Exhibit 10.3
AGREEMENT OF PURCHASE AND SALE
This Agreement, dated as of
October 26, 2007, is between ESS TECHNOLOGY, INC., a
California corporation (“ Seller ”), and TC FUND
PROPERTY ACQUISITIONS, INC., a Delaware corporation (“
Buyer ”).
ARTICLE I
PURCHASE AND SALE OF PROPERTY
Section 1.1 Sale .
Seller agrees to sell to Buyer, and
Buyer agrees to purchase from Seller, subject to the terms,
covenants and conditions set forth herein, all of Seller’s
right, title and interest in and to the following property
(collectively, the “ Property ”):
(a) Real Property. That certain real property
located at 48401 Fremont Boulevard, 48461 Fremont Boulevard and
48481 Fremont Boulevard, in the City of Fremont, State of
California, as more particularly described in
Exhibit A attached hereto and made a part hereof
(the “ Land ”), together with (1) all
improvements located thereon (the “ Improvements
”), (2) all rights, benefits, privileges, easements,
tenements, hereditaments, rights-of-way and other appurtenances
thereon or in any way appertaining thereto, including all mineral
rights, development rights, air and water rights, and (3) all
strips and gores and any land lying in the bed of any street, road
or alley, open or proposed, adjoining such Land (collectively, the
“ Real Property ”); and
(b) Intangible Personal Property . To the
extent assignable at no cost to Seller, all intangible personal
property, if any, owned by Seller and related to the Real Property
and the Improvements, including, without limitation: any trade
names and trademarks associated with the Real Property and the
Improvements (but specifically excluding the names “ESS
Technology” and any derivatives thereof); any plans and
specifications and other architectural and engineering drawings for
the Improvements; any warranties; any Service Contracts (as defined
in Section 2.1(b) below) and other contract rights related to
the Property (but only to the extent Seller’s obligations
thereunder are expressly assumed by Buyer pursuant to the
Assignment of Intangible Personal Property as defined in
Section 8.3(a)(2) below); and any governmental permits,
approvals and licenses (including any pending applications).
Notwithstanding anything to the contrary contained herein, there
shall be excluded from the assignment of any rights of Seller under
any intangible property any rights of Seller against third parties
with respect to the period prior to Closing (the “
Excluded Rights ”) and any rights and obligations of
Seller under the Transition Services Agreement (as defined in
Section 3.1(d)) (collectively, the “ Intangible
Personal Property ”).
Section 1.2 Purchase
Price .
(a) The purchase price of the Property is Twenty Six
Million Three Hundred Thousand Dollars ($26,300,000) (the “
Purchase Price ”).
(b) The Purchase Price shall be paid as follows:
(1) Not later than the second business day after the
Effective Date (as defined herein), Buyer shall deposit in escrow
with LandAmerica Commercial Services, 7552 Rambler Road,
Suite 1700, Dallas, Texas 75231, Attention: Jennifer
Flynn-Maxwell (the “ Title Company ”, which
includes any title insurance company affiliate thereof) a
promissory note executed by Buyer payable to the order of Seller
(the “ Promissory Note ”) in the amount of Two
Hundred Thousand Dollars ($200,000) and in the form set forth on
Exhibit B attached hereto and made a part
hereof.
(2) If Buyer delivers a waiver notice under
Section 2.2 to Seller prior to the expiration of the
Contingency Period, Buyer shall deposit in escrow with the Title
Company the amount of One Million Dollars ($1,000,000) (the “
Deposit ”, which includes all interest which accrues
thereon) in cash or other immediately available funds within two
(2) business days after the expiration of the Contingency
Period. The Deposit shall replace the Promissory Note, and upon the
Title Company’s receipt of the Deposit, the Title Company
shall release the Promissory Note to Buyer. The Deposit shall be
considered fully earned by Seller as consideration for entering
into the Agreement and shall be nonrefundable after the Contingency
Period except as otherwise expressly provided herein.
