PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
[L'Auberge Pinecliff]
BETWEEN
CLUSTER HOUSING PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP,
as Seller,
AND
DRA ADVISORS, INC.,
a Delaware corporation,
as Purchaser
TABLE OF CONTENTS
Paragraph/Topic Page
Recitals 1
Section 1. Definitions.................................................... 2
Section 2. Purchase and Sale.............................................. 4
Section 3. Purchase Price................................................. 4
Section 4. Closing........................................................ 6
Section 5. Conditions to Closing........................................... 9
Section 6. Title and Survey............................................... 12
Section 7. Representations and Warranties................................. 13
Section 8. Purchaser's Acceptance of Property As-Is....................... 18
Section 9. Seller's Covenants............................................. 18
Section 10. Prorations.................................................... 19
Section 11. Transfer Taxes; Title Charges;
Other Closing Costs and Escrow Cancellation.................. 22
Section 12. Risk of Loss.................................................. 23
Section 13. Condemnation.................................................. 24
Section 14. Default....................................................... 25
Section 15. Notices....................................................... 26
Section 16. Time of Essence............................................... 27
Section 17. Termination of Agreement...................................... 27
Section 18. Governing Law; Jurisdiction; Venue............................ 27
Section 19. Counterparts and Facsimile Signatures......................... 28
Section 20. Captions...................................................... 28
Section 21. Assignability................................................. 28
Section 22. Binding Effect................................................ 29
Section 23. Modifications; Waiver......................................... 29
Section 24. Entire Agreement.............................................. 29
Section 25. Partial Invalidity; Further Assurances........................ 29
Section 26. Survival...................................................... 29
Section 27. No Third-Party Rights......................................... 30
Section 28. Attorneys' Fees............................................... 30
Section 29. Broker........................................................ 30
Section 30. Opening of Escrow............................................. 30
Section 31. Exhibits...................................................... 31
Section 32. Form of Title Policy.......................................... 31
Section 33. No Partnership or Other Liability............................. 31
Section 34. General Provisions Regarding Title Company.................... 31
Section 35. Limited Partners' Consent......................................32
Section 36. Limited Prohibition on Negotiations............................33
LIST OF EXHIBITS
.........A -- Legal Description
.........B -- Diagram of the Property and Improvements
.........C -- Schedule of Personal Property
.........D -- Form of Special Warranty Deed
.........E -- Form of Bill of Sale
.........F -- Form of Assignment of Leases
.........G -- Assignment of Tradename and Trademark Rights
.........H -- Form of Assignment of Intangible Property
.........I -- Form of Tenant Letters
.........J -- Certificate of Rent Roll
.........K -- Form of Non-Foreign Affidavit
.........L -- Form of Affidavit of Value
LA980570.053
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
L'Auberge Pinecliff Apartments
This Purchase and Sale Agreement and Escrow Instructions (Agreement) is
entered into as of January __, 1998 (Effective Date), by and between Cluster
Housing Properties, A California Limited Partnership (Seller), and DRA Advisors,
Inc., a Delaware corporation or its assignee (Purchaser), with reference to the
following:
Recitals
A........Seller is the owner of:
(1)......the land (Real Property) in Colorado Springs (the City),
Colorado, and located at 515 Autumn Crest Circle. The Real Property is more
particularly described in Exhibit A and generally depicted on Exhibit B attached
hereto and incorporated herein by this reference and is commonly known as
L'Auberge Pinecliff Apartments;
(2)......all structures, buildings, improvements and fixtures on the
Real Property (collectively, Improvements), including without limitation an
apartment complex consisting of 96 units (the Units) situated in eighteen (18)
buildings (the Complex) together with all equipment, appliances, and amenities
used in connection with the Complex;
(3)......certain personal property on the Real Property or the
Improvements or personal property used primarily in connection with the
operation and maintenance of the Real Property or the Improvements, more
particularly described in Exhibit C attached hereto and incorporated herein by
this reference (Personal Property);
(4)......all of Seller's interest in all leases and other agreements,
if any, to occupy all or any portion on the Units, as amended from time to time
(such leases and agreements being sometimes collectively referred to in this
Agreement as Leases);
(5)......all of Seller's interest, if any, in mineral, water and
irrigation rights, if any, running with or otherwise pertaining to the Real
Property; and,
(6)......all intangible property used in connection with the Real
Property, the Improvements or the Personal Property, including but not limited
to the trade name Pinecliff and related trademarks and associated good will
(collectively the Tradename) used in connection with the Real Property or the
Improvements (but not any tradename utilizing the term "L'Auberge"); plans and
specifications in possession, custody or control of Seller or its property
manager that were prepared in connection with the construction of the
Improvements; all hereditaments, privileges, tenements and appurtenances
pertaining to the Real Property; all Seller's rights to open or proposed
highways, streets, roads, avenues, alleys, easements, strips, gores and
rights-of-way in any way affecting the Real Property; all currently effective
and transferable licenses, permits and warranties for the Real Property, the
Improvements and the Personal Property; and all written contracts and guarantees
running in favor of Seller in effect at Closing as approved by Purchaser that
relate in any way to the Property (Contracts) (collectively, Intangible
Property).
The Real Property, the Improvements, the Personal Property, the Leases
and the Intangible Property are sometimes collectively referred to in this
Agreement as the Property.
B........Purchaser desires to purchase the Property from Seller, and
Seller desires to sell the Property to Purchaser, on the terms and conditions
set forth in this Agreement.
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall be defined in
Section 1:
Additional Earnest Money is defined in Section 3(b).
Agreement is defined in the preamble.
Approved Exceptions is defined in Section 6(b).
Business Day means a calendar day on which banks in Denver, Colorado
shall be open to transact business (other than by automated teller or
similar equipment).
City is defined in Recital A(1).
Closing is defined in Section 4(a).
Closing Date is defined in Section 4(a).
Code is defined in Section 5(a)(viii).
Complex is defined in Recital A(2).
Contracts is defined in Recital A(6).
Court is defined in Section 5(a)(1).
Disapproval Notice is defined in Section 6(b).
Disapproved Exceptions is defined in Section 6(b).
Due Diligence Period is defined in Section 5(a).
Effective Date is defined in the preamble.
Earnest Money is defined in Section 3(b).
Escrow is defined in Section 4(a).
Improvements is defined in Recital A(2).
Initial Earnest Money is defined in Section 3(a).
Intangible Property is defined in Recital A(6).
Leases is defined in Recital A(4).
Loss Threshold is defined in Section 12(a).
Opening of Escrow is defined in Section 30.
Personal Property is defined in Recital A(3).
Preliminary Report is defined in Section 6(a).
Property is defined in Recital A.
Purchase Price is defined in Section 3.
Purchase Transaction is defined in Section 2.
Purchaser is defined in the preamble.
Purchaser's Event of Default is defined in Section 14(a).
Real Property is defined in Recital A(1).
Seller is defined in the preamble.
Seller's actual knowledge is defined in Section 7(a).
Seller's Broker is defined in Section 29.
Seller's Disclosure Documentation is defined in Section 5(a)(ii).
Seller's Event of Default is defined in Section 14(b).
Studies is defined in Section 5(a)(i).
Survey is defined in Section 6(c).
Survival Items is defined in Section 5(a).
Tenants is defined in Section 4(b).
Tenant Letters is defined in Section 4(c)(vi).
Title Company is defined in Section 3(a).
Title Policy is defined in Section 6(b).
Tradename is defined in Recital A(6).
Unit is defined in Recital A(2).
Section 2. Purchase and Sale.
In consideration of the mutual covenants contained in this Agreement,
Seller agrees to sell the Property to Purchaser, and Purchaser agrees to
purchase the Property from Seller, on the terms and conditions hereinafter set
forth (the Purchase Transaction).
Section 3. Purchase Price.
