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Exhibit 10(k)
OPTION AGREEMENT
AGREEMENT, dated this 31st day of March 1995 made by and between LAND
DEVELOPMENT ASSOCIATES S.E., a Puerto Rico limited partnership, having an
office at the Doral Building, Suite 700, 650 Munoz Rivera Avenue, Hato Rey,
Puerto Rico (hereinafter referred to as the "Seller",) and COMPRI CARIBE
HOSPITALITY CORP., a Puerto Rico corporation having an office at Catano, Puerto
Rico 00962 (hereinafter referred to as the Buyer).
PRELIMINARY STATEMENT
WHEREAS Seller owns two (2) parcels of land of 5,317.10 and 7,395.77
square meters in the San Anton Ward of Carolina, Puerto Rico, which parcels of
land are identified as Parcels I-IE and I-2E in surveys prepared by Engineer
Raul Franqui on February 27, 1995 and March 8, 1995, copies of which are
attached hereto as Exhibits A and B (hereinafter referred to as the "First
Phase Parcels").
WHEREAS Seller also owns another parcel of land of 17,343.03 square
meters in the San Anton Ward of Carolina, Puerto Rico, which parcel of land is
identified as Parcels I-3E, 1-4E and I-5E in a plot plan dated March 23, 1995
attached hereto as Exhibit C (hereinafter referred to as the "Second Phase
Parcels"). The First Phase Parcels and the Second Phase Parcels shall be
hereinafter referred to as the "Parcels".
WHEREAS, the Parcels are an integral and important part of Parque
Escorial, a master planned residential and commercial community (hereinafter
referred to as "Parque Escorial") being developed by Seller in a parcel of land
of approximately 439 cuerdas located in the municipalities of San Juan and
Carolina, Puerto Rico (hereinafter referred to as "Main Farm"), best identified
in the attached copy of the Parque Escorial master plan, which is made Exhibit
D hereto, and as such, the Parcels are subject to certain restrictive covenants
(hereinafter referred to as the "Restrictive Covenants), a draft of which is
attached hereto as Exhibit E, including architectural standards (hereinafter
referred to as the "Parque Escorial Architectural Standards"), attached hereto
as Exhibit F and certain use restrictions best described in Paragraph 4 (xii)
of this Option (hereinafter referred to as the Wal-Mart Use Restrictions.)
WHEREAS, Seller has agreed that the Buyer shall have a non
transferable option to purchase the Parcels from Seller upon the terms and
conditions hereinafter set forth (hereinafter referred as to "Option").
WHEREAS, it is the expressed intention of the parties that the option
is granted exclusively to Buyer, and under no circumstances shall the Option be
transferred or assigned to another party except with the written consent of the
Seller, provided, however, that if, such transfer or assignment shall be to a
party related to Buyer through common ownership and that reasonable evidence of
such relationship is provided by Buyer to Seller and that such transfer or
assignment in no way alters the intent, terms, conditions and guarantees of
this Option, Seller shall not unduly withhold its consent to the assignment.
Any such assignment or transfer will not release Buyer from the obligations and
responsibilities assumed under the terms and conditions of this Option.
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NOW, THEREFORE, in consideration of the mutual covenants set forth
below, the parties agree as follows:
1. Grant of Option, and Option Price. Subject to the provisions of
Paragraph 6 hereof, Seller for and in consideration of the sum of One Dollar
($1.00) of lawful money of the United States of America to be paid by Buyer at
or before the execution and delivery hereof (hereinafter referred to as the
"Option Money") hereby gives and grants to Buyer the irrevocable right and
option to purchase the parcels during the Option Period, as said term is
hereinafter defined, for a purchase price of Six Million Eight Hundred Fifty
Thousand Dollars ($6,850,000) of lawful money of the United States of America,
as increased from time to time in the manner provided for hereinafter,
(hereinafter referred to as the "Purchase Price") of which One Million Six
Hundred Sixteen Thousand Dollars ($1,616,000) is the portion of the Purchase
Price allocated to Parcel I-1E (hereinafter referred to as "Parcel I-1E
Purchase Price") and One Million Eight Hundred and Thirty Seven Thousand
Dollars ($1,837,000) is the portion of the Purchase Price allocated to Parcel
I-2E (hereinafter referred to as "Parcel I-2E Purchase Price) (the Parcel I-1E
Purchase Price and the Parcel I-2E Purchase Price are hereinafter collectively
referred to as the "First Phase Purchase Price") and Three Million Three
Hundred Ninety Seven Thousand Dollars ($3,397,000) is the portion of the
Purchase Price allocated to the Second Phase Parcels (hereinafter referred to
as the "Second Phase Base Purchase Price").
Notwithstanding the above, the second Phase Base Purchase Price shall
be increased on the earlier of (i) the first day of the month in which the
Infrastructure Improvements, as said term is defined hereinafter, and the
Avenida Sur Improvements, as said term is defined hereinafter, have been
accepted by the government agencies involved or (ii) December 15, 1995,
hereinafter referred to as the "Commencement Date) by an amount equal to one
percent (1%) of the Second Phase Base Purchase Price for each calendar month
that transpires between the commencement Date and the settlement under the
contract of sale, as said term is defined in Paragraph 6 a. hereof, pursuant to
the terms and conditions of the Contract of Sale but in no event the sum of the
monthly increments to the Second Phase Base Purchase Price shall be more than
Four Hundred Seven Thousand Six Hundred Twenty Eight Dollars ($407,628). The
Second Phase Base Purchase Price, as increased from time to time in the manner
stated in this paragraph, shall hereinafter be referred to as the "Second Phase
Purchase Price".
