EXHIBIT (10)
AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
BY AND AMONG
SPIEKER PROPERTIES, L.P.,
AS BUYER
AND
MISSION WEST PROPERTIES
AND
MISSION WEST EXECUTIVE AIRCRAFT CENTER, INC.,
AS SELLER
TABLE OF CONTENTS
PAGE
1. KEY BUSINESS TERMS...................................................... 1
1.1 Date of this Agreement............................................. 1
1.2 Parties' Addresses................................................. 2
1.3 Deposit............................................................ 2
1.4 Escrow Holder...................................................... 2
1.5 Scheduled Closing Date............................................. 2
1.6 Contingency Period................................................. 2
1.7 Contingency Period Extension....................................... 2
1.8 Due Diligence...................................................... 2
1.9 Closing Deadline................................................... 2
1.10 Target Date for Seller's Shareholders' Meeting..................... 2
1.11 Purchase Price..................................................... 2
2. DEFINITIONS AND EXHIBITS ............................................... 3
2.1 Defined Terms...................................................... 3
2.2 Exhibits............................................................ 9
3. TRANSACTION.............................................................. 9
3.1 Agreement to Purchase and Sell...................................... 9
3.2 Parties' Intent..................................................... 9
4. PURCHASE PRICE.......................................................... 10
4.1 Amount............................................................. 10
4.2 Payment............................................................ 10
4.3 Seller's Covenant Re Existing Loans................................ 11
5. EARNEST MONEY DEPOSIT................................................... 11
5.1 Time of Payment.................................................... 11
5.2 Status............................................................. 11
5.3 [Intentionally Deleted.]........................................... 12
5.4 Deposit as Liquidated Damages...................................... 12
6. ESCROW.................................................................. 12
6.1 Opening of Escrow.................................................. 12
6.2 Close of Escrow.................................................... 12
6.3 Execution of Additional Escrow Instructions........................ 13
6.4 Apportionment of Closing Costs..................................... 14
6.5 Deliveries by Seller............................................... 14
6.6 Deliveries by Buyer................................................ 15
6.7 Joint Deliveries................................................... 16
6.8 Prorations and Credits............................................. 16
6.9 Post-Closing Adjustments to Prorations............................. 17
6.10 Tenant Security Deposits........................................... 18
6.11 Release of Holdback................................................ 18
7. TITLE MATTERS........................................................... 19
7.1 Preliminary Title Reports.......................................... 19
7.2 Surveys............................................................ 19
7.3 Title Insurance.................................................... 19
7.4 Reinsurance........................................................ 20
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8. CONDITIONS TO BUYER'S OBLIGATIONS....................................... 20
8.1 General............................................................ 20
8.2 Due Diligence Review............................................... 20
8.3 Due Diligence Materials............................................ 21
8.4 Conclusion of Due Diligence Review................................. 21
8.5 Accuracy of Seller's Representations and Warranties................ 22
8.6 Entry on Realty; Indemnification by Buyer.......................... 22
8.7 Delivery of Due Diligence Materials by Buyer....................... 22
9. CONDITIONS TO SELLER'S OBLIGATIONS...................................... 23
9.1 Seller's Conditions................................................ 23
9.2 Fiduciary Out...................................................... 23
10. LEASES.................................................................. 23
10.1 Operation of Realty................................................ 23
10.2 Estoppel Certificates.............................................. 24
10.3 Delinquent Rents................................................... 25
11. MISCELLANEOUS COVENANTS BY SELLER....................................... 25
11.1 Construction Contracts............................................. 25
11.2 Assignment of Warranties........................................... 26
11.3 Public Disclosure.................................................. 26
12. REPRESENTATIONS AND WARRANTIES.......................................... 26
12.1 "As-Is" Transaction................................................ 26
12.2 Representations and Warranties by Seller........................... 26
12.3 Representations and Warranties by Buyer............................ 29
12.4 Termination of Representations and Warranties...................... 30
13. DAMAGE, DESTRUCTION AND CONDEMNATION.................................... 30
13.1 Risk of Physical Loss.............................................. 30
13.2 Condemnation....................................................... 30
14. MISCELLANEOUS........................................................... 30
14.1 Waiver............................................................. 30
14.2 Attorneys' Fees.................................................... 30
14.3 Notices............................................................ 30
14.4 Entire Agreement................................................... 31
14.5 Successors......................................................... 31
14.6 Assignment......................................................... 31
14.7 Choice of Law...................................................... 32
14.8 Headings........................................................... 32
14.9 Counterparts....................................................... 32
14.10 Brokers and Finders............................................... 32
14.11 No Offer.......................................................... 32
14.12 Limitation of Liability........................................... 32
14.13 Jurisdiction and Venue............................................ 32
14.14 Lease to MWP...................................................... 32
14.15 Arbitration of Disputes........................................... 32
14.16 No Successor Liability............................................ 33
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AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
This AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS (the
"Agreement") is made as of this 6th day of December 1996 by and among SPIEKER
PROPERTIES, L.P., a California limited partnership (the "Buyer"), MISSION WEST
PROPERTIES, a California corporation ("MWP"), and MISSION WEST EXECUTIVE
AIRCRAFT CENTER, INC., a California corporation ("MWEAC"), with reference to the
facts set forth in the Recitals below.
RECITALS
I. MWEAC is a wholly-owned subsidiary of MWP. Hereafter, MWP and MWEAC
may sometimes be collectively referred to as the "Seller."
II. MWP is the owner of nine (9) parcels of improved and unimproved land
("MWP's Land"), as generally described on the Schedule of MWP's Land attached
hereto as Exhibit "A-1." Seven (7) parcels of MWP's Land are located in San
Diego and Riverside Counties, California. Two (2) parcels of MWP's Land are
located in Maricopa County, Arizona.
III. The parcels of MWP's Land which are improved with Improvements (as
defined below) are referred to individually as a "Property" and collectively as
the "Properties." The one parcel of MWP's Land which is unimproved is referred
to as the "Unimproved Parcel."
IV. MWEAC is leasing two (2) parcels of land ("MWEAC's Leaseholds") from
the County of San Diego (the "Ground Lessor") pursuant to (1) a certain Aviation
Lease dated May 24, 1988, as amended by a certain First Amendment to Aviation
Lease dated March 12, 1991 and a certain Second Amendment to Aviation Lease
dated June 1, 1993 (collectively, the "MWEAC I Ground Lease") and (2) a certain
Aviation Lease dated March 4, 1992 (the "MWEAC II Ground Lease"). Hereafter,
the MWEAC I and II Ground Leases may sometimes be collectively referred to as
the "MWEAC Ground Leases." MWEAC's Leaseholds are generally described on the
Schedule of MWEAC's Leaseholds attached as Exhibit "A-2."
V. MWEAC owns the Improvements located on MWEAC's Leaseholds (the
"Leasehold Improvements"). Hereafter, MWEAC's Leaseholds and the Leasehold
Improvements may sometimes be collectively referred to as the "Leasehold
Properties."
VI. MWP's Land and MWEAC's Leaseholds are legally described on Exhibits
"A-3" and "A-4," respectively.
VII. Seller desires to sell the above-referenced real property and Buyer
desires to purchase same, all as more fully provided below in this Agreement.
VIII. The parties are executing this Agreement to memorialize their
understanding concerning the purchase and sale of the Realty and such other
Assets of Seller.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants and conditions contained below in this Agreement, the parties hereby
agree as follows:
1. KEY BUSINESS TERMS
1.1 DATE OF THIS The date specified in the
AGREEMENT: Preamble to this Agreement.
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1.2 PARTIES' Buyer: SPIEKER PROPERTIES, L.P.
ADDRESSES: 9255 Towne Centre Drive, Suite 100
San Diego, CA 92121
Attn: Richard L. Romney
Facsimile No.: (619) 623-8506
Seller: MISSION WEST PROPERTIES
6815 Flanders Drive, Suite 250
San Diego, CA 92121-3914
Attn: J. Gregory Kasun
Facsimile No.: (619) 450-1618
1.3 DEPOSIT: The earnest money deposit to be made by Buyer in
the total amount of Six Million Dollars
($6,000,000), asprovided in Section 5.1. The
first increment of the Deposit shall be an amount
equal to One Hundred Fifty Thousand Dollars
($150,000). The second increment of the Deposit
shall be an amount equal to Five Million Eight
Hundred Fifty Thousand Dollars ($5,850,000).
1.4 ESCROW HOLDER: FIRST AMERICAN TITLE INSURANCE COMPANY
411 Ivy Street
San Diego, CA 92101
Attn: Pat Pipher
Facsimile No.: (619) 231-4696
1.5 SCHEDULED January 7, 1997, subject to extension
CLOSING DATE: pursuant to Section 6.2(b)
1.6 CONTINGENCY Notwithstanding anything in this
PERIOD: Agreement to the contrary, it is agreed that the
Contingency Period shall be deemed to have expired
upon execution of this Agreement by Buyer and
Seller.
1.7 CONTINGENCY None
PERIOD
EXTENSION:
1.8 DUE DILIGENCE Not applicable.
DELIVERY DATE:
1.9 CLOSING February 28, 1997
DEADLINE:
1.10 TARGET DATE December 16, 1996
FOR SELLER'S
SHAREHOLDERS'
MEETING
1.11 PURCHASE PRICE: Fifty Million Five Hundred Thousand Dollars
($50,500,000)
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2. DEFINITIONS AND EXHIBITS
2.1 DEFINED TERMS. Terms used in this Agreement which begin with initial
capital letters are defined terms which shall have the meanings ascribed to them
in the Recitals above, in this Section 2.1 below, or elsewhere in this
Agreement. Terms defined in this Section 2.1 are as follows:
"AIRPORT CLOSURE REPORTS." The following reports: (1) letter dated July
16, 1996 from the County of San Diego, Department of Environmental Health re
release of JP-5 fuel from USTs on MWEAC's Leaseholds; (2) Letter Report re
Removal of Underground Storage Tank, Palomar Airport Road, Carlsbad, California
dated November 4, 1996 prepared by Environmental Business Solutions, Inc.; (3)
Phase II-Limited Soil Sampling and Excavation Observation Report re MWEAC II
Leasehold dated September 1990 prepared by Geocon Environmental Consultants,
Inc.; (4) Preliminary Site Assessment re MWEAC I Leasehold dated October 1990
prepared by Geocon Environmental Consultants, Inc.; (5) letter dated January 27,
1992 from Applied Consultants to Rick Jenkins re Additional Site Assessment
Mitigation Plan for MWEAC II Leasehold; and (6) letter dated May 22, 1991 from
the County of San Diego, Department of Health Services, Environmental Health
Services concerning the remediation of an unauthorized release of Hazardous
Materials on the MWEAC II Leasehold.
"A-LEASES." All leases affecting the Realty under which Seller is the
landlord which are not B-Leases and which are in effect on the Date of this
Agreement or which are executed subsequent thereto in accordance with the
provisions of Section 10.1. The A-Leases include some month-to-month leases, as
listed on the Rent Rolls.
"APPURTENANT RIGHTS." All rights, tenements, hereditaments, easements,
rights of way, privileges in and to the Land, including without limitation: (1)
any easements, rights of way and other appurtenances used or connected with the
beneficial use or enjoyment of the Properties, the Unimproved Parcel, MWEAC's
Leaseholds and/or the Leasehold Improvements; (2) all present and future
development rights, air rights, water rights, water stock and mineral rights of
record as of the Close of Escrow; and (3) all rights to use any streets, ways,
alleys, gores or strips of land adjoining MWP's Land and/or MWEAC's Leaseholds.
"ASSETS." The assets of Seller to be purchased by Buyer pursuant to this
Agreement, consisting of:
(1) The Realty,
(2) The Personal Property,
(3) The Property Reports,
(4) The Intangible Property,
(5) The Leases, including all security deposits made by the Tenants
under the Leases,
(6) The Permits,
(7) The Continuing Service Contracts, and
(8) All other rights and interests of Seller relating to the Realty.
"A-TENANTS." The tenants under the A-Leases.
"B-LEASES." All month-to-month leases with the tenants of the airport
facilities which are located on MWEAC's Leaseholds.
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"B-TENANTS." The tenants under the B-Leases.
"BREAK-UP FEE." As defined in Section 9.2(f) below.
"BUYER'S CLOSING CERTIFICATE." The certificate of Buyer to be provided to
Seller pursuant to Section 9.1(a) below at the Closing, certifying that Buyer's
representations and warranties in Section 12.3 are true and correct in all
material respects on and as of the Closing Date, without material adverse
exceptions.
"BUYER'S REPORTS." As defined in Section 8.7 below.
"CHANGE IN CONTROL." As defined in Section 9.2(f)(2) below.
"CLOSING" or "CLOSE OF ESCROW." The recordation of the Deeds and the MWEAC
Ground Lease Assignments and the concurrent disbursement of Buyer's funds to
Seller in consequence thereof.
"CLOSING DATE." The date upon which the Close of Escrow occurs.
"CLOSING DEADLINE." The date specified in Section 1.9 above as the last
date by which the subject transaction must occur, as more fully provided in
Section 6.2(c) below.
"CODE." The Internal Revenue Code of 1986, as amended.
"CONTINGENCY PERIOD." The period of time specified in Section 1.6 for
Buyer to conduct and complete its due diligence review of the Assets.
"CONTINUING SERVICE CONTRACTS." The Service Contracts to be assumed by
Buyer and assigned to Buyer at the Closing, as provided in Section 8.2(e) below.
The Continuing Service Contracts shall specifically include the Gibbs Agreement.
"DEEDS." The Grant Deeds conveying to Buyer title to the Properties, the
Leasehold Improvements and the Unimproved Parcel.
"DEPOSIT." The earnest money deposit to be made by Buyer pursuant to
Section 5.1 in the amount specified in Section 1.3 above.
"DISAPPROVAL NOTICE." As defined in Section 8.4(a) below.
"DISAPPROVED EXCEPTIONS." The exceptions or discrepancies to title for the
Realty described in the Preliminary Reports and/or the Surveys to which Buyer
objects by written notice to Seller and Escrow Holder within the Title Review
Period or the Survey Review Period, as the case may be.
