AGREEMENT

Exhibit 10.15

 

AGREEMENT

 

By and Between

 

HIGHWOODS REALTY LIMITED PARTNERSHIP,

A North Carolina Limited Partnership

 

and

 

JOHN L. TURNER, SR. and

ROBERT GOLDMAN,

 

and

 

Allman Spry Leggett & Crumpler, P.A.

 

as Escrow Agent

TABLE OF CONTENTS

 

 

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STATE OF NORTH CAROLINA

 

AGREEMENT

 

COUNTY OF FORSYTH

 

THIS AGREEMENT (this “Agreement”) is made and entered into as of the 28 ^th day of January, 2005, by and between HIGHWOODS REALTY LIMITED PARTNERSHIP, a North Carolina Limited Partnership (“Highwoods”) and JOHN L. TURNER, SR. and ROBERT GOLDMAN, (the “Distributees”) and Allman Spry Leggett & Crumpler, P.A. (“Escrow Agent”).

 

WITNESSETH :

 

WHEREAS, the Distributees are limited partners in Highwoods and the Distributees and Highwoods have agreed that Highwoods will make a current “in-kind” distribution of property to the Distributees in reduction of the Distributees’ capital interest in Highwoods. It is intended that Highwoods’ distribution of property to the Distributees will be a non-taxable distribution of property pursuant to Section 731(a) of the Internal Code 1986 as amended.

 

WHEREAS, Highwoods and the Distributees desire to enter into this Agreement to incorporate all prior negotiations and dealings of the parties with respect to the transaction contemplated hereby.

 

NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, the payment of earnest money, and other good and valuable consideration, receipt of which is hereby acknowledged by Highwoods, the parties hereto agree as follows:

 

1. AGREEMENT TO MAKE PARTNERSHIP DISTRIBUTION . Highwoods agrees to distribute, assign and convey to the Distributees, and the Distributees agree to accept such distribution and conveyance from Highwoods, of all that Property as defined and described in Section 2 hereof. The distribution by Highwoods to each Distributee as described above shall consist of a fifty percent (50%) undivided interest in the Land, as defined below , as tenant in common with the other Distributee and a fifty percent (50%) interest in all of the remaining Property not constituting real estate.

 

2. DESCRIPTION OF SUBJECT PROPERTY . The property owned by Highwoods which is the subject of this Agreement is as follows:

 

(a) that tract containing approximately 14.2247 acres of land and being described on Exhibit A (attached hereto and incorporated herein by reference), together with all right-of-ways and easements appurtenant thereto (said tract being commonly known as 3928 Westpoint Boulevard, Winston-Salem, North Carolina and being hereinafter referred to as the “Land”).

 

(b) All of Highwoods’ right, title and interest in and to all rights, privileges, and easements appurtenant to the Land, including all water rights, rights-of-way, roadways, parking areas, roadbeds, alleyways and reversions or other appurtenances used in connection with the beneficial use of the Land.

 

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(c) All improvements, buildings, structures, related amenities and fixtures located on the Land and owned by Highwoods including, without limitation, that warehouse building containing approximately 240,879000 square feet (hereinafter referred to as the “Building”), any and all other buildings, structures and amenities currently located on the Land, all fixtures, apparatus, equipment, vaults, machinery and built-in appliances used in connection with the operation and occupancy of the Land such as heating and air conditioning systems, electrical systems, plumbing systems, sprinkler and other fire protection and life safety systems, refrigeration, ventilation, or other facilities or services on the Land (all of which are together hereinafter called the “Improvements”).

 

(d) Except as hereinafter set forth, all personal property to be described on Exhibit B pursuant to Section 4(b) hereof located on or in or used exclusively in connection with the Land and Improvements and owned by Highwoods and used or usable in the operation of the Property (as defined below) including, without limitation, fittings, appliances, shades, furniture, furnishings, and other furnishings or items of personal property used or usable in connection with the Building’s HVAC systems, but excluding all personal property located on the Land or in the Building owned by the tenant thereof or contractors who provide service to the Building or is not otherwise owned by Highwoods (hereinafter called the “Personal Property”). Notwithstanding the above, the Personal Property being purchased hereby shall not include those items of Personal Property described on Exhibit B-1 , attached hereto and incorporated herein by reference. After the date of this Agreement, Highwoods shall not remove any Personal Property from the Building, Land or Improvements without the prior written consent of The Distributees.

