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EXHIBIT 2.1
CENTEX DEVELOPMENT COMPANY, L.P.
OPTION AGREEMENT
by and between
CENTEX DEVELOPMENT COMPANY, L.P.
and
ESTRELLA PROPERTIES, LTD.
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TABLE OF CONTENTS
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ARTICLE 1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Additional Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 2. OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.01. Grant of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.02. Option Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.03. Monthly Option Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.04. Option Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.05. Exercise of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 3. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.01. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4. INVESTIGATION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . 16
4.01. As Is With All Faults Conveyance . . . . . . . . . . . . . . . . . . . . 16
4.02. Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . 17
4.03. Authorization by Estrella to CDC . . . . . . . . . . . . . . . . . . . . 17
4.04. Limitations on CDC Rights . . . . . . . . . . . . . . . . . . . . . . . . 18
4.05. Right to Work Product . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 5. ESTRELLA'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 20
5.01. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 6. CDC'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 21
6.01. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 7. EFFECT OF REPRESENTATIONS AND WARRANTIES, INDEMNIFICATION . . . . . . . . 21
7.01. Effect of Representations and Warranties . . . . . . . . . . . . . . . . 21
7.02. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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ARTICLE 8. CDC'S REQUIREMENTS AND ESTRELLA'S COVENANTS . . . . . . . . . . . . . . . 22
8.01. CDC'S Pre-Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.02. Golf Course Easement . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.03. SDG&E Site Relocation . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.04. Green Belt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.05. Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.06. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.07. No Representation or Warranty . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 9. ASSIGNMENT OF DEVELOPMENT RIGHTS AND OBLIGATIONS. . . . . . . . . . . . . 26
9.01. Settlement/Development Agreement . . . . . . . . . . . . . . . . . . . . 26
9.02. Tentative Tract 12895 . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.03. Wastewater Treatment Capacity . . . . . . . . . . . . . . . . . . . . . . 27
9.04. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.05. Subdivision Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.06. Other Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.07. Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 10. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.01. Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.02. Recovery on Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.03. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.04. Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.05. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.06. Commissions; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.07. Right of Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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10.08. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.09. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . 34
10.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.11. Confidentiality and Publicity . . . . . . . . . . . . . . . . . . . . . 34
10.12. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.13. Limitation on CDC Damages and Indemnities . . . . . . . . . . . . . . . 36
10.14. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.15. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 37
10.16. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.17. Memorandum of Option . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.18. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . 38
10.19. Counterparts; Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.20. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.21. Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 11. SPECIAL REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.01. Reference Provision . . . . . . . . . . . . . . . . . . . . . . . . . . 39
LIST OF EXHIBITS
Exhibit A - Description of the Property . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Exhibit B - Grant Deed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exhibit C - Nonforeign Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exhibit D - Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit E - Estrella's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit F - Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exhibit G - Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Exhibit H - Grant of Easement and Declaration of Covenants . . . . . . . . . . . . . . . . . 23
Exhibit I - Greenbelt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Exhibit J - Memorandum of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Exhibit K - Letter of Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit L - Letter of Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit M - Outline of Proposed Development Agreement . . . . . . . . . . . . . . . . . . . 17
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OPTION AGREEMENT
THIS OPTION AGREEMENT is made as of November 3, 1988, between
CENTEX DEVELOPMENT COMPANY, L.P. (hereinafter called "CDC"), a Delaware limited
partnership whose sole general partner is 3333 Development Corporation, a
Nevada corporation, and ESTRELLA PROPERTIES, LTD. (hereinafter called
"Estrella"), a California limited partnership whose general partners are
Shannon Developers, Inc., a California corporation, and Leo Fitzsimmon, an
individual, and whose limited partners are Borg-Warner Equities Corporation, a
Delaware corporation and Sea-Aire Properties, Inc., a California corporation.
ARTICLE 1
DEFINED TERMS
1.01. Definitions. The following terms used in this Agreement, unless
the context otherwise requires, shall have the meanings set forth in this
Section 1.01:
"Acceptable Conditions of Title" shall mean those exceptions to the
title set forth in Section 3.01.4, subject to which CDC shall accept title to
the Property.
"Affordable Housing Site" shall mean that approximately 24.9-acre
portion of the Property consisting of Lot 26 of Tract 11781, and more
particularly described in Exhibit A attached hereto.
"Agreement" shall mean this Option Agreement.
"City" shall mean the City of San Clemente, a municipal corporation.
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"Closing" shall mean the recordation of the Deed in accordance with
the provisions of Article 3.
"Closing Date" shall mean the date which is designated for closing in
Section 3.01.3.
"Commercial Site" shall mean that approximately 7.3-acre portion of
the Property consisting of Lot 25 of Tract 11781, and more particularly
described in Exhibit A attached hereto.
"County" shall mean Orange County, California.
"Deed" shall mean a duly executed and acknowledged grant deed, in the
form attached hereto as Exhibit B, conveying the Property to CDC.
"Development Area" shall mean that real property identified as the
Development Area in the Settlement/Development Agreement.
"Development Entitlements" shall mean all approvals, grants, permits,
licenses, development allocations and subdivision maps related to development
of the Property, including any applications therefor.
"Effective Date" shall mean the date of the making of this Agreement
as set forth on page 1 of this Agreement.
"Estrella's Best Knowledge" shall mean information known to the
current officers of Shannon Developers, Inc., but without any duty of such
officers to conduct any independent investigation or inquiry.
"Excluded Property" shall mean the following real property which is
not part of the Property: (a) the Golf Course (including the hotel site),
(b) Tract 10764 (as shown on map
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recorded in Book 521, pages 7-9 of miscellaneous maps); Tract 10596 (as shown
on map recorded in Book 531, pages 31-38), lots 1-23 and lot 27 in Tract 11781
(as shown on map recorded in book 531, pages 3-6 of miscellaneous maps) and (c)
the balance of the Development Area to the extent not included within the
Property.
"Exercise Date" shall mean the date the Option is exercised by CDC
pursuant to Section 2.05 of this Agreement.
"Exercise Deposit" shall mean the sum of One Hundred Thousand Dollars
($100,000) to be delivered by CDC into escrow upon exercise of the Option
pursuant to Section 2.05 of this Agreement.
"Golf Course" shall mean the Shorecliffs Golf Course located in the
City and described in the preliminary title report of the Company dated as of
October 7, 1988, Order No. 592794-9.
"Hazardous Materials" shall include, but shall not be limited to
any flammable explosives, radioactive materials, hazardous wastes, toxic
substances or related materials, substances defined as "hazardous substances,"
hazardous materials" or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
42 USC Section 9601, et seq.; the Hazardous Materials Transportation Act,
49 USC Section 1801, et seq.; the Resource Conservation and Recovery Act,
42 USC Section 6901, et seq.; those substances defined as "hazardous wastes"
in California Health & Safety Code Section 25117 or as "hazardous substances"
in California Health & Safety Code Section 25316; and those chemicals
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known to cause cancer or reproductive toxicity, as published pursuant to the
Safe Drinking Water and Toxic Enforcement Act of 1986, California Health &
Safety Code Section 25249.5 et seq.; and in the regulations adopted and
publications promulgated pursuant to each of the aforesaid laws.
