Seller, all in
accordance with the terms and conditions set forth in this Contract.
2.2 Purchase Price and Deposit. The total purchase price ("Purchase Price") for
the Property shall be an amount equal to $9,300,000.00, less the Lender Fees,
which amount shall be paid by Purchaser, as follows:
2.2.1 On the Effective Date, Purchaser shall deliver to Fidelity National Title
Company, c/o Lolly Avant, National Commercial Closing Specialist, 1900 West Loop
South, Suite 650, Houston, TX 77027, telephone 1-800-879-1677 ("Escrow Agent" or
"Title Insurer") an initial deposit (the "Initial Deposit") of $100,000.00 by
wire transfer of immediately available funds ("Good Funds"). The Initial Deposit
shall be held and disbursed in accordance with the escrow provisions set forth
in Section 2.3.
2.2.2 On the day that the Feasibility Period expires, Purchaser shall deliver to
Escrow Agent an additional deposit (the "Additional Deposit") of $400,000.00 by
wire by transfer of Good Funds. The Additional Deposit shall be held and
disbursed in accordance with the escrow provisions set forth in Section 2.3.
2.2.3 [Intentionally left blank].
2.2.4 The balance of the Purchase Price for the Property shall be paid to and
received by Escrow Agent by wire transfer of Good Funds no later than 11:00 a.m.
(in the time zone in which Escrow Agent is located) on the Closing Date (or such
earlier time as required by Seller's lender but no more than 1 Business Day
prior to the Closing Date).
2.3 Escrow Provisions Regarding Deposit.
2.3.1 Escrow Agent shall hold the Deposit and make delivery of the Deposit to
the party entitled thereto under the terms of this Contract. Escrow Agent shall
invest the Deposit in such short-term, high-grade securities, interest-bearing
bank accounts, money market funds or accounts, bank certificates of deposit or
bank repurchase contracts as Escrow Agent, in its discretion, deems suitable,
and all interest and income thereon shall become part of the Deposit and shall
be remitted to the party entitled to the Deposit pursuant to this Contract.
2.3.2 Escrow Agent shall hold the Deposit until the earlier occurrence of (i)
the Closing Date, at which time the Deposit shall be applied against the
Purchase Price, or (ii) the date on which Escrow Agent shall be authorized to
disburse the Deposit as set forth in Section 2.3.3. The tax identification
numbers of the parties shall be furnished to Escrow Agent upon request.
2.3.3 If the Deposit has not been released earlier in accordance with Section
2.3.2, and either party makes a written demand upon Escrow Agent for payment of
the Deposit, Escrow Agent shall give written notice to the other party of such
demand. If Escrow Agent does not receive a written objection from the other
party to the proposed payment within 5 Business Days after the giving of such
notice, Escrow Agent is hereby authorized to make such payment (subject to
Purchaser's obligation under Section 3.5.2 to return all Third-Party Reports and
information and Materials provided to Purchaser as a pre-condition to the return
of the Deposit to Purchaser). If Escrow Agent does receive such written
objection within such 5-Business Day period, Escrow Agent shall continue to hold
such amount until otherwise directed by written instructions from the parties to
this Contract or a final judgment or arbitrator's decision. However, Escrow
Agent shall have the right at any time to deposit the Deposit and interest
thereon, if any, with a court of competent jurisdiction in the commonwealth in
which the Property is located. Escrow Agent shall give written notice of such
deposit to Seller and Purchaser. Upon such deposit, Escrow Agent shall be
relieved and discharged of all further obligations and responsibilities
hereunder.
2.3.4 The parties acknowledge that Escrow Agent is acting solely as a
stakeholder at their request and for their convenience, that Escrow Agent shall
not be deemed to be the agent of either of the parties for any act or omission
on its part unless taken or suffered in bad faith in willful disregard of this
Contract or involving gross negligence. Seller and Purchaser jointly and
severally shall indemnify and hold Escrow Agent harmless from and against all
costs, claims and expenses, including reasonable attorney's fees, incurred in
connection with the performance of Escrow Agent's duties hereunder, except with
respect to actions or omissions taken or suffered by Escrow Agent in bad faith,
in willful disregard of this Contract or involving gross negligence on the part
of the Escrow Agent.
2.3.5 The parties shall deliver to Escrow Agent an executed copy of this
Contract, which shall constitute the sole instructions to Escrow Agent. Escrow
Agent shall execute the signature page for Escrow Agent attached hereto with
respect to the provisions of this Section 2.3; provided, however, that (a)
Escrow Agent's signature hereon shall not be a prerequisite to the binding
nature of this Contract on Purchaser and Seller, and the same shall become fully
effective upon execution by Purchaser and Seller, and (b) the signature of
Escrow Agent will not be necessary to amend any provision of this Contract other
than this Section 2.3.
2.3.6 Escrow Agent, as the person responsible for closing the transaction within
the meaning of Section 6045(e)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"), shall file all necessary information, reports, returns,
and statements regarding the transaction required by the Code including, but not
limited to, the tax reports required pursuant to Section 6045 of the Code.
Further, Escrow Agent agrees to indemnify and hold Purchaser, Seller, and their
respective attorneys and brokers harmless from and against any Losses resulting
from Escrow Agent's failure to file the reports Escrow Agent is required to file
pursuant to this section.
2.3.7 The provisions of this Section 2.3 shall survive the termination of this
Contract, and if not so terminated, the Closing and delivery of the Deed to
Purchaser.
ARTICLE 3...
FEASIBILITY PERIOD
3.1 Feasibility Period. Subject to the terms of Section 3.3 and 3.4 and the
right of Tenants under the Leases, from the Effective Date to and including
March 15, 2004 (the "Feasibility Period"), and thereafter to and including the
Closing Date (provided that this Contract is then in full force and effect),
Purchaser, and its agents, contractors, engineers, surveyors, attorneys, and
employees (collectively, "Consultants") shall have the right from time to time
to enter onto the Property:
3.1.1 To conduct and make any and all customary studies, tests, examinations,
inquiries, and inspections, or investigations (collectively, the "Inspections")
of or concerning the Property (including, without limitation, engineering and
feasibility studies, evaluation of drainage and flood plain, soil tests for
bearing capacity and percolation and surveys, including topographical surveys);
3.1.2 To confirm any and all matters which Purchaser may reasonably desire to
confirm with respect to the Property;
3.1.3 To ascertain and confirm the suitability of the property for
Purchaser's intended use of the Property; and
3.1.4 To review the Materials at Purchaser's sole cost and expense.
3.2 Expiration of Feasibility Period. If the results of any of the matters
referred to in Section 3.1 appear unsatisfactory to Purchaser for any reason or
if Purchaser elects not to proceed with the transaction contemplated by this
Contract for any other reason, or for no reason whatsoever, in Purchaser's sole
and absolute discretion, then Purchaser shall have the right to terminate this
Contract by giving written notice to that effect to Seller and Escrow Agent on
or before 5:00 p.m. (California time) on March 15, 2004. If Purchaser exercises
such right to terminate, this Contract shall terminate and be of no further
force and effect subject to and except for Purchaser's liability pursuant to
Section 3.3 and any other provision of this Contract which survives such
termination, and Escrow Agent shall forthwith return the Initial Deposit to
Purchaser (subject to Purchaser's obligation under Section 3.5.2 to return all
Third-Party Reports and information and Materials provided to Purchaser as a
pre-condition to the return of the Initial Deposit). If Purchaser fails to
provide Seller with written notice of termination prior to the expiration of the
Feasibility Period in strict accordance with the notice provisions of this
Contract, Purchaser's right to terminate under this Section 3.2 shall be
permanently waived and this Contract shall remain in full force and effect, the
Deposit (including both the Initial Deposit and, when delivered in accordance
with Section 2.2.2, the Additional Deposit) shall be non-refundable, and
Purchaser's obligation to purchase the Property shall be non-contingent and
unconditional except only for satisfaction of the conditions expressly stated in
Section 8.1.
3.3 Conduct of Investigation. Purchaser shall not permit any mechanic's or
materialmen's liens or any other liens to attach to the Property by reason of
the performance of any work or the purchase of any materials by Purchaser or any
other party in connection with any Inspections conducted by or for Purchaser.
Purchaser shall give notice to Seller a reasonable time prior to entry onto the
Property and shall permit Seller to have a representative present during all
Inspections conducted at the Property. All information made available by Seller
to Purchaser in accordance with this Contract or obtained by Purchaser in the
course of its Inspections shall be treated as confidential information by
Purchaser, and, prior to the purchase of the Property by Purchaser, Purchaser
shall use its best efforts to prevent its Consultants from divulging such
information to any unrelated third parties except as reasonably necessary to
third parties engaged by Purchaser for the limited purpose of analyzing and
investigating such information for the purpose of consummating the transaction
contemplated by this Contract. The provisions of this Section 3.3 shall survive
the termination of this Contract, and if not so terminated shall survive (except
for the confidentiality provisions of this Section 3.3) the Closing and delivery
of the Deed to Purchaser.
3.4 Purchaser Indemnification.
3.4.1 Purchaser shall indemnify, hold harmless and, if requested by Seller (in
Seller's sole discretion), defend (with counsel approved by Seller) Seller,
together with Seller's affiliates, parent and subsidiary entities, successors,
assigns, partners, managers, members, employees, officers, directors, trustees,
shareholders, counsel, representatives, agents, Property Manager, Regional
Property Manager, and AIMCO (collectively, including Seller, "Seller's
Indemnified Parties"), from and against any and all damages, mechanics' liens,
liabilities, losses, demands, actions, causes of action, claims, costs and
expenses (including reasonable attorneys' fees, including the cost of in-house
counsel and appeals) (collectively, "Losses") arising from or related to
Purchaser's or its Consultant's entry onto the Property, and any Inspections or
other matters performed by Purchaser with respect to the Property during the
Feasibility Period or otherwise (but excluding any liability arising out of the
discovery of any hazardous materials or other substances as long as Purchaser
immediately stops all work upon discovery of such substances and immediately
notifies Seller).
3.4.2 Notwithstanding anything in this Contract to the contrary, Seller shall
have the right, without limitation, to disapprove any and all entries, surveys,
tests (including, without limitation, a Phase II environmental study of the
Property), investigations and other matters that in Seller's reasonable judgment
could result in any injury to the Property or breach of any contract, or expose
Seller to any Losses or violation of applicable law, or otherwise adversely
affect the Property or Seller's interest therein; provided, however, if Seller
disapproves any such investigation, Seller shall reimburse Purchaser for
Purchaser's reasonable, documented out-of-pocket expenses incurred up to the
time of such disapproval (but not to exceed $15,000). Purchaser shall use best
efforts to minimize disruption to Tenants in connection with Purchaser's or its
Consultants' activities pursuant to this Section. No consent by the Seller to
any such activity shall be deemed to constitute a waiver by Seller or assumption
of liability or risk by Seller. Purchaser hereby agrees to restore, at
Purchaser's sole cost and expense, the Property to the same condition existing
immediately prior to Purchaser's exercise of its rights pursuant to this Article
3. Purchaser shall maintain and cause its third party consultants to maintain
(a) casualty insurance and comprehensive public liability insurance with
coverages of not less than $1,000,000.00 for injury or death to any one person
and $3,000,000.00 for injury or death to more than one person and $500,000.00
with respect to property damage, by water or otherwise, and (b) worker's
compensation insurance for all of their respective employees in accordance with
the law of the commonwealth in which the Property is located. As a condition
precedent to Purchaser's entry onto the Property, Purchaser shall deliver proof
of the insurance coverage required pursuant to this Section 3.4.2 to Seller (in
the form of a certificate of insurance) prior to Purchaser's or Purchaser's
Consultants' entry onto the Property. The provisions of this Section 3.4 shall
survive the termination of this Contract, and if not so terminated, the Closing
and delivery of the Deed to Purchaser.
