PURCHASE AGREEMENT FOR PURCHASE
OF OFFICE BUILDING
THIS PURCHASE
AGREEMENT FOR PURCHASE OF OFFICE BUILDING (this “
Agreement ”) is made and entered into as of the ___day
of August, 2005, by and among JB MANAGEMENT L.P. , a
California limited partnership (“ Seller ”) and
HINES REIT PROPERTIES, L.P. , a Delaware limited
partnership, or its assigns (“ Buyer
”).
A. Seller is
the owner of the “ Property ” (defined below),
which consists principally of an approximately 400,000 square foot
office building with a parking garage with approximately 774
parking spaces located on several different legal parcels, in the
City of Sacramento, California, having commonly known street
addresses of 1515 R and 1515 S Street, Sacramento, California
95814-7243, comprised of the following legal parcels: garage:
006-292-0014, 006-292-0015, 006-292-0024, and 006-292-0025;
building: 009-091-0001, 009-0091-0002, 009-0091-0003, 009
0091-0004, 009-0091-0005, 009-0091-006 and
009-0091-0014.
B. Buyer
desires to purchase the Property on the terms and conditions
hereinafter documented.
NOW, THEREFORE, in
consideration of the mutual undertakings of the parties hereto, it
is hereby agreed as follows:
1.
Purchase and Sale . Seller shall sell to Buyer, and Buyer
shall purchase from Seller, the Property on the terms and
conditions hereinafter set forth.
1.1
Property . As used herein, the “ Property
” means, collectively, all right, title and interest of
Seller in and to (i) that certain land described in Exhibit
“A”, together with all easements, rights-of-way, and
appurtenances benefitting such land (the “ Land
”), (ii) any land lying in the bed of any street, road,
alley or right-of-way, open or closed, adjacent to or abutting the
Land, (iii) any and all air rights, subsurface rights,
development rights, entitlements, wastewater capacities and credit
reservations, and water rights pertaining to the Land or the
Improvements (as hereinafter defined), (iv) all improvements,
structures and fixtures now or on the “Closing Date”
(as hereinafter defined) located upon the Land (the “
Improvements ”), (v) all machinery, equipment,
gas and electric systems, lighting, heating, ventilating and air
conditioning equipment and systems, elevators, radiators,
incinerators, furnaces, hot water heaters, water, sewage, and
plumbing systems, fire protection and security systems, and all
other tangible personal property now or on the Closing Date located
on or used in connection with the Land and Improvements, in each
case to the extent Seller has any right, title or interest therein
(the “ Personal Property ”), and (vi) all
“ Leases ” (as hereinafter defined), and
(vii) all “ Service Agreements ” (as
hereinafter defined), (viii) to the extent assignable, all
governmental permits, certificates of occupancy, licenses and
approvals, (ix) all warranties and guarantees that Seller has
received in connection with any work or services performed with
respect to, or equipment installed in or on, the Improvements or
the Land, and (x) all tenant lists, advertising material,
telephone exchange numbers and other intangible personal property
related to the Land,
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Improvements or
Personal Property, in each case to the extent Seller has any right,
title or interest therein (the “ Intangible Property
”). The Property includes the items specified on Exhibit
“B” and, notwithstanding the foregoing, excludes any
items of personal property owned by tenants or any other third
parties not affiliated with Seller (provided, however, Seller shall
assign to Buyer any right, title, interest or claim of Seller
[e.g., landlord’s liens] in and to any such excluded items of
personal property).
2.
Purchase Price . The purchase price (the “ Purchase
Price ”) shall be SIXTY-NINE MILLION AND NO/100 DOLLARS
($69,000,000.00).
3.
Payment of Purchase Price . The Purchase Price shall be paid
to Seller by Buyer as follows:
3.1
Escrow Deposit . Within ten (10) calendar days after
the Effective Date (as defined in Section 4.1.1 below), Buyer
shall deliver the sum of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,000.00) to First American Title Insurance Company at its
offices at 899 Pacific Street, San Luis Obispo, California 93402-
Attention: Lisa Blasquez; Telephone No. (805) 786-2038, which
company, in its capacity as escrow holder hereunder, is called
“ Escrow Agent ” (this amount, together with all
interest earned thereon, are collectively herein called the “
Initial Escrow Deposit ”). If Buyer does not terminate
this Agreement prior to the expiration of the Due Diligence Period
(as hereinafter defined), then on or prior to the last day of the
Due Diligence Period, Buyer shall deposit an additional Five
Hundred Thousand Dollars ($500,000.00) (the “ Additional
Escrow Deposit ”) with Escrow Agent; the Initial Escrow
Deposit and, if made, the Additional Escrow Deposit (as hereinafter
defined), together with all interest earned thereon, are referred
to collectively in this Agreement as the “ Escrow
Deposit ”. The Escrow Deposit shall be delivered to
Escrow Agent by wire transfer of immediately available federal
funds or by bank or cashier’s check drawn on a national bank
reasonably satisfactory to Seller. The Escrow Deposit shall be held
by Escrow Agent as a deposit against the Purchase Price in
accordance with the terms and provisions of this Agreement. At all
times that the Escrow Deposit is being held by the Escrow Agent,
the Escrow Deposit shall be invested by Escrow Agent in the
following investments (“ Approved Investments
”): (i) United States Treasury obligations,
(ii) United States Treasury-backed repurchase agreements
issued by a major national money center banking institution
reasonably acceptable to Seller and Buyer, or (iii) such other
manner as may be reasonably agreed to by Seller and Buyer. The
Escrow Deposit shall be disposed of by Escrow Agent only as
provided in this Agreement.