"Intermediate School Site" shall mean that approximately 14-acre
portion of the Property more particularly described in Exhibit A attached
hereto.
"Monthly Option Fee" shall mean the sum of One Hundred Seventy-five
Thousand Dollars ($175,000) to be paid monthly to Estrella to continue the
Option as provided in Section 2.03.
"Nonforeign Certification" shall mean a certification in the form
attached hereto as Exhibit C, duly executed by Estrella under penalty of
perjury, certifying that Estrella is not a "foreign person" in accordance with
the provisions of Section 1445 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
"Option" shall mean CDC's right to purchase the Property subject
to the terms and conditions of this Agreement.
"Option Payment" shall mean the sum of One Million Dollars
($1,000,000) paid by CDC to Estrella pursuant to Section 2.04.
"Planning Area" shall mean that approximately 1,031-acre portion of
the Property more particularly described in Exhibit A attached hereto.
"Property" shall mean the real property, improvements and other
assets described in Section 2.01 which CDC is granted
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the Option to purchase pursuant to this Agreement. In no event shall the
Property include all or any part of the Excluded Property.
"Purchase Price" shall mean the sum of Fifty Million Dollars
($50,000,000).
"Settlement/Development Agreement" shall mean that certain
Settlement/Development Agreement between Estrella and the City dated August 5,
1981, as amended by that certain First Amendment to Settlement/Development
Agreement dated as of December 14, 1983 and that certain undated Second
Amendment to Settlement/Development Agreement.
"Specific Plan" shall mean the Forster Ranch Specific Plan prepared
by Tierra Planning & Design, Inc., dated October 1985 and approved by the City
on October 1, 1986.
"Title Company" shall mean Chicago Title Insurance Company, 825 North
Broadway, Santa Ana, California, 92701; Attn: David Butler (FAX (714)
667-0343; telephone (714) 547-7251)).
"Title Policy" shall mean an ALTA 1970 Form B Extended Coverage
Owner's Form title insurance policy, insuring that fee title to the Property is
vested in CDC in the amount of the Purchase Price.
"Title Reports" shall mean the following preliminary title reports
prepared by the Title Company:
(a) Order No. 592744-9, dated as of August 3, 1988, as
amended by Supplemental Report dated October 26, 1988, and received November
3, 1988, for the Planning Area;
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(b) Order No. 592745-9, dated as of August 3, 1988, as
amended by Supplemental Report dated October 26, 1988, for the Commercial Site;
(c) Order No. 592746-9, dated as of August 3, 1988, as
amended by Supplemental Report dated October 26, 1988, for the Affordable
Housing Site; and
(d) Order No. 592770-9, dated as of September 7, 1988, as
amended by Supplemental Report dated October 26, 1988, for the Intermediate
School Site.
"Wastewater Agreement" shall mean that certain Agreement for
Construction of Wastewater Treatment Facilities dated as of October 3, 1984.
"Work Product" shall mean preliminary engineering drawings, any final
subdivision map for Tentative Tract 12895, the ALTA survey of the Property
prepared by Madole & Associates, Inc., soils reports and other studies related
to the Property which have been prepared for CDC by third party consultants.
1.02. Additional Defined Terms. To the extent capitalized terms are
not defined in Section 1.01, such terms shall have the meaning otherwise
ascribed to them in this Agreement.
ARTICLE 2
OPTION
2.01. Grant of Option. Estrella grants to CDC the Option, during the
period and subject to all of the provisions of this Agreement, to purchase all
of the following property:
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2.01.1 Land. The real property consisting of approximately
1,077.2 acres located in the City as more particularly described in Exhibit A
attached hereto, together with all of Estrella's rights in and to (a) all
privileges, rights, easements and appurtenances belonging to the real property,
including without limitation, all minerals, oil, gas and other hydrocarbon
substances on and under the real property, (b) all development rights, air
rights, water, water rights and water stock relating to the real property and
(c) all rights of Estrella in and to any streets, alleys, passages, other
easements and other rights-of-way or appurtenances included in, adjacent to or
used in connection with the real property, before or after the vacation
thereof;
2.01.2 Improvements. All rights of Estrella in and to any
and all buildings, systems, facilities, fixtures, structures, fences, parking
areas, machinery, equipment, apparatus and appliances located on the real
property described in Section 2.01.1; and
2.01.3 Other Assets. All rights of Estrella, if any, in and
to all tangible and intangible assets of any nature relating to the Property
(except as they pertain to the Excluded Property), including without limitation
(a) all Development Entitlements, (b) all surveys, maps, studies, reports, test
results, plans, specifications, engineering drawings and prints relating to
development of the Property or construction of any improvements thereon, (c)
all trade names and goodwill associated with the Property, (d) all other
intangible property used by
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Estrella in connection with the Property, (e) all warranties upon the
improvements, to the full extent such warranties are assignable, and (f) to the
extent the same are approved by CDC pursuant to the provisions of this
Agreement, all claims, causes of action, contract and lease rights, agreements,
utility contracts or other rights relating to the ownership, use and operation
of the Property.
2.02. Option Term. The Option shall commence on the Effective Date and
shall continue to and including February 28, 1989, provided CDC is not in
default in payment of the Monthly Option Fee under Section 2.03.
2.03. Monthly Option Fee. Commencing on the Effective Date and on the
first business day of each month thereafter until the Closing Date, but
excluding the month in which the Closing Date occurs, CDC shall pay to Estrella
the Monthly Option Fee. The Monthly Option Fees shall constitute consideration
for the granting of the Option and shall not be credited toward the Purchase
Price. If Estrella fails to receive the Monthly Option Fee on any date it is
due, Estrella shall notify CDC of such fact by written notice, in which case
CDC shall have the right to make such payment within two business days without
being in default in payment of the Monthly Option Fee. If CDC fails to pay the
Monthly Option Fee within the two business days after receipt of such notice,
the Option shall terminate. The Monthly option Fee shall not be refundable to
CDC if CDC fails to exercise the Option under any circumstances.
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2.04. Option Payment. Upon the Effective Date, and as additional
consideration for the Option, CDC shall deliver the Option Payment to Estrella
and Estrella hereby directs that the payment be wired to Borg-Warner
Corporation, First National Bank of Chicago, ABA No. 071000013, Account No.
53-06841, for the account of Borg-Warner Corporation. The Option Payment shall
not be refundable to CDC for any reason except as provided in Section 10.12.
The Option Payment shall be applied to the Purchase Price at Closing pursuant
to Section 3.01.2.
2.05. Exercise of Option. The Option shall be exercised by CDC's
delivery to Estrella, on or before the expiration of the Option, of written
notice stating that CDC exercises the Option, and the delivery of the Exercise
Deposit into escrow with Chicago Title Insurance Company, Santa Ana, California
(the "Escrow") within two business days after delivery of such written notice.