The Deposit shall be held in an
interest bearing account at an FDIC insured bank. If the sale of
the Property as contemplated hereunder is consummated, then the
Deposit shall be paid to Seller at the Closing (as defined in
Section 1.2(b)(3) below) and credited against the Purchase
Price. IF THE SALE OF THE PROPERTY IS NOT CONSUMMATED DUE TO
SELLER’S DEFAULT HEREUNDER, THEN BUYER MAY ELECT, AS
BUYER’S SOLE AND EXCLUSIVE REMEDY, EITHER TO:
(1) TERMINATE THIS AGREEMENT AND RECEIVE A REFUND OF THE
DEPOSIT, TOGETHER WITH REIMBURSEMENT OF BUYER’S ACTUAL
DOCUMENTED COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE
NEGOTIATION AND EXECUTION OF THIS AGREEMENT, AND IN PERFORMING ITS
DUE DILIGENCE, NOT TO EXCEED ONE HUNDRED THOUSAND DOLLARS
($100,000), IN WHICH EVENT NEITHER PARTY SHALL HAVE ANY FURTHER
RIGHTS OR OBLIGATIONS HEREUNDER EXCEPT AS PROVIDED IN SECTIONS 6.1,
9.3 AND 9.9 BELOW, OR (2) ENFORCE SPECIFIC PERFORMANCE OF THIS
AGREEMENT. PROVIDED, HOWEVER, THAT IF SELLER’S DEFAULT
RESULTS FROM THE SALE OR OTHER DISPOSITION OF THE PROPERTY, SUCH
THAT THE REMEDY OF SPECIFIC PERFORMANCE IS NOT AVAILABLE, THEN
BUYER MAY SEEK MONETARY DAMAGES. BUYER SHALL NOT HAVE ANY OTHER
RIGHTS OR REMEDIES HEREUNDER AS A RESULT OF ANY DEFAULT BY SELLER
PRIOR TO CLOSING, AND BUYER HEREBY WAIVES ANY OTHER SUCH REMEDY AS
A RESULT OF A DEFAULT HEREUNDER BY SELLER. IF THE SALE IS NOT
CONSUMMATED DUE TO ANY DEFAULT BY BUYER HEREUNDER, THEN SELLER
SHALL RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES. THE PARTIES HAVE
AGREED THAT SELLER’S ACTUAL DAMAGES, IN THE EVENT OF A
FAILURE TO CONSUMMATE THIS SALE DUE TO BUYER’S DEFAULT PRIOR
TO CLOSING, 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
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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 FOREGOING IS
NOT INTENDED TO LIMIT BUYER’S OBLIGATIONS UNDER SECTIONS 6.1,
9.3 AND 9.9.
INITIALS:
SELLER /s/RLB
BUYER /s/NB
(3) The balance of the Purchase Price, which is Twenty
Five Million Three Hundred Thousand Dollars ($25,300,000) (plus or
minus the prorations pursuant to Section 8.5 hereof) shall be
paid to Seller in cash or by wire transfer of other immediately
available funds at the consummation of the purchase and sale
contemplated hereunder (the “ Closing ”).
ARTICLE II
CONDITIONS
Section 2.1 Buyer’s
Conditions Precedent .
Subject to the provisions of
Section 9.3 hereof, Seller has provided and/or shall provide
Buyer and its consultants and other agents and representatives with
access to the Property to perform Buyer’s inspections and
review and determine the present condition of the Property. Seller
has delivered or made available to Buyer at Seller’s offices
or at the Real Property or on a website all of those items listed
on Schedule 2 attached hereto, and shall within
the Delivery Period (as defined below) deliver or make available to
Buyer at Seller’s offices or at the Real Property or on a
website, copies of all other Due Diligence Materials (as defined in
Section 2.2 below) in Seller’s possession, except as
otherwise specifically provided herein along with all other
documents and materials in Seller’s possession or reasonably
available to Seller relating to the ownership or operation of the
Property as Buyer may reasonably request. Notwithstanding anything
to the contrary contained herein, the Due Diligence Materials shall
expressly exclude (i) those portions of the Due Diligence Materials
that would disclose Seller’s cost of acquisition of the Real
Property, or cost of construction of the Improvements and related
soft costs, or any estimates of costs to repair, replace, remediate
or maintain the Real Property, (ii) any reports,
presentations, summaries and the like prepared for any of
Seller’s boards, committees, partners or investors in
connection with its consideration of the acquisition of the Real
Property, construction of the Improvements or sale of the Property,
(iii) any proposals, letters of intent, draft contracts or the
like prepared by or for other prospective purchasers of the
Property or any part thereof, (iv) Seller’s internal
memoranda, attorney-client privileged materials or internal
appraisals, and (v) any information which is the subject of a
confidentiality agreement between Seller and a third party (the
items described in clauses (i), (ii) (iii), (iv) and
(v) being collectively referred to as the “
Confidential Information ”). The “ Delivery
Period ” shall mean the period which ends five
(5) days after the Effective Date (as defined in
Section 9.14 below). Buyer’s obligation to purchase the
Property is conditioned upon Buyer’s review and approval of
the following, within the applicable time periods described in
Sections 2.2 and 4.1 hereof:
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(a) Title to the Property and survey matters in
accordance with Article IV below.
