EXHIBIT 2.1
AGREEMENT OF PURCHASE AND SALE
THE SELLERS NAMED HEREIN,
AS "SELLERS"
AND
UNITED DOMINION REALTY, L.P.,
AS "BUYER"
TABLE OF CONTENTS
Page
----
ARTICLE I AGREEMENT TO SELL AND PURCHASE............................................ 1
ARTICLE II PURCHASE PRICE............................................................ 1
2.1 Amount of Purchase Price.................................................... 1
2.2 Deposit..................................................................... 2
2.3 Terms of Payment............................................................ 3
2.4 Portfolio Purchase.......................................................... 4
2.5 Loans....................................................................... 4
ARTICLE III TITLE..................................................................... 6
3.1 Condition of Title at Closing............................................... 6
3.2 Title Insurance............................................................. 7
3.3 Intervening Title Matters................................................... 7
ARTICLE IV CONDITION OF REAL PROPERTY; CERTAIN INSPECTIONS; ASSUMED CONTRACTS;
SELLER'S REPRESENTATIONS AND WARRANTIES;.................................. 8
4.1 Buyer's Inspection.......................................................... 8
4.2 Inspections with Respect to the Kelvin Property............................. 10
4.3 Assumption of Contracts..................................................... 11
4.4 Sellers' Employees.......................................................... 11
4.5 Development of the Property................................................. 12
4.6 "As-Is" Sale, Buyer's Indemnities, Etc...................................... 12
4.7 Sellers' Representations and Warranties..................................... 19
ARTICLE V ESCROW; CLOSINGs; ETC..................................................... 22
5.1 Escrow Holder............................................................... 22
5.2 Closings.................................................................... 22
5.3 Closing Deliveries.......................................................... 23
5.4 Prorations.................................................................. 24
5.5 Closing Costs............................................................... 25
5.6 Real Estate Commission...................................................... 26
5.7 IRS Reporting............................................................... 26
5.8 Conditions.................................................................. 26
5.9 Seller's Employees.......................................................... 32
5.10 Assignment of Warranties.................................................... 32
5.11 Rivermark Management Budget................................................. 32
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TABLE OF CONTENTS
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ARTICLE VI CASUALTY OR CONDEMNATION................................................. 33
6.1 Casualty or Condemnation.................................................... 33
6.2 Cooperation................................................................. 33
ARTICLE VII BUYER'S REPRESENTATION AND WARRANTIES..................................... 34
7.1 Due Organization............................................................ 34
7.2 Right, Power and Authority.................................................. 34
7.3 Enforceability.............................................................. 34
7.4 Bankruptcy Matters.......................................................... 34
ARTICLE VIII SELLER COVENANTS......................................................... 34
8.1 Seller Covenants............................................................ 34
ARTICLE IX GENERAL PROVISIONS........................................................ 36
9.1 Entire Agreement............................................................ 36
9.2 Offer to Purchase........................................................... 36
9.3 Possession.................................................................. 36
9.4 Notices..................................................................... 36
9.5 Assignment.................................................................. 38
9.6 Successors.................................................................. 38
9.7 Further Documents........................................................... 39
9.8 Survival of Agreement....................................................... 39
9.9 LIQUIDATED DAMAGES.......................................................... 39
9.10 Seller's Default............................................................ 41
9.11 Time of Essence; Measure of Time............................................ 41
9.12 Amendments.................................................................. 41
9.13 Counterparts................................................................ 41
9.14 Governing Law............................................................... 41
9.15 Construction................................................................ 41
9.16 Exhibits.................................................................... 42
9.17 No Recordation.............................................................. 42
9.18 Gender...................................................................... 42
9.19 Waiver...................................................................... 42
9.20 Authority to Execute........................................................ 42
9.21 Attorneys' Fees............................................................. 42
9.22 Public Announcements........................................................ 42
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TABLE OF CONTENTS
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9.23 Severability................................................................ 43
9.24 Exchange.................................................................... 43
9.25 Lead-Based Paint............................................................ 43
9.26 Natural Hazard Areas Or Zones............................................... 43
9.27 Statutory Disclaimer........................................................ 44
9.28 Buyer Not a Successor of Seller............................................. 44
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EXHIBITS AND SCHEDULES
Exhibit A Legal Description for Properties
Exhibit B-1 California Form of Deed
Exhibit A to Grant Deed Legal Description of the Property
Exhibit B to Grant Deed Title Exceptions
Exhibit B-2 Oregon Statutory Special Warranty Deed
Exhibit C Assignment of Personal Property and Assignment
and Assumption of Leases and Contracts
Exhibit A to Exhibit C Legal Description
Exhibit B to Exhibit C List of Service Agreements, Maintenance Agreements
and Other Contracts
Exhibit D-1 Form of Coronado Management Agreement
Exhibit D-2 Form of Rivermark Management Agreement
Schedule 2.1 Purchase Price Allocation
Schedule 2.5 Repayment Loans and Assumption Loans
Schedule 3.1 Existing Title Policies and Preliminary Reports
Schedule 3.2 Title Companies
Schedule 4.1.2 Ownership Dates
Schedule 4.3 Assumed Contracts
Schedule 4.7(d) Litigation
Schedule 4.7(f) Personal Property
Schedule 4.7(j) Financial Information
Schedule 5.8(b) Coronado South Improvements Contracts
Schedule 5.8(c) Rivermark Plans and Specifications
Schedule 5.9 Employee Incentives and Bonuses
Schedule 8.1(d) Form of Representation Letter
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DEFINED TERMS
Term Section
---- -------
Agreement..................................................................... Preamble
assign........................................................................ Section 9.5
assignment.................................................................... Section 9.5
Assignment and Assumption Agreement........................................... Section 5.3(a)
Assumed Loan.................................................................. Section 2.5(a)
Assumed Loans................................................................. Section 2.5(a)
Books and Records............................................................. Section 4.1.2
Broker........................................................................ Section 5.6
business days................................................................. Section 9.11
Buyer......................................................................... Preamble
California Form 593........................................................... Section 5.3(a)
Closing....................................................................... Section 5.2(e)
Closing Date.................................................................. Section 5.2(e)
CLTA.......................................................................... Section 3.2
Code.......................................................................... Section 4.7(e)
control....................................................................... Section 9.5
Coronado Improvements......................................................... Section 5.8(b)(iii)
Coronado Improvements Contracts............................................... Section 5.8(b)(iii)
Coronado South Deposit........................................................ Section 2.2(a)(ii)
Coronado South Property....................................................... Exhibit A
Deed.......................................................................... Section 3.1
Deferred Property............................................................. Section 2.2(b)(i)
Deposit....................................................................... Section 2.2(a)
Effective Date................................................................ Preamble
Environmental Laws............................................................ Section 4.6(h)(iii)
Escrow Holder................................................................. Section 5.1
Exchange Instructions......................................................... Section 9.24
Excluded Documents............................................................ Section 4.1.3
Finally Completed............................................................. Section 5.8(b)(iii)
Hazardous Substances.......................................................... Section 4.6(h)(iii)
Independent Consultant........................................................ Section 5.8(b)(ii)
Initial Closing............................................................... Section 2.4
Initial Closing Date.......................................................... Section 5.2(a)
Initial Closing Deposit....................................................... Section 2.2(a)(i)
Inspection.................................................................... Section 4.1.1
Intervening Event............................................................. Section 4.7
Kelvin Litigation............................................................. Section 4.2
Kelvin Property............................................................... Exhibit A
Knowledgeable Employees....................................................... Section 4.7(j)
Leases........................................................................ Section 3.1(b)
Lender........................................................................ Section 2.5(a)
Lender's Approval............................................................. Section 2.5(b)
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Lenders............................... Section 2.5(a)
Loan.................................. Section 2.5(a)
Loan Transfer Documents............... Section 2.5(b)
Loans................................. Section 2.5(a)
Losses................................ Section 4.7, Section 4.5
Management Agreements................. Section 5.3(a)
Natural Hazard Expert................. Section 9.26
New Matter............................ Section 3.3
Permitted Exceptions.................. Section 3.1
Permitted Outside Parties............. Section 4.1.4
Policies.............................. Section 3.2
Policy................................ Section 3.2
Properties............................ Recitals
Property.............................. Recitals
Proprietary Information............... Section 4.1.4
Punchlist Estimate.................... Section 5.8(c)(iv)
Punchlist Holdback.................... Section 5.8(c)(iv)
Purchase Price........................ Section 2.1
Real Property......................... Recitals
Released Parties...................... Section 4.6(h)(i)
rentals............................... Section 5.4(f)
Repayment Loan........................ Section 2.5(a)
Repayment Loans....................... Section 2.5(a)
Rivermark Construction................ Section 5.8(c)(ii)(A)
Rivermark Deposit..................... Section 2.2(a)(iii)
Rivermark Project..................... Section 5.8(c)(ii)(B)(2)
Rivermark Property.................... Exhibit A
Rivermark Punchlist Items............. Section 5.8(c)(iii)
Seller................................ Preamble
Sellers............................... Preamble
Substantially Completed............... Section 5.8(c)(ii)(B), Section 5.8(b)(iii), Section 5.8(b)(i)
Survival Period....................... Section 4.7(j)
Target Rivermark Completion Date...... Section 5.8(c)(i)
Tenant's Notice....................... Section 5.3(a)
Title Adjustment...................... Section 3.3
Title Company......................... Section 3.2
Unknown Environmental Liabilities..... Section 4.6(h)(iii)
Vacant Units.......................... Section 8.1(f)
Work.................................. Section 4.5
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AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement") is made
effective as of the 13th day of August, 2004 (the "Effective Date"), by and
between Essex The Crest, L.P., a California limited partnership, Essex El
Encanto Apartments, L.P., a California limited partnership, Essex Hunt Club
Apartments, L.P., a California limited partnership, Essex Rosebeach Apartments,
L.P., a California limited partnership, Essex Andover Park Apartments, L.P., a
California limited partnership, Essex Kelvin Apartments, L.P., a California
limited partnership, Essex Rivermark Apartments, L.P., a California limited
partnership, Essex Arboretum Apartments, L.P., a California limited partnership,
Essex Ocean Villa Apartments, L.P., a California limited partnership, Essex
Carlsbad Apartments, L.P., a California limited partnership, Essex San Dimas
Bonita Apartments, L.P., a California limited partnership, Essex San Dimas
Canyon Apartments, L.P., a California limited partnership, Essex Huntington
Beach Apartments, L.P., a California limited partnership, Essex Villa Venetia
Apartments, L.P., a California limited partnership, Newport Beach North LLC, a
Delaware limited liability company, Newport Beach South LLC, a Delaware limited
liability company, and Essex Woodland Apartments, L.P., a California limited
partnership (each such entity being known individually as "Seller" and
collectively all such entities shall hereinafter be known as "Sellers"), and
United Dominion Realty, L.P., a Delaware limited partnership (together with its
successors and permitted assigns, "Buyer").
RECITALS
Sellers are the owners of those certain real properties located in the
states of California and Oregon and more particularly described in Exhibit "A-1"
through and including "A-17" attached hereto and made a part hereof (each, a
"Real Property"). Each Real Property and all improvements and personal property
owned by the applicable Seller located on such Real Property, if any (but
excluding personal property and fixtures owned by tenants or occupants, if any),
shall be individually known as a "Property" and all of same shall be known as
the "Properties".
ARTICLE I
AGREEMENT TO SELL AND PURCHASE
1.1 Agreement to Sell and to Purchase. Sellers agree to sell the
Properties to Buyer, and Buyer agrees to purchase the Properties from Sellers,
on the terms and conditions contained in this Agreement.
ARTICLE II
PURCHASE PRICE
2.1 Amount of Purchase Price. The purchase price for the Properties is the
sum of Seven Hundred and Sixty-Five Million and No/100s U.S. Dollars (U.S.
$765,000,000.00) (the "Purchase Price"). The Purchase Price is allocated between
the Properties as set forth on Schedule 2.1 attached hereto and made a part
hereof. When used with respect to a particular
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Property, the term "Purchase Price" shall mean the portion of the Purchase Price
allocated to such Property on Schedule 2.1.
2.2 Deposit.
(a) Within one (1) business day after execution of this Agreement,
Buyer shall deliver to Sellers as an earnest money deposit the sum of Ten
Million and No/100 U.S. Dollars (U.S. $10,000,000.00) in good, "same day"
funds at par (the "Deposit"). The Deposit shall bear interest at a rate of
four percent (4.0%) per annum, compounded monthly. All interest accruing
from time to time on the Deposit pursuant to this Section 2.2(a) shall be
added to the Deposit and become a part thereof, and all references herein
to the "Deposit" shall be deemed to include all such interest. The Deposit
shall be allocated to the Properties as follows:
(i) A portion of the Deposit (together with the interest
accrued on such portion in accordance with Section 2.2(a), the
"Initial Closing Deposit") in the amount of Six Million and No/100s
U.S. Dollars ($6,000,000.00) shall be applicable to all of the
Properties other than the Coronado South Property and the Rivermark
Property;
(ii) A portion of the Deposit (together with the interest
accrued on such portion in accordance with Section 2.2(a), the
"Coronado South Deposit") in the amount of Two Million Two Hundred
Thousand and No/100s U.S. Dollars ($2,200,000.00) shall be
applicable to the Coronado South Property; and
(iii) A portion of the Deposit (together with the interest
accrued on such portion in accordance with Section 2.2(a), the
"Rivermark Deposit") in the aggregate amount of One Million Eight
Hundred Thousand and No/100s U.S. Dollars ($1,800,000.00) shall be
applicable to the Rivermark Property.
(b) The Deposit shall be applied as follows:
(i) Upon the Initial Closing, the Initial Closing Deposit
shall be applied to the Purchase Prices for the Properties included
in the Initial Closing; provided, however, that in the event that
the Closing of one or more of such Properties (each, a "Deferred
Property") is deferred in accordance with Sections 2.5(b), 3.3 or
5.8 or Article VI, the Initial Closing Deposit shall not be applied
to the Purchase Prices for the Properties included in the Initial
Closing, but shall continue to be held by the Seller, and shall
continue to accrue interest, in accordance with this Agreement until
the Closing of the last Deferred Property, at which time the Initial
Closing Deposit shall be applied to the Purchase Price of the last
Deferred Property or, in the event that Buyer's obligation to
purchase the last Deferred Property is terminated in accordance with
Sections 3.3, 4.2 or 5.8 or Article VI hereof, the Initial Closing
Deposit shall be returned to Buyer. Notwithstanding the foregoing:
(A) if the Closing with respect to any Property (other than the
Coronado South Property or the Rivermark Property) does not occur
for any reason other than Seller's breach of this Agreement or
pursuant to
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Sections 3.3, 4.2 or 5.8 or Article VI, the Initial Closing Deposit
shall be non-refundable and shall become the property of the Sellers
as liquidated damages pursuant to Section 9.9 below; and (B) if the
Initial Closing or the Closing of the last Deferred Property does
not occur due to Seller's breach of this Agreement or pursuant to
Sections 3.3, 4.2 or 5.8 or Article VI, the Initial Closing Deposit
shall be returned to Buyer.
(ii) Upon the Closing of the Coronado South Property, the
Coronado South Deposit shall be applied to the Purchase Price for
the Coronado South Property as set forth in Section 2.2(a)(ii)
above; provided, however, that in the event that the Closing of the
Coronado South Property does not occur for any reason other than
Seller's breach of this Agreement or pursuant to Sections 3.3, 4.2
or 5.8 or Article VI, the Coronado South Deposit shall be
non-refundable and shall become the property of the Sellers as
liquidated damages pursuant to Section 9.9 below. If the Closing of
the Coronado South Property does not occur due to Seller's breach of
this Agreement or pursuant to Sections 3.3, 4.2 or 5.8 or Article
VI, the Coronado South Deposit shall be returned to Buyer.
(iii) Upon the Closing of the Rivermark Property, the
Rivermark Deposit shall be applied to the Purchase Price for the
Rivermark Property as set forth in Section 2.2(a)(iii) above;
provided, however, that in the event that the Closing of the
Rivermark Property does not occur for any reason other than Seller's
breach of this Agreement or pursuant to Sections 3.3, 4.2 or 5.8 or
Article VI, the Rivermark Deposit shall be non-refundable and shall
become the property of the Sellers as liquidated damages pursuant to
Section 9.9 below. If the Closing of the Rivermark Property does not
occur due to Seller's breach of this Agreement or pursuant to
Sections 3.3, 4.2 or 5.8 or Article VI, the Rivermark Deposit shall
be returned to Buyer.
2.3 Terms of Payment. The Purchase Price for the Properties shall be paid
as follows:
(a) Not later than one (1) day prior to the Initial Closing, Buyer
shall deposit with Escrow Holder in good, "same-day" funds at par an
amount equal to the sum of the Purchase Prices allocated to the Properties
included in the Initial Closing (less the Initial Closing Deposit, unless
the Initial Closing Deposit is to be held by Sellers pending the Closing
of, or termination of Buyer's obligation to purchase, a Deferred Property
as provided in Section 2.2(b)(i)), together with any and all amounts, if
any, necessary to pay any and all prorations and/or expenses to be paid by
Buyer under the terms of this Agreement with respect to such Properties
(including any amounts of any nature and related expenses payable under
the loan documents relating to any Repayment Loans encumbering such
Properties, which Escrow Holder shall cause to be paid to such Lender),
less (i) any prorations or other amounts to be credited to Buyer under the
terms of this Agreement with respect to such Properties, and (ii) the then
current principal balance of the Assumed Loans encumbering such
Properties.
(b) Not later than one (1) day prior to the Closing of any Deferred
Property which is not included in the Initial Closing pursuant to Sections
2.5(b), 3.3, 5.8 or Article
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VI below, Buyer shall deposit with Escrow Holder in good "same-day" funds
at par an amount equal to the sum of the Purchase Price allocated to such
Property (less the Initial Closing Deposit, unless the Initial Closing
Deposit is to be held by Sellers pending the Closing of, or termination of
Buyer's obligation to purchase, any other Deferred Property), together
with any and all amounts, if any, necessary to pay any and all prorations
and/or expenses to be paid by Buyer under the terms of this Agreement with
respect to such Property (including any amounts of any nature and related
expenses payable under the loan documents relating to any Repayment Loans
encumbering such Properties, which Escrow Holder shall cause to be paid to
such Lender), less (i) any prorations or other amounts to be credited to
Buyer under the terms of this Agreement with respect to such Property, and
(ii) the then current principal balance of any Assumed Loan encumbering
such Property.
(c) Upon the Closing of the Coronado South Property, Buyer shall
deposit with Escrow Holder in good "same-day" funds at par an amount equal
to the sum of the Purchase Price allocated to the Coronado South Property
(as adjusted in accordance with Section 5.8(b), if applicable, and less
the Coronado South Deposit), together with any and all amounts, if any,
necessary to pay any and all prorations and/or expenses to be paid by
Buyer under the terms of this Agreement (including any amounts of any
nature and related expenses payable under the loan documents relating to
any Repayment Loans encumbering such Property, which Escrow Holder shall
cause to be paid to such Lender), less (i) any prorations or other amounts
to be credited to Buyer under the terms of this Agreement, and (ii) the
then current principal balance of any Assumed Loan encumbering such
Property.
(d) Not later than one (1) day prior to the Closing of the Rivermark
Property, Buyer shall deposit with Escrow Holder in good "same-day" funds
at par an amount equal to the sum of the Purchase Price allocated to the
Rivermark Property (less the Rivermark Deposit), together with any and all
amounts, if any, necessary to pay any and all prorations and/or expenses
to be paid by Buyer under the terms of this Agreement, less any prorations
or other amounts to be credited to Buyer under the terms of this
Agreement.
2.4 Portfolio Purchase. The parties acknowledge and agree that it is the
intention of the parties that all of the Properties, other than the Coronado
South Property and the Rivermark Property (which shall be sold and purchased
upon satisfaction of the conditions set forth in Sections 5.8(b) and 5.8(c),
respectively) be purchased and sold simultaneously and that the same is a
condition precedent to the parties obligations under this Agreement, except as
expressly provided otherwise in this Agreement (including in Sections 2.5(b),
3.3, 4.2 and 5.8 and Article VI). The Closing of the Properties, other than the
Coronado South Property, the Rivermark Property, any Deferred Property, any
Property with respect to which Buyer's obligation to purchase is terminated in
accordance with the express provisions of this Agreement (including in Sections
3.3, 4.2 and 5.8 and Article VI), is referred to herein as the "Initial
Closing."
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2.5 Loans.
(a) Repayment Loans. Sellers are the borrowers under those certain
loans listed on Schedule 2.5 attached hereto and made a part hereof (each
a "Loan" and collectively the "Loans") made by the lenders set forth on
Schedule 2.5 (each a "Lender" and collectively the "Lenders"), which Loans
encumber the Properties as described on Schedule 2.5. Buyer intends to pay
at the Closing, and not assume, those Loans which are identified on
Schedule 2.5 as "Repayment Loans" (each a "Repayment Loan" and
collectively the "Repayment Loans"). Subject to the provisions of this
Section 2.5, Buyer shall assume at the Closing all of the Loans other than
the Repayment Loans (each an "Assumed Loan" and collectively the "Assumed
Loans"). With respect to each Property which is the subject of a Repayment
Loan, upon the Closing of such Loan, Sellers shall deposit with Escrow
Holder in accordance with Section 2.3, an amount equal to the outstanding
amount of such Repayment Loan, which Escrow Holder shall cause to be paid
to such Lender upon the Closing of such Property. The applicable Seller
shall be entitled to receive from the applicable Lender (and Buyer shall
have no rights or obligations with respect to) any and all impounds
related to any Repayment Loans.
(b) Assumption Loans. Promptly following the Effective Date (but in
any event not later than fourteen (14) days from the Effective Date),
Buyer shall submit to each Lender of an Assumed Loan all applications,
application and other fees and costs and documentation required by such
Lender for such Lender to review and approve the assumption of its
respective Loan by Buyer. In the event Lender's approval of the assumption
of its respective Loan by Buyer ("Lender Approval") is not received by the
Closing Date applicable to the Property encumbered by such Loan, either
party may extend the Closing Date with respect to such Property one or
more times for a time period not to exceed one hundred and twenty (120)
days in the aggregate to enable Buyer to obtain such Lender Approval. In
the event such Lender Approval is not obtained within such one hundred and
twenty (120) day period, such Loan shall become a Repayment Loan, rather
than an Assumed Loan, and the provisions of Section 2.5(a) regarding
Repayment Loans shall apply thereto, and the Closing of such Repayment
Loan shall occur within ten (10) business days following the end of such
one hundred and twenty (120) day period. If such Lender Approval is
obtained within such one hundred and twenty (120) day period, the Closing
of such Property shall occur ten (10) business days following receipt of
such Lender Approval. At the Closing of any Property encumbered by an
Assumed Loan, Buyer and the applicable Seller shall execute and deliver,
or cause the execution and delivery, as the case may be, of, such
documentation required by the applicable Lender to effectuate the
assumption of each Assumed Loan by Buyer (the "Loan Transfer Documents"),
which documentation may include, without limitation, (i) the requirement
that a new key principal execute a guaranty of all recourse obligations of
the applicable Seller under such Loan, and (ii) that a new indemnity
regarding hazardous substances or materials be executed. As a condition to
Sellers' obligation to Close, such documentation must include a full
release of the applicable Seller (and its key principal), in form and
content satisfactory to Seller in its sole and absolute discretion, from
any and all liability under such Assumed Loan for all matters accruing
from and after the Closing Date and, if such release is not obtained,
Sellers, at their sole option, may exclude the Property which is
encumbered by such Excluded Loan and neither party shall have any
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obligations under this Agreement with respect to such excluded Property
other than those obligations provided for in this Agreement which
expressly survive termination of this Agreement. Buyer shall, at all
times, use good faith and reasonable efforts to assume the Assumed Loans
and cause the satisfaction of the conditions contained in this Section 2.5
to occur as soon as reasonably possible. At the Closing of any Property
which is encumbered by an Assumed Loan, Buyer shall reimburse the Seller
of such Property for any impounds which the Lender of such Assumed Loan
may hold and which are not otherwise credited or returned to such Seller.
(c) Election. Buyer may elect, upon written notice to Sellers, to
redesignate as an Assumed Loan any Loan which is designated as of the
Effective Date as a Repayment Loan on Schedule 2.5, in which event such
Loan shall become an Assumed Loan, rather than a Repayment Loan, and the
provisions of Section 2.5(b) regarding Assumed Loans shall apply thereto.
Buyer may also elect, upon written notice to Sellers, to redesignate as a
Repayment Loan any Loan which designated as of the Effective Date as an
Assumed Loan on Schedule 2.5, in which event such Loan shall become a
Repayment Loan, rather than an Assumed Loan, and the provisions of Section
2.5(a) regarding Repayment Loans shall apply thereto. No election by Buyer
pursuant to this Section 2.5 shall delay the Initial Closing with respect
to any Property or the Closing of the Coronado South Property.
ARTICLE III
TITLE
3.1 Condition of Title at Closing. Upon Closing, each Seller shall convey
each Property to Buyer (or shall cause each Property to be conveyed to Buyer) by
(i) with respect to the California Properties, a Grant Deed substantially in the
form of Exhibit "B-1" attached hereto and made a part hereof, and with (ii)
respect to the Oregon Properties, a Statutory Special Warranty Deed
substantially in the form of Exhibit "B-2" attached hereto and made a part
hereof (any of which shall hereinafter be known as a "Deed"), executed in
recordable form, subject only to the following:
(a) The lien for non-delinquent real and personal property taxes and
non-delinquent installments of any assessments or bonds;
(b) Leases and rental agreements with respect to apartment tenants,
laundry room facilities and other rental agreements ordinarily associated
with residential apartment properties ("Leases"), which leases and rental
agreements shall not contain any rights to purchase or rights of first
offer to purchase;
(c) All applicable building, zoning and use restrictions and/or
regulations of any municipality, township, county or state;
(d) Defects which would be shown by an inspection or by a survey of
the Property;
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(e) The printed exceptions and exclusions contained in the Policy
(as defined in Section 3.2 below);
(f) Any mechanics' or other liens or matters created or consented to
by Buyer or arising out of or in any way connected with Buyer's entry upon
the Property;
(g) Any reserved oil and/or mineral rights;
(h) All exceptions to title reflected in the owner's policy of title
insurance and the preliminary title report with respect to such Property
described on Schedule 3.1 attached hereto and made a part hereof, other
than any delinquent liens with respect to taxes, assessments or bonds and
any mechanics' or materialmens' liens (which Sellers shall cause to be
removed prior to the Closing, provided the same was not created or
consented to by Buyer and does not arise out of and is not in any way
connected with Buyer's entry upon the Property);
(i) The liens securing any Assumed Loan applicable to such Property;
and
(j) Any liens or encumbrances against the Property that are
otherwise approved by Buyer in writing.
Those exceptions to title described in Section 3.1(a) through 3.1(j) above shall
be collectively known as the "Permitted Exceptions."
