EXHIBIT 10(q)
REAL ESTATE PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
This REAL ESTATE PURCHASE AND SALE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS ("Agreement") is dated October 25, 2002 ("Effective Date") and is
made by and between INNOVATIVE DEVELOPMENT ENTERPRISES, INC., a California
corporation, as "SELLER", and ▇▇▇▇▇▇▇▇, INC., a Delaware corporation, as
"BUYER", and for valuable consideration, SELLER and BUYER agree as follows:
1. INTRODUCTION/DEFINED TERMS. SELLER agrees to sell and BUYER
agrees to purchase the Property, consisting of the Land (as defined below) and
the Improvements (as defined below) to be constructed during the period of the
escrow ("Escrow") to be conducted by Escrow Agent (as defined below). In
furtherance of this Agreement, SELLER is entering into the Ocean Ranch Contract
(as defined below) pursuant to which SELLER is purchasing the Land. The defined
words or phrases used in this Agreement shall, unless the context otherwise
indicates, have the meanings specified in this section 1. The singular shall
include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, as the context indicates. Additional terms defined in
other sections of this Agreement shall have the same definition for all purposes
of this Agreement unless otherwise indicated, notwithstanding that such
additional terms are not defined in this section 1.
1.1. "ARCHITECT" shall mean the Architect-Interior
Improvements or the Architect-Exterior Improvements, as the context requires,
and "Architects" shall mean both such parties.
1.2. "ARCHITECT - INTERIOR IMPROVEMENTS" shall mean
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Associates, Inc., who has been retained by SELLER and
approved by BUYER for the design services for the Interior Improvements,
together with such architect's consultants and subcontractors, including,
without limitation, any engineer for the Interior Improvements.
1.3. "ARCHITECT - SHELL IMPROVEMENTS" shall mean ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ & Associates, Inc., who has been retained by SELLER and approved by
BUYER, and its consultants and subcontractors, including, without limitation, a
structural engineer for the Building Shell Improvements.
1.4. "BUILDING" shall mean an approximately 201,316
Rentable Square Foot (including a mezzanine consisting of approximately 35,000
square feet ("Mezzanine")), free-standing building consisting of the Building
Shell Improvements and the Interior Improvements for use by BUYER for finishing,
packaging, handling, warehousing and distributing clothing products and related
accessories and supporting general office, sales and administration use, as more
particularly described in section 3 below.
1.5. "BUILDING SHELL IMPROVEMENTS" means improvements
(other than the Interior Improvements) comprising the Building to be constructed
as shown in the Building Shell Plans and the Building Shell Specifications,
including, without limitation (a) roofing, fascia, exterior walls, doors and
windows, and truck doors (both at grade and at dock level), (b) footings and
concrete floors, (c) fire sprinkler system, (d) conduits and pipes for
telephone, electricity, water, fire sprinklers and sewer brought to "stub out"
termination points in or above a perimeter wall of the premises, (e) a main
electrical termination panel for the Building, (f) paving and finish of parking
areas, entrance areas and walkways, (g) landscaping in accordance with the
Building Shell Specifications and Legal Requirements, (h) in the case of the
Mezzanine, structural elements, consisting of framing, light-weight concrete
floor and legally required stairways, and (i) site improvements located within
the boundaries of the Property consisting of driveways, parking areas, gutters,
sidewalks, storm drains and erosion control (construction period and permanent)
as described in the Development Plan, Building Shell Specifications and Building
Shell Plans and to comply with Legal Requirements; provided, however, the term
does not include any Land Improvements to be provided by the Ocean Ranch
Developer.
-1-
1.6. "BUILDING SHELL PLANS" shall mean (a) initially, the
architectural plans included in the Development Plan until the approval of the
Final Building Shell Plans in accordance with section 3.7 below, and (b)
thereafter, the Final Building Shell Plans.
1.7. "BUILDING SHELL SPECIFICATIONS" means the Concrete
Tilt-Up Building Specifications dated October 23, 2002 a copy of which is
annexed to this Agreement as EXHIBIT "1", as may be amended or supplemented as
provided in this Agreement; such specifications contain provisions applicable to
the Building Shell Improvements and may also contain provisions applicable to
the Interior Improvements.
1.8. "CONSTRUCTION CONTRACT" means that certain General
Construction Contract annexed to this Agreement as EXHIBIT "2" between SELLER
and Contractor providing for the Contractor to construct the Building Shell
Improvements and the Interior Improvements; BUYER, by execution and delivery of
this Agreement, shall be deemed to have approved the form of the Construction
Contract and, except with BUYER's approval, which shall not be unreasonably
withheld, SELLER shall not amend or modify the Construction Contract, whether by
change order or otherwise, except for modifications consisting of change orders
(a) required to conform the Construction Contract to Change Requests submitted
by BUYER, or (b) increasing the Contract Time or the Costs of the Work on
account of Excusable Delays. Any words or phrases defined in the Construction
Contract shall have the same meaning when used in this Agreement, unless
otherwise expressly stated.
1.9. "CONTRACTOR" means Hamann Construction, Inc., a
California corporation (License #373142), the general contractor with whom
SELLER is contracting for the construction of the Building Shell Improvements
and the Interior Improvements.
1.10. "CONTRACTOR'S FEE" means an amount equal to a 12%
overhead and profit fee payable to Contractor as provided in the Construction
Contract on the "Costs of the Work" (except any costs excluded in calculating
the Contractor Fee as provided in the Construction Contract) as defined in the
Construction Contract (i.e. "hard costs" of construction); provided, however,
(a) for purposes of determining the Costs of Work for work performed directly by
the Contractor's own forces (i) Contractor shall not be entitled to any separate
or underlying "markup" for overhead or profit on such work, and (ii) amounts
payable to Contractor for labor shall be limited to the actual cost thereof (at
applicable union wage and benefit rates), except for supervisory personnel, who
shall be paid based on reasonable industry standards; and (b) Design Costs and
the cost of building permit(s) shall not be included in calculating the
Contractor's Fee.
1.11. "DEPOSIT" means any funds paid by BUYER in advance of
the Closing Date pursuant to the terms of subsection 3.7.4 below.
1.12. "DESIGN COSTS" means the actual, out-of-pocket
amounts paid or incurred by SELLER to (a) any Design Professionals, including
the Architect - Interior Improvements or the Architect -Shell Improvements, for
design services in connection with the planning, design, inspection and/or
processing of any required Government or Ocean Ranch Developer approvals for the
Improvements, (b) the Preparation of the Plans or related documentation and the
performance of any other services to be performed by a Design Professional as
specified in this Agreement, and (c) the Government and Ocean Ranch Developer in
connection with the processing of any required approvals of the Development Plan
and/or other plans or specifications of the design of Improvements for the
Property. The Development Cost Breakdown includes SELLER's good faith estimate
of the Design Costs.
1.13. "DESIGN PROFESSIONALS" means the Architect and if
separately retained by SELLER or Contractor, soils engineer, civil engineer,
landscape architect, permit processing consultant and interior decorator; the
Design Professionals List annexed as EXHIBIT "3" to this Agreement shows the
Design Professionals approved by BUYER; SELLER shall have the right to
substitute a replacement Design Professional provided such replacement shall be
subject to BUYER's reasonable approval.
-2-
1.14. "DEVELOPER FEE" means a fee payable to SELLER for its
efforts in causing the development of the Property in an amount equal to three
percent (3%) of all Development Costs as shown in the Development Cost
Breakdown.
1.15. "DEVELOPMENT COST BREAKDOWN" means the Development
Cost Breakdown annexed as Exhibit "4" to this Agreement, which includes the
"Build To Suit Pro Forma" summary sheet of line items comprising the overall
Development Costs elements (including costs of permits, fees and "hard costs"
and "soft costs" of the design and construction for the Building) and the
supporting "Construction Cost Breakdown" showing the line item elements of the
"hard costs", together with any supplement or modification provided for in this
Agreement; BUYER, by execution of this Agreement, is approving the Development
Cost Breakdown subject to SELLER's obligation to update the same as provided in
section 3.7.5 below.
1.16. "DEVELOPMENT COSTS" means, subject to the limitations
set forth below in this section, the actual, out-of-pocket costs incurred by
SELLER in connection with the acquisition of the Land under the Ocean Ranch
Contract, ownership of the Land and/or in connection with planning for and
carrying out the initial development and construction of improvements comprising
the Property, including, without limitation (a) testing, inspections, permits
and other Government fees and exactions, (b) soils reports, (c) points,
brokerage fees and costs, title, escrow and appraisal fees incurred in
connection with obtaining a construction loan, (d) all "hard costs" of
construction (i.e. described in the Construction Contract as "Costs of the
Work") payable to Contractor and/or other suppliers and contractors together
with amounts payable to the Contractor for general conditions, job site
supervision, cleanup, trash and janitorial services and the Contractor's Fee,
(e) the purchase price, costs, fees and expenses paid by SELLER under and in
conformance with the Ocean Ranch Contract, and (f) any other categories of costs
and expenses to be incurred by SELLER as shown in the Development Cost
Breakdown, including "Interest Carry" based on the actual Development Costs as
they are incurred until the Close of Escrow under this Agreement; provided,
however, the phrase "Development Costs" does not include and specifically
excludes (i) any depreciation on real or personal property included in the
Property, (ii) any additional costs resulting from any delays that do not
constitute Excusable Delays, (iii) any costs incurred or associated with the
correction of any defective work, except for corrections required on account of
design errors or defects caused by any Design Professional, (iv) any Deposits
paid by BUYER for the cost of any Change Work, (v) any increased costs, fees and
expenses incurred as a direct result of SELLER's gross negligence, willful
misconduct or breach of the Ocean Ranch Contract (or any document entered into
in connection therewith) or this Agreement, and (vi) legal fees and expenses
incurred by SELLER in connection with the negotiation and documentation of the
Ocean Ranch Contract, this Agreement or any other related agreements.
1.17. "DEVELOPMENT PLAN" means those certain initial
architectural plans dated August 19, 2002 prepared by the Architect-Shell
Improvements which comprise the Development Plan annexed as Exhibit "5" to this
Agreement, as reviewed, modified, supplemented and approved in accordance with
this Agreement; the Development Plan includes a site plan showing the planned
dimensions of the Land and a layout of the Building, preliminary landscape
plans, exterior elevations, preliminary grading plans, preliminary Interior
Improvements plans, a statement of the Ocean Ranch ADT's allocated to the Land
under the Ocean Ranch Contract (i.e., the Land ADT's) and a description of
certain Future Improvements denoted as the "Phase II" improvements; provided,
however, the Future Improvements are not included in the Property as more
particularly described in section 1.20 below.
1.18. "ENTITLEMENTS" means all Government permits and
approvals required to construct the Improvements and for the Substantial
Completion of the Improvements as provided in section 6.4 below.
1.19. "EXCUSABLE DELAYS" means delays encountered in
obtaining the Entitlements, in causing Substantial Completion of the Property
and/or in scheduling the Closing Date resulting from delays caused by any of the
following (but specifically excluding any such delays caused by SELLER,
Contractor, the Architects or Ocean Ranch Developer (or their respective
employees, contractors, architects or agents)) and not within SELLER's or Ocean
Ranch Developer's reasonable control: (a) delays caused by BUYER and
-3-
its employees, separate contractors or representatives, including delays caused
by BUYER's requested changes to previously approved items or BUYER's failure to
timely approve any items submitted to BUYER for approval within the time
permitted in section 3.7 below or expressly required in another specific
provision in this Agreement, physical interference with the construction of the
Improvements by BUYER or delays for which BUYER has assumed responsibility as
provided in subsection 6.3.1 below ("BUYER's Delays"), (b) fire, earthquake or
other casualties or inclement weather conditions not reasonably anticipatable,
(c) extraordinary or unusual governmental action or inaction, including unusual
delays encountered in processing the Development Plan approval described in
section 11.7 below, building permits and other Government approvals or
inspections, (d) the discovery and/or remediation of any unknown or concealed
conditions affecting the Ocean Ranch Subdivision or the Property, (e) general
area-wide labor or material shortages or labor disputes (such as strikes or
lockouts), but specifically excluding any such shortages or disputes applicable
specifically to SELLER, Contractor or any of their contractors, architects or
agents, (f) any delay resulting from a dispute relating to approval of the Plans
under section 3.7 below, the Certificate of Substantial Completion under section
6.4.2.2 below or the amount of the Development Costs or Purchase Price as
described in section 4 below, if, but only if, BUYER agrees that the same shall
constitute an Excusable Delay or SELLER prevails in any Arbitration with respect
thereto; otherwise the same shall not constitute an Excusable Delay; provided,
however in the case of a dispute concerning the Development Costs or Purchase
Price, SELLER shall be deemed the prevailing party if SELLER is awarded any
amount in excess of the last offer made by BUYER to resolve such dispute, (g)
any other causes not the fault of SELLER or SELLER's Contractor, Architects,
subcontractors, agents or employees but excluding SELLER's economic condition or
economic conditions generally, or (h) by one (1) day for each day after February
1, 2003, the issuance of the grading and building permit for the Building Shell
Improvements, and/or May 1, 2003, the issuance of the building permit for the
Interior Improvements is delayed, in each case for any reason not the fault of
SELLER or Contractor; provided, however, that notwithstanding the foregoing, any
extension of time and/or increase in Development Costs (i) shall be conditioned
upon any such delay lasting not less than one (1) day, (ii) shall only be based
upon the number of days the delaying event actually exists and prevents the
performance of the affected activity together with a reasonable allowance for
scheduling the discontinuation and resumption of the affected activity, (iii)
with respect to an increase in Development Costs, such increase shall only be
permitted if such delay causes a delay in the Closing Date commercially
reasonable increases in the Cost of the Work under the Construction Contract or
if BUYER otherwise agrees in writing to such an increase, and (iv) SELLER having
given written notice thereof to BUYER within fifteen (15) days after SELLER has
actual knowledge of the first occurrence thereof and SELLER's failure to timely
give such notice shall be deemed to be a waiver of SELLER's right to claim such
specific Excusable Delay extends the date for SELLER's performance of any duty
or obligation for a period more than fifteen (15) days prior to the date of
SELLER's notice; provided, further, however, that (aa) such waiver shall only
apply to the particular Excusable Delay and shall not waive SELLER's right to
claim an Excusable Delay for any other event, (bb) SELLER shall not be obligated
to deliver more than one (1) notice in the case of a continuing Excusable Event,
and (cc) SELLER shall be deemed to have complied with this notice requirement if
delay is reflected in an updated Project Schedule delivered by BUYER in
accordance with subsection 3.7.5 below within such fifteen (15) days period.
1.20. "FUTURE IMPROVEMENTS" means building improvements
that BUYER may elect in the future after the Closing Date to construct on the
Property, which are generally shown on the Development Plan and denoted as
"Phase II"; notwithstanding any other provisions in this Agreement, the Building
to be constructed and the Property to be sold by SELLER does not include any
Future Improvements notwithstanding that the Future Improvements are shown in
the Development Plan.
1.21. "GOVERNMENT" means and includes the City of
Oceanside, California and each other governmental and quasi-governmental agency
and instrumentality whose consent is required to obtain the Entitlements and any
public or private utilities whose consent is required for the Government to
grant the Entitlements.
1.22. "IMPROVEMENTS" means the Building Shell Improvements
and the Interior Improvements, but does not include any Land Improvements.
-4-
1.23. "INTEREST CARRY" means a element of the Development
Costs calculated as of the date funds are disbursed to pay Development Costs
until the Purchase Price is paid in full calculated as follows: (a) a variable
rate of interest equal to the rate of interest charged by SELLER's construction
lender for amounts disbursed from a construction loan to pay Development Costs,
provided, however, that such interest rate shall not exceed the Maximum Rate (as
defined below) then in effect, and (b) a fixed rate of ten percent (10%) per
annum on SELLER's own funds disbursed by SELLER to pay any Development Costs.
The "Maximum Rate" means (a) the average of London Interbank Offered Rates (in
U.S. dollar deposits) for a term of three (3) months as determined by ▇▇▇▇▇
Fargo Bank, NA. as of the date the funds in question are disbursed plus (b) two
and 50/100 percent (2.50%).
1.24. "INTERIOR IMPROVEMENT COSTS" means all actual,
out-of-pocket amounts paid or incurred in connection with the design,
construction and/or installation of the Interior Improvements incurred by
SELLER, including (a) amounts payable to the Contractor for general conditions,
job site supervision, cleanup, trash and janitorial services and the
Contractor's Fee, (b) the actual "hard costs" of construction of the Interior
Improvements (i.e. described in the Construction Contract as "Costs of the
Work"); (c) the costs of all required permits, fees, inspections and other
charges payable to any government authority in connection with the Interior
Improvements; (d) the costs for initial utility improvements and/or connection
fees; (e) all space planning, interior decorating, architectural and engineering
services required to prepare and obtain required approvals for the Interior
Improvement Plans and (f) loan fees, costs and interest attributable to
expenditures for Interior Improvement Costs.
1.25. "INTERIOR IMPROVEMENTS" means all interior
improvements which are not a part of the Building Shell Improvements, including
(a) partitions, walls, doors, (b) all surface finishes, including wall
coverings, paint, floor coverings, suspended ceilings and other similar items,
(c) duct work, heat pumps, vents, filters, diffusers, terminal boxes and
accessories for completion of heating, ventilation and air conditioning systems
within the premises, (d) electrical distribution systems (including panels,
subpanels, wires and outlets), lighting fixtures, outlets, switches and other
electrical work to be installed in the premises, (e) plumbing lines, fixtures
and accessories, (f) all fire and life safety control systems such as fire
walls, and fire alarms (including piping, wiring and accessories) to be located
in the premises, (g) entrance door signage and directory listings, (h)
improvements required for compliance with Title 24, and (i) such other elements
as designed in the approved Interior Improvement Plans; provided, however, the
term "Interior Improvements" does not include any of BUYER's trade fixtures,
equipment and personal property (including telephone systems, chairs, tables,
furniture, movable partitions, racks, conveyors and other equipment used in
BUYER's business). 1.26. "LAND" means the real property being purchased by
SELLER under the Ocean Ranch Contract without any Improvements, except any Land
Improvements to be constructed by Ocean Ranch Developer, consisting of a portion
of ▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇. ▇▇▇▇▇ in the City of Oceanside, California containing
the Net Usable Land area as described and approved in accordance with Section 1
of the Ocean Ranch Contract.
1.27. "LAND IMPROVEMENTS" means works of improvement to be
constructed within the Ocean Ranch Subdivision, and, if necessary, portions of
the Land, as required under the Ocean Ranch Contract or to otherwise satisfy
Legal Requirements by Ocean Ranch Developer and for the issuance of the
Entitlements, as more particularly provided in the Ocean Ranch Contract,
consisting of curbs, gutters, sidewalks, street lighting, streets, off-site
storm drains and Utilities as necessary to provide for ingress and egress to and
from the property line of the Property and to provide for Utilities to the
perimeter boundary of the Property and grading as required to deliver the
Property ready for construction of the Building Shell Improvements in a "rough
graded" condition in substantial conformance with the Government-approved
Grading Plans described in the Ocean Ranch Contract, subject to any
modifications required by the Government in connection with the approval of the
Parcel Map or the Entitlements.
1.28. "LEASE" means that certain Standard
Industrial/Commercial Single-Tenant Lease-Net being executed and delivered by
BUYER and SELLER in accordance with the provisions of
-5-
subsection 14.1.1 below, a copy of which is annexed to this Agreement as EXHIBIT
"6"; any words or phrases defined in the Lease shall have the same meaning when
used in this Agreement, unless otherwise expressly provided.
1.29. "LEGAL REQUIREMENTS" means all applicable laws,
statutes, ordinances, orders, rules, regulations, permits, licenses,
authorizations, directions and requirements of Government, which concern or
relate to the development of the Property.
1.30. "NET USABLE LAND" shall have the same meaning as
provided in Section 1 of the Ocean Ranch Contract.
1.31. "OCEAN RANCH CONTRACT" means that certain Purchase
Agreement and Escrow Instructions dated October 25, 2002 between SELLER and
Ocean Ranch Developer pursuant to which SELLER is purchasing the Land; BUYER
acknowledges that SELLER has delivered to BUYER a copy of the Ocean Ranch
Contract. BUYER and its legal counsel have participated extensively in the
negotiation of the Ocean Ranch Contract and BUYER, by execution of this
Agreement, approves the form of the Ocean Ranch Contract.
1.32. "OCEAN RANCH DEVELOPER" means ▇▇▇▇ Ranch Development
Company, LLC, who is the developer of a large master planned commercial and
industrial development in Oceanside, California commonly referred to as "Ocean
Ranch" and which includes the area to comprise the Land ("Ocean Ranch
Subdivision").
1.33. "PARCEL MAP" means the lot line adjustment (referred
to as the "Map" in the Ocean Ranch Contract) to be recorded by Ocean Ranch
Developer to provide for the legal division of the Property as a legal lot
separate from the Remainder Parcel as described in Section 4 of the Ocean Ranch
Contract.
1.34. "PLANS" means, collectively, the Final Building Shell
Plans and the final Interior Improvement Plans.
1.35. "PROJECT SCHEDULE" means the schedule attached to
this Agreement as EXHIBIT "7" as updated by SELLER from time to time in
accordance with section 3.7.5 below
1.36. "PROPERTY" means the Land and, as and when
constructed, the Building Shell Improvements, the Interior Improvements and the
Land Improvements constructed on the Property.
1.37. "RENTABLE SQUARE FEET" or "RENTABLE SQUARE FOOTAGE"
means the gross square footage within the perimeter boundaries of the Building
Shell Improvements walls, windows and doorways, including the gross square
footage of any Mezzanine area, measured from the exterior surface of such
perimeter boundaries, unless the roof extends beyond such perimeter boundary, in
which event the area shall be from the roof "drip line" and shall be equivalent
to the determination of rentable square footage measurements in accordance with
prevailing industry practices for single-tenant industrial/commercial
properties.
1.38. "RESTRICTIONS" means (a) the Declaration of
Covenants, Conditions and Restrictions recorded on March 15, 2001 as Document
No. 2001-0150425 in the Official Records of San Diego County, California (the
"CC&R Instrument"), (b) The Ocean Ranch Master Development Plan Planning and
Design Guidelines dated April 21, 2000 ("Guidelines") described in the CC&R
Instrument, (c) the Special Declaration and (d) any other covenants, conditions,
restrictions or limitations effecting the Land as described in the Preliminary
Report identified in Section 8(a) of the Ocean Ranch Contract, which is being
approved by BUYER in accordance with section 9 below.
1.39. "SPECIAL DECLARATION" means the special covenants,
conditions and restrictions provided in that certain Declaration of Special Land
Use Restriction Agreement to be recorded in the Official
-6-
Records of the San Diego County, California Recorder upon the conveyance of the
Land to SELLER pursuant to the Ocean Ranch Contract, a copy of which is attached
as Exhibit D to the Ocean Ranch Contract.
1.40. "SUBSTANTIAL COMPLETION" shall have the meaning set
forth in section 6.4 below.
1.41. "UTILITIES" means sewer, natural gas, water,
telephone, electrical power, cable television, and fire services as reasonably
required to permit development, operation and occupancy of the Building on the
Property.
