EXHIBIT 99.1
AGREEMENT FOR PURCHASE AND SALE
OF REAL PROPERTY AND ESCROW INSTRUCTIONS
THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY AND ESCROW INSTRUCTIONS
("AGREEMENT") between GREIT - 525 AND 600 B STREET, LP, a Virginia limited
partnership ("SELLER"), and ▇▇▇▇▇-SUMISEI US CORE OFFICE PROPERTIES, LP, a
Delaware limited partnership ("BUYER"), is made and entered into as of the date
this Agreement is executed by both Seller and Buyer (the "EFFECTIVE DATE"), with
reference to the following facts:
A. Seller owns a certain fee simple interest in real property located
in San Diego County, California, and more specifically described in
Exhibit A attached hereto, improved by a 22-story office and retail
building (the "BUILDING") containing approximately 423,546 rentable
square feet of space and an attached 5-story parking garage, and
commonly known as Golden Eagle Plaza, and such other assets, as the
same are herein described.
B. Subject to the terms and conditions contained in this Agreement,
Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller the Land and the associated assets.
NOW, THEREFORE, in consideration of the mutual covenants, premises and
agreements herein contained, the parties hereto do hereby agree as follows:
1. Purchase and Sale.
1.1. The purchase and sale includes, and at Close of Escrow (hereinafter
defined) Seller shall sell, assign, grant and transfer to Buyer, all
of Seller's right, title, estate and interest in and to all of the
following (hereinafter sometimes collectively, the "PROPERTY"):
1.1.1. The Land described on Exhibit A attached hereto, together
with (i) all easements, privileges and rights belonging or in
any way appurtenant to 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, and (iii) any and
all air rights, subsurface rights, development rights,
entitlements, wastewater capacities and credit reservations,
and water rights pertaining to the Land (all of the foregoing
being collectively referred to herein as the "LAND");
1.1.2. All structures, buildings, improvements, machinery, fixtures,
and equipment affixed or attached to the Land, all gas and
electric systems, lighting, heating, ventilating, and air
conditioning equipment and systems, elevators, radiators,
incinerators, furnaces, hot water heaters, water,
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sewage, and plumbing systems, fire protection and security
systems, and all other fixtures attached to the Land and
buildings (collectively, the "IMPROVEMENTS", and together with
the Land, the "REAL PROPERTY");
1.1.3. All leases (the "LEASES"), including associated amendments,
with all persons ("TENANTS") leasing the Real Property or any
part thereof now existing or hereafter entered into in
accordance with the terms hereof prior to Close of Escrow,
together with all security deposits and other deposits in the
possession or control of Seller or its affiliates (or their
respective agents, representatives and/or employees), and all
of Seller's right, title and interest in and to all
guarantees, letters of credit and other similar credit
enhancements providing additional security for such Leases;
1.1.4. All tangible and intangible personal property owned by Seller
located on or used in connection with the Real Property,
including, specifically, without limitation, all sculptures,
paintings and other artwork, all equipment, furniture, tools
and supplies, all plans and specifications and other
architectural and engineering drawings, if any, with respect
to the Land and the Improvements, and any other personal
property and all related intangibles as are owned by Seller
and currently located in, on or about and are used for the
operation, maintenance, administration or repair of the Real
Property, including Seller's interest, if any, in the name
"Golden Eagle Plaza" (the "PERSONAL PROPERTY");
1.1.5. To the extent assignable, all Contracts (as defined below)
and Commission Agreements (as defined below) as of the
Effective Date and that are entered into by Seller after the
date of this Agreement and prior to the Closing in accordance
with the terms of this Agreement, in each case to the extent
approved by Buyer in accordance with Section 5.2 below, but
excluding any Contracts and Commission Agreements terminated
by Seller on or before the Closing in accordance with Section
5.2 and the Existing Management Agreement (as defined below)
terminated by Seller on or before the Closing in accordance
with Section 7.1.6; and
1.1.6. To the extent transferable, all building permits,
certificates of occupancy and other certificates, permits,
consents, authorizations, variances or waivers, dedications,
subdivision maps, licenses and approvals from any governmental
or quasi-governmental agency, department, board, commission,
bureau or other entity or instrumentality relating to the
Property (the "PERMITS").
2. Purchase Price.
Subject to the charges, prorations and other adjustments set forth in this
Agreement, the total Purchase Price of the Property shall be One Hundred
Sixteen Million Eight Hundred
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Thousand and No/100 Dollars ($116,800,000.00) (the "PURCHASE PRICE"), payable as
follows:
2.1. Deposit/Further Payments.
2.1.1. Concurrent with Opening of Escrow (as hereinafter defined),
Buyer shall deposit into Escrow (as hereinafter defined) the
amount of Four Million and No/100 Dollars ($4,000,000.00) (the
"DEPOSIT"), in the form of a wire transfer payable to Chicago
Title Insurance Company, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ 90017(the "ESCROW HOLDER") -- ▇▇▇▇▇ ▇▇▇▇,
escrow officer, ▇▇▇.▇▇▇.▇▇▇▇ (phone) -- ▇▇▇.▇▇▇.▇▇▇▇ (fax).
Escrow Holder shall place the Deposit into an interest bearing
money market account at a bank or other financial institution
reasonably satisfactory to Buyer. If Buyer terminates (or is
deemed to have terminated) this Agreement for any reason
during the Inspection Period (as hereinafter defined), the
Deposit and all interest earned thereon shall be returned to
Buyer. If the Closing occurs, the Deposit and all interest
earned thereon shall be credited to Buyer's account at the
Close of Escrow.
2.1.2. On or before Close of Escrow, Buyer shall deposit into Escrow
the balance of the Purchase Price, by wire transfer payable to
Escrow Holder.
3. Title to Property.
3.1. Title Insurance.
Escrow Holder will obtain a Form B 1970 ALTA Extended Coverage
Owner's Policy of Title Insurance (the "TITLE POLICY") issued to
Buyer from Chicago Title Insurance Company or any other nationally
recognized title company Buyer, in its sole discretion, selects (the
"TITLE COMPANY") in the amount of the Purchase Price. The Title
Policy shall insure that fee simple title in the Property is vested
in Buyer, subject only to the Permitted Exceptions (hereafter
defined).
3.2. Procedure for Approval of Title.
During the Inspection Period, Buyer shall review and approve the
Title Documents (hereinafter defined) and the Survey (hereinafter
defined). If the Title Documents or Survey reflect or disclose any
defect, exception or other matter affecting the Property ("TITLE
DEFECTS") that is unacceptable to Buyer, then prior to the expiration
of the Inspection Period, Buyer shall provide Seller with written
notice of such Title Defects. Within three (3) business days after
receipt of Buyer's written notice of Title Defects, Seller may, at
its sole option, notify Buyer and Escrow Holder, in writing, of
Seller's election to cure or remove any or all of such Title Defects
to Buyer's satisfaction prior to the Close of Escrow, and provide
sufficient evidence of Seller's ability to so cure or remove such
Title
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Defects. Notwithstanding the foregoing, and without any
obligation of further written notice by either party, Buyer
hereby objects to (i) any and all Title Defects caused by or
on behalf of Seller and arising during the period from and
after the expiration of the Inspection Period and prior to the
Close of Escrow ("SELLER TITLE DEFECTS") and (ii) any and all
monetary liens and encumbrances (other than liens for
non-delinquent general real property taxes) ("MONETARY
DEFECTS"), and Seller, at its sole cost and expense, hereby
agrees to cause all such Seller Title Defects and Monetary
Defects to be cured and removed from title to the Property
prior to or at the Close of Escrow. Prior to the Close of
Escrow, Seller shall cause to be cured or removed to Buyer's
satisfaction, all Title Defects Seller elected to cure or
remove pursuant to this Section 3.2 (including, without
limitation, all Seller Title Defects and Monetary Defects),
and Seller's failure to do so shall constitute a default by
Seller hereunder. Unless Seller provides written notice to
Buyer within the aforementioned three (3) business day period
that Seller elects to cure or remove any particular Title
Defects (other than any Seller Title Defects and Monetary
Defects), Seller shall be deemed to have elected not to cure
or remove such Title Defects, and Buyer shall be entitled, as
Buyer's sole and exclusive remedies, either (i) to terminate
this Agreement and to obtain a refund of the Deposit and all
interest earned thereon by providing written notice of
termination to Seller and returning the Due Diligence Items
(hereinafter defined) before the later to occur of (A) the end
of the Inspection Period, or (B) that date which is three (3)
business days after Seller's notice (or deemed election) not
to cure such Title Defects, or (ii) to waive Buyer's
objections to such Title Defects (other than any Seller Title
Defects and Monetary Defects) and to close this transaction as
otherwise contemplated herein. If Buyer shall fail to timely
terminate this Agreement in accordance with item (i) of the
immediately preceding sentence, then all matters shown on the
Survey or described in the Title Report (hereinafter defined),
except for Seller Title Defects, Monetary Defects and any
Title Defects that Seller has agreed to cure in writing, shall
be deemed "PERMITTED EXCEPTIONS".
4. Due Diligence Items.
4.1. Seller shall deliver to Buyer upon the Effective Date the
following items (collectively with the items set forth in Section
4.2 below, the "DUE DILIGENCE ITEMS"):
4.1.1. The most recent existing ALTA survey of the Property (as
Buyer may elect, at its expense, to have updated, the
"SURVEY");
4.1.2. A copy of Seller's existing title policy;
4.1.3. A current preliminary title report or title commitment (the
"TITLE REPORT") for the issuance of the Title Policy from the
Title Company, together with legible and complete copies of
all documents constituting exceptions to
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the title as reflected in the Title Report (collectively
referred to hereinafter as the "TITLE DOCUMENTS");
4.1.4. A schedule of all service contracts, Commission Agreements
(as defined below) and Existing Management Agreements (as
defined below) affecting the Property;
4.1.5. A schedule of all Security Deposits and Non-Cash Security
Deposits (as each is defined below) in the possession or
control of Seller or its affiliates (or the agents,
representatives and/or employees of Seller or its affiliates);
4.1.6. Copies of all (i) service contracts, warranties, guaranties,
maintenance, repair, supply, consulting or other agreements
affecting the Property (collectively, the "CONTRACTS"); (ii)
lease brokerage agreements, leasing commission agreements or
other agreements providing for payments of any amounts for
leasing activities or procuring tenants with respect to the
Property or any portion or portions thereof (the "COMMISSION
AGREEMENTS"); and (iii) agreements currently in effect
relating to the management and leasing of the Property (the
"EXISTING MANAGEMENT AGREEMENT", in each case to the extent
the same are in the possession or control of Seller or its
affiliates (or the agents, representatives and/or employees of
Seller or its affiliates);
4.1.7. A current certified rent roll (the "RENT ROLL") and
delinquency report, both dated as near as possible to the
Effective Date but in no event more than fifteen (15) days
prior to the Effective Date;
4.1.8. Any and all capital expenditure budgets and reports, to the
extent the same are in the possession or control of Seller or
its affiliates (or the agents, representatives and/or
employees of Seller or its affiliates);
4.1.9. A schedule of all current or pending litigation with respect
to the Property or any part, thereof, if any;
4.1.10. Copies of any correspondence to or from governmental
agencies to the extent the same are in the possession or
control of Seller or its affiliates (or the agents,
representatives and/or employees of Seller or its affiliates);
4.1.11. Copies of unaudited financial statements covering the period
of Seller's ownership of the Property;
4.1.12. Copies of (i) the property tax assessments and tax bills for
the past three (3) calendar years, (ii) insurance policies and
premiums, (iii) utility statements and contracts and (iv)
operating expense reconciliations and base year calculations
with supporting documentation for all Tenants, to
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the extent the same are in the possession or control of Seller
or its affiliates (or the agents, representatives and/or
employees of Seller or its affiliates);
4.1.13. A copy of Guarantor's current financial statement;
4.1.14. Copies of any and all Leases (including any and all
amendments, riders, licenses, work letters, inducement
letters, side letters, indemnity and reimbursement agreements,
and similar agreements) and copies of all guaranties and
letters of credit relating thereto or required thereby, all
sublease approvals, consents and related agreements and copies
of all subleases to the extent the same are in the possession
or control of Seller or its affiliates (or the agents,
representatives and/or employees of Seller or its affiliates);
4.1.15. A schedule of all outstanding Leasing Costs (hereinafter
defined); and
4.1.16. An inventory of all Personal Property located on the
Property, used in the maintenance of the Property or stored
for future use at the Property and an inventory of all
furniture and appliances used in the units, if any.
