FORMATION AND CONTRIBUTION AGREEMENT

Exhibit 10.1

 

FORMATION AND CONTRIBUTION AGREEMENT

 

RREEF AMERICA REIT II CORP. TTT

 

AND

 

CARRAMERICA REALTY OPERATING PARTNERSHIP, L.P.

 

CarrAmerica Corporate Center

4400-4460 Rosewood

Pleasanton, California

 

Dated as of March 31, 2005

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

(continued)

 

 

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FORMATION AND CONTRIBUTION AGREEMENT

 

THIS FORMATION AND CONTRIBUTION AGREEMENT (this “ Agreement ”) is made and entered into as of March 31, 2005 (the “ Effective Date ”), by and between RREEF AMERICA REIT II CORP. TTT, a Maryland corporation (hereinafter called “ RREEF ”) and CARRAMERICA REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (hereinafter called “ CarrAmerica ”).

 

RECITALS

 

A. CarrAmerica is the fee owner of that certain real property in Pleasanton, California, more particularly described in Exhibit A attached hereto (the “ Land ”), together with all improvements thereon, and all rights and appurtenances thereto, including, without limitation, all easements and any and all right, title and interest of CarrAmerica in adjacent roads, alleys and easements. The Land and all Improvements thereon are defined below as the “ Real Property .”

 

B. Subject to the terms and conditions set forth in this Agreement, CarrAmerica and RREEF desire to form a Delaware limited liability company (the “ Venture ”), which Venture shall hold title to the Real Property.

 

NOW, THEREFORE, CarrAmerica and RREEF do hereby agree as follows:

 

ARTICLE I

 

BASIC DEFINITIONS

 

Accounting Agreement . The term “ Accounting Agreement ” shall mean that certain Accounting Agreement between Pleasant Partners, LLC, and RREEF Management Company in the form of Exhibit P hereto, to be executed on the Closing Date.

 

Affiliate . The term “ Affiliate ” shall mean, when used with reference to a specific Person, any Person directly or indirectly controlling, controlled by, or under common control with the Person in question. As used in this definition, the terms “controlling”, “controlled” and “control” mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

 

Agreed Value of the Property . The term “ Agreed Value of the Property ” shall mean One Hundred Ninety-Seven Million Three Hundred Thousand Dollars ($197,300,000).

 

Business Day . The term “ Business Day ” shall mean any day on which banks are open for business in San Francisco, California.

 

Closing . The term “ Closing ” shall mean the consummation of the transaction contemplated herein, including formation of the Venture and the contributions thereto by CarrAmerica and RREEF of the Property and the Contribution Amount, respectively.

Closing Date . The term “ Closing Date ” shall mean the date of the formation of the Venture and the contributions thereto by CarrAmerica and RREEF of the Property and the Contribution Amount, which date shall be March 31, 2005.

 

Closing Documents . The term “ Closing Documents ” shall mean, collectively, all of the documents and agreements delivered by CarrAmerica or RREEF in connection with the Closing, including, without limitation, all of the documents specified in Article VIII below, the Limited Liability Company Agreement, the Property Management Agreement, the Accounting Agreement and all documents related thereto.

 

Code . The term “ Code ” shall mean the United States Internal Revenue Code of 1986, as amended.

 

Contingency Period . See Section 3.01 below.

 

Contract Period . See Section 6.01 below.

 

Contracts . The term “ Contracts ” shall mean all of the contracts and agreements entered into by CarrAmerica or an Affiliate (other than the Leases) affecting the Property and extending beyond the Closing Date, as set forth on Exhibit B attached hereto; provided, however, that CarrAmerica shall terminate, at its cost and expense, on or prior to the Closing Date any listing agreement and management agreement, if any, currently in effect with respect to the Property and provide reasonable evidence of such termination to RREEF at or prior to Closing.

 

Contribution Amount . The term “ Contribution Amount ” shall mean the amount to be contributed by RREEF for its interest in the Venture, which amount shall be equal to One Hundred Sixty Million Dollars ($160,000,000). The capital accounts for RREEF and CarrAmerica as set forth in the Limited Liability Company Agreement shall be adjusted to reflect the actual net closing prorations and other adjustments agreed to by and between RREEF and CarrAmerica in connection with the Closing.