The Exercise Deposit shall be applied to the Purchase Price at Closing, or
shall be treated as liquidated damages under Section 10.01 if the purchase and
sale fails to close because of the default of CDC. If CDC fails to exercise the
Option within the time allowed herein, Estrella shall be entitled to receive
the Work Product and retain the Option Payment and all Monthly Option Fees,
this Agreement shall immediately terminate, and the parties shall have no
further obligations under this Agreement, except as provided in Sections
4.04.2, 4.05, 10.06, and 10.07.
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ARTICLE 3
PURCHASE AND SALE
3.01. Purchase and Sale. Upon timely exercise of the Option by CDC,
Estrella shall sell the Property to CDC, and CDC shall purchase the Property
from Estrella, upon each and all of the following terms:
3.01.1 Purchase Price. The Purchase Price for the Property
shall be the sum of Fifty Million Dollars ($50,000,000).
3.01.2 Manner of Payment. On the Closing Date, CDC shall pay
the Purchase Price to Estrella by (a) crediting to the Purchase Price the
Option Payment and applying the Exercise Deposit from the Escrow and paying the
balance of the Purchase Price through the Escrow by electronic transfer of
federal funds or other immediately available funds.
3.01.3 Closing Date. The Closing shall occur through the
Escrow on or before the fiftieth (50th) day after exercise of the Option, but
not later than March 31, 1989.
3.01.4 Condition of Title. Title to the Property shall be
conveyed by Estrella on or before the Closing Date free and clear of all liens,
leases, restrictions and encumbrances, except for the Acceptable Conditions of
Title. The Acceptable Conditions of Title are: (a) the lien for real property
taxes, supplemental taxes, and assessments not delinquent; (b) exceptions shown
on the Title Report for the Planning Area, but excluding exceptions Nos. 5, 6
and 7; (c) exceptions shown on the Title Report for the Commercial Site, but
excluding exceptions No. 3; (d) exceptions shown on the Title Report for the
Intermediate
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School Site; (e) exceptions shown on the Title Report for the Affordable
Housing Site, but excluding exception 3; (f) such other matters as shall be
created by or with the consent of CDC or by any persons claiming by or under
CDC; and (g) that certain lease between Estrella and Rams Manufacturing, Inc.,
dated January 2, 1987, and (h) matters shown on the ALTA survey being prepared
by Madole & Associates, Inc. Estrella's obligation to convey title shall be
satisfied only by the willingness of the Title Company to issue the Title
Policy showing fee title to the Property vested in CDC or its nominee, subject
only to the Acceptable Conditions of Title, and the standard printed exclusions
contained in the Title Policy. If Estrella is unable to convey title as
required under this Section 3.01.4, then Estrella: (i) may elect to eliminate
the unpermitted title exception and Estrella shall have up to 30 days for such
purpose, and (ii) shall be obligated to remove any liens of a definite or
ascertainable amount and pay any delinquent taxes using the proceeds of sale
for such purpose. Estrella shall not be in default of this Agreement for
failure to convey title in the condition required by this Section 3.01.4 unless
(i) Estrella fails to pay any delinquent taxes or remove any liens against the
Property as to which Estrella has agreed to apply the proceeds of sale or (ii)
failure of Estrella to convey title is due to the affirmative act of Estrella,
which affirmative act would result in an exception to title on the title policy
to be issued at Closing, and which affirmative act occurs after the date of the
Title
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Reports (including supplements) applicable to the respective portions of the
Property, in which case CDC shall be entitled to the remedies contained in
Section 10.12. In the event of any other defects in title, CDC shall within
five days after expiration of the 30 days period either terminate this
Agreement and receive a return of the Exercise Deposit or accept title in the
condition tendered and proceed to close the purchase and sale. In such case,
CDC shall not be entitled to a return of the Option Payment or to recover
damages or seek any other remedies.
3.01.5 Estrella's Deposit of Documents and Funds. Estrella
shall deposit or cause to be deposited the following into Escrow before the
Closing Date for delivery to CDC:
(a) The Deed duly executed and acknowledged by
Estrella;
(b) Counterpart original of the assignment and
assumption agreement, in the form attached as Exhibit D, duly executed and
acknowledged by Estrella;
(c) A certificate executed by Estrella in the form
attached as Exhibit E representing that all representations and warranties made
by Estrella under this Agreement are true and correct as of the Closing Date;
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(d) A duly executed certification in the form
attached as Exhibit F representing that neither Estrella, nor any party with
any interest in Estrella, has or shall receive any brokerage commission or
finder's fee paid or to be paid in connection with the sale of the Property to
CDC;
(e) A Nonforeign Certification duly executed by
Estrella as of the Closing Date; and
(f) The Grant of Easement and Declaration of
Covenants, duly executed and acknowledged by Shorecliffs Golf Course, Inc. or
its successor in interest, as required by Section 8.03.
(g) Such additional documents, including written
escrow instructions consistent with this Agreement, as may be reasonably
required for conveyance of the Property to CDC in accordance with this
Agreement.
3.01.6 CDC's Deposit of Documents and Funds. CDC shall deposit
or cause to be deposited the following into Escrow for delivery to Estrella on
or before the Closing Date:
(a) Sums sufficient to close the purchase of the
Property;
(b) A certificate executed by CDC affirming that all
representations and warranties made by CDC under this Agreement are true and
correct as of the Closing Date; and
(c) The letter of credit for $1,500,000 (hereinafter
"B-W Letter of Credit") held by the City as security for certain obligations
under the Settlement/Development Agreement, or in lieu thereof, a letter of
credit in the amount of $1,500,000
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in favor of Borg-Warner corporation which, by its terms, may be drawn on if the
City makes demand upon Estrella or Shorecliffs Golf Course, Inc. to perform the
obligations secured under the Settlement/Development Agreement, or if the B-W
Letter of Credit is drawn on by the City.
(d) Counterpart original of the assignment and
assumption agreement, in the form attached as Exhibit D, duly executed and
acknowledged by CDC.
(e) The improvement bonds held by the City as
security for Estrella's obligations under the subdivision agreement for the
Affordable Housing Site and the Commercial Site, or in lieu thereof, a bond or
other security reasonably satisfactory to Estrella which shall indemnify
Estrella and BorgWarner Corporation if the City makes demand upon such bonds or
upon Estrella to perform its obligations secured under such subdivision
agreements relative to the installation of subdivision improvements in the
Commercial Site and the Affordable Housing Site, and Estrella shall be
responsible for maintaining bonds required by the City for other real property
covered by such subdivision agreement.
(f) Such additional documents, including written
escrow instructions consistent with this Agreement, as may be reasonably
required for conveyance of the Property in accordance with this Agreement.
3.01.7 Closing Costs and Prorations.
(a) Estrella shall pay the cost of a CLTA Owner's
Form title insurance policy, any documentary transfer taxes, and one-half of
any escrow fees. CDC shall pay the
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difference between the cost of the Title Policy and the cost of a CLTA title
policy, all recording fees, and one-half of any escrow fees. All other Closing
costs shall be paid in accordance with the custom of the County.