4.2. Seller shall make the following available for inspection by Buyer
during ordinary business hours at Seller's management office:
4.2.1. All site plans, leasing plans, as-built plans, area
calculations, surveys, drawings, plans and specifications
(ADA, architectural, engineering, landscaping, interiors,
etc.), construction documents, computerized or CAD documents
and electronic files, mechanical, engineering, physical
inspection, electrical, structural, soils, geotechnical,
foundation, seismic and similar reports and/or audits relative
to the Property in the possession of Seller or its authorized
representatives or agents, if any;
4.2.2. Any and all documentation which is in the possession of
Seller or its authorized representatives or agents in
connection with the environmental condition of the Property
(including all Phase I and, if applicable, Phase II
assessments and reports, all asbestos, air quality and mold
reports and studies and any remediation or monitoring plans);
4.2.3. Copies of any and all certificates of occupancy, permits,
governmental entitlements/approvals and similar documents in
the possession of Seller or its authorized representatives or
agents;
4.2.4. The Tenant files, books and records relating to the ownership
and operation of the Property; and
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4.2.5. Copies of all maintenance schedules, records or reports
relating to the Property.
From and after the Effective Date until the Closing, Buyer may reasonably
request additional items in connection with its Inspections and Seller shall
promptly deliver or make available such additional items to the extent the same
are in the possession or control of Seller or its affiliates (or the agents,
representatives and/or employees of Seller or its affiliates), but such requests
during such period shall not operate to extend the Inspection Period.
5. Inspections.
Buyer, at its sole expense, shall have the right to conduct feasibility,
environmental, engineering and physical studies or other tests, as well as
to conduct studies to evaluate the legal, financial and operational
documentation of the Property (collectively, the "INSPECTIONS") at any
time during the Inspection Period (hereinafter defined). Buyer, and its
duly authorized agents or representatives, shall be permitted to enter
upon the Property at all reasonable times during the Inspection Period in
order to conduct engineering studies, soil tests, tenant interviews and
any other Inspections and/or tests that Buyer may deem necessary or
advisable. Buyer must arrange all Inspections of the Property with Seller
at least twenty-four (24) hours in advance of any Inspections. Seller
shall also make available for inspection by Buyer copies of the Due
Diligence Items listed in Section 4 above. In the event that the review
and/or Inspection conducted pursuant to this paragraph shows any fact,
matter or condition to exist with respect to the Property that is
unacceptable to Buyer, or if Buyer is otherwise dissatisfied with the
Property for any or no reason, in Buyer's sole subjective discretion, then
Buyer shall be entitled, as its sole and exclusive remedies, to (1)
terminate this Agreement and obtain a refund of the Deposit plus all
accrued interest thereon, or (2) waive the objection, and close the
transaction as otherwise contemplated herein. Buyer agrees to promptly
discharge any liens that may be imposed against the Property as a result
of the Inspections and to defend, indemnify and hold Seller harmless from
all, claims, suits, losses, costs, expenses (including without limitation
court costs and attorneys' fees), liabilities, judgments and damages
incurred by Seller as a result of any Inspections, other than to the
extent arising from (i) any act or omission of Seller or its employees,
representatives, agents or consultants, or (ii) any pre-existing
liabilities, conditions or other matters merely discovered by Buyer or its
employees, representatives, agents or consultants (e.g., latent
environmental contamination, latent construction or other physical defects
or conditions, etc.). Buyer's indemnification obligations hereunder shall
expressly exclude consequential or punitive damages. Said indemnification
obligations shall survive the Closing or earlier termination of this
Agreement for a period of one (1) year.
5.1. Approval.
5.1.1. Buyer shall have from the Effective Date through and
including July 1, 2005 (the "INSPECTION PERIOD") to
approve or disapprove the Inspections. If Buyer shall
fail to notify Seller and Escrow Holder of its approval
of the
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Inspections in writing within the Inspection Period, the
condition of the Property shall be deemed disapproved,
and this Agreement and the Escrow shall automatically
terminate, whereupon the Deposit and all interest earned
thereon shall be immediately returned to Buyer, and
Buyer shall not be entitled to purchase the Property,
Seller shall not be obligated to sell the Property to
Buyer and the parties shall be relieved of any further
obligation to each other with respect to the Property,
except as provided in Section 5 above.
5.1.2. Notwithstanding anything to the contrary contained
herein, Buyer hereby agrees that, in the event this
Agreement is terminated for any reason, upon written
request from Seller, Buyer shall promptly and at its
sole expense return to Seller all Due Diligence Items
which have been delivered by Seller to Buyer in
connection with the Inspections, along with copies of
all reports, drawings, plans, studies, summaries,
surveys, maps and other data prepared by third parties
relating to the Property, subject to restrictions on
Buyer's ability to make any such materials available to
Seller that are imposed in any agreement with a third
party consultant preparing any such reports or materials
(the "BUYER'S REPORTS"); provided, however, that
delivery of such copies and information by Buyer shall
be without warranty or representation whatsoever,
express or implied, including without limitation, any
warranty or representation as to ownership, accuracy,
adequacy or completeness thereof or otherwise. Buyer
shall cooperate with Seller at no expense to Buyer in
order to obtain a waiver of any such limitations.
5.1.3. Notwithstanding any contrary provision of this
Agreement, Buyer acknowledges that Seller is not
representing or warranting that any of the Due Diligence
Items prepared by third parties are accurate or
complete, such as the Survey, engineering reports and
the like. Seller advises Buyer to independently verify
the facts and conclusions set forth therein, provided
however, Seller warrants that it has no knowledge of any
material errors or misstatements in such information
regarding the Property.
5.2. Contracts; Commission Agreements. On or before the end of the
Inspection Period, Buyer will designate in a written notice to
Seller which Contracts and Commission Agreements Buyer will
assume and which Contracts and Commission Agreements must be
terminated by Seller at Closing (and Buyer agrees not to
designate for such termination any Contract or Commission
Agreements that require more than thirty (30) days notice of
termination be given to the other party thereto). Taking into
account any credits or prorations to be made pursuant to
Section 6.7 for payments coming due after Closing but accruing
prior to Closing, Buyer will assume the obligations arising
from and after the Closing under those Contracts and Commission
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Agreements which Buyer has designated will not be terminated.
Seller, without cost to Seller, shall terminate at Closing
all Contracts and Commission Agreements that are not so
assumed.
6. Escrow.
6.1. Opening.
The purchase and sale of the Property shall be consummated through
an escrow ("ESCROW") to be opened with Escrow Holder within two (2)
business days after the Effective Date. Escrow shall be deemed to be
opened as of the date fully executed copies (or counterparts) of
this Agreement are delivered to Escrow Holder by Buyer and Seller
("OPENING OF ESCROW"). This Agreement shall be considered as the
Escrow instructions between the parties, with such further
instructions as Escrow Holder shall require in order to clarify its
duties and responsibilities. If Escrow Holder shall require further
Escrow instructions, Escrow Holder may prepare such instructions on
its usual form. Such further instructions shall be promptly signed
by Buyer and Seller and returned to Escrow Holder within three (3)
business days of receipt thereof. In the event of any conflict
between the terms and conditions of this Agreement and such further
instructions, the terms and conditions of this Agreement shall
control.
6.2. Close of Escrow.
6.2.1. Escrow shall close ("CLOSE OF ESCROW" or "CLOSING") on July
15, 2005, subject to Seller's options to extend such Closing
date pursuant to and in accordance with the provisions of
Section 9.
6.3. Buyer Required to Deliver.
Buyer shall deliver to Escrow the following:
6.3.1. Concurrently with the Opening of Escrow, the Deposit;
6.3.2. On or before Close of Escrow, the payment required by Section
2.1.2, subject to the Closing adjustments, credits and
prorations contemplated hereby;
6.3.3. On or before Close of Escrow, such other documents as Title
Company may reasonably require from Buyer in order to issue
the Title Policy;
6.3.4. An original counterpart executed by Buyer of an assignment
and assumption agreement (the "ASSIGNMENT AND ASSUMPTION
AGREEMENT") in substantially the form attached hereto as
Exhibit B, whereby Seller
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assigns and conveys to Buyer all of Seller's right, title and
interest in and to the Leases, the Contracts and the Permits;
6.3.5. A counterpart Closing statement (the "CLOSING STATEMENT")
setting forth the Purchase Price and all amounts charged
against Buyer pursuant to Section 6.7 of this Agreement.
6.4. Seller Required to Deliver.
On or before Close of Escrow, Seller shall deliver to Escrow the
following:
6.4.1. A duly executed and acknowledged grant deed, conveying fee
simple title to the Property in favor of Buyer, in
substantially the form attached hereto as Exhibit D (the
"GRANT DEED");
6.4.2. An executed certificate of non-foreign status, in form
reasonably acceptable to Buyer, and a duly executed California
Form 593-C (Real Estate Withholding Certificate) or its
then-current equivalent, stating that Seller is exempt from
any withholding of Seller's proceeds from the sale of the
Property under the California Revenue and Taxation Code;
6.4.3. A ▇▇▇▇ of sale of the Personal Property, if any, without
warranty (the "▇▇▇▇ OF SALE"), in favor of Buyer and duly
executed by Seller, in substantially the form attached hereto
as Exhibit C;
6.4.4. An original counterpart executed by Seller of the Assignment
and Assumption Agreement;
6.4.5. A counterpart Closing Statement setting forth the Purchase
Price and all amounts charged against Seller pursuant to
Section 6.7 of this Agreement;
6.4.6. Such other documents as Title Company may reasonably require
from Seller in order to issue the Title Policy;
6.4.7. A letter from Seller addressed to each Tenant informing such
Tenant of the change in ownership and directing that future
rent payments be made to Buyer (the "TENANT LETTERS"):
6.4.8. [Intentionally deleted];
6.4.9. All Non-Cash Security Deposits (defined below) in accordance
with Section 6.7.1(e);
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6.4.10. Such reasonable and customary owner's affidavit and
indemnities for mechanics' liens and other matters, in each
case as may be required by the Title Company to issue the
Policy;
6.4.11. The Guaranty (as defined below) set forth in Section 25
hereof, duly executed by Guarantor for the benefit of Buyer;
and
6.4.12. A copy of corporate Resolutions, certified by the Secretary
or Assistant Secretary thereof to be in force and unmodified
as of the date and time of Closing, authorizing the
transactions contemplated herein (including the Guaranty), the
execution and delivery of the documents required hereunder
(including the Guaranty), and designating the signatures of
the persons who are to execute and deliver all such documents
on behalf of Seller and Guarantor or such other documentation
as Buyer or Buyer's title insurer may reasonably require to
establish that this Agreement, the transaction contemplated
herein, and the execution and delivery of the documents
required hereunder (including the Guaranty), are duly
authorized, executed and delivered.