3.2 Title Insurance. Title to Buyer for each Property shall be evidenced
by a California Land Title Association ("CLTA") owner's standard form title
insurance policy (or equivalent form with respect to the Properties located in
Oregon) issued by the title companies listed on Schedule 3.2 attached hereto
(each a "Title Company") with coverage insuring title to such Property in an
amount equal to the allocated Purchase Price with regard to same, subject only
to the Permitted Exceptions and, subject to the provisions of Section 3.3 below,
New Matters with respect to such Property (the "Policy" and, together with the
Policy for each other Property, the "Policies"). The premium for the Policies
shall be paid for by Sellers. Buyer may obtain an ALTA survey and an extended
ALTA policy of title insurance with respect to each Property, provided that (a)
Buyer shall pay any additional cost for same over and above the cost of the
Policy and all survey costs, (b) Sellers shall have no responsibility for
matters which may be disclosed by the ALTA survey, and (c) Sellers' obligation
to convey title to each Property shall be satisfied by each Title Company's
willingness to deliver the applicable Policy. Buyer's election to obtain an
extended policy of title insurance with respect to any Property shall not delay
the Closing of such Property and Buyer's inability to obtain an extended policy
of title insurance or any endorsements will not be deemed to be a failure of any
condition to Closing with respect to such Property.
3.3 Intervening Title Matters. In the event that at any time after the
Effective Date and prior to the Closing Date with respect to any Property, any
new matter affecting title to such Property which is not a Permitted Exception
(a "New Matter") is discovered by or is disclosed to Buyer, Buyer shall promptly
give written notice thereof to Sellers. Buyer shall have the right to approve
such New Matter within five (5) business days after receiving written request
for such approval from Sellers (accompanied by copies of the documents, if any,
creating or evidencing
7
such New Matter to the extent the same are in Sellers' possession or control or
are otherwise reasonably obtainable by Seller). If Buyer disapproves such New
Matter within such five (5) business day period, the Seller of the affected
Property shall take such action as may be commercially reasonable to eliminate
such New Matter or to cause the applicable Title Company to provide affirmative
insurance (either by eliminating such New Matter as an exception to the
applicable Title Policy or by issuance of an endorsement to such Title Policy
which is reasonably acceptable to Buyer); provided, however, that Seller shall
cause to be removed from the Property (or cause the Title Company to provide
Buyer with affirmative insurance with respect to) any New Matter which is a
monetary lien and Seller shall cause to be removed from the Property any New
Matter which was created by Seller on or after the Effective Date. In the event
that such Seller is unable to eliminate such matter or to cause Title Company to
provide such insurance, Buyer and Sellers shall negotiate in good faith prior to
the Closing Date as to an adjustment in the Purchase Price for such Property
sufficient to compensate Buyer for any loss or diminution in the value of such
Property arising from such New Matter (the "Title Adjustment"). In the event
that Buyer and Sellers are unable to agree upon the Title Adjustment prior to
the Closing Date, Buyer and the Seller which owns such Property shall, within
five (5) business days thereafter, each select one M.A.I. appraiser with at
least ten (10) years experience in appraising residential apartment buildings in
the geographical area applicable to the Property to determine the Title
Adjustment. In the event that either Buyer or such Seller fails to select such
an appraiser within such five (5) day period, it shall forfeit its right to do
so and the single appraiser shall determine the Title Adjustment. If two
appraisers are timely selected pursuant to the preceding sentence and the two
appraisers cannot agree on the amount of the Title Adjustment within ten (10)
business days of their selection, the two appraisers shall select a third
appraiser within five (5) business days following the end of such ten (10)
business day period, whose determination of the Title Adjustment shall be made
within ten (10) business days of his or her selection and whose determination
shall be final and binding. The Closing Date for such Property shall occur upon
the later of (i) the Initial Closing Date and (ii) ten (10) business days after
the Title Adjustment is finally determined in accordance with the foregoing
provisions of this Section 3.3. All costs of appraisers shall be divided equally
between Buyer on one hand and the applicable Seller on the other hand. In the
event that the Buyer and Seller agree upon (or in the event that the
appraiser(s) selected pursuant to foregoing provisions of this Section 3.3
determine) the amount of such adjustment, the Purchase Price for the applicable
Property shall be reduced by the amount of such adjustment; provided, however,
that in the event such adjustment exceeds ten percent (10%) of the Purchase
Price for the applicable Property, either Buyer or Sellers may, upon written
notice to the other parties hereto, exclude such Property, in which case Sellers
shall not be obligated to sell, and Buyer shall not be obligated to purchase,
such Property.
ARTICLE IV
CONDITION OF REAL PROPERTY; CERTAIN INSPECTIONS; ASSUMED
CONTRACTS; SELLER'S REPRESENTATIONS AND WARRANTIES;
4.1 Buyer's Inspection.
4.1.1 Physical Inspection. Following not less than twenty- four (24)
hours prior written notice to Sellers, Sellers hereby grant permission to Buyer
and its agents to enter upon the Properties at any reasonable time, and provided
that such entries do not unreasonably
8
interfere (as reasonably determined by Sellers) with the normal operation of the
Properties, to enable Buyer, at its sole cost and expense, to conduct
feasibility studies and investigations to determine the condition and status of
the Properties, including, without limitation, zoning and use limitations,
conditions of the improvements, the condition of any personal property, the
soils conditions, groundwater conditions and the status and existence of or to
governmental or quasi-governmental agencies in connection with the Properties
(the "Inspection"). Notwithstanding the foregoing, Buyer may not perform any
invasive testing or other activities on any portion of the Properties without
Sellers' prior written consent, which consent will not be unreasonably withheld,
conditioned or delayed. Buyer and/or its contractors who enter upon any Property
shall maintain Comprehensive General Liability Insurance covering Buyer's
obligations to Sellers under this Agreement with liability limits of not less
than $2,000,000.00 combined single limit per occurrence and not less than
$2,000,000.00 in the aggregate for bodily injury, sickness or death, and
property damage. Such insurance shall name the applicable Seller as an
additional insured, and a Certificate of Insurance evidencing such coverage
shall be provided to the Sellers prior to any entrance by Buyer or its
contractors on the applicable Property.
4.1.2 Books and Records. Sellers have previously provided Buyer or
shall provide Buyer, as the case may be, at Sellers' option, access to or copies
of the following materials with respect to each Property, other than the
Excluded Documents, not later than five (5) business days after the Effective
Date to the extent same are in Sellers' actual possession or control, Buyer
acknowledging that the applicable Seller or its affiliate have only owned the
Properties since the dates set forth on Schedule 4.1.2 attached hereto and made
a part hereof: (a) books and records for the Property, including the current
year-to-date; (b) all rental agreements, leases or other written agreements used
in the operation of and pertaining to the Property; (c) copies of any
correspondence received from any governmental (including municipal) agencies
concerning building and code violations of any nature; (d) a personal property
inventory list; (e) any documents relating to the physical or environmental
condition of the Property (including any Phase I and Phase II Environmental
Reports and all contracts, plans and specifications relating to any construction
or renovation activities on the Property); (f) any documents relating to the
zoning of the Property or its compliance with applicable legal requirements; and
(g) any documents relating to any threatened or pending litigation or
condemnation proceedings relating to the Property (collectively, other than the
Excluded Documents, the "Books and Records"). Buyer shall be responsible for any
and all costs and expenses incurred in connection with the Inspection.
4.1.3 Excluded Documents. As used herein, "Excluded Documents" shall
mean (a) any documents involving Sellers' financing or refinancing of the
Properties (other than documents pertaining to the physical or environmental
condition of the Properties and other than documents pertaining to the Loans),
(b) any purchase and escrow agreements and correspondence pertaining to Sellers'
acquisition of the Properties (other than documents pertaining to the physical
or environmental condition of the Properties), (c) any documents pertaining to
the potential acquisition of the Properties by any past or prospective
purchasers (other than documents relating to the physical or environmental
condition of the Properties), (d) any third party purchase inquiries and
correspondence, appraisals or economic evaluations of the Properties, (e)
Sellers' organizational documents and records, internal budgets, financial
projections, reports or correspondence prepared by Seller or Sellers' advisors
exclusively for Sellers or Sellers' constituent entities and any other internal
documents (other than documents
9
relating to the physical or environmental conditions of the Properties), (f) any
personnel records and files maintained by or on behalf of Sellers with respect
to individuals, if any, employed at or in connection with the Properties which
Sellers are obligated by law or otherwise to keep confidential, and (g) any
documents or materials which are subject to the attorney/client privilege or
which are the subject of a confidentiality obligation. Notwithstanding anything
in Section 4.1.2 to the contrary, Sellers shall have no obligation to make
available to Buyer and Buyer's authorized agents and representatives, and Buyer
and Buyer's authorized agents and representatives shall have no right to inspect
to make copies of, any of the Excluded Documents.
4.1.4 Proprietary Information. Buyer acknowledges and agrees that
the Books and Records are proprietary and confidential in nature and have been
or will be made available to Buyer solely to assist Buyer in determining the
feasibility of purchasing the Properties. Prior to the Closing with respect to
the applicable Property, Buyer agrees not to disclose the Books and Records, or
any analyses, compilations, studies or other documents or records prepared by or
on behalf of Buyer from any of the Books and Records (collectively, the
"Proprietary Information") to any party outside of Buyer's organization except
(a) as necessary to Buyer's attorneys, accountants, lenders, prospective
lenders, investors and/or prospective investors (collectively, the "Permitted
Outside Parties"), or (b) as may be required by any law applicable to Buyer.
Buyer further agrees to notify all Permitted Outside Parties that the
Proprietary Information is to be kept confidential and not disclosed to third
parties. In permitting Buyer and the Permitted Outside Parties to review the
Books and Records to assist Buyer, Sellers have not waived any privilege or
claim of confidentiality with respect thereto, and no third party benefits or
relationships of any kind, either express or implied have been offered, intended
or created by Sellers and any such claims are expressly rejected by Sellers and
waived by Buyer.
4.1.5 Return of Books and Records. At such time as this Agreement is
terminated for any reason, Buyer shall return to Sellers the originals of all of
the Books and Records delivered to Buyer by or on behalf of Sellers, and Buyer
shall destroy, and instruct all Permitted Outside Parties in writing to destroy,
any and all copies Buyer or the Permitted Outside Parties have made of the Books
and Records. In the event that this Agreement is terminated and Buyer is
entitled to the return of the Deposit under the terms of this Agreement, the
Deposit shall be released to Buyer only after Buyer has delivered a certificate
to Seller certifying the destruction of the Books and Records.
4.1.6 No Representation or Warranty by Sellers. Buyer acknowledges
that many of the Books and Records were prepared by third parties other than
Sellers, and in some instances, may have been prepared prior to Sellers'
ownership of the Properties. Buyer further acknowledges and agrees that (a)
except as expressly set forth in Section 4.7(j), neither Sellers nor any of
Sellers' respective agents, advisors, employees or contractors have made any
warranty or representation regarding the truth, accuracy or completeness of the
Books and Records, (b) Sellers expressly disclaim any such representation or
warranty, and (c) Sellers have not undertaken any independent investigation as
to the truth, accuracy or completeness of the Books and Records and Sellers are
providing the Books and Records or making the Books and Records available to
Buyer solely as an accommodation to Buyer.
4.1.7 Survival and Remedies. The obligations of Section 4.1.3,
Section 4.1.4 and Section 4.1.5 shall survive any termination of this Agreement.
In addition to any other
10
remedies available to Sellers, Sellers shall have the right to seek equitable
relief (including specific performance and injunctive relief) against Buyer and
Buyer's representatives to enforce the provisions of Section 4.1.4 and Section
4.1.5.
4.2 Inspections with Respect to the Kelvin Property. Buyer shall be
permitted to conduct such investigations and inquiries as Buyer deems necessary
or prudent with respect to that certain litigation affecting the Kelvin Property
generally described as Royalty Carpet v. City of Irvine and Essex Property
Trust, Inc., Case No. 03CC00225, originally filed in Orange County Superior
Court (the "Kelvin Litigation") and any claims related thereto. In the event
that Buyer, in its sole and absolute discretion, objects to or is dissatisfied
with the results of such investigations and/or inquiries for any reason or no
reason, Buyer may elect, by written notice delivered to Sellers no later than
5:00 P.M. Pacific Time on the date that is ten (10) business days from the
Effective Date, not to acquire the Kelvin Property pursuant to this Agreement.
If Buyer fails to deliver a notice of its election not to acquire the Kelvin
Property in accordance with this Section 4.2, Buyer shall be deemed to have
elected to purchase the Kelvin Property in accordance with this Agreement and
Sellers hereby agree that they shall (a) defend Buyer and the Kelvin Property
against the Kelvin Litigation and to use good faith and reasonable efforts to
prosecute such litigation to a successful outcome (subject to the following
provisions of this Section 4.2 relating to settlement of the Kelvin Litigation),
and (b) protect, indemnify and hold harmless Buyer and its subsidiaries,
affiliates, partners and constituent entities, and all their respective
employees, shareholders, officers and directors, successors and assigns, from
and against any demands, claims (including, but not limited to, warranty
claims), liens, pre-litigation procedures (statutory or otherwise), obligations
(including, but not limited to, repair obligations), liabilities, losses,
damages (whether general, special, consequential or otherwise, but specifically
excluding lost profits), costs, expenses, including, but not limited to, actual
expert consulting and witness fees and attorneys' fees and costs and court
costs, awards, fines or judgments arising from or by reason of the Kelvin
Litigation and any adverse determinations with respect thereto. The applicable
Seller may, at its sole expense, settle the Kelvin Litigation with Buyer's
consent, not to be unreasonably withheld or delayed, provided that any such
settlement shall (i) provide for the unconditional release of Buyer and the
indemnified parties, (ii) require only the payment of monetary damages by
Seller, and shall not impose any liability on Buyer and shall not provide for
any injunctive or other relief with respect to Buyer or the Property, and (iii)
expressly state that neither the fact of settlement nor the settlement agreement
shall constitute, or be construed or interpreted as, an admission by Buyer or
any indemnified party of any issue, fact, allegation or any other aspect of the
claim being settled. If Seller fails to diligently defend the Kelvin Litigation
as provided herein for a period of twenty (20) days (or such shorter period as
is reasonable under the circumstances) following delivery of written notice of
such failure from Buyer, Buyer shall have the right (but not the obligation) to
assume the defense thereof with counsel of its choice, at Seller's expense, and
defend, settle or otherwise dispose of such action. With respect to any such
action which Seller shall fail to promptly defend, Seller shall not thereafter
question the liability of Seller hereunder to Buyer for any Loss (including
counsel fees and other expenses of defense). Sellers' liability pursuant to the
clause (b) of the third sentence of this Section 4.2 shall not exceed Two
Million and No/100 U.S. Dollars ($2,000,000.00). Sellers' obligations under this
Section 4.2 shall survive the Closing with respect to the Kelvin Property and
the recordation of the Deed relating thereto, and shall not be deemed merged
into such Deed or the other documents and instruments delivered at such Closing.
11
4.3 Assumption of Contracts. Upon the Closing of a Property, Seller shall
assign to Buyer, and Buyer shall assume from Seller, all of the rights and
obligations arising on or after the Closing Date under each of the contracts and
other agreements listed on Schedule 4.3 attached hereto and made a part hereof
which relate to such Property. Buyer shall have no obligation to assume any
other contracts or agreements relating to such Property, Sellers shall indemnify
Buyer from and against any claims arising under such contracts and agreements,
and Sellers shall cause such other contracts and other agreements to be
terminated as soon as commercially reasonable following the Closing.
4.4 Sellers' Employees. From and after the Effective Date, Buyer shall
have the right to interview and make offers of employment to those employees of
Sellers and their affiliates who are employed at the Properties upon the Closing
(other than employees who are employed at any Property(ies) with respect to
which Buyer's obligation to purchase is terminated in accordance with the
express provisions of this Agreement (including in Sections 3.3, 4.2 and 5.8 and
Article VI)). Seller shall allow such employees to be interviewed and shall
provide Buyer with the amount of the current salaries and benefits of such
employees, and shall provide Buyer with information concerning any bonuses or
other incentives which Sellers are providing to such employees between the
Effective Date and the Closing Date, including those described on Schedule 5.9
attached hereto.
4.5 Development of the Property. Buyer agrees that in the event that
either it or any of its successors or assigns sell any individual condominium
units at any Property, all risk associated with the improvements situated upon
such Property including, but not limited to, surveying, engineering, design,
construction, supervision, inspection and testing (collectively the "Work")
shall be borne, as between Sellers, on the one hand, and Buyer, on the other
hand, exclusively by Buyer, regardless of whether the Work was originally
performed by any Seller and/or any of its architects, engineers, design
professionals, general contractors or subcontractors of any tier, material
suppliers, product manufacturers and any of the foregoing parties' agents or
servants or other third parties. With respect to all such Work and each
Property, Buyer shall defend, protect, indemnify and hold harmless Sellers and
their subsidiaries, affiliates, partners and constituent entities, and all their
respective employees, shareholders, officers and directors, from and against any
of the following: Any demands, claims (including, but not limited to, warranty
claims), liens, pre-litigation procedures (statutory or otherwise), obligations
(including, but not limited to, repair obligations), liabilities, losses,
damages (whether general, special, consequential or otherwise, but specifically
excluding lost profits), costs, expenses, including, but not limited to, actual
expert consulting and witness fees and attorneys' fees and costs and court
costs, awards, fines or judgments (collectively, "Losses") arising by reason of
(a) death or bodily injury to persons or injury to real or personal property
occurring following the Closing, and (b) design or construction deficiencies or
defects, or other Losses resulting from any acts or omissions of any Seller or
any of its architects, engineers, contractors, subcontractors of any tier or any
other design professionals, material suppliers or product manufacturers or any
of the foregoing parties' agents or servants or other third parties which arise
in connection with such Property. Buyer's duty to defend is independent and
separate from Buyer's duty to indemnify, and shall exist regardless of any
ultimate obligation of Buyer hereunder to indemnify, and shall arise upon
written request therefore being provided to Buyer by the applicable Seller
following an alleged or actual claim which would otherwise be covered by this
indemnity (which notice shall specify in detail the nature of such alleged or
actual claim and the applicable Seller shall
12
thereafter fully cooperate with Buyer as necessary to provide such defense). The
foregoing indemnification shall not apply to any fraud or intentional
misrepresentation by the applicable Seller. In addition, nothing contained in
this Section 4.5 shall limit or impair Buyer's rights against any third parties
(e.g., the general contractor and the architect), nor shall this paragraph grant
any rights to any such third parties against Buyer (i.e., there shall be no
third party beneficiaries of this paragraph except as expressly provided
herein).
4.6 "As-Is" Sale, Buyer's Indemnities, Etc.
(a) No Representations With Respect to Properties. No person acting
on behalf of any Seller is authorized to make, and by execution hereof
Buyer acknowledges that no person has made, any representation, agreement,
statement, warranty, guarantee or promise regarding any of the Properties
or its or their value, or the transactions contemplated herein or
regarding the title, including, without limitation, the physical location
of the dimensions of any of the Properties as shown on any survey or plat
map, zoning, construction, physical condition, including, without
limitation, with respect to the Americans With Disabilities Act, or other
status of or to any of the Properties, except as expressly set forth
herein. No representation, warranty, agreement, statement, guarantee or
promise, if any, made by any person acting on behalf of any Seller which
not contained herein shall be valid or binding on any Seller. Buyer
acknowledges and agrees that (i) the sale provided for herein is made
without any representation or warranty by any Seller except as expressly
set forth in Sections 4.7 and 5.6 below, and no Seller makes any warranty
of any kind or nature whatsoever, whether express or implied,
specifically, but without limiting the generality of the foregoing, as to
any physical condition of or at any of the Properties (including, without
limitation, as to any environmental matters, including, without
limitation, soil and groundwater conditions) or of the fitness of any of
the Properties and/ or the soil conditions existing at any of the
Properties for any particular purpose or development potential; or as to
the zoning, title, permitted use or other legal status of or to any of the
Properties including, without limitation, the availability of any permits
issued by any governmental authority having jurisdiction thereover; (ii)
except as expressly set forth in Sections 4.7 and 5.6 below, neither any
Seller nor its directors, officers, shareholders, agents, employees or
representatives have made any written or oral warranty, representation or
guarantee, express, implied or statutory, concerning any of the
Properties, including, but not limited to, as to any physical condition of
or at any of the Properties (including, without limitation, as to any
environmental matters, including, without limitation, soils and
groundwater conditions) or of particular use or purpose or development
potential, which has induced Buyer to execute this Agreement; and (iii)
except as expressly set forth in Sections 4.7 and 5.6 below, any and all
such warranties, representations and guarantees are expressly disclaimed
by Sellers.
(b) Independent Investigation. Buyer acknowledges that prior to the
Closing of any Property, Buyer will have independently and personally
conducted such inspections of such Property as Buyer deems prudent. Seller
represents that prior to the Effective Date, it has made available to
Buyer at the offices of Broker in Los Angeles, California, or has
delivered to Buyer, and Buyer acknowledges that it has received copies of
or had access to, the items set forth on Schedule 4.6(b) attached hereto
and made a part
13
hereof. Buyer agrees that subject to the express provisions of this
Agreement, each Property is to be sold to and accepted by Buyer, at the
Closing of such Property, in its then condition "AS-IS" and "WITH ALL
FAULTS."
(c) Documents Prepared by Buyer. Subject to applicable
confidentiality provisions with third parties, Buyer agrees that at the
written request of Sellers, copies of all studies, reports, plans and
analyses obtained or prepared by or for Buyer in any study or
investigation or the like conducted by Buyer, if any, shall be delivered
without representation or warranty of any kind to Seller (and at no cost
to Seller) if Closing should not occur for any reason whatsoever other
than for Sellers' breach of this Agreement.
(d) Buyer's Indemnity. Buyer shall defend, indemnify, protect and
hold Sellers and their subsidiaries, affiliates, partners and constituent
entities, and each of their respective shareholders, directors, officers,
representatives, employees and/or agents harmless from and against any and
all claims, liens, expenses, costs (including, without limitation,
attorneys' fees and costs and court costs), liabilities, damages, losses,
demands, actions or causes of action of whatever kind or nature arising
out of or in any way connected with, directly or indirectly, the
Inspection. The provisions of this Section 4.6(d) shall survive the
termination of this Agreement and/or the Closing.
(e) As-Is.
(i) Disclaimer of Representations and Warranties by Sellers.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE
CONTRARY, EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY
MADE BY SELLERS IN SECTIONS 4.7 AND 5.6 BELOW, IT IS UNDERSTOOD AND
AGREED THAT NEITHER SELLERS NOR ANY OF THEIR RESPECTIVE AGENTS,
EMPLOYEES OR CONTRACTORS HAVE MADE AND ARE NOT NOW MAKING, AND BUYER
HAS NOT RELIED UPON AND WILL NOT RELY UPON (DIRECTLY OR INDIRECTLY),
ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS
OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, WITH RESPECT
TO THE PROPERTIES, INCLUDING WARRANTIES OR REPRESENTATIONS AS TO (A)
MATTERS OF TITLE, (B) ENVIRONMENTAL MATTERS RELATING TO THE
PROPERTIES OR ANY PORTIONS THEREOF, (C) GEOLOGICAL CONDITIONS,
INCLUDING SUBSIDENCE, SUBSURFACE CONDITIONS, WATER TABLE,
UNDERGROUND WATER RESERVOIRS, LIMITATIONS REGARDING THE WITHDRAWAL
OF WATER AND EARTHQUAKE FAULTS AND THE RESULTING DAMAGE OF PAST
AND/OR FUTURE EARTHQUAKES, (D) WHETHER, AND TO THE EXTENT TO WHICH,
THE PROPERTIES OR ANY PORTIONS THEREOF ARE AFFECTED BY ANY STREAM
(SURFACE OR UNDERGROUND), BODY OF WATER, FLOOD PRONE AREA, FLOOD
PLAIN, FLOODWAY OR SPECIAL FLOOD HAZARD, (E) DRAINAGE, (F) SOIL
CONDITIONS, INCLUDING THE EXISTENCE OF
14
INSTABILITY, PAST SOIL REPAIRS, SOIL ADDITIONS OR CONDITIONS OF SOIL
FILL, OR SUSCEPTIBILITY TO LANDSLIDES, OR THE SUFFICIENCY OF ANY
UNDERSHORING, (G) ZONING TO WHICH THE PROPERTIES OR ANY PORTIONS
THEREOF MAY BE SUBJECT, (H) THE AVAILABILITY OF ANY UTILITIES TO THE
PROPERTIES OR ANY PORTIONS THEREOF INCLUDING WATER, SEWAGE, GAS AND
ELECTRIC, (I) USAGES OF ADJOINING PROPERTY, (J) ACCESS TO THE
PROPERTIES OR ANY PORTIONS THEREOF, (K) THE VALUE, COMPLIANCE WITH
THE PLANS AND SPECIFICATIONS, SIZE, LOCATION, AGE, USE, DESIGN,
QUALITY, DESCRIPTIONS, SUITABILITY, SEISMIC OR OTHER STRUCTURAL
INTEGRITY, OPERATION, TITLE TO, OR PHYSICAL OR FINANCIAL CONDITION
OF THE IMPROVEMENTS OR ANY OTHER PORTION OF THE PROPERTIES, (L) ANY
INCOME, EXPENSES, CHARGES, LIENS, ENCUMBRANCES, RIGHTS OR CLAIMS ON
OR AFFECTING OR PERTAINING TO THE PROPERTIES OR ANY PART THEREOF,
(M) THE PRESENCE OF HAZARDOUS SUBSTANCES IN OR ON, UNDER OR IN THE
VICINITY OF THE PROPERTIES, (N) THE CONDITION OR USE OF THE
PROPERTIES OR COMPLIANCE OF THE PROPERTIES WITH ANY OR ALL PAST,
PRESENT OR FUTURE FEDERAL, STATE OR LOCAL ORDINANCES, RULES,
REGULATIONS OR LAWS, BUILDING, FIRE OR ZONING ORDINANCES, CODES OR
OTHER SIMILAR LAWS, (O) THE EXISTENCE OR NON-EXISTENCE OF
UNDERGROUND STORAGE TANKS, (P) ANY OTHER MATTER AFFECTING THE
STABILITY OR INTEGRITY OF THE PROPERTIES, (Q) THE POTENTIAL FOR
FURTHER DEVELOPMENT OF THE PROPERTIES, (R) THE EXISTENCE OF VESTED
LAND USE, ZONING OR BUILDING ENTITLEMENTS AFFECTING THE PROPERTIES,
(S) THE MERCHANTABILITY OF THE PROPERTY OR FITNESS OF THE PROPERTY
FOR ANY PARTICULAR PURPOSE (BUYER AFFIRMING THAT BUYER HAS NOT
RELIED ON THE SKILL OR JUDGMENT OF SELLERS, OR ANY OF THEIR
RESPECTIVE AGENTS, EMPLOYEES OR CONTRACTORS TO SELECT OR FURNISH THE
PROPERTIES FOR ANY PARTICULAR PURPOSE, AND THAT SELLERS MAKE NO
WARRANTY THAT THE PROPERTIES ARE FIT FOR ANY PARTICULAR PURPOSE), OR
(T) TAX CONSEQUENCES (INCLUDING THE AMOUNT, USE OR PROVISIONS
RELATING TO ANY TAX CREDITS). BUYER FURTHER ACKNOWLEDGES THAT ANY
INFORMATION OF ANY TYPE WHICH BUYER HAS RECEIVED OR MAY RECEIVE FROM
SELLERS OR ANY OF THEIR RESPECTIVE AGENTS, EMPLOYEES OR CONTRACTORS,
INCLUDING ANY ENVIRONMENTAL REPORTS AND SURVEYS, IS FURNISHED ON THE
EXPRESS CONDITION THAT BUYER SHALL NOT RELY THEREON, BUT SHALL MAKE
AN INDEPENDENT VERIFICATION OF THE ACCURACY OF SUCH INFORMATION, ALL
SUCH INFORMATION BEING FURNISHED WITHOUT ANY REPRESENTATION OR
WARRANTY WHATSOEVER.
