AGREEMENT OF SALE AND PURCHASE AND JOINT ESCROW INSTRUCTIONS WATERFORD PLACE APARTMENTS, LLC

 

1.1.9       “Assumption Approval Deadline” shall have the meaning ascribed in Section 2.4.2 .

 

1.1.10     “Assumption Documents” shall have the meaning ascribed in Section 9.5.1(g).

 

1.1.11     “ Bill of Sale ” shall have the meaning ascribed in Section 9.5.1(b) .

 

1.1.12     “ Broker ” shall mean Marcus & Millichap.

 

1.1.13     “ Broker’s Commission ” shall have the meaning ascribed in Section 9.8 .

 

1.1.14     “Buyer’s Conditions Precedent” shall have the meaning ascribed in Section 9.3.

 

1.1.15     “Certificate of Insurance” shall have the meaning ascribed in Section 3.4 .

 

1.1.16     “ Closing ” shall have the meaning ascribed in Section 9.4.1 .

 

1.1.17     “ Closing Date ” shall mean the date set forth in Section 9.4.1 .

 

1.1.18     “ Closing Statement ” shall have the meaning ascribed in Section 9.7.1(a) .

 

1.1.19     “ Code ” shall have the meaning ascribed in Section 5.4 .

 

1.1.20     “ Commissions ” shall mean all commissions, referral or locator fees, payments and obligations of Seller or the Property Manager to make payments to third party leasing agents, leasing brokers or other parties (not affiliated with the Property Manager) with respect to the leasing of all or any of the Property, whether such agreements are contained in a Lease or in any separate Commission Agreement.

 

1.1.21     “ Commission Agreements ” shall mean all written agreements and documents entered into by Seller or the Property Manager to pay Commissions that are not contained in a Lease, together with all amendments thereto or modifications thereof.

 

1.1.22     “Computer Equipment” means all word processing and computing equipment including, without limitation, all CPUs, monitors, printers, hubs, switches, firewalls, networking equipment and modems unless specifically listed on attached Exhibit I .

 

1.1.23     “Contracts ” shall mean the service contracts described in Exhibit B and all other service contracts entered into by Seller after the Effective Date with respect to the Property in accordance with Section 8.3 .

 

1.1.24     “Covenant Running With The Land” shall have the meaning ascribed in Section 10.23 .

 

2

 

1.1.25     “ Deed ” shall have the meaning ascribed in Section 9.5.1(a) .

 

1.1.26     “ Deposit ” shall have the meaning ascribed in Section 2.3.

 

1.1.27     “Deposit Date” shall have the meaning ascribed in Section 2.3 .

 

1.1.28     “Disapproval Notice” shall have the meaning ascribed in Section 3.8 .

 

1.1.29     “ Disclosure Items ” shall have the meaning ascribed in Section 6.1 .

 

1.1.30     “Dispute” shall have the meaning ascribed in Section 10.22 .

 

1.1.31     “ Due Diligence ” shall have the meaning ascribed in Section 3.1 .

 

1.1.32     “ Due Diligence Items ” shall have the meaning ascribed in Section 3.2 .

 

1.1.33     “ Due Diligence Period ” shall mean the time period provided for in Section 3.1 of this Agreement.

 

1.1.34     “ Effective Date ” shall mean the first date on which Escrow Agent has in its possession a fully executed original or copy of this Agreement.  Escrow Agent shall promptly notify Buyer and Seller in writing of the Effective Date.

 

1.1.35     “ Environmental Laws ” means all Federal, state and local environmental laws, rules, statutes, directives, binding written interpretations, binding written policies, ordinances and regulations issued by any Governmental Entity and in effect as of the date of this Agreement with respect to or which otherwise pertain to or affect the Real Property or the Improvements, or any portion thereof, the use, ownership, occupancy or operation of the Real Property or the Improvements, or any portion thereof, or any owner of the Real Property, and as same have been amended, modified or supplemented from time to time prior to the date of this Agreement, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.), the Hazardous Substances Transportation Act (49 U.S.C. § 1802 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Safe Drinking Water Act (42 U.S.C. § 300f et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Solid Waste Disposal Act (42 U.S.C. § 6901 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. § 11001 et seq.), the Radon and Indoor Air Quality Research Act (42 U.S.C. § 7401 note, et seq.), the Superfund Amendment Reauthorization Act of 1986 (42 U.S.C. § 9601 et seq.), comparable state and local laws, and any and all rules and regulations which have become effective prior to the date of this Agreement under any and all of the aforementioned laws.

 

1.1.36     “ Escrow Agent ” shall mean Partners Title Company, Houston, Texas.

 

3

 

1.1.37     “ Excluded Materials ” shall have the meaning ascribed in Section 3.2.3 .

 

1.1.38     “Extended Assumption Approval Deadline” shall have the meaning ascribed in Section 2.4.2 .

 

1.1.39     “ Fixtures ” shall mean the fixtures that are located at and affixed to any of the Improvements as of the Closing Date, but specifically excluding any fixtures owned by any of the Tenants.

 

1.1.40     “ Governmental Entity ” means the various governmental and quasi- governmental bodies or agencies having jurisdiction over Seller, the Real Property or any portion thereof.

 

1.1.41     “ Hazardous Materials ” means any pollutants, contaminants, hazardous or toxic substances, materials or wastes (including petroleum, petroleum by-products, radon, asbestos and asbestos containing materials, polychlorinated biphenyls (“ PCBs ”), PCB-containing equipment, radioactive elements, infectious agents, and urea formaldehyde), as such terms are used in any Environmental Laws (excluding solvents, cleaning fluids and other lawful substances used in the ordinary operation and maintenance of the Real Property, to the extent in closed containers).

 

1.1.42     “ Improvements ” shall mean all buildings, structures and improvements located on the Land not owned by a Tenant or any other third party including, without, limitation, three hundred ninety (390) apartment units.

 

1.1.43     “Indemnitor” shall have the meaning ascribed in Section 7.3.4 .

 

1.1.44     “Initial Deposit” shall have the meaning ascribed in Section 2.3.1 .

 

1.1.45     “ Land ” shall mean that certain parcel or parcels of land and appurtenances thereto located at 4800 Tassajara Road, Dublin, California, and more particularly described on Exhibit A , including Seller’s right, title and interest, if any, in and to all rights-of-way, open or proposed streets (public or private), alleys, easements, strips or gores of land adjacent thereto.  The Land expressly excludes the ground floor retail condominiums and the common areas, if any, as described in the condominium plan attached as Exhibit A to The Waterford Place Condominiums Declaration of Restrictions Recorded November 3, 2003 as Series No. 2003653881 of the Official Records of Alameda County.

 

1.1.46     “Laws” shall mean all applicable federal, state or local statutes, ordinances, codes, regulations, decrees, orders, laws, rulings, judgment or other governmental or judicial requirements affecting the Property.

 

1.1.47     “ Leases ” shall mean all unexpired leases, subleases, occupancy agreements, and any other agreements, including all modifications or amendments thereto, for the use, possession, or occupancy of any portion of the Property as of the Closing Date.

 

1.1.48     “Lender” shall have the meaning ascribed in Section 2.2 .

 

4

 

1.1.49     “ Licensee Parties ” shall mean those authorized agents, contractors, consultants and representatives of Buyer who shall inspect, investigate, test or evaluate the Property on behalf of Buyer in accordance with this Agreement.

 

1.1.50     “ Licenses and Permits ” shall mean, collectively, to the extent assignable, all licenses, permits, approvals, certificates of occupancy, dedications, subdivision maps and entitlements now or hereafter issued, approved or granted by any Governmental Entity in connection with the Real Property, together with all renewals and modifications thereof.

 

1.1.51     “ Liens ” shall have the meaning ascribed in Section 4.2 .