The documents delivered by Seller pursuant to Section 6.4 above shall
hereinafter collectively be referred to as the "CLOSING DOCUMENTS".
On the Close of Escrow, Seller shall deliver to Buyer the following:
6.4.13. All keys to all buildings and other improvements located on
the Property, combinations to any safes thereon, and security
devices therein in Seller's possession; and
6.4.14. All records and files relating to the ownership, management
or operation of the Property, including, without limitation,
all insurance policies, all security contracts, originals of
all Leases (to the extent in Seller's possession or control),
all Tenant files (including correspondence), property tax
bills, and all general ledgers, invoices, check copies and
calculations used to prepare statements of rental increases
under the Leases and statements of common area charges,
insurance, property taxes and other charges which are paid by
Tenants.
6.5. Buyer's Costs.
At Closing, Buyer shall pay the following:
6.5.1. One-half (1/2) of Escrow Holder's fees, costs and expenses;
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6.5.2. The cost of the "ALTA portion" of the Title Policy and any
endorsements (other than those which are Seller's obligation
under Section 6.6.2 below) thereto requested by Buyer;
6.5.3. Any cost of updating the existing Survey, to the extent not
previously paid by Buyer;
6.5.4. Buyer's attorneys' fees; and
6.5.5. All other costs customarily borne by purchasers of real
property in San Diego, California;
6.6. Seller's Costs.
At Closing, Seller shall pay (or provide Buyer with a credit) for
the following:
6.6.1. One-half (1/2) of Escrow Holder's fees, costs and expenses;
6.6.2. The cost of the "CLTA portion" of the Title Policy and, if
requested in order to insure over any title defect that Seller
elected to or is required to cure, any endorsement thereto to
insure over such title defect;
6.6.3. The cost of recording the Grant Deed and such other
instruments as the Title Company may consider necessary to be
recorded;
6.6.4. General prorated general real estate taxes and assessments;
6.6.5. The amount of any special assessments due as of the Closing;
6.6.6. Prorated charges for Contracts and any other obligations
assumed by Buyer and any other operating expense items for
which payments are made in arrears;
6.6.7. Prorated prepaid rents, parking fees and charges, and other
charges prepaid under the Leases;
6.6.8. Security Deposits (other than Non-Cash Security Deposits) in
accordance with Section 6.7.1(e);
6.6.9. Any and all costs and expenses associated with the transfer,
reissuance or amendment of any letters of credit or similar
security for the Leases as required by Section 6.7.1(e) below;
6.6.10. All costs and expenses required to release and discharge
fully all Seller Title Defects and Monetary Defects
(including, without limitation, any and
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all prepayment, yield maintenance, defeasance and other costs
and expenses associated therewith);
6.6.11. The cost of any real estate transfer tax, deed tax, stamp
fee or conveyance fee, including all city or county transfer
taxes and conveyance fees;
6.6.12. All brokerage fees payable in connection with this
transaction, as required by Section 21 of this Agreement;
6.6.13. All tenant inducements, improvement costs, tenant
improvement allowances, brokerage commissions and other costs
and expenses relating to the Leases which are Seller's
obligation under this Agreement;
6.6.14. Seller's attorneys' fees; and
6.6.15. All other costs not itemized above which are customarily
borne by sellers of real property in San Diego, California.
6.7. Prorations.
6.7.1. Items to be Prorated. The following shall be prorated between
Seller and Buyer as of the Close of Escrow, with the Buyer
being deemed the owner of the Property as of the Close of
Escrow:
(a) Taxes and Assessments. All non-delinquent real
property taxes, assessments and other governmental
impositions of any kind or nature, including, without
limitation, any special assessments or similar charges,
unless the same do not constitute Permitted Exceptions
hereunder (collectively, "TAXES"), which relate to the
tax year within which the Closing occurs based upon the
actual number of days in the tax year. With respect to
any portion of the Taxes which are payable by any Tenant
directly to the authorities, no proration or adjustment
shall be made. The proration for Taxes shall be based
upon the most recently issued tax ▇▇▇▇ for the Property.
If the most recent tax ▇▇▇▇ is not for the current tax
year, then the parties shall reprorate within thirty
(30) days of the receipt of the tax ▇▇▇▇ for the current
tax year. Upon the Close of Escrow and subject to the
adjustment provided above, Buyer shall be responsible
for real estate taxes and assessments on the Property
payable from and after the Close of Escrow. In no event
shall Seller be charged with or be responsible for any
increase in the Taxes on the Property resulting from the
sale of the Property to Buyer or from any improvements
made or leases entered into after the Close of Escrow.
Notwithstanding the foregoing, Seller will be
responsible for and will indemnify and hold Buyer
harmless from and against any reassessed or supplemental
tax bills to the extent they relate to the period of
time prior to the Close of Escrow (e.g.,
13
related to Seller's purchase of the Property in the year
2004). With respect to all periods for which Seller has
paid Taxes, Seller hereby reserves the right to
institute or continue any proceeding or proceedings for
the reduction of the assessed valuation of the Property,
and, in its sole discretion, to settle the same. Seller
shall have sole authority to control the progress of,
and to make all decisions with respect to, such
proceedings but shall provide Buyer with copies of all
communications with the taxing authorities. All net tax
refunds and credits attributable to any period prior to
the Close of Escrow which Seller has paid or for which
Seller has given a credit to Buyer shall belong to and
be the property of Seller, provided, however, that any
such refunds and credits that are the property of
Tenants under Leases shall be promptly remitted by
Seller directly to such Tenants or to Buyer for the
credit of such Tenants. All net tax refunds and credits
attributable to any period subsequent to the Close of
Escrow shall belong to and be the property of Buyer.
Buyer agrees to cooperate with Seller as may be
reasonably necessary in connection with the prosecution
of any such proceedings and to take all steps, whether
before or after the Close of Escrow, as may be
reasonably necessary to carry out the intention of this
subparagraph, including the delivery to Seller promptly
following receipt of Seller's request therefor, of any
relevant books and records, including receipted tax
bills and cancelled checks used in payment of such
Taxes, the execution of any and all consent or other
documents, and the undertaking of any acts reasonably
necessary for the collection of such refund by Seller;
provided, however, Buyer shall not be obligated to incur
any liability, cost or expense as a result of such
cooperation.
(b) Rents. Buyer will receive a credit at the
Close of Escrow for all rents collected by Seller prior
to the Closing and allocable to the period from and
after the Close of Escrow based upon the actual number
of days in the month. No credit shall be given the
Seller for accrued and unpaid rent or any other
non-current sums due from Tenants ("DELINQUENT RENT")
until these sums are paid, and Seller shall retain the
right to collect any such rent; provided, however,
Seller shall not have the right to ▇▇▇ any Tenant for
nonpayment of rent, to file an unlawful detainer action
or otherwise seek in any manner to terminate such
Tenant's lease or disturb its possession thereunder.
Buyer shall cooperate with Seller after Closing to
collect any Delinquent Rent as of the Closing; provided,
however, Buyer shall not be obligated to ▇▇▇ any Tenants
or exercise any legal remedies under the Leases or to
incur any expense over and above its own regular
collection expenses. All payments collected from Tenants
after Closing shall first be applied, after deducting
therefrom any cost or expense incurred by Buyer in
collecting such amounts, to the month in
14
which the Closing occurs and prorated appropriately,
then to any rent due to Buyer for the period after
Closing and finally to any rent due to Seller for the
period prior to Closing. If rents or any portion thereof
received by Seller or Buyer after the Closing are due
and payable to the other party by reason of this
allocation, the appropriate sum shall promptly be paid
to the other party.
(c) CAM Expenses. To the extent that Tenants are
reimbursing the landlord for common area maintenance and
other operating expenses (collectively, "CAM CHARGES"),
CAM Charges shall be prorated at Closing and again
subsequent to Closing, as of the date of Closing on a
Lease-by-Lease basis, with each party being entitled to
receive a portion of the CAM Charges payable under each
Lease for the CAM Lease Year (defined below) in which
Closing occurs, which portion shall be equal to the
actual CAM Charges incurred during the party's
respective periods of ownership of the Property during
the CAM Lease Year. As used herein, the term "CAM LEASE
YEAR" means the twelve (12) month period as to which
annual CAM Charges are owed under each Lease. Five (5)
days prior to Closing, Seller shall submit to Buyer an
itemization of its actual CAM Charges through such date
and the amount of CAM Charges received by Seller as of
such date, together with an estimate of CAM Charges to
be incurred prior to, but not including, the Close of
Escrow. In the event that Seller has received CAM
Charges payments in excess of its actual CAM Charges,
Buyer shall be entitled to receive a credit against the
Purchase Price for the excess. In the event that the
Seller has received CAM Charges payments less than its
actual CAM Charges, to the extent that the Leases
provide for a "true up" at the end of the CAM Lease
Year, Seller shall be entitled to receive any deficit,
but only after Buyer has received any true up payment
from the Tenants. Upon receipt by either party of any
CAM Charges true up payment from a Tenant, the party
receiving the same shall provide to the other party its
allocable share of the true up payment within five (5)
business days of the receipt thereof.
(d) Operating Expenses. All operating expenses
(including all charges under the Contracts assumed by
Buyer) shall be prorated, and as to each service
provider, operating expenses payable or paid to such
service provider in respect to the billing period of
such service provider in which the Close of Escrow
occurs (the "CURRENT BILLING PERIOD"), shall be prorated
on a per diem basis based upon the number of days in the
Current Billing Period prior to the Close of Escrow and
the number of days in the Current Billing Period from
and after the Close of Escrow, and assuming that all
charges are incurred uniformly during the Current
Billing Period. If actual bills for the Current Billing
15
Period are unavailable as of the Close of Escrow, then
such proration shall be made on an estimated basis based
upon the most recently issued bills, subject to
readjustment upon receipt of actual bills.
(e) Security Deposits; Prepaid Rents. Prepaid
rentals and other Tenant charges and security deposits
(including any portion thereof which may be designated
as prepaid rent) required under the Leases (the
"SECURITY DEPOSITS"), to the extent the Security
Deposits are in the possession or control of Seller or
its affiliates (or their respective agents,
representatives and/or employees) and have not been
otherwise applied by Seller to any obligations of any
Tenants under the Leases or otherwise returned to the
Tenants, subject to confirmation by the Tenant Estoppel
Certificates (defined below), shall be credited against
the Purchase Price, and upon the Closing, Buyer shall
assume full responsibility for all Security Deposits to
be refunded to the Tenants under the Leases (to the
extent the same are required to be refunded by the terms
of such Leases). In the event that any Security Deposits
are in the form of letters of credit or other financial
instruments (the "NON-CASH SECURITY DEPOSITS"), Seller
will, at Closing, deliver said Non-Cash Security
Deposits to Buyer, and Buyer will not receive a credit
against the Purchase Price for such Non-Cash Security
Deposits. In order to facilitate the naming of Buyer as
beneficiary under any and all such Non-Cash Security
Deposits after Closing (the necessity of which the
parties hereto acknowledge), Seller will, upon Buyer's
request, execute any documentation that Buyer, any
issuer of any such Non-Cash Security Deposit and/or any
applicable Tenant consider necessary to transfer and/or
reissue said Non-Cash Security Deposit to Buyer. After
Closing and until Buyer is so named as beneficiary under
any such Non-Cash Security Deposit, Seller will draw
upon such Non-Cash Security Deposit at the direction of
and for the benefit of Buyer.