 

(e) All of Highwoods’ interest, if any, in the intangible property now or hereafter owned by Highwoods and used or usable in connection with the Property, Land, Improvements or Personal Property, that lease of the Building set forth on Exhibit C (the “Lease”), ground leases, subleases, prepaid rent, security deposits, contract rights, escrow deposits, utility agreements, guaranties, warranties, zoning rights or other rights related to the ownership of or use and operation of said Property, but excluding the rights to use the trade style name Highwoods Properties, and derivations thereof and any other trademarks used in connection therewith. A list of the service, maintenance and/or management contracts affecting or relating to the Property (the “Service Contracts”), some of which The Distributees may agree to assume prior to Closing, and all guaranties and warranties relating to the Property which are assignable together with a description of all pertinent terms and provisions of such Service Contracts, guaranties and warranties shall be set forth in Exhibit C-1 and attached hereto prior to Closing. All Service Contracts that are not assumed by The Distributees shall be terminated at or before Closing.

 

All of the items of property described in Subsections (a), (b), (c), (d) and (e) above are hereinafter collectively called the “Property.”

 

It is hereby acknowledged by the Distributees that Highwoods shall not convey to the Distributees claims relating to any real property tax refunds or rebates for periods occurring

 

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prior to Closing, (as hereinafter defined), existing insurance claims and any existing claims against the Tenant or former tenants of the Property related to claims or causes of actions which arise prior to the Closing Date, which claims shall be reserved by Highwoods.

 

3. REDUCTION OF THE DISTRIBUTEES’ CAPITAL INTEREST IN HIGHWOODS.

 

Subject to the terms and conditions of this Agreement, the Distributees agree that their capital interest in Highwoods shall be reduced by Three Million One Hundred Twelve Thousand Five Hundred and No/100 Dollars ($3,112,500) each , that is Six Million Two Hundred Twenty-Five Thousand and No/100 Dollars ($6,225,000) in the aggregate, (subject to prorations and adjustments as described herein) as the result of the distribution of the Property by Highwoods to the Distributees. This reduction in each Distributees’ capital interest in Highwoods shall occur by the redemption from each Distributee of that number of partnership units owned by each Distributee in Highwoods (the “Partnership Units”) determined by dividing $3,112,500 by the average of the closing prices of the common stock of Highwoods Properties, Inc. (Highwoods’ general partner) as listed on the New York Stock Exchange on the ten (10) business days immediately preceding the date of the Closing of the transaction contemplated by this Agreement.

 

(a) Binder Deposit and Escrow Agent’s Duties and Rights . Within five (5) business days after the full execution of this Agreement, the Distributees shall pay and deliver to the Escrow Agent in United States currency the sum of Forty Thousand and No/100 Dollars ($40,000.00) as a binder deposit (such amount, together with all interest earned thereon, being referred to herein as the “Binder Deposit”). Escrow Agent shall hold the Binder Deposit in trust for the mutual benefit of the parties, subject to the following terms and conditions:

 

(i) Escrow Agent shall deposit the Binder Deposit in an interest bearing account in an institution as directed by the Distributees, and reasonably acceptable to Highwoods, in Winston-Salem, North Carolina. The Binder Deposit, plus all accrued interest thereon, shall be returned to the Distributees at the Closing of this transaction. Otherwise, the Binder Deposit shall be delivered by Escrow Agent to Highwoods or refunded by Escrow Agent to the Distributees in accordance with the terms of this Agreement.

 

(ii) In the event the transaction contemplated by this Agreement is not closed solely because of any default on the part of Highwoods, or if any of the conditions precedent set forth in Section 6 fail to be satisfied at Closing, or if the Distributees terminate their obligations as allowed herein pursuant to any other provision of this Agreement, then the Escrow Agent shall pay to the Distributees the Binder Deposit, including interest which has accrued thereon. To allow the interest bearing account to be opened, the Distributees’ and Highwoods’ tax identification numbers are set forth below their signatures at the end of this Agreement. Escrow Agent is executing this Agreement to acknowledge Escrow Agent’s responsibilities hereunder, which may be modified only by a written amendment signed by all of the parties. No such amendment shall be binding on

 

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the Escrow Agent unless it has been signed by the Escrow Agent. Escrow Agent shall accept the Binder Deposit with the understanding of the parties that Escrow Agent is not a party to the Agreement except to the extent of its specific responsibilities hereunder; and does not assume or have any liability for the performance or non-performances of Highwoods or the Distributees hereunder to either of them.