 

Deposit . See Section 2.03 , below.

 

Escrow Holder . The term “ Escrow Holder ” shall mean the Title Company.

 

Hazardous Materials . The term “ Hazardous Materials ” shall mean inflammable explosives, radioactive materials, asbestos, asbestos–containing materials, polychlorinated biphenyls, lead, lead-based paint, radon, under and/or above ground tanks, hazardous materials, hazardous wastes, hazardous substances, oil, or related materials, which are listed or regulated in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 6901, et seq .), the Resources Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901, et seq .), the Clean Water Act (33 U.S.C. Section 1251, et seq .), the Safe Drinking Water Act (14 U.S.C. Section 1401, et seq .), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq .), and the Toxic Substance Control Act (15 U.S.C. Section 2601, et seq. ), the California Hazardous Waste Control Law (California Health and Safety Code Section 25100, et seq .), the Porter-Cologne Water Quality Control Act (California Water Code Section 13000, et seq .), and the Safe Drinking Water and Toxic Enforcement Act of 1986 (California Health and Safety Code Section 25249.5, et seq .) and any other applicable federal, state or local laws.

 

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Improvements . The term “ Improvements ” shall mean all buildings, fixtures, walls, fences, landscaping and other structures and improvements situated on, affixed or appurtenant to the Land, including, without limitation, the corporate business park commonly known as the CarrAmerica Corporate Center, located at 4400-4460 Rosewood, Pleasanton, California, consisting of 8 buildings containing 1,019,864 square feet of net rentable area, including 6 Class “A” office buildings, a five-room state-of-the-art conference center, a cafeteria with seating for 600 guests, along with associated parking, open space and similar items.

 

Intangible Property . The term “ Intangible Property ” shall mean, to the extent assignable, and without any representations or warranties except as provided in this Agreement, all of CarrAmerica’s rights and interests, whether held directly or indirectly, in and to: (a) any and all permits, building plans and specifications, filings, working drawings, entitlements, certificates of occupancy, operating permits, sign permits, zoning and development rights and approvals (including, without limitation, any development rights transferred to the Real Property in connection with the development thereof), certificates, licenses, warranties and guarantees (including, without limitation, all bonds, unexpired warranties and guaranties related to construction of the Improvements or to any component thereof or to any Personal Property), trade names (including the names “CarrAmerica Corporate Center”), the CarrAmerica Corporate Center.com website, the CarrAmerica Corporate Center.com/org/net domain names, service marks, engineering, soils, pest control and other reports relating to the Property, tenant lists, advertising materials, and telephone exchange numbers identified with the Property and all deposits or fees paid in connection with such matters; (b) all Leases and Contracts; and (c) all other transferable intangible property, miscellaneous rights, benefits or privileges of any kind or character with respect to the Property; but excluding (i) any rights of CarrAmerica against third parties with respect to the period prior to Closing (to the extent required to permit CarrAmerica to be indemnified or reimbursed by, or otherwise recover from, any third party in respect of any liability or potential liability of CarrAmerica), and (ii) except to the extent CarrAmerica receives a credit therefor at Closing, the rights of CarrAmerica to rents and other payments from tenants and other third parties (including, without limitation, any unpaid tenant improvement reimbursements payable to the landlord under the Leases which are not being amortized and which are not part of the rental due under the Leases) for the period prior to Closing, but provided, however, CarrAmerica shall have no right to cause any such tenant to be evicted or to exercise any other landlord remedy against such tenant. Intangible Property shall not include the name “CarrAmerica”, “CarrAmerica Realty Corporation” or any other CarrAmerica name, website or domain name other than “CarrAmerica Corporate Center”, CarrAmerica Corporate Center.com website and CarrAmerica Corporate Center.com/org/net domain names.

 

Land . See Recital A above.

 

Leases . The term “ Leases ” shall mean all existing leases, subleases and rental agreements, amendments thereto and any guaranties thereof affecting the Improvements or any portion thereof, all of which are set forth on Exhibit C hereto.