The purchase price for the Property shall be Six Million Seven Hundred
Thousand and No/100 Dollars ($6,700,000.00) (Purchase Price). The Purchase Price
shall be payable as follows:
(a) The sum of Sixty-Seven Thousand and No/100 Dollars ($67,000.00)
shall be tendered to Seller in the form of Purchaser's check or wire transfer
made payable to Chicago Title Insurance Company (Title Company), simultaneously
with Purchaser's delivery of fully executed originals of this Agreement to Title
Company in triplicate, as earnest money (Initial Earnest Money). The Initial
Earnest Money shall be applied to the Purchase Price at Closing or paid to
Seller or Purchaser, as applicable, upon cancellation of this Agreement as
provided in this Agreement. Upon execution of this Agreement by Seller, the
Initial Earnest Money shall be deposited with and held by Title Company in
accordance with this Agreement. Any interest on the Earnest Money shall belong
to Purchaser and shall be applied to the Purchase Price in accordance with
Section 3(c), unless the Purchase Transaction fails to close or is terminated
because of a Purchaser's Event of Default (as defined below). Purchaser shall
concurrently with its deposit of the Initial Earnest Money furnish its Federal
Taxpayer Identification No. to Title Company.
(b) Within two (2) Business Days after satisfaction or waiver, in
writing, of the conditions precedent in Section 5(a), Purchaser shall in each
case tender to Seller the sum of Sixty-Seven Thousand and No/100 Dollars
($67,000.00) in the form of Purchaser's check or wire transfer made payable to
Title Company (Additional Earnest Money). The Initial Earnest Money and the
Additional Earnest Money (collectively, Earnest Money) shall be invested by
Title Company in a federally insured, daily interest-bearing account as directed
by Purchaser, and all interest shall become part of the Earnest Money. As long
as the conditions precedent in Section 5(a) shall have been satisfied or
otherwise waived, in writing, by Purchaser and Seller does not default in the
performance of its obligations under this Agreement, the Earnest Money shall be
applied against the Purchase Price at the Closing or, if a Purchaser's Event of
Default exists under this Agreement, immediately disbursed to Seller pursuant to
Section 14 as Seller's agreed and total liquidated damages, it being
acknowledged and agreed by Purchaser and Seller that it would be extremely
difficult or impossible to determine Seller's exact damages. If a Seller's Event
of Default exists under this Agreement and Purchaser elects to terminate this
Agreement, the Earnest Money together with accrued interest thereon shall be
immediately released to Purchaser.
(c) On or before the Closing Date, Purchaser shall deposit with Title
Company, in immediately available funds in addition to the Earnest Money, the
sum necessary to make the total consideration equal to the Purchase Price, plus
or minus prorations and closing costs, in accordance with this Agreement, which
funds are to be held in escrow by Title Company until cancellation of this
Agreement as provided in this Agreement or paid to Seller at the Closing.
Section 4. Closing.
(a) The purchase and sale of the Property (Closing) shall be
consummated through an escrow established by the Title Company (Escrow) that
shall close at Title Company's office by 5:00 p.m. MST on the date (Closing
Date) that is thirty (30) days after the expiration of the Due Diligence Period
(as defined below), unless such date is extended pursuant to this Agreement or
otherwise by written agreement signed by the parties.
(b) Prior to or at the Closing, Purchaser shall pay the Purchase Price
into the Escrow, Purchaser and Seller shall execute and deliver into Escrow all
necessary documents and Seller shall deliver marketable fee title and possession
of the Property to Purchaser free and clear of all tenants or occupants other
than the tenants of the Units under the Leases (Tenants).
(c) On or before the Closing Date, Seller shall deliver into Escrow the
following documents and things:
(i) a Special Warranty Deed, in recordable form and
properly executed and acknowledged on behalf of Seller, conveying to
Purchaser the Real Property and the Improvements in fee simple, in
substantially the form attached hereto as Exhibit D and incorporated
herein by this reference;
(ii) a Bill of Sale executed by Seller transferring to
Purchaser the Personal Property, with a warranty of title only. No
warranty of condition or fitness for any use or purpose will be made.
The Bill of Sale shall be substantially in the form attached hereto as
Exhibit E and incorporated herein by this reference;
(iii) a duly executed Assignment of Leases that assigns and
transfers to Purchaser, as of the Closing, all of Seller's interests
under the Leases and that contains an assumption by Purchaser of
Seller's obligations under the Leases, including without limitation
obligations relating to security deposits. The Assignment of Leases
shall be substantially in the form attached hereto as Exhibit F and
incorporated herein by this reference;
(iv) a duly executed Assignment of Tradename and Trademark
Rights that assigns and transfers all of Seller's interest in the
Tradename. The Assignment of Tradename and Trademark Rights shall be
substantially in the form attached hereto as Exhibit G and incorporated
by reference;
(v) a duly executed and acknowledged Assignment of
Intangible Property that assigns and transfers to Purchaser as of the
Closing all of Seller's interests to the Intangible Property and the
Contracts substantially in the form attached hereto as Exhibit H and
incorporated herein by this reference;
(vi) a form of letter to Tenants (Tenant Letters) at the
Real Property and Improvements that instruct the Tenants, after the
Closing Date, to pay rent to Purchaser and to recognize Purchaser as
the new lessor under their respective Leases substantially in the form
attached hereto as Exhibit I attached hereto and incorporated by
reference;
(vii) originals or, if originals are not available, complete
copies, of all Leases in the possession of Seller or its property
manager, together with a Certificate of Rent Roll substantially in the
form of Exhibit J attached hereto and incorporated herein by this
reference dated as of the Closing Date;
(viii) Seller's affidavit that Seller is not a foreign person
within the meaning of Section 1445(f)(3) of the Internal Revenue Code
of 1986, as amended (the Code) substantially in the form attached
hereto as Exhibit K and incorporated by reference as prescribed by
Treas. Reg. 1.1445-2(b). If Seller does not timely furnish the
Non-Foreign Affidavit, Purchaser may withhold (or direct Title Company
to withhold) from the Purchase Price an amount equal to the amount
required to be so withheld pursuant to Section 1445(a) of the Code, and
such withheld funds shall be deposited with the Internal Revenue
Service as required by Section 1445(a) and the regulations promulgated
thereunder. The amount withheld, if any, shall nevertheless be deemed
to be part of the Purchase Price paid to Seller;
(ix) a duly executed and acknowledged Affidavit of Value
substantially in the form attached hereto as Exhibit L and incorporated
by reference; and
(x) termination notices that terminate, as of the Closing
Date, all of the management, service and leasing contracts for the
Improvements as selected by Purchaser in accordance with this
Agreement;
(xi) delivery by Seller to Purchaser at Closing of the
security deposits under the Leases that have not been applied in the
form of a credit in favor of Purchaser against the Purchase Price;
(xii) delivery by Seller to Purchaser at Closing of a
complete list of the names, addresses and telephone numbers of all
contractors, subcontractors and materials suppliers known to Seller or
Property Manager and who worked on or supplied materials in regard to
the Improvements within the last twelve (12) months prior to Closing;
(xiii) Seller, at Seller's cost and prior to Closing, paying
in full all real estate commissions which may be due from Seller in
regard to the Leases, including any commission due in regard to any of
the Leases which commissions shall be due and payable on or before
Closing or within three (3) months after Closing. In this regard,
Seller shall deposit with Title Company, for delivery to Purchaser at
Closing, written documentation signed by the applicable real estate
brokers that such commissions, if any, to be paid by Seller have been
paid in full;
(xiv) Seller, at Seller's cost, completing by Closing all
improvements, if any, to the Units required under the respective
Leases; and
(xv) current estoppel from the applicable homeowner's
association (if any) as to (A) the amount of current assessments, (B)
the date through which such assessments are paid and (C) the absence of
any default on the part of Seller under the documents creating such
homeowner's association.
If the foregoing conditions have not been satisfied by the specified date or
Closing, as the case may be, then Purchaser shall have the right, at Purchaser's
sole option, exercisable by written notice to Seller and Title Company but
subject to Seller's right to satisfy any such condition identified in writing by
Purchaser within five (5) Business Days following Seller's receipt of such
written notice, to cancel this Agreement, whereupon the Earnest Money plus
interest shall be paid immediately by Title Company to Purchaser and, subject to
the provisions of Section 14 and except for any Survival Items (as defined
below), neither Purchaser nor Seller shall have any further liability or
obligation under this Agreement.
Section 5. Conditions to Closing.