2. FUNDAMENTAL TERMS. The provisions in this section 2 are
included to summarize for convenience some of the important terms of this
Agreement, and the provisions in this section are supplemented by and subject to
the other sections of this Agreement. In the event of any conflict between this
section 2 and any other provisions, the other provisions shall supersede and
control.
2.1. PROPERTY IDENTIFICATION. The Property that is the
subject of the purchase and sale transaction provided for in this Agreement
consists of the Land and, when constructed, the Building Shell Improvements and
Interior Improvements and the Land Improvements located on the Property, except
any such Land Improvements that are public improvements.
2.2. SELLER'S ADDRESS FOR NOTICE. For purposes of any
notices to SELLER, SELLER's address, telephone and facsimile numbers are:
INNOVATIVE DEVELOPMENT ENTERPRISES, INC.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
2.3. BUYER'S ADDRESS FOR NOTICE. For purposes of any
notices to BUYER, BUYER's address, telephone and facsimile numbers are:
▇▇▇▇▇▇▇▇, INC.
Attention: ▇▇▇▇▇ ▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
2.4. ESCROW AGENT. For purposes of notice and delivery
under this Agreement, the name, address, telephone and facsimile numbers of
Escrow Agent are:
First American Title Insurance Company
Attention: ▇▇▇▇ ▇▇▇▇▇▇
-7-
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
2.5. SELLER'S BROKER. SELLER's Broker is: None
2.6. BUYER'S BROKER. BUYER's Broker is:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ of California, Inc.
Attention: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, III
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
2.7. TITLE COMPANY. For purposes of notice and delivery
under this Agreement, the name, address, telephone and facsimile numbers
of the Title Company are:
First American Title Insurance Company
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
2.8. PURCHASE PRICE. The purchase price ("Purchase Price")
for the Property, which is payable upon Close of Escrow (as described below),
shall be calculated in accordance with section 4 below and payable in accordance
with section 5 below.
2.9. DEPOSIT. No good faith deposit will be required to be
made by BUYER in connection with entering into this Agreement. BUYER may be
required to make Deposits pursuant to pursuant to the terms of subsection
3.7.4 below providing for a Change Request Deposit.
2.10. CLOSING DATE. The date for Close of Escrow ("Closing
Date") shall be the date determined in accordance with the provisions of section
7 below, unless BUYER and SELLER mutually agree in writing to change the Closing
Date.
2.11. CONTINGENCY/CONDITIONS TO CLOSE OF ESCROW. The Close
of Escrow is subject to certain contingencies or conditions as described in
sections 9, 11 and 12 below, which contingencies or conditions are required to
be satisfied or waived by the times described in sections 9, 11 and 12 below.
Unless otherwise expressly provided in another section of this Agreement, the
dates for satisfaction or waiver of such contingencies and conditions shall not
be subject to extension for any reason, except with the prior written consent of
SELLER and BUYER, in their respective sole discretion.
3. DESCRIPTION OF THE PROPERTY. The Property to be conveyed by
SELLER includes the Land, the Land Improvements located on the Property (except
any Land Improvements constituting public improvements), the Building Shell
Improvements and the Interior Improvements to be constructed by SELLER. Except
as expressly provided in subsection 3.6 below, the conveyance includes all
rights and privileges appurtenant to the Property, if any, now owned and
possessed or hereafter acquired by SELLER. Subject to the provisions in sections
3.1 to 3.7 below, BUYER, by execution of this agreement, is approving the
Development Plan for the Property.
-8-
3.1. PLANNED LAND SIZE AND FINAL MEASUREMENT. It is
planned that the Net Usable Land of the Land will be determined as provided in
Section 1 of the Ocean Ranch Contract.
3.1.1 LAND DESCRIPTION. Subject to modification as
provided in this Agreement, BUYER has approved the description of the Net Usable
Land as depicted on Exhibit A to the Ocean Ranch Contract. Pursuant to the Ocean
Ranch Contract, Ocean Ranch Developer has agreed to (a) cause the boundaries of
the Land to be located as shown on Exhibit A to the Ocean Ranch Contract, and
(b) submit and obtain Government approval of a lot line adjustment consistent
with Exhibit A to the Ocean Ranch Contract, unless otherwise approved by SELLER
and BUYER. BUYER understands that the real property to be conveyed by Ocean
Ranch Developer to SELLER at the close of escrow under the Ocean Ranch Contract
will include an area greater than the Land (such excess area is referred to as
the "Remainder Parcel" in the Ocean Ranch Contracts) and, in all events, BUYER
consents to SELLER's reconveyance to Ocean Ranch Developer of the Remainder
Parcel. BUYER shall have no liability or obligation of any kind with respect to
the Remainder Parcel. The recordation of the Parcel Map is a condition to the
Close of Escrow as provided in section 11.5 below.
3.1.2 LOT SIZE MODIFICATIONS. SELLER may make
modifications to the size or configuration of the Land on account of Government
requirements in connection with the approval of the Parcel Map and upon receipt
of BUYER's prior written consent, not to be unreasonably withheld; provided,
however, BUYER agrees not to withhold its approval on account of any increase or
decrease the total square footage of the Net Usable Land of two percent (2%) or
less that results from any Government action or requirement.
3.1.3 ADJUSTMENT OF NET USABLE LAND. The square
footage of the Net Usable Land will be determined by Ocean Ranch Developer as
more particularly provided in the Ocean Ranch Contract, subject to any
adjustment as permitted in the Ocean Ranch Contract and to receipt of BUYER's
prior written consent thereto, not to be unreasonably withheld. BUYER and SELLER
agree that the square footage of the Net Usable Land as determined in accordance
with the Ocean Ranch Contract and approved by BUYER shall be a final and binding
determination of the Net Usable Land for all purposes of this Agreement.
3.1.4 APPROVAL OF PARCEL MAP. Ocean Ranch
Developer has agreed to submit the recorded Parcel Map to SELLER for approval of
its conformance, without material deviation, with the requirements of Section 1
of the Ocean Ranch Contract and Exhibit A to the Ocean Ranch Contract. SELLER
shall submit such Parcel Map to BUYER for its approval, not to be unreasonably
withheld, along with an Action Notice in the form described in section 3.7 below
and BUYER shall have three (3) business days to give SELLER written notice of
any objection BUYER may have to the Parcel Map. BUYER's failure to timely
deliver notice of objection shall constitute BUYER's approval of the Parcel Map
as accurately depicting the Land to be conveyed by SELLER.
3.2. BUILDING SHELL IMPROVEMENTS. The Building Shell
Improvements shall be designed and constructed on the Land in accordance with
the Development Plan (EXHIBIT "5"), the Building Shell Specifications (Exhibit
"1") and the Final Building Shell Plans, as such plans and specifications may be
supplemented, modified and amended in accordance with this Agreement, and in
accordance with all Legal Requirements.
3.2.1 PLANNED SIZE AND FINAL MEASUREMENT. It is
planned that the Building Shell Improvements will consist of a building
containing approximately 201,316 Rentable Square Feet, including a Mezzanine
containing approximately 35,000 Rentable Square Feet. BUYER has approved the
Building Shell Improvements as depicted on the Development Plan.
-9-
3.2.2 MODIFICATIONS. BUYER agrees that SELLER may
make modifications to the Building Shell Improvements design on account of
Government requirements, subject to receipt of BUYER's written consent, not to
be unreasonably withheld; provided, however, BUYER agrees not to withhold its
consent on account of any increase or decrease the total square footage of the
Rentable Square Feet of two percent (2%) or less that results from any
Government action or requirement or inadvertent jobsite discrepancies during the
course of construction. The Developments Costs will be increased for the actual
costs attributable to Government required changes to the Building as described
in the Development Plan, the Building Shell Specifications (EXHIBIT "1") and the
Development Cost Breakdown..
3.2.3 FINAL BUILDING SHELL PLANS. Subject to the
provisions of subsection 3.2.2 above, SELLER shall cause Architect-Shell
Improvements to prepare and deliver to SELLER and BUYER proposed final Building
Shell Plans, consisting of at least the documentation described in the Plan
Sheets List annexed as EXHIBIT "8" to this Agreement, which shall include
reasonable specifications sufficient to describe the quality of the material
components of the improvements, including finishes, colors and materials ("Final
Building Shell Plans") to the extent not set forth in the Building Shell
Specifications (EXHIBIT "1"). SELLER shall provide the Design Professionals the
relevant estimated Development Cost Breakdown with instructions to undertake the
design work, to the extent commercially reasonable, to conform to cost estimates
in the initial Development Costs Breakdown and shall otherwise use its good
faith efforts to avoid any commercially unreasonable increases in the
Development Costs. The Final Building Shell Plans shall be subject to BUYER's
and SELLER's reasonable approval in accordance with the procedures provided in
section 3.7 below and the proposed Final Building Shell Plans upon such approval
shall become the Final Building Shell Plans for all purposes of this Agreement.
If BUYER determines that the Final Building Shell Plans for any material
elements are not of adequate detail, BUYER shall give SELLER notice of BUYER's
requested additional information in accordance with section 3.7 below and SELLER
shall arrange, as an additional Design Cost, for the Design Professionals to
provide additional documentation.
3.2.4 THIRD PARTY APPROVALS. BUYER acknowledges it
is aware that (a) the Land, as a part of the Ocean Ranch Subdivision, is subject
to the Restrictions, and (b) the overall design of the Improvements as shown in
the Development Plan will be subject to the approval of the Ocean Ranch
Developer as provided in Exhibit D (Section B) of the Ocean Ranch Contract, the
Association as provided in Section 9(c) of the Ocean Ranch Contract and the
Government as provided in Section 9(b) of the Ocean Ranch Contract ("Design
Review Approval"). SELLER shall cause the Development Plan to be submitted for
Design Review Approval and shall be responsible, as a part of the Development
Costs, for submitting plans and materials reasonably required by the Ocean Ranch
Developer, the Association or the Government in furtherance of obtaining Design
Review Approval; provided, however, that all such plans and materials that
modify the Development Plan shall have been previously approved by BUYER and any
modifications to any such approved documents and any conditions to approval
thereof shall be subject to BUYER's reasonable approval in accordance with
section 11.7below.
3.3. INTERIOR IMPROVEMENTS DESCRIPTION. The Property to be
purchased and sold shall include certain Interior Improvements as approved by
SELLER and BUYER in accordance with the procedures provided in this subsection.
BUYER, by execution of this Agreement, approves the design of the Interior
Improvements as shown on the Development Plan.
3.3.1 DESIGN OF INTERIOR IMPROVEMENTS. SELLER
shall furnish to BUYER for its approval, a complete set of plans and
specifications detailing all Interior Improvements consisting of at least the
documentation applicable to the Interior Improvements described in the Plan
Sheets List (EXHIBIT "8") to this Agreement, which shall include reasonable
specifications sufficient to describe the quality of the material components of
the improvements, including finishes, colors and materials ("Interior
Improvement Plans") to the extent not set forth in the Building Shell
Specifications (EXHIBIT "1"). Unless otherwise approved by BUYER, the Interior
Improvement Plans will be prepared by the Architect-Interior Improvements, who
has been retained by SELLER. Following BUYER's approval, the Architect-Interior
Improvements shall submit the Interior Improvement Plans for Government plan
checking and a building permit. The final Interior Improvement Plans shall be
subject to any changes required by Government authorities or for compliance
-10-
with any Legal Requirements, provided, however, that BUYER shall have the right
to approve such changes in accordance with section 3.7 below. The Developments
Costs will be increased for the actual costs attributable to Government required
changes to the Building as described in the Development Plan, the Building Shell
Specifications (EXHIBIT "1") and the Development Cost Breakdown. SELLER shall
provide the Design Professionals the relevant estimated Development Cost
Breakdown for the Interior Improvements with instructions to undertake the
design work, to the extent commercially reasonable, to conform to the Interior
Improvement Costs estimated in the initial Development Cost Breakdown (EXHIBIT
"4") and shall otherwise use its good faith efforts to avoid any commercially
unreasonable increases in the Development Costs. If BUYER determines that the
Interior Improvement Plans for any material elements are not of adequate detail,
BUYER shall give SELLER notice of BUYER's requested additional information in
accordance with section 3.7 below and SELLER shall arrange, as an additional
Design Cost, for the Design Professionals to provide additional documentation.
3.4. DAILY TRIP ALLOWANCE. The Ocean Ranch Subdivision
generally is subject to Government traffic volume restrictions on the number of
average daily trips ("ADT's") generated by use of the property within the entire
Ocean Ranch Subdivision (the "Ocean Ranch ADT's"). Under the Special
Declaration, and as a covenant running with the Land, Ocean Ranch Developer has
allocated to the Land a number of the Ocean Ranch ADT's equal to 1,755 ADT's
(the "Land ADT's"). SELLER's conveyance of the Property to BUYER includes any
and all rights of SELLER, without representation or warranty, in the Land ADT's
as provided in the Special Declaration.
3.5. RETAIL SPACE LIMITATION. Pursuant to the Special
Declaration and other Restrictions, Ocean Ranch Developer has subjected the Land
to certain restrictions on the retail use of the Land. Ocean Ranch Developer has
agreed to permit use of the parking areas and allocated a maximum number of
square feet, not to exceed 2,000 square feet of space within the Building, in
each case for the limited uses described in Section 2.2(c) of the Special
Declaration ("Special Use Allowance"). SELLER's conveyance of the Property to
BUYER includes any and all rights of SELLER, without representation or warranty,
in the Special Use Allowance.
3.6. EXCLUSIONS. The Property being conveyed by SELLER
does not include any utility deposits, governmental deposits or any rights to
any refunds arising from facts or circumstances arising prior to the Close of
Escrow, except to the extent that the same have been included in Development
Costs or that BUYER and SELLER agree in a separate written agreement to
reimburse SELLER for any such prepaid deposits. In addition, the conveyance does
not include any rights, claims, demands or actions which SELLER may have now or
in the future against persons other than BUYER on account of any acts, omissions
or circumstances arising prior to the Close of Escrow, except as expressly
provided (a) in section 4.5 below with respect to the Ocean Ranch Contract
adjustments, (b) in section 13.1 below concerning the assignment of Contractor's
warranties and claims against Contractor, any architect, engineer, designer or
other contractor or subcontractor or material supplier and (c) in section 13.7
below concerning the assignment of certain claims against Ocean Ranch Developer,
and that affect the Property or BUYER's use thereof after the Closing Date.
3.7. BUYER APPROVALS, RESPONSES AND CHANGES. Unless a
different time period for a particular action by BUYER is expressly set forth in
another section of this Agreement, all approvals, responses and other actions
required from BUYER by this Agreement in connection with the acquisition of the
Land, the design and construction of the Improvements, completion of the
Improvements or the Close of Escrow, shall be governed by this section 3.7, and
no claim for Excusable Delay or increase in the Development Costs as a result of
BUYER's failure to timely act shall be permitted or allowed unless BUYER fails
to act in a timely manner as required by this section 3.7. Unless otherwise
expressly provided, BUYER agrees to act in good faith and not to unreasonably
withhold or delay any such approvals, responses and other actions.
3.7.1 PLAN SUBMITTALS. BUYER hereby approves the
Development Plan, including the preliminary Interior Improvement Plans. SELLER
shall submit to BUYER for review
-11-
SELLER's proposed Final Building Shell Plans and Interior Improvement Plans.
BUYER hereby acknowledges and agrees that, at any time prior to the submittal of
the Final Building Shell Plans or the final Interior Improvement Plans, SELLER
may submit to BUYER written descriptions or proposals showing design details for
the elements of the Improvements, which may include new versions of all or part
of the Building Shell Plans and Interior Improvement Plans, provided that the
items shown therein can reasonably be approved separately from the balance of
the Plans ("Submittals"). BUYER's review and approval of the Plans and
Submittals shall be governed by section 3.7.2 below.
3.7.2 APPROVAL PROCEDURES. Any items that require
BUYER's approval, including, without limitation, the Plans and any Submittals,
shall be submitted to BUYER, together with an Action Notice (as defined below).
BUYER shall have the following periods of time ("Time Limit") from the delivery
of such items to give SELLER notice of objection ("Objection Notice") to any
items shown or set forth therein: (a) ten (10) days in the case of the
submission of the proposed Final Building Shell Plans or the proposed final
Interior Improvement Plans, and (b) five (5) days in all other cases.
Notwithstanding any other provision herein to the contrary: (i) BUYER shall not
have the right to submit an Objection Notice or otherwise withhold its approval
of any Plans or Submittals with respect to any elements shown therein that were
previously disclosed in the Development Plan, Building Shell Specifications, the
initial Interior Improvements Plans or in prior Submittals approved by BUYER;
(ii) BUYER shall not otherwise unreasonably withhold its approval of the
proposed Final Building Shell Plans or final Interior Improvement Plans provided
that the same are materially consistent with the Development Plan, the Building
Shell Specifications, the initial Interior Improvements Plans and any Submittals
previously approved by BUYER and the most recent updated Development Cost
Breakdown that has been approved by BUYER; or (iii) where the basis of BUYER's
objection would give rise to a violation of any Legal Requirements. Provided
that SELLER has provided an Action Notice with any such item submitted to BUYER
for approval, BUYER's failure to timely give an Objection Notice shall
constitute a BUYER's Delay. If BUYER timely and properly gives an Objection
Notice, such notice shall specify in detail the basis of BUYER's objection and,
if applicable, any proposed change. SELLER and BUYER shall promptly negotiate in
good faith in an effort to resolve the grounds for such objection. If BUYER and
SELLER are unable to resolve the dispute within five (5) days or such extended
time as they may agree, then either BUYER or SELLER may submit the matter to
Arbitration in accordance with section 35 below. SELLER shall act in good faith
to continue its performance, to the extent commercially reasonable, during
BUYER's review process or any Arbitration proceeding; however, SELLER may not
commence any of the work described or required by any item submitted to BUYER
for approval without first obtaining written approval from the BUYER or
obtaining an Arbitration Award in SELLER's favor. Once approved by BUYER in
writing, SELLER shall make no changes to any approved items without the prior
written consent of BUYER.
3.7.3 ACTION NOTICE In connection with any
approval, response or other action required from BUYER under this Agreement with
respect to the acquisition of the Land or the design and construction of the
Improvements, SELLER shall provide to BUYER, together with any separate
materials being submitted for review and approval, a notice in the form of the
Action Notice annexed as EXHIBIT "9" to this Agreement, stating the nature of
such requested approval, response or other action together with a statement that
the failure to respond to such notice within the applicable Time Limit may
constitute grounds for a BUYER's Delay and an increase in the Development Costs
(the "Action Notice"). If the BUYER fails to respond by the applicable Time
Limit, then, subject to satisfaction of the notice requirement described in
section 1.19 above, SELLER shall be entitled to claim a BUYER's Delay and to an
increase in the Development Costs as a result of such failure.
3.7.4 CHANGE REQUESTED BY BUYER. Subject to the
limitations in subsection 3.7.4.1 concerning changes to the Final Building Shell
Plans, if BUYER requests any changes to the Improvements from Development Plan
(EXHIBIT "5"), the Building Shell Specifications (EXHIBIT "1") or the
Development Cost Breakdown(EXHIBIT "4"), which have been approved by BUYER, any
such changes shall be made in writing (a "Change Request") and shall be in
accordance with applicable Legal Requirements. SELLER's approval of such Change
Request shall not be required, except that SELLER shall have the right to
disapprove, in its sole discretion, any proposed changes to the Improvements
which (a) adversely alter or
-12-
otherwise adversely affect any structural component of the Building, (b) in the
case of Interior Improvements, are visible from the exterior of the Building,
(c) would require materials which are not readily available or customarily and
ordinarily used in similarly situated construction work where the procurement of
such materials would cause a delay in Substantial Completion unless BUYER
authorizes the same in writing as a BUYER's Delay, (d) specify materials that
are not at least of comparable quality to those recommended in the Plans
submitted by SELLER or (e) in the case of the Building Shell Improvements, is
not approved by SELLER in accordance with subsection 3.7.4.1 below. SELLER shall
respond within ten (10) days after receipt of any request to change the Plans in
which to approve or disapprove in writing such change. If SELLER disapproves
such proposed change, it shall state with specificity the reasons for such
disapproval. SELLER and BUYER shall promptly negotiate in good faith in an
effort to resolve the grounds for such disapproval. If BUYER and SELLER are
unable to resolve the dispute regarding any Change Request within five (5) days
or such extended time as they may agree, then either BUYER or SELLER may submit
the matter to Arbitration in accordance with section 35 below. Within ten (10)
days from the later of delivery of the Change Request or the issuance of the
Arbitration Award, as applicable, SELLER shall provide to BUYER a good faith,
reasonable estimate of the net additional costs of the additional Interior
Improvement Work (the "Change Work") (including estimated additional Design
Costs, permits and inspection fees) required to comply with the Change Request
and after crediting any savings resulting from the Change Request ("Change Cost
Proposal"). Within five (5) days from the delivery of the Change Cost Proposal,
BUYER shall give SELLER written notice of the approval of the Change Cost
Proposal ("Final Change Approval") and, if required by SELLER, make a deposit
("Change Request Deposit") as required under subsection 5.1 below in the amount
of the Change Cost Proposal. If BUYER objects to the Change Cost Proposal, BUYER
shall notify SELLER of such objection within such five (5) day period, and such
notice shall specify in detail the basis of BUYER's objection and, if
applicable, any proposed change. SELLER and BUYER shall promptly negotiate in
good faith in an effort to resolve the grounds for such objection. If BUYER and
SELLER are unable to resolve the dispute regarding any Change Cost Proposal
within five (5) days or such extended time as they may agree, then either BUYER
or SELLER may submit the matter to Arbitration in accordance with section 35
below. If BUYER fails to timely deliver a Final Change Approval, then BUYER
shall be deemed to have revoked the Change Request and the construction of the
Improvements shall continue without regard to the Change Request. The failure of
SELLER to require a Change Request Deposit or, in the case of any minor Change
Cost Proposal involving less than $30,000.00, the failure of SELLER to submit a
Change Cost Proposal before proceeding with the requested change shall not waive
or otherwise prejudice SELLER's right to an increase in the Development Costs on
account of such change. Any delays in the design or construction of the
Improvements on account of any Change Request shall be deemed BUYER's Delays,
except to the extent that any portion of such delay is determined in an
Arbitration Award to be a result of (i) SELLER's failure to timely respond to
Change Requests in accordance the preceding procedures, or (ii) SELLER's bad
faith refusal to approve a Change Request requiring SELLER's approval, which in
either event will not constitute an Excusable Delay.
3.7.4.1 LIMITATIONS ON CHANGES TO BUILDING
SHELL PLANS. Notwithstanding any other provision, BUYER shall not have the right
to submit any Change Request that would have the effect of requiring a change in
the Building Shell Improvements, in any of the following events: (a) the Change
Request would require submission of a modification of the Development Plan
following receipt of the Design Review Approval that would require additional
discretionary Government approvals that cannot be issued by administrative staff
or that would require additional public hearings; (b) where the Change Request
is submitted later than thirty (30) days prior to the planned date of issuance
of the building permit as shown in the then current Project Schedule, except in
respect to a Change Request requesting a purely cosmetic change to the exterior
of the Building that does not change the dimensions or configuration of the
Building footprint or cause a delay in the processing of the building permit
longer than fifteen (15) days; or (c) the proposed change is not acceptable to
the Ocean Ranch Developer and/or the Association when (i) the change is required
to be approved by the Ocean Ranch Developer and/or the Association in accordance
with the requirements of the Ocean Ranch Contract, and (ii) the time for such
approval would be after the date that SELLER's deposits under Section 5 of the
Ocean Ranch Contract have become nonrefundable.