15
(ii) Sale "As Is". BUYER REPRESENTS AND WARRANTS THAT BUYER IS
A KNOWLEDGEABLE, EXPERIENCED AND SOPHISTICATED BUYER OF REAL ESTATE
AND THAT BUYER HAS RELIED AND SHALL RELY SOLELY ON (A) BUYER'S OWN
EXPERTISE AND THAT OF BUYER'S CONSULTANTS IN PURCHASING THE
PROPERTIES, AND (B) BUYER'S OWN KNOWLEDGE OF THE PROPERTY BASED ON
BUYER'S INVESTIGATIONS AND INSPECTIONS OF THE PROPERTIES. BUYER HAS
CONDUCTED OR WILL CONDUCT SUCH INSPECTIONS AND INVESTIGATIONS OF THE
PROPERTIES AS BUYER DEEMS NECESSARY, INCLUDING THE PHYSICAL AND
ENVIRONMENTAL CONDITIONS THEREOF, AND SHALL RELY UPON SAME. UPON
CLOSING, BUYER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING
ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN
REVEALED BY BUYER'S INSPECTIONS AND INVESTIGATIONS. BUYER
ACKNOWLEDGES AND AGREES THAT UPON CLOSING, SELLERS SHALL SELL AND
CONVEY TO BUYER AND BUYER SHALL ACCEPT THE PROPERTIES "AS IS, WHERE
IS," WITH ALL FAULTS AND DEFECTS (LATENT AND APPARENT). BUYER
FURTHER ACKNOWLEDGES AND AGREES THAT THERE ARE NO ORAL AGREEMENTS,
WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE PROPERTIES MADE BY
SELLERS (OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY
MADE BY SELLER IN SECTIONS 4.7 AND 5.6 BELOW), OR ANY AGENT,
EMPLOYEE OR CONTRACTOR OF SELLERS. THE TERMS AND CONDITIONS OF
SECTION 4.6(a) AND THIS SECTION 4.6(e) SHALL EXPRESSLY SURVIVE THE
CLOSING, SHALL NOT MERGE WITH THE PROVISIONS OF THE DEEDS OR ANY
OTHER CLOSING DOCUMENTS AND SHALL BE INCORPORATED INTO THE DEEDS.
SELLERS ARE NOT LIABLE OR BOUND IN ANY MANNER BY ANY ORAL OR WRITTEN
STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE
PROPERTIES FURNISHED BY ANY REAL ESTATE BROKER, CONTRACTOR, AGENT,
EMPLOYEE, SERVANT OR OTHER PERSON. BUYER ACKNOWLEDGES THAT THE
PURCHASE PRICE REFLECTS THE "AS IS" NATURE OF THIS SALE AND ANY
FAULTS, LIABILITIES, DEFECTS OR OTHER ADVERSE MATTERS THAT MAY BE
ASSOCIATED WITH THE PROPERTIES. BUYER HAS FULLY REVIEWED THE
DISCLAIMERS AND WAIVERS SET FORTH IN THIS AGREEMENT WITH BUYER'S
COUNSEL AND UNDERSTANDS THE SIGNIFICANCE AND EFFECT THEREOF.
(f) Buyer Acknowledgements. Buyer acknowledges and agrees that (i)
to the extent required to be operative, the disclaimers of warranties
contained in Section 4.6(a) and Section 4.6(e) above are "conspicuous"
disclaimers for purposes of all applicable laws and other legal
requirements, and (ii) the disclaimers and other agreements set forth in
Section 4.6(a) and Section 4.6(e) are an integral part of this Agreement,
that the Purchase Price has been adjusted to reflect the same and that
Sellers would not have
16
agreed to sell the Properties to Buyer for the Purchase Price without the
disclaimers and other agreements set forth in Section 4.6(a) and Section
4.6(e) above.
(g) Buyer Represented by Counsel. Buyer hereby represents and
warrants to Sellers that: (i) Buyer is not in a significantly disparate
bargaining position in relation to Sellers; (ii) Buyer is represented by
legal counsel in connection with the transaction contemplated by this
Agreement; and (iii) Buyer is purchasing the Properties for business,
commercial, investment or other similar purposes.
(h) Buyer's Release of Sellers.
(i) Sellers Released From Liability. Subject only to those
obligations of Sellers which this Agreement specifically provides
shall survive the Closing and without limiting the provisions of
Section 4.7, Buyer and anyone claiming by, through or under Buyer
hereby waives its right to recover from and fully and irrevocably
releases Sellers and Sellers' employees, officers, directors,
representatives, agents, advisors, servants, attorneys, affiliates,
parent, subsidiaries, and successors and assigns (the "Released
Parties") from any and all claims, responsibility and/or liability
that Buyer may now have or hereafter acquire against any of the
Released Parties for any costs, loss, liability, damage, expenses,
demand, action or cause of action arising from or related to (A) the
condition (including any construction defects, matters referred to
in Section 4.6(h)(ii) and (iii) below, errors, omissions or other
conditions, latent or otherwise), valuation, salability or utility
of the Properties, or their suitability for any purpose whatsoever,
and (B) any information furnished by the Released Parties under or
in connection with this Agreement other than intentional
misstatements. Notwithstanding the foregoing the Released Parties
shall not be deemed to include contractors, subcontractors and other
persons who are unaffiliated with Sellers and who have supplied
labor, materials or equipment to a work of improvement at the
Properties. This release includes claims of which Buyer is presently
unaware or which Buyer does not presently suspect to exist which, if
known by Buyer, would materially affect Buyer's release of the
Released Parties. Buyer specifically waives the provision of any
statute or principle of law, which provides otherwise. In this
connection and to the extent permitted by law, Buyer agrees,
represents and warrants that Buyer realizes and acknowledges that
factual matters now unknown to Buyer may have given or may hereafter
give rise to causes of action, claims, demands, debts,
controversies, damages, costs, losses and expenses which are
presently unknown, unanticipated and unsuspected, and Buyer further
agrees, represents and warrants that the waivers and releases herein
have been negotiated and agreed upon in light of that realization
and that Buyer nevertheless hereby intends to release, discharge and
acquit Sellers from any such unknown causes of action, claims,
demands, debts, controversies, damages, costs, losses and expenses.
With respect to the claims released in this Section 4.6, Buyer
expressly waives any rights or benefits available to it under the
provisions of Section 1542 of the California Civil Code, which
provides as follows:
17
"A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release,
which if known by him must have materially affected
his settlement with the debtor."
Buyer acknowledges that its attorney at law has explained to it the
meaning and effect of this statute. Buyer understands fully the
statutory language of Section 1542 of the California Civil Code,
and, with this understanding, Buyer nevertheless elects to, and
does, assume all risk for claims released under this Agreement
whether arising before or after the execution of this Agreement and
whether now known or unknown, and Buyer specifically waives any
rights it may have under Section 1542 of the California Civil Code.
Buyer fully understands that if the facts with respect to which this
Agreement is executed are later found to be other than or different
from the facts now believed by it to be true, it expressly accepts
and assumes the risk of that possible difference in facts and agrees
that this Agreement shall be and remain effective notwithstanding
that difference in facts.
_________________
BUYER'S INITIALS
(ii) Buyer's Waiver of Objections. Buyer acknowledges that, as
of the date of Closing, Buyer will have inspected the Properties and
observed their physical characteristics and existing conditions and
will have had the opportunity to conduct such investigations and
studies on and of said Properties and adjacent areas as Buyer deems
necessary, and hereby waives any and all objections to or complaints
regarding the Properties and their condition, physical
characteristics and existing conditions, including structural and
geologic conditions, subsurface soil and water conditions, on,
under, adjacent to or otherwise affecting the Properties. Buyer
further hereby assumes the risk of changes in applicable laws and
regulations relating to past, present and future environmental
conditions on the Properties and the risk that adverse physical
characteristics and conditions may not have been revealed by Buyer's
investigation. Sellers have given Buyer material concessions
regarding this transaction in exchange for Buyer agreeing to the
provisions of this Section 4.6(h)(ii). Buyer has initialed Section
4.6(h)(i) and this Section 4.6(h)(ii) to further indicate Buyer's
awareness and acceptance of each and every provision hereof.
_________________
BUYER'S INITIALS
(iii) Claims Under Environmental Laws. As used herein, (i)
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et
seq.), as amended, or the Resource Conservation and Recovery Act (42
U.S.C. Section 6902 et seq.), as amended, the applicable provisions
of the California Health and
18
Safety Code, as amended, or any similar federal, state or local law,
ordinance, rule or regulation applicable to the Properties (but
specifically excluding any principles of common law or common law
theories); (ii) "Hazardous Substances" means any hazardous, toxic or
dangerous waste, substance or material, any pollutant or
contaminant, or any sub stance which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous, or any substance which contains gasoline,
diesel fuel or other petroleum hydrocarbons, polychlorinated
biphenyls (PCBs), radon gas, urea formaldehyde or asbestos; and
(iii) "Unknown Environmental Liabilities" means future obligations
to remediate Hazardous Substances which are located on the
Properties prior to the Closing, whether or not such Hazardous
Substance is disclosed by any of the Books and Records, or any other
source prior to the Closing. Without limiting the foregoing
provisions of this Section 4.6 and notwithstanding the provisions of
any Environmental Laws to the contrary, but without limiting
Seller's representations and warranties set forth in Section 4.7,
Unknown Environmental Liabilities relating to the Properties which
exist on or before the Closing shall be borne solely by Buyer and
Seller shall be deemed to be released from all Unknown Environmental
Liabilities pursuant to Section 4.6(h) above.
(i) Survival. The foregoing provisions of this Section 4.6,
including the waivers and releases by Buyer, shall survive the Closing and
the recordation of the Deeds, and shall not be deemed merged into the
Deeds or other documents and instruments delivered at the Closing.
4.7 Sellers' Representations and Warranties. Each Seller represents and
warrants as to the following matters both as of the date hereof and as of the
date of Closing:
(a) Due Authorization. Such Seller has full power to execute,
deliver and carry out the terms and provisions of this Agreement, and has
taken all necessary action to authorize the execution, delivery and
performance of this Agreement. The individual(s) executing this Agreement
on behalf of such Seller has the authority to bind such Seller to the
terms and conditions of this Agreement.
(b) Enforceability. This Agreement and all documents required hereby
to be executed by such Seller, when so executed, shall be legal, valid,
and binding obligations of such Seller enforceable against such Seller in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, and other similar laws affecting
the rights of creditors generally and, as to enforceability, the general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(c) No Conflict. The execution and delivery of, and consummation of
the transactions contemplated by this Agreement are not prohibited by, and
will not materially conflict with, any other agreement or instrument to
which such Seller is now a party or otherwise subject.
19
(d) Litigation. To such Seller's knowledge, except as set forth on
Schedule 4.7(d) attached hereto and made a part hereof, none of such
Sellers have received any written notice of any threatened or pending
litigation against any Seller or affecting any Property which would
materially and adversely affect any Property or any Seller's capacity to
perform under this Agreement, and to such Seller's knowledge no such
litigation has been threatened.
(e) Foreign Person. None of the Sellers is a "foreign person" within
the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as
amended (the "Code").
(f) Personal Property. Except as set forth on Schedule 4.7(f)
attached hereto and made a part hereof, each Seller is the owner of the
Personal Property free and clear of any liens, claims or encumbrances
other than the Loans.
(g) Condemnation. To such Seller's knowledge, none of such Sellers
have received any written notice from any governmental agency of any
threatened or pending condemnation proceedings affecting any of the
Properties and, to such Sellers' knowledge, no such proceedings are or
have been initiated or threatened, that would result in the taking of any
of the Properties or any portion thereof.
(h) Contracts. To such Seller's knowledge, the contracts delivered
to Buyer pursuant to Section 4.3, the Permitted Exceptions and the tenant
leases are the only contracts and other agreements binding on such Seller
or the Property owned by such Seller. Neither Sellers nor, to such
Sellers' knowledge, any other party is in default in any material respect
under any such contract or other agreement.
(i) Bankruptcy Matters. Such Seller has not made a general
assignment for the benefit of creditors, filed any voluntary petition in
bankruptcy or suffered the filing of an involuntary petition by its
creditors, suffered the appointment of a receiver to take possession of
substantially all of its assets, suffered the attachment or other judicial
seizure of substantially all of its assets, admitted its inability to pay
its debts as they come due, or made an offer of settlement, extension or
composition to its creditors generally.
(j) Financial Information. The historical financial information
through December 31, 2003 set forth on the operating statements attached
hereto as Schedule 4.7(j) is materially consistent with the information
provided to the auditors of Essex Apartment Value Fund, L.P. for such
period. The historical financial information after December 31, 2003 set
forth on such operating statements is materially consistent with the
information that Sellers are planning to provide to such auditors for
audits that will be completed for 2004.
(k) Material Information. To such Seller's knowledge, (i) no written
consultant's reports exist which are in Sellers' actual possession or
control which relate to the physical or environmental condition of its
Property, and (ii) no written notices of any violations of law which
relate to its Property exist which are in Sellers' actual possession or
control, which consultants reports or written notices of violation
describe a
20
material adverse condition at such Property which has not been corrected
or as to which condition other written evidence of same has not otherwise
been made available to Buyer and is not otherwise within its knowledge.
In the event that, as a result of any event or occurrence after the
Effective Date and prior the Closing Date (an "Intervening Event"), any of the
representations and warranties set forth in clauses (d), (f), (g), (h), (j) or
(k) with respect to any Property would be untrue, inaccurate or misleading in
any respect as of the Closing Date, Sellers shall not be in default hereunder.
In the event that Buyer obtains knowledge of any such Intervening Event prior to
the Closing of such Property, Buyer shall provide to Seller written notice of
such Intervening Event, which notice shall describe how such Intervening Event
affects the representations and warranties in clauses (d), (f), (g), (h), (j) or
(k). Sellers shall defend, protect, indemnify and hold harmless Buyer and its
subsidiaries, affiliates, partners and constituent entities, and all their
respective employees, shareholders, officers and directors, from and against any
Losses (but specifically excluding lost profits) arising from or by reason of
such Intervening Event. Sellers' obligations pursuant to this paragraph shall
survive for a period of time equal to nine (9) months from and after the Closing
Date of the applicable Property. Sellers' obligations pursuant to this paragraph
shall not be subject to the limitations on Sellers' liability set forth in the
following paragraph of this Section 4.7.
The representations and warranties set forth in this Section 4.7 shall
survive the Closing and the recordation of the Deeds, and shall not be deemed
merged into the Deeds or other documents and instruments delivered at Closing
for a period of time equal to nine (9) months from and after the Closing Date of
the applicable Property (the "Survival Period"). Terms such as "to such Seller's
knowledge," "to the best of such Seller's knowledge," "of which Seller obtains
actual knowledge" or like phrases, including those used in Section 8.1(e) below,
mean the current actual knowledge of Jordan E. Ritter and John F. Burkart (the
"Knowledgeable Employees"), the persons at Seller with the greatest knowledge of
the matters which are the representations and warranties set forth in this
Section 4.7, without any duty of inquiry or investigation; provided that so
qualifying Sellers' knowledge shall in no event give rise to any personal
liability on the part of any Knowledgeable Employee or any officer or employee
of any Seller on account of any breach of any representation or warranty made by
any Seller herein. Said terms do not include constructive knowledge, imputed
knowledge, or knowledge the applicable Seller or such persons do not have but
could have obtained through further investigation or inquiry. Except as provided
in the preceding paragraph of this Section 4.7, Buyer shall have the right to
bring an action against Sellers on the breach of any representation or warranty
under Section 4.7, but only on the following conditions: (i) Buyer first learns
of the breach after Closing and files such action within the Survival Period;
and (ii) Buyer shall not have the right to bring a cause of action for a breach
of any such representation or warranty unless the damage to Buyer on account of
such breach (individually or when combined with damages from other breaches)
equals or exceeds One Million and no/100 U.S. Dollars ($1,000,000.00). Unless
and until the amount of the actual damages suffered or incurred by Buyer by
reason of any such breach of representations, warranties or covenants (when
combined with damages from other breaches) exceeds in the aggregate the sum of
One Million and no/100 U.S. Dollars ($1,000,000.00), Buyer shall not be entitled
to file an action or lawsuit or undertake any other legal proceeding against
Sellers by reason of such breach of representations, warranties or covenants. No
Seller shall have any liability after Closing for the breach of any
representation
21
or warranty under this Section 4.7 of which the Buyer had knowledge as of
Closing. Except to the extent expressly limited in this paragraph and the
proceeding paragraph of this Section 4.7, the provisions of this Section 4.7
shall survive the Closing. Any breach of a representation or warranty that
occurs prior to Closing shall be governed by Section 9.10. Subject to the
limitations and other provisions of this Agreement and except as provided in the
preceding paragraph of this Section 4.7 and in Sections 4.2 and 5.6, Seller
shall not be liable for any breach of any representation or warranty contained
in this Section 4.7 unless and until the total Losses of Buyer with respect to
any such breach (when combined with the Losses of Buyer with respect to any
other such breach) equal or exceed One Million and No/100s U.S. Dollars
($1,000,000.00), and Sellers' total liability with respect to a breach of any of
Sellers' representations, warranties and other obligations contained in this
Agreement or in any document or instrument executed and delivered by Sellers at
Closing (including any indemnity obligations of Sellers in this Agreement or in
any such document or instrument) is limited to Twenty Million and No/100s U.S.
Dollars ($20,000,000.00) in the aggregate. In computing the aggregate amount of
claims for the foregoing purpose, Sellers' liability shall be reduced by the
amount of any insurance proceeds and any indemnity, contribution or similar
payment received by Buyer from any third party with respect thereto less
expenses incurred by Buyer in collecting any such insurance proceeds and third
party payments. Except as provided in the Joinder to this Agreement executed by
Essex Apartment Value Fund, L.P., a Delaware limited partnership, in no event
shall any of the direct or indirect partners, shareholders, owners, affiliates,
officers, directors, employees or agents of Sellers or any affiliate or
controlling person thereof, have any liability for any claim, cause of action or
other liability arising out of or relating to this Agreement or the Properties
whether based on contract, common law, statute, equity or otherwise, except with
respect to Buyer's rights by statute to seek to recover proceeds of the Purchase
Price actually distributed or paid by Sellers to Sellers' shareholders, but
subject in all events to the limit of Twenty Million Dollars ($20,000,000.00) as
provided herein. The foregoing limitation on liability shall survive the Closing
or any earlier termination of this Agreement and shall not diminish or otherwise
affect Buyer's waivers and releases in this Agreement. Sellers shall be jointly
and severally liable for any breach of any representation or warranty made by
any Seller hereunder.
The limitations on Seller's liability set forth in this Section 4.7 shall
not apply to any intentional or fraudulent misrepresentation of Seller.
ARTICLE V
ESCROW; CLOSINGS; ETC.
5.1 Escrow Holder.
The parties hereby name Chicago Title Company, 700 South Flower
Street, Suite 900, Los Angeles, CA 90017, Attention: Ms. Maggie Watson, to serve
as escrow holder ("Escrow Holder") for the purposes of depositing and
transferring funds and consummating the transactions contemplated by this
Agreement.
22
5.2 Closings.
(a) Initial Closing. Unless otherwise agreed in writing by Sellers
and Buyer, the Closing with respect to the Properties, other than the
Rivermark Property, the Coronado South Property, any Property for which a
Lender Approval has not been obtained as of the Initial Closing Date and
any Property as to which the Closing is delayed under Section 3.3 or which
is excluded pursuant to the express provisions of this Agreement, shall
occur on the first business day that is seventy-five (75) days from the
date hereof (the "Initial Closing Date").
(b) Deferred Closings. With respect to any Property for which the
Closing is deferred in accordance with Sections 2.5 or 3.3 or Article VI
(and provided such Property is not excluded pursuant to the express
provisions of this Agreement), the Closing with respect to such Property
shall occur on the first business day that is ten (10) business days from
the date that Buyer has received the Lender Approval (or such Loan is
deemed to be a Repayment Loan) pursuant to Section 2.5(b) or after a
Purchase Price reduction has been determined in accordance with Section
3.3, as applicable.
(c) Coronado South Closing. Unless otherwise agreed in writing by
Sellers and Buyer and subject to the provisions of Section 5.8(b), the
Closing with respect to the Coronado South Property shall occur upon the
later of (i) March 31, 2005, and (ii) the date that is ten (10) business
days following such time as the Coronado South Improvements are
Substantially Completed (as defined in Section 5.8(b)(ii)).
(d) Rivermark Closing. Unless otherwise agreed in writing by Sellers
and Buyer and subject to the provisions of Section 5.8(c), the Closing
with respect to the Rivermark Property shall occur on August 1, 2005, as
such date may be extended in accordance with Section 5.8(c).
(e) Location and Deliveries. Each Closing shall take place at the
offices of the Escrow Holder, and not later than one (1) day prior to the
time that such Closing is scheduled to occur, the parties hereto shall
deliver all funds and documents reasonably necessary to consummate such
Closing, including, without limitation, the items set forth in Section 5.3
below, and at such time the Deeds for the applicable Properties shall be
recorded. With respect to each Property, the recording of the Deed for
such Property shall be deemed to be the "Closing" of such Property and the
date upon which such Closing occurs shall be referred to herein as the
"Closing Date" of such Property.
5.3 Closing Deliveries.
(a) Seller's Deliveries. Not later than one (1) day prior to each
Closing, each Seller shall deliver to Escrow Holder with respect to each
of the Properties which are the subject of such Closing: (i) the duly
executed and acknowledged Deed conveying the Property to Buyer, subject
only to the Permitted Exceptions, (ii) a duly executed Assignment of
Personal Property and Assignment and Assumption of Leases and Contracts in
the form of Exhibit "C" attached hereto and made a part hereof (an
"Assignment and Assumption Agreement"), (iii) for each of the Properties
located in
23
California, a California Form 593-W (the "California Form 593"), (iv) a
tenant's notice in form and substance reasonably satisfactory to Buyer and
the applicable Seller and in compliance with any applicable laws (the
"Tenant's Notice"), (v) a certificate from the applicable Seller
certifying the information required by Section 1445 of the Code and the
regulations issued thereunder to establish, for the purposes of avoiding
Buyer's tax withholding obligations, that such Seller is not a "foreign
person" as defined in Section 1445(f)(3) of the Code, (vi) if required by
the Title Company, an affidavit in form reasonably acceptable to the Title
Company sufficient to remove any exception for mechanics' and
materialmen's liens and parties in possession (except tenants under
Leases), duly executed by such Seller, (vii) counterpart originals of the
Loan Transfer Documents to be executed by each Seller, duly executed by
each such Seller and acknowledged, if applicable, (viii) evidence in form
and substance reasonably satisfactory to Buyer and the Title Company
issuing the applicable Policy to establish the due formation, valid
existence and good standing of the Seller and its authority to consummate
the transactions contemplated hereby, and (ix) any other documents
reasonably required by Escrow Agent or otherwise reasonably necessary to
effect such Closing. Additionally, on the Initial Closing Date, the
Sellers of the Coronado South Property and the Rivermark Property shall
deliver duly executed counterparts to the Management Agreements with
respect to the Coronado South Property and the Rivermark Property in the
forms of Exhibits "D-1" and "D-2" attached hereto and made a part hereof,
respectively (each a "Management Agreement" and collectively the
"Management Agreements").
(b) Buyer's Deliveries. Not later than one (1) day prior to each
Closing, Buyer shall deliver to Escrow Holder with respect to each of the
Properties which are the subject of such Closing: (i) all funds required
to be delivered by Buyer hereunder with respect to such Closing, (ii) a
duly executed copy of the Assignment and Assumption Agreement for such
Property, (iii) for each Property located in California, a duly executed
and completed copy of a Preliminary Change of Ownership Form for such
Property, (iv) a duly executed copy of the Tenant's Notice for such
Property, (v) counterpart originals of the Loan Transfer Documents to be
executed by Buyer, duly executed by Buyer and acknowledged, if applicable,
(vi) evidence in form and substance reasonably satisfactory to Sellers and
the Title Company issuing the applicable Policy to establish the due
formation, valid existence and good standing of the Buyer and its
authority to consummate the transactions contemplated hereby, and (vii)
any other documents reasonably required by Escrow Agent or otherwise
reasonably necessary to effect such Closing. Additionally, upon the
Initial Closing, the Buyer shall deliver duly executed counterparts to the
Management Agreements.
5.4 Prorations. The following prorations shall be made as of the Closing
Date and shall be paid in cash to the party entitled thereto, unless the amount
of any such proration cannot be established, in which event such proration shall
be paid within ten (10) days after the amount thereof is established.
(a) Taxes. Real and personal property taxes and bonds and/or
assessments (whether general or special), and all public or governmental
charges or assessments affecting the applicable Property for the entire
calendar year in which the Closing Date
24
occurs shall be prorated based on the most recent official information
applicable to such year obtainable in the office of the particular taxing
authority. If actual tax and bond and/or assessment figures for the year
of the Closing Date are not available at the Closing Date, an estimated,
tentative proration of taxes and assessments shall be made using figures
from the preceding year; provided, however, when actual taxes and bond
and/or assessments for the year of the Closing Date are available, a
correct proration shall be made. Any such payment shall be made within ten
(10) business days after notification by either party that such adjustment
is necessary.
(b) Utility Charges. Each Seller shall use reasonable efforts to
cause all utility billings to be closed and billed by the respective
utility companies as of the Closing Date in order that utility charges may
be separately billed for the period prior to the Closing Date and the
period after the Closing Date. If any such utility charges are not
separately billed, the same shall be prorated. In connection with any such
proration, it shall be presumed that utility charges were uniformly
incurred during the billing period in which the Closing Date occurs.
(c) Operating Expenses. Expenses of operating the Properties and
(other than insurance premiums, taxes, utility charges and items which
would accounted for as capital expenditures in accordance with generally
accepted accounting principles) which were either (i) prepaid by any
Seller for a period beyond the Closing Date, or (ii) with respect to which
payment is due after the Closing Date and the amount billed after the
Closing Date includes charges applicable to the period prior to the
Closing Date, shall be prorated. The parties shall attempt to ascertain
that portion of the charges relating to the period prior to the Closing
Date. If such determination cannot be accurately made, it shall be
presumed that the charges reflected in such billing were incurred
uniformly during the billing period in which the Closing Date occurred.
(d) Interest on Loan. Interest on any Assumed Loan shall be prorated
as of Closing.
(e) Insurance. Buyer shall secure its own insurance.
(f) Rentals. Rents and all other revenue and expense items actually
paid by tenants ("rentals"), shall be prorated as of the Closing Date.
Prepaid rentals and unapplied refundable security deposits shall be
assigned by each Seller to Buyer at Closing. Any rentals accrued but
unpaid at Closing, and which are collected by Buyer, shall be remitted
(less reasonable collection charges) to the applicable Seller; provided,
however, that in determining whether sums collected by Buyer after the
Closing Date are attributable to rentals accrued but unpaid at Closing the
amounts collected by Buyer after the Closing Date from each tenant shall
be applied first to the rentals accruing since the Closing Date, and
second to rentals accruing prior to the Closing Date. Seller shall deliver
to Buyer any rentals received by Seller subsequent to the Closing Date to
be applied as set forth in this Section 5.4(f). With respect to the
Rivermark Property, any rental concessions, such as free rent, which are
made or paid to tenants with respect to the period from and after the date
that Buyer or its affiliate takes control over management of the Rivermark
Property pursuant to the Management Agreement through the Closing
25
Date of the Rivermark Property shall be prorated as of the Closing of the
Rivermark Property based upon the full terms of such tenants' leases.