 

(iii) In the event the transaction contemplated by this Agreement is not closed solely because of any default on the part of the Distributees, then the Escrow Agent shall pay to Highwoods the Binder Deposit including interest which has accrued thereon, and, except for the Distributees’ Continuing Indemnification Obligations (as defined in Section 4(f) below), such payment shall be the Distributees’ only liability to Highwoods as the result of such breach and shall be considered liquidated damages, as Highwoods’ actual damages as a result of the Distributees’ breach of its obligation hereunder shall be difficult, if not impossible, to ascertain.

 

(iv) Within two (2) days after execution of this Agreement, the Distributees and Highwoods shall deposit a copy of this Agreement executed by them with Escrow Agent, and, upon receipt of the Binder Deposit from the Distributees, Escrow Agent shall immediately execute this agreement where provided below. This Agreement, together with such further instructions, if any, as the parties shall provide to Escrow Agent by written agreement, shall constitute the escrow instructions. If any requirements relating to the duties or obligations of Escrow Agent hereunder are not acceptable to Escrow Agent, or if Escrow Agent requires additional instructions, the parties hereto agree to make such deletions, substitutions and additions hereto as counsel for the Distributees and Highwoods shall mutually approve, which additional instructions shall not substantially alter the terms of this Agreement unless otherwise expressly agreed to by Highwoods and the Distributees.

 

(v) Escrow Agent shall hold the Binder Deposit in accordance with the terms and provisions of this Agreement, subject to the following:

 

(A) Escrow Agent’s duties hereunder shall be limited to investing, administering and disbursing the Binder Deposit, and Escrow Agent shall have no additional duties or responsibilities hereunder (in its role as Escrow Agent) in connection with the Closing. Escrow Agent undertakes to perform only such duties as are expressly set forth in this Agreement and no implied duties or obligations shall be read into this Agreement against Escrow Agent.

 

(B) Escrow Agent may act in reliance upon any writing or instrument or signature which it, in good faith, believes of any statement or assertion contained in such writing or instrument, and may assume that any person purporting to give any writing, notice, advice or instrument in

 

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connection with the provisions of this Agreement has been duly authorized to do so. Escrow Agent shall not be liable in any manner for the sufficiency or correctness as to form, manner and execution, or validity of any instrument deposited in escrow, nor as to the identity, authority, or right of any person executing the same, and Escrow Agent’s duties under this Agreement shall be limited to those provided in this Agreement.

 

(C) Unless Escrow Agent discharges any of its duties under this Agreement in a negligent manner or is guilty of willful misconduct with regard to its duties under this Agreement, Highwoods and the Distributees shall indemnify Escrow Agent and hold it harmless from any and all claims, liabilities, losses, actions, suits or proceedings at law or in equity which it may incur or with which it may be threatened by reason of its acting as Escrow Agent under this Agreement; and in such connection Highwoods and the Distributees shall indemnify Escrow Agent against any and all expenses including reasonable attorney’s fees and the cost of defending any action, suit or proceeding or resisting any claim in such capacity.

 

(D) If the parties (including Escrow Agent) shall be in disagreement about the interpretation of this Agreement, or about their respective rights and obligations, or the propriety of any action contemplated by Escrow Agent, Escrow Agent may, but shall not be required to, file an action in interpleader to resolve the disagreement. Escrow Agent shall be indemnified for all costs and reasonable attorneys’ fees in its capacity as Escrow Agent in connection with any such interpleader action and shall be fully protected in suspending all or part of its activities under this Agreement until a final judgment in the interpleader action is received.

 

(E) Escrow Agent may consult with counsel of its own choice and have full and complete authorization and protection in accordance with the opinion of such counsel. Escrow Agent shall otherwise not be liable for any mistakes of fact or errors of judgment, or for any acts or omissions of any kind, unless caused by its negligence or willful misconduct.

 

(F) The Escrow Agent may in its sole discretion resign by giving thirty (30) days’ written notice thereof to the Distributees and Highwoods. The Distributees and Highwoods shall furnish to the Escrow Agent written instructions for the release of the escrow funds and escrow documents in such event. If the Escrow Agent shall not have received such written instructions, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor Escrow Agent, and upon such appointment deliver the escrow funds and escrow documents to such successor.

