EXHIBIT 10.2
AGREEMENT OF PURCHASE AND SALE
AND ESCROW INSTRUCTIONS
between
▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Trustees of the ▇▇▇▇▇ Family Trust dated November 11, 1991;
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Trustees of the ▇▇▇▇▇▇▇▇ Family Trust dated October 31, 1991;
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Trustees of the Chubak Family Trust dated January 10, 1992;
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Trustees of the Solomon Family Trust dated January 23, 1997;
collectively, as Seller,
and
FOUR MEDIA COMPANY,
a Delaware corporation,
as Purchaser
Dated: As of September 10, 1998
TABLE OF CONTENTS
Page
ARTICLE 1 PURCHASE AND SALE OF PROPERTY...................... 1
1.1 Property........................................... 1
1.2 Solomon Trust...................................... 3
ARTICLE 2 PURCHASE PRICE..................................... 3
2.1 Purchase Price..................................... 3
2.2 Payment of Purchase Price.......................... 3
2.3 Treatment of Deposits and Closing Payment.......... 4
2.4 Allocation of Purchase Price....................... 4
ARTICLE 3 PURCHASER'S DUE DILIGENCE PERIOD................... 4
3.1 Due Diligence Period............................... 4
3.2 Physical and Environmental Condition of Property... 5
3.3 Planning, Zoning and Rent Control Status........... 5
3.4 Review of Documentation............................ 6
3.5 Termination Rights of Purchaser.................... 8
ARTICLE 4 TITLE AND SURVEY................................... 9
4.1 Preliminary Title Reports.......................... 9
4.2 Surveys............................................ 9
4.3 Supplemental Report................................ 10
4.4 Title Objection Notice............................. 10
4.5 Election of Non-Removal............................ 10
4.6 Non-Removal by Seller.............................. 11
4.7 Condition of Title................................. 11
4.8 Title Policies..................................... 12
ARTICLE 5 LEASE ASSUMPTIONS.................................. 12
5.1 Assumable Leases................................... 12
5.2 Landlord Estoppel Certificates and Consents........ 13
5.3 Purchaser's Rights................................. 14
ARTICLE 6 OPENING AND CLOSING OF ESCROW...................... 14
6.1 Establishment of Escrow............................ 14
6.2 Opening of Escrow.................................. 14
6.3 Form Escrow Instructions........................... 14
6.4 Closing Date....................................... 15
6.5 Place of Closing................................... 15
ARTICLE 7 CONSUMMATION OF SALE AND CONDITIONS TO CLOSING..... 15
7.1 Documents and Funds Delivered into Escrow or
by Escrow Holder................................... 15
7.2 Conditions to Close................................ 16
7.3 Recordation and Transfer........................... 17
7.4 Possession of Property............................. 18
7.5 Post-Closing Delivery.............................. 18
i
ARTICLE 8 PRORATIONS AND COSTS............................... 18
8.1 Real Property and Improvements..................... 18
8.2 Assumable Leases................................... 19
ARTICLE 9 REPRESENTATIONS AND WARRANTIES..................... 19
9.1 Representations of Seller.......................... 19
9.2 Representations of Purchaser....................... 21
ARTICLE 10 OPERATION OF THE PROPERTY DURING ESCROW PERIOD..... 22
10.1 Seller's Obligations............................... 22
10.2 Access Rights of Purchaser......................... 24
ARTICLE 11 CONDEMNATION AND DESTRUCTION....................... 24
11.1 Condemnation....................................... 24
11.2 Damage or Destruction of Improvements.............. 25
ARTICLE 12 REAL ESTATE COMMISSIONS............................ 26
12.1 Payment of Commission.............................. 26
12.2 Cross-Indemnity.................................... 26
ARTICLE 13 REMEDIES........................................... 26
13.1 Seller's Remedy.................................... 26
13.2 Available Remedies................................. 28
ARTICLE 14 GENERAL PROVISIONS................................. 28
14.1 Notices............................................ 28
14.2 Assignment......................................... 29
14.3 Attorneys' Fees and Legal Expenses................. 30
14.4 Reporting of Foreign Investment.................... 30
14.5 Time Calculations.................................. 30
14.6 Entire Agreement................................... 30
14.7 Applicable Law..................................... 31
14.8 Amendments......................................... 31
14.9 Severability....................................... 31
14.10 Further Assurances................................. 31
14.11 Counterpart Execution.............................. 31
14.12 Gender and Number.................................. 31
14.13 Section Headings................................... 31
14.14 Exhibits Incorporated by Reference................. 31
14.15 Publicity.......................................... 31
ii
LIST OF EXHIBITS
----------------
EXHIBIT "A": Legal Description of ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT "B": Legal Description of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT "C": Legal Description of ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT "D": Legal Description of 1921 North ▇▇▇▇▇▇
EXHIBIT "E": Legal Description of ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT "F": List of Tenant Leases
EXHIBIT "G": Legal Description of ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT "H": Legal Description of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT "I": Legal Description of ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT "J": Legal Description of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT "K": Form of Landlord Estoppels
EXHIBIT "L": Form of Grant Deeds
EXHIBIT "M": Form of Bills of Sale
EXHIBIT "N": Form of Landlord Lease Assignments
EXHIBIT "O": Form of Certification of Seller
EXHIBIT "P": Exceptions To Representations and Warranties
iii
TABLE OF DEFINED TERMS
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Page
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1010 North Highland Avenue........................................... 1
1222 Purchase Option................................................. 12
1222 Sixth Street.................................................... 12
1222 Sixth Lease..................................................... 12
1313 Seventh Street.................................................. 2
1921 North ▇▇▇▇▇▇.................................................... 2
2222 Columbus Street................................................. 12
2222 Columbus Lease.................................................. 13
545 Sansome Lease.................................................... 13
545 Sansome Street................................................... 13
6344 Fountain Avenue................................................. 1
6345 Purchase Option................................................. 12
6345 Fountain Lease.................................................. 12
6345 Fountain Avenue................................................. 12
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Street.............................................. 1
Agreement............................................................ 1
ALTA Title Reports................................................... 10
ALTA Owner's Policies................................................ 9
ALTA Title Report.................................................... 10
ALTA Owner's Policy.................................................. 9
Applicable Agencies.................................................. 6
Applicable Agencies.................................................. 23
Appurtenances........................................................ 2
Assumable Leases..................................................... 13
Authorized Broker.................................................... 26
Bills of Sale........................................................ 15
Certification of Seller.............................................. 16
CIBC................................................................. 30
Closing.............................................................. 15
Closing Payment...................................................... 3
Closing Date......................................................... 15
CLTA Owner's Policy.................................................. 9
CLTA Owner's Policies................................................ 9
Condemnation Termination Notice...................................... 25
Damage Notice Period................................................. 25
Damage Termination Notice............................................ 25
Deposit.............................................................. 3
Diligence Termination Notice......................................... 8
Due Diligence Period................................................. 4
Election of Non-Removal.............................................. 10
Encore............................................................... 12
Environmental Laws................................................... 20
Escrow Period........................................................ 22
Escrow Holder........................................................ 14
Escrow............................................................... 14
Existing Applications................................................ 6
Existing Permits..................................................... 6
Grant Deeds.......................................................... 15
Hazardous Materials.................................................. 20
iv
Improvements......................................................... 2
Intangible Property.................................................. 2
Landlord Estoppel Certificate........................................ 13
Landlord Consent..................................................... 13
Landlord Lease Assignments........................................... 15
Leasehold Termination Notice......................................... 14
Leasehold Properties................................................. 13
Listed Exceptions.................................................... 10
MSCL................................................................. 12
Notice of Violation.................................................. 20
Notices.............................................................. 28
Owner's Title Policy................................................. 12
Owner's Title Policies............................................... 12
Permitted Encumbrances............................................... 11
Personal Property.................................................... 2
Planning Permits..................................................... 6
Preliminary Title Reports............................................ 9
Preliminary Title Report............................................. 9
Property............................................................. 3
Property Information Documents....................................... 6
Purchase Price....................................................... 3
Purchaser............................................................ 1
Real Properties...................................................... 1
Real Property........................................................ 1
Reference Date....................................................... 1
Refundable Event..................................................... 4
Seller............................................................... 1
Seller Mortgages..................................................... 10
Service Contracts.................................................... 6
Solomon Trust........................................................ 3
Stock Purchase Agreement............................................. 15
Studies.............................................................. 5
Supplemental Report.................................................. 10
Survey............................................................... 9
Surveys.............................................................. 9
Tenant Leases........................................................ 8
Title Objection Notice............................................... 10
Title Company........................................................ 9
Title Termination Notice............................................. 11
Violations........................................................... 20
Lenders.............................................................. 30
v
AGREEMENT OF PURCHASE AND SALE
------------------------------
AND ESCROW INSTRUCTIONS
-----------------------
THIS AGREEMENT OF PURCHASE AND SALE AND ESCROW INSTRUCTIONS ("AGREEMENT") is
entered into as of the 10th day of September, 1998 ("REFERENCE DATE") by and
between ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as Trustees of the ▇▇▇▇▇ Family Trust
dated November 11, 1991; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as Trustees
of the ▇▇▇▇▇▇▇▇ Family Trust dated October 31, 1991; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Trustees of the Chubak Family Trust dated January 10,
1992; and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustees of the Solomon Family
Trust dated January 23, 1997 (collectively, "SELLER") and FOUR MEDIA COMPANY, a
Delaware corporation ("PURCHASER"). Seller and Purchaser hereby agree as
follows:
ARTICLE 1
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PURCHASE AND SALE OF PROPERTY
-----------------------------
1.1 PROPERTY. Subject to and upon the terms and conditions of this
--------
Agreement, Seller hereby agrees to sell to Purchaser, and Purchaser hereby
agrees to purchase from Seller, all of Seller's right, title and interest in the
following:
1.1.1 Those certain tracts of land (collectively, the "REAL PROPERTIES" and
individually, a "REAL PROPERTY") described as follows:
1.1.1(a) That certain real property located in the City of Los Angeles,
County of Los Angeles, State of California, commonly referred to as 6332-6336
1/2 Fountain Avenue, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, which is
more particularly described in Exhibit "A" to this Agreement ("6344 FOUNTAIN
-----------
AVENUE").