In addition to the other conditions to the completion of the Purchase
Transaction, Seller and Purchaser agree that the Closing is subject to the
satisfaction, approval or waiver, in writing, by Purchaser, in Purchaser's sole
discretion, of the following conditions contained in this Section 5:
(a) Purchaser's due diligence conditions shall be the following:
(i) the conduct and approval of any inspection, investigation
and approval, deemed necessary by Purchaser in Purchaser's sole
discretion and at Purchaser's sole cost and expense, of any physical,
structural, geological and environmental or other condition of the
Property (including without limitation the availability of access,
utility services, zoning, environmental risks, engineering and soil
conditions) deemed necessary by Purchaser to determine the feasibility
of acquiring the Property (collectively, the Studies). In the event
Purchaser withdraws from the Purchase Transaction for any reason
whatsoever (other than a Seller's Event of Default) to the extent
permitted by the respective third party provider, Purchaser shall
immediately deliver to Seller each and all of the Studies prepared or
undertaken by or for the benefit of Purchaser in connection therewith.
The Studies shall include, but not be limited to, Purchaser's right to:
(i) review and approve the Survey (as defined below), the Leases and
the Contracts; and (ii) meet and confer with Seller's property manager.
For the purpose of conducting physical inspections by Purchaser, Seller
agrees to provide full and complete access to the Property at
reasonable times, upon not less than two (2) Business Days' notice to
Seller or to Seller's property manager, up to and including the Closing
Date. Purchaser shall conduct such inspections in a nondisruptive
manner as to the Tenants and in compliance with any applicable legal
requirements and shall in no event conduct destructive testing of the
Real Property and the Improvements without Seller's prior written
consent, which consent may be granted or withheld in Seller's sole
discretion; provided, however, that for such purpose customary Phase I
environmental investigation (including lead paint sampling and soil
borings) shall not be deemed "destructive testing." Purchaser agrees to
defend, indemnify and hold Seller, Seller's agents and employees, and
the Property harmless from and against any losses, costs, damages,
claims or liabilities, including but not limited to mechanics' and
materialmen's liens, personal injury or death, property damage and
attorneys' fees and costs, arising from or otherwise relating to
Purchaser's entry upon the Property for the aforementioned purposes
under this subsection. Purchaser shall immediately repair any damage
caused by such inspection and shall restore the Real Property and the
Improvements to their condition prior to such testing. Purchaser's
indemnity, hold harmless and repair obligations under this Section
shall survive the termination or expiration of this Agreement or the
Closing, as applicable, for a period of twelve (12) months after which
Purchaser's obligations shall automatically terminate unless prior to
the end of the twelve-month period, Seller shall have brought suit
against Purchaser in the El Paso County, Colorado Superior Court or the
United States District Court for the District of Colorado located in
Denver, Colorado (either, the Court) to enforce Purchaser's indemnity,
hold harmless and repair obligations.
(ii) subject to Seller's delivery obligations under Section
5(b), inspection and approval, in Purchaser's sole discretion, of all
documents relating to the Property that are in the possession of Seller
or its property manager or under their custody or control
(collectively, Seller's Disclosure Documentation), all of which shall
be made available at all reasonable times after Opening of Escrow to
Purchaser at the Property for Purchaser's inspection and copying at
Purchaser's sole cost and expense. The information made available to
Purchaser by Seller under this subsection shall not be released or
otherwise disclosed by Purchaser to any third parties other than to
Purchaser's attorneys, accountants or in-house property evaluation
personnel or to any prospective assignee or partner of, or lender to,
Purchaser in connection with the Purchase Transaction. If the Purchase
Transaction does not close for any reason, Purchaser and Purchaser's
agents, representatives, attorneys and accountants shall refrain from
disclosing such information to any third party whatsoever. Purchaser
shall defend, indemnify and hold Seller harmless (which indemnification
shall survive the termination or expiration of this Agreement) for all
loss, damage or expense incurred by Seller because of any unauthorized
disclosure of such information by Purchaser or Purchaser's attorneys,
accountants or in-house property evaluation personnel; provided,
however, that Purchaser's indemnity and hold harmless obligations shall
only exist for a period of twelve (12) months after the effective date
of such termination or expiration after which Purchaser's obligations
shall automatically terminate unless prior to the end of the
twelve-month period, Seller shall have brought suit against Purchaser
in the Court to enforce Purchaser's indemnity and hold harmless
obligations.
During the period commencing with the Opening of Escrow (as defined below) and
ending at 5:00 p.m. (MST) on the thirtieth (30th) day thereafter (Due Diligence
Period), Purchaser shall have the right to examine and investigate to
Purchaser's sole satisfaction the physical, financial and legal status of the
Property and the Seller's Disclosure Documentation; provided, however, that in
the event Purchaser is despite good faith efforts unable to obtain any studies,
reports of inspections to be prepared for Purchaser by third parties within such
thirty-day period, Purchaser shall be entitled to extend the Due Diligence
Period for up to fifteen (15) additional days upon delivery of written notice to
Seller setting forth the basis for such extension. In the event Purchaser
notifies Seller in writing within the Due Diligence Period that Purchaser is
terminating this Agreement for any reason or for no reason, this Agreement shall
terminate at the end of the final day of the Due Diligence Period. Upon
termination of this Agreement, the Earnest Money, together with accrued interest
thereon, shall be immediately refunded to Purchaser by Title Company, both
Seller and Purchaser shall be released from all further obligations under this
Agreement (excluding the indemnity, hold harmless and repair obligations of
Purchaser under Section 5(a)) and neither Seller nor Purchaser shall be subject
to a claim by the other for damages of any kind, except for Purchaser's
indemnity, hold harmless and repair obligations provided in Section 5(a) of this
Agreement and in other indemnity provisions of this Agreement, if any (a
Survival Item). In the event Purchaser fails to notify Seller in writing within
the Due Diligence Period that Purchaser is terminating this Agreement for any
reason or for no reason, each of such conditions shall conclusively be deemed to
have been satisfied.
(b) Seller agrees to make available and to cause its property manager
to make available at the Property to Purchaser or Purchaser's agents or
employees all information requested by Purchaser in writing that is in the
possession, custody or control of Seller or its property manager relating to the
leasing, operating, maintenance, construction, repair, zoning, platting,
engineering, soil tests, water tests, environmental tests, construction, master
planning, architectural drawings and like matters regarding the Property as part
of Seller's Disclosure Documentation.
(c) Seller's representations and warranties contained in this Agreement
shall be true and correct in all material respects as of the Closing, and Seller
shall have performed each and every obligation to be performed by Seller under
this Agreement prior to or at the Closing.
Section 6. Title and Survey.
(a) Within seven (7) Business Days following the Opening of Escrow,
Seller shall cause Title Company to deliver to Purchaser a current title
insurance commitment from Title Company covering the Property, together with
full and legible copies of all supporting documents (collectively, Preliminary
Report). The Preliminary Report is to be preliminary to the extended coverage
owner's policy of title insurance to be issued to Purchaser by Title Company
insuring Purchaser's fee simple title to the Property in the amount of the
Purchase Price (the Title Policy). Seller shall pay only the premium for a
standard owner's policy in the amount of the Purchase Price with the Purchaser
to pay all additional costs in regard to extended coverage, if elected by
Purchaser, and for all endorsements, if any, required by Purchaser.
(b) In addition to the contingencies set forth in Section 5, Purchaser
shall have to the end of the Due Diligence Period to disapprove, in writing, any
exceptions to title shown on the Preliminary Report or reflected on the Survey
(as defined below) (collectively, Disapproved Exceptions) and to provide Seller
and Title Company with notice of disapproval in writing describing the defect
with reasonable particularity (Disapproval Notice). In the event Purchaser fails
to deliver a Disapproval Notice to Seller and Title Company within the Due
Diligence Period, all such exceptions to title shall be deemed to have been
approved. Within ten (10) Business Days after Seller's receipt of the
Disapproval Notice, if any, Seller shall notify Purchaser whether Seller does or
does not intend to remove the Disapproved Exceptions. Seller shall remove all
monetary liens and all other encumbrances created by Seller after the Effective
Date that shall not have been approved in writing by Purchaser. If Seller
notifies Purchaser in writing within such ten-day period that Seller intends to
eliminate some or all of the Disapproved Exceptions, Seller shall do so prior to
or at the Closing. If Seller fails to notify Purchaser in writing within such
ten-day period that Seller intends to eliminate all of the Disapproved
Exceptions or if Seller elects to eliminate some but not all of the Disapproved
Exceptions, Purchaser may, by notifying Seller and Title Company within five (5)
Business Days after Purchaser's receipt of Seller's notice to Purchaser, elect
either to terminate this Agreement or to take title to the Property subject to
the Disapproved Exceptions that Seller has not undertaken to remove. Purchaser's
failure to notify Seller and Title Company of Purchaser's election to terminate
this Agreement within such five Business Day period shall be deemed an election
to take title to the Property subject to the Disapproved Exceptions that Seller
has not undertaken to remove. Seller shall cause the Title Company to issue the
Title Policy at the Close of Escrow insuring marketable fee title to the Real
Property in Purchaser in the amount of the Purchase Price, subject only to the
following matters (collectively, Approved Exceptions):
(i) a lien for current real property taxes or general or
special assessments not then delinquent;
(ii) matters affecting title to the Property not disapproved
by Purchaser in accordance with this Section 6(b); and
(iii) matters affecting title to the Property created by or
with the consent of Purchaser.