(g) Contracts. All amounts payable by or to the Sellers under any
contracts assumed by Buyer in accordance with Section 4.3 shall be
prorated as of the applicable Closing Date. Additionally, Buyer shall
receive a pro rata portion of any lump-sum signing, pre-revenue or similar
payments actually made to Sellers in connection with such assumed
contracts based upon the remaining terms of such contracts.
5.5 Closing Costs. Each Seller shall pay all of the real estate transfer
taxes payable to any county government (as opposed to any city government),
one-half (1/2) of any real estate transfer taxes payable to any city government,
one-half (1/2) of any Escrow Holder's fees, all recording fees normally paid by
sellers in the county in which the Property is located, the brokerage commission
referred to in Section 5.6 below and the cost of the Policy. Each party shall
pay for their own attorneys' fees. Buyer shall pay the premium for the extra
cost for an ALTA extended owner's policy if same is requested by Buyer and any
endorsements, one-half (1/2) of any real estate transfer taxes payable to a city
government (as opposed to a county government), one-half (1/2) of any Escrow
Holder's fee, any recording costs normally paid for by buyers in the county in
which the Property is located, all assumption fees and other costs incurred in
connection with the assumption of each Loan, any and all sales, use or other
taxes on the transfer of any personal property arising out of the transactions
contemplated under this Agreement, if any, and any costs incurred in connection
with the Inspection. The payment of any other closing costs shall be determined
in accordance with the custom of the county where the applicable Property
exists.
5.6 Real Estate Commission. Sellers hereby represent and warrant to Buyer
that Sellers have not engaged or dealt with any broker, finder or other agent in
connection with their entry into this Agreement or the transactions contemplated
hereby other than Credit Suisse First Boston LLC ("Broker"). Buyer hereby
represents and warrants to Sellers that Buyer has not engaged or dealt with any
broker, finder or other agent in connection with its entry into this Agreement
or the transactions contemplated hereby. Seller shall pay any real estate
brokerage commissions due to the Broker pursuant to a separate agreement with
the Broker. In any event, Sellers shall not be responsible for the payment of
any broker's commission or finder's fee charged by any broker, finder or other
agent acting on behalf of Buyer in connection with its entry into this Agreement
or the transactions contemplated hereby. Subject to the foregoing obligations,
Buyer and Sellers each hereby indemnify and hold the other harmless from and
against all costs, expenses or liabilities (including without limitation
reasonable attorneys' fees and court costs, whether or not taxable and whether
or not any action is prosecuted to judgment) incurred by the indemnified party
in connection with any claim or demand by any person or entity for any broker's,
finder's or other commission or fee in connection with the indemnifying party's
entry into this Agreement and the transactions contemplated hereby. The
obligations of Sellers under this Section 5.6 shall not be subject to the
limitations on liability set forth in Section 4.7.
5.7 IRS Reporting. Buyer and Sellers designate Escrow Holder as the party
to prepare and file IRS Form 1099B, if such filing is required.
26
5.8 Conditions.
(a) Properties Other than Coronado South and Rivermark. Except as
provided in Section 5.8(b) and 5.8(c), but notwithstanding any other
provision of this Agreement to the contrary, Buyer's obligation to
purchase a Property shall be subject to and contingent upon the
satisfaction or waiver of the following conditions precedent:
(i) The Title Company being irrevocably and unconditionally
committed to issue, upon the sole condition of the payment of its
regularly scheduled premium, the Policy with respect to such
Property, insuring Buyer in the amount of the Purchase Price
allocable to such Property that title to such Property is vested of
record in Buyer on the Closing Date subject only to the Permitted
Exceptions (and, to the extent provided in Section 3.3, any New
Matters);
(ii) Except to the extent such matters are the responsibility
of the Buyer under the Management Agreement relating to the Coronado
South Property (during the time such Management Agreement is in
effect), the physical condition of the Property shall be in at least
substantially the same physical condition on the Closing Date as on
the Effective Date, reasonable wear and tear and loss by casualty or
condemnation excepted (subject to the provisions of Article VI); and
(iii) To the extent any of the following would reasonably be
expected to materially and adversely affect the Buyer, any Property
or Buyer's ownership of such Property after the Closing Date
(including but not limited to the ability of Buyer to operate such
Property as a multifamily residential property), as of the Closing
Date:
(A) There shall be no litigation, administrative action
or governmental proceeding pending or threatened in writing by
any applicable governmental agency against a Property or the
Seller of such Property, which seeks to restrain or prohibit
the purchase and sale of the Property; provided, however, that
in the event of any such litigation, administrative action or
proceeding, Buyer's obligation to purchase such Property shall
not terminate if, within ten (10) business days, such action
is dismissed or a court order is issued allowing the sale to
proceed; and provided, further, that in the event the Closing
of such Property proceeds on the basis of such a court order
or in the event of any litigation, administrative action or
governmental proceeding pending or threatened in writing
against a Property or the Seller of such Property which seeks
to obtain damages or a discovery order with respect to this
Agreement or the purchase and sale of the Property, but which
does not seek to restrain or prohibit the purchase and sale of
the Property, the Closing of such Property shall proceed and
Sellers hereby agree to protect, indemnify and hold harmless
Buyer and its subsidiaries, affiliates, partners and
constituent entities, and all their respective employees,
shareholders, officers and directors, successors and assigns,
from and against any Losses
27
(but specifically excluding lost profits) arising from such
litigation or administrative action or other governmental
proceeding, and such indemnity shall not be limited by the
provisions of Section 4.7; and
(B) Except to the extent such proceedings are the
subject of Sellers' indemnity as set forth in the second
paragraph of Section 4.7, no proceedings shall be pending or
threatened in writing by the applicable governmental agency
which could or would cause the redesignation or other
modification of the zoning classification of, or of any
building code requirements applicable to, the Property or any
portion thereof which would reasonably be expected to have a
material adverse effect on Buyer's ability to own, operate,
maintain and repair such Property as a multi-family
residential property.
The failure of any of the foregoing conditions to occur solely with
respect to any Property shall not be deemed to be a failure of such
condition with respect to any other Property.
(b) Coronado South.
(i) Buyer's obligation to purchase the Coronado South Property
shall be subject to and contingent upon the satisfaction or waiver
of the conditions set forth in Section 5.8(a)(i), (ii) and (iii)
with respect to such Property, and, in addition, shall be subject to
the Sellers having caused the Coronado South Improvements to be
Substantially Completed. Subject to the following provisions of this
Section 5.8(b)(i) and the provisions of Section 5.8(b)(iv), the
Closing of the Coronado South Property shall occur upon the later of
(A) March 31, 2005, and (B) ten (10) business days after the
Coronado South Improvements have been Substantially Completed. In
the event that the Closing of the Coronado South Property occurs
pursuant to clause (B) of the preceding sentence, (1) it shall be a
condition to the Buyer's obligation to Close with respect to the
Coronado South Property that Sellers shall have assigned to Buyer
the Coronado South Improvements Contracts so as to enable Buyer to
complete the Coronado South Improvements in accordance therewith,
and (2) Buyer shall be entitled to a credit against the Purchase
Price for the Coronado South Property in an amount equal to the
amount which must be paid under the Coronado South Improvements
Contracts in order to fully complete the Coronado South
Improvements; provided, however, that in the event that the Seller
of the Coronado South Property is unable to satisfy the condition
set forth in clause (1) of this sentence, Buyer may, at its option
and notwithstanding any other provision of this Section 5.8(b) to
the contrary, elect to either (I) extend the Closing of the Coronado
South Property until the date that is ten (10) business days
following the date on which the Coronado South Improvements have
been Finally Completed or (II) proceed with the Closing of the
Coronado South Property, in which case the Seller of the Coronado
South Property shall cause the Coronado South Improvements to be
Finally Completed, at such Seller's sole cost and expense, within
sixty (60) days following such Closing. The determination of whether
the Coronado South
28
Improvements are Finally Completed shall be made in accordance with
the procedures set forth in Section 5.8(b)(ii) and, for such
purpose, all references in said section to "Substantially Completed"
shall be deemed to refer to "Finally Completed."
(ii) At such time as the Sellers consider the Coronado South
Improvements to be Substantially Completed, Sellers shall notify the
Buyer in writing. Sellers and Buyer shall endeavor in good faith to
agree as to whether the Coronado South Improvements are
Substantially Completed and as to the cost of completing the
uncompleted portion of the Coronado South Improvements. In the event
that Sellers and Buyer are unable to reach such agreements within
ten (5) business days following Buyer's receipt of such notice, then
Buyer and Seller shall submit such matters to Marx/Okubo or such
other third party consultant as may be agreed by Buyers and Sellers
("Independent Consultant") and shall instruct such Independent
Consultant to make a determination prior to the Closing of whether
the Coronado South Improvements have been Substantially Completed.
The Independent Consultant's determination of whether the Coronado
South Improvements are Substantially Completed shall be binding on
the parties and must be obtained prior to the Closing.
(iii) As used in this Section 5.8(b), (A) the "Coronado South
Improvements" means those renovations and improvements to the
Coronado South Property more fully described in the Coronado South
Improvements Contracts; (B) "Substantially Completed" means that (1)
Buyer and Seller have agreed (or the Independent Consultant has
determined) in accordance with this Section 5.8(b) that not less
than ninety percent (90%) of the Coronado South Improvements have
been completed in compliance with all applicable laws and legal
requirements (including applicable building and fire codes and
zoning and other similar requirements) and any Permitted Exceptions
(including any New Matters) affecting the Coronado South Property
and substantially in accordance with the Coronado South Improvements
Contracts, and (2) the Coronado South Property shall be free of any
liens with respect to all work completed prior to the date of
Substantial Completion and Sellers shall have received final lien
waivers with respect to all such work (or, alternatively, the Title
Policy issued at the Closing of the Coronado South Property shall
affirmatively insure against any such liens); (C) "Finally
Completed" means that all of the requirements for the Coronado South
Improvements to be Substantially Completed shall have been
satisfied, except that Buyer and Seller shall have agreed (or the
Independent Consultant shall have determined) in accordance with
this Section 5.8(b)(iv) that one hundred percent (100%) of the
Coronado South Improvements shall have been completed; and (D) the
"Coronado South Improvements Contracts" means those documents listed
on Schedule 5.8(b) attached hereto.
(iv) Notwithstanding any provision of Section 5.8(b)(i) to the
contrary, in the event that the Coronado South Improvements are not
Substantially Completed on or before September 30, 2005, Buyer may
elect to proceed to the Closing of the Coronado South Property, in
which case (1) it shall be a condition
29
to the Buyer's obligation to Close with respect to the Coronado
South Property that Sellers shall have assigned to Buyer the
Coronado South Improvements Contracts, to the extent assignable, so
as to enable Buyer to complete the Coronado South Improvements in
accordance therewith, and (2) Buyer shall be entitled to a credit
against the Purchase Price for the Coronado South Property in an
amount equal to one hundred and fifty percent (150%) of the amount
which must be paid under the Coronado South Improvements Contracts
in order to cause the Coronado South Improvements to be Finally
Completed. In the event that Buyer and Seller are unable to agree
upon such amount, Buyer and Seller shall instruct Independent
Consultant to make a determination prior to the Closing of a
reasonable estimate, on an item-by-item basis, based upon all
relevant and available information, of such amount, which
determination shall be binding on the parties and must be obtained
prior to the Closing.
(c) Rivermark.
(i) Buyer's obligation to purchase the Rivermark Property
shall be subject to and contingent upon the satisfaction or waiver
of the conditions set forth in Section 5.8(a)(i) and (iii) with
respect to such Property, and, in addition, shall be subject to
Sellers having Substantially Completed the Rivermark Construction on
or before February 15, 2005 (the "Target Rivermark Completion
Date"); provided, however, that in the event that Sellers have
failed to cause the Rivermark Construction to be Substantially
Completed on or before such date, such failure shall not constitute
a default by Sellers hereunder, but the Closing Date of the
Rivermark Property, which is August 1, 2005, shall be extended for a
period of one (1) calendar month for each thirty-day period (or
portion thereof) beyond the Target Rivermark Completion Date which
the Rivermark Construction is not Substantially Completed; provided,
further, that if the Rivermark Construction is not Substantially
Completed on or before December 31, 2005, Buyer may, upon three (3)
business days' written notice to Sellers, elect not to purchase the
Rivermark Property, in which case Buyer shall have no further
obligation to purchase the Rivermark Property and that portion of
the Deposit allocated to the Rivermark Property, together with all
accrued interest thereon, shall be promptly released to Buyer.
(ii) As used in this Section 5.8(c), (A) "Rivermark
Construction" means the construction of a 250-unit residential
apartment complex located on the Rivermark Property as more fully
described in the plans, specifications and contract documents
described on Schedule 5.8(c) attached hereto; and (B) "Substantially
Completed" means that (1) except for the Rivermark Punchlist Items,
the Rivermark Construction has been completed in compliance with all
applicable laws and legal requirements (including applicable
building and fire codes and zoning and other similar requirements)
and any Permitted Exceptions affecting the Rivermark Property and
substantially in accordance with the plans, specifications and
contract documents described on Schedule 5.8(c), (2) except for the
Rivermark Punchlist Items, each of the apartment units, together
with the common areas (including landscaping), which are the subject
of the Rivermark
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Construction (collectively, the "Rivermark Project") are ready for
occupancy by tenants, (3) a final certificate of occupancy for the
Rivermark Project has been issued by the City of Santa Clara with
respect to the Rivermark Project, (4) the Rivermark Property shall
be free of any liens with respect to all work completed prior to
Substantial Completion and Seller shall have received final lien
waivers with respect to all such work (or, alternatively, the Title
Policy issued at the Closing of the Rivermark Property shall
affirmatively insure against any such liens); and (5) Buyer and the
applicable Seller have agreed upon the Rivermark Punchlist Items in
accordance with Section 5.8(c)(iii).
(iii) Within five (5) business days following Buyer's receipt
of a written certification from Seller that the Rivermark
Construction has been Substantially Completed (except for agreement
among the Buyer and the applicable Seller on the Rivermark Punchlist
Items), Buyer, Buyer's consultants, the applicable Seller and such
Seller's consultants shall conduct a walk-through of the Rivermark
Project in order to identify and compile a list of those items of
construction, decoration, and mechanical adjustment (including,
without limitation, plumbing and electrical facilities, appliances,
HVAC and roofing) relating to the Rivermark Construction which,
individually or in the aggregate, do not materially interfere with
the full use, enjoyment and occupancy of the Rivermark Construction
or any material amenity or appurtenance constituting a part of the
Rivermark Construction which need to be completed to Buyer's
reasonable satisfaction (the "Rivermark Punchlist Items"). Seller
shall use good faith and reasonable efforts, at Seller's sole cost
and expense, and in a good and proper manner and substantially in
accordance with plans, specifications and contract documents
described on Schedule 5.8(c), to complete to Buyer's reasonable
satisfaction the Punchlist Items prior to the scheduled Closing Date
for the Rivermark Property in accordance with Section 5.2(d).
(iv) The completion of the Punchlist Items is not a condition
precedent to Buyer's obligation to Close with respect to the
Rivermark Property; provided, however, in the event that any of the
Punchlist Items are not completed on or before the date that is ten
(10) business days prior to the Closing Date for the Rivermark
Property in accordance with Section 5.8(c)(i), then, prior to the
Closing of the Rivermark Property, Buyer and Seller shall attempt to
agree upon the estimated amount of the cost to complete the
remaining Punchlist Items. If Buyer and Seller cannot so agree on
the amount of the cost of completion of such Punchlist Items no
later than five (5) business days prior to the Closing Date, then
Buyer and Seller shall submit the matter to Independent Consultant
and shall instruct such Independent Consultant to make a
determination prior to the Closing of a reasonable estimate, on an
item-by-item basis, based upon all relevant and available
information, of the cost of completion each of the incomplete
Punchlist Items by the Closing (the "Punchlist Estimate"). The
Independent Consultant's determination of the Punchlist Estimate
shall be binding on the parties and must be obtained prior to the
Closing. If such estimate has not been obtained prior to the Closing
Date as set forth in Section 5.2(d), the Closing shall be extended
as necessary to obtain the Punchlist Estimate. Escrow Holder shall
withhold (the
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"Punchlist Holdback") from the Closing proceeds due to Seller the
sum of one hundred twenty five percent (125%) of the total Punchlist
Estimate (whether determined by agreement between the parties or by
the Independent Consultant). The Punchlist Holdback shall be placed
by Escrow Holder in an interest-bearing, government-insured account
for the benefit of the party ultimately entitled thereto. The
applicable Seller shall, within ten (10) days after the Closing
commence the completion of the Punchlist Items, Seller shall
thereafter diligently pursue completion of the Punchlist Items, and
Seller shall have until the date that is sixty (60) days after the
Closing in order to complete each of the Punchlist Items to Buyer's
reasonable satisfaction (as determined above) and, if Seller fails
to timely complete any of the Punchlist Items in accordance with
this Section 5.8(c), then Buyer shall deliver written notice to
Seller of the incomplete Punchlist Item(s) and the corresponding
line item amount identified on the Punchlist Estimate due to Buyer.
Buyer and Seller shall endeavor to agree upon which Punchlist
Item(s) are incomplete and the cost to complete the same within five
(5) business days following delivery of such notice. Upon such
agreement, Buyer and Seller shall direct Escrow Holder to release to
Buyer from the Punchlist Holdback an amount equal to the agreed upon
cost to complete any incomplete Punchlist Items, and such amount
shall be immediately released by Escrow Holder to Buyer. In the
event that Buyer and Seller are unable to agree upon which Punchlist
Item(s) are incomplete and the cost to complete the same within such
five (5) business day period, such matters shall be referred to the
Independent Consultant, who shall determine such matters and notify
Buyer and Sellers in writing of such determination within five (5)
business days following such referral. At any time following Buyer's
receipt of such notice from Independent Consultant, Buyer may
deliver a notice to Escrow Holder, which notice shall include a copy
of Independent Consultant's determination written by the Independent
Consultant, directing Escrow Holder to immediately deliver to Buyer
a portion of the Punchlist Holdback in the amount of one hundred and
twenty-five percent (125%) of the amount determined by Independent
Consultant to be the cost of completing any incomplete Punchlist
Items, and Escrow Holder shall immediately comply with such
direction. During the period between the Closing and the date which
is sixty (60) days thereafter, and upon completion of various
Punchlist Items by Seller as specified above, Seller shall be
entitled to periodic releases of the Punchlist Holdback in an amount
which corresponds to the specific amounts of the Punchlist Holdback
attributed to such completed items as identified on the Punchlist
Estimate, provided further that Seller shall not be permitted to
seek periodic releases from the Punchlist Holdback unless and until
the amount attributed to such completed Punchlist Items equals or
exceeds $25,000.00. Not by way of limitation of the foregoing, Buyer
and Seller each agree, following a determination as to the manner in
which any portion of the Punchlist Holdback is to be released, that
within five (5) business days following written request by either
party the other party will execute and deliver to the requesting
party and to Escrow Holder a written instruction authorizing the
release of the applicable portion of the Punchlist Holdback in
accordance with the
32
terms hereof. The obligations of the parties hereunder with respect
to the Punchlist and the Punchlist Holdback shall survive the
Closing.
The provisions of Sections 5.8(b) and (c) shall survive the Closings of
the Coronado South Property and the Rivermark Property, respectively.
5.9 Seller's Employees. During the period between the Effective Date and
the Closing Date, Sellers shall provide the bonuses and other incentives to its
employees at the Properties as more fully described on Schedule 5.9.
5.10 Assignment of Warranties. Upon the Closing of the Coronado South
Property and the Rivermark Property, respectively, Seller shall cause to be
assigned to Buyer, to the extent assignable, all guaranties and warranties of
the contractors and material suppliers of the Coronado South Improvement and the
Rivermark Construction, respectively. In the event that any such guaranties and
warranties are not assignable, Sellers shall cooperate with Buyer following the
Closings, at no cost or expense to Sellers, in prosecuting, settling and
compromising any claims under such guaranties and warranties.
5.11 Rivermark Management Budget. Not less than ten (10) days prior to the
Initial Closing, Buyer and the Seller of the Rivermark Property shall meet and
agree upon the amount of the "Working Capital Reserve" and the "Budget"
described in the Management Agreement for the Rivermark Property.
ARTICLE VI
CASUALTY OR CONDEMNATION
6.1 Casualty or Condemnation. Unless damage or destruction of a Property
exceeds twenty percent (20%) of the Purchase Price allocated to such Property,
or in the event that any partial taking or condemnation of any Property which
results in a reduction in the value of such Property of more than ten percent
(10%) of the Purchase Price, in each as determined reasonably by Buyer and the
applicable Seller, in which case Buyer may terminate this Agreement with respect
to such damaged Property only within ten (10) days after receipt of written
notice from such Seller of the occurrence of such damage, destruction or partial
condemnation, Buyer shall be bound to purchase such Property as required by the
terms hereof, without regard to the occurrence or effect of any damage to or
destruction or partial condemnation of such Property, provided that upon the
Closing of such Property, except for proceeds of rental loss or business
interruption insurance which applies to time periods prior to Closing, Buyer
shall be credited against the Purchase Price for such Property with the full
amount of any insurance or condemnation proceeds, if any, actually received and
collected by the applicable Seller as a result of any such damage, destruction
or condemnation, less any expenses incurred by such Seller in connection
therewith (or such Seller's rights, if any, with respect to such proceeds shall
be assigned to Buyer if not then collected); provided, however, Buyer
specifically acknowledges and agrees that, subject to Section 8.1(b), Sellers do
not have any obligation to obtain or maintain any casualty or other insurance
with respect to any Property and that Sellers shall in no
33
event be required to repair or restore any Property. Notwithstanding the
provisions of the preceding sentence, if Buyer has not elected to terminate this
Agreement with respect to such damaged Property or has no right to do so, and
any insurance proceeds are insufficient (or, in the event the applicable
Seller's rights thereto as assigned will be insufficient) to cover the cost of
repair or restoration to the applicable Property after damage to or destruction
of such Property, Sellers shall have the option to terminate this Agreement with
respect to such damaged Property only or to obligate Buyer to purchase such
Property; provided, however, in the event Sellers obligate Buyer to purchase
such Property, Buyer shall receive an abatement in the allocated Purchase Price
for such Property equal to the difference between any such insurance proceeds
and the cost of such repair or restoration of such Property. If Buyer and the
applicable Seller cannot agree to the extent of any damage to a Property or the
amount of abatement of the allocated Purchase Price for such Property, Buyer and
such Seller shall each select one M.A.I. appraiser to decide same and if the two
appraisers cannot agree on an amount of abatement, the two appraisers shall
select a third appraiser whose decision shall be final and binding. If
necessary, Closing for any Property which is the subject of this Article VI
shall be deferred for a reasonable amount of time to obtain such appraisals. All
costs of appraisers shall be divided equally between Buyer on one hand and the
applicable Seller on the other hand. If the transactions contemplated under this
Agreement are not completed for any reason whatsoever, the applicable Sellers
shall receive any and all insurance proceeds or condemnation awards.
6.2 Cooperation. The applicable Seller shall cooperate with Buyer in
prosecuting, settling and compromising any insurance claims from any fire or
other casualty suffered by a Property prior to Closing and any awards or other
compensation with respect to a condemnation or other taking of a Property prior
to the Closing.
ARTICLE VII
BUYER'S REPRESENTATION AND WARRANTIES
Buyer represents and warrants the following both as of the date
hereof and as of the Closing Date:
7.1 Due Organization. Buyer is a Delaware limited partnership, duly
organized, validly existing and qualified to do business in the state of its
incorporation, and is duly qualified to do business in the State of California.
7.2 Right, Power and Authority. Buyer has the legal right, power and
authority to enter into this Agreement and perform all of its obligations
hereunder, and the execution and delivery of this Agreement and the performance
by Buyer of its obligations hereunder will not conflict with or result in a
breach of any law or regulation, or order, judgment, writ, injunction or decree
of Court or governmental instrumentality, or its limited liability company
agreement or any of its other organizational documents, or any agreement or
instrument to which Buyer is a party or by which it is bound, or to which it or
any portion of its property is subject.
34
7.3 Enforceability. This Agreement and all documents required hereby to be
executed by Buyer when so executed, shall be legal, valid, and binding
obligations of Buyer enforceable against Buyer in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, and other similar laws affecting the rights of creditors generally
and, as to enforceability, the general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
7.4 Bankruptcy Matters. Buyer has not made a general assignment for the
benefit of creditors, filed any voluntary petition in bankruptcy or suffered the
filing of an involuntary petition by its creditors, suffered the appointment of
a receiver to take possession of substantially all of its assets, suffered the
attachment or other judicial seizure of substantially all of its assets,
admitted its inability to pay its debts as they come due, or made an offer of
settlement, extension or composition to its creditors generally.
ARTICLE VIII
SELLER COVENANTS
8.1 Seller Covenants.
(a) Between the date of this Agreement and the Closing Date, except
to the extent such matters are the responsibility of the Buyer under the
Management Agreement relating to the Coronado South Property (during the
time such Management Agreement is in effect), each Seller agrees that it
will maintain, operate, staff and rent its Property in a manner which is
substantially similar to that in which it is currently being maintained,
operated, staffed and rented and make any and all repairs and replacements
reasonably required to deliver the Property to Buyer at Closing
substantially in its present condition, normal wear and tear and casualty
and condemnation excluded; provided, however, in no event shall any Seller
be required to make any capital improvements to any Property except to the
extent the same are required pursuant to the express provisions of this
Agreement, including the Coronado South Improvements and the Rivermark
Construction.
(b) At all times prior to the Closing Date with respect to each
Property, Sellers shall maintain or cause to be maintained, at such
Sellers' sole cost and expense, all policies of casualty insurance
currently in effect with respect to such Property (or comparable
replacements thereof), unless such policies are no longer available upon
commercially reasonable terms.
(c) Sellers shall terminate prior to the Closing Date with respect
to each Property, at no cost or expense to Buyer, all employees, if any,
of such Property.
(d) Following the Closing Date until March 31, 2006, each Seller
shall provide Buyer or its representatives with Property information, to
the extent the same is in Seller's actual possession or control, (i) if
reasonably requested by Buyer in connection with any audit being performed
by Buyer; the information to be provided may include revenue and expense
records (including, without limitation, monthly rent rolls, monthly
35
bank statements, collection reports, selected tenant lease files, selected
vendor paid bills/invoices, property and liability insurance premium
notices and policies, real property tax assessments and bills, property
management contracts, payroll information (including payroll general
ledger accounts, employee names and gross pay), selected tenant leases,
selected invoices for legal, audit and professional services and selected
utility bills), detail general ledger, general ledger trial balances or
financial statements, description of the accounting system in place, and a
representation letter in the form of Schedule 8.1(d) attached hereto and
made a part hereof duly executed by each Seller; (ii) to the extent it is
non-confidential and non-proprietary (as determined by each Seller in its
sole but good faith discretion), and (iii) to the extent not previously
delivered to Buyer or its affiliates.
(e) During the period from the Effective Date to Closing, each
Seller shall promptly notify Buyer of any condemnation, environmental,
zoning or other land-use regulation proceedings of which Seller obtains
actual knowledge, as well as any written notices of violations of any law
relating to a Property of which Seller obtains knowledge, and any
litigation of which Seller obtains actual knowledge that Seller believes
may affect Buyer or a Property after the close of escrow.
(f) Subject to the balance of this subsection (f), Seller shall
deliver the Property to Buyer on the Closing Date with all Vacant Units
(as hereinafter defined) in ready-to-rent condition, which shall be
limited to clean carpets, freshly painted walls, working (and undamaged)
kitchen appliances, water heaters and HVAC, and no material damage to
doors, walls, ceilings, floors or windows which has not been repaired. The
foregoing shall not be a condition to Buyer's obligation hereunder.