2. Option Period. The option period (herein referred to as the
"Option Period") shall be the tern from the date hereof to 11:59 P.M. (A.S.T.)
of the 31st day of March 1995.
3. Exercise of Option. The option herein granted may be exercised
by personal delivery to Seller on or before March 30, 1995 of Buyer's written
notice of exercise, at the address stated at the outset of this option.
4. Warranties and Representations of Seller. Seller warrants and
represents to Buyer the following:
(i) Seller is, and on the Time of Settlement will be, as said term is
defined hereinafter, the lawful owner of the Parcels to be sold
and delivered by it hereunder and has full right and authority to
sell and deliver the same in accordance with this option subject
only to obtaining the approval of Banco Central Hispano Puerto
Rico, (hereinafter referred to as the "Bank") to the terms and
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conditions of the Option as holders of a first mortgage on the
Main Farm in the amount of Eight Million Dollars ($8,000,000)
(hereinafter referred to as the "Mortgage"), which approval is
best defined in Paragraph 5 (vi) hereof. Upon the delivery of
said Parcels to Buyer pursuant to the provisions of this Option,
Seller will convey and transfer to Buyer by Public Deed a valid,
fee simple (pleno dominio), insurable and recordable title to the
Parcels, free and clear of all mortgage liens and of any
encumbrances and other charges or restrictions which presently
affect the Parcels, subject only to those matters set forth
herein including but not limited to the (a) the Restrictive
Covenants (b) the Parque Escorial Architectural Standards, (c)
the Wal-Mart Use Restrictions, (d) the requirements of the Water
and Sewer Authority of Puerto Rico as defined in Exhibit M
hereto, and (e) to those normal and ordinary liens, encumbrances
and easements required by governmental authorities for public
services and which a search at the Registry of the Property would
reveal hereto;
(ii) Seller shall not take any action during the Option Period or
during the term of the Contract of Sale, which would impair title
to the Parcels or further encumber the parcels, except for the
mortgage liens required for the development of Parque Escorial,
from which the Parcels will be released upon their acquisition by
Buyer, encumbrances and easements required by the governmental
authorities for the furnishing of public services and the
(Restrictive Covenants and the Parque Escorial Architectural
standards.
(iii) Seller shall not willfully take any action which would impair the
physical condition of the Parcels during the term of this Option
or the contract of Sale;
(iv) Seller shall complete within the period of time allocated under
the construction contracts identified hereinafter, as extended
for reasons beyond the control of Seller including but not
limited to reasons of force majeure, at Seller's sole cost, all
the improvements to the 65th Infantry Avenue described in the
Plans and specifications prepared by Engineer Luis F. Franqui and
dated February 11, 1994, as amended from time to time, made an
exhibit hereto by reference only (hereinafter referred to as
"Exhibit G") which plans and specifications constitute the object
of a construction contract awarded to Rexach Construction Company
on October 21, 1994, a copy of which is attached hereto as
Exhibit H.
(v) Seller shall also complete within the period of time allocated
under the construction contract identified hereinafter, as
extended for reasons beyond the control of Seller, including but
not limited to reasons of force majeure, at Seller's sole cost,
all the improvements to the infrastructure of Parque Escorial
described in the plans and specifications prepared by Engineer
Luis F. Franqui and dated March 1, 1994, as amended from time to
time, made an exhibit hereto by reference only (hereinafter
referred to as "Exhibit I"), which plans and specifications
constitute the object of a construction contract awarded to
Rexach Construction Company on October 21, 1994, a copy of which
is attached hereto as Exhibit J.
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The improvements to the 65th Infantry Avenue described in Exhibit
G hereto and the improvements to the infrastructure of Parque
Escorial described in Exhibit I hereto shall be collectively
referred to hereinafter as the "Infrastructure Improvements".
(vi) As to the Second Phase Parcels, Seller shall also construct, at
Seller's sole cost, all of those improvements to the
infrastructure of Parque Escorial that will provide the Second
Phase Parcels with all the utilities and direct access to Avenida
Sur, as said road is identified in Exhibit D hereto, along the
entire length of the Second Phase parcels' frontage to Avenida
Sur (hereinafter referred to as the "Avenida Sur Improvements").
(vii) Seller shall have available for inspection by Buyer at all tines
at its offices copies of Exhibits G and I.
(viii) This Option and the documents to be executed by Seller pursuant
to the terms thereof constitute the legal, valid and binding
obligation of Seller enforceable in accordance with its terms;
(ix) All necessary actions have been taken by the Board of Directors
of Seller to authorize the execution and delivery of this Option
and the consummation of all transactions contemplated hereunder.
(x) Seller has not made and does not make any representations or
warranties whatsoever concerning the physical condition of the
Parcels, accesses, zoning, soil or subsoil condition, area,
availability of utilities, construction or use permits, or any
other permits issued by the government agencies affecting or
related to or necessary for the development or use of the Parcels
or any other matter or thing affecting or related to the Parcels,
other than those specifically referred to in (a) this Agreement,
(b) the "Consulta de Ubicacion" issued by the Planning Board of
Puerto Rico dated October 27, 1992, as amended on December 23,
1994, copies of which are attached hereto as Exhibits K and K-1,
(c) the "Desarrollo Preliminar" of Parque Escorial approved by
the Administracion de Reglamentos y Permisos of Puerto Rico on
June 18, 1993, as amended on August 25, 1993, copies of which are
attached hereto as Exhibits L and L-1, (d) a letter from the
Water and Sewer Authority of Puerto Rico dated March 24, 1995 in
which it restates the obligations of each developer of commercial
land within Parque Escorial, including but not limited the
payment of fees for the connection of the water and sewer systems
and certain impact fees, a copy of which is attached hereto as
Exhibit M, (e) the Wal-Mart Use Restrictions and (f) the
warranties and representations made by Seller that the Parcels
have adequate street frontage, level topography, adequate
drainage and that all typical urban infrastructure will be
readily available, and that the Parcels are presently zoned C-2
("Commercial 2"). Buyer hereby expressly acknowledges and accepts
that no other such representations or warranties have been made
or implied and agrees that other than the Infrastructure
Improvements and the Avenida Sur Improvements, as the latter
relates to the Second Phase Parcels, to be completed by Seller
and the representations and warranties made herein the Parcels
will be acquired by Buyer on an "as is where is" condition. It
shall be the Buyer's sole responsibility to satisfy himself, at
its sole cost, expense and risk, as to the status of the Parcels
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and, accordingly, does herein specifically renounce and waive any
and all rights, claims and/or causes of action against Seller as
to the Parcels, forever releasing, relieving and holding harmless
Seller from any and all liability or legal responsibility in
connection therewith. Notwithstanding anything to the contrary
herein, Seller shall not be released from any liability or legal
responsibility for any representations made by Seller herein.