 

1.1.52     “Loan” shall have the meaning ascribed in Section 2.2 .

 

1.1.53     “Loan Documents” shall have the meaning ascribed in Section 2.2 .

 

1.1.54     “Losses” means claims, actions, causes of action, suits, proceedings, costs, expenses (including, without limitation, reasonable attorneys’ fees and costs), liabilities, damages, demands, rights and/or liens of any type, whether known or unknown, direct or indirect, absolute or contingent.

 

1.1.55     “ New Leases ” or “ New Lease ” shall mean, collectively, or singularly, any Lease entered into after the Effective Date and before the Closing Date.

 

1.1.56     “Non-Terminable Contract” shall have the meaning ascribed in Section 4.6 .

 

1.1.57     “ Permitted Exceptions ” shall mean and include all of the following:  (a) applicable zoning and building ordinances and land use regulations; (b) such state of facts as would be disclosed by a physical inspection of the Property; (c) the lien of taxes and assessments not yet due and payable (it being agreed by Buyer and Seller that if any tax or assessment is levied or assessed with respect to the Property after the date hereof and the owner of the Property has the election to pay such tax or assessment either immediately or under a payment plan with interest, Seller may elect to pay under a payment plan, which election shall be binding on Buyer); (d) any exclusions from coverage set forth in the jacket of any Owner’s Policy of Title Insurance, but excluding all specific title exceptions in Schedules B and C of the Title Commitment on any standard printed exceptions in the Title Commitment; (e) any exceptions caused by Buyer, any Licensee Parties and their respective agents, representatives or employees; (f) such other exceptions as the Title Company shall commit to insure over, without any additional cost to Buyer, whether such insurance is made available in consideration of payment, bonding, indemnity of Seller or otherwise; (g) the rights of the Tenants under the Leases, as tenants only; (h) the Covenant Running With The Land; and (i) any matters deemed to constitute Permitted Exceptions under Section 4.2 hereof.

 

1.1.58     “ Permitted Outside Parties ” shall have the meaning ascribed in Section 3.7 .

 

5

 

1.1.59     “ Personal Property ” shall mean all of the right, title, and interest of Seller in and to the tangible personal property, which is located at and used exclusively in connection with the Property as of the Closing Date a specific list thereof as of the Effective Date being attached hereto as Exhibit I , but specifically excluding (a) any personal property owned, financed or leased by any Tenant under any Lease, (b) the Computer Equipment, (c) any tangible personal property owned by the Property Manager, and (d) any tangible personal property owned by a third party.  Personal Property shall not include the Excluded Materials.

 

1.1.60     “ Pre-Effective Date Leases ” or “ Pre-Effective Date Lease ” shall mean, collectively, or singularly, any Lease in effect as of the Effective Date.

 

1.1.61     “Private Restrictions” shall mean (as they may exist from time to time) any and all covenants, conditions and restrictions, private agreements, easements, and any other recorded documents or instruments affecting the use of the Property.

 

1.1.62     “ Property ” shall mean the Land, the Improvements, the Personal Property, the Leases, the Approved Contracts, and to the extent transferable, all of Seller’s right, title and interest in and to all tangible and intangible assets of any nature relating to the Property, including without limitation, (a) all warranties upon the Improvements or the Personal Property, (b) rights to any plans, specifications, engineering studies, reports, drawings, and prints relating to the construction, reconstruction, modification, and alteration of Improvements, (c) all works of art, graphic designs, and other intellectual or intangible property owned and used by Seller exclusively in connection with the Property, including any trade name associated with the Improvements, (d) all claims and causes of action arising out of or in connection with the Property after the Closing Date, and (e) the Licenses and Permits.

 

1.1.63     “ Property Manager ” shall mean those individuals or entities which manage the Property.

 

1.1.64     “ Proration Items ” shall have the meaning ascribed in Section 9.7.1(a) .

 

1.1.65     “ Proration Time ” shall have the meaning ascribed in Section 9.7.1(a) .

 

1.1.66     “ Purchase Price ” shall have the meaning ascribed in Section 2.2 .

 

1.1.67     “ Reimbursable Lease Expenses ” shall mean any Commissions and locator fees payable pursuant to a Commission Agreement or a Lease or a New Lease with respect to Tenants who are scheduled to take occupancy after Closing.

 

1.1.68     “ Rent Roll ” shall have the meaning ascribed in Section 3.2.1 .

 

1.1.69     “ Rent ” or “ Rents ” shall mean and include fixed monthly rentals, additional rentals, escalation rentals, retroactive rentals, all administrative charges, utility charges, vending machine receipts and other sums and charges payable by Tenants under the Leases.

 

6

 

1.1.70     “Replacement Guarantor” shall have the meaning ascribed in Section 2.4.1 .

 

1.1.71     “ Reporting Person ” shall have the meaning ascribed in Section 5.4 .

 

1.1.72     “Representative” shall have the meaning ascribed in Section 10.22.1 .

 

1.1.73     “Seller Guarantors” shall have the meaning ascribed in Section 2.4.1.

 

1.1.74     “Servicer” shall have the meaning ascribed in Section 2.3 .

 

1.1.75     “Shopping Center” shall have the meaning ascribed in Section 10.23 .

 

1.1.76     “Survey” shall have the meaning ascribed in Section 4.4 and means an ALTA/ACSM survey of the Land prepared by a surveyor licensed by the State of California.

 

1.1.77     “Survey Objections” shall have the meaning ascribed in Section 4.4 .

 

1.1.78     “Tenant” or “Tenants” means all persons or entities occupying or entitled to possession of any portion of the Real Property pursuant to the Lease, including tenants, subtenants, and licensees.

 

1.1.79     “Tenant Deposit” means all refundable deposits (whether cash or non-cash and whether designated as security or otherwise) paid or deposited by a Tenant to Seller, as landlord, or any other person on Seller’s behalf pursuant to a Lease (together with any interest which has accrued thereon as required by the terms of such Lease, but only to the extent such interest has accrued for the account of the respective Tenant or as required by law).

 

1.1.80     “Tenant Notice” shall have the meaning ascribed in Section 9.5.1(f) .

 

1.1.81     “ Title Commitment ” shall have the meaning ascribed in Section 4.1 .

 

1.1.82     “Title Commitment Update” shall have the meaning ascribed in Section 4.3 .

 

1.1.83     “Title Commitment Update Review Period” shall have the meaning ascribed in Section 4.3 .

 

1.1.84     “ Title Company ” shall mean Chicago Title Company.

 

7

 

1.1.85     “ Title Documents ” shall have the meaning ascribed in Section 4.1 .

 

1.1.86     “ Title Objections ” shall have the meaning ascribed in Section 4.2 .

 

1.1.87     “ Title Policy ” shall have the meaning ascribed in Section 4.5.

 

1.2                  Rules of Construction .  Article and Section captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement.  All references to “Article” or “Sections” without reference to a document other than this Agreement, are intended to designate articles and sections of this Agreement, and the words “herein,” “hereof,” “hereunder,” and other words of similar import refer to this Agreement as a whole and not to any particular Article or Section, unless specifically designated otherwise.  The use of the term “including” shall mean in all cases “including but not limited to,” unless specifically designated otherwise.  No rules of construction against the drafter of this Agreement shall apply in any interpretation or enforcement of this Agreement, any documents or certificates executed pursuant hereto, or any provisions of any of the foregoing.  Any deletion of language from this Agreement prior to its execution by Buyer and Seller shall not be construed to raise any presumption, canon of construction or implication, including, without limitation, any implication that the parties intended thereby to state the converse of the deleted language.

 

ARTICLE 2

 

AGREEMENT OF PURCHASE AND SALE; PURCHASE PRICE

 

2.1                  Agreement of Purchase and Sale .  Seller agrees to sell, transfer, assign and convey to Buyer, and Buyer agrees to purchase, accept and assume subject to the terms and conditions stated herein, all of Seller’s right, title and interest in and to the Property.

