PURCHASE AND SALE AGREEMENT

 

Exhibit 10.1

 

PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (“ Agreement ”) is dated as of July 31, 2008 (which date is only to be the reference date and not the “Effective Date” of this Agreement) by and between 7725 WASHINGTON AVENUE CORP., a Minnesota corporation Seller ”) and RIMAGE CORPORATION, a Minnesota corporation (“ Buyer ”).

 

RECITALS:

 

A.        Seller owns certain real property, located at 7725 Washington Avenue South, in the City of Edina (the “ City ”), County of Hennepin, State of Minnesota that is legally described on the attached Exhibit A (the “ Land ”);

 

B.        A building comprising approximately 58,500 square feet is located on the Land (the “ Building ”);

 

C.        Buyer is the tenant of the Building pursuant to that certain Lease dated August 1, 2004 (the “ Lease ”); and

 

D.        Seller desires to sell, and Buyer desires to purchase, the Land, Building and certain other property, as more further described in Section 1 of this Agreement.

 

NOW, THEREFORE , in consideration of the foregoing and of the following terms and conditions, the parties agree as follows:

 

1.          Sale and Purchase .   Seller hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from Seller, upon the terms and conditions set forth below, the following (collectively, the “Property” ):

 

(a)        Real Property . Fee simple title to the Land together with (i) all buildings, parking facilities, fixtures and improvements constructed or located on the Land (the “ Improvements ”), (ii) all easements, air rights, and other rights benefiting or appurtenant to the Land, and (iii) Seller’s interest in all neighboring or contiguous alleys, streets, roads, utilities servicing, pertaining or relating to the Land (collectively, the “ Real Property ”);

 

(b)        Personal Property . All of Seller’s right, title and interest in any personal property situated in or about the Real Property and used in the maintenance or operation of the Real Property, including, without limitation, any and all appliances, furniture, furnishings, carpeting, draperies and curtains, equipment, tools, supplies, keys, access cards, security systems (hardware and software), fire protection systems (hardware and software), accounting programs and software (collectively the “ Personal Property ”);

 

 

 

(c)        Miscellaneous . All of Seller’s right, title and interest in the “Contracts” the “Permits,” the “Warranties,” the “Plans” and the “Records” (as each term is defined in Section 3(d) below) to the extent approved by Buyer and transferable by Seller.

 

2.          Purchase Price . The total purchase price to be paid by Buyer to Seller for the Property (the “Purchase Price” ) shall be Three Million Eight Hundred Thousand Dollars ($3,800,000), which shall be payable as follows:

 

(a)       $50,000 earnest money deposited with Title Company as set forth below (the “Earnest Money” ).

 

(b)       The balance of the Purchase Price (subject to prorations and adjustments as provided herein) shall be payable on the “Closing Date” (as defined in Section 5 below) in cash, certified or cashier’s check or by wire transfer.

 

The parties agree to deposit this executed Agreement in triplicate counterparts with First American Title Insurance Company (“Title Company”) . Title Company shall act as escrow agent with respect to the Earnest Money deposit. All costs of Title Company, if any, with respect to the escrow shall be borne equally by Buyer and Seller; provided however, Title Company shall deposit the Earnest Money in an interest bearing account if Buyer so directs and if Buyer agrees to pay any fees in relation thereto and provides Title Company with completed IRS W-9 forms, all pursuant to the acknowledgment by Title Company attached hereto (the “Escrow Agreement” ). Buyer and Seller agree to the terms, conditions and provisions of the Escrow Agreement, upon Title Company’s acceptance and execution thereof. The date that the counterpart original of this Agreement executed by both Buyer and Seller is delivered to Title Company and the Earnest Money is deposited with Title Company shall be the “Effective Date” and this Agreement shall not be binding until such Effective Date ( i.e. the deposit of the Earnest Money is a condition precedent). Title Company shall fill in the Effective Date on the Escrow Agreement and deliver original counterparts of this Agreement to each of Buyer and Seller, together with a copy of the executed Escrow Agreement as soon as practicable after Title Company’s receipt of the Earnest Money. Buyer shall deposit the Earnest Money with Title Company on the date that it deposits its counterparts of this Agreement with Title Company. All Earnest Money payments shall be fully credited towards the Purchase Price at Closing, provided that this Agreement is not terminated pursuant to the provisions hereof.

 

3.