3.5 Property Materials.
3.5.1 Within 5 Business Days after the Effective Date, and to the extent the
same exist and are in Seller's possession or reasonable control (subject to
Section 3.5.2), Seller agrees to deliver to Purchaser the documents set forth on
Schedule 3.5 (the "Materials"). In the alternative, at Seller's option and
within the foregoing 5-day period, Seller may make the same available to
Purchaser on a secure web site (Purchaser agrees that any item to be delivered
by Seller under this Contract shall be deemed delivered to the extent available
to Purchaser on such secured web site). To the extent that Purchaser determines
that any of the Materials have not been made available or delivered to Purchaser
pursuant to this Section 3.5.1, Purchaser shall notify Seller and Seller shall
use commercially reasonable efforts to deliver the same to Purchaser within 5
Business Days after such notification is received by Seller; provided, however,
that under no circumstances will the Feasibility Period be extended and
Purchaser's sole remedy will be to terminate this Contract pursuant to Section
3.2.
3.5.2 In providing such information and Materials to Purchaser, other than
Seller's Representations, Seller makes no representation or warranty, express,
written, oral, statutory, or implied, and all such representations and
warranties are hereby expressly excluded and disclaimed. Any information and
Materials provided by Seller to Purchaser under the terms of this Contract is
for informational purposes only and, together with all Third-Party Reports,
shall be returned by Purchaser to Seller as a condition to return of the Deposit
to Purchaser (if Purchaser is otherwise entitled to such Deposit pursuant to the
terms of this Contract) if this Contract is terminated for any reason. Purchaser
shall not in any way be entitled to rely upon the accuracy of such information
and Materials. Purchaser recognizes and agrees that the Materials and other
documents and information delivered or made available by Seller pursuant to this
Contract may not be complete or constitute all of such documents which are in
Seller's possession or control, but are those that are readily available to
Seller after reasonable inquiry to ascertain their availability. Purchaser
understands that, although Seller will use commercially reasonable efforts to
locate and make available the Materials and other documents required to be
delivered or made available by Seller pursuant to this Contract, Purchaser will
not rely on such Materials or other documents as being a complete and accurate
source of information with respect to the Property, and will instead in all
instances rely exclusively on its own Inspections and Consultants with respect
to all matters which it deems relevant to its decision to acquire, own and
operate the Property.
3.5.3 The provisions of this Section 3.5 shall survive the Closing and delivery
of the Deed to Purchaser. 3.6 Property Contracts. On or before the expiration of
the Feasibility Period, Purchaser may deliver written notice to Seller (the
"Property Contracts Notice") specifying any Property Contracts with respect to
which Purchaser desires to have Seller deliver notices of termination at the
Closing (the "Terminated Contracts"); provided that (a) the effective date of
such termination after Closing shall be subject to the express terms of such
Terminated Contracts, (b) if any such Property Contract cannot by its terms be
terminated, it shall be assumed by Purchaser and not be a Terminated Contract,
and (c) to the extent that any such Terminated Contract requires payment of a
penalty or premium for cancellation, Purchaser shall be solely responsible for
the payment of any such cancellation fees or penalties. If Purchaser fails to
deliver the Property Contracts Notice on or before the expiration of the
Feasibility Period, there shall be no Terminated Contracts and Purchaser shall
assume all Property Contracts at the Closing.
ARTICLE 4...
TITLE
4.1 Title Documents. Within 5 Business Days after the Effective Date, Seller
shall cause to be delivered to Purchaser a standard form commitment for title
insurance ("Title Commitment") for the Property in an amount equal to the
Purchase Price from Title Insurer for a standard coverage policy of insurance
(the "Title Policy") on the most recent standard American Land Title Association
form, together with copies of all instruments identified as exceptions therein
(together with the Title Commitment, referred to herein as the "Title
Documents"). Seller shall be responsible only for payment of the basic premium
for the Title Policy, but only to the extent of the premium due with respect to
the first $9,000,000 of the amount insured and Purchaser shall be responsible
for the amount of the basic premium attributable to the amount of coverage in
excess thereof. Purchaser shall be solely responsible for payment of all other
costs relating to procurement of the Title Commitment, the Title Policy, and any
requested endorsements.
4.2 Survey. Within 3 Business Days after the Effective Date, Seller shall
deliver to Purchaser the currently existing survey of the Property (the
"Existing Survey") (subject to Section 3.5.2); provided, however, Purchaser
shall pay the costs thereof not to exceed $10,500. Purchaser acknowledges and
agrees that delivery of the Existing Survey is subject to Section 3.5.2. If
Purchaser desires a new or updated survey, Purchaser shall request the same from
Seller in writing no later than 5 Business Days after the Effective Date, in
which event Seller shall order such new or updated survey (together with the
Existing Survey, referred to herein as the "Survey") from the surveyor who
prepared the Existing Survey (or from such other surveyor as Seller determines
in its reasonable discretion). Purchaser shall be solely responsible for the
cost and expense of the preparation of any updated or new survey requested
pursuant to the terms of this Section 4.2.
4.3 Objection and Response Process. On or before March 8, 2004 (the "Objection
Deadline"), Purchaser shall give written notice (the "Objection Notice") to the
attorneys for Seller of any matter set forth in the Title Documents or the
Survey to which Purchaser objects (the "Objections"). If Purchaser fails to
tender an Objection Notice on or before the Objection Deadline, Purchaser shall
be deemed to have approved and irrevocably waived any objections to any matters
covered by the Title Documents and the Survey. On or before March 11, 2004 (the
"Response Deadline"), Seller may, in Seller's sole discretion, give Purchaser
notice (the "Response Notice") of those Objections which Seller is willing to
cure, if any. Seller shall be entitled to reasonable adjournments of the Closing
Date to cure the Objections. If Seller fails to deliver a Response Notice by the
Response Deadline, Seller shall be deemed to have elected not to cure or
otherwise resolve any matter set forth in the Objection Notice. If Purchaser is
dissatisfied with the Response Notice, Purchaser may, as its exclusive remedy,
elect by written notice given to Seller on or before the expiration of the
Feasibility Period (the "Final Response Deadline") either (a) to accept the
Title Documents and Survey with resolution, if any, of the Objections as set
forth in the Response Notice (or if no Response Notice is tendered, without any
resolution of the Objections) and without any reduction or abatement of the
Purchase Price, or (b) to terminate this Contract, in which event the Initial
Deposit shall be returned to Purchaser (subject to Purchaser's obligation under
Section 3.5.2 to return all Third-Party Reports and information and Materials
provided to Purchaser as a pre-condition to the return of the Initial Deposit).
If Purchaser fails to give notice to terminate this Contract on or before the
Final Response Deadline, Purchaser shall be deemed to have elected to approve
and irrevocably waived any objections to any matters covered by the Title
Documents or the Survey, subject only to resolution, if any, of the Objections
as set forth in the Response Notice (or if no Response Notice is tendered,
without any resolution of the Objections).
4.4 Permitted Exceptions. The Deed delivered pursuant to this Contract shall be
subject to the following, all of which shall be deemed "Permitted Exceptions":
4.4.1 All matters shown in the Title Documents and the Survey, other than (a)
those Objections, if any, which Seller has agreed to cure pursuant to the
Response Notice under Section 4.3, (b) mechanics' liens and taxes due and
payable with respect to the period preceding Closing, (c) the standard exception
regarding the rights of parties in possession which shall be limited to those
parties in possession pursuant to the Leases, and (d) the standard exception
pertaining to taxes which shall be limited to taxes and assessments payable in
the year in which the Closing occurs and subsequent taxes and assessments;
4.4.2 All Leases;
4.4.3 [Intentionally left blank];
4.4.4 Applicable zoning and governmental regulations and ordinances;
4.4.5 Any defects in or objections to title to the Property, or title
exceptions or encumbrances, arising by, through or under Purchaser; and
4.4.6 The terms and conditions of this Contract.
4.5 Existing Deed of Trust. It is understood and agreed that, whether or not
Purchaser gives an Objection Notice with respect thereto, any deeds of trust
and/or mortgages (including any and all mortgages which secure the Note) against
the Property (whether one or more, the "Deed of Trust ") shall not be deemed
Permitted Exceptions, whether Purchaser gives written notice of such or not, and
shall be paid off, satisfied, discharged and/or cured by Seller at Closing,
provided that the Lender's Fees due in connection with the Loan Payoff shall be
paid by Purchaser, subject to the provisions of Section 2.2.
ARTICLE 5...
CLOSING
5.1 Closing Date. The Closing shall occur on April 30, 2004 (the "Closing Date")
through an escrow with Escrow Agent, whereby the Seller, Purchaser and their
attorneys need not be physically present at the Closing and may deliver
documents by overnight air courier or other means.
5.2 Seller Closing Deliveries. No later than 1 Business Day prior to the Closing
Date, Seller shall deliver to Escrow Agent, each of the following items:
5.2.1 Special Warranty Deed (the "Deed") in the form attached as Exhibit B to
Purchaser, subject to the Permitted Exceptions.
5.2.2 A Bill of Sale in the form attached as Exhibit C.
5.2.3 A General Assignment in the form attached as Exhibit D (the "General
Assignment").
5.2.4 An Assignment of Leases and Security Deposits in the form attached as
Exhibit E (the "Leases Assignment").
5.2.5 A letter in the form attached hereto as Exhibit F prepared by Purchaser
and countersigned by Seller to each of the vendors under the Terminated
Contracts informing them of the termination of such Terminated Contract as of
the Closing Date (subject to any delay in the effectiveness of such termination
pursuant to the express terms of each applicable Terminated Contract) (the
"Vendor Terminations").
5.2.6 A closing statement executed by Seller.
5.2.7 A title affidavit or at Seller's option an indemnity, as applicable, in
the customary form reasonably acceptable to Seller to enable Title Insurer to
delete the standard exceptions to the title insurance policy set forth in this
Contract (other than matters constituting any Permitted Exceptions and matters
which are to be completed or performed post-Closing) to be issued pursuant to
the Title Commitment; provided that such affidavit does not subject Seller to
any greater liability, or impose any additional obligations, other than as set
forth in this Contract; and
5.2.8 A certification of Seller's non-foreign status pursuant to Section 1445 of
the Internal Revenue Code of 1986, as amended.