 

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(G) If costs and expenses (including attorneys’ fees) are incurred by Escrow Agent because of litigation of any dispute between Highwoods and the Distributees arising out of the holding of the Binder Deposit, the non-prevailing party ( i.e. , either Highwoods or the Distributees) shall reimburse Escrow Agent for such reasonable costs and expenses incurred. Highwoods and the Distributees hereby agree and acknowledge that Escrow Agent assumes no liability in connection with the holding or investment of the Binder Deposit pursuant hereto, except for the negligence or willful misconduct of Escrow Agent and its employees and agents. Escrow Agent shall not be responsible for the validity, correctness or genuineness of any document or notice referred to herein; and, in the event of any dispute under this Agreement relating to the disposition of the Binder Deposit, Escrow Agent may seek advice from its own counsel and shall be fully protected in any action taken in good faith in accordance with the opinion of Escrow Agent’s counsel.

 

(H) Escrow Agent’s address for purpose of mailing or delivering documents and notices hereunder is as follows:

 

 

Provisions with respect to notices set forth herein shall apply with respect to notices given by or to Escrow Agent hereunder.

 

4. ACTIONS PENDING CLOSING .

 

(a) Survey and Plans . The Distributees may cause to be secured and delivered to the Distributees prior to the end of the Review Period (as defined in Section 4(g) below) a current physical and boundary survey (the “Survey”) of the Land and Improvements prepared by a North Carolina registered land surveyor or licensed engineer which shall be certified to the Distributees which shall contain such documentation and certifications as the Title Company (as defined in Section 5[a]) may require. The Distributees agree to pay for the cost of the Survey. The Survey shall be used for a description of the Land contained in the deed of conveyance of the Land from Highwoods to the Distributees and in all other documents related to this transaction which require a legal description [including, without limitation, such description as is required for the Title Policies described under Section 5(a)]. In the event the Survey reveals anything which materially or adversely affects the Property in the sole reasonable discretion of the Distributees, the Distributees shall give notice to Highwoods of those matters objected to by the Distributees in the Survey prior to the last day of the Review Period. Highwoods shall then have the right, but not the obligation, for a period of ten (10) business days to cure any defects or

 

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objectionable matters specified by the Distributees. In the event that Highwoods fails or is unwilling to cure such defects to the reasonable satisfaction of the Distributees’ counsel at Highwoods’ sole cost and expense, the Distributees may proceed to a Closing subject to the defect, or by written notice to Highwoods, terminate this Agreement and receive a refund of the Binder Deposit, or otherwise allow this Agreement to expire.

 

(b) Initial Delivery of Documentation . At the time of the execution of this Agreement or within five (5) business days thereafter, Highwoods shall provide to the Distributees the following: (i) a list of all the personal property described in Section 2 above which shall be attached hereto as Exhibit B , (ii) true, correct and complete copies of all service, maintenance, utility and other contracts related to the Property, including any warranties or guaranties, a list of which shall be attached hereto as Exhibit C-1 , (iii) all title information related to the Land in Highwoods’ possession or available to Highwoods including but not limited to, title insurance policies, attorney’s opinions on title and existing surveys, (iv) all environmental, engineering or similar reports and drawing/specifications relating to the Land, Building or Improvements in Highwoods’ possession, (v) a true, correct and complete copy of the Lease and any amendments or guaranties of such Lease, (vi) all income and expense records related to the Property for the year 2003 and 2004; and (vii) a current rent roll of the Building. To the knowledge of Highwoods, the information to be delivered to the Distributees pursuant to this subsection is true and correct in every material respect.

 

(c) Access to the Property . Subject to Section 4(f) of this Agreement, Highwoods shall give the Distributees and its agents, engineers and other representatives, reasonable access to the Property.

 

(d) Matters of Title . If any objection to the Title Report (as defined in Section 5[a] hereof) or the Survey (or existing survey(s), if applicable) is identified by the Distributees, Highwoods shall use its commercially reasonable efforts to resolve such objection to the Distributees’ satisfaction provided the cost of such resolution does not exceed Twenty-Fifty Thousand and No/100 Dollars ($25,000). In the event that Highwoods cannot or refuses to cure an objection to the Title Report or the Survey (or existing survey[s]) which remains unacceptable to the Distributees, then and in that event, the Distributees may terminate this Agreement without any further claim or obligation of any kind to Highwoods, except for the Distributees’ Continuing Indemnification Obligation (as defined in Section 4(f) below) or in the alternative, consummate the Closing in accordance with the terms of Section 5(a) below.