(b) The Due Diligence Materials, including, but not
limited to all contracts pertaining to the maintenance of the
Property (collectively, the “ Service Contracts
”).
(c) The physical condition of the Property.
(d) The zoning, land use, building, environmental and
other statutes, rules, or regulations applicable to the
Property.
(e) The current real estate tax bills, any warranties,
licenses, permits, certificates of occupancy, plans and
specifications, and other agreements or documents pertaining to the
Property which will be binding on Buyer after Closing.
(f) Any other matters Buyer deems relevant to the
Property.
Section 2.2 Contingency
Period .
Buyer shall have until the date that
is thirty (30) days after the Seller Board Approval Date as
defined in this Agreement (such period being referred to herein as
the “ Contingency Period ”) to review and
approve the matters described in Sections 2.1(b)-(f) above in
Buyer’s sole discretion (title and survey review and approval
shall be governed by the provisions of Section 4.1 below). If
Buyer determines to proceed with the purchase of the Property, then
Buyer shall, before the end of the Contingency Period, so notify
Seller in writing, in which case Buyer shall be deemed to have
approved all of the matters described in Sections 2.1(a)-(f)
above (subject to the provisions of Section 4.1 below as to
title and survey matters), including, without limitation, all
documents, Service Contracts and other contracts, agreements,
reports and other items and materials related to the Property
prepared by or on behalf of Seller which have been delivered or
otherwise made available to Buyer (collectively, the “ Due
Diligence Materials ”), and the Deposit shall become
nonrefundable except as expressly provided herein. If before the
end of the Contingency Period Buyer fails to give Seller such
written notice, then Buyer shall be deemed to have elected to
terminate this Agreement, the Promissory Note shall be immediately
returned to Buyer, and neither party shall have any further rights
or obligations hereunder except as provided in Sections 6.1,
9.3 and 9.9 below.
ARTICLE III
BUYER’S EXAMINATION
Section 3.1 Representations
and Warranties of Seller .
Subject to the disclosures contained
in Schedule 1 attached hereto and made a part
hereof (the “ Disclosure Items ”), matters
contained in the Due Diligence Materials, and any matters of public
record in the city, county and state where the Property is located,
Seller hereby makes the following representations and warranties
with respect to the Property. Notwithstanding anything to the
contrary contained herein or in any document delivered in
connection herewith, Seller shall have no liability with respect to
the Disclosure Items.
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(a) Seller has not (i) made a general assignment
for the benefit of creditors, (ii) filed any voluntary
petition in bankruptcy or suffered the filing of any involuntary
petition by Seller’s creditors, (iii) suffered the
appointment of a receiver to take possession of all, or
substantially all, of Seller’s assets, (iv) suffered the
attachment or other judicial seizure of all, or substantially all,
of Seller’s assets, (v) admitted in writing its
inability to pay its debts as they come due, or (vi) made an
offer of settlement, extension or composition to its creditors
generally.
(b) Seller is not a “foreign person” as
defined in Section 1445 of the Internal Revenue Code of 1986,
as amended (the “ Code ”) and any related
regulations.
(c) Subject to the provisions of Section 9.17
below, (i) this Agreement has been, and all documents executed
by Seller which are to be delivered to Buyer at Closing will be,
duly authorized, executed and delivered by Seller, and
(ii) this Agreement does not and such other documents will not
violate any provision of any agreement or judicial order to which
Seller is a party or to which Seller or, to the best of
Seller’s knowledge, the Property is subject.
(d) Except for that certain Transition Services
Agreement dated January 1, 2007, by and between Seller and
Silicon Integrated Systems Corporation, a California corporation
(“ SIS ”), pursuant to which SIS occupies space
in the 48461 Fremont Boulevard building (the “ Transition
Services Agreement ”), no leases are currently in effect
for the Property.
(e) The only Service Contracts in effect for the
Property are set forth in a list of Service Contracts attached
hereto as Exhibit E and made a part hereof (or,
if not attached, which Seller shall deliver to Buyer within the
Delivery Period) and which at that time will be attached hereto as
Exhibit E and made a part hereof.