However, representatives of the Seller and Buyer shall inspect the Vacant
Units on the day prior to the Closing Date and at the close of escrow,
Buyer shall receive a credit against the Purchase Price in the amount of
$500.00 for each Vacant Unit which is not ready-to-rent in accordance with
this Section 8.1(f). As used herein, the term "Vacant Units" shall mean
apartment units with respect to which the applicable lease has terminated
and the tenant is no longer in possession. With respect to the Coronado
South Property, the credit to Buyer provided for in this Section 8.1(f)
shall be determined at the time of the Initial Closing.
(g) During the period from the Effective Date until Closing, no
Seller shall, without the prior consent of the Buyer, which shall not be
unreasonably withheld or delayed, enter into any contract that will be an
obligation affecting the Property subsequent to the Closing Date, except
(i) leases on such Seller's standard form, for periods of no less than six
months and no more than 12 months at current market rental rates and (ii)
contracts entered into in the ordinary course of business that are
terminable without cause on 30-days' notice and without penalty or
cancellation fee; provided, that the foregoing shall not be construed as
requiring any Seller to obtain Buyer's consent to permitting any existing
tenant lease to rollover into a month-to-month lease. As to the Coronado
South Property, this Section 8.1(g) shall not apply to any contract or
lease entered into by Buyer as the Manager under the Management Agreement
relating to the Coronado South Property.
36
(h) During the period from the Effective Date until Closing, no
Seller shall create any new encumbrance or lien affecting the Property,
other than liens and encumbrances that are discharged prior to or at the
Closing.
(i) During the period from the Effective Date until Closing, Sellers
shall promptly provide Buyer with copies of all written notices received
by Sellers after the date hereof which assert any material breach of
Leases, agreements or covenants applicable to the Property.
(j) Sellers shall not modify in any material respect any of the
Coronado South Improvements Contracts or any of the contracts, plans or
specifications relating to the Rivermark Construction without Buyer's
prior written approval, which approval shall not be unreasonably withheld
or delayed.
(k) Seller shall notify Buyer within two (2) business days after any
Seller obtains knowledge that any of the representations or warranties of
Sellers set forth become untrue, inaccurate or misleading.
ARTICLE IX
GENERAL PROVISIONS
9.1 Entire Agreement. This Agreement contains the entire understanding and
agreement between the parties relating to the transactions contemplated hereby,
and supersedes all prior or contemporaneous agreements, understandings,
representations and statements, oral or written, between the parties hereto,
except as otherwise specifically stated herein.
9.2 Offer to Purchase. Buyer acknowledges and agrees that in the event
this Agreement is executed only by Buyer, the Agreement shall be regarded as an
offer by Buyer to purchase the Properties on the terms and conditions contained
herein and such offer shall not be deemed accepted unless and until an original
counterpart of this Agreement has been duly executed by each Seller.
9.3 Possession. Possession of each Property shall be delivered to Buyer
upon Closing for same as herein provided.
9.4 Notices. Any and all notices or other communications required or
permitted by this Agreement, by law, to be delivered to, served on or given to
either party to this Agreement, by the other party to this Agreement, or to
Escrow Holder, shall be in writing and shall be deemed properly delivered, given
or served when personally delivered to such party, or in lieu of personal
service, when telecopied or when mailed by United States mail, express,
certified or registered, postage prepaid (or other overnight delivery services,
charges prepaid), addressed as follows:
37
BUYER: United Dominion Realty, L.P.
c/o 1745 Shea Center Drive
Suite 200
Highlands Ranch, CO 80129
Attn: W. Mark Wallis
Telecopy No. (720) 283-2451
with a copy to: United Dominion Realty Trust, Inc.
1745 Shea Center Drive
Suite 200
Highlands Ranch, CO 80129
Attn: Mary Ellen Norwood
Telecopy No. (720) 283-2451
and with a copy to: United Dominion Realty Trust, Inc.
4055 Valley View Lane
Suite 300
Dallas, TX 75244
Attn: Matthew T.Akin
Telecopy: 972-866-0163
and with a copy to: Morrison & Foerster LLP
370 17th Street
Suite 5200
Denver, Colorado 80202
Attn: Warren L. Troupe
Facsimile: (303) 592-1510
and with a copy to: Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attn: Marc D. Young
Facsimile: (213) 892-5454
SELLERS: c/o Essex Apartment Value Fund, L.P.
925 East Meadow Drive
Palo Alto, CA 94303
Attn: Keith Guericke, John Burkart and
Jordan E. Ritter, Esq.
Telecopy Nos. (650) 858-1634 - Guericke,
(650) 565-9855 - Burkart,
(650) 858-1372 - Ritter
38
ESCROW HOLDER: Chicago Title Insurance Company
700 South Flower Street, Suite 900
Los Angeles, California 90017
Attn: Ms. Maggie Watson
Telecopy No. (213) 488-4380
All notices so telecopied shall be deemed delivered upon receipt of confirmation
of delivery thereof and all notices so mailed shall be deemed received on the
date which is twenty-four hours (24 hours) after delivery to the overnight
delivery service by the sender, or if placed in the United States mails, on the
date of the return receipt or, if delivery is refused or cannot be accomplished,
forty-eight (48) hours after deposit in the United States mails (or with an
overnight delivery service, as the case may be). Either party may change its
address for the purpose of this Section 9.4 by giving ten (10) days advance
written notice of such change to the other party in the manner provided in this
Section 9.4.
9.5 Assignment. Except as set forth in Section 9.24, this Agreement may
not be assigned by Buyer without the prior written consent of Sellers, which
consent may be withheld or granted on conditions in Sellers' sole and absolute
discretion; provided, however, that Buyer may assign this Agreement to one or
more affiliates of United Dominion Realty Trust, Inc., which is directly or
indirectly controlled by United Dominion Realty Trust, Inc. Unless Sellers
otherwise agree in writing, no assignment by Buyer of its rights shall relieve
Buyer of its liability hereunder, and any consent by Sellers to any such
assignment (or any assignment is made for which no consent is required) shall
not be deemed to obviate or negate the need for consent to any further
assignment for which consent is required hereunder. The terms "assign" or
"assignment" as used in this Section 9.5 shall mean a transfer of this
Agreement, (a) by sale or other transfer, whether voluntary, involuntary, by
operation of law or otherwise; or (b) any interest therein by mortgage, pledge,
encumbrance or hypothecation. The term "control" means, with respect to any
person or entity, the ability of another person or entity to direct or cause the
direction of the management and policies of such person or entity, whether
through the ownership of voting securities, by contract or otherwise. Any
purported assignment made without satisfying the requirements of this Section
9.5 shall be null and void, not merely voidable and, at the election of Sellers,
shall constitute a default by Buyer hereunder, for which Sellers may terminate
this Agreement.
9.6 Successors. Subject to Section 9.5 above, the terms, covenants and
conditions of this Agreement shall be binding upon and shall inure to the
benefit of the successors and permitted assigns of the respective parties
hereto.
9.7 Further Documents. Sellers and Buyer hereby instruct Escrow Holder to
use this Agreement, together with consistent additional written instructions
which the parties may deliver, as escrow instructions. Each party shall,
whenever and as often as it shall be required by the other party, execute,
acknowledge and deliver or cause to be executed, acknowledged and delivered such
further instruments and documents as may be reasonable and necessary in order to
complete the sale, conveyance and transfer provided for herein, including,
without limitation, such additional escrow instructions as reasonably may be
required by Escrow Holder and shall do any and all other acts and shall execute,
acknowledge and deliver any and all reasonable
39
documents as may be required in order to carry out the intent and purpose of
this Agreement. Any inconsistency between any additional escrow instructions and
this Agreement is to be resolved in a manner consistent with this Agreement
which shall prevail unless any such inconsistent provision is expressly waived
by Buyer and Sellers in writing specifically referring to the fact of such
inconsistency and the desire to waive it.
9.8 Survival of Agreement. Except as otherwise expressly provided or
limited in this Agreement, the agreements, covenants, conditions,
representations, warranties and indemnities contained in this Agreement shall
survive the Closing and shall not merge with the Deeds regardless of whether or
not the provisions containing such agreements, covenants, conditions,
representations, warranties and indemnities actually provide for such survival.
In addition to those provisions of this Agreement which survive the termination
of same in accordance with their terms, the provisions of Sections 9.1, 9.4,
9.6, 9.9 through and including 9.23, inclusive, 9.26, 9.27 and 9.28 shall
survive the termination of this Agreement.
9.9 LIQUIDATED DAMAGES. IN THE EVENT THE PURCHASE AND SALE OF ANY PROPERTY
FAILS TO CLOSE FOR ANY REASON OTHER THAN SELLER'S BREACH OF THIS AGREEMENT OR
PURSUANT TO SECTIONS 3.3, 4.2 OR 5.8 OR ARTICLE VI, THE SAME SHALL BE DEEMED TO
BE A BREACH OF THIS AGREEMENT BY BUYER OF ITS OBLIGATION TO PURCHASE SUCH
PROPERTY, AND SELLERS, BY NOTICE TO BUYER, MAY, AS THEIR SOLE AND EXCLUSIVE
REMEDY ON ACCOUNT OF SUCH BREACH, TERMINATE ALL RIGHTS OF BUYER TO PURCHASE SUCH
PROPERTY AND ANY OTHER PROPERTIES WHICH HAVE NOT ALREADY CLOSED (AND EXCEPT AS
EXPRESSLY PROVIDED BELOW IN THIS SECTION 9.9, BUYERS AND SELLERS SHALL BE
RELEASED FROM ALL OBLIGATIONS UNDER THIS AGREEMENT WITH RESPECT TO SUCH
PROPERTIES) AND AS ITS SOLE COMPENSATION FOR SUCH BREACH, SELLERS SHALL BE
ENTITLED TO RECEIVE AND RETAIN THE DEPOSIT AS AND TO THE EXTENT PROVIDED IN
SECTION 2.2(B), AS LIQUIDATED AND AGREED UPON DAMAGES. BUYER AND SELLERS
ACKNOWLEDGE AND AGREE THAT THEY HAVE MUTUALLY DISCUSSED THE IMPRACTICALITY AND
EXTREME DIFFICULTY OF FIXING THE ACTUAL DAMAGES TO SELLERS IN THE EVENT THE
PURCHASE AND SALE OF ANY PROPERTY FAILS TO CLOSE AS PROVIDED HEREIN FOR ANY
REASON OTHER THAN SELLER'S BREACH OF THIS AGREEMENT OR PURSUANT TO SECTIONS 3.3,
4.2 OR 5.8 OR ARTICLE VI, AND THAT AS A RESULT OF SUCH DISCUSSION THE PARTIES
AGREE THAT THE DEPOSIT (OR SUCH PORTION OF IT AS MAY BE RELEASED TO SELLER
PURSUANT TO SECTION 2.2(B)), REPRESENTS A REASONABLE ESTIMATE OF THE ACTUAL
DAMAGES WHICH SELLERS WOULD INCUR IN THE CASE OF SUCH BREACH BY BUYER. THE
PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES TO SELLERS UNDER THIS SECTION 9.9
IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA
CIVIL CODE SECTION 3275 OR 3369 BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES
TO SELLER UNDER CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. BY SIGNING
THE SPACES WHICH FOLLOW, BUYER AND SELLERS SPECIFICALLY AND EXPRESSLY AGREE TO
40
ABIDE BY THE TERMS AND PROVISIONS OF THIS PARAGRAPH CONCERNING LIQUIDATED
DAMAGES.
BUYER: SELLERS:
UNITED DOMINION REALTY, L.P. ESSEX APARTMENT VALUE FUND, L.P., A
DELAWARE LIMITED PARTNERSHIP, IN ITS
CAPACITY AS GENERAL PARTNER OF EACH
OF THE SELLERS, OTHER THAN NEWPORT
BEACH NORTH, LLC AND NEWPORT BEACH
SOUTH, LLC
By: United Dominion Realty Trust, Inc., By: Essex VFGP, L.P., a Delaware
a Maryland corporation, its General limited partnership, its general
Partner partner
By: /s/ W. Mark Wallis By: Essex VFGP, Inc., a Delaware
---------------------------- corporation, its general partner
W. Mark Wallis
Senior Executive Vice President
By: /s/ John Burkart
---------------------------
Its: First Vice President
NEWPORT BEACH NORTH, LLC
By: Newport Beach North, Inc.,
its managing member
By: /s/ John Burkart
----------------------------
Its: First Vice President
NEWPORT BEACH SOUTH, LLC
By: Newport Beach South, Inc.,
its managing member
By: /s/ John Burkart
----------------------------
Its: First Vice President
NOTHING CONTAINED IN THIS SECTION 9.9 SHALL BE DEEMED TO LIMIT ANY OF THE
OBLIGATIONS OR INDEMNITIES OF BUYER OR SELLERS CONTAINED ELSEWHERE IN THIS
AGREEMENT WHICH, BY THEIR EXPRESS TERMS, SURVIVE THE TERMINATION OF THIS
AGREEMENT.
9.10 Seller's Default. If any Seller fails to perform its obligations
pursuant to this Agreement for any reason except failure by Buyer to perform
hereunder, or if prior to Closing any one or more of any Seller's
representations or warranties are breached in any material respect, and any such
failure or breach is not cured by such Seller within ten (10) days after receipt
of written notice from Buyer specifying the nature of any such failure and/or
breach, Buyer shall elect, as its sole remedy, either to (a) terminate this
Agreement (or, in the event such failure to perform or breach relates to one or
more specific Properties, terminate Buyer's obligation to purchase such
Property(ies)) by giving Sellers timely written notice of such election
41
prior to or at Closing and recover the Deposit applicable to such Property, (b)
enforce specific performance, or (c) waive said failure and/or breach and
proceed to Closing. Notwithstanding anything herein to the contrary, Buyer shall
be deemed to have elected to terminate this Agreement (or in the event that such
failure to perform or breach relates to one or more specific Properties,
terminate Buyer's obligation to purchase such Property(ies)) if Buyer fails to
either waive such failure and/or breach and proceed to Closing or to deliver to
Sellers written notice of its intent to file a claim or assert a cause of action
for specific performance against Sellers on or before twenty (20) business days
following the scheduled Closing Date or, having given such notice, fails to file
a lawsuit asserting such claim or cause of action in the county in which the
Property which is the subject of such breach is located within nine (9) months
following the scheduled Closing Date. EXCEPT AS SET FORTH IN THE JOINDER HERETO
EXECUTED BY ESSEX APARTMENT VALUE FUND, L.P., A DELAWARE LIMITED PARTNERSHIP, IN
NO EVENT SHALL ANY OF SELLER'S DIRECT OR INDIRECT PARTNERS, CONSTITUENT
ENTITIES, SUBSIDIARIES AND/OR AFFILIATES, OR ANY OF THEIR RESPECTIVE OFFICERS,
DIRECTORS, SHAREHOLDERS, EMPLOYEES, REPRESENTATIVES OR AGENTS HAVE ANY LIABILITY
FOR ANY CLAIM, CAUSE OF ACTION OR OTHER LIABILITY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY PROPERTY, WHETHER BASED ON CONTRACT, COMMON LAW, STATUTE,
EQUITY OR OTHERWISE,.
9.11 Time of Essence; Measure of Time. Time is of the essence of this
Agreement and each and every provision herein. All references herein to
"business days" shall be deemed to refer to days other than Saturdays, Sundays
and legal holidays in the State of California.
9.12 Amendments. This Agreement may only be amended or modified by a
written document that expressly refers to this Agreement and that is signed by
each of the parties hereto.
9.13 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original, but all of which when
taken together shall constitute but one and the same agreement.
9.14 Governing Law. The validity, meaning and effect of this Agreement
shall be determined in accordance with the laws of the State of California,
without regard to any choice of law principles.
9.15 Construction. Sellers and Buyer acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or exhibits thereto. It shall be construed neither for nor
against Sellers or Buyer, but shall be given a reasonable interpretation in
accordance with the plain meaning of its terms and the intent of the parties.
9.16 Exhibits. All exhibits attached hereto are incorporated herein as if
set forth in full.
9.17 No Recordation. No document or other memorandum relating to the
subject matter hereof shall be recorded without the prior written consent and
approval thereof by Sellers,
42
which consent and approval may be withheld, or granted on conditions, in Sellers
sole and absolute discretion, and any attempt to record same shall be deemed a
material default hereunder and thereupon, at the sole option of Sellers, this
Agreement shall be deemed cancelled and Sellers shall have any and all remedies
for default by Buyer as provided for in this Agreement.
9.18 Gender. The masculine, feminine or neuter gender and the singular or
plural number shall each be deemed to include the other whenever the context so
indicates.
9.19 Waiver. Waiver by one party of the performance of any covenant,
condition or provision of the other party shall not invalidate this Agreement,
nor shall it be considered to be a waiver by such party of any other covenant,
condition or provision containing herein. The waiver of either or both parties
of the time for performing any act shall not be construed as a waiver of any
other act required to be performed at a later date.
9.20 Authority to Execute. Each person executing this Agreement represents
and warrants that the execution of this Agreement has been duly authorized by
the party on whose behalf the person is executing the Agreement and that such
person is authorized to execute the Agreement on behalf of such party.
9.21 Attorneys' Fees. If any party hereto commences any action so as to
interpret or enforce this Agreement or any provision hereof, the prevailing
party shall be entitled to an award of costs and reasonable attorneys' fees and
costs (including, without limitation, costs allocated to Sellers' in-house
counsel) in addition to all other amounts awarded by the court. Except as
otherwise specifically provided herein, each party shall pay its own attorney's
fees in connection with the preparation, negotiation and execution of this
Agreement and the transactions contemplated thereby.
9.22 Public Announcements. From the Effective Date through the Closing
Date, each party will consult with the other before issuing, and provide each
other the opportunity to review and make reasonable comment upon, any press
release or making any public statement with respect to this Agreement and the
transactions contemplated hereby and, except as may be required by applicable
law or any listing agreement with NYSE, will not issue any such press release or
make any such public statement prior to such consultation; provided, however,
each party may make any public statement in response to specific questions by
the press, analysts, investors or those attending industry conferences or
financial analyst conference calls, so long as any such statements are not
inconsistent with previous press releases, public disclosures or public
statements made jointly by the parties and do not reveal non public information
regarding the other party. Without limiting the generality of the foregoing,
except as may be required by applicable law or any listing agreement with NYSE:
(a) each party agrees to refrain from issuing any press release or public
statement with respect to this Agreement and the transactions contemplated
hereby for a period of ten (10) business days following the Effective Date; and
(b) each party agrees to cause any such press release or public statement issued
by it to be issued concurrently with the press release or public statement of
the other party.
9.23 Severability. The invalidity or unenforceability of any provision(s)
herein shall not render any other provision(s) invalid or unenforceable.
43
9.24 Exchange. Each party acknowledges and agrees that the other parties
may transfer or acquire Property as part of a tax-deferred exchange by such
party pursuant to Section 1031 of the Code, and that each party, subject to the
provisions of this Section 9.24, has the right to restructure all or part of the
transaction contemplated by this Agreement as provided in Section 1031 of the
Code as a concurrent or delayed (nonsimultaneous) tax-deferred exchange for the
benefit of such party. Each party shall cooperate with the other parties to
convey the Property in connection with the tax-deferred exchange within the
meaning of Section 1031 of the Code and, if requested by the other party, shall
accommodate such other party with respect to any such exchange, provided that
such election to effect a tax-deferred exchange shall not create any additional
conditions to the Closing, create an obligation upon the other party to take or
convey title to any property other than the Property, extend the Closing Date or
create any additional liabilities or costs for the other party. A party, in
electing to structure the sale as an exchange, shall have the right to
substitute, assign, or delegate its rights and duties to one or more entities or
persons who will be such party's qualified intermediary or exchange
accommodation title holder as seller or buyer, as applicable, in such party's
place and stead; provided, however, such party shall remain liable for any
breach of this Agreement. Any such exchange shall be accomplished by
supplemental instructions reasonably acceptable to both parties, including any
exchange documents and instructions with the qualified intermediary (the
"Exchange Instructions"). Each party shall execute and deliver to the other
party or Escrow Holder any and all of Exchange Instructions provided within
three (3) business days after such party's receipt of such Exchange
Instructions. Each party shall bear its own costs and expenses (including,
without limitation, attorneys' fees and costs) incurred in connection with the
preparation and review of the Exchange Instructions.
9.25 Lead-Based Paint. The parties agree, prior to the Closing of each
Property, to execute and acknowledge any lead-based paint forms and related
items that may be required by law.
9.26 Natural Hazard Areas Or Zones. As to California Properties only,
Buyer and Seller acknowledge that each Seller may be required to disclose if its
Property lies within the following natural hazard areas or zones: (a) a special
flood hazard area designated by the Federal Emergency Management Agency; (b) an
area of potential flooding; (c) a very high fire hazard severity zone; (d) a
wild land area that may contain substantial forest fire risks and hazards; (e)
earthquake fault zone; or (f) a seismic hazard zone. Each such Seller has
engaged or will engage the services of Disclosure Source or another entity
reasonably acceptable to Buyer (who, in such capacity, is herein called the
"Natural Hazard Expert") to examine the maps and other information specifically
made available to the public by government agencies for the purposes of enabling
such Sellers to fulfill their disclosure obligations, if and to the extent such
obligations exist, with respect to the natural hazards referred to in Section
1103 of the California Civil Code and to report the result of its examination to
Buyer and such Sellers in writing, which report shall be delivered to Buyer no
later than fifteen (15) days from and after the date hereof. The written report
prepared by the Natural Hazard Expert regarding the results of its full
examination will fully and completely discharge each such Seller from its
obligations referred to herein, if and to the extent any such obligations exist,
and, for the purpose of this Agreement, the provisions of Section 1103 et seq.
of the California Civil Code regarding non-liability of each such Seller for
errors or omissions not within its personal knowledge shall be deemed to apply
and the Natural Hazard Expert shall be deemed to be an expert, dealing with
matters within the scope of its
44
expertise with respect to the examination and written report regarding the
natural hazards referred to above.
9.27 Statutory Disclaimer. The following disclaimer is made with respect
to the Properties located in Oregon:
THE PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT BE WITHIN A FIRE
PROTECTION DISTRICT PROTECTING STRUCTURES. THE PROPERTY IS SUBJECT TO LAND
USE LAWS AND REGULATIONS, WHICH, IN FARM OR FOREST ZONES, MAY NOT
AUTHORIZE CONSTRUCTION OR SITING OF A RESIDENCE AND WHICH LIMIT LAWSUITS
AGAINST FARMING OR FOREST PRACTICES AS DEFINED IN ORS 30.930 IN ALL ZONES.
BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE
TITLE TO THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY
PLANNING DEPARTMENT TO VERIFY APPROVED USES AND EXISTENCE OF FIRE
PROTECTION FOR STRUCTURES.
9.28 Buyer Not a Successor of Seller. Buyer is not and shall not be deemed
to be a successor to any Seller. Buyer is acquiring only the Properties and not
any ongoing business enterprise.
[Signature Pages Follow]
45
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the Effective Date.
BUYER:
United Dominion Realty, L.P., a Delaware limited
partnership
By: United Dominion Realty Trust, Inc., a
Maryland corporation, its General Partner
By: /s/ W. Mark Wallis
---------------------------------------
W. Mark Wallis
Senior Executive Vice President
[Signatures Continued on Next Page]
S-1
SELLERS:
ESSEX THE CREST, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
ESSEX EL ENCANTO APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
[Signatures Continued on Next Page]
S-2
ESSEX HUNT CLUB APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
ESSEX ROSEBEACH APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
[Signatures Continued on Next Page]
S-3
ESSEX ANDOVER PARK APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
ESSEX KELVIN APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
[Signatures Continued on Next Page]
S-4
ESSEX RIVERMARK APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
ESSEX ARBORETUM APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
[Signatures Continued on Next Page]
S-5
ESSEX OCEAN VILLA APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
ESSEX CARLSBAD APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
[Signatures Continued on Next Page]
S-6
ESSEX SAN DIMAS BONITA APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
ESSEX SAN DIMAS CANYON APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
[Signatures Continued on Next Page]
S-7
ESSEX HUNTINGTON BEACH APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
ESSEX VILLA VENETIA APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
NEWPORT BEACH NORTH, LLC
By: Newport Beach North, Inc.,
its managing member
By: /s/ John Burkart
--------------------------------------
Its: First Vice President
[Signatures Continued on Next Page]
S-8
NEWPORT BEACH SOUTH, LLC
By: Newport Beach South, Inc.,
its managing member
By: /s/ John Burkart
----------------------------------
Its: First Vice President
ESSEX WOODLAND APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------
Its: First Vice President
S-9
JOINDER OF ESSEX APARTMENT VALUE FUND, L.P.
The undersigned, ESSEX APARTMENT VALUE FUND, L.P., a Delaware limited
partnership, hereby joins in this Agreement solely for the purpose of confirming
that it shall be jointly and severally liable to Buyer on a primary basis, and
not merely as a surety, for any and all obligations of the Sellers pursuant to
Sections 3.3, 4.2, 4.7, 5.6 and 5.8 of this Agreement, which obligations (except
to the extent survival of the same are limited as to Sellers pursuant to such
Sections) and this Joinder shall survive the Closings and the recordation of the
Deeds, and shall not be deemed merged into such Deeds or the other documents and
instruments delivered at such Closing.
Essex Apartment Value Fund, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, L.P.,
a Delaware limited partnership,
its general partner
By: Essex VFGP, Inc.,
a Delaware corporation,
its general partner
By: /s/ John Burkart
---------------------------------
Its: First Vice President
S-10
JOINDER OF UNITED DOMINION REALTY TRUST
The undersigned, United Dominion Realty Trust, Inc., a Maryland
corporation, a Delaware limited partnership, hereby joins in this Agreement
solely for the purpose of confirming that it shall be jointly and severally
liable to Seller on a primary basis, and not merely as a surety, for any and all
obligations of the Buyer pursuant to Section 4.5 of this Agreement, which
obligations and this Joinder shall survive the Closings and the recordation of
the Deeds, and shall not be deemed merged into such Deeds or the other documents
and instruments delivered at such Closing.
United Dominion Realty Trust, Inc., a Maryland
corporation
By: /s/ W. Mark Wallis
-------------------------------------------
W. Mark Wallis
Senior Executive Vice President
S-11
EXHIBIT "A"
DESCRIPTION OF PROPERTIES
OWNER PROPERTY NAME*
- --------------------------------------------------------- -----------------------------------------------------
Essex Andover Park Apartments, L.P., a California limited Andover Park
partnership
Essex Arboretum Apartments, L.P., a California limited Arboretum at Lake Forest
partnership
Newport Beach South LLC, a Delaware limited liability Coronado at Newport (South)
company REFERRED TO IN THE AGREEMENT AS THE "CORONADO SOUTH
PROPERTY".
Newport Beach North LLC, a Delaware limited liability Coronado at Newport (North)
company
Essex The Crest, L.P., a California limited partnership The Crest at Phillips Ranch
Essex Woodland Apartments, L.P., a California limited Foxborough (Woodlands)
partnership
Essex Hunt Club Apartments, L.P., a California limited Hunt Club
partnership
Essex Huntington Beach Apartments, L.P., a California Huntington Villas
limited partnership
Essex Kelvin Apartments, L.P., a California limited Kelvin
partnership REFERRED TO IN THE AGREEMENT AS THE "KELVIN PROPERTY".