Inspections and Examinations . Buyer and Seller covenant and agree as follows:

 

(a)         Right of Entry . Seller hereby agrees that, in addition to Buyer’s rights as tenant pursuant to the Lease, Buyer may investigate and test the Property for the purpose of conducting due diligence as a Buyer of the Property. Buyer shall pay all costs and expenses of such investigation and testing and shall hold Seller and the Real Property harmless from all costs and liabilities relating to Buyer’s activities, provided, however, that costs and liability with respect to existing Hazardous Substances shall be governed by Section 7(i) of this Agreement. In the event this Agreement is terminated without Buyer’s purchase of the Property, Buyer shall further repair and restore any damage to the Real Property caused by or occurring during Buyer’s testing and return the Real Property to substantially the same condition as existed prior to such entry.

 

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(b)        Phase I ESA . Within ten (10) days after the Effective Date, Seller shall, at its cost and expense, provide Buyer copies of any Phase I Environmental Site Assessments and/or Phase II Environmental Site Assessments concerning the Real Property that is in its possession (individually or collectively, the “Phase I ESA” ).

 

(c)        Documents and Materials . Within ten (10) days after the Effective Date, to the extent in Seller’s possession or control, and to the extent not already delivered to Buyer, Seller shall deliver to Buyer true and correct copies of all “Contracts,” “Permits,” “Warranties,” “Plans” and “Records,” with any amendments thereto (collectively, with the Phase I ESA the “ Seller Deliveries ”), for Buyer’s examination and analysis. If Buyer requests, Buyer shall have the right to examine the books and records regarding the Property at Seller’s and/or Seller’s property manager’s offices. At Seller’s option, a representative of Seller may accompany Buyer at all times that Buyer is examining such books and records at Seller’s and/or Seller’s property manager’s offices, provided that Seller shall not delay or disrupt Buyer’s examination of such books and records. “Contracts” means the service and maintenance contracts, equipment leases, and other contracts regarding the Real Property and the Personal Property. “Permits” means any approvals, permits and licenses benefiting the Real Property. “Warranties” means all warranties and guaranties given to, assigned to, or benefiting Seller or the Real Property or the Personal Property regarding the acquisition, construction, design, use, operation, management, or maintenance of the Real Property and/or the Personal Property. “Plans” means all originals and copies of all blueprints, surveys, plans and specifications regarding the Real Property and/or the Personal Property in the possession of or available to Seller. “Records” means all records and reports of Seller regarding the Real Property and/or the Personal Property, including all reports, site plans, surveys, tests and inspections regarding any part of the Property (such as, but not limited to, engineer’s reports, environmental assessments, soil tests, and water tests), records regarding real estate taxes and assessments, insurance claims, insurance notices, maintenance, repairs, capital improvements, operating statements, financial statements, books, records, expense and revenue budgets, leasing, management, governmental notices and services, and CAD files (but excluding income tax returns).

 

(d)        Confidentiality . Buyer agrees that prior to Closing, the information provided to it in the Seller Deliveries shall be strictly confidential, except to the extent such information is public or otherwise available to third-parties. Buyer shall have the right to disclose all or any of such information to Buyer’s legal counsel, lender (or proposed lender), equity investors (or proposed equity investors) and any professional counselors or consultants used to assist Buyer in this transaction.

 

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4.          Conditions . The obligations of Buyer under this Agreement are conditioned upon satisfaction or waiver by Buyer of each of the following by the respective dates indicated:

 

(a)        Representations and Warranties . The representations and warranties of Seller contained in this Agreement are true, and Seller shall have delivered to Buyer at Closing a certificate dated as of the Closing Date, signed by an authorized representative of Seller, certifying that such representations and warranties are true as of the Closing Date (the “ Bring-down Certificate ”);

 

(b)        Title . Title shall have been found acceptable by Buyer, or been made acceptable, in accordance with the requirements and terms of Section 9 below; and at Closing, a title insurance policy (the “ Title Policy ”) shall be issued by Title Company pursuant to the Title Commitment (as defined below) or a suitably marked-up Title Commitment shall be issued to Buyer at Closing;

 

(c)        Performance of Seller’s Obligations . Seller shall have performed all of the obligations required to be performed by Seller under this Agreement, by the dates set forth herein.

 

(d)        Testing . Buyer shall have determined in Buyer’s sole discretion, within sixty (60) days after the Effective Date (the “ Contingency Date ”), that it is satisfied with the results of and matters disclosed by soil tests, engineering inspections, feasibility tests and studies, hazardous waste and environmental reviews, code and other legal compliance analyses and other tests and inspections, evaluations, assessments, surveys and reviews of the Property, any or all of which shall be obtained at Buyer’s sole cost and expense, unless otherwise provided herein.

 

(e)        Document Review . Buyer shall have determined in Buyer’s sole discretion by the Contingency Date that it is satisfied with its examination and analysis of the Seller Deliveries and any other books and records pertaining to the Property.