(f) Except as set forth on
Schedule 1 , Seller has received no written
notice of any litigation or governmental proceeding (including, but
not limited to any condemnation proceeding) pending with respect to
the Property, or with respect to Seller which impairs
Seller’s ability to perform its obligations under this
Agreement, except for any personal injury or property damage action
for which there is adequate insurance coverage.
(g) To the best of Seller’s knowledge, Seller
has received no written notice from any governmental authority of
any violation of any law applicable to the Property (including,
without limitation, any Environmental Law as defined in
Section 3.6(a)(2) below) that has not been corrected.
(h) To the best of Seller’s knowledge, all of
the Due Diligence Materials delivered or made available by Seller
to Buyer in connection with the Property are true and complete
copies of such items in Seller’s possession.
(i) Seller has been duly organized, is validly
existing, and is in good standing in the state in which it was
formed, and, if so required to, is qualified to do business in the
state in which the Real Property is located.
(j) Seller is in compliance with, and, to
Seller’s knowledge, all beneficial owners of Seller are, in
compliance with the requirements of Executive Order No. 13224,
66 Fed
5
Reg.
49079 (September 25, 2001) (the “ Order ”)
and other similar requirements contained in the rules and
regulations of the Office of Foreign Asset Control, Department of
the Treasury (“ OFAC ”) and in any enabling
legislation or other Executive Orders in respect thereof (the Order
and such other rules, regulations, legislation, or orders are
collectively called the “ Orders ”).
(k) Seller has not entered into any contracts for the
sale, exchange or other disposition of the Property or any portion
thereof, nor do there exist any rights of first refusal, options or
other rights of any other party to purchase all or any portion of
the Property.
(l) To the best of Seller’s knowledge, there is
no current default or breach by Seller under the terms or
provisions of any of the documents which are referenced as
exceptions in the Title Report, the SIS Lease, or under any of the
Service Contracts.
Each of the representations and
warranties of Seller contained in this Section 3.1:
(1) shall be true in all material respects as of the date of
Closing, subject in each case to (A) any Exception Matters (as
defined below), (B) the Disclosure Items, and (C) other
matters expressly permitted in this Agreement or otherwise
specifically approved in writing; and (2) shall survive the
Closing as provided in Section 3.3 below.
Section 3.2 No Liability for
Exception Matters .
As used herein, the term “
Exception Matter ” shall refer to a matter which would
make a representation or warranty of Seller contained in this
Agreement untrue or incorrect and which is disclosed to Buyer in
the Due Diligence Materials, the Disclosure Items, or otherwise, or
is a matter of public record in the city, county and state where
the Property is located, or is otherwise discovered by or known to
Buyer before the Closing. If Buyer first obtains knowledge of any
Material Exception Matter, as such term is defined below, after the
close of the Contingency Period and prior to Closing and such
Exception Matter was not contained in the Due Diligence Materials,
the Disclosure Items or is not a matter of public record in the
city, county and state where the Property is located, Buyer’s
sole remedy shall be to terminate this Agreement on the basis
thereof, upon written notice to Seller within the earlier of
(a) five (5) days following Buyer’s discovery of
such Exception Matter or (b) the Closing, which ever occurs
first, in which event the Deposit shall be returned to Buyer,
unless within five (5) days after receipt of such notice or by
the Closing, as the case may be, Seller notifies Buyer in writing
that it elects to attempt to cure or remedy such Exception Matter,
in which event there shall be no return of the Deposit unless
Seller fails to so cure or remedy within the time period set forth
below. Seller shall be entitled to extend the Closing Date (as
defined in Section 8.2 below) for up to five (5) business days
in order to attempt to cure or remedy any Exception Matter for
which Buyer gives written notice to Seller within the five
(5) business day period prior to the Closing Date.
Buyer’s failure to give notice within five (5) days
after it has obtained knowledge of a Material Exception Matter
shall be deemed a waiver by Buyer of such Exception Matter. Seller
shall have no obligation to cure or remedy any Exception Matter,
even if Seller has notified Buyer of Seller’s election to
attempt to cure or remedy any Exception Matter (except as
specifically provided in Section 4.1(c) hereof), and, subject
to Buyer’s right to terminate this Agreement as set forth
above, Seller shall have no liability whatsoever to Buyer with
respect to any Exception Matters. Upon any termination of this
Agreement, pursuant to this Section 3.2, neither party shall
have
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any
further rights nor obligations hereunder, except as provided in
Sections 6.1, 9.3 and 9.9 below. Except as set forth below, if
Buyer obtains knowledge of any Exception Matter before the Closing,
but nonetheless elects to proceed with the acquisition of the
Property or is obligated to proceed with the acquisition of the
Property, Seller shall have no liability with respect to such
Exception Matter, notwithstanding any contrary provision, covenant,
representation or warranty contained in this Agreement or in any
Other Documents (as defined in Section 9.18 below). As used in
this Section 3.2, the term “Material Exception
Matter” shall mean a matter that would have a negative impact
on the value of the Property in excess of Two Hundred Fifty
Thousand Dollars ($250,000).