Essex Ocean Villa Apartments, L.P., a California limited Ocean Villa
partnership
Essex Rivermark Apartments, L.P., a California limited River Terrace
partnership REFERRED TO IN THE AGREEMENT AS THE "RIVERMARK
PROPERTY".
Essex Rosebeach Apartments, L.P., a California limited Rosebeach
partnership
Essex Villa Venetia Apartments, L.P., a California limited Villa Venetia
partnership
Essex San Dimas Bonita Apartments, L.P., a California The Villas at Bonita
limited partnership
Essex Carlsbad Apartments, L.P., a California limited Villas at Carlsbad
partnership
Essex San Dimas Canyon Apartments, L.P., a California The Villas at San Dimas
limited partnership
Essex El Encanto Apartments, L.P., a California limited Vista Del Rey (El Encanto)
partnership
* Legal descriptions for each of the Properties is attached.
EXHIBIT "B-1"
[CALIFORNIA FORM OF DEED]
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
________________________________
________________________________
________________________________
________________________________
Attn: __________________________
MAIL TAX STATEMENTS TO:
________________________________
________________________________
________________________________
________________________________
Attn: __________________________
________________________________________________________________________________
(Space above this line for Recorder's use)
The undersigned grantor declares:
Documentary transfer tax is not for public record.
GRANT DEED
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are
hereby acknowledged, ______________________________, a
__________________________, hereby grants to
_______________________
_______________________
the real property in ___________ County, State of __________, more particularly
described in Exhibit A attached hereto and made a part hereof (the "Property").
This conveyance is made subject to all matters, liens and
encumbrances of record, including, without limitation, those listed on Exhibit B
attached hereto and made a part hereof, and all matters that would be revealed
by a physical inspection and/or a survey of the Property.
Dated as of ____________, 200_ ___________________________________,
____________________________________
By:_________________________________
Its:________________________________
B-1-1
ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss
COUNTY OF_____________________)
On ________ __, 200_, before the undersigned Notary Public, personally appeared
____________, personally known to me or proved to me on the basis of
satisfactory evidence to be the person (s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
______________________________________
Signature
B-1-2
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
[TO BE ATTACHED AT CLOSING]
A-1
EXHIBIT B
TO
GRANT DEED
TITLE EXCEPTIONS
[TO BE ATTACHED AT CLOSING]
B-1
EXHIBIT "B-2"
[Oregon Form of Deed]
AFTER RECORDING RETURN TO:
________________________________
________________________________
UNTIL A CHANGE IS REQUESTED, ALL TAX
STATEMENT SHOULD BE SENT TO:
________________________________
________________________________
STATUTORY SPECIAL WARRANTY DEED
__________________________________________, as Grantor, conveys and
specially warrants to _______________________________________, as Grantee, the
following described real property free of encumbrances created or suffered by
Grantor except as specifically set forth herein:
The real property described on the attached Exhibit A, subject to all
matters, liens and encumbrances of record, including, without limitation,
those items listed on the attached Exhibit B incorporated herein, and all
matters that would be revealed by a physical inspection and/or a survey of
the property.
THIS INSTRUMENT WILL NOT ALLOW USE OF THE PROPERTY DESCRIBED IN THIS
INSTRUMENT IN VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS. BEFORE
SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE
PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO
VERIFY APPROVED USES AND TO DETERMINE ANY LIMITS ON LAWSUITS AGAINST FARMING OR
FOREST PRACTICES AS DEFINED IN ORS 30.930.
The true consideration for this conveyance is $___________________.
Dated this _____ day of _________________________, 2004.
By:________________________________
B-2-1
EXHIBIT "C"
ASSIGNMENT OF PERSONAL PROPERTY AND
ASSIGNMENT AND ASSUMPTION OF LEASES AND CONTRACTS
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are
hereby expressly acknowledged, _____________________________, a
__________________ ______________________________ ("Assignor"), hereby grants,
conveys, transfers and assigns to ______________________________________
("Assignee"), all of Assignor's right, title and interest in and to:
(a) all leases (the "Leases") of space in the real property
more particularly described in Exhibit "A" attached hereto and by this
reference made a part hereof (the "Real Property");
(b) all service agreements, maintenance agreements and other
contracts listed on Exhibit "B" relating to the Real Property (the
"Contracts");
(c) all tangible personal property located at the Real
Property which is actually owned by Seller, except for all computers,
software and the like;
(d) to the extent assignable and to the extent actually owned
by Seller, and except for claims accruing for the benefit of Assignor
prior to the date hereof (other than those relating to the physical or
environmental condition of the Properties, which are hereby assigned), all
intangible personal property which is solely related to the Real Property.
ASSIGNEE ACKNOWLEDGES AND AGREES THAT THE PERSONAL PROPERTY IS
BEING DELIVERED BY ASSIGNOR TO IT WITHOUT ANY REPRESENTATIONS OR
WARRANTIES OF ANY KIND OR NATURE WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATIONS OR WARRANTIES REGARDING FITNESS FOR
A PARTICULAR PURPOSE OR MERCHANTABILITY.
Assignee agrees to perform or cause to be performed Assignor's
obligations, if any, under the Leases and the Contracts from and after the date
of this instrument, and shall indemnify, defend, protect and hold Assignor
harmless from and against any and all liability, loss, cost, damage and expense
(including, without limitation, attorneys' fees and costs and court costs)
asserted against, incurred or suffered by Assignor relating to obligations with
respect to the Leases and the Contracts to be performed on or after the date
hereof. Assignor shall indemnify, defend, protect and hold Assignor harmless
from and against any and all liability, loss, cost, damage and expense
(including, without limitation, attorneys' fees and costs and court costs)
asserted against, incurred or suffered by Assignee relating to obligations with
respect to the Leases and the Contracts to be performed prior to the date
hereof.
C-1
Each of Assignor and Assignee hereby covenants that they will, at
any time and from time to time upon written request therefore, execute and
deliver to the other, its nominees, successors and/or assigns, any new or
confirmatory instruments and do and perform any other acts which the other, its
successors and/or assigns, may reasonably request in order to fully assign and
transfer to and vest in Assignee, its nominees, successors and/or assigns, and
protect its and/or their rights, title and interest in and enjoyment of, all of
the assets of Assignor intended to be transferred and assigned hereby, or to
enable Assignee, its successors and/or assigns, to realize upon or otherwise
enjoy any such assets, or to effect the allocation of responsibility for
performance under the Leases and the Contracts.
The provisions of this Assignment of Personal Property and
Assignment and Assumption of Leases and Contracts shall be binding upon and
inure to the benefit of Assignor, Assignee and their successors and assigns.
The provisions of this Assignment of Personal Property and
Assignment and Assumption of Leases and Contracts shall be governed by the laws
of the state in which the Real Property is located without regard to any choice
of law principles.
IN WITNESS WHEREOF, the undersigned have executed this Assignment of
Personal Property and Assignment and Assumption of Leases and Contracts as of
the ____ day of ____, 200_.
ASSIGNOR :
________________________________,
________________________________
By:_____________________________
Its:____________________________
ASSIGNEE:
________________________________,
________________________________
By:_____________________________
Its:____________________________
By:_____________________________
Its:____________________________
C-2
EXHIBIT "A" TO EXHIBIT "C"
Legal Description
[To be Attached at Closing]
A-1
EXHIBIT "B" TO EXHIBIT "C"
List of Service Agreements, Maintenance
Agreements and Other Contracts
[To Be Attached at Closing]
B-1
EXHIBIT "D-1"
FORM OF CORONADO MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement"), made and entered into
this ___ day of _______, 2004 (the "Effective Date") by and among Newport Beach
South LLC, a Delaware limited liability company ("Owner"), and United Dominion
Realty, L.P., a Delaware limited partnership ("Manager").
RECITALS
WHEREAS, Owner owns that certain multifamily residential complex
known as the "Coronado at Newport (South)" and located in Newport Beach,
California (the "Project"); and
WHEREAS, Owner and Manager are parties to that certain Agreement of
Purchase and Sale dated as of August 13, 2004 pursuant to which, among other
things, the Project shall be purchased from Owner by Manager or an affiliate of
Manager (the "Purchase Agreement"); and
WHEREAS, Owner desires to employ Manager in the management and
operation of the Project by turning over to Manager the operation, direction,
management and supervision of the Project, as outlined below, and Manager
desires to assume such duties upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants herein contained, Owner and Manager agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following meanings when used in
this Agreement:
1.01 "Business Day" means any day other than a Saturday, Sunday and those
legal public holidays specified in 5 U.S.C. Section 6103(a), as may be amended
from time to time.
1.02 "Coronado Improvements Contracts" has the meaning ascribed for such
term in the Purchase Agreement.
1.03 "Coronado South Improvements" has the meaning ascribed for such term
in the Purchase Agreement.
1.04 "Gross Receipts" means the entire amount of all actual receipts,
determined on a cash basis, from (a) tenant rentals collected pursuant to tenant
leases for each month during the Term; provided, however, that there shall be
excluded from tenant rentals any unapplied tenant security, cleaning, damage
and/or pet deposits; (b) laundry and vending machine income; and (c) proceeds
from rental interruption insurance. Gross Receipts do not include the proceeds
of
(i) any sale, exchange, refinancing, condemnation, or other disposition of all
or any part of the Project, (ii) any loans to the Owner whether or not secured
by all or any part of the Project, (iii) any capital contributions made by the
Owner, or (iv) any insurance (other than rental interruption insurance)
maintained with regard to the Project.
1.05 "Operating Expenses" means all expenses incurred in the operation,
management, maintenance (including the cost of capital improvements other than
the Coronado South Improvements) and leasing of the Project by Manager pursuant
to the terms of this Agreement; provided, however, that "Operating Expenses"
shall not include: (a) any taxes, assessments and charges of any kind imposed by
any governmental authority having jurisdiction over the Project; (b) any
insurance premiums for insurance coverage carried by the Owner with respect to
the Project; (c) any debt service or other payments in connection with any loans
or other liens encumbering the Project; and (d) any costs and expenses
associated with the Coronado South Improvements, all of which shall be paid by
Owner.
1.06 "Owner Payment" means a monthly sum in the amount of $491,919.00,
which shall be payable by the Manager on the fifteenth day of each calendar
month during the Term and which shall be prorated for any partial month during
the Term.
1.07 "Project Employees" means those persons employed by Manager solely to
carry out Manager's obligations under this Agreement (i.e., manager, assistant
managers, leasing agents, maintenance personnel, and other necessary personnel).
1.08 "Term" means the period commencing on the Effective Date and
terminating on the earlier to occur of (a) expiration or earlier termination of
the Purchase Agreement with respect to the Project, (b) the sale of the Project
pursuant to the Purchase Agreement or (c) termination of this Agreement pursuant
to its terms (the "Expiration Date").
ARTICLE II
DUTIES AND RIGHTS OF MANAGER
2.01. APPOINTMENT OF MANAGER. During the Term, the Manager agrees, for and
in consideration of the compensation paid to Manager pursuant to this Agreement
and other good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, and the Owner hereby grants to Manager the right, to
supervise and direct the leasing, management and operation of the Project.
Manager shall perform its obligations under this Agreement as an independent
contractor of Owner.
2.02. GENERAL OPERATION. Manager shall consistently devote its
commercially reasonable efforts consistent with professional management to
manage, operate and market the Project for lease, and perform its duties
hereunder in a reasonable, diligent, and careful manner so as to manage and
supervise marketing, leasing and operation of the Project as a first-class
apartment community. In addition to the other obligations of Manager set forth
herein, during the Term Manager shall use commercially reasonable efforts
consistent with professional management to: (a) maintain businesslike relations
with tenants of the Project, including receiving, considering and recording
tenant service requests in a systematic fashion in order to show the action
taken with respect to each; (b) collect all monthly rentals due from tenants of
the
Project and rent from users or lessees of other non-dwelling facilities in the
Project, if any; (c) request, demand, collect, receive and receipt for any and
all charges or rents which become due to Owner, and take such legal action as
may be necessary or desirable to evict tenants delinquent in payment of monthly
rental or other charges as more particularly described in Section 2.08 below;
(d) prepare or cause to be prepared for execution by the Owner all forms,
reports and returns, if any, required to be filed by the Owner under applicable
federal, state or local laws and any other requirements relating to the
employment of personnel (anything contained herein to the contrary
notwithstanding, however, Manager shall not be obligated to prepare any of
Owner's state or federal income tax returns); (e) operate and maintain the
Project in a manner consistent with first-class professional management; (f)
advertise when necessary the availability for rental of the Project's units and
display "for rent" or other similar signs upon the Project (it being understood
that Manager may install one or more signs on or about the Project stating that
same is under management of Manager and may use Manager's name and logo in any
display advertising which may be done on behalf of the Project) in accordance
with Section 2.11; and (g) sign, renew and cancel tenant leases for the Project,
on terms, criteria and policies approved or required from time to time by Owner,
based upon Manager's recommendations, and otherwise in accordance with Section
2.10. It is understood and agreed that notwithstanding the provisions of Section
2.03(a), Manager shall not, and does not, provide security services to the
Project. Manager's sole responsibility in respect of security services shall be
cooperation with any security company retained by Owner. The parties further
understand and agree that nothing herein shall be construed to require Manager
to perform any services (including any services as a construction manager) or to
expend any funds (including any portion of Gross Receipts) in connection with
the Coronado South Improvements.
2.03. MANAGER AND OTHER PERSONNEL
(a) Manager shall investigate, hire, train, instruct, pay, promote,
discharge and supervise the work of the Project Employees. All matters
pertaining to the employment, supervision, compensation, promotion and discharge
of Manager's employees are the sole responsibility of Manager and Manager shall
indemnify Owner with respect to such matters pursuant to Section 6.01.
Notwithstanding the foregoing, (i) Manager shall have in its employ at all times
a sufficient number of capable Project Employees to enable it, subject to the
terms of this Agreement, to perform Manager's obligations under this Agreement,
and (ii) Manager shall advise Owner and coordinate with any local property
supervisor retained by Owner as to the on-site staffing requirements to enable
Manager, subject to the terms of this Agreement, to perform Manager's
obligations under this Agreement and to properly, adequately, safely and
economically lease, manage, operate, repair and maintain the Project.
(b) The Project Employees shall be employees of Manager and all
compensation of the Project Employees shall be at Manager's expense. Since some
of the Project Employees may need to reside at the Project and be available full
time in order to perform properly the duties of their employment, Owner
acknowledges that Manager may provide discounted employee housing and use of all
Project facilities to the Project Employees. All leases for discounted employee
housing shall provide that such lease will terminate effective upon termination
of this Agreement if this Agreement is terminated for any reason other than the
sale of the Project in accordance with the Purchase Agreement.
(c) Manager shall timely and reasonably provide the local property
supervising agent, as designated by Owner from time to time, with reasonable
access to the Project and the Project's books and records and, a regular basis,
coordinate duties and communicate with such local property supervisor retained
by Owner.
2.04. CONTRACTS AND SUPPLIES. Manager shall, in the name of and on behalf
of Owner and at Manager's expense, (a) negotiate and enter into service
contracts for the furnishing to the Project of electricity, gas, water, steam,
telephone, trash removal, cleaning, vermin extermination, furnace and air
conditioning maintenance, security services, pest control, landscaping, and any
other utilities, services and concessions which are reasonably required in the
course of business for the operation, repair and maintenance of the Project, and
(b) place purchase orders for such equipment, tools, appliances, materials and
supplies as are reasonably necessary to properly maintain the Project. Manager
shall be required to obtain Owner's written consent to such contract prior to
entering into any such contract if it cannot be terminated without penalty on
sixty (60) days or less notice. Nothing in this Section 2.04 shall be construed
as requiring Manager to enter into any contracts, agreements or purchase orders
with respect to the Coronado South Improvements.
2.05. ALTERATIONS, REPAIRS AND MAINTENANCE. Manager shall initiate, make
or install, or cause to be made and installed, or do or cause to be done, all
normal maintenance and repair work on and to the Project, including those which
Owner is required to make pursuant to the leases, sufficient to maintain the
Project in first-class condition and repair and in accordance with the terms of
all leases of the Project; provided, however, that the foregoing shall not be
construed as obligating Manager to undertake any construction activities or to
repair, replace or renovate any portion of the Property which is the subject of
the Coronado Improvements Contracts.
2.06. LICENSES AND PERMITS. Manager shall apply for, obtain, and maintain
all licenses, permits, deposits and bonds required of Owner or Manager in
connection with the management and operation of the Project; provided, however,
that the foregoing shall not be construed to require Manager to apply for,
obtain or maintain any building permits, certificates of occupancy or other
license, permits, approvals, deposits or bonds relating to the Coronado South
Improvements. Owner agrees to execute and deliver any and all applications and
other documents and to otherwise cooperate to the fullest extent with Manager in
applying for, obtaining and maintaining such licenses and permits.
2.07. COMPLIANCE WITH LAWS. Subject the last sentence of Section 2.02,
Manager shall use reasonable efforts to comply with (and correct violations of)
all applicable laws, statutes, ordinances, codes, rules, regulations and
policies of federal, state, county and municipal authorities and insurance
bodies and underwriters concerning the use, operation, management and
maintenance of the Project. If Owner instructs Manager not to disclose any
matter and such failure to disclose is subsequently determined to be fraudulent
or tortuous, Owner shall indemnify Manager (pursuant to Section 6.02 below) with
respect to any claim based on such failure to disclose.
2.08. LEGAL PROCEEDINGS. Manager shall institute any and all legal actions
or proceedings that Manager deems reasonable to collect charges, rent or other
income from the Project or to dispossess tenants or other persons in possession,
or to cancel, terminate, or enforce
any lease, license or concession agreement for the breach thereof or default
thereunder by the tenant, licensee or concessionaire. Manager and Owner shall
each promptly notify the other of any violation, order, rule, or determination
of any governmental authority or Board of Fire Underwriters or similar agency
that affect the Project of which they become aware.
2.09. TAXES BILLS AND SPECIAL REQUIREMENTS. Manager shall promptly forward
real estate tax and assessment bills to Owner. Subject to the last sentence of
Section 2.02, Manager will promptly notify Owner of and comply promptly with any
and all orders and/or requirements affecting the Project placed thereon by any
federal, state, county or municipal authority or any other governmental body
having jurisdiction over the Project. Manager shall not take any action under
this section so long as Owner is contesting, or has notified Manager of its
intention to contest, any such order and/or requirement. In the event Owner has
directed Manager to refrain from complying with such orders or requirements
affecting the Project and as a consequence thereof Manager could potentially
incur civil or criminal liability, then in such event, Owner will indemnify,
defend and hold harmless Manager and its, directors, officers, employees and
agents from and against all losses, liabilities, penalties, fines, claims,
actions, causes of action, costs and expenses (including attorneys fees and
costs) arising from or related to directly or indirectly Manager not complying
with such order or requirement at Owner's direction, except to the extent
arising from the negligence or willful misconduct of Manager, or Manager's
employees, agents, representatives, contractors, invitees and others for whom
Manager is responsible. Owner will supply Manager with all information necessary
for Manager to comply promptly with these requirements.
2.10. LEASING. All leases are to be prepared by Manager utilizing a form
of lease approved by Owner and Manager. Manager shall use commercially
reasonable efforts to obtain and keep tenants of the Project. Manager shall, so
far as reasonably possible, procure and investigate prospective tenants and use
reasonable judgment in the selection of tenants for the Project. Manager agrees
to perform whatever service may be required in connection with the negotiation
of leases or renewals, extensions, modifications or cancellations thereof.
2.11. ADVERTISING. Manager shall prepare advertising plans and promotional
material to be used to further rentals of the Project. Manager shall not use
Owner's name in any advertising or promotional material without Owner's express
written approval. Advertising and promotional materials shall be prepared in
full compliance with all applicable federal, state and local laws, ordinances,
regulations and orders.
2.12. OPERATION AND MAINTENANCE PLANS. Manager will comply with any
operation and maintenance plan with respect to Hazardous Substances (as defined
below), methane or hydrogen sulfide provided to Manager by Owner prior to the
Effective Date.
ARTICLE III
MANAGEMENT FEE
3.01. NET OPERATING INCOME. During the Term, in consideration of the
services to be rendered by Manager hereunder from the Effective Date until the
Expiration Date, Manager shall be entitled to retain all Net Operating Income
(as defined below) from the Project.
3.02. COSTS AND EXPENSES PAID BY MANAGER. Except as otherwise expressly
provided herein, Manager shall be responsible for paying all Operating Expenses.
ARTICLE IV
PROCEDURE FOR HANDLING RECEIPTS AND OPERATING CAPITAL
4.01. PRORATION PAYMENT. On the Effective Date Owner shall pay Manager an
amount equal to the prorated portion of the revenue and expenses with respect to
the Project for the month in which the Effective Date occurs, prorated based on
the number of days, including the Effective Date, remaining in such month.
4.02. SECURITY DEPOSITS. Manager shall hold in trust for the benefit of
Owner all existing and future security deposits relating to the Project. Manager
shall comply with all applicable laws with respect to such security deposits.
All security deposit funds held by Manager shall at all times be the property of
Owner, subject to all applicable laws with respect thereto.
4.03. DISBURSEMENT OF DEPOSITS. Any Gross Receipts in excess of Operating
Expenses and the Owner Payment (the "Net Operating Income") shall be paid to or
retained by Manager. Manager shall pay Owner the Owner Payment notwithstanding
the amount of Net Operating Income.
ARTICLE V
ACCOUNTING
5.01. BOOKS AND RECORDS. Manager shall maintain separate books and records
for the Project, the entries to which shall be supported by documentation
sufficient to ascertain that said entries are properly and accurately recorded.
All such books and records shall be available for copy, inspection and review by
Owner or any local property supervisor retained by Owner at any time during
Manager's normal business hours and upon at least three (3) Business Days prior
written notice. Manager shall maintain accounting records on a calendar year
basis. Manager shall, at the direction of the Owner, prepare and deliver
documentation, records and/or reports requested or required by any current or
prospective lender of the Project, provided that such documentation, records
and/or reports are either required to be kept or made pursuant to this Agreement
or may be created directly from documentation, records and/or reports required
to be kept or made pursuant to this Agreement.
5.02. PERIODIC STATEMENTS. Manager shall prepare and provide to Owner on
or before the 15th of each month, (a) a true and accurate rent roll for the
Project, (b) a detailed, unaudited income statement for the Project and (c) a
year-to-date report of the foregoing income statement.
5.03. EXPENSES. All costs and expenses incurred in connection with the
preparation of any books, records, statements, budgets, schedules, computations
and other reports provided for under this Article V or under any other
provisions of this Agreement shall, unless otherwise expressly set forth in this
Agreement, be borne by Manager.
5.04. AUDIT; OWNERSHIP. In the event that Owner or Owner's mortgagee(s)
require an audit, Manager shall cooperate with the auditors. The foregoing books
and records (but not
Manager's computer software program) shall be deemed owned by Owner, but Manager
shall be entitled to retain a copy of such books and records upon the expiration
or termination of this Agreement. Owner also may perform additional audit tests,
at Owner's sole cost and expense, either at the Project or at the office of
Manager, provided such audit tests are related to the activities performed by
Manager for Owner, pursuant to this Agreement and provided further that Owner
gives Manager at least three (3) Business Days prior written notice of such
audit and such audit is conducted during normal business hours. Further, all
individuals conducting such audit shall, as a condition to conducting such
audit, execute a confidentiality agreement as reasonably requested by Manager;
provided, however, that such agreement shall not adversely affect Owner's rights
or remedies relating to such audit.
ARTICLE VI
INDEMNIFICATION
6.01. INDEMNIFICATION BY MANAGER. Manager shall indemnify, defend and hold
harmless Owner, its affiliates and their respective directors, officers,
partners, shareholders, employees, agents, contractors, tenants and invitees
from and against any and all actions, administrative proceedings, causes of
action, charges, claims, commissions, costs, damages, decrees, demands, duties,
expenses, fees, fines, judgments, liabilities, losses, obligations, orders,
penalties, recourses, remedies, responsibilities, rights, suits and undertakings
of every nature and kind whatsoever, including, but not limited to, reasonable
attorneys' fees and litigation expenses (collectively "Claims"), arising or
alleged to arise, directly or indirectly, out of the negligent or willful
misconduct of, or the breach of this Agreement (including Section 2.03) by,
Manager or Manager's employees, agents, representatives, contractors, invitees
and others for whom Manager is responsible.
6.02. INDEMNIFICATION BY OWNER. Owner agrees to defend, indemnify, and
hold harmless Manager, its affiliates and their respective partners, directors,
shareholders, officers and agents, against and from any and all Claims arising
from or related to directly or indirectly (a) the presence of Hazardous
Substances (as defined below) in, on or under the Project, except to the extent
that the Hazardous Substances are present as a result of acts or omissions of,
or the breach of this Agreement by, Manager or Manager's employees, agents,
representatives, contractors, invitees and others for whom Manager is
responsible or (b) Owner's breach of this Agreement. Without limiting the
generality of the foregoing, the indemnification provided by this Section 6.02
specifically shall cover costs incurred in connection with any investigation of
site conditions or any remediation, removal or restoration work required by any
federal, state or local governmental agency because of the presence of Hazardous
Substances in, on, under or about the Project. For purposes of this Section
6.02, "Hazardous Substances" shall mean all substances defined as hazardous
materials, hazardous wastes, hazardous substances, or extremely hazardous waste
under any federal, state, or local law or regulation. Notwithstanding the above,
Owner indemnity and defense obligations set forth in this Section 6.02 shall not
apply to Claims arising from or related to directly or indirectly Hazardous
Substances arising in, on or under the Project after the Owner's conveyance of
the Project pursuant to the Purchase Agreement except as otherwise set forth in
the Purchase Agreement.
6.03. SURVIVAL OF INDEMNITY OBLIGATIONS. The obligations of the parties in
this Article VI shall survive the expiration or earlier termination of this
Agreement.
ARTICLE VII
DEFAULTS; TERMINATION RIGHTS
7.01. DEFAULT BY MANAGER. Manager shall be deemed to be in default under
this Agreement in the event Manager shall fail to keep, observe or perform any
material covenant, agreement, term or provision of this Agreement to be kept,
observed or performed by Manager, and such default shall (a) result from
Manager's negligence or willful misconduct; (b) involve Manager's
misappropriation or misapplication of funds received or held by Manager
hereunder; or (c) continue for a period of thirty (30) days (except in the case
of emergencies) after notice thereof by Owner to Manager, or if such default
cannot be cured within thirty (30) days, then such additional period as is
necessary in the circumstances, provided Manager commences its cure of same
within said thirty-day period and thereafter diligently pursues such cure to
completion, but in no event beyond sixty (60) days after such notice (in each
instance, an "Event of Default by Manager"). An Event of Default by Manager
shall not be deemed to be a default by Manager under any other agreement between
Manager and Owner, including but not limited to, the Purchase Agreement, unless
otherwise provided in such Agreement.
7.02. REMEDIES OF OWNER. Upon the occurrence of an Event of Default by
Manager as specified in Section 7.01 hereof, Owner shall be entitled to
terminate this Agreement and pursue any other remedy it may have at law or in
equity, it being expressly understood that following such a termination, Owner
shall have no further obligation to pay any amount accruing with respect to any
period following the termination date. Notwithstanding such termination, Manager
shall not be relieved of any liability arising as a result of Manager's default.