 

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Limited Liability Company Agreement . The term “ Limited Liability Company Agreement ” shall mean that certain Limited Liability Company Agreement between RREEF and CarrAmerica Pleasanton LLC (“CarrAmerica Pleasanton”) in the form of Exhibit D hereto, to be executed on the Closing Date.

 

Losses . The term “ Losses ” shall mean claims, losses, damages, costs, causes of action, liens, encumbrances, liabilities and expenses, including, without limitation, reasonable attorneys’ fees and costs.

 

Major Tenants . The term “ Major Tenants ” shall mean AT&T Corporation, Pacific Bell Mobile Services, Ross Stores, and Safeway.

 

Permitted Exceptions . See Section 3.04 below .

 

Person . The term “ Person ” shall mean a natural person, or any entity, and the successors and assigns of such Person, where the context so permits.

 

Personal Property . The term “ Personal Property ” shall mean all furniture, furnishings, trade fixtures, building systems and equipment and other tangible personal property owned or leased by CarrAmerica that is located at the Real Property (including, without limitation, in the conference center, the cafeteria/kitchen, the on-site management office, and the mechanical rooms) and is used by CarrAmerica primarily in connection with the ownership, management and/or operation of, the Real Property (including, without limitation: (a) materials, supplies and inventory; (b) safety, heating, ventilation, air conditioning, elevator, escalator, telephone, computer, electrical, plumbing, sanitation, kitchen, mechanical and other systems and facilities; (c) carpeting and floor coverings, draperies, wall coverings, artwork, office furniture and equipment such as safes, computer, duplicating and communication equipment, and telephone equipment; (d) decorative lighting, material handling equipment, and cleaning and engineering equipment, and (e) supplies, fuels, mechanical stores, paper supplies, stationery, literature, cleaning materials, light bulbs, and other consumable items and inventories). A nonexclusive list of the Personal Property is attached as Exhibit A to the Bill of Sale attached hereto as Exhibit I . Notwithstanding anything to the contrary contained herein, the Personal Property shall not include the items described on Exhibit Q attached hereto.

 

Property . The term “ Property ” shall mean the Real Property, the Personal Property and the Intangible Property.

 

Property Management Agreement . The term “ Property Management Agreement ” shall mean that certain Property Management Agreement, in the form of Exhibit E to this Agreement, to be entered into on the Closing Date between the Venture and CarrAmerica Real Estate Services, LLC, with respect to the management of the Property.

 

Real Property . The term “ Real Property ” shall mean the Land and the Improvements.

 

Title Company . The term “ Title Company ” shall mean Chicago Title Company, 700 S. Flower Street, Suite 3305, Los Angeles, California 90017, Attn: Frank Jansen. Title Company shall also serve as Escrow Holder for the transaction contemplated herein.

 

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Title Policy . The term “ Title Policy ” shall mean an ALTA owner’s extended coverage policy of title insurance (Form B, rev. 10/17/70), issued by the Title Company insuring that fee title to the Real Property is vested in the Venture, in an amount equal to the Agreed Value of the Property, subject only to the Permitted Exceptions, containing such endorsements as RREEF may reasonably require (including, without limitation, a nonimputation endorsement), and with reinsurance provided by such other title companies and in such amounts as the RREEF may reasonably require, pursuant to ALTA Facultative Reinsurance Agreements (9/24/94).

 

Venture . See Recital B above.

 

ARTICLE II

 

FORMATION AND CONTRIBUTION

 

Section 2.01 Formation . CarrAmerica and RREEF (directly or through such assignees of the parties as may be permitted pursuant to Section 9.04 below) agree to form the Venture by entering into the Limited Liability Company Agreement on the Closing Date, upon and subject to all of the terms, covenants and conditions set forth in this Agreement.

 

Section 2.02 Contributions to the Venture . Subject to the terms and conditions set forth in this Agreement, on the Closing Date, (a) RREEF shall contribute to the Venture the Contribution Amount, (b) CarrAmerica shall contribute, assign, and transfer to the Venture, and RREEF and CarrAmerica shall cause the Venture to accept from CarrAmerica, CarrAmerica’s right, title and interest in and to the Real Property and the Personal Property; and (c) CarrAmerica shall contribute, assign, and transfer to the Venture, and RREEF and CarrAmerica shall cause the Venture to accept and assume (except as otherwise provided herein) from CarrAmerica, CarrAmerica’s rights under the Intangible Property and all obligations that accrue thereunder from and after the Closing.