(f) Leasing Costs. Seller shall receive a credit
at the Closing for all leasing costs, including tenant
improvement and refurbishments costs and allowances (the
"LEASING COSTS"), and its prorata leasing commissions,
previously paid by Seller in connection with any new
Lease or modification to an existing Lease which was
entered into after the Effective Date and which is
approved or deemed approved by Buyer pursuant to this
Agreement, which approval included approval of the
Leasing Costs. The Seller's prorata share shall be equal
to a fraction which has as its numerator the number of
months left in the base term of the Lease after the
Close of Escrow and which has as its denominator the
number of months in the base term of the Lease. Seller
shall pay (or provide Buyer with a credit at the
Closing) for all Leasing Costs with respect to the
premises leased as of the Effective Date by the Tenants
pursuant to the Leases in effect as of the Effective
Date, to the extent that such Leasing Costs are unpaid
as of the Close of Escrow.
16
(g) Percentage Rent. Any percentage rents due or
paid under any of the Leases ("PERCENTAGE RENT") shall
be prorated between Buyer and Seller outside of Closing
as of the Close of Escrow on a Lease-by-Lease basis, as
follows: (a) Seller shall be entitled to receive that
portion of the Percentage Rent under each Lease for the
Lease Year (hereinafter defined) in which Closing
occurs, which portion shall be the ratio of the number
of days of said Lease Year in which Seller was landlord
under the Lease to the total number of days in the Lease
Year; provided, however, Buyer shall be entitled to
deduct from Seller's portion thereof a prorata portion
of any reasonable third-party costs incurred by Buyer in
collecting same, and (b) Buyer shall receive the balance
of Percentage Rent paid under each Lease for the Lease
Year. As used herein, the term "LEASE YEAR" means the
twelve (12) month period as to which annual Percentage
Rent is owed under each Lease. Upon receipt by either
Buyer or Seller of any gross sales reports ("GROSS SALES
REPORTS") and any full or partial payment of Percentage
Rent from any Tenant, the party receiving the same shall
provide to the other party a copy of the Gross Sales
Report and a check for the other party's prorata share
(determined in accordance with the provisions hereof) of
the Percentage Rent within five (5) business days of the
receipt thereof. In the event that the Tenant only
remits a partial payment, then the amount to be remitted
to the other party shall be its prorata share of the
partial payment. Nothing contained herein shall be
deemed or construed to require either Buyer to Seller to
pay to the other party its prorata share of the
Percentage Rent prior to receiving the Percentage Rent
from the Tenant, and the acceptance or negotiation of
any check for Percentage Rent by either party shall not
be deemed a waiver of that party's right to contest the
accuracy or amount of the Percentage Rent paid by the
Tenant.
6.7.2. Calculation; Reproration. Seller shall prepare and deliver to
Buyer no later than five (5) days prior to the Close of Escrow
an estimated closing statement which shall set forth the costs
payable under subsection (d) and the prorations and credits
provided for in this section and subsection (e) and elsewhere
in this Agreement. 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 adjusted when the information is available in
accordance with this Section 6.7.2. Buyer shall notify Seller
within two (2) days after its receipt of such estimated
closing statement of any items which Buyer disputes, and the
parties shall attempt in good faith to reconcile any
differences not later than one (1) day before the Close of
Escrow. The estimated closing statement as adjusted as
aforesaid and approved in writing by the parties (which
approval shall not
17
be unreasonably withheld if prepared in accordance with this
Agreement) shall be referred to herein as the "CLOSING
STATEMENT". If the prorations and credits made under the
Closing Statement shall prove to be incorrect or incomplete
for any reason, then either party shall be entitled to an
adjustment to correct the same; provided, however, that any
adjustment shall be made, if at all, within one hundred eighty
(180) days after the Close of Escrow (except with respect to
CAM Charges, Percentage Rent and Taxes, in which case such
adjustment shall be made within ninety (90) days after the
information necessary to perform such adjustment is
available), and if a party fails to request an adjustment to
the Closing Statement by a written notice delivered to the
other party within the applicable period set forth above (such
notice to specify in reasonable detail the items within the
Closing Statement that such party desires to adjust and the
reasons for such adjustment), then the prorations and credits
set forth in the Closing Statement shall be binding and
conclusive against such party.
6.7.3. Items Not Prorated. Seller and Buyer agree that (a) on the
Close of Escrow, the Property will not be subject to any
financing arranged by Seller; (b) none of the insurance
policies relating to the Property will be assigned to Buyer,
and Buyer shall responsible for arranging for its own
insurance as of the Close of Escrow; and (c) utilities,
including telephone, electricity, water and gas, shall be read
on the Close of Escrow, and Buyer shall be responsible for all
the necessary actions needed to arrange for utilities to be
transferred to the name of Buyer on the Close of Escrow,
including the posting of any required deposits, and Seller
shall be entitled to recover and retain from the providers of
such utilities any refunds or overpayments to the extent
applicable to the period prior to the Close of Escrow, and any
utility deposits which it or its predecessors may have posted.
Accordingly, there will be no prorations for debt service,
insurance or utilities. In the event a meter reading is
unavailable for any particular utility, such utility shall be
prorated in the manner provided in Section 6.7.1(e) above.
6.7.4. Indemnification. Buyer and Seller shall each indemnify,
protect, defend and hold the other harmless from and against
any claim in any way arising from the matters for which the
other receives a credit or otherwise assumes or is designated
with responsibility pursuant to this Section 6.7.
6.7.5. Survival. The provisions of this Section 6.7 shall survive
the Closing for a period of six (6) months after the Closing,
except that (i) the provisions of Section 6.7.1 (a) shall
survive the Closing for a period of three (3) years after the
Closing, (ii) the provisions of Sections 6.7.1(c) and (g)
shall survive the Closing for a period of one (1) year after
the Closing and (iii) the provisions of Section 6.7.4 shall
survive the Closing for the same survival period that applies
to the particular underlying provisions of this
18
Section 6.7 for which such indemnification is sought (e.g.,
such indemnification obligations for Taxes shall survive the
Closing for a period of three (3) years after the Closing).
6.8. Determination of Dates of Performance.
Promptly after delivery to Buyer of the Title Report, Escrow
Holder shall prepare and deliver to Buyer and Seller a schedule
which shall state each of the following dates:
6.8.1. The date of Opening of Escrow pursuant to Section 6.1;
6.8.2. The date of receipt of the Title Report by Buyer;
6.8.3. The date by which title must be approved by Buyer
pursuant to Section 3.2;
6.8.4. The date by which the Inspections must be approved by
Buyer pursuant to Section 5.1.1;
6.8.5. The date by which the amounts described in Section 2 must
be deposited by Buyer, for which determination Escrow
Holder shall assume satisfaction of the condition
expressed in Section 2 on the last date stated for its
satisfaction; and
6.8.6. The date of Close of Escrow pursuant to Section 6.2.
If any events which determine any of the aforesaid dates occur
on a date other than the date specified or assumed for its
occurrence in this Agreement, Escrow Holder shall promptly
redetermine as appropriate each of the dates of performance in
the aforesaid schedule and notify Buyer and Seller of the dates
of performance, as redetermined.
7. Representations, Warranties, and Covenants.
7.1. Representations of Seller. Seller hereby represents and
warrants to Buyer as follows (which representations and
warranties shall be deemed made as of one (1) business day
prior to the expiration of the Inspection Period; provided,
however, if the Closing is extended pursuant to the second
extension option provided in Section 9, then such
representations and warranties shall be remade by Seller as of
the Closing):
7.1.1. Seller is a limited partnership duly formed and validly
existing and in good standing under the laws of the State of
Virginia and is in good standing in the State of California.
Subject to obtaining the authorizations and
19
approvals described in Section 26, (i) Seller has full power
and authority to enter into this Agreement, to perform this
Agreement and to consummate the transactions contemplated
hereby, (ii) this Agreement is, and each instrument referenced
herein to be delivered by Seller at the Close of Escrow shall
be, a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws
affecting the rights of creditors generally and (iii) the
individuals executing this Agreement and the instruments
referenced herein on behalf of Seller have the legal power,
right, and actual authority to bind Seller to the terms and
conditions hereof and thereof.
7.1.2. Neither the execution, delivery or performance of this
Agreement by Seller, nor compliance with the terms and
provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a
default under, or result in the creation of any lien, charge
or encumbrance upon the Property or any portion thereof
pursuant to the terms of any indenture, deed to secure debt,
mortgage, deed of trust, note, evidence of indebtedness, any
judgment, order, injunction, decree, regulation or ruling of
any court or governmental agency, authority or body, any
organizational document of Seller or its constituents, or any
other agreement or instrument by which Seller is bound.
7.1.3. Seller has not received written notice of any pending, and
has no knowledge of any threatened, suit, action or proceeding
affecting Seller or the Property.
7.1.4. Other than the Leases, there are no contracts or agreements
with respect to the occupancy of the Property or any portion
or portions thereof which will be binding on Buyer after the
Closing. The copies of the Leases, including all modifications
and amendments thereto, all related material correspondence,
material side letters, indemnity and/or reimbursement
agreements, letters of credit and other material documentation
relating thereto, and, to the extent in Seller's possession,
copies of all subleases and other occupancy agreements
affecting the Property, heretofore delivered by Seller to
Buyer are true, correct and complete copies thereof, and the
Leases are in full force and effect and have not been amended
or modified in any respect, except as evidenced by amendments,
modifications or similar documents similarly delivered to
Buyer with the Leases, and constitute the entire agreement
between Seller and the Tenants thereunder. To Seller's
knowledge, there are no uncured defaults on the part of
Seller, as landlord, or any Tenant under any Leases. No Tenant
has asserted offsets or claims against rentals payable or
obligations under the Leases. To Seller's knowledge, no Tenant
or any guarantor of any Lease has filed for bankruptcy, is
subject to an involuntarily bankruptcy
20
proceeding, or has been adjudicated bankrupt or admitted in
writing its inability to pay its debts as they become due. No
Tenant is entitled to any free rent, concessions, and no
Tenant has prepaid any rents or other charges for more than
one (1) month in advance.
7.1.5. No Tenant or any other party (other than Buyer) has any right
or option (including any right of first refusal or right of
first offer) to purchase all or any part of the Property or
any interest therein.
7.1.6. All leasing commissions, brokerage fees and management fees
accrued or due and payable under the Commission Agreements and
the Existing Management Agreement as of the Effective Date and
at the Closing have been or shall be paid in full by Seller.
The Existing Management Agreement shall be terminated at
Closing without any cost, expense or liability to Buyer.