(c) Seller, at Seller's sole cost, shall deliver to Purchaser and Title
Company on or before 5:00 p.m. MST on the tenth Business Day (10th) day after
Opening of Escrow, a certified ALTA survey of the Property (the Survey) to be
completed by a surveyor licensed in the State of Colorado, whereupon the legal
description in the Survey shall control over the description in Exhibit A to the
extent they may be inconsistent. The Survey shall set forth the legal
description and boundaries of the Property and all easements, encroachments and
Improvements thereon and shall comply with all requirements of Title Company in
regard to Title Company's issuance of the Title Policy.
Section 7. Representations and Warranties.
(a) As used herein, "Seller's actual knowledge" shall mean the actual
knowledge of Stephen B. Boyle, the president of the corporate general partner of
the general partner of Seller, without any duty of inquiry except inquiry of the
on-site property manager. Seller represents and warrants to Purchaser, as of the
Effective Date and again as of the Closing Date, as follows:
(i) that to Seller's actual knowledge, Seller has received
no notice from any governmental authority of (A) any existing or
threatened zoning, building, fire or health code violations or
violations of other governmental regulations concerning the Property or
the operation of the Property that has not previously been corrected or
(B) any existing or threatened condemnation of the Property or any part
of the Property. Seller further covenants that if Seller should receive
any such notice prior to the Closing Date, Seller will provide
Purchaser with copies of the notice promptly following the receipt
thereof by Seller. As an additional condition precedent to Closing,
Seller agrees to use reasonable efforts to correct any matters
disclosed in any such notice on or before Closing; provided, however,
that Seller need not expend more than an aggregate amount of
Twenty-Five Thousand Dollars ($25,000) for such corrections. If any
such matter(s) cannot be corrected by Seller by Closing, Seller shall
give Purchaser a credit at Closing for the amount reasonably estimated
by Seller and Purchaser required to correct the matter(s), but in no
event more than Twenty-Five Thousand Dollars ($25,000). If the
estimated cost to correct the matter(s) is greater than Twenty-Five
Thousand Dollars ($25,000) and Seller, by written notice to Purchaser,
elects not to correct the matter(s) prior to Closing, Purchaser may
deliver written notice of termination of this Agreement to Seller and
Title Company whereupon this Agreement shall terminate and the Earnest
Money shall be immediately returned to Purchaser, unless Purchaser, in
Purchaser's sole discretion, elects in writing to pay the excess
required to correct the matter(s);
(ii) that to Seller's actual knowledge, no legal actions are
existing or threatened against the Property, nor are there any
violations of building codes or other statutes affecting the use,
operation, occupancy and enjoyment of the Property;
(iii) that to Seller's actual knowledge, there exist no
violations of any statutes, ordinances, regulations or administrative
or judicial orders or holdings, whether or not appearing in public
records, with respect to the Improvements or the Property, and the
present use of the Property complies with existing zoning laws and
ordinances;
(iv) that to Seller's actual knowledge, Seller has received
no notices from insurers of defects in the Improvements which have not
been corrected;
(v) that to Seller's actual knowledge, there exist no
continuing, pending or threatened public improvements that would result
in a tax assessment or other similar charge being levied or assessed
against the Property;
(vi) that Seller has disclosed to Purchaser all information,
records and studies for the Property in the possession, custody or
control of Seller or its property manager concerning hazardous, toxic
or governmentally regulated materials that are or have been stored,
handled, disposed of or released on the Property;
(vii) that no leases or other agreements for occupancy are in
effect for the Property except for the Leases as described on the rent
roll attached hereto as Exhibit J;
(viii) that to Seller's actual knowledge, all mechanical,
electrical, structural and plumbing systems for the Property are in
good operating condition;
(ix) that there exist no (A) agreements or arrangements
pursuant to which goods, services, water, equipment, labor, supplies or
any other items are being or will be furnished to the Property, except
for the Contracts or as relate to the other Intangible Property or to
standard arrangements for utility services; (B) agreements other than
the Leases whereby any person or entity holds any right, license or
privilege to possess or use the Property; and (C) licenses, franchises
or permits issued or required for the ownership of the Property;
(x) that to Seller's actual knowledge, there exist no
agreements or understandings relating to the Property, except for this
Agreement and the agreements (if any) shown as exceptions to the title
to the Property;
(xi) the Purchase Transaction will not in any material
respect violate any other agreements to which Seller is a party;
(xii) prior to Closing or any earlier termination of this
Agreement, Seller will not enter into or execute any employment,
management or service contract with respect to the Property without
Purchaser's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, unless such contract so
entered by Seller shall provide that such contract can be terminated by
Seller, or Seller's successor, at any time without penalty, upon not
more than thirty (30) days' prior written notice to the other party
thereto. When any such contracts are fully executed, Seller shall
deliver a copy thereof to Purchaser;
(xiii) no default of Seller exists under any of the Contracts
and, to Seller's actual knowledge, no default of the other parties
exists under any of the Contracts. Between the Effective Date and the
Closing Date, or any earlier termination of this Agreement, Seller,
without Purchaser's prior written consent which consent shall not be
unreasonably withheld, conditioned or delayed, shall not amend, modify
in any material respect (such as increasing or decreasing the term or
monetary obligations thereunder) or terminate, or agree to amend,
modify or terminate, any Contract or Lease or waive any substantial
right thereunder;
(xiv) except as expressly provided otherwise in Section 35
below, no consent of any third party is required in order for Seller to
enter into this Agreement and perform Seller's obligation hereunder.
Without limiting the generality of the foregoing, no consent of any
third party is required in order for Seller to assign the Contracts to
Purchaser;
(xv) except for any item to be prorated at Closing in
accordance with this Agreement, all bills or other charges, costs or
expenses arising out of or in connection with or resulting from
Seller's construction, use, ownership, or operation of the Property up
to Closing shall be paid in full by Seller on or before Closing;
(xvi) all general real estate taxes, assessments and personal
property taxes that have become due with respect to the Property
(except for those that will be prorated at Closing in accordance with
this Agreement) have been paid or will be so paid by Seller prior to
Closing;
(xvii) between the Effective Date and later of the Closing
Date or any earlier termination of this Agreement, Seller shall not
execute or enter into any new lease of any part of the Improvements,
except in the normal course of business using Seller's standard form of
lease and adhering to Seller's standard rental schedule;
(xviii) except in the ordinary course of business or as
required by a governmental agency, Seller shall not place or permit to
be placed on any portion of the Real Property any new improvements of
any kind or remove or permit any improvements to be removed from the
Real Property without the prior written consent of Purchaser, which
consent may be granted or withheld for any reason;
(xix) Seller shall not restrict, rezone, file or modify any
development plan or zoning plan or establish or participate in the
establishment of any improvements district with respect to all or any
portion of the Real Property without Purchaser's prior written consent,
which consent may be granted or withheld for any reason; and,
(xx) without Purchaser's prior written consent, which may
be granted or withheld for any reason, Seller shall not, by voluntary
or intentional act or omission to act, further cause or create any
easement, encumbrance, or mechanic's or materialmen's liens, and/or
similar liens or encumbrances to arise or to be imposed upon the
Property or any portion thereof.