 

2.2                  Purchase Price .  Buyer shall pay Seller the purchase price of EIGHTY MILLION DOLLARS ($80,000,000.00) (“ Purchase Price ”) at Closing in cash or other immediately available federal funds.  Notwithstanding the foregoing, a portion of the Purchase Price shall be paid by Buyer’s assumption of, and agreement to pay and perform, the obligations of Seller under the loan documents (the “ Loan Documents ”) evidencing two loans (the “ Loans ”) from Deutsche Bank Berkshire Mortgage, Inc. (together with its successors and assigns, “ Lender ”) to Seller in the original principal amounts of FIFTY TWO MILLION DOLLARS ($52,000,000.00) and THIRTEEN MILLION TWO HUNDRED FORTY-FIVE DOLLARS ($13,245,000.00) having an approximate unpaid balance of FORTY-SEVEN MILLION FIVE HUNDRED TWENTY-THREE THOUSAND AND TWELVE DOLLARS ($47,523,012.00) and THIRTEEN MILLION FORTY-NINE THOUSAND FOUR HUNDRED EIGHTY-THREE DOLLARS ($13,049,483.00), respectively.  The Loans are serviced by a service (the “ Servicer ”).  The balance of the Purchase Price and such other funds as may be necessary to pay Buyer’s expenses hereunder, subject to closing adjustments, shall be deposited with the Escrow Agent no later than one (1) business day prior to the Closing Date in accordance with this Agreement and paid to Seller upon satisfaction of all conditions precedent to the Closing as described herein.

 

8

 

2.3                  Deposits; Designation of Reporting Person & Contract Consideration .

 

2.3.1       Deposits .  Within two (2) business days after the Effective Date (the “ Deposit Date ”), Buyer shall deposit via wire transfer the sum of SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($750,000.00) in immediately available U.S. funds as a deposit (the “ Initial Deposit ”) with Escrow Agent whose address is as indicated in Section 10.3 , below.  By 5:00 p.m. Pacific Time on the last day of the Due Diligence Period, Buyer shall deposit with Escrow Agent via wire transfer an additional ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($1,250,000.00) (the “ Additional Deposit ”) in immediately available funds.  The Initial Deposit and the Additional Deposit shall be referred to herein collectively as the “ Deposit ”.  If Buyer fails to make the Initial Deposit on or before 5:00 p.m. Pacific Time on the Deposit Date or make the Additional Deposit on or before 5:00 p.m. Pacific Time on the last day of the Due Diligence Period, then this Agreement shall terminate and shall be of no further force and effect and the parties shall have no further obligations to one another except to the extent expressly stated otherwise herein.  If and when made, the Deposit shall be held by Escrow Agent in accordance with Section 2.3.2 , below, and, once made, shall be non-refundable in all instances except (a) if Buyer elects to terminate this Agreement on or before the end of the Due Diligence Period in accordance with the terms and conditions of Section 3.6 , (b) if the Closing fails to occur solely as a result of a material default by Seller hereunder that is not cured within all applicable notice and cure periods, and (c) as otherwise expressly stated otherwise in this Agreement, including specifically Section 2.4.2 hereof.

 

2.3.2       Deposit Instructions .  The Escrow Agent shall invest the amount in escrow, including without limitation the Deposit, in accounts which are federally insured or which invest solely in government securities and shall be applied in accordance with the terms of this Agreement.  Interest earned on the Deposit shall be considered part of the Deposit and shall be deemed to have been earned by, and constitute income of, Buyer.

 

2.3.3       Designation of Reporting Person .  In order to assure compliance with the requirements of Section 6045 of the Internal Revenue Code of 1986, as amended (for purposes of this Section 2.3.3 , the “ Code ”), and any related reporting requirements of the Code, Seller and Buyer hereby designate Escrow Agent as the person to be responsible for all information reporting under Section 6045(e) of the Code (the “ Reporting Person ”).  In connection with the foregoing appointment, Seller and Buyer hereby agree: (a) to provide to the Reporting Person all information and certifications regarding such party, as reasonably requested by the Reporting Person or otherwise required to be provided by a party to the transaction described herein under Section 6045 of the Code; and (b) to provide to the Reporting Person such party’s taxpayer identification number and a statement (on Internal Revenue Service Form W-9 or an acceptable substitute form, or on any other form the applicable current or future Code sections and regulations might require and/or any form requested by the Reporting Person), signed under penalties of perjury, stating that the taxpayer identification number supplied by such party to the Reporting Person is correct.  Each party hereto agrees to retain this Agreement for not less than four years from the end of the calendar year in which the Closing occurred, and to produce it to the Internal Revenue Service upon a valid request therefor.

 

9

 

2.3.4       Contract Consideration .  Notwithstanding anything in this Agreement to the contrary, in any event where the Deposit, or any part thereof, is to be returned to Buyer, ONE HUNDRED DOLLARS ($100.00) thereof shall be paid by Escrow Agent to Seller as consideration for the rights and privileges granted to Buyer herein thus making this Agreement the valid and binding obligation of Buyer and Seller even though Buyer may have certain unilateral termination rights during certain periods under this Agreement.

 

2.4                  Loan Assumption .

 

2.4.1       Application for Loan Assumption .  Within five (5) business days after Seller has provided Buyer the request forms and requirements from Lender for the Loan Assumption (the “ Application Deadline ”), Buyer shall apply, in good faith, to the Lender for approval of the assignment by Seller, and assumption by Buyer, of Seller’s interest in the Loan.  Buyer and Seller agree to use commercially reasonable efforts to cooperate with each other in connection with said application process and each party shall submit to Lender any information reasonably requested by Lender to complete and approve said application by the Assumption Approval Deadline (as hereinafter defined).  Buyer agrees that Buyer shall pay any required loan assumption review fee to the Lender as and when required by the Lender and/or Servicer in accordance with the Loan Documents.  Seller has informed Buyer that certain Affiliates of Seller (each a “ Seller Guarantor ”) have provided certain standard non-recourse carve-out guaranties and/or environmental indemnities to the Lender with respect to the Loan and that Lender will require Buyer to provide a financially responsible person or entity to provide a substantially similar guaranty and indemnity (a “ Replacement Guarantor ”).  Buyer agrees that Buyer will offer a Replacement Guarantor who shall, in Lender’s sole discretion, satisfy the financial conditions currently required to be maintained by the applicable Seller Guarantor(s) pursuant to the Loan Documents.  Notwithstanding anything to the contrary contained herein, provided that Seller and Buyer shall have satisfied its obligations under this Section 2.4 , the failure of Lender to approve the assignment and assumption of the Loan by the Assumption Approval Deadline shall not constitute a default by either Seller or Buyer.

 

2.4.2       Certain Condition Precedent Regarding Loan Assumption .  Without limitation to any of the conditions precedent set forth in this Agreement, it shall be a condition to Buyer’s and Seller’s obligation to close the purchase and sale of the Property that the Lender shall have approved, in writing, the assumption of the Loan by Buyer and the release of Seller and Seller Guarantor and approval of Buyer’s Replacement Guarantor within thirty (30) days of the Effective Date (the “ Assumption Approval Deadline ”).  If Lender fails to approve the assumption of the Loan, the release of Seller and Seller Guarantor and approval of Buyer’s Replacement Guarantor by Buyer on or before 5:00 p.m. Pacific Time on the Assumption Approval Deadline, then either Buyer or Seller, in their sole and absolute discretion, may extend the Assumption Approval Deadline for ten (10) additional days (the “ Extended Assumption Approval Deadline ”) by notice in writing to the other party prior to the expiration of the Assumption Approval Deadline; provided, however, that if Lender fails to approve the assumption of the Loan by Buyer, the release of Seller and the Seller Guarantor and approval of Buyer’s replacement Guarantor on or before 5:00 p.m. Pacific Time on the Extended Assumption Approval Deadline, then either Buyer or Seller may thereafter terminate this Agreement by delivering written notice to the other at any time after the expiration of the Extended Assumption Approval Deadline; provided, however, that if the Lender approves

 

10

 

Buyer’s assumption of the Loan before the delivery of such termination notice, then such termination notice shall be null and void.  In the event of such termination the Deposit shall be returned to Buyer so long as the Buyer is not otherwise in material default hereunder and the parties shall have no further liability to each other except as set forth herein.