Notwithstanding anything herein to
the contrary, if an Exception Matter results from the breach of
Seller’s covenants specifically contained in Section 7.2
and 7.3 of this Agreement, Buyer may elect to terminate this
Agreement (according to the provisions in Section 1.2(b)(2)
above) or Buyer may proceed to Closing, and may pursue Seller for
monetary damages after the Closing.
Section 3.3 Survival of
Seller’s Representations and Warranties of Sale .
The representations and warranties of
Seller contained herein or in any Other Documents shall survive for
a period of twelve (12) months after the Closing. Any claim
which Buyer may have against Seller for a breach of any such
representation or warranty, whether such breach is known or
unknown, which is not specifically asserted by written notice to
Seller within such twelve (12) month period shall not be valid or
effective, and Seller shall have no liability with respect
thereto.
Section 3.4 Seller’s
Knowledge .
For purposes of this Agreement and
any document delivered at Closing, whenever the phrase “
to the best of Seller’s knowledge ” or the
“ knowledge ” of Seller or words of similar
import are used, they shall be deemed to mean and are limited to
the current actual knowledge only of Robert Blair, at the times
indicated only, and not any implied, imputed or constructive
knowledge of such individual or of Seller or any Seller Related
Parties (as defined in Section 3.7 below), and without any
independent investigation or inquiry having been made or any
implied duty to investigate, make any inquiries or review the Due
Diligence Materials. Seller represents that Robert Blair is the
person affiliated with Seller who is most knowledgeable regarding
the matters that are being represented and warranted by Seller
hereunder. Furthermore, it is understood and agreed that such
individual shall have no personal liability in any manner
whatsoever hereunder or otherwise related to the transactions
contemplated hereby.
Section 3.5 Representations
and Warranties of Buyer .
Buyer represents and warrants to
Seller as follows:
(a) This Agreement and all documents executed by Buyer
which are to be delivered to Seller at Closing do not and at the
time of Closing will not violate any provision of any agreement or
judicial order to which Buyer is a party or to which Buyer is
subject.
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(b) Buyer has not (i) made a general assignment
for the benefit of creditors, (ii) filed any voluntary
petition in bankruptcy or suffered the filing of any involuntary
petition by Buyer’s creditors, (iii) suffered the
appointment of a receiver to take possession of all, or
substantially all, of Buyer’s assets, (iv) suffered the
attachment or other judicial seizure of all, or substantially all,
of Buyer’s assets, (v) admitted in writing its inability
to pay its debts as they come due, or (vi) made an offer of
settlement, extension or composition to its creditors
generally.
(c) Buyer has been duly organized, is validly existing
and is in good standing in the state in which it was formed, and,
if required to do so, is (or will be, at Closing) qualified to do
business in the state in which the Real Property is located. This
Agreement has been, and all documents executed by Buyer which are
to be delivered to Seller at Closing will be, duly authorized,
executed and delivered by Buyer.
(d) Buyer is purchasing the Property as investment
rental property, and not for Buyer’s own operations or
use.
(e) Buyer is not a party in interest with respect to
any employee benefit or other plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ ERISA ”), or of
Section 4975(e)(1) of the Code, which is subject to ERISA or
Section 4975 of the Code and which is an investor in
Seller.
(f) Other than the Brokers (as defined in
Section 6.1 below) Buyer has had no contact with any broker or
finder with respect to the Property.
(g) Buyer is in compliance with all laws, statutes,
rules and regulations or any federal, state or local governmental
authority in the United States of America applicable to Buyer and
all beneficial owners of Buyer with respect to or arising out of
the requirements of Executive Order No. 13224, 66 Fed Reg.