-13-
3.7.5 PROJECT MEETINGS/DOCUMENT UPDATES. BUYER's
Representative and SELLER's and Contractor's project manager(s) shall meet on a
weekly basis to discuss the progress of the work, any required decisions or
requested change orders and other matters related thereto, including any matters
that such parties are aware of that could have a material adverse effect on the
cost, schedule or quality of the construction and design of the Improvements or
the Land Improvements. SELLER shall provide (a) an updated Project Schedule no
less frequently than at fifteen (15) days intervals, (b) an updated Development
Costs Breakdown (i.e. Cost versus Budget Summary and Job Cost Detail Report) at
least monthly, and (c) copies of Construction Draw Requests promptly following
submission to the construction lender. Such updated documents shall be reviewed
and approved/disapproved at the next scheduled meeting following the delivery to
BUYER of the updated documentation..
4. DETERMINATION AND PAYMENT OF THE PURCHASE PRICE. The Purchase
Price for the Property shall be calculated in accordance with the provisions of
this section 4. The Purchase Price shall be an amount equal to the sum of: (a)
the Development Costs actually incurred by SELLER, as adjusted in accordance
with the provisions of subsections 4.1 to 4.5 below; and (b) the Developer's
Fee. The parties currently anticipate that the Purchase Price will be
approximately $14,022,596 based upon the Improvements as described in the
Development Plan, and as itemized in the initial Development Cost Breakdown
(Exhibit "4"). The Purchase Price shall be payable as provided in section 5
below. BUYER acknowledges that: (i) the Development Cost Breakdown constitutes
only SELLER's good faith estimate of Development Costs based on known
conditions, information provided by SELLER's Contractor based on its recent
experience with costs incurred in development of other similar projects and is
being made without the benefit of bidding or final plans, specifications and
requirements for the development of the Property; (ii) the Development Cost
Breakdown is being provided for informational purposes only and is not intended
to constitute a representation or warranty of the actual Development Costs;
(iii) BUYER, as a part of its own due diligence is required to make its own
independent decision concerning the Development Costs; and (iv) such Development
Costs shall be subject to increase or decrease as provided in subsections 4.1 to
4.6 below. SELLER shall use its reasonable, good faith efforts to not to exceed
the costs shown in the initial Development Cost Breakdown (EXHIBIT "4"), subject
to increases permitted in accordance with this Agreement. SELLER shall update
the Development Cost Breakdown and set fixed line item costs as bids are
received, subcontractors and materials are selected and costs are otherwise
identified, but in any event on not less than a monthly basis, and submit the
same to BUYER for BUYER's reasonable review and approval. Upon BUYER's approval
thereof, the revised Development Cost Breakdown shall replace the previously
approved Development Cost Breakdown for all purposes, the fixed costs identified
therein shall be fixed for all purposes (and may only be modified by written
agreement of BUYER and SELLER) other than for increased costs resulting from
Excusable Delays or Change Requests submitted by BUYER.
4.1. INCREASE/EXCLUDED ITEMS. Development Costs (and the
Purchase Price) shall be subject to increase for work required to be performed
to the extent that the Development Plan, Building Shell Specifications or the
Development Cost Breakdown specifically shown items of work as "excluded" (e.g.
racks, conveyors, equipment or equipment installation, electrical fixtures,
etc.) and SELLER is required to incur Development Costs on account of any such
item of work. For convenient reference, a list of items identified as "excluded
items" on the Development Plan, Building Shell Specifications or the Development
Cost Breakdown is set forth in the Initial Excluded Items List annexed as
EXHIBIT "1A" to this Agreement; provided, however, the inclusion of this list is
not intended to infer that the scope of required work includes any elements
other than the specific work described in the Development Plan, Building Shell
Specifications and the Development Cost Breakdown. In the event there are any
additional "excluded" items arising from any Change Request submitted by BUYER
under section 3.7.4 above, SELLER shall expressly identify any such "excluded
item(s)" in the Change Cost Proposal.
4.2. INCREASE/CHANGE REQUESTS. Development Costs (and the
Purchase Price) shall be subject to increase for work required to be performed
as a result of any Change Request by BUYER in the actual, out-of-pocket amount
of all increased Development Costs resulting from the Change Request requested
by BUYER to the Plans, subject to a credit therefor for any Deposits made by
BUYER with respect thereto as provided in sections 3.7 above and 5.1 below.
-14-
4.3. BUYER CAUSED DELAYS. To the extent any of the
Excusable Delays constitute BUYER's Delays and the Closing Date is delayed for a
period of not less than sixty (60) days after the date that the Closing Date
otherwise would have occurred as a result of such BUYER's Delays, the Purchase
Price shall also be increased at a daily rate equal to $3,333.00 per day
multiplied times the number of days in excess of sixty (60) days that the
Closing Date is so delayed by such BUYER's Delays ("Delay Credit"). BUYER AND
SELLER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE
THE DAMAGES THAT SELLER MAY SUFFER ON ACCOUNT OF THE FAILURE OF THE CLOSING DATE
TO OCCUR ON A TIMELY BASIS ON ACCOUNT OF THE FAULT OF BUYER OR ITS CONTRACTORS,
AGENTS AND EMPLOYEES. THEREFORE, BUYER AND SELLER AGREE THAT THE DELAY CREDIT
INCREASE OF THE PURCHASE PRICE PROVIDED IN THIS SECTION REPRESENTS A FAIR AND
REASONABLE ESTIMATE OF SELLER'S DAMAGES UNDER THE PROVISIONS OF SECTIONS 1671,
1676 AND 1677 OF THE CALIFORNIA CIVIL CODE, AND THAT SELLER SHALL BE ENTITLED TO
SUCH DELAY CREDIT AS IT'S SOLE AND EXCLUSIVE REMEDY (EXCEPT FOR PERMITTED
INCREASES IN THE DEVELOPMENT COSTS) ON ACCOUNT OF SUCH DELAY AND SELLER
OTHERWISE WAIVES ANY RIGHT TO TERMINATE THIS AGREEMENT ON OR BEFORE THE OUTSIDE
COMPLETION DATE ON ACCOUNT OF SUCH DELAYS.
/s/ JCH /s/ TWT
-------------------- --------------------
SELLER'S Initials BUYER's Initials
4.4. DECREASE/SELLER CAUSED DELAYS. If the Closing Date is
delayed for a period of not less than sixty (60) days after the date that the
Closing Date (after extension for any Excusable Delays) otherwise would have
occurred on account of delays for which SELLER is responsible under this
Agreement ("SELLER's Delays"), the Purchase Price shall be decreased at a daily
rate equal to the Delay Credit (i.e. $3,333.00) provided in section 7.3 below
multiplied times the number of days that the Closing Date is so delayed.
4.5 OCEAN RANCH CONTRACT ADJUSTMENTS. Notwithstanding any
other provisions of this Agreement, certain provisions of the Ocean Ranch
Contract described below provide for either reimbursements to SELLER or payments
by SELLER under the Ocean Ranch Contract that may increase or decrease the
Development Costs and the Purchase Price as provided in sections 4.5.1 to 4.5.4
below. To the extent that any such adjustments are not determinable as of the
Closing Date or the date for completion of the final accounting procedure
described in section 4.6.4 below, BUYER and SELLER agree to make such
adjustments and either pay or reimburse the other as applicable within thirty
(30) days after a determination of the adjustment. In the case of any payment by
SELLER to Ocean Ranch Developer on account of any such matters, SELLER shall
give BUYER notice of the required payment in accordance with the procedure in
section 3.7 above and BUYER shall have the right to approve such payment;
provided, however, that BUYER shall have no right to disapprove any such payment
for a reason that would constitute a default under the Ocean Ranch Contract.
4.5.1 SAVINGS CLAUSE. Pursuant to the terms of
Section 7(a) of the Ocean Ranch Contract, Ocean Ranch Developer has agreed to
provide for the benefit of SELLER and BUYER certain "Government Funds" or "Other
Savings" in the amount of Three Hundred Thirty Seven Thousand One Hundred Fifty
Four Dollars ($337,154.00) in a form approved by SELLER. As between SELLER and
BUYER, SELLER agrees that BUYER shall be entitled to exercise the approval
rights granted in the Ocean Ranch Contract and SELLER shall follow such
directions in making exercising such approval rights. To the extent that the
consideration proposed by the Ocean Ranch Developer consists of performance of
work (e.g. finish grading) or credits against permit or other Development Costs,
such savings shall reduce the Development Costs and SELLER shall reflect such
savings as and when realized in the then current Development Cost Breakdown. To
the extent that BUYER approves some other form of "Government Funds" or "Other
Savings" that does not result in an actual savings in the Development Costs, the
Development Costs shall not be reduced and BUYER shall be entitled to the
benefit of the other consideration.
-15-
4.5.2 STORM DRAINAGE FEES. Pursuant to the terms
of Section 15(g)(iii) of the Ocean Ranch Contract, SELLER is obligated to
reimburse Ocean Ranch Developer for certain fees it previously paid in
connection with the Local and Major Storm Drain Fee Programs in the amount of
One Hundred Thirty-Six Thousand Eight Hundred Seventy-Three and 57/100 Dollars
($136,873.57). Such amount shall be included in the Development Costs.
4.5.3 PERMIT FEE PAYMENTS. Pursuant to the terms
of Section 15(g)(ii) of the Ocean Ranch Contract, SELLER is obligated to
purchase from Ocean Ranch Developer certain credits arising from certain permit
costs it has prepaid in lieu of making direct payment of such permit costs to
the applicable Government authority. Such amounts paid to the Ocean Ranch
Developer shall be included in the Development Costs in reduction of permit
costs that may otherwise be shown as Government permit costs.
4.5.4 EXPENSES OF COLLECTION. Subject to SELLER's
entitlement to reimbursement for its Legal Expenses, SELLER shall use
commercially reasonable efforts to collect amounts due from Ocean Ranch
Developer under the preceding provisions; provided, however, if, prior to the
Close of Escrow, it become necessary to initiate a legal action against the
Ocean Ranch Developer to collect any such amounts, SELLER agrees, if requested
by BUYER, to assign, to the extent permitted under the Ocean Ranch Contract, the
claim against Ocean Ranch Developer to BUYER and BUYER shall have the right to
directly pursue collection. If, as of Close of Escrow, any amounts payable by
the Ocean Ranch Developer have not been received, whether on account of Ocean
Ranch Developer's or otherwise, then SELLER shall assign the right to receive
such payments to BUYER and BUYER shall be entitled to receive and retain any
such payments, subject to SELLER's entitlement to be reimbursed for its Legal
Expenses in connection with any prior collection actions. For purposes of
determining any amounts to be credited under subsections 4.5.1 or 4.5.2 above,
if SELLER is required to incur Legal Expenses in connection with enforcements of
Ocean Ranch Developer's obligation to make such reimbursements, the amount of
any savings credits to the Development Costs shall be calculated after deduction
for SELLER's Legal Expenses. The term "Legal Expenses" means reasonable
attorneys' fees and costs (including any expert witness fees), including
attorneys' fees and costs in connection with the enforcement of any award or
judgment or any appellate proceedings.
4.6 PROCEDURES/ACCOUNTING. The final Purchase Price shall
be equal to the final Development Costs plus the Developer Fees, subject to the
limitations set forth in and as increased or decreased pursuant to sections 4.1
through 4.5 above.
4.6.1 INSPECTION OF RECORDS. During the course of
performance of the construction of the Building Shell Improvements and Interior
Improvements and in connection with the final reconciliation of the Development
Costs as provided in subsection 4.6.4 below, and in addition to SELLER's monthly
update of the Development Cost Breakdown as required above, SELLER and BUYER
shall regularly confer concerning the Development Costs, and BUYER shall be
entitled to reasonably review books and records maintained by SELLER and
Contractor relating to such Development Costs at Contractor's office or such
other location as designated by SELLER within San Diego County, California. Such
right of inspection is exercisable on reasonable prior written notice (not less
than one (1) business day) to SELLER and during the regular business hours of
SELLER or Contractor, whichever is applicable. In addition, in the case of
construction work being performed by Contractor's own forces, SELLER shall cause
the Contractor to provide BUYER with a monthly job report showing the progress
of the work, percentage of completion for each trade, hours worked per trade,
number of workers employed per trade, amounts requested and paid to date and
such other information as is reasonably requested by BUYER, and if requested by
BUYER, copies of the draw requests and related documentation submitted by
Contractor in connection with the work.
4.6.2 PRELIMINARY CLOSING ACCOUNTING. No later
than thirty (30) days prior to the expected Closing Date, SELLER shall deliver
to BUYER an accounting of the Development Costs incurred and projected through
the Closing Date ("Preliminary Closing Accounting"). Such Closing
-16-
Accounting shall also include a detailed description of any adjustments from the
most recent version of the Development Cost Breakdown that had been approved by
both BUYER and SELLER and state the amount of the Purchase Price as of the
Preliminary Closing Accounting. Within twenty (20) days from delivery of the
Preliminary Closing Accounting, BUYER shall provide to SELLER a written notice
stating its approval or disapproval of the Preliminary Closing Accounting and,
in the event of disapproval, shall include a detailed description of the grounds
for such disapproval, including a line item by line item response to each
element for a proposed Purchase Price adjustment to which BUYER has an objection
("Disapproval Notice"). In the event BUYER gives a Disapproval Notice, SELLER
and BUYER shall in good faith endeavor to reach agreement on the Preliminary
Closing Accounting, provided that if the parties are unable to reach agreement
within ten (10) days from the delivery of the Disapproval Notice either BUYER or
SELLER may immediately submit the matter for decision by Arbitration (as defined
below).
4.6.3 CLOSING. If BUYER and SELLER are unable to
agree on the amount of the Purchase Price as of the Closing Date and the amount
in dispute is Two Hundred Fifty Thousand Dollars ($250,000.00) or less, BUYER
and SELLER shall nonetheless proceed with the Close of Escrow. For purposes of
such Close of Escrow, the Purchase Price shall be the Development Costs, as
shown in the most recent version of the Development Cost Breakdown that had been
approved by both BUYER and SELLER, adjusted by those items in subsections 4.1 to
4.5 above on which BUYER and SELLER are in agreement. If the amount in dispute
is more than Two Hundred Fifty Thousand Dollars ($250,000.00), then BUYER shall
have the right to elect whether or not to proceed with the Close of Escrow in
advance of the resolution of such dispute, either by agreement or by
Arbitration. Neither BUYER nor SELLER shall be deemed to have waived, released,
prejudiced or otherwise affected any rights or remedies they may have with
respect to such dispute by proceeding with the Close of Escrow in accordance
with this section. If the amount in dispute as reflected in the items identified
in BUYER's Disapproval Notice ("Disputed Adjustments") is more than One Hundred
Thousand Dollars ($100,000.00), then prior to the Close of Escrow, BUYER shall
deposit in the Escrow the aggregate amount of the Disputed Adjustments which
shall then be held by Escrow Agent pending (a) delivery of a supplemental joint
Escrow Instructions signed by both BUYER and SELLER directing Escrow Agent with
respect to the disbursement of such deposit, or (b) delivery of an Arbitration
Award by BUYER or SELLER setting forth the disbursement of such deposit.
4.6.4 FINAL RECONCILIATION AFTER CLOSE OF ESCROW.
Within ninety (90) days following the Close of Escrow, SELLER shall deliver to
BUYER a final accounting of the Development Costs and a detailed statement of
the Purchase Price showing the effect of any adjustments required to be made
under this section 4 subject to any items not then known or verifiable ("Final
Accounting"). BUYER shall have the right to review books and records, including
invoices and draw requests, of SELLER and Contractor concerning such Development
Costs. Within thirty (30) days following the delivery of the Final Accounting,
BUYER shall give SELLER notice of any costs included in the Final Accounting
which BUYER disputes ("Objection Notice"). If BUYER does not timely give an
Objection Notice, BUYER shall be deemed to have approved the Final Accounting
subject to any items not then known or verifiable. If BUYER timely gives an
Objection Notice, and BUYER and SELLER are unable to resolve such dispute,
either BUYER or SELLER may have the dispute resolved through Arbitration in
accordance with the procedure provided in section 35 below. Within thirty (30)
days from the approval of the Final Accounting or, if applicable, a
determination of the Development Costs and Purchase Price in an Arbitration,
BUYER and SELLER shall reconcile any difference in the amount of the Purchase
Price paid by BUYER at the Close of Escrow. Within such thirty (30) day period,
SELLER shall refund to BUYER any overpayment or BUYER shall pay to SELLER any
underpayment, whichever is applicable. The provisions of this section 4.6 shall
survive Closing.
5. MANNER OF PAYING THE PURCHASE PRICE. The Purchase Price shall
be payable through Escrow as provided in sections 5.1 and 5.2 below. The full
Purchase Price shall be payable in cash or cash equivalent upon Close of Escrow,
except as provided in subsections 4.6.3 and 4.6.4 above.
5.1. DEPOSITS. BUYER shall not be required to deliver any
deposit to Escrow Agent or SELLER in connection with the execution of this
Agreement. BUYER shall be required to make Deposits
-17-
during the pendency of Escrow and in advance of the Closing Date as follows: a
Deposit(s) in the amount(s) and such at such times as determined in accordance
with section 3.7 above on account of Change Requests. Except as provided in
subsection 5.1.1 below, any such Deposits shall be delivered directly to SELLER
and Escrow Agent shall have no responsibility to collect or account for any such
Deposits. SELLER shall not be required to keep such Deposits separate from its
general accounts and no interest shall be deemed earned or credited on any
deposit delivered to SELLER. In the case of any deposit with Escrow Agent at the
Close of Escrow on account of any Disputed Adjustment as required under
subsection 4.6.3 above, such deposit shall be held in an interest bearing
account at a rate generally available to Escrow Agent on accounts permitting
daily withdrawal, with interest credited to the party who becomes entitled to
receive the deposit as provided in section 4.6.3 above.
5.1.1 FUND CONTROL. If requested by BUYER, SELLER
agrees to cooperate with BUYER in the establishment of an institutional fund
control at Dixieline in San Diego County, California ("Fund Control"), as an
additional Development Cost, for the purpose of receiving and disbursing
Deposits on account of Change Requests in either of the following events: (a) in
the case of any single Change Request, the amount required for Deposit exceeds
Fifty Thousand Dollars ($50,000.00), or (b) when the aggregate amount of all
Change Requests exceeds One Hundred Thousand Dollars ($100,000.00). In such
event, BUYER and SELLER shall provide joint instructions to Fund Control that
the funds on Deposit be released thereby to SELLER on a monthly basis in
proportion to the percentage of completion of the Change Work represented by the
Deposit upon Fund Control's receipt of (a) payment applications from SELLER and
Contractor certifying that such payments are being made to pay the cost of
Change Work and the percentage of completion of such Change Work as of the date
of each such application, (b) unconditional lien releases from Contractor and
any affected subcontractors or suppliers for prior payments and conditional lien
releases for the requested payment, in form reasonably acceptable to Fund
Control, and (c) such other information as is reasonably requested by Fund
Control.
5.1.2 CREDIT TO PURCHASE PRICE. If the Close of
Escrow occurs, the actual costs of any Change Work shall be included in the
Development Costs and BUYER shall be entitled to a credit against the Purchase
Price in the amount of the Deposits made and released to pay for such costs of
the Change Work.
5.1.3 NON-REFUNDABLE DEPOSITS. As more
particularly provided in subsection 14 below, the Deposits shall be
non-refundable except as provided in Section 14.2 in the event of a default by
SELLER, or if prior to the performance of the Change Work (a) BUYER terminates
this Agreement pursuant to any express right granted to BUYER to terminate this
Agreement, or (b) if this Agreement is terminated by SELLER pursuant to any
express right of termination granted to SELLER for a reason other than SELLER's
termination on account of BUYER's default.
5.2. BALANCE OF PURCHASE PRICE. BUYER shall pay to Escrow
Agent the balance of the Purchase Price on or before the Closing Date, together
with any additional amounts required to pay costs charged to BUYER. Such amounts
shall be deposited by cashier's check, certified check or wire transfer.
6. DEVELOPMENT PROCEDURES. The procedures provided in this
section shall govern development and construction activities requiring the
cooperation of SELLER and BUYER. BUYER and SELLER generally agree to cooperate
in good faith and in a commercially reasonable manner to provide for the
efficient administration of necessary design and construction activities
requiring the participation of SELLER and BUYER and their respective agents,
contractors and representatives.
6.1. APPROVED CONTRACTOR. Hamann Construction, a licensed
general contractor, will be the Contractor for construction of the Building
Shell Improvements and the Interior Improvements (exclusive of any Excluded
Items). BUYER and SELLER approve Hamann Construction acting as the general
contractor ("Contractor"). Contractor shall be entitled to receive the
Contractor's Fee in accordance with the Construction Contract and such fee is a
part of the Development Costs. SELLER shall be responsible for coordinating the
activities of the Design Professionals and ensuring the timely performance
-18-
thereby. SELLER shall cause the Contractor to provide instructions to any
separate contractors of BUYER performance work on the Property as permitted
under this Agreement in an effort to mitigate any interference of such separate
contractor's work with Contractor's work; under no circumstance shall SELLER or
Contractor have any responsibility whatsoever to supervise BUYER's separate
contractors or otherwise be responsible for any acts or omissions of such
separate contractors.
6.2. AUTHORIZED REPRESENTATIVES. BUYER appoints ▇▇▇▇▇ ▇▇▇▇
("BUYER's Representative") to represent BUYER's interests in connection with the
review and approval of plans and specifications, bidding documentation,
submission of Change Requests, approval of any Change Cost Proposals or
accountings, construction progress and such any other matters concerning or
relating to the development. BUYER authorizes SELLER to provide to BUYER's
Representative any information concerning the design and construction of the
Improvements required to be provided by SELLER under this Agreement. SELLER
shall have the right to rely on instructions, directives and decisions of
BUYER's Representative the same as if such instructions, directives and
decisions were communicated by BUYER directly to SELLER. If ▇▇▇▇▇ ▇▇▇▇ is no
longer available to act as BUYER's Representative, BUYER shall appoint another
responsible qualified person as a replacement by promptly giving SELLER written
notice.
6.3. APPROVAL OF CONSULTANTS AND BIDS. BUYER shall have
the right to approve all Design Professionals retained by SELLER in connection
with the development of the Land and the construction of the Improvements; the
Design Professionals shown in the Design Professional List (Exhibit "3"). The
procedures in this section shall apply separately with respect to Bids for the
construction of the Building Shell Improvements and Bids for the Interior
Improvements, which may take place at different times. All such Bids shall be on
a fixed price basis unless otherwise agreed in writing by BUYER. BUYER shall
have the right to review the subcontract proposals ("Bids") for the Major Trades
(as defined below) required for construction of the Improvements. SELLER shall
cause Contractor to deliver to BUYER (i) a list of all subcontractors from which
Contractor intends to solicit bids, and (ii) Bids for each Major Trade from no
less than three (3) licensed and qualified subcontractors on such Bid list,
together with a written notice specifying the Bids which Contractor recommends
for acceptance ("Recommended Subcontractor"). BUYER shall have the right to
reasonably disapprove Contractor's recommended Bid for any of the Major Trades
by giving SELLER written notice of any objection that BUYER may have to such
Bids within ten (10) days from BUYER's receipt of the subject Bid from
Contractor. BUYER's notice of disapproval shall explain in detail the basis for
the disapproval of any Bid recommended by Contractor and shall specify the
subcontractor preferred by BUYER from the list of Bids submitted for the
applicable Major Trade if BUYER has a preference between the remaining Bids.