 

(e) Environmental Assessments . Prior to Closing, the Distributees at their sole expense, and upon reasonable notice to Highwoods, may cause to be undertaken and completed a current Phase I Environmental Site Assessment of the Land (the “Environmental Assessment”). The Environmental Assessment shall be performed by environmental inspection and engineering firms selected by the Distributees. The Distributees shall determine from the Environmental Assessment and from such other information available to the Distributees, in its sole discretion, whether or not the Property is likely to be contaminated by hazardous or toxic waste, substances or materials (including but not limited to, asbestos, PCB’s or petroleum products) as defined under any applicable federal, state or local laws, statutes, orders, rules, regulations, permits or approvals. In the event that contamination or any other adverse

 

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environmental condition is found to likely exist at the Property, or in the event that such Environmental Assessment recommends additional testing and Highwoods refuses to consent to such testing (which consent may be withheld by Highwoods in its sole discretion), the Distributees reserves the right to terminate this Agreement and receive a refund of the Binder Deposit. If Highwoods withholds its consent for the Distributees to do additional environmental testing of the Land, and the Distributees terminate this Agreement as the result thereof, Highwoods will pay to the Distributees its due diligence costs reasonably incurred during the Review Period, and any fees forfeited by the Distributees to its lender as the result of the Distributees’ termination of this Agreement as the result of Highwoods refusal to allow the Distributees to conduct further environmental tests of the Land. Highwoods has no obligation to the Distributees to remediate any environmental contamination on the Land discovered by the Distributees or the Distributees’ engineers. As stated above, the Distributees will not conduct a Phase II Environmental Assessment of the Property without Highwoods’ written consent, which consent may be withheld in Highwoods sole discretion.

 

(f) Investigation Rights . From the Agreement Date until such time as this Agreement is either settled or terminated, the Distributees, the Distributees’ authorized agents, employees, consultants, architects, engineers and contractors, as well as others authorized by the Distributees, shall have access to the Property and shall be entitled to enter upon the Property and make such surveying, architectural, engineering, topographical, geological, soil, subsurface, environmental, water drainage, traffic, and other studies related to the availability of water, sewer, natural gas, and other utility services in sufficient quantities to meet the Distributees’ requirements and such other investigations, inspections, evaluations, studies, tests and measurements (collectively, the “Investigations”) as the Distributees deems necessary or advisable. Provided, however, the Distributees’ rights hereunder to conduct Investigations shall be subject to the following requirements and limitations: (i) any entry upon the Property by the Distributees, the Distributees’ authorized agents and employees, as well as others authorized by the Distributees shall require at least twenty-four (24) hours advance notice to Highwoods of the date and time of the entry and the specific Investigations to be conducted in connection with the entry, (ii) the Investigations shall not result in any adverse change to the physical characteristics of the Property (and the Distributees shall be obligated to completely repair and restore any damage to the Property resulting from the Investigations), and (iii) the Investigations will not substantially or adversely interfere with the rights of the tenant in the Building to use and enjoy its leased space therein according to its Lease thereof. The Distributees agree to indemnify and hold Highwoods harmless from and against any and all claims, costs, expenses, and liabilities, including reasonable attorneys’ fees, arising out of claims for injury, including death, to persons or physical injury to property resulting from the Investigations (hereinafter the “The Distributees’ Continuing Indemnification Obligations”); provided, however, the Distributees shall not be obligated to indemnify Highwoods from and against any claims, costs, expenses, and liabilities caused by or arising out of the acts or omissions of Highwoods or Highwoods’ employees, representatives or agents, or from the presence or release of Hazardous Substances (as defined in Section 5(c) herein) not introduced onto the Property by the Distributees or the Distributees’ authorized agents and employees or other entities conducting the Investigations. Highwoods shall be entitled to have one or more representatives present to observe the Investigations on the Property. The Distributees shall not be entitled to conduct any environmental Investigations on the Property beyond a Phase I environmental site assessment

 

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( i.e. no sampling, drilling, etc.) without first obtaining Highwoods’ prior written consent, which consent may be withheld by Highwoods, in Highwoods’ sole discretion. Notwithstanding any term or provision herein to the contrary, the provisions in this Agreement [including in this Section 4(f)] relating to the Investigations shall apply to all Investigations conducted by the Distributess and the Distributees’ authorized agents, employees, consultants, architects, engineers and contractors both prior to the Agreement Date and from and after the Agreement Date.