"DMB/SVP." DMB/SVP California Investments, LLC, an Arizona limited
liability company.
"DMB/SVP PURCHASE AGREEMENT." That certain Agreement of Purchase and Sale
and Joint Escrow Instructions dated July 1, 1996 between Seller and DMB/SVP, as
amended.
"DUE DILIGENCE MATERIALS." As defined in Section 8.3 below.
"EARNOUT PERIOD." As defined in Section 9.2(f) below.
"ENVIRONMENTAL LAWS." As defined in the definition of "Hazardous
Materials" below in this Section 2.1.
"ESCROW." That certain escrow to be opened with the Escrow Holder in
respect of this Agreement and the transfer of the Realty, as more fully provided
in Article 6 below.
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ESCROW HOLDER." The company responsible for the Escrow, as specified in
Section 1.4 above.
"FIDUCIARY OUT." As defined in Section 9.2 below.
"FIDUCIARY OUT NOTICE." As defined in Section 9.2(d) below.
"GIBBS AGREEMENT." That certain Management Agreement dated December 1,
1989 between MWEAC, as owner, and Gibbs Flite Center, Inc., as manager.
"GROUND LESSOR." As defined in Recital D above.
"HAZARDOUS MATERIALS." Any wastes, materials or substances (whether in the
form of liquids, solids or gases, and whether or not air-borne), which are or
are deemed to be pollutants or contaminants, or which are or are deemed to be
hazardous, toxic, ignitable, reactive, corrosive, dangerous, harmful or
injurious, or which present a risk, to public health or to the environment, or
which are regulated by or under the authority of any applicable local, state or
federal laws, judgments, ordinances, orders, rules, regulations, codes or other
governmental restrictions, guidelines or requirements, any amendments or
successor(s) thereto, replacements thereof or publications promulgated pursuant
thereto (collectively, the "Environmental Laws").
"HOLDBACK." As defined in Section 4.2(b).
"HOLDBACK PERIOD." The ninety (90) day period beginning on the Close of
Escrow and ending on the 90th day thereafter.
"IMPROVEMENTS." All buildings, fixtures, equipment (including without
limitation mechanical, heating, ventilation and air conditioning systems) and
other improvements located upon the Realty at the Closing.
"INTANGIBLE PROPERTY." Any and all intangible property arising out of or
used in conjunction with the Realty, including without limitation, all signs,
logos, trade names or styles relating to the trade names listed on the Schedule
of Intangible Property attached hereto as Exhibit E, if any, owned by Seller as
of the Closing Date. The Intangible Property shall not include the names
"Mission West Properties," "Mission West Executive Aircraft Center," or any
variations thereof. The Intangible Property shall include (as of the Closing)
all pending or future awards made in condemnation or in lieu thereof, any unpaid
award for damage to the Realty and any proceeds of insurance or claim or cause
of action for damage, loss or injury to the Realty. The Intangible Property
shall not include any amounts payable to Seller by the Ground Lessor for
reimbursement of costs incurred by Seller in removing an underground storage
tank from MWEAC's Leaseholds.
"JOINT PRORATION STATEMENT." As defined in Section 6.8(a) below.
"JOINT SCHEDULE OF DELINQUENT RENTS." As defined in Section 10.3 below.
"JOINT SECURITY DEPOSIT STATEMENT." As defined in Section 6.10 below.
"LEARY ENTITLEMENT REPORTS." The reports dated July 15, 1996 prepared by
James A. Leary Architecture and Planning for each of the Properties and the
Unimproved Parcel concerning zoning, access, parking and permits.
"LEASES." The A-Leases and the B-Leases, collectively.
"LEASE CHANGES." As defined in Section 10.1(a) below.
"LEASE DISCREPANCIES." As defined in Section 10.2(c) below.
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"LEASEHOLD IMPROVEMENTS." As defined in Recital E above.
"LEASEHOLD PROPERTIES." As defined in Recital E above.
"LPC." Lincoln Property Company N.C., Inc., a Texas corporation.
"LPC PURCHASE AGREEMENT." That certain Agreement of Purchase and Sale and
Joint Escrow Instructions dated October 14, 1996 between Seller and LPC, as the
same may be amended. Buyer has obtained a copy of the LPC Purchase Agreement.
"MONETARY LIENS." As defined in Section 7.1(b) below.
"MWEAC CONTINGENCIES." The following conditions or contingencies to
Buyer's obligation to purchase the Leasehold Properties:
(1) The MWEAC Ground Lease Assignments shall be executed by Seller, Buyer
and the Ground Lessor.
(2) A Memorandum of Ground Lease shall be recorded with respect to the
MWEAC II Ground Lease and, if necessary for Buyer to obtain the title insurance,
in the form contemplated in this Agreement, with respect to the MWEAC I Ground
Lease.
(3) Seller shall have arranged, to Buyer's reasonable satisfaction, for
the relinquishment by the Ground Lessor of those certain rights to terminate the
MWEAC Ground Leases pursuant to Paragraph 27 of the MWEAC I Ground Lease and
Paragraph 27 of the MWEAC II Ground Lease.
(4) Finally, Buyer shall have approved, in Buyer's reasonable discretion,
of any amendment, modification, renewal, extension or change to either or both
of the MWEAC Ground Leases; provided, however, that Buyer shall not be entitled
to disapprove the pending amendments to the MWEAC Ground Leases on the grounds
that such amendments fail to include -- in whole or in part -- the following
provisions: Clauses 50.7, 50.8, 50.9, and 54 as set forth in the draft of the
First Amendment to Aviation Lease previously furnished to Buyer. Seller, upon
request of Buyer, shall endeavor to include provisions in the pending amendments
to the MWEAC Ground Leases clarifying provisions of the MWEAC Ground Leases to
address certain concerns of Buyer relating to the condemnation provisions
thereof and the rights and remedies of an encumbrance of the MWEAC Leaseholds in
the event of a default under an encumbrance thereof by the tenant under the
MWEAC Ground Leases; provided, however, that the failure to include such amended
provisions in the final versions of such amendments shall not be grounds for
Buyer to disapprove such amendments.
"MWEAC EXTENSION PERIOD." As defined in Section 3.3(a) below.
"MWEAC GROUND LEASES." As defined in Recital D above.
"MWEAC GROUND LEASE ASSIGNMENTS." The instruments assigning the MWEAC
Ground Leases from Seller to Buyer.
"MWEAC'S LEASEHOLDS." As defined in Recital D above.
"MWP'S LAND." As defined in Recital B above.
"OPENING OF ESCROW." The date on which the Escrow is opened as indicated
by the date on the signature page of this Agreement as the date on which the
Escrow Holder accepted the Escrow and agreed to be bound by the escrow
instructions contained in this Agreement.
"OPERATING EXPENSES." Expenses incurred in the maintenance and operation
of the Realty which are separately charged or billed to the Tenants.
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"PERMITS." All those governmental permits or land use entitlements
obtained by, vested in or in the possession of Seller which are related to the
use, ownership or occupancy of the Realty. The Permits include, by way of
illustration, building permits and certificates of occupancy.
"PERMITTED EXCEPTIONS." The exceptions or discrepancies to title for the
Realty as shown on the Preliminary Reports and/or the Surveys which are not
Disapproved Exceptions. The Permitted Exceptions shall include without
limitation non-delinquent property taxes and assessments, but not supplemental
taxes for the period before the Close of Escrow which may be levied with respect
to improvements to the Realty made before the Close of Escrow.
"PERSONAL PROPERTY." All furniture, personal property, machinery,
apparatus, equipment and other personal property owned by Seller which are
located on the Realty and listed on the Schedule of Personal Property attached
hereto as Exhibit B; provided, however, that it is understood that Buyer is not
purchasing any Personal Property which may be located in Seller's corporate
offices at 6815 Flanders Drive, Suite 250, San Diego, CA 92121, even though such
corporate offices are located in a building which is part of the Realty.
"POST-CLOSING R&W BREACH." A material breach of Seller's representations
and warranties contained in Section 12.2 of this Agreement which is discovered
or identified by Buyer during the Holdback Period.
"PRE-CLOSING DATE." The date on which Buyer and Seller shall meet to
verify the status of the transaction contemplated in this Agreement in order to
insure that the Closing will occur on the Scheduled Closing Date. On the
Pre-Closing Date, the parties shall (1) begin the calculation of amounts to be
prorated at the Closing and the allocation of the Purchase Price among the
Assets other than the Realty and (2) determine whether all deliveries due each
party to the other have been made, whether the final form of documents to be
delivered by each party at the Closing has been agreed on, whether Buyer's
lender is in a position to fund the portion of the Purchase Price to be borrowed
by Buyer, and such other matters as may be appropriate or necessary. The
Pre-Closing Date shall occur seven (7) business days before the Scheduled
Closing Date, as the same may be extended.
"PRELIMINARY REPORTS." The preliminary title reports issued by the Title
Company describing the state of title to the Realty, as listed on the Schedule
of Preliminary Title Reports and Proforma Title Policies attached hereto as
Exhibit "I."
"PROPERTY" OR "PROPERTIES." As defined in Recital C above.
"PROPERTY REPORTS." All reports relating to the Realty prepared by third
party engineers, architects and other professionals which may be in Seller's
possession, including without limitation architectural plans and drawings, soils
reports, and environmental audits or analyses or other similar reports. The
Property Reports include the Leary Entitlement Reports.
"PRORATED LEASES." As defined in Section 6.8(e) below.
"PRORATION DATE." The date and time for prorating all amounts to be
prorated between Buyer and Seller, as more fully provided in Section 6.8(a)
below.
"PURCHASE PRICE." The amount specified in Section 1.11 above to be paid
for the Assets pursuant to Section 4.1 below.
"REALTY." The Appurtenant Rights, the Properties, the Unimproved Parcel,
MWEAC's Leaseholds and the Leasehold Improvements, collectively. The Realty
constitutes substantially all of Seller's Assets.
"RENT ROLLS." The rent rolls for the Realty dated October 1996 to be
attached hereto as Exhibit "C." Seller is in the process of revising and
editing the Rent Rolls and will furnish Buyer with a copy
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of same within five (5) business days after the Opening of Escrow. Upon receipt
of the Rent Rolls, this Agreement will be amended to incorporate same as part of
this Agreement. It is agreed that Buyer shall have the right to review the Rent
Rolls and approve any information thereon which is materially different from
that furnished Buyer before execution of this Agreement (hereafter "Rent Roll
Discrepancy"). If Buyer disapproves of any Rent Roll Discrepancy, the parties
shall agree on a mutually satisfactory adjustment to the Purchase Price to
compensate Buyer for the economic loss resulting from the Rent Roll Discrepancy.
"SCHEDULED CLOSING DATE." The date on which the Escrow is scheduled to
close. The initial Scheduled Closing Date is specified in Section 1.5 above.
"SELLER'S ACTUAL KNOWLEDGE." The actual knowledge of Seller after (1) due
inquiry of its current employees, officers, and directors, and (2) a review of
its books, records and files.
"SELLER'S CLOSING CERTIFICATE". The certificate of Seller to be provided
to Buyer pursuant to Section 8.5 below at the Closing, certifying that Seller's
representations and warranties in Section 12.2 are true and correct in all
material respects on and as of the Closing Date, without material adverse
exception.
"SERVICE CONTRACTS." Those contracts relating to the maintenance and
operation of the Realty, including without limitation utility contracts, water
and sewer contracts, maintenance contracts, janitorial service contracts,
management contracts, and any other contracts of a similar nature. The Service
Contracts are listed on Exhibit "F."
"SURVEYS." The ALTA/ASCM surveys of the Realty to be provided to Buyer by
Seller pursuant to Section 7.2 below. The Surveys shall be prepared in
accordance with the ALTA/ASCM standards for land title surveys (1992) and be in
a form sufficient for the Title Company to issue the Title Policies.
"SURVEY REVIEW PERIOD." The period during which Buyer is to review the
Surveys. The Survey Review Period shall be deemed to have ended on the date of
execution of this Agreement by Seller; provided, however, that Buyer shall have
the right to have the Surveys modified to reflect Buyer's reasonable concerns or
preferences.
"TENANTS." The A-Tenants and the B-Tenants, collectively.
"THIRD PARTY BUYERS." As defined in Section 9.2(a) below.
"THIRD PARTY OFFERS." As defined in Section 9.2(b) below.
"TITLE COMPANY." The title insurance division of Escrow Holder which is
responsible for issuing the Preliminary Reports and the Title Policies.
"TITLE POLICIES." As defined in Section 7.3 below.
"TITLE REVIEW PERIOD." The period during which Buyer is to review the
Preliminary Reports. The Title Review Period shall be deemed to have ended on
the date of execution of this Agreement by Seller; provided, however, that Buyer
shall have the right to have the Preliminary Reports modified to reflect Buyer's
reasonable concerns or preferences.
"UNIMPROVED PARCEL." As defined in Recital C above.
"UST." An underground storage tank.
"WARRANTIES." As defined in Section 11.2 below.
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2.2 EXHIBITS. The Exhibits attached to this Agreement and incorporated
into this Agreement by this reference consist of the following:
Exhibit "A-1" -- Schedule of MWP's Land
Exhibit "A-2" -- Schedule of MWEAC's Leaseholds
Exhibit "A-3" -- Legal Description of MWP's Land
Exhibit "A-4" -- Legal Description of MWEAC's Leaseholds
Exhibit "B" -- Schedule of Personal Property
Exhibit "C" -- Rent Rolls dated October 1996
Exhibit "D" -- Schedule of Prorated Leases
Exhibit "E" -- Schedule of Intangible Property
Exhibit "F" -- Schedule of Service Contracts
Exhibit "G" -- Schedule of Buyer's Disapproved Title
Exceptions (To be provided within five (5)
business days after the Opening of Escrow.)
Exhibit "H" -- Schedule of Buyer's Disapproved Survey
Exceptions (To be provided within five (5)
business days after the Opening of Escrow.)
Exhibit "I" -- Schedule of Preliminary Title Reports and
Proforma Title Policies
Exhibit "J" -- Schedule of Confirming Tenants
3. TRANSACTION
3.1 AGREEMENT TO PURCHASE AND SELL. Subject to all of the terms and
conditions of this Agreement, Seller hereby agrees to sell and Buyer hereby
agrees to buy the Assets for the consideration set forth in this Agreement.