1.1.1(b) That certain real property located in the City of Los Angeles,
County of Los Angeles, State of California, commonly referred to as ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, which is more particularly described in Exhibit "B" to this
-----------
Agreement ("▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇").
1.1.1(c) That certain real property located in the City of Los Angeles,
County of Los Angeles, State of California, commonly referred to as ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, which is more particularly described in Exhibit "C" to this
-----------
Agreement ("▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇").
1.1.1(d) That certain real property located in the City of Los Angeles,
County of Los Angeles, State of California, commonly referred to as 1921 North
▇▇▇▇▇▇, which is more
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particularly described in Exhibit "D" to this Agreement ("1921 NORTH ▇▇▇▇▇▇").
-----------
1.1.1(e) That certain real property located in the City of Santa ▇▇▇▇▇▇,
County of Los Angeles, State of California, commonly referred to as ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, which is more particularly described in Exhibit
-------
"E" to this Agreement ("1313 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇").
---
1.1.2 All buildings, improvements and fixtures located on the Real
Properties as of the Reference Date (collectively, "IMPROVEMENTS").
1.1.3 All of Seller's right, title, interest, privileges, easements and
appurtenances to the Real Properties and the Improvements, including, without
limitation, (a) all mineral, mining and water rights and (b) all easements,
rights-of-way, and other appurtenances used or connected with the beneficial use
or enjoyment of the Real Properties and the Improvements, including, without
limitation, access to a public way and all right, title and interest of Seller
in and to any land lying in the bed of any street, alley, gore, road or avenue
opened or proposed, appurtenant to, abutting, or adjoining the Real Properties,
to the center line thereof (collectively, the "APPURTENANCES").
1.1.4 All of Seller's right, title and interest, if any, without warranty,
in and to all tangible personal property now or hereafter used in connection
with the operation, ownership, maintenance, management, or occupancy or
improvement of the Real Properties and Improvements, including without
limitation: (a) equipment, machinery, and supplies; (b) all tools, supplies, and
construction and finish materials not incorporated in the Improvements and held
for repairs and replacements, whether stored on or off-site; (c) utility systems
and components not otherwise deemed fixtures; and (d) any and all deposits,
bonds or other security deposited or delivered by Seller with or to any and all
governmental bodies, utility companies or other third parties in connection with
the operation, ownership, maintenance, management, occupancy or improvement of
the Real Properties and Improvements (collectively, the "PERSONAL PROPERTY").
1.1.5 All of Seller's right, title and interest in and to all intangible
personal property now or hereafter used in connection with the operation,
ownership, maintenance, management, development or occupancy of the Real
Properties and Improvements, each to the extent of such use or utilization
(collectively, the "INTANGIBLE PROPERTY"). The Intangible Property includes,
without limitation, (a) all trade names and trade marks associated with the Real
Properties and Improvements; (b) all plans and specifications for the
Improvements; (c) all warranties in favor of Seller; (d) all indemnities in
favor of Seller; (e) all claims against third parties; (f) all contract rights
related to the construction,
Page 2 of 33
operation, ownership or management of the Real Properties and Improvements that
are expressly assumed by Purchaser pursuant to this Agreement; (g) permits,
licenses and approvals, including, without limitation, Existing Permits (as
hereinafter defined), (h) all pending applications for Planning Permits whether
issued or applied for in name of Seller, Purchaser or any prior owner of the
Real Properties and Improvements or any agent thereof, including, without
limitation, the Existing Applications (as hereinafter defined), and (i)
insurance proceeds and condemnation awards or claims thereto to be assigned to
Purchaser hereunder.
The Real Properties, Improvements, Appurtenances, Personal Property and
Intangible Property are hereinafter sometimes collectively referred to as the
"PROPERTY".
1.2 SOLOMON TRUST. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustees of the
-------------
Solomon Family Trust dated January 23, 1997 ("SOLOMON TRUST") own an undivided
five percent (5%) interest of 1921 North ▇▇▇▇▇▇. The ▇▇▇▇▇▇▇ Trust has no
ownership interest in any other Real Property (or the Improvements,
Appurtenances, Personal Property or Intangible Property related thereto) that is
the subject of this Agreement other than 1921 North ▇▇▇▇▇▇. All rights,
obligations and warranties of the Solomon Trust under this Agreement relate and
apply only to 1921 North ▇▇▇▇▇▇ and do not relate or apply to any other Property
(or Improvements, Appurtenances, Personal Property or Intangible Property
related thereto) that is the subject of this Agreement.
ARTICLE 2
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PURCHASE PRICE
--------------
2.1 PURCHASE PRICE. The purchase price for the Property shall be ELEVEN
--------------
MILLION TWO HUNDRED THOUSAND DOLLARS ($11,200,000) ("PURCHASE PRICE").
2.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by
-------------------------
Purchaser as follows:
2.2.1 TEN THOUSAND DOLLARS ($10,000) ("DEPOSIT") to be deposited by
Purchaser with Escrow Holder (as hereinafter defined) no later than the five (5)
business days following the mutual execution of this Agreement by Seller and
Purchaser.
2.2.2 ELEVEN MILLION ONE HUNDRED NINETY THOUSAND DOLLARS
($11,190,000), which sum may be subject to adjustment for any prorations
required pursuant to Article 8 ("CLOSING PAYMENT"), to be deposited by Purchaser
with Escrow Holder at Closing. The Closing Payment shall be made by wire
transfer to Escrow Holder of immediately available funds.
Page 3 of 33
2.3 TREATMENT OF DEPOSITS AND CLOSING PAYMENT.
-----------------------------------------
2.3.1 In the event that Closing occurs, the Deposit and the Closing
Payment shall be credited against the Purchase Price.
2.3.2 The Deposit and the Closing Payment shall be placed by Escrow
Holder in a federally-insured, interest-bearing account satisfactory to
Purchaser. Except as provided in Section 13.1, interest earned on the Deposit
and the Closing Payment shall be for the account of Purchaser.
2.3.3 The Deposit and Closing Payment shall be refundable to Purchaser,
in the event of one of the following events (collectively, "REFUNDABLE EVENT"):
(a) a default by Seller of its obligations under this Agreement, (b) the
termination of this Agreement by either party pursuant to rights to terminate
under this Agreement, or (c) the non-occurrence of any of the conditions to
close in Section 7.2, unless waived by Purchaser in its sole and absolute
discretion. Upon the occurrence of a Refundable Event, Escrow Holder shall
refund the Deposit and any Closing Payment to Purchaser on the next business day
following written request by Purchaser.
2.4 ALLOCATION OF PURCHASE PRICE. Seller shall deliver written
----------------------------
instructions to Escrow Holder directing the distribution of the Purchase Price
between the trust entities which comprise the Seller. The failure of Seller to
deliver such written instructions or the failure of the trust entities which
comprise the Seller to mutually agree on the allocation of the Purchase Price to
the Seller shall not alter, affect or delay the obligations of Seller or the
rights of Purchaser under this Agreement.
ARTICLE 3
---------
PURCHASER'S DUE DILIGENCE PERIOD
--------------------------------
3.1 DUE DILIGENCE PERIOD. Purchaser shall have a period of time ("DUE
--------------------
DILIGENCE PERIOD") to investigate and satisfy itself, as to any and all matters
related to (a) the physical condition and environmental condition of the Real
Properties and the physical and structural condition of the Improvements
pursuant to Section 3.2, (b) the planning, zoning, land use and rent control
status of the Property pursuant to Section 3.3, (c) the existing documents and
agreements affecting the Property pursuant to Section 3.4, and (d) the
suitability and economic viability of the Property for Purchaser's intended
purposes. Unless further extended by mutual agreement of Seller and Purchaser,
the Due Diligence Period shall conclude at 5:00 p.m., California time, on the
business day immediately proceeding the Closing Date.
Page 4 of 33
3.2 PHYSICAL AND ENVIRONMENTAL CONDITION OF PROPERTY.
------------------------------------------------
3.2.1 During the Due Diligence Period, Purchaser shall have the right to
investigate and physically inspect, and satisfy itself, as to all matters
concerning the physical and environmental condition of the Property, including,
but not limited to, soil, geology, compaction and toxicity of the Real
Properties, rights of access and ingress and egress to and from the Real
Properties and the physical condition and structural integrity of the
Improvements. Purchaser shall also have the right to investigate and physically
inspect the physical and environmental condition of the Leasehold Properties (as
hereinafter defined) in accordance with Section 5.2 of the Stock Purchase
Agreement.
3.2.2 In connection with its investigation and inspection of the
physical condition of the Real Properties and the condition and structural
integrity of the Improvements and all equipment and utility systems relating to
the Improvements during the Due Diligence Period, Purchaser shall have the
right, at reasonable times and upon prior notice to Seller, to (a) enter any and
all of the Real Properties and the corresponding Improvements thereon for the
purpose of making such surveys, investigations, soil tests, compaction and
geology studies, physical inspections and tests of the Improvements,
investigations and other tests (collectively, the "STUDIES") as Purchaser deems
necessary or appropriate; and (b) make inquiry of any persons in possession or
occupancy of any and all of the Real Properties and the corresponding
Improvements thereon. All Studies shall be performed at Purchaser's sole cost
and expense.
3.2.3 Purchaser shall indemnify, defend and hold harmless Seller from
claims or damages arising out of any physical damage to Property or any liens
recorded against the Property resulting from such Studies. Such indemnity shall
not include any claims or damages relating to (a) the discovery of any physical
defects in the Property or (b) the discovery of the presence of any Hazardous
Materials (as hereinafter defined) on, in or under the Property or any adjacent
parcels or (c) any economic loss, loss of profits, diminution in value or any
other consequential damages.
3.2.4 Any investigation or studies shall be conducted in a fashion to
(a) preserve the confidentiality of the transactions contemplated by this
Agreement and the Stock Purchase Agreement and (b) to minimize any interference
with the operations of Seller or any tenant or tenants at the Property.