Contractor shall have the right to utilize any subcontractors submitting Bids
for which BUYER does not timely give notice of its disapproval and in all
events, the subcontractors selected shall be subject to Contractor's reasonable
approval. The term "Major Trades" means portions of the construction work
consisting of the supply or installation of heating and air conditioning, fire
sprinkler system, framing, drywall, plumbing, painting, floor coverings,
suspended ceilings, glass, doors and ceramic tile, and grading and excavations.
SELLER shall cause Contractor to procure such Bids and deliver such Bids to
BUYER: (a) in the case of the Building Shell Improvements, within thirty (30)
days after receipt of the Final Building Shell Plans; and (b) in the case of the
Interior Improvements, within thirty (30) days after BUYER's approval of the
final Interior Improvement Plans. In the case of electrical and concrete work
and other work not constituting a Major Trade, BUYER and SELLER agree that
Contractor will directly perform such work with its own forces and, subject to
the cost limitations set forth in section 1.10 above, that Contractor is not
required to obtain competitive bids from any subcontractors for such work.
6.3.1 LIMITATIONS ON LIABILITY. If BUYER rejects a
Bid recommended by Contractor and an alternate subcontractor is selected in
accordance with the procedures described this section 6.3 ("Alternate
Subcontractor"), then neither Contractor nor SELLER shall be liable for (a) any
delays caused by Alternate Subcontractor selected for the Major Trade, which
delays shall be deemed BUYER's Delays, (b) defects or deficiencies caused by
such Alternate Subcontractor, or (c) claims for extra compensation by such
Alternate Subcontractor that are not caused by the negligence or willful
misconduct of SELLER, Contractor or a Recommended Subcontractor.
-19-
6.4. CONSTRUCTION/SUBSTANTIAL COMPLETION. SELLER shall
cause the Contractor to proceed with the construction of the Improvements in
order to cause the Substantial Completion of the Improvements in accordance with
the provisions of section 7 below and the Project Schedule.
6.4.1 "SUBSTANTIAL COMPLETION" DEFINED. The terms
"Substantial Completion" or "Substantially Complete" mean the date upon which
SELLER satisfies all of the following requirements, as determined as provided in
section 6.4.2 below: (a) the construction of the Improvements is substantially
completed in substantial conformance with the Plans as modified only by any
changes which are permitted by this Agreement, subject only to minor corrective
work which does not affect or limit BUYER's use of the Building ("Corrective
Work") and the cost of completing which does not exceed Fifty Thousand Dollars
($50,000.00); (b) SELLER has procured a certificate of occupancy (whether
temporary or permanent) or other applicable permit allowing BUYER's immediate
use and occupancy of the Property; provided, however, if the SELLER is unable to
obtain a certificate of occupancy (whether temporary or permanent) or other
applicable permit permitting occupancy on account of BUYER's fixturization work
or BUYER's other activities at the Property, then Substantial Completion shall
nevertheless be deemed to occur as of the date the other requirements for
Substantial Completion have been satisfied.
6.4.2 DETERMINATION OF SUBSTANTIAL COMPLETION. No
earlier than fifteen (15) days prior to the projected date of Substantial
Completion, SELLER shall prepare and submit to the Architects a comprehensive
list of items remaining to be completed or corrected. Failure to include an item
on such list does not alter the responsibility of the SELLER to complete the
Improvements in accordance with the terms hereof.
6.4.2.1 ARCHITECTS' INSPECTION. Upon
receipt of SELLER's list and no earlier than five (5) days prior to the planned
date of Substantial Completion, the Architects will make an inspection to
determine whether the Improvements are Substantially Complete. If the
Architects' inspection discloses any item, whether or not included on the
SELLER's list, which is not sufficiently complete in accordance with the Plans
so that the Improvements may be deemed Substantially Complete, then SELLER
shall, before issuance of the Certificate of Substantial Completion, complete or
correct such item upon receipt of notification regarding the insufficient items.
In such case, SELLER shall then submit a request for another inspection by the
Architects to determine Substantial Completion.
6.4.2.2 CERTIFICATE OF SUBSTANTIAL
COMPLETION. When the Improvements are Substantially Complete, the Architects
will prepare a Certificate of Substantial Completion annexed as EXHIBIT "10" to
this Agreement (a) stating that the Improvements have been completed in
accordance with the Plans, subject to the Corrective Work identified therein
that remains to be completed, and (b) that will include certificates from
Contractor's the soils engineer(s) and the civil engineer(s) in favor of BUYER,
certifying that the work undertaken by or on behalf of SELLER and/or the
Contractor Improvements have been completed in substantial conformance with the
respective approved plans. Subject to section 6.4.2.3 below, the Certificate of
Substantial Completion shall establish the date of Substantial Completion.
6.4.2.3 DISPUTE PROCEDURE. The thirty (30)
day period between the date of Substantial Completion and the Closing Date as
provided in section 7.1 below shall commence as of the date of the delivery of
the Certificate of Substantial Completion to BUYER and SELLER and the Closing
Date shall not be extended on account of any dispute between BUYER and SELLER in
the absence of an Arbitration award entered prior to the expiration of such
thirty (30) day period determining that such Certificate of Substantial
Completion was prematurely issued by the Architect. The Certificate of
Substantial Completion shall be submitted to BUYER and SELLER for their written
approval, which shall not be unreasonably withheld. BUYER and SELLER shall
provide written notice of any objections to the Certificate of Substantial
Completion to the Architects and the other party within five (5) days after
receipt thereof. The Architects, BUYER and SELLER shall promptly negotiate in
good faith to resolve such dispute. If such parties are unable to resolve such
dispute within five (5) days, then either BUYER or SELLER shall have the right
to submit the matter to Arbitration as provided in section 35 below.
-20-
6.4.3 DELIVERY OF "PUNCH LIST". In connection with
the Architect's inspection as required under section 6.4.2 above, the Architect
shall prepare and deliver to BUYER and SELLER for review and approval a "punch
list" of any Corrective Work to be completed by Contractor promptly following
the Close of Escrow. Upon Approval thereof by the parties, one hundred fifty
percent (150%) of the cost of completing all such Corrective Work shall be
retained from the Purchase Price in Escrow until the same has been completed, at
which time BUYER shall instruct Escrow Agent to release such funds to SELLER. If
such Corrective Work has not been completed on or before the date that is thirty
(30) days after Substantial Completion occurs, then, without limiting SELLER's
obligation to complete the same, BUYER shall have the right to utilize the funds
retained in Escrow to complete the same. Except with respect to such Corrective
Work and any claim submitted to Arbitration in accordance with subsection
6.4.2.3 above, if BUYER proceeds with the Close of Escrow, BUYER shall be deemed
to have accepted the Building Shell Improvements and Interior Improvements as
conforming to the requirements of this Agreement, including the Final Building
Shell Plans and the final Interior Improvements Plans; provided, however, BUYER
shall not be deemed to have approved, or waived or otherwise modified or changed
its rights with respect to, any defects or to enforce the warranties being
provided and assigned to BUYER in accordance with section 13 below by proceeding
with the Close of Escrow.
6.5. FINAL MEASUREMENTS. Following Substantial Completion
of the Interior Improvements and prior to the Closing Date, SELLER will cause
the Architect - Shell Improvements to certify the Rentable Square Feet within
the Building to confirm compliance with the restriction in subsection 3.2.2
above. If BUYER disputes such certification, BUYER shall notify SELLER in
writing within ten (10) days of BUYER's receipt of such certification. In such
event, SELLER and BUYER shall submit any such dispute for decision by
Arbitration. Notwithstanding the submission of such dispute to Arbitration,
BUYER and SELLER shall proceed with the Close of Escrow based on the
determination of the Architect-Shell Improvements and any adjustment resulting
from a different determination in an Arbitration shall be made within thirty
(30) days from the receipt of the Arbitration award. In addition, SELLER shall
cause the Architects to deliver as-built plans of the Improvements to SELLER and
BUYER no later than sixty (60) days following the issuance of the Certificate of
Substantial Completion.
6.6. BUYER'S FIXTURIZATION. On or before the earlier of
sixty (60) days prior to the expected date of Substantial Completion of the
Building or the date permitted therefore by the City of Oceanside, SELLER shall
permit BUYER to enter upon the premises for the purposes of permitting BUYER to
commence installation of BUYER's machinery and trade fixtures ("Fixturization
Period"). BUYER agrees to carry out such work in such manner as will not
interfere with the Contractor's work and any delays caused by such activities
shall be BUYER's Delays. If requested by BUYER, SELLER shall cause Contractor to
contract with a private security company for the premises as an added
Development Cost. Contractor's sole responsibility will be to hire and pay the
security company and give them such general instructions for security procedures
in accordance with BUYER's instructions to SELLER and neither SELLER nor
Contractor shall be responsible for supervising the performance of such security
company nor liable for any loss or damage to any such machinery or trade
fixtures installed by BUYER prior to the Close of Escrow. Prior to entering into
the Property for such fixturization, BUYER shall provide and cause each of
BUYER's suppliers and separate contractors to provide evidence of Commercial
General Liability insurance coverage in the amount of One Million Dollars
($1,000,000.00) to protect the Property, SELLER and Contractor from any loss or
liability arising from the acts or omissions of BUYER and/or such suppliers and
separate contractors. BUYER agrees that it will pay for the cost or expense of
any repairs or replacements resulting from BUYER's exercise of the access rights
provided in this section and the existence of any damage or "punch list" items
caused by such activities shall not delay the date for Substantial Completion or
be considered Corrective Work subject to the provisions of section 6.4 above.
BUYER shall indemnify, defend and hold harmless SELLER, Contractor and the
Property from and against any loss, liability, claim or expense (including
reasonable attorneys' fees and court costs) or damage resulting from BUYER's
exercise of such access rights. In addition, to the extent that such activities
upon the Property may result in the Title Company showing an exception to title
to the Property, BUYER agrees to accept the title to the Property subject to any
such exception.
-21-
6.7. ACCESS TO PROPERTY. Between the date of SELLER's
acceptance of this Agreement and the Close of Escrow, SELLER shall allow BUYER
and its agents reasonable access to the Property for the purpose of (a)
inspecting, testing and otherwise evaluating the Property pursuant to section 10
below, (b) planning the design of the Interior Improvements or (c) inspecting
and otherwise evaluating the progress of construction of the Improvements;
provided, however, in all events such Property inspections and visits shall not
interfere with the construction of the Improvements. Prior to the close of
escrow under the Ocean Ranch Contract, BUYER agrees not to interfere with the
activities of Ocean Ranch Developer, to give SELLER reasonable notice (not less
than forty-eight (48) hours), of any request for access so that SELLER can make
appropriate arrangements with Ocean Ranch Developer and to comply with the
access requirements set forth in the Ocean Ranch Contract. BUYER agrees that it
will pay for the cost or expense of any repairs or replacements resulting from
BUYER's activities in exercising the access rights provided in this section, and
BUYER shall indemnify, defend and hold harmless SELLER, the Land and the Ocean
Ranch Developer from and against any loss, liability, claim or expense
(including reasonable attorneys' fees and court costs) or damage resulting from
BUYER's exercise of such access rights, including, indemnification of SELLER
against any claims by Ocean Ranch Developer arising from BUYER's activities.
SELLER may require, upon reasonable notice to BUYER, that BUYER provide evidence
of Commercial General Liability insurance coverage in an amount not to exceed
$1,000,000.00 from an insurer reasonably acceptable to SELLER and name SELLER
and, if requested, Ocean Ranch Developer, as an additional insured under BUYER's
policy, as a condition to BUYER's exercise of such access rights to the
Property.
6.8 DESIGN PROFESSIONALS. SELLER shall be responsible for
coordinating the timely and proper performance of the Design Professionals and
delays by the Design Professionals in performing their work shall not constitute
an Excusable Delay.
7. DETERMINATION OF CLOSING DATE. Except as otherwise provided in
this Agreement, the Closing Date shall be determined in accordance with this
section.
7.1. CLOSE OF ESCROW/CLOSING DATE. "Close of Escrow" means
the date Escrow Agent records the Deed in favor of BUYER and delivers the
Purchase Price to SELLER. Except as otherwise expressly provided in this
Agreement, the Closing Date for the Close of Escrow shall be the date that is
thirty (30) days after the date of Substantial Completion of the Improvements,
as such date is identified as provided in section 6.4 above; provided, however,
that BUYER shall have the right, in its sole discretion, to close on any other
date occurring after the date of Substantial Completion and prior to the date
that is thirty (30) days thereafter, upon not less than three (3) days prior
written notice of BUYER's election to exercise such right. The Closing Date
shall be a date no earlier then October 1, 2003.
7.2. NOTICE FROM SELLER. No later than thirty (30) days
prior to the date SELLER reasonably determines will be the date of Substantial
Completion of the Improvements, SELLER shall give BUYER and Escrow Agent notice
of the planned date for Substantial Completion ("Closing Date Notice") and the
Closing Date shall be the date specified in the Closing Date Notice; provided,
however, the Closing Date so specified shall be subject to extension on a
day-to-day basis until Substantial Completion occurs, except as provided in
subsection 6.4.2 above and subject to the provisions of section 7.3 below.
7.3. SELLER OR CONTRACTOR DELAYS. In the event the Closing
Date is delayed by more than sixty (60) days after the Target Completion Date
(as defined below) for any reason other than an Excusable Delay, BUYER shall be
entitled to a reduction in the Purchase Price of the Property as provided in
section 4.4 above in an amount equal to Three Thousand Three Hundred and Thirty
Three Dollars ($3,333.00) per day for each day that Substantial Completion is
delayed past the Target Completion Date for any reason other than an Excusable
Delay ("Delay Credit"). The phrase "Target Completion Date" means December 1,
2003 as extended by Excusable Delays. BUYER AND SELLER AGREE THAT IT WOULD BE
IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES THAT BUYER MAY
SUFFER ON ACCOUNT OF THE FAILURE OF SUBSTANTIAL COMPLETION TO OCCUR ON A TIMELY
BASIS ON ACCOUNT OF THE FAULT OF SELLER OR CONTRACTOR. THEREFORE, BUYER AND
SELLER AGREE THAT THE DELAY CREDIT AGAINST THE PURCHASE PRICE
-22-
PROVIDED IN THIS SECTION REPRESENTS A FAIR AND REASONABLE ESTIMATE OF BUYER'S
DAMAGES UNDER THE PROVISIONS OF SECTIONS 1671, 1676 AND 1677 OF THE CALIFORNIA
CIVIL CODE, AND THAT BUYER SHALL BE ENTITLED TO SUCH DELAY CREDIT AS IT'S SOLE
AND EXCLUSIVE REMEDY ON ACCOUNT OF SUCH DELAY AND BUYER OTHERWISE WAIVES ANY
SUCH OTHER RIGHTS AND REMEDIES, INCLUDING, WITHOUT LIMITATION, ANY RIGHT TO
TERMINATE THIS AGREEMENT ON OR BEFORE THE OUTSIDE COMPLETION DATE. NOTHING IN
THIS SECTION IS INTENDED TO IMPOSE ANY LIABILITY ON SELLER OR CAUSE A REDUCTION
IN THE PURCHASE PRICE ON ACCOUNT OF ANY EXCUSABLE DELAYS.
/s/ JCH /s/ TWT
---------------------- -------------------------
SELLER'S Initials BUYER's Initials
8. ESCROW. SELLER and BUYER hereby agree that the Escrow for this
transaction shall be conducted by the Escrow Agent identified in subsection 2.4
above; provided, however, should such Escrow Agent decline to act, SELLER with
BUYER'S written approval, which shall not be unreasonably withheld, shall have
the right to designate such other institutional escrow company to act as the
Escrow Agent. Escrow Agent is authorized and instructed by BUYER and SELLER that
the terms set forth in this Agreement, which was drawn outside of escrow and
handed to Escrow Agent, shall constitute Escrow Agent's full and complete
instructions pertaining to the sale and purchase of the Property; provided,
however, BUYER and SELLER also agree and adopt, by execution of this Agreement,
that certain "First American Title Insurance Company, Escrow Agent General
Provisions" annexed as EXHIBIT "11" to this Agreement, except to the extent any
such instructions are inconsistent with any express provision of this Agreement,
in which event this Agreement shall control.
8.1. OPENING OF ESCROW. Immediately after SELLER's
execution and delivery of this Agreement, BUYER and SELLER shall deliver a fully
executed copy of this Agreement to Escrow Agent. Escrow Agent shall acknowledge
the opening of Escrow ("Opening of Escrow") and its agreement to act as Escrow
Agent under this Agreement by: (a) executing the Consent of Escrow Agent where
designated below; and (b) promptly delivering a copy of the executed Consent to
SELLER and BUYER.
8.2. PRORATIONS, ESCROW FEES AND COSTS.
8.2.1 PRORATIONS. Items of ownership costs
incurred from the date of the closing under the Ocean Ranch Contract, such
current and supplemental real property taxes, current, non-delinquent annual
installments of all general and special assessments and/or assessments or fees
payable to any owner's association under any of the Restrictions, that are
typically items for proration are not subject to proration in this transaction
since such items are to be included in the Development Costs. According, BUYER
and SELLER instruct Escrow Agent that there is no need for any prorations as of
the Close of Escrow
8.2.2 SELLER'S PAYMENTS. SELLER will pay as a part
of the Development Costs: (a) documentary transfer tax (or any other similar
taxes imposed on account of the conveyance of the Property to BUYER), in the
amount Escrow Agent determines to be required by law; (b) the cost for the
Owner's Title Policy described in section 9 below, including the cost of the
mechanics' lien coverage required thereby; (c) one-half of Escrow Agent's escrow
fee or escrow cancellation charge; and (d) other charges and expenses usually
payable by a seller in accordance with the customary practices of Escrow Agent.
8.2.3 BUYER'S PAYMENTS. BUYER will pay: (a)
one-half of Escrow Agent's escrow fee or escrow cancellation charge; (b) the
increased cost of any additional title insurance coverage requested by BUYER;
and (c) other charges and expenses usually payable by a buyer in accordance with
the customary practices of Escrow Agent.
8.3. DELIVERIES. At least one (1) day prior to the
scheduled Closing Date, SELLER shall deliver to Escrow Agent: (a) a grant deed
in the form as shown in the Grant Deed annexed as EXHIBIT "12"
-23-
to this Agreement ("Deed"), duly executed and acknowledged and naming BUYER as
the grantee; (b) counterpart originals of a general assignment in the form as
shown in the General Assignment annexed as Exhibit "13" to this Agreement (the
"Assignment") and (c) the warranties and properly executed certificates and
affidavits as required under sections 12 and 13 below. At least one (1) day
prior to the scheduled Closing Date, BUYER shall deliver to Escrow Agent: a
counterpart originals of the Assignment signed by BUYER.
8.4. DISTRIBUTION OF FUNDS AND DOCUMENTS. Escrow Agent
shall proceed with the Close of Escrow so long as at the Close of Escrow, Escrow
Agent can comply with the provisions of subsections 8.4.1 to 8.4.4 below and
Escrow Agent shall comply with such provisions at the Close of Escrow.
8.4.1 PAYMENT OF ENCUMBRANCES. Pay the amount of
all existing liens and encumbrances on the Property to the obligees thereof,
other than the encumbrances expressly permitted to be shown as exceptions to the
title, pursuant to section 9, utilizing funds to which SELLER is entitled upon
Close of Escrow and funds (if any) deposited in Escrow by SELLER.
8.4.2 RECORDATION OF DOCUMENTS. Submit to the
appropriate recorder of San Diego County, California, the Deed and each other
document to be recorded under the terms of this Agreement or by general usage
and, after recordation, cause the Deed and such other documents to be delivered
to BUYER or such other person acquiring rights thereunder or for whose benefit
such document was recorded.
8.4.3 NON-RECORDED DOCUMENTS. Deliver by United
States mail (or hold for personal pickup, if requested): (i) to BUYER, the
Assignment, the Owner's Title Policy and the Non-Foreign Affidavit referred to
below, provided however, Escrow Agent shall have ten (10) days following the
Close of Escrow to deliver the Owner's Title Policy, and Escrow Agent's
disbursement of the Purchase Price to SELLER shall constitute Escrow Agent's
agreement and warranty that such Owner's Title Policy shall conform to the
requirements of the approved title described in section 9 below; (ii) to SELLER,
the Assignment, and (iii) each other non-recorded document received to the payee
or person acquiring rights under any such document or for whose benefit such
document was acquired.
8.4.4 APPLICATION/DISBURSEMENT OF FUNDS. Apply all
funds received by Escrow Agent first to the payment of all costs and expenses
otherwise payable by SELLER and BUYER in connection with the Escrow, with any
excess funds to be delivered to SELLER upon Close of Escrow.
8.5. SUPPLEMENTAL INSTRUCTIONS TO ESCROW AGENT.
Notwithstanding any other provision, Escrow Agent shall not be responsible for
independently determining the amount of any Purchase Price adjustments under
section 4 above. Instead, Escrow Agent shall be entitled to conclusively rely on
supplemental written instructions signed by both BUYER and SELLER with respect
to any such Purchase Price adjustments or any Arbitration Award delivered in
accordance with section 35 below.
9. TITLE MATTERS. Upon Close of Escrow, SELLER shall cause the
Title Company designated in subsection 2.7 to issue to BUYER an ALTA Owner's
Title Insurance Policy Form B-1970, including mechanics' lien coverage ("Owner's
Title Policy"), insuring title to the Property in BUYER, with coverage in the
amount of the Purchase Price, subject only to: (a) a lien for current taxes and
any lien for supplemental taxes arising on account of the conveyance of the
Property to BUYER or the construction of any Improvements on the Property and
any lien for existing or future assessments, including an assessment under CFD
2000-1 as described in section 9.7 below; (b) assessments arising under any
Restrictions, and which are not then delinquent; (c) any deed of trust, security
instruments or other instruments granted by BUYER in favor of BUYER's lender;
(d) any matters caused by BUYER or its agents or successors; (e) the Special
Declaration and other Restrictions; (f) any Easements granted at the request of
the Ocean Ranch Developer and approved by BUYER described in subsection 9.2.2
below; (g) the Title Company's standard printed exceptions applicable to the
ALTA form of the Owner's Title Policy; (h) any mechanics liens arising from
BUYER's fixturization or other activities on the Property prior to the Close of
Escrow; (i) the 20' "no build"
-24-
setback easement described in the Grant Deed annexed as Exhibit 1 to the Ocean
Ranch Contract; and (j) such other items of record or matters approved by BUYER
in accordance with the procedures provided in sections 9.1 through 9.8 below.
SELLER hereby agrees to provide (or cause Contractor to provide) any indemnity
required by Title Company as a condition to providing mechanics' lien coverage,
not including an indemnity for any exception described in preceding clause (h).