3.2 PARTIES' INTENT.
(a) DMB/SVP AND LPC TRANSACTIONS.
(1) BACK-UP OFFER. Buyer acknowledges that Seller is presently
in escrow to sell the Assets to LPC and that this Agreement is in the nature of
a "back-up" offer to purchase the Assets. Buyer agrees that Seller shall have
no obligation to sell Buyer the Assets unless and until the escrow to sell the
Assets to LPC is terminated by Seller exercising the Fiduciary Out provided for
in the LPC Purchase Agreement or otherwise. If Seller sends a Fiduciary Out
Notice to LPC, it is also obligated to send a Fiduciary Out Notice to DMB/SVP.
(2) SENDING FIDUCIARY OUT NOTICES. After (i) confirming that
the full amount of the Deposit is in the Escrow and (ii) execution of this
Agreement by both Buyer and Seller, Seller shall send the Fiduciary Out Notices
to DMB/SVP and LPC. Concurrently with the sending of the Fiduciary Out Notices,
Buyer shall instruct Escrow Holder to pay the first increment of the Deposit to
Seller.
(b) AS-IS TRANSACTION. It is expressly agreed that, Buyer must
purchase all of the Assets and may not elect to purchase only portions of the
Assets. The parties intend that Buyer will purchase the Assets on an "AS-IS"
basis, as more fully provided below, and that all Monetary Liens will be
discharged and paid in full by the Seller at the Close of Escrow, excluding,
however, any non-delinquent liens for assessments which are paid as part of any
real estate tax bill, including without limitation the lien of Municipal
Improvement Bond No. 151 filed in the Office of the Treasurer of the City of
Riverside, which is commonly referred to as the "Clay Street Assessment Bond."
The Clay Street Assessment Bond affects the Western Metal Lath Property. Prior
to the Opening of Escrow, Buyer has evaluated the economic and financial
feasibility of purchasing the Assets. Notwithstanding anything in this
Agreement to the contrary, it is agreed that by executing this Agreement Buyer
waives
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the right to terminate this Agreement for reasons relating to such economic
matters, including without limitation Buyer's inability to obtain financing to
purchase the Assets.
(c) SCOPE OF BUYER'S DUE DILIGENCE. The parties intend that Buyer
shall have completed all of its due diligence investigations of the Assets
before signing this Agreement. By signing below, Buyer acknowledges and agrees
that notwithstanding anything in this Agreement to the contrary, it has
completed its due diligence review of the Assets, as provided in Section 8.2(a)
below.
3.3 POSSIBLE BIFURCATION OF TRANSACTION.
(a) In the event the MWEAC Contingencies have not been waived or
satisfied on or before the Scheduled Closing Date, Buyer shall remain obligated
to purchase the Assets, exclusive of the Leasehold Properties, on the Scheduled
Closing Date for a Purchase Price which is Three Million Dollars ($3,000,000)
less than Purchase Price specified in Section 1.11. As soon as the MWEAC
Contingencies are satisfied, Buyer shall purchase the Leasehold Properties. If
the MWEAC Contingencies are not satisfied within ninety (90) (the "MWEAC
Extension Period") days after the first Closing, this Agreement and the Escrow
shall be terminated with respect to the Leasehold Properties and Buyer shall be
released from all liability under this Agreement to purchase the Leasehold
Properties. If the transaction is bifurcated, the Closing Deadline specified in
Section 1.9 shall not be applicable to the second Closing, it being understood
that in such event, the Closing Deadline shall become the last day of the MWEAC
Extension Period. In the event the transaction is bifurcated and the first
Closing occurs, if this Agreement is thereafter terminated for reasons other
than Buyer's default, the portion of the Deposit then remaining in Escrow,
together with interest accrued thereon, shall be promptly returned to Buyer.
(b) Notwithstanding anything in this Agreement to the contrary,
if the purchase of the Assets is bifurcated as provided above, the first
increment of the Deposit shall be deemed to have been applied in full to the
portion of the Purchase Price allocable to the portion of the Assets first
purchased by Buyer and a portion of the second increment of the Deposit equal to
Three Hundred Thousand Dollars ($300,000) shall be retained in the Escrow to be
allocated to the Leasehold Properties to be payable to Seller as liquidated
damages in the event that Buyer fails to purchase the Leasehold Properties in
breach of this Agreement. The portion of second increment of the Deposit which
is not allocated to the Leasehold Properties shall be credited against the
Purchase Price for the other Assets. In the event the purchase of the Assets is
bifurcated as provided above, the parties agree to amend this Agreement as
necessary or appropriate to reflect such bifurcation.
(c) Notwithstanding anything in this Agreement to the contrary,
it is agreed that Buyer shall be obligated to purchase the Assets, including the
Leasehold Properties even if Buyer identifies Disapproved Exceptions on the
Surveys and the Preliminary Reports for the Assets, it being agreed that such
Disapproved Exceptions are hereby deemed not to have a materially adverse effect
on the use and development of the Assets; provided, however, that Seller shall
be obligated to effect the release of the Assets from any Monetary Liens and to
use its best efforts to remove Disapproved Exceptions, all as limited by and
more fully provided in Section 7.1(b) below.
4. PURCHASE PRICE
4.1 AMOUNT. The Purchase Price shall be the amount specified in Section
1.11. On or before the Pre-Closing Date, the parties shall agree on an
allocation of the Purchase Price among the various parcels which comprise the
Realty. Such allocation of the Purchase Price shall be used for all purposes,
including the calculation of real property transfer taxes.
4.2 PAYMENT AND HOLDBACK.
(a) PAYMENT. The Purchase Price shall be paid in full in cash on the
Closing Date at which time the Assets shall be delivered to Buyer as provided in
this Agreement. The Purchase Price shall be paid in lawful currency of the
United States of America in the form required by Escrow Holder.
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After payment of the closing costs payable by Seller and amounts required to pay
or discharge liens encumbering the Realty, the balance of the Purchase Price,
shall be paid to Seller.
(b) HOLDBACK. At the Close of Escrow, Escrow Holder shall retain in
the Escrow a portion of the Purchase Price in an amount equal to Six Hundred
Thousand Dollars ($600,000) (the "Holdback"). The Holdback shall be invested in
U.S. Government securities or bank insured deposits. Interest accrued on the
Holdback shall be paid to Seller. The Holdback shall be released from Escrow as
provided in Section 6.11 below. If the purchase of the Assets is bifurcated,
the Holdback shall be split into two equal shares of Three Hundred Thousand
Dollars ($300,000) each, with each Closing having a separate Holdback Period of
ninety (90) days each.
4.3 SELLER'S COVENANT RE EXISTING LOANS. As additional consideration for
the purchase of the Assets, Seller covenants that it shall not further encumber
the Assets with any additional debt without the prior written consent of Buyer,
whose consent may be withheld in Buyer's sole and absolute discretion.
5. EARNEST MONEY DEPOSIT
5.1 TIME OF PAYMENT. Prior to execution of this Agreement, Buyer
deposited Three Million Dollars ($3,000,000) in an escrow account with Escrow
Holder. Upon execution of this Agreement by Seller, Buyer shall instruct Escrow
Holder to deposit all of said sum of $3,000,000 with the Escrow and to pay the
first increment of the Deposit directly to Seller to be retained by Seller as
consideration for negotiating and executing this Agreement, subject, however, to
any provisions of this Agreement requiring Seller to refund such first increment
to Buyer. No later than two (2) business days after execution of this Agreement
by Seller, Buyer shall deposit the balance of the Deposit (i.e., $3,000,000)
into the Escrow. The portion of the Deposit placed in Escrow shall be placed in
an interest bearing account at the direction of Buyer. All interest earned on
such account shall belong to and be credited to Buyer, subject, however, to
Seller's rights to liquidated damages under Section 5.4. If Seller and Buyer
complete the purchase and sale of the Assets in accordance with this Agreement,
the full amount of the Deposit, plus accrued interest, shall be applied to the
payment of the Purchase Price, except in the event that the purchase of the
Assets is bifurcated.
5.2 STATUS.
(a) FIRST INCREMENT. The first increment of the Deposit shall be
non-refundable when paid to Seller and Seller shall be entitled to retain same
if this Agreement is terminated for any reason except:
(1) In the event of a breach of this Agreement by Seller,
(2) The failure of a condition to the Close of Escrow in favor
of Buyer, or
(3) As expressly provided in Section 3.3(a), Section 6.2(b),
Section 9.1(c), Section 13.1, Section 13.2, or elsewhere in this Agreement.
If at any time this Agreement is terminated due to a breach of this Agreement by
Seller, or the failure of a condition to the Close of Escrow in favor of Buyer,
or pursuant to any of the sections of this Agreement referenced in the
immediately preceding sentence, Seller shall promptly repay the first increment
of the Deposit to Buyer.
(b) SECOND INCREMENT. Once deposited into the Escrow, the second
increment of the Deposit shall remain in the Escrow until released to Buyer or
Seller, as the case may be, or credited against the Purchase Price, all as
provided in this Agreement. If the purchase and sale of the Assets is not
completed and this Agreement terminates for any reason other than a default by
Buyer under this Agreement, then the second increment of the Deposit, plus all
accrued interest, shall be
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promptly returned to Buyer upon such termination of this Agreement. In the
event of a default by Buyer under this Agreement, the provisions of Section 5.4
shall apply to the Deposit and the interest accrued thereon. The second
increment of the Deposit is subject to being released in part to Seller, as more
fully provided in Section 6.2(b)(2).
5.3 [INTENTIONALLY DELETED.]
5.4 DEPOSIT AS LIQUIDATED DAMAGES.
(a) GENERAL. IN THE EVENT THAT THE SALE OF THE ASSETS AS
CONTEMPLATED IN THIS AGREEMENT IS NOT CONSUMMATED BECAUSE OF A DEFAULT ON THE
PART OF BUYER, THIS AGREEMENT AND THE ESCROW SHALL BE TERMINATED AND THE DEPOSIT
(INCLUDING ALL INTEREST EARNED FROM THE INVESTMENT THEREOF) SHALL BE PAID TO AND
RETAINED BY SELLER AS LIQUIDATED DAMAGES PURSUANT TO CALIFORNIA CIVIL CODE
SECTIONS 1671 AND 1677. THE PARTIES ACKNOWLEDGE THAT SELLER'S ACTUAL DAMAGES IN
EVENT OF A DEFAULT BY BUYER WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO
DETERMINE. THEREFORE, BY INITIALING BELOW, THE PARTIES ACKNOWLEDGE THAT THE
DEPOSIT, PLUS ACCRUED INTEREST, HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE
PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS SELLER'S SOLE AND
EXCLUSIVE REMEDY AGAINST BUYER IN THE EVENT OF A DEFAULT ON THE PART OF BUYER
PRIOR TO THE CLOSE OF ESCROW.
Buyer: /S/ Seller: /S/
-------------------------- ----------------------------
(b) OTHER REMEDIES. Notwithstanding anything in this Section 5.4 to
the contrary, Buyer agrees that Seller's right to retain the Deposit as
liquidated damages is intended to compensate Seller only for damages arising
from the failure of Buyer to timely purchase the Property in accordance with
this Agreement, and neither the existence of nor enforcement by Seller of such
remedy shall restrict or prejudice Seller's rights or remedies to: (1) recover
attorneys' fees and legal expenses in the event that Buyer objects to or
otherwise impedes the release by Escrow Holder of the second increment of the
Deposit to Seller in the event of Buyer's default under this Agreement; (2)
enforce any indemnification obligations of Buyer provided for in this Agreement
or as a matter of law; and/or (3) assert any and all claims for damages or for
any other relief if Buyer commences any action or proceeding against Seller for
reasons other than a default by Seller under this Agreement.
6. ESCROW
6.1 OPENING OF ESCROW. Promptly after the execution of this Agreement by
both parties, a signed copy of this Agreement shall be deposited by Seller with
the Escrow Holder in order to open the Escrow. Escrow Holder shall signify its
acceptance of the Escrow and its agreement to be bound by the escrow
instructions contained in this Agreement by signing the signature page hereto in
the space provided and sending Buyer and Seller an executed original of such
signature page. Escrow Holder is hereby authorized and instructed to act in
accordance with the provisions of this Agreement, which, together with Escrow
Holder's standard, general escrow instructions, shall constitute escrow
instructions to Escrow Holder. Seller and Buyer shall each deposit such other
instruments and funds as are necessary to close the Escrow and complete the sale
and purchase of the Assets in accordance with the terms of this Agreement. In
the event of a conflict between the provisions of this Agreement and those of
the Escrow Holder's standard or general escrow instructions, this Agreement
shall control.
6.2 CLOSE OF ESCROW.
(a) GENERAL. Seller and Buyer shall use their best efforts to
diligently complete the transaction contemplated in this Agreement in accordance
with the schedule set forth in this Agreement. Time is specifically a matter of
essence with respect to the performance of the parties' respective obligations
under this Agreement.
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(b) SCHEDULED CLOSING DATE.
(1) The Escrow is scheduled to close at the offices of the
Escrow Holder on or before the Scheduled Closing Date specified in Section 1.5,
as the same may be extended. The Scheduled Closing Date shall not change except
as provided in this Section 6.2(b). Subject to Section 6.2(c), the Scheduled
Closing Date shall be extended, as necessary or appropriate, in the event the
conditions to Buyer's obligations specified in Article 8 and the conditions to
Seller's obligations specified in Article 9, have not been waived or satisfied
by the date specified in Section 1.5. Seller shall use its best efforts to hold
its shareholders' meeting on the date specified in Section 1.10 above. If it is
not possible to hold the shareholders' meeting on that date, Seller shall
reschedule the shareholders' meeting for the first date thereafter as maybe
reasonably feasible and consistent with Seller's legal obligations to its
shareholders. If Seller's shareholders' meeting is not held by the date
specified in Section 1.10, the Scheduled Closing Date shall be extended to a
date which is seven (7) business days after such shareholders' meeting is held;
provided, however, that if Seller's shareholders disapprove of or vote against
the transaction contemplated in this Agreement, this Agreement shall be
terminated and the Escrow cancelled. In the event of termination of this
Agreement pursuant to the preceding sentence, both the first and second
increments of the Deposit, together with interest accrued on the second
increment, shall be promptly returned to Buyer.