 

2.4.3       Closing of Loan Assumption .  Upon Lender’s approval of Buyer’s assumption of the Loan, Seller and Buyer agree to execute such documentation as may be reasonably required by Lender pursuant to and in accordance with the terms of the Loan Documents and to take all other steps necessary to promptly close the loan assumption on the Closing Date, the completion of which shall include Lender’s release of Seller and the Seller Guarantor from future liability with respect to the Loan.  Concurrent with the Closing of the assumption of the Loan and provided the Lender shall agree, all reserve accounts maintained by such Lender on behalf of Seller in connection with the Loan, if any,  shall be assigned by Seller to Buyer at the Closing and Seller shall receive a credit at Closing equal to the amounts so assigned.  If the Lender shall not so agree to the assignment and assumption of existing reserves at Closing as aforesaid, such reserves shall not be assigned to or assumed by Buyer and Seller shall not receive a credit therefor at Closing, and if required by Lender, Buyer shall establish replacement reserves in the amounts reasonably required by Lender but such amounts shall not be in excess of the amounts currently required by the Loan Documents, and if Lender requires such additional reserves, Buyer shall have no obligation to agree thereto and such requirement shall be deemed to be a “material change” in the Loan Documents as contemplated in Section 9.4.1 hereof, and Buyer shall upon Seller’s request and expense, reasonably cooperate with Seller’s efforts to recover such Seller reserves from Lender.  All costs and fees of assuming the Loan shall be at Buyer’s sole cost and expense and Buyer shall pay all assumption deposit fees, application fees, review processing fees, legal fees, and loan assumption fees when charged by the Lender and/or Servicer in accordance with the terms of the applicable Loan Documents in connection with the assumption thereof.

 

2.4.4       Materiality.   The provisions of this Section 2.4 are material and included as a material portion of the consideration given by Buyer to Seller in exchange for Seller’s agreement to enter into and perform under this Agreement

 

2.5                  General Assumption .  As additional consideration for the purchase and sale of the Property, at Closing Buyer will: (a) assume and perform (i) all of the covenants and obligations of Seller, Seller’s predecessors in title and Seller’s Affiliates pursuant to the Leases and Approved Contracts (including, without limitation, those relating to any Deposits) which arise on or after the Closing Date, and (ii) all obligations under the Leases and Approved Contracts relating to the physical and environmental condition of the Property arising on or after the Closing Date; and (b) assume and agree to discharge, perform and comply with each and every liability, duty, covenant, debt or obligation of Seller or any of its Affiliates resulting from, arising out of, or in any way related to any Licenses and Permits and arising on or after the Closing Date.  By closing under this Agreement, Buyer hereby indemnifies, defends, and holds Seller, Seller’s Affiliates and their respective partners, members, shareholders, officers, directors, managers, employees and agents harmless from and against any and all claims, liens, damages, demands, causes of action, liabilities, lawsuits, judgments, losses, costs and expenses (including but not limited to reasonable attorneys’ fees and expenses) asserted against or incurred by Seller

 

11

 

and arising out of the failure of Buyer to perform its obligations pursuant to this Section 2.5 .  The provisions of this Section 2.5 shall survive the Closing.

 

ARTICLE 3

BUYER’S DUE
DILIGENCE/CONDITION OF THE PROPERTY

 

3.1                  Buyer’s Inspections and Due Diligence .  Buyer acknowledges that commencing on the Effective Date and continuing until June 22, 2009 (which will expire at 5:00 p.m. Pacific Time) on such date (the period of time from the Effective Date until such time shall be referred to herein as the “ Due Diligence Period ”), Buyer shall conduct its examinations, inspections, testing, studies and investigations of the Property, review information regarding the Property and such documents applicable to the Property, including, without limitation, the documents that Seller delivers or makes available, as set forth in Section 3.2 below (collectively, the “ Due Diligence ”).  Except for any limitations as may be imposed by this Article 3 below, Buyer may conduct such due diligence activities, inspections, and studies of the Property as it deems necessary or appropriate, and examine and investigate to its full satisfaction all facts, circumstances, and matters relating to the Property (including the physical condition and use, availability and adequacy of utilities, access, zoning, compliance with applicable laws, environmental conditions, accessibility matters, engineering and structural matters), title and survey matters, and any other matters it deems necessary or appropriate for purposes of consummating this transaction.  The Due Diligence shall be at Buyer’s sole cost and expense.

 

3.2                  Delivery Period .

 

3.2.1       Due Diligence Items .  To the extent Seller has not already done so, within three (3) business days of the Effective Date, Seller shall deliver to Buyer for the following: (i) the most recent rent roll statement (the “ Rent Roll ”) with respect to the Property prepared by Seller, in the form and containing such information as maintained by Seller from time to time; (ii) copies of all Contracts (including any Commission Agreements); and (iii) copies of any of the following items pertaining to the Property to the extent they exist and are in Seller’s or Property Manager’s possession: plans and specifications; “as-built” plans and specifications; structural, seismic or geological investigations and/or reports prepared by third parties; environmental investigations and/or reports prepared by third parties; warranties; income and expense statements for the prior three (3) years; current tax bill, and the Licenses and Permits (collectively, the “ Deliverable Due Diligence Items ”).  Seller shall also make available to Buyer for inspection at Seller’s primary office, the primary office of the Property Manager or the Property Managers on-site office the following:  (i) copies of all Leases referenced on the Rent Roll and copies of any subleases or amendments relating thereto and Tenant correspondence in Seller’s possession; (ii) maintenance and renovations records; and (iii) subject to Section 3.2.3 hereof, all other information relating to the operation of the Property (collectively, the “ Other Due Diligence Items ”).  The Deliverable Due Diligence Items and Other Due Diligence Items are all collectively referred to herein as the “ Due Diligence Items ”.

 

3.2.2       No Warranty .  Buyer acknowledges that many of the Due Diligence Items were prepared by third parties other than Seller.  Buyer further acknowledges

 

12

 

and agrees that (a) except as specifically set forth in this Agreement, neither Seller nor any of Seller’s respective agents, employees, contractors or any other party has made any warranty or representation regarding the truth, accuracy or completeness of the Due Diligence Items or the source(s), and (b) Seller has not undertaken any independent investigation as to the truth, accuracy or completeness of the Due Diligence Items, and Seller is providing the Due Diligence Items or making the Due Diligence Items available to Buyer solely as an accommodation to Buyer.  Buyer acknowledges that the Due Diligence Items are subject to the confidentiality provisions of Section 3.5 below.

 

3.2.3       Excluded Materials .  Notwithstanding any terms to the contrary in this Agreement, (a) Seller shall not be obligated or otherwise required to furnish or make available to Buyer any of the following (collectively, “ Excluded Materials ”):  (i) any appraisals or other economic evaluations of, or projections with respect to, all or any portion of the Property, including, without limitation, budgets, prepared by or on behalf of Seller or any Affiliate of Seller or any other party, (ii) any documents, materials or information which are subject to attorney/client, work product or similar privilege, which constitute attorney communications with respect to the purchase of the Property by Seller, (iii) any information which Seller, in good faith, considers proprietary and not related to the operation of the Property, and (iv) any information which is subject to any other confidentiality obligations; (b) Due Diligence Items shall not include any Excluded Materials; and (c) Seller shall have no obligation or liability of any kind to Buyer as a result of Seller not furnishing or making available to Buyer the Excluded Materials.