BUYER shall be responsible for the cost of issuance of any additional title
insurance policy, coverage and/or endorsements, which BUYER, or BUYER's lender,
may request. On or before the date of Substantial Completion, SELLER shall cause
to be prepared, at BUYER's expense, an ALTA as-built survey of the Property and
deliver a copy thereof to the Title Company and BUYER. The ALTA survey shall be
prepared by a civil engineer listed on the Design Professionals List. As soon as
reasonably possible after delivery of the ALTA survey, Escrow Agent shall cause
the Title Company: (a) to review the ALTA survey and to conduct a physical
inspection for purposes of issuing the Owner's Title Policy described above; and
(b) to identify any additional title exceptions resulting from the Title
Company's review of such survey and physical inspection in a supplement to the
Preliminary Report. BUYER shall have a right to review and approve any such
supplement to the Preliminary Report in accordance with the procedure described
in section 9.1 below. The cost of the Owner's Title Policy, the survey and any
other matters to be provided by SELLER under this section shall be a part of the
Development Costs unless separately paid by BUYER.
9.1. PRELIMINARY REPORT. Prior to the Effective Date,
SELLER has delivered to BUYER the Preliminary Report (including schedules and
exhibits) received by SELLER from the Ocean Ranch Developer pursuant to Section
8(a) of the Ocean Ranch Contract. SELLER shall have reviewed the Preliminary
Report and determined that none of the matters disclosed will prevent
construction of the Improvements, subject to compliance with the Design Review
Approval procedures described in other sections of this Agreement and any
limitation in the Restrictions.
9.1.1 BUYER'S APPROVAL. Within five (5) days
following the Effective Date, BUYER may give written notice ("Disapproval
Notice") to SELLER and Escrow Agent if BUYER disapproves or objects to any of
the exceptions or other items shown in the Preliminary Report. BUYER's
Disapproval Notice shall also itemize any and all objections that BUYER may
have. If BUYER fails to timely deliver a Disapproval Notice, BUYER shall be
conclusively deemed to have approved all such exceptions and items shown in the
Preliminary Report, and the requirement for BUYER's approval of title to the
Land shall be deemed satisfied for all purposes; provided, however, this
provision providing for automatic approval shall not constitute BUYER's approval
of any deed of trust, mortgage or other security instrument encumbering the
Land, and BUYER shall be deemed to have automatically disapproved and objected
to any such items and SELLER shall cause the same to be removed from title to
the Property prior to Closing.
9.1.2 SELLER'S RESPONSE. SELLER shall have seven
(7) days from the receipt of any Disapproval Notice to give BUYER notice of
which objections, if any, SELLER will cause to be eliminated and any objections
that SELLER will not cause to be eliminated ("SELLER's Response"). If SELLER
does not agree to cause an objection to be eliminated, BUYER shall have a period
of seven (7) days from receipt of SELLER's Response, to give notice to SELLER of
BUYER's election either to (a) revoke BUYER's objection and agree to accept the
Land subject to the exception or item previously objected to, or (b) elect to
terminate this Agreement and the Escrow by giving SELLER and Escrow Agent notice
of such election to terminate within such seven-day period. If BUYER fails to
timely give such termination notice, such right of termination shall be deemed
waived, and BUYER shall be deemed to have revoked BUYER's objection.
9.1.3 SUPPLEMENTS TO PRELIMINARY REPORT. The Ocean
Ranch Contract provides for the Ocean Ranch Developer to deliver to SELLER any
new exceptions disclosed by the Title Company that are not disclosed in the
Preliminary Report ("Supplemental Report"). SELLER shall promptly deliver any
Supplemental Report received by SELLER along with an Action Notice as described
in section 3.7 above to BUYER and BUYER shall have a period of five (5) days
from such delivery to provide
-25-
any Disapproval Notice and the procedures in subsections 9.1.1 and 9.1.2 above
shall otherwise apply to any such Supplemental Report.
9.2. FINAL TITLE REPORT. Promptly following recordation of
the Parcel Map, SELLER shall cause to be delivered to BUYER a supplemental
preliminary title report from the Title Company describing all items of record,
encumbering or otherwise affecting the Land, together with copies of all
exceptions to title shown on the preliminary title report ("Final Title
Report"). In lieu of providing a Final Title Report, SELLER shall have the right
to satisfy the requirement in this section if SELLER causes title company to
deliver a Pro Forma Owner's Title Policy in a form which the Title Company
irrevocably commits in writing it will issue following the Closing and which
specifically references only the Land as the covered property and shows all
exceptions and items of record and other usual information and missing solely
the recording information regarding the recordation of the Parcel Map and the
Grant Deed to BUYER ("Pro Forma Policy").
9.2.1 PRIOR APPROVAL. Notwithstanding any other
provision, BUYER agrees to approve all exceptions and other items of record
shown in the Final Title Report or Pro Forma Policy, whichever is applicable,
that were disclosed in the Preliminary Report for which BUYER did not give an
Disapproval Notice under section 9.1 above and other exceptions conforming to
the requirements of subsection 9.2.2 below.
9.2.2 NEW EASEMENTS. Notwithstanding any other
provision, BUYER acknowledges that Ocean Ranch Developer has reserved, pursuant
to Section 11 of the Ocean Ranch Contract, the right to create (and require
SELLER and, after the Close of Escrow, BUYER, to grant), for a period expiring
upon the completion by Ocean Ranch Developer of the street improvements to
Section 16(d) of the Ocean Ranch Contract, easements affecting the Property
("Easements") for the purposes Section 11 of the Ocean Ranch Contract. SELLER
shall have the right to grant any such Easements as from time to time requested
by Ocean Ranch Developer, either before or after the close of escrow under the
Ocean Ranch Contract, provided that SELLER has obtained BUYER's prior approval,
which approval shall comply with the requirements of Section 11 of the Ocean
Ranch Contract and shall not otherwise be unreasonably withheld. SELLER shall
provide to BUYER a copy of the proposed forms of any Easements so granted to or
at the request of Ocean Ranch Developer in accordance with the procedure in
section 3.7 above.
9.3. BUYER'S APPROVAL. Subject to the provisions of
section 9.2 above, within five (5) business days after the delivery of the Final
Title Report or the Pro Forma Policy, whichever is applicable, BUYER may give
written notice ("Disapproval Notice") to SELLER and Escrow Agent if BUYER
disapproves or objects to any of New Title Exception(s) shown in the Final Title
Report or Pro Forma Policy, whichever is applicable, or any supplements. "New
Title Exception" means an exception that (a) was not disclosed in the
Preliminary Report, (b) does not constitute an Easement approved under
subsection 9.2.2 above, or (c) does not arise from CFD 2000-1 described in
section 9.7 below. BUYER's Disapproval Notice shall also itemize any and all
objections that BUYER may have to any such New Title Exception. If BUYER fails
to timely deliver a Disapproval Notice, BUYER shall be conclusively deemed to
have approved all such exceptions and items shown in the Final Title Report or
Pro Forma Policy, whichever is applicable, and the requirement for BUYER's
approval of title to the Land shall be deemed satisfied for all purposes;
provided, however, this provision providing for automatic approval shall not
constitute BUYER's approval of any deed of trust, mortgage or other security
instrument encumbering the Land, and BUYER shall be deemed to have automatically
disapproved and objected to any such items and SELLER shall cause the same to be
removed from title to the Property prior to Closing.
9.4. SELLER'S RESPONSE. SELLER shall have five (5)
business days from the receipt of any Disapproval Notice to give BUYER notice of
which objections, if any, SELLER will cause to be eliminated and any objections
that SELLER will not cause to be eliminated ("SELLER's Response"). If SELLER
does not agree to cause an objection to be eliminated, BUYER shall have a period
of five (5) business days from receipt of SELLER's Response, to give notice to
SELLER of BUYER's election either to (a) revoke BUYER's objection and agree to
accept the Property subject to the New Title Exception
-26-
previously objected to, or (b) elect to terminate this Agreement and the Escrow
by giving SELLER and Escrow Agent notice of such election to terminate within
such five (5) business day period. If BUYER fails to timely give such
termination notice, such right of termination shall be deemed waived, and BUYER
shall be deemed to have revoked BUYER's objection and approved the New Title
Exception. The provisions of subsection 14.3 below apply if this Agreement is
terminated in accordance with this section.
9.5. APPROVALS. BUYER has the right to approve matters
pertaining to the title to the Property to be conveyed, including any New Title
Exception, BUYER shall have the right to withhold the same in its sole
discretion prior to the date SELLER's deposits under Section 5 of the Ocean
Ranch Contract have become nonrefundable. Thereafter, BUYER agrees not to
unreasonably withhold it's approval and to approve a New Title Exception, unless
such exception (a) constitutes a lien, deed of trust, mortgage or other security
instrument or other monetary encumbrance upon the Property, or (b) demonstrably
would interfere with the use or enjoyment of the Property, including the ability
to sell, develop or finance the Property.
9.6. DISCLAIMER. Except for SELLER's obligations to cause
the delivery of the Owner's Title Policy in compliance with this section 9 and
the warranties implied in the Deed (subject to the disclaimer limitation stated
below), and provided that SELLER hereby agrees not to cause or create any New
Title Exceptions not otherwise permitted hereby or approved by BUYER, SELLER is
not making any representations or warranties concerning title to the Property,
and SELLER disclaims any implied warranties concerning the impact of any acts or
omissions of SELLER's predecessors-in-interest on the apparent title to the
Property.
9.7. COMMUNITY FACILITIES DISTRICT. Notwithstanding any
other provisions, BUYER acknowledges that the Property is within the boundaries
of the City of Oceanside Community Facilities District No. 2000-1 (Ocean Ranch
Corporate Centre) ("CFD 2000-1"), and that a special tax will be included in
BUYER's annual property tax ▇▇▇▇ for the repayment of indebtedness incurred by
CFD 2000-1. The maximum special tax which may be levied upon the Land by CFD
2000-1 is as set forth in the Notice of Special Tax annexed as Exhibit "F" to
the Ocean Ranch Contract. Concurrently with the execution of this Agreement,
BUYER shall execute and deliver to SELLER a copy of the Notice of Special Tax to
confirm that SELLER has given written notice to BUYER of the Rate and Method of
Apportionment for CFD 2000-1 and that BUYER has approved such matters.
9.8. EXTENSION. SELLER shall have the right to extend the
Closing Date for a reasonable time not to exceed thirty (30) days in the event a
New Title Exception arises and such extension is reasonably required to correct
the New Title Exception, provided, however, that the same shall not constitute
an Excusable Delay if the same was caused by or on behalf of SELLER. SELLER
shall give BUYER and Escrow Agent written notice of any such extension no later
than ten (10) days after receipt of Disapproval Notice of the extension.
10. CONDITION OF THE PROPERTY/BUYER'S INVESTIGATION. As more
particularly provided in section 11.1 below, BUYER's obligation to purchase the
Property is contingent upon BUYER's satisfaction with and approval of the
condition of the Land and the planned development of the Property and its
feasibility for such use as BUYER may determine in BUYER's sole and absolute
discretion as provided in section 11.1 below. BUYER shall conduct such
inspections, investigations, reviews, audits and evaluations of the condition
and feasibility of the Land, as BUYER desires, including, without limitation,
environmental audits, inspections and investigations concerning any Hazardous
Substances (as defined in subsection 10.3 below) affecting the Property. BUYER
acknowledges and agrees that this Agreement affords BUYER a reasonable
opportunity to conduct such inspections, investigations, reviews, audits and
evaluations of the condition and feasibility of the Land and the planned
development of the Improvements, as BUYER desires, including, without
limitation, environmental audits, inspections and investigations concerning any
Hazardous Substances affecting the Land.
10.1. "AS IS" PURCHASE AND SALE. Except with respect to the
warranties of SELLER described in section 13 below and the completion of the
Land Improvements by Ocean Ranch Developer
-27-
under the Ocean Ranch Contract as needed for Substantial Completion, BUYER is
purchasing the Property "AS IS" and "where is", subject to all latent and patent
defects and deficiencies, solely in reliance on BUYER's own investigation and
evaluation of the Property and without any representation or warranty from
SELLER. BUYER acknowledges, represents and agrees, subject to the foregoing
exceptions, that BUYER's willingness to undertake its own independent
investigation of the Property and to assume such risks arising from or
concerning the condition of the Property and/or its potential use is a material
consideration to SELLER's establishment of the Purchase Price and SELLER's
willingness to enter into this Agreement.
10.2. GOVERNMENTAL REQUIREMENTS. Except with respect to the
warranties of SELLER set forth in section 13 below, BUYER specifically
acknowledges that BUYER will be solely responsible for determining and for
compliance with all Government and Legal Requirements that might effect its
ownership, use, development or improvement of the Property following the Close
of Escrow.
10.3. HAZARDOUS SUBSTANCES. Except with respect to the
warranty of SELLER set forth in section 13 below, BUYER specifically
acknowledges, agrees and represents that BUYER's evaluation of the Property has
included such studies, audits and investigations of any environmental conditions
affecting the Property, including the presence of or adverse effect by any
Hazardous Substances in, under or around the Property. The term "Hazardous
Substances" shall be interpreted broadly to include, but not be limited to, any
material or substance that is defined or classified under federal, state or
local laws as: (a) a "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section.9601 (14), Section 311 of the Federal Water Pollution Control Act, 33
U.S.C. Section .1321, as now or hereafter amended; (b) a "hazardous waste"
pursuant to Section 1004 or Section 3001 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section.6903, 6921, as now or hereafter amended; (c) a
toxic pollutant under Section 307(a)(1) of the Federal Water Pollution Control
Act, 33 U.S.C. 1317(a)(1); (d) a "hazardous air pollutant" under Section 112 of
the Clean Air Act, 42 U.S.C. 7412, as now or hereafter amended; (e) a "hazardous
material" under the Hazardous Materials Transportation Uniform Safety Act of
1990, 49 U.S.C. App. Section.1802(4), as now or hereafter amended; (f) toxic or
hazardous pursuant to regulations promulgated now or hereafter under the
aforementioned laws; or (g) presenting a risk to human health or the environment
under other applicable federal, state or local laws, ordinances, or regulations,
as now in effect or as may be passed or promulgated in the future. "Hazardous
Substances" shall also mean any substance that after release into the
environment and upon exposure, ingestion, inhalation, or assimilation, either
directly from the environment or directly by ingestion through food chains, will
or may reasonably be anticipated to cause death, disease, behavior
abnormalities, cancer, or genetic abnormalities. "Toxic or Hazardous Substances"
specifically includes, but is not limited to, asbestos, polychlorinated
biphenyls ("PCBs"), petroleum and petroleum-based derivatives, and urea
formaldehyde.
10.4. CONDITION OF SOILS. Without limiting the general
application of section 10.1 above, but subject to the terms of this section
10.4, BUYER specifically acknowledges and agrees that: (a) BUYER is aware that
the natural soil of the Property may have been subject to substantial
modification as a result of the addition of substantial quantities of "fill";
(b) such fill has the potential of causing differential settlement and/or
unstable soils conditions and/or may require specially designed foundation
improvements; and (c) SELLER is not making any representation or warranty
concerning such soils conditions; provided, however, that the foregoing shall
not affect SELLER's or Contractor's obligation with respect to any grading or
other construction work undertaken by SELLER or Contractor.
10.5. BUYER'S STUDIES AND REPORTS. BUYER agrees that BUYER
will provide SELLER, without charge to SELLER, copies of all studies, reports,
plans and analyses obtained or prepared or conducted by or for BUYER concerning
the Property promptly following BUYER's receipt of any such reports, studies,
plans or analyses. BUYER's obligation to provide such documents shall apply
regardless of whether SELLER or BUYER terminates this Agreement pursuant to any
express right of termination, or if for any other reason the transaction
contemplated by this Agreement is not completed. Such studies, reports and
analyses shall be used by BUYER only in connection with its evaluation of the
Property and/or the feasibility of the development of the Property and/or
financing or proposed financing for the purchase of the
-28-
Property and the contents of such studies, reports and/or analyses shall not
otherwise be disclosed by BUYER, except as authorized under section 36 below.
11. BUYER'S CONDITIONS TO CLOSE OF ESCROW. As more particularly
described in section 10 above, in addition to any other requirements or
conditions to Close of Escrow expressly provided in this Agreement, the Close of
Escrow is contingent upon the satisfaction or waiver of the conditions set forth
in subsections 11.1 to 11.10 below. BUYER may unilaterally waive any of the
conditions by giving Escrow Agent and SELLER written notice of such waiver
provided, however, in the case of any condition required to be satisfied at the
time of the Close of Escrow, no waiver notice shall be required and BUYER's
proceeding with the Close of Escrow shall constitute confirmation of the
satisfaction or waiver of the applicable condition. If BUYER elects to terminate
this Agreement on account of the failure of any such condition, BUYER shall give
written notice to SELLER and Escrow Agent of its election to terminate on or
before the expiration of the period specified for the waiver or satisfaction of
the applicable condition ("Termination Notice). If BUYER fails or declines to
deliver a Termination Notice strictly within the time specified for such
satisfaction or waiver of each condition, such failure shall constitute BUYER's
irrevocable waiver of the subject condition and BUYER shall have not further
right to terminate this Agreement on account of the nonsatisfaction of such
condition. To the extent that any such conditions impose on SELLER or BUYER an
obligation to undertake any action or refrain from taking any action, such
conditions shall also constitute covenants, the breach of which would constitute
a default under this Agreement.
11.1. GENERAL FEASIBILITY AND EVALUATION. BUYER's
obligation to purchase the Property is contingent upon BUYER's satisfaction with
and approval of the condition of the Land, its feasibility for such use as BUYER
may determine and the economic advisability of the purchase, all as determined
by BUYER in BUYER's sole discretion. BUYER acknowledges that Ocean Ranch
Developer has granted SELLER a period of thirty (30) days for a general due
diligence period as provided in Section 8 of the Ocean Ranch Contract. BUYER
shall have until the date that is three (3) business days before expiration of
the thirty (30) days described in the Ocean Ranch Contract to conduct such
inspections, investigations, reviews, audits and evaluations of the condition
and feasibility of the Land, as BUYER desires, including, without limitation,
environmental audits, inspections and investigations concerning any Hazardous
Substances (as defined below) affecting the Land and to give SELLER and Escrow
Agent a Termination Notice on account of the nonsatisfaction of this condition.
SELLER agrees to cooperate with BUYER in connection with such evaluation and to
provide the information and inspection rights described in subsections 11.1.1
and 11.1.2 below.
11.1.1 SELLER'S DELIVERY OF INFORMATION. SELLER
shall provide BUYER, within three (3) days after any such documents become
available to SELLER, any additional studies, reports or material information
SELLER receives from Ocean Ranch Developer or any soils engineer or Hazardous
Substance consultant concerning the physical condition of the Land, provided
SELLER is not undertaking to independently obtain any such studies, reports or
information. For purposes of reference in this Agreement, the term "Documents"
refers to all of the documentation described in this section that SELLER
delivers to BUYER. BUYER agrees to hold the information disclosed in the
Documents in confidence and only to use and disclose such information in
connection with BUYER's evaluation and financing of the acquisition of the
Property and for no other purpose, as more particularly provided in section 36
below. In the event the Close of Escrow does not occur for any reason, BUYER
agrees to return to SELLER all copies of Documents within five (5) days of the
termination of this Agreement. BUYER acknowledges that pursuant to Section
8(b)of the Ocean Ranch Contract, SELLER has obtained the right for BUYER to have
access to all books and records (except for any confidential or proprietary
materials such as Ocean Ranch Developer's financial analyses) with respect to
the Land of Ocean Ranch Developer concerning the condition of the Land and that
SELLER will cooperate to schedule BUYER's inspection of such books and records
upon reasonable notice and request from BUYER. With BUYER's approval, SELLER is
not undertaking to retain independent expert consultants to conduct any
independent examination of such books and records.
11.1.2 ACCESS TO PROPERTY. Pursuant to Section 8(b)
of the Ocean Ranch Contract, SELLER has obtained permission to allow BUYER and
its agents and contractors reasonable
-29-
access to the Land for the purpose of inspecting, testing and otherwise
evaluating the Land as more particularly described in section 6.7 above prior to
the closing under the Ocean Ranch Contract. With BUYER's approval, SELLER is not
undertaking to retain independent expert consultants to conduct any independent
examination or testing of the Land in connection with the purchase from Ocean
Ranch Developer.
11.2. CLOSING UNDER OCEAN RANCH CONTRACT. BUYER's
obligation to purchase the Property is subject to the condition of the
occurrence of the close of escrow under the Ocean Ranch Contract on or before
July 31, 2003 (the "Outside ORC Date"). If such closing has not occurred by the
Outside ORC Date, BUYER shall have the right to terminate this Agreement by
giving a Termination Notice to SELLER and Escrow Agent of such election to
terminate no later than August 15, 2003.
11.3. SELLER'S WARRANTIES. BUYER's obligation to proceed
with the Close of Escrow and purchase the Property is contingent upon SELLER's
warranties set forth in this Agreement below being true and correct in all
material respects as of the Close of Escrow, subject to the provisions of
section 13.10 below.
11.4. TITLE/POSSESSION. BUYER's obligation to proceed with
the Close of Escrow and purchase the Property is contingent upon SELLER's
delivery of title to the Property in accordance with section 9 above, SELLER's
delivery of possession of the Property in accordance with the requirements of
this Agreement and Title Company's delivery or irrevocable commitment to deliver
the Owner's Title Policy insuring BUYER's title to the Property subject only to
matters approved or deemed approved by BUYER pursuant to section 9 above.
11.5. PARCEL MAP. BUYER's obligation to proceed with the
Close of Escrow and purchase the Property is contingent upon recordation of the
Parcel Map on or before the Closing Date. If the Ocean Ranch Developer has not
caused the recordation of the Parcel Map in conformance with the requirements of
the Ocean Ranch Contract on or before the date that the Close of Escrow is
otherwise ready to occur, then BUYER shall have the right to extend the Closing
Date (and BUYER's right to terminate this Agreement on account of the
nonsatisfaction of this condition) for an additional period of thirty (30) days
to allow additional time for the satisfaction of this condition by giving SELLER
written notice of such extension on or before the date that the Close of Escrow
would have occurred without the delay caused by the nonsatisfaction of this
condition. Any such delay shall constitute a SELLER's Delay to be taken into
account for purposes of determining any adjustment in the Purchase Price in
accordance with section 4.4 above.
11.6. OCEAN RANCH DEVELOPER ESTOPPEL. Buyer's obligations
to proceed with the Close of Escrow and purchase the Property is contingent upon
BUYER's receipt, not more than thirty (30) days and not less than five (5) days
prior to the Closing Date, of estoppel certificate(s) from Ocean Ranch Developer
in accordance with the provisions of Section 33 of the Ocean Ranch Contract. If
the Ocean Ranch Developer has not timely delivered an estoppel certificate in
conformance with the requirements of the Ocean Ranch Contract on or before the
date that the Close of Escrow is otherwise ready to occur, then BUYER shall have
the right to extend the Closing Date (and BUYER's right to terminate this
Agreement on account of the nonsatisfaction of this condition) for an additional
period of thirty (30) days to allow additional time for the satisfaction of this
condition by giving SELLER written notice of such extension on or before the
date that the Close of Escrow would have occurred without the delay caused by
the nonsatisfaction of this condition. Any such delay shall constitute a
SELLER's Delay to be taken into account for purposes of determining any
adjustment in the Purchase Price in accordance with section 4.4 above.