7.1.7. Seller has not filed, and has not retained anyone to file,
notices of protests against, or to commence action to review,
real property tax assessments against the Property.
7.1.8. To Seller's knowledge, Seller has received no written notice
alleging any violations of law (including any federal or state
environmental law), municipal or county ordinances, or other
legal requirements with respect to the Property. To Seller's
knowledge, except as disclosed in the Due Diligence Documents
delivered to Buyer pursuant to Section 4.2.2, there has been
no production, disposal or storage on or from the Property of
any Hazardous Substances (defined below) or other toxic or
radioactive substances or matters by Seller or, to Seller's
knowledge, by any Tenant or any prior owner of the Real
Property. To Seller's knowledge, except as disclosed in the
Due Diligence Documents delivered to Buyer pursuant to Section
4.2.2, there have been no underground storage tanks installed
on or under the Land. Seller has provided Buyer with copies of
all environmental reports, information, correspondence and
similar material which is in Seller's (or its agents')
possession. "HAZARDOUS SUBSTANCES" shall mean any and all
pollutants, contaminants, toxic or hazardous wastes, any
chemicals or substances known to cause cancer or reproductive
toxicity or any other elements, materials, compounds,
mixtures, and substances now or hereafter contained in any
list of hazardous substances adopted by the EPA or Congress or
otherwise designated as hazardous, toxic, pollutant,
infectious, flammable, or radioactive or that might pose a
hazard to health or safety, or with respect to which removal,
reporting, investigation or remediation may be required or
generation, manufacture, refining, production, processing,
treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage or filtration
of which is or shall be restricted, regulated, prohibited or
penalized under any state or federal environmental law
(including, without
21
limitation, lead paint, asbestos, urea formaldehyde foam
insulation, petroleum, natural gas, natural gas liquids and
polychlorinated biphenyls).
7.1.9. Except for the Leases, the Contracts, the Commission
Agreements and the Permitted Exceptions, there are no written
or oral agreements or instruments in force and effect
affecting all or any part of the Property or any interest
therein which will survive the Closing or be binding upon
Buyer.
7.1.10. Complete, true and correct copies of all Contracts to be
delivered by Seller pursuant to Section 4.1.4, including all
modifications and amendments thereto, have been delivered to
Buyer. To Seller's knowledge, neither Seller nor any party
under any Contract is in default under any Contract, and no
condition exists nor has any event occurred that by notice,
the passage of time, or otherwise, would constitute an event
of default under any Contract.
7.1.11. Seller is not a "foreign person" within the meaning of
Section 1445(f) of the Internal Revenue Code of 1986, as
amended (the "CODE"), and Seller is exempt from any
withholding of Seller's proceeds from the sale of the Property
under the California Revenue and Taxation Code.
7.1.12. Seller has no employees to whom Buyer will have any
obligation after the Closing.
7.1.13. To Seller's knowledge, Seller (i) has obtained all Permits
required for operating the Property and all of such Permits
are in full force and effect, (ii) has not taken (or failed to
take) any action that would result in the revocation of such
Permits, and (iii) has not received any written notice of
violation thereof from any governmental or other authority, or
written notice of an intention by the foregoing to revoke any
Permit issued by it in connection with the use of the
Property.
7.1.14. Neither Seller nor any of its Affiliates (hereinafter
defined), and to Seller's knowledge, none of the Tenants, is
(i) a person designated by the U.S. Department of Treasury's
Office of Foreign Assets Control from time to time as a
"specially designated national or blocked person" or similar
status, or (ii) a person described in Section 1 of U.S.
Executive Order 13224, issued on September 23, 2001 or listed
on the Annex (as amended to date) of such Executive Order, or
(iii) a person otherwise identified by any government or legal
authority as a person with whom Buyer or any of its Affiliates
are prohibited from transacting business.
7.1.15. Seller is not: (i) an "employee benefit plan" (within the
meaning of Section 3(3) of ERISA) that is subject to Title I
of ERISA, or (ii) a "plan" described in section 4975(e)(1) of
the Code, or (iii) an entity whose
22
underlying assets are considered to include "plan assets" of
any such "employee benefit plan" or "plan" (within the meaning
of the plan asset regulations promulgated by the Department of
Labor, 29 C.F.R. Section 2510.3-101).
For purposes of the representations and warranties made by Seller in this
Agreement, ▇▇▇▇ ▇▇▇▇▇▇ (Asset Management) and ▇▇▇ ▇▇▇▇▇▇ (Asset Management) are
the employees of Seller and/or Seller's affiliates or agents who, as a result of
their responsibilities and duties with respect to one or more aspects of
Seller's and/or such affiliate's interests in the Property, are the persons
responsible for being aware of, and being kept informed of, the facts and
circumstances pertinent to the representations and warranties made by Seller in
this Agreement. If at any time before the Closing Seller or Buyer discovers
facts, or facts arise, that make one or more of the representations and
warranties made by Seller in this Section 7.1 materially inaccurate, Seller or
Buyer (as the case may be) shall immediately notify the other in writing of such
facts; provided, however, such notification shall not be deemed to cure the
inaccuracy or breach, and Buyer shall have the rights hereinafter set forth with
respect to any such notification of an inaccurate matter by Seller. Thereafter,
Seller may elect to correct the representation and warranty and to cure the
matter referred to so that its representations and warranties are no longer
materially inaccurate, or may decline to do so. If Seller declines to cure such
matter or if such cure is not completed by Closing, Buyer may, at its option,
(i) proceed to purchase the Property pursuant to this Agreement, in which case
Buyer's objection to the inaccuracy of Seller's representations and warranties
shall be deemed waived by Buyer, or (ii) terminate this Agreement and receive an
immediate return of the Deposit and all interest accrued thereon; provided,
however, if such inaccuracy is attributable to events or circumstances that
existed prior to the date that is one (1) business day prior to the expiration
of the Inspection Period of which Seller had (or should have had) knowledge or
to acts or omissions of Seller between such date and the Closing, Buyer shall be
entitled to the remedies provided in Section 13.1 (including, without
limitation, the right to receive reimbursement from Seller for Buyer's Due
Diligence Costs [defined below] and other expenses). In the event any such
breach or inaccurate representation or warranty is not discovered prior to
Closing, Buyer shall be entitled to pursue any and all rights and remedies
available at law or in equity. The provisions of this Section 7.1 shall survive
the Closing for a period of one (1) year after the Closing Date. Notwithstanding
anything to the contrary provided in this Section 7.1, Buyer shall have no right
to bring any action against Seller after Closing as a result of any inaccuracy
or breach of the representations and warranties in this Section 7.1 unless and
until the aggregate amount of all liability and losses (including Buyer's
attorneys' fees and costs) arising out of all such inaccuracies and breaches
exceeds One Hundred Thousand and No/100 Dollars ($100,000.00) (in which event
Seller's liability shall be from the first (1st) dollar of said loss, subject to
the other limitations herein). In addition, in no event shall Seller's liability
for all such inaccuracies and breaches under this Section 7.1 (including
Seller's liability for Buyer's attorneys' fees and costs in connection with such
inaccuracies and breaches) exceed, in the aggregate, One Million and No/100
Dollars ($1,000,000.00). However, in the event the Closing occurs and if, prior
to such Closing, Buyer has actual
23
knowledge of any material inaccuracy of any such representation or warranty of
Seller (including from any executed tenant estoppel certificates and Due
Diligence Items provided to Buyer in accordance with the terms hereof), and
Buyer nevertheless consummates the Closing, then Seller shall have no liability
after Closing with respect to such material inaccuracy of such representation or
warranty.
7.2. Covenants of Seller. Seller hereby covenants as follows:
7.2.1. At all times from the Effective Date through the Closing,
Seller shall cause to be in force fire and extended coverage
insurance upon the Property, and public liability insurance
with respect to damage or injury to persons or property
occurring on the Property in at least such amounts as are
maintained by Seller on the Effective Date;
7.2.2. From the Effective Date through the expiration of the
Inspection Period, Seller will give prior written notice to
Buyer of any new lease with respect to the Property and of any
renewal, amendment or modification of any existing Lease
(which notice shall include a description of any Leasing Costs
associated therewith) that Seller will enter into (or
contemplates entering into) prior to the expiration of the
Inspection Period. From and after the expiration of the
Inspection Period until the Closing, Seller will not enter
into any new lease with respect to the Property, permit any
Tenant to renew its Lease except pursuant to the terms of an
existing renewal option under such Lease (however, in such
event, Seller shall notify Buyer in writing of any such
exercise by a Tenant of its existing renewal option, which
notice shall include a description of any Leasing Costs
associated therewith), or otherwise amend or modify any Lease
without Buyer's prior written consent, which consent may be
withheld in Buyer's sole and absolute discretion. Any request
for Buyer's approval of such new lease or Lease renewal,
amendment or modification shall be accompanied by (i) a copy
of any proposed modification or amendment of an existing Lease
or of any new lease that Seller wishes to execute between the
expiration of the Inspection Period and the Closing,
including, without limitation, a description of any Leasing
Costs associated with any proposed renewal or expansion of an
existing Lease requiring Buyer's approval hereunder or with
any such new lease, and (ii) appropriate financial information
on the applicable tenant and such other information as Buyer
may reasonably require. Buyer shall have five (5) business
days in which to approve or disapprove of any new lease or any
Lease renewal (if such renewal is subject to Buyer's approval
hereunder), amendment or modification. Failure to respond in
writing within said time period shall be deemed Buyer's
approval of such new lease or proposed renewal, amendment or
modification. Any Leasing Costs payable with respect to a new
lease or any renewal, modification or amendment of an existing
Lease approved by Buyer shall be prorated between Buyer and
Seller in
24
accordance with their respective periods of ownership as it
bears to the primary term of the new lease;
7.2.3. From the Effective Date through the Closing, Seller shall not
sell, assign, or convey any right, title or interest
whatsoever in or to the Property, or create or permit to
attach any lien, security interest, easement, encumbrance,
charge, or condition affecting the Property (other than the
Permitted Exceptions) without promptly discharging the same
prior to Closing;
7.2.4. Seller shall not, without Buyer's written approval, (a) amend
or waive any right under any Contract, or (b) enter into any
agreement of any type affecting the Property that would
survive the Closing;
7.2.5. Seller shall fully and timely comply with all obligations to
be performed by it under the Leases, the Contracts, the
Permits and all laws, regulations and orders applicable to the
Property.
7.2.6. During the pendency of this Agreement, Seller shall continue
to operate, repair, maintain and manage the Property in a good
and businesslike fashion consistent with Seller's past
practices.
7.2.7. Seller shall use commercially reasonable efforts to obtain
and deliver to Buyer as promptly as possible the Tenant
Estoppel Certificates in the form required by Section 9.4 from
all Tenants; provided that delivery of such signed Tenant
Estoppel Certificates shall be a condition of Closing only to
the extent set forth in Section 9.4 hereof. Additionally,
Seller shall submit to the Tenants such subordination,
nondisturbance and attornment agreements as may be requested
by Buyer or Buyer's lender; provided, however, Buyer's receipt
of such subordination, nondisturbance and attornment
agreements shall not constitute a condition to Closing.
7.2.8. During the pendency of this Agreement, Seller shall deliver
to Buyer any written notice given by Seller or received by
▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇ (and Seller shall instruct the
property manager to deliver to Buyer any written notice given
or received by the property manager) of any defaults under the
Leases, and Seller shall not accept any rent more than thirty
(30) days in advance, nor apply any security deposits or draw
on any Non-Cash Security Deposits without Buyer's consent.