(xi) That Seller warrants and represents to Buyer that all information
owned or available to Seller as of the date of this document
regarding plans, studies and approvals of any kind pertaining to
the development of the Parcels, including but not limited to
Exhibit C thru N hereto, shall be made available at no cost to
Buyer for the purpose only of seeking the necessary approvals
from governmental agencies for the proposed development on the
parcels. Any cost or responsibility related to the amendment,
change or alteration of any of those mentioned documents or any
additional documents requested by Buyer shall be for the sole
account of Buyer.
(xii) That Seller warrants and represents that other than (a) the
Restrictive covenants, (b) the Wal-Mart Use Restrictions, imposed
upon the Main Farm, including the Parcels, upon the sale of a
parcel of land within Parque Escorial on March 27, 1991 to Wal
Mart Puerto Rico, Inc. (hereinafter referred to as "Wal-Mart"),
which restrictions Seller warrants and represents to be as
described in Paragraph 4 (xiii) hereof and (c) those restrictions
imposed by the regulatory agencies as described in Exhibits K
through M, there are no other restrictions regarding the use of
the Parcels for the purpose intended in the Master Plan of Parque
Escorial, best defined in page MP-3 of Exhibit D hereto.
(xiii) That Seller warrants and represents that Wal-Mart Use
Restrictions are as follows:
(a) Unless otherwise waived by Wal-Mart, no portion of Parque
Escorial, including but not limited to the Parcels, shall be used
for, nor shall there be permitted upon Parque Escorial the
operation of
1. Any type of department store, wholesale club or supermarket
store; or
2. Any other type of single retail store containing more than
twenty five thousand (25,000) square feet of gross floor area; or
(xiv) That seller further warrants and represents that nothing
contained in the Wal-Mart Agreement or in Deed number Five (5) of
Segregation, Purchase and Sale and Constitution of Easements
executed by Wal-Mart and Seller on March 27, 1991 before Notary
Public Salvador Casellas Toro, a copy of which is attached hereto
as Exhibit O, as amended by Deed No. 4 dated March 30, 1995
before notary public Juan Carlos Galanes, attached hereto as
Exhibit O-1, and as further contemplated to be amended pursuant
to a letter agreement dated March 21, 1995, a copy of which is
attached hereto as Exhibit O-2, precludes or prohibits Buyer from
applying to the regulatory agencies at its sole cost and
responsibility, for commercial uses in the Parcels which does not
violate the restrictions defined in Paragraph 4 (xiii) (a)
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hereof. Buyer hereby expressly acknowledges and accepts that no
other such representations or warrants have been made or implied
regarding the uses to be given to the Parcels and agrees to
acquire the Parcels subject to the use restrictions defined
herein.
(xv) That Seller warrants and represents that the right granted by the
Water and Sewer Authority to Seller on March 24, 1995 to connect
an additional 100,000 square feet of commercial space in Parque
Escorial to the existing sewer system as evidenced in Exhibit M
hereto shall be transferred to Buyer to serve the needs of the
Parcels, subject to all the terms and conditions contained in
said letter.
(xvi) That Seller warrants and represents that Wal-Mart has secured
zoning from the Planning Board of Puerto Rico for a 450,000
shopping center to be built on Parque Escorial, as evidenced in
Exhibit K-I hereto.
5. Warranties and Representations of Buyer. Buyer warrants and
represents to Seller the following:
(i) That Buyer shall bear all the costs, expenses and risks related
to any request filed by Buyer with any government agency for the
approval of the Parcels as the site of any development
alternative proposed by Buyer provided that all the warranties
and representations made herein by Seller remain valid.
(ii) That Buyer shall only seek during the term of this Option or the
Contract of Sale, as it relates to the second Phase Parcels those
changes to the zoning of the Parcels which shall have been
previously approved in writing by seller.
(iii) That the Parcels constitute an integral and important part of
Parque Escorial and as such they shall always remain subject to
the Restrictive Covenants, as amended from time to time by the
governing body of the Parque Escorial commercial Owners
Association (hereinafter referred to as the "Association"), and
the Parque Escorial Architectural Standards, as amended from time
to time by the Parque Escorial Architectural Review Committee or
the Association.
(iv) That Buyer acknowledges that pursuant to the terms of the
Mortgage, as said term is defined in Paragraph 4 hereof, the Bank
is entitled to receive, in cash, certain amounts of money in
consideration for the release of the Parcels from the Mortgage,
and that should the Bank decline to approve a modification to the
land release provisions of the Mortgage requested by Seller as a
result of the fact that the sale of the First Phase Parcels to
Buyer under the terms of this Option entails financing by Seller
of up to eighty percent (80%) of the Purchase Price, the Option
shall be rendered null and void. Notwithstanding the above, Buyer
shall be entitled to acquire the Parcels within the term of the
Option by paying the full amount of the Purchase Price, in cash,
to Seller on or before the expiration of the Option Period.