11.7. DEVELOPMENT PLAN APPROVAL. BUYER's obligation to
purchase the Property is contingent upon receipt of Design Review Approval of
the Development Plan and BUYER's approval of the requirements and conditions of
the Design Review Approval. SELLER shall deliver the documents evidencing the
Design Review Approval to BUYER and BUYER shall have five (5) days from such
delivery to give SELLER a Termination Notice on account of the nonsatisfaction
of this condition. Satisfaction of
-30-
this condition requires BUYER approval, in accordance with the same approval
standard binding on SELLER in accordance with Section 9(b) of the Ocean Ranch
Contract, of the terms and conditions of the Design Review Approval, including
the provisions concerning the ADTs. If (a) the Government's procedures provide
for the issuance of tentative or preliminary conditions or requirements for
final Design Review Approval, (b) SELLER delivers documents evidencing such
conditions and requirements to BUYER, and (c) BUYER does not give written notice
of objection to such conditions and requirements in accordance with the
procedure provided in section 3.7 above, then BUYER agrees not to withhold its
approval of the final Design Review Approval on account of any condition or
requirement disclosed in the preliminary documents delivered to BUYER.
11.8. OCEAN RANCH DEVELOPER CONSTRUCTION. BUYER's
obligation to proceed with the Close of Escrow is subject to the condition that,
on or before the Closing Date, all off-site Land Improvements required to be
completed by Ocean Ranch Developer in order for SELLER to obtain the occupancy
authorization required for Substantial Completion, shall have been completed and
accepted by the Government or shall be secured by a payment and performance bond
provided to and accepted by the Government by or on behalf of Ocean Ranch
Developer.
11.9. CONSTRUCTION COMMENCEMENT. Subject to the provisions
of section 14.5 below concerning BUYER's Take-Over Right, BUYER's obligation to
proceed with the Close of Escrow is subject to the condition that SELLER has
caused actual construction (i.e. grading, footing excavations, etc.) on the
Building Shell Improvements to begin on or before the Outside Commencement Date.
"Outside Commencement Date" means November 1, 2003 as extended only for BUYER's
Delays and not for any other Excusable Delays. BUYER shall have fifteen (15)
days from the occurrence of the Outside Commencement Date to give SELLER a
Termination Notice on account the nonsatisfaction with the condition in this
section 11.9.
11.10. CONSTRUCTION COMPLETION. Subject to the provisions of
section 14.5 below concerning BUYER's Take-Over Right, BUYER's obligation to
proceed with the Close of Escrow is subject to the condition that SELLER has
caused Substantial Completion of the Improvements on or before the Outside
Completion Date. "Outside Completion Date" means June 1, 2004 as extended only
for BUYER's Delays and not for any other Excusable Delays; provided, however, in
the event any casualty loss as described in section 21 below occurs within one
hundred eighty (180) days of the date that would otherwise constitute the
Outside Closing Date, then the Outside Closing Date shall be extended to the new
date for completion estimated in SELLER's Casualty Loss Notice under section 21
below up to a maximum extension of one hundred eighty (180) days after the
occurrence of such casualty loss, unless a longer extension is approved by BUYER
in accordance with section 21 below. BUYER shall have fifteen (15) days from the
occurrence of the Outside Completion Date to give SELLER a Termination Notice on
account of nonsatisfaction of the condition in this section 11.10 and BUYER's
termination on account of the nonsatisfaction of this condition shall be deemed
a termination on account of SELLER's default.
12. SELLER'S CONDITIONS TO CLOSE OF ESCROW. In addition to any
other requirements or conditions set forth in this Agreement, the obligations of
SELLER to develop the Property and to proceed with the Close of Escrow shall be
subject to conditions and contingencies provided in subsections 12.1 to 12.5
below. SELLER may unilaterally waive any of the conditions by giving Escrow
Agent and BUYER written notice of such waiver; provided, however, in the case of
any condition required to be satisfied at the time of the Close of Escrow, no
waiver notice shall be required and SELLER's proceeding with the Close of Escrow
shall constitute confirmation of the satisfaction or waiver of the applicable
condition. If SELLER elects to terminate this Agreement on account of the
failure of any such condition, SELLER shall give written notice to BUYER and
Escrow Agent of its election to terminate on or before the expiration of the
period specified for the waiver or satisfaction of the applicable condition
("Termination Notice). If SELLER fails or declines to deliver a Termination
Notice strictly within the time specified for such satisfaction or waiver of
each condition, such failure shall constitute SELLER's irrevocable waiver of the
subject condition and SELLER shall have no further right to terminate this
Agreement on account of the nonsatisfaction of such condition. To the extent
that any such conditions impose on SELLER or BUYER an
-31-
obligation to undertake any action or refrain from taking any action, such
conditions shall also constitute covenants, the breach of which would constitute
a default under this Agreement.
12.1. OCEAN RANCH CONTRACT/GENERAL FEASIBILITY AND
EVALUATION. The Ocean Ranch Contract grants SELLER the right to approval of the
condition of the Land, its feasibility for such use as SELLER may determine and
the economic advisability of the acquisition as provided in Section 8 of the
Ocean Ranch Contract and SELLER has until expiration of the thirty (30) day
period to exercise its right to terminate the Ocean Ranch Contract on account of
its dissatisfaction. SELLER's obligations under this Agreement are subject to
the condition that SELLER does not elect to terminate the Ocean Ranch Contract
on account of its dissatisfaction with the Land. If SELLER elects to give a
notice of termination in accordance with Section 8 of the Ocean Ranch Contract,
SELLER shall have the right to give BUYER and Escrow Agent a Termination Notice
under this section 12.1 no later than three (3) days after the delivery of
SELLER's notice of termination of the Ocean Ranch Contract.
12.2. DEVELOPMENT PLAN APPROVAL. SELLER's obligations to
purchase the Land and sell the Property to BUYER are contingent upon receipt of
Design Review Approval of the Development Plan and SELLER's approval of the
terms and conditions in the Design Review Approval in accordance with the same
approval standard binding on SELLER in accordance with Section 9(b) of the Ocean
Ranch Contract, of the terms and conditions of the Design Review Approval. At
any time prior to the Outside ORC Date (as defined in section 11.2 above),
SELLER shall have the right to terminate this Agreement by giving a Termination
Notice to BUYER on account of the nonsatisfaction of this condition, subject to
subsection 12.5 below.
12.3. ABSENCE OF EXTRAORDINARY BUILDING PERMIT
REQUIREMENTS. SELLER's obligations are subject to the condition of the
procurement of the Government issuance of a building permit for permitting
construction of the Building Shell Improvements on such terms and conditions as
are reasonably acceptable to SELLER; provided, however, SELLER agrees not to
unreasonably withhold its approval of such building permit requirements so long
as (a) the building permit permits construction of the Building Shell
Improvements in substantial accordance with the Development Plan submitted by
SELLER; and (b) no monetary, property or off-site improvement exactions or
extraordinary fees or assessment are imposed by the Government as a requirement
for issuance of such building permit. SELLER shall have the right to terminate
this Agreement by giving a Termination Notice to BUYER on or before May 1, 2003,
subject to extension on account of any Excusable Delays, on account of the
nonsatisfaction of this condition; provided, however, SELLER must exercise such
termination right within fifteen (15) days of receipt from the City of the final
requirements for issuance of the building permit.
12.4. CLOSING UNDER OCEAN RANCH CONTRACT. SELLER's
obligations are subject to the condition of the close of escrow under the Ocean
Ranch Contract. SELLER agrees to perform all material obligations required to be
performed to permit the close of escrow under the Ocean Ranch Contract, and the
failure to do the same shall constitute a default hereunder by SELLER; provided,
however, nothing in this provision shall be deemed to restrict or impede
SELLER's right to elect not to proceed with the closing under the Ocean Ranch
Contract in the event that SELLER is not satisfied with any condition or
requirement for such closing. SELLER shall have the right to terminate this
Agreement by giving a Termination Notice to BUYER on or before the Outside ORC
Date on account of the nonsatisfaction of this condition.
12.5. OCEAN RANCH CONTRACT ASSIGNMENT. Notwithstanding the
foregoing provisions of this section 12, if SELLER elects to give a Termination
Notice under sections 12.2, 12.3 or 12.4 above at any time prior to the date
that Ocean Ranch Developer determines SELLER is obligated to proceed with the
closing under the Ocean Ranch Contract, SELLER agrees to cooperate in good faith
with BUYER to provide for the assignment of SELLER's rights and obligation under
the Ocean Ranch Contract to BUYER, subject to compliance will all of the
following conditions and requirements: (a) SELLER give BUYER notice of SELLER's
intention to terminate the Ocean Ranch Contract no later than ten (10) days
prior to the date such termination of the Ocean Ranch Contract will be
effective; (b) prior to the expiration of such ten (10) day period, BUYER shall
enter into an assignment and assumption agreement with SELLER, providing for (i)
-32-
the assignment of SELLER's rights, without representation or warranty or
recourse, to BUYER, (ii) BUYER assumption of any and all liabilities and
obligations of SELLER under the Ocean Ranch Contract, including BUYER's
agreement to indemnify, defend and hold harmless SELLER from any claims by Ocean
Ranch Developer on account of BUYER's failure to perform any of the assumed
obligations, (iii) BUYER's payment to SELLER within thirty (30) days of the
following amounts: (aa) SELLER's deposits under Sections 5(a) and (b) of the
Ocean Ranch Contract, (bb) SELLER's Grading Deposit under Section 5(c) of the
Ocean Ranch Contract and (cc) all Development Costs paid or incurred by SELLER;
(iv) SELLER's agreement to indemnify, defend and hold harmless BUYER with
respect to any accrued obligation or liability to the Ocean Ranch Developer that
would have survived and remained enforceable against SELLER even if SELLER had
exercised its right of termination under the Ocean Ranch Contract and the
assignment to BUYER had not taken place, and (v) such other commercially
reasonable terms and conditions as approved by BUYER and SELLER, in their
respective reasonable discretion; (c) in no event or circumstance shall SELLER
be liable to BUYER on account of Ocean Ranch Developer's refusal to permit such
assignment in accordance Section 12 of the Ocean Ranch Contract nor on account
of any default by Ocean Ranch Developer and (d) any obligation of SELLER to give
notice or otherwise provide for such assignment shall immediately terminate in
the event SELLER receives any Termination Notice from BUYER under section 11
above. If BUYER satisfies the requirements for such assignment and assumption
within such ten (10) day period, then SELLER shall refrain from to terminating
the Ocean Ranch Contract, and this Agreement shall terminate effective as of the
date of the effective date of such assignment and assumption. If BUYER does not
timely satisfy all of the requirements for such assignment and assumption, then
SELLER shall have the right to proceed with the termination of the Ocean Ranch
Contract and to give BUYER and Escrow Agent a Termination Notice under the
applicable section 12.2, 12.3 or 12.4 above.
13. SELLER'S DISCLAIMER/LIMITATION ON LIABILITY. Except for the
warranties expressly provided in this section, SELLER is not making any
representation or warranty concerning the physical condition of the Property,
the feasibility of the use of the Property for any particular purpose, any
governmental rules, regulations or requirements affecting the Property or any
improvement of the Property and SELLER DISCLAIMS ANY SUCH EXPRESS OR IMPLIED
WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR USE OF THE PROPERTY BEING CONVEYED AND/OR ANY AND ALL
OTHER EXPRESS OR IMPLIED WARRANTIES WHATSOEVER. In particular, BUYER
acknowledges that it is aware that SELLER, as of the time of Close of Escrow,
will only have owned the Property for a brief period of time following the
closing under the Ocean Ranch Contract and that SELLER's knowledge concerning
the Property has primarily been obtained from Ocean Ranch Developer. Subject to
section 13.10 below, but notwithstanding the preceding provisions, SELLER is
making warranties, as of the Effective Date and, as of the Closing Date set
forth in sections 13.1 below to 13.8 below.
13.1. CONSTRUCTION WARRANTIES/CLAIMS. SELLER hereby
warrants that (a) SELLER will cause Contractor to construct the Improvements in
a good and workmanlike manner and otherwise without material deviation from all
Legal Requirements, the Plans, the requirements of the Ocean Ranch Contract, the
Special Declaration or any other Restrictions and this Agreement, and (b) in the
event of the breach of the preceding warranty, for a period of one (1) year
after the date of Substantial Completion, SELLER shall cause the repair or, if
necessary, replace, of any material defects in any components of the
construction of the Building Shell Improvements and the Interior Improvements
caused by defective work of Contractor, including, without limitation, (i) the
roof of the Improvements and all plumbing, electrical, mechanical and utility
facilities and the heating, air conditioning, and ventilating systems serving
the Property, which shall be in good operating condition as of the Close of
Escrow, and (ii) material defects or deficiencies in the integrity or condition
of the soils caused by SELLER, Contractor or any subcontractor of either of them
or of the structural components of the Improvements. In addition, SELLER shall
secure and deliver to BUYER written warranties and guarantees from Contractor
and all Major Trades, in industry standard form, which shall likewise be
effective for a period of not less than one (1) year from the date of
Substantial Completion; provided, however, BUYER may, in connection with the
approval of the Plans as described in section 3 above, request extended
warranties that extend beyond one (1) year from the date of Substantial
Completion from subcontractors or suppliers and SELLER shall use its
commercially reasonable efforts to procure such
-33-
warranties, as additional Development Costs, to be included in the Bids
submitted for BUYER's approval.. Upon the expiration of the one (1) year
warranty provided by SELLER and Contractor, SELLER and Contractor shall assign
to BUYER all of the subcontractor and supplier warranties. Thirty (30) days
prior to expiration of the one (1) year warranty period, SELLER shall notify
BUYER in writing to schedule a walk-through of the Improvements. BUYER and
SELLER shall walk through the Improvements in order to list deficiencies which
must be corrected by SELLER under this warranty, and SELLER shall correct the
same on or before the date that is thirty (30) days after the expiration of such
one-year period; provided, however, if due to the nature of the deficiency,
additional time is required for correction, then SELLER shall have a reasonable
time to complete such corrective work so long as SELLER diligently commences the
work within such thirty (30) day period.. In addition, SELLER, upon the Close of
Escrow, shall assign to BUYER, on a non-exclusive basis with SELLER reserving
rights therein to the extent necessary to satisfy its obligations under this
section 13.1 or any other provision of this Agreement, any and all warranties of
Contractor and any of Contractor's subcontractors and/or suppliers together with
any claims that SELLER might otherwise have concerning or relating to any defect
or deficiency in the design or construction of the Building Shell or Interior
Improvements. In addition, SELLER warrants that the Improvements shall be
completed free of material design defects; provided, however, that the aggregate
liability of SELLER under the foregoing warranty shall not exceed the amount of
errors and omissions ("E&O")insurance coverages maintained by the Design
Professional causing such defect or deficiency, as approved by BUYER. SELLER has
indicated that the Architect will maintain $2 million of E&O insurance, the
Civil Engineer will maintain $1 million of E&O insurance, and no E&O insurance
will be maintained by the professionals preparing the landscaping design, energy
calculations, plumbing design, mechanical design and electrical design, and
BUYER has approved these coverages
13.1.1 CONTRACTOR WARRANTIES. Notwithstanding any
other provision, SELLER shall include in the Construction Contract with
Contractor the Contractor warranty provisions set forth in Section 5.4 of the
Construction Contract (EXHIBIT "2"). SELLER shall not modify or amend the
Construction Contract without BUYER's prior written consent, not to be
unreasonably withheld.
13.2. HAZARDOUS SUBSTANCES. SELLER warrants (a) to the best
of SELLER's current knowledge (i) that there are no existing, pending or
threatened enforcement action or proceeding by any governmental authority under
any applicable federal, state or local law, regulation or ordinance pertaining
to air and water quality, or the handling, transportation, storage, treatment,
usage, or disposal of Hazardous Substances (collectively, "Hazmat Laws"), nor
(ii) is the Land in violation of any Hazmat Laws, provided that BUYER
acknowledges that SELLER's only knowledge concerning the existing condition of
the Land is based on reports obtained from Ocean Ranch Developer concerning the
Ocean Ranch Subdivision generally, which have also been made available to BUYER
and SELLER is not undertaking to conduct any separate or special investigation
of any existing Hazmat conditions, and (b) neither SELLER nor Contractor nor any
of their respective contractors, employees or agents have caused any Hazardous
Substances contamination of the Property in violation of any Hazmat Laws in
connection with the development of the Improvements. Except as provided in the
preceding provisions, SELLER is not making any representation or warranty
whatsoever concerning the presence in, about or under the Property of any
Hazardous Substances.
13.3. DOCUMENTS. To the extent that SELLER has provided or
provides to BUYER any documents, instruments, reports or other similar writings
or materials (collectively referred to as "Documents"), which have been drafted
or prepared by third parties, such as environmental consultants, title insurers,
architects, soils engineers, engineers, contractors and/or any governmental
authorities, SELLER warrants that, to the best of SELLER's current knowledge,
such Documents so provided to BUYER are true and accurate copies of such
Documents in the possession of SELLER; provided, however, that notwithstanding
the foregoing, SELLER warrants the accuracy and correctness of all documents and
materials prepared by Contractor. Except for the preceding warranty and the
warranty provided in subsection 13.2 above, BUYER acknowledges and agrees that
SELLER is not making any representation or warranty concerning the accuracy or
correctness of the information or conclusions stated in any such Documents and
SELLER shall have no liability to BUYER whatsoever in the event it is determined
that any such Documents are incorrect or inaccurate. BUYER specifically
acknowledges that BUYER is being
-34-
afforded adequate opportunity to independently determine the accuracy or
correctness of such Documents as a part of BUYER's investigation of the
Property.
13.4. ABSENCE OF ADVERSE LEGAL ACTION. To the best of
SELLER's current knowledge, there are no legal actions or proceedings pending or
threatened against SELLER or Contractor that might in any way affect the
Property or SELLER's or Contractor's performance under this Agreement, and there
are no pending or threatened legal actions or proceedings relating to the
Property that would adversely affect the Property.
13.5. ABSENCE OF BINDING CONTRACTS. SELLER warrants that
SELLER is not a party to any contracts or other agreements for services,
supplies or materials affecting the use, operation or management of the Property
which are unrecorded and which would be binding upon the Property following the
conveyance, except contracts and agreements that are terminable on no more than
sixty (60) days notice from SELLER, except any covenants or requirements
described in the Ocean Ranch Contract that will remain binding upon BUYER as a
successor owner of the Property.
13.6. COMPLIANCE WITH LAW. SELLER warrants that SELLER has
not received any written notice and does not otherwise have actual knowledge of
any violation of any Legal Requirements relating to the Property.
13.7. OCEAN RANCH DEVELOPER. SELLER hereby warrants that
SELLER (a) will use its commercially reasonable efforts to cause Ocean Ranch
Developer to comply with the permitting, entitlement, mapping, construction and
other material obligations of Ocean Ranch Developer under the Ocean Ranch
Contract, and in accordance with any applicable requirements and plans therefor,
and SELLER, by excluding delays caused by the Ocean Ranch Developer from
Excusable Delays, has assumed the risk of such delays as provided in this
Agreement; provided, however, nothing in this Agreement shall be construed or
interpreted (i) as a guaranty by SELLER of the performance of the Ocean Ranch
Developer or its contractors or agents or any undertaking by SELLER to supervise
such performance, (ii) to require SELLER to initiate any legal action against
the Ocean Ranch Developer on account of any default, errors or omissions of the
Ocean Ranch Developer or its contractors or agents, or (iii) make SELLER or
Contractor liable for any defect or deficiency affecting the Land or the Land
Improvements caused by Ocean Ranch Developer or its contractors or agents; (b)
that SELLER will comply with all material obligations of SELLER under the Ocean
Ranch Contract, including the Special Declaration, provided that the preceding
provision shall not be construed to restrict SELLER's right to terminate the
Ocean Ranch Contract; (c) will not enter into any modification of the Ocean
Ranch Contract, the Special Declaration or any other documents to which SELLER
and Ocean Ranch Developer or any affiliate thereof are a party (collectively,
the "Ocean Ranch Documents") that could affect the Purchase Price or the
construction, use, operation or marketability of the Property without BUYER's
prior written approval, not to be unreasonably withheld; provided, however, the
preceding provision shall not limit the right of SELLER, without BUYER's consent
to modify provisions to reduce any amounts payable by SELLER, waive or reduce
any liability of SELLER or extend the date for SELLER's exercise of any
termination right; (d) will not approve any matters or items under or in
connection with the Ocean Ranch Documents that could have a material adverse
affect the Purchase Price, or the construction, use, operation or marketability
of the Property without BUYER's prior written approval, not to be unreasonably
withheld, (e) will obtain and deliver to BUYER the certifications from Ocean
Ranch Developer's engineers described in Section 7(c) of the Ocean Ranch
Contract, (f) will assign, without warranty or recourse to BUYER, at the Close
of Escrow any rights of SELLER under the Ocean Ranch Contract to enforce any
warranties of Ocean Ranch Developer and its contractors; and (g) will provide
BUYER with copies of all material notices received from Ocean Ranch Developer,
the Government or any other party. SELLER acknowledges and agrees that BUYER
shall have no liability or responsibility for any ▇▇▇▇▇▇▇ money, grading and
other deposits made by SELLER under the Ocean Ranch Contract unless the Closing
shall occur (in which event such deposits shall constitute Development Costs to
the extent not repaid to SELLER), SELLER terminates this Agreement due to a
default by BUYER hereunder or as otherwise provided in this Agreement.
-35-
13.8. SUITABILITY FOR DEVELOPMENT. SELLER warrants that
based on (a) its recent experience with other development projects within the
Ocean Ranch Subdivision, and (b) its review of the documents provided by the
Ocean Ranch Developer as described in section 11.1 above, that SELLER in good
faith believes that the Land is suitable for the intended development of the
Improvements. SELLER shall give BUYER written notice no later than five business
(5) days prior to the end of BUYER's general due diligence period described in
section 11.1 above, if SELLER has actual knowledge of any information that
changes SELLER's good faith belief.
13.9. SELLER'S CURRENT KNOWLEDGE. Whenever in this
Agreement, the phrases "actual knowledge" or "to the best of SELLER's current
knowledge" are used, such phrase means and refers only to matters of which ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and/or SELLER's and Contractor's construction managers
for the Improvements ("SELLER's Representatives") are actually aware, without
undertaking any investigation or inquiry whatsoever other than a review of such
documentation in the immediate possession and control of SELLER's
Representatives, and shall not include the knowledge of any other persons or
firms, it being understood and agreed by BUYER that: (a) SELLER's
Representatives themselves are not individually liable for any statements or
representations made on behalf of SELLER, but are merely the persons whose
knowledge is attributed to SELLER; (b) SELLER's Representatives were not
involved in the negotiation or execution of contracts relating to the Property
before SELLER's acquisition of the Property; (c) SELLER's Representatives,
except as to information actually known to any of them, are not charged with
knowledge of all of the acts and/or omissions of predecessors-in-title to the
Property or management of the Property before SELLER's acquisition of the
Property; and (d) "SELLER's current knowledge" shall not include information or
material which may be in the possession of SELLER generally, but of which
SELLER's Representatives are not actually aware.