 

Buyer may, at its option by notice to Seller, postpone the Contingency Date for up to fifteen (15) days after receipt of any documents, data or other matters that Seller is required to furnish to Buyer hereunder if Buyer has not received such documents, data or other matters fifteen (15) or more days prior to the Contingency Date. If the Contingency Date is extended to a date that is later than the Closing Date set forth hereinbelow, then the Closing Date shall be automatically extended to the date that is five (5) business days after the expiration of the extended Contingency Date or as otherwise mutually agreed by Buyer and Seller.

 

If any condition set forth in this Section 4 has not been satisfied or waived by Buyer before its respective date ( i.e. , the Contingency Date or the Closing Date, as applicable), then Buyer may terminate this Agreement at any time on or before its respective date by delivery of written notice to Seller and to Title Company. Upon receipt of such notice from Buyer, Title Company shall promptly return to Buyer the Earnest Money and any interest accrued thereon. Upon such return, neither Seller nor Buyer shall have any further rights or obligations under this Agreement, except for the covenants made in Section 3(a), which shall survive termination of this Agreement, whether such termination is effected by Seller or Buyer (the “ Surviving Covenants” ). Seller and Buyer specifically state and acknowledge that all of the conditions set forth in this Agreement are for the sole and exclusive benefit of Buyer, and Buyer shall have the unilateral right to waive any condition by notice to Seller.

 

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With respect to each condition set forth above, If Buyer fails to terminate this Agreement on the date as set forth with respect to said condition, time being of the essence, then, upon the expiration of such date, said condition to Buyer’s performance hereunder shall conclusively be deemed satisfied or waived by Buyer.

 

5.          Closing . The closing of the purchase and sale contemplated by this Agreement (the “ Closing ”) shall occur on that date which is ninety (90) days following the Effective Date (the “ Closing Date ”). Buyer shall have the right at any time to accelerate the Closing Date, upon five (5) business days notice to Seller, to a date specified in such notice. The Closing shall take place at 10:00 a.m. local time at the office of Buyer’s counsel or at such other place as may be acceptable to Seller and Buyer. Seller shall deliver possession of the Property to Buyer on the Closing Date, together with all access cards, keys to locks and doors in or on the Real Property and the Personal Property that are in Seller’s possession.

 

(a)        Seller’s Closing Documents . On the Closing Date, Seller shall execute and/or deliver to Buyer the following in form and content satisfactory to Buyer (collectively, the “ Seller’s Closing Documents ”):

 

(i)

Deed . A Warranty Deed (“ Deed ”) conveying fee simple title to the Real Property to Buyer, free and clear of all encumbrances, except the “Permitted Encumbrances” (as defined in Section 9 below) on a Minnesota Uniform Conveyancing blank form;

 

(ii)

Bill of Sale . A Warranty Bill of Sale conveying the Tangible Personal Property to Buyer, free and clear of all encumbrances;

 

(iii)

Lease Termination . A Termination of Lease regarding the Lease (“ Lease Termination ”);

 

(iv)

Assignment of Intangible and Other Personal Property . An Assignment in the form of Exhibit B conveying Seller’s interest in the Contracts, Permits, Warranties, Plans, Records and Intangible Personal Property to Buyer (the “ Assignment of Intangible Property ”) with warranties, free and clear of all encumbrances, together with the written consent of any parties required to consent to such assignment;

 

(v)

Bring-down Certificate . The Bring-down Certificate as required pursuant to Section 4(a) above;

 

(vi)

Seller’s Affidavit . An Affidavit by Seller indicating that on the Closing Date there are no outstanding, unsatisfied judgments, tax liens, or bankruptcies against or involving Seller or the Real Property; that there has been no skill, labor, or material furnished to the Real Property for which payment has not been made or for which mechanics’ liens could be filed; and that there are no unrecorded interests in the Real Property (other than the Lease), together with whatever standard owner’s affidavit and/or indemnity as may be required by Title Company to issue the Title Policy in the form required by Section 9 hereof;

 

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(vii)

Original Documents . Originals of the Contracts, and, to the extent in Seller’s possession or control, originals of the Permits, the Warranties, the Plans, and the Records;

 

(viii)

FIRPTA Affidavit . A non-foreign affidavit, properly executed and in recordable form, containing such information as is required by Internal Revenue Code Section 1445(b)(2) and its regulations;

 

(ix)

IRS Reporting Form . The appropriate federal income tax reporting form, if any is required;

 

(x)

Resolutions . Resolutions and other certificates and documents reasonably necessary for Buyer and Title Company to confirm the good standing, power and authority of Seller to enter into this Agreement, perform the obligations of Seller under this Agreement, and to execute, deliver and perform (to the extent applicable) the Seller’s Closing Documents, certified by the Secretary of Seller or other appropriate officer of Seller;

 

(xi)

Settlement Statement . A Closing settlement statement reflecting the financial provisions of the Closing, consistent with the provisions of this Agreement; and

 

(xii)

Other Documents . All other documents reasonably determined by Title Company to be necessary to transfer the Property to Buyer free and clear of all encumbrances, except the Permitted Encumbrances.

