PURCHASE AND SALE AGREEMENT

EXHIBIT 10(xx)

 

TO FORM 10-K OF

WELLS REAL ESTATE FUND VIII, L.P.

 

 

 

PURCHASE AND SALE AGREEMENT

 

BY AND BETWEEN

 

FUND VIII-IX REIT JOINT VENTURE

a Georgia joint venture,

 

AS SELLER

 

AND

 

CTA, LP,

a California limited partnership,

 

AS PURCHASER

 

FOR

 

15253 Bake Parkway

Irvine, California

 

Dated as of November 19, 2004

Table of Contents

 

 

 

i

Table of Contents

(continued)

 

 

ii

PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (the “Agreement”) is made as of the 19 ^th day of November, 2004 (the “Effective Date”) by and between Fund VIII-IX REIT Joint Venture, a Georgia joint venture (“Seller”), having an office c/o Wells Real Estate Funds, 6200 The Corners Parkway, Norcross, Georgia 30092, and CTA, LP, a California limited partnership (“Purchaser”), having an office at P.O. Box 440 Sunset Beach, California 90742.

 

ARTICLE I

 

PURCHASE AND SALE

 

1.1 Agreement of Purchase and Sale . Subject to the terms and conditions hereinafter set forth, Seller agrees to sell and convey and Purchaser agrees to purchase the following:

 

(a) that certain tract or parcel of land situated in Orange County, California, more particularly described on Exhibit A attached hereto and made a part hereof, together with all and singular the rights and appurtenances pertaining to such property, including any right, title and interest of Seller in and to adjacent streets, alleys or rights-of-way (the property described in clause (a) of this Section 1.1 being herein referred to collectively as the “Land”);

 

(b) the buildings, structures, fixtures and other improvements on the Land, including specifically, without limitation, the certain office building located thereon having a street address of 15253 Bake Parkway, Irvine, California (the property described in clause (b) of this Section 1.1 being herein referred to collectively as the “Improvements”);

 

(c) all of Seller’s right, title and interest in and to all tangible personal property upon the Land or within the Improvements, including specifically, without limitation, appliances, furniture, carpeting, draperies and curtains, tools and supplies, and other items of personal property (excluding cash) used exclusively in connection with the operation of the Land and the Improvements and only as specifically described on Exhibit B attached hereto and made a part hereof (the property described in clause (c) of this Section 1.1 being herein referred to collectively as the “Personal Property”);

 

(d) all of Seller’s right, title and interest in and to that certain lease more fully described on Exhibit C attached hereto and made a part hereof (the “Lease”); and

 

(e) all of Seller’s right, title and interest in and to (i) all assignable contracts and agreements (collectively, the “Operating Agreements”) listed and described on Exhibit D (the “Operating Agreements Schedule”) attached hereto and made a part hereof, relating to the upkeep, repair, maintenance or operation of the Land, Improvements or Personal Property which will extend beyond the date of Closing (as such term is defined in Section 4.1 hereof), including specifically, without limitation, all assignable equipment leases, (ii) all assignable warranties and guaranties (expressed or implied) issued to Seller in connection with the Improvements (including any issued in connection with the tenant improvement work described in that certain Work Letter Agreement attached as Exhibit B to the Lease) or the Personal Property, and (iii) any plans and specifications for the Improvements (the property described in this Section 1.1(e) being sometimes herein referred to collectively as the “Intangibles”).

 

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1.2 Property Defined . The Land, the Improvements, the Personal Property, the Lease and the Intangibles are hereinafter sometimes referred to collectively as the “Property.”

 

1.3 Permitted Exceptions . The Property shall be conveyed subject to the matters which are, or are deemed to be, Permitted Exceptions pursuant to Article II hereof (herein referred to collectively as the “Permitted Exceptions”).

 

1.4 Purchase Price . Seller is to sell and Purchaser is to purchase the Property for a total of twelve million four hundred thousand dollars ($12,400,000) (the “Purchase Price”).

 

1.5 Payment of Purchase Price . The Purchase Price, as increased or decreased by prorations and adjustments as herein provided, shall be payable in full at Closing in cash by wire transfer of immediately available federal funds to a bank account designated by Escrow Agent in writing to Purchaser prior to the Closing. Said funds shall be so deposited at least one (1) business day prior to the date of Closing.