13.10. LATER DISCOVERED INFORMATION. Should SELLER's
Representatives receive notice or obtain actual knowledge of any material
information, which makes any of the warranties set forth in this section 13
materially false or misleading after the Effective Date of this Agreement and
prior to Close of Escrow, SELLER will immediately notify BUYER in writing of
such information. Except in the event a warranty becomes materially misleading
or false as a result of the voluntary act or a failure to act when required by
this Agreement to act of SELLER, Contractor, or their respective contractors,
agents, consultants or employees, if, prior to the Close of Escrow, BUYER
becomes aware of any facts or circumstances making any of SELLER's warranties
materially misleading or false, whether on account of SELLER's subsequent
disclosures or BUYER's independent investigation, then BUYER's sole remedies
shall be to (a) terminate this Agreement and not proceed with the purchase of
the Property, and BUYER shall not have any claim against SELLER for breach or
default under this Agreement, (b) obtain an equitable reduction to the Purchase
Price, or (c) in the case of the warranty under section 13.1 require SELLER to
correct any defective work at SELLER's sole cost. If BUYER elects to proceed
with the Close of Escrow after BUYER becomes aware of such facts or
circumstances, SELLER's warranties shall be deemed automatically modified and
amended to be consistent with the facts and circumstances of which BUYER is
aware. Except as provided in the preceding provisions, nothing contained herein
shall limit or affect BUYER's remedies hereunder in the event of any default by
SELLER under this Agreement.
13.11. TIME LIMITATION ON ACTION. Notwithstanding any
statute or law permitting a longer period, any legal action or claim concerning
or based upon any representation or warranty of SELLER provided in this
Agreement, or implied in law, shall be brought by BUYER no later than two (2)
years from the Closing Date, and if not so timely commenced shall be deemed
waived; provided, however, the preceding limitation shall not apply to an action
for any patent deficiency or any latent deficiency, which shall be governed by
California Code of Civil Procedure Sections 337.1 and 337.15, respectively.
14. TERMINATION/CANCELLATION/REMEDIES. This Agreement shall
terminate and Escrow shall be canceled in the event that BUYER or SELLER
exercise any express right granted in this Agreement to so terminate this
Agreement for a reason other than the default of the other party, and the
provisions of section 14.3 below shall apply in the event of such nondefault
termination. In the event of the termination of this Agreement by a
nondefaulting party on account of the default of the other party, then such
termination
-36-
or cancellation shall not waive or otherwise affect any legal or equitable
remedy of the nondefaulting party, provided such rights and remedies shall be
subject to the provisions of subsections 14.1 and 14.2 below. In all other
events, SELLER's obligation to sell the Property to BUYER shall immediately
cease and terminate upon any termination of this Agreement and any termination
of this Agreement shall also cause a termination of the Escrow.
14.1. DEFAULT BY BUYER. If the Close of Escrow does not
timely occur by reason of a default by BUYER, BUYER shall be responsible for
payment of all costs, expenses, fees and charges of Escrow Agent and Title
Company chargeable on account of the cancellation of the Escrow. In addition, if
SELLER elects to terminate this Agreement on account of BUYER'S default, BUYER's
right to purchase the Property under this Agreement shall immediately terminate
and SELLER shall have the rights to pursue any and all rights and remedies that
SELLER may have against BUYER, subject to the provisions of subsections 14.1.1
to 14.1.3 below.
14.1.1 LEASE PERFORMANCE. Concurrently with the
execution of this Agreement, BUYER and SELLER are also executing the Lease
(EXHIBIT "6"). If the Close of Escrow occurs under this Agreement, then the
Lease shall be deemed null and void from its inception and of no force or
effect. Except as provided in this subsection and subsection 14.1.3 below, if
this Agreement is terminated by SELLER on account of BUYER'S default, then BUYER
shall be obligated to perform as the LESSEE under the Lease and the Lease shall
be in full force and effect and binding on SELLER and BUYER notwithstanding that
BUYER shall no longer have the right to purchase the Property under this
Agreement. Notwithstanding the preceding provision, if BUYER fails or refuses to
take possession of the Property in compliance with all requirements of the Lease
and agrees to fully perform all obligations under the Lease, then SELLER shall
have the right to pursue any and all rights and remedies at law or in equity it
may have under this Agreement and under the Lease and all such remedies shall be
cumulative and non-exclusive. If BUYER takes possession of the Property and
agrees to perform all obligations under the Lease, then SELLER agrees not to
assert any claims against BUYER on account of its default in failing to purchase
the Property under this Agreement except (a) for a claim for damages in amount
equal to the amount of any Delay Credit resulting from BUYER's Delays that
SELLER would have been entitled to receive in accordance with section 4.3 above,
and (b) if the Lease is terminated by SELLER within twenty four (24) months on
account of the breach of the Lease by BUYER that is not cured within any
applicable notice and cure period under the Lease.
14.1.2 DISPOSITION OF THE DEPOSIT. BUYER
acknowledges and agrees that any Deposits are being made for the purpose of
reimbursing SELLER for excess expenses incurred by SELLER in connection with the
development of the Property and such Deposits shall not be refundable to BUYER,
except in the event this Agreement is terminated on account of SELLER's default
or except as otherwise provided in this Agreement. In the event this Agreement
is terminated on account of BUYER's default and BUYER takes possession of the
Property in accordance with the requirements of the Lease, the Deposits shall be
deemed to have been applied to pay costs of tenant improvements payable by the
BUYER as the Lessee under the Lease. If this Agreement is terminated for BUYER's
default and BUYER does not take possession of the Property pursuant to the
Lease, then SELLER shall have the right to continue to retain possession of the
Deposit and apply any Deposits to reimburse SELLER for losses, damages, costs
and expenses (including reasonable attorneys' fees) incurred by SELLER on
account of BUYER's default and under no circumstance whatsoever shall SELLER's
retention of such Deposits be construed to be SELLER's acceptance of liquidated
damages nor shall the retention and application of such funds otherwise waive,
prejudice or otherwise affect any rights or remedies that SELLER may have on
account of such losses, damages, costs and expenses to the extent not satisfied
from the Deposits.
14.1.3 CANCELLATION OF LEASE. If this Agreement
is terminated by SELLER on account of BUYER's default, and notwithstanding the
provisions of subsection 14.1.1 which provide for the Lease to become effective
in such circumstance, SELLER shall have the right to elect not to have the Lease
become effective if BUYER has suffered a Material Adverse Change in its
financial condition as of the date the Lease would otherwise become effective.
Such election shall be exercised by giving BUYER written
-37-
notice of such election no later than fifteen (15) days after the date that
SELLER has actual knowledge of such a Material Adverse Change. In such event and
notwithstanding any other provisions in this Agreement or the Lease, the Lease
shall not become effective, neither party shall be bound to perform under the
Lease and SELLER shall be entitled to pursue any and all rights and remedies
that SELLER would otherwise have at law or in equity as a result of BUYER's
default under this Agreement. "Material Adverse Change" means (a) BUYER's total
assets less BUYER's total liabilities (BUYER's "net worth"), as disclosed in its
financial accountings filed with the United State Securities & Exchange
Commission ("SEC"), is reduced to less than $50,000,000; or (b) BUYER is subject
to any Bankruptcy. "Bankruptcy" means any proceeding under the United States
Bankruptcy Code or any equivalent proceeding under state or federal law,
including appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator, or similar officer for BUYER or any part of its
property, or any other type of bankruptcy, insolvency, reorganization,
rearrangement, readjustment of debt, dissolution, custodianship,
conservatorship, liquidation or rehabilitation proceeding, whether commenced
voluntarily by BUYER or involuntary against BUYER by others, which in the case
of an involuntary Bankruptcy, such proceeding is not dismissed within sixty (60)
days.
14.2. DEFAULT BY SELLER. If the Close of Escrow does not
occur by reason of a default by SELLER, SELLER shall be responsible for payment
of all costs, expenses, fees and charges of Escrow Agent and Title Company
chargeable on account of the cancellation of the Escrow. In addition, BUYER
shall be entitled to and shall receive a refund of all unexpended Deposits made
hereunder for work that has not been performed and shall be entitled either to
(a) pursue the specific performance of the conveyance of the Property pursuant
to this Agreement, (b) recover damages (including the amount of any Deposits) in
an amount and subject to the limitations provided in subsection 14.2.1 below, or
(c) pursue its self-help remedies under subsection 14.5 below. In the case of a
default by SELLER under provisions of this Agreement that do not concern
obligations relating to the development of the Improvements, BUYER shall have
the right to terminate this Agreement on account of SELLER's default and such
termination shall become effective unless SELLER thereafter fails to fully cure
such default within thirty (30) days from the delivery of the notice of
termination, or if such default is not reasonably susceptible to cure within
such thirty (30) day period, SELLER commences the cure within such period and
diligently completes such cure within a reasonable time. In addition, SELLER has
delivered to BUYER, concurrently with execution of this Agreement, a Guaranty
dated October 25, 2002, executed by Hamann Construction, Inc., and Harmony
▇▇▇▇▇▇ Partners L.P. (collectively, "GUARANTOR"), in the form attached hereto as
EXHIBIT "14", to guaranty performance of SELLER's obligations under this
Agreement. SELLER covenants and agrees, at all times from and after the
Effective Date until the Close of Escrow, to maintain, in the aggregate with
Guarantor, a tangible net worth of not less than Fifteen Million Dollars
($15,000,000.00); provided however, shareholder loans shall be deemed assets and
not liabilities for determination of this net worth, provided that said loans
shall at all times be subordinate to Guarantor's obligations under the Guaranty
and Guarantor acknowledges the same. SELLER shall provide BUYER with financial
statements of SELLER and Guarantor, within ten (10) days after the Opening of
Escrow, and thereafter upon reasonable request of BUYER, evidencing that such
parties satisfy such minimum aggregate net worth requirement
14.2.1 LIMITATION ON DAMAGES. Notwithstanding any
other provisions, any claim of BUYER for damages, directly or indirectly, shall
be subject to the limitation of liability provisions in this subsection. Any
such damages shall not exceed an amount equal to BUYER's out-of-pocket expenses,
including the amount of delay damages payable under section 7.3 above, up to
$2,000,000.00, provided in no event shall SELLER be liable for consequential or
incidental damages in the nature of lost business or lost profits.
14.3. NONDEFAULT TERMINATION. Subject to the provisions of
subsection 14.3.1 below, the provisions of this section shall apply in the event
of the termination of this Agreement for any reason not constituting a default
of a party, including any termination by BUYER pursuant to sections 9 or 11
above or SELLER under section 12 above; provided, however, if another provision
of this Agreement provides for some other payment to SELLER in the event of such
a termination, then amount payable in this section shall be in addition to such
other amount(s). In the event of such termination, BUYER agrees to reimburse
SELLER for fifty percent (50%) of the Design Costs incurred by SELLER and BUYER
shall be entitled to a
-38-
refund of the Deposits to the extent the Deposits in the aggregate exceed the
amount payable to SELLER; provided, however, SELLER shall have the right to
defer payment of any such refund until BUYER has complied with the requirements
in sections 10.5 and 11.1.1 above
14.3.1 SPECIAL BUYER TERMINATION RIGHTS.
Notwithstanding any other provisions in this Agreement, BUYER shall have the
right to terminate this Agreement by giving written notice of such election to
terminate as follows and making payment to SELLER within the specified time
periods as follows: (a) prior to the close of escrow under the Ocean Ranch
Contract, BUYER may exercise such termination right by (i) giving written notice
to SELLER prior to the scheduled closing date, (ii) reimbursing SELLER for all
Development Costs (including all deposits made by SELLER under the Ocean Ranch
Contract, including ▇▇▇▇▇▇▇ money deposits and the Grading Deposit) paid or
incurred to the date of such termination together with the Developer's Fee
attributable to such costs, and (iii) indemnifying, defending and holding SELLER
harmless from any claims, demands, liabilities or actions by Ocean Ranch
Developer arising on account of SELLER's failure to proceed with the closing
under the Ocean Ranch Contract on account of BUYER's termination of this
Agreement; and (b) after the close of escrow under the Ocean Ranch Contract, but
prior to the commencement of actual construction of Improvements in accordance
with this Agreement, BUYER may exercise such termination right by (i) giving
written notice to SELLER prior to commencement of construction, (ii) reimbursing
SELLER for all Development Costs (including the purchase price and all costs,
including the Grading Deposit paid in connection with acquisition of the Land
from the Ocean Ranch Developer) paid or incurred to the date of such termination
together with the Developer's Fee attributable to such costs, any commercially
reasonably cancellation fees payable to subcontractors and suppliers, (iii)
assuming any and all obligations of SELLER to be performed under the Ocean Ranch
Contract following the close of escrow under the Ocean Ranch Contract and (iv)
indemnifying, defending and holding SELLER harmless from any claims, demands,
liabilities or actions by Ocean Ranch Developer on account of the failure to
perform any of the obligations of the Ocean Ranch Contract to be performed
following the closing under the Ocean Ranch Contract. In the case of BUYER' s
termination in accordance with the preceding provisions, SELLER shall assign and
transfer to BUYER, concurrently with BUYER's payment to SELLER, any assignable
rights of SELLER under the Ocean Ranch Contract or to the Land, without recourse
or representation, except, in the case of the case of the conveyance of title to
the Land in accordance with preceding clause (b), SELLER shall convey title
subject only to the exceptions to title existing as of the date of SELLER's
receipt of title from Ocean Ranch Developer together with any other exceptions
provided for under the Ocean Ranch Contract or this Agreement.
14.4. SURVIVAL OF CERTAIN OBLIGATIONS. Notwithstanding any
termination of this Agreement, any obligations of a party to provide
indemnification, BUYER's obligation of confidentiality under section 36 below,
SELLER's obligation to return the Deposits or any portion thereof and any other
provisions herein that expressly survive termination hereof shall survive such
termination and remain in full force and effect.
14.5. TAKE-OVER RIGHT. Notwithstanding the foregoing, if,
and only in the event that, the condition in section 11.9 above or the condition
in section 11.10 above are not timely satisfied or waived, and in lieu of and as
a waiver of BUYER's exercise of its right to terminate this Agreement on account
of such nonsatisfaction of such condition, BUYER shall have the right (but not
any obligation) to assume control of the construction and completion of the
Improvements ("Take-Over Right) in strict accordance with the requirements and
limitations in subsections 14.5.2 below. Notwithstanding that BUYER exercises
its right to complete SELLER's work on account of the condition in section
11.10, the time reasonably required for completion shall be deemed a SELLER's
Delay; provided, however, any delays caused by BUYER or its replacement
contractor in failing to prosecute the work in a commercially reasonable manner
shall be excluded from calculated the period of such SELLER's Delays.
14.5.1 NOTICE TO AND RIGHTS OF CONSTRUCTION LENDER.
Prior to exercising the Take-Over Right, BUYER shall give written notice of
BUYER's intention to exercise its Take-Over Right to SELLER and any lender
providing construction financing to SELLER for the Improvements. The
construction lender shall have a thirty (30) day period during which such lender
may take elect to take
-39-
control of the work of the Improvements, through a contractor selected by
lender, by giving written notice to BUYER of such election. In the event
SELLER's construction lender exercises such right to take control of the work of
the Improvements, then (a) if the Take-Over Right is being exercised on account
of a delay past the Outside Commencement Date, then the Outside Commencement
Date shall be extended for sixty (60) days from the date of lender's notice of
election to permit the commencement of construction; or if the Take-Over Right
is being exercised on account of a delay past the Outside Completion Date, the
Outside Completion Date shall be extended for the benefit of such lender for a
period not to exceed thirty (30) days from the date of lender's notice of
election, to allow such lender to complete the work of the Improvements. BUYER
shall have the right to proceed to exercise its Take-Over Right in accordance
with all other requirements of this section, including subsection 14.5.2 below,
in the event (i) if lender declines to take over construction or fails to give
notice of election within such thirty (30) day period, or (ii) lender does not
diligently prosecute such work to completion or such work is not completed on or
before the Outside Completion Date as extended as provided in preceding clause
(b). Notwithstanding any other provision, BUYER agrees that such construction
lender shall not have any liability or duty to BUYER on account of its efforts
to cause completion of the Improvements and BUYER's sole right shall be to
exercise its Take-Over Right if lender does not timely cause completion on or
before the extended Outside Completion Date. Notwithstanding any other
provision, BUYER irrevocable agrees that any rights or interest of BUYER arising
under this Agreement, including the Take-Over Right and the right to the
consensual lien described in subsection 14.5.4 below are subordinate and
inferior to all rights and interests of the construction lender in the Property,
including any partially completed Improvements.
14.5.2 TAKE-OVER RIGHT REQUIREMENTS. If BUYER
becomes entitled to exercise its Take-Over Right, BUYER shall contract with a
licensed contractor, who is regularly engaged in the construction of
improvements of the same type and nature as the Improvements, to complete such
work. BUYER shall require that such contractor deliver for the benefit of both
BUYER and SELLER, prior to construction of any work (a) payment and performance
bonds to insure lien free completion of the work, and (b) certificates of
insurance, naming both BUYER and SELLER as additional insured, with minimum
coverages imposed upon the Contractor under the Construction Contract. BUYER
shall have the option to require an assignment from Contractor of its contracts
with its subcontractors and suppliers and assume the obligations of Contractor
with respect to such contracts, except: a subcontractor or supplier refuses to
perform the work for BUYER's replacement contractor and consent to such
assignment. SELLER shall cause Contractor to cooperate with such assignments.
14.5.3 SELLER'S COOPERATION. In the event BUYER
exercises its Take-Over Right to assume control of the work of the Improvements,
SELLER shall cooperate in all respects with BUYER's efforts (including, without
limitation, by assigning contracts with subcontractors and suppliers. BUYER, its
employees, agents, contractors and subcontractors shall have an irrevocable
license to enter the Land for purposes of performing any and all such work and
in connection therewith, and BUYER, its employees, agents, contractors and
subcontractors shall be allowed in, to, from, on and over the Land, or any
portion thereof, for the purpose of ingress, egress, delivery, storage, removal
of construction equipment and supplies, and placement of trailers. BUYER may
draw upon any unused Deposits on a monthly basis, in proportion to the amount of
the work performed at such time, and to the extent of all actual and reasonable
costs incurred by BUYER in connection therewith.
14.5.4 ADDITIONAL COSTS AND FEES. In the event
BUYER incurs additional Development Costs as a result of taking control of such
work, such amounts, together with interest at a rate of ten percent (10%) per
annum (the "Interest Rate"), shall be credited to the Purchase Price upon Close
of Escrow; provided, however, if SELLER fails to proceed with the Close of
Escrow, then such amounts shall be due and payable on demand and BUYER may
exercise all remedies available to BUYER at law or in equity (in addition to any
remedies available to BUYER under the Purchase Agreement and this Agreement) to
collect such amounts. In addition, SELLER shall pay to BUYER, as an
administrative and oversight fee, an amount equal to five percent (5%) of the
cost of the work performed during the period of BUYER's control thereof (which
amount shall not increase or be included in Development Costs or otherwise be
reimbursable to SELLER), at the Close of Escrow, or within ten (10) days after
written demand therefor by
-40-
BUYER if SELLER fails to proceed with the Close of Escrow. Amounts due BUYER
together with any costs or expenses paid or incurred by BUYER in prosecuting any
or its rights and remedies set forth in this Agreement or available to BUYER at
law or in equity (including attorneys' fees and court costs), together with
interest thereon at the Interest Rate, shall be a charge against the Property
with a continuing lien (with power of sale) thereon until the Close of Escrow or
until paid in full. In addition to any other rights or remedies hereunder, BUYER
may deliver to SELLER and record in the Official Records of San Diego County,
California, a certificate or notice of claim of lien. If any breach recited in
such lien or claim has not been cured to BUYER's satisfaction within thirty (30)
days thereafter, BUYER may foreclose such lien by a sale conducted pursuant to
the terms of the laws of the State of California; provided, however, no breach
shall be deemed to have occurred until SELLER has refused to proceed with the
Close of Escrow following completion of the Improvements. If any breach recited
in the lien or claim is cured, BUYER shall forthwith record an appropriate
release of such lien at the Owner's expense. BUYER, through its authorized
representatives, may bid on and acquire any property subject to such lien at any
such foreclosure sale. BUYER's exercise of its Take-Over Right shall not affect
the Closing Date or SELLER's warranties hereunder, but any delay resulting
therefrom shall not constitute an Excusable Delay and BUYER shall have no
liability to SELLER as a result thereof provided that BUYER uses commercially
reasonable efforts to cause the same to be completed in a timely manner.
14.5.5 LENDER APPROVAL. BUYER has requested that
SELLER's construction lender enter into a written agreement acknowledging
BUYER's Take Over Right as provided in this section 14.5. BUYER and SELLER agree
to cooperate in good faith to negotiate an acceptable agreement with such lender
prior to the expiration of BUYER's general due diligence period described in
section 11.1 above and either BUYER or SELLER shall have the right to terminate
this Agreement prior to the expiration of such period by giving written notice
to the other party if a satisfactory agreement with such lender has not been
concluded.
15. REAL ESTATE COMMISSION. In the event the Close of Escrow
occurs in accordance with this Agreement, SELLER authorizes Escrow Agent to pay
real estate commissions from the proceeds of the Purchase Price deposited in
Escrow to BUYER's Broker in the amount calculated as follows: (a) the amount of
four percent (4%) of the Purchase Price payable by BUYER at Close of Escrow,
less (b) the amount of all commissions received by BUYER's Broker from or on
behalf of the Ocean Ranch Developer on account of the sale of the Land to SELLER
("Commission"). SELLER shall pay the Commission in two (2) equal installments:
(i) one-half at the time of recordation of SELLER's construction loan, and (ii)
one-half upon Close of Escrow; provided, however if BUYER defaults in failing to
proceed with the Close of Escrow and fails or refuses to perform in accordance
with the Lease, then the amount paid to SELLER under preceding clause (i) shall
be refunded by BUYER's Broker to SELLER. Except for BUYER's Broker, BUYER
represents and warrants that it has not been represented by a real estate broker
or other person and has incurred no liability for any brokerage commission or
finder's fee arising from or relating to the transactions contemplated by this
Agreement which could give rise to a claim against SELLER. BUYER does hereby
agree to indemnify, and covenants and agrees to protect, defend and hold
harmless SELLER from and against all liability, cost, damage or expense,
including, but not by way of limitation, reasonable attorneys' fees, on account
of any brokerage commission or finder's fee arising from any act or omission of
BUYER which is claimed to be due as a result of the sale of the Property to
BUYER. SELLER represents and warrants that it has not been represented by a real
estate broker or other person and has incurred no liability for any brokerage
commission or finder's fee arising from or relating to the transactions
contemplated by this Agreement which could give rise to a claim against BUYER.
SELLER does hereby agree to indemnify, and covenants and agrees to protect,
defend and hold harmless BUYER from and against all liability, cost, damage or
expense, including, but not by way of limitation, reasonable attorneys' fees, on
account of any brokerage commission or finder's fee arising from any act or
omission of SELLER which is claimed to be due as a result of the sale of the
Property to BUYER.
15.1. PRINCIPAL LICENSEE DISCLOSURE. BUYER acknowledges
that SELLER has disclosed to BUYER that one or more partners, members, officers,
directors or shareholders of SELLER or affiliates of
-41-
SELLER are licensed in California as real estate brokers, provided such persons
are not acting in any agency or representative capacity in this transaction.