(b) All real property taxes and interest on
assessments, whether payable in installments or not, including without
limitation all supplemental taxes for the fiscal year in which the Closing
occurs, shall be prorated as of the Closing Date. It is understood that CDC
shall be responsible for paying any supplemental taxes levied and assessed as a
result of the sale of the Property or applicable to the period after the
Closing (it being understood that Estrella shall be responsible for paying such
supplemental taxes for the period before Closing). If the amount of taxes or
charges applicable to any portion of the Property cannot be determined as of
the Closing Date because the assessed value of the Property or the tax rate
affecting the Property has not been determined or publicly announced, or
portions of the Property have not yet been segregated for tax purposes, or for
any other reason, then a proration shall be made based upon the Title Company's
best estimate of the taxes or charges applicable to the Property and an
adjustment outside of escrow shall be made between the parties upon written
request of either party when the correct amount of taxes or charges becomes
known. All utility charges accrued up to the Closing Date shall be paid by
Estrella.
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ARTICLE 4
INVESTIGATION OF PROPERTY
4.01. As Is With All Faults Conveyance. CDC acknowledges and agrees
the Property is being optioned and sold by Estrella in an AS IS, WITH ALL
FAULTS condition. CDC and Estrella have previously executed and entered into a
non binding Letter of Intent dated July 20, 1988, attached hereto as Exhibit K,
pursuant to which CDC was allowed to pursue its own independent analysis and
due diligence inspection of the Property and Development Entitlements. Under
said Letter of Intent CDC was granted access to the Property, Title Reports,
Settlement/Development Agreement, Specific Plan, Wastewater Agreement, the
proposed City Regional Circulation, Financing and Phasing Program and the
Development Entitlements within the possession of Estrella. CDC was also
granted access to the Property consultants including, but not limited to,
Tierra Planning & Design, Madole & Associates, the attorneys for Estrella
(Menke, Fahrney & Carroll), as well as the officials of the City. Estrella has,
during the term of the Letter of Intent, provided to CDC certain information as
to the Property, but, with the express understanding that CDC should do its own
investigation and analysis and come to its own conclusions as to any such
information. Estrella has also allowed CDC to take an active part relating to
certain matters affecting the Property, including but not limited to: (i)
Estrella has delivered a Letter of Authorization, attached hereto as Exhibit L,
to the City Planning Commission which authorized CDC to submit information or
applications on behalf of Estrella with respect to both the
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existing 155 allocations and the pending application for allocations for the
balance of the units in Tentative Tract Map 12895 and (ii) Estrella has
authorized CDC to submit an Outline of Proposed Development Agreement, attached
hereto as Exhibit M, to the City.
4.02. Disclaimer of warranties. Estrella makes no warranty,
representation or guarantee as to CDC's ability to successfully obtain the
allocations referenced in the Letter of Authorization or as to the willingness
of the City to enter into a development agreement. Except for the express
representations and warranties of Estrella contained in Article 5, CDC is
acquiring the Property "as is" and without any warranty of Estrella, express or
implied, as to the Property or fitness of any of the Property for CDC's use.
EXCEPT FOR OBLIGATIONS CONTAINED IN THIS AGREEMENT OR REPRESENTATIONS CONTAINED
IN ARTICLE 5, NEITHER ESTRELLA NOR ANY PERSON ACTING FOR OR WITH ESTRELLA HAS
MADE OR DOES MAKE ANY STATEMENT, AFFIRMATION, REPRESENTATION OR WARRANTY UPON
WHICH CDC SHOULD RELY, WHETHER EXPRESS OR IMPLIED, AS TO THE PROPERTY
INCLUDING, BUT NOT LIMITED TO, ANY ITEM OF PERSONAL PROPERTY OR AS TO THE
CONDITION, QUALITY, OPERATING CHARACTERISTICS OR RELIABILITY OF SUCH PROPERTY,
OR AS TO ITS SUITABILITY FOR ANY GENERAL OR PARTICULAR PURPOSE, WHATSOEVER, AND
ANY AND ALL WARRANTIES IMPLIED BY LAW, INCLUDING, BUT NOT LIMITED TO, ALL
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE
HEREBY EXPRESSLY DISCLAIMED AND EXCLUDED.
4.03 Authorization By Estrella to CDC. Subject to the limitations
contained in Section 4.04 of this Agreement, during the
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term of this Agreement, provided the Monthly Option Fees are paid to Estrella
and provided that the Option has not been terminated, Estrella authorizes CDC
to proceed as follows:
4.03.1 CDC can proceed with its activities as outlined in the
Letter of Authorization.
4.03.2 CDC can proceed with its efforts to obtain the City
approval of its proposed development agreement; provided, however, the
development agreement shall not adversely affect the rights of Estrella under
the Settlement/Development Agreement.
4.03.3 Estrella shall allow CDC, on behalf of Estrella, to
process a final subdivision map for a portion of Tentative Tract 12895
containing a total of 161 lots and permitting construction of not less than 155
market-rate single-family residences, five (5) model homes and an adjacent
parking lot, and to process other final subdivision maps with respect to
tentative Tract 12895.
4.03.4 CDC may proceed with further inspections, due
diligence, and other activities related to Section 4.03.1 through 4.03.
4.04 Limitations on CDC Rights. While Estrella shall allow CDC, during
the term of the option, to proceed as set forth in Section 4.03, Estrella's
authorization to CDC is expressly subject to the following terms and
conditions:
4.04.1 CDC may proceed to enter upon the Property as set forth
in, and subject to, Section 10.07.
4.04.2 To the extent CDC proceeds with the activities
authorized by Estrella under Sections 4.03.1 through
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4.03.4 above, such activities shall be at CDC's sole cost and expense,
including without limitation, the costs and expenses of the property
consultants, agents, contractors and subcontractors engaged by CDC with respect
to such activities.
4.04.3 In connection with CDC's activities under Sections
4.03.1 through 4.03.4, above, Estrella may be requested to enter into
agreements with the City or other parties, or to undertake certain commitments
or obligations which would be binding on Estrella or the Property, even if CDC
does not exercise the Option and close the purchase of the Property
(hereinafter called "Binding Agreements"). Estrella shall be under no
obligation to enter into any Binding Agreements, even if Estrella's refusal to
enter into the Binding Agreements results in CDC's inability to continue and/or
successfully complete its activities under Sections 4.03.1 through 4.03.4
above; except Estrella shall not act unreasonably in refusing to enter into any
Binding Agreement or unreasonably delay in doing so upon request of CDC. If
requested by CDC, Estrella shall affirm in writing to third parties, including
the City, its approval of the cost allocations in the traffic plan approved by
the City at the City Council meeting of November 2, 1988.
4.04.4 CDC shall not record any final subdivision maps with
respect to Tentative Tract Map 12895, or any portion thereof.