(b) If Seller learns of anything that would make the representations
and warranties set forth above untrue in any material respect following the
expiration of the Due Diligence Period and prior to the Closing, Seller shall
immediately notify Purchaser in writing. Upon written notice to Seller and Title
Company within five (5) Business Days following receipt of Seller's notice,
Purchaser shall be entitled to (i) terminate this Agreement if Purchaser
reasonably concludes that the Property will be adversely affected in any
material respect by such untrue representation or warranty, in which case
Purchaser shall be entitled to an immediate return of the Earnest Money together
with accrued interest thereon and reimbursement of Purchaser's reasonable
out-of-pocket expenses actually paid to third parties in connection with
Purchaser's due diligence investigation and documented to Seller's reasonable
satisfaction (such reimbursement, however, in no event to exceed Nineteen
Thousand Dollars ($19,000.00) in the aggregate) or (ii) allow Seller a
reasonable period (not to exceed an additional ten (10) Business Days) within
which to cure such untrue representation or warranty. After such disposition of
the Earnest Money, the Escrow shall be canceled and neither party shall have any
rights or responsibilities to the other except as otherwise expressly provided
by this Agreement.
(c) Each of the parties represents and warrants to the other that each
of the persons executing this Agreement on behalf of the warranting party is
authorized to do so; that the execution, delivery and performance of this
Agreement will not conflict with, or result in a breach or other violation of,
any contract, agreement or instrument to which Purchaser or Seller, as the case
may be, is a party; and that upon execution, this Agreement shall be a valid
obligation of, binding upon and enforceable against Purchaser or Seller, as the
case may be.
(d) All representations made in this Agreement by Seller shall survive
the execution and delivery of this Agreement or the cancellation of this
Agreement or Closing, as applicable. Seller shall and does hereby indemnify and
hold Purchaser harmless from and against any loss, damage, liability and
expense, together with all court costs and attorneys' fees which Purchaser may
incur, by reason of any third party claims asserted against Purchaser and based
upon any material misrepresentation by Seller or any material breach of any of
Seller's warranties; provided, however, that Seller's representations and
indemnity obligations under this Section 7 shall survive for six (6) months
after cancellation of this Agreement or Closing, as applicable, whereupon
Seller's obligations shall terminate automatically unless Purchaser shall have
commenced an action thereon against Seller in the Court within such period;
provided, however, that Seller's liability with respect to any action commenced
within the fourth (4th), fifth (5th) or sixth (6th) months of such period shall
be limited to Fifty Thousand Dollars ($50,000.00) in the aggregate.
Section 8. Purchaser's Acceptance of Property As-Is.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND/OR IN THE DOCUMENTS
TO BE DELIVERED AT CLOSING, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS
NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE,
NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING WITHOUT LIMITATION THE
WATER, SOIL AND GEOLOGY, AND ANY IMPROVEMENTS CONSTRUCTED THEREON, (B) THE
INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR
ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREON, (D) THE
HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY, (E) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, OR (F) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY. EXCEPT FOR
THOSE ITEMS OF SELLER'S DISCLOSURE DOCUMENTATION THAT HAVE BEEN PREPARED BY
SELLER, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN
INVESTIGATION OF THE PROPERTY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
ANY INFORMATION PROVIDED OR TO BE PROVIDED TO PURCHASER WITH RESPECT TO THE
PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY
INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER'S DISCLOSURE
DOCUMENTATION OR IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, SELLER IS NOT AND
SHALL NOT BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION
THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER
PERSON. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN AND/OR IN THE DOCUMENTS TO
BE DELIVERED AT CLOSING, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT TO THE
MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN
IS MADE ON AN "AS IS," "WHERE IS" AND "WITH ALL FAULTS" CONDITION AND BASIS.
Section 9. Seller's Covenants.
From and after the Effective Date until Closing, and so long as this
Agreement remains in effect, Seller shall:
(a) except as otherwise provided in Section 7(a), maintain, manage and
operate the Property substantially in accordance with the established practices
of Seller and its property manager;
(b) comply with all applicable covenants, conditions and other
restrictions of record, including those relating to a homeowner's association
(if any);
(c) maintain the Property in its present condition, ordinary wear and
tear and casualty loss excepted;
(d) maintain all casualty, liability and hazard insurance currently in
force for the Property;
(e) except as otherwise provided in Section 7(a), operate, manage and
enter into contracts for the Property and maintain present services and
sufficient supplies and equipment for the operation and maintenance of the
Property, all in the same manner as that done by Seller and its property manager
prior to the Effective Date; provided, however, that Seller shall not enter into
any service contract that cannot be terminated within thirty (30) days following
notice to the vendor; and
(f) continue to enter into Leases in the ordinary course of Seller's
business in accordance with the standards of Section 7(a)(xvii).
If Seller enters into leases or grants concessions in violation of this Section
9, Purchaser may either waive the violation or, as Purchaser's sole remedy,
terminate this Agreement and require the return of the Earnest Money together
with accrued interest thereon.
Section 10. Prorations.
The following adjustments to the Purchase Price shall be made between
Seller and Purchaser:
(a) The following items, as applicable, shall be prorated between
Purchaser and Seller on a per diem basis as of the Closing Date:
(i) all nondelinquent real estate taxes, installments of
general and special assessments, homeowner's association dues, if any,
and fire protection service charges, if any, due and payable in the
calendar year in which Closing occurs, based upon the most recent
information available to Seller. If Closing shall occur before the tax
rate or assessment for the current year is fixed, the initial proration
of such taxes or assessments shall be based upon the latest available
information. Thereafter, when the actual tax rate for such current year
becomes known, Seller and Purchaser shall, outside of escrow and after
Closing, re-prorate any such taxes or assessments to the extent that
the actual rate thereof was different than the rate used for prorations
made at Closing and shall pay, one to the other, any adjustment due as
a result of such re-proration;
(ii) current rents, advance rentals, nonrefundable deposits
and other charges, if any, payable by Tenants under the Leases; and
(iii) all charges for fuel, water, sewer, electricity and
other utility services furnished to the Property which are not metered
to Tenants. Seller, to the extent the same is obtainable, shall furnish
meter readings for such utilities through the close of business on the
day prior to the Closing. If any such meter readings are not so
obtainable, then Seller shall provide meter readings as of a date not
more than thirty (30) days prior to the Closing Date, and the proration
of utility charges shall initially be based upon such prior reading.
Upon the taking of actual meter readings first after Closing, such
proration shall be readjusted outside of escrow after Closing and
Seller or Purchaser, as the case may be, shall promptly pay to the
other the amount determined to be so due upon such readjustment.
(b) All other items of accrued or prepaid income and expense, except
delinquent rents, shall be prorated as of the Closing Date, on the basis of the
most recent ascertainable amounts of or other reliable information for each item
of income and expense. Seller and Purchaser shall duly cooperate with each other
and the Title Company in making prorations, adjustments and credits pursuant to
this Section 10 and shall, as requested by the Title Company, furnish to the
Title Company such information as is in the possession of or obtainable by them
to assist in making such prorations, adjustments or credits. In the event, for
any reason beyond the reasonable control of the parties hereto, information
necessary to calculate any proration, adjustment or credit for any item required
to be prorated, adjusted or credited under this Section 10 is not available
prior to Closing, then such items shall be prorated, adjusted or credited
outside of escrow after Closing as soon as such information is available, and
Seller and Purchaser shall duly cooperate with each other in regard thereto and
shall pay, one to the other, any amounts which may be owing as a result of any
such subsequent proration, adjustment or credit. In the event, at any time
within six (6) months after Closing, errors shall be discovered in any
prorations, adjustments or credits made pursuant to this Section 10, Seller and
Purchaser shall correct such errors and shall pay, one to the other, any sums
owning as a result of such correction.
(c) For purposes of all prorations provided for in this Agreement,
Seller shall be responsible for all days up to the Closing Date, and Purchaser
shall be responsible for all days including and after the Closing Date. Except
as otherwise expressly provided in this Agreement, all prorations shall be
final.
(d) Security deposits, including cleaning and pet deposits and prepaid
rent and any interest thereon, shall be credited to Purchaser at Closing.