 

1.6 Earnest Money . Purchaser has previously deposited with Farmers & Merchants Bank (the “Escrow Agent”), having its office at 302 Pine Avenue, Long Beach, California 90802, the sum of five hundred thousand dollars ($500,000) (the “Earnest Money”). The Escrow Agent shall hold the Earnest Money in an interest-bearing account in accordance with the terms and conditions of an escrow agreement entered into among Seller, Purchaser and Escrow Agent simultaneously with the execution of this Agreement. All interest accruing on such sums shall become a part of the Earnest Money and shall be distributed as Earnest Money in accordance with the terms of this Agreement. Upon the Purchaser’s receipt of the Estoppel Certificate (as defined below), the Earnest Money shall be non-refundable to Purchaser except as expressly set forth in this Agreement.

 

1.7 Delivery to Escrow Agent . Upon mutual execution of this Agreement, the parties hereto shall deposit an executed copy of this Agreement with Escrow Agent and this Agreement shall (along with such supplementary instructions not inconsistent herewith as either party hereto may deliver to Escrow Agent) serve as escrow instructions to Escrow Agent for the consummation of the purchase and sale contemplated hereby. Seller and Purchaser agree to execute such additional escrow instructions as Escrow Agent may reasonably require and which are not inconsistent with the provisions hereof; provided, however, that in the event of any conflict between the provisions of this Agreement and any supplementary escrow instructions, the terms of this Agreement shall control.

 

ARTICLE II

 

TITLE AND SURVEY

 

2.1 Title Examination; Commitment for Title Insurance . Seller has obtained from Chicago Title Insurance Company, 4170 Ashford Dunworthy Rd., Suite 460, Atlanta, Georgia

 

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30319, Attention: Judy Stillings (“Title Company”) and delivered to Purchaser, a preliminary title insurance report (the “Title Commitment”) covering the Land and Improvements, and Purchaser has approved the condition of title to the Land and Improvements.

 

2.2 Survey . Seller has delivered or shall deliver to Purchaser, Seller’s existing survey of the Property (the “Survey”). Purchaser may, at its sole cost and expense, update and recertify the Survey. Purchaser shall delivery a copy of any such Survey update to Seller prior to the Closing.

 

2.3 [Intentionally Omitted].

 

2.4 Conveyance of Title . At Closing, Seller shall convey and transfer to Purchaser such title to the Land and Improvements as will enable the Title Company to issue to Purchaser an ALTA Owner’s Policy of Title Insurance (the “Title Policy”) covering the Property, in the full amount of the Purchase Price. Notwithstanding anything contained herein to the contrary, the Property shall be conveyed subject to the following matters, which shall be deemed to be Permitted Exceptions:

 

(a) the rights of Gambro Healthcare, Inc., a Tennessee corporation (“Tenant”), as tenant only, under the Lease;

 

(b) the lien of all ad valorem real estate taxes and assessments not yet due and payable as of the date of Closing, subject to adjustment as herein provided;

 

(c) local, state and federal laws, ordinances or governmental regulations, including but not limited to, building and zoning laws, ordinances and regulations, now or hereafter in effect relating to the Property; and

 

(d) items appearing of record or shown on the Survey and, in either case, not objected to by Purchaser or waived or deemed waived by Purchaser in accordance with Sections 2.3 or 2.5 hereof.

 

2.5 Pre-Closing “Gap” Title Defects . Purchaser may, at or prior to Closing, notify Seller in writing of any objections to title first raised by the Title Company between (a) the date hereof and (b) the date on which the transaction contemplated herein is scheduled to close. With respect to any objections to title set forth in such notice, Seller shall have the right, but not the obligation, to cure such objections. Within five (5) days after receipt of Purchaser’s notice of objections, Seller shall notify Purchaser in writing whether Seller elects to attempt to cure such objections. Seller’s failure to respond within said five (5) day period shall be deemed to be Seller’s election not to attempt to cure any such objections. If Seller elects to attempt to cure, Seller shall have until the date of Closing to attempt to remove, satisfy or cure the same and for this purpose Seller shall be entitled to a reasonable adjournment of the Closing if additional time is required, but in no event shall the adjournment exceed sixty (60) days after the date for Closing set forth in Section 4.1 hereof. Seller shall not be obligated to expend any sums, commence any suits or take any other action to effect such cure or removal. If Seller elects not to cure any objections specified in Purchaser’s notice, or if Seller is unable to effect a cure prior

 

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to the Closing (or any date to which the Closing has been adjourned), Purchaser shall have the following options: (i) to accept a conveyance of the Property subject to the Permitted Exceptions, specifically including any matter objected to by Purchaser which Seller is unwilling or unable to cure, and without reduction of the Purchase Price; or (ii) to terminate this Agreement by sending written notice thereof to Seller, and upon delivery of such notice of termination, this Agreement shall terminate and the Earnest Money shall be returned to Purchaser, and thereafter neither party hereto shall have any further rights, obligations or liabilities hereunder except to the extent that any right, obligation or liability set forth herein expressly survives termination of this Agreement. If Seller notifies (or is deemed to have notified) Purchaser that Seller does not intend to attempt to cure any title objection, or if, having commenced attempts to cure any objection, Seller later notifies Purchaser that Seller will be unable to effect a cure thereof, Purchaser shall advise Seller in writing whether Purchaser shall elect to accept the conveyance under clause (i) or to terminate this Agreement under clause (ii). Purchaser’s failure to notify Seller within such period shall be deemed to be Purchaser’s election to accept the conveyance under clause (i) above.