5.2.9 Resolutions, certificates of good standing, and such other organizational
documents as Title Insurer shall reasonably require evidencing Seller's
authority to consummate this transaction.
5.3 Purchaser Closing Deliveries. No later than 1 Business Day prior to the
Closing Date (except for the balance of the Purchase Price which is to be
delivered at the time specified in Section 2.2.4), Purchaser shall deliver to
the Escrow Agent (for disbursement to Seller upon the Closing) the following
items with respect to the Property being conveyed at such Closing:
5.3.1 The full Purchase Price (with credit for the Deposit), plus or minus the
adjustments or prorations required by this Contract.
5.3.2 A title affidavit (or at Purchaser's option an indemnity) pertaining to
Purchaser's activity on the Property prior to Closing, in the customary form
reasonably acceptable to Purchaser, to enable Title Insurer to delete the
standard exceptions to the title insurance policy set forth in this Contract
(other than matters constituting any Permitted Exceptions and matters which are
to be completed or performed post-Closing) to be issued pursuant to the Title
Commitment; provided that such affidavit does not subject Purchaser to any
greater liability, or impose any additional obligations, other than as set forth
in this Contract.
5.3.3 Any declaration or other statement which may be required to be submitted
to the local assessor with respect to the terms of the sale of the Property.
5.3.4 A closing statement executed by Purchaser.
5.3.5 A countersigned counterpart of the General Assignment.
5.3.6 A countersigned counterpart of the Leases Assignment.
5.3.7 Notification letters to all Tenants prepared and executed by Purchaser in
the form attached hereto as Exhibit G.
5.3.8 The Vendor Terminations. Purchaser shall be solely responsible for
identifying each of the Terminated Contracts (subject to the terms and
conditions of Section 3.6) and addressing and preparing each of the Vendor
Terminations for execution by Purchaser and Seller.
5.3.9 Any cancellation fees or penalties due to any vendor under any Terminated
Contract as a result of the termination thereof.
5.3.10......Resolutions, certificates of good standing, and such other
organizational documents as Title Insurer shall reasonably require evidencing
Purchaser's authority to consummate this transaction.
5.3.11......[Intentionally deleted].
5.3.12......The Lender Fees (subject to reduction from the Purchase Price in
accordance with Section 2.2).
5.4 Closing Prorations and Adjustments.
5.4.1 General. All normal and customarily proratable items, including, without
limitation, collected rents, operating expenses, personal property taxes, other
operating expenses and fees, shall be prorated as of the Closing Date, Seller
being charged or credited, as appropriate, for all of same attributable to the
period up to the Closing Date (and credited for any amounts paid by Seller
attributable to the period on or after the Closing Date, if assumed by
Purchaser) and Purchaser being responsible for, and credited or charged, as the
case may be, for all of same attributable to the period on and after the Closing
Date. Seller shall prepare a proration schedule (the "Proration Schedule") of
the adjustments described in this Section 5.4 prior to Closing. Such adjustments
shall be paid by Purchaser to Seller (if the prorations result in a net credit
to Seller) or by Seller to Purchaser (if the prorations result in a net credit
to Purchaser), by increasing or reducing the cash to be paid by Purchaser at
Closing.
5.4.2 Operating Expenses. All of the operating, maintenance, taxes (other than
real estate taxes, such as rental taxes), and other expenses incurred in
operating the Property that Seller customarily pays, and any other costs
incurred in the ordinary course of business for the management and operation of
the Property, shall be prorated on an accrual basis. Seller shall pay all such
expenses that accrue prior to Closing and Purchaser shall pay all such expenses
that accrue from and after the Closing Date.
5.4.3 Utilities. The final readings and final billings for utilities will be
made if possible as of the Closing Date, in which case Seller shall pay all such
bills as of the Closing Date and no proration shall be made at the Closing with
respect to utility bills. Otherwise, a proration shall be made based upon the
parties' reasonable good faith estimate and a readjustment made within 30 days
after the Closing, if necessary. Seller shall be entitled to the return of any
deposit(s) posted by it with any utility company, and Seller shall notify each
utility company serving the Property to terminate Seller's account, effective as
of noon on the Closing Date.
5.4.4 Real Estate Taxes. Any real estate ad valorem or similar taxes for the
Property, or any installment of assessments payable in installments which
installment is payable in the calendar year of Closing, shall be prorated to the
date of Closing, based upon actual days involved. The proration of real property
taxes or installments of assessments for the tax year in which the Closing
occurs shall be shall be subject to re-adjustment when the actual property taxes
are known; provided, however, neither Purchaser nor Seller shall be liable for
any reproration and payment of less than $2,500.00; provided, further, that the
party seeking reproration must provide written notice to the other party within
30 days after such taxes are finally known, accompanied with a statement and
calculation of reproration; provided, however, that no re-adjustment shall be
made with respect to an increase in real property taxes which are attributable
solely to the occurrence of the sale of the Property to Purchaser pursuant to
this Contract.
5.4.5 Property Contracts. Purchaser shall assume at Closing the obligations
under the Property Contracts assumed by Purchaser, subject to proration of
operating expenses under Section 5.4.2.
5.4.6 Leases.
5.4.6.1 All collected rent (whether fixed monthly rentals,
additional rentals, escalation rentals, retroactive rentals, operating cost
pass-throughs or other sums and charges payable by Tenants under the Leases),
income and expenses from any portion of the Property shall be prorated as of the
Closing Date (prorated for any partial month). Purchaser shall receive all
collected rent and income attributable to dates from and after the Closing Date.
Seller shall receive all collected rent and income attributable to dates prior
to the Closing Date. Notwithstanding the foregoing, no prorations shall be made
in relation to either (a) non-delinquent rents which have not been collected as
of the Closing Date, or (b) delinquent rents existing, if any, as of the Closing
Date (the foregoing (a) and (b) referred to herein as the "Uncollected Rents").
In adjusting for Uncollected Rents, no adjustments shall be made in Seller's
favor for rents which have accrued and are unpaid as of the Closing, but
Purchaser shall pay Seller such accrued Uncollected Rents as and when collected
by Purchaser. Purchaser agrees to bill Tenants of the Property for all
Uncollected Rents and to take reasonable actions to collect Uncollected Rents.
After the Closing, Seller shall continue to have the right, but not the
obligation, in its own name, to demand payment of and to collect Uncollected
Rents owed to Seller by any Tenant, which right shall include, without
limitation, the right to continue or commence legal actions or proceedings
against any Tenant and the delivery of the Leases Assignment shall not
constitute a waiver by Seller of such right. Purchaser agrees to cooperate with
Seller in connection with all efforts by Seller to collect such Uncollected
Rents and to take all steps, whether before or after the Closing Date, as may be
necessary to carry out the intention of the foregoing, including, without
limitation, the delivery to Seller, within 7 days after a written request, of
any relevant books and records (including, without limitation, rent statements,
receipted bills and copies of tenant checks used in payment of such rent), the
execution of any and all consents or other documents, and the undertaking of any
act reasonably necessary for the collection of such Uncollected Rents by Seller;
provided, however, that Purchaser's obligation to cooperate with Seller pursuant
to this sentence shall not obligate Purchaser to terminate any Tenant lease with
an existing Tenant or evict any existing Tenant from the Property, nor shall
Seller have the right to seek to terminate any Tenant Lease or evict any
existing Tenant.
5.4.6.2 At Closing, Purchaser shall receive a credit against
the Purchase Price in an amount equal to the received and unapplied balance of
all cash (or cash equivalent) Tenant Deposits, including, but not limited to,
security, damage or other refundable deposits or required to be paid by any of
the Tenants to secure their respective obligations under the Leases, together,
in all cases, with any interest payable to the Tenants thereunder as may be
required by their respective Tenant Lease or commonwealth law (the "Tenant
Security Deposit Balance"). Any cash (or cash equivalents) held by Seller which
constitute the Tenant Security Deposit Balance shall be retained by Seller in
exchange for the foregoing credit against the Purchase Price and shall not be
transferred by Seller pursuant to this Contract (or any of the documents
delivered at Closing), but the obligation with respect to the Tenant Security
Deposit Balance nonetheless shall be assumed by Purchaser. The Tenant Security
Deposit Balance shall not include any non-refundable deposits or fees paid by
Tenants to Seller, either pursuant to the Leases or otherwise.
5.4.6.3 With respect to operating expenses, taxes, utility
charges, other operating cost pass-throughs, retroactive rental escalations,
sums or charges payable by Tenants under the Tenant Leases, to the extent that
Seller has received as of the Closing payments allocable to periods subsequent
to Closing, the same shall be properly prorated with an adjustment in favor of
Purchaser, and Purchaser shall reserve a credit therefor at Closing. With
respect to any payments received by Purchaser after the Closing allocable to
Seller prior to Closing, Purchaser shall promptly pay the same to Seller.
5.4.7 Existing Loan. On the Closing Date, Seller shall pay (which payment may be
made by Seller out of the proceeds of the Purchase Price) the outstanding
principal balance of the Note together with all interest accrued under the Note
prior to the Closing Date (the "Loan Payoff"). Purchaser shall pay all Lender
Fees (subject to reduction from the Purchase Price in accordance with Section
2.2). Any existing reserves, impounds and other accounts maintained in
connection with the Loan shall be released in Good Funds to Seller at the
Closing unless credited by Lender against the amount due from Seller under the
Note.
5.4.8 Insurance. No proration shall be made in relation to insurance premiums
and insurance policies will not be assigned to Purchaser.
5.4.9 Employees. All of Seller's and Seller's manager's on-site employees shall
have their employment at the Property terminated as of the Closing Date.
5.4.10......Closing Costs. Purchaser shall pay any grantee's (but not
grantor's), sales, use, recordation, gross receipts or similar taxes, any
premiums or fees required to be paid by Purchaser with respect to the Title
Policy pursuant to Section 4.1, and one-half of the customary closing costs of
the Escrow Agent; however, Purchaser shall be responsible for any such taxes
otherwise imposed on Seller that are attributable to the amount in excess of
$9,000,000 of the Purchase Price. Seller shall pay the grantor's tax payable in
the Commonwealth of Virginia (up to $9,000,000 of the Purchase Price), the cost
of recording any instrument required to discharge any liens or encumbrances
against the Property, the base premium for the Title Policy to the extent
required by Section 4.1, and one-half of the customary closing costs of the
Escrow Agent.
5.4.11......Utility Contracts. If Seller has entered into an agreement for the
purchase of electricity, gas or other utility service for the Property or a
group of properties (including the Property) (a "Utility Contract"), or an
affiliate of Seller has entered into a Utility Contract, then, at the option of
Seller, (a) Purchaser either shall assume the Utility Contract with respect to
the Property, or (b) the reasonably calculated costs of the Utility Contract
attributable to the Property from and after the Closing shall be paid to Seller
at the Closing and Seller shall remain responsible for payments under the
Utility Contract.