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Upon the termination of the Option or the Agreement of Sale, as
said term is defined in Paragraph 6. hereof, or the Contract of
Sale, as applicable, for any reason whatsoever, Seller shall
return the Option Money, if any, and the Deposit, as said term is
defined in Paragraph 6a. hereof, if any, to Buyer, and Seller and
Buyer shall not have any further rights, claims, causes of
action, or obligations under the Option, the Agreement of Sale or
the Contract of Sale, as applicable; it being understood that
under no circumstances shall Seller be bound to reimburse Buyer
for any expenses, of any nature whatsoever, incurred by Buyer for
any reason whatsoever.
(v) That Buyer further acknowledges that upon the termination of the
Option or the Agreement of Sale, or the Contract of Sale as
applicable, for any reason whatsoever, Seller shall become free
to negotiate the sale or lease of the Parcels, or the Second
Phase Parcels only if Buyer has already acquired the First Phase
Parcels, individually or collectively, with any interested party
including but not limited to those parties with whom Buyer might
have previously discussed or negotiated the sale of any of the
Parcels and Buyer shall not be entitled to any compensation
whatsoever if any of said parties were to acquire or lease real
property within Parque Escorial including but not limited to the
Parcels.
(vi) That Buyer further warrants and represents to Seller that any
agreement entered into by Buyer and any other party interested in
acquiring or leasing all or any of the Parcels shall in no manner
or form be binding on Seller.
(vii) That Buyer acknowledges the use of the Parcels is subject to the
Wal-Mart Use Restrictions and any intended use of the Parcels
which would be in conflict with the Wal-Mart Use Restrictions
shall be previously discussed and agreed to with Wal-Mart and
Seller.
(viii) This Option and the documents to be executed by Buyer pursuant to
the terms thereof constitute the legal, valid and binding
obligations of Buyer enforceable in accordance with its terms;
(ix) All necessary actions have been taken by the Board of Directors
of Buyer to authorize the execution and delivery of this option
and the consummation of all transactions contemplated hereunder.
6. Terms of Agreement of Sale. Subject to Paragraph 1 hereof and
the approval of the Bank of the terms and conditions of the Option as it refers
to the First Phase Parcels, and upon the exercise of the Option herein given
and granted to purchase the Parcels in the manner provided in Paragraph 3
hereof, the option shall without further action of Seller be a binding
agreement of sale (herein referred to as the "Agreement of Sale"), enforceable
at law or in equity for the sale by Seller and purchase by Buyer of the Parcels
at the Purchase Price provided in Paragraph 1 hereof, upon the terms and
conditions of the option and upon the following terms and conditions.
a. Time for Settlement. Execution under the terms of the Agreement
of Sale for sale by Seller and purchase by Buyer of the First
Phase Parcels shall be made no later than the 31st day of March
1995 (herein referred to as the "Time of Settlement of the First
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Phase"). The settlement shall be at a place designated by
Seller.
At the Time for Settlement of the First Phase Parcels, title to
the First Phase Parcels shall be conveyed to Buyer by a deed
pursuant to the terms and conditions contained herein.
Concurrently, Buyer shall deposit with Seller the amount of Ten
Thousand Dollars ($10,000), non refundable unless otherwise
provided herein (referred to as the "Deposit") and Seller and
Buyer shall enter into a contract of sale binding to both
parties, (herein referred to as the "Contract of Sale") for the
sale by Seller and the purchase by Buyer of the Second Phase
Parcels pursuant to the terms and conditions contained in the
Contract of Sale, which terms and conditions shall be the same as
those contained in this Option.
Execution under the terms of the Contract of Sale for sale by
Seller and purchase by Buyer of the second Phase Parcels shall be
made no later than thirty (30) days after Seller gives written
notice to Buyer that the Conditions Precedent, as said term is
defined in Paragraph 6 f, have been satisfied but in no event
shall the settlement under the Contract of Sale shall occur prior
to June 15, 1995 or later than March 31, 1996 unless otherwise
provided for herein (herein referred to as the "Time of
Settlement of the Second Phase"). The settlement shall be at a
place designated by Seller.
b. The payment of the First Phase Purchase Price by Buyer shall be
made at the Time of Settlement for the First Phase, in exchange
for the delivery by the Seller to Buyer of the deed hereinafter
referred to Paragraph 6.e hereof in (i) cash or cashiers check
drawn on a banking institution doing business in Puerto Rico
acceptable to Seller in favor of Seller in the amount by which
Six Hundred Ninety Three Thousand Dollars ($693,000) exceeds the
Option Money, plus the costs that Seller has agreed to pay as
provided in Paragraph 6.c hereof and (ii) the delivery of an
interest bearing promissory note in the amount of Two Million
Seven Hundred Sixty Thousand Dollars ($2,760,000) (hereinafter
referred to as the "First Phase Note") secured by a first
mortgage on Parcel I-IE in the amount of One Million Two Hundred
Ninety One Thousand Seven Hundred Dollars ($1,291,700) and a
first mortgage on Parcel I-2E in the amount of One Million Four
Hundred Sixty Eight Thousand Three Hundred Dollars ($1,468,300).