49079 (September 23, 2001) (the “ Order ”)
and other similar requirements contained in the rules and
regulations of the Office of Foreign Asset Control. Department of
the Treasury (“ OFAC ”) and in any enabling
legislation or other Executive Orders in respect thereof (the Order
and such other rules, regulations, legislation, or orders are
collectively called the “ Orders ”). Buyer
agrees to make its policies, procedures and practices regarding
compliance with the Orders available to Seller for its review and
inspection during normal business hours and upon reasonable prior
notice. Neither Buyer nor to Buyer’s knowledge (without any
duty of inquiry or investigation), any beneficial owner of
Buyer:
(1) is listed on the Specially Designated Nationals
and Blocked Persons List maintained by OFAC pursuant to the Order
and/or on any other list of terrorists or terrorist organizations
maintained pursuant to any of the rules and regulations of OFAC or
pursuant to any other applicable Orders (such lists are
collectively referred to as the “ Lists
”);
(2) has been determined by competent authority to be
subject to the prohibitions contained in the Orders;
(3) is owned or controlled by, nor acts for or on
behalf of, any person or entity on the Lists or any other person or
entity who has been determined by competent authority to be subject
to the prohibitions contained in the Orders; or
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(4) shall transfer or permit the transfer of any
interest in Buyer or any beneficial owner in Buyer to any person
who is or whose beneficial owners are listed on the Lists.
Each of
the representations and warranties of Buyer contained in this
Section shall be deemed remade by Buyer as of the Closing and shall
survive the Closing for a period of twelve (12) months. Any
claim which Seller may have against Buyer for a breach of any such
representation or warranty, whether such breach is known or
unknown, which is not specifically asserted by written notice to
Buyer within such twelve (12) month period shall not be valid
or effective, and Buyer shall have no liability with respect
thereto.
Section 3.6 Buyer’s
Independent Investigation .
(a) By Buyer electing to proceed under
Section 2.2, Buyer will be deemed to have acknowledged and
agreed that it has been given a full opportunity to inspect and
investigate each and every aspect of the Property, either
independently or through agents of Buyer’s choosing,
including, without limitation:
(1) All matters relating to title and survey, together
with all governmental and other legal requirements such as taxes,
assessments, zoning, use permit requirements and building
codes.
(2) The physical condition and aspects of the
Property, including, without limitation, the interior, the
exterior, the square footage within the improvements on the Real
Property, the structure, seismic aspects of the Property, the
foundation, roof, paving, parking facilities, utilities, and all
other physical and functional aspects of the Property. Such
examination of the physical condition of the Property shall include
an examination for the presence or absence of Hazardous Materials,
as defined below, which shall be performed or arranged by Buyer
(subject to the provisions of Section 9.3 hereof) at
Buyer’s sole expense. For purposes of this Agreement, “
Hazardous Materials ” shall mean inflammable
explosives, radioactive materials, asbestos, asbestos —
containing materials, polychlorinated biphenyls, lead, lead-based
paint, radon, under and/or above ground tanks, hazardous materials,
hazardous wastes, hazardous substances, oil, or related materials,
which are listed or regulated in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Sections 6901, et seq .), the Resources
Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901,
et seq .), the Clean Water Act (33 U.S.C.
Section 1251, et seq .), the Safe Drinking Water
Act (14 U.S.C. Section 1401, et seq .), the
Hazardous Materials Transportation Act (49 U.S.C.
Section 1801, et seq .), and the Toxic Substance
Control Act (15 U.S.C. Section 2601, et seq. ),
the California Hazardous Waste Control Law (California Health and
Safety Code Section 25100, et seq .), the
Porter-Cologne Water Quality Control Act (California Water Code
Section 13000, e t seq .), and the Safe Drinking
Water and Toxic Enforcement Act of 1986 (California Health and
Safety Code Section 25249.5, et seq .) and any
other applicable federal, state or local laws (collectively,
“ Environmental Laws ”).
(3) Any easements and/or access rights affecting the
Property.
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(4) The Service Contracts and any other documents or
agreements of significance affecting the Property.
(5) All other matters of material significance
affecting the Property, including, but not limited to, the Due
Diligence Materials and the Disclosure Items.
(b) Except as expressly stated herein, Seller makes no
representation or warranty as to the truth, accuracy or
completeness of any materials, data or information delivered by
Seller to Buyer in connection with the transaction contemplated
hereby. Buyer acknowledges and agrees that all materials, data and
information delivered by Seller to Buyer in connection with the
transaction contemplated hereby are provided to Buyer as a
convenience only and that any reliance on or use of such materials,
data or information by Buyer shall be at the sole risk of Buyer,
except as otherwise expressly stated herein. Without limiting the
generality of the foregoing provisions, Buyer acknowledges and
agrees that (a) any environmental or other report with respect
to the Property which is delivered by Seller to Buyer shall be for
general informational purposes only, (b) Buyer shall not have
any right to rely on any such report delivered by Seller to Buyer,
but rather will rely on its own inspections and investigations of
the Property and any reports commissioned by Buyer with respect
thereto, (c) neither Seller, any affiliate of Seller nor the
person or entity which prepared any such report delivered by Seller
to Buyer shall have any liability to Buyer for any inaccuracy in or
omission from any such report and (d) the failure to deliver
any report as to the environmental or other condition of the
Property, including any proposal for work at the Property which was
not performed by Seller, shall not be actionable by Buyer under
this Agreement or otherwise.