 

ARTICLE III

 

INSPECTION PERIOD

 

3.1 Right of Inspection . Prior to the execution of this Agreement, Purchaser has had the right to make a physical inspection of the Property and to examine any operating files maintained by Seller or its property manager in connection with the leasing, current maintenance and/or management of the Property, including, without limitation, the Lease, lease files, Operating Agreements, insurance policies, bills, invoices, receipts and other general records relating to the income and expenses of the Property, correspondence, surveys, plans and specifications, warranties for services and materials provided to the Property, environmental audits and similar materials.

 

3.2 Tenant Estoppel . Following the execution of this Agreement, Seller shall use reasonable efforts (but without obligation to incur any cost or expense) to obtain and deliver to Purchaser prior to Closing, a written estoppel certificate in the form of Exhibit K attached hereto and made a part hereof or otherwise reasonably acceptable to Purchaser, signed by the Tenant (the “Tenant Estoppel”).

 

3.3 Right of Termination . If the Seller has not obtained the Tenant Estoppel by the Closing Date, Purchaser shall have the right to terminate this Agreement by giving written notice thereof to Seller. If Purchaser gives such notice of termination, this Agreement shall terminate and the Earnest Money shall be returned to Purchaser. Time is of the essence with respect to the provisions of this Section 3.3. Upon delivery to Purchaser of the Tenant Estoppel, Purchaser shall no longer have any right to terminate this Agreement under this Section 3.3 and (subject to the provisions of Section 2.5 hereof) shall be bound to proceed to Closing and consummate the transaction contemplated hereby pursuant to the terms of this Agreement.

 

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ARTICLE IV

 

CLOSING

 

4.1 Time and Place . The parties shall conduct an escrow closing (the “Closing”) on November 30, 2004, or on such earlier date as may be agreed to by the parties, subject to extension pursuant to Section 2.5 hereof (the “Closing Date”). If the Closing does not occur on or before the Closing Date, the Escrow Agent shall, unless it is notified by both Seller and Purchaser to the contrary within three (3) days after the Closing Date, return to the depositor thereof items other than the Earnest Money which were deposited thereunder; any such return shall not, however, relieve either party of any liability it may have for its wrongful failure to close. At Closing, Seller and Purchaser shall perform the obligations set forth in, respectively, Section 4.2 hereof and Section 4.3 hereof, the performance of which obligations shall be concurrent conditions.

 

4.2 Seller’s Obligations at Closing . Not less than one (1) business day prior to Closing, Seller shall, unless otherwise agreed by Purchaser and Seller, deliver to the Escrow Agent or Purchaser as appropriate:

 

(a) a duly executed grant deed in the form of Exhibit E attached hereto, conveying the Land and Improvements, subject only to the Permitted Exceptions; the warranty of title in the Deed will be only as to claims made by, through or under Seller and not otherwise;

 

(b) four (4) duly executed counterparts of a bill of sale in the form of Exhibit F attached hereto;

 

(c) four (4) duly executed counterparts of an assignment and assumption agreement as to the Lease in the form of Exhibit G attached hereto;

 

(d) four (4) duly executed counterparts of an assignment and assumption agreement as to the Operating Agreements and other Intangibles in the form of Exhibit H attached hereto;

 

(e) the Tenant Estoppel, to the extent received by Seller from the Tenant;

 

(f) four (4) duly executed originals of a notice in the form of Exhibit I attached hereto, a copy of which Purchaser shall send to the Tenant informing the Tenant of the sale of the Property and of the assignment to Purchaser of Seller’s interest in, and obligations under, the Lease (including, if applicable, any security deposits) and directing that all rent and other sums payable under the Lease after the Closing shall be paid as set forth in the notice;

 

(g) four (4) originals of a certificate, dated as of the date of Closing and executed on behalf of Seller by a duly authorized officer thereof, stating that the representations and warranties of Seller contained in this Agreement are true and correct in all material respects as of the date of Closing (with appropriate modifications of those representations and warranties made in Section 5.1 hereof to reflect any changes therein including without limitation any changes resulting from actions under Section 5.4 hereof) or identifying any representation or