3.2
Closing Payment . The Purchase Price, as adjusted by the
application of the Escrow Deposit and by the prorations and credits
specified herein, shall be paid to Escrow Agent by wire transfer or
immediately available federal funds (through the escrow described
in Section 5) on the Closing Date (the amount to be paid under
this Section 3.2 being herein called the “ Closing
Payment ”).
4.
Conditions Precedent . The obligation of Buyer to purchase
as contemplated by this Agreement is subject to Seller’s
satisfaction of each of conditions precedent set forth in this
Agreement (any of which may be waived in writing by Buyer) on or
before the applicable date specified for satisfaction of the
applicable condition. If any of such conditions is not fulfilled
(or
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so waived)
pursuant to the terms of this Agreement, then Buyer may terminate
this Agreement and, in connection with any such termination made in
accordance with this Section 4, Seller and Buyer shall be
released from further obligation or liability hereunder (except for
those obligations and liabilities which, pursuant to the terms of
this Agreement, survive such termination and without releasing any
party for a breach or default occurring prior to such termination),
and the Escrow Deposit shall be immediately returned to
Buyer.
4.1
Limited Due Diligence Period
4.1.1
Information To Be Reviewed . Buyer, or its lender, shall
have from the date of execution of this Agreement (the “
Effective Date ”) through the date which is SIXTY
(60) days after the Effective Date (the “ Due
Diligence Period ”) within which to perform and complete
all of Buyer’s due diligence/feasibility examinations, title
and survey and other reviews and inspections of all matters
pertaining to the Property (keeping all information confidential;
subject, however to the provisions of Section 4.1.2 hereof).
In particular, the following may be reviewed by Buyer or its
lender:
(a) a current
ALTA title commitment covering the Property, together with complete
and best available copies of all exception and other documents or
instruments referenced therein (collectively, the “
Preliminary Title Report ”) from First American Title
Insurance Company (which company, in its capacity as title insurer
hereunder, is herein called the “ Title Company
”), setting forth the current status of title to the Property
and committing to insure the same for the full amount of the
Purchase Price;
(b) a true,
correct and complete copy of the most recent existing ALTA survey
of the Property (the “ Existing Survey ”), which
Buyer may have updated and/or recertified at Buyer’s
expense;
(c) true,
correct and complete copies of all Leases (and all modifications
and amendments thereto, all related correspondence, side letters,
indemnity and/or reimbursement agreements, letters of credit and
other documents and materials relating thereto, and, to the extent
in Seller’s possession, copies of all subleases and other
occupancy agreements affecting the Property) (including a current
certified rent roll, which shall be re-certified and updated at
Closing) and Service Agreements;
(d) all
physical, environmental, seismic and compliance matters and
conditions respecting the Property, but excluding any confidential
information; provided, however, in the case of any confidential
information that would be material to Buyer in deciding whether to
purchase the Property or make a loan thereon, Seller shall notify
Buyer in writing of the existence of the same and shall either
(i) give Buyer the right to terminate this Agreement or
(ii) disclose the same to Buyer on the condition that Buyer
executes a confidentiality agreement reasonably satisfactory to
Buyer and Seller. During the Due Diligence Period, Seller shall
provide Buyer with reasonable access to the Property and its files
relating to the Property (excluding confidential information,
except as aforesaid) upon reasonable advance notice and shall also
provide to Buyer copies of such leases and service contracts and
other items as Buyer shall request, all upon reasonable advance
notice;
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(e) copies of
all existing as-built architectural, structural, civil, mechanical,
electrical, and plumbing plans and specifications, and as-built
drawings of tenant improvements in place for the Property within
Seller’s possession or control, and, to the extent in
Seller’s possession or control, all space plans, stacking
plans and area calculations (provided such are within
Seller’s possession or control);
(f) copies of
any soil, groundwater contamination, seismic, environmental,
physical condition or other assessments, evaluations, reports,
studies or test results to the extent the same have been
prepared;
(g) true,
correct and complete copies of all operating statements (year to
date and for a period of the prior three (3) years), budgets
and all appraisals, maintenance records, repair records, tax and
utility bills, operational records and other such records
pertaining to the acquisition, construction, ownership, condition
and operation of the Property within Seller’s possession or
control;
(h) true,
correct and complete copies of all licenses, approvals,
certificates and permits (including certificates of occupancy),
agreements with adjacent or nearby landowners or occupants, or
other such agreements pertaining to the ownership, construction,
operation, leasing or maintenance of the Property within
Seller’s possession or control; and
(i) the other
matters specifically listed on Exhibit “U” attached
hereto.