3.3 PLANNING, ZONING AND RENT CONTROL STATUS. During the Due Diligence
----------------------------------------
Period, Purchaser shall have the right to generally investigate and review:
3.3.1 All the planning, zoning, land use and rent control laws and
regulations of the cities in which the Real
Page 5 of 33
Properties are located, and other applicable local, state and federal laws and
regulations, as said laws and regulations affect the ownership, use, and any
proposed or contemplated development by Purchaser of the Property or any portion
thereof.
3.3.2 All planning, zoning, land use or rent control permits or
approvals related to the Property or any portion thereof, including, without
limitation, (a) development agreements, (b) development permits and approvals,
(c) final and tentative tract maps, (d) conditional use permits, other use
permits and variances, and (e) building, grading and other technical permits
(collectively the "PLANNING PERMITS") which have been issued, granted or
approved by the cities in which the Real Properties are located, or other
governmental agencies having jurisdiction over the Property ("APPLICABLE
AGENCIES") as of the Reference Date of this Agreement (collectively, the
"EXISTING PERMITS").
3.3.3 All applications for Planning Permits which have been filed with
Applicable Agencies as of the Reference Date of this Agreement, if any
("EXISTING APPLICATIONS").
3.3.4 All environmental impact reports and negative declarations which
have been submitted to, or prepared by, Applicable Agencies related to the
Property or any portion thereof.
3.4 REVIEW OF DOCUMENTATION.
-----------------------
3.4.1 During the Due Diligence Period, Seller shall provide Purchaser
with reasonable access to Seller's books and records related to the Property. No
later than 5:00 p.m., California time, on the third business day following
mutual execution of this Agreement by Seller and Purchaser, Seller shall deliver
to Purchaser true and complete copies of the following documents which are
within the possession of Seller or MSCL (as hereinafter defined) (collectively,
the ("PROPERTY INFORMATION DOCUMENTS").
3.4.1(a) A written list, together with copies of all listed documents,
of (i) all Existing Permits, (ii) Existing Applications, (iii) all existing
certificates of occupancy for any portion of the Property, (iv) all other
licenses, permits, authorizations and approvals from any Applicable Agency with
respect to the Property, or any portion thereof, the occupancy thereof or any
present or permitted use thereof.
3.4.1(b) A written list, together with copies of all listed documents,
of all management, service, supply, equipment rental, and other contracts
related to the operation or improvement of the Property, or any portion thereof,
which are in effect as of the Reference Date (collectively the "SERVICE
CONTRACTS").
Page 6 of 33
3.4.1(c) A written list, together with copies of all listed documents,
of (i) any surveys of any Real Property and the corresponding Improvements
thereon; (ii) any report or study related to the soil or environmental condition
of any Real Property, including, without limitation, any studies or reports
relating to storage tanks, asbestos or any Hazardous Materials in, on or beneath
any Real Property or adjoining sites and Phase I or Phase II environmental
reports; and (iii) any report or study related to the physical condition of any
Real Property, including, without limitation, structural engineering reports and
reports regarding drainage, sewer, septic, electrical, water, mechanical and
elevator systems.
3.4.1(d) Copies of ad valorem property tax statements relating to any
portion of the Property for the current tax year.
3.4.1(e) Copies of Seller's certificates of insurance for all portions
of the Property and any notices received from insurance carriers.
3.4.1(f) Copies of any documents or materials relating to (i) any
litigation or potential litigation which affects or may affect the Property or
any portion thereof; (ii) the condemnation or potential condemnation of the
Property or any portion thereof; (iii) any proceeding of any kind pending or
threatened affecting any of the Property or any portion thereof or the ability
of Seller to consummate the transactions contemplated by this Agreement; or (iv)
any citations, violation notices or other notices received from governmental
agencies relating to any Real Property and corresponding Improvements thereon.
3.4.1(g) Any and all building plans and specifications for the
Improvements showing their "as-built" condition, including but not limited to
any plans and specifications relating to additions, enlargements or installation
of fixtures relating to the Real Properties and Improvements.
3.4.1(h) Copies of all utility bills, including, without limitation,
water, sewer, electrical and gas, for the twelve (12) months preceding the month
in which the Reference Date occurs relating to the Real Properties and
Improvements.
3.4.1(i) Any and all reports or summaries prepared by or on behalf of
Seller relating to the operating expenses of the Real Properties and
Improvements.
3.4.2 Prior to the execution of this Agreement, Seller provided to
Purchaser a written list, together with copies of all listed documents, of:
Page 7 of 33
3.4.2(a) The existing leases affecting all portions of the Real
Properties and Improvements (collectively, the "TENANT LEASES"). A copy of this
written list is attached hereto as Exhibit "F".
-----------
3.4.2(b) A copy of the Assumable Leases (as hereinafter defined).
3.4.3 The Property Information Documents that are required to be
delivered to Purchaser include any such documents in the possession of MSCL or
any subsidiaries thereof. In addition, if Seller has knowledge that certain
Property Information Documents that are not in the possession of Seller or MSCL
are in the possession of any employees, agents, representatives or contractors
of Seller or MSCL or any subsidiaries thereof, Seller shall use commercially
reasonable efforts (provided such efforts shall not require any additional
payments by Seller) to obtain such Property Information Documents from such
third parties for delivery to Purchaser.
3.4.4 In the event that this Agreement is terminated for any reason,
Purchaser agrees to immediately return to Seller all copies of the Property
Information Documents.
3.5 TERMINATION RIGHTS OF PURCHASER.
-------------------------------
3.5.1 If, at any time during the Due Diligence Period, Purchaser, in
its sole and absolute discretion, deems the results of any of its investigations
of the Property pursuant to this Article 3 to be unsatisfactory or unacceptable
in any way, Purchaser shall have the unilateral right to terminate this entire
Agreement by delivery to Seller and Escrow Holder of a Diligence Termination
Notice in accordance with Section 3.5.2.
3.5.2 Prior to the conclusion of the Due Diligence Period, Purchaser
shall be permitted, at its sole option and in its sole discretion, to deliver to
Seller a written notice exercising its rights to terminate this Agreement
pursuant to this Section 3.5 ("DILIGENCE TERMINATION NOTICE"), in which case
this Agreement shall be terminated as of the date of the delivery of the
Diligence Termination Notice to Seller. If Purchaser fails to deliver a
Diligence Termination Notice prior to the conclusion of the Due Diligence
Period, Purchaser shall be deemed to have waived its right to terminate this
Agreement pursuant to this Section 3.5.
3.5.3 In the event that Purchaser terminates this Agreement pursuant
to Section 3.5.2 then: (a) this Agreement shall be terminated and cancelled as
of the date set forth in Section 3.5.2 and, except for the obligations of
Purchaser set forth in Section 3.2.3 and Article 12 of this Agreement, neither
Seller nor Purchaser shall thereafter have any rights or obligations under this
Agreement; (b) Escrow (as hereinafter defined) shall be
Page 8 of 33
cancelled; (c) Purchaser shall pay any reasonable cancellation or termination
fee, if any, charged by Escrow Holder; and (d) the Initial Deposit shall be
returned to Purchaser by Escrow Holder, together with any interest earned
thereon. Seller and Purchaser agree to promptly execute any documents reasonably
requested by the other party or Escrow Holder to evidence the termination of
this Agreement and the cancellation of Escrow.
ARTICLE 4
---------
TITLE AND SURVEY
----------------
4.1 PRELIMINARY TITLE REPORTS. Prior to the execution of this Agreement,
-------------------------
Purchaser obtained (a) a Preliminary Title Report with respect to each of the
Real Properties (individually, a "PRELIMINARY TITLE REPORT" and collectively,
the "PRELIMINARY TITLE REPORTS") issued by Chicago Title Insurance Company
("TITLE COMPANY") containing such exceptions as the Title Company would specify
in a California Land Title Association form of owner's policy of title insurance
for each of the Real Properties (individually, a "CLTA OWNER'S POLICY" and
collectively, the "CLTA OWNER'S POLICIES") and (b) legible copies of all
documents referred to in each Preliminary Title Report. Seller shall pay all
expenses and costs charged by the Title Company to produce and deliver to
Purchaser the Preliminary Title Reports and all documents referred to therein.
Purchaser has delivered to Seller a copy of the Preliminary Title Reports for
each of the Real Properties, receipt of which is hereby acknowledged by Seller.
4.2 SURVEYS.
-------
4.2.1 In the event that Purchaser desires to have title to one or more
of the Real Properties and the related Improvements and Appurtenances insured at
Closing by an ALTA Owner's Policy (as hereinafter defined), Purchaser, at
Purchaser's expense, shall cause to be prepared and delivered to Seller,
Purchaser and the Title Company, a survey each of the Real Properties for which
it desires such a policy (individually, a "SURVEY" and collectively, "SURVEYS").
Each Survey shall locate all Improvements on the applicable Real Property and
all Appurtenances thereto, and shall otherwise contain such specificity
sufficient to permit the Title Company to issue an American Land Title
Association form of owner's policy of title insurance (1992 form) for such Real
Property (individually, an "ALTA OWNER'S POLICY" and collectively, "ALTA OWNER'S
POLICIES").
4.2.2 Following delivery of all Surveys to the Title Company, Purchaser
shall cause the Title Company, at Purchaser's expense, to issue and deliver to
Seller, Purchaser and Escrow Holder, supplementary Preliminary Title Reports
containing such additional exceptions as the Title Company would specify in an
ALTA Owner's Policy or ALTA Owner's Policies, as applicable, based upon
Page 9 of 33
its review of the Surveys (individually, an "ALTA TITLE REPORT" and
collectively, "ALTA TITLE REPORTS").
4.3 SUPPLEMENTAL REPORT. For purposes of this Agreement, the term
-------------------
"SUPPLEMENTAL REPORT" shall mean any supplemental title report which is issued
by the Title Company prior to the Closing Date, containing exceptions not
contained in the original ALTA Title Report (or in the Preliminary Title Report
if an ALTA Title Report is not issued by the Title Company).