5.4.12......Survival. The provisions of this Section 5.4 shall survive the
Closing and delivery of the Deed to Purchaser.
5.4.13......Possession. Possession of the Property, subject to the Leases,
Property Contracts which are not identified as Terminated Contracts during the
Feasibility Period (subject to the limitations of Section 3.6), and Permitted
Exceptions, shall be delivered to Purchaser at the Closing upon release from
escrow of all items to be delivered by Purchaser pursuant to Section 5.3,
including, without limitation, the Purchase Price. To the extent reasonably
available to Seller, originals or copies of the Leases and Property Contracts,
lease files, warranties, guaranties, operating manuals, keys to the property,
and Seller's books and records (other than proprietary information) regarding
the Property shall be made available to Purchaser at the Property after the
Closing.
5.5 Post Closing Adjustments. In general, and except as provided in this
Contract or the Closing Documents, Seller shall be entitled to all income, and
shall pay all expenses, relating to the operation of the Property for the period
prior to the Closing Date and Purchaser shall be entitled to all income, and
shall pay all expenses, relating to the operation of the Property for the period
commencing on and after the Closing Date. Purchaser or Seller may request that
Purchaser and Seller undertake to re-adjust any item on the Proration Schedule
(or any item omitted therefrom) in accordance with the provisions of Section 5.4
of this Contract; provided, however, that neither party shall have any
obligation to re-adjust any items (a) after the expiration of 90 days after
Closing, or (b) subject to such 90-day period, unless and until all such items
exceed $5,000.00 in magnitude in aggregate. The provisions of this Section 5.6
shall survive the Closing and delivery of the Deed to Purchaser.
ARTICLE 6...
REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER
6.1 Seller's Representations. Except, in all cases, for any fact, information or
condition disclosed in the Title Documents, the Permitted Exceptions, the
Property Contracts, or the Materials, or which is otherwise known by Purchaser
prior to the Closing, Seller represents and warrants to Purchaser the following
(collectively, the "Seller's Representations") as of the Effective Date and as
of the Closing Date (provided that Purchaser's remedies if any such Seller's
Representations are untrue as of the Closing Date are limited to those set forth
in Section 8.1):
6.1.1 Seller is duly organized, validly existing and in good standing under the
laws of the state of its formation set forth in the initial paragraph of this
Contract; and has or at the Closing shall have the entity power and authority to
sell and convey the Property and to execute the documents to be executed by
Seller and prior to the Closing will have taken as applicable, all corporate,
partnership, limited liability company or equivalent entity actions required for
the execution and delivery of this Contract, and the consummation of the
transactions contemplated by this Contract. The compliance with or fulfillment
of the terms and conditions hereof will not conflict with, or result in a breach
of, the terms, conditions or provisions of, or constitute a default under, any
contract to which Seller is a party or by which Seller is otherwise bound, which
conflict, breach or default would have a material adverse affect on Seller's
ability to consummate the transaction contemplated by this Contract or on the
Property. Subject to Section 8.2.4, this Contract is a valid, binding and
enforceable agreement against Seller in accordance with its terms;
6.1.2 Other than the Leases, the Property is not subject to any written lease
executed by Seller or, to Seller's knowledge, any other possessory interests of
any person;
6.1.3 Seller is not a "foreign person," as that term is used and defined in the
Internal Revenue Code, Section 1445, as amended;
6.1.4 Except for any actions by Seller to evict Tenants under the Leases, to
Seller's knowledge, there are no actions, proceedings, litigation or
governmental investigations or condemnation actions either pending or threatened
against the Property;
6.1.5 To Seller's knowledge, Seller has not received any written notice from a
governmental agency of any uncured material violations of any federal, state,
commonwealth, county or municipal law, ordinance, order, regulation or
requirement affecting the Property; and
6.1.6 To Seller's knowledge, Seller has not received any written notice of any
material default by Seller under any of the Property Contracts that will not be
terminated on the Closing Date.
6.2 AS-IS. Except for Seller's Representations, the Property is expressly
purchased and sold "AS IS," "WHERE IS," and "WITH ALL FAULTS." The Purchase
Price and the terms and conditions set forth herein are the result of
arm's-length bargaining between entities familiar with transactions of this
kind, and said price, terms and conditions reflect the fact that Purchaser shall
have the benefit of, and is not relying upon, any information provided by Seller
or Broker statements, representations or warranties, express or implied, made by
or enforceable directly against Seller or Broker, including, without limitation,
any relating to the value of the Property, the physical or environmental
condition of the Property, any state, federal, county or local law, ordinance,
order or permit; or the suitability, compliance or lack of compliance of the
Property with any regulation, or any other attribute or matter of or relating to
the Property (other than any covenants of title contained in the Deed conveying
the Property and Seller's Representations). Purchaser agrees that Seller shall
not be responsible or liable to Purchaser for any defects, errors or omissions,
or on account of any conditions affecting the Property. Purchaser, its
successors and assigns, and anyone claiming by, through or under Purchaser,
hereby fully releases Seller's Indemnified Parties from, and irrevocably waives
its right to maintain, any and all claims and causes of action that it or they
may now have or hereafter acquire against Seller's Indemnified Parties with
respect to any and all Losses arising from or related to any defects, errors,
omissions or other conditions affecting the Property. Purchaser represents and
warrants that, as of the date hereof and as of the Closing Date, it has and
shall have reviewed and conducted such independent analyses, studies (including,
without limitation, environmental studies and analyses concerning the presence
of lead, asbestos, PCBs and radon in and about the Property), reports,
investigations and inspections as it deems appropriate in connection with the
Property. If Seller provides or has provided any documents, summaries, opinions
or work product of consultants, surveyors, architects, engineers, title
companies, governmental authorities or any other person or entity with respect
to the Property, including, without limitation, the offering prepared by Broker,
Purchaser and Seller agree that Seller has done so or shall do so only for the
convenience of both parties, Purchaser shall not rely thereon and the reliance
by Purchaser upon any such documents, summaries, opinions or work product shall
not create or give rise to any liability of or against Seller's Indemnified
Parties. Purchaser shall rely only upon any title insurance obtained by
Purchaser with respect to title to the Property. Purchaser acknowledges and
agrees that no representation has been made and no responsibility is assumed by
Seller with respect to current and future applicable zoning or building code
requirements or the compliance of the Property with any other laws, rules,
ordinances or regulations, the financial earning capacity or expense history of
the Property, the continuation of contracts, continued occupancy levels of the
Property, or any part thereof, or the continued occupancy by tenants of any
Leases or, without limiting any of the foregoing, occupancy at Closing. Prior to
Closing, Seller shall have the right, but not the obligation, to enforce its
rights against any and all Property occupants, guests or tenants. Purchaser
agrees that the departure or removal, prior to Closing, of any of such guests,
occupants or tenants shall not be the basis for, nor shall it give rise to, any
claim on the part of Purchaser, nor shall it affect the obligations of Purchaser
under this Contract in any manner whatsoever; and Purchaser shall close title
and accept delivery of the Deed with or without such tenants in possession and
without any allowance or reduction in the Purchase Price under this Contract.
Purchaser hereby releases Seller from any and all claims and liabilities
relating to the foregoing matters. The provisions of this Section 6.2 shall
survive the Closing and delivery of the Deed to Purchaser.
6.3 Survival of Seller's Representations. Seller and Purchaser agree that
Seller's Representations shall survive Closing for a period of 12 months (the
"Survival Period"). Seller shall have no liability after the Survival Period
with respect to Seller's Representations contained herein except to the extent
that Purchaser has requested arbitration against Seller during the Survival
Period for breach of any of Seller's Representations. Under no circumstances
shall Seller be liable to Purchaser for more than $360,000 (the "Liability Cap")
in any individual instance or in the aggregate for all breaches of Seller's
Representations, nor shall Purchaser be entitled to bring any claim for a breach
of Seller's Representations unless and until the claim for damage by Purchaser
exceeds $5,000. In the event that Seller breaches any representation contained
in Section 6.1 and Purchaser had knowledge of such breach prior to the Closing
Date, Purchaser shall be deemed to have waived any right of recovery, and Seller
shall not have any liability in connection therewith.
6.4 Definition of Seller's Knowledge. Any representations and warranties made
"to the knowledge of Seller" shall not be deemed to imply any duty of inquiry.
For purposes of this Contract, the term Seller's "knowledge" shall mean and
refer only to actual knowledge of the Designated Representative of the Seller
and shall not be construed to refer to the knowledge of any other partner,
officer, director, agent, employee or representative of the Seller, or any
affiliate of the Seller, or to impose upon such Designated Representative any
duty to investigate the matter to which such actual knowledge or the absence
thereof pertains, or to impose upon such Designated Representative any
individual personal liability. As used herein, the term Designated
Representative shall refer to Regina Harris who is the Regional Property Manager
handling this Property (the "Regional Property Manager").
6.5 Representations And Warranties Of Purchaser. For the purpose of inducing
Seller to enter into this Contract and to consummate the sale and purchase of
the Property in accordance herewith, Purchaser represents and warrants to Seller
the following as of the Effective Date and as of the Closing Date:
6.5.1 Purchaser is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of California.
6.5.2 Purchaser, acting through any of its or their duly empowered and
authorized officers or members, has all necessary entity power and authority to
own and use its properties and to transact the business in which it is engaged,
and has full power and authority to enter into this Contract, to execute and
deliver the documents and instruments required of Purchaser herein, and to
perform its obligations hereunder; and no consent of any of Purchaser's
partners, directors, officers or members are required to so empower or authorize
Purchaser. The compliance with or fulfillment of the terms and conditions hereof
will not conflict with, or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, any contract to which Purchaser is
a party or by which Purchaser is otherwise bound, which conflict, breach or
default would have a material adverse affect on Purchaser's ability to
consummate the transaction contemplated by this Contract. This Contract is a
valid, binding and enforceable agreement against Purchaser in accordance with
its terms.
6.5.3 No pending or, to the knowledge of Purchaser, threatened litigation exists
which if determined adversely would restrain the consummation of the
transactions contemplated by this Contract or would declare illegal, invalid or
non-binding any of Purchaser's obligations or covenants to Seller.
6.5.4 Other than Seller's Representations, Purchaser has not relied on any
representation or warranty made by Seller or any representative of Seller
(including, without limitation, Broker) in connection with this Contract and the
acquisition of the Property.
6.5.5 The Broker and its affiliates do not, and will not at the Closing, have
any direct or indirect legal, beneficial, economic or voting interest in
Purchaser (or in an assignee of Purchaser, which pursuant to Section 13.3,
acquires the Property at the Closing), nor has Purchaser or any affiliate of
Purchaser granted (as of the Effective Date or the Closing Date) the Broker or
any of its affiliates any right or option to acquire any direct or indirect
legal, beneficial, economic or voting interest in Purchaser.