Notwithstanding
the foregoing, Buyer acknowledges that Seller’s maintenance
records, repair records, tax and utility bills and operational
records are voluminous in nature, and, therefore, Seller shall make
such documentation available for Buyer’s review. Within ten
(10) days after the Effective Date, Seller shall deliver (or
cause to be delivered) to Buyer the documents and other materials
described in clauses (a), (b), (d) and (f) and
(i) and shall have otherwise made the materials described in
clause (d), (e), (g) and (h) available for Buyer’s
review and inspection at the Property. Without in any manner
limiting the foregoing, Seller covenants and agrees that,
commencing on the Effective Date, Buyer and its accountants,
auditors and other representatives shall have access to all of
Seller’s financial and accounting information within
Seller’s possession or control and relating to the operation
of the Property, including all supporting documentation relating
thereto.
4.1.2.
Review Standards . Buyer shall at all times conduct its due
diligence review, inspections and examinations in a manner so as to
not cause liability, damage, loss, cost or expense to Seller or the
Property (other than that arising from the discovery of preexisting
conditions) and so as to not unreasonably interfere with or disturb
any tenant at the Property, and Buyer will indemnify, defend, and
hold Seller and the Property harmless from and against any such
liability, damage, loss, cost or expense, except to the extent
based on any such preexisting conditions or on the negligence or
willful misconduct of Seller or its employees or agents (the
foregoing obligation surviving any termination of this Agreement).
Without limitation on the foregoing, without the prior written
consent of Seller (which consent shall not be unreasonably withheld
or delayed), in no event shall Buyer make any intrusive physical
testing
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(environmental,
structural or otherwise) at the Property (such as soil borings,
water samplings or the like). Seller shall have the right, at its
option, to cause a representative of Seller to be present at all
inspections, reviews and examinations of the Property conducted
hereunder. In the event of any termination hereunder, Buyer shall
return all documents and other materials furnished by Seller
hereunder and at Seller’s written request, Buyer shall
promptly deliver to Seller, without warranty, copies of any written
reports relating to the Property prepared for or on behalf of Buyer
by any third party engaged by Buyer. Prior to Closing, Buyer shall
keep all information or data received or discovered in connection
with any of the inspections, reviews or examinations strictly
confidential; provided, however, that (i) such information or
data may be disclosed by Buyer (a) to the extent required by
law, (b) to Buyer’s lender and to Buyer’s and such
lender’s respective representatives, agents and affiliates
(including attorneys and accountants) to the extent such
representatives and agents need to know such information for the
purpose of evaluating the purchase contemplated hereby and any loan
made in connection therewith and are instructed to maintain such
confidentiality, (c) as may otherwise be necessary for Buyer
or Buyer’s representatives or affiliates, Hines Interests
Limited Partnership (“ Hines ”) or its
affiliates or any other entities advised by Hines or its affiliates
to comply with applicable laws, including, without limitation,
governmental, regulatory, disclosure, tax and reporting
requirements (including without limitation, the requirements of the
Securities and Exchange Commission, the New York Stock Exchange
and/or any similar body or agency), to comply with other
requirements and requests of regulatory and supervisory authorities
and self-regulatory organizations having jurisdiction over Buyer or
Buyer’s representatives or affiliates, Hines or its
affiliates or any other entities advised by Hines or its
affiliates, (d) to comply with regulatory or judicial
processes, or (d) to satisfy reporting procedures and
inquiries of credit rating agencies in accordance with customary
practices of Buyer or its affiliates; and (ii) the foregoing
confidentiality restriction shall not apply to any information or
data that is available to Buyer from any other source (other than
by reason of a breach by Buyer of such confidentiality
restriction).
4.1.3
CONFIDENTIAL NATURE, AND LIMITED ACCESS, OF DUE DILIGENCE
ACTIVITIES
Buyer recognizes and acknowledges that the primary tenant in
the Property is the State of California. Hence, in order not to
create any confusion or misunderstandings on said tenant’s
part while Buyer is performing its Due Diligence, Buyer agrees to
(a) except as otherwise permitted by Section 4.1.2, hold
confidential the possible sale of the Property by Seller, and not
to discuss such with any third parties information which could in
any way be learned, directly or indirectly, by the State of
California, (b) only make inquires of representatives of any
tenants in the Property through individuals identified in writing
by Seller, and (c) discuss the possible sale of the Property
with said individuals in the presence of authorized representatives
of Seller (as identified by Seller in writing).