(2) If the Escrow does not close on or before December 18, 1996,
Escrow Holder is hereby irrevocably instructed to release One Million Dollars
($1,000,000) to Seller. Upon release to Seller, said sum shall be deemed to be
part of the first increment of the Deposit and be credited against the Purchase
Price.
(c) CLOSING DEADLINE. Except in the event of a failure of Seller to
convey the Assets to Buyer in breach of this Agreement, in no event shall the
Closing occur after the Closing Deadline specified in Section 1.9. If, through
no fault of Seller or Buyer, the Closing has not occurred by the Closing
Deadline, Seller, in its sole discretion, may elect to: (1) terminate this
Agreement and the Escrow without penalty by sending written notice of
termination to Buyer and Escrow Holder, or (2) extend the Closing Deadline to a
mutually acceptable date. If Seller elects to send a notice of termination
pursuant to the preceding sentence, Escrow Holder shall return all documents and
funds deposited into the Escrow to the party which deposited same and the costs
of escrow cancellation shall be paid as provided in Section 6.2(e). In the
event of termination of this Agreement pursuant to the preceding sentence, both
the first and second increments of the Deposit, together with interest accrued
on the second increment, shall be promptly returned to Buyer, subject, however,
to Section 3.3(a) in the event the transaction is bifurcated.
(d) EXTENSION OF CLOSING DEADLINE. In the event the Closing fails to
occur by the Closing Deadline specified in Section 1.9, the parties may, by
mutual written agreement, extend the Closing Deadline to a mutually acceptable
date which shall in no event be later than March 31, 1997, it being agreed that
in the event that the transaction is bifurcated, the Closing Deadline applicable
to the second Closing shall be as provided in Section 3.3(a) above.
(e) CONSEQUENCES OF FAILURE TO CLOSE. If the Escrow fails to close
because of a breach of this Agreement by Buyer, the costs incurred in connection
with the Escrow through the date of termination, including without limitation
the cost of the Preliminary Reports, shall be paid by Buyer and Buyer shall be
liable to pay Seller the liquidated damages specified in Section 5.4. If the
Escrow fails to close because of a breach of this Agreement by Seller, such
costs, without limitation of Buyer's remedies, shall be paid by Seller. If the
Escrow fails to close for any reason other than a breach by Seller or Buyer, the
cost of terminating the Escrow shall be divided equally between the parties.
6.3 EXECUTION OF ADDITIONAL ESCROW INSTRUCTIONS. If Escrow Holder
requires additional escrow instructions, the parties agree to execute such
supplemental instructions as counsel for Seller and Buyer shall mutually
approve, and which do not substantively change this Agreement or the obligations
of the parties under this Agreement.
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6.4 APPORTIONMENT OF CLOSING COSTS. If the Closing does not occur, the
costs and expenses of the Escrow shall be paid as provided in Section 6.2(e).
If the Closing occurs, the costs and expenses of the Escrow shall be paid as
follows:
(a) SHARED COSTS. Buyer and Seller shall each pay one-half (1/2) of
the costs of the Escrow.
(b) SELLER'S COSTS. Seller shall pay: (1) the portion of the cost of
the Title Policies equal to the cost of CLTA owner's standard coverage title
insurance policies, plus the cost of such endorsements thereto as may be
reasonably required in order for Seller to convey good and marketable title to
the Realty and assign the MWEAC Ground Leases to Buyer; (2) all documentary
transfer taxes; and (3) all sales and use taxes payable with respect to the sale
of the Personal Property. Beginning on the Pre-Closing Date, the parties shall
agree on the allocation of the Purchase Price among the Assets other than the
Realty.
(c) BUYER'S COSTS. Buyer shall pay: (1) all costs of recording all
documents to be recorded in order to convey title to the Realty and assign
MWEAC's Ground Leases to Buyer; (2) the cost of the premiums for the Title
Policies in excess of the portion to be paid by Seller; (3) the cost of any
special or custom endorsements to the Title Policies requested by Buyer which
relate to matters other than marketability of title, e.g., zoning and
subdivision map act endorsements; (4) the cost of the Surveys; and (5) all other
costs incurred by Buyer in the course of its due diligence review of the Assets.
6.5 DELIVERIES BY SELLER.
(a) LISTING. On or before the Scheduled Closing Date, Seller shall
deposit into the Escrow, for delivery to Buyer at the Close of Escrow, the
following documents:
(1) The Deeds, fully executed and acknowledged, in recordable
form, sufficient to convey marketable and good fee simple title to the
Properties, the Unimproved Parcel and the Leasehold Improvements, subject only
to the Permitted Exceptions;
(2) An Assignment of A-Leases assigning the A-Leases and
Seller's post-Closing obligations thereunder from Seller to Buyer;
(3) An Assignment of B-Leases assigning the B-Leases and
Seller's post-Closing obligations thereunder from Seller to Buyer;
(4) Estoppel Certificates from the A-Tenants in form mutually
acceptable to the parties, subject, however, to Section 10.2 below;
(5) Notices of Lease Assignment in form mutually acceptable to
the parties duly executed by Seller to be sent by Buyer to the A-Tenants and the
B-Tenants after the Closing;
(6) An Assignment of Contracts assigning the Continuing Service
Contracts to Buyer;
(7) The Assignment of Warranties to be delivered pursuant
to Section 11.2 below, including all written warranties in Seller's possession;
(8) A Bill of Sale for the Personal Property;
(9) The Rent Rolls Update dated as of the Closing Date,
containing the information required to update the Rent Rolls attached hereto as
Exhibit C;
14
(10) An Assignment of Permits assigning the Permits to Buyer,
including originals or, if necessary, copies of all Permits in Seller's
possession;
(11) An Assignment of Intangible Property assigning the
Intangible Property to Buyer;
(12) The Tenant Improvement Construction Schedule pursuant to
Section 11.1 below;
(13) Such funds as may be necessary to comply with Seller's
obligations under this Agreement regarding prorations and assignment of the
security deposits made by the Tenants;
(14) The contents of Seller's files for the Leases, including all
correspondence with the Tenants, tenant ledger cards, keys, books, records (or
copies thereof) and other items used in connection with the operation of the
Realty;
(15) The original, executed copy of each of the MWEAC Ground
Leases, each A-Lease and each B-Lease, including any amendments thereto. If the
original executed copy of any such Lease cannot be located, a copy of the
missing original Lease shall be certified as true and correct by Seller. The
Leases shall be delivered to Buyer outside of the Escrow at Buyer's offices and
Escrow Holder is not to be concerned with delivery of the Leases;
(16) The certificate, concerning changes in Seller's
representations and warranties, if any, after the Date of this Agreement
provided for in Section 12.2(b) below;
(17) The original, executed copy of each Continuing Service
Contract;
(18) The original, executed copies of the Estoppel Certificates;
(19) Seller's Closing Certificate pursuant to Section 8.5 and
Section 12.2(c);
(20) A California Form 590 (Certificate of California Residence
or Permanent Place of Business), certifying, among other things, that Seller's
permanent place of business is located in California; and
(21) A FIRPTA Certificate confirming Seller's representation and
warranty in Section 12.2(a)(4).
(b) FORM. All of the foregoing instruments and documents described
above in this Section 6.5 shall be in form reasonably satisfactory to both Buyer
and Seller. Buyer and Seller shall agree on the form of such instruments and
documents before the Pre-Closing Date.
6.6 DELIVERIES BY BUYER.
(a) LISTING. On or before the Scheduled Closing Date, Buyer shall
deposit into the Escrow, for delivery to Buyer at the Close of Escrow, the
following:
(1) The balance of the Purchase Price, taking into account any
credits due Buyer for security deposits of Tenants or otherwise under this
Agreement;
(2) Buyer's certificate pursuant to Section 8.7 below;
(3) Buyer's Closing Certificate pursuant to Section 9.1(a)
below; and
15
(4) Such other certificates or documents as may be reasonably
required of Buyer to complete the transactions contemplated in this Agreement.
(b) FORM. All of the foregoing instruments and other documents
described above in this Section 6.6 shall be in form reasonably satisfactory to
both Buyer and Seller. Buyer and Seller shall agree on the form of such
instruments and documents before the Pre-Closing Date.
6.7 JOINT DELIVERIES.
(a) LISTING. On or before the Scheduled Closing Date or such other
times as may be specified in this Agreement, Buyer and Seller shall jointly
deposit into the Escrow the following:
(1) The Joint Proration Statement setting forth the prorations
of income and expenses relating to the Assets, as more fully provided in Section
6.8 and Section 10.2(c) below;
(2) The MWEAC Ground Lease Assignments, fully executed by
Seller, Buyer and the Ground Lessor, in the form prescribed by the Ground Lessor
and approved by Buyer;
(3) Memoranda of Ground Leases, as contemplated in the MWEAC
Contingencies;
(4) The Joint Security Deposit Statement pursuant to Section
6.10 below; and
(5) The Joint Schedule of Delinquent Rents pursuant to
Section 10.3 below.
(b) FORM. All of the foregoing schedules described above in this
Section 6.7 shall be in form reasonably satisfactory to both Buyer and Seller.
6.8 PRORATIONS AND CREDITS.
(a) GENERAL. All prorations provided for in this Agreement shall be
made as of the Proration Date on the basis of a thirty (30) day month or three
hundred sixty (360) day year. All prorations shall be made through the Escrow
unless otherwise specified in this Agreement. All revenues and all expenses of
the Realty shall be prorated and apportioned as of 12:01 a.m. on the Closing
Date, so that Seller shall bear all expenses with respect to the Realty and
shall have the benefit of all revenues with respect to the Realty through and
including midnight of the day (the "Proration Date") preceding the Closing Date.
For purposes of this Agreement, the term "revenues" shall include any rent, and
Operating Expenses payable to Seller by the Tenants under the Leases. Any
revenue or expense item which cannot be ascertained with certainty as of the
Closing Date shall be prorated on the basis of the parties' reasonable estimates
of any such items. A statement (the "Joint Proration Statement") setting forth
such agreed prorations signed by Buyer and Seller shall be delivered to Escrow
Holder at least two (2) business days before the Scheduled Closing Date. Escrow
Holder shall not be required to calculate any prorations provided for in this
Section 6.8. As soon as practicable after the Closing, the parties shall make
appropriate adjustments to prorations of items which were based on estimates, as
more fully provided in Section 6.9 below.
(b) OPERATING EXPENSES. Certain of the Leases, both the A-Leases and
the B-Leases, are net leases which require the Tenants thereunder to pay
estimates of Operating Expenses for their respective premises. Seller makes
annual (calendar year) reconciliations of such Operating Expenses in order to
reconcile (on a cash basis) the receipts of estimated Operating Expenses from
the Tenants with the Operating Expenses actually paid for the relevant calendar
year. The reconciliation of Operating Expenses collected for calendar year 1995
has been completed. Payments of Operating Expenses by Tenants for calendar year
1996 shall be prorated in the same manner as rent pursuant to Section 6.8(a).
Any prepayments by Seller of expenses for the Realty which are to be billed to
the
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Tenants as Operating Expenses for 1996 shall be prorated in the same manner as
other items subject to proration.
(c) PREPAID RENTS. Any prepaid rents under the Leases which are
allocable to the period following the Closing shall be credited to Buyer at the
Closing.
(d) TAXES, UTILITIES, ETC. Other items to be prorated by Buyer and
Seller shall include property taxes on the Realty and the Personal Property,
payments under any Continuing Service Contracts (provided that any delinquent
payments owing to Seller shall be treated in the same manner as delinquent rents
under the Leases), water, gas, electricity and other utility charges, any
unfixed meter charges, if any (apportioned on the basis of the last meter
reading), license and permit fees and other expenses customarily prorated.
Items prorated pursuant to this Section 6.8(d) shall be listed on the Joint
Proration Statement.
(e) LEASE BROKERAGE COMMISSIONS. The parties intend that brokerage
commissions payable for the Leases which are listed on Exhibit "D" or which are
Lease Changes (collectively, the "Prorated Leases") shall be prorated as of the
Closing. Such prorations shall be handled through the Escrow. Prorations shall
be made in proportion to the portion of the term (without regard to any
unexercised options to extend or renew) of the Prorated Leases which is
attributable to the period after the Closing. Seller shall be responsible for
the portion of any brokerage commissions payable with respect to the Prorated
Leases which are attributable to the period before the Closing, while Buyer
shall be responsible for the portion of any such brokerage commissions which is
attributable to the period after the Closing. In order to effect such
prorations before the Scheduled Closing Date, Seller shall deliver to Buyer and
Escrow Holder an updated version of the Schedule of Prorated Leases, if
necessary to reflect any Lease Changes which may occur after the Date of this
Agreement. Prorations of brokerage commissions shall be listed on the Joint
Proration Statement.
(f) TENANT IMPROVEMENT COSTS. The parties also intend that any
amounts expended or to be expended by Seller for the construction of tenant
improvements for the Tenants under the Prorated Leases shall be prorated in the
same manner as provided for in Section 6.8(e) for the proration of brokerage
commissions under the Prorated Leases. Prorations of tenant improvements costs
shall be listed on the Joint Proration Statement. See also Section 11.1 below.
(g) INSURANCE PREMIUMS. Insurance premiums shall not be prorated.
Seller shall be entitled to all insurance premium refunds on its insurance
policies. Buyer shall obtain its own insurance coverages for the Realty in form
and amount satisfactory to Buyer and its lenders.
(h) LEASE TERMINATION PAYMENTS. Lease termination payments made
before the Close of Escrow shall be allocated as follows:
(1) Seller shall be entitled to receive all payments made before
the Closing for Leases terminated before the Opening of Escrow;
(2) Lease termination payments paid before the Closing for
Leases which are terminated after November 27, 1996 shall be prorated between
Buyer and Seller in proportion to the portions of the terminated term of the
subject Lease(s) which relate to the periods before and after the Close of
Escrow, respectively.
(i) CAMINO WEST BUSINESS PARK PROPERTY. Buyer has had its
consultants review the soils and structural problems at the Camino West Business
Park Property and has agreed to assume full responsibility for such problems.