(e) If on the Closing Date any Tenant is delinquent in the payment of
rent, including any additional rent billed but unpaid at the time of Closing,
the delinquent rent shall remain the property of Seller and be paid to Seller
if, as and when collected by Purchaser out of the funds received by Purchaser
from such Tenant, and no proration of such delinquent rent shall be made at
Closing. For a period of one hundred eighty (180) days after Closing, Purchaser
shall diligently attempt to collect and shall remit to Seller any such
delinquent rents owing to Seller; provided, however, that (i) Purchaser shall be
required only to periodically send bills to the Tenant(s) owing such delinquent
rent and shall not be required to commence any litigation or undertake any other
collection efforts in regard thereto; and (ii) in the event Purchaser collects
rent from a person who owes rent for any period of time after Closing and for a
period of time prior to Closing, all amounts collected from such person shall be
applied first to the amount of rents owing by such person for the period of time
after Closing shall be retained by Purchaser and only the excess, if any, shall
be remitted to Seller.
(f) Contemporaneously with the Closing, Seller shall deliver to
Purchaser at the offices of Seller's property manager all originals (including
computer discs and tapes) of books and records of accounts, contracts, leases,
leasing correspondence, receipts for deposits, bills and other papers that
pertain to the Property, together with all advertising materials, booklets, keys
and other items, if any, used in the Property's operation, provided that Seller,
at Seller's cost, may retain a copy of the foregoing items for tax reporting
purposes. For a period of two (2) years after the Closing and solely for the
purposes of Section 10, Seller, upon at least five (5) days' prior written
request to Purchaser and at Seller's sole cost and expense, shall have the right
to inspect the books and records for the Property located at the office of
Purchaser and/or Purchaser's property manager to verify that Purchaser is
remitting to Seller the proper amounts according to this Agreement and for any
other purpose related to Seller's prior ownership of the Property.
(g) The cost of any tenant improvements paid or incurred by Seller for
Leases approved by Purchaser and executed after the date of this Agreement shall
be paid in full by Seller at or before Closing. Seller shall supply to Purchaser
and Title Company paid invoices and final lien waivers for all such tenant
improvement work to the extent performed on or prior to the Closing Date. Any
provision of this Agreement to the contrary notwithstanding, after the Effective
Date, Seller shall not undertake any tenant improvement work on any Unit without
the prior written consent of Purchaser, such consent not to be unreasonably
withheld, conditioned or delayed.
Section 11. Transfer Taxes; Title Charges;
Other Closing Costs and Escrow Cancellation.
(a) Seller and Purchaser agree to execute any real estate transfer
declarations required by the state, county or municipality in which the Real
Property is located. Seller shall pay: (i) one-half of the escrow charges of
Title Company; (ii) one-half of the cost of recording the instruments of
conveyance; (iii) the cost of the Survey; and (iv) the portion of the premium
charged for the Title Policy attributable to standard coverage. Purchaser shall
pay all other costs of consummating this transaction, including without
limitation the premium for the Title Policy in excess of standard coverage and
for any endorsements required by Purchaser, all transfer taxes and other fees
(if any) assessed by any governmental authority against the Real Property
because of this sale and transfer, all sales and transfer taxes or other fees
assessed by any governmental authority against the Personal Property (if any)
and the cost of any municipal deed or transfer taxes (if any). The parties shall
each pay their own attorneys' fees in regard to the negotiation and
documentation of the Purchase Transaction.
(b) If the Escrow fails to close because of a Seller's Event of
Default, Seller shall be liable for the cancellation charge, if any, of Title
Company. If the Escrow fails to close because of a Purchaser's Event of Default,
Purchaser shall be liable for the cancellation charge, if any, of Title Company.
If the Escrow fails to close for any other reason, Seller and Purchaser shall
each be liable for one-half of the cancellation charge, if any, of Title
Company.
Section 12. Risk of Loss.
(a) Except as provided in any indemnity provisions of this Agreement,
Seller shall bear all risk of loss for the Property up to the Closing.
(b) The foregoing to the contrary notwithstanding, if the Property is
damaged by fire or other casualty prior to the Closing Date and is insured under
one or more fire or casualty insurance policies maintained by Seller, and if
Seller determines, in Seller's reasonable good faith discretion, that repair of
the Property would cost less than Two Hundred Fifty Thousand Dollars
($250,000.00) (Loss Threshold), Purchaser shall not have the right to terminate
this Agreement and Seller, in Seller's sole discretion, may elect either: (i) to
repair and restore the Property to its condition immediately preceding the fire
or casualty if such repair and restoration can be substantially completed within
thirty (30) days following the date originally scheduled as the Closing Date; or
(ii) to proceed to close this Purchase Transaction without reduction in the
Purchase Price provided that, as a condition precedent thereto and in a form
acceptable to Purchaser in Purchaser's reasonable discretion, Seller assigns and
transfers to Purchaser on the Closing Date all of Seller's right, title and
interest in and to the insurance proceeds paid or payable to Seller under the
policy or policies covering the damage and pays to Purchaser the amount of
Seller's deductible under the insurance policy or policies.
(c) However, if the Property is damaged by fire or other casualty prior
to the Closing Date and is insured under one or more fire or casualty insurance
policies maintained by Seller, and if Seller determines, in Seller's reasonable
good faith discretion, that the repair of the damage would cost an amount equal
to or in excess of the Loss Threshold, Purchaser, in Purchaser's sole
discretion, may elect either: (i) to terminate this Agreement and have the Title
Company immediately return the Earnest Money together with accrued interest
thereon to Purchaser; or (ii) to proceed to close this Purchase Transaction,
without reduction in the Purchase Price, and, as a condition precedent thereto
and in a form acceptable to Purchaser in Purchaser's reasonable discretion, have
Seller assign and transfer to Purchaser on the Closing Date all of Seller's
right, title and interest in and to the insurance proceeds paid or payable to
Seller under the policy or policies covering the damage and pay to Purchaser the
amount of Seller's deductible under the insurance policy or policies.
(d) Immediately after Seller obtains notice of any fire or casualty,
Seller shall notify Purchaser thereof in writing, including Seller's reasonable
determination of the repair cost; provided, however, that in the event Purchaser
shall in good faith dispute the repair cost so determined by Seller, Purchaser
shall immediately notify Seller of such dispute, in which event Seller shall as
soon as practicable obtain three (3) bids to repair such damage from reputable
contractors licensed in the State of Colorado and furnish copies thereof to
Purchaser. The average of the two bids that are the closest to each other shall
be determinative as to whether the Loss Threshold shall have been exceeded. If
the repair cost so determined exceeds the Loss Threshold, Purchaser shall notify
Seller in writing within fifteen (15) Business Days after Purchaser's receipt of
Seller's notice whether Purchaser elects to terminate this Agreement in
accordance with this Section 12. Closing shall be delayed, if necessary, to
allow Purchaser to make such election. If Purchaser fails to notify Seller of
Purchaser's election within such fifteen-day period, Purchaser shall be deemed
to have elected to perform its obligations under this Agreement.
Section 13. Condemnation.
(a) If, between the Effective Date and the Closing Date, any
condemnation or eminent domain proceedings are commenced or threatened that
might result in the taking of all or any material part of the Real Property or
the Improvements or the taking or closing of any access right to the Property,
Purchaser, in Purchaser's sole discretion, may either:
(i) terminate this Agreement by written notice to Seller and
have the Title Company return the Earnest Money together with accrued
interest thereon; or
(ii) proceed with the Closing and, as a condition precedent
thereto and in a form acceptable to Purchaser, in Purchaser's sole
discretion, have Seller assign to Purchaser all of Seller's right,
title and interest in and to any award made or to be made for the
condemnation or eminent domain action.
(b) Immediately after Seller obtains notice of the commencement or the
threatened commencement of eminent domain or condemnation proceedings, Seller
shall notify Purchaser in writing. Purchaser shall then notify Seller, within
fifteen (15) Business Days after Purchaser's receipt of Seller's notice, whether
Purchaser elects to terminate this Agreement in accordance with Section
13(a)(i). Closing shall be delayed, if necessary, to allow Purchaser to make
such election. If Purchaser fails to make the election within such fifteen-day
period, Purchaser shall be deemed to have elected to terminate this Agreement.
Section 14. Default.