 

The Distributees will remain responsible and liable to Highwoods for the Continuing Indemnification Obligations and the full amount of actual damages suffered by Highwoods resulting from the Distributees’ Investigation after the completion of the Closing hereunder, the termination of this Agreement by the Distributees or Highwoods or a default by the Distributees under this Agreement.

 

(g) Termination Rights: Review Period . The Distributees shall have the unqualified right, in the Distributees’ sole and absolute discretion, to terminate this Agreement by giving written notice of such election at any time from the Agreement Date until 5:00 p.m. Eastern Standard time on the January 30, 2005 (30 ^th ) (such period of time until January 30, 2005 being referred to herein as the “Review Period”). In the event the Distributees properly and timely terminates this Agreement pursuant to this Section 4(g); Escrow Agent shall promptly refund all but One Hundred and No/100 Dollars ($100) of the Binder Deposit to the Distributees (such $100 payment to Highwoods being the consideration paid by the Distributees for the right to terminate this Agreement pursuant to this Section 4(g)), whereupon the parties hereto shall have no further rights, obligation or liabilities to each other hereunder, except for the Distributees’ Continuing Indemnification Obligations. Time is of the essence with respect to this right to terminate. The failure of the Distributees to provide such notice of termination prior to the expiration of the Review Period shall be deemed conclusively a waiver of the Distributees’ termination rights under this Section 4(g); and in such event, except in the case of a default by Highwoods hereunder (which shall be governed by the terms of Section 8 herein) or failure of any condition precedent to the Distributees’ obligation to close, and except in the event of the termination of this Agreement by either party pursuant to any specific termination right set forth herein which requires the return of the Binder Deposit to the Distributees, the Binder Deposit shall be deemed for all purposes under this Agreement to be nonrefundable to the Distributees and “earned” by Highwoods.

 

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Highwoods’ Removal of Property From Market . Until the end of the Review Period, or earlier termination of this Agreement, Highwoods shall remove the Property from the market and not have discussions with prospective purchasers thereof, and will not solicit or accept any offers, whether or not binding, regarding the Property during the Review Period and thereafter until the Closing of the transaction contemplated hereby occurs or until the earlier termination of this Agreement.

 

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5. ADDITIONAL AGREEMENTS OF THE PARTIES .

 

(a) Title to the Property . At the Closing, Highwoods shall deliver to the Distributees a limited warranty deed in form and content satisfactory to the Distributees’ counsel with transfer tax, if any, paid at Highwoods’ expense, conveying to the Distributees a good, indefeasible, fee simple title to the Land, its appurtenances and Improvements, said title to be insurable both as to fee and marketability at regular rates by Chicago Title Insurance Company (the “Title Company”), subject only to those matters enumerated in Section 5(b)(i)-(vi) below (“Permitted Exceptions”). Prior to the end of the Review Period, the Distributees shall procure from HPI Title Agency, LLC, at the Distributees’ cost, a current title commitment for title insurance issued by the Title Company showing the condition of title to the Land, its appurtenances and Improvements (the “Title Report”). If, prior to the end of the Review Period, the Distributees disapproves of any matter of title contained in the Title Report, the Distributees may then elect to provide written notice of the Distributees’ disapproval of the same to Highwoods (those disapproved title matters as so identified by the Distributees are hereinafter called the “Disapproved Exceptions”). Highwoods agrees to commit its commercially reasonable efforts to remove any Disapproved Exception, provided the cost thereof does not exceed Twenty-Five Thousand and No/100 Dollars ($25,000). However, in the event that as provided in Sections 4(a) and (d) above, the Distributees proceed to and consummate the Closing subject to a Disapproved Exception, such Disapproved Exception shall then be deemed to be a Permitted Exception. Any expenses incurred in obtaining such title insurance commitment (including, without limitation, those incurred by an attorney in conducting the necessary title search) shall be borne by the Distributees. The title insurance premium for the title insurance policy issued by the Title Company pursuant to the title commitment (the “Title Policy”) shall be borne by the Distributees. The Title Policy shall provide full coverage against mechanics’ or materialmen’s liens, shall commit full survey coverage (if the Distributees procure a Survey of the Land) and such other coverages and endorsements as shall be reasonably required by the Distributees. If the Distributees request any endorsements to the Title Policy, the Distributees will be responsible for the cost attributable thereto.