The provisions of this Section 6.5 shall survive the Closing and delivery
of the Deed to Purchaser.
ARTICLE 7...
OPERATION OF THE PROPERTY
7.1 Leases and Property Contracts. During the period of time from the Effective
Date to the Closing Date, in the ordinary course of business Seller may enter
into new Property Contracts, new Leases, renew existing Leases or modify,
terminate or accept the surrender or forfeiture of any of the Leases, modify any
Property Contracts, or institute and prosecute any available remedies for
default under any Lease or Property Contract without first obtaining the written
consent of Purchaser; provided, however, Seller agrees that any such new
Property Contracts or any new or renewed Leases shall not have a term in excess
of 1 year (or such longer period of time for which such Property Contracts or
Leases are entered into by Seller in the ordinary course of its operation of the
Property) without the prior written consent of Purchaser, which consent shall
not be unreasonably withheld, conditioned or delayed.
7.2 General Operation of Property. Except as specifically set forth in this
Article 7, Seller shall operate the Property after the Effective Date in the
ordinary course of business, and except as necessary in the Seller's sole
discretion to address (a) any life or safety issue at the Property or (b) any
other matter which in Seller's reasonable discretion materially adversely
affecting the use, operation or value of the Property, Seller will not make any
material alterations to the Property or remove any material Fixtures and
Tangible Personal Property without the prior written consent of Purchaser which
consent shall not be unreasonably withheld, denied or delayed.
7.3 Liens. Other than utility easements and temporary construction easements
granted by Seller in the ordinary course of business, Seller covenants that it
will not voluntarily create or cause any lien or encumbrance to attach to the
Property between the Effective Date and the Closing Date (other than Leases and
Property Contracts as provided in Section 7.1) unless Purchaser approves such
lien or encumbrance, which approval shall not be unreasonably withheld or
delayed. If Purchaser approves any such subsequent lien or encumbrance, the same
shall be deemed a Permitted Encumbrance for all purposes hereunder.
ARTICLE 8...
CONDITIONS PRECEDENT TO CLOSING
8.1 Purchaser's Conditions to Closing. Purchaser's obligation to close under
this Contract, shall be subject to and conditioned upon the fulfillment of each
and all of the following conditions precedent:
8.1.1 All of the documents required to be delivered by Seller to Purchaser at
the Closing pursuant to the terms and conditions hereof shall have been
delivered;
8.1.2 Each of the representations, warranties and covenants of Seller contained
herein shall be true in all material respects as of the Closing Date;
8.1.3 Seller shall have complied with, fulfilled and performed in all material
respects each of the covenants, terms and conditions to be complied with,
fulfilled or performed by Seller hereunder; and
8.1.4 Neither Seller nor Seller's general partner shall be a debtor in any
bankruptcy proceeding nor shall have been in the last 6 months a debtor in any
bankruptcy proceeding.
8.1.5 Seller has, on or before April 16, 2004, notified Purchaser that Seller
has received the consents required under Section 8.2.4(a) to consummate the
transactions contemplated by this Agreement.
Notwithstanding anything to the contrary, there are no other conditions on
Purchaser's obligation to Close except as expressly set forth in this Section
8.1. If any condition set forth in Sections 8.1.1, 8.1.3 or 8.1.4 is not met,
Purchaser may (a) waive any of the foregoing conditions and proceed to Closing
on the Closing Date with no offset or deduction from the Purchase Price, or (b)
if such failure constitutes a default by Seller, exercise any of its remedies
pursuant to Section 10.2. If the condition set forth in Section 8.1.2 is not
met, Purchaser may, as its sole and exclusive remedy, (i) notify Seller of
Purchaser's election to terminate this Contract and receive a return of the
Deposit from the Escrow Agent, or (ii) waive such condition and proceed to
Closing on the Closing Date with no offset or deduction from the Purchase Price.
If the condition stated in Section 8.1.5 is not satisfied by April 16, 2004,
Purchaser may, on or before April 23, 2004, as its sole and exclusive remedy,
terminate this Agreement, recover the Deposit and recover its direct and actual
out-of-pocket expenses and costs (documented by paid invoices to third parties)
in connection with this transaction, but not to exceed $20,000 in aggregate.
8.2 Seller's Conditions to Closing. Without limiting any of the rights of Seller
elsewhere provided for in this Contract, Seller's obligation to close with
respect to conveyance of the Property under this Contract shall be subject to
and conditioned upon the fulfillment of each and all of the following conditions
precedent:
8.2.1 All of the documents and funds required to be delivered by Purchaser to
Seller at the Closing pursuant to the terms and conditions hereof shall have
been delivered;
8.2.2 Each of the representations, warranties and covenants of Purchaser
contained herein shall be true in all material respects as of the Closing Date;
8.2.3 Purchaser shall have complied with, fulfilled and performed in all
material respects each of the covenants, terms and conditions to be complied
with, fulfilled or performed by Purchaser hereunder; and
8.2.4 Seller shall have received all consents and approvals to the consummation
of the transactions contemplated hereby (a) of Seller's partners, members,
managers, shareholders or directors to the extent required by Seller's (or
Seller's affiliates') organizational documents, or (b) that are required by law.
In the event that this Contract is terminated because Seller is unable to obtain
the consents stated in Section 8.2.4.(a), then Purchaser's sole rights and
remedies are as stated in Section 8.1 for a failure of condition stated in
Section 8.1.5.
8.2.5 [Intentionally deleted.]
If any of the foregoing conditions to Seller's obligation to close with
respect to conveyance of the Property under this Contract are not met, Seller
may (a) waive any of the foregoing conditions and proceed to Closing on the
Closing Date, or (b) terminate this Contract, and, if such failure constitutes a
default by Purchaser, exercise any of its remedies under Section 10.1.
ARTICLE 9...
BROKERAGE
9.1 Indemnity. Seller represents and warrants to Purchaser that it has dealt
only with Marcus & Millichap having an office at 1250 24th Street, N.W., Suite
750, Attention: C. Richard Struse, Washington, DC 20037 ("Broker"), in
connection with this Contract. Seller and Purchaser each represents and warrants
to the other that, other than Broker, it has not dealt with or utilized the
services of any other real estate broker, sales person or finder in connection
with this Contract, and each party agrees to indemnify, hold harmless, and, if
requested in the sole and absolute discretion of the indemnitee, defend (with
counsel approved by the indemnitee) the other party from and against all Losses
relating to brokerage commissions and finder's fees arising from or attributable
to the acts or omissions of the indemnifying party. The provisions of this
Section 9.1 shall survive the termination of this Contract, and if not so
terminated, the Closing and delivery of the Deed to Purchaser.
9.2 Broker Commission. If the Closing occurs, Seller agrees to pay Broker a
commission according to the terms of a separate contract. Broker shall not be
deemed a party or third party beneficiary of this Contract.
9.3 Broker Signature Page. As a condition to Seller's obligation to pay the
commission pursuant to Section 9.2, Broker shall execute the signature page for
Broker attached hereto solely for purposes of confirming the matters set forth
therein; provided, however, that (a) Broker's signature hereon shall not be a
prerequisite to the binding nature of this Contract on Purchaser and Seller, and
the same shall become fully effective upon execution by Purchaser and Seller,
and (b) the signature of Broker will not be necessary to amend any provision of
this Contract.
9.4 Purchaser's Consultant. Seller agrees, at the request of Purchaser, to pay
Arroyo and Coates a consulting fee in the amount of $300,000 from the Purchase
Price, if and only if the Closing occurs.
ARTICLE 10..
DEFAULTS AND REMEDIES
10.1 Purchaser Default. If Purchaser defaults in its obligations hereunder to
(a) deliver the Initial Deposit or Additional Deposit (or any other deposit or
payment required of Purchaser hereunder), (b) deliver to the Seller the
deliveries specified under Section 5.3 on the date required thereunder, or (c)
deliver the Purchase Price at the time required by Section 2.2.4 and close on
the purchase of the Property on the Closing Date, then, immediately and without
notice or cure, Purchaser shall forfeit the Deposit, and the Escrow Agent shall
deliver the Deposit to Seller, and neither party shall be obligated to proceed
with the purchase and sale of the Property. If, Purchaser defaults in any of its
other representations, warranties or obligations under this Contract, and such
default continues for more than 10 days after written notice from Seller, then
Purchaser shall forfeit the Deposit, and the Escrow Agent shall deliver the
Deposit to Seller, and neither party shall be obligated to proceed with the
purchase and sale of the Property. The Deposit is liquidated damages and
recourse to the Deposit is, except for Purchaser's indemnity and confidentiality
obligations hereunder, Seller's sole and exclusive remedy for Purchaser's
failure to perform its obligation to purchase the Property or breach of a
representation or warranty. Seller expressly waives the remedies of specific
performance and additional damages for such default by Purchaser. SELLER AND
PURCHASER ACKNOWLEDGE THAT SELLER'S DAMAGES WOULD BE DIFFICULT TO DETERMINE, AND
THAT THE DEPOSIT IS A REASONABLE ESTIMATE OF SELLER'S DAMAGES RESULTING FROM A
DEFAULT BY PURCHASER IN ITS OBLIGATION TO PURCHASE THE PROPERTY. SELLER AND
PURCHASER FURTHER AGREE THAT THIS SECTION 10.1.1 IS INTENDED TO AND DOES
LIQUIDATE THE AMOUNT OF DAMAGES DUE SELLER, AND SHALL BE SELLER'S EXCLUSIVE
REMEDY AGAINST PURCHASER, BOTH AT LAW AND IN EQUITY, ARISING FROM OR RELATED TO
A BREACH BY PURCHASER OF ITS OBLIGATION TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED BY THIS CONTRACT, OTHER THAN WITH RESPECT TO PURCHASER'S INDEMNITY
AND CONFIDENTIALITY OBLIGATIONS HEREUNDER.