 

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warranty which is not, or no longer is, true and correct and explaining the state of facts giving rise to the change. In no event shall Seller be liable to Purchaser for, or be deemed to be in default hereunder by reason of, any breach of representation or warranty which results from any change that (i) occurs between the Effective Date and the date of Closing and (ii) is expressly permitted under the terms of this Agreement or is beyond the reasonable control of Seller to prevent; provided, however, that the occurrence of a change which is not permitted hereunder or is beyond the reasonable control of Seller to prevent shall, if materially adverse to Purchaser, constitute the non-fulfillment of the condition set forth in Section 4.7(b) hereof; if, despite changes or other matters described in such certificate, the Closing occurs, Seller’s representations and warranties set forth in this Agreement shall be deemed to have been modified by all statements made in such certificate;

 

(h) such evidence as the Escrow Agent may reasonably require as to the authority of the person or persons executing documents on behalf of Seller;

 

(i) four (4) duly executed counterparts of an affidavit by Seller stating that Seller is not a “foreign person” as defined in the Federal Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax Reform Act in the form of Exhibit J attached hereto, and four (4) duly executed originals of a California Form 593-W; and

 

(j) such additional documents as shall be reasonably required to consummate the transaction expressly contemplated by this Agreement.

 

At the Closing, Seller shall deliver to Purchaser possession and occupancy of the Property, subject to the rights of the Tenant and the Permitted Exceptions. Purchaser shall cooperate with Seller for a period of seven (7) years after the Closing in case of Seller’s need in response to any legal requirements, tax audits, tax return preparation or litigation threatened or brought against Seller, by allowing Seller and its agents or representatives access, upon reasonable advance notice (which notice shall identify the nature of the information sought by Seller), at all reasonable times to examine and make copies of any and all instruments, files and records, which right shall survive the Closing.

 

4.3 Purchaser’s Obligations at Closing . Not less than one (1) business day prior to Closing, Purchaser shall, unless otherwise agreed by Purchaser and Seller, deliver to the Escrow Agent or Seller as appropriate:

 

(a) the full amount of the Purchase Price, as increased or decreased by prorations and adjustments as herein provided, in immediately available wire transferred funds pursuant to Section 1.5 hereof, it being agreed that at Closing the Earnest Money shall be delivered to Seller and applied towards payment of the Purchase Price;

 

(b) four (4) duly executed counterparts of the instruments described in Sections 4.2(b), 4.2(c), 4.2(d) and 4.2(f) hereof;

 

(c) a letter duly executed by Purchaser, confirming that Purchaser is not acquiring the Property with the assets of an employee benefit plan as defined in Section 3(3) of

 

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the Employee Retirement Income Security Act of 1974 (“ERISA”), and, if Purchaser is unable or unwilling to make such a representation, Purchaser shall be deemed to be in default hereunder, and Seller shall have the right to terminate this Agreement and to receive and retain the Earnest Money;

 

(d) such evidence as the Escrow Agent may reasonably require as to the authority of the person or persons executing documents on behalf of Purchaser;

 

(e) any assignment of the Purchase Agreement (if applicable); and

 

(f) such additional documents as shall be reasonably required to consummate the transaction contemplated by this Agreement.

 

4.4 Escrow Agent’s Obligations at Closing . Subject to the terms of any escrow instructions received from counsel for either Purchaser or Seller which are not contradictory with this Agreement, at Closing, Escrow Agent shall:

 

(a) at such time as Escrow Agent holds and is irrevocably obligated to deliver the Purchase Price to Seller, record the Deed in the Official Records of Orange County, California.

 

(b) deliver to Seller the Purchase Price by wire transfer of immediately available federal funds to a bank account designated by Seller in writing to Escrow Agent prior to the Closing;

 

(c) deliver to Seller and Purchaser two (2) fully executed counterparts of the instruments described in Sections 4.2(b), 4.2(c), 4.2(d), 4.2(f), 4.2(g) and 4.2(i) hereof; and

 

(d) deliver to Seller and Purchaser settlement statements prepared by Escrow Agent and approved by Seller and Purchaser not less than two (2) business days prior to the Closing.

 

4.5 Credits and Prorations .

 

(a) Seller shall prepare a schedule of tentative prorations, and Purchaser and Seller shall endeavor to finalize such schedule no later than three (3) business days prior to Closing. The following shall be apportioned with respect to the Property as of 12:01 a.m., on the day of Closing, as if Purchaser were vested with title to the Property during the entire day upon which Closing occurs:

 

(i) rents, if any, as and when collected (the term “rents” as used in this Agreement includes all payments due and payable by Tenant);

 

(ii) taxes (including personal property taxes on the Personal Property) and assessments levied against the Property;

 

(iii) payments under the Operating Agreements; and

 

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(iv) any other operating expenses or other items pertaining to the Property which are customarily prorated between a purchaser and a seller in the area in which the Property is located.