4.04.5 CDC shall indemnify, defend and hold Estrella harmless
from and against any and all claims, losses, liabilities, damages or expenses,
including but not limited to
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reasonable attorneys fees and costs of defense, arising in whole or in part out
of a breach by CDC of its obligations under Section 4.03 or 4.04.
4.05 Right to Work Product. As part of the consideration for the grant
of option, if CDC does not exercise the option or close the purchase of the
Property, it shall promptly furnish to Estrella at CDC's expense copies of the
Work Product and assign to Estrella all of CDC's right, title and interest
therein.
ARTICLE 5
ESTRELLA'S REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties. Estrella makes the following
representations and warranties for the benefit of CDC:
5.01.1 Condemnation. Estrella has not received written notice
of any actions by the City or any other governmental agency to condemn any
portion of the Property by action of eminent domain.
5.01.2 Authorization. This Agreement and all other documents
delivered by Estrella to CDC (a) have been or will be duly authorized, executed
and delivered by Estrella, (b) are legal, valid and binding obligations of
Estrella and, with respect to those documents that are instruments of
conveyance, are sufficient to convey title and (c) are enforceable in
accordance with their respective terms. Estrella is a limited partnership duly
formed and validly existing under the laws of the State of California.
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5.01.3 Hazardous Wastes. To Estrella's Best Knowledge,
Estrella has not used or installed any underground tank, or used, generated,
manufactured, treated, stored, placed, deposited or disposed of any Hazardous
Materials on or about the Property or transported any Hazardous Materials to or
from the Property and Estrella has not received any written notice from any
state or federal agency concerning the violation of any laws or regulations
relating to Hazardous Materials on the Property.
ARTICLE 6
CDC'S REPRESENTATIONS AND WARRANTIES
6.01. Representations and Warranties. CDC represents and warrants that
this Agreement and all other documents delivered by CDC to Estrella (a) have
been or will be duly authorized, executed and delivered by CDC, (b) are legal,
valid and binding obligations of CDC and (c) are enforceable in accordance with
their respective terms. CDC is a limited partnership formed and validly
existing under the laws of the State of Delaware.
ARTICLE 7
EFFECT OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.01. Effect of Representations and Warranties. Each representation
and warranty contained in Articles 5 and 6, respectively, (a) shall survive for
a period of one year after the Closing Date and not merge with the delivery to
CDC of the Deed, (b) is material and is being relied upon by the other party,
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(c) is true in all material respects as of the Effective Date and (d) shall be
true in all material respects on the Closing Date.
7.02. Indemnification. CDC and Estrella each shall indemnify, defend
and hold the other party, harmless from and against any and all claims, losses,
liabilities, damages, or expenses, including without limitation reasonable
attorneys' fees and costs of defense, arising in whole or in part, out of the
breach or untruth of any representation, warranty or covenant contained in
Article 5 and Article 6 of this Agreement.
ARTICLE 8
CDC's REQUIREMENTS
AND
ESTRELLA'S COVENANTS
8.01. CDC's Pre-Conditions. In purchasing the Property, CDC is relying
on its ability to develop the Property substantially in accordance with the
Specific Plan, and to obtain the approvals from the City necessary for the
residential development of 2,200 units and the commercial development of 55
acres on the Property. Accordingly, CDC intends to purchase the Property if the
following approvals are obtained on or before the Closing Date:
8.01.1. Final Map. City shall have approved a final
subdivision map for a portion of Tentative Tract 12895 containing not less than
161 lots and such map shall be ready for immediate recording;
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8.01.2. Development Allocations. The City shall have granted
development allocations in sufficient quantity to permit the issuance of
building permits for not less than 397 market-rate single family residences,
exclusive of model homes, and, at Closing, such allocations shall be
immediately transferable to CDC;
8.01.3. Development Agreement. The City and CDC shall have
approved and executed a development agreement for the Property and the
statutory referendum period shall have expired without initiation of a
referendum; provided, however, the development agreement shall provide for
termination if the purchase and sale shall fail to close as provided in this
Agreement; and
8.01.4. General Plan Amendment. The City shall have amended
its General Plan to the extent required to bring it into compliance with law.
8.02. Golf Course Easement. On or before the Closing Date, Estrella
shall cause Shorecliffs Golf Course, Inc. (or its successor-in-interest as
owner of the Golf Course) to execute and record a Grant of Easement and
Declaration of Covenants in substantially the form attached hereto as Exhibit H
providing for, among other things, a grant of easement in favor of CDC for
construction and installation of, and access to, an enclosed box culvert storm
drain across a portion of the Golf Course (which easement may be assigned to
the County Flood Control District). In addition, before Closing, Estrella shall
cause any beneficiary under any deed of trust encumbering the Golf Course to
subordinate
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to the Grant of Easement and Declaration of Covenants in form satisfactory to
CDC.
8.03. SDG&E Site Relocation. Estrella shall not enter into any
agreement with San Diego Gas & Electric Company ("SDG&E") relocating the
substation site of SDG&E near the entrance to the Forster Ranch without the
written approval of CDC, which approval shall not be unreasonably withheld or
delayed. Upon Closing CDC shall assume Estrella's obligations under any such
agreement.
8.04. Green Belt. Estrella, at its sole cost and expense, shall
maintain the approximately 12-acre linear greenbelt (hereinafter called the
"Greenbelt") described on Exhibit I attached in an attractive and healthy
condition until such time as the Greenbelt is transferred to and accepted for
ownership and maintenance by a homeowners association, or until Closing,
whichever shall first occur. If the Greenbelt has not been conveyed to a
homeowners association by Closing, then CDC shall accept title to the Greenbelt
and Estrella shall have no further obligations relating thereto. Estrella shall
continue its efforts to convey the Greenbelt to a homeowners association until
Closing.
8.05. Alterations. Estrella shall not make any material alterations to
the physical condition of the Property without CDC's prior written consent,
which consent shall not be unreasonably withheld or delayed.
8.06. Cooperation. Estrella shall continue to cooperate with CDC and
its agents and consultants in CDC'S: (i) investigation of the Property, (ii)
efforts to negotiate with the City and other public agencies relating to
development of the
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Property and obtaining Development Entitlements, (iii) efforts to eliminate any
title defects that may affect the Property, and (iv) efforts to work with other
builders and developers in mutual resolution of any issues affecting the
Property. Such cooperation shall include, but not necessarily be limited to,
assisting CDC in meeting the requirements contained in Section 8.01, attending
meetings with the City regarding development of the Property, providing
information concerning the history and background of the Property, providing
letters to the City and other public agencies in support of resolving traffic
and other development impacts to the Property, assistance in obtaining approval
of public agencies for the storm drain and related improvements over the Golf
Course, and assistance in relocating the SDG&E substation. Notwithstanding any
failure of Estrella to cooperate as provided herein, CDC expressly acknowledges
and agrees that neither the term of the Option nor the time of Closing shall be
extended and CDC shall have no right to refund of the option Payment or Monthly
Option Fees due to its failure to cooperate and CDC's exclusive remedy for any
breach of this Section 8.06, shall be to proceed under Section 10.12, but
nothing herein contained shall be construed to limit the damages available.