Upon such termination, Manager shall deliver to Owner such funds, books and
records of Owner then in the possession or control of Manager, and shall assign
to such persons as may be designated by Owner all service contracts and deliver
all personal property relating to or used in the operation and maintenance of
the Project, except any personal property that was paid for by Manager out of
its own funds and which is the property of Manager. Owner acknowledges that an
Event of Default by Manager under this Agreement shall not constitute a breach
or default under the Purchase Agreement or any other agreement between Owner and
Manager.
7.03. DEFAULTS BY OWNER. Owner shall be deemed to be in default hereunder
in the event Owner shall fail to keep, observe or perform any material covenant,
agreement, term or provision of this Agreement to be kept, observed or performed
by Owner, and such default shall continue for a period of five (5) Business Days
after written notice thereof by Manager to Owner as to any default in payment of
money, or thirty (30) days after notice thereof by Manager to Owner as to any
non-monetary default, or, if such non-monetary default cannot be cured within
thirty (30) days, then such additional period as shall be reasonable provided
that Owner is capable of curing same and has continuously attempted to cure such
default, but in no event beyond sixty (60) days after such notice (in each
instance, an "Event of Default by Owner"). An Event of Default by Owner shall
not be deemed to be a default by Owner under any other agreement between Owner
and Manager, including but not limited to the Purchase Agreement, unless
otherwise provided in such Agreement.
7.04. REMEDIES OF MANAGER. Upon the occurrence of an Event of Default by
Owner as specified in Section 7.03 hereof, Manager, as its sole and exclusive
remedy, shall be entitled to terminate this Agreement. Following such
termination, Owner shall continue to be obligated to
pay and perform all of its obligations which have accrued with respect to the
Project as of the date of termination and Owner shall pay Manager or Manager may
retain, within three Business Days following such termination, all amounts
payable to Manager or earned by Manager (including Net Operating Income) under
this Agreement up to the date of such termination.
7.05. EXPIRATION OF TERM. Upon the expiration of the Term, or the earlier
termination of this Agreement, Manager shall deliver to Owner all funds,
including tenant security deposits, books and records of Owner relating to the
Project then in possession or control of Manager, except for such sums as are
then due and owing to Manager or earned by Manager (including Net Operating
Income) up to the date of expiration under this Agreement or any other written
agreement between Owner and Manager. Further, Owner shall, unless the
transaction with respect to the Project contemplated by the Purchase Agreement
closes concurrently with such termination or expiration, reimburse Manager upon
such termination or expiration an amount equal to the excess of (a) all expenses
with respect to the Project paid by Manager for capital improvements for the
Project during the Term over (b) Twenty-Five Thousand Nine Hundred Nineteen
Dollars ($25,919.00) multiplied by the number of months, or portion thereof
based on a 30 day month, in the Term. This provision shall survive the
expiration or earlier termination of this Agreement. This provision shall not be
construed as limiting any of the provisions of Section 5.4 of the Purchase
Agreement.
7.06. FINAL ACCOUNTING. Manager shall, within thirty (30) days after the
termination date, deliver to Owner the following:
(a) an accounting reflecting the balance of income and expenses of
the Project to the termination date; and
(b) subject to the provisions of Section 5.4 of the Purchase
Agreement, the balance of moneys of Owner then held by Manager.
ARTICLE VIII
INSURANCE
8.01. MANAGER'S INSURANCE. Manager will obtain, at Manager's expense, the
following insurance, all of which must comply with the requirements of any
lender(s) to or mortgagee(s) of Owner notwithstanding any lesser or different
requirements set forth in this Agreement:
(a) Commercial general liability on a "per-occurrence" form for
bodily injury liability and property damage liability with limits of $1,000,000
combined single limit each occurrence and $2,000,000 from the aggregate of all
occurrences within each policy year, including but not limited to personal
injury and advertising injury, premises-operation, products/completed operations
hazard and contractual coverage (including coverage for the indemnity clause
provided under this Agreement) for claims arising out of actions beyond the
scope of its duties or authority under this Agreement (if a blanket policy,
endorsed to specify coverage of the Project), it being agreed that Manager's
insurance will be primary, and any insurance of Owner shall be secondary and in
excess of Manager's coverage.
(b) Comprehensive form automobile liability covering owned, hired
and non-owned vehicles of Manager with limits of $1,000,000 combined single
limit per occurrence.
(c) Employer's liability insurance in an amount not less than
$1,000,000.
(d) Excess liability (umbrella) insurance on the above with limits
of $2,000,000.
(e) Workers' compensation insurance covering the Project Employees
in accordance with the laws of the State of California.
(f) Blanket crime coverage protecting Manager against fraudulent or
dishonest acts of all Project Employees, whether acting alone or with others,
with limits of liability of not less than $100,000 in any one occurrence with a
maximum deductible of $500.00. Any loss within the deductible shall be borne by
Manager.
(g) Professional liability (professional errors and omissions)
insurance covering the activities of Manager written on a "per-occurrence" basis
with limits of at least $1,000,000 with a maximum deductible of $25,000. Any
loss within the deductible shall be borne by Manager. Coverage shall be
maintained in effect during the Term and for not less than two years after
termination of this Agreement.
(h) Each of the above policies will contain provisions giving Owner
at least thirty (30) days' prior written notice of cancellation or expiration of
coverage and name Owner (and any lender of Owner) as additional insureds on
items (a) and (d) of this Section 8.01. Owner (and any lender of Owner) are to
be named as loss payee on item (f) and (g) of this Section 8.01. Manager will
provide Owner with a certificate or certificates evidencing all required
coverages prior to the Effective Date and thereafter upon written request.
(i) Such insurance shall be placed with reputable insurance
companies licensed or authorized to do business in the State of California with
a minimum Best's rating of A-VII.
Manager acknowledges that in the event evidence of insurance is not timely
furnished in accordance with Section 8.01, that Owner may, but shall not be
obligated to, obtain such coverage on Owner's behalf and at Manager's expense.
Manager shall require that all contractors and subcontractors providing goods or
services to the Project be insured in amounts as reasonably determined from time
to time by Owner, and evidence same.
8.02. OWNER'S INSURANCE. All other insurance with respect to the Project,
including property, casualty and liability insurance, shall be obtained by
Owner.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01. GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of California, without
regard to the choice of law provisions thereof.
9.02. NOTICES. Any notice, demand, consent, authorization or other
communication that any party to this Agreement is required or may desire to give
to or make upon the other parties to
this Agreement pursuant to this Agreement shall be in writing and shall be
effective, valid (with confirmed receipt) and duly given and received if hand
delivered or sent by nationally recognized overnight delivery service with
receipt acknowledgement requested, by facsimile, or by regular mail, postage
prepaid to the addresses set forth below or to such other address as any party
to this Agreement may designate by notice to the other parties from time to
time. Notice so given shall be deemed given and received if sent (a) by hand
delivery, on the date of actual delivery; (b) by overnight delivery service, on
the next Business Day following the day such notice is delivered to the
overnight delivery service, with receipt acknowledgment requested; (c) by
facsimile with evidence of transmission acceptance, on the date of actual
transmission, or, if such notice is received after 5:00 p.m. (at the
destination), on the next Business Day; or (d) by mail, on the fourth Business
Day after posting.
If intended for Manager: United Dominion Realty Trust, Inc.
1745 Shea Center Drive, Suite 200
Highlands Ranch, Colorado 80129
Attention: W. Mark Wallis
Facsimile No.: 720-283-2454
and to: United Dominion Realty Trust, Inc.
4055 Valley View Lane, Suite 300
Dallas, Texas 75244
Attention: Matt Akin
Facsimile No.: 972-866-0163
and to: Morrison & Foerster LLP
370 17th Street, Suite 5200
Denver, Colorado 80202-5638
Attention: Warren L. Troupe
Facsimile No.: 303-592-1510
If intended for Owner: c/o Essex Apartment Value Fund, L.P.
925 East Meadow Drive
Palo Alto, CA 94303
Attn: Keith Guericke, John Burkart and
Jordan E. Ritter, Esq.
Telecopy No. (650) 858-1634 - Guericke,
(650) 565-9855 - Burkart,
(650) 858-1372 - Ritter
9.03. SEVERABILITY. If any term or provision of this Agreement conflicts
with the law under which this Agreement is to be construed or if any such
provision is held invalid by a court with jurisdiction over the parties to this
Agreement, such provision shall be deemed to be restated to reflect, as nearly
as possible, the original intentions of the parties in accordance with
applicable law, and the remainder of this Agreement shall remain unchanged and
in full force and effect.
9.04. NO JOINT VENTURE OR PARTNERSHIP; RISK OF LOSS. Owner and Manager
hereby agree that nothing contained herein or in any document executed in
connection herewith shall be construed as making Manager and Owner joint
venturers or partners. In no event shall Manager have any obligation or
liability whatsoever with respect to any debts, obligations or liabilities of
Owner. Risk of loss of the Project shall not pass, or be deemed to have passed,
to Manager.
9.05. MODIFICATION; TERMINATION. Any amendment, modification, termination
or release of this Agreement may be effected only by a written instrument
executed by Manager and Owner.
9.06. ATTORNEYS' FEES. Should either party employ an attorney or attorneys
to enforce any of the provisions hereof or to protect its interest in any manner
arising under this Agreement, or to recover damages for the breach of this
Agreement, the non-prevailing party in any action (the finality of which is not
legally contested) agrees to pay to the prevailing party all reasonable costs,
damages and expenses, including attorneys' and experts' fees, and costs expended
or incurred in connection therewith.
9.07. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties and there are no further agreements or
understandings, written or oral, in effect between the parties relating to the
subject matter hereof.
9.08. APPROVALS AND CONSENTS. If any provision hereof requires the
approval or consent of Owner or Manager to any act or omission, such approval or
consent shall not be unreasonably withheld or delayed.
9.09. CASUALTY. In the event that the Project, or any portion thereof, is
substantially or totally damaged or destroyed by fire, tornado, windstorm, flood
or other casualty during the Term, Manager or Owner may terminate this Agreement
upon giving the other party written notice of termination on or before the date
which is thirty (30) days after the date of such casualty.
9.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted successors
and assigns. Neither party shall have the right to assign this Agreement or to
delegate its duties hereunder to any other party without the other party's prior
written consent given in its absolute and sole discretion; provided that Manager
may assign this Agreement to any affiliate of Manager to which the Manager is
permitted to assign the Purchase Agreement pursuant to the terms thereof.
9.11. FURTHER ACTIONS. Each party hereto shall, as often as reasonably
requested by the other party hereto, take such further actions as may be
necessary in order to carry out the purpose of this Agreement.
9.12. COUNTERPARTS; FACSIMILE. This Agreement may be executed in any
number of counterparts, any of which when taken together shall constitute one
and the same document. This Agreement may be executed and delivered by facsimile
signature; such transmission will be deemed a valid signature.
9.13. EQUAL EMPLOYMENT OPPORTUNITY. Without limitations of any other
provisions of this Agreement, Owner and Manager expressly agree to abide by any
and all applicable federal and/or state equal employment opportunity statues,
rules and regulations, including without limitation, Title VII of the Civil
Rights Act of 1964, the Equal Pay Act of 1963, the National Labor Relations Act,
the Fair Labor Standards Act, the Rehabilitation Act of 1973, the Occupational
Health and Safety Act of 1970, and the Americans With Disabilities Act, all as
may be from time to time modified or amended.
9.14. EQUAL HOUSING OPPORTUNITY. Without limitation of any other
provisions of this Agreement, Owner and Manager expressly agree to abide by any
and all applicable federal, state, county and municipal equal housing
opportunity statutes, rules and regulations, as from time to time modified or
amended prohibiting discrimination in housing on the grounds of race, color,
sect, creed or national origin, or source of income, including Title VI of the
Civil Rights Act of 1964 (Public Law 88-352, 78 Stat. 241), all requirements
imposed by or pursuant to the Regulations of the Secretary of HUD (24 CFR,
Subtitle A, Part 1) issued pursuant to that Title, and regulations issued
pursuant to Executive Order 11063 and Title VIII of the 1968 Civil Rights Act.
9.15. SUBORDINATION. This Agreement, and any renewals, extensions or
modifications thereof, and all rights and interests of Manager hereunder shall
at all times be subject and subordinate to any and all financing instruments of
and to the rights and claims of any lender(s) or mortgagees to or of Owner. This
provision shall be unconditional and self-operative, but, at the request of
Owner or such lender(s) or mortgagee(s), Manager shall execute any instrument
submitted to it in confirmation of the foregoing provisions.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.
OWNER:
NEWPORT BEACH SOUTH, LLC
By: Newport Beach South, Inc., its managing member
By:________________________________
Name:______________________________
Title:_____________________________
MANAGER:
UNITED DOMINION REALTY, L.P. a Delaware limited
partnership
By: United Dominion Realty Trust, Inc., a Maryland
corporation, its General Partner
By:________________________________
W. Mark Wallis
Executive Vice President
EXHIBIT "D-2"
FORM OF RIVERMARK MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement"), made and entered into
this ___ day of _______, 2004 (the "Effective Date") by and among Essex
Rivermark Apartments, L.P., a California limited partnership ("Owner"), and
United Dominion Realty, L.P., a Delaware limited partnership ("Manager").
RECITALS
WHEREAS, Owner owns that certain multifamily residential complex
known as the "River Terrace Apartments" and located in Santa Clara, California
(the "Project"), and which is currently being constructed by Owner; and
WHEREAS, Owner and Manager are parties to that certain Agreement of
Purchase and Sale dated as of August 13, 2004 pursuant to which, among other
things, the Project shall be purchased from Owner by Manager or an affiliate of
Manager (the "Purchase Agreement"); and
WHEREAS, Owner desires to employ Manager in the management and
operation of the Project by turning over to Manager the operation, direction,
management and supervision of the Project, as outlined below, and Manager
desires to assume such duties upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants herein contained, Owner and Manager agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following meanings when used in
this Agreement:
1.01 "Budget" means collectively (a) the operating budget mutually agreed
to prior to the Effective Date and made a part hereof as Schedule 1-A, as
updated and replaced from time to time by mutual agreement of Manager and Seller
(the "Operating Budget") and (b) the capital budget mutually agreed to prior to
the Effective Date and made a part hereto as Schedule 1-B, as updated and
replaced from time to time by mutual agreement of Manager and Seller (the
"Capital Budget").
1.02 "Business Day" means any day other than a Saturday, Sunday and those
legal public holidays specified in 5 U.S.C. Section 6103(a), as may be amended
from time to time.
1.03 "Depository" means an FDIC insured bank designated by Owner and
approved by Manager.
1.04 "Fee" means the management fee payable each month by Owner to Manager
hereunder pursuant to Article III hereof.
1.05 "Gross Receipts" means the entire amount of all actual receipts,
determined on a cash basis, from (a) tenant rentals collected pursuant to tenant
leases for each month during the Term; provided, however, that there shall be
excluded from tenant rentals any unapplied tenant security, cleaning, damage
and/or pet deposits; (b) laundry and vending machine income; and (c) proceeds
from rental interruption insurance. Gross Receipts do not include the proceeds
of (i) any sale, exchange, refinancing, condemnation, or other disposition of
all or any part of the Project, (ii) any loans to the Owner whether or not
secured by all or any part of the Project, (iii) any capital contributions made
by the Owner, or (iv) any insurance (other than rental interruption insurance)
maintained with regard to the Project.
1.06 "Project Employees" means those persons employed by Manager solely to
carry out Manager's obligations under this Agreement (i.e., manager, assistant
managers, leasing agents, maintenance personnel, and other necessary personnel).
1.07 "Term" means the period commencing on the Effective Date and
terminating on the earlier to occur of (i) expiration or earlier termination of
the Purchase Agreement with respect to the Project, (ii) the sale of the Project
pursuant to the Purchase Agreement or (iii) termination of this Agreement
pursuant to its terms (the "Expiration Date").
1.08 "Working Capital Reserve" means $100,000, or such other amount as may
be reasonably agreed to by Owner and Manager, to be used in connection with the
operation of the Project in accordance with the terms hereof, and restored in
accordance with terms of Sections 4.04 and 4.05.
ARTICLE II
DUTIES AND RIGHTS OF MANAGER
2.01. APPOINTMENT OF MANAGER. During the Term, the Manager agrees, for and
in consideration of the compensation paid to Manager pursuant to this Agreement,
and for other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, and the Owner hereby grants to Manager the right,
to supervise and direct the leasing, management and operation of the Project.
Manager shall perform its obligations under this Agreement as an independent
contractor of Owner. All obligations or expenses incurred by Manager under this
Agreement (including the pro rata portion used in connection with or for the
benefit of the Project of all purchases of or contracts for sales or services in
bulk obtained by Manager) shall be for the account of, on behalf of, and at the
expense of Owner, except as otherwise specifically provided in this Agreement;
provided, however, that Owner shall not be obligated to reimburse Manager for
expenses for office equipment or office supplies of Manager (unless incurred
solely for the Project), for any overhead expenses of Manager incurred with
respect to its general offices, costs relating to accounting services performed
hereunder, or for any salaries of employees of Manager paid with respect to
duties performed on a supervisory level.
2.02. GENERAL OPERATION.
(a) Subject to the limitations imposed by the Budget from time to
time, Manager shall consistently devote its commercially reasonable efforts
consistent with professional management to manage, operate and market the
Project for lease, and perform its duties hereunder in a reasonable, diligent,
and careful manner so as to manage and supervise marketing, leasing and
operation of the Project as a first-class apartment community. In addition to
the other obligations of Manager set forth herein, during the Term Manager shall
use commercially reasonable efforts consistent with professional management to:
(i) maintain businesslike relations with tenants of the Project, including
receiving, considering and recording tenant service requests in a systematic
fashion in order to show the action taken with respect to each; (ii) collect all
monthly rentals due from tenants of the Project and rent from users or lessees
of other non-dwelling facilities in the Project, if any; (iii) request, demand,
collect, receive and receipt for any and all charges or rents which become due
to Owner, and at Owner's expense in accordance with the Budget, take such legal
action as may be necessary or desirable to evict tenants delinquent in payment
of monthly rental or other charges as more particularly described in Section
2.09 below; (iv) prepare or cause to be prepared for execution by the Owner all
forms, reports and returns, if any, required to be filed by the Owner under
applicable federal, state or local laws and any other requirements relating to
the employment of personnel (anything contained herein to the contrary
notwithstanding, however, Manager shall not be obligated to prepare any of
Owner's state or federal income tax returns); (v) operate and maintain the
Project in a manner consistent with first-class professional management; (vi)
advertise when necessary, at Owner's expense, the availability for rental of the
Project's units and display "for rent" or other similar signs upon the Project
(it being understood that Manager may install one or more signs on or about the
Project stating that same is under management of Manager and may use Manager's
name and logo in any display advertising which may be done on behalf of the
Project), in accordance with Section 2.13; (vii) sign, renew and cancel tenant
leases for the Project, on terms, criteria and policies approved or required
from time to time by Owner, based upon Manager's recommendations, and otherwise
in accordance with Section 2.12; and (viii) take commercially reasonable steps
to control and minimize utility costs once the Project has been completed and is
ready for tenant occupancy.
(b) It is understood and agreed that notwithstanding the provisions
of Section 2.02(a), Manager shall not, and does not, provide security services
to the Project. Manager's sole responsibility in respect of security services
shall be cooperation with any security company retained by Owner.
(c) The parties acknowledge that the Project is presently under
construction. Nothing herein shall be construed to require Manager to perform
any services (including any services as a construction manager) or to expend any
funds (including any portion of Gross Revenues) in connection with such
construction activities. In determining whether Manager has complied with its
obligations hereunder, the uncompleted nature of the Project and the existence
of major construction activities at the Project shall be taken into account.
2.03. BUDGET. Manager shall operate the Project in accordance with the
Budget, and there shall be no substantial deviations therefrom except as
permitted by Section 2.06.
2.04. MANAGER AND OTHER PERSONNEL
(a) Manager shall investigate, hire, train, instruct, pay, promote,
discharge and supervise the work of the Project Employees. All matters
pertaining to the employment, supervision, compensation, promotion and discharge
of Manager's employees are the sole responsibility of Manager and Manager shall
indemnify Owner with respect to such matters pursuant to Section 6.01.
Notwithstanding the foregoing, (i) Manager shall have in its employ at all times
a sufficient number of capable Project Employees to enable it, subject to the
terms of this Agreement, to perform Manager's obligations under this Agreement,
and (ii) Manager shall advise Owner and coordinate with any local property
supervisor retained by Owner as to the on-site staffing requirements to enable
Manager, subject to the terms of this Agreement, to perform Manager's
obligations under this Agreement and to properly, adequately, safely and
economically lease, manage, operate, repair and maintain the Project. Costs
(including salaries and fringe benefits) associated with the Project Employees
and any on-site employees of Owner shall be budgeted for, and paid from, the
Operating Account, provided that such costs and expenses are consistent in all
material respects with the Budget.
(b) The Project Employees shall be employees of Manager. Owner
shall, provided that such compensation is consistent, in all material respects,
with the Budget, reimburse Manager each pay period for the total aggregate
compensation, including salary and fringe benefits, payable with respect to the
Project Employees, which amount may be paid by Manager from Gross Receipt's or
the Working Capital Reserve. The term "fringe benefits" as used herein shall
mean and include the employer's contribution of F.I.C.A., unemployment
compensation and other employment taxes, worker's compensation, group life and
accident and health insurance premiums, performance bonuses, uniforms, 401(k)
contributions, holidays and paid vacations and disability and other similar
benefits paid or payable by the Manager to the Project Employees. Further, Owner
shall reimburse Manager each pay period for the Project's proportionate share of
the total aggregate compensation, including salary and fringe benefits, relating
to roving maintenance or similar personnel (the "Roving Services"), so long as
(i) the costs of the Roving Services are allocated in good faith on a uniform,
fair, equitable and proportionate basis among the Project and the other
Manager-operated properties benefiting therefrom; (ii) the Roving Services will
not include services that do not benefit the Project; and (iii) the cost of the
Roving Services are either (A) itemized by Manager in each Operating Budget or
(B) otherwise approved in writing by Owner. The cost of the Roving Services and
the allocation of that cost to the Project and other Manager-operated properties
shall be subject to audit by Owner pursuant to the terms of this Agreement.
(c) Since some of the Project Employees may need to reside at the
Project and be available full time in order to perform properly the duties of
their employment it is further understood and agreed that the Project Employees
(including their dependants), in addition to their salary and fringe benefits,
may receive the normal benefits customarily provided managers, assistant
managers, leasing agents, and maintenance personnel of an apartment project of
comparable character and quality to the Project, including discounted employee
housing (provided that such discount will not exceed 30% and that the total
number of Project Employees receiving discounted housing does not exceed five
(5)) and use of all Project facilities. All leases for discounted employee
housing shall provide that such lease will terminate effective upon
termination of this Agreement if this Agreement is terminated for any reason
other than the sale of the Project in accordance with the Purchase Agreement.
(d) Manager shall timely and reasonably provide the local property
supervising agent, as designated by Owner from time to time, with reasonable
access to the Project and the Project's books and records and, a regular basis,
coordinate duties and communicate with such local property supervisor retained
by Owner.
2.05. CONTRACTS AND SUPPLIES. Manager shall, except as provided in this
Agreement, in the name of and on behalf of Owner and at Owner's expense, (a)
negotiate and enter into service contracts for the furnishing to the Project of
electricity, gas, water, steam, telephone, trash removal, cleaning, vermin
extermination, furnace and air conditioning maintenance, security services, pest
control, landscaping, and any other utilities, services and concessions which
are reasonably required in the course of business for the operation, repair and
maintenance of the Project, and (b) place purchase orders for such equipment,
tools, appliances, materials and supplies as are necessary to properly maintain
the Project. Except for service contracts for public utilities such as water,
electricity and gas, each such service contract shall: (i) include a provision
for cancellation thereof by Owner or Manager upon no more than 30 days' written
notice without the imposition of any penalty or fee, and (ii) require that all
contractors provide evidence of sufficient insurance. All service contracts and
purchase orders shall be paid by Manager, on behalf of Owner, from the Operating
Account, in accordance with the Budget. Manager shall obtain Owner's consent,
which consent shall not be unreasonably withheld or delayed, to terminate any
existing contracts for services or supplies. Nothing in this section shall be
construed as requiring Manager to enter into any contracts, agreements or
purchase orders with respect to any construction activities at the Project.
2.06. ALTERATIONS, REPAIRS AND MAINTENANCE. Manager shall initiate, make
or install, or cause to be made and installed, or do or cause to be done at
Owner's expense and in the name of Owner, all normal maintenance and repair work
on and to the Project, including those which Owner is required to make pursuant
to the leases, sufficient to maintain the Project in first-class condition and
repair and in accordance with the terms of all leases of the Project; provided,
however, that the foregoing shall not be construed as obligating Manager to
undertake any construction activities or to repair, replace or renovate any
portion of the Property which is the subject of new construction. All such
expenditures are to be made in the name of Owner and shall only be incurred by
Manager in accordance with the Budget, unless emergency repairs that threaten
life or property are immediately necessary for the preservation of the life or
safety of any person or of the safety of the Project, or to avoid criminal or
civil liability of Owner or Manager, or are required to avoid the suspension of
any necessary service to the Project, in which event such expenditures may be
made by the Manager without prior approval and irrespective of the cost
limitations imposed by this Section 2.06; provided, however, that in each such
instance, Manager shall, before causing any such emergency repair to be made,
use commercially reasonable efforts under the circumstances to notify Owner of
the necessity of the repair. In accordance with the terms of the Capital Budget
or upon written demand or approval of Owner (except in the case of an
emergency), Manager shall, at Owner's expense, from time to time during the term
hereof, make all required capital replacements or repairs to the Project.
Subject to obtaining Owner's prior written approval in regard to sums necessary
to cover costs of
such capital replacements or repairs, Manager shall first use any Excess Funds
held pursuant to Section 4.05 and then funds furnished by Owner.
2.07. LICENSES AND PERMITS. Manager shall apply for, obtain, and maintain,
in the name and at the expense of Owner, all licenses, permits, deposits and
bonds required of Owner or Manager in connection with the management and
operation of the Project; provided, however, that the foregoing shall not be
construed to require Manager to apply for, obtain or maintain any building
permits, certificates of occupancy or other license, permits, approvals,
deposits or bonds relating to the construction of the Project. Owner agrees to
execute and deliver any and all applications and other documents and to
otherwise cooperate to the fullest extent with Manager in applying for,
obtaining and maintaining such licenses and permits.
2.08. COMPLIANCE WITH LAWS. Subject to Sections 2.02(b) and 2.02(c),
Manager, at Owner's expense, use reasonable efforts to comply with (and correct
violations of) all applicable laws, statutes, ordinances, codes, rules,
regulations and policies of federal, state, county and municipal authorities and
insurance bodies and underwriters concerning the use, operation, management and
maintenance of the Project. If Owner instructs Manager not to disclose any
matter and such failure to disclose is subsequently determined to be fraudulent
or tortuous, Owner shall indemnify Manager (pursuant to Section 6.02 below) with
respect to any claim based on such failure to disclose.
2.09. LEGAL PROCEEDINGS. Manager shall institute, in its own name or in
the name of Owner, but in any event at the expense of Owner, any and all legal
actions or proceedings that Manager deems reasonable to collect charges, rent or
other income from the Project or to dispossess tenants or other persons in
possession, or to cancel, terminate, or enforce any lease, license or concession
agreement for the breach thereof or default thereunder by the tenant, licensee
or concessionaire. In each such instance where expenses related to such action
are expected to exceed $1,000.00, Manager shall, before taking or causing to be
taken any such action, use reasonable efforts under the circumstances to notify
Owner of the need for this action and obtain Owner's prior written approval.