 

The Distributees may, at or prior to Closing, notify Highwoods in writing (the “Gap Notice”) of any objections to title raised by the Distributees’ Counsel or the Title Company between the issuance of the Title Report and the Closing, which did not exist as of the date of the issuance of the Title Report (“New Encumbrances”). If the Distributees sends a Gap Notice to Highwoods, but the New Encumbrance is the result of some act that is beyond the control of Highwoods, then the Distributees and Highwoods shall have the same rights and obligations with respect to such notice as apply to a Disapproved Exception under Sections 5(a) and 5(b) hereof. However, in the event the New Encumbrance results from any action or omission of Highwoods (with the exception of New Encumbrances which can be cured by a monetary payment which the Distributees have, and shall have, the absolute right of making such payment and reducing by a like amount the value of the Distributees’ capital interest in Highwoods, to be reduced as a result of this transaction), the Distributees shall be entitled to terminate this Agreement, receive a refund of the Binder Deposit, and reimbursement from Highwoods of the costs, fees and expenses incurred by the Distributees related to this Agreement and the Property.

 

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(b) Permitted Exceptions . The Land, its appurtenances and the Improvements shall be conveyed by Highwoods to the Distributees free and clear of all liens, encumbrances, claims, rights-of-way, easements, leases, restrictions and restrictive covenants, except the following Permitted Exceptions:

 

(i) Public utility easements and rights-of-way in customary form, so long as no Improvements are located thereon and they do not interfere with the use of the Property for office, warehouse and related commercial purposes permitted by the Lease or materially affect the value of the Property;

 

(ii) Zoning and building laws or ordinances, provided they do not prohibit the use of the Property for office, warehouse and related commercial purposes permitted by the Lease and so long as the Property is in compliance with same;

 

(iii) Ad valorem real estate taxes for any year in which they are not yet due and payable as of the date of Closing; and

 

(iv) Those matters which the Distributees have elected to accept;

 

(v) Items shown on the Survey and not objected to by the Distributees or waived by the Distributees in accordance with Section 4(a) hereof.

 

(vi) Those Permitted Exceptions listed on Exhibit D , so long as they to not interfere with the use of the Property for office, warehouse and related commercial purposes permitted by the Lease or materially affect the value of the Property.

 

If, in the opinion of the Distributees’ counsel, the Distributees are not able to procure an owner’s title insurance commitment from the Title Company prior to Closing, complying with the requirements of this Section 5, the Distributees shall have the option of taking title “as is” and consummating the Closing, or terminating this Agreement. Notwithstanding any other provision contained herein to the contrary, if the title defect(s) which may include, without limitation, a Disapproved Exception, is a mortgage, lien, judgment, assessment, unpaid taxes or tax which can be cured by a monetary payment (and with respect to which affirmative title insurance coverage is not available at the Title Company’s standard rates) the Distributees have, and shall have, the absolute right of making such payment and reducing by a like amount the value of the capital interest of the Distributees in Highwoods to be reduced as a result of this transaction.

 

(c) Representations and Warranties of Highwoods . Highwoods hereby makes the following representations and warranties to the Distributees:

 

(i) There are no options to purchase the Property which are effective, nor has Highwoods previously entered into any contract of sale of the Property with a party other than the Distributees which is presently effective. After the date hereof and until Closing, or until this Agreement is otherwise terminated, Highwoods will not enter into any agreement or contract or negotiate with any party other than the Distributees with respect to the sale of the Property, nor, will Highwoods pledge or assign any right, title, interest in or to the Property or any part thereof to any person or entity.

 

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(ii) All bills and claims for labor performed and services and materials furnished to or for the benefit of the Property have been or will be paid in full by Closing, and there are no mechanics’ liens or materialmen’s liens on or affecting the Property. If any mechanics’ or materialmen’s lien is filed on or affecting the Property for work, labor or materials, Highwoods shall indemnify and save the Distributees harmless from, or bond over, such lien and cause the Title Company to eliminate any exception therefor from the Title Policy issued to the Distributees.

 

(iii) As of the date of the Agreement, except as otherwise set forth on Exhibit C , there are no leases, subleases, licenses or other rental agreements or occupancy agreements (written or verbal) which grant any possessory interest in and to any space situated on or in any of the Property or that otherwise give rights with regard to use of any portions of any of the Property and except as set forth on Exhibit C-1 , there are no commissions due with respect to any such lease, sublease, etc., nor, except as set forth on Exhibit C-1 , will any commissions be due in connection with the renewal of any such lease, sublease, etc.