4.4 TITLE OBJECTION NOTICE.
----------------------
4.4.1 Except as provided in Section 5.4, in the event that Purchaser
disapproves any items identified as exceptions in the Preliminary Title Report
or the ALTA Title Report (in the event that the Title Company has issued an ALTA
Title Report prior to the conclusion of the Due Diligence Period) or in any
Supplemental Report (collectively, the "LISTED EXCEPTIONS"), Purchaser shall
give written notice of disapproval to Seller ("TITLE OBJECTION NOTICE"). The
Title Objection Notice shall be delivered by Purchaser, if at all, not later
than: (a) the conclusion of the Due Diligence Period, with respect to the
Preliminary Title Report or ALTA Title Report; or (b) five (5) business days
following Purchaser's receipt of the Supplemental Report, with respect to any
Supplemental Report.
4.4.2 Purchaser shall be deemed to have approved all Listed Exceptions
which are not listed as disapproved by Purchaser in a Title Objection Notice
timely delivered by Purchaser to Seller in accordance with Section 4.4.1;
provided that: (a) Seller, at its sole cost and expense, shall be required to
remove all deeds of trust, mortgages, and assignments of rents and other
monetary encumbrances (collectively, the "SELLER MORTGAGES") at or prior to
Closing and (b) the Seller Mortgages are automatically deemed to be
Objectionable Exceptions and are not required to be listed by Purchaser in the
Title Objection Notice.
4.4.3 Except as provided in Section 4.5, in the event that Purchaser
timely delivers a Title Objection Notice, Seller shall remove at or prior to the
Closing (as hereinafter defined), at Seller's sole cost and expense, all Listed
Exceptions which are listed as disapproved by Purchaser in the Title Objection
Notice and the Seller Mortgages.
4.5 ELECTION OF NON-REMOVAL. Notwithstanding the provisions of Section
-----------------------
4.4, Seller may elect not to remove or cure any Listed Exception which is
specifically listed as disapproved by Purchaser in a Title Objection Notice by
delivering written notice of Seller's election of non-removal to Purchaser
("ELECTION OF NON-REMOVAL") not later than seven (7) days following the date on
which Seller receives the Title Objection Notice. The Election of Non-Removal
shall specifically identify the Listed Exceptions in the
Page 10 of 33
Title Objection Notice which Seller has elected not to remove, or otherwise cure
in a manner satisfactory to Purchaser, at or prior to Closing. In the event that
Seller fails to deliver an Election of Non-Removal to Purchaser within the
required seven (7) day period, Seller shall remove, or otherwise cure in a
manner satisfactory to Purchaser, at or prior to Closing all Listed Exceptions
which are specifically listed as disapproved by Purchaser in the Title Objection
Notice. Seller shall not be permitted to list any Seller Mortgages in the
Election of Non-Removal as Seller is required to remove all Seller Mortgages at
or prior to Closing at Seller's sole expense.
4.6 NON-REMOVAL BY SELLER. If Seller timely delivers to Purchaser an
---------------------
Election of Non-Removal, Purchaser shall have the following rights:
4.6.1 Purchaser may terminate this Agreement by delivering a written
termination notice to Seller not later than ten (10) business days following the
date that Purchaser receives the Election of Non-Removal ("TITLE TERMINATION
NOTICE"). In the event that Purchaser timely delivers the Title Termination
Notice, then: (a) this Agreement shall be terminated and cancelled and, except
for the obligations of Purchaser set forth in Section 3.2.3 and Article 12 of
this Agreement, neither Seller nor Purchaser thereafter shall have any rights or
obligations under this Agreement, (b) Escrow (as hereinafter defined) shall be
cancelled, (c) Purchaser shall pay all reasonable cancellation or termination
fees charged by Escrow Holder, if any, and (d) the Initial Deposit shall be
returned to Purchaser by Escrow Holder, together with any interest earned
thereon. Seller and Purchaser agree to promptly execute any documents
reasonably requested by the other party or Escrow Holder to evidence the
termination of this Agreement and the cancellation of Escrow.
4.6.2 If Purchaser does not timely terminate this Agreement pursuant to
Section 4.6.1, Purchaser shall be deemed to have approved any Listed Exceptions
in the Title Objection Notice which Seller has elected not to remove pursuant to
the Election of Non-Removal (other than Seller Mortgages which Seller shall
remove at or prior to Closing) for all Real Properties.
4.7 CONDITION OF TITLE. The Property shall be conveyed by Seller to
------------------
Purchaser on the Closing Date free and clear of all liens, encumbrances and
easements, excepting only the following (collectively, the "PERMITTED
ENCUMBRANCES"):
4.7.1 Those Listed Exceptions which are approved or deemed approved by
Purchaser pursuant to Sections 4.4 and 4.6.2.
4.7.2 Current real estate taxes and assessments which are a lien not yet
payable.
Page 11 of 33
4.8 TITLE POLICIES. The title to each Real Property and the related
--------------
Improvements and Appurtenances shall be evidenced on the Closing Date by CLTA
Owner's Policies, or at Purchaser's election, by ALTA Owner's Policies, as
applicable, issued by the Title Company in the amount for each Real Property as
identified in Section 2.3 showing title vested in Purchaser subject only to the
Permitted Encumbrances (individually, an "OWNER'S TITLE POLICY" and
collectively, "OWNER'S TITLE POLICIES"). Seller shall pay toward the cost of
each Owner's Title Policy an amount equal to the cost of the corresponding CLTA
Owner's Policy for each Real Property. Purchaser shall pay the incremental
additional cost to obtain each ALTA Owner's Policy over the cost of the CLTA
Owner's Policy for each Real Property for which Purchaser desires an ALTA
Owner's Policy and shall pay the cost of any additional title insurance or
endorsements requested by Purchaser.
ARTICLE 5
---------
LEASE ASSUMPTIONS
-----------------
5.1 ASSUMABLE LEASES. MSCL, Inc., a corporation ("MSCL"), is a corporation
----------------
in which the trustees of the trusts which collectively comprise Seller, are the
principal shareholders. "Encore Video" ("ENCORE") and "Filmcore" is also a
fictitious business name of MSCL. MSCL, in its name or doing business under the
fictitious names of Filmcore or Encore, is the tenant under the following
leases:
5.1.1 That certain lease for the real property and improvements located
at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in the City of Los Angeles, County of Los Angeles, State
of California ("6345 FOUNTAIN AVENUE") between ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as
landlord, and MSCL dba Encore, as tenant, dated January 1, 1997, as amended
("6345 FOUNTAIN LEASE"). The legal description for ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ is
attached to this Agreement as Exhibit "G". The 6345 Fountain Lease grants to
-----------
MSCL dba Encore the option to purchase ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ on the terms and
conditions set forth in the 6345 Fountain Lease ("6345 PURCHASE OPTION").
5.1.2 That certain lease for the real property and improvements located
at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ in the City of Santa ▇▇▇▇▇▇, County of Los Angeles, State
of California ("1222 SIXTH STREET") between ▇▇▇▇▇▇ Santa ▇▇▇▇▇▇ Limited
Partnership, as landlord, and MSCL dba Filmcore, as tenant, dated February 25,
1997 ("1222 SIXTH LEASE"). The legal description for ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ is
attached to this Agreement as Exhibit "H". The 1222 Sixth Lease grants to MSCL
-----------
the option to purchase ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ on the terms and conditions set forth
in the 1222 Sixth Lease ("1222 PURCHASE OPTION").
5.1.3 That certain lease for the real property and improvements located
at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in the City of San
Page 12 of 33
Francisco, County of ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇ COLUMBUS STREET")
between BPBH Limited/Housing Corps, as landlord, and Filmcore, as tenant, dated
June 26, 1997 ("2222 COLUMBUS LEASE"). The legal description for ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ is attached to this Agreement as Exhibit "I".
-----------
5.1.4 That certain lease for the real property and improvements located
at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in the City of San Francisco, County of San Francisco,
State of California ("545 SANSOME STREET") between Pyramid Investment
Corporation, as landlord, and MSCL dba Filmcore, as tenant, dated December 20,
1993 ("545 SANSOME LEASE"). The legal description for ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ is
attached to this Agreement as Exhibit "J".
-----------
For purposes of this Agreement: (a) the 6345 Fountain Lease, the 1222 Sixth
Lease, the 2222 Columbus Lease and the 545 Sansome Lease are hereinafter
sometimes collectively referred to as the "ASSUMABLE LEASES" and (b) ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
are hereinafter sometimes collectively referred to as the "LEASEHOLD
PROPERTIES".
5.2 LANDLORD ESTOPPEL CERTIFICATES AND CONSENTS.
-------------------------------------------
5.2.1 Seller shall deliver, or shall cause MSCL to deliver to all
landlords or lessors under the Assumable Leases the following documents:
5.2.1(a) A copy of the Landlord Estoppel Certificate substantially in
the form of Exhibit "K" attached to this Agreement ("LANDLORD ESTOPPEL
-----------
CERTIFICATE").
5.2.1(b) A copy of a written consent by the landlord/lessor ("LANDLORD
CONSENT") of the assignment by MSCL of each of the following Assumable Leases to
Purchaser, in form and content acceptable to Purchaser: (i) 6345 Fountain Lease,
(ii) 1222 Sixth Lease, and (iii) ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
5.2.2 Seller shall use commercially reasonable efforts (provided such
efforts shall not require any payment by Seller) to (a) obtain or cause MSCL to
obtain an executed Landlord Estoppel Certificate and Landlord Consent from each
landlord/lessor to whom a Landlord Estoppel Certificate and Landlord Consent is
delivered pursuant to Section 5.2.1 and (b) deliver such executed Landlord
Estoppel Certificate and Landlord Consent to Purchaser at least one (1) business
day prior to the conclusion of the Due Diligence Period. In no event shall
Seller be obligated to obtain a Landlord Estoppel Certificate if the Assumable
Lease to be covered thereby does not, by its terms, obligate the lessor
thereunder to deliver same; provided that the inability or failure of Seller to
deliver an executed Landlord Estoppel Certificate for any Assumable Lease, in
form and content acceptable to Purchaser, prior to the conclusion of the Due
Diligence Period, may be the
Page 13 of 33
basis for the delivery by Purchaser of Leasehold Termination Notice pursuant to
Section 5.3.