Unless otherwise paid sooner, the First Phase Note shall be paid
through (i) thirty five (35) monthly payments of Twenty Seven
Thousand Dollars ($27,000) commencing on May 1, 1995 and ending
on March 1, 1998, and (ii) one (1) final payment in the amount of
principal and interest outstanding on April 1, 1998 together with
all amounts then owed to Seller. The monthly payments shall be
applied to the repayment of principal owed under the First Phase
Note until the date in which Buyer becomes obligated to start
paying interest under the First Phase Note at which time the
monthly payments will be applied first to the payment of interest
accrued under the First Phase Note and the balance to the payment
of principal. Forty six point two percent (46.2%) of any such
principal payments shall be allocated to the deferred portion of
the purchase price of Parcel I-IE and fifty three point eight
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percent (53.8%) of any such payments shall be allocated to the
deferred portion of the purchase price of parcel I-2E. Upon the
payment in full of the deferred portion of the purchase price of
either of the Parcels, the monthly payments shall be reduced by
the percentage attributable to the parcel on which the deferred
portion of the purchase price has been paid.
The First Phase Note shall bear interest at a fixed rate equal to
the sum of (i) one percent (1%) and (ii) Citibank NA'S prime
rate, as said term is commonly defined, prevailing at the Time of
Settlement of the First Phase, commencing on the earlier of (i)
the date in which the Infrastructure improvements identified in
Exhibits G thru J have been accepted by the government agencies
concerned or (ii) December 15, 1995; and ending on the date that
all amounts owed under the First Phase Note are paid to seller.
In the event that Buyer prepays the First Phase Note, or any
portion thereof, before the date in which interest begins to
accrue on the First Phase Note, Seller shall reimburse Buyer an
amount equal to ten percent (10%) on the prepaid amount from the
date in which the prepayment is effected to the earlier of (i)
the date in which the Infrastructure improvements have been
accepted by the government agencies concerned or (ii) December
15, 1995. The reimbursement will be made no later than 15 days
after the date that the amount of the reimbursement can be
determined. The payment of the Second Phase Purchase Price shall
be made at the Time of Settlement of the Second Phase in exchange
for the delivery by Seller of a deed in the manner provided in
Paragraph 6.e, in (i) cash or a cashier's check drawn on a
banking institution doing business in Puerto Rico in favor of
Seller in an amount equal to the sum of (a) twenty percent (20%)
of the Second Phase Purchase Price (hereinafter referred to as
the "Down Payment") and (b) the costs that Buyer has agreed to
pay as provided in Paragraph 6.c and (ii) an interest bearing
note in the amount of the Second Phase Purchase Price less the
Down Payment and the Deposit (hereinafter referred to as the
"Second Phase Note") secured by a first mortgage on the Second
Phase Parcel in the same amount of the Second Phase Note.
Unless otherwise paid sooner, the Second Phase Note shall be paid
through (i) thirty five (35) monthly payments of Twenty Seven
Thousand Dollars ($27,000) commencing the first day of the month
following the Time of Settlement of the Second Phase and (ii) one
(1) final payment in the amount of principal and interest
outstanding on the first day of the thirty sixth (36th) month
following the Time of Settlement of the Second Phase together
with all amounts then owed to Seller. The monthly payments of
Twenty Seven Thousand Dollars ($27,000) each shall be applied to
the reduction of principal owed under the Second Phase Note until
the date in which Buyer becomes obligated to start paying
interest under the Second Phase Note at which time they will be
applied first to the payment of interest accrued under the Second
Phase Note and then to the payment of principal. If the monthly
payments of Twenty Seven Thousand Dollars ($27,000) would be less
than the amount required to amortize the Second Phase Note based
on an amortization schedule of a twenty (20) year loan bearing
interest at the rate of ten percent (10%) per annum, the amount
of said monthly payments shall then be increased to such required
amount, rounded up to the next One Thousand Dollars ($1,000).
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The Second Phase Note shall bear interest at a fixed rate equal
to the sum of (i) one percent (1%) and (ii) Citibank N.A.'s prime
rate prevailing at the Time of Settlement of the Second Phase,
and shall be paid on the first day of each month commencing on
the first day of the month that follows (i) the Time of
Settlement of the Second Phase if all the Infrastructure
improvements and the Avenida Sur improvements have been accepted
by the government agencies concerned, or (ii) the date in which
the Infrastructure Improvements and the Avenida Sur improvements
have been accepted by the government agencies concerned.
Upon the sale or lease by Buyer of any portion of the Parcels
encumbered by the mortgages securing the First Phase Note or the
Second Phase Note, or to otherwise release the parcels from said
mortgages, Buyer shall pay to Seller, in cash or a cashier's
check issued by a banking institution doing business in Puerto
Rico, the amount set forth herein to release the parcels from
said mortgages.
FIRST PHASE:
Parcel I-1E shall be released from the Note for the amount of One
Million Two Hundred Ninety One Thousand Seven Hundred Dollars
($1,291,7OO) and Parcel I-2E shall be released from the Note for
the amount of One Million Four Hundred Sixty Eight Thousand Three
Hundred Dollars ($1,468,300), less principal payments allocable
to the Parcels which were made prior to their release from the
mortgages, as applicable, plus unpaid interest applicable to the
Parcels so released.
SECOND PHASE:
Parcel I-4E -- $180.00 per sq. mt.
Parcel I-5E -- $150.00 " " "
Parcel I-6E -- $150.00 " " "
The price for which Seller has agreed to release each of the
parcels of land comprising the Second Phase Parcels (hereinafter
referred to as the "Release Price") as stated herein, shall be
increased on the first day of each month commencing on May 1,
1595 by an amount equal to one percent (1%) of the Release Price
specified hereinbefore for each one of said parcels and reduced
by the amounts of principal payments made prior to their release
that are allocated to each of the parcels I-4E, I-5E and I-6E.