 

(iv) Except as set forth on Exhibit C-1 , neither Highwoods, nor to the knowledge of Highwoods, any other party, has entered into any construction, design, engineering, service, maintenance, supply, brokerage/leasing agreements, employment agreements, management contracts or leases of personal property (collectively, “Service/Equipment Contracts”) affecting the construction, use, ownership, maintenance or/or operation of the Property that will continue subsequent to the Closing. Prior to or on the Closing Date, Highwoods shall terminate, at Highwoods’ sole cost and expense, all Service/Equipment Contracts which the Distributees do not elect to assume in writing; or, if not terminable by the Closing Date, shall remain responsible for and will timely perform all of the obligations thereunder. To Highwoods’ knowledge, Highwoods is not in material default under any of the Service/Equipment Contracts and, to Highwoods’ knowledge, no other parties to any of the Service/Equipment Contracts are in default, nor do any conditions exist that, with the passage of time, or giving of notice, or both, shall constitute a default thereunder. The copies of the Service/Equipment Contracts provided to the Distributees pursuant to this Agreement are true, accurate and complete as of the date hereof, are in full force and effect and none of them have been modified, amended or extended except as otherwise set forth on Exhibit C-1 .

 

(v) To the knowledge of Highwoods, which knowledge is based solely on the Phase I Environmental Site Assessment of the Land dated September 25, 2002, conducted by Trigon Engineering Consultants, Inc. (The Environmental Report), the Property has not been used for the generation, treatment, storage or disposal of any hazardous substances in violation of any federal, state or local

 

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environmental law, rule or violation during the period in which Highwoods has owned the property. For the purposes of this Section 5(c)(v), “hazardous substances” shall include (i) “hazardous substances” as defined in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq ., as amended, or by any regulations promulgated thereunder; (ii) any “hazardous waste, underground storage tanks, petroleum, regulated substance, or used oil as defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et. seq .), as amended or by any regulations promulgated thereunder; (iii) any oil or other hazardous substances as defined by the Oil and Hazardous Substances Control Act of 1986 as amended, and any regulations adopted pursuant to said Act, or any similar environmental protection law of the state in which the Property is located or its political subdivisions. To the knowledge of Highwoods, which knowledge is based solely on the Environmental Report, no asbestos or asbestos-containing materials have been installed, used, incorporated into or disposed of on the Property. To the knowledge of Highwoods, which knowledge is based solely on the Environmental Report, no polychlorinated biphenyls (“PCBs”) are located on or in the Property, whether such PCBs are in the form of electrical transformers, florescent light fixtures with ballast, cooling oils or any other device or form. To the knowledge of Highwoods, which knowledge is based solely on the Environmental Report, except as set forth in the Environmental Report, no underground storage tanks are located on the Property or were located on the Property and subsequently removed or filled. To the knowledge of Highwoods, but without having made any independent investigation, no investigation, administrative order, consent order and agreement, litigation, or settlement with respect to hazardous substances is proposed, threatened, anticipated or in existence with respect to the Property.

 

(vi) Neither the entering into of this Agreement nor the consummation of the transaction contemplated hereby will constitute or result in a violation or breach by Highwoods of any judgment, order, writ, injunction or decree issued against or imposed upon it, or will result in a violation of any applicable law, order, rule or regulation of any governmental authority. There are no actions, suits, proceedings, arbitrations or investigations pending or, to Highwoods’ knowledge, threatened (i) against, relating to or affecting Highwoods which might interfere in a material respect with the transaction contemplated by this Agreement, become an encumbrance on the title to the Property or any portion thereof or otherwise affect the Property or Highwoods’ ability to consummate the transaction contemplated hereby or (ii) against, relating to or affecting the Property.

 

(vii) Highwoods has not received notice:

 

(A) From any federal, state, county or municipal authority alleging any fire, health, safety, building, pollution, environmental, zoning or other violation of law in respect of the Property or any part thereof, including, without limitation, the occupancy or operation thereof, which has not been entirely corrected;

 

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(B) Concerning the possible or anticipated condemnation of any part of the Property, or the widening, change of grade or limitation on use of streets abutting the same or concerning any special taxes or assessments levied or to be levied against the Property or any part thereof;

 

(C) Concerning any change in the zoning or other land use classification of the Property or any part thereof;

 

(D) Of any pending insurance claim related to the Property;

 

(E) From any governmental authority that any licenses, permits, certificates, easements and rights of way, including proof of dedication, required from all authorities having jurisdiction over the Property or from private parties for the existing use, occupancy and operation of the Property and to insure vehicular and ped