(c) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
BUYER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT SELLER IS SELLING
AND BUYER IS PURCHASING THE PROPERTY ON AN “AS IS WITH ALL
FAULTS” BASIS AND THAT BUYER IS NOT RELYING ON ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR
IMPLIED, FROM SELLER, ANY SELLER RELATED PARTIES, OR THEIR AGENTS
OR BROKERS, OR ANY OTHER PERSON ACTING OR PURPORTING TO ACT ON
BEHALF OF SELLER AS TO ANY MATTERS CONCERNING THE PROPERTY,
INCLUDING WITHOUT LIMITATION: (i) the quality, nature,
adequacy and physical condition and aspects of the Property,
including, but not limited to, the structural elements, seismic
aspects of the Property, foundation, roof, appurtenances, access,
landscaping, parking facilities and the electrical, mechanical,
HVAC, plumbing, sewage, and utility systems, facilities and
appliances, the square footage within the improvements on the Real
Property, (ii) the quality, nature, adequacy, and physical
condition of soils, geology and any groundwater, (iii) the
existence, quality, nature, adequacy and physical condition of
utilities serving the Property, (iv) the development potential of
the Property, and the Property’s use, habitability,
merchantability, or fitness, suitability, value or adequacy of the
Property for any particular purpose, (v) the zoning or other
legal status of the Property or any other public or private
restrictions on use of the Property, (vi) the compliance of
the Property or its operation with any applicable codes, laws,
regulations, statutes, ordinances, covenants, conditions and
restrictions of any governmental or quasi-governmental entity or of
any other person or entity, (vii) the presence of Hazardous
Materials on, under or about the Property or the adjoining or
neighboring property, (viii) the quality of any labor and
materials used in any improvements on the Real Property,
(ix) the condition of title to the Property, (x) the
Service
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Contracts, or other documents or agreements affecting the Property
(xi) the value, economics of the operation or income potential
of the Property, or (x) any other fact or condition which may
affect the Property, including without limitation, the physical
condition, value, economics of operation or income potential of the
Property. In addition, Seller shall have no legal obligation to
apprise Buyer regarding any event or other matter involving the
Property which occurs after the Effective Date or to otherwise
update the Due Diligence Items, unless and until an event or other
matter occurs which would cause Seller to be unable to remake any
of its representations or warranties contained in this
Agreement.
Section 3.7 Release
.
(a) Without limiting the above, and subject to
Seller’s liability with respect to the representations,
warranties and covenants of Seller contained in this Agreement,
Buyer on behalf of itself and its successors and assigns waives its
right to recover from, and forever releases and discharges, Seller,
Seller’s affiliates, Seller’s investment advisor, the
partners, trustees, beneficiaries, shareholders, members, managers,
directors, officers, employees and agents and representatives of
each of them, and their respective heirs, successors, personal
representatives and assigns (collectively, the “ Seller
Related Parties ”), from any and all demands, claims,
legal or administrative proceedings, losses, liabilities, damages,
penalties, fines, liens, judgments, costs or expenses whatsoever
(including, without limitation, court costs and attorneys’
fees and disbursements), whether direct or indirect, known or
unknown, foreseen or unforeseen, that may arise on account of or in
any way be connected with or related to the Property, this
Agreement and/or the transactions contemplated hereunder,
including, without limitation (i) the physical condition of
the Property including, without limitation, all structural and
seismic elements, all mechanical, electrical, plumbing, sewage,
heating, ventilating, air conditioning and other systems, the
environmental condition of the Property and the presence of
Hazardous Materials on, under or about the Property, (ii) any
law or regulation applicable to the Property, including, without
limitation, any Environmental Law and any other federal, state or
local law, (iii) the Disclosure Items, (iv) any Exception
Matter or (v) any other matter.