6.9 POST-CLOSING ADJUSTMENTS TO PRORATIONS. No later than sixty (60) days
after the Closing, the parties shall finalize any estimated prorations made at
the Closing. After the end of said 60-day period, no further adjustments to
such prorations shall be made. Either party owing the other party money based
on adjustments made to estimated prorations after the Closing Date shall
promptly
17
pay the sum due to the other party, plus, if payment is not made within ten (10)
days after mutual agreement on the final adjustments to the prorations, interest
thereon at the rate of ten percent (10.0%) per annum to the date of payment.
6.10 TENANT SECURITY DEPOSITS. Buyer shall receive a credit against the
Purchase Price for any security deposits paid to Seller by the Tenants other
than Mediashare Corporation, it being understood that Mediashare Corporation's
security deposit has been applied to cure defaults by Mediashare Corporation
under its Lease. Buyer and Seller shall deposit into the Escrow before the
Scheduled Closing Date a jointly signed statement (the "Joint Security Deposit
Statement") listing all such security deposits by Tenant name.
6.11 RELEASE OF HOLDBACK.
(a) GENERAL. The parties intend that the Holdback shall be released
to Buyer or Seller, as the case may be, as provided in this Section 6.11. In
the event that Buyer believes that a Post-Closing R&W Breach has occurred, Buyer
may seek to have the Holdback released to Buyer pursuant to Section 6.11(b). To
the extent not released to Buyer, the Holdback shall be released to Seller as
provided in Section 6.11(c) below.
(b) RELEASE TO BUYER.
(1) If, during the Holdback Period Buyer believes that a
Post-Closing R&W Breach has occurred, Buyer shall send Seller and Escrow Holder
a written notice (the "Claim Notice"), describing in reasonable detail the
nature of the Post-Closing R&W Breach and the reason why Buyer believes that a
breach of Seller's representations and warranties has occurred. Upon receipt of
a Claim Notice, Seller shall have five (5) business days in which to evaluate
the Claim Notice and to request that Buyer provide additional information with
respect thereto. If Seller agrees with the Claim Notice, Buyer and Seller shall
promptly attempt to agree on the cost of curing or correcting the matter
described in the Claim Notice. If Buyer and Seller are unable to agree on (A)
the validity of the claim asserted in the Claim Notice, or (B) the cost of
correcting the matter described therein within fifteen (15) days after Seller's
receipt of the Claim Notice, the dispute shall be submitted to arbitration
pursuant to Section 14.15. Buyer shall have no right to send a Claim Notice as
to any matter contained or disclosed in any of Buyer's Reports or in the Due
Diligence Materials.
(2) Upon a final determination of the cost of curing or
correcting the matter described in a Cure Notice, Escrow Holder shall
immediately release to Buyer a portion of the Holdback in the amount required to
pay such cost.
(3) Notwithstanding anything in this Agreement to the contrary,
it is expressly understood and agreed that in the event a Post-Closing R&W
Breach occurs, Buyer's sole recourse against Seller for damages and any other
form of legal or equitable relief shall be to seek to have the Holdback released
to Buyer. Buyer hereby waives the right to seek to collect damages or any other
form of legal or equitable relief from Seller due to a Post-Closing R&W Breach.
(c) RELEASE TO SELLER. Upon the end of the Holdback Period, Escrow
Holder shall promptly release to Seller the full amount of the Holdback
remaining in the Escrow, plus accrued interest; provided, however, that if Buyer
and Seller have not yet resolved a Claim Notice timely filed by Buyer before the
end of the Holdback Period, Escrow Holder shall retain in the Escrow an amount
reasonably estimated to pay for the cost of curing or correcting the matter
described in the unresolved Claim Notice. Upon final resolution of the subject
Claim Notice, all funds then remaining in the Escrow shall be distributed to the
party or parties entitled thereto.
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7. TITLE MATTERS
7.1 PRELIMINARY TITLE REPORTS.
(a) REVIEW. By signing this Agreement, Buyer acknowledges that: (1)
it has previously received copies of all the Preliminary Reports, together with
copies of all instruments giving rise to the exceptions contained in the
Preliminary Reports, and (2) it will prepare a list of Disapproved Exceptions
shown on the Preliminary Reports for all of the Realty no later than five (5)
business days after the Opening of Escrow. Such Disapproved Exceptions will be
listed on the Schedule of Buyer's Disapproved Title Exceptions to be attached
hereto as Exhibit "G." The preparation of the Schedule of Buyer's Disapproved
Title Exceptions shall not extend the Title Review Period.
(b) REMOVAL OF DISAPPROVED EXCEPTIONS. By signing this Agreement,
Buyer shall be deemed to have waived its right to terminate this Agreement
because of any Disapproved Exceptions -- other than Monetary Liens -- listed on
the Schedule of Buyer's Disapproved Title Exceptions, it being agreed that Buyer
shall be obligated to take title to the Realty subject to such Disapproved
Exceptions. Seller shall be obligated to remove or clear recorded liens or
encumbrances securing monetary obligations other than non-delinquent taxes and
assessments (hereafter, "Monetary Liens") by paying the amounts secured thereby
or, if necessary, the posting of bonds -- reasonably satisfactory to the Title
Company -- to clear any Monetary Liens which cannot be discharged or released at
the Closing. Seller shall, as to Disapproved Exceptions other than Monetary
Liens, undertake to use its best efforts to remove such items or promptly advise
Buyer that it shall not be able to remove such items. Seller shall not be
obligated to initiate litigation or expend more than One Thousand Dollars
($1,000) in the aggregate to remove any Disapproved Exceptions other than
Monetary Liens. After consulting with Seller, Escrow Holder shall obtain
demands for payment from each lien holder of record whose Monetary Lien is to be
discharged at the Close of Escrow. After approval of such demands by Seller,
Escrow Holder shall pay such demand at the Close of Escrow using funds deposited
into the Escrow for that purpose.
7.2 SURVEYS.
(a) REVIEW. By signing this Agreement, Buyer acknowledges that: (1)
it has previously received copies of all the Surveys, and (2) it will prepare a
list of Disapproved Exceptions shown on the Surveys for all of the Realty no
later than five (5) business days after the Opening of Escrow. Such Disapproved
Exceptions will be listed on the Schedule of Buyer's Disapproved Survey
Exceptions to be attached hereto as Exhibit "H." The preparation of the
Schedule of Buyer's Disapproval Survey Exceptions shall not extend the Survey
Review Period. If the Escrow does not close for any reason, Seller shall pay
for the cost of the Surveys. If the Escrow does close, Buyer shall pay for the
cost of the Surveys.
(b) RESPONSE BY SELLER. Seller shall have no obligation to correct
any Disapproved Exceptions listed on the Schedule of Buyer's Disapproved Survey
Exceptions, it being agreed that Buyer shall be obligated to take title to the
Realty subject to such Disapproved Exceptions. Seller shall, however, cooperate
with and assist Buyer in revising the Surveys to address reasonable concerns
raised by Buyer.
7.3 TITLE INSURANCE. At the Close of Escrow and as a condition thereto,
the Title Company shall issue ALTA owners extended coverage policies of title
insurance (the "Title Policies") to Buyer, together with such endorsements as
Buyer's counsel may reasonably require, with liability in the amount of the
Purchase Price (as allocated to each legal parcel comprising the Realty),
showing title to the Realty vested in Buyer, subject only to the Permitted
Exceptions. Indemnification of the Title Company by Seller or any other party,
in order to induce the Title Company to insure around any otherwise Disapproved
Exception, or to obtain any endorsement required by Buyer, shall not be allowed
except with the prior written consent of Buyer after full disclosure to Buyer of
the nature and substance of the indemnity and the matter to be indemnified
against.
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7.4 REINSURANCE. At the request of Buyer, the Title Company shall obtain
reinsurance agreements from such companies as Buyer may direct. Such
reinsurance agreements shall be in the form of the ALTA Facultative Reinsurance
Agreement (revised 1961), and shall include direct access agreements, in such
amounts and in such form as shall otherwise be satisfactory to Buyer.
8. CONDITIONS TO BUYER'S OBLIGATIONS
8.1 GENERAL. Buyer's obligation to purchase the Assets is subject to the
satisfaction of the conditions listed in Sections 3.2(a), 3.3, 6.5, 6.7, 7.3,
8.2, 8.5, and 10.2(a), on or before the Closing. These conditions are for the
benefit of Buyer, any or all of which may be waived by Buyer in writing, at
Buyer's sole option. In the event that any of such conditions are not satisfied
to Buyer's reasonable satisfaction or waived by Buyer, then Buyer shall be
entitled to elect to: (a) purchase the Assets on the terms and conditions stated
in this Agreement, (b) terminate this Agreement and the Escrow, or (c) extend
the Scheduled Closing Date to a date no later than the Closing Date in order to
grant Seller additional time in which to satisfy the subject condition,
reserving all of Buyer's rights and remedies against Seller in the event that
the failure to satisfy the subject condition is due to a breach of this
Agreement by Seller. If Buyer terminates this Agreement pursuant to this
Section 8.1, the full amount of the Deposit, plus accrued interest, shall be
returned to Buyer.
8.2 DUE DILIGENCE REVIEW.
(a) GENERAL. Prior to signing this Agreement, Buyer conducted a due
diligence review of the Assets. Buyer's due diligence review consisted of any
matter which Buyer deemed to be relevant, including without limitation an
examination of the Realty and the Due Diligence Materials provided by Seller
pursuant to Section 8.3. Notwithstanding anything in this Agreement to the
contrary, Buyer acknowledges that it has completed its due diligence review of
the Assets as of the Date of this Agreement. The foregoing sentence shall not
affect the MWEAC Contingencies, which are not items of Buyer's due diligence.
(b) ASSISTANCE BY SELLER. Seller shall assist Buyer in conducting
its due diligence review by delivering the Due Diligence Materials pursuant to
Section 8.3 and providing Buyer with access to the Realty pursuant to Section
8.6. Seller shall also respond to written requests from Buyer for additional
information about the Assets which is in Seller's possession.
(c) CORRECTION OF DEFECTS AND DISCREPANCIES. Subject to the
representations and warranties made by Seller, the parties intend that the
Assets be purchased on an "AS IS" basis. Accordingly, it is agreed that Seller
shall have no obligation to correct or remedy defects or deficiencies in the
Assets noted by Buyer or disclosed to Buyer by Seller, except as may be
expressly provided in Section 7.1(b) with respect to Disapproved Exceptions
shown on the Preliminary Reports.
(d) LEASEHOLD PROPERTIES. As soon as practicable after the Opening
of Escrow, Buyer shall ascertain the terms and conditions on which the Ground
Lessor will consent to the assignment of the MWEAC Ground Leases from Seller to
Buyer.
(e) CONTINUING SERVICE CONTRACTS. Seller shall give any notice that
is required to terminate those Service Contracts which Buyer desires to be
terminated, with such termination to be effective as of the earliest date
possible under the subject Service Contracts. The parties acknowledge, however,
that there may be insufficient time for Seller to terminate as of the Closing
those Service Contracts which will not be treated as Continuing Service
Contracts. Accordingly, if Buyer does not identify the Continuing Service
Contracts at least five (5) business days before the Scheduled Closing Date, all
Service Contracts which have not been previously identified for termination will
be regarded as Continuing Service Contracts and Buyer shall assume full
responsibility for terminating after the Closing those Service Contracts which
Buyer desires to terminate. Prorations of income and expenses under the
Continuing Service Contracts shall be made as provided above.
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8.3 DUE DILIGENCE MATERIALS. Seller has already provided Buyer with the
following materials (the "Due Diligence Materials"):
(a) Financial records and statements for the Realty consisting of:
(1) monthly operating statements for the Realty for the two (2) immediately
preceding twelve (12) month periods and the current year to date, and (2)
audited, consolidated annual financial statements for the preceding three (3)
fiscal years [FURNISHED PRIOR TO THE OPENING OF ESCROW];
(b) Access to the Realty by Buyer, its agents or representatives
pursuant to Section 8.6 below to inspect any matter deemed relevant by Buyer,
including without limitation the physical condition of every portion thereof,
and to determine the availability, capacity and costs of utilities [ACCOMPLISHED
PRIOR TO THE OPENING OF ESCROW];
(c) To the extent in the possession of Seller, "as built" mechanical,
electrical and structural plans and specifications for the Improvements [MADE
AVAILABLE TO BUYER'S CONSULTANTS PRIOR TO THE OPENING OF ESCROW];
(d) To the extent in the possession of Seller, true and correct
copies of soils reports for the Realty [FURNISHED PRIOR TO THE OPENING OF
ESCROW];
(e) True and correct copies of all of the Leases and the MWEAC Ground
Leases [FURNISHED PRIOR TO OPENING OF ESCROW];
(f) The Leary Entitlement Reports [FURNISHED PRIOR TO THE OPENING OF
ESCROW];
(g) Access to insurance certificates of the Tenants and Tenant
payment records [MADE AVAILABLE PRIOR TO THE OPENING OF ESCROW];
(h) True and correct copies of all Property Reports, including any
Phase I and Phase II environmental investigations or audits of any part of the
Realty, in the possession of Seller [FURNISHED PRIOR TO THE OPENING OF ESCROW];
(i) True and correct copies of all Permits in the possession of
Seller [FURNISHED PRIOR TO THE OPENING OF ESCROW];
(j) A schedule of all the Service Contracts [FURNISHED PRIOR TO THE
OPENING OF ESCROW];
(k) Access to Seller's files relating to the Realty [ACCOMPLISHED
PRIOR TO THE OPENING OF ESCROW]; and
(l) The Surveys [FURNISHED FOR ALL THE REALTY PRIOR TO THE OPENING OF
ESCROW].
8.4 CONCLUSION OF DUE DILIGENCE REVIEW.
(a) GENERAL. On or before the end of the Contingency Period Buyer
shall send Seller and Escrow Holder a written notice (the "Disapproval Notice")
of any matters affecting the Assets of which Buyer disapproves. If Buyer fails
to timely send the Disapproval Notice,(1) such failure shall constitute a waiver
of Buyer's right to terminate this Agreement and the Escrow pursuant to Section
8.2;(2) Buyer shall be deemed to have approved all matters affecting the Assets,
including without limitation the state of title to the Realty; and (3) Buyer
shall be obligated to complete the purchase of the Assets, subject to
satisfaction of the conditions precedent to the Closing in favor of Buyer.