4.1.4
Termination Right . If (a) on or before the expiration
of the Due Diligence Period, Buyer shall determine that it no
longer intends to acquire the Property for any reason or no reason
at all and at Buyer’s sole discretion, then Buyer shall have
the right to terminate this Agreement by so notifying Seller of
such determination in writing (such notice
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being herein
called the “ Termination Notice ”), whereupon
this Agreement, and the obligations of the parties hereunder, shall
terminate (other than those obligations that expressly survive a
termination of this Agreement), or (ii) in the event Buyer
fails to deposit the Additional Escrow Deposit with Escrow Agent
prior the expiration of the Due Diligence Period in accordance with
Section 3.1 hereof, then Buyer shall be deemed to have elected
to terminate this Agreement, and the obligations of the parties
hereunder shall terminate (other than those obligations that
expressly survive a termination of this Agreement), and upon any
such termination or deemed termination, the Escrow Deposit shall be
immediately returned to Buyer. In the event Buyer fails to
terminate (or is not deemed to have terminated) this Agreement
prior to the expiration of the Due Diligence Period, the Escrow
Deposit shall become non-refundable, except in the event of a
Seller default, upon the failure of a closing condition, or as may
otherwise be provided to the contrary in this Agreement (e.g., in
connection with casualty, condemnation, certain tenant estoppel
issues, certain leases entered into by Seller over Buyer’s
disapproval, etc.).
4.2
Title and Survey Review/Objections . Buyer shall have until
the date (the “ Title/Survey Objection Date ”)
that is fifteen (15) days prior to the expiration of the Due
Diligence Period to give written notice to Seller of such
objections as Buyer may have to any exceptions to title or survey
matters disclosed in the Preliminary Title Report or in the
Existing Survey (or any update or recertification thereof) or
otherwise in Buyer’s examination of title. Seller shall have
the right, but not the obligation (except as provided in
Section 4.3 below), to remove, satisfy or otherwise cure any
title or survey matters to which Buyer objects hereunder. Within
five (5) days after receipt of Buyer’s objection notice,
Seller shall give written notice to Buyer informing Buyer of
Seller’s election with respect to such objections. If Seller
fails to give written notice of such election within such 5-day
period, Seller shall be deemed to have elected not to cure the
objections. If Seller elects, or is deemed to have elected, not to
cure any title or survey matters to which Buyer has objected or if,
after electing to attempt to cure, Seller fails to cure any such
objections prior to Closing, Buyer may either (i) waive such
objections and accept title to the Property subject thereto, or
(ii) terminate this Agreement, whereupon the Escrow Deposit
(together with all interest earned thereon) shall be immediately
returned to Buyer. Any title or survey matter (other than the
matters described in Section 4.3 which shall in all events be
cured, satisfied and discharged at or prior to Closing whether or
not Buyer objects to same) reflected in the Preliminary Title
Report or the Existing Survey as to which Buyer fails to object on
or prior to the Title/Survey Objection Date and any other title or
survey matter as to which Buyer (in its sole discretion) elects to
waive its objection as provided above, shall be deemed “
Permitted Exceptions ”.
4.3
Existing Loan . The Property is currently encumbered by a
certain deed of trust and other loan documents securing a loan to
Seller (the “ Existing Loan ”). The Existing
Loan will come due upon the sale contemplated hereby and a portion
of the Purchase Price will be used by Seller to repay the Existing
Loan (and any related prepayment or defeasance penalties, premiums,
costs or other charges) in full. Additionally, Seller shall cure,
satisfy, discharge and release, at or prior to Closing, any other
mortgage, deed of trust or similar security instrument encumbering
all or any part of the Property, any mechanic’s,
materialman’s or similar lien (unless resulting from any act
or omission of Buyer or any of its agents), any delinquent taxes,
assessments and governmental charges affecting all or any portion
of the Property, and any judgment of record affecting the
Property.