Notwithstanding the above, Seller shall not be obligated to
release any portion of the parcels from the First Phase Note if
Buyer is in default under the First Phase Note or to release any
portion of the Second Phase Parcels in the event that Buyer is in
default under the Second Phase Note.
c. Allocation of Certain Costs and Charges. Seller shall pay all
notarial fees including those related to the preparation of the
Contract of Sale and the internal revenue stamps of the original
of the Deeds of Sale and Buyer shall pay for the internal revenue
stamps corresponding to the certified copies of the Deeds of Sale
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and the stamps to be cancelled in the registration of said
certified copies. Seller shall be responsible for the premium to
be paid on a title insurance policy insuring Seller as the
Mortgagee under the Deeds of Mortgage. The Deeds of Sale and the
Deeds of Mortgage securing the First Phase Note and the Second
Phase Note will be prepared by the Notary selected by Seller and
will be approved by Buyer as to form and substance. Buyer shall
be responsible for the notarial fees and the internal revenue
stamps of the original and certified copies of the Deeds of
Mortgage and the stamps to be cancelled in the registration of
said certified copies. Seller shall be responsible for all the
unpaid property taxes up to the time of execution of the Deeds of
Sale and Buyer shall be responsible thereafter. Buyer will
reimburse Seller for any portion of the property taxes paid in
advance by Seller for the parcels at the Time of Settlement of
the First Phase or Time of Settlement of the Second Phase.
Buyer warrants and represents that no broker has participated in
the transaction contemplated under this Option or is interested
hereby, through or on account of Buyer. Should any claim for
commissions be made by any broker on account of any acts of
Buyer, Buyer will indemnify and hold Seller free and harmless
from any and all liabilities and expenses in connection
therewith, including any and all legal expenses, incurred by
Seller as a consequence thereof.
d. Delivery of Possession. Actual possession of the Parcels shall
be delivered by Seller to Buyer at the Time of Settlement of the
First Phase or the Time of Settlement of the Second Phase, as
applicable.
e. Deed to be Delivered by Seller at Settlement. The conveyance of
the Parcels under the Agreement of Sale or the Contract of Sale
shall be by deed. Such deeds and the Contract of Sale shall be
prepared by Seller and approved by Buyer as to form and
substance.
f. Title Defects; Breach by Seller. In the event Seller, for
reasons beyond its control including but not limited to the
Bank's failure to approve the terms and conditions of this option
or the Contract of Sale, as applicable, but excluding those acts
to be performed by Buyer, is unable to transfer title to the
First Phase Parcels to Buyer on or before March 31, 1995 or as to
the Second Phase Parcels, on the date in which Buyer comes
obligated to purchase the Second Phase Parcels as represented in
this document, then Seller shall have the alternative, at its
option, to pay from the Purchase Price any outstanding liens or
encumbrances upon the title of the parcels, in which case Buyer
shall be bound to acquire the parcels.
In the event Seller is unable or does not wish to discharge said
liens and encumbrances for whatever valid reasons, then Seller
shall have the right to terminate the Option, the Agreement of
Sale and the Contract of Sale, as applicable, and Seller shall
promptly repay Buyer the Option Money and the Deposit, if any, as
applicable, in which event the Option, the Agreement of Sale and
the Contract of Sale, as applicable, shall be terminated and
Buyer shall not have any further rights, claims, causes of action
12
or obligations under this Option, the Agreement of Sale or the
Contract of Sale, as applicable.
In the event that Seller has been unable to obtain within the
term of the Option period any approval or endorsement required
from government agencies which seller is obligated to obtain
pursuant to the terms of this Option, and having Seller exercised
this option pursuant to Paragraph 3 hereof, the Option Period
shall be automatically extended for a period no longer than
thirty (30) business days from the date any such approval or
endorsements are finally obtained but in no event shall the
Option Period be extended beyond April 30, 1995.
In the event that Seller is unable to obtain any approval or
endorsement required on or before April 30, 1995, Seller shall
return the Option Money to Buyer and the Option and the Agreement
of Sale shall be terminated and Buyer shall not have any further
rights, claims, causes of action or obligations under this Option
or the Agreement of Sale; it being understood that under no
circumstances Seller shall be bound to reimburse Buyer for any
expenses, of any nature whatsoever, that could have been incurred
by Buyer for any reason whatsoever.
As to the Second Phase Parcels, if seller is unable to obtain
within the terms of the Contract of Sale, (i) the permit required
to segregate the second phase parcels from the Main Farm
(hereinafter referred to as the Second Phase Segregation Permit;
(ii) an agreement with the University of Puerto Rico (hereinafter
referred to as the "University") whereby the University agrees to
dedicate to the Municipality of Carolina a parcel of land of
approximately 1.36 cuerdas within their Carolina Campus for the
construction of a section of Avenida Sur, which will provide the
Second Phase Parcel with all the utilities and direct access to
Avenida Sur along the entire length of its frontage to Avenida
Sur; or (iii) any other approval or endorsement from government
agencies which Seller is obligated to obtain pursuant to the
terms of this Option (all of the above conditions are hereinafter
referred to collectively as the "Conditions Precedent"), the term
of the Contract of Sale shall not be extended.
In the event that Seller is unable to satisfy the conditions
Precedent, Seller shall return the Deposit to Buyer and the
Contract of Sale shall be terminated and Buyer shall have no
further rights, claims, causes of action or obligations under
this Option or the Contract of Sale; it being understood that
under no circumstances Seller shall be bound to reimburse Buyer
for any expenses, of any nature whatsoever, that could have been
incurred by Buyer for any reason whatsoever.
Notwithstanding the above, Buyer shall be entitled to purchase
the Second Phase Parcels for the Second Phase Purchase Price, at
a price determined pursuant to an appraisal report prepared by R.