Buyer shall be entitled to send only one Disapproval Notice.
(b) CURE BY SELLER. If Buyer timely sends the Disapproval Notice,
and the matters listed in the Disapproval Notice are susceptible of cure, Seller
shall then have two (2) business days
21
after receipt of the Disapproval Notice in which to correct the matters listed
in the Disapproval Notice; provided, however, that Seller shall have no
obligation, expressed or implied, to correct such matters. If Seller corrects
the matters listed in the Disapproval Notice to Buyer's reasonable satisfaction,
this Agreement and the Escrow shall remain in full force and effect. If Seller
fails to correct any disapproved matters to Buyer's reasonable satisfaction
within said two-day period, or if any matter specified in the Disapproval Notice
is not susceptible of being cured, Buyer shall have the right to terminate this
Agreement and the Escrow by sending written notice ("Buyer's Termination
Notice") to such effect to Seller and Escrow Holder within five (5) business
days ("Buyer's Reconsideration Period") after the sending of the Disapproval
Notice. Upon such termination, subject to Buyer's obligations under Section
6.2(e) to pay costs of Escrow cancellation, Escrow Holder shall promptly refund
to Buyer all amounts paid into the Escrow by Buyer, including without limitation
the second increment of the Deposit and interest accrued thereon.
(c) FIDUCIARY OUT NOTICE. Seller shall send DMB/SVP and LPC the
Fiduciary Out Notices, as more fully provided in Section 3.2(a)(2). Except as
may be otherwise provided elsewhere in this Agreement, upon the sending of the
Fiduciary Out Notices to DMB/SVP and LPC, the full amount of the Deposit shall
become nonrefundable (subject, however, to satisfaction of the conditions
precedent to the Closing in favor of Buyer), and payable to Seller as liquidated
damages, as provided above in this Agreement.
8.5 ACCURACY OF SELLER'S REPRESENTATIONS AND WARRANTIES. On the Closing
Date, all representations and warranties made by Seller in Section 12.2 below
shall be true and correct in all material respects as if made on the Closing
Date and Buyer shall have received Seller's Closing Certificate executed by
Seller. In the event of a material change in Seller's representations and
warranties before the Close of Escrow, the provisions of Section 12.2(d) shall
apply.
8.6 ENTRY ON REALTY; INDEMNIFICATION BY BUYER.
(a) ENTRY. Buyer and its agents, representatives, employees or
contractors (hereafter "Buyer's Representatives") are hereby granted the right
to enter into the Realty before the Closing for the purpose of inspecting the
Realty during normal business hours pursuant to Section 8.3(b). All persons who
enter upon the Realty pursuant to the right granted in this Section 8.6 shall do
so at their own risk and shall comply with any and all reasonable instructions
and directions of Seller.
(b) INDEMNIFICATION. Buyer shall defend, indemnify and hold Seller
and the Realty entirely harmless from and against any loss, damage, injury,
liability or claim of any kind or character to any person or property arising
from or caused by or arising from: (1) any use or testing of the Realty by
Buyer, (2) any act of omission of Buyer or any of Buyer's Representatives, (3)
any accident on the Realty or any fire or other casualty thereon caused by Buyer
or Buyer's Representatives, or (4) any violation or alleged violation by Buyer
or Buyer's Representatives of any law or regulation now or hereafter enacted;
provided, however, that this indemnity shall not apply to any pre-existing
condition on the Realty or the financial effect of the discovery of any
Hazardous Materials on the Realty. Such indemnity shall not require payment by
Seller as a condition precedent to recovery by Seller.
8.7 DELIVERY OF DUE DILIGENCE MATERIALS BY BUYER. If Buyer terminates
this Agreement for any reason at any time, Buyer shall immediately return to
Seller all Due Diligence Materials furnished to Buyer by Seller. In addition,
as additional consideration for Seller entering into this Agreement, Buyer shall
deliver to Seller complete copies of all reports, studies, and other
investigations of the Realty performed by or on behalf of Buyer by third parties
other than Buyer's legal counsel during Buyer's due diligence review of the
Assets (hereafter, "Buyer's Reports"). If the Closing occurs, copies of Buyer's
Reports shall be delivered to Seller outside of the Escrow on or before the
Closing, it being agreed that in the event the transaction is bifurcated, the
term "Closing" as used in this Section 8.7 shall mean the first Closing. If the
Escrow is cancelled or terminated, complete copies of Buyer's Reports shall be
delivered to Seller within five (5) business days after such termination. As a
condition to the Closing in favor of Seller at the Closing, Buyer shall deliver
to Seller, through the Escrow, a certificate in which
22
Buyer represents and warrants to Seller that Buyer has previously delivered to
Seller all of Buyer's Reports.
9. CONDITIONS TO SELLER'S OBLIGATIONS
9.1 SELLER'S CONDITIONS. Seller's obligation to perform its obligations
under this Agreement and convey the Assets to Buyer is subject to the
satisfaction of the following conditions on or before the Closing:
(a) ACCURACY OF BUYER'S REPRESENTATIONS AND WARRANTIES. On the
Closing Date, all representations and warranties made by Buyer in Section 12.3
below shall be true and correct in all material respects as if made on the
Closing Date and Seller shall have received Buyer's Closing Certificate executed
by Buyer.
(b) NO FIDUCIARY OUT. [INTENTIONALLY DELETED.]
(c) SHAREHOLDER APPROVAL. Seller's shareholders shall have voted to
approve this Agreement and the transaction contemplated in this Agreement on or
before the date specified in Section 1.10 above, or such later date as may be
approved by the parties in writing or may be provided for in this Agreement.
Should Seller fail to timely obtain the required shareholder approval and this
Agreement and the Escrow are terminated, the full amount of the Deposit, plus
accrued interest, shall be returned to Buyer and Seller shall pay Buyer Fifty
Thousand Dollars ($50,000) to reimburse Buyer for its out-of-pocket costs in
conducting its due diligence review of the Assets.
(d) NO DEFAULT BY BUYER. Buyer shall not be in material default
under this Agreement on the Scheduled Closing Date, as the same may be extended.
9.2 FIDUCIARY OUT. [INTENTIONALLY DELETED.]
10. LEASES
10.1 OPERATION OF REALTY.
(a) LEASE CHANGES. All or portions of the Realty have been leased by
Seller to various Tenants who are listed on the Rent Rolls. From and after the
Date of this Agreement until the Close of Escrow, Seller agrees that it will
continue to operate the Realty in the ordinary course of business and perform
all of its obligations as Landlord under all the Leases and as Tenant under the
MWEAC Ground Leases. Seller further agrees that it will not (1) amend or
terminate the MWEAC Ground Leases, (2) enter into any new or additional Leases
(i.e. Leases not shown on the Rent Rolls) ("New Leases"), or (3) amend,
terminate or accept the surrender of any existing Leases or approve any
subleases by Tenants (hereafter, "Lease Changes") without the prior consent of
Buyer, except as follows:
(1) Seller may negotiate, but not sign, New Leases which provide
for the payment of rents at market rates by the Tenants thereunder and the
provision of market concessions to such Tenants by Seller as landlord;
(2) Seller shall submit, for approval by Buyer, all Lease
Changes;
(3) Buyer shall have forty-eight (48) business hours after
receipt of faxed notice from Seller of any Lease Change in which to approve or
disapprove of same;
(4) If Buyer disapproves of any matter submitted for its
approval, it shall do so by faxed notice to Seller before the end of said
48-hour period;
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(5) If Buyer fails to timely disapprove of any Lease Change,
Buyer shall be deemed to have approved of same and Seller may then sign the
subject Lease Change.
(b) MAINTENANCE OF REALTY. Seller shall also maintain the Realty in
condition at least as good condition as of the Date of this Agreement, and shall
not, without first obtaining the written consent of Buyer, enter into any
contracts or agreements, or permit any Tenants to enter into any contracts or
agreements pertaining to the Realty which require the consent of Seller unless
those contracts can be terminated without penalty on thirty (30) days' notice.
Through the Close of Escrow, Seller shall maintain in full force and effect "All
Risk" property insurance insuring the Realty in the amount of at least ninety
percent (90%) of the replacement value of the Realty without deduction for
physical depreciation.
10.2 ESTOPPEL CERTIFICATES.
(a) REQUIREMENT. Subject to Section 10.2(e), Seller shall obtain and
furnish to Buyer at least three (3) business days prior to the Scheduled Closing
Date, as the same may be extended, Estoppel Certificates from the A-Tenants
representing at least eighty-five percent (85.0%) of the rental income shown on
the Rent Rolls, including Western Metal Lath, Inc. (the "Minimum Number of
Estoppels"). The Estoppel Certificates shall be dated no earlier than
forty-five (45) days before the Scheduled Closing Date if Seller fails to obtain
the Minimum Number of Estoppels by the Scheduled Closing Date, as the same may
be extended, Buyer shall have the right to elect to: (1) extend the Scheduled
Closing Date until one (1) business day before the Closing Deadline in order to
grant Seller additional time to obtain the Minimum Number of Estoppels;
(2) proceed with the purchase of the Assets with no reduction in the Purchase
Price, but with Seller providing all missing Estoppel Certificates pursuant to
Section 10.2(d); or (3) terminate this Agreement and the Escrow without penalty.
If Buyer so elects to terminate the Escrow, the full amount of the Deposit, plus
accrued interest, shall be returned to Buyer. Seller shall have no obligation
to obtain Estoppel Certificates from the B-Tenants.
(b) FORM. The Estoppel Certificates shall be in the form specified
in the A-Leases, or if no form is so specified, in such form as may be
reasonably satisfactory to Buyer and Seller. Such Estoppel Certificates shall
verify the accuracy of the information provided by Seller on the Rent Rolls and
the Rent Rolls Update with respect to each A-Lease.
(c) LEASE DISCREPANCIES. In the event of discrepancies ("Lease
Discrepancies") for the A-Leases between the Rent Rolls and the Estoppel
Certificates, the parties shall endeavor to promptly resolve such Lease
Discrepancies. Lease Discrepancies shall be monetary in nature; provided,
however, that if a Lease Discrepancy is such that it could result in the
termination of an A-Lease, it shall, nonetheless, be deemed to be a Lease
Discrepancy. It is expressly understood and agreed that neither the termination
of the Mediashare Corporation Lease nor any dispute about the interpretation or
application of such Lease shall be deemed to be a Lease Discrepancy. If the
aggregate cost or amount of the Lease Discrepancies is less than Fifty Thousand
Dollars ($50,000), there shall be no adjustment to the Purchase Price and this
Agreement shall remain in full force and effect. If the parties conclude that
the aggregate cost or amount of the Lease Discrepancies is more than Fifty
Thousand Dollars ($50,000), then Buyer shall have two (2) business days after
the amount of the Lease Discrepancies is determined in which to elect -- by
sending written notice to Seller and Escrow Holder -- either to terminate this
Agreement or to purchase the Assets without any reduction in the Purchase Price.
If Buyer elects to terminate this Agreement, Seller shall have two (2) business
days after receipt of Buyer's notice of termination in which to elect -- by
sending written notice to Buyer and Escrow Holder -- to sell the Assets with a
reduction in the Purchase Price equal to the portion of the Lease Discrepancies
which is in excess of $50,000 or to terminate this Agreement. If Seller fails
to timely send notice of its election to so reduce the Purchase Price, Seller
shall be deemed to have elected to terminate this Agreement. If Seller elects
to reduce the Purchase Price, the amount of the reduction shall be listed on the
Joint Proration Schedule. If this Agreement is terminated pursuant to this
Section 10.2(c), the full amount of the Deposit, plus accrued interest, shall be
returned to Buyer.
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(d) INABILITY TO OBTAIN. The parties intend that Seller will obtain
Estoppel Certificates from all A-Tenants. However, it is not a condition to the
Close of Escrow that Seller obtain Estoppel Certificates from those A-Tenants in
excess of the Minimum Number of Estoppels. In the event that Seller is unable
to obtain an Estoppel Certificate from these A-Tenants (or if Buyer elects to
purchase the Assets and have Seller furnish Estoppel Certificates even if the
Minimum Number of Estoppels has not been obtained), then at the Closing, Seller
shall furnish a certificate for each A-Lease for which an Estoppel Certificate
has not been obtained, containing a representation that such A-Lease is in full
force and effect; that there are no modifications or amendments to such A-Lease
except as have been delivered to Buyer; that, to Seller's Actual Knowledge, the
subject A-Tenant is not in default thereunder (or stating such default as may
exist); that Seller, as landlord, is not in default thereunder; and stating the
commencement and expiration dates of such A-Lease.
(e) CONFIRMATION LETTERS. Seller has previously collected Estoppel
Certificates from A-Tenants in excess of the Minimum Number of Estoppels for use
in the terminated transaction with DMB/SVP. Notwithstanding anything in this
Section 10.2 to the contrary, the parties agree that Seller may use these same
Estoppel Certificates in the pending transaction with Buyer without having to
update them, subject, however, to the following terms and conditions:
(1) Seller shall obtain a letter (the "Confirmation Letter")
dated no earlier than November 11, 1996 from each of the Confirming Tenants (as
defined below) confirming to Buyer the accuracy of the Estoppel Certificates
previously furnished by the Confirming Tenants.
(2) The Confirmation Letters shall be in form reasonably
acceptable to the parties.
(3) The term "Confirming Tenants" shall mean (i) the four (4)
largest Tenants of each Property and (ii) one Tenant of each building on each
Property. The Confirming Tenants are listed on the Schedule of Confirming
Tenants attached hereto as Exhibit "J."