(b) In connection with Section 3.7(a) above,
Buyer expressly waives the benefits of Section 1542 of the
California Civil Code, which provides as follows: “A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.” BUYER
ACKNOWLEDGES AND AGREES THAT IT HAS BEEN REPRESENTED BY LEGAL
COUNSEL OF ITS CHOICE IN CONNECTION WITH THIS AGREEMENT, AND THAT
SUCH COUNSEL HAS EXPLAINED TO BUYER THE PROVISIONS OF THIS SECTION
3.7. BY INITIALING BELOW, BUYER CONFIRMS IT HAS AGREED TO THE
PROVISIONS OF THIS SECTION 3.7.
In this connection, Buyer hereby
agrees, represents and warrants that Buyer realizes and
acknowledges that factual matters now unknown to it may have given
or may hereafter give rise to causes of action, claims, demands,
debts, controversies, damages, costs, losses and expenses and other
claims and liabilities which are presently unknown, unanticipated
and unsuspected, and Buyer further agrees, represents and warrants
that the waivers and releases herein have been
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negotiated and agreed upon in light of that realization and that
Buyer nevertheless hereby intends to release, discharge and acquit
Seller and the Seller Related Parties from any such unknown causes
of action, claims, demands, debts, controversies, damages, costs,
losses and expenses and other claims and liabilities which might in
any way be included as a material portion of the consideration
given to Seller by Buyer in exchange for Seller’s performance
hereunder.
Seller has given Buyer material
concessions regarding this transaction in exchange for Buyer
agreeing to the provisions of this Section 3.7. Each Seller
and Buyer have initialed this Section 3.7 to further indicate their
awareness and acceptance of each and every provision hereof;
provided, however that failure of any party to initial this
Section 3.7 below shall not invalidate this Section 3.7
nor any other provision of this Agreement.
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Section 3.8 Survival
.
The provisions of this
Article III shall survive the Closing subject to the
limitations and qualifications contained in such provisions and in
Sections 9.11 and 9.18 hereof.
ARTICLE IV
TITLE
Section 4.1 Conditions of
Title .
(a) Upon execution of this Agreement, Buyer will order
a current preliminary title report or commitment from the Title
Company (the “ Title Report ”), together with
copies of all underlying documents relating to title exceptions
referred to therein. Buyer shall immediately order a survey of the
Property or any update thereto from a duly licensed surveyor (the
“ Survey ”) if desired by Buyer or if necessary
to support the issuance of the Title Policy (as defined in
Section 4.2 below). Buyer shall provide to Seller a copy of
the Survey, which shall be certified to the Title Company, Buyer
and Seller. Buyer shall pay the entire cost of the Survey. If
Closing does not occur, Buyer shall, if Seller so requests, assign
to Seller all contract rights Buyer has with the surveyor and in
such event Seller shall reimburse Buyer for the cost of the
Survey.
(b) Within five (5) business days after the later
of the Seller Board Approval Date, or Buyer’s receipt of the
Title Report and Survey (the “ Title Review Date
”), Buyer shall furnish Seller with a written statement of
objections, if any, to the title to the Property, including,
without limitation, any objections to any matter shown on the
Survey (collectively, “ Objections ”). In the
event the Title Company amends or updates the Title Report after
the Title Review Date (each, a “ Title Report Update
”), Buyer shall furnish Seller with a written statement of
Objections to any matter first raised in a Title Report Update
within three (3)
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business
days after its receipt of such Title Report Update (each, a “
Title Update Review Period ”). Should Buyer fail to
notify Seller in writing of any Objections in the Title Report
prior to the Title Review Date, or to any matter first disclosed in
a Title Report Update prior to the Title Update Review Period, as
applicable, Buyer shall be deemed to have approved such matters
which shall be considered to be “ Conditions of Title
” as defined in Section 4.1(e) below.
(c) If Seller receives a timely Objection in
accordance with Section 4.1(b) (“ Buyer’s
Notice ”), Seller shall have the right, but not the
obligation, within five (5) business days after receipt of
Buyer’s Notice (“ Seller’s Response Period
”), to elect to attempt to cure any such matter upon written
notice to Buyer (“ Seller’s Response ”),
and may extend the Closing Date for up to five (5) business
days to allow such cure. If Seller does not give any Seller’s
Response, Seller shall be deemed to have elected not to attempt to
cure any such matters. Notwithstanding the foregoing, Seller shall
in any event be obligated to cure all matters or items
(i) that are mortgage or deed of trust liens or security
interests against the Property, in each case granted by Seller (and
not by other third parties), (ii) real estate tax liens, other
than liens for taxes and assessments not yet deli
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