10.2 Seller Default. If Seller, prior to the Closing, defaults in its
representations, warranties, covenants, or obligations under this Contract,
including to sell the Property as required by this Contract and such default
continues for more than 10 days after written notice from Purchaser, then, at
Purchaser's election and as Purchaser's sole and exclusive remedy, either (A)
this Contract shall terminate, and all payments and things of value, including
the Deposit, provided by Purchaser hereunder shall be returned to Purchaser
(subject to Purchaser's obligation under Section 3.5.2 to return all Third-Party
Reports and information and Materials provided to Purchaser as a pre-condition
to the return of the Deposit) and Purchaser may recover, as its sole recoverable
damages (but without limiting its right to receive a refund of the Deposit), its
direct and actual out-of-pocket expenses and costs (documented by paid invoices
to third parties) in connection with this transaction, which damages shall not
exceed $20,000 in aggregate, or (B) Purchaser may seek specific performance of
Seller's obligation to deliver the Deed pursuant to this Contract (but not
damages). Purchaser agrees that it shall promptly deliver to Seller an
assignment of all of Purchaser's right, title and interest in and to (together
with possession of) all plans, studies, surveys, reports, and other materials
paid for with the out-of-pocket expenses reimbursed by Seller pursuant to the
foregoing sentence. SELLER AND PURCHASER FURTHER AGREE THAT THIS SECTION 10.2 IS
INTENDED TO AND DOES LIMIT THE AMOUNT OF DAMAGES DUE PURCHASER AND THE REMEDIES
AVAILABLE TO PURCHASER FOR A DEFAULT BY SELLER PRIOR TO CLOSING, AND SHALL BE
PURCHASER'S EXCLUSIVE REMEDY AGAINST SELLER, BOTH AT LAW AND IN EQUITY ARISING
FROM OR RELATED TO A BREACH BY SELLER OF ITS REPRESENTATIONS, WARRANTIES, OR
COVENANTS PRIOR TO CLOSING OR ITS OBLIGATION TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED BY THIS CONTRACT. UNDER NO CIRCUMSTANCES, WHETHER BEFORE OR AFTER
CLOSING, MAY PURCHASER SEEK OR BE ENTITLED TO RECOVER ANY SPECIAL,
CONSEQUENTIAL, PUNITIVE, SPECULATIVE OR INDIRECT DAMAGES, ALL OF WHICH PURCHASER
SPECIFICALLY WAIVES, FROM SELLER FOR ANY BREACH BY SELLER, OF ITS
REPRESENTATIONS, WARRANTIES OR COVENANTS; PROVIDED, HOWEVER, THAT, TO THE EXTENT
INCLUDED WITHIN THE LIMIT ON DAMAGES RECOVERABLE UNDER THE LIABILITY CAP STATED
IN SECTION 6.3, PURCHASER MAY, DURING THE SURVIVAL PERIOD, SEEK TO PROVE AND
RECOVER INDIRECT, CONSEQUENTIAL AND SPECIAL DAMAGES RESULTING FROM A BREACH OF
SELLER'S REPRESENTATIONS. PURCHASER SPECIFICALLY WAIVES THE RIGHT TO FILE ANY
LIS PENDENS OR ANY LIEN AGAINST THE PROPERTY UNLESS AND UNTIL IT HAS IRREVOCABLY
ELECTED TO SEEK SPECIFIC PERFORMANCE OF THIS CONTRACT AND HAS FILED AN ACTION
SEEKING SUCH REMEDY.
ARTICLE 11..
RISK OF LOSS OR CASUALTY
11.1 Major Damage. In the event that the Property is damaged or destroyed by
fire or other casualty prior to Closing, and the cost of repair is more than
$300,000, then Seller shall have no obligation to repair such damage or
destruction and shall notify Purchaser in writing of such damage or destruction
(the "Damage Notice"). Within 10 days after Purchaser's receipt of the Damage
Notice, Purchaser may elect at its option to terminate this Contract by
delivering written notice to Seller. In the event Purchaser fails to terminate
this Contract within the foregoing 10-day period, this transaction shall be
closed in accordance with the terms of this Contract for the full Purchase Price
notwithstanding any such damage or destruction and Purchaser shall receive all
insurance proceeds pertaining thereto (plus a credit against the Purchase Price
in the amount of any deductible payable by Seller in connection therewith) at
Closing.
11.2 Minor Damage. In the event that the Property is damaged or destroyed by
fire or other casualty prior to the Closing, and the cost of repair is less than
$300,000, this transaction shall be closed in accordance with the terms of this
Contract, notwithstanding the damage or destruction; provided, however, Seller
shall make such repairs to the extent of any recovery from insurance carried on
the Property if they can be reasonably effected before the Closing. Subject to
Section 11.3, if Seller is unable to effect such repairs, then Purchaser shall
receive all insurance proceeds pertaining thereto (plus a credit against the
Purchase Price in the amount of any deductible payable by Seller in connection
therewith) at Closing.
11.3 Repairs. To the extent that Seller elects to commence any repair,
replacement or restoration of the Property prior to Closing, then Seller shall
be entitled to receive and apply available insurance proceeds to any portion of
such repair, replacement or restoration completed or installed prior to Closing,
with Purchaser being responsible for completion of such repair, replacement or
restoration after Closing from the balance of any available insurance proceeds.
The provisions of this Section 11.3 shall survive the Closing and delivery of
the Deed to Purchaser.
ARTICLE 12..
EMINENT DOMAIN
12.1 Eminent Domain. In the event that, at the time of Closing, any material
part of the Property is (or previously has been) acquired, or is about to be
acquired, by any governmental agency by the powers of eminent domain or transfer
in lieu thereof (or in the event that at such time there is any notice of any
such acquisition or intent to acquire by any such governmental agency),
Purchaser shall have the right, at Purchaser's option, to terminate this
Contract by giving written notice within 10 days after Purchaser's receipt from
Seller of notice of the occurrence of such event, and if Purchaser so terminates
this Contract shall recover the Deposit hereunder (subject to Purchaser's
obligation under Section 3.5.2 to return all Third-Party Reports and information
and Materials provided to Purchaser as a pre-condition to the return of the
Deposit). If Purchaser fails to terminate this Contract within such 10-day
period, this transaction shall be closed in accordance with the terms of this
Contract for the full Purchase Price and Purchaser shall receive the full
benefit of any condemnation award. It is expressly agreed between the parties
hereto that this section shall in no way apply to customary dedications for
public purposes which may be necessary for the development of the Property.
ARTICLE 13..
MISCELLANEOUS
13.1 Binding Effect of Contract. This Contract shall not be binding on either
party until executed by both Purchaser and Seller. As provided in Sections 2.3.5
and Section 9.3, above, neither Escrow Agent's nor Broker's execution of this
Contract shall not be a prerequisite to its effectiveness.
13.2 Exhibits And Schedules. All Exhibits and Schedules, whether or not annexed
hereto, are a part of this Contract for all purposes.
13.3 Assignability. This Contract is not assignable by Purchaser without first
obtaining the prior written approval of the Seller, except that Purchaser may
assign this Contract to one or more entities so long as (a) Purchaser is an
affiliate of the purchasing entity(ies), and Purchaser is not released from its
liability hereunder, (b) if Purchaser is not an affiliate of the purchasing
entity(ies) then Seller has consented in its reasonable discretion and Purchaser
is not released from its liability hereunder, or (c) if Purchaser is not an
affiliate of the purchasing entity(ies), then such purchasing entities are
affiliates of David Gustafson, Eric Wilcox and/or Ken Meislin, are using the
transaction for purposes of a Section 1031 Exchange, and Purchaser is not
released from liability hereunder. As used herein, an affiliate is a person or
entity controlled by, under common control with, or controlling another person
or entity.
13.4 Binding Effect. Subject to Section 13.3, this Contract shall be binding
upon and inure to the benefit of Seller and Purchaser, and their respective
successors, heirs and permitted assigns.
13.5 Captions. The captions, headings, and arrangements used in this Contract
are for convenience only and do not in any way affect, limit, amplify, or modify
the terms and provisions hereof.
13.6 Number And Gender Of Words. Whenever herein the singular number is used,
the same shall include the plural where appropriate, and words of any gender
shall include each other gender where appropriate.
13.7 Notices. All notices, demands, requests and other communications required
or permitted hereunder shall be in writing, and shall be (a) personally
delivered with a written receipt of delivery; (b) sent by a nationally
recognized overnight delivery service requiring a written acknowledgement of
receipt or providing a certification of delivery or attempted delivery; (c) sent
by certified or registered mail, return receipt requested, or (d) sent by
confirmed facsimile transmission with an original copy thereof transmitted to
the recipient by one of the means described in subsections (a) through (c) no
later than 3 Business Days thereafter. All notices shall be deemed effective
when actually delivered as documented in a delivery receipt; provided, however,
that if the notice was sent by overnight courier or mail as aforesaid and is
affirmatively refused or cannot be delivered during customary business hours by
reason of the absence of a signatory to acknowledge receipt, or by reason of a
change of address with respect to which the addressor did not have either
knowledge or written notice delivered in accordance with this paragraph, then
the first attempted delivery shall be deemed to constitute delivery. Each party
shall be entitled to change its address for notices from time to time by
delivering to the other party notice thereof in the manner herein provided for
the delivery of notices. All notices shall be sent to the addressee at its
address set forth following its name below:
......To Purchaser:
......Jackson Square Properties, LLC
......500 Washington Street, Suite 700
......San Francisco, California 94111
......Attention: Curtis Gardner and Thomas Coates
......Telephone: 415-445-7800
......Facsimile: 415-544-9134 AND 415-544-9135
......with copy to:
......Holland & Knight, LLP
......10 St. James Avenue
......Boston, MA 02116
......Attention: John P. O'Neill
......Phone: 617-305-2011
......Fax: 617-523-6850
......To Seller:
c/o AIMCO
4582 South Ulster Street Parkway
Suite 1100
Denver, Colorado 80237
Attention: Patrick Slavin and Kris Vercauteren
Telephone: 303-691-4340
Facsimile: 303-300-3282
......And:
c/o AIMCO
4582 South Ulster Street Parkway
Suite 1100
Denver, Colorado 80237
Attention: Mr. Harry Alcock
Telephone: 303-691-4344
Facsimile: 303-300-3282
......with copy to:
Chad Asarch, Esq.
......Vice President and Assistant General Counsel
......AIMCO
4582 South Ulster Street Parkway
Suite 1100
Denver, Colorado 80237
......Telephone: 303-691-4303
Facsimile: 303-300-3260
......and a copy to:
......Brownstein Hyatt & Farber, P.C.
......410 17th Street, 22nd Floor
......Denver, Colorado 80202
......Attention: Gary M. Reiff, Esq.
......Telephone: 303-223-1100
......Facsimile: 303-223-1111
Any notice required hereunder to be delivered to the Escrow Agent shall be
delivered in accordance with above provisions as follows:
......Fidelity National Title Company
......1900 West Loop South, Suite 650
......Houston, Texas 77027
......Attention: Lolly Avant, National Commercial Closing Specialist
......Telephone: 800-879-1672
Unless specifically required to be delivered to the Escrow Agent pursuant
to the terms of this Contract, no notice hereunder must be delivered to the
Escrow Agent in order to be effective so long as it is delivered to the other
party in accordance with the above provisions.
13.8 Governing Law And Venue. The laws of the Commonwealth of Virginia shall
govern the validity, construction, enforcement, and interpretation of this
Contract, unless otherwise specified herein except for the conflict of laws
provisions thereof. Subject to Section 13.25, all claims, disputes and other
matters in question arising out of or relating to this Contract, or the breach
thereof, shall be decided by proceedings instituted and litigated in a court of
competent jurisdiction in the commonwealth in which the Property is situated,
and the parties hereto expressly consent to the venue and jurisdiction of such
court.
13.9 Entire Agreement. This Contract embodies the entire Contract between the
parties hereto concerning the subject matter hereof and supersedes all prior
conversations, proposals, negotiations, understandings and Contracts, whether
written or oral.