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4.4
Tenant Estoppel Certificates . Receipt of estoppel
certificates (“ Tenant Estoppel Certificates ”)
from all the tenants of the Property occupying not less than ninety
percent (90%) of the total net rentable square footage of the
Property covered by Leases in effect as of the Closing Date, shall
be a condition precedent to Buyer’s obligation to acquire the
Property hereunder. Each Tenant Estoppel Certificate shall be
substantially in the applicable form provided in Exhibit
“D”; provided, however, that with respect to any tenant
of the Property which is the State of California or a division
thereof, any such Tenant Estoppel Certificate shall be in the then
current form of estoppel customarily provided by the State of
California or such division thereof and not in the form of Exhibit
“D”. Seller shall deliver to Buyer fully executed
original Estoppel Certificates no later than ten (10) calendar
days prior to the Closing Date (as hereinafter defined) (the "
Tenant Estoppel Certificate Deadline ”), which
Estoppel Certificates shall be re-certified by Seller prior to the
Closing Date in order to conform with the requirements of
Buyer’s lender. Buyer shall have until five (5) calendar
days prior to the Closing Date (the “ Estoppel Objection
Period ”) to examine the Tenant Estoppel Certificates and
to notify Seller in writing specifying Buyer’s objections
(the “ Buyer’s Estoppel Notice ”);
provided that if Buyer fails to give Seller the Buyer’s
Estoppel Notice before the expiration of the Estoppel Objection
Period, the Buyer shall be deemed to have accepted the Estoppel
Certificates and to have waived any matters reflected thereon. If
Buyer has timely delivered to Seller the Buyer’s Estoppel
Notice, then Seller shall prior to the expiration of the Estoppel
Objection Period deliver to Buyer written notice specifying the
items set forth in the Buyer’s Notice which Seller, in its
sole discretion, shall elect to cure (the " Seller’s
Estoppel Notice ”). In connection with any items set
forth in the Seller’s Estoppel Notice, Seller agrees to use
its reasonable good faith efforts to cause such defects set forth
in the Seller’s Estoppel Notice to be cured by the Closing
Date. If, for any reason, on or before the Closing Date, Seller
does not cause: (i) any matters which are set forth in the
Seller’s Estoppel Notice to be removed at no cost or expense
to Buyer; or (ii) any new material adverse matters reflected
in any re-certified Estoppel Certificate as objected to in writing
by Buyer within two (2) days from receipt of any such
re-certified Estoppel Certificate to be cured at no cost or expense
to Buyer, the obligation of Buyer to buy the Property as herein
provided shall terminate (and no party hereto shall have any
further obligations in connection herewith except under those
provisions that expressly survive a termination of this Agreement),
and the Escrow Deposit (together with all interest earned thereon)
shall be immediately returned to Buyer.
4.5
Performance by Seller . The performance and observance, in
all material respects, by Seller of all covenants and agreements of
this Agreement to be performed or observed by Seller prior to or on
the Closing Date shall be a condition precedent to Buyer’s
obligation to purchase the Property. Without limitation on the
foregoing, in the event that the “Seller Closing
Certificate” (as hereinafter defined) shall disclose any
material adverse changes in the representations and warranties of
Seller contained in this Agreement or any certificate delivered by
Seller in connection herewith which are not otherwise permitted or
contemplated by the terms of this Agreement, then Buyer shall have
the right to terminate this Agreement, whereupon the Escrow Deposit
(together with all interest earned thereon) shall be immediately
returned to Buyer.
5.
Closing Procedure . Subject to Section 5.5 below, the
sale and purchase herein provided shall be consummated (the “
Closing ”) at a closing conference (“ Closing
Conference ”),
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which shall be
held on the Closing Date by mail or at a mutually satisfactory
location. As used herein, “ Closing Date ” shall
be that date which is the thirtieth (30th) day from and after the
expiration of the Due Diligence Period, or such earlier date as may
be agreed upon by Seller and Buyer. The Closing Date is subject to
extension as set forth in Section 5.1.
5.1
Escrow . On or before 1:00 p.m. Pacific time on the Closing
Date, the parties shall deliver to Escrow Agent the following:
(i) by Seller, a duly executed and acknowledged original grant
deed (the “ Deed ”) in the form of Exhibit
“E”, subject only to the Permitted Exceptions, and
(ii) by Buyer, the Closing Payment in immediately available
federal funds. If the Closing Payment is received on the Closing
Date but after 1:00 p.m. Pacific time, then the Closing Date shall
be changed to the next business day. Such delivery shall be made
pursuant to escrow instructions (“ Escrow Instructions
”) to be executed among Buyer, Seller and Escrow Agent in the
form of Exhibit “F”. The conditions to the closing of
such escrow shall include the Escrow Agent’s receipt of the
Closing Payment and a notice from each of Buyer and Seller
authorizing Title Company to close the transactions as contemplated
herein (each of Buyer and Seller being obligated to deliver such
authorization notice on the Closing Date as soon as it is
reasonably satisfied that the other party is in a position to
deliver the items to be delivered by such other party under
Section 5.2 below and all conditions to Buyer’s
obligations hereunder shall have been satisfied or waived by Buyer
in writing).