5.3 PURCHASER'S RIGHTS. If Purchaser deems any executed Landlord Estoppel
------------------
Certificate or Landlord Consent for any Assumable Lease to be unsatisfactory or
unacceptable, or if all Landlord Estoppel Certificates and Landlord Consents
required hereunder are not executed and delivered to Purchaser at least one (1)
business day prior to the expiration of the Due Diligence Period, then Purchaser
shall have the right to terminate this Agreement by delivery of a written
termination notice to Seller ("LEASEHOLD TERMINATION NOTICE") prior to the
expiration of the Due Diligence Period. In the event that Purchaser terminates
this Agreement by delivering a Leasehold Termination Notice to Seller, then:
(a) this Agreement shall be terminated and cancelled as of the date that
Purchaser delivers the Leasehold Termination Notice and, except for the
obligations of Purchaser set forth in Section 3.2.3 and Article 12 of this
Agreement, neither Seller nor Purchaser shall thereafter have any rights or
obligations under this Agreement; (b) Escrow shall be cancelled; (c) Purchaser
shall pay any reasonable cancellation or termination fee, if any, charged by
Escrow Holder; and (d) the Initial Deposit shall be returned to Purchaser by
Escrow Holder, together with any interest earned thereon. Seller and Purchaser
agree to promptly execute any documents reasonably requested by the other party
or Escrow Holder to evidence the termination of this Agreement and the
cancellation of Escrow.
ARTICLE 6
---------
OPENING AND CLOSING OF ESCROW
-----------------------------
6.1 ESTABLISHMENT OF ESCROW. An escrow for the purpose of facilitating the
-----------------------
consummation of the purchase and sale of the Property pursuant to this Agreement
("ESCROW") shall be established at the Escrow Department of the Title Company
("ESCROW HOLDER") at the address listed in Section 14.1.
6.2 OPENING OF ESCROW. Escrow shall be deemed to have opened on the date
-----------------
of the receipt by Escrow Holder of (a) the original or counterparts of this
Agreement duly executed by both Seller and Purchaser, and (b) the Deposit from
Purchaser.
6.3 FORM ESCROW INSTRUCTIONS. This Agreement shall constitute escrow
------------------------
instructions between Seller and Purchaser for the Escrow. Seller and Purchaser
agree to execute such additional documents which may be required by Escrow
Holder attendant to this Agreement and the purchase and sale herein
contemplated. In the event of any conflict between the form escrow instructions
and this Agreement, the terms and conditions of this Agreement shall control and
govern.
Page 14 of 33
6.4 CLOSING DATE.
------------
6.4.1 The consummation of the purchase and sale herein contemplated
("CLOSING") shall occur on the Closing Date established pursuant to Section
6.4.2, provided that neither party shall be obligated to consummate the purchase
and sale of the Property unless all conditions to the obligations of such party
to consummate said purchase and sale pursuant to Section 7.2 have been satisfied
or waived.
6.4.2 Purchaser and the shareholders of MSCL are parties to that
certain Stock Purchase Agreement dated as of September 15, 1998, which provides
for the sale of all of the stock in MSCL to Purchaser ("STOCK PURCHASE
AGREEMENT"). Unless earlier terminated by Seller or Purchaser pursuant to a
specific right of termination expressly set forth in this Agreement, the Closing
shall occur simultaneous with the closing of the Stock Purchase Agreement
("CLOSING DATE"). Notwithstanding anything to the contrary herein, the Closing
Date under this Agreement shall not be later than October 1, 1998.
6.5 PLACE OF CLOSING. The Closing shall take place at the offices of
----------------
Escrow Holder at the address set forth in Section 14.1, or at such other place
as may be agreed upon by Seller and Purchaser.
ARTICLE 7
---------
CONSUMMATION OF SALE AND CONDITIONS TO CLOSING
----------------------------------------------
7.1 DOCUMENTS AND FUNDS DELIVERED INTO ESCROW OR BY ESCROW HOLDER. The
-------------------------------------------------------------
following shall be delivered into the Escrow in connection with the transfer of
the Property:
7.1.1 At Closing, Seller shall deposit into Escrow:
7.1.1(a) Grant deeds ("GRANT DEEDS") for each of the Real Properties,
the Improvements and the Appurtenances duly executed by Seller and acknowledged
and in the form that is attached as Exhibit "L" to this Agreement.
-----------
7.1.1(b) Two (2) original Assignment of Personal Property and
Intangible Property ("BILLS OF SALE") for each Real Property, duly executed by
Seller in counterpart, assigning to Purchaser all of Seller's interest in the
Personal Property and Intangible Property for each Real Property, in the form
that is attached as Exhibit "M" to this Agreement.
-----------
7.1.1(c) Two (2) original Assignment and Assumption of Leases
("LANDLORD LEASE ASSIGNMENTS"), duly executed by Seller in counterpart,
assigning all of Seller's interest in the Tenant Leases to Purchaser in the form
that is attached as Exhibit "N" to this Agreement.
-----------
Page 15 of 33
7.1.1(d) One (1) original from each of the trust entities that
comprise Seller of a certification which satisfies the requirements of Section
1445 of the Internal Revenue Code, as amended, and California Revenue and
Taxation Code Section 18662 ("CERTIFICATION OF SELLER"), in the form that is
attached as Exhibit "O" to this Agreement.
-----------
7.1.1(e) A certificate from Seller that each of the representations
and warranties of Seller contained in Section 9.1 is true and correct as of the
Closing Date, in a form acceptable to Purchaser.
7.1.1(f) All of the original executed Landlord Estoppel Certificates.
7.1.1(g) The original Tenant Leases.
7.1.1(h) The original Assumable Leases.
7.1.1(i) The original Landlord Consents.
7.1.1(j) Such other instruments and documents as may be reasonably
requested by Escrow Holder or otherwise required to transfer the Property to
Purchaser.
7.1.2 At Closing, Purchaser shall deposit into Escrow:
7.1.2(a) An amount equal to (i) the Closing Payment pursuant to
Section 2.2.2, plus (ii) such additional sums as shall be necessary to pay the
prorations, costs and other items chargeable to Purchaser pursuant to Article 8.
7.1.2(b) Two (2) originals of each ▇▇▇▇ of Sale, duly executed by
Purchaser in counterpart.
7.1.2(c) Two (2) originals of the Landlord Lease Assignment, duly
executed by Purchaser in counterpart.
7.1.2(d) Such other instruments and documents as may be reasonably
requested by Escrow Holder or otherwise required to transfer the Property to
Purchaser.
7.2 CONDITIONS TO CLOSE.
-------------------
7.2.1 Escrow shall not close if Purchaser has terminated this Agreement in
accordance with the express terms of this Agreement or unless and until the
following conditions precedent have been satisfied or waived in writing by
Purchaser:
7.2.1(a) All documents described in Section 7.1.1 have been delivered
by Seller to Escrow Holder.
Page 16 of 33
7.2.1(b) All representations and warranties of Seller under Section 9.1 are
true and correct in all material respects on the Closing Date.
7.2.1(c) The Title Company is in a position to issue to Purchaser the
Owner's Title Policies required under Section 4.8 for each of the Properties
subject only to the Permitted Exceptions.
7.2.1(d) Seller can deliver possession of the Property free and clear of
any leases, tenancies or occupancies, other than the Tenant Leases listed on
Exhibit "F".
----------
7.2.1(e) The physical and environmental condition of the Property shall be
the same on the Closing Date as on the Reference Date of this Agreement.
7.2.1(f) The closing under the Stock Purchase Agreement has occurred or
will occur concurrently with the Closing hereunder.
7.2.2 Escrow shall not close if Seller has terminated this Agreement in
accordance with the express terms of this Agreement or unless and until the
following conditions precedent have been satisfied or waived in writing by
Seller:
7.2.2(a) All documents and funds described in Section 7.1.2 have been
delivered by Purchaser to Escrow Holder.
7.2.2(b) All representations and warranties of Purchaser under Section 9.2
are true and correct in all material respects.
7.2.2(c) The closing under the Stock Purchase Agreement has occurred or
will occur concurrently with the Closing hereunder.
7.2.3 Seller and Purchaser mutually acknowledge and agree that whenever in
this Agreement there are conditions to the Closing which are provided for the
benefit of a party to this Agreement, that party shall have the right, at any
time during the Escrow Period, to waive such conditions and the benefits
conferred thereby and proceed to Closing without such conditions having been
satisfied.
7.3 RECORDATION AND TRANSFER. Upon satisfaction of the conditions set
------------------------
forth in Section 7.2, Escrow Holder shall transfer the Property as follows:
7.3.1 Cause the Grant Deeds to be recorded with the Los Angeles County
Recorder.
Page 17 of 33
7.3.2 Deliver to Purchaser: (a) one (1) executed original of each ▇▇▇▇ of
Sale, (b) one (1) executed original of the Landlord Lease Assignment and
Certification of Seller, (c) conformed copies of the recorded Grant Deeds, (d)
all of the original executed (i) Landlord Estoppel Certificates and (ii)
Landlord Consents and (e) the original Tenant Leases.
7.3.3 Deliver to Seller: (a) one (1) executed original of each ▇▇▇▇ of
Sale and (b) one (1) executed original of the Landlord Lease Assignment.
7.3.4 Deliver to the parties entitled thereto any other Closing
documents.
7.4 POSSESSION OF PROPERTY. In the event that this Agreement is not
----------------------
terminated pursuant to Section 3.5 or pursuant to any other right of termination
set forth in this Agreement, Seller shall deliver possession of the Property to
Purchaser on the Closing Date in the same condition it existed on the Reference
Date, normal wear and tear accepted, subject only to the Tenant Leases.
7.5 POST-CLOSING DELIVERY. Immediately after the Closing, Seller shall
---------------------
deliver to the offices of Purchaser: (a) all advertising materials, booklets,
keys and other items, if any, used in the operation of the Property, (b) the
original "as-built" plans and specifications of the Improvements and (c) all
operation manuals.
ARTICLE 8
---------
PRORATIONS AND COSTS
--------------------
8.1 REAL PROPERTY AND IMPROVEMENTS.
------------------------------
8.1.1 Monthly Base Rent under the Tenant Leases shall be prorated as of
the Closing Date.