 

3.3                  Site Visits .  During the pendency of this Agreement, Buyer and its Licensee Parties shall have reasonable access to the Property at agreed upon times for agreed upon purposes on at least one (1) business day prior notice to Seller.  Such notice shall describe the scope of the Due Diligence Buyer intends to conduct during Buyer’s access to the Property.  Seller shall have the right to have a representative present during any visits to or inspections of the Property or any meetings or discussions with any Tenant by Buyer or any Licensee Parties or any Governmental Entity.  Buyer will conduct its Due Diligence in a manner so as to minimize, to the extent reasonably possible to do so, any interference with the operations and occupancy of the Property and to minimize, to the extent reasonably possible to do so, any disturbance to Tenants.  Buyer will not enter the Property or contact any leasing agents or the Property Manager of the Property or any Governmental Entity without Seller’s prior written consent, which consent shall not be unreasonably withheld or delayed.  Neither Buyer nor any Licensee Parties may contact any Tenants or make any inquiries of such Tenants including, without limitation, those which in any way relate to the Property, without Seller’s prior written consent which consent may be withheld in Seller’s sole and absolute discretion.  In the event Buyer desires to conduct any physically intrusive Due Diligence, such as sampling of soils, other media, building materials, or the like, Buyer will identify in writing exactly what procedures Buyer desires to perform and request Seller’s express written consent.  Seller may withhold or condition consent to any physically intrusive Due Diligence in Seller’s sole and absolute discretion.  Upon receipt of Seller’s written consent, Buyer and all Licensee Parties shall, in performing such Due Diligence, comply with any agreed upon procedures and with any and all Laws including, without limitation, any Environmental Laws.

 

13

 

3.4                  Insurance Requirements .  As a condition precedent to any entry onto the Property by Buyer or any Licensee Parties prior to the Closing, Buyer or any such Licensee Parties shall carry worker’s compensation insurance in compliance with applicable law, liability insurance covering bodily injury, property damage, with a combined single limit of $2,000,000, and automobile liability insurance in an amount not less than $1,000,000.00 covering all automobile and equipment owners and/or operated by Buyer and any Licensee Parties in connection with the license granted herein.  The liability policies described herein shall name Seller and those reasonably designated by Seller as an additional insured.  All such insurance shall: (a) be primary and no insurance of Seller or any of the additional insured shall be called upon to contribute to a loss and (b) not be cancelled or materially modified without first giving Seller thirty (30) days’ advance written notice of cancellation or material modification.  Before entering the Property pursuant to this Section 3.4 , Buyer shall deliver copies of the policies or certificates of insurance issued by the insurance carrier(s) to Seller demonstrating compliance with the terms of this Section.  In the event that, during the Due Diligence Period or at any other time during the pendency of this Agreement that Buyer or any Licensee Parties are entering the Property, Buyer or any Licensee Parties fail to procure or maintain the insurance requirements as set forth in this Section or such insurance is modified such that it does not provide coverage to Seller and its additional insured as required herein, Seller shall have the right upon twenty-four (24) hours notice to immediately terminate this Agreement by written notice to Buyer whereupon Buyer shall immediately cease all operations on the Property and promptly remove all Licensee Parties from the Property (unless the subject insurance requirements are satisfied and evidence thereof delivered to Seller before the expiration of said twenty-four (24) hour notice) and the Deposit shall be promptly returned to Buyer.

 

3.5                  Restoration; No Liens .  Buyer shall promptly pay when due the costs of all entry and inspections and examinations done with regard to the Property and repair and/or restore the Property to the condition in which the same were found before any such entry upon the Property and inspection or examination was undertaken.  Buyer shall not permit any mechanics’ or other liens to be filed against the Property as a result of labor or materials furnished in connection with its Due Diligence.  If any such lien is filed against the Property as a result of the activities of Buyer or any Licensee Parties, then within ten (10) days after receipt of written demand from Seller or any other notice of such lien, Buyer shall either cause the same to be discharged of record by payment of the claim or posting of a bond, or will take such other action as may be reasonably acceptable to protect Seller, Seller’s Affiliates and the Property from any loss or damage arising from such lien.  In the event Buyer fails to release any lien by payment, bond or otherwise as set forth herein, Seller may pay such amounts necessary to cause the release of the lien and Buyer shall promptly reimburse Seller one hundred percent (100%) of the amount so paid, in addition to Seller’s other costs (including, but not limited to attorneys’ fees) necessary to discharge the lien(s)).  Buyer’s obligations under this Section 3.5 shall expressly survive the Closing or, if the purchase and sale is not consummated, any termination of this Agreement.  The provisions of this Section 3.5 shall survive the Closing or, if the purchase and sale is not consummated, any termination of this Agreement.

 

3.6                  Due Diligence Indemnity .  Buyer shall defend, protect, indemnify, and hold harmless Seller, Seller’s Affiliates and their respective partners, shareholders, members, officers, directors, employees and agents, as applicable, and the Property Manager from and against all Losses (whether arising out of injury or death to persons or damage to the Property or

 

14

 

otherwise) including, but not limited to, costs of remediation, restoration and other similar activities, mechanic’s and materialmen’s liens and attorneys’ fees, arising out of or in connection with Buyer’s Due Diligence, Buyer’s breach of its obligations under Section 3.7 or Buyer’s or any Licensee Parties’ entry upon the Property; provided, however, that Buyer shall have no obligations under this Section 3.6 to the extent the Losses are caused solely by the negligence or willful misconduct of Seller, Seller’s Affiliates, Seller’s partners, shareholders, members, officers, directors, employees and agents, as applicable, and/or the Property Manager or result from the mere discovery by Buyer of pre-existing conditions at the Property and the Buyer promptly notifies Seller in writing of such discovery.  The provisions of this Section 3.6 shall survive the Closing or, if the purchase and sale is not consummated, any termination of this Agreement.

 

3.7                  Confidentiality .  Buyer agrees that any information obtained by Buyer or its Affiliates or their respective attorneys, partners, accountants, brokers, property management companies, third party consultants, lenders or investors (collectively, for purposes of this Section 3.7 , the “ Permitted Outside Parties ”) in the conduct of its Due Diligence shall be treated as confidential pursuant to Section 10.11 of this Agreement and shall be used only to evaluate the acquisition of the Property from Seller.  Buyer further agrees that within its organization, or as to the Permitted Outside Parties, the Due Diligence Items and all other information obtained by Buyer pursuant to its Due Diligence will be disclosed and exhibited only to those persons within Buyer’s organization or to those Permitted Outside Parties who are involved in determining the feasibility of Buyer’s acquisition of the Property.  Buyer further acknowledges that the Due Diligence Items, all information relating to the leasing arrangements between Seller and any Tenant or prospective tenants, and all other information obtained by Buyer pursuant to its Due Diligence are proprietary and confidential in nature.  Buyer agrees not to divulge the contents of such Due Diligence Items or any other information except in strict accordance with this Section 3.7 and Section 10.11 of this Agreement.  In permitting Buyer and the Permitted Outside Parties to review the Due Diligence Items and other information to assist Buyer, Seller has 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 Seller and any such claims are expressly rejected by Seller and waived by Buyer and the Permitted Outside Parties, for whom, by its execution of this Agreement, Buyer is acting as an agent with regard to such waiver.  The provisions of this Section 3.7 shall survive the Closing or, if the purchase and sale is not consummated, any termination of this Agreement.