McCloskey & Associates, MAI, which takes into account any
difference in the area of the Second Phase Parcels resulting from
the refusal by the University to dedicate a parcel of land within
their Carolina Campus for the construction of Avenida Sur, within
sixty (60) days from the date in which the University advises
Seller of its refusal to dedicate such parcel of land for the
13
construction of a section of Avenida Sur but in no event later
than March 31, 1996.
g. Default by Buyer. Thirty (30) days after notice thereof has been
given to Buyer, the Seller, at its sole option, may cancel all of
its obligations under the Option, the Agreement of Sale or the
Contract of Sale, as applicable, without liability in the event
of any of the following events:
1) With respect to the Buyer or any assignee of the Option duly
approved by Seller (hereinafter referred to as the "Assignee"),
(i) the filing by or against it or any case or other proceedings
for any relief pursuant to the bankruptcy or insolvency laws of
the United states, of any State, of the United States Virgin
Islands, or of the Commonwealth of Puerto Rico; (ii) the filing
of an answer admitting insolvency or inability to pay debts as
they became due; (iii) a material adverse change in the financial
condition of Buyer or any of the assumptions and representations
under which the Option, the First Phase Note or the Contract of
Sale were entered into;
2) The attachment, seizure, levy upon, or taking possession by
any receiver, custodian or assignee for the benefit of creditors
of a substantial part of any property of the Buyer or the
Assignee.
3) If Buyer or the Assignee shall default in the performance of
any of the obligations and agreements on its part to be performed
under the Option or the Agreement of Sale or the First Phase
Note.
In the event that Seller decides to cancel its obligations under
the Option or the Agreement of Sale or the Contract of Sale, as
applicable, upon the happening of any of the events of default
described above, then the Option Money and the Deposit, if any,
shall be retained by Seller as additional consideration and
liquidated damages for Such breach, whereupon Buyer, Seller and
the Assignee, if any, shall be released and relieved from all
liability towards each other and the Option, the Agreement of
Sale and the Contract of Sale, as applicable, shall become null
and void; it being understood that the right to retain the Option
Money and the Deposit, if any, as compensation and liquidated
damages shall be the sole remedy available to Seller in the event
of such default except that Seller shall retain its right to seek
legal and monetary remedies from Buyer and the Assignee in an
amount in excess of the OptIon Money and the Deposit in the event
an action or lack of action by Buyer or the Assignee results in
damages to Seller; it being understood that failure by Buyer or
the Assignee to exercise the Option as provided in Paragraph 3
hereof shall not be deemed a lack of action by Buyer or the
Assignee.
h. Cross Default Provisions. A default by Buyer under the
provisions of the First Phase Note prior to its purchase of the
Second Phase Parcels shall constitute a default under the
Contract of Sale whereby Seller shall be entitled to terminate
the Contract of Sale in which case Seller shall retain the
Deposit as additional consideration and liquidated damages for
14
such breach whereupon Seller, Buyer and the assignee, if any,
shall be released and relieved from any liabilities towards each
other.
i. Survival of Agreement. Notwithstanding any presumption to the
contrary, all agreements contained in this Option and in the
Contract of Sale which by their nature impliedly or expressly
involve performance at any particular time after closing shall
survive the closing.
j. Seller not Bound. The Seller is not liable in any manner by any
oral or written statements, representations, or other information
pertaining to the parcels by any broker, agent, employee,
servant, account, or any other person, whether or not associated
with or employed by Seller, unless the same are specifically set
forth herein.
7. Right of Access. During the term of this Option or the Contract
of Sale, as applicable, Buyer and his authorized representatives shall be
entitled to enter the Parcels for the purpose of inspecting the same, making
appraisals and conducting engineering investigations. Buyer agrees to hold
Seller safe and harmless from any claim or liability arising out of any injury
to Buyer, or to any of his officers, agents or employees while in the Parcels,
and shall indemnify and hold Seller harmless from any and all damages, losses,
expenses, claims suits, judgments and liabilities (including claims and suits
by and judgment and liabilities to Buyer's employees) resulting in any way from
the acts to Buyer, his agents, or employees as herein provided. During all
times that Buyer enters upon and/or conducts any surveys, studies, tests, etc.
on the Parcels, Buyer shall have and maintain, at his cost, public liability
and property damage insurance in form and substance acceptable to Seller with a
minimum, single, combined liability limit of $500,000.00 insuring Buyer and
Buyer's authorized representatives, agents, employees, etc., against all
liability arising out of or in connection with Buyer's use or occupancy of the
Parcels. The insurance required herein shall (i) be issued by an insurance
company authorized to do business in Puerto Rico with a financing rating of at
least plus 3 status as reported in the most recent edition of Best's Report;
(ii) be issued as a primary policy; and (iii) contain endorsements naming
Seller as additional insured and requiring thirty days written notice from the
insurance company to Seller and Buyer before cancellation or changing coverage,
scope or amounts. Each policy or a certificate of insurance, together with
evidence of payment of premiums, shall be delivered to Seller prior to entry
upon the Parcels.