5.2
Delivery to Parties . Upon the satisfaction of the
conditions set forth in the Escrow Instructions (including all
conditions to Buyer’s obligation to close hereunder), then
(i) the Deed shall be delivered to Buyer by Escrow Agent’s
depositing the same for recordation, (ii) the Closing Payment (and
the Escrow Deposit) shall be delivered by Escrow Agent to satisfy
the Existing Loan (and any other matters which Seller is obligated
by Sections 4.2 or 4.3 or any other provision of this
Agreement to pay, satisfy or discharge at Closing) and any balance
shall be paid to Seller and (iii) on the Closing Date, the
following items shall be delivered:
5.2.1
Seller Deliveries . Seller shall deliver to Buyer the
following:
(a) A
duly executed bill of sale, assignment and assumption agreement
(“ Assignment and Assumption Agreement ”) from
Seller with respect to the tangible and intangible personal
property included in the Property (including the Leases and Service
Agreements) in the form of Exhibit “G,” together with
any and all consents as may be required to effect the assignment of
any tangible or intangible personal property;
(b) A
duly executed certificate of Seller (the “ Seller Closing
Certificate ”) in the form of Exhibit “I”
updating the representations and warranties contained in
Section 7.1 hereof to the Closing Date and noting any changes
thereto (subject, however, to Buyer’s right to terminate as
provided herein with respect to any such changes);
(c) Notices
to each of the tenants under the Leases (“ Tenant
Notices ”), duly executed by Seller in the form of
Exhibit “K”, addressed to each of such
tenants;
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(d) Evidence
reasonably satisfactory to Buyer and Title Company respecting the
due organization and good standing of Seller and the due
authorization and execution of this Agreement and the documents
required to be delivered hereunder;
(e) To
the extent they are then in Seller’s possession, and have not
heretofore been delivered to Buyer: (i) any plans and
specifications for all Improvements on the Property; (ii) all
unexpired warranties and guarantees which Seller has received in
connection with any work or services performed with respect to, or
equipment installed in, the improvements on the Property;
(iii) all keys for all improvements on the Property;
(iv) all documents of Seller relating to the Property;
(v) originals of all Leases (and all modifications and
amendments thereto, side letters, indemnity and/or reimbursement
agreements, letters of credit and other documents and materials
relating thereto), copies of all subleases and other occupancy
agreements affecting the Property, all correspondence to or from
any tenants, relating to the Leases; and (vi) originals of all
Service Agreements that will remain in effect after the Closing and
all correspondence and records relating to the on-going operations
(including tenant billings) and maintenance of the Property (which
materials under this clause (e) may be either delivered at
Closing or left at the management office at the Property). In
addition, Seller shall direct its property management company, if
any, to deliver any documents or other files of Seller in such
management company’s possession to Buyer at the Closing or to
be left at the offices of the Property;
(f) A
Certificate of Non-Foreign Status;
(g) A
California Franchise Tax Board Form 590RE certifying that
Seller is exempt from withholding requirements under Revenue &
Taxation Code Section 18662;
(h) Any
customary owner’s affidavit and indemnities for
mechanics’ liens and similar matters as may be required by
the Title Company to issue the Title Policy (defined below) to
Buyer; and
(i) Such
additional documents as may be reasonably required by Buyer and
Title Company in order to consummate the transactions hereunder
(provided the same do not increase in any material respect the
costs to, or liability or obligations of, Seller in a manner not
otherwise provided for herein).
5.2.2
Buyer Deliveries . Buyer shall deliver to Seller the
following:
(a) A
duly executed and acknowledged Assignment and Assumption
Agreement;
(b) A
certificate of Buyer (the “ Buyer Closing Certificate
”) in the form of Exhibit “L” updating the
representations and warranties contained in Section 7.2 hereof
to the Closing Date and noting any changes thereto;
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(c) Evidence
reasonably satisfactory to Seller and Title Company respecting the
due organization of Buyer and the due authorization and execution
of this Agreement and the documents required to be delivered
hereunder; and
(d) Such
additional documents as may be reasonably required by Seller and
Title Company in or to consummate the transactions hereunder
(provided the same do not increase in any material respect the
costs to, or liability or obligations of, Buyer in a manner not
otherwise provided for herein).
5.3
Closing Costs . Seller shall pay (i) all state, county
and city transfer taxes payable, (including any sales taxes
thereon) if any, in connection with the transfer contemplated
herein, (ii) the title insurance premium for the CLTA portion
of the Owner’s Policy, (iii) 50% of all escrow charges,
(iv) 50% of any costs incurred in recording the Deed or any
other instruments with respect to the transfer contemplated herein,
and (v) all costs to satisfy, release and discharge any
Existing Loan, including, without limitation, any prepayment or
defeasance penalty, premium or charge, and any of the other matters
which Seller is obligated to remove, discharge or cure pursuant to
Sections 4.2 or 4.3 hereof. Buyer shall pay (i) 50% of
all escrow charges, (ii) the costs of extended coverage and any
endorsements to the Owner’s Policy, (iii) the costs, if
any, to update the Existing Survey, (iv) 50% of any costs
incurred in recording the Deed or any other instrument with respect
to the transfer contemplated herein, and (v) all fees, costs
or expenses in connection with Buyer’s due diligence reviews
hereunder. Any other closing costs shall be allocated in accordance
with local custom. Seller and Buyer shall pay their respective
shares of prorations as hereinafter provided.
5.4.1
Items to be Prorated . The following shall be prorated
between Seller and Buyer as of 11:59 p.m. the day prior to the
Closing Date (on the basis of the actual number of days elapsed
over the applicable period):
(a) All
real estate taxes, assessments, bond assessments and personal
property taxes on the Property for the tax year (the “
Current Tax Year ”) in which the Closing occurs (with
Seller and Buyer each being responsible for a pro rata share of
such taxes and assessments based upon the number of days in such
tax year occurring before the Closing Date, in the case of Seller,
and on or after the Closing Date, in the case of Buyer). However,
in no event shall Seller be charged with or be responsible for any
increase in the taxes on the Property resulting from the sale
contemplated hereby or from any improvements made or leases entered
into on or after the Closing. If any assessments on the Property
are payable in installments, then the installment for the current
period shall be prorated (with Buyer being allocated the obligation
to pay any installments due after the Closing Date).