 

3.8                  Due Diligence Period .  Unless Buyer delivers to Seller and Escrow Agent written notice terminating this Agreement on or before the end of the Due Diligence Period which notice may be for any reason, or no reason, (the “ Disapproval Notice ”), this Agreement shall continue in full force and effect.  If Buyer fails to give Seller the Disapproval Notice, then Buyer shall be deemed to have approved all of the matters described in Sections 3.1 and 3.2 .  If Buyer timely elects to terminate its obligations hereunder as described above, then Buyer shall be entitled to the immediate return of the Deposit and Buyer shall return all Due Diligence Items to Seller and provide to Seller, promptly after receipt of a request from Seller, originals of all third party reports, studies and appraisals relating to the Property in its possession, without representation or warranty and at no cost to Seller.  The foregoing obligation shall survive any termination of this Agreement.  Subject to the terms of this Agreement, provided that Buyer has not delivered the Disapproval Notice, Buyer, after the expiration of the

 

15

 

Due Diligence Period, may continue to conduct further physical Due Diligence or other examinations, inspections, tests, studies and investigations regarding the Property; provided, however, that except as otherwise expressly provided in Sections 5.1 and 10.2.2 , in no event shall Buyer have any right to terminate or otherwise modify its obligations hereunder after the end of the Due Diligence Period as a result of any such further Due Diligence or other examinations, inspections, tests, studies or investigations regarding the Property, and the provisions of this Article 3 , including, without limitation, the indemnification provisions, shall continue to apply.

 

3.9                  Delivery of Buyer’s Due Diligence Materials .  Buyer agrees that if Buyer terminates this Agreement for any reason permitted hereunder, including Buyer’s disapproval of its Due Diligence within the Due Diligence Period, then Buyer shall, at Seller’s request and at no cost to Seller, assign to Seller all of its rights, interest and title to copies of all third party drafts and final surveys, environmental site assessments, appraisals, examinations, inspections, tests, studies and investigations of the Property or any other similar documents or materials applicable to the Property, obtained by Buyer during the Due Diligence Period (collectively, “ Buyer’s Due Diligence Materials ”).  Buyer’s obligations under this Section shall expressly survive the termination and/or expiration of this Agreement.

 

ARTICLE 4

TITLE, SURVEY & CONTRACTS

 

4.1                  Title to Real Property .  Buyer shall obtain (a) a preliminary report or commitment to issue an owner’s policy of title insurance with respect to the Property issued by the Title Company (the “ Title Commitment ”), and (b) copies of all recorded documents referred to on Schedule B of the Title Commitment as exceptions to coverage (the “ Title Documents ”).  Buyer shall instruct Escrow Agent to deliver a copy of the Title Commitment and the Title Documents to Seller concurrent with its delivery of the same to Buyer.

 

4.2                  Certain Exceptions to Title .  Buyer shall have the right to object in writing to any title matters that are not Permitted Exceptions and that are disclosed in the Title Commitment (herein collectively called “ Liens ”) on or before the tenth (10 th ) day prior to the expiration of the Due Diligence Period.  Buyer’s failure to disapprove the Liens in writing within such period shall constitute Buyer’s approval of all such Liens.  All such Liens which are timely objected to by Buyer shall be herein collectively called the “ Title Objections ”.  Seller, in its sole and absolute discretion, may elect (but shall not be obligated) to remove or cause to be removed, or insured over, at its expense, any Title Objections, and shall be entitled to a reasonable adjournment of the Closing for the purpose of such removal, which removal will be deemed effected by, among other things, the issuance of title insurance reasonably acceptable to Buyer eliminating or insuring against the effect of the Title Objections.  Seller shall notify Buyer in writing within five (5) days after receipt of Buyer’s notice of Title Objections (the “ Title Cure Period ”), whether Seller elects to remove the same.  If Seller is unable to remove or endorse over any Title Objections prior to the expiration of the Title Cure Period, or if Seller elects not to remove one or more Title Objections by the expiration of the Title Cure Period, Buyer may elect, as its sole and exclusive remedy therefore, to either (a) terminate this Agreement on or before the end of the Due Diligence Period, in which event the Deposit shall be paid to Buyer and,

 

16

 

thereafter, the parties shall have no further rights or obligations hereunder except for those obligations which expressly survive the termination of this Agreement, or (b) waive, in writing, such Title Objections, in which event such Title Objections shall be deemed additional “Permitted Exceptions” and the Closing shall occur as herein provided without any reduction of or credit against the Purchase Price.  If before the end of the Due Diligence Period, Buyer elects to proceed with the transaction contemplated herein, then Buyer shall be deemed to have elected to waive those Title Objections Seller elected not to remove or endorse over and its right to terminate this Agreement pursuant to this Section 4.2 .  Notwithstanding the foregoing, Seller shall be obligated at Closing to cause the release of the Liens of any financing obtained by Seller which is secured by the Property other than the Loans.

 

4.3                  Additional Exceptions .  In the event the Title Commitment is amended or updated after the expiration of the Due Diligence Period (each, a “ Title Commitment Update ”), Buyer shall furnish Seller with a written statement of approval or objections to any matter first raised in a Title Commitment Update that affects title to the Real Property and that was not caused by Buyer or any Licensee Parties within five (5) business days after its receipt of such Title Commitment Update together with a legible copy of each new exception raised therein (each, a “ Title Commitment Update Review Period ”).  Should Buyer fail to notify Seller in writing of any objections to any matter first disclosed in a Title Commitment Update prior to the expiration of the applicable Title Commitment Update Review Period, as applicable, Buyer shall be deemed to have approved such matters whereupon they shall become Permitted Exceptions. If, however, Buyer objects to such new exception, then Seller shall have until 5:00 p.m. Pacific Time on the fifth (5 th ) business day after Seller’s receipt of Buyer’s written objection in which to notify Buyer, in Seller’s sole discretion, either (a) that Seller will remove the new disapproved exception(s) prior to the Close of Escrow and, thereafter, Seller shall be entitled to a reasonable adjournment of the Closing for the purpose of such removal, which removal will be deemed effected by, among other things, the issuance of title insurance reasonably acceptable to Buyer eliminating or insuring against the effect of the Title Objections, or (b) that Seller will not remove the new disapproved exception(s).  If Seller does not elect to do either (a) or (b), such silence shall be conclusively deemed to constitute Seller’s election not to remove any new exception(s) disapproved by Buyer.  If Seller elects not to remove any new disapproved exception(s), whether by giving notice thereof or by failing to give notice, then Buyer shall have until 5:00 p.m. Pacific Time on the fifth (5 th ) business day after Seller’s election (or deemed election) not to cure the disapproved exception in which to elect (y) to terminate this Agreement by written notice to Seller and Escrow Holder or (z) to waive in writing Buyer’s previous disapproval of (and thereby accept) any items that Seller does not elect to remove.  Buyer’s failure to terminate this Agreement by delivering written notice of such election on or before 5:00 p.m. Pacific Time on the fifth (5 th ) business day after Seller’s election or deemed election not to remove the new disapproved exception shall be deemed to constitute Buyer’s irrevocable election to waive Buyer’s previous disapproval whereupon the disapproved exception shall become a Permitted Exception.  If, however, Buyer does elect to terminate this Agreement, then this Agreement shall so terminate, the Deposit shall be returned to Buyer and neither party shall have any further obligations to the other hereunder except to the extent any such obligation expressly survives the termination of this Agreement.

 

4.4                  Survey Objections .  Buyer shall have the right to obtain a new survey or an update of any survey provided by Seller (the “ Survey ”) at its sole cost and expense. 

