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EXHIBIT 10.6
PURCHASE AND SALE AGREEMENT
by and among
[SELLER]
and
Palace Operating Partnership, L.P., a
Delaware limited partnership
as
the Operating Partnership
and
PALACE REIT, a
Texas real estate investment trust
as
the Company
Dated as of ___________, 1998
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TABLE OF CONTENTS
ARTICLE 1. SUBJECT OF CONVEYANCE...........................................................................1
Section 1.1 Conveyance of the Property...................................................1
Section 1.2 Excluded Assets..............................................................2
ARTICLE 2. VALUE AND PAYMENT TERMS.........................................................................2
Section 2.1 Consideration................................................................2
ARTICLE 3. TITLE...........................................................................................3
Section 3.1 Independent Contract Consideration...........................................3
Section 3.2 Inspection Materials.........................................................3
Section 3.3 Title Commitment and Survey..................................................3
Section 3.4 Title Policy.................................................................4
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER
...............................................................................................4
Section 4.1 Seller's Representations and Warranties......................................4
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP AND THE COMPANY....................................................................10
Section 5.1 Palace's Representations and Warranties......................................10
ARTICLE 6. COVENANTS......................................................................................11
Section 6.1 Covenants of Seller.........................................................11
Section 6.2 Confidentiality.............................................................12
Section 6.3 Cooperation.................................................................13
Section 6.4 Time of Closing.............................................................13
ARTICLE 7. CLOSING........................................................................................13
Section 7.1 The Closing.................................................................13
(i)
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Section 7.2 Deliveries at the Closing by Seller.........................................13
Section 7.3 Deliveries at the Closing by Palace.........................................15
Section 7.4 Fees and Expenses...........................................................15
ARTICLE 8. ADJUSTMENTS....................................................................................15
Section 8.1 Adjustments at the Closing Date.............................................15
Section 8.2 Adjustments for Assessments.................................................16
Section 8.3 Other Adjustments...........................................................16
Section 8.4 Errors in Calculations......................................................17
Section 8.5 Survival....................................................................17
ARTICLE 9. CONDITIONS PRECEDENT TO CLOSING................................................................17
Section 9.1 Conditions to Obligations of Seller.........................................17
Section 9.2 Conditions to Obligations of Palace ........................................17
ARTICLE 10. ASSIGNMENT.....................................................................................18
ARTICLE 11. BROKERS/COMMISSIONS............................................................................18
ARTICLE 12. CASUALTY LOSS..................................................................................18
Section 12.1 Maintenance of Insurance Policies...........................................18
Section 12.2 Risk of Loss................................................................18
ARTICLE 13. CONDEMNATION...................................................................................19
ARTICLE 14. DEFAULT/REMEDIES...............................................................................19
Section 14.1 Termination by Palace........................................................19
Section 14.2 Termination by Seller ......................................................20
ARTICLE 15. TAX MATTERS....................................................................................20
Section 15.1 Payment of Taxes by Seller..................................................20
(ii)
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Section 15.2 Definition of Taxes.........................................................20
Section 15.3 Allocation Method...........................................................21
Section 15.4 Seller Reliance.............................................................21
Section 15.5 Survival....................................................................21
ARTICLE 16. NOTICE................................................................................22
ARTICLE 17. MISCELLANEOUS.........................................................................22
Section 17.1 Survival of Representation and Warranties...................................22
Section 17.2 Entire Agreement; No Third-Party Rights.....................................22
Section 17.3 Amendment...................................................................22
Section 17.4 Governing Law...............................................................22
Section 17.5 Section Headings............................................................22
Section 17.6 Severability................................................................22
Section 17.7 No Other Rights or Obligations..............................................22
Section 17.8 Counterparts................................................................22
Section 17.9 Construction................................................................22
Section 17.10 Attorneys' Fees.............................................................22
Section 17.11 Interpretation..............................................................23
Section 17.12 Exclusivity.................................................................23
(iii)
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SCHEDULES
Schedule 1.1(a) Land
Schedule 1.1(d) Leases
Schedule 1.1(e) Service Contracts
Schedule 1.2 Excluded Assets
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "AGREEMENT") dated as of
_______________________, 1998 (the "EFFECTIVE DATE") is made and entered by and
among _____________________________ (the "SELLER"), PALACE REIT, a Texas real
estate investment trust (the "COMPANY"), and PALACE OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"). The Company and
the Operating Partnership are sometimes hereinafter collectively referred to as
"PALACE".
RECITALS
A. Seller owns certain improved real property.
B. The Operating Partnership desires to acquire such real
property from Seller in exchange for cash. Closing hereunder will be contingent
on and concurrent with the closing of the initial public offering of the shares
of common stock of the Company (the "OFFERING").
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound hereby, do hereby agree as follows:
ARTICLE 1. SUBJECT OF CONVEYANCE.
Section 1.1 Conveyance of the Property. In accordance with the terms
and conditions of this Agreement and subject to Palace's performance and
satisfaction of the conditions, covenants and obligations contained herein,
Seller shall sell to the Operating Partnership all of its right, title and
interest in and to the following assets:
(a) the real property described on Schedule 1.1(a) (the
"LAND") and all the buildings, structures, parking areas, landscaping and
improvements located on the Land and all fixtures and other property affixed
thereto (the "IMPROVEMENTS");
(b) (i) any and all rights, titles, power, privileges, grants,
easements, licenses, rights-of-way and interests appurtenant to the Land and the
Improvements, including, without limitation, air rights, water and water rights,
sanitary sewer rights and capacities, development rights, and rights and
interests in and to minerals, oil and gas and other hydro carbons; (ii) any and
all rights, titles, power, privileges, grants, easements, licenses, easements,
rights-of-way and interests of Seller, either at law or in equity in possession
or in expectancy, in and to any real estate lying in the streets, highways,
roads, alleys, rights-of-way or sidewalks, open or proposed, in front of, above,
over, under, through or adjoining the Land and in and to any strips or gores of
real estate adjoining the Land; and (iii) all of Seller's right, title, claim
and interest, if any, in and to any and all rights, titles, power, privileges,
grants, easements, licenses, rights-of-way and interest appurtenant to or
incident to any of the foregoing (the Land and the Improvements and all of the
foregoing are sometimes referred to herein as the "REAL PROPERTY");
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(c) all personal property, fixtures, equipment, inventory and
computer programming and software owned or licensed by Seller and located on any
of the Real Property (collectively, the "PERSONAL PROPERTY");
(d) all leases and other agreements with respect to the use
and occupancy of the Real Property described in the rent roll attached as
Schedule 1.1(d), together with all amendments and modifications thereto and any
guaranties provided thereunder (the "LEASES"), and rents, additional rents,
reimbursements, profits, income, receipts and the amount deposited (the
"SECURITY DEPOSITS") under the Leases in the nature of refundable security for
the obligations of the performance of those parties occupying space at the Real
Property (the "LESSEES") under such Lease;
(e) (i) all permits, licenses, certificates of occupancy,
approvals, dedications, subdivision maps or plats and entitlements issued,
approved or granted by any applicable governmental authority in connection with
the construction, development, ownership, use or operation of the Real Property,
and all other certificates, guaranties and warranties relating to the Real
Property (collectively, the "PERMITS AND LICENSES") and (ii) all of Seller's
right, title and interest in and to those contracts and agreements described in
Schedule 1.1(e) for the servicing, maintenance and operation of the Real
Property (the "SERVICE CONTRACTS"); (the Permits and Licenses and the Service
Contracts are herein collectively called the "INTANGIBLE PROPERTY");
(f) all books, records, promotional materials, tenant data,
leasing material and forms, past and current rent rolls, files, statements, tax
returns, market studies, keys, plans, specifications, reports, tests and other
materials of any kind owned by Seller that are or may be used by Seller in the
use and operation of the Real Property or the Personal Property (collectively,
the "BOOKS AND RECORDS");
(g) any and all structural reviews, architectural drawings,
engineering, environmental, soils, seismic, geological and architectural
reports, studies and certificates and all plans, specifications and drawings of
the Improvements or any portion thereof (collectively, the "TESTS AND PLANS");
(h) all Seller's right, title, claim and interest, if any, in
and to all trademarks, trade names or symbols under which the Real Property (or
any part thereof) is operated; and
(i) all other rights, privileges and appurtenances owned by
Seller and in any way related to the rights and interests described above in
this Section 1.1.