13.10 Amendments. This Contract shall not be amended, altered, changed,
modified, supplemented or rescinded in any manner except by a written contract
executed by all of the parties; provided, however, that, (a) as provided in
Section 2.3.5 above, the signature of the Escrow Agent shall not be required as
to any amendment of this Contract other than an amendment of Section 2.3, and
(b) as provided in Section 9.3, above, the signature of the Broker shall not be
required as to any amendment of this Contract.
13.11 Severability. In the event that any part of this Contract shall be held to
be invalid or unenforceable by a court of competent jurisdiction, such provision
shall be reformed, and enforced to the maximum extent permitted by law. If such
provision cannot be reformed, it shall be severed from this Contract and the
remaining portions of this Contract shall be valid and enforceable.
13.12 Multiple Counterparts/Facsimile Signatures. This Contract may be executed
in a number of identical counterparts. This Contract may be executed by
facsimile signatures which shall be binding on the parties hereto, with original
signatures to be delivered as soon as reasonably practical thereafter.
13.13 Construction. No provision of this Contract shall be construed in favor
of, or against, any particular party by reason of any presumption with respect
to the drafting of this Contract; both parties, being represented by counsel,
having fully participated in the negotiation of this instrument.
13.14 Confidentiality. Purchaser shall not disclose the terms and conditions
contained in this Contract and shall keep the same confidential, provided that
Purchaser may disclose the terms and conditions of this Contract (a) as required
by law, (b) to consummate the terms of this Contract, or any financing relating
thereto, or (c) to Purchaser's or Seller's lenders, attorneys and accountants.
Any information and Materials provided by Seller to Purchaser hereunder are
confidential and Purchaser shall be prohibited from making such information
public to any other person or entity other than its agents and legal
representatives, without Seller's prior written authorization, which may be
granted or denied in Seller's sole discretion. Notwithstanding the provisions of
Section 13.9, Purchaser agrees that the covenants, restrictions and agreements
of Purchaser contained in any confidentiality agreement executed by Purchaser
prior to the Effective Date shall survive the execution of this Contract and
shall not be superceded hereby.
13.15 Time Of The Essence. It is expressly agreed by the parties hereto that
time is of the essence with respect to this Contract.
13.16 Waiver. No delay or omission to exercise any right or power accruing upon
any default, omission, or failure of performance hereunder shall impair any
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. No waiver, amendment, release, or modification of this Contract shall
be established by conduct, custom, or course of dealing and all waivers must be
in writing and signed by the waiving party.
13.17 Attorneys Fees. In the event either party hereto commences litigation or
arbitration against the other to enforce its rights hereunder, the prevailing
party in such litigation shall be entitled to recover from the other party its
reasonable attorneys' fees and expenses incidental to such litigation and
arbitration, including the cost of in-house counsel and any appeals.
13.18 Time Periods. Should the last day of a time period fall on a weekend or
legal holiday, the next Business Day thereafter shall be considered the end of
the time period.
13.19 1031 Exchange. Seller and Purchaser acknowledge and agree that the
purchase and sale of the Property may be part of a tax-free exchange under
Section 1031 (a "Section 1031 Exchange") of the Code for either Purchaser or
Seller. Each party hereby agrees to take all reasonable steps on or before the
Closing Date to facilitate such exchange if requested by the other party,
provided that (a) no party making such accommodation shall be required to
acquire any substitute property, (b) such exchange shall not affect the
representations, warranties, liabilities and obligations of the parties to each
other under this Contract, (c) no party making such accommodation shall incur
any additional cost, expense or liability in connection with such exchange
(other than expenses of reviewing and executing documents required in connection
with such exchange), and (d) no dates in this Contract will be extended as a
result thereof. Notwithstanding anything to the contrary contained in the
foregoing, if Seller so elects to close the transfer of the Property as an
exchange, then (i) Seller, at its sole option, may delegate its obligations to
transfer the Property under this Contract, and may assign its rights to receive
the Purchase Price from Purchaser, to a deferred exchange intermediary (an
"Intermediary") or to an exchange accommodation titleholder, as the case may be;
(ii) such delegation and assignment shall in no way reduce, modify or otherwise
affect the obligations of Seller pursuant to this Contract; (iii) Seller shall
remain fully liable for its obligations under this Contract as if such
delegation and assignment shall not have taken place; (iv) Intermediary or
exchange accommodation titleholder, as the case may be, shall have no liability
to Purchaser; and (v) the closing of the transfer of the Property to Purchaser
shall be undertaken by direct deed from Seller (or, if applicable, from other
affiliates of Seller whom Seller will cause to execute such deeds) to Purchaser
or to exchange accommodation titleholder, as the case may be. Notwithstanding
anything to the contrary contained in the foregoing, if Purchaser so elects to
close the acquisition of the Property as an exchange, then (i) Purchaser, at its
sole option, may delegate its obligations to acquire the Property under this
Contract, and may assign its rights to receive the Property from Seller, to an
Intermediary or to an exchange accommodation titleholder, as the case may be;
(ii) such delegation and assignment shall in no way reduce, modify or otherwise
affect the obligations of Purchaser pursuant to this Contract; (iii) Purchaser
shall remain fully liable for its obligations under this Contract as if such
delegation and assignment shall not have taken place; (iv) Intermediary or
exchange accommodation titleholder, as the case may be, shall have no liability
to Seller; and (v) the closing of the acquisition of the Property by Purchaser
or the exchange accommodation titleholder, as the case may be, shall be
undertaken by direct deed from Seller (or, if applicable, from other affiliates
of Seller whom Seller will cause to execute such deeds) to Purchaser (or to
exchange accommodation titleholder, as the case may be).
13.20 No Personal Liability of Officers, Trustees or Directors of Seller's
Partners. Purchaser acknowledges that this Contract is entered into by Seller
which is a California limited partnership, and Purchaser agrees that none of
Seller's Indemnified Parties shall have any personal liability under this
Contract or any document executed in connection with the transactions
contemplated by this Contract.
13.21 No Exclusive Negotiations. Seller shall have the right, at all times prior
to the expiration of the Feasibility Period (but not after the expiration of the
Feasibility Period if this Contract remains in full force and effect), to
solicit backup offers and enter into discussions, negotiations, or any other
communications concerning or related to the sale of the Property with any
third-party; provided, however, that such communications are subject to the
terms of this Contract, and that Seller shall not enter into any contract or
binding Contract with a third-party for the sale of the Property unless such
Contract is contingent on the termination of this Contract without the Property
having been conveyed to Purchaser.
13.22 ADA Disclosure. Purchaser acknowledges that the Property may be subject to
the federal Americans With Disabilities Act (the "ADA") and the federal Fair
Housing Act (the "FHA"). The ADA, which requires, among other matters, that
tenants and/or owners of "public accommodations" remove barriers in order to
make the Property accessible to disabled persons and provide auxiliary aids and
services for hearing, vision or speech impaired persons. Seller makes no
warranty, representation or guarantee of any type or kind with respect to the
Property's compliance with the ADA or FHA (or any similar state, commonwealth or
local law), and Seller expressly disclaims any such representation.
13.23 No Recording. Purchaser shall not cause or allow this Contract or any
contract or other document related hereto, nor any memorandum or other evidence
hereof, to be recorded or become a public record without Seller's prior written
consent, which consent may be withheld at Seller's sole discretion. If the
Purchaser records this Contract or any other memorandum or evidence thereof,
Purchaser shall be in default of its obligations under this Contract. Purchaser
hereby appoints the Seller as Purchaser's attorney-in-fact to prepare and record
any documents necessary to effect the nullification and release of the Contract
or other memorandum or evidence thereof from the public records. This
appointment shall be coupled with an interest and irrevocable.
13.24 Relationship of Parties. Purchaser and Seller acknowledge and agree that
the relationship established between the parties pursuant to this Contract is
only that of a seller and a purchaser of property. Neither Purchaser nor Seller
is, nor shall either hold itself out to be, the agent, employee, joint venturer
or partner of the other party.
13.25 Dispute Resolution. Any controversy, dispute, or claim of any nature
arising out of, in connection with, or in relation to the interpretation,
performance, enforcement or breach of this Contract (and any closing document
executed in connection herewith), including any claim based on contract, tort or
statute, shall be resolved at the written request of any party to this Contract
by binding arbitration. The arbitration shall be administered in accordance with
the then current Commercial Arbitration Rules of the American Arbitration
Association; provided, however, that (a) the parties shall have the right to
conduct reasonable discovery; and (b) the arbitrator (i) shall be a retired
judge, (ii) shall decide all matters in accordance with the governing law, and
(iii) shall render a written decision. Any matter to be settled by arbitration
shall be submitted to the American Arbitration Association in the commonwealth
in which the Property is located. The parties shall attempt to designate one
arbitrator from the American Arbitration Association. If they are unable to do
so within 30 days after written demand therefor, then the American Arbitration
Association shall designate an arbitrator. The arbitration shall be final and
binding, and enforceable in any court of competent jurisdiction. The arbitrator
shall award attorneys' fees (including those of in-house counsel) and costs to
the prevailing party and charge the cost of arbitration to the party which is
not the prevailing party. Notwithstanding anything herein to the contrary, this
Section 13.25 shall not prevent Purchaser or Seller from seeking and obtaining
equitable relief on a temporary or permanent basis, including, without
limitation, a temporary restraining order, a preliminary or permanent injunction
or similar equitable relief, from a court of competent jurisdiction located in
the commonwealth in which the Property is located (to which all parties hereto
consent to venue and jurisdiction) by instituting a legal action or other court
proceeding in order to protect or enforce the rights of such party under this
Contract or to prevent irreparable harm and injury. The court's jurisdiction
over any such equitable matter, however, shall be expressly limited only to the
temporary, preliminary, or permanent equitable relief sought; all other claims
initiated under this Contract between the parties hereto shall be determined
through final and binding arbitration in accordance with this Section 13.25.
13.26 AIMCO Marks. Purchaser agrees that Seller, the Property Manager or AIMCO,
or their respective affiliates, are the sole owners of all right, title and
interest in and to the AIMCO Marks (or have the right to use such AIMCO Marks
pursuant to license agreements with third parties) and that no right, title or
interest in or to the AIMCO Marks is granted, transferred, assigned or conveyed
as a result of this Contract. Purchaser further agrees that Purchaser will not
use the AIMCO Marks for any purpose.
13.27 Non-Solicitation of Employees. Purchaser acknowledges and agrees that,
without the express written consent of Seller, neither Purchaser nor any of
Purchaser's employees, affiliates or agents shall solicit any of Seller's
employees or any employees located at the Property (or any of Seller's
affiliates' employees located at any property owned by such affiliates) for
potential employment.