 

(b) Notwithstanding anything contained in the foregoing provisions:

 

(i) At Closing, (A) Seller shall credit to the account of Purchaser the amount of any security deposits held by Seller pursuant to the Lease (to the extent such security deposits are not applied against delinquent rents or otherwise as provided in the Lease), (B) if Seller is holding letters of credit as a security deposit or portion thereof, then Seller shall either (1) if same are assignable, at Seller’s option either assign such letters of credit to Purchaser or deliver to Purchaser the forms necessary to do so (completed and executed, to the extent required, by Seller), or (2) if not assignable, endeavor to cause such letters of credit to be re-issued in favor of Purchaser (and if any letter of credit cannot be re-issued prior to Closing, then Seller shall escrow the applicable amount with the Escrow Agent until re-issuance); and (C) Seller shall be entitled to receive and retain any refundable cash and other deposits held by utility companies serving the Property.

 

(ii) Any taxes paid at or prior to Closing shall be prorated based upon the amounts actually paid. If taxes and assessments for the current year have not been paid before Closing, Seller shall be charged at Closing an amount equal to that portion of such taxes and assessments which relates to the period before Closing and Purchaser shall pay the taxes and assessments prior to their becoming delinquent. Any such apportionment made with respect to a tax year for which the tax rate or assessed valuation, or both, have not yet been fixed shall be based upon the tax rate and/or assessed valuation last fixed. To the extent that the actual taxes and assessments for the current year differ from the amount apportioned at Closing, the parties shall make all necessary adjustments by appropriate payments between themselves following Closing.

 

(iii) Charges referred to in Section 4.5(a) hereof which are payable by the Tenant to a third party shall not be apportioned hereunder, and Purchaser shall accept title subject to any of such charges unpaid and Purchaser shall look solely to the Tenant for the payment of the same. If Seller shall have paid any of such charges on behalf of the Tenant, and shall not have been reimbursed therefor by the time of Closing, Purchaser shall credit to Seller an amount equal to all such charges so paid by Seller.

 

(iv) Seller shall receive the entire advantage of any discounts for the prepayment by it of any taxes, water rates or sewer rents.

 

(v) As to gas, electricity and other utility charges referred to in Section 4.5(a)(iv) hereof, Seller shall pay such items accrued to the date of Closing directly to the person or entity entitled thereto, and Seller’s obligation to pay such

 

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item directly in such case shall survive the Closing; Purchaser shall be responsible for the payment of all gas, electricity and other utility charges attributable to the period following the Closing.

 

(vi) Purchaser shall pay to Seller the amount of any and all sales or similar taxes payable in connection with the Personal Property and Purchaser shall execute and deliver any tax returns required of it in connection therewith, said obligations of Purchaser to survive Closing.

 

(vii) Unpaid and delinquent rent collected by Seller and Purchaser after the date of Closing shall be delivered as follows: (a) if Seller collects any unpaid or delinquent rent for the Property, Seller shall, within fifteen (15) days after the receipt thereof, deliver to Purchaser any such rent which Purchaser is entitled to hereunder relating to the date of Closing and any period thereafter, and (b) if Purchaser collects any unpaid or delinquent rent from the Property, Purchaser shall, within fifteen (15) days after the receipt thereof, deliver to Seller any such rent which Seller is entitled to hereunder relating to the period prior to the date of Closing. Seller and Purchaser agree that (i) all rent received by Seller or Purchaser from any prior tenant of the Property (whether received before or after the Closing) shall be payable to Seller, and (ii) all rent received by Seller or Purchaser from Tenant subsequent to the Closing shall be payable to Purchaser. If there shall be any rents or other charges under any lease which, although relating to a period prior to Closing, do not become due and payable until after Closing or are paid prior to Closing but are subject to adjustment after Closing (such as year end common area expense reimbursements and the like), then any rents or charges of such type received by Purchaser or its agents or Seller or its agents subsequent to Closing shall, to the extent applicable to a period extending through the Closing, be prorated between Seller and Purchaser as of Closing and Seller’s portion thereof shall be remitted promptly to Seller by Purchaser.