8.1.2 All expenses of the Property, including without limitation,
property taxes, utilities and maintenance expenses, are directly paid by the
respective tenants under the Tenant Leases. Accordingly, there shall be no
proration between Seller and Purchaser at Closing of the operating expenses of
the Property.
8.1.3 Documentary transfer taxes and local transfer or conveyance taxes
shall be paid by Seller. Any escrow fee charged by the Escrow Holder shall be
paid one-half (1/2) by Seller and one-half (1/2) by Purchaser. Seller shall pay
the fees for the recording of the Grant Deeds. Seller and Purchaser shall bear
the respective costs of the CLTA Owner's Policies or the ALTA Owner's Policies
and any additional title insurance or endorsements required by Purchaser in
accordance with Section 4.6. All costs related to satisfying any "due
diligence" requirements or requests
Page 18 of 33
which Purchaser deems necessary in its analysis of the Property pursuant to
Article 3 or otherwise shall be the sole obligation of Purchaser. Each party
shall be responsible for the payment of its own attorneys' fees incurred in
connection with the transaction which is the subject of this Agreement.
8.2 ASSUMABLE LEASES. There shall be no allocation between Seller and
----------------
Purchaser or proration under this Agreement of income and expenses related to
the Assumable Leases. Such allocation or proration, if any, shall be pursuant
to the Stock Purchase Agreement.
ARTICLE 9
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
9.1 REPRESENTATIONS OF SELLER. Seller hereby makes the representations and
-------------------------
warranties to Purchaser set forth in this Section 9.1, subject only to the
exceptions specifically listed on Exhibit "P". Each of Seller's representations
-----------
and warranties, shall be effective as of the Reference Date and the Closing
Date. As used herein, the term "to the best of Seller's actual knowledge" means
that no facts are known by or have been brought to the attention of ▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ which are
inconsistent with the representations set forth herein, without such individuals
having done any specific inquiry or investigation.
9.1.1 This Agreement constitutes the legal, valid and binding obligation
of Seller, enforceable in accordance with its terms, subject to laws applicable
generally to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles affecting or limiting the right of
contracting parties generally.
9.1.2 Seller: (a) is not in receivership or dissolution; (b) has not
made any assignment for the benefit of creditors; (c) has not admitted in
writing its inability to pay its debts as they mature; (d) has not been
adjudicated a bankrupt; (e) has not filed a petition in voluntary bankruptcy, a
petition or answer seeking reorganization, or an arrangement with creditors
under the Federal Bankruptcy Law or any other similar law or statute of the
United States or any state; and (f) does not have any such petition described in
subsection (e) filed against Seller.
9.1.3 Seller is not a "foreign person" within the meaning of Section
1445 of the Internal Revenue Code of 1986 (i.e., Seller is not a non-resident
----
alien, foreign corporation, foreign partnership, foreign trust or foreign
estate, as those terms are defined in the Internal Revenue Code and regulations
promulgated thereunder). Seller is organized under the laws of the State of
California and is qualified to do business in the State of California.
Page 19 of 33
9.1.4 To the best of Seller's actual knowledge, during the period of
Seller's ownership of the Property and the occupancy of the Leasehold Properties
by MSCL, no Hazardous Materials are or have been installed or stored in, or
otherwise existing at, on, in or under, the Property or Leasehold Properties or
any portion thereof excluding the safe and lawful use and storage of quantities
of Hazardous Materials in accordance with Environmental Laws (as hereinafter
defined). As used in this Agreement: (a) "HAZARDOUS MATERIALS" means any
hazardous, toxic or dangerous waste, substance or material, pollutant or
contaminant under the Environmental Laws, and (b) "ENVIRONMENTAL LAWS" means (i)
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. Sections 9601, et seq.), as amended, (ii) the Resource Conservation
-- ----
and Recovery Act (42 U.S.C. Sections 6901, et seq.), as amended, and (iii) any
-- ----
other federal, state or local law, ordinance or regulation applicable to the
Property relating to industrial hygiene or environmental conditions.
9.1.5 To the best of Seller's actual knowledge, there are no Service
Contracts effecting the Property to which Seller is a party.
9.1.6 No outstanding notices ("NOTICE OF VIOLATION") of any violation of
law or ordinances, orders, requirements or regulations of any federal, state,
county, municipal or other governmental or quasi-governmental department, agency
or authority (collectively, "VIOLATIONS") relating to the Property or any
portion thereof or the Leasehold Properties have been received by Seller and, to
the best of Seller's actual knowledge, there is no basis for the entering of any
Notice of Violation.
9.1.7 To the best of Seller's actual knowledge, all water, storm and
sanitary sewer, gas, electricity, telephone and other utilities serving the
Property and all portions thereof are supplied directly to the Property by
facilities of public or municipal utilities.
9.1.8 To the best of Seller's actual knowledge, there are no federal,
state, county, municipal or other governmental plans to change the highway or
road system in a manner which will restrict or change access from any such
highway or road to the Property or any portion thereof or the Leasehold
Properties.
9.1.9 To the best of Seller's actual knowledge, all policies of insurance
for the Property and all portions thereof are in full force and effect and no
notices have been received by Seller from any insurance company issuing any of
such policies with which Seller has not complied.
9.1.10 To the best of Seller's actual knowledge, there are no pending or
threatened special or other assessments for
Page 20 of 33
public improvements or otherwise affecting the Property or any portion thereof
or the Leasehold Properties.
9.1.11 No person, firm, corporation or other entity (other than Purchaser
by reason of this Agreement) has any right or option to acquire the Property or
any portion thereof.
9.1.12 To the best of Seller's actual knowledge, neither the air rights
over the Real Properties and the Improvements, nor any other "development
rights" with respect to the Real Properties and the Improvements have been
assigned, transferred or encumbered.
9.1.13 To the best of Seller's actual knowledge, except as may be
reflected in the reports delivered by Seller to Purchaser pursuant to Paragraph
3.4, there are no structural defects or material defects in the physical
condition of the Improvements or any portions thereof or the improvements on the
Leasehold Properties.
9.1.14 Except as otherwise may be disclosed in the Preliminary Title
Reports, no mechanic's or material liens have been filed, or to the best of
Seller's actual knowledge, are threatened against any of the Real Properties or
the related Improvements.
9.1.15 To the best of Seller's actual knowledge: (a) the Tenant Leases
delivered to Purchaser pursuant to Section 3.4.1(a) shall constitute all lease,
rental agreements and occupancy agreements affecting the Property which are in
effect as of the Reference Date or will be in effect as of the Closing Date and
all amendments and modifications thereto, (b) the Tenant Leases are in full
force and effect, are binding obligations of the tenants identified therein, are
enforceable in accordance with their terms and are assignable by Seller to
Purchaser without the consent of any other party and (c) there are no defaults
under the Tenant Leases.
9.1.16 To the best of Seller's actual knowledge: (a) MSCL, as applicable,
are not in breach or default of any of their respective duties or obligations
pursuant to the Assumable Leases for the Leasehold Properties, (b) the Assumable
Leases are in full force and effect and can be assigned to Purchaser, (c) there
are no defaults under the Assumable Leases, (d) the 6345 Purchase Option and the
1222 Purchase Option are in full force and effect and (e) MSCL has not
previously assigned its rights or interests under any of the Assumable Leases or
sublet any of the Leasehold Properties.
9.2 REPRESENTATIONS OF PURCHASER. Purchaser represents to Seller that
----------------------------
as of the Reference Date and the Closing Date:
Page 21 of 33
9.2.1 This Agreement constitutes the legal, valid and binding obligation
of Purchaser enforceable in accordance with its terms, subject to laws
applicable generally to applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles affecting or limiting the
right of contracting parties generally.
9.2.2 Purchaser (a) is not in receivership or dissolution, (b) has not
made any assignment for the benefit of creditors, (c) has not admitted in
writing its inability to pay its debts as they mature, (d) has not been
adjudicated as bankrupt, (e) has not filed a petition in voluntary bankruptcy, a
petition or answer seeking reorganization, or an arrangement with creditors
under the Federal Bankruptcy Law, or any similar law or statute of the United
States or any state, or (f) does not have any such petition described in
subsection (e) filed against Purchaser.
ARTICLE 10
----------
OPERATION OF THE PROPERTY DURING ESCROW PERIOD
----------------------------------------------
10.1 SELLER'S OBLIGATIONS. During the period commencing on the Reference
--------------------
Date and concluding on the earlier to occur of: (a) the Closing Date or (b)
termination of this Agreement ("ESCROW PERIOD"):
10.1.1 Seller shall, or shall cause MSCL to: (a) operate the Property and
every portion thereof only in the ordinary and usual course of business and
consistent with past practice and (b) shall not take any action or omission
which would cause any of the representations or warranties of Seller contained
herein to become inaccurate or any of the covenants of Seller to be breached.
10.1.2 Seller shall, or shall cause MSCL to: (a) continue to carry the
existing insurance through the Closing Date, and (b) not allow any breach,
default, termination or cancellation of such insurance policies or agreements to
occur or exist.
10.1.3 Without Purchaser's prior written consent in each instance, Seller
shall not and shall cause MSCL to not enter into or amend any contract or
agreement that will be an obligation affecting the Property or any portion
thereof or binding on the Purchaser after the Closing other than in the ordinary
course (provided same shall be terminable without penalty on 30 days' notice).
10.1.4 Seller shall not and shall cause MSCL to not: (a) list the Property
or any portion thereof with any broker or otherwise solicit or make or accept
any offers to sell the Property or any portion thereof, (b) engage in any
discussions or negotiations with any third party with respect to the sale or
other
Page 22 of 33
disposition of any of the Property, or (c) enter into any contracts or
agreements (whether binding or not) regarding any disposition of any of the
Property.
10.1.5 Seller shall not and shall cause MSCL to not remove any Personal
Property unless it is replaced with a comparable item of equal quality and
quantity as existed as of the time of such removal.
10.1.6 Seller shall or shall cause MSCL to not take action that would result
in the termination or expiration of any existing licenses, permits and approvals
necessary or reasonably appropriate to the ownership, operation or improvement
of the Property.