 

Section 2.03 Contribution Amount and Deposit . The Contribution Amount shall be paid by RREEF to the Venture as follows:

 

(a) Within three (3) days after the Effective Date, CarrAmerica and RREEF shall open an escrow with Escrow Holder and RREEF shall deposit the sum of Two Million Dollars ($2,000,000) by wire transfer of federal funds or other immediately available form of funds (the “ Deposit ”). Escrow Holder shall invest the Deposit in an interest bearing account subject to RREEF’s reasonable approval; provided, however, that Escrow Holder shall invest the Deposit only in such a manner as will allow Escrow Holder to disburse the Deposit on two (2) Business Days’ notice. Interest on the Deposit shall belong to RREEF. Prior to the expiration of the Contingency Period, Escrow Holder shall return the Deposit to RREEF on RREEF’s notification that this Agreement has terminated. If the transaction contemplated herein closes, the Deposit and all interest accrued thereon shall be applied and credited towards the Contribution Amount at Closing.

 

(b) The balance of the Contribution Amount (i.e., the Contribution Amount, minus the Deposit and any interest earned on the Deposit), together with RREEF’s share of all closing costs, shall be deposited with Escrow Holder by wire transfer or in immediately available funds not later than the time required in order to close the transaction contemplated hereby at 11:59 P.M. Pacific Daylight Time on the Closing Date.

 

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(c) In the event RREEF rightfully terminates this Agreement at or prior to the end of the Contingency Period, the Deposit and all interest earned thereon, without any deductions whatsoever, shall be returned to RREEF, and neither party shall have any further rights or obligations hereunder, except as provided in Sections 3.02, 9.03, 9.15 and 9.17 hereof.

 

(d) AFTER RREEF’S ELECTION TO PROCEED HEREUNDER AT THE CLOSE OF THE CONTINGENCY PERIOD, IF THE CLOSING FAILS TO OCCUR DUE TO A BREACH OF ANY COVENANTS OF RREEF HEREUNDER, INCLUDING, WITHOUT LIMITATION, RREEF’S WRONGFUL FAILURE TO CLOSE (BUT NOT IF THE CLOSING FAILS TO OCCUR AS A CONSEQUENCE OF THE FAILURE OF ANY CONDITION PRECEDENT SPECIFIED IN SECTION 4.01(a) OR ELSEWHERE HEREIN) CARRAMERICA SHALL BE ENTITLED TO RECEIVE AND RETAIN THE DEPOSIT (INCLUDING ALL INTEREST EARNED THEREON) AS LIQUIDATED DAMAGES AND NOT A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. THE PARTIES ACKNOWLEDGE THAT CARRAMERICA’S ACTUAL DAMAGES IN THE EVENT OF SUCH A DEFAULT BY RREEF WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES EXPRESSLY AGREE AND ACKNOWLEDGE THAT THE AMOUNT OF THE DEPOSIT HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES’ REASONABLE ESTIMATE OF CARRAMERICA’S DAMAGES IN SUCH EVENT. THE PARTIES FURTHER ACKNOWLEDGE THAT THE DEPOSIT HAS BEEN AGREED UPON AS CARRAMERICA’S SOLE AND EXCLUSIVE REMEDY AT LAW OR IN EQUITY AGAINST RREEF EXCEPT FOR ANY RIGHTS CARRAMERICA MAY HAVE UNDER SECTIONS 3.02, 9.03, 9.15 AND 9.17 HEREOF.