Estrella shall not be in default of its obligations under this Section 8.06
unless such failure to cooperate is in bad faith and unless it has received
from CDC at least five business days' written notice of failure to cooperate
and Estrella fails to cure its failure to cooperate within such
five-business-day period; provided, however, that after
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two such defaults have occurred and been cured, Estrella shall have no further
right to cure.
8.07 No Representation or Warranty. Estrella makes no warranty,
representation, or guarantee as to CDC's ability to satisfy the requirements or
obtain the approvals from the City as provided in this Article 8. The failure
of such requirements to be satisfied or approvals to be obtained shall not
extend the term of the Option or time of Closing, and shall not give CDC any
right to receive a refund of the Option Payment or Monthly Option Fees.
ARTICLE 9
ASSIGNMENT OF DEVELOPMENT RIGHTS AND OBLIGATIONS
9.01. Settlement/Development Agreement. Estrella shall assign to CDC,
effective as of the Closing Date, all its rights in and to the
Settlement/Development Agreement and CDC shall assume Estrella's obligations
thereunder; provided, however, that CDC shall not assume any obligations under
Sections 305D (dedication and landscaping of park site located in Development
Area), 312 (Golf Course obligations), 501.1 (dismissal of lawsuits) or any
other sections of the Settlement/Development Agreement which affects only that
portion of the Development Area not included within the Property and such
obligations shall remain the obligations of Estrella or the owner of the Golf
Course, as the case may be.
9.02. Tentative Tract 12895. Estrella shall assign to CDC, effective
as of the Closing Date, all its rights in and to Tentative Tract Map 12895 and
all Development Entitlements
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thereunder, including, without limitation, any final subdivision maps,
development allocations, building permits, and grading permits issued or
initiated thereunder, and any application for any of the foregoing.
9.03. Wastewater Treatment Capacity. Estrella shall assign to CDC,
effective as of the Closing Date, all its rights in and to the Wastewater
Agreement including, but not limited to, the allocation of wastewater treatment
capacity designated for the Forster Ranch, and CDC shall assume Estrella's
obligations thereunder.
9.04. Litigation. Estrella shall assign to CDC effective as of the
Closing Date, all of its rights in and to the lawsuits described in Exhibit G
and, upon request of CDC, Estrella shall execute and deliver to CDC a
substitution of legal counsel and such other documents as may be required by
CDC to substitute itself in place of Estrella in such lawsuits and CDC shall
accept such assignment. CDC shall indemnify, defend and hold Estrella harmless
from and against any and all claims, damages, liabilities and expenses
(including, without limitation, actual attorneys' fees and costs of defense)
arising out of such litigation; provided, however, Estrella shall be liable
(and CDC shall have no responsibility for) any of Estrella's attorney's fees,
expert and consultant fees, or any other costs or expenses related to the
lawsuits incurred before the Closing. Nothing contained in this Agreement is
intended to limit Estrella's control or conduct of the litigation described in
Exhibit G.
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9.05. Subdivision Agreements. Estrella shall assign to CDC effective
as of the Closing Date, all of its rights in and to the subdivision agreement
dated August 15, 1984 between Estrella and the City to the extent it affects
the Commercial Site and the Affordable Housing Site (but not as to any other
real property) in force as of the Effective Date, and at Closing, CDC shall
assume Estrella's obligations thereunder as to the Affordable Housing Site and
the Commercial Site and substitute subdivision improvement bonds in place of
those which have been posted by Estrella with respect to subdivision
improvements to be made for the Commercial Site and the Affordable Housing
Site, but Estrella shall maintain bonds relating to any other real property
covered by such subdivision agreement.
9.06. Other Rights. Estrella shall assign to CDC, effective as of the
Closing Date, all its rights in and to that certain lease dated January 2,
1987, between Estrella and Rams Manufacturing, Inc., relating to the grazing of
livestock on the Property, and any Development Entitlements, except as they may
pertain to Excluded Property. Upon written request of Estrella, Estrella shall
give notice of termination to the lessee under such lease, as provided under
Paragraph 4 of such lease.
9.07. Indemnities. CDC shall indemnify, defend, and hold Estrella
harmless from and against any and all claims, damages, liabilities and expenses
(including, without limitation, actual attorneys' fees and costs of defense)
arising from or in any way related to CDC's failure after Closing to perform
obligations it assumes under the Settlement/Development Agreement, Wastewater
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Agreement, the Subdivision Agreement, or the lease and Development Entitlements
referred to in Section 9.06.
ARTICLE 10
GENERAL
10.01. LIQUIDATED DAMAGES. EXCEPT AS PROVIDED IN SECTION 10.02, IF CDC
DEFAULTS IN THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, ESTRELLA,
BY WRITTEN NOTICE TO CDC, SHALL MAKE DEMAND FOR PERFORMANCE, AND IF CDC SHALL
FAIL TO PERFORM WITHIN FIFTEEN (15) BUSINESS DAYS AFTER RECEIPT OF SUCH DEMAND,
ESTRELLA MAY TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO CDC. UPON SUCH
TERMINATION, ESTRELLA SHALL BE ENTITLED TO RETAIN THE EXERCISE DEPOSIT AS
LIQUIDATED DAMAGES. ESTRELLA AND CDC ACKNOWLEDGE AND AGREE THAT DETERMINING
ESTRELLA'S ACTUAL DAMAGES, IN THE EVENT OF AN UNCURED DEFAULT BY CDC, WOULD BE
EXTREMELY DIFFICULT OR IMPRACTICABLE. THEREFORE, IN THE EVENT OF AN UNCURED
DEFAULT BY CDC, THE PARTIES HAVE AGREED THAT, AFTER NEGOTIATION, THE EXERCISE
DEPOSIT SHALL CONSTITUTE ESTRELLA'S SOLE AND EXCLUSIVE REMEDY, AND THAT THIS
SUM REPRESENTS A REASONABLE ESTIMATE OF THE ACTUAL DAMAGES ESTRELLA WOULD INCUR
IN THE EVENT OF AN UNCURED MATERIAL DEFAULT BY CDC. BY INITIALING IN THE SPACES
WHICH FOLLOW, ESTRELLA AND CDC SPECIFICALLY AND EXPRESSLY AGREE TO ABIDE BY THE
TERMS AND PROVISIONS OF THIS SECTION 10.01 GOVERNING LIQUIDATED DAMAGES, AND
ESTRELLA WAIVES ANY RIGHT TO SPECIFICALLY ENFORCE THIS AGREEMENT. IT IS
EXPRESSLY UNDERSTOOD THAT ANY PAYMENT OF LIQUIDATED DAMAGES UNDER THIS SECTION
10.01 SHALL BE IN ADDITION TO
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PAYMENT TO ESTRELLA OF THE OPTION PAYMENT, THE MONTHLY OPTION FEES, AND THE
WORK PRODUCT.