The Real Property, the Personal Property, the Leases, the Security
Deposits, the Intangible Property, the Books and Records, the Tests and Plans
and the other property interests being transferred hereunder are hereinafter
collectively referred to as the "PROPERTY."
Section 1.2 Excluded Assets. In addition to such other property, rights
and interests of Seller which are excluded from the sale contemplated by this
Agreement through separate, specific reference elsewhere in this Agreement, all
of Seller's right, title and interest in and to the items
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described in Schedule 1.2 are expressly retained by Seller and excluded from any
sale otherwise contemplated by this Agreement.
ARTICLE 2. VALUE AND PAYMENT TERMS.
Section 2.1 Consideration. At the Closing, the Operating Partnership
shall pay Seller in cash an amount equal to _______________ percent (_____%) of
the proceeds received by the Operating Partnership from the Offering less
underwriters' fees, offering expenses, including, but not limited to, SEC fees,
NASD fees, printing and engraving expenses, accounting fees and expenses, legal
fees and expenses, blue sky fees, NASDAQ listing fees, transfer agent and
registrar fees and miscellaneous expenses, and $50,000.00 working capital for
the Operating Partnership (the "CASH CONSIDERATION").
ARTICLE 3. TITLE.
Section 3.1 Independent Contract Consideration. Contemporaneously with
the execution and delivery of this Agreement, the Operating Partnership has
delivered to Seller, and Seller hereby acknowledges the receipt of, a check in
the amount of One Hundred Dollars ($100.00) ("INDEPENDENT CONTRACT
CONSIDERATION"), which amount the parties bargained for and agreed to as
consideration for the Operating Partnership's exclusive right to purchase the
Property pursuant to this Agreement and for Seller's execution, delivery and
performance of this Agreement. The Independent Contract Consideration is in
addition to and independent of any other consideration or payment provided in
this Agreement, is nonrefundable, and it is fully earned and shall be retained
by Seller notwithstanding any other provision of this Agreement.
Section 3.2 Inspection Materials. The Seller shall allow the Operating
Partnership and its representatives access to all financial and other
information relating to the Property sufficient to enable them to prepare
audited financial statements in conformity with Regulation S-X of the Securities
and Exchange Commission and such other information as may be necessary in
connection with any filings or other disclosures under applicable stock exchange
rules or securities laws.
Section 3.3 Title Commitment and Survey. As soon as practicable after
the Effective Date, Seller shall obtain and deliver to the Operating
Partnership, at Seller's sole cost and expense, the following as to the
Property:
(a) Title Commitment. A Commitment for Title Insurance (the
"TITLE COMMITMENT") issued by National Title Company, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇.▇. ▇▇▇▇▇▇▇▇, Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇ (the "TITLE
COMPANY") for a title insurance underwriter acceptable to the Operating
Partnership, for the most recent form of ALTA owner's policy, covering the Land
and Improvements, in an amount designated by the Operating Partnership and
providing for such endorsements as the Operating Partnership may reasonably
require, setting forth the current status of the title to the Land and
Improvements, showing all liens, claims, encumbrances, easements, rights of way,
encroachments, reservations, restrictions, and any other matters affecting the
Land and Improvements, and pursuant to which the Title Company agrees to issue
to the Operating Partnership at Closing an Owner's Policy of Title Insurance
(the "TITLE POLICY") on the most recent form of ALTA comprehensive coverage
owner's policy endorsed as the Operating Partnership may reasonably require. The
Title Commitment shall be accompanied by a true, complete, and legible copy of
all documents and instruments (as recorded, where applicable)
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(the "SUPPORTING DOCUMENTS") referred to or identified in the Title Commitment,
including, but not limited to, all deeds and other conveyance documents
evidencing transfer of title into Seller, lien instruments, leases, plats,
surveys, reservations, restrictions and easements.
(b) UCC Search. Current written reports (the "UCC SEARCHES")
from the Office of the Secretary of State of the State where the Property is
located and the deed recording offices of the county where the Property is
located reflecting the results of current searches of the Uniform Commercial
Code Records maintained by such offices, said UCC Searches to be made under the
name of Seller.
(c) Survey. An "as built" survey (the "SURVEY"), of the Land
and Improvements made on the ground and certified by a professional land
surveyor licensed in the State in which the Property is located and approved by
the Title Company and Operating Partnership (the "SURVEYOR"). If different from
the description contained in Schedule 1.1(a) attached to this Agreement, the
legal description of the Land contained in the Survey (once the correctness
thereof has been confirmed by Seller, the Operating Partnership and the Title
Company) shall be substituted for the description of the Land contained in said
Schedule 1.1(a). Such description, if available, shall be used in the Title
Policy and the Deed to be delivered at Closing.
(d) Procedure for Objections to Title Commitment and Survey.
The Operating Partnership shall have ten (10) days after receipt of the last of
the Title Commitment together with complete and legible copies of all Supporting
Documents and the Survey to notify Seller in writing (the "OBJECTION NOTICE") of
any objections the Operating Partnership may have to matters reflected in or
relating to the Title Commitment, the Supporting Documents or the Survey. If
Seller has not cured or undertaken in writing to cure prior to Closing any
objection set forth in the Objection Notice to the Operating Partnership's
reasonable satisfaction by Closing, the Operating Partnership shall be entitled
to terminate this Agreement by written notice given by Closing. If the Operating
Partnership shall terminate this Agreement under this Section 3.3(d), neither
Palace nor Seller shall have any further right or obligation hereunder except
for rights or obligations which survive termination of this Agreement. If the
Operating Partnership has not terminated this Agreement as provided in this
Section 3.3(d), any objection reflected in the Title Commitment which Seller has
failed to cure shall be a Permitted Encumbrance, unless Seller shall have
undertaken in writing to cure such objection prior to Closing. As used in this
Agreement, the term "PERMITTED ENCUMBRANCE" shall mean any title exception
reflected in the Title Commitment as to which the Operating Partnership either
did not object in accordance with Section 3.3(d) or any such title exception as
to which the Operating Partnership did object that is not cured prior to Closing
in accordance with Section 3.3(d).
Section 3.4 Title Policy. At the Closing, Seller shall provide to the
Operating Partnership, at Seller's sole cost and expense, as to the Property,
the Title Policy issued pursuant to the Title Commitment, dated as of the
Closing Date, in an amount designated by the Operating Partnership and insuring
that the Operating Partnership has good and marketable title to the Property in
fee simple subject to no exceptions other than the Permitted Encumbrances. The
Title Policy shall be in the form required by Section 3.3(a).
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ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Section 4.1 Seller's Representations and Warranties. In order to induce
the Company and the Operating Partnership to enter into this Agreement and to
perform their respective obligations hereunder, Seller hereby warrants and
represents the following, with respect to itself and to the Property:
(a) Organization, Good Standing and Power. Seller is duly
organized, validly existing and in good standing, under the laws of the
jurisdiction in which it was organized, is duly authorized to transact business
under the laws of each state in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, and has all requisite power and authority to execute
and deliver this Agreement and all other documents and instruments to be
executed and delivered by it hereunder and to perform its obligations hereunder
and thereunder in accordance with the terms and conditions hereof and thereof.