 

(c) If a post closing true-up is necessary, Purchaser shall work diligently with Seller to finalize the prorations as soon as possible, but in no event later than forty-five (45) days after the close of the calendar year. Purchaser shall be responsible for billing and collecting, if necessary, any amounts owed by Tenant as a result of the true-up. Purchaser agrees to refund Seller’s portion of Landlord’s CAM reimbursement within thirty (30) days of receipt of funds. If Tenant is owed a refund, Seller agrees to refund to Purchaser its proportionate share within forty-five (45) days after receiving notification from Purchaser of such amounts owed; Seller shall have the right to review the true-up and withhold any refund until the completion of said review.

 

(d) The provisions of this Section 4.5 shall survive Closing.

 

4.6 Closing Costs . Seller shall pay (a) the fees of any counsel representing it in connection with this transaction; (b) the CLTA and ALTA portions of the premium for the Owner’s Policy of Title Insurance to be issued to Purchaser by the Title Company at Closing; (c) any transfer tax, documentary stamp tax or similar tax which becomes payable by reason of the transfer of the Property; and (d) one-half (1/2) of any escrow fee which may be charged by

 

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Escrow Agent, not to exceed $125. Purchaser shall pay (u) the fees of any counsel representing Purchaser in connection with this transaction; (v) the costs of any endorsements to the Owner’s Policy of Title Insurance to be issued to Purchaser by the Title Company at Closing; (w) for the cost of the any update or recertification of the Survey; (x) the fees for recording the deed conveying the Property to Purchaser; and (y) all escrow fees charged by Escrow Agent other than those to be paid by the Seller pursuant to Section 4.6(d) above. All other costs and expenses incident to this transaction and the closing thereof shall be paid by the party incurring same.

 

4.7 Conditions Precedent to Obligation of Purchaser . The obligation of Purchaser to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing of all of the following conditions, any or all of which may be waived by Purchaser in its sole discretion:

 

(a) Seller shall have delivered to Purchaser all of the items required to be delivered to Purchaser pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.2 hereof.

 

(b) All of the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of the date of Closing (with appropriate modifications permitted under this Agreement or not materially adverse to Purchaser).

 

(c) Title Company shall have agreed that the Title Policy shall not contain an exception for that certain Declaration of Special Land Use Restrictions (“Regulations”), Abatement Lien, Mortgage Lien and Option to Repurchase recorded in the Official Records of Orange County as Instrument No. 13086.

 

(d) Seller shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Seller as of the date of Closing.

 

Purchaser acknowledges and agrees that its obligation to perform under this Agreement is not contingent upon Purchaser’s ability to obtain any (i) governmental or quasi-governmental approvals or changes or modifications in use or zoning, (ii) modification of any existing land use restriction, (iii) consents to assignments of any Operating Agreements or (iv) endorsements to the Title Policy.

 

4.8 Conditions Precedent to Obligation of Seller . The obligation of Seller to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing of all of the following conditions, any or all of which may be waived by Seller in its sole discretion:

 

(a) Seller shall have received the Purchase Price as adjusted pursuant to and payable in the manner provided for in this Agreement.

 

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(b) Purchaser shall have delivered to Seller all of the items required to be delivered to Seller pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.3 hereof.

 

(c) All of the representations and warranties of Purchaser contained in this Agreement shall be true and correct in all material respects as of the date of Closing.

 

(d) Title Company shall have agreed that the Title Policy shall not contain an exception for that certain Declaration of Special Land Use Restrictions (“Regulations”), Abatement Lien, Mortgage Lien and Option to Repurchase recorded in the Official Records of Orange County as Instrument No. 13086.

 

(e) Purchaser shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Purchaser as of the date of Closing.

 

ARTICLE V

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

5.1 Representations and Warranties of Seller . Seller hereby makes the following representations and warranties to Purchaser as of the Effective Date:

 

(a) Organization and Authority . Seller has the full right, power and authority to enter into this Agreement and, to transfer all of the Property to be conveyed by Seller pursuant hereto and to consummate or cause to be consummated the transactions contemplated herein to be made by Seller. The person signing this Agreement on behalf of Seller is authorized to do so.

 

(b) Pending Actions . To Seller’s knowledge, there is no action, suit, arbitration, unsatisfied order or judgment, governmental investigation or proceeding pending against the Property or the transaction contemplated by this Agreement, which, if adversely determined, could individually or in the aggregate have a material adverse effect on title to the Property or any portion thereof or which could in any material way interfere with the consummation by Seller of the transaction contemplated by this Agreement.

 

(c) Lease . Seller is the lessor or landlord or the successor lessor or landlord under the Lease. Other than the Lease, to Seller’s knowledge, there are no other leases or occupancy agreements to which Seller is a party affecting the Property. Seller does not represent or warrant that the Lease will be in force or effect at Closing or that the Tenant will have performed its obligations thereunder.