7.2.9. During the pendency of this Agreement, Seller shall deliver
to Buyer any written notice received by ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇
▇▇▇▇▇▇ (and Seller shall instruct the property manager to
deliver to Buyer any written notice received by the property
manager) relating to the Property from any governmental
authority, insurance carrier, tenant or other third party.
25
7.2.10. During the pendency of this Agreement, Seller shall not make
any material alterations to the Property without the prior
written consent of Buyer.
7.2.11. During the pendency of this Agreement and promptly upon
Buyer's request, Seller shall deliver to Buyer copies of any
updates of (or new) Due Diligence Items that Seller receives
or obtains (and Seller shall instruct the property manager to
deliver to Buyer copies of any updates of (or new) Due
Diligence Items that the property manager receives or
obtains), except that in each case, updates of (or new)
financial statements shall be excluded from the foregoing.
7.2.12. Seller shall not knowingly take or omit to take any action
that would have the effect of violating any of the
representations, warranties, covenants, and agreements of
Seller contained in this Agreement.
7.2.13. During the pendency of this Agreement, Seller shall not
enter into any contract or agreement regarding the sale,
financing or other disposition of all or any part of, or any
interest in, the Property or authorize the Broker (defined
below) or any other party to do so on its behalf.
7.3. Approval of Property. The consummation of the purchase and sale of
the Property pursuant to this Agreement shall be deemed Buyer's
acknowledgement that it has had an adequate opportunity to make such
legal, factual and other inspections, inquiries and investigations as it
deems necessary, desirable or appropriate with respect to the Property.
Such inspections, inquiries and investigations of Buyer shall be deemed to
include, but shall not be limited to, any leases and contracts pertaining
to the Property, the physical components of all portions of the Property,
the physical condition of the Property, such state of facts as an accurate
survey, environmental report and inspection would show, and the present
and future zoning ordinances. Except as otherwise expressly set forth in
this Agreement and the Closing Documents, and as expressed or implied in
the Grant Deed, Buyer shall not be entitled to and shall not rely upon
Seller or Seller's agents with regard to, and Seller will not make any
representation or warranty with respect to: (i) the quality, nature,
adequacy or physical condition of the Property including, but not limited
to, the structural elements, foundation, roof, appurtenances, access,
landscaping, parking facilities, or the electrical, mechanical, HVAC,
plumbing, sewage or utility systems, facilities, or appliances at the
Property, if any; (ii) the quality, nature, adequacy or physical condition
of soils or the existence of ground water at the Property; (iii) the
existence, quality, nature, adequacy or physical condition of any
utilities serving the Property; (iv) the development potential of the
Property, its habitability, merchantability, or the fitness, suitability,
or adequacy of the Property for any particular purpose; (v) the zoning or
other legal status of the Property; (vi) the Property or its operations'
compliance with any applicable codes, laws, regulations, statutes,
ordinances, covenants, conditions or restrictions of any governmental or
26
quasi-governmental entity or of any other person or entity; (vii) the
quality of any labor or materials relating in any way to the Property; or
(viii) the condition of title to the Property or the nature, status and
extent of any right-of-way, lease, right of redemption, possession, lien,
encumbrance, license, reservation, covenant, condition, restriction, or
any other matter affecting the Property. EXCEPT AS EXPRESSLY PROVIDED IN
THIS AGREEMENT AND THE CLOSING DOCUMENTS, AND AS EXPRESSED OR IMPLIED IN
THE GRANT DEED, SELLER HAS NOT, DOES NOT, AND WILL NOT MAKE ANY WARRANTIES
OR REPRESENTATIONS WITH RESPECT TO THE PROPERTY, AND SELLER SPECIFICALLY
DISCLAIMS ANY OTHER IMPLIED WARRANTIES OR WARRANTIES ARISING BY OPERATION
OF LAW, INCLUDING, BUT IN NO WAY LIMITED TO, ANY WARRANTY OF CONDITION,
MERCHANTABILITY, HABITABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OR USE.
FURTHERMORE, SELLER HAS NOT, DOES NOT, AND WILL NOT MAKE ANY
REPRESENTATION OR WARRANTY WITH REGARD TO COMPLIANCE WITH ANY
ENVIRONMENTAL PROTECTION, POLLUTION, OR LAND USE LAWS, RULES, REGULATIONS,
ORDERS, OR REQUIREMENTS INCLUDING, BUT NOT LIMITED TO, THOSE PERTAINING TO
THE HANDLING, GENERATING, TREATING, STORING OR DISPOSING OF ANY HAZARDOUS
WASTE OR SUBSTANCE INCLUDING, WITHOUT LIMITATION, ASBESTOS, PCB AND RADON.
BUYER ACKNOWLEDGES THAT BUYER IS A SOPHISTICATED BUYER FAMILIAR WITH THIS
TYPE OF PROPERTY AND THAT, SUBJECT ONLY TO THE EXPRESS WARRANTIES SET
FORTH IN THIS AGREEMENT AND THE CLOSING DOCUMENTS AND THE EXPRESS AND
IMPLIED WARRANTIES CONTAINED IN THE GRANT DEED, BUYER WILL BE ACQUIRING
THE PROPERTY "AS IS AND WHERE IS, WITH ALL FAULTS," IN ITS PRESENT STATE
AND CONDITION, SUBJECT ONLY TO NORMAL WEAR AND TEAR, AND BUYER SHALL
ASSUME THE RISK THAT ADVERSE MATTERS AND CONDITIONS MAY NOT HAVE BEEN
REVEALED BY BUYER'S INSPECTIONS AND INVESTIGATIONS. BUYER SHALL ALSO
ACKNOWLEDGE AND AGREE THAT THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR
REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE PROPERTY BY SELLER, ANY
AGENT OF SELLER OR ANY THIRD PARTY WHICH ARE NOT EXPRESSLY SET FORTH IN
THIS AGREEMENT OR IN THE CLOSING DOCUMENTS OR EXPRESS OR IMPLIED IN THE
GRANT DEED. THE TERMS AND CONDITIONS OF THIS PARAGRAPH SHALL SURVIVE THE
CLOSING, AND NOT MERGE WITH THE PROVISIONS OF ANY CLOSING DOCUMENTS.
SELLER SHALL NOT BE LIABLE OR BOUND IN ANY MANNER BY ANY ORAL OR WRITTEN
STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY
FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER
PERSON, UNLESS THE SAME ARE
27
SPECIFICALLY SET FORTH OR REFERRED TO IN THIS AGREEMENT OR THE CLOSING
DOCUMENTS OR THE SAME ARE EXPRESSED OR IMPLIED IN THE GRANT DEED. EXCEPT
WITH REGARD TO THE OBLIGATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT AND
THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT
AND THE CLOSING DOCUMENTS AND EXPRESSED OR IMPLIED IN THE GRANT DEED,
BUYER HEREBY RELEASES SELLER AND ITS AGENTS, REPRESENTATIVES AND EMPLOYEES
FROM ANY AND ALL LIABILITY RELATING TO THE CONDITION OF THE PROPERTY
BEFORE OR AFTER THE CLOSE OF ESCROW AND ANY OTHER MATTER RELATING TO THE
PROPERTY, WHETHER KNOWN OR UNKNOWN AT THE TIME OF THE CLOSE OF ESCROW;
PROVIDED, HOWEVER, THE FOREGOING RELEASE SHALL NOT APPLY TO AND SHALL
SPECIFICALLY EXCLUDE ANY LIABILITIES OR CLAIMS (X) MADE BY THIRD PARTIES
FOR PERSONAL INJURY, PROPERTY DAMAGE OR DEATH OCCURRING DURING SELLER'S
PERIOD OF OWNERSHIP OF THE PROPERTY OR (Y) BASED ON ANY GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT OF SELLER OR ITS OFFICERS, DIRECTORS, SHAREHOLDERS,
AGENTS, AFFILIATES, EMPLOYEES AND SUCCESSORS AND ASSIGNS.
8. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller as follows:
8.1. Buyer is a limited partnership duly organized and validly existing
and in good standing under the laws of the State of Delaware. Buyer
has full power and authority to enter into this Agreement, to
perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement is a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with
its terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar
laws affecting the rights of creditors generally.
9. Conditions Precedent to Closing.
The obligations of Buyer pursuant to this Agreement shall be subject to
the following conditions precedent to Closing (any of which may be waived
in writing by Buyer in its sole discretion):
9.1. All of the representations and warranties of Seller set forth in
Section 7.1 shall be true and correct in all material respects as of
the Closing, and all of the other representations, warranties and
agreements of Seller set forth in this Agreement shall be true and
correct in all material respects as of the date hereof, and Seller
shall not have on or prior to Closing, failed to meet,
28
comply with or perform in any material respect any conditions or
agreements on Seller's part as required by the terms of this
Agreement.
9.2. There shall be no material adverse change in the matters reflected
in the Title Report, and there shall not exist any material adverse
encumbrance or Title Defect affecting the Property except for the
Permitted Exceptions or matters to be satisfied at Closing.
9.3. The Existing Management Agreement affecting the Property shall be
terminated by Seller and any and all termination fees incurred as a
result thereof shall be the sole obligation of Seller.
9.4. Seller shall have obtained and delivered to Buyer the Tenant
Estoppel Certificates in the form attached hereto as Exhibit H,
signed by each Major Tenant (defined below). Tenant Estoppel
Certificates shall be deemed to satisfy this condition precedent
unless they disclose material adverse matters. Buyer shall notify
Seller within three (3) business days of receipt of a copy of an
executed Tenant Estoppel Certificate of its approval or disapproval
and the basis of such disapproval, if disapproved. If Buyer
disapproves of a Tenant Estoppel Certificate executed by a Major
Tenant because of a material, adverse matter disclosed therein, and
Seller is unable to obtain a reasonably acceptable Tenant Estoppel
Certificate from such Major Tenant prior to the Close of Escrow,
this Agreement shall terminate, Buyer shall be entitled to a refund
of the Deposit and all interest earned thereon, and neither party
shall have any further obligation to the other except Buyer's
indemnification obligations under Section 5. As used herein, the
term "MAJOR TENANT" shall mean each of (i) Golden Eagle Insurance,
(ii) Elsevier, (iii) the US Navy, (iv) Barrister Executive Services,
(v) First Allied Security, (vi) California Bank & Trust and (vii)
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP (d/b/a Lerach ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP). The Leases between Landlord and
each of the Major Tenants are hereinafter referred to as the "MAJOR
LEASES."
9.5. The Title Company shall, at Closing, have irrevocably committed to
issue to Buyer 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,
subject only to the Permitted Exceptions, and containing such
endorsements as may be required to cure any Title Defects that
Seller elects to cure or is required to cure hereunder.
9.6. Seller shall have deposited with the Escrow Holder all documents
required of Seller to be delivered into Escrow hereunder.
29
9.7. No order or injunction shall have been issued by any court or
administrative agency which restricts or prohibits the transactions
contemplated by this Agreement.
9.8. No default under or termination of any Major Lease and no bankruptcy
or similar proceeding of any Major Tenant, shall be pending or have
occurred from the expiration of the Inspection Period through the
Closing.