(b) All
fixed and additional rentals under the Leases, security deposits
(including any utility deposits posted by Seller and assigned to
Buyer with the approval of the utility service provider) and other
tenant charges. Seller shall provide a credit in an amount equal to
all prepaid rentals for periods after the Closing Date and all
refundable security deposits (to the extent the foregoing were made
by tenants under the Leases and are not applied
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or forfeited
prior to the Closing Date) to Buyer on the Closing Date. To the
extent any security deposits are in the form of a letter of credit
Seller, at Closing and at its sole cost and expense, shall cause
such letters of credit to be reissued with Buyer as the named
beneficiary thereof. Rents which are delinquent (or payable but
unpaid) as of the Closing Date shall not be prorated on the Closing
Date. Buyer shall not waive any delinquent (or unpaid) rents or
modify a Lease so as to reduce or otherwise affect amounts owed
thereunder for any period with respect to which Seller is entitled
to receive a share of charges or amounts without first obtaining
Seller’s written consent. After the Closing, Buyer shall
include such delinquencies (or unpaid amounts) in its normal
billing and diligently pursue the collection thereof in good faith
after the Closing Date (but Buyer shall not be required to litigate
or declare a default under any Lease). Notwithstanding any
provision to the contrary contained herein, from and after the
Closing Date, in no event will Seller have the right to threaten or
institute any legal or arbitration proceeding to collect any
delinquent rents or other amounts from, or threaten the termination
of, or any other action with respect to, any Lease of, any tenants
who are tenants of the Property as of the Closing Date; provided,
however, in the event more than one (1) year has passed since
the Closing Date with no collection of any such delinquent rents
having been made by Buyer, Seller shall have the right to institute
legal or arbitration proceedings to collect any such delinquent
rents to which Seller is entitled hereunder, but in no event shall
Seller threaten the termination of any Lease or of any
tenant’s rights thereunder. Additionally, with respect to
delinquent rents and any other amounts or other rights of any kind
respecting tenants who are no longer tenants of the Property as of
the Closing Date, Seller shall retain all rights relating
thereto.
(c) All
operating expenses; however, there will be no prorations for debt
service, insurance premiums or payroll (because Buyer is not
acquiring Seller’s financing, insurance or
employees).
5.4.2
Calculation . The prorations and payments shall be made on
the basis of a written statement submitted to Buyer and Seller by
Escrow Agent prior to the Close of Escrow and approved by Buyer and
Seller. Any item which cannot be finally prorated because of the
unavailability of information shall be tentatively prorated on the
basis of the best data then available and reprorated when the
information is available. In the event any prorations or
apportionments made under this Section 5.4.2 shall prove to be
incorrect for any reason, then any party shall be entitled to an
adjustment to correct the same provided a written request
identifying the error in reasonable detail is given to the other
parties no later than one (1) year after the Closing. At
Closing, Buyer shall receive a credit against the Purchase Price
for all prorated amounts of the items set forth in
Section 5.4.1 above which shall be Seller’s obligation
to pay.
5.4.3
Tenant Inducements and Leasing Commissions . Seller shall
pay (or provide Buyer with a credit at Closing) for all tenant
improvement costs, free rent or other inducements and all leasing
commissions due under or with respect to all Leases in effect as of
Closing.
5.5
Specific Conditions to Buyer’s Obligation to Close .
The obligations of Buyer pursuant to this Agreement shall be
subject to the following additional conditions precedent (any of
which may be waived in writing by Buyer in its sole
discretion):
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(a) All of the
representations, warranties and agreements of Seller set forth in
this Agreement shall be true and correct in all material
respects;
(b) Seller shall
have terminated any existing property management and listing
agreements for the Property and to the extent such agreements exist
shall have provided Buyer with satisfactory evidence of such
termination thereof;
(c) There shall be
no material adverse change in the matters reflected in the
Preliminary Title Report (as approved or deemed approved by Buyer
prior to the expiration of the Due Diligence Period), and there
shall not exist any material adverse encumbrance or title defect
affecting the Property except for the Permitted
Exceptions;
(d) The Title
Company shall have irrevocably committed to issue to Buyer at
Closing a Form B 1970 ALTA Extended Coverage Owner’s
Policy of Title Insurance for the Property in an amount equal to
the Purchase Price insuring fee simple title to the Property in
Buyer (the “ Title Policy ”), subject only to
the Permitted Exceptions, and containing such endorsements as the
Title Company shall have committed to issue as of the end of the
Due Diligence Period (said commitment to be evidenced by a pro
forma policy containing such endorsements provided to Seller);
and
(e) No other
material adverse change shall occur with respect to the Property or
any tenant of the Property (including any default under such
tenant’s Lease or any bankruptcy or similar proceeding) from
the expiration of the Due Diligence Period through the Closing
Date.