 

(d) Condemnation . To Seller’s knowledge, no condemnation proceedings relating to the Property are pending or threatened.

 

(e) Not a Foreign Person . Seller is not a “foreign person” which would subject Purchaser to the withholding tax provisions of Section 1445 of the Internal Revenue Code of 1986, as amended

 

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(f) General Contract. Attached hereto as Exhibit M is a true and correct copy of the Agreement Between Owner and Contractor (“ General Contract ”) dated as of August 6, 2004, by and between Seller, as owner, and Gordon & Williams General Contractors, Inc. (“ Contractor ”), as contractor, together with true and correct copies of all amendments and approved change orders relating thereto.

 

5.2 Knowledge Defined . References to the “knowledge” of Seller shall refer only to the actual knowledge of the Designated Employee (as hereinafter defined), and shall not be construed, by imputation or otherwise, to refer to the knowledge of Seller, or any affiliate of Seller, to any property manager, or to any other officer, agent, manager, representative or employee of Seller or any affiliate thereof or to impose upon such Designated Employee any duty to investigate the matter to which such actual knowledge, or the absence thereof, pertains. As used herein, the term “Designated Employee” shall refer to Scott Brown, Senior Vice President, Asset Management, who is hereby represented by Seller to be the person in Seller’s employ or under its control most likely to have direct knowledge of the matters represented by Seller.

 

5.3 Survival of Seller’s Representations and Warranties . The representations and warranties of Seller set forth in Section 5.1 hereof as updated by the certificate of Seller to be delivered to Purchaser at Closing in accordance with Section 4.2(g) hereof, shall survive Closing for a period of one hundred eighty (180) days. No claim for a breach of any representation or warranty of Seller shall be actionable or payable (a) if the breach in question results from or is based on a condition, state of facts or other matter which was known to Purchaser prior to Closing, (b) unless the valid claims for all such breaches collectively aggregate more than fifty thousand dollars ($50,000), in which event the full amount of such claims shall be actionable, and (c) unless written notice containing a description of the specific nature of such breach shall have been given by Purchaser to Seller prior to the expiration of said one hundred eighty (180) day period and an action shall have been commenced by Purchaser against Seller within thirty (30) days after the termination of the survival period provided for above in this Section 5.3. Purchaser agrees to first seek recovery under any insurance policies, service contracts and leases prior to seeking recovery from Seller, and Seller shall not be liable to Purchaser if Purchaser’s claim is satisfied from such insurance policies, service contracts or the Lease. As used herein, the term “Cap” shall mean the total aggregate amount of one million dollars ($1,000,000). In no event shall Seller’s aggregate liability to Purchaser for breach of any representation or warranty of Seller in this Agreement or the certificate to be delivered by Seller at Closing pursuant to Section 4.2(g) hereof exceed the amount of the Cap.

 

5.4 Covenants of Seller . Seller hereby covenants with Purchaser that from the Effective Date hereof until the Closing or earlier termination of this Agreement, Seller shall use reasonable efforts to operate and maintain the Property in a manner generally consistent with the manner in which Seller has operated and maintained the Property prior to the date hereof.

 

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5.5 Representations and Warranties of Purchaser . Purchaser hereby represents and warrants to Seller:

 

(a) ERISA . Purchaser is not acquiring the Property with the assets of an employee benefit plan as defined in Section 3(3) of ERISA.

 

(b) Organization and Authority . Purchaser has the full right, power and authority to purchase the Property as provided in this Agreement and to carry out Purchaser’s obligations hereunder, and all requisite action necessary to authorize Purchaser to enter into this Agreement and to carry out its obligations hereunder have been, or by the Closing will have been, taken. The person signing this Agreement on behalf of Purchaser is authorized to do so.

 

(c) Pending Actions . There is no action, suit, arbitration, unsatisfied order or judgment, government investigation or proceeding pending against Purchaser which, if adversely determined, could individually or in the aggregate materially interfere with the consummation of the transaction contemplated by this Agreement.

 

5.6 Survival of Purchaser’s Representations and Warranties . The representation and warranties of Purchaser set forth in Section 5.5(a) hereof shall survive Closing and shall be a continuing representation and warranty without limitation. All other representations and warranties of Purchaser shall survive Closing for a period of one hundred eighty (180) days.