10.1.7 Without the prior written approval of Purchaser, which Purchaser may
grant or deny in its sole and absolute discretion, Seller shall not and shall
cause MSCL to not (a) file any new applications with Applicable Agencies for any
Planning Permits, (b) file any application or take any action to amend, modify
or terminate any Existing Permits or (c) amend or withdraw any Existing
Applications.
10.1.8 Seller shall have the continuing obligation during the Escrow Period
to provide Purchaser with any document which constitutes a Property Information
Document and which comes into possession of Seller or MSCL is produced by Seller
or MSCL after the initial delivery of the Property Information Documents.
10.1.9 In the event that any Hazardous Materials are discovered in, on or
under the Property prior to the Closing Date: (a) the party to this Agreement
which first learns of, or discovers, the Hazardous Materials shall promptly
provide written notice to the other party; (b) unless Seller shall provide
written notice to Purchaser that Seller, at its sole cost and expense, shall
fully remove or remediate such Hazardous Materials prior to the Closing,
Purchaser may terminate this Agreement upon delivery of written notice of
termination to Seller; (c) in the event that Seller elects to fully remove and
remediate the Hazardous Materials, completion of Seller's removal and
remediation work shall be subject to the approval by Purchaser (which shall not
be unreasonably withheld or delayed) and issuance by applicable agencies
("APPLICABLE AGENCIES") of any written certificates of compliance or completion
which are required under Environmental Laws; and (d) the full removal or
remediation of the Hazardous Materials by Seller shall be a condition to
Purchaser's obligation to close Escrow under Section 7.1. In the event that
Purchaser terminates this Agreement pursuant to this Section 10.1.10 then: (w)
this Agreement shall be terminated and cancelled as of the date of delivery of
Purchaser's termination notice to Seller and, except
Page 23 of 33
for the obligations of Purchaser set forth in Section 3.2.3 and Article 12 of
this Agreement, neither Seller nor Purchaser shall thereafter have any rights or
obligations under this Agreement; (x) Escrow shall be cancelled; (y) Purchaser
shall pay any reasonable cancellation or termination fee, if any, charged by
Escrow Holder; and (z) the Initial Deposit shall be returned to Purchaser by
Escrow Holder, together with any interest earned thereon. Seller and Purchaser
agree to promptly execute any documents reasonably requested by the other party
or Escrow Holder to evidence the termination of this Agreement and the
cancellation of Escrow.
10.1.10 With respect to the Assumable Leases, Seller shall cause MSCL to
fully and timely perform all of their respective obligations as the
tenant/lessee thereunder. Seller shall not permit MSCL to assign or transfer
any of their respective rights under the Assumable Leases or sublet any portion
of the Leasehold Properties without the prior consent of Purchaser.
10.2 ACCESS RIGHTS OF PURCHASER. Upon written notice to Seller during this
--------------------------
Escrow Period: (a) Seller shall provide Purchaser and its agents access to the
Property and all portions thereof and (b) Seller shall cause MSCL to provide
access to: (i) ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and (ii) ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇. The provisions
of Section 3.2 shall govern and apply to any such access by Purchaser and its
agents and any activities conducted by Purchaser and its agents in the course of
such access during the Escrow Period.
ARTICLE 11
----------
CONDEMNATION AND DESTRUCTION
----------------------------
11.1 CONDEMNATION.
------------
11.1.1 Promptly upon obtaining knowledge of the institution of the
proceedings for the condemnation of any part of the Real Properties and the
Improvements, Seller or Purchaser will notify the other of the pendency of such
proceedings. In the event of the condemnation of any portion of the Real
Properties and the Improvements or the sale of any portion of the Real
Properties and the Improvements in lieu of condemnation prior to the Closing,
Purchaser shall have the right to terminate or modify this Agreement, in its
sole and absolute discretion, pursuant to the provisions of Section 11.1.2. If
Purchaser does not elect to terminate or modify this Agreement pursuant to
Section 11.1.2, then this Agreement shall remain in full force and effect and,
in such event, Seller shall assign to Purchaser any and all claims for the
proceeds of such condemnation or sale, and Purchaser shall take title to the
remainder of the Real Properties and the Improvements with the assignment of
such proceeds and subject to such condemnation and without reduction in the
Purchase Price.
Page 24 of 33
11.1.2 In the event of the condemnation of any portion of the Real
Properties and the Improvements or the sale in lieu of condemnation prior to
Closing, Purchaser may terminate this Agreement by delivering a written
termination notice ("CONDEMNATION TERMINATION NOTICE"), in which case this
Agreement shall be terminated as of the date of the delivery of the Condemnation
Termination Notice to Seller. In the event that Purchaser terminates this
Agreement pursuant to delivery of a Condemnation Termination Notice to Seller,
then: (a) this Agreement shall be terminated and cancelled as of the date of
delivery of the Condemnation Termination Notice to Seller and, except for the
obligations of Purchaser set forth in Section 3.2.3 and Article 12 of this
Agreement, neither Seller nor Purchaser shall thereafter have any rights or
obligations under this Agreement; (b) Escrow shall be cancelled; (c) Purchaser
shall pay any reasonable cancellation or termination fee, if any, charged by
Escrow Holder; and (d) the Initial Deposit shall be returned to Purchaser by
Escrow Holder, together with any interest earned thereon. Seller and Purchaser
agree to promptly execute any documents reasonably requested by the other party
or Escrow Holder to evidence the termination of this Agreement and the
cancellation of Escrow.
11.2 DAMAGE OR DESTRUCTION OF IMPROVEMENTS.
-------------------------------------
11.2.1 In the event that, prior to the Closing Date, the Improvements are
damaged in whole or in part by fire or other casualty, Seller shall promptly
notify Purchaser in writing of such event. All risk of loss concerning the
Improvements shall be borne by Seller prior to the Closing Date. All risk of
loss concerning the Improvements subsequent to the Closing Date shall be borne
by Purchaser. In the event of the damage or destruction of the Improvements
prior to the Closing Date, Purchaser shall have the right to terminate or modify
this Agreement, in its sole and absolute discretion, pursuant to the provisions
of Section 11.2.2. In the event that Purchaser does not elect to terminate or
modify this Agreement pursuant to Section 11.2.2, this Agreement shall remain in
full force and effect and, in such event, Seller shall assign to Purchaser any
and all claims for the proceeds of such damage or destruction, and Purchaser
shall take title to the remainder of the Real Properties and the Improvements
with the assignment of such proceeds and subject to such damage and without
reduction in the Purchase Price.
11.2.2 Within fifteen (15) business days following the earlier to occur
of Purchaser learning of or receiving notice in writing by Seller of such damage
of any part of the Improvements ("DAMAGE NOTICE PERIOD"), Purchaser may
terminate this Agreement by delivering a written termination notice ("DAMAGE
TERMINATION NOTICE"), in which case this Agreement shall be terminated as of the
date of the delivery of the Damage Termination Notice to Seller. In the event
that Purchaser terminates this Agreement pursuant to delivery of a Damage
Termination Notice to Seller,
Page 25 of 33
then: (a) this Agreement shall be terminated and cancelled as of the date of
delivery of the Damage Termination Notice to Seller and, except for the
obligations of Purchaser set forth in Section 3.2.3 and Article 12 of this
Agreement, neither Seller nor Purchaser shall thereafter have any rights or
obligations under this Agreement; (b) Escrow (as hereinafter defined) shall be
cancelled; (c) Purchaser shall pay any reasonable cancellation or termination
fee, if any, charged by Escrow Holder; and (d) the Initial Deposit shall be
returned to Purchaser by Escrow Holder, together with any interest earned
thereon. Seller and Purchaser agree to promptly execute any documents reasonably
requested by the other party or Escrow Holder to evidence the termination of
this Agreement and the cancellation of Escrow.
ARTICLE 12
----------
REAL ESTATE COMMISSIONS
-----------------------
12.1 PAYMENT OF COMMISSION. Seller shall be solely responsible for the
---------------------
payment to Barrington Associates ("AUTHORIZED BROKER") of a brokerage commission
in connection with the sale of the Property from Seller to Purchaser.
12.2 CROSS-INDEMNITY. Seller and Purchaser each represent to the other
---------------
that, except as set forth in Section 12.1 with respect to the Authorized Broker,
they have not authorized any broker or finder to act on their behalf in
connection with the sale of the Property to Purchaser under this Agreement and
that such party has not dealt with any broker or finder purporting to act on
behalf of any other party. Seller and Purchaser agree to indemnify and hold
harmless the other party from and against any and all losses, liens, claims,
judgments, liabilities, costs, expenses or damages (including reasonable
attorneys' fees and court costs) of any kind or character arising out of or
resulting from any agreement, arrangement or understanding (except as set forth
above with respect to the Authorized Broker) alleged to have been made by such
party or on its behalf with any broker or finder in connection with this
Agreement or the transaction contemplated hereby.
ARTICLE 13
----------
REMEDIES
--------
13.1 SELLER'S REMEDY. IN THE EVENT THAT THE CLOSING SHALL NOT OCCUR AS A
---------------
RESULT OF A DEFAULT BY PURCHASER IN THE PERFORMANCE OF ITS OBLIGATIONS
HEREUNDER, THEN SELLER, AS ITS SOLE AND EXCLUSIVE REMEDY, MAY TERMINATE THIS
AGREEMENT BY NOTIFYING PURCHASER THEREOF AND RETAIN THE DEPOSIT, AND ANY
INTEREST EARNED THEREON, AS LIQUIDATED DAMAGES. THE PARTIES AGREE THAT SELLER
WILL SUFFER DAMAGES IN THE EVENT OF PURCHASER'S DEFAULT ON ITS OBLIGATIONS.
ALTHOUGH THE AMOUNT OF SUCH DAMAGES IS DIFFICULT OR IMPOSSIBLE TO DETERMINE, THE
PARTIES AGREE THAT THE AMOUNT OF THE DEPOSIT, AND ANY INTEREST EARNED THEREON,
IS A REASONABLE ESTIMATE OF SELLER'S LOSS IN THE EVENT OF PURCHASER'S DEFAULT.