If any such condition precedent is not fully satisfied by Closing, Buyer
shall so notify Seller and may terminate this Agreement by written notice to
Seller, whereupon this Agreement may be canceled, and the Deposit and all
interest earned thereon shall be paid to Buyer, and thereafter, neither
Seller nor Buyer shall have any continuing obligations hereunder. However,
(i) Seller shall be permitted (upon written notice to Buyer given on or prior
to July 14, 2005) a one-time extension of the Closing date for a period of up
to five (5) calendar days after July 15, 2005 (in which event the Closing
date may be no later than July 20, 2005) (the "EXTENDED CLOSING DATE"), and
(ii) if such extension is properly and timely exercised by Seller, Seller
shall be permitted (upon written notice to Buyer given at least one (1)
business day prior to such Extended Closing Date) a one-time extension to
further extend the Extended Closing Date for a period up to but not later
than July 29, 2005 (in which event the Closing date may be no later than July
29, 2005) (the "SECOND EXTENDED CLOSING DATE"); and provided further,
however, notwithstanding any such exercise by Seller of one or both of the
foregoing extension options, Seller and Buyer may, by mutual agreement,
designate in writing a Closing date that is earlier than such Extended
Closing Date or such Second Extended Closing Date (as applicable).
Notwithstanding anything to the contrary that may be contained in any of the
foregoing provisions of this paragraph, if any failure of any condition
precedent is attributable to the willful or intentional acts of Seller, then
Buyer shall be entitled to the remedies provided in Section 13.1 below
(including without limitation, the right to receive reimbursement from Seller
for Buyer's Due Diligence Costs and other expenses).
10. Damage or Destruction Prior to Close of Escrow.
In the event that the Property should be damaged by any casualty prior to the
Close of Escrow, then if the cost of repairing such damage, as estimated by
an architect or contractor retained pursuant to the mutual agreement of the
parties, is:
10.1. Less than Six Hundred Twenty-Five Thousand Dollars ($625,000), the
Close of Escrow shall proceed as scheduled, and any insurance
proceeds (including any rent loss insurance applicable to any period
on or after the Closing) shall be assigned and distributed to Buyer
(to the extent not expended by Seller for restoration), and Buyer
shall receive a credit at Closing for any deductible amount under
said insurance policies and for any proceeds previously paid to
Seller and not applied to the costs of restoration. Seller shall
cooperate with Buyer after the Closing to assist Buyer in obtaining
the insurance proceeds from Seller's insurers.
30
or if said cost is:
10.2. Greater than Six Hundred Twenty-Five Thousand Dollars ($625,000),
then Buyer may elect to (i) terminate this Agreement, in which case
the Deposit and all interest earned thereon shall be returned to
Buyer and neither party shall have any further obligation to the
other except for Buyer's indemnification obligations under Section
5, or (ii) proceed to close under this Agreement, in which event
Buyer shall be entitled to any and all insurance proceeds (including
any rent loss insurance applicable to the period on or after the
Closing) otherwise payable to Seller on account of such damage, all
of which shall be assigned by Seller to Buyer at the Close of
Escrow, and Buyer shall receive a credit at Closing for any
deductible amount under said insurance policies and for any proceeds
previously paid to Seller and not applied to the costs of
restoration. If Buyer fails to deliver to Seller notice of its
election within the earlier to occur of (A) twenty (20) days after
Buyer is notified by Seller in writing of such damage or
destruction, or (B) the Closing, but in no event less than ten (10)
days after Buyer is notified by Seller of such damage or destruction
(and, if necessary, the Closing shall be extended to give Buyer the
full 10-day period to make such election), Buyer will conclusively
be deemed to have elected to terminate and receive a refund of the
Deposit and all interest earned thereon as provided in clause (i) of
the preceding sentence. If Buyer elects clause (ii) above, Seller
will cooperate with Buyer after the Closing to assist Buyer in
obtaining the insurance proceeds from Seller's insurers.
10.3. Notwithstanding anything to the contrary contained in this
Agreement, to the extent any damage or destruction to the Property
is not covered by insurance or the proceeds which are anticipated to
be paid under the applicable insurance policies will be insufficient
to fully repair all such damage or destruction and to fully replace
all rent and other income to be lost during such repair
("UNDERINSURED CASUALTY"), Buyer may terminate this Agreement by
delivering written notice to Seller on or prior to the earlier of
(A) twenty (20) days after Buyer is notified by Seller in writing of
such Underinsured Casualty, or (B) the Closing, but in no event less
than ten (10) days after Buyer is notified by Seller of such damage
or destruction (and, if necessary, the Closing shall be extended to
give Buyer the full 10-day period to make such decision), unless
within the applicable time period Seller (without having obligation
to do so) agrees to (a) repair such damage or destruction in full
before the Closing, or (b) provide Buyer with a credit at Closing
equal to the amount reasonably estimated by Buyer and Seller to be
necessary for the repair of the damage and replacement of such lost
rent and other income caused by any such Underinsured Casualty. Upon
any termination by Buyer under this Section 10.3, Buyer shall be
entitled to the immediate return of the Deposit and all interest
earned thereon.
31
10.4. The provisions of this Article 10 shall survive the Closing.
11. Eminent Domain.
11.1. If, before the Close of Escrow, proceedings are commenced (or
threatened to commence) for the taking by exercise of the power of
eminent domain of all or a material part of the Property which, as
reasonably determined by Buyer, would render the Property
unacceptable to Buyer or unsuitable for Buyer's intended use, Buyer
shall have the right, by giving notice to Seller within thirty (30)
days after Seller gives notice of the commencement of such
proceedings to Buyer, to terminate this Agreement, in which event
this Agreement shall terminate, the Deposit and all interest earned
thereon shall be returned to Buyer, and neither party shall have any
further obligation to the other except for Buyer's indemnification
under Section 5. If, before the Close of Escrow, proceedings are
commenced (or threatened to commence) for the taking by exercise of
the power of eminent domain of less than such a material part of the
Property, or if Buyer has the right to terminate this Agreement
pursuant to the preceding sentence but Buyer does not exercise such
right, then this Agreement shall remain in full force and effect
and, at the Close of Escrow, the condemnation award (or, if not
therefore received, the right to receive such portion of the award)
payable on account of the taking shall be transferred in the same
manner as title to the Property is conveyed. Seller shall give
notice to Buyer within three (3) business days after Seller's
receiving notice of the commencement (or threatened commencement) of
any proceedings for the taking by exercise of the power of eminent
domain of all or any part of the Property. At such time as all or a
part of the Property is subjected to any such proceedings and Buyer
shall not have elected to terminate this Agreement as provided in
this Section 11.1, and provided that the Inspection Period has
expired and Buyer has not otherwise terminated this Agreement, (i)
Buyer shall thereafter be permitted to participate in the
proceedings as if Buyer were a party to the action, and (ii) Seller
shall not settle or agree to any award or payment pursuant to
condemnation, eminent domain, or sale in lieu thereof without
obtaining Buyer's prior written consent thereto in each case. The
provisions of this Section 11.1 shall survive the Closing
12. Notices.
12.1. All notices, demands, or other communications of any type given by
any party hereunder, whether required by this Agreement or in any
way related to the transaction contracted for herein, shall be void
and of no effect unless given in accordance with the provisions of
this Section 12.1. All notices shall be in writing and delivered to
the person to whom the notice is directed, either in person, by
United States Mail, as a registered or certified item,
32
return receipt requested, by telecopy or by Federal Express. Notices
delivered by mail shall be deemed given when received. Notices by
telecopy shall be deemed given at the time of successful
transmission, as evidenced by electronic confirmation received by
the sender's fax machine. Notice by Federal Express shall be deemed
given on the business day following transmission. Notices shall be
given to the following addresses:
Seller: GREIT - 525 and ▇▇▇ ▇ ▇▇▇▇▇▇, LP
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Triple Net Properties, LLC
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇. #▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
With Required Copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
The Federal Reserve Bank Building, 16th Floor
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
Buyer: Hines-Sumisei US Core Office Properties, LP
c/o Hines Interests Limited Partnership
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
With Required Copies to: Hines-Sumisei US Core Office Properties, LP
c/o Hines Interests Limited Partnership
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
33
▇▇▇▇▇ Interests Limited Partnership
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
▇▇▇▇▇ Interests Limited Partnership
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
▇▇▇▇▇ ▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
13. Remedies.
13.1. Defaults by Seller. If there is any default by Seller under this
Agreement, following notice to Seller and seven (7) days, during
which period Seller may cure the default, then Buyer may elect
either (a) to treat this Agreement as terminated, in which case the
Deposit and all interest earned thereon shall be returned to Buyer,
and Buyer shall be entitled to reimbursement from Seller of all its
out-of-pocket costs and expenses incurred in connection with the
transaction contemplated hereby in an amount not to exceed One
Hundred Fifty Thousand and No/100 Dollars ($150,000.00) (the "DUE
DILIGENCE COSTS"); or (b) to treat this Agreement as being in full
force and effect and to bring an action against Seller seeking the
remedy of specific performance; provided, however, Buyer shall have
the right to pursue concurrently any remedies allowed by items (a)
and (b) of this Section 13.1 so long as Buyer makes an election of
remedies prior to the entry of a judgment. Nothing contained in this
Section 13.1 shall limit Buyer's right to recover attorneys' and
other professionals' fees and other costs and expenses incurred in
connection with a suit or arbitration under Sections 13.3 and 17
below. Notwithstanding the foregoing, Seller's right to cure shall
not be applicable to a failure to close, and the Close of Escrow
shall in no event be extended pursuant to this Section 13.1.
13.2. Defaults by Buyer. If the Closing fails to occur on account of any
default by Buyer under this Agreement (for any reason other than a
default by Seller), then Seller may, as its sole remedy, declare
this Agreement terminated, in which case the Deposit shall be paid
to Seller as liquidated damages (the parties hereto acknowledging
that it is impossible to estimate more precisely
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the damages which might be suffered by Seller upon Buyer's default,
said Deposit is a reasonable estimate of Seller's probable loss in
the event of a default by Buyer, and Seller's retention of said
Deposit is intended not as a penalty, but as full liquidated
damages), and each party shall thereupon be relieved of all further
obligations and liabilities, except any which survive termination.
In the event this Agreement is terminated due to the default of
Buyer hereunder, Buyer shall deliver to Seller, at no cost to
Seller, the Due Diligence Items and all of Buyer's Reports in
accordance with Section 5.1.2 above.
13.3. ARBITRATION OF DISPUTES. ANY CLAIM, CONTROVERSY OR DISPUTE, WHETHER
SOUNDING IN CONTRACT, STATUTE, TORT, FRAUD, MISREPRESENTATION OR
OTHER LEGAL THEORY, RELATED DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, WHENEVER BROUGHT AND WHETHER BETWEEN THE PARTIES TO THIS
AGREEMENT OR BETWEEN ONE OF THE PARTIES TO THIS AGREEMENT AND THE
EMPLOYEES, AGENTS OR AFFILIATED BUSINESSES OF THE OTHER PARTY, SHALL
BE RESOLVED BY ARBITRATION AS PRESCRIBED IN THIS SECTION. THE
FEDERAL ARBITRATION ACT, 9 U.S.C. Sections 1-15, NOT STATE LAW,
SHALL GOVERN THE ARBITRABILITY OF ALL CLAIMS, AND THE DECISION OF
THE ARBITRATOR AS TO ARBITRABILITY SHALL BE FINAL. NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, EITHER PARTY MAY APPLY TO
A COURT FOR ANY PROVISIONAL REMEDY NECESSARY (e.g., AN INJUNCTION OR
LIS PENDENS) SO AS TO NOT RENDER THE ARBITRATION AWARD INEFFECTUAL.