Manager and Owner shall each promptly notify the other of any violation, order,
rule, or determination of any governmental authority or Board of Fire
Underwriters or similar agency that affect the Project of which they become
aware.
2.10. DEBTS OF OWNER. Subject to the terms and conditions of this
Agreement, all debts and liabilities to third persons incurred by Manager
pursuant to and in compliance with this Agreement in the course of its operation
and management of the Project shall be the debts and liabilities of the Owner
only, and Manager shall not be liable for (and is hereby indemnified in respect
of) any such debts or liabilities, except to the extent Manager has exceeded its
authority under this Agreement or such debts and liabilities were not incurred
pursuant to or in compliance with this Agreement. Manager shall have no
responsibility to make payments on any indebtedness of Owner secured by the
Project or any portion thereof.
2.11. TAXES BILLS AND SPECIAL REQUIREMENTS. Manager shall promptly forward
real estate tax and assessment bills to Owner. Subject to Section 2.02(c),
Manager will promptly notify Owner of and comply promptly with any and all
orders and/or requirements affecting the Project placed thereon by any federal,
state, county or municipal authority or any other governmental body having
jurisdiction over the Project. Manager shall not take any action under
this section so long as Owner is contesting, or has notified Manager of its
intention to contest, any such order and/or requirement. In the event Owner has
directed Manager to refrain from complying with such orders or requirements
affecting the Project and as a consequence thereof Manager could potentially
incur civil or criminal liability, then in such event, Owner will indemnify,
defend and hold harmless Manager and its, directors, officers, employees and
agents from and against all losses, liabilities, penalties, fines, claims,
actions, causes of action, costs and expenses (including attorneys fees and
costs) arising from or related to directly or indirectly Manager not complying
with such order or requirement at Owner's direction, except to the extent
arising from the negligence or willful misconduct of Manager, or Manager's
employees, agents, representatives, contractors, invitees and others for whom
Manager is responsible. Owner will supply Manager with all information necessary
for Manager to comply promptly with these requirements.
2.12. LEASING. All leases are to be prepared by Manager utilizing a form
of lease approved by Owner and Manager. Manager shall use commercially
reasonable efforts to obtain and keep tenants of the Project. Manager shall, so
far as reasonably possible, procure and investigate prospective tenants and use
reasonable judgment in the selection of tenants for the Project. Manager agrees
to perform whatever service may be required in connection with the negotiation
of leases or renewals, extensions, modifications or cancellations thereof.
2.13. ADVERTISING. Manager shall prepare advertising plans and promotional
material to be used to further rentals of the Project. Manager shall not use
Owner's name in any advertising or promotional material without Owner's express
written approval. Advertising and promotional materials shall be prepared in
full compliance with all applicable federal, state and local laws, ordinances,
regulations and orders.
2.14. OPERATION AND MAINTENANCE PLANS. Manager will comply with any
operation and maintenance plan with respect to Hazardous Substances (as defined
below) provided to Manager by Owner prior to the Effective Date.
ARTICLE III
MANAGEMENT FEES
3.01. FEE. During the Term, in consideration of the services to be
rendered by Manager hereunder from the Effective Date until the Expiration Date,
Manager will be paid a monthly management fee in the amount of $8,333.34.
3.02. CALCULATION AND PAYMENT OF FEE. The Fee shall be paid on the first
(1st) day of each calendar month and shall be disbursed by Manager from the
Operating Account. If the Effective Date is not on the first day of a month, or
the Expiration Date is not the last day of a month, the fee for the month in
which the Effective Date or Expiration Date occurs shall be prorated on a
per-diem basis, based on a thirty (30) day month and the actual number of days
elapsed. With respect to the Fee earned for the last month or portion thereof of
the Term, the Fee shall be payable to Manager on the Expiration Date.
3.03. REIMBURSEMENTS TO OWNER. Manager shall reimburse Owner for all
payments made in error and for all discounts not taken and penalties paid, in
the event funds were then available, unless such payments, discounts or
penalties are subsequently recovered.
3.04 COSTS AND EXPENSES PAID BY MANAGER. Except as otherwise expressly
provided herein and without limiting costs and expenses to be paid by Manager in
connection with the leasing, administration and management of the Project,
Manager shall be responsible, at its own expense, for fees and expenses related
to: (a) travel costs incurred by its employees and agents for the benefit of the
Project, (b) accounting, (c) bookkeeping, (d) payroll processing (except with
respect to employees of the Owner), (e) computer usage including the cost of
software and hardware upgrades, (f) the cost of the insurance set forth in
Section 8.01 and (g) other administrative charges incurred by the Manager's
corporate office for the benefit of the Project.
ARTICLE IV
PROCEDURE FOR HANDLING RECEIPTS AND OPERATING CAPITAL
4.01. BANK DEPOSITS. All monies received by Manager for or on behalf of
Owner shall be deposited by Manager with the Depository. Manager shall maintain
a separate account for the Project consistent with the system of accounting of
the Project, in the name of the Project (the "Operating Account"). All funds on
deposit shall be and remain under the control of Manager and Owner, subject to
the provisions of this Agreement. Manager shall cause all rents, security
deposits (unless by law such security deposits must be retained in a separate
account), revenues, issues and profits from the Project to be deposited and
maintained in the Operating Account. Any interest earned on the Operating
Account shall accrue solely to the benefit of and be paid to Owner. All monies
of Owner held by Manager pursuant to the terms of this Agreement shall be held
by Manager in trust for the benefit of Owner to be held and disbursed as
provided in this Agreement, and shall not, unless Owner otherwise has agreed or
directed, be commingled with the funds of any other person, including Manager or
any affiliate of Manager.
4.02. SECURITY DEPOSITS. Manager shall hold in trust for the benefit of
Owner all existing and future security deposits relating to the Project. Manager
shall comply with all applicable laws with respect to such security deposits.
All security deposit funds held by Manager shall at all times be the property of
Owner, subject to all applicable laws with respect thereto.
4.03. DISBURSEMENT OF DEPOSITS. Except as otherwise provided herein
(including Section 2.11), Manager shall disburse and pay all funds on deposit on
behalf of and in the name of Owner in such amounts and at such times as required
in connection with the ownership, maintenance and operation of the Project on
account of all costs and expenses of maintaining, operating and supervising the
operation of the Project, including, but not limited to, salaries, fringe
benefits and expenses of the Project Employees, legal and accounting fees and
the cost and expense of utilities, services and concessions. Notwithstanding any
other provision of this Agreement to the contrary, Owner shall be responsible
for paying directly (and such sums shall not be paid out of the Operating
Account) all taxes, assessments and charges of every kind imposed by any
governmental authority having jurisdiction over the Project, all insurance
premiums for insurance coverage carried by the Owner with respect to the
Project, and any and all debt service and loan payments with respect to the
Project.
4.04. WORKING CAPITAL. Concurrently with its execution and delivery of
this Agreement, Owner has deposited with Manager the Working Capital Reserve for
the Project. If, due to an emergency situation or otherwise (including but not
limited to due to lower than expected occupancy of the Project or higher than
expected operating expenses), at any time Manager shall notify Owner in writing
that the balance of the Operating Account for the Project is insufficient to
fund the management activities for the Project, Owner shall promptly deposit in
the Operating Account the funds necessary to restore a sufficient balance.
Manager shall have no responsibility or obligation with respect to the
furnishing of such funds.
4.05. EXCESS FUNDS. Any operating funds in excess of the Working Capital
Reserve for the Project on deposit in the Operating Account (the "Excess Funds")
shall be transferred at the written request of Owner to a bank account opened
and maintained solely by Owner, following which Owner shall promptly deposit in
the Operating Account the funds necessary to restore a sufficient balance, in
accordance with Section 4.04. Manager shall have no liability for loss of funds
in the Operating Account due to insolvency of the Depository, even though the
amount of funds maintained exceeds the available federal or other deposit
insurance.
4.06. AUTHORIZED SIGNATORIES. In addition to any signatory designated by
Owner, any persons from time to time designated in writing by Manager shall be
authorized signatories on all bank accounts, including, without limitation, the
Operating Account, established by Manager hereunder and shall have authority to
make disbursements from such accounts. Funds may be withdrawn from all bank
accounts established by Manager, in accordance with this Article IV, only upon
the signature of an individual who has been granted that authority by Manager.
All persons who are authorized signatories or who in any way handle funds for
the Project shall be insured in accordance with the provisions of Article VIII.
ARTICLE V
ACCOUNTING
5.01. BOOKS AND RECORDS. Manager shall maintain separate books and records
for the Project, the entries to which shall be supported by documentation
sufficient to ascertain that said entries are properly and accurately recorded.
All such books and records shall be available for copy, inspection and review by
Owner or any local property supervisor retained by Owner at any time during
Manager's normal business hours and upon at least three Business Days prior
written notice. Manager shall maintain accounting records on a calendar year
basis. Manager shall, at the direction of the Owner, prepare and deliver
documentation, records and/or reports requested or required by any current or
prospective lender of the Project, provided that such documentation, records
and/or reports are either required to be kept or made pursuant to this Agreement
or may be created directly from documentation, records and/or reports required
to be kept or made pursuant to this Agreement.
5.02. PERIODIC STATEMENTS. Manager shall prepare and provide to Owner on
or before the 15th of each month, (a) a true and accurate rent roll for the
Project, (b) a detailed, unaudited income statement for the Project, (c) a
year-to-date report of the foregoing income statement with reference to the
Budget and (d) during the "lease up" of the Project a weekly update with respect
to leasing activity.
5.03. EXPENSES. All costs and expenses incurred in connection with the
preparation of any books, records, statements, budgets (including the Budget),
schedules, computations and other reports provided for under this Article V or
under any other provisions of this Agreement shall, unless expressly otherwise
set forth in this Agreement, be borne by Manager.
5.04. AUDIT; OWNERSHIP. In the event that Owner or Owner's mortgagee(s)
require an audit, Manager shall cooperate with the auditors. The foregoing books
and records (but not Manager's computer software program) shall be deemed owned
by Owner, but Manager shall be entitled to retain a copy of such books and
records upon the expiration or termination of this Agreement. Owner also may
perform additional audit tests, at Owner's sole cost and expense, either at the
Project or at the office of Manager, provided such audit tests are related to
the activities performed by Manager for Owner pursuant to this Agreement and
provided further that Owner gives Manager at least three (3) Business Days prior
written notice of such audit and such audit is conducted during normal business
hours. Further, all individuals conducting such audit shall, as a condition to
conducting such audit, execute a confidentiality agreement as reasonably
requested by Manager; provided, however, that such agreement shall not adversely
affect Owner's rights or remedies relating to such audit.
ARTICLE VI
INDEMNIFICATION
6.01. INDEMNIFICATION BY MANAGER. Manager shall indemnify, defend and hold
harmless Owner, its affiliates and their respective directors, officers,
partners, shareholders, employees, agents, contractors, tenants and invitees
from and against any and all actions, administrative proceedings, causes of
action, charges, claims, commissions, costs, damages, decrees, demands, duties,
expenses, fees, fines, judgments, liabilities, losses, obligations, orders,
penalties, recourses, remedies, responsibilities, rights, suits and undertakings
of every nature and kind whatsoever, including, but not limited to, reasonable
attorneys' fees and litigation expenses (collectively "Claims"), arising or
alleged to arise out of, directly or indirectly, the negligent or willful
misconduct of, or the breach of this Agreement (including Section 2.04) by,
Manager or Manager's employees, agents, representatives, contractors, invitees
and others for whom Manager is responsible.
6.02. INDEMNIFICATION BY OWNER. Owner agrees to defend, indemnify, and
hold harmless Manager, its affiliates and their respective partners, directors,
shareholders, officers and agents, against and from any and all Claims arising
from or related to directly or indirectly (a) the presence of Hazardous
Substances (as defined below) in, on or under the Project, except to the extent
that the Hazardous Substances are present as a result of acts or omissions of,
or the breach of this Agreement by, Manager or Manager's employees, agents,
representatives, contractors, invitees and others for whom Manager is
responsible or (b) Owner's breach of this Agreement. Without limiting the
generality of the foregoing, the indemnification provided by this Section 6.02
specifically shall cover costs incurred in connection with any investigation of
site conditions or any remediation, removal or restoration work required by any
federal, state or local governmental agency because of the presence of Hazardous
Substances in, on, under or about the Project. For purposes of this Section
6.02, "Hazardous Substances" shall mean all substances defined as hazardous
materials, hazardous wastes, hazardous substances, or extremely hazardous waste
under any federal, state, or local law or regulation. Notwithstanding the above,
Owner indemnity and defense obligations set forth in this Section 6.02 shall not
apply to Claims arising from or related to directly or indirectly Hazardous
Substances arising in, on or under the Project after the Owner's conveyance of
the Project pursuant to the Purchase Agreement except as otherwise set forth in
the Purchase Agreement.
6.03. COVENANTS CONCERNING PAYMENT OF OPERATING EXPENSES. Without limiting
the provisions of Section 4.05, Owner covenants to pay all sums for operating
expenses provided for in the Operating Budget in excess of Gross Receipts
required to operate the Project upon written notice and demand from Manager
within ten (10) days after receipt of written notice.
6.04. SURVIVAL OF INDEMNITY OBLIGATIONS. The obligations of the parties in
this Article VI shall survive the expiration or earlier termination of this
Agreement.
ARTICLE VII
DEFAULTS; TERMINATION RIGHTS
7.01. DEFAULT BY MANAGER. Manager shall be deemed to be in default under
this Agreement in the event Manager shall fail to keep, observe or perform any
material covenant, agreement, term or provision of this Agreement to be kept,
observed or performed by Manager, and such default shall (a) result from
Manager's negligence or willful misconduct; (b) involve Manager's
misappropriation or misapplication of funds received or held by Manager
hereunder; or (c) continue for a period of thirty (30) days (except in the case
of emergencies) after notice thereof by Owner to Manager, or if such default
cannot be cured within thirty (30) days, then such additional period as is
necessary in the circumstances, provided Manager commences its cure of same
within said thirty-day period and thereafter diligently pursues such cure to
completion, but in no event beyond sixty (60) days after such notice (in each
instance, an "Event of Default by Manager"). An Event of Default by Manager
shall not be deemed to be a default of Manager under any other agreement between
Manager and Owner, including but not limited to the Purchase Agreement, unless
otherwise provided in such agreement.
7.02. REMEDIES OF OWNER. Upon the occurrence of an Event of Default by
Manager as specified in Section 7.01 hereof, Owner shall be entitled to
terminate this Agreement and pursue any other remedy it may have at law or in
equity, it being expressly understood that following such a termination, Owner
shall have no further obligation to pay any Fee or other amount accruing with
respect to any period following the termination date. Notwithstanding such
termination, Manager shall not be relieved of any liability arising as a result
of Manager's default. Upon such termination, Manager shall deliver to Owner such
funds, books and records of Owner then in the possession or control of Manager,
and shall assign to such persons as may be designated by Owner all service
contracts and deliver all personal property relating to or used in the operation
and maintenance of the Project, except any personal property that was paid for
by Manager out of its own funds and which is the property of Manager. Owner
acknowledges that an Event of Default by Manager under this Agreement shall not
constitute a breach or default under the Purchase Agreement or any other
agreement between Owner and Manager.
7.03. DEFAULTS BY OWNER. Owner shall be deemed to be in default hereunder
in the event Owner shall fail to keep, observe or perform any material covenant,
agreement, term or provision of this Agreement to be kept, observed or performed
by Owner, and such default shall
continue for a period of five (5) Business Days after written notice thereof by
Manager to Owner as to any default in payment of money (including in Owner's
obligation to maintain the Working Capital Reserve for the Project in accordance
with Section 4.04), or thirty (30) days after notice thereof by Manager to Owner
as to any non-monetary default, or, if such non-monetary default cannot be cured
within thirty (30) days, then such additional period as shall be reasonable
provided that Owner is capable of curing same and has continuously attempted to
cure such default, but in no event beyond sixty (60) days after such notice (in
each instance, an "Event of Default by Owner"). An Event of Default by Owner
shall not be deemed to be a default of Owner under any other agreement between
Manager and Owner, including but not limited to the Purchase Agreement, unless
otherwise provided in such agreement.
7.04. REMEDIES OF MANAGER. Upon the occurrence of an Event of Default by
Owner as specified in Section 7.03 hereof, Manager, as its sole and exclusive
remedy, shall be entitled to terminate this Agreement. Following such
termination, Owner shall continue to be obligated to pay and perform all of its
obligations which have accrued with respect to the Project as of the date of
termination and Owner shall pay Manager, within three Business Days following
such termination, in addition to all other amounts payable to Manager under this
Agreement, a termination fee equal to the Fee paid for the last full calendar
month preceding the month in which the Agreement was terminated as liquidated
damages and as its sole and exclusive remedy; the parties hereby agreeing in
good faith that inasmuch as actual damages, if any, to Manager would be
speculative and difficult to ascertain, such termination fee shall serve as
complete liquidated damages to Manager in the event if such an Event of Default
by Owner and Owner shall have no further or other liability in connection
herewith.
7.05. EXPIRATION OF TERM. Upon the expiration of the Term, or the earlier
termination of this Agreement, Manager shall deliver to Owner all funds,
including tenant security deposits, books and records of Owner relating to the
Project then in possession or control of Manager, except for such sums as are
then due and owing to Manager under this Agreement or any other written
agreement between Owner and Manager. This provision shall survive the expiration
or earlier termination of this Agreement. This provision shall not be construed
as limiting any of the provisions of Section 5.4 of the Purchase Agreement.
7.06. FINAL ACCOUNTING. Manager shall, within thirty (30) days after the
termination date, deliver to Owner the following:
(a) an accounting reflecting the balance of income and expenses of
the Project to the termination date; and
(b) subject to the provisions of Section 5.4 of the Purchase
Agreement, the balance of moneys of Owner then held by Manager.
ARTICLE VIII
INSURANCE
8.01. MANAGER'S INSURANCE. Manager will obtain, at Manager's expense, the
following insurance, all of which must comply with the requirements of any
lender(s) to or mortgagee(s) of Owner notwithstanding any lesser or different
requirements set forth in this Agreement:
(a) Commercial general liability on a "per-occurrence" form for
bodily injury liability and property damage liability with limits of $1,000,000
combined single limit each occurrence and $2,000,000 from the aggregate of all
occurrences within each policy year, including but not limited to personal
injury and advertising injury, premises-operation, products/completed operations
hazard and contractual coverage (including coverage for the indemnity clause
provided under this Agreement) for claims arising out of actions beyond the
scope of its duties or authority under this Agreement (if a blanket policy,
endorsed to specify coverage of the Project), it being agreed that Manager's
insurance will be primary, and any insurance of Owner shall be secondary and in
excess of Manager's coverage.
(b) Comprehensive form automobile liability covering owned, hired
and non-owned vehicles of Manager with limits of $1,000,000 combined single
limit per occurrence.
(c) Employer's liability insurance in an amount not less than
$1,000,000.
(d) Excess liability (umbrella) insurance on the above with limits
of $2,000,000.
(e) Workers' compensation insurance covering the Project Employees
in accordance with the laws of the State of California.
(f) Blanket crime coverage protecting Manager against fraudulent or
dishonest acts of all Project Employees, whether acting alone or with others,
with limits of liability of not less than $100,000 in any one occurrence with a
maximum deductible of $500.00. Any loss within the deductible shall be borne by
Manager.
(g) Professional liability (professional errors and omissions)
insurance covering the activities of Manager written on a "per-occurrence" basis
with limits of at least $1,000,000 with a maximum deductible of $25,000. Any
loss within the deductible shall be borne by Manager. Coverage shall be
maintained in effect during the Term and for not less than two years after
termination of this Agreement.
(h) Each of the above policies will contain provisions giving Owner
at least thirty (30) days' prior written notice of cancellation or expiration of
coverage and name Owner (and any lender of Owner) as additional insureds on
items (a) and (d) of this Section 8.01. Owner (and any lender of Owner) are to
be named as loss payee on item (f) and (g) of this Section 8.01. Manager will
provide Owner with a certificate or certificates evidencing all required
coverages prior to the Effective Date and thereafter upon written request.
(i) Such insurance shall be placed with reputable insurance
companies licensed or authorized to do business in the State of California with
a minimum Best's rating of A-VII.
Manager acknowledges that in the event evidence of insurance is not timely
furnished in accordance with Section 8.01, that Owner may, but shall not be
obligated to, obtain such coverage on Owner's behalf and at Manager's expense.
Manager shall require that all contractors and subcontractors providing goods or
services to the Project be insured in amounts as reasonably determined from time
to time by Owner, and evidence same.
8.02. OWNER'S INSURANCE. All other insurance with respect to the Project,
including property, casualty and liability insurance, shall be obtained by
Owner.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.01. GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of California, without
regard to the choice of law provisions thereof.
9.02. NOTICES. Any notice, demand, consent, authorization or other
communication that any party to this Agreement is required or may desire to give
to or make upon the other parties to this Agreement pursuant to this Agreement
shall be in writing and shall be effective, valid (with confirmed receipt) and
duly given and received if hand delivered or sent by nationally recognized
overnight delivery service with receipt acknowledgement requested, by facsimile,
or by regular mail, postage prepaid to the addresses set forth below or to such
other address as any party to this Agreement may designate by notice to the
other parties from time to time. Notice so given shall be deemed given and
received if sent (a) by hand delivery, on the date of actual delivery; (b) by
overnight delivery service, on the next Business Day following the day such
notice is delivered to the overnight delivery service, with receipt
acknowledgment requested; (c) by facsimile with evidence of transmission
acceptance, on the date of actual transmission, or, if such notice is received
after 5:00 p.m. (at the destination), on the next Business Day; or (d) by mail,
on the fourth Business Day after posting.
If intended for Manager: United Dominion Realty Trust, Inc.
1745 Shea Center Drive, Suite 200
Highlands Ranch, Colorado 80129
Attention: W. Mark Wallis
Facsimile No.: 720-283-2454
and to: United Dominion Realty Trust, Inc.
4055 Valley View Lane, Suite 300
Dallas, Texas 75244
Attention: Matt Akin
Facsimile No.: 972-866-0163
and to: Morrison & Foerster LLP
370 17th Street, Suite 5200
Denver, Colorado 80202-5638
Attention: Warren L. Troupe
Facsimile No.: 303-592-1510
If intended for Owner: c/o Essex Apartment Value Fund, L.P.
925 East Meadow Drive
Palo Alto, CA 94303
Attn: Keith Guericke, John Burkart and
Jordan E. Ritter, Esq.
Telecopy No. (650) 858-1634 - Guericke,
(650) 565-9855 - Burkart,
(650) 858-1372 - Ritter
9.03. SEVERABILITY. If any term or provision of this Agreement conflicts
with the law under which this Agreement is to be construed or if any such
provision is held invalid by a court with jurisdiction over the parties to this
Agreement, such provision shall be deemed to be restated to reflect, as nearly
as possible, the original intentions of the parties in accordance with
applicable law, and the remainder of this Agreement shall remain unchanged and
in full force and effect.
9.04. NO JOINT VENTURE OR PARTNERSHIP; RISK OF LOSS. Owner and Manager
hereby agree that nothing contained herein or in any document executed in
connection herewith shall be construed as making Manager and Owner joint
venturers or partners. In no event shall Manager have any obligation or
liability whatsoever with respect to any debts, obligations or liabilities of
Owner. Risk of loss of the Project shall not pass, or be deemed to have passed,
to Manager.
9.05. MODIFICATION; TERMINATION. Any amendment, modification, termination
or release of this Agreement may be effected only by a written instrument
executed by Manager and Owner.
9.06. ATTORNEYS' FEES. Should either party employ an attorney or attorneys
to enforce any of the provisions hereof or to protect its interest in any manner
arising under this Agreement, or to recover damages for the breach of this
Agreement, the non-prevailing party in any action (the finality of which is not
legally contested) agrees to pay to the prevailing party all reasonable costs,
damages and expenses, including attorneys' and experts' fees, and costs expended
or incurred in connection therewith.
9.07. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties and there are no further agreements or
understandings, written or oral, in effect between the parties relating to the
subject matter hereof.
9.08. APPROVALS AND CONSENTS. If any provision hereof requires the
approval or consent of Owner or Manager to any act or omission, such approval or
consent shall not be unreasonably withheld or delayed.
9.09. CASUALTY. In the event that the Project, or any portion thereof, is
substantially or totally damaged or destroyed by fire, tornado, windstorm, flood
or other casualty during the Term, Manager or Owner may terminate this Agreement
upon giving the other party written notice of termination on or before the date
which is thirty (30) days after the date of such casualty.
9.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted successors
and assigns. Neither party shall have the right to assign this Agreement or to
delegate its duties hereunder to any other party without the other party's prior
written consent given in its absolute and sole discretion; provided
that Manager may assign this Agreement to any affiliate of Manager to which the
Manager is permitted to assign the Purchase Agreement pursuant to the terms
thereof.
9.11. FURTHER ACTIONS. Each party hereto shall, as often as reasonably
requested by the other party hereto, take such further actions as may be
necessary in order to carry out the purpose of this Agreement.
9.12. COUNTERPARTS; FACSIMILE. This Agreement may be executed in any
number of counterparts, any of which when taken together shall constitute one
and the same document. This Agreement may be executed and delivered by facsimile
signature; such transmission will be deemed a valid signature.
9.13. EQUAL EMPLOYMENT OPPORTUNITY. Without limitations of any other
provisions of this Agreement, Owner and Manager expressly agree to abide by any
and all applicable federal and/or state equal employment opportunity statues,
rules and regulations, including without limitation, Title VII of the Civil
Rights Act of 1964, the Equal Pay Act of 1963, the National Labor Relations Act,
the Fair Labor Standards Act, the Rehabilitation Act of 1973, the Occupational
Health and Safety Act of 1970, and the Americans With Disabilities Act, all as
may be from time to time modified or amended.
9.14. EQUAL HOUSING OPPORTUNITY. Without limitation of any other
provisions of this Agreement, Owner and Manager expressly agree to abide by any
and all applicable federal, state, county and municipal equal housing
opportunity statutes, rules and regulations, as from time to time modified or
amended prohibiting discrimination in housing on the grounds of race, color,
sect, creed or national origin, or source of income, including Title VI of the
Civil Rights Act of 1964 (Public Law 88-352, 78 Stat. 241), all requirements
imposed by or pursuant to the Regulations of the Secretary of HUD (24 CFR,
Subtitle A, Part 1) issued pursuant to that Title, and regulations issued
pursuant to Executive Order 11063 and Title VIII of the 1968 Civil Rights Act.
9.15. SUBORDINATION. This Agreement, and any renewals, extensions or
modifications thereof, and all rights and interests of Manager hereunder shall
at all times be subject and subordinate to any and all financing instruments of
and to the rights and claims of any lender(s) or mortgagees to or of Owner. This
provision shall be unconditional and self-operative, but, at the request of
Owner or such lender(s) or mortgagee(s), Manager shall execute any instrument
submitted to it in confirmation of the foregoing provisions.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.
OWNER:
ESSEX RIVERMARK APARTMENTS, L.P.
By: Essex Apartment Value Fund, L.P., a Delaware
limited partnership, its general partner
By: Essex VFGP, L.P., a Delaware limited
partnership, its general partner
By: Essex VFGP, Inc., a Delaware
corporation, its general partner
By:________________________________
Name:______________________________
Title:_____________________________
MANAGER:
UNITED DOMINION REALTY, L.P. a Delaware limited
partnership
By: United Dominion Realty Trust, Inc., a
Maryland corporation, its General Partner
By:______________________________
W. Mark Wallis
Executive Vice President