10.3 DELINQUENT RENTS. Nondelinquent rents shall be prorated up to the
Proration Date through the Escrow as provided above. Rents delinquent at the
Closing Date, but collected later, shall be prorated to the Proration Date when
collected. In order to identify the delinquent rents, no later than five (5)
business days before the Scheduled Closing Date, as the same may be extended,
Buyer and Seller shall prepare and deposit into the Escrow a schedule (the
"Joint Schedule of Delinquent Rents") listing, by Tenant name, the rents
anticipated to be delinquent as of the Closing. Rents collected after the
Closing Date from Tenants whose rent was delinquent at the Closing shall be
deemed to apply first to the current rent due at the time of payment and second
to rent which was delinquent at Closing. Rents collected by Buyer after the
Closing Date to which Seller is entitled, shall be promptly paid to Seller. For
a period of ninety (90) days after the Closing Date, Buyer shall use reasonable
efforts to collect all rents which were delinquent at the Closing Date, but with
no obligation to commence litigation to collect such rents.
10.4 NOTICES OF LEASE ASSIGNMENT. Upon the Close of Escrow, Buyer shall
notify each Tenant, in writing, of its acquisition of the Realty. Said notice
shall set forth Buyer's address for payment of rent and the giving of notices
and shall also recite that the Tenants' security deposits, if any, have been
delivered to Buyer. Seller shall, if requested by Buyer, join in the execution
of such notices at the Close of Escrow.
11. MISCELLANEOUS COVENANTS BY SELLER
11.1 CONSTRUCTION CONTRACTS. As soon as possible after the Opening of
Escrow, Seller shall provide Buyer with a schedule (the "Tenant Improvement
Construction Schedule") which sets forth all ongoing obligations to construct
tenant improvements for the Tenants. The Tenant Improvement Construction
Schedule shall not list obligations for routine maintenance work or periodic
remodeling work which may be set forth in any of the Leases. The cost of such
construction work shall be prorated between Buyer and Seller as provided in
Section 6.8(f). From and after the Date of this
25
Agreement, Seller shall not enter into any new contracts or agreements for such
construction work without the prior consent of Buyer, except as provided in
Section 10.1(a) with respect to Lease Changes.
11.2 ASSIGNMENT OF WARRANTIES. At the Closing, Seller shall assign to
Buyer, pursuant to an Assignment of Warranties, all warranties, guaranties and
sureties (the "Warranties") which Seller may have from vendors, contractors or
servicing agents with respect to the Realty.
11.3 PUBLIC DISCLOSURE. Seller has obligations to make public disclosure
of material information about this Agreement and the subject transactions. Each
public release of information shall be subject to the prior written consent of
Seller and Buyer, which consent shall not be unreasonably withheld. Such
consent shall conclusively be deemed to have been granted if a written
disapproval of the proposed language specifying in detail the objectionable
portions of the proposed public release is not received by the proposing party
within twenty-four (24) hours following receipt of the proposed release by the
receiving party. Written communications between the parties pursuant to this
Section 11.3 shall be made by telecopier or fax.
12. REPRESENTATIONS AND WARRANTIES
12.1 "AS-IS" TRANSACTION. The parties intend that, as regards to
(a) matters affecting the physical condition of the Assets and (b) the amount of
the income generated (on a gross or net basis) from the leasing of the Realty,
Buyer will be acquiring the Assets on an "AS-IS, WHERE-IS" basis, without any
warranty, expressed or implied, by Seller as to the physical condition of same
or the amount of such income, subject, however, to Seller's disclosure
obligations under its representations and warranties in Section 12.2. As to
matters affecting the physical condition of the Assets and the amount of such
income, Buyer will be relying solely on its own due diligence investigation of
the physical condition of the Assets, its own financial analysis of the revenue
and expenses of the Realty, and Seller's representations and warranties in
Section 12.2. As to matters affecting title to the Realty, including ingress
and egress thereto, Buyer will be relying solely on the Title Policies and the
Surveys.
12.2 REPRESENTATIONS AND WARRANTIES BY SELLER.
(a) LISTING. Seller hereby represents and warrants to Buyer that:
(1) LITIGATION. To Seller's Actual Knowledge, there is
presently no claim, litigation, proceeding or governmental investigation
pending or threatened against or relating to the Realty or the transactions
contemplated hereby. (Seller shall give Buyer immediate written notice of any
such claim, litigation proceeding or investigation which becomes known to Seller
prior to the Closing Date.)
(2) COMPLIANCE WITH LAWS.
(i) To Seller's Actual Knowledge, no notice of violation of
any applicable zoning regulation or ordinance or other law, order, ordinance,
permit, rule, regulation or requirement, or any covenants, conditions or
restrictions affecting or relating to the use, operation or occupancy of the
Realty has been given to Seller by any governmental agency having jurisdiction
or by any other person entitled to enforce the same;
(ii) To Seller's Actual Knowledge, the Realty conforms to
all applicable ordinances and other laws, orders, ordinances, permits, rules,
regulations and requirements, and to all covenants, conditions and restrictions
affecting or relating to the use, operation or occupancy of the Realty, subject
to the qualifications in Section 12.2(a)(2)(iii); and
(iii) With respect to the Americans with Disabilities
Act (the "ADA"), Seller has no knowledge that any governmental authority is
presently requesting that remedial or corrective work be done to the Realty in
order to comply with the ADA, it being understood that
26
most of the Improvements were constructed before implementation of the ADA
began. As a result, portions of the Improvements may not now comply with the
ADA. If changes or modifications are made in the future to the Realty, local
governmental authorities may have the right to require that such remedial or
corrective work be done as a condition to granting building permits for new
construction work. Seller shall inform Buyer in writing if any remedial
corrective work that any governmental agency may require to bring any part of
the Realty into compliance with the ADA.
(3) ENVIRONMENTAL. Subject to the Airport Closure Letter and
Seller's disclosure that (i) the operation of the aircraft maintenance and
repair services at the Leasehold Improvements involves the Use (as defined
below) of Hazardous Materials and (ii) one Tenant of each of the Arizona
Corporate Center Property and the Centerpark Plaza I Property may have
improperly disposed of certain chemicals:
(A) To Seller's Actual Knowledge, Seller and the Realty are
not and will not be in violation of any federal, state or local law, ordinance
or regulation relating to industrial hygiene, soil, water, or environmental
conditions on, under or about the Realty, including, but not limited to, the
Environmental Laws;
(B) To Seller's Actual Knowledge, during the period that
Seller has owned the Realty there has been no use, presence, disposal, storage,
generation, release, or threatened release (as those terms are used in the
Environmental Laws, and are hereinafter collectively referred to as "Use") of
Hazardous Materials on, from or under the Realty, except as disclosed by Seller
to Buyer in writing;
(C) To Seller's Actual Knowledge, no Use of Hazardous
Materials occurred on, from or under the Realty prior to Seller taking title to
the Realty, except as disclosed by Seller to Buyer in writing; and
(D) To Seller's Actual Knowledge, during the period that
Seller has owned the Realty, there has been no enforcement action or litigation
brought or threatened against Seller or the Realty, nor any settlements reached
by or with any party or parties alleging the Use of any Hazardous Materials on,
from or under the Realty, except as disclosed by Seller to Buyer in writing.
(4) FOREIGN PERSON. Seller is not a foreign person and is a
"United States Person," as such term is defined in Section 7701(a)(30) of the
Code.
(5) PERMITS. To Seller's Actual Knowledge, Seller has obtained
all governmental licenses and permits in the nature of certificates of occupancy
required from governmental authorities having jurisdiction over the Realty or
from private parties for the use of the Realty and to insure vehicular and
pedestrian ingress and egress to the Realty, except as disclosed by Seller to
Buyer in writing.
(6) PUBLIC IMPROVEMENTS. To Seller's Actual Knowledge, there
are presently no proposed public improvements which would result in any charge
being levied or assessed against the Realty or in the creation of any lien upon
the Realty. Seller shall promptly notify Buyer in writing of any changes
affecting this representation of which it becomes aware prior to the Closing
Date.
(7) CONDEMNATION. To Seller's Actual Knowledge, there is
presently no pending or contemplated condemnation of the Realty or any part
thereof. Seller shall promptly notify Buyer in writing of any changes affecting
this representation of which it becomes aware prior to the Closing Date.
(8) DEFAULT. To Seller's Actual Knowledge, (i) the closing of
the various transactions contemplated by this Agreement will not constitute or
result in any default, or event ("Potential Default") that with a notice or
lapse of time, or both, would be a default, breach or violation
27
of any lease (except for any consent by the Ground Lessor to the assignment of
the MWEAC Ground Leases which may be required), covenant or other agreement,
instrument or arrangement by which Seller or the Realty is bound, and (ii)
Seller is not in default (and there exists no Potential Default on the part of
Seller) as tenant under the MWEAC Ground Leases, as landlord under the A-Leases,
or, as party to the Continuing Service Contracts.
(9) DEFECTS. To Seller's Actual Knowledge, there are no latent,
hidden or structural defects in the Improvements, nor are there any defects or
conditions of the Realty or the soils which would materially impair the use of
such Realty, except as disclosed by Seller to Buyer in writing.
(10) CONSTRUCTION CONTRACTS. Except as provided elsewhere in
this Agreement with respect to pending or ongoing tenant improvement
construction, there are no outstanding construction contracts entered into by
Seller for any Improvements to the Realty which have not been fully paid for by
Seller.
(11) AUTHORITY OF SELLER. MWP and MWEAC are corporations duly
organized and validly existing and in good standing under the laws of the State
of California and have the authority to own and convey the Assets. This
Agreement and all other documents to be executed by Seller and delivered to
Buyer at the Closing are or at the time of Closing will be duly authorized,
executed and delivered by Seller, shall be valid, binding and enforceable
against Seller in accordance with their respective terms, and do not now and at
the time of Closing will not violate any provisions of any agreement or
judicial order to which Seller is a party or to which Seller or the Assets are
subject. Except as set forth in this Agreement, no consent of any third party
is required to consummate the transaction contemplated in this Agreement.
(12) LEASE BROKERAGE COMMISSIONS. To Seller's Actual Knowledge,
there are no commissions, finder's fees or other compensation owing or which may
become owing to any broker or any other person or entity with respect to any
Lease or occupancy agreement including, without limitation, any such
compensation with respect to any future renewals, extensions or expansions
thereof, except for amounts which may be payable with respect to the Prorated
Leases.
(13) LABOR CONTRACTS. Seller is not party to, or otherwise bound
by, any collective bargaining agreement or multi-employer pension fund covering
employees who service the Realty.
(14) LABOR DISPUTES. There is no current labor dispute with any
maintenance or other personnel or employees of Seller or any contracts with
respect to the Realty which could adversely affect the use, operation or value
of the Realty.
(15) RETROACTIVE PROPERTY TAX ASSESSMENT. Notwithstanding any
other provision of this Agreement to the contrary, if Buyer shall become liable
after the Closing for payment of any property taxes assessed against the Realty
for any period of time prior to the Closing Date, Seller shall immediately pay
to Buyer on demand an amount equal to such tax assessment.
(16) OPERATING STATEMENTS. The operating statements for the
Properties and the Leasehold Properties, which have previously been furnished by
Seller to Buyer, are true and correct.
(17) PROPERTY REPORTS AND SERVICE CONTRACTS. To Seller's Actual
Knowledge, Seller has delivered to Buyer all Property Reports and Service
Contracts in Seller's possession, except as noted in Section 6.5(a).
(18) B-LEASES. To Seller's Actual Knowledge, all the B-Leases
are in full force and effect with no material defaults on the part of the
B-Tenants. Seller is not in material default under the B-Leases.
28
(19) NO INACCURACIES. To Seller's Actual Knowledge, there are no
material inaccuracies in any of the Due Diligence Materials delivered to Buyer
by Seller.
(b) SUBSEQUENT CHANGES IN CONDITIONS. If, before the Close of
Escrow, Seller becomes aware of any fact or circumstance which would change a
representation or warranty made by Seller in Section 12.2(a), then Seller shall
give prompt written notice of such changed fact or circumstance to Buyer. The
sending of such notice before the Close of Escrow shall not constitute a breach
of Seller's representations and warranties, but shall serve to amend or modify
Seller's representations and warranties; provided, however, that if Seller
intentionally causes the event which changes Seller's representations and
warranties in a materially adverse manner, such change ("Intentional Change") in
Seller's representations and warranties shall constitute a breach of Seller's
representations and warranties subject to Buyer's rights under Section 12.2(d).
(c) STATUS AT CLOSING. All representations and warranties of Seller
contained in Section 12.2(a) or otherwise made in writing by Seller in
connection with the transactions provided for in this Agreement shall be true
and correct on the Date of this Agreement and on the Closing Date, except to the
extent Buyer has been notified in writing by Seller or otherwise to the contrary
after the Date of this Agreement and prior to the Closing Date. At the Closing,
Seller shall deliver to Buyer, pursuant to Section 8.5, Seller's Closing
Certificate to confirm the status of Seller's representations and warranties.
(d) BUYER'S RIGHTS. Upon notification before the Closing of any fact
or circumstance which would materially change any of the representations or
warranties of Seller contained in this Section 12.2, Buyer shall have the option
of: (1) waiving such change, or (2) terminating this Agreement and the Escrow;
provided, however, that if any such change constitutes an Intentional Change,
Buyer shall have the right to elect -- within five (5) business days after
learning of the Intentional Change -- to have the Intentional Change treated as
either a Post-Closing R & W Breach or a basis for terminating this Agreement.
If Buyer terminates this Agreement pursuant to this Section 12.2(d), the full
amount of the Deposit, plus accrued interest, shall be returned to Buyer.
12.3 REPRESENTATIONS AND WARRANTIES BY BUYER.
(a) LISTING. Buyer hereby represents and warrants to Seller that:
(1) Buyer is a partnership duly organized, validly existing and
in good standing under the laws of the State of California and has the authority
to purchase the Assets.
(2) This Agreement and all other documents to be executed by
Buyer which are to be delivered to Seller at the Closing are, or at the time of
Closing will be duly authorized, executed and delivered by Buyer and do not and
at the time of Closing will not violate any provisions of any agreement or
judicial order to which Buyer is a party or to which Buyer is subject.
(3) This Agreement and all other documents to be executed by
Buyer have been or will be duly executed by duly authorized officers of Buyer
and, when executed and delivered, constitute valid, binding and enforceable
obligations of Buyer and do not now and at the time of Closing will not violate
any provisions of any agreement or judicial order to which Buyer is a party to
or which Buyer or its property is subject.