ESTRELLA: /s/ DS CDC: /s/ J
10.02 Recovery on Indemnities. Nothing contained in Section 10.01
shall preclude or limit recovery by Estrella under the indemnity covenants of
CDC as provided in Sections 4.04.5, 7.02, 9.07, 10.03, 10.06, 10.07 and 10.14
of this Agreement.
10.03. Indemnity. Estrella shall indemnify, defend and hold CDC
harmless from and against any and all claims, damages, liabilities or expenses
(including reasonable attorneys' fees and costs of defense) for personal injury
or damage to property of others occurring on the Property before the Closing.
CDC shall indemnify, defend and hold Estrella harmless from and against any and
all claims, damages, liabilities or expenses (including reasonable attorneys'
fees and costs of defense) for personal injury or damage to property of others
occurring on the Property after the Closing.
10.04. Eminent Domain. If before Closing all or any material portion
of the Property is taken by eminent domain, or any public authority having the
power of eminent domain threatens to take all or any material portion of the
Property, CDC shall have the right to terminate this Agreement by written
notice to Estrella and recover the Exercise Deposit. If CDC does not elect to
terminate this Agreement because of such taking or threatened taking, the
purchase and sale shall close, CDC shall have the right
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to any award made by the condemning authority, and Estrella shall immediately
assign to CDC its right to such award. Estrella shall notify CDC of any action
or threatened action to condemn all or any part of the Property within fifteen
business days after first receiving written notice of same. For purposes of
this Section 10.04, a "material" portion of the Property shall mean a taking of
(a) more than ten percent (10%) of the real property, (b) a means of access to
the Property, unless alternative means of access exist which in CDC's judgment
are adequate to serve the Property or (c) 10% or more of the dwelling units
that may be constructed on the Property or 20% or more of the buildable area of
the Commercial Site. If any nonmaterial portion of the Property is taken by
eminent domain before the Closing Date, CDC shall complete the purchase of the
Property, and shall have the right to any award made by the condemning
authority, and Estrella shall assign to CDC its right to any such award.
10.05. Notice. Every notice, demand, request, designation, consent,
approval or other document or instrument delivered pursuant to this Agreement
shall be in writing, and shall be either personally delivered, sent by Federal
Express or other reputable overnight courier, sent by facsimile transmission
with the original subsequently delivered by other means, or sent by registered
or certified United States mail, postage prepaid, return receipt requested, to
the address set forth below, or to such other address as a party may designate
from time to time:
To CDC: Centex Development Company, L.P.
5928 Pascal Court, Suite 213
Carlsbad, CA 92009
Attn: Ron Brent
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Phone Number: (619) 431-9228
Facsimile: (619) 431-0721
With a copy to: Raymond G. Smerge
3333 Lee Parkway, Suite 1200
P. 0. Box 19000
Dallas, Texas 75219
Phone Number: (214) 559-6500
Facsimile: (214) 522-7568
With a copy to: McCutchen, Doyle, Brown & Enersen
Three Embarcadero Center
San Francisco, CA 94111
Attn: Robert E. Merritt, Jr.
Phone Number: (415) 393-2000
Facsimile: (415) 393-2286
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To Estrella: Estrella Properties, Ltd.
33971 Selva Road, Suite 260
Laguna Niguel, California 92677
Attn: Darrel M. Spence
Phone Number: (714) 496-7770
With a copy to: Leonard M. Klehr, Esq.
Klehr, Harrison, Harvey,
Branzburg, Ellers & Weir
1401 Walnut Street
Philadelphia, PA 19102
Phone Number: (215) 568-6060
Facsimile: (215) 568-6603
With a copy to: D. William Wagner, Esq.
Sidley & Austin
2049 Century Park East, #3900
Los Angeles, CA 90067
Phone Number: (213) 556-6421
Facsimile: (213) 556-6502
With a copy to: Patrick D. Carroll
Menke, Fahrney & Carroll
650 Town Center Drive, #1850
Costa Mesa, CA 92626
Phone Number: (714) 556-7111
Facsimile: (714) 566-6426
Written notices served by registered or certified mail shall be deemed
delivered 48 hours after the date mailed. Other notices shall be effective upon
delivery.
10.06. Commissions; Indemnity. CDC shall indemnify, defend and hold
Estrella harmless from and against all claims, liability, damages and expenses
(including, without limitation, actual attorneys' fees and costs of defense)
for fees or other compensation claimed due to any broker, salesman or finder
based on any agreement or commitment made or alleged to have been made by CDC.
Estrella shall indemnify, defend and hold CDC harmless from and against all
claims, liability, damages and expenses (including, without limitation, actual
attorneys' fees and costs of defense) for fees or other compensation claimed
due to any broker, salesman
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or finder based on any agreement or commitment made or alleged to have been
made by Estrella.
10.07. Right of Entry. At any time before Closing, CDC and its
authorized representatives, agents, employees and contractors shall have the
right to enter upon the Property for purposes of inspecting the Property,
conducting tests and studies, preparing surveys and maps and all other purposes
reasonably related to the proposed acquisition and development of the Property.
CDC shall (a) exercise reasonable care in connection with any such entry and
activities upon the Property, (b) keep the Property free of liens and (c)
indemnify Estrella against any claims, damages, liabilities or expenses
resulting from CDC's exercise of its rights under this Section 10.07.
10.08. Entire Agreement. This Agreement, including the exhibits
attached hereto, is intended by the parties as a final expression of their
agreement with respect to the subject matter contained in this Agreement and
this Agreement shall supersede any prior agreements oral or written.
10.09. Amendments and Waivers. No amendment to this Agreement shall be
effective unless set forth in writing signed by both parties.
10.10. Governing Law. This Agreement shall be governed by the laws of
the State of California applicable to contracts made and to be performed in
California.
10.11. Confidentiality and Publicity. A signed, redacted copy of this
Agreement may be delivered by either party to the City and a full copy to any
prospective lender of CDC and
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the partners of either party. In all other respects, the parties shall at all
times keep this transaction and any documents received from each other
confidential, except to the extent necessary to (a) comply with applicable law
and regulations or (b) carry out the obligations set forth in this Agreement.
Any disclosure to third parties shall indicate that the information is
confidential and should be so treated by the third party. No press release or
other public disclosure shall be made by either party or any of its agents
concerning this transaction without the prior written consent of CDC.
10.12 Remedies. The remedies of Estrella for a default under this
Agreement by CDC are addressed in Sections 10.01 and 10.02 and these rights
constitute the exclusive remedies available to Estrella. If Estrella defaults
in the performance of any of its covenants or obligations under this Agreement,
including breaches of any of its representations or warranties made in this
Agreement, CDC shall have as its exclusive remedy the right to: (i) proceed to
close the purchase and sale of the Property, in which case CDC shall be deemed
to have waived all claims for damages for defaults, including breaches of
representations or warranties to the extent such matters were known or
disclosed to CDC at, or prior to, Closing, or seek specific performance of this
Agreement if Estrella shall fail or refuse to close, provided that this remedy
shall be available only on the conditions contained below in this Section
10.12; or (ii) recover the Exercise Deposit and, subject to Section 10.13, any
and all damages for such default as may be available to CDC under the law, but
without limiting the foregoing, if the
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default consists of the failure of Estrella to close the purchase and sale or
to remove any liens or delinquent taxes against the Property as provided in
Section 3.01.4, or the creation of a defect in title by the affirmative act of
Estrella after the dates of the Title Reports as provided in Section 3.01.4,
CDC shall be entitled to a refund of the Option Payment.