 

(b)        Buyer’s Closing Documents . On the Closing Date, Buyer will execute and/or deliver to Seller the following (collectively, “ Buyer’s Closing Documents ”):

 

(xiii)

Purchase Price . The cash payment toward the Purchase Price to be paid as required by Section 2(b) hereof;

 

(xiv)

Lease Termination . The Lease Termination;

 

(xv)

Assignment of Intangible Property . The Assignment of Intangible Property;

 

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(xvi)

Title Documents . Such affidavits of Buyer or other documents as may be reasonably required by the Company to record the Seller’s Closing Documents and issue the Title Policy required by Section 9 of this Agreement; and

 

(xvii)

Settlement Statement . A Closing settlement statement reflecting the financial provisions of the Closing, consistent with the provisions of this Agreement.

 

6.          Prorations . Seller and Buyer shall make the following prorations and allocations of taxes, assessments, rents, costs, and other expenses at Closing:

 

(a)        Title Insurance and Closing Fee . Seller shall pay all costs of the Title Commitment (as defined in Section 9(a)). Seller and Buyer will each pay one-half of any reasonable and customary closing fee or charge imposed by Title Company or its designated closing agent. Buyer shall pay the premium costs for the title policy which it desires and the title policy of its lender, if any.

 

(b)        Transfer Tax . Seller shall pay all state deed or other governmental transfer taxes due upon the delivery of the Warranty Deed and other transfer documents to be delivered by Seller under this Agreement. Buyer shall pay all mortgage registration taxes due and payable with regard to any mortgage to be recorded in favor of Buyer’s lender.

 

(c)         Real Estate Taxes and Special Assessments . Pursuant to the Lease, Buyer has been making regular payments to Seller for real estate taxes on the Real Property (“ Taxes ”) and Seller has made payment of Taxes to the taxing authority. At Closing, Seller shall return to Buyer (by credit of the Purchase Price or direct payment), all amounts prepaid by Buyer to Seller for Taxes, which amounts have not been paid to the taxing authority. Buyer shall be responsible for payment of all Taxes payable in the calendar year of Closing and all subsequent years. Buyer shall assume all special assessments, area charges, lateral charges, and similar impositions, if any (collectively, “ Assessments ”) levied, “pending,” or constituting a lien against the Real Property as of the Closing Date, including without limitation any installments of Assessments, including interest, payable in the calendar year of the Closing.

 

(d)         Recording Costs . Seller shall pay the cost of recording all documents necessary to place record title in Seller in the condition warranted by Seller in this Agreement. Buyer will pay the cost of recording the Deed and all other documents.

 

(e)         Rents . Seller shall credit to Buyer on the Closing Date, any rent paid by Buyer for the period from and after the Closing Date.

 

(f)         Insurance . Pursuant to the Lease, Buyer has been making regular payments to Seller for insurance premiums due and payable for the Property (“ Insurance ”) and Seller has made payment of all amounts for Insurance to the insurer. At Closing, Seller shall return to Buyer (by credit of the Purchase Price or direct payment), all amounts prepaid by Buyer to Seller for Insurance, which amounts have not been paid to the insurer.

 

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(g)        Other Costs . If and to the extent not otherwise accounted for above in this Section, Seller and Buyer shall prorate all other operating costs of the Property as of the Closing Date.

 

(h)        Proration Method . Unless otherwise stated herein, Buyer’s and Seller’s respective proration obligations shall be determined as follows: (i) Seller pays that part of expenses that have accrued before the Closing Date, (ii) Buyer pays that part of expenses that accrue on or after the Closing Date, (iii) Seller is entitled to that part of Rents and other income that has accrued before the Closing Date, and (iv) Buyer is entitled to that part of Rents and other income that accrues on or after the Closing Date.