 

 

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(e) If the Closing fails to occur due to a breach of any material covenants of CarrAmerica hereunder, including, without limitation, CarrAmerica’s wrongful failure to close (but not if the Closing fails to occur as a consequence of the failure of any condition precedent specified in Section 4.01(b) or elsewhere herein), RREEF shall be entitled to receive back the Deposit and all interest thereon, and commence an action against CarrAmerica for breach of this Agreement and a claim for damages and expenses (including, but not limited to, any out-of-pocket title, escrow, legal and inspection fees, costs and expenses incurred by RREEF in connection with the performance of its due diligence review of the Property and the negotiation and performance of this Agreement, including, without limitation, environmental and engineering consultants’ fees and expenses); provided, however, the maximum aggregate amount which may be awarded to and collected by RREEF against CarrAmerica pursuant to an action taken under this Section 2.03(e) shall not exceed Two Million Dollars ($2,000,000). The parties acknowledge and agree that the remedy provided for in this Section 2.03(e) has been agreed upon as RREEF’s sole and exclusive remedy at law or in equity if the Closing fails to occur as a result of a breach or default by CarrAmerica under this Agreement.

 

ARTICLE III

 

CONTINGENCY PERIOD

 

Section 3.01 Contingency Period . The Contingency Period shall commence on the Effective Date and shall expire on March 31, 2005, at 11:59 P.M. Pacific Daylight Time (the “ Contingency Period ”), during which time RREEF may conduct such inspections, determine and approve the Property income and operating expenses, review and approve the Leases and any other relevant documents and information, and undertake any other due diligence regarding the Property as it desires or deems necessary. At any time during the Contingency Period, RREEF may determine, in its sole and absolute discretion, not to proceed hereunder. In that event, RREEF may terminate this Agreement by written notice to CarrAmerica, in which case the Deposit (including any interest accrued thereon) shall be returned to RREEF and neither party shall have any further rights or obligations hereunder, except as provided in Sections 3.02, 9.03, 9.15 and 9.17 hereof. If RREEF elects to go forward with the formation of the Venture and acquisition of an interest therein, RREEF shall give notice to CarrAmerica in writing of such election to proceed at any time prior to the expiration of the Contingency Period; and such election by RREEF shall be irrevocable, provided that if RREEF proceeds to go forward with the formation of the Venture, then RREEF shall be deemed to have given such notice. Failure by RREEF to so notify CarrAmerica prior to the expiration of the Contingency Period of such unconditional election to proceed, or, in the alternative, actually to proceed to go forward with the formation of the Venture, shall be deemed RREEF’s election not to proceed hereunder and to terminate this Agreement as provided above.

 

Section 3.02 Right of Entry and Inspection . During the Contingency Period, RREEF and its consultants and advisors may enter upon all portions of the Property to perform such tests and inspections of the Property as RREEF desires, at RREEF’s sole cost and expense, including, but not limited to, conducting soils tests, tests for the presence of hazardous substances and wastes, and engineering, geological, mechanical and structural inspections; provided, however, (i) CarrAmerica’s prior consent shall be required before RREEF undertakes any invasive tests or borings on the Property, (ii) any invasive tests or borings shall be subject to conditions imposed

 

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by CarrAmerica in its reasonable judgment with respect to method, location and other aspects of the tests or borings, and (iii) CarrAmerica shall be previously informed of and permitted to accompany RREEF and RREEF’s consultants and advisors at all times while RREEF or RREEF’s consultants and advisors are present on the Real Property. Promptly after undertaking any invasive test or boring or any other inspection on the Property, RREEF shall restore the Property to its condition immediately prior to any such test, boring or inspection. RREEF agrees to indemnify, defend and hold harmless CarrAmerica, its partners, and their respective officers, directors, employees, agents, affiliates, successors and assigns, from and against any and all Losses arising out of, in connection with or incidental to any injury or death to any person or any damage to the Property or any property of third parties or other property of CarrAmerica, or liens which attach to the Property, by reason of RREEF’s or RREEF’s consultants’ or advisors’ activities on the Property prior to Closing; provided, however, that such indemnification shall not apply to hazardous or toxic materials or other condition presently existing on or about the Real Property, whether disclosed to or discovered by RREEF. This indemnity shall survive the Closing or any earlier termination of this Agreement.