(b) Authorization; No Violation. Assuming the due and valid
authorization, execution and delivery of this Agreement by Palace, this
Agreement, and the other agreements and documents to be executed by Seller
hereunder, will be the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or similar laws relating to
creditors' rights and general principles of equity. The performance by Seller of
its duties and obligations under this Agreement and the documents and
instruments to be executed and delivered by it hereunder will not (i) conflict
with, or result in a breach of, or default under, any provision of any of the
Organizational Documents (hereinafter defined) of Seller or any agreement,
instrument, decree, judgment, injunction, order, writ, law, rule or regulation,
or any determination or award of any court or arbitrator, to which Seller is a
party or by which its assets are or may be bound (a "LEGAL REQUIREMENT") or (ii)
require any consent, approval or authorization of, declaration, filing or
registration with, or notice to, any federal, state or local governmental or
regulatory authority having jurisdiction over the Property or Seller (a
"GOVERNMENTAL AUTHORITY") or any other person or entity or (iii) result in the
creation of any lien or other encumbrance on the Property. As used herein, the
term "ORGANIZATIONAL DOCUMENTS" means as to any entity, its articles or
certificate of incorporation and its bylaws as each of the foregoing may have
been or may hereafter be amended from time to time.
(c) No Right to Acquire Property. No person has any right or
option to acquire all or any portion of the Property or any interest therein.
(d) Title to Property. Seller has, and on the Closing Date
will convey to the Operating Partnership, good and marketable title to the
Property, free and clear of any and all liens and encumbrances.
(e) Organizational Documents. The Organizational Documents of
Seller are in full force and effect and have not been amended except pursuant to
written instrument delivered to Palace. No default has occurred and is
continuing under any such Organizational Document, and
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no fact or circumstance has occurred which in and of itself, or with the giving
of notice or the passage of time, or both, would constitute such a default.
(f) Work on Real Property; Liens. No work has been performed
on any Real Property that would require an amendment to the certificate of
occupancy for such Real Property for which an amendment has not been obtained,
and, to Seller's knowledge, any and all work performed at the Real Property as
of the Effective Date has been, and to the Closing Date will be, performed in
all material respects in accordance with all Legal Requirements of all
applicable Governmental Authorities. Except for items being paid by Seller at
Closing or prorated at Closing, there are no outstanding accounts payable or
unpaid debts relating to the Property that are binding on Seller or would be
binding on the Operating Partnership or the Property, including, without
limitation, any unpaid charges, debts, liabilities, claims or obligations
arising from the construction, occupancy, ownership, use or operation of the
Property, which could give rise to any mechanic's or materialmens' or other
statutory liens against any portion of the Property.
(g) Validity of Service Contracts and Leases. There are no
service contracts, management or maintenance agreements, leases or other
agreements affecting the use or occupancy of the Real Property or other
agreements otherwise affecting the Property or the operation thereof other than
the Service Contracts and the Leases. All of the Service Contracts and the
Leases are, and as of the Effective Date and on the Closing Date will be, in
full force and effect without any material default or claim of material default
by any party thereto. To Seller's knowledge, all sums presently due and payable
by Seller under the Service Contracts have been fully paid, and all sums which
become due and payable thereunder between the Effective Date and the Closing
Date shall be fully paid by Seller within the time periods required thereby. All
agreements with respect to the Property, including, without limitation, all
Leases and Service Contracts, heretofore delivered by Seller to the Operating
Partnership or its representatives for examination, are true, correct, and
complete copies thereof, and have not been amended except as evidenced by
amendments similarly delivered. Seller has not entered into any agreement
regarding, nor is the Property or any part thereof subject to, any rights to
acquire or to lease the Property or any part thereof, or to otherwise obtain any
interest therein, and there are no outstanding rights of first refusal, rights
of reverter, purchase options or rights of first offer relating to the Property
or any interest therein.
(h) Litigation. There is no litigation, claim, audit, action,
or proceeding pending or, to Seller's knowledge, threatened before or by any
Governmental Authority or by Seller or by any other person or entity in any
manner adversely affecting the Property, or the ability of Seller to perform any
of its obligations hereunder, and also including, without limitation, any matter
seeking to (i) enjoin, restrain, prohibit or affect the transaction contemplated
hereby, (ii) increase significantly any ad valorem taxes previously assessed or
to be assessed in connection with the Property, (iii) enjoin a violation of the
Property concerning any Legal Requirement or (iv) attach any portion of the
Property.
(i) No Actions Relating to Property. Seller has not received
any notice of, nor to Seller's knowledge are there any facts or circumstances
which could give rise to, any pending liens or special assessments or taxes
against any portion of the Property by any Governmental Authority. There is no
pending, or to Seller's knowledge, threatened, condemnation, environmental,
zoning or
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other land-use regulation proceeding against the Property or any portion
thereof, nor does Seller have any knowledge of any public request, plans,
proceedings or proposals for changes in road grade, access, road widening,
realignment or other modification or other municipal improvements or other
matters that may materially affect the Property or (i) result in a tax, levy or
assessment against the Property, or (ii) that could cause a change or
modification of the zoning classification or of any other Legal Requirements
applicable to the Property or any part thereof or applicable to any property
adjacent to the Property, or (iii) otherwise detrimentally affect the use,
zoning, operation or value of the Property.
(j) Compliance With Legal Requirements.
(i) Violations. The Property, as improved by
the Improvements, and the use and operation thereof, do not violate any Legal
Requirement of any applicable Governmental Authority or any easement or
restriction affecting the Property, and Seller has not received any notice that
any building or other improvement not included in any part of the Property
relies on any part of the Property to fulfill any Legal Requirement applicable
to the Property.
(ii) Licenses. Permanent certificates of
occupancy and all licenses, permits, authorizations and approvals required from
all Governmental Authorities and local boards of fire underwriters (or similar
body) have been issued and are in effect for each building or structure
constituting a portion of the Improvements and have been paid for in full and
are in full force and effect.
(iii) No Agreements. There are no agreements
with or commitments to any Governmental Authorities, agencies, utilities or
quasi-governmental entities or other third parties with respect to the Property
which would bind the Property or the Operating Partnership following the Closing
Date, including, without limitation, any agreements or commitments which will
impose an obligation upon the Operating Partnership or its successors or assigns
to make any contribution or dedication of money or land or to construct, install
or maintain any improvements of a public or private nature on or off the
Property, except those agreements which are identified in the Title Commitment
and disclosed by Survey. To Seller's knowledge, no governmental authority has
imposed any requirement that any owner or developer of the Property pay directly
or indirectly any special fees or contributions or incur any expenses or
obligations in connection with any development of the Property or any portion
thereof.
(iv) Access/Improvements. The Real Property has
access to and from dedicated streets. Seller has no knowledge of any pending or
threatened governmental proceeding or any other fact or condition which would
purport to limit or would result in the termination of such access to and from
public roads.
(k) Environmental Matters. With respect to environmental
matters affecting the Property:
(i) No Violation of Laws. The Property is not
in violation of any Environmental Laws. Neither Seller, nor to Seller's
knowledge any third party, has or is engaged
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in any operations or activities upon, or any use or occupancy of the Property,
or any portion thereof, for the purpose of or in any way involving the handling,
manufacture, treatment, storage, use, generation, release, discharge, refining,
dumping or disposal of any Hazardous Materials, accidental or intentional, on,
under or in the Property, or transported any Hazardous Materials to, from or
across the Property, except in compliance with Environmental Laws.