 

17

 

Promptly upon receipt of the Survey, Buyer, at its sole cost and expense, shall deliver a copy to Seller and to Escrow Agent.  No later than ten (10) days prior to the expiration of the Due Diligence Period, Buyer shall have the right to notify Seller, in writing, of any matters disclosed on the Survey that are not Permitted Exceptions and that affect Buyer’s title to the Property.  Buyer’s failure to obtain the Survey or disapprove any matters disclosed by the Survey on or before such time shall constitute Buyer’s approval of the matters disclosed by the Survey or matters that would have been disclosed had Buyer obtained a Survey.  All such matters which are timely objected to by Buyer shall be herein collectively called the “ Survey Objections ”.  Seller, in its sole and absolute discretion, may within five (5) days of receipt of Buyer’s notice of Survey Objection elect (but shall not be obligated) to remove or cause to be removed, or insured over, at its expense, any Survey Objections, and shall be entitled to a reasonable adjournment of the Closing for the purpose of such removal, which removal will be deemed effected by, among other things, the issuance of title insurance reasonably acceptable to Buyer eliminating or insuring against the effect of the Survey Objections.  Seller shall notify Buyer in writing within five (5) days after receipt of Buyer’s notice of Survey Objections (the “ Survey Cure Period ”), if any, whether Seller elects to cure the same.  If Seller is unable to cure or endorse over any Survey Objections prior to the expiration of the Survey Cure Period, or if Seller elects not to remove one or more Survey Objections, Buyer may elect, as its sole and exclusive remedy therefore, to either (a) terminate this Agreement by giving written notice to Seller and Escrow Agent on or before the end of the Due Diligence Period, in which event the Deposit shall be paid to Buyer and, thereafter, the parties shall have no further rights or obligations hereunder except for those obligations which expressly survive the termination of this Agreement, or (b) waive, in writing, such Survey Objections, in which event the Closing shall occur as herein provided without any reduction of or credit against the Purchase Price.  If before the end of the Due Diligence Period, Buyer elects to proceed with the transaction contemplated herein, then Buyer shall be deemed to have elected to waive those Survey Objections Seller elected not to cure and its right to terminate this Agreement pursuant to this Section 4.4 .

 

4.5                  Title Insurance .  At Closing, the Title Company shall issue to Buyer or be irrevocably committed to issue to Buyer a CLTA standard coverage form title policy (the “ Title Policy ”) in the amount of the Purchase Price, insuring that fee simple title to the Land is vested in Buyer subject only to the Permitted Exceptions.  Buyer shall be entitled to request that the Title Company provide ALTA extended coverage and/or such endorsements (or amendments) to the Title Policy as Buyer may reasonably require and/or increased liability as Buyer may reasonably require, provided that the same shall (a) be at no cost to Seller, (b) impose no additional liability on Seller, (c) not be a condition to the Closing and, accordingly, if Buyer is unable to obtain any of the foregoing, Buyer shall nevertheless be obligated to proceed to close the transaction contemplated by this Agreement without reduction of or set off against the Purchase Price, and (d) the Closing shall not be delayed as a result of Buyer’s request.

 

4.6                  Contracts .  On or before the tenth (10th) day prior to the expiration of the Due Diligence Period, Buyer shall have the right to disapprove, by written notice to Seller, any of the Contracts that are not terminable upon thirty (30) days or less prior notice.  If Buyer desires to have any Contract terminated that is not expressly terminable upon thirty (30) days’ or less notice (any, a “ Non-Terminable Contract ”), then Buyer shall notify Seller in writing of any such Non-Terminable Contract that it desires to have terminated.  Within five (5) days following receipt of any such Buyer notice, Seller shall notify Buyer in writing whether Seller, in

 

18

 

its sole and absolute discretion, is willing to terminate such Non-Terminable Contract.  If Seller notifies Buyer that it is unwilling to terminate any such Non-Terminable Contracts, then Buyer shall have the right, until the expiration of the Due Diligence Period, either to waive in writing its prior disapproval of the corresponding Non-Terminable Contract(s) or to terminate this Agreement by giving written notice to Seller and Escrow Holder as Buyer’s sole and exclusive remedy, in which event the Deposit shall be returned to Buyer.  If Buyer fails to waive any such prior disapproval and does not terminate this Agreement before the expiration of the Due Diligence Period, then Buyer shall be deemed to have waived its prior disapproval of the corresponding Non-Terminable Contract(s).  All of the Contracts which are either terminable on thirty (30) days or less notice or which are not disapproved by Buyer, or with respect to which Buyer’s initial disapproval is waived or deemed to be waived hereunder, are referred to herein as the “ Approved Contracts .”

 

ARTICLE 5

 

REMEDIES

 

5.1                  Permitted Termination; Seller Default .  If the sale of the Property is not consummated due to the permitted termination of this Agreement by Buyer as herein expressly provided, then the Deposit shall be returned to Buyer and Buyer will have no liability hereunder except as otherwise expressly stated in this Agreement.  If the sale of the Property is not consummated due solely to Seller’s material default hereunder that is not cured within all applicable notice and cure periods, then Buyer shall have the right, to elect, as its sole and exclusive remedy, to (a) terminate this Agreement by written notice to Seller, promptly after which the Deposit shall be returned to Buyer, (b) waive the default and proceed to close the transaction contemplated herein, or (c) provided that all of the conditions to Seller’s obligations to close have been satisfied and so long as Buyer is not then in default of any of its material obligations under this Agreement, seek specific performance of Seller’s obligations under this Agreement and record and maintain against the Property a notice of lis pendens in accordance with applicable law if Buyer further satisfies and continues to satisfy each of the following obligations: (i) Buyer shall have reasonably demonstrated that it is prepared to deliver into escrow all funds required by this Agreement in order for the Closing to occur, Buyer shall have deposited all funds required by this Agreement in order for the Closing to occur, and Buyer shall be ready and willing in all other respects to close escrow in accordance with the terms and conditions of this Agreement; and (ii) Buyer shall have filed an action for specific performance (a “ Specific Performance Action ”) within sixty (60) days of the date the Closing was to have occurred.  Notwithstanding anything to the contrary contained herein, Seller shall not be deemed in default unless and until Buyer provides Seller with written notice of such default and Seller fails to cure such default within five (5) business days of its receipt of such written notice.

 

5.2                  Buyer Default; Liquidated Damages .  IF THE SALE IS NOT CONSUMMATED DUE TO ANY DEFAULT BY BUYER HEREUNDER AND BUYER FAILS TO CURE SUCH BREACH WITHIN FIVE (5) BUSINESS DAYS AFTER BUYER’S RECEIPT OF WRITTEN NOTICE FROM SELLER SPECIFYING SUCH BREACH (PROVIDED, HOWEVER, THAT THE FOREGOING NOTICE AND CURE RIGHTS SHALL NOT APPLY TO BUYER’S FAILURE TO CLOSE ON THE CLOSING DATE), THEN SELLER SHALL RETAIN THE DEPOSIT AS LIQUIDATED

 

19

 

DAMAGES, WHICH RETENTION SHALL OPERATE TO TERMINATE THIS AGREEMENT AND RELEASE BUYER FROM ANY AND ALL LIABILITY HEREUNDER, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT.  THE PARTIES HAVE AGREED THAT SELLER’S ACTUAL DAMAGES, IN THE EVENT OF A FAILURE TO CONSUMMATE THIS SALE DUE TO BUYER’S DEFAULT, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.  AFTER NEGOTIATION, THE PARTIES HAVE AGREED THAT, CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, THE AMOUNT OF THE DEPOSIT IS A REASONABLE ESTIMATE OF THE DAMAGES THAT SELLER WOULD INCUR IN SUCH EVENT.  BY PLACING THEIR INITIALS BELOW, EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED, AT THE TIME THIS AGREEMENT WAS MADE, THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION.  THE PARTIES ACKNOWLEDGE THAT SUCH PAYMENT OF THE DEPOSIT IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER UNDER CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677.  THE FOREGOING IS NOT INTENDED TO LIMIT BUYER’S SURVIVING OBLIGATIONS UNDER THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, ALL OF BUYER’S INDEMNITIES IN THIS AGREEMENT.