In order to be entitled to seek specific performance under this
Agreement and to file a lis pendens with respect to the Property, CDC shall
have: (i) timely exercised the Option as required in Section 2.05; (ii)
deposited into Escrow before March 31, 1989, all deposits required under
Section 3.01.6 (provided, however, CDC shall be entitled to withdraw such funds
and documents three (3) days after tender has been made, unless Estrella shall
perform by completing the sale of the Property as provided in the Agreement);
and (iii) tendered waiver of all conditions for Closing, except performance of
any covenants of Estrella under Sections 3.01.1, 3.01.2, 3.01.3, 3.01.5,
3.01.6, 3.01.7, Article 9, and the obligation of Estrella to pay any delinquent
taxes and remove liens from the Property out of the proceeds of sale as
contained in Section 3.01.4.
10.13 Limitation on CDC Damages and Indemnities. With respect to any
default by Estrella under this Agreement, except the failure of Estrella to
make all deposits as required by Section 3.01.5, or the creation of a defect in
title by the affirmative act of Estrella after the date of the Title Report as
provided in Section 3.01.4 or the failure of Estrella to remove any liens or
pay delinquent taxes as provided in Section 3.01.4, CDC shall only
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be entitled to recover its out-of-pocket expenses as damages. Nothing contained
in Section 10.12 shall preclude or limit recovery by CDC under the indemnity
covenants of Estrella as provided in Sections 7.02, 10.03, 10.06, and 10.14 of
this Agreement.
10.14. Attorneys' Fees. In the event of any legal proceeding for
enforcement of any of the terms or conditions of this Agreement, the prevailing
party in such action, or the nondismissing party where the dismissal occurs
other than by reason of a settlement, shall be entitled to recover its
reasonable costs and expenses, including without limitation reasonable
attorneys' fees and costs. The "prevailing party," for purposes of this
Agreement, shall be deemed to be that party which obtains substantially the
result sought, whether by dismissal or judgment.
10.15. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective successors and
assigns. Neither party shall have any right to assign their interest in this
Agreement, except at the Closing or except to an Affiliate. As used herein
"Affiliate" shall mean an entity controlled by, or under common control with,
either party, or partners of a party having at least a 20% interest in equity.
10.16. Further Assurances. CDC and Estrella each, at any time before
or after Closing and at their own expense, shall execute, acknowledge and
deliver any further deeds, assignments, conveyances and other assurances,
documents and instruments of transfer reasonably requested by the other party,
and shall take
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any other action consistent with the terms of this Agreement for the purpose of
carrying out the intent of this Agreement.
10.17. Memorandum of Option. A memorandum of this Agreement in the
form attached hereto as Exhibit J shall be recorded in the official records of
the County contemporaneously with the execution of this Agreement.
10.18. No Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any person other than the parties to it and their
respective permitted successors and assigns, nor is anything in this Agreement
intended to relieve or discharge any obligation of any third person to any
party hereto or give any third person any right of subrogation or action over
against any party to this Agreement.
10.19. Counterparts; Exhibits. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The exhibits
attached to this Agreement are incorporated herein and made a part hereof by
this reference.
10.20. Headings. The headings used in this Agreement are for
descriptive purposes only and shall not be used in the interpretation or
construction of this Agreement.
10.21 Time. Time is of the essence of each and every term of this
Agreement.
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ARTICLE 11
SPECIAL REMEDIES
11.1 Reference Provision.
11.1.1 Each controversy, dispute or claim between the parties
arising out of or relating to this Agreement, which controversy, dispute or
claim is not settled in writing within thirty (30) days after the "Claim Date"
(as hereinafter defined), will be settled by a reference proceeding in Orange
County, California, in accordance with the provisions of Sections 638, et seq.,
of the California Code of Civil Procedure, or their successor sections ("CCP"),
which shall constitute the exclusive remedy for the settlement of any
controversy, dispute or claim concerning this Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding, and the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court of Orange County
(the "Court"). The referee shall be a retired Judge of the Court selected by
mutual agreement of the parties, and if they cannot so agree within forty-five
(45) days after the Claim Dates, the referee shall be promptly selected by the
Presiding Judge of the Orange County Superior Court (or his representative).
The referee shall be appointed to sit as a temporary judge, as authorized by
law, and upon selection should take and subscribe to the oath of office as
provided for in Rule 244 of the California Rules of Court (or any subsequently
enacted Rule). Each party shall have one preemptory challenge pursuant to CCP
170.6. The referee shall: (a) be requested to set the matter
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for hearing within sixty (60) days after the Claim Date; and (b) try any and
all issues of law or fact and report a statement of decision upon them, if
possible, within ninety (90) days of the Claim Date. Any decision rendered by
the referee will be final, binding and conclusive, and judgment shall be
entered pursuant to CCP 644 in any court in the State of California having
jurisdiction and be subject to review as provided in CCP 645. Any party may
apply for a reference at any time after thirty (30) days following notice to
any other party of the nature of the controversy, dispute or claim (the "Claim
Date"), by filing a petition for a hearing or trial. All discovery permitted by
this Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event of a party's refusal to provide requested discovery for any
reason whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon fifteen (15) days' written notice, and requests
for production or inspection of documents shall be responded to within twenty
(20) days after service. All disputes relating to discovery which cannot be
resolved by the parties shall be submitted to the referee.
11.1.2 Except as expressly set forth in this Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted, including the time and place of all hearings, the order or
presentation of evidence, and all other
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questions that arise with respect to the course of the reference proceeding.
All proceedings and hearings conducted before the referee, except for trial,
shall be conducted without a court reporter, except that when any party so
requests, a court reporter will be used at any hearing conducted before the
referee. The party making such a request shall have the obligation to arrange
for and pay for the court reporter at the trial, which payment shall be borne
equally by the parties.
11.1.3 The referee shall be required to determine all issues
in accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the claims of
the parties that are the subject of the reference. The parties hereto expressly
reserve the right to findings of fact, conclusions of law, a written statement
of
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decision, and the right to move for a new trial or a different judgment.
IN WITNESS WHEREOF, the parties have executed this Option
Agreement the day and year first above set forth.
ESTRELLA PROPERTIES, LTD., a
California limited partnership
By: Shannon Developers, Inc., a
California Corporation
By: /s/ DARREL SPENCE
Darrel Spence, President
CENTEX DEVELOPMENT COMPANY, L.P., a
Delaware limited partnership
By: 3333 Development Corporation,
general partner
By: /s/ RAYMOND G. SMERGE
Raymond G. Smerge,
Agent and Attorney-In-Fact
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