 

5.7 Covenants of Purchaser . Purchaser hereby assumes full responsibility for inspecting the Property for the presence of hazardous substances and irrevocably waives any claim against Seller arising from the presence of hazardous substances on the Property. Purchaser shall furnish to Seller copies of any reports received by Purchaser relating to the Property conducted on Purchaser’s behalf, if any (including, specifically, without limitation, any reports analyzing the environmental condition of the Property or the compliance of the Property with the provisions of the Americans with Disabilities Act (“ADA”), 42 U.S.C. §12101, et seq ., if applicable). The provisions of this Section shall survive Closing or any early termination of this Agreement.

 

5.8 Post-Closing Covenants of Seller .

 

(a) Seller has disclosed to Purchaser that under the Lease, Seller is obligated to Tenant complete the construction obligations set forth on Exhibit L attached hereto (the “Open Tenant Improvement Work”). Seller does not expect to be able to complete the Open Tenant Improvement Work prior to Closing but has agreed with Purchaser that, subsequent to the Closing, Seller shall complete Open Tenant Improvement Work in accordance with the all applicable governmental laws, statutes, ordinances, codes, rules and regulations and within the time and as required by the Lease. All of the Open Tenant Improvement Work shall be performed in a good and workmanlike manner and on a lien-free basis and in accordance with the terms of the Lease. Upon final completion of the Open Tenant Improvement Work, Seller shall assign to Purchaser all warranties and guaranties given or made in connection with such work, and Seller shall provide to Purchaser: (i) any certificates of final completion issued in connection with the Open Tenant Improvement Work, (ii) copies of all governmental permits or approvals (if any) issued in connection with the Open Tenant Improvement Work; (iii) either (A) a copy of a Notice of Completion filed by Seller with respect to the Open Tenant Improvement Work and evidence that the statutory period for the filing of liens has passed or (B) final lien

 

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waivers from all contractors, subcontractors and materialmen performing or providing material in connection with the Open Tenant Improvement Work; and (iv) any other information or documentation reasonably requested by Purchaser and available at no additional cost or expense to Seller to evidence the lien-free completion of construction and payment of all costs associated with the Open Tenant Improvement Work. Seller hereby reserves and retains the right and privilege, on behalf of itself, its agents, contractors and employees, of entering upon the Property from and after the Closing Date as reasonably necessary to complete the Open Tenant Improvement Work. If Seller shall default in the performance of its obligations pursuant to this Section 5.8 and such default shall continue for a period of thirty (30) days after written notice from Purchaser or Tenant to Seller (provided, however, that Seller shall not be deemed in default hereunder if Seller commences such remedy or cure within thirty (30) days after receipt of such notice, and thereafter diligently pursues to remedy or cure such default), then Purchaser may, but shall not be obligated, to complete the Open Tenant Improvement Work at Seller’s expense. The provisions of this Section 5.8 shall survive the Closing for a period of one (1) year following the date of substantial completion of the Open Tenant Improvement Work.

 

(b) In order to provide assurance as to the payment in full of the Open Tenant Improvement Work, Seller has agreed that the sum $373,248 of the Purchase Price (the “Escrowed Funds”) shall be retained in escrow by the Title Company pursuant to an Escrow Agreement to be entered into by and among Purchaser, Seller and Title Company prior to the Closing Date (the “Escrow Agreement”). The Escrow Agreement will provide that (i) $319,445 of the Escrowed Funds will be distributed to Seller upon the substantial completion of the Open Tenant Improvement Work described at Item 1 on Exhibit L attached hereto, (ii) $29,000 of the Escrowed Funds will be distributed to Seller upon the substantial completion of the Open Tenant Improvement Work described at Item 2 on Exhibit L attached hereto and (iii) $24,803 of the Escrowed Funds will be distributed to Seller upon the substantial completion of the Open Tenant Improvement Work described at Item 3 on Exhibit L attached hereto, in each case such funds to be disbursed only upon the (i) filing by Seller of a Notice of Completion followed by passage of the statutory period for the filing of any liens or (ii) delivery by the relevant contractors of the lien waivers described in Section 5.8(a)(iii) above. The Escrow Agreement shall further provide that if and to the extent that the Open Tenant Improvement Work is not completed by Seller as contemplated hereby, Purchaser shall be entitled to payment from the Escrowed Funds of an amount reasonably determined to be necessary to complete any such incomplete Open Tenant Improvement Work, it being agreed that the $50,000 floor set forth in Section 5.3 above does not apply to this to Purchaser’s rights under this Section 5.8(b).

 

(c) Upon completion of the Open Tenant Improvement Work and the performance of all other obligations of Contractor under the General Contract, Seller will pay all sums due to the Contractor under the General Contract.

 

(d) Upon receipt by Seller of the “project close out package” described in Item 14 of Exhibit A to the General Contract, Seller shall deliver one copy thereof to Purchaser.

 

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