13.28 Survival. Except for (a) all of the provisions of this Article 13 (other
than Section 13.19 and 13.21, and (b) any provision of this Contract which
expressly states that it shall so survive, and (c) any payment obligation of
Purchaser under this Contract (the foregoing (a), (b) and (c) referred to herein
as the "Survival Provisions"), none of the terms and provisions of this Contract
shall survive the termination of this Contract, and, if the Contract is not so
terminated, all of the terms and provisions of this Contract (other than the
Survival Provisions) shall be merged into the Closing documents and shall not
survive Closing.
13.29 Multiple Purchasers. As used in this Contract, the term "Purchaser" means
all entities acquiring any interest in the Property at the Closing, including,
without limitation, any assignee(s) of the original Purchaser pursuant to
Section 13.3 of this Contract. In the event that "Purchaser" has any obligations
or makes any covenants, representations or warranties under this Agreement, the
same shall be made jointly and severally by all entities being a Purchaser
hereunder. In the event that Seller receives notice from any entity being a
Purchaser hereunder, the same shall be deemed to constitute notice from all
entities being a Purchaser hereunder. In the event that any entity being a
Purchaser hereunder takes any action, breaches any obligation or otherwise acts
pursuant to the terms of this Contract, the same shall be deemed to be the
action of the other entity(ies) being a Purchaser hereunder and the action of
"Purchaser" under this Contract. In the event that Seller is required to give
notice or take action with respect to Purchaser under this Contract, notice to
any entity being a Purchaser hereunder or action with respect to any entity
being a Purchaser hereunder shall be a notice or action to all entities being a
Purchaser hereunder. In the event that any entity being a Purchaser hereunder
desires to bring an action or arbitration against Seller, such action must be
joined by all entities being a Purchaser hereunder in order to be effective. In
the event that there is any agreement by Seller to pay any amount pursuant to
this Contract to Purchaser under any circumstance, that amount shall be deemed
maximum aggregate amount to be paid to all parties being a Purchaser hereunder
and not an amount that can be paid to each party being a Purchaser hereunder. In
the event that Seller is required to return the Initial Deposit, Additional
Deposit or other amount to Purchaser, Seller shall return the same to any entity
being a Purchaser hereunder and, upon such return, shall have no further
liability to any other entity being a Purchaser hereunder for such amount. The
foregoing provisions also shall apply to any documents, including, without
limitation, the General Assignment and Assumption and the Assignment and
Assumption of Leases and Security Deposits, executed in connection with this
Contract and the transaction(s) contemplated hereby.
ARTICLE 14..
LEAD-BASED PAINT DISCLOSURE
14.1 Disclosure. Seller and Purchaser hereby acknowledge delivery of the Lead
Based Paint Disclosure attached as Exhibit G hereto. The provisions of this
Section 14.1 shall survive the Closing and delivery of the Deed to Purchaser.
14.2 Consent Agreement. Testing (the "Testing") has been performed at the
Property with respect to lead-based paint. Connor Environmental Services and
Engineering Assessments performed the Testing and reported its findings in the
Lead-Based Paint Inspection and Assessment Report dated May 15, 2003, a copy of
which has been provided to Purchaser (the "Report"). The Report certifies the
Property as free of (a) lead based hazards, (b) dust lead hazards and (c) soil
lead hazards. By execution hereof, Purchaser acknowledges receipt of a copy of
the Report, the Lead-Based Paint Disclosure Statement attached hereto as Exhibit
H, and acknowledges receipt of that certain Consent Agreement (the "Consent
Agreement") by and among the United States Environmental Protection Agency
(executed December 19, 2001), the United States Department of Housing and Urban
Development (executed January 2, 2002), and Apartment Investment and Management
Company ("AIMCO") (executed December 18, 2001). Because the Property has been
certified as free of (x) lead based hazards, (y) dust lead hazards and (z) soil
lead hazards, Seller is not required under the Consent Agreement to remediate or
abate any lead-based paint condition at the Property prior to the Closing.
Purchaser acknowledges and agrees that (1) after Closing, the Purchaser and the
Property shall be subject to the Consent Agreement and the provisions contained
herein related thereto and (2) that Purchaser shall not be deemed to be a third
party beneficiary to the Consent Agreement. The provisions of this Section 14.2
shall survive the termination of this Contract, and if not so terminated, the
Closing and delivery of the Deed to Purchaser. Seller shall provide the notice
attached hereto as Exhibit I prior to the Closing.
[Remainder of Page Intentionally Left Blank]
NOW, THEREFORE, the parties hereto have executed this Contract as of the
date first set forth above.
Seller:
NATIONAL PROPERTY INVESTORS, 7,
a California limited partnership
By: NPI Equity Investments, Inc.
a Florida corporation,
its General Partner
By: /s/Harry Alcock
Name: Harry Alcock
Title: Executive Vice President
Purchaser:
JACKSON SQUARE PROPERTIES, LLC,
a California limited liability
company
By: /s/Curtis Gardner
Name: Curtis Gardner
Title: Managing Member
ESCROW AGENT SIGNATURE PAGE
The undersigned executes the Contract to which this signature page is
attached for the purpose of agreeing to the provisions of Section 2.3 of the
Contract, and hereby establishes February 13, 2004 as the date of opening of
escrow and designates 04-193705 as the escrow number assigned to this escrow.
ESCROW AGENT:
FIDELITY NATIONAL TITLE COMPANY
By: /s/Lolly Avant
Name: Lolly Avant
Title: Vice President
BROKER SIGNATURE PAGE
The undersigned Broker hereby executes this Broker Signature Page solely
to confirm the following: (a) Broker represents only the Seller in the
transaction described in the Contract to which this signature page is attached,
(b) Broker acknowledges that the only compensation due to Broker in connection
with the Closing of the transaction described in the Contract to which this
signature page is attached is as set forth in a separate agreement between
Seller and Broker at the Closing, and (c) Broker represents and warrants to
Seller that Broker and its affiliates has not and will not receive any
compensation (cash or otherwise) from or on behalf of Purchaser or any affiliate
thereof in connection with the transaction, and do not, and will not at the
Closing, have any direct or indirect legal, beneficial, economic or voting
interest in Purchaser (or in an assignee of Purchaser, which pursuant to Section
13.3 of the Contract, acquires the Property at the Closing) nor has Purchaser
granted (as of the Effective Date or the Closing Date) the Broker or any of its
affiliates any right or option to acquire any direct or indirect legal,
beneficial, economic or voting interest in Purchaser.
BROKER:
MARCUS AND MILLICHAP REAL ESTATE
BROKERAGE COMPANY OF WASHINGTON,
D.C.
By: /s/Andrew P. Boyle
Name: Andrew P. Boyle
Title: Broker of Record/Regional
Manager
Exhibit 10.26
FIRST AMENDMENT TO
PURCHASE AND SALE CONTRACT
THIS FIRST AMENDMENT to Purchase and Sale Contract (this "First
Amendment"), is made as of the 23rd day of March, 2004 (the "Amendment Date"),
by and between NATIONAL PROPERTY INVESTORS 7, a California limited partnership
("Seller"), and JACKSON SQUARE PROPERTIES, LLC, a California limited liability
company ("Purchaser").
RECITALS:
WHEREAS, Seller and Purchaser entered into the Purchase and Sale Contract
dated February 12, 2004 (the "Contract"), for certain real property situated in
Roanoke County, Virginia, and more specifically described in the Contract; and
WHEREAS, Seller and Purchaser desire to amend the Contract on the terms
and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants set forth in the
Contract and herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Seller and Purchaser agree to
amend the Contract as follows:
AGREEMENT:
1. Investigation of Lead Based Paint. From the Amendment Date through and unto
April 13, 2004 (the "Lead Based Paint Inspection Period"), Purchaser may,
subject to the rights of Tenants and during normal business hours with
reasonable prior notice, enter the clubhouse on the Property to continue its
inspection and testing regarding the presence of lead based paint. Purchaser's
entry into the clubhouse, inspection and testing are subject to Purchaser's
obligations under the Contract, including Section 3.4 of the Contract, and
specifically including providing the insurance set forth therein and
indemnifying Seller from any Losses related thereto. Purchaser shall obtain
Seller's prior approval, which shall not be unreasonably withheld or denied,
with respect to all testing activities contemplated by this section. Purchaser
hereby waives any right pursuant to Section 3.4.2 of the Contract to recover
out-of-pocket expenses from Seller.
2. Seller's Indemnity. If Purchaser closes on the acquisition of the Property,
then Seller shall hold harmless and indemnify Purchaser from any loss, cost or
expense (including, without limitation, reasonable attorneys fees and expenses)
arising out of any failure by Seller to comply with the Consent Agreement as it
relates to the Property.
3. Additional Deposit. On or before the Amendment Date, Purchaser shall deposit
the Additional Deposit pursuant to the Contract.
4. Acknowledgement of Waiver of Contingencies. Except as stated in this Section
4, Purchaser agrees that Purchaser's right to terminate the Contract is
irrevocably waived, the Deposit (including the Additional Deposit) is
non-refundable, and Purchaser's obligation to purchase the Property is
non-contingent and unconditional except only for satisfaction of the conditions
expressly stated in Section 8.1 of the Contract. Notwithstanding the foregoing,
Purchaser may, on or prior to the expiration of the Lead Based Paint Inspection
Period, terminate the Contract if it concludes (in its reasonable discretion)
that, based on its inspections and testing, the presence of lead based paint at
the clubhouse constitutes a material unacceptable condition on the Property. If
Purchaser terminates this the Contract as stated in the preceding sentence, this
Contract shall terminate and be of no further force and effect subject to and
except for Purchaser's liability pursuant to Section 3.3 and any other provision
of this Contract which survives such termination, and Escrow Agent shall
forthwith return the Deposit to Purchaser (subject to Purchaser's obligation
under Section 3.5.2 to return all Third-Party Reports and information and
Materials provided to Purchaser as a pre-condition to the return of the
Deposit).
5. Miscellaneous. The following provisions shall apply with respect to this
First Amendment:
(a) Except as modified herein, the Contract is in full force and effect and is
hereby ratified by Purchaser and Seller.
(b) Capitalized terms not defined herein shall have the same meaning as set
forth in the Contract.
(c) In the event of any conflict between the Contract and this First Amendment,
the terms and conditions of this First Amendment shall control.
(d) This First Amendment may be executed in counterparts, each of which (or any
combination of which) when signed by all of the parties shall be deemed an
original, but all of which when taken together shall constitute one agreement.
Executed copies hereof may be delivered by telecopier and upon receipt shall be
deemed originals and binding upon the parties hereto, and actual originals shall
be promptly delivered thereafter.
[signature page follows]
NOW, THEREFORE, the parties hereto have executed this First Amendment as
of the date first set forth above.
SELLER:
NATIONAL PROPERTY INVESTORS, 7,
a California limited partnership
By: NPI Equity Investments, Inc.
a Florida corporation,
its General Partner
By: /s/Brian J. Bornhorst
Name: Brian J. Bornhorst
Title: Vice President
PURCHASER:
JACKSON SQUARE PROPERTIES, LLC,
a California limited liability
company
By: /s/Curtis Gardner
Name: Curtis Gardner
Title: Managing Member