THUS, SELLER
Page 26 of 33
SHALL ACCEPT AND RETAIN THE DEPOSIT, AND ANY INTEREST EARNED THEREON, AS
LIQUIDATED DAMAGES BUT NOT AS A PENALTY. SUCH LIQUIDATED DAMAGES SHALL
CONSTITUTE SELLER'S SOLE AND EXCLUSIVE REMEDY. IN CONSIDERATION OF SELLER
RECEIVING THE LIQUIDATED DAMAGES, SELLER WILL BE DEEMED TO HAVE WAIVED ALL OF
ITS CLAIMS AGAINST PURCHASER FOR DAMAGES. THE PROVISIONS OF THIS SECTION 13.1
SHALL NOT RELIEVE PURCHASER OF ITS OBLIGATIONS UNDER SECTION 3.2.3 AND ARTICLE
12.
SELLER AND PURCHASER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE
PROVISIONS OF THE FOREGOING LIQUIDATED DAMAGES PROVISION AND BY THEIR SIGNATURES
IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.
"SELLER"
▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Trustees of the ▇▇▇▇▇ Family Trust
dated November 11, 1991
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------
▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Trustees of the Chubak Family Trust dated
January 10, 1992
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Trustees of the ▇▇▇▇▇▇▇▇ Family Trust
dated October 31, 1991
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Trustees of the Solomon Family Trust
dated January 23, 1997
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee
"PURCHASER"
FOUR MEDIA COMPANY,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
Title: Chairman & Chief Executive Officer
----------------------------------
Page 27 of 33
13.2 AVAILABLE REMEDIES. In the event of a default by Seller of its
------------------
obligations hereunder, Purchaser shall have all rights and remedies available
under this Agreement at law or in equity, including, without limitation, the
remedies of specific performance and injunctive relief.
ARTICLE 14
----------
GENERAL PROVISIONS
------------------
14.1 NOTICES.
-------
14.1.1 IN WRITING/ADDRESSES. All notices, statements, demands, consents
--------------------
and other communications ("NOTICES") required or permitted to be given by any
party to another party pursuant to this Agreement or pursuant to any applicable
law or requirement of public authority shall be properly given only if the
Notice is (a) made in writing (whether or not so stated elsewhere in this
Agreement), (b) given by one of the methods prescribed in Section 14.1.2, and
(c) sent to the party to which it is addressed at the address set forth below or
at such other address as such party may hereafter specify by at least fifteen
(15) days' prior written notice:
If to Seller: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
--------------
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser: Four Media Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
--------------
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Page 28 of 33
If to Title
Company: Chicago Title Company
Title Department
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Rad ▇▇▇▇▇▇, Title Officer
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Escrow
Holder: Chicago Title Company
Escrow Department
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇ ▇▇▇▇▇▇▇▇,
Escrow Officer
Escrow No. 8100163X41
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
14.1.2 METHOD OF DELIVERY. Notices may be either (a) mailed by United
------------------
States certified mail, return receipt requested, postage prepaid, (b) delivered
by hand, (c) delivered by a nationally recognized overnight courier which
maintains evidence of receipt, or (d) sent by facsimile transmission with a
confirmation copy delivered the following day by a nationally recognized
overnight courier which maintains evidence of receipt. Notices shall be
effective on the date of receipt. If any Notice is not received or cannot be
delivered due to a change in address of the receiving party, of which notice was
not properly given to the sending party, or due to a refusal to accept by the
receiving party, such Notice shall be effective on the date delivery is
attempted.
14.2 ASSIGNMENT.
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14.2.1 Purchaser shall have the right to assign all of its interest in this
Agreement without the prior written consent of Seller provided that all of the
following conditions are satisfied: (a) the proposed assignee is a legal entity
which was formed and is operating under laws of one of the United States, or is
a resident of the United States; (b) Purchaser delivers to Seller a written
notice of the proposed assignment to the assignee no less than one (1) business
day prior to the Closing Date; (c) the proposed assignee executes a written
agreement, in form and consent reasonably satisfactory to Seller and Seller's
counsel, to assume all of the obligations of Purchaser under this Agreement.
Purchaser acknowledges and agrees that any assignment of its rights under this
Section 14.2.1 shall not release Purchaser of any of its obligations under this
Agreement.
14.2.2 Seller and Purchaser mutually agree that the provisions of Section
14.2.1 shall not apply to Purchaser's right
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to assign for collateral purposes, without the prior consent of Seller, all its
interest in this Agreement to Canadian Imperial Bank of Commerce ("CIBC") and
its successors and assigns for the benefit of the several banks and other
financial institutions (the "LENDERS") from time to time parties to the Credit
Agreement, dated as of February 27, 1998, as amended by Amendment No. 1, dated
as of July 31, 1998 and Amendment No. 2, dated as of August 28, 1998, and as may
be further amended, restated, supplemented or otherwise modified from time to
time, the ("CREDIT AGREEMENT") among Purchaser, the Lenders, CIBC, as issuer of
certain letters of credit, CIBC, as administrative agent for the Lenders, Union
Bank of California, N.A., as documentation agent for the Lenders, Bank of
America, NT&SA, as syndication agent for the Lenders and Societe Generale, as
co-agent.
14.2.3 The terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective permitted
successors and assigns, except as expressly set forth herein.
14.3 ATTORNEYS' FEES AND LEGAL EXPENSES. Should either party hereto
----------------------------------
institute any action or proceeding in court or through arbitration to enforce
any provision hereof or for damages by reason of any alleged breach of any
provision of this Agreement or for any other remedy, the prevailing party shall
be entitled to receive from the losing party all reasonable attorneys' fees and
all court and/or arbitration costs in connection with said proceeding.
14.4 REPORTING OF FOREIGN INVESTMENT. Seller and Purchaser agree to comply
-------------------------------
with any and all reporting requirements applicable to the transaction which is
the subject of this Agreement which are set forth in any law, statute,
ordinance, rule, regulation, order or determination of any governmental
authority, including, but not limited to, The International Investment Survey
Act of 1976, The Agricultural Foreign Investment Disclosure Act of 1978, The
Foreign Investment in Real Property Tax Act of 1980, the Tax Reform Act of 1984,
and California Revenue and Taxation Code Section 18662, and further agree upon
request of one party to furnish the other party with evidence of such
compliance.
14.5 TIME CALCULATIONS. Should the calculation of any of the various time
-----------------
periods provided for herein result in an obligation becoming due on a Saturday,
Sunday or legal holiday, then the due date of such obligation or scheduled time
of occurrence of such event shall be delayed until the next business day.
14.6 ENTIRE AGREEMENT. This Agreement embodies the entire agreement
----------------
between the parties hereto related to the subject matter hereof and supersedes
any prior understandings or written or oral agreements between the parties
concerning the Property.
Page 30 of 33
14.7 APPLICABLE LAW. This Agreement shall be construed and interpreted in
--------------
accordance with the laws of the State of California.
14.8 AMENDMENTS. This Agreement may be varied, modified, amended, altered
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or terminated only by written agreement signed by both Seller and Purchaser.
14.9 SEVERABILITY. If any portion of this Agreement is held to be
------------
unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall remain in full force and effect.
14.10 FURTHER ASSURANCES. Purchaser and Seller agree to execute all
------------------
documents and instruments reasonably required in order to consummate the
purchase and sale herein contemplated.
14.11 COUNTERPART EXECUTION. This Agreement may be executed in multiple
---------------------
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one document.
14.12 GENDER AND NUMBER. Within this Agreement, words of any gender shall
-----------------
be held and construed to include any other gender, and words in the singular
number shall be held and construed to include the plural, unless the context
otherwise requires.
14.13 SECTION HEADINGS. The Section headings contained in this Agreement
----------------
are for convenience only and shall in no way enlarge or limit the scope or
meaning of the various and several Sections hereof.
14.14 EXHIBITS INCORPORATED BY REFERENCE. All exhibits attached to this
----------------------------------
Agreement are incorporated into this Agreement by reference.
14.15 PUBLICITY. Seller and Purchaser shall not issue any press release or
---------
make any other public statement, in each case, relating to, in connection with
or arising out of this Agreement or the transactions contemplated hereby,
without obtaining the prior approval of the other, which shall not be
unreasonably withheld or delayed, except that prior approval shall not be
required if, in the reasonable judgment of Purchaser, prior approval by Seller
would prevent the timely dissemination of such release or statement in violation
of applicable federal securities laws, rules or regulations or statement in
violation of applicable federal securities laws, rules or regulations or
policies of NASDAQ. In the event Purchaser is required by applicable federal
securities laws, rules or regulations or policies of NASDAQ to make any public
disclosure relating to, in connection with or arising out of this Agreement or
the transactions contemplated hereby, without first obtaining the approval of
the Seller, then Purchaser shall provide to Seller no less than forty-eight (48)
hours advance notice (by
Page 31 of 33
telephone and confirmed in writing by facsimile) and Seller shall then have the
option to terminate this Agreement upon written notice from Seller to Purchaser.
In the event that Purchaser terminates this Agreement pursuant to this Section
14.15, then: (a) this Agreement shall be terminated and cancelled as of the date
of delivery of the termination notice to Seller and, except for the obligations
of Purchaser set forth in Section 3.2.3 and Article 12 of this Agreement,
neither Seller nor Purchaser shall thereafter have any rights or obligations
under this Agreement; (b) Escrow shall be cancelled; (c) Purchaser shall pay any
reasonable cancellation or termination fee, if any, charged by Escrow Holder;
and (d) the Initial Deposit shall be returned to Purchaser by Escrow Holder,
together with any interest earned thereon. Seller and Purchaser agree to
promptly execute any documents reasonably requested by the other party or Escrow
Holder to evidence the termination of this Agreement and the cancellation of
Escrow.
IN WITNESS WHEREOF, Seller and Purchaser have executed this Agreement as of
the date first above written.
"SELLER"
▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Trustees of the ▇▇▇▇▇ Family Trust dated November 11, 1991
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustees of the
▇▇▇▇▇▇▇▇ Family Trust dated October 31, 1991
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Trustee
Page 32 of 33
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Trustees of the Chubak Family Trust dated January 10, 1992
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustees of the Solomon
Family Trust dated January 23, 1997
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Trustee
"PURCHASER"
FOUR MEDIA COMPANY,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman & Chief Executive Officer
Page 33 of 33