IN THE EVENT EITHER PARTY SEEKS SUCH PROVISIONAL RELIEF, A PARTY
WILL NOT BE DEEMED TO HAVE WAIVED ITS RIGHT TO ARBITRATE PROVIDED
THAT IT CONCURRENTLY APPLIES FOR AN ORDER STAYING ALL OTHER
PROCEEDINGS PENDING ARBITRATION.
A SINGLE ARBITRATOR WHO IS A RETIRED FEDERAL OR CALIFORNIA JUDGE SHALL
CONDUCT THE ARBITRATION UNDER THE THEN CURRENT COMMERCIAL ARBITRATION
RULES AND MEDIATION PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION
(THE "RULES"). THE ARBITRATOR SHALL BE SELECTED BY MUTUAL AGREEMENT ON THE
ARBITRATOR WITHIN THIRTY (30) DAYS OF WRITTEN NOTICE BY ONE PARTY TO THE
OTHER INVOKING THIS ARBITRATION PROVISION, IN ACCORDANCE WITH THE RULES
FROM A LIST OF QUALIFIED PEOPLE MAINTAINED BY THE AMERICAN ARBITRATION
ASSOCIATION. THE ARBITRATION SHALL BE CONDUCTED IN SAN DIEGO, CALIFORNIA.
35
THE ARBITRATOR SHALL HAVE AUTHORITY ONLY TO GRANT SPECIFIC PERFORMANCE AND
TO ORDER OTHER EQUITABLE RELIEF AND TO AWARD COMPENSATORY DAMAGES, BUT
SHALL NOT HAVE THE AUTHORITY TO AWARD PUNITIVE DAMAGES OR OTHER
NONCOMPENSATORY DAMAGES OR ANY OTHER FORM OF RELIEF. THE ARBITRATOR SHALL
AWARD TO THE PREVAILING PARTY ITS REASONABLE ATTORNEYS' AND OTHER
PROFESSIONALS' FEES AND OTHER COSTS AND EXPENSES INCURRED IN THE
ARBITRATION AND ANY ACTION FOR ANCILLARY RELIEF, EXCEPT THE PARTIES SHALL
SHARE EQUALLY THE FEES AND EXPENSES OF THE ARBITRATOR. THE ARBITRATOR'S
DECISION AND AWARD SHALL BE FINAL AND BINDING, AND JUDGMENT ON THE AWARD
RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION
THEREOF.
14. Assignment.
Buyer may assign this Agreement and Buyer's rights hereunder to an entity
or entities which are Affiliates (defined below) of Buyer or of ▇▇▇▇▇
Interests Limited Partnership, a Delaware limited partnership ("HINES").
For purposes of this Agreement, (x) the term "AFFILIATE" means any person
or entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with Buyer or Hines,
as the case may be, and (y) the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a person or entity, whether through the
ownership of voting securities, by contract or otherwise, and (z) the
terms "controlling" and "controlled" have the meanings correlative to the
foregoing. Buyer shall notify Seller in writing, no later than five (5)
business days prior to the Closing, of any such assignment by Buyer
pursuant to this Section 14, which notice shall include the name of said
assignee.
15. Interpretation and Applicable Law.
This Agreement shall be construed and interpreted in accordance with the
laws of the State of California. Where required for proper interpretation,
words in the singular shall include the plural; the masculine gender shall
include the neuter and the feminine, and vice versa. The terms "successors
and assigns" shall include the heirs, administrators, executors,
successors, and assigns, as applicable, of any party hereto.
16. Amendment.
This Agreement may not be modified or amended, except by an agreement in
writing signed by the parties. The parties may waive any of the conditions
contained herein or any of the obligations of the other party hereunder,
but any such waiver shall be effective only if in writing and signed by
the party waiving such conditions and obligations.
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17. Attorney's Fees.
In the event it becomes necessary for either party to file a suit or bring
an arbitration to enforce this Agreement or any provisions contained
herein, the prevailing party shall be entitled to recover, in addition to
all other remedies or damages, reasonable attorneys' and other
professionals' fees and other costs and expenses incurred in such suit or
arbitration.
18. Entire Agreement; Survival.
This Agreement (and the items to be furnished in accordance herewith)
constitutes the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings of the parties in connection therewith. No
representation, warranty, covenant, agreement, or condition not expressed
in this Agreement shall be binding upon the parties hereto, nor affect or
be effective to interpret, change, or restrict the provisions of this
Agreement. The obligations of the parties hereunder and all other
provisions of this Agreement shall survive the closing or earlier
termination of this Agreement, except as expressly limited herein.
19. Multiple Originals; Counterparts.
Numerous agreements may be executed by the parties hereto. Each such
executed copy shall have the full force and effect of an original executed
instrument. This Agreement may be executed in any number of counterparts,
all of which when taken together shall constitute the entire agreement of
the parties.
20. Acceptance.
Time is of the essence of this Agreement. The date of execution of this
Agreement by Seller shall be the date of execution of this Agreement. If
the final date of any period or the date for performance of any obligation
falls upon a Saturday, Sunday, or legal holiday under federal law or the
laws of the State of California, then in such event the expiration date of
such period or the date for such performance shall be extended to the next
day which is not a Saturday, Sunday, or legal holiday under federal law or
the laws of the State of California.
21. Real Estate Commission.
Seller and Buyer each represent and warrant to the other that neither
Seller nor Buyer has contracted or entered into any agreement with any
real estate broker, agent, finder or any other party in connection with
this transaction, and that neither party has taken any action which would
result in any real estate broker's, finder's or other fees or commissions
being due and payable to any party with respect to the transaction
contemplated hereby, except that Seller has contracted with Eastdil as its
broker (the "BROKER"), and Seller will pay any commission due to Broker.
Each party hereby indemnifies and agrees to hold the other party harmless
from any loss, liability, damage, cost, or expense (including
37
reasonable attorneys' fees) resulting to the other party by reason of a
breach of the representation and warranty made by such party in this
Section 21. The provisions of this Section 21 shall survive the Closing or
earlier termination of this Agreement for a period of one (1) year.
22. Exchange.
Seller reserves the right to structure the sale of the Property as a like
kind exchange pursuant to Section 1031 of the Code. In such event Seller
shall have the right to assign its interest in this Agreement to a
qualified exchange intermediary of its choosing to effect such exchange.
Buyer shall sign a customary notice of assignment, however, such
assignment and the related exchange transaction shall be at no cost or
expense to Buyer and shall not otherwise affect this Agreement or any of
Buyer's or Seller's rights or obligations hereunder.
23. Confidentiality.
Buyer agrees that, prior to the Closing, all Property information received
by Buyer shall be kept confidential as provided in this paragraph. Without
the prior written consent of Seller, prior to the Closing, the Property
information shall not be disclosed by Buyer or its representatives, in any
manner whatsoever, in whole or in part, except (1) to Buyer's
representatives or Affiliates who need to know the Property information
for the purpose of evaluating the Property and who are informed by Buyer
of the confidential nature of the Property information; (2) as may be
necessary for Buyer or Buyer's representatives or Affiliates, 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, to comply with
regulatory or judicial processes, or to satisfy reporting procedures and
inquiries of credit rating agencies in accordance with customary practices
of Buyer or its Affiliates; (3) to prospective tenants of the Property,
and (4) to the extent any such information is published as public
knowledge or generally available in the public domain.
24. Audit Cooperation.
Prior to and after the Closing, Seller shall provide to Buyer (at Buyer's
expense) copies of, or shall provide Buyer access to, such factual
information as may be reasonably requested by Buyer and in the possession
or control of Seller or its property manager or accountants, to enable
Buyer (or Hines or an Affiliate of Hines) to allow Buyer's auditor
(Deloitte & Touche LLP or any successor auditor selected by Buyer) to
conduct an audit of the income statements of the Property for the year to
date of the year in which the
38
Closing occurs, plus up to the three (3) prior calendar years. Buyer shall
be responsible for all out-of-pocket costs associated with this audit.
Seller shall cooperate (at no cost to Seller) with Buyer's auditor in the
conduct of such audit. In addition, Seller agrees to provide to Buyer's
auditor a letter of representation in the form attached hereto as Exhibit
I (the "REPRESENTATION LETTER") covering the period from June 14, 2004
through and including December 31, 2004, and, if requested by such
auditor, historical financial statements for the Property, including
income and balance sheet data for the Property, whether required before or
after the Closing. Without limiting the foregoing, (i) Buyer or its
designated independent or other auditor may audit Seller's operating
statements of the Property, at Buyer's expense, and Seller shall provide
such documentation as Buyer or its auditor may reasonably request in order
to complete such audit, and (ii) Seller shall furnish to Buyer such
financial and other information as may be reasonably required by Buyer or
an Affiliate of Buyer to make any required filings with the Securities and
Exchange Commission or other governmental authority; provided, however,
that the foregoing obligations of Seller shall be limited to providing
such information or documentation as may be in the possession of, or
reasonably obtainable by, Seller, its property manager or accountants, at
no cost to Seller, and in the format that Seller (or its property manager
or accountants) have maintained such information.
25. Guaranty.
On or prior to the Close of Escrow, Seller shall cause G REIT, Inc., a
Maryland corporation ("GUARANTOR"), to execute, for the benefit of Buyer,
a guaranty substantially in the form attached hereto as Exhibit L (the
"GUARANTY"). Said Guaranty shall irrevocably guarantee to Buyer the due
and punctual payment and performance by Seller of its obligations,
covenants and agreements (including indemnification agreements) under
Sections 6.7, 7.1, 13.3, 17 and 21 of this Agreement, up to the amount of
One Million and No/100 Dollars ($1,000,000.00) (collectively, the
"GUARANTEED SECTIONS"). The Guaranty shall terminate on April 1, 2006 as
to the Guaranteed Sections.
26. Transaction Authorizations and Approvals.
Within seven (7) business days after the Effective Date, Seller shall
obtain (or cause to be obtained) and shall deliver to Buyer, (i) a copy of
the resolutions of the board of directors of G REIT, Inc. authorizing the
execution and delivery of this Agreement by Seller and the Guaranty by
Guarantor and the performance of their respective obligations hereunder
and thereunder and designating the persons who are authorized to execute
and deliver such documents on behalf of Seller and Guarantor and (ii) any
and all consents, approvals and other authorizations as may be necessary
for Seller to enter into this Agreement and Guarantor to enter into said
Guaranty.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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EXECUTED on this the 27 day of June, 2005.
SELLER:
GREIT - 525 AND 600 B STREET, LP,
a Virginia limited partnership
By: GREIT - 525 and 600 B Street GP, LLC,
a Virginia limited liability company,
its general partner
By: Triple Net Properties, LLC,
a Virginia limited liability company,
its manager
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CEO
EXECUTED on this the 24th day of June, 2005.
BUYER:
▇▇▇▇▇-SUMISEI US CORE OFFICE PROPERTIES, LP,
a Delaware limited partnership
By: ▇▇▇▇▇-Sumisei U.S. Core Office Trust,
a Maryland real estate investment trust,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
40