 

Initials:

Seller

RO, SDS

Buyer

MA

 

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF SELLER

 

6.1                  Representations and Warranties of Seller .  Subject to the provisions of this Agreement including, without limitation, Sections 6.2 , 6.3, and Article 7 , Seller makes the following representations and warranties with respect to the Property:

 

6.1.1       Status .  Seller is a limited liability company organized or formed, validly existing and in good standing under the laws of the State of California.

 

6.1.2       Authority .  The execution and delivery of this Agreement and the performance of Seller’s obligations hereunder have been or will be duly authorized by all necessary action on the part of Seller, and this Agreement constitutes the legal, valid and binding obligation of Seller, subject to equitable principles and principles governing creditors’ rights generally.

 

6.1.3       Non-Contravention .  The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby will not, to Seller’s knowledge (i) violate any Laws or (ii) conflict with, result in a breach of, or constitute a default under the organizational documents of Seller, any note or other evidence of indebtedness, any mortgage, deed of trust or indenture, or any lease or other material agreement

 

20

 

or instrument to which Seller is a party or by which Seller may be bound and, in either case, that would have a material and adverse affect on Seller’s ability to consummate the transactions contemplated by this Agreement.

 

6.1.4       Non-Foreign Entity .  Seller is not a “foreign person” or “foreign corporation” as those terms are defined in the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

 

6.1.5       Consents .  No consent, waiver, approval or authorization is required from any person or entity (that has not already been obtained or will be obtained) in connection with the execution and delivery of this Agreement by Seller or the performance by Seller of the transactions contemplated hereby.

 

6.1.6       Leases.   To Seller’s knowledge, true, correct and complete copies of the Leases in Property Manager’s files have been or will be delivered or made available to Buyer in accordance with Section 3.2.1 above.  Except as set forth in the Rent Roll or otherwise disclosed to Buyer by Seller in writing prior to the expiration of the Due Diligence Period, to Seller’s knowledge, the Leases listed on the Rent Roll are in full force and effect as of the date set forth on the Rent Roll.  To Seller’s knowledge, Seller has not received written notice of any uncured default of Seller, as landlord, under any Lease.  Except as may be set forth in the Rent Roll or otherwise disclosed to Buyer by Seller in writing prior to the expiration of the Due Diligence Period, to Seller’s knowledge, no Tenant has paid any rent, fees, or other charges for more than one month in advance.  Seller is the landlord under each of the Leases and, except for the security interests granted in connection with the Loans encumbering the Property, has not assigned, mortgaged, pledged or otherwise encumbered any of its rights or interests under the Leases.

 

6.1.7       Contracts .  To Seller’s knowledge, there are no Contracts except for the Contracts specifically designated in Exhibit B attached hereto.  To Seller’s knowledge, true, correct and complete copies of the Contracts in Property Manager’s files have been or will be delivered to Buyer in accordance with Section 3.2.1 , above.  To Seller’s knowledge, Seller has not received written notice of any uncured default of Seller under any Contracts.

 

6.1.8       Notice of Violation .  Except as may be disclosed in the Due Diligence Items, to Seller’s knowledge, Seller has not received written notice from any Governmental Entity having jurisdiction over the Property that the Property is in violation of any Law regulating the operation or use thereof.

 

6.1.9       Litigation .  To Seller’s knowledge, there is no legal action, suit, proceeding or claim affecting Seller or the Land, Improvements or Personal Property or any portion thereof relating to or arising out of the ownership, operation, use or occupancy of the Property being prosecuted in any court or by or before any federal, state, county or municipal department, commission, board, bureau or agency or other Governmental Entity.

 

6.1.10     Special Assessments .  To Seller’s knowledge and except as may otherwise be disclosed by the Due Diligence Items or the Title Documents, Seller has received

 

21

 

no written notice of any pending improvement liens or special assessments to be made against the Property by any governmental authority.

 

6.1.11     No Contracts.   Except for this Agreement, there are no options, contracts or other obligations outstanding for the sale, exchange or transfer of the Property or any portion thereof or the business operated thereon.

 

6.1.12     Environmental Issues .  To Seller’s knowledge, Seller has not received any written notice from any Governmental Entity that there is a presence, release, threat of release, placement on or in the Property, of any Hazardous Materials in violation of any Laws.

 

6.1.13     Prohibited Persons and Transactions .  Neither Seller nor any of its affiliates, nor, to Seller’s knowledge, any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“ OFAC ”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such persons or entities.

 

6.2                  Seller’s Knowledge .  For purposes of this Agreement and any document delivered at Closing, whenever the phrase “to Seller’s knowledge,” or the “knowledge” of Seller or words of similar import are used, they shall be deemed to refer to facts within the actual knowledge only of Steve Gilmore and Gina Costantino, the representatives or employees of the Seller who are most knowledgeable as to the status of the Property of Seller and no others, as of the Effective Date, without duty of inquiry whatsoever.  Buyer acknowledges that the individual named above is named solely for the purpose of defining and narrowing the scope of Seller’s knowledge and not for the purpose of imposing any liability on or creating any duties running from such individuals to Buyer.  Buyer covenants that it will bring no action of any kind against such individual, any shareholder, partner or member of Seller related to or arising out of these representations and warranties.

 

6.3                  Seller’s Maximum Aggregate Liability .  Notwithstanding any provision to the contrary contained in this Agreement or any documents executed by Seller pursuant hereto or in connection herewith, the representations and warranties of Seller set forth in Section 6.1 , together with Seller’s liability for any breach of any of Seller’s interim operating covenants under Article 8 , shall survive the Closing and not be merged into the deed for a period of nine (9) months.  Buyer shall have no right to bring any action against Seller as a result of any untruth or inaccuracy of such representations and warranties, or any such breach, unless (a) Buyer serves a written claim on Seller within such nine (9) month period, (b) Buyer commences and serves an action against Seller within thirty (30) days after Buyer gives such notice, and (c) the aggregate amount of all liability and losses arising out of any such untruth or inaccuracy, or any such breach, exceeds $25,000.  In addition, in no event shall Seller’s liability for all such breaches exceed, in the aggregate, $800,000.  Seller shall have no liability with respect to any of

 

22

 

Seller’s representations, warranties and covenants herein if, prior to the Closing, Buyer has actual knowledge of any breach of a representation, warranty or covenant of Seller herein, or Buyer obtains actual knowledge (from whatever source, including, without limitation, any of the Due Diligence Items, as a result of Buyer’s Due Diligence, the inclusion of any information in or written disclosure by Seller or Seller’s agents and employees) that contradicts any of Seller’s representations and warranties herein, and Buyer nevertheless consummates the transaction contemplated by this Agreement.  The provisions of this Section 6.3 shall expressly survive the Close of Escrow and shall not merger into the Deed or any of the other closing documents hereunder.

 

ARTICLE 7

REPRESENTATIONS AND WARRANTIES OF BUYER

 

7.1                  Buyer’s Representations and Warranties .  Buyer represents and warrants to Seller the following:

 

7.1.1       Status .  Buyer is a limited partnership organized or formed, validly existing and in good standing under the laws of the State of Delaware and has, or will have at Closing, the authority to transact business in the State of California.

 

7.1.2       Authority .  The execution and delivery of this Agreement and the performance of Buyer’s obligations hereunder have been or will be duly authorized by all necessary action on the part of Buyer and this Agreement constitutes the legal, valid and binding obligation of Buyer, subject to equitable principles and principles governing creditors’ rights generally.

 

7.1.3       Non-Contravention .  The execution and delivery of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby will not, to Buyer’s knowledge, violate any Law or conflict