 

(i)         Unknown Amounts . Any expense amount that cannot be ascertained with certainty ( i.e. , under the accounting required above) as of the Closing Date shall be prorated on the basis of the parties’ reasonable estimate of such amount, and shall be subject to final proration within 30 days after the Closing, or as soon thereafter as the precise amount can be ascertained, which shall in no event be later than 30 days after the end of the calendar year following the Closing Date. Once all income and expense amounts have been ascertained, Buyer and Seller shall prepare, sign and deliver a final proration statement, and Buyer shall pay Seller, or Seller shall pay Buyer, as applicable, the amount of any adjustment required under the final proration statement.

 

(j)         Utilities . Buyer is responsible for all utility payments pursuant to the Lease and will remain so responsible following the Closing. Accordingly, no proration of utility charges is required pursuant to this Agreement.

 

(k)        Attorneys’ Fees . Each of Seller and Buyer shall pay its own attorneys’ fees in connection with the preparation and negotiation of this Agreement and the Closing, except that a party defaulting under this Agreement or any of its respective Closing Documents shall pay the reasonable attorneys’ fees and court costs incurred by the non-defaulting party to enforce its rights regarding such default.

 

7.          Representations, Warranties and Indemnity by Seller . Seller represents and warrants to Buyer as follows:

 

(a)         Organization; Authority . Seller is duly organized and is in good standing under the laws of the State of Minnesota; Seller is duly qualified to transact business in the State of Minnesota; Seller has the requisite power and authority to execute and perform this Agreement and those Seller’s Closing Documents to be signed by it; such documents have been duly authorized by all necessary action on the part of Seller and at the Closing will be executed and delivered; such execution, delivery, and performance by Seller of such documents do not conflict with or result in a violation of Seller’s organizational documents, any judgment, order, or decree of any court or arbiter to which Seller is a party, or any agreement by which Seller is bound; and such documents are and shall be valid and binding obligations of Seller, enforceable in accordance with their terms.

 

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(b)        Title to Real Property . Seller owns the Real Property, free and clear of all encumbrances except the Permitted Encumbrances identified in Section 9(b) below.

 

(c)        Title to Personal Property . Seller owns the Personal Property, free and clear of all encumbrances.

 

(d)        Contracts . The Contracts are in full force and neither Seller nor, to the best knowledge of Seller, any other party to the Contracts is in default under the Contracts. All other contracts in effect regarding the Property may be terminated by Seller at its sole option on or before the Closing Date and Seller shall do so.

 

(e)        Assessments . Seller has received no notice of, nor is Seller aware of, any actual or threatened special assessments or reassessments of the Real Property.

 

(f)         Environmental Laws . To Seller’s knowledge, the documents listed on Exhibit C attached hereto (the “Environmental Reports” ) include all reports, studies and assessments commissioned by Seller or now or ever in the possession of Seller or Seller’s agents relating to toxic or hazardous substances or wastes, pollutants, or contaminants (including, without limitation, asbestos, urea formaldehyde, the group of organic compounds known as polychlorinated biphenyls, petroleum products including gasoline, fuel oil, crude oil, and various constituents of such products, and any hazardous substance as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ( “CERCLA” ), 42 U.S.C. §§ 9601-9657, as amended) (collectively “Hazardous Substances” ) at the Property. Other than as disclosed in the Environmental Reports (i) Seller has not caused any Hazardous Substances to be generated, used, treated, stored or released on, under or about the Property and (ii) Seller has no knowledge of the presence of Hazardous Substances on under or about the Property. Seller will include the Environmental Reports as part of the Records to be delivered to Buyer pursuant to Section 3(c) of this Agreement.

 

To the best of Seller’s knowledge, no above-ground or underground tanks are located in or about the Real Property or have been located under, in, or about the Real Property and have subsequently been removed or filled.

 

This Section 7(f) is subject to the limitation of Seller’s knowledge during Buyer’s occupancy of the Property during the Term of the Lease and any prior leases pursuant to which Buyer was a tenant of the Property, commencing on or about August, 1992 (“Buyer’s Occupancy”). The parties agree that Buyer is and shall remain responsible for Hazardous Substances arising in, on or from the Property by reason of Buyer’s actions or failures to act during Buyer’s Occupancy (“Buyer’s Environmental Responsibility”) and Seller shall be responsible for Hazardous Substances arising in, on or from the Property other than Buyer’s Environmental Responsibility.

 

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(g)        Wells and Septic . Seller knows of no wells on the Real Property except as disclosed on the Well Disclosure Certificate which has been given to Buyer. At the time of Closing, Seller will deliver any required well certificate pursuant to applicable laws. There is no “individual sewage treatment system” within the meaning of Minn. Stat. Section 115.55 on or serving the Real Property. Sewage generated at the Real Property goes to a facility permitted by the Minnesota