(a) Purchaser shall be in default under this Agreement (a Purchaser's
Event of Default) if any of the following events shall occur:
(i) Purchaser fails to close the Escrow on the date
scheduled therefor as provided in this Agreement;
(ii) Purchaser shall fail to pay any monies due in accordance
with this Agreement (other than the obligations referenced in Subparagraph (i))
by 5:00 p.m. MST on the stated due date; or
(iii) Purchaser shall fail to fully and timely perform any of
Purchaser's obligations (other than the monetary obligations referenced in
Subparagraphs (i) and (ii)) arising under this Agreement by 5:00 p.m. MST on the
fifth (5th) Business Day after Purchaser's receipt of written notice from Seller
specifying Purchaser's nonperformance.
(b) Seller shall be in default under this Agreement (a Seller's Event
of Default) if:
(i)Seller fails to close the Escrow on the date scheduled
therefor as provided in this Agreement; or,
(ii) Seller shall fail to fully and timely perform any of
Seller's obligations arising under this Agreement (other than the obligations
referenced in Subparagraph (i)) and such failure shall continue past 5:00 p.m.
MST on the fifth (5th) Business Day after Seller's receipt of written notice
from Purchaser specifying Seller's nonperformance.
(c) If a Seller's Event of Default shall exist, Purchaser, at
Purchaser's sole option and as Purchaser's sole remedies, may (i) cancel this
Agreement by written notice to Seller and Title Company whereupon the Earnest
Money plus interest thereon and reimbursement of Purchaser's reasonable
out-of-pocket expenses actually paid to third parties in connection with
Purchaser's due diligence investigation and documented to Seller's reasonable
satisfaction (such reimbursement, however, in no event to exceed Nineteen
Thousand Dollars ($19,000.00) in the aggregate) shall be paid immediately by
Title Company to Purchaser and, except as otherwise provided in this Agreement
as to any Survival Item, neither Purchaser nor Seller shall have any further
liability or obligation hereunder; or, (ii) seek specific performance against
Seller by delivering the Purchase Price into the Escrow; provided, however, that
as conditions precedent to such action for specific performance: [a] no uncured
Purchaser's Event of Default shall exist and no event shall have occurred which
with the passage of time or with notice, or both, could become a Purchaser's
Event of Default; and [b] Purchaser shall not seek to amend the Purchase Price
in such action, in which event the Closing shall be automatically extended as
necessary.
(d) If a Purchaser's Event of Default shall exist, as Seller's sole
remedy (in lieu of any other legal or equitable remedies against Purchaser which
Seller expressly waives except as hereinafter provided otherwise) Seller shall
be entitled to retain the Earnest Money only in accordance with Section 3(b) as
Seller's agreed and total liquidated damages unless Purchaser objects to, fails
to cooperate with or otherwise opposes Seller's withdrawal of such Earnest Money
out of the Escrow, in which event Seller shall have all of the remedies
otherwise available to Seller at law or in equity.
Section 15. Notices.
All notices under this Agreement shall be in writing and sent by: (a)
certified or registered mail, postage prepaid and return receipt requested, in
which case notice shall be deemed delivered at the earlier of actual receipt or
three (3) Business Days after deposit in the United States Mail, (b) by a
nationally recognized overnight courier, in which case notice shall be deemed
delivered one (1) Business Day after deposit with that courier, or (c) telecopy
or similar means, if a copy of the notice is also sent by United States
certified mail, in which case notice shall be deemed delivered on the date of
confirmed receipt, as follows:
If to Seller:
c/o L'Auberge Communities Inc.
14988 North 78th Way, Suite 211
Scottsdale, Arizona 85260
Attention: Stephen B. Boyle
Facsimile No.: (602) 607-9773
With a copy to:
Hughes Hubbard & Reed LLP
350 South Grand Avenue, Suite 3600
Los Angeles, California 90071-3442
Attention: George A. Furst, Esq.
Facsimile No.: (213) 613-2950
If to Purchaser:
DRA Advisors, Inc.
1180 Avenue of the Americas, 18th Floor
New York, New York 10036
Attention: Francis X. Tarsey
Facsimile No.: (212) 764-3571
With a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Russel T. Hamilton, Esq.
Facsimile No.: (212) 259-6333
The addresses above may be changed by written notice to the other
party; provided, however, that no notice of a change of address shall be
effective until actual receipt of the notice by the addressee thereof. Copies of
notices are for informational purposes only, and a failure to give or receive
copies of any notice shall not be deemed a failure to give notice.
Section 16. Time of Essence.
Time is of the essence in this Agreement and the performance of each
and every obligation hereunder, except that Purchaser shall have a one-time
right to extend the Closing Date for five (5) Business Days upon prior written
notice delivered to Seller not less than five (5) Business Days prior to the
originally scheduled Closing Date. However, if this Agreement requires any act
to be done or action to be taken on a date which is a Saturday, Sunday or legal
holiday, such act or action shall be deemed to have been validly done or taken
if done or taken on the next succeeding day which is not a Saturday, Sunday or
legal holiday.
Section 17. Termination of Agreement.
If triplicate fully executed originals of this Agreement have not been
delivered by Purchaser to Seller by 5:00 p.m. MST on January 27, 1998, for
immediate deposit by Purchaser with Title Company along with the Initial Earnest
Money, this Agreement shall automatically be deemed revoked and null and void.
Section 18. Governing Law; Jurisdiction; Venue.
This Agreement shall be governed by and construed in accordance with
Colorado law. In regard to any litigation which may arise in regard to this
Agreement, the parties shall and do hereby submit to the sole jurisdiction of
and the parties hereby agree that the sole proper venue shall be in the Court.
Section 19. Counterparts and Facsimile Signatures.
(a) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(b) The execution of this Agreement by the parties may be evidenced by
facsimile signatures with originals to be immediately distributed thereafter
albeit the Agreement may be deemed binding upon transmittal of the facsimiles.
Section 20. Captions.
The captions in this Agreement are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of its provisions.
Section 21. Assignability.
(a) Purchaser shall not have the right to assign this Agreement or any
of Purchaser's rights under this Agreement prior to Closing to any person or
entity (other than an entity controlling, controlled by, or under common control
with Purchaser) without the prior written consent of Seller, which consent may
be granted or withheld in Seller's sole discretion. In the event of such an
assignment: (i) such assignee shall assume Purchaser's duties and obligations
under this Agreement by delivering to Seller and Title Company duplicate
originals of an assumption agreement in form and substance reasonably acceptable
to Seller, (ii) Purchaser shall not be released from any of its obligations
under this Agreement, (iii) Seller shall not incur any additional expense
because of such assignment and (iv) such assignment shall not delay the Closing.
(b) Seller shall not have the right or authority to assign this
Agreement or any of Seller's rights under this Agreement prior to Closing to any
person or entity without the prior written consent of Purchaser, which consent
may be granted or withheld in Purchaser's sole discretion. In the event
Purchaser consents to such an assignment, (i) such consent may be conditioned
upon the assignee's assumption of Seller's duties and obligations under this
Agreement by delivery to Purchaser and Title Company of duplicate originals of
an assumption agreement in form and substance reasonably acceptable to
Purchaser, (ii) Seller shall not be released from any of its obligations under
this Agreement, (iii) Purchaser shall not incur any additional expense because
of such assignment and (iv) such assignment shall not delay the Closing.
Section 22. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective legal representatives, successors, heirs and
permitted assigns, subject to the provisions of Section 21 hereof.
Section 23. Modifications; Waiver.
No waiver, modification, amendment, discharge or other change of this
Agreement shall be valid unless it is in writing and signed by the party against
which the enforcement of the modification, waiver, amendment, discharge or other
change is sought.
Section 24. Entire Agreement.
This Agreement and the exhibits attached hereto contain the entire
agreement between the parties relating to the Purchase Transaction. All prior or
contemporaneous letters of intent (including but not limited to that certain
non-binding letter of intent, agreements, understandings, representations or
statements, whether oral or written, with respect to the subject matter hereof
are superseded hereby.
Section 25. Partial Invalidity; Further Assurances.
If any provision of this Agreement shall be determined by any
court to be invalid, illegal or unenforceable to any extent, the remainder of
this Agreement shall not be affected and this Agreement shall be construed as if
the invalid, illegal or unenforceable provision had never been contained in this
Agreement. Prior to and after the Closing, the parties hereto agree to take such
action and execute, acknowledge, file and record any additional documents
reasonably necessary to effectuate the terms and provisions of this Agreement.