6.
Condemnation or Destruction of Property .
6.1
Condemnation . In the event any proceeding should be
commenced for the taking in condemnation or under the power of
eminent domain or any offer made in lieu thereof for any portion of
the Property (“Condemnation Proceeding”), Seller shall
promptly give notice of and full information concerning such
Condemnation Proceeding to Buyer and shall thereafter keep Buyer
fully informed concerning such Condemnation Proceeding. Within
twenty (20) days after receipt of such notice, if the portion
of the Property that is the subject of the Condemnation Proceeding
is of a value greater than $100,000.00, or is otherwise a material
portion of the Property, then Buyer may terminate this Agreement.
Should Buyer elect to terminate this Agreement, the Escrow Deposit
shall be immediately returned to Buyer and both parties shall be
released from any further obligations hereunder except as otherwise
provided herein. If Buyer does not elect to terminate this
Agreement, and the Property is purchased while such Condemnation
Proceeding is pending, then Buyer shall be substituted for Seller
as the defendant/land owner in such proceedings. In the event such
Condemnation Proceeding is concluded while Seller is still the
owner of the Property and Seller receives the condemnation award or
payment in lieu thereof, then the Purchase Price shall be reduced
by the amount of such condemnation award or payment in lieu thereof
actually received by Seller, if any. If Seller has not received the
condemnation award or payment in lieu thereof at the time of
Closing, then the Purchase Price shall remain unchanged and Seller
shall assign to Buyer all of the right, title and interest of
Seller in such condemnation award or payment in lieu thereof .
Seller agrees that
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Buyer shall
have the right, at its expense, to participate and assist Seller in
any such Condemnation Proceeding.
6.2.
Casualty . All risk of loss with respect to the Property
shall be with Seller until Closing. If any portion of the Property
is damaged or destroyed prior to Closing, Seller shall promptly
give notice thereof to Buyer. If any portion of the Property is
damaged or destroyed prior to Closing and the cost to repair such
damage is less than $100,000.00, then the parties shall proceed to
closing, and Seller shall either (i) complete the repair of
the damage prior to Closing at Seller’s sole cost and
expense, or (ii) give Buyer a credit against the Purchase
Price in the amount required to repair the damage, which amount
shall be agreed upon by Buyer and Seller. If any portion of the
Property is damaged or destroyed prior to Closing, and the cost to
repair such damage is at least $100,000.00, then Buyer may, within
fifteen (15) days after receipt from Seller of written notice
thereof, elect to terminate this Agreement, in which event the
Escrow Deposit shall be immediately returned to Buyer and neither
party shall have any further rights or obligations hereunder. If
Buyer does not elect to terminate this Agreement , then Seller
shall either (i) commence the repair of the damage at
Seller’s sole cost and expense, and pursue the completion of
the repair in a timely, diligent, and commercially reasonable
manner, and the Closing Date shall be extended until the final
completion of such repairs; or (ii) provided that Buyer,
Seller, and Seller’s insurance carrier reach a satisfactory
agreement with regard to the release of the insurance proceeds and
the repair of the damage, Seller shall assign to Buyer at Closing
all insurance proceeds (including rent loss and business
interruption proceeds) payable in connection with such damage and
shall provide Buyer with a credit against the Purchase Price in an
amount equal to the sum of any applicable deductibles under
Seller’s insurance policies plus any amount of the estimated
repair costs (or loss of rents) which are not covered by
Seller’s insurance policies.
7.
Representations and Warranties.
7.1
Representations and Warranties of Seller.
7.1.1
General Disclaimer . Except as specifically set forth in
Section 7.1.2 below or in the Deed and the Assignment and
Assumption Agreement, the sale of the Property hereunder is and
will be made on an “as is” basis.
7.1.2
Limited Representations and Warranties of Seller . Seller
hereby represents and warrants to Buyer as follows:
(a)
Leases . There are no leases of space in the Property which
will be in force on the Closing Date and under which Seller is the
landlord (whether by entering into the leases or acquiring the
Property subject to the leases) other than the Leases. As used
herein, “ Leases ” means, collectively,
(i) the leases listed in Exhibit “O” (the “
Lease Exhibit ”) and (ii) the leases entered into
in accordance with this Agreement. Seller has provided Buyer with
true, correct and complete copies of all Leases (and all
modifications and amendments thereto, all related correspondence,
side letters, indemnity and/or reimbursement agreements, letters of
credit and other documents and materials relating thereto, and, to
the extent in Seller’s possession, copies of all subleases
and other occupancy agreements affecting the Property).
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None of the
Leases has been amended except as set forth in the Lease Exhibit.
There are no security deposits under the Leases except as set forth
in the Lease Exhibit. As of the Closing, there shall be no
commissions or tenant improvement cost obligation owing by Seller
with respect to any Leases in effect as of the Closing, except for
(1) extensions, expansions, options or renewal
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