16. SELLER'S TAX CERTIFICATIONS. Prior to Close of Escrow, SELLER
shall deliver to Escrow Agent (with a copy to BUYER) the following
certifications: (a) an affidavit, executed and sworn to under penalty of
perjury, that SELLER is not a foreign person and is a United States Person, as
defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended
("Code") and in a form in compliance with the Code; and (b) a certification,
executed and sworn to under penalty of perjury, that SELLER is domiciled in or
has its principal place of business in California, and, therefore, this
transaction is exempt from withholding tax under California Revenue and Taxation
Code Sections 18805, 18815 and 26131.
17. NOTICE. Except as otherwise provided herein, any notice or
other items to be delivered to a party pursuant to this Agreement shall be in
writing and either personally delivered, sent by first class mail (alone or in
combination with a facsimile transmittal), postage prepaid, addressed to the
party to be notified at the address specified in accordance with this section,
or delivered by Federal Express or other comparable overnight delivery service,
delivery costs prepaid and addressed to the party to be notified at the address
specified in accordance with this section. Any such notice or other items to be
delivered shall be deemed duly given, delivered and received on the date of
personal delivery to the party (or such party's authorized representative) or in
the case of mailing, three (3) business days after deposit in the U.S. Mail, or,
in the case of Federal Express or other comparable overnight delivery service,
one (1) business day following the delivery of such notice or item to such
delivery service, as the case may be; provided, however, in the case a party
transmits such notice or item by facsimile transmission to a facsimile number
designated above together with the separate mailing of the original, then such
notice shall be deemed delivered one (1) day following the date of the facsimile
transmission. Unless a party changes its address or facsimile number for notice
by giving a notice in accordance with this section changing such address or
facsimile number, the address or facsimile number for notice and delivery of
each party shall be as set forth in section 2 above.
18. POSSESSION. Subject to any matters approved by BUYER pursuant
to section 6 above, possession of the Property shall be delivered by SELLER to
BUYER concurrently with the Close of Escrow.
19. SPECIAL COVENANTS/POST-CLOSING OBLIGATIONS. Escrow Agent shall
not be concerned with the matters provided in this section nor shall Escrow
Agent otherwise be responsible for confirming the occurrence or satisfaction of
any condition or requirement described in this section. All of the obligations
and covenants in this section shall survive the Close of Escrow and the
conveyance of the Property to BUYER.
19.1. CONSTRUCTION OF THE BUILDING. Section 2.3(a) of the
SpecialDeclaration imposes certain obligations on SELLER to complete
construction of the Building on the Land within twenty (20) months of the from
the closing under the Ocean Ranch Contract. BUYER's willingness to perform its
obligations under this Agreement and to cooperate to provide for the completion
of the Building within twenty (20) month period is a material inducement to
SELLER to enter into this Agreement. If BUYER or its employees, agents, separate
contractors or representatives causes the completion of the Building to be
delayed thereby causing SELLER to be in violation of the Special Declaration,
BUYER agrees to indemnify, defend and hold harmless SELLER and its Affiliates
from any loss, damage, liability, cost or expense (including reasonable
attorneys' fees and other legal expenses) in any way suffered or incurred by
SELLER or any of its Affiliates as a result of any claim, demand, action or
proceeding commenced or maintained by Ocean Ranch Developer or any of
Developer's successors arising from or concerning the delayed completion of the
Building to the extent caused by BUYER or its employees, agents, separate
contractors or representatives.
19.2. MUTUAL INDEMNITY. SELLER agrees to indemnify, defend
and hold harmless BUYER and its Affiliates from any loss, damage, liability,
cost or expense (including reasonable attorneys' fees and other legal expenses)
in any way suffered or incurred by BUYER or any of its Affiliates as a result of
any claim, demand, action or proceeding commenced or maintained by Ocean Ranch
Developer or any of
-42-
its successors relating to or based upon SELLER's breach of the Special
Declaration prior to the Closing Date. BUYER agrees to indemnify, defend and
hold harmless SELLER and its Affiliates from any loss, damage, liability, cost
or expense (including reasonable attorneys' fees and other legal expenses) in
any way suffered or incurred by SELLER or any of its Affiliates as a result of
any claim, demand, action or proceeding commenced or maintained by Ocean Ranch
Developer or any of its successors relating to or based upon BUYER's breach of
the Special Declaration after to the Closing Date. The indemnity obligations in
this section shall survive the Closing and any earlier termination of this
Agreement.
19.3. CONTINUING OBLIGATIONS TO OCEAN RANCH DEVELOPER.
Pursuant to the Ocean Ranch Contract, Ocean Ranch Developer has required that
SELLER obligate any purchasers of any of the Land to agree to assume certain
obligations of SELLER. The provisions of this section are intended for the
benefit of and shall be enforceable directly by Ocean Ranch Developer against
BUYER in addition to SELLER's entitlement to enforce such provisions. BUYER
agrees to indemnify, defend and hold harmless SELLER and its Affiliates from any
loss, damage, liability, cost or expense (including reasonable attorneys' fees
and other legal expenses) in any way suffered or incurred by SELLER or any of
its affiliates as a result of BUYER's failure to comply with the requirements of
this section, including the requirements of sections 19.3.1 to 19.3.3 below.
19.3.1 DEVELOPMENT CREDITS. Ocean Ranch Developer
has required that SELLER obligate any purchasers of any of SELLER's Tract to
agree to assume the obligation of SELLER to purchase from Ocean Ranch Developer
certain credits held by Ocean Ranch Developer as a result of prepayment of
certain fees or charges to any governmental agency, public utility or school
district ("Credits") as more particularly provided in Section 15(g) of the Ocean
Ranch Contract. BUYER, effective as of the Close of Escrow, agrees to perform
such obligation, including providing the Ocean Ranch Developer or its successor
written notice in accordance with the requirements of the Ocean Ranch Contract.
19.3.2 NEW ASSESSMENT BONDS. BUYER agrees that,
in connection with CFD 2000-1, Ocean Ranch Developer shall have the right,
either before or after the Close of Escrow, to cause the issuance of bonds
and/or the placement of new assessments under CFD 2000-1, strictly in accordance
with the terms of Section 15(h) of the Ocean Ranch Contract and the Special
Declaration. If any such action occurs after the Close of Escrow, then BUYER
shall execute (and cause its lenders, if any, to execute) any documents
reasonably required by Ocean Ranch Developer in connection with the sale of
bonds by such district. The provisions of this section shall be binding on
BUYER, and on any successor purchaser of the Property or any portion of the
Property. BUYER shall notify any such successor purchaser of the obligations of
this section and obtain such successor purchaser's written agreement to be bound
by the same with Ocean Ranch Developer being a third party beneficiary to such
agreement. Notwithstanding any provision contained in this section to the
contrary, BUYER shall not be obligated to execute any documents as provided
above if, as a result thereof, it is contemplated that the special tax
assessment levied against the Property in connection CFD 2000-1 will cause the
overall tax rate (regular and special assessments combined) imposed upon the
Property immediately following the sale of bonds by such community facilities
district to exceed two percent (2%) of the value of the Property.
19.3.3 EASEMENT GRANTS. As more particularly
provided in section 9.2 above, Section 11 of the Ocean Ranch Contract and the
Grant Deed annexed as Exhibit 1 to the Ocean Ranch Contract grant Ocean Ranch
Developer the right to require SELLER and BUYER, with respect to the Property,
to grant Easements (as defined in section 9.2 above and subject to the
limitations therein). Following the Close of Escrow, BUYER agrees, for the
benefit of SELLER, to so grant any such Easements requested by Ocean Ranch
Developer upon the written request of SELLER or Ocean Ranch Developer and to
promptly execute, acknowledge and deliver any instruments required to legally
perfect such Easements grant.
20. CONDEMNATION. In the event any condemnation proceedings are
threatened or commenced against the Property prior to Close of Escrow that would
cause a Material Taking (as defined below), then BUYER shall have the right,
exercisable by giving notice of such decision to SELLER within ten (10) days
-43-
of obtaining actual knowledge of such existing or threatened condemnation
proceedings, to terminate this Agreement. If BUYER does not elect to terminate
this Agreement by giving such timely termination notice, BUYER shall be deemed
to have elected to accept the Property subject to the effect of the condemnation
proceedings and BUYER, upon Close of Escrow, shall be entitled to receive any
condemnation award or right to receive such an award on account of such
condemnation. The term "Material Taking" means a taking of (a) more than ten
percent (10%) of the Rentable Square Footage of the Building, or (b) any other
taking that would have the legal effect of reducing the intensity of BUYER's
planned use of the Property by more than ten percent (10%) from the use that
would have been permitted in the absence of the taking. Notwithstanding any
other provision, if the condemnation would result in a temporary taking, then
BUYER shall have no right of termination under this section and such temporary
taking shall constitute an Excusable Delay, but any award received shall be
applied in reduction of the Development Costs.
21. CASUALTY. In the event any casualty to the Property occurs
prior to Close of Escrow, within fifteen (15) days from the casualty, SELLER
shall determine in good faith and give written notice to BUYER ("Casualty Loss
Notice") stating (a) whether or not the affected Improvements can be repaired or
reconstructed in time to permit completion of all Improvements on or before the
Outside Completion Date, and, if not the estimated time required for extension
of the Outside Completion Date, and (b) if the full cost of repair or
replacement of casualty loss is not fully covered by insurance, whether or not
SELLER will complete the repair or reconstruction at its expense. If SELLER
timely gives a Casualty Loss Notice stating SELLER's intention to repair or
reconstruction the affected Improvements and complete the Improvements and the
estimated extension of the Outside Completion Date does not exceed one hundred
and eighty (180) days, then this Agreement shall continue in effect, subject to
completion of such Improvements by the extended Outside Completion Date
("Extended Outside Completion Date"). If SELLER fails to timely give a Casualty
Loss Notice or gives a Casualty Loss Notice stating SELLER's decision not to
repair or reconstruct and its election to terminate this Agreement, then BUYER
shall have the right, exercisable by giving notice to SELLER within ten (10)
days of SELLER's delivery of its Casualty Loss Notice or failure to timely give
notice, to elect: (i) to give a continuation notice ("Continuation Notice")
stating (aa) in the case the reason for the termination by SELLER was that the
repair or reconstruction together with any remaining Improvements cannot be
completed before expiration of the Extended Outside Completion Date, BUYER's
Agreement to extend the Extended Outside Completion Date for the estimated
period set forth in SELLER's Casualty Loss Notice sufficient to permit
completion of the Improvements, including the repairs and reconstruction, and to
continue this Agreement in effect, subject to modification in accordance with
the preceding provisions, or (bb) if the reason for SELLER's decision was the
casualty loss was not fully insured, BUYER's Agreement to include in the
Development Costs all of the reasonable costs of repair or restoration; or (ii)
to give a notice of termination of this Agreement ("Casualty Termination
Notice"). If BUYER does not timely deliver either a Continuation Notice or a
Casualty Loss Termination Notice within such ten (10) days period, then BUYER
shall be deemed to have agreed to the termination of this Agreement.
Notwithstanding the preceding provisions, any casualty loss suffered as a result
of the activities of BUYER on the Property shall be considered a BUYER's Delay.
22. HEADINGS. The captions and paragraph headings used in this
Agreement are inserted for convenience of reference only and are not intended to
define, limit or affect the interpretation or construction of any term or
provision hereof.
23. EXHIBITS. All exhibits referred to in this Agreement are
attached and are deemed incorporated in and a part of the terms of this
Agreement by reference.
24. COUNTERPARTS. This Agreement or any escrow instructions
pursuant to this Agreement may be executed in multiple copies, each of which
shall be deemed an original.
25. ENTIRE AGREEMENT. This Agreement together with all exhibits
attached hereto and other agreements expressly referred to herein, constitutes
the entire agreement between the parties with respect to the purchase and sale
of the Property. All prior or contemporaneous agreements, understandings,
representations, warranties and statements, oral or written, are superseded.
-44-
26. ASSIGNMENT. BUYER may assign its rights under this Agreement
to any entity or person (i) who owns more than fifty percent (50%) of BUYER's
shares, (ii) who controls, is under common control with or is controlled by
BUYER, (iii) resulting from the merger, consolidation or other reorganization
with BUYER, whether or not BUYER is the surviving entity, (iv) which acquired
all or substantially all of the assets of BUYER, or (v) as part of a
sale-leaseback, synthetic lease, operating lease or similar transaction pursuant
to which BUYER or a permitted assignee under subparagraph (i) through (iv) above
leases back the Land pursuant to a written lease of at least ten (10) years (not
including options) provided that and regardless of the form of the transaction,
no such assignment is permitted except in compliance with all of the following
limitations and requirements: (a) the net worth of the assignee responsible for
assuming BUYER's obligations shall not be less than Fifty Million Dollars
($50,000,000.00), and BUYER shall be obligated to provide financial information
concerning the assignee to evidence compliance with this requirement unless
assignee's financial information is regularly reported to the SEC; provided,
however, if ▇▇▇▇▇▇▇▇, Inc. is a surviving entity following the occurrence of any
such transaction, then compliance with the preceding financial standard shall be
determined based on the collective net worth of ▇▇▇▇▇▇▇▇, Inc. and the assignee;
(b) the assignee unconditionally assumes in writing all the obligations of BUYER
under this Agreement and the Escrow, (c) no such assignment shall release or
relieve BUYER from its obligations under this Agreement, (d) no such assignment
shall change, delay or otherwise affect any time periods for performance under
this Agreement, (e) no such assignment shall reinstate any rights or
entitlements waived by BUYER prior to such assignment, (f) any such assignment
shall be conclusively presumed to include an assignment of any right of BUYER to
receive any deposited funds if such funds become subject to refund in accordance
with this Agreement, and (g) BUYER shall provide SELLER, upon request,
documentary evidence that such assignment conforms to the requirements of this
section. SELLER may assign its rights under this Agreement to any entity or
person owned or controlled by SELLER or into which SELLER is merged or
reorganized, provided (aa) the assignee assumes all the obligations of SELLER
under this Agreement and the Escrow, (bb) no such assignment shall release or
relieve SELLER from its obligations under this Agreement, (cc) no such
assignment shall change, delay or otherwise affect any time periods for
performance under this Agreement, (dd) no such assignment shall reinstate any
rights or entitlements waived by SELLER prior to such assignment, and (ee)
SELLER shall provide BUYER, upon request, documentary evidence that such
assignment conforms to the requirements of this section. Except as provided in
the preceding provision, neither SELLER nor BUYER shall have any right to assign
this Agreement or any of its rights under this Agreement. In addition, if all
conditions and requirements to be performed by BUYER, including the deposit with
Escrow Agent of the full Purchase Price, have been satisfied, then BUYER shall
have the right to nominate and designate any other party as the record title
owner of the Property as of the Closing; provided, however, any such other party
shall be bound by and subject to all terms and conditions of this Agreement that
would be binding upon BUYER.
27. SUCCESSORS. Except as otherwise provided, all terms of this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives, successors
and assigns.
28. ATTORNEYS' FEES. If either party commences legal proceedings
(including any Arbitration) for any relief against the other party arising out
of this Agreement, the losing party shall pay the prevailing party's legal costs
and expenses, including, but not limited to, reasonable attorneys' fees, and
reasonable expert witness fees as determined by the court or arbitrator.
29. TIME IS OF THE ESSENCE. Time is of the essence in the
performance and satisfaction of each of the covenants, conditions and
requirements stated in this Agreement. All time periods provided in this
Agreement shall be strictly observed, and shall not be subject to extension or
delay except as expressly permitted by any provision of this Agreement.
30. FACSIMILE TRANSMISSIONS. A facsimile transmission of the
executed signature page from this Agreement, or any other documents to be
delivered in accordance with this Agreement, shall constitute due and proper
execution of such document, and any party making such facsimile transmission
will be
-45-
deemed to have agreed to deliver a copy of such document bearing the
original signature of such party no later than three (3) days following the date
of the facsimile transmission.
31. PROTECTION OF AFFILIATES. Whenever in this Agreement a party
is obligated to indemnify, defend and/or hold harmless another party, such
obligation to provide indemnification shall be deemed to include indemnification
of the officers, directors, shareholders, partners, members and agents of the
party entitled to indemnification, who are expressly declared to be third party
beneficiaries of this Agreement for purposes of the enforcement of such
indemnification rights.
32. SURVIVAL OF REPRESENTATIONS AND COVENANTS. All agreements,
representations and warranties made by either party, and all covenants not to be
fully performed by Close of Escrow, including any obligation to provide
indemnification, shall survive Close of Escrow and remain in effect and shall
not be merged by delivery of the Deed. Any representations and/or obligation to
provide indemnification shall survive the termination of this Agreement.
33. REPRESENTATION OF AUTHORITY. In the event that a party to this
Agreement is a legal entity, such as a corporation, partnership, limited
liability company or trust, the individual(s) executing this Agreement on behalf
of such party shall, as a result of such execution, be deemed to represent and
warrant that such person(s) has the authority to cause such party to enter into
this Agreement as a legally binding contract by execution of this Agreement.
34. INTERPRETATION. Each party acknowledges that the terms of this
Agreement have been negotiated and that any rule of construction or
interpretation of a written document against the draftsperson shall not apply to
the interpretation or application of this Agreement. If any provision of this
Agreement is determined, by a court of competent jurisdiction to be illegal or
unenforceable, such provision shall be deemed to be severed and deleted, and
neither such provision, its severance nor deletion shall affect the validity of
the remaining provisions of this Agreement.
35. ARBITRATION OF DISPUTES. Except as provided in subsection 35.2
below, in the event of any disagreement or dispute between the BUYER and SELLER
arising prior to the Close of Escrow, either party shall be entitled to have
such dispute or disagreement determined by binding arbitration in accordance
with the procedure provided in this section ("Arbitration"). Any Arbitration
permitted pursuant to this section shall be commenced and conducted in
accordance with the California Code of Civil Procedure Section 1281, et. seq.,
and the discovery procedures permitted by California Code of Civil Procedure
Section 1283.05 shall apply. The Arbitration award rendered shall be final and
binding and judgment may be entered upon it in accordance with applicable laws
by any court having jurisdiction thereof. The arbitrator shall prepare and
provide to the parties a written decision on all matters which are the subject
of the arbitration, including factual findings and the reasons which form the
basis of the arbitrator's decision. The arbitrator shall not have the power to
commit errors of law or legal reasoning and the award may be vacated or
corrected pursuant to California Code of Civil Procedure Section 1286.2 or
1286.6 for any such error and shall otherwise be subject to judicial review for
any such errors to the same extent as a judgment entered in a judicial
proceeding. The award of the arbitrator shall be mailed to the parties no later
than thirty (30) days after the close of the Arbitration hearing. The costs of
the Arbitration shall be paid by the parties equally, provided the prevailing
party shall be entitled to an award against the other party of any costs paid or
incurred by such prevailing party in such Arbitration in addition to all other
relief awarded.
35.1. ARBITRATION PROCEDURE. BY INITIALING IN THE SPACE
BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED
IN THE ABOVE STATED "ARBITRATION OF DISPUTES" PROVISION DECIDED BY A NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA LAW, AND YOU ARE GIVING UP ANY RIGHTS YOU
MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY
INITIALING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
-46-
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY. THE UNDERSIGNED HAVE READ AND UNDERSTAND THE
FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN
THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
/s/ JCH /s/ TWT
----------------------- -----------------------
SELLER'S Initials BUYER's Initials
35.2. EXCLUSIONS FROM ARBITRATION. Notwithstanding any
other provision, the following matters are excluded from the Arbitration
agreement: (a) a judicial or non-judicial foreclosure or any other action or
proceeding to enforce a deed of trust, mortgage or other security device
encumbering the Property; (b) an action for bodily injury or wrongful death; (c)
any provisional remedies such as attachment, injunction, receivership, and the
filing of a judicial action to enable such a provisional remedy to be obtained
shall not constitute a waiver of the agreement to submit certain disputes to
Arbitration; (d) any action for specific performance or, upon termination
hereof, to pursue damages or other relief or rights based upon any breach
hereof; (e) any action to enforce any obligation of indemnification BUYER or
SELLER may have under an express provision of this Agreement; and/or (f) any
action to expunge any lis pendens and/or any action for damages or other relief
arising from such violation.
36. CONFIDENTIALITY OF PURCHASE PRICE AND ECONOMIC TERMS. BUYER
covenants and agrees not to disclose Confidential Information and not to use
such Confidential Information for any purpose other than the transaction
contemplated by this Agreement except as permitted in this section. The term
"Confidential Information" means (a) the Property Purchase Price or the other
economic terms and conditions of this Agreement ("Confidential Information") and
(b) any other information or documents for which BUYER has an obligation of
confidentiality pursuant to any other express provision of this Agreement. The
covenant sets forth in this section shall be in effect from the Effective Date
to a date that is five (5) years following the Closing Date.
36.1. EXCEPTIONS. BUYER shall not be determined to be in
violation of its obligations under this Agreement to the extent that BUYER
demonstrates that such Confidential Information used or disclosed by BUYER was,
at the time of disclosure or use: (a) generally known or available to the
general industry, or which becomes at a later date so generally known or
available, through no fault of BUYER; (b) specifically known to BUYER or in
BUYER's possession before disclosure directly or indirectly by SELLER; (c)
disclosed to BUYER without restriction on disclosure by another person who, to
the best of BUYER's knowledge and without a duty of investigation, is not
restricted from disclosure of such information; (d) in the public domain; (e)
required by BUYER to be disclosed pursuant to legal process or any other legal
requirement in connection with any judicial or other governmental proceedings,
in which event, such disclosure by BUYER will not constitute a violation of this
Agreement, so long as BUYER gives written notice to SELLER of the receipt of
such legal process no later than three (3) days following BUYER's receipt of
such legal process; or (f) required to be disclosed to its shareholders by
applicable laws, regulations, rules or guidelines.
36.2. INTERNAL DISCLOSURE. To the extent necessary to carry
out this transaction and BUYER's evaluation of the Property and/or the
satisfaction of any contingency, BUYER is authorized to furnish such information
to (a) its responsible officers, directors and/or employees, and (b) its agents,
contractors, lenders, consultants and prospective lessees ("Secondary
Recipients") reasonable access to the Confidential Information as necessary to
consult and advise BUYER concerning the Property and this transaction and/or in
connection with lease negotiations, in the case of prospective lessees. BUYER
agrees that it will advise its Secondary Recipients of the existence of this
Agreement and use its reasonable efforts to cause such Secondary Recipients to
honor the confidential nature of such Confidential Information to the same
extent as BUYER would protect its own Confidential Information.
-47-
IN WITNESS WHEREOF, BUYER and SELLER have executed this Agreement to be
effective as of the Effective Date designated above.
"BUYER"
▇▇▇▇▇▇▇▇, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
[Signature]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, EVP/CFO/COO
-----------------------------------
[Print Name and Title]
By: -------------------------------
[Signature]
-----------------------------------
[Print Name and Title]
"SELLER"
INNOVATIVE DEVELOPMENT ENTERPRISES,
INC., a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
-48-
CONSENT OF ESCROW AGENT
The undersigned ("Escrow Agent") hereby agrees (1) to accept the
foregoing Agreement, and (2) to be bound by said Agreement in the performance of
its duties as Escrow Agent subject to First American Title Insurance Company
Cover Instructions and General Provisions.
This Consent is executed on 11/12/02, which shall constitute the
"Opening of Escrow" pursuant to subsection 8.1 of the Agreement.
The Escrow No. is 710669-LG.
"ESCROW AGENT"
FIRST AMERICAN TITLE INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
[Signature]
-49-