Section 26. Survival.
Except as expressly provided in this Agreement to the contrary, all
representations, warranties, covenants, agreements and other obligations of
Seller and Purchaser in this Agreement shall not survive the Closing of the
Purchase Transaction.
Section 27. No Third-Party Rights.
Nothing in this Agreement, express or implied, is intended to confer
upon any person, other than the parties to this Agreement and their respective
successors and permitted assigns, any rights or remedies.
Section 28. Attorneys' Fees.
If any legal action or any other proceeding, including without
limitation an action for declaratory relief, is brought to enforce this
Agreement or any rights or obligations hereunder or because of a dispute,
breach, default or misrepresentation in connection with this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
other costs incurred in that action or proceeding (including without limitation
any appeal or post-judgment enforcement proceedings), in addition to any other
relief to which that party may be entitled. "Prevailing party" shall include the
party determined to be the prevailing party by the Court.
Section 29. Broker.
Seller and Purchaser each represent and warrant to the other that it
has not had any dealings with any broker, finder or other party concerning
Purchaser's purchase of the Property, except Amercon Realty Services, Inc.
(Seller's Broker). Seller agrees to pay at Closing a commission to Seller's
Broker pursuant to a separate agreement between Seller and Seller's Broker, a
copy of which shall be deposited in escrow on or before Closing if Seller's
Broker is to be paid through escrow at Closing. Seller and Purchaser each agree
to defend, indemnify and hold the other harmless from and against any such all
loss, liability, damage, cost or expense, including without limitation
reasonable attorneys' fees, incurred by the other as a result of any claim
arising out of the acts of the indemnifying party, or others on that party's
behalf, for a commission, finder's fee or similar compensation made by any
broker (including Seller's Broker), finder or any person who claims to have
dealt with the indemnifying party. The representations, warranties and covenants
contained in this Section 29 shall survive the Closing or termination of this
Agreement.
Section 30. Opening of Escrow.
The term "Opening of Escrow" shall mean the date of delivery to Title
Company of triplicate fully executed originals of this Agreement by Seller and
Purchaser together with the delivery by Purchaser to Title Company of the
Initial Earnest Money.
Section 31. Exhibits.
The following exhibits have been attached to this Agreement and
incorporated herein by reference:
Exhibit A -- Legal Description
Exhibit B -- Diagram of the Property and Improvements Exhibit C --
Schedule of Personal Property Exhibit D -- Form of Special Warranty
Deed Exhibit E -- Form of Bill of Sale Exhibit F -- Form of Assignment
of Leases Exhibit G -- Assignment of Tradename and Trademark Rights
Exhibit H -- Form of Assignment of Intangible Property Exhibit I --
Form of Tenant Letters Exhibit J -- Certificate of Rent Roll Exhibit K
-- Form of Non-Foreign Affidavit Exhibit L -- Form of Affidavit of
Value
Section 32. Form of Title Policy.
The Title Policy to be issued by Title Company shall be Title Company's
most current form. A specimen of the Title Policy is to be delivered to
Purchaser within thirty (30) days following the delivery of the Preliminary
Report to the parties. The Policy is to include, among other things, the
following endorsements which are also to be delivered to Purchaser at
Purchaser's cost: (i) a survey endorsement to the effect that the insured legal
description and the legal description in the Survey describe one and the same
property; (ii) if necessary, a patent endorsement; (iii) if necessary, a
contiguity endorsement and (iv) if necessary, an endorsement insuring against
archaic deed restrictions.
Section 33. No Partnership or Other Liability.
Any and all provisions, implications, or interpretations of or from
this Agreement to the contrary notwithstanding, no partnership, joint venture or
other relationship is created, implied or acknowledged between or among the
parties.
Section 34. General Provisions Regarding Title Company.
(a) Title Company will make all adjustments and/or prorations on the
basis of the actual number of days in a month, and by credit and/or debit to the
respective accounts of Seller and Purchaser in the Escrow.
(b) For purposes of the instructions to Title Company, the expression
"Closing" shall mean the date on which the Deed is recorded.
(c) Title Company shall: (i) make disbursements by wire transfer of
federal funds; (ii) mail instruments to the addresses of the parties shown
above, unless Title Company is instructed otherwise; and (iii) wire funds to
Seller by wire transfer as directed by Seller.
(d) No change of instructions shall be of any effect on Title Company
unless given in writing by all of the parties hereto. In the event conflicting
demands are made or conflicting notices served upon Title Company with respect
to the Escrow, the parties expressly agree that Title Company shall have the
absolute right at Title Company's election to do either or both of the
following: (i) withhold and stop all further proceedings in, and performance of,
the Escrow; or (ii) file a suit in interpleader and obtain an order from the
Court requiring the parties to interplead and litigate in the Court their
several claims and rights among themselves. In the event such interpleader suit
is brought, Title Company shall ipso facto be fully released and discharged from
all obligations to further perform any and all duties or obligations imposed
upon Title Company in the Escrow, and the parties jointly and severally agree to
pay all reasonable costs, expenses and reasonable attorneys' fees expended or
incurred by Title Company, the amount thereof to be fixed and a judgment
therefor entered by the Court in such suit.
(e) Except for Title Company's negligence, fraud, willful misconduct or
breach of contract, Title Company shall not be held liable for the identity,
authority or rights of any person executing any document deposited in the
Escrow, or for failure by Seller or Purchaser to comply with any of the
provisions of any agreement, contract or other instrument deposited in the
Escrow, and Title Company's duties hereunder shall be limited to the safekeeping
of such money, instruments or other documents received by Title Company as
escrow holder and to the disposition of same in accordance with the written
instructions accepted by Title Company in the Escrow.
(f) It is agreed by the parties to this Agreement that so far as Title
Company's rights and liabilities are concerned, this transaction is an escrow
and not any other legal relation.
Section 35. Limited Partners' Consent.
Notwithstanding anything contained herein to the contrary, the
obligations of Seller hereunder are subject to and conditioned upon the
procurement of the consent of a majority in interest of the limited partners of
Seller to the Purchase Transaction. Seller shall use diligent efforts to obtain
such consent. If Seller shall not have received such consent within sixty (60)
days after the Opening of Escrow and provided evidence thereof to Purchaser,
Purchaser may upon written notice to Seller terminate this Agreement whereupon
the Earnest Money plus interest thereon and (provided that Purchaser shall have
elected or be deemed to have elected to purchase the Property at or prior to the
expiration of the Due Diligence Period) reimbursement of Purchaser's reasonable
out-of-pocket expenses actually paid to third parties in connection with
Purchaser's due diligence investigation and documented to Seller's reasonable
satisfaction (such reimbursement, however, in no event to exceed Nineteen
Thousand Dollars ($19,000.00) in the aggregate) shall be paid immediately by
Title Company to Purchaser, and except as otherwise provided in this Agreement
as to any Survival Item, neither Purchaser nor Seller shall have any further
liability or obligation hereunder.
Section 36. Limited Prohibition on Negotiations
Seller agrees to refrain from actively marketing the Property,
submitting due diligence packages for the Property to any third parties,
soliciting offers for the Property or accepting any offers as backup offers for
the Property during the Due Diligence Period, and to cease all discussions and
negotiations with any third parties for the sale of the Property or any interest
therein following the expiration or earlier termination of the Due Diligence
Period during the term of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
"PURCHASER"
DRA ADVISORS, INC.,
a Delaware corporation
By: /s/ Francis X. Tansey__________________
Name: Francis X. Tansey
Title: President
"SELLER"
CLUSTER HOUSING PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
By: GP L'Auberge Communities, L.P.,
a California limited partnership,
a general partner
By: L'Auberge Communities Inc.,
a California corporation
its general partner
By: /s/ Stephen B. Boyle_____________
Name: Stephen B. Boyle
Title: President
TITLE COMPANY'S ACCEPTANCE
The foregoing fully executed Agreement together with the Initial
Earnest Money is accepted by the undersigned this _____ day of January, 1998,
which for the purposes of this Agreement shall be deemed to be the date of
"Opening of Escrow".
CHICAGO TITLE INSURANCE COMPANY,
a Delaware corporation
By: /s/ Tiffany Olmstead__________
Name: Tiffany Olmstead
Its: Escrow Officer