(b) STATUS AT CLOSING. All representations and warranties of Buyer
contained in Section 12.3(a) or otherwise made in writing by Buyer in connection
with the transactions provided for in this Agreement shall be true and correct
on the Date of this Agreement and on the Closing Date, except to the extent
Seller has been notified to the contrary after the Date of this Agreement and
prior to the Closing Date. At the Closing, Buyer shall deliver to Seller,
pursuant to Section 9.1(a), Buyer's Closing Certificate to confirm the status of
Buyer's representations and warranties.
29
12.4 TERMINATION OF REPRESENTATIONS AND WARRANTIES. Seller's and Buyer's
representations and warranties under this Agreement shall terminate at the end
of the Holdback Period.
13. DAMAGE, DESTRUCTION AND CONDEMNATION
13.1 RISK OF PHYSICAL LOSS.
(a) SUBSTANTIAL LOSS. Risk of physical loss to the Improvements
shall be borne by Seller prior to the Closing Date and by Buyer thereafter. In
the event that any Improvements shall be damaged after the Date of this
Agreement and before the Closing by fire, flood, earthquake or other casualty in
a material degree (that is, to the extent that ten percent (10%) or more of the
total floor space of the Improvements are rendered unusable as of the Closing
Date), Buyer may, at its option: (1) elect not to acquire the Realty, in
which case this Agreement shall be terminated and Buyer shall be entitled to be
paid the full amount of the Deposit; or (2) elect to proceed to close the
purchase of the Realty. If Buyer elects to proceed with the transaction, Seller
shall assign to Buyer all insurance proceeds relating to such damage, as well as
the right to negotiate the adjustment with the insurer and pay Buyer any
deductible amounts under the applicable insurance policies. Seller shall
promptly thereupon provide Buyer with copies of its insurance coverage so that
Buyer may use such information in making its election under this Section
13.1(a).
(b) MINOR LOSS. If damage to less than ten percent (10%) of the
total floor space of the Improvements occurs after the Date of this Agreement
and before the Closing, then at Buyer's option, Seller shall (1) assign to Buyer
at the Closing all insurance proceeds relating to such damage and pay Buyer any
deductible amounts under the applicable insurance policies, or (2) restore and
repair such damage which can reasonably be completed before the Scheduled
Closing Date; provided, however, that in no event shall any repairs by Seller
extend the Closing to a date later than the Closing Deadline.
13.2 CONDEMNATION. In the event that, prior to the Close of Escrow, a
governmental entity shall commence any action of eminent domain to take a
material portion of any one legal parcel which is part of the Realty (or the
Improvements on any such parcel), Buyer shall have the option either to
(a) elect not to acquire the Assets, in which case this Agreement and the Escrow
shall be terminated and Buyer shall be entitled to be paid the full amount of
the Deposit, or (b) complete the acquisition of the Assets, in which case Buyer
shall be entitled to the proceeds of such taking.
14. MISCELLANEOUS
14.1 WAIVER. In the event of a breach by Seller of this Agreement, Buyer
may elect: (a) nevertheless to proceed with the purchase of the Assets,
reserving all of its other rights and remedies available to it under this
Agreement or otherwise at law or in equity including, without limitation, the
right to collect damages from Seller arising from such breach, or (b) to
terminate this Agreement and the Escrow by written notice to Seller and Escrow
Holder delivered prior to the Scheduled Closing Date, as the same may be
extended. In the event of such termination, Buyer shall be relieved of all
further obligations under this Agreement and the full amount of the Deposit,
plus accrued interest, shall be repaid to Buyer.
14.2 ATTORNEYS' FEES. In the event of any action or arbitration between
Buyer and Seller seeking enforcement or interpretation of any of the terms and
conditions of this Agreement, the prevailing party in such action or arbitration
shall be awarded, in addition to damages, injunctive or other relief, its
reasonable costs and expenses, including but not limited to court or
arbitrator's costs and reasonable attorneys' fees.
14.3 NOTICES.
(a) TRANSMISSION. All notices under this Agreement shall be sent by
reputable commercial courier service, telecopier (or electronic facsimile
("fax")), or personal delivery, addressed
30
to the party for whom intended. Notices shall be effective, in the case of
delivery by courier or overnight delivery service, as at the date of receipt
when sent by a courier service which provides written evidence of delivery; and
in case of notices sent by fax, twenty-four (24) business hours after
transmission by a machine which provides automatic evidence of transmission.
Notices to the parties shall be sent to the addresses stated in Section 1.2 of
this Agreement, or such other addresses as the parties may from time to time
designate in writing.
(b) SELLER'S COPIES. A copy of notices to Seller shall be sent to:
Hillyer & Irwin
550 West C Street, Suite 1600
San Diego, CA 92101
William A. Reavey, Esq.
Facsimile No. (619) 595-1313
Pillsbury Madison & Sutro, LLP
101 West Broadway, Suite 1800
San Diego, CA 92101
David R. Snyder, Esq.
Facsimile No. (619) 236-1995
(c) BUYER'S COPIES. A copy of any notice to Buyer shall be sent to:
Spieker Properties, L.P.
2180 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Attn: Sara Reynolds, Vice President and General Counsel
Facsimile No.: (415) 854-6594
(d) COMMUNICATIONS. As a matter of convenience, however,
communications between Buyer and Seller shall, to the extent feasible, be
conducted orally, by telephone or in person, between counsel or other authorized
agents of the parties, with such communications to be confirmed and made
effective in writing as set forth above.
14.4 ENTIRE AGREEMENT. This Agreement and its exhibits contain all of the
agreements and understandings of the parties hereto with respect to the matters
contained in this Agreement. No prior agreement or understanding pertaining to
any such matter shall be effective for any purpose. No provisions of this
Agreement may be amended or modified in any manner whatsoever except by an
agreement in writing signed by duly authorized officers or general partners of
each of the parties hereto, except that any modifications which relate to the
adjustment of time limitations (except the Closing Deadline) or the form of
documents may be made by legal counsel to the parties.
14.5 SUCCESSORS. The terms, covenants and conditions of this Agreement
shall be binding upon and shall inure to the benefit of the heirs, executors,
administrators and assigns of the respective parties hereto.
14.6 ASSIGNMENT. Seller may not assign its rights under this Agreement
without the prior written consent of Buyer. Buyer may assign its rights under
this Agreement to any wholly owned subsidiary of Buyer or any entity owned by or
affiliated with Spieker Properties, L.P. or which is directly or indirectly
controlled by the principals of Buyer or in which a related entity of Buyer is a
member or partner, so long as Buyer covenants in writing to remain responsible
for the full performance of all obligations of its assignee through the Close of
Escrow.
31
14.7 CHOICE OF LAW. This Agreement shall be governed by the laws of the
State of California and any question arising hereunder shall be construed or
determined according to such law.
14.8 HEADINGS. Headings at the beginning of each numbered section of this
Agreement are solely for the convenience of reference and are not a part of this
Agreement.
14.9 COUNTERPARTS. This Agreement may be signed by the parties in
different counterparts and the signature pages combined to create a document
binding on all parties.
14.10 BROKERS AND FINDERS. In connection with the transaction contemplated
by this Agreement, Seller and Buyer represent to one another that neither has
employed a broker or finder in connection with the transaction contemplated in
this Agreement, except as described below with respect to Slusser Associates,
Inc. In the event of a claim for any broker's fee, finder's fee, commission or
other similar compensation in connection herewith other than as set forth
above, Buyer, if such claim is based upon any agreement alleged to have been
made by Buyer, hereby agrees to defend, indemnify and hold Seller harmless
against any and all liability, loss, cost, damage or expense (including
reasonable attorneys' fees and costs) which Seller may sustain or incur by
reason of such claim. If such claim is based upon any agreement alleged to have
been made by Seller, Seller hereby agrees to defend, indemnify and hold Buyer
harmless against any and all liability, loss, cost, damage or expense (including
reasonable attorneys' fees and costs) which Buyer may sustain or incur by reason
of such claim. The provisions of this Section 14.10 shall survive the Closing.
Seller shall be solely responsible for paying an advisory fee due Slusser
Associates, Inc. for investment banking and other advisory services provided to
Seller. Buyer shall be solely responsible for paying any real estate brokerage
commission, referral fees or other fees due to any parties claiming through
Buyer.
14.11 NO OFFER. The submittal or execution of this Agreement, or a draft
thereof, by either party shall not constitute an offer, nor shall either party
be bound to any of the terms hereof until both parties have executed this
document and an original signed copy of such executed document has been received
by each party.
14.12 LIMITATION OF LIABILITY. It is agreed that:
(a) None of the officers, members, directors, employees or
shareholders of Buyer assume any personal liability for the obligations entered
into by or on behalf of Buyer; and
(b) None of the officers, directors, employees or shareholders
of Seller shall have any personal liability for the obligations entered into by
or on behalf of Seller.
14.13 JURISDICTION AND VENUE. In the event of litigation between the
parties with respect to this Agreement or the transactions contemplated in this
Agreement, the parties agree that such litigation shall be filed only in the
Superior Court of the State of California for the County of San Diego. This
Section 14.13 is subject to Section 14.15 relating to arbitration.
14.14 LEASE TO MWP. [Intentionally deleted.]
14.15 ARBITRATION OF DISPUTES.
(a) AGREEMENT TO ARBITRATE. ANY CONTROVERSY OR CLAIM RELATING
TO THIS AGREEMENT SHALL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH THE
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION, AND
JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. ANY SUCH ARBITRATION SHALL BE HELD IN SAN DIEGO,
CALIFORNIA. NOTWITHSTANDING ANYTHING IN THIS SECTION 14.15 TO THE CONTRARY, IT
IS AGREED THAT SUBJECT TO THE AUTHORITY OF THE ARBITRATOR(S), THE PARTIES SHALL
BE ENTITLED TO CONDUCT ANY AND ALL DISCOVERY IN ACCORDANCE WITH THE PROVISIONS
OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 2016, ET SEQ.
32
(b) STATUTORY NOTICE. NOTICE: BY INITIALLING IN THE SPACE BELOW
YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE
`ARBITRATION OF DISPUTES' PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED
BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE
DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALLING IN THE SPACE BELOW
YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE
RIGHTS ARE SPECIFICALLY INCLUDED IN THE `ARBITRATION OF DISPUTES' PROVISION. IF
YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE
COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. YOU HAVE
READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF
THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES PROVISION TO NEUTRAL
ARBITRATION.
/S/ /S/
- ---------------------------- ----------------------------
BUYER'S INITIALS SELLER'S INITIALS
14.16 NO SUCCESSOR LIABILITY. Seller agrees that Buyer shall have no
liability as a successor in interest for any Service Contracts which are not
Continuing Service Contracts or for any other contract or agreement entered into
by Seller in connection with the Realty (other than the A-Leases and B-Leases
and the MWEAC Ground Leases), unless specifically approved in writing by Buyer.
Seller shall indemnify, defend and hold Buyer harmless from any loss, cost,
expense, liability or damage (including reasonable attorneys' fees) incurred by
Buyer in connection with such contracts, agreements and Service Contracts which
are not Continuing Service Contracts.
14.17 SEC COMPLIANCE. If it becomes reasonably necessary to do so in
order to comply with applicable securities laws or the rules or regulations of
the Securities and Exchange Commission, for a period beginning on the Date of
this Agreement and extending until four (4) years after the Closing Date, Buyer
and Buyer's agents shall have the right to inspect and to obtain copies of
Seller's books and records supporting the operation of the Property for the
period of three (3) full calendar years preceding the calendar year which
includes the Closing Date. Buyer shall give reasonable prior notice to Seller
when Buyer wishes to exercise its right to inspect such books and records. Such
inspection shall take place at times reasonably convenient to Seller and Buyer.
[SIGNATURES ON FOLLOWING PAGE]
33
IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement of
Purchase and Sale and Joint Escrow Instructions as of the date first above
written.
"BUYER:" SPIEKER PROPERTIES, L.P.,
a California limited partnership
By: SPIEKER PROPERTIES, INC.,
a Maryland corporation,
Its General Partner
By: /S/ Richard L. Romney
-------------------------------------
Richard L. Romney
Senior Vice President
"SELLER:" MISSION WEST PROPERTIES, a
California corporation
By: /S/ J. Gregory Kasun
------------------------------------------
J. Gregory Kasun
President and Chief Executive Officer
MISSION WEST EXECUTIVE AIRCRAFT
CENTER, INC., a California corporation
By: /S/ J. Gregory Kasun
------------------------------------------
J. Gregory Kasun
President and Chief Executive Officer
34
The undersigned Escrow Holder hereby accepts the Escrow and agrees to
comply with the escrow instructions contained in the foregoing Agreement of
Purchase and Sale and Joint Escrow Instructions.
Dated: December 9, 1996
FIRST AMERICAN TITLE INSURANCE
COMPANY
By: /S/ Patricia Pipher
-----------------------------------
Printed Name: Patricia Pipher
-------------------------
Title: SR. Escrow Officer
--------------------------------
35
By signing below, the undersigned shareholders of Mission West Properties
hereby agree to vote their shares of stock in Mission West Properties to (1)
approve the foregoing Agreement and (2) the transactions contemplated therein at
the time the shareholders' vote contemplated in Section 9.1(c) of the Agreement
is held. The undersigned are signing this Agreement for only such limited
purpose and not to incur any other obligation or duty under the Agreement. The
foregoing agreement of the undersigned shareholders to so vote their shares of
stock shall survive and in no event be terminated or altered by the transfer of
ownership of any of the undersigned's shares of stock, whether by sale,
assignment, merger, consolidation or otherwise, and any successor in interest to
or transferee of such shares shall be bound by and unable to alter in any manner
such agreement.
TRITON GROUP LTD.,
/S/ William E. Nelson a Delaware corporation
- --------------------------------
William E. Nelson, individually
/S/ Byron B. Webb, Jr. By: /S/ Michael E. Earley
- -------------------------------- ------------------------------------
Byron B. Webb, Jr., individually Michael M. Earley
President and Chief Executive
Officer
/S/ J. Gregory Kasun
- --------------------------------
J. Gregory Kasun, individually
36