 

(a) Upon CarrAmerica’s written request, RREEF shall provide CarrAmerica with copies of any test, report, survey, study or other document or information (other than economic analysis and other documents constituting RREEF’s trade secrets or proprietary information) obtained by RREEF in connection with any of its inspections. In the event, as a result of RREEF’s inspections hereunder, the need arises to notify under applicable law any federal, state or local public agencies of any environmental conditions at the Real Property, RREEF shall immediately notify CarrAmerica. RREEF agrees that CarrAmerica, and not RREEF or RREEF’s representatives, shall make such disclosure as CarrAmerica deems appropriate, unless such disclosure is required by law to be made by RREEF or RREEF’s representatives, in which instance RREEF or such RREEF’s representatives shall make such disclosure and RREEF shall immediately notify CarrAmerica in writing. This obligation shall survive the Closing or any earlier termination of this Agreement.

 

(b) In exercising RREEF’s inspection rights described in this Section 3.02 , RREEF shall (i) notify CarrAmerica and obtain CarrAmerica’s approval prior to contacting any tenant of the Property (and shall give CarrAmerica an opportunity to be present at any such tenant meeting), (ii) give not less than two (2) Business Days’ notice to CarrAmerica of any visit to or inspection of the Property, and (iii) conduct all visits, inspections and reviews in a manner consistent with and not likely to disturb the normal operations of the Property, and in such a manner as to minimize, to the extent reasonably practical, any disruption to the tenants of the Property due to such visits, inspections and reviews. CarrAmerica agrees to reasonably cooperate with RREEF in connection with RREEF’s review and inspections of the Property during the Contingency Period.

 

Section 3.03 CarrAmerica’s Delivery of Documents . Promptly following the Effective Date, CarrAmerica shall, at CarrAmerica’s sole cost and expense, either provide RREEF with, or otherwise make available to RREEF for its review, (a) copies of all information and documents relating to the Property in CarrAmerica’s possession and listed on Exhibit F hereto, and (b) all other documents and information in CarrAmerica’s possession, so long as such requested documents and information are neither subject to a legal privilege nor contain CarrAmerica’s trade secrets or proprietary information (such as any appraisal or other economic analysis of the

 

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Property). In the event the transaction contemplated herein does not close, RREEF agrees to return to CarrAmerica promptly upon request by CarrAmerica, all documents and information so furnished to RREEF hereunder by or on behalf of CarrAmerica, without retaining copies thereof, and agrees to keep such documents and information obtained from CarrAmerica confidential as provided in Section 9.15 .

 

Section 3.04 Title Review .

 

(a) CarrAmerica shall, at CarrAmerica’s sole cost and expense, provide to RREEF promptly after the Effective Date, (i) a title report for the entire Real Property (the “ Title Report ”), not more than sixty days old, issued by the Title Company, together with copies of all instruments underlying or giving rise to all exceptions to coverage that would appear in an ALTA owner’s extended coverage title policy, and (ii) a print of the most recent ALTA survey of the Land and Improvements obtained by CarrAmerica (the “ Survey ”). If RREEF determines that any of the exceptions to title reflected in the Title Report are unacceptable for any reason, or that any matter reflected on the Survey (as the same may be updated during the Contingency Period as required by RREEF, at its sole cost and expense) is unacceptable for any reason (in each case, an “ Objectionable Exception ”), RREEF shall so notify CarrAmerica in writing (the “ Title Notice ”) not later than five (5) days prior to the expiration of the Contingency Period. Other than new exceptions discussed below, any title matters not identified as Objectionable Exceptions in the Title Notice shall be deemed “Permitted Exceptions.” Notwithstanding the foregoing, any mortgage lien granted by CarrAmerica, any mechanics lien relating to the construction of the Improvements under a contract entered into by CarrAmerica, or any judgment lien against CarrAmerica recorded against the Real Property shall be deemed an Objectionable Exception and CarrAmerica shall remove or insure over any such lien as an encumbrance against title to the Real Property at or prior to the Closing.