Likewise, Seller and its authorized representatives shall be entitled
to enter the Parcels after their acquisition by Buyer or its Assignee for the
purpose of conducting engineering investigations and completing the
improvements to the Parcels, Parque Escorial and Avenida Sur that Seller is
committed to do pursuant to the terms and conditions of this Option and the
Contract of Sale. Seller agrees to hold Buyer safe and harmless from any claim
or liability arising out of any injury to Seller, or to any of his officers,
agents or employees while in the Parcels, and shall indemnify and hold Buyer
harmless from any and all damages, losses, expenses, claims suits, judgments
and liabilities (including claims and suits by and judgment and liabilities to
Seller's employees) resulting in any way from the acts to Seller, his agents,
or employees as herein provided. During all times that Seller enters upon
and/or conducts any surveys, studies, tests, etc. on the Property, Seller shall
have and maintain, at his cost, public liability and property damage insurance
in form and substance acceptable to Buyer with a minimum, single, combined
15
liability limit of $500,O00.00 insuring Seller and Seller's authorized
representatives, agents, employees, etc., against all liability arising out of
or in connection with Seller's use or occupancy of the Parcels. The insurance
required herein shall (i) be issued by an insurance company authorized to do
business in Puerto Rico with a financing rating of at least plus 3 status as
reported in the most recent edition of Best's Report; (ii) be issued as a
primary policy; and (iii) contain endorsements naming Buyer as additional
insured and requiring thirty days written notice from the insurance company to
Buyer and Seller before cancellation or changing coverage, scope or amounts.
Each policy or a certificate of insurance, together with evidence of payment of
premiums, shall be delivered to Buyer prior to entry upon the Parcels.
8. Title to be of Essence. It is distinctly understood and agreed
that time wherever specified in this Option and in the Contract of Sale is made
and declared to be of the essence hereof. Buyer acknowledges that the terms and
conditions contained herein including but not limited to, the Purchase Price,
shall only be available if the settlement under this Option and the Contract of
Sale, as applicable, is effected within the time periods available to Buyer as
specified therein.
9. Notices. Any notice required or permitted to be given under this
Option and the Contract of Sale must be in writing and sent by certified or
registered mail, return receipt requested, to the respective addresses of the
parties stated at the outset of this Option and the Contract of Sale, or to
such other single address as either party may designate from time to time with
the terms of this Paragraph. In the case of Seller, all notices shall be
addressed to Mr. Francisco Arrivi, Senior Vice President, 650 Munoz Rivera
Avenue, Doral Building, Suite 700, Hato Rey, P. R. 00918 with a copy to Mr.
Donald C. Blakeman, Executive Vice President at the same address. In case of
Buyer, all notices shall be addressed to Mr. Jorge Colon Nevares, President,
Compri Caribe Hospitality Corp., P.O. Box 11662, Caparra Heights Station, San
Juan, P.R. 00922 with a copy to Mr. Herman Cestero, Esq., P.O. Box 364251, San
Juan, P.R. 00936-4251.
10. Construction. This Option shall be construed in accordance with
and governed by the laws of the Commonwealth of Puerto Rico and Seller and
Buyer and their assignees hereby submit themselves to the exclusive
jurisdiction of the San Juan Section of the Superior Court of Puerto Rico for
any and all controversies that may arise thereunder.
11. Miscellaneous. Each of the parties acknowledges that it has not
relied on any agreements or commitments by the other party or any of their
affiliates with respect to the subject matter hereof except the agreements and
commitments specifically set forth herein. This Option supersedes and
nullifies all prior agreements and sets forth the entire understanding of the
parties with respect to the Parcels. The provisions of this Option may not be
waived, extended or modified by subsequent conduct, correspondence or
otherwise. Each of the parties agrees that it or he shall not obtain, seek to
obtain, or rely on any waiver extension, modification, or approval unless the
waiver, extension, modification or approval is evidenced in writing, and (b) is
specifically approved in writing by the Seller or by Buyer. No delay or
failure of the Seller in exercising any right or privilege hereunder shall
affect such right or privilege; nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such right or
privilege preclude any further exercise thereof or of any other right or
privilege. Any waiver, extension, modification or approval related to this
Option shall be effective only to the extent and subject to the terms and
16
conditions in writing evidencing the same. Any waiver, extension, modification
or approval may be made subject to additional terms and conditions from time to
time after it is given or agreed to by the party giving or agreeing to it,
whether or not such waiver, extension, modification or approval has been relied
on in the meantime by the other party. Approval by Seller on any matter for
which approval is required shall not be unreasonably withheld. Whenever any
reference is made in this Option to an event of default, it shall be understood
that no such event of default has occurred until thirty (30) days have lapsed
since notice thereof has been given to Buyer as provided herein.
IN WITNESS WHEREOF, the parties have executed this agreement by their
respective duly authorized officers on the day and year first above written.
SELLER: BUYER:
LAND DEVELOPMENT ASSOCIATES S.E., COMPRI CARIBE HOSPITALITY
a Puerto Rico special partnership CORP.
By: INTERSTATE GENERAL PROPERTIES By: /s/ Jorge Colon Nevares
LIMITED PARTNERSHIP, S.E., a -------------------------
Maryland limited partnership, Jorge Colon Nevares
its managing partner Title: President
By: INTERSTATE GENERAL COMPANY
L.P., a Delaware limited
partnership, a general partner
By: INTERSTATE GENERAL MANAGEMENT
CORPORATION, a Delaware corporation,
its managing general partner
By: /s/ Francisco Arrivi Cros
------------------------------------
Francisco Arrivi Cros
Title: Senior Vice President
AFFIDAVIT NO. 3566
Acknowledged and subscribed to before me by Francisco Arrivi Cros, of
legal age, married, executive and resident of San Juan, Puerto Rico, in his
capacity as Senior Vice President of Interstate General Management Corporation,
Managing General Partner of Interstate General Company, L.P., Managing Partner
of Interstate General Properties Limited Partnership, S.E., Managing Partner of
Land Development Associates; and by Jorge Colon Nevares, of legal age, married,
executive and resident of Guaynabo, Puerto Rico, in his capacity as President
of Compri Caribe Hospitality Corp., both to me personally known in San Juan,
Puerto Rico, this thirty-first (31st) day of March, 1995.
/s/ Jose A. Ledruma Vivaldi
---------------------------------
NOTARY PUBLIC