(ii) No Hazardous Materials. No Hazardous
Materials have been constructed, deposited, placed, discharged, stored, or
otherwise located on, under or in the Property by Seller or to its knowledge any
third party, except in compliance with Environmental Laws. To Seller's
knowledge, (a) the Property has not previously been used as a landfill or as a
dump for garbage or refuse, (b) no Hazardous Materials have been released into
the environment or discharged at, on, from or under the Property, and (c) no
portion of the Property contains any Hazardous Materials, including, without
limitation, any asbestos or asbestos containing materials, polychlorinated
biphenyls and radon, except to the extent that any or all of the foregoing have
been done in compliance with Environmental Laws.
(iii) Notice. Seller has not received written
notice nor is Seller aware of (a) the migration of Hazardous Materials from
other properties to the Property (above or below ground), (b) the current or
past use for the disposal, storage, treatment, processing, manufacturing or
other handling of Hazardous Materials on any property adjoining the Property,
and (c) any property adjoining the Property which contains Hazardous Materials.
(iv) Underground Storage Tanks. There are no
underground storage tanks at the Property.
(v) Legal Proceedings and Notices. No
administrative order or notice, consent order, agreement, litigation or
settlement with respect to any Hazardous Materials is in existence with respect
to the Property or, to Seller's knowledge, proposed, threatened or anticipated,
nor has Seller received any notice of any such action or proceeding regarding
the Property or any property adjacent to the Property. To Seller's knowledge, no
investigation with respect to Hazardous Materials is proposed, threatened or
anticipated in respect to the Property, and Seller has received no communication
from or on behalf of any Governmental Authority or any other person or entity
indicating that any applicable Legal Requirements relating to Hazardous
Materials have been or may have been violated with respect to the Property. The
Property is not currently on and, to Seller's knowledge has never been on, any
federal or state "Superfund," or "Superlien" list, and Seller is not aware that
the Property is anticipated or threatened to be placed on any such list. Seller
has received no notice of any third party claims regarding damage to property or
persons resulting from any Hazardous Materials affecting the Property or any
adjacent property.
The term "ENVIRONMENTAL LAWS" shall mean the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. Sections 9601, et seq., the Resource Conservation and Recovery Act of
1976, 42 U.S.C. Sections 6901 et seq., the Toxic Substances Control Act, 15
U.S.C. Sections 2601 et. seq., the Hazardous Materials Transportation Act, 49
U.S.C. 1801 et seq., the Clean Water Act, 33 U.S.C. Sections 1251 et seq., as
said laws have been supplemented or amended to date, the regulations promulgated
pursuant to
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said laws and any other administrative, federal, state or local law, statute,
rule, regulation or ordinance which regulates or proscribes the use, storage,
disposal, presence, cleanup, transportation or release or threatened release
into the environment of Hazardous Materials. The term "HAZARDOUS MATERIALS"
shall mean any substance, chemical, waste or other material which is listed,
defined or otherwise identified as "hazardous" or "toxic" under any of the
Environmental Laws, and including, without limitation, formaldehyde, urea,
polychlorinated biphenyls, petroleum, petroleum product or by-product, crude
oil, natural gas, natural gas liquids, liquefied natural gas, or synthetic gas
usable for fuel or mixture thereof, radon, asbestos and any by-product of same.
(l) Solvency. Seller is solvent, and has not made a general
assignment for the benefit of creditors or a transfer in fraud of creditors, or
been adjudicated a bankrupt or insolvent, nor has a receiver, liquidator,
custodian, or trustee of any of them or any of its properties (including the
Property) been appointed or taken possession of any of its respective
properties, or a petition filed by or against any of them for bankruptcy,
composition, rearrangement, extension, reorganization, or arrangement pursuant
to the Federal Bankruptcy Act or any similar present or future federal or state
insolvency or bankruptcy law or statute, or any proceeding instituted for the
dissolution or liquidation of any of them.
(m) Utilities. To Seller's knowledge, all utilities and
services necessary for operation of the Improvements (including, without
limitation, road access, gas, water, storm and sanitary sewers, electricity and
telephone), are available at the boundary of the Real Property, may be used or
tapped into by Seller, and, to Seller's knowledge, after Closing by the
Operating Partnership, will be connected with valid permits, are of sufficient
capacity to meet adequately all needs and requirements necessary for the use of
the Real Property for its intended purposes. To Seller's knowledge, the Real
Property is legally entitled to be served by such utilities without further
action by Seller. To Seller's knowledge, such utilities and services are
properly and fully installed and operating and comply with all Legal
Requirements. To Seller's knowledge (i) no fact, condition or proceeding exists
which would result in the termination or impairment of the furnishing of such
utilities to the Real Property, and (ii) no material, latent defects exist in
the plumbing, electrical, mechanical, heating, ventilating or air-conditioning
system or other systems in the Real Property and the same are in good operating
order and repair. To Seller's knowledge, all utility lines servicing the Real
Property are located either within the boundaries of the Real Property, or
within lands dedicated to the public use, or within recorded easements for such
purpose and are serviced and maintained by the appropriate public or
quasi-public entity.
(n) Property Condition. To Seller's knowledge, (i) there is no
condition or defect of the Property not disclosed in writing to the Operating
Partnership that would, if known, cause a reasonable and prudent person to
decide not to purchase the Property, (ii) the Improvements are free from
material defects in design and construction, (iii) there is no adverse
geological or soil condition affecting the Property, and (iv) there are no
material, latent defects in the roof or other structural components of the
Property. Seller has not altered the appearance of the Property in any way that
would cause a normal inspection of the Property to not accurately reveal its
present condition and general state of repair. Seller has not received written
notice of any outstanding requirements or recommendations by (1) the insurance
company(s) currently insuring the Property, or (2) any board
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of fire underwriters or other body exercising similar functions, which in any
case require or recommend any repairs or work to be done on the Property of a
material nature.
(o) Flood Hazard Area. Except as shown on the Surveys, no
portion of the Property is located within any flood plain or flood prone area.
(p) Taxes. Seller has paid all Taxes due and payable prior to
the Closing and timely filed all returns and reports required to be filed prior
to the Closing with respect to the ownership and operation of the Real Property
(by it or any predecessor entity) for which the Operating Partnership could be
held liable or a claim made against the Real Property. There are no audits or
other proceedings by any Governmental Authority pending or threatened with
respect to Taxes resulting from the ownership and operation of the Real Property
(by it or any predecessor entities) for which the Operating Partnership could be
held liable or a claim made against the Real Property, and no agreement
extending the period for assessment and collection has been executed with
respect thereto.
(q) Property Reports. Seller has delivered to the Operating
Partnership true and complete copies of all environmental, asbestos, soil,
substrata and geotechnical reports regarding the Property and surrounding land
in its possession or control.
(r) Insurance. All insurance coverage with respect to the
Property is in full force and effect, insures the Property in reasonably
sufficient amount against all risks usually insured against by persons operating
similar businesses or properties of similar size in the localities where such
businesses or properties are located, provides coverage as may be required by
applicable regulation and by any and all contracts to which Seller is a party
and has been issued by insurers of recognized responsibility. There is no
default under any such coverage nor has there been any failure to give notice or
present any claim under any such coverage in a due and timely fashion. There are
no outstanding unpaid premiums except in the ordinary course of business and no
notice of cancellation or nonrenewal of any such coverage has been received. No
insurer has advised Seller that it intends to reduce coverage, increase premiums
or fail to renew any existing policy or binder.
(s) Seller Not a Foreign Person. Seller is not a "foreign
person" which would subject the Operating Partnership to the withholding tax
provisions of Section 1445 of the Internal Revenue Code of 1986, as amended.
(t) Material Facts. No representation or warranty by Seller
herein, nor any certificate or other writing furnished or to be furnished by
Seller to the Operating Partnership pursuant hereto or in connection with the
transaction contemplated hereby, contains any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading. Seller has no information
or knowledge of any change contemplated in any applicable governmental
requirement or any judicial administrative action or any action by any adjacent
landowners or any natural or artificial conditions upon the Property or any
significant adverse fact or condition relating to the Property or its continued
use by the Operating Partnership which has not been disclosed in writing to the
Operating Partnership by
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Seller or which would prevent, limit, impede or render materially more costly
the Operating Partnership's continued use of the Property.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP AND THE COMPANY.
Section 5.1 Palace's Representations and Warranties. In order to induce
Seller to enter into this Agreement and to perform its respective obligations
hereunder, the Operating Partnership and the Company hereby jointly and
severally warrant and represent the following:
(a) Organization, Good Standing and Power of the Company. The
Company is a real estate investment trust duly organized, validly existing and
in good standing under the laws of the State of Texas, is duly authorized to
transact business under the laws of any state in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary and has all requisite corporate
power and authority to execute and deliver this Agreement and all other
documents and instruments to be executed and delivered by it hereunder and to
perform its obligations hereunder and thereunder in accordance with the terms
and conditions hereof and thereof.
(b) Organization, Valid Existence and Partnership Power of the
Operating Partnership. The Operating Partnership is a limited partnership duly
formed and validly existing under the laws of the State of Delaware, is duly
authorized to transact business under the laws of any state in which the
character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary has all requisite
partnership power and authority to execute and deliver this Agreement and all
other documents and instruments to be executed and delivered by it hereunder and
to perform its obligations hereunder and thereunder in accordance with the terms
and conditions hereof and thereof.
(c) Authorization; No Violation. Assuming the due and valid
authorization, execution and delivery of this Agreement by Seller, this
Agreement and the other agreements and documents to be executed and delivered by
each of the Operating Partnership and the Company hereunder, when duly executed
and delivered, will be the legal, valid and binding obligation of each of the
Operating Partnership and the Company, enforceable against the Operating
Partnership and the Company in accordance with their respective terms, subject
to applicable bankruptcy, insolvency, moratorium or similar laws relating to
creditors' rights and general principles of equity. The performance by each of
the Operating Partnership and the Company of its respective duties and
obligations under this Agreement and the documents and instruments to be
executed and delivered by each of them hereunder will not (i) conflict with, or
result in a breach of, or default under, any provision of any of the
organizational documents of either of the Operating Partnership or the Company
or any agreements, instruments or Legal Requirements to which either of the
Operating Partnership or the Company is a party or by which the assets of either
are or may be bound, or (ii) require any consent, approval or authorization of,
or declaration, filing or registration with, or notice to, any Governmental
Authority.
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(d) Litigation. There is no pending or, to Palace's knowledge,
threatened litigation against the Operating Partnership or the Company that if
adversely determined would have a material adverse effect on Palace or its
ability to perform its obligations under this Agreement in a timely manner.
ARTICLE 6. COVENANTS.
Section 6.1 Covenants of Seller. Seller covenants and agrees that
between the Effective Date and the Closing Date, unless Palace has consented in
writing to any other act or omission, it shall perform or observe the following:
(a) Seller will use commercially reasonable efforts to obtain
Tenant Estoppel Certificates from all tenants at the Property;
(b) Seller will keep and maintain the Property in good order
and condition, in compliance with all Legal Requirements and will cause all
necessary repairs, renewals and replacements to be made promptly. Seller will
not manage or maintain the Property differently due to the transaction
contemplated by this Agreement.
(c) Seller will continue to operate the Property in the usual
and customary manner and will not enter into any new Service Contract or Lease
or extend, renew, amend, cancel or terminate any existing Service Contract or
Lease.
(d) If Seller discovers any defect, error or omission in any
representation or warranty made in Section 4.1, Seller will give the Operating
Partnership prompt written notice thereof accompanied by information in detail
reasonably required to correct such defect, error or omission.
(e) Seller will make all required payments under any
indebtedness secured by a lien on its Real Property (other than payments due at
stated maturity) within any applicable grace period. Seller shall also comply
with all other material terms, covenants and conditions of any such
indebtedness.
(f) Except for the Permitted Encumbrances, Seller will not
cause or permit the Property, or any interest therein, to be sold, transferred,
alienated, mortgaged, licensed, encumbered or otherwise be transferred.
(g) Seller will maintain and keep in full force and effect the
hazard, liability and casualty insurance policies it is currently maintaining
with respect to the Property.
(h) Seller shall promptly give the Operating Partnership
written notice of, and promptly deliver to the Operating Partnership, a true and
complete copy of any written notice Seller may receive, on or before the Closing
Date, from any Governmental Authority, concerning a violation of any applicable
Legal Requirement pertaining to the Property.
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(i) Seller shall cooperate in the preparation by the Company
of a registration statement on Form S-11 to be filed with the Securities and
Exchange Commission ("SEC") under the 1933 Act in connection with the Offering.
Seller shall provide the Company with all such financial and other information
relating to the Property and in such form which would be sufficient to enable
the Company to prepare financial statements in conformity with Regulation S-X of
the SEC and such other information as may be necessary in connection with any
filings or other disclosures under applicable stock exchange rules or securities
laws.
Section 6.2 Confidentiality. Except as hereinafter provided, from and
after the execution of this Agreement, Palace and Seller shall keep the terms,
conditions and provisions of this Agreement confidential and neither shall make
any public announcements hereof unless the other first approves of same in
writing, nor shall either disclose the terms, conditions and provisions hereof,
except to their respective attorneys, accountants, engineers, surveyors,
financiers and bankers. Notwithstanding the foregoing, in connection with the
Offering, Palace will have the absolute right to market the Shares and prepare
and file all necessary or required registration statements and other papers,
documents and instruments necessary or required in Palace's judgment and that of
the attorneys and underwriters to file a registration statement with respect to
the Shares with the SEC and/or similar state authorities and to cause same to
become effective and to disclose therein and thus to its underwriters, to the
SEC and/or to similar state authorities and to the public all of the terms,
conditions and provisions of this Agreement. The obligations of this Section 6.3
shall survive any termination of this Agreement.
Section 6.3 Cooperation. Subject to the terms and conditions herein
provided, the parties to this Agreement shall (a) use their best efforts to
cooperate with each other in (i) determining which filings are required to be
made prior to the Closing Date with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Closing Date from,
Governmental Authorities or third parties in connection with the execution and
delivery of this Agreement and the transactions contemplated hereby and (ii)
timely making all such filings and timely seeking all such consents, approvals,
permits or authorizations; (b) use their best efforts to obtain in writing any
consents required from third parties necessary to effectuate the transactions
contemplated hereby; and (c) use their best efforts to take, or cause to be
taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the Closing
Date, any further action is necessary or desirable to carry out the purpose of
this Agreement, the proper officers and directors and other duly authorized
representatives of the parties shall take all such necessary action.
Section 6.4 Time of Closing. Each of the parties hereto shall use its
best efforts to consummate the transactions contemplated hereby on or prior to
the Closing Date.
ARTICLE 7. CLOSING.
Section 7.1 The Closing. The consummation of the transactions
contemplated hereunder (the "CLOSING") shall take place on the date of closing
(the "CLOSING DATE") of the Offering or September 30, 1998, whichever occurs
earlier, at such place as the parties hereto shall mutually agree.
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Section 7.2 Deliveries at the Closing by Seller. At the Closing, Seller
will deliver or cause to be delivered to the Operating Partnership the following
and, where appropriate, duly executed on behalf of all necessary parties thereto
other than the Operating Partnership and the Company:
(a) A current schedule of all Leases and the Tenant Estoppel
Certificates or Building Tenants certificate, as required by Section 9.2(b)
hereof;
(b) With respect to the Property conveyed to the Operating
Partnership by Seller as contemplated in Section 1.1 hereof, (i) a special
warranty deed, or the equivalent in the jurisdiction in which the Real Property
is situated (the "DEED"), duly executed by Seller in proper form for recording
so as to convey to the Operating Partnership good and marketable title to its
Real Property, free and clear of all liens and encumbrances, except the
Permitted Encumbrances and (ii) a ▇▇▇▇ of sale and assignment (the "▇▇▇▇ OF
SALE") duly executed by Seller conveying to the Operating Partnership all of
Seller's right, title and interest in and to the Personal Property, the Leases,
the Intangible Property, the Books and Records, and the Tests and Plans
pertaining to its Real Property, and whereby the Operating Partnership will
assume and agree to perform all of Seller's duties and obligations under the
foregoing assigned documents from and after the Closing Date.
(c) All original Leases and all other documents pertaining
thereto or copies of same where Seller, using its best efforts, is unable to
deliver originals and an updated rent roll.
(d) All other original documents or instruments referred to
herein, including, without limitation, the Service Contracts, Licenses and
Permits, and Tests and Plans or copies of same where Seller, using its best
efforts, is unable to deliver originals; and keys to the Improvements.
(e) Any affidavits and such other documents or instruments
required by the Title Company to consummate the transactions contemplated
hereby.
(f) Affidavits and other instruments, including but not
limited to all organizational documents of Seller, including bylaws, articles of
incorporation and certificates of good standing and/or existence reasonably
requested by Palace or the Title Company evidencing the power and authority of
such entity to enter into and perform this Agreement and any documents to be
delivered hereunder.
(g) A certificate executed by a duly authorized representative
of Seller stating that the representations and warranties made by Seller in this
Agreement are true and correct in all material respects as of the Closing Date
and that Seller has performed all of its covenants and other obligations under
this Agreement.
(h) All proper instruments as shall be reasonably required for
the conveyance to the Operating Partnership of all right, title and interest, if
any, of Seller in and to any award or payment made, or to be made, (i) for any
taking in condemnation, eminent domain or agreement in
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lieu thereof of land adjoining all or any part of the Real Property, (ii) for
damage to the Land or the Improvements or any part thereof by reason of change
of grade or closing of any such street, road, highway or avenue, and (z) for any
taking in condemnation or eminent domain of any part of the Land or the
Improvements.
(i) In order to avoid the imposition of the withholding tax
payment pursuant to Section 1445 of the Code, a certificate signed by a duly
authorized representative of Seller to the effect that Seller is not a "foreign
person" as that term is defined in section 1445(f)(3) of the Code.
(j) All such transfer and other tax declarations and returns
and information returns, duly executed and sworn to by Seller to the extent
required by law in connection with the conveyance of the Property to the
Operating Partnership.
(k) Possession of the Property, subject only to the Leases,
and the Permitted Encumbrances.
(l) The Title Policy.
(m) Updated UCC Searches.
(n) The Survey.
(o) Such other documents as may be reasonably required or
appropriate to effectuate the consummation of the transactions contemplated by
this Agreement.
Section 7.3 Deliveries at the Closing by Palace. At the Closing, the
Operating Partnership and the Company shall deliver or cause to be delivered to
Seller the following and, where appropriate, duly executed by all necessary
parties thereto other than Seller:
(a) The Cash Consideration.
(b) A certificate executed by a duly authorized representative
of the Operating Partnership and the Company stating that the representations
and warranties made by the Operating Partnership and the Company in this
Agreement are true and correct in all material respects as of the Closing Date,
and that the Operating Partnership and the Company have performed their
respective covenants and other obligations under this Agreement.
(c) Affidavits and other instruments, including but not
limited to all organizational documents of the Operating Partnership and the
Company including limited partnership agreements, filed copies of limited
partnership certificates, articles of organization, and certificates of good
standing and existence, reasonably requested by Seller evidencing the power and
authority of the Operating Partnership and the Company to enter into and perform
this Agreement and any documents to be delivered hereunder.
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(d) Such other documents as may be reasonably required or
appropriate to effectuate the consummation of the transactions contemplated by
this Agreement.
Section 7.4 Fees and Expenses. Seller shall pay for preparation of each
Deed and the expense of recording each Deed, including, but not limited to,
transfer, indebtedness, intangible, sales, recordation and/or conveyance taxes,
whether at the local or state level. Subject to Section 17.10, each party shall
pay the fees and expenses of its own attorneys and accountants. Seller shall pay
for the Title Policy, Survey, UCC searches, documentary stamp taxes, revenue
stamps and filing fees, whether at the local or state level. The parties shall
share equally the Title Company's escrow closing expenses. The provisions of
this Section 7.4 shall survive the Closing.
ARTICLE 8. ADJUSTMENTS.
Section 8.1 Adjustments at the Closing Date. The following items shall
be apportioned as of midnight on the date preceding the Closing Date between
Seller and the Operating Partnership:
(a) Rents payable by Lessees as and when collected. All moneys
received from Lessees from and after the Closing shall belong to the Operating
Partnership and shall be applied by the Operating Partnership to current rents
and other charges under the Leases. After application of such moneys to current
rents and charges, the Operating Partnership shall remit to Seller any excess
amounts paid by a Lessee to the extent that such Lessee was in arrears in the
payment of rent prior to the Closing.
(b) At the Closing, Seller shall pay to the Operating
Partnership an amount equal to all Security Deposits and any prepaid rents.
(c) Utility charges payable by Seller, including, without
limitation, electricity, gas, water and sewer bills. If there are meters on the
Real Property, Seller will cause readings of all said meters to be performed not
more than ten (10) days prior to the Closing Date. To the extent said meters are
not read prior to Closing, the Operating Partnership will cause same to be read
promptly thereafter and a pro-rata adjustment shall be made upon said reading.
(d) Amounts payable under the Service Contracts.
(e) Real estate taxes due and payable for the calendar year.
If the Closing Date shall occur before the tax rate is fixed, the apportionment
of real estate taxes shall be upon the basis of the tax rate for the preceding
year applied to the latest assessed valuation. If subsequent to the Closing
Date, real estate taxes (by reason of change in either assessment or rate or for
any other reason) for the Real Property should be determined to be higher or
lower than those that are apportioned, a new computation shall be made, and
Seller agrees to pay the Operating Partnership any increase shown by such
recomputation and vice versa. All of the foregoing adjustments shall be made in
cash at Closing, with Seller making a cash payment to Palace of the net amount
due Palace or vice versa.
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(f) All other items of revenue and expense, such that Seller
shall be entitled to all revenues and shall be responsible for all expenses
derived from or related to the Property up to but not including the Closing
Date, and the Operating Partnership shall be entitled to all revenues and shall
be responsible for all expenses derived from or related to the Property from and
after the Closing Date.
Section 8.2 Adjustments for Assessments. If, on the Closing Date, the
Real Property or any part thereof shall be or shall have been affected by an
assessment or assessments which are or may become payable in annual
installments, all the unpaid installments of any such assessment due and payable
on or prior to the Closing Date shall be paid and discharged by Seller on the
Closing Date. The Operating Partnership shall pay and discharge all such
installments of such assessments due and payable after the Closing Date.
Section 8.3 Other Adjustments. Except as otherwise provided in this
Agreement, all other adjustments and prorations shall be made in accordance with
the customs in respect to title closings in the State where the Real Property is
located.
Section 8.4 Errors in Calculations. Any errors in calculations or
adjustments shall be corrected or adjusted within one hundred twenty (120) days
after the Closing.
Section 8.5 Survival. The provisions of this Article 8 shall survive
the Closing Date.
ARTICLE 9. CONDITIONS PRECEDENT TO CLOSING.
Section 9.1 Conditions to Obligations of Seller. The obligations of
Seller to sell the Property and to perform the other covenants and obligations
to be performed by Seller on the Closing Date shall be subject to satisfaction
of the following conditions (all or any of which may be waived, in whole or in
part, by Seller):
(a) The representations and warranties made by the Operating
Partnership and the Company herein shall be true and correct in all material
respects with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date; provided, however, that
a failure of any representations or warranties to be true and correct in all
material respects shall not give rise to a claim or right of termination by
Seller hereunder so long as such matters do not have a material adverse effect
on the transactions contemplated herein.
(b) The Operating Partnership and the Company shall have
executed and delivered to Seller all of the items and documents provided herein
for said delivery.
(c) The Operating Partnership and the Company shall have
performed all covenants and obligations undertaken by the Operating Partnership
and the Company herein in all material respects and materially complied with all
conditions required by this Agreement to be performed or complied with by them
on or before the Closing Date.
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Section 9.2 Conditions to Obligations of Palace. The obligations of the
Operating Partnership to acquire title to the Property and the Operating
Partnership's and the Company's obligation to perform the other covenants and
obligations to be performed by the Operating Partnership and the Company on the
Closing Date shall be subject to satisfaction of the following conditions (all
or any of which may be waived, in whole or in part, by the Operating Partnership
or the Company):
(a) The representations and warranties made by Seller herein
shall be true and correct in all material respects with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date; provided, however, that a failure of a representation or
warranty to be true and correct in all material respects shall not give rise to
a claim or right of termination by the Operating Partnership or the Company
hereunder so long as such matters do not have a material adverse effect on the
transactions contemplated herein.
(b) Seller shall have delivered to the Operating Partnership
in form, substance and quantity satisfactory to the Operating Partnership, (i)
Tenant Estoppel Certificates, a form of which is attached hereto as Schedule
9.2-A, from a sufficient number of tenants so that certificates have been
received for tenants occupying 70% of the occupied rentable square footage at
the Property (including all tenants leasing over 10% of the occupied rentable
square footage), or (ii) a Building Tenants Certificate completed by ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, a form of which is attached hereto as Schedule 9.2-B.
(c) Seller shall have executed and delivered to the Operating
Partnership and the Company all of the items and documents provided herein for
said delivery.
(d) Seller shall have performed all covenants and obligations
undertaken by Seller herein in all material respects, including, without
limitation, the covenants set forth in Section 6.1(h), and materially complied
with all conditions required by this Agreement to be performed or complied with
by it on or before the Closing Date.
(e) The closing of the Offering upon terms and conditions
satisfactory to Palace, including, without limitation, pricing and timing, shall
occur simultaneously with Closing under this Agreement.
(f) The Title Company shall have delivered or committed to
deliver the Title Policy in the form and on the terms required by this
Agreement.
(g) The Real Property shall be in substantially the same
condition and repair on the Closing Date as existed on the Effective Date,
reasonable wear and tear excepted.
ARTICLE 10. ASSIGNMENT.
No party may assign this Agreement or any interest therein to any other
person without the prior written consent of the other parties hereto.
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ARTICLE 11. BROKERS/COMMISSIONS.
Seller and Palace covenant and agree one with the other that no real
estate commissions, finders' fees or brokers' fees have been or will be incurred
in connection with this Agreement or the transaction contemplated hereby. Seller
and Palace shall indemnify, defend and hold each other harmless from and against
any claims, liabilities, obligations or damages for commissions, finders' or
brokers' fees resulting from or arising out of Palace's acquisition of the
Property hereunder asserted against either party by any broker or other person
claiming by, through or under the indemnifying party or whose claim is based on
the indemnifying party's acts or omissions. The provisions of this Article 11
shall survive the Closing or other termination of this Agreement.
ARTICLE 12. CASUALTY LOSS.
Section 12.1 Maintenance of Insurance Policies. Seller shall continue
to maintain, in all material respects, the fire and extended coverage insurance
policies with respect to the Property which are currently in effect, through the
Closing Date.
Section 12.2 Risk of Loss.
(a) The risk of any damage or loss to the Property prior to
Closing shall remain with Seller. If at any time prior to the Closing Date all
or any portion of the Property is destroyed or damaged as a result of fire or
any other casualty (a "CASUALTY"), Seller shall promptly give written notice
("CASUALTY NOTICE") thereof to Palace. If the estimated cost to repair or
restore the Property following such Casualty equals or exceeds Fifty Thousand
and no/100 Dollars ($50,000.00), such Casualty is herein called a "MAJOR
CASUALTY." Upon the occurrence of a Major Casualty, Palace may, at its option,
either (i) terminate this Agreement only by written notice to Seller within
twenty (20) days after receipt of the Casualty Notice, or (ii) acquire the
Property without in any manner affecting the consideration payable to Seller
hereunder, provided, (A) the proceeds of any applicable insurance policy
together with a cash adjustment at Closing in an amount equal to the deductible
under such insurance policy shall be paid to the Operating Partnership at
Closing, or (B) if such proceeds have not yet been collected, all unpaid claims
and other rights in connection with the Casualty shall be assigned to the
Operating Partnership at Closing.
(b) If the Property is the subject of a Casualty but Palace
either is not entitled to or does not terminate this Agreement pursuant to the
provisions of this Article 12, then Seller shall prior to the Closing Date cause
all temporary repairs to be made to the Property as shall be required to prevent
further deterioration and damage to the Property and to protect public health
and safety.
(c) If the Property is the subject of a Casualty which is not
a Major Casualty, this Agreement shall continue in full force and effect, and
(a) the proceeds of any applicable insurance policy, together with a credit
equal to the deductible under such insurance policy, shall be paid to the
Operating Partnership at Closing, and (b) all unpaid claims and rights in
connection with the Casualty shall be assigned to the Operating Partnership at
Closing without in any manner affecting the consideration payable to Seller
hereunder.
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ARTICLE 13. CONDEMNATION.
In the event of a Material Taking of the Property, Palace shall have
the right, at its sole option, to either (a) terminate this Agreement by giving
Seller written notice to such effect within fifteen (15) days after its receipt
of written notification of any such occurrence or (b) accept title to the
Property without reduction of any consideration to be given to Seller hereunder.
In the event that Palace elects not to terminate this Agreement under this
Article 13, Seller shall assign all proceeds of such taking to the Operating
Partnership, and same shall be the Operating Partnership's sole property, and
the Operating Partnership shall have the sole right to settle any claim in
connection with the Property. The term "MATERIAL TAKING" as to the Property or
any portion thereof shall be defined to mean the institution or threatened
institution of any proceedings, judicial, administrative or otherwise which
Palace in the exercise of its sole discretion determines (a) causes access to
the Real Property to be taken or materially diminished (i.e., following such
taking the Real Property no longer has access to a publicly dedicated street or
traffic flow from and to the Real Property is materially impaired), (b) results
in parking no longer being in compliance with applicable zoning laws; (c)
results in a taking of any portion of any buildings constituting the
Improvements; or (d) materially and adversely impacts the use or value of the
Property.
ARTICLE 14. DEFAULT/REMEDIES.
Section 14.1 Termination by Palace. If any condition set forth herein
for the benefit of Palace cannot or will not be satisfied prior to Closing, or
upon the occurrence of any other event that would entitle Palace to terminate
this Agreement and its obligations hereunder, and Seller fails to cure any such
matter within ten (10) days after notice thereof from Palace, Palace at its
option, may elect either (a) to terminate this Agreement, and all rights and
obligations of Seller and Palace hereunder shall terminate immediately, (b) to
enforce specific performance or (c) to waive its right to terminate (but without
waiving any breach or default on the part of Seller) and, instead, to proceed to
Closing.
Section 14.2 Termination by Seller. If any condition set forth herein
for the benefit of Seller (other than a default by Palace) cannot or will not be
satisfied prior to Closing, and Palace fails to cure any such matter within ten
(10) days after notice thereof from Seller, Seller may, at its option, elect
either (a) to terminate this Agreement, in which event the rights and
obligations of Seller and Palace hereunder shall terminate immediately, or (b)
to waive its right to terminate, and instead, to proceed to Closing. If, prior
to Closing, Palace defaults in performing any of its obligations under this
Agreement (including its obligation to purchase the Property), and Palace fails
to cure any such default within ten (10) days after notice thereof from Seller,
Seller's sole and exclusive remedy for such default shall be to terminate this
Agreement, whereupon Palace shall pay to Seller as liquidated damages the sum of
$1,000.00, said sum being established by agreement of the parties as a
reasonable estimate of the amount of damages incurred by Seller in that event as
the actual amount of such damages would be difficult or impossible to determine,
and neither Palace nor Seller shall have any further rights, liabilities or
obligations hereunder. Except as otherwise provided in the immediately preceding
sentence, Seller waives any claims for damages, whether actual,
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consequential, punitive or otherwise, that it may possess against Palace arising
out of or resulting from any such default by Palace hereunder.
ARTICLE 15. TAX MATTERS.
Section 15.1 Payment of Taxes by Seller. Seller will pay or provide for
payment of all Taxes due and payable on or after the Closing and will file all
returns and reports required to be filed on or after the Closing with respect to
Taxes imposed in connection with the ownership and operation of the Property for
all taxable periods (or portions thereof) ending on or prior to the Closing for
which the Operating Partnership could be held liable on a claim made against the
Operating Partnership.
Section 15.2 Definition of Taxes. "TAXES" mean all federal, state,
county, local, foreign and other taxes of any kind whatsoever (including,
without limitation, income, profits, premium, estimated, excise, sales, use,
occupancy, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, license, stamp, environmental, withholding, employment,
unemployment compensation, payroll related and property taxes, import duties and
other governmental charges or assessments), whether or not measured in whole or
in part by net income, and including deficiencies, interest, additions to tax or
interest, and penalties with respect thereto, and including expenses associated
with contesting any proposed adjustment related to any of the foregoing.
Section 15.3 Allocation Method. The Operating Partnership and its
affiliates will use the "traditional method with curative allocations" (as
defined in Treas. Reg. Section 1.704-3(b)) of allocating income, gain, loss and
deduction to account for the variation between the fair market value and
adjusted basis of the Property for federal income tax purposes with respect to
(i) the contribution of the Property, and (ii) any revaluation of the Property
in accordance with the provisions of Treas. Reg. Sections 1.704-1(b)(2)(iv)(f),
1.704-1(b)(2)(iv)(g) and 1.704-3(a)(6).
Section 15.4 Seller Reliance. Seller acknowledges that it has relied
upon its own tax advisors to determine the impact of federal, state and local
income tax laws on the transaction contemplated by this Agreement, and that
Palace has made no representations to it in this regard.
Section 15.5 Survival. The provisions of this Article 15 shall
survive the Closing Date.
ARTICLE 16. NOTICE.
All notices, demands, requests, or other writings in this Agreement
provided to be given, made or sent, or which may be given, made or sent, by
either party hereto to the other, shall be in writing and shall be delivered by
depositing the same with any nationally recognized overnight delivery service,
or by telecopy or fax machine, in either event with all transmittal fees
prepaid, properly addressed, and sent to the following addresses:
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If to Seller: [to come]
with a copy to: ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: W. ▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Operating Partnership 3535 Las Vegas Blvd. South
or the Company: ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Liddell, Sapp, Zivley,
Hill & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as either party may from time to time designate by
written notice to the other. Notices given by (i) overnight delivery service as
aforesaid shall be deemed received and effective on the first business day
following such dispatch and (ii) telecopy or fax machine shall be deemed given
at the time and on the date of machine transmittal provided same is sent prior
to 5:00 p.m., central time, on a business day (if sent later, then notice shall
be deemed given on the next business day) and if the sending party receives a
written send confirmation on its machine and forwards a copy thereof by
overnight delivery service accompanied by such notice or communication. Notices
may be given by counsel for the parties described above, and such notices shall
be deemed given by said party, for all purposes hereunder.
ARTICLE 17. MISCELLANEOUS.
Section 17.1 Survival of Representation and Warranties. The
representations and warranties made by Seller in Article 4 and by Palace in
Article 5 shall survive the Closing.
Section 17.2 Entire Agreement; No Third-Party Rights. This Agreement
constitutes the entire agreement between the parties and incorporates and
supersedes all prior negotiations and discussions between the parties. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto and their successors and assigns, and nothing in the Agreement, express
or implied, is intended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
Section 17.3 Amendment. This Agreement cannot be amended, waived or
terminated orally, but only by an agreement in writing signed by each party
hereto.
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Section 17.4 Governing Law. This Agreement shall be interpreted and
governed by the laws of the State of Texas, without regard to its rules of
conflicts of laws and shall be binding upon the parties hereto and their
respective successors and assigns.
Section 17.5 Section Headings. The caption headings in this Agreement
are for convenience only and are not intended to be part of this Agreement and
shall not be construed to modify, explain or alter any of the terms, covenants
or conditions herein contained.
Section 17.6 Severability. If any term, covenant or condition of this
Agreement is held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be construed without such provision.
Section 17.7 No Other Rights or Obligations. Nothing contained in this
Agreement shall be deemed to create any rights or obligations of partnership,
joint venture or similar association between Seller and the Company.
Section 17.8 Counterparts. This Agreement may be executed by the
parties hereto in counterparts, all of which together shall constitute a single
Agreement.
Section 17.9 Construction. All references herein to any Section, or
Exhibit shall be to the Sections of this Agreement and to the Exhibits annexed
hereto unless the context clearly dictates otherwise. All of the Exhibits
annexed hereto are, by this reference, incorporated herein.
Section 17.10 Attorneys' Fees. In the event of any litigation or
alternative dispute resolution between the Operating Partnership or the Company,
on the one hand, and Seller, on the other hand, in connection with this
Agreement or the transactions contemplated herein, the non-prevailing party in
such litigation or alternative dispute resolution shall be responsible for
payment of all expenses and reasonable attorneys' fees incurred by the
prevailing party. The provisions of this Section 17.10 shall survive the
Closing.
Section 17.11 Interpretation. Whenever used herein, the singular number
shall include the plural, the plural shall include the singular, and the use of
any gender shall be applicable to all genders.
Section 17.12 Exclusivity. In consideration for the significant time
and expense that Palace will devote to consummation of this Agreement and the
Offering, and in order to facilitate consummation of this transaction, Seller
agrees that until termination of this Agreement, it will not, and will not
permit any of its affiliates or anyone acting on its behalf to, (i) solicit,
encourage, negotiate, act upon, conclude or entertain in any way any offer from
any person or entity other than Palace to (1) purchase or acquire any interest
in the Property, or (2) consolidate or combine any of such person's or entity's
assets with the Property, or (ii) furnish any information with respect to Seller
or the Property to any person or entity, other than Palace. Seller agrees to
immediately notify the Company of its receipt of any unsolicited offer (written
or oral) in respect of such a transaction and the proposed terms of the offer.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
SELLER:
-----------------------------------------------
a
--------------------------
By:
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
COMPANY:
PALACE REIT,
a Texas real estate investment trust
By:
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
OPERATING PARTNERSHIP:
PALACE OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: Palace REIT, a Texas real estate
investment trust, Sole General Partner
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
SIGNATURE PAGE TO
PURCHASE AND SALE AGREEMENT