 

(b) CarrAmerica shall give RREEF written notice (the “ Title Response ”) within two (2) days after receipt of the Title Notice of whether CarrAmerica will undertake to remove or cure the identified Objectionable Exceptions (whether by causing the elimination of such exception, or by obtaining a title insurance endorsement insuring the Venture as to such matters or other remedy reasonably acceptable to RREEF). CarrAmerica, at its option, may direct that all or any portion of the Contribution Amount be used to pay, through the Closing escrow, any monetary liens, encumbrances or other matters constituting Objectionable Exceptions. If CarrAmerica does not elect to remove or cure all of the Objectionable Exceptions, then RREEF may (1) elect in its sole and absolute discretion to terminate this Agreement by written notice to CarrAmerica, in which case the Deposit (including any interest accrued thereon) shall be returned to RREEF and neither party shall have any further rights or obligations hereunder, except as provided in Sections 3.02, 9.03, 9.15 and 9.17 hereof, or (2) proceed to close hereunder, and accept the Property subject to the Objectionable Exceptions (other than liens that CarrAmerica is obligated, or has agreed, to cure or remove) and the same shall thereupon be deemed Permitted Exceptions.

 

(c) Notwithstanding the above, any new exception revealed by an update to the Title Report first delivered to RREEF after the date of the Title Notice must be designated in writing (the “ New Title Notice ”) by RREEF as an Objectionable Exception, if at all, within five (5) days after receipt of the update to the Title Report. CarrAmerica shall give RREEF a Title

 

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Response within five (5) days after receipt of the New Title Notice, and any such new exceptions timely identified as Objectionable Exceptions in the New Title Notice shall be dealt with in the same manner as set forth in Section 3.04(b) above.

 

Section 3.05 Contracts . Not later than the end of the Contingency Period, RREEF shall notify CarrAmerica of which Contracts the Venture will assume at Closing; provided, however, RREEF agrees that the Venture shall assume any Contract which, by its terms, cannot be terminated prior to the Closing without cost or other penalty. Except as provided above, CarrAmerica shall terminate all Contracts that RREEF does not agree to cause the Venture to assume, effective as of the Closing Date.

 

Section 3.06 Disclaimer; As Is Transaction . Upon the Closing and delivery by CarrAmerica to the Venture of possession of the Property, RREEF and the Venture shall be deemed to have accepted the Property in its “AS-IS” condition as of the Closing Date, subject only to the representations and warranties expressly provided in Section 5.01 herein and/or the representations and warranties of CarrAmerica contained in any Closing Document executed and delivered at Closing by CarrAmerica pursuant to this Agreement (collectively, “ CarrAmerica’s Warranties ”). Except for CarrAmerica’s Warranties, RREEF is not relying on any verbal or written representations, warranties, promises or guarantees (whether express, implied, statutory or otherwise) to RREEF with respect to the Property, any matter set forth, contained or addressed in the documents delivered to RREEF in connection with the Property (including, but not limited to, the accuracy and completeness thereof) or the results of RREEF’s due diligence; and (c) RREEF has confirmed independently all information that it considers material to its purchase of the Property or the transaction contemplated hereby. RREEF specifically acknowledges that, except for CarrAmerica’s Warranties, RREEF is not relying on (and CarrAmerica does hereby disclaim and renounce) any representations or warranties of any kind or nature whatsoever, whether oral or written, express, implied, statutory or otherwise, as to: (1) the operation of the Property or the income potential, uses, or the merchantability, habitability or fitness of any portion of the Property for a particular purpose; (2) the physical condition of the Property or the condition or safety of the Property or any component thereof, including, but not limited to, plumbing, sewer, heating, ventilating and electrical systems, roofing, air conditioning, foundations, soils and geology, including Hazardous Materials, lot size, or suitability of the Property or any component thereof for a particular purpose; (3) the presence or absence, location or scope of any Hazardous Materials in, at, about or under the Property; (4) whether the appliances, if any, plumbing or utilities are in working order; (5) the habitability or suitability for occupancy of any structure or the quality of its construction; (6) whether the improvements are structurally sound, in good condition, or in compliance with applicable laws; (7) the dimensions of the Property or the accuracy of any floor plans, square footage, lease abstracts, sketches, or revenue or expense projections related to the Property; (8) the operating performance, the income and expenses of the Property or the economic status of the Property; (9) the ability of RREEF to obtain any and all necessary governmental approvals or permits for RREEF’s intended use and development of the Property, and (10) the accuracy or completeness of any documents and information delivered to or made available to RREEF by any of the CarrAmerica Related Parties for its review. The provisions of this Section 3.06 shall survive the Closing.

 

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Section 3.07 Release .

 

(a) Without limiting the above, and subject to the CarrAmerica Warranties and any covenants of Seller contained in this Agreement or in any of the Closing Documents and subject to the provisions of Section 3.07(c) below, from and after the Closing, RREEF on behalf of itself and its successors and assigns waives its right to recover from, and forever releases and discharges, CarrAmerica, CarrAmerica’s Affiliates, the partners, trustees, beneficiaries, shareholders, members, managers, directors, officers, employees and agents and representatives of each of them, and their respective heirs, successors, personal representatives and assigns (collectively, the “ CarrAmerica Related Parties ”), from any and all demands, claims, legal or administrative proceedings, losses, liabilities, damages, penalties, fines, liens, judgments, costs or expenses whatsoever (including, without limitation, court costs and attorneys’ fees and disbursements), whether direct or indirect, known or unknown, foreseen or unforeseen, that may arise on account of (i) the physical condition of the Property including, without limitation, all structural and seismic elements, all mechanical, electrical, plumbing, sewage, heating, ventilating, air conditioning and other systems, the environmental condition of the Property and the presence of Hazardous Materials on, under or about the Property, or (ii) any law or regulation applicable to the Property, including, without limitation, any laws with respect to Hazardous Materials and any other federal, state or local law. The provisions of this Section 3.07 shall survive the Closing.

 

(b) In connection with Section 3.07(a) above, RREEF expressly waives the benefits of Section 1542 of the California Civil Code, which provides as follows: “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.” RREEF ACKNOWLEDGES AND AGREES THAT IT HAS BEEN REPRESENTED BY LEGAL COUNSEL OF ITS CHOICE IN CONNECTION WITH THIS AGREEMENT, AND THAT SUCH COUNSEL HAS EXPLAINED TO BUYER THE PROVISIONS OF THIS SECTION 3.07 . BY INITIALING BELOW, RREEF CONFIRMS IT HAS AGREED TO THE PROVISIONS OF THIS SECTION 3.07 .

 

RREEF’S INITIALS:                                     

 

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(c) Notwithstanding anything to the contrary contained in this Article, RREEF is not releasing any claims RREEF may have against CarrAmerica, CarrAmerica’s Affiliates or any of CarrAmerica’s Related Parties arising out of (i) any breach of any of CarrAmerica’s Warranties or any of CarrAmerica’s covenants in this Agreement or under the Closing Documents, or (ii) any claims by RREEF against CarrAmerica, CarrAmerica’s Affiliates or any of CarrAmerica’s Related Parties arising out of claims against RREEF or the Venture by third parties for personal injury or property damage with respect to events occurring prior to Closing during CarrAmerica’s (or its Affiliate’s) period of ownership, and not actually discovered during RREEF’s inspections pursuant to Section 3.02, provided that the exclusion in this clause (ii) shall not apply to third party claims for remediation of environmental conditions on the Property or any other real properties or for the repair or replacement of physical conditions on the Property.

 

ARTICLE IV

 

CONDITIONS PRECEDENT

 

Section 4.01 Conditions Precedent .

 

(a) Notwithstanding anything in this Agreement to the contrary, RREEF’s obligation to form the Venture, to cause the Venture to accept and assume the contribution of the Property from CarrAmerica, and to pay the Contribution Amount shall be subject to and contingent upon the satisfaction or waiver of the following conditions precedent:

 

(i) Prior to Closing, CarrAmerica shall have performed, or tendered performance of, in all material respects, all its material obligations under this Agreement, including delivery to RREEF or the Venture, as the case may be, of all of the items required to be delivered by CarrAmerica pursuant to Section 8.02 below.

 

(ii) CarrAmerica’s representations and warranties set forth in Section 5.01 hereof, as qualified or limited by Schedule 1 hereto, shall be true and correct in all material respects at the time made and as